KINGSMEN CREATIVES LTD
ANNUAL REPORT
2014
73
15.
Investments in subsidiaries (cont’d)
Deemed acquisition of a subsidiary due to re-measurement of interest
As disclosed in Note 37 of the financial statements, the Group made an assessment as at the date of initial application
of FRS 110 Consolidated Financial Statements (i.e. 1 January 2014) and concluded that it has control over Kingsmen
Middle East LLC, which was previously accounted for as a 25% associate of the Group using the equity method of
accounting. Although the Group does not own more than half of the voting power of the company, it is able to govern
the financial and operating policies of Kingsmen Middle East LLC by virtue of agreements with other shareholders
of the company. The nature of these agreements results in the Group having the power over Kingsmen Middle East
LLC’s variable returns. The effective beneficial interest of the Group in Kingsmen Middle East LLC is assessed to be
55.51%. Therefore, in accordance with the requirements of FRS 110, Kingsmen Middle East LLC was accounted for as
a subsidiary of the Group in the current reporting year with its financial statements consolidated with those of the
Group.
The fair value of the identifiable assets and liabilities of Kingsmen Middle East LLC deemed acquired for the reporting
year ended 31 December 2014 is based on book value, which is a reasonable approximation of fair value. The cash
flow effect of the deemed acquisition are as follows:
$'000
Property, plant and equipment
340
Inventories
643
Gross amount due from customers for contract work-in-progress
58
Trade and other receivables
2,411
Other assets
157
Cash and cash equivalents
1,805
Trade and other payables
(5,598)
Carrying amount of net liabilities
(184)
Share of net identifiable liabilities deemed acquired
(102)
Other reserves arising from acquisition
253
Goodwill arising from acquisition
1,940
Intangible asset arising from acquisition
546
Deemed purchase consideration
2,637
As a result of the re-measurement of interest in Kingsmen Middle East LLC, the Group recorded a net cash inflow of
$1,805,000 in its consolidated statement of cash flow.
From the date of the re-measurement of interest in Kingsmen Middle East LLC (i.e. 1 January 2014), Kingsmen Middle
East LLC has contributed $17,682,000 and $592,000 to the revenue and net profit of the Group respectively.
With the adoption of FRS 110, the effects of the change in accounting treatment of Kingsmen Middle East LLC are
to be applied retrospectively. However, as the effect of the adoption is not material to the comparative figures, no
restatement of comparative figures has been made.
Notes to the Financial Statements
31 December 2014
