2.
Summary of significant accounting policies (cont’d)
Associates
An associate is an entity in which the Group has a significant influence and that is neither a subsidiary nor a joint
arrangement of the Group. Significant influence is the power to participate in the financial and operating policy decisions
of the investee but is not control or joint control over those policies. An investment in an associate includes goodwill on
acquisition, which is accounted for in accordance with FRS 103 Business Combinations. However, the entire carrying
amount of the investment is tested under FRS 36 Impairment of Assets for impairment, by comparing its recoverable
amount (higher of value in use and fair value) with its carrying amount, whenever application of the requirements in
FRS 39 Financial Instruments: Recognition and Measurement indicates that the investment may be impaired.
In the consolidated financial statements, investment in an associate is accounted for using the equity method. Under
the equity method, the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change
in the Group’s share of the associate’s net assets. Goodwill relating to an associate is included in the carrying amount
of the investment and is neither amortised nor tested individually for impairment. Any excess of the Group’s share of
the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of investment
is deducted from the carrying amount of the investment and is recognised as income as part of the Group’s share of
results of the associate in the period in which the investment is acquired. The Group’s profit or loss includes its share
of the associate’s profit or loss and the Group’s other comprehensive income includes its share of the associate’s other
comprehensive income. Distributions received from an associate reduce the carrying amount of the investment. Losses
of an associate in excess of the Group’s interest in the associate are not recognised except to the extent that the Group
has an obligation. Profits and losses resulting from transactions between the Group and an associate are recognised in
the financial statements only to the extent of the Group’s unrelated interests in the associate. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred. The financial statements
of the associates are prepared as of the same reporting date as the Company. Accounting policies of associates are
changed where necessary to ensure consistency with the policies adopted by the Group. The Group discontinues the
use of the equity method of accounting from the date when its investment ceases to be an associate and accounts for
the investment as a financial asset in accordance with FRS 39 Financial Instruments: Recognition and Measurement from
that date. Any gain or loss is recognised in profit or loss. Any investment retained in the former associate is measured
at fair value at the date that it ceases to be an associate.
In the Company’s separate financial statements, an investment in an associate is accounted for at cost less any allowance
for impairment in value. Impairment loss recognised in profit or loss for an associate is reversed only if there has been a
change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
The carrying value and the net book value of the investment in an associate are not necessarily indicative of the amount
that would be realised in a current market exchange.
Business combinations
A business combination is a transaction or other event which requires that the assets acquired and liabilities assumed
constitute a business. It is accounted for by applying the acquisition method of accounting.
The cost of a business combination includes the fair values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree. The
acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received.
At acquisition date, the acquirer recognises, separately from goodwill, the identifiable assets acquired, the liabilities
assumed and any non-controlling interest in the acquiree measured at acquisition date fair values as defined in and
that meet the conditions for recognition under FRS 103 Business Combinations. If the acquirer has made a gain from
a bargain purchase, that gain is recognised in profit or loss. For gain on bargain purchase, a reassessment is made of
the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the
measurement of the cost of the business combination and any excess remaining after this reassessment is recognised
immediately in profit or loss.
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