2
BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES CONTINUED¡
(a) Basis of consolidation
The consolidated financial statements of the Group for the year ended 31 December 2015 include all its direct and indirect
subsidiary companies and also incorporate the interest in associated companies and joint ventures on the basis set out in
Notes 2(c) and 2(d) below. Results of subsidiary companies, associated companies and joint ventures acquired or disposed
of during the year are included as from their e
ective dates of acquisition to 31 December 2015 or up to the dates of
disposal as the case may be. The acquisition of subsidiary companies is accounted for using the acquisition method.
(b) Subsidiary companies
A subsidiary company is an entity in which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to a
ect those returns through
its power over the entity. Subsidiary companies are fully consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases. In the unconsolidated financial statements of the holding
company, investments in subsidiary companies are carried at cost less provision for impairment in value.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration
transferred for the acquisition of subsidiary companies are the fair values of the assets transferred, the liabilities incurred
and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. On the acquisition by acquisition basis, the Group recognises a non-controlling interest in the
acquiree either at fair value or at non-controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain
purchase, the di
erence is recognised directly in the income statement.
(c) Associated companies
An associated company is an entity, other than a subsidiary company or a joint venture, in which the Group has a long-term
equity interest and over which the Group is in a position to exercise significant influence over its management, which includes
participation in the financial and operating policy decisions.
The results and assets and liabilities of associated companies are incorporated in these financial statements using the equity
method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under
HKFRS 5, “Non-current assets held for sale and discontinued operations”. The total carrying amount of such investments is
reduced to recognise any identified impairment loss in the value of individual investments.
(d) Joint ventures
A joint venture is a contractual arrangement whereby the venturers undertake an economic activity which is subject to joint
control and over which none of the participating parties has unilateral control.
Joint ventures involve the establishment of separate entities. The results and assets and liabilities of joint ventures are
incorporated in these financial statements using the equity method of accounting, except when the investment is classified
as held for sale, in which case it is accounted for under HKFRS 5, “Non-current assets held for sale and discontinued
operations”. The total carrying amount of such investments is reduced to recognise any identified impairment loss in the
value of individual investments.
Notes to the
Financial Statements
OPTIMISING FOR THE FUTURE
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