Page 69 - ar2011_hi

ANNUAL REPORT 2011 // 67
2 Significant accounting policies (Continued)
(b) Subsidiary companies
A subsidiary is an entity in which the Group has the power, directly or indirectly, to govern the fnancial and
operating policies, so as to obtain benefts from their activities. 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.
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
includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifable 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 identifable
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 difference is recognised directly in the income statement.
The Trust’s investment in a subsidiary is stated at cost less provision for impairment losses. The result of the
subsidiary is accounted for by the Trust on the basis of dividend received and receivable.
(c) Associated companies
An associate is an entity, other than a subsidiary company or a jointly controlled entity, in which the Group has
a long-term equity interest and over which the Group is in a position to exercise signifcant infuence over its
management, which includes participation in the fnancial and operating policy decisions.
The results and assets and liabilities of associates are incorporated in these accounts using the equity method
of accounting, except when the investment is classifed 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 identifed 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.
Jointly controlled entities are joint ventures which involve the establishment of separate entities. The results and
assets and liabilities of jointly controlled entities are incorporated in these accounts using the equity method of
accounting, except when the investment is classifed 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 identifed impairment loss in the value of individual investments.