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121

notes to the

financial statements

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 (cont’d)

4 SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Consolidation (continued)

(ii) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with equity owners of the Group. For

purchases from minority interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. For disposals to minority interests, differences between any proceeds received and the relevant share of minority interests are also recognised in equity.

Disposals to minority interests result in gains and losses for the Group that are recorded in the proft or loss. Purchases from

minority interests result in goodwill, being the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired.

(iii) Associates

Associates are those corporations, partnerships or other entities in which the Group exercises signifcant infuence, but which it

does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Signifcant infuence is the power to participate in the fnancial and operating policy decisions of the associates but not the power to exercise control over those policies.

Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The

Group’s investment in associates includes goodwill identifed on acquisition, net of any accumulated impairment loss (see accounting policy Note 4(e)(i) on goodwill).

The Group’s share of its associates’ post-acquisition profts or losses is recognised in the proft or loss, and its share of post-

acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. If the Group’s share of losses of an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profts, the Group resumes recognising its share of those profts only after its share of the profts equals the share of losses not recognised.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the

associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the fnancial statements of associate to ensure consistency of accounting policies with those of the Group.

Dilution gains and losses in associates are recognised in the proft or loss.

When the Group increases its stake in an existing investment and the investment becomes an associate for the frst time, goodwill

is calculated at each stage of the acquisition. The Group does not revalue its previously owned share of net assets to fair value. Any existing available-for-sale reserve is reversed in other comprehensive income, restating the investment to cost. A share of profts (after dividends) together with a share of any equity movements relating to the previously held interest are accounting for in other comprehensive income.

(iv) Changes in ownership interests

When the Group ceases to have control or signifcant infuence over an entity, the carrying amount of the investment at the date

control or signifcant infuence ceases become its cost on initial measurement as a fnancial asset in accordance with FRS 139. Any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.

(b) Investments in subsidiaries and associates

In the Company’s separate fnancial statements, investments in subsidiaries and associates are carried at cost less accumulated

impairment losses. On disposal of investments in subsidiaries and associates, the difference between disposal proceeds and the carrying amounts of the investments are recognised in proft or loss.