Page 147 - KPJ_2011

2. Summary of significant accounting policies (continued)
2.12 Subsidiaries (continued)
The Group has taken advantage of the exemption provided under FRS 1222004 “Business Combinations” to
apply the standard prospectively. Accordingly, business combinations entered into prior to 1 January 2008
have not been restated with this standard.
2.13 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signimcant innuence.
An associate is equity accounted for from the date the Group obtains signimcant innuence until the date the
Group ceases to have signimcant innuence over the associate.
The Group’s investments in associates are accounted for using the equity method. Under the equity method,
the investment in associates is measured in the statement of mnancial position at cost plus post-acquisition
changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in
the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s
identimable assets, liabilities and contingent liabilities over the cost of the investment is excluded from the
carrying amount of the investment and is instead included as income in the determination of the Group’s share
of the associate’s promt or loss for the period in which the investment is acquired.
Under the equity method, unrealised promt and losses resulting from upstream (associate to investor) and
downstream (investor to associate) associate should be eliminated to the extent of the investor’s interest in
the associate. However, unrealised losses should not be eliminated to the extent that the transaction provides
evidence of an impairment of the assets transferred.
After application of the equity method, the Group determines whether it is necessary to recognise an additional
impairment loss on the Group’s investment in its associates. The Group determines at each reporting date
whether there is any objective evidence that the investment in the associate is impaired. If this is the case,
the Group calculates the amount of impairment as the difference between the recoverable amount of the
associate and its carrying value and recognises the amount in promt or loss.
The mnancial statements of the associates are prepared as of the same reporting date as the Company. Where
necessary, adjustments are made to bring the accounting policies in line with those of the Group.
In the Company’s mnancial statements, investments in associates are stated at cost less impairment losses.
On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is
included in promt or loss.
2.14 Financial assets
Financial assets are recognised in the statement of mnancial position when, and only when, the Group and the
Company become a party to the contractual provisions of the mnancial instrument.
When mnancial assets are recognised initially, they are measured at fair value, plus, in the case of mnancial
assets not at fair value through promt or loss, directly attributable transaction costs.
The Group and the Company determine the classimcation of their mnancial assets at initial recognition, and the
categories include loans and receivables and available-for-sale mnancial assets.
(a) Loans and receivables
Financial assets with mxed or determinable payments that are not quoted in an active market are classimed
as loans and receivables.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the
effective interest method. Gains and losses are recognised in promt or loss when the loans and
receivables are derecognised or impaired, and through the amortisation process.
Loans and receivables are classimed as current assets, except for those having maturity dates later than
12 months after the reporting date which are classimed as non-current.
NOTES TO THE FINANCIAL STATEMENTS
For the financial year ended 31 December 2011 (continued)
ANNUAL REPORT 2011 142