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Notes to the financial statements
31 December 2012
(continued)
Annual Report 2012 KPJ Healthcare Berhad
2. Summary of significant accounting policies (continued)
2.10 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual
impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).
In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an
asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups
of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying
amount of the other assets in the unit or groups of units on a pro-rata basis.
Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive
income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist
or may have decreased. A previously recognised impairment loss 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. If that is the case, the carrying amount of the asset is increased to its
recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss
been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is
treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period.
2.11 Non-current assets (or disposal groups) classified as assets held for sale
Non-current assets (or disposal groups) are classified as assets held for sale and stated at the lower of carrying amount and fair value less costs to sell
if their carrying amount is recovered principally through a sale transaction rather than through a continuing use and a sale is considered highly probable.
2.12 Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities,
generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are consolidated using the acquisition method of accounting except for Johor Specialist Hospital Sdn Bhd and Ipoh Specialist Hospital Sdn
Bhd which were consolidated using the merger method of accounting as disclosed in Note 2.5.
2.13 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from
the date the Group obtains significant influence until the date the Group ceases to have significant influence 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 financial 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 identifiable
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 profit or loss for the period in which the investment is acquired.
Under the equity method, unrealised profit 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.