Frencken Group Limited - Annual Report 2015 - page 56

FRENCKEN GROUP LIMITED
ANNUAL REPORT 2015
55
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (CONT’D)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(b) Group accounting (Cont’d)
Subsidiaries (Cont’d)
(ii) Changes in the group’s ownership interests in existing subsidiaries
Pursuant to the reorganisation of companies under common control, under a Scheme of Arrangement
on 28 March 2001, a subsidiary was consolidated in accordance with the principles of merger method of
consolidation. Consequently, the consolidated financial statements were presented as if the Scheme of
Arrangement had been effected on 27 August 1999 (the date of incorporation of the Company) and its
results are presented as if the merger had been effected throughout the current and previous financial
years.
The cost of investment in a merger is recorded at the aggregate of the nominal value of the equity
shares issued, cash and cash equivalents and fair values of other considerations. Expenditure incurred
in connection with the merger is recognised as an expense in the income statement. On consolidation,
the cost of investment in the merger is cancelled with the nominal values of the shares received. The
net differences between the cost of investment and share premium and any other reserves which are
attributable to the subsidiary was taken to “merger reserve”.
Other than the above, the acquisition method of accounting is used to account for business combinations
by the Group.
The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets
transferred, the liabilities incurred and the equity instruments issued by the Group in exchange for control
of the acquiree. The consideration transferred also includes the fair value of any contingent consideration
arrangement and the fair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are,
with limited exceptions, measured initially at their fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree
at the date of acquisition either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net identifiable 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
net identifiable assets acquired is recorded as goodwill. Please refer to the Note 2(d)(i) for the accounting
policy on goodwill.
(iii) Disposals of subsidiaries or businesses
When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the
subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts
recognised in other comprehensive income in respect of that entity are also reclassified to income
statement or transferred directly to retained earnings if required by a specific standard.
Any retained interest in the entity is re-measured at fair value. The difference between the carrying
amount of the retained investment at the date when control is lost and its fair value is recognised in
income statement.
Please refer to the Note 2(c) for the accounting policy on investments in subsidiaries in the separate
financial statements of the Company.
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