FRENCKEN GROUP LIMITED
ANNUAL REPORT 2015
57
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (CONT’D)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(c) Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are stated at cost less accumulated impairment losses
(Note 2(e)(ii)) in the Company’s balance sheet. On disposal of such investments, the difference between net
disposal proceeds and the carrying amounts of the investments are taken to the income statement.
(d) Intangible assets
(i)
Goodwill on consolidation
Goodwill on acquisitions of subsidiaries represents the excess of (i) 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 (ii) the fair value of the net identifiable assets acquired.
When the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
of the subsidiary acquired exceeds the cost of the business combination (“negative goodwill”), and if,
after reassessment, the net fair value of the identifiable assets, liabilities and contingent liabilities of the
subsidiary acquired remains higher than the cost of the business combination, the excess is recognised
immediately in income statement.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated
impairment losses.
Goodwill on associated companies is included in the carrying amount of the investments in associated
companies.
Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of
goodwill relating to the equity sold, except for goodwill arising from acquisitions prior to 1 January 2001.
Such goodwill was adjusted against retained earnings in the year of acquisition and not recognised in the
income statement on disposal.
(ii) Other intangible assets
Other intangible assets acquired separately are measured initially at cost. The cost of other intangible
assets such as deferred development costs, patents, club membership and intellectual properties acquired
in a business combination is their fair value as at the date of acquisition. Following initial acquisition,
other intangible assets are carried at cost less accumulated amortisation and any accumulated impairment
losses, if any. Internally generated other intangible assets, excluding capitalised deferred development
costs, are not capitalised and expenditure is reflected in income statement in the year in which the
expenditure is incurred.
The useful lives of other intangible assets are assessed as either finite or indefinite.
Other intangible assets with finite useful lives are amortised over the estimated useful lives and assessed
for impairment whenever there is an indication that the other intangible assets may be impaired. The
amortisation period and the amortisation method are reviewed at least at each financial year end.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation period or method, as appropriate,
and are treated as changes in accounting estimates. The amortisation expense on other intangibles assets
with finite useful lives is recognised in income statement in the expense category consistent with the
function of the other intangible assets.
