DELEUM BERHAD UNISON IN DIVERSITY - ChartNexus

Summary of Significant Accounting Policies (continued)
For the Financial Year Ended 31 December 2009
A BASIS OF PREPARATION (continued)
Deleum Berhad Annual Report 2009 65
(c) Standards, amendments to published standards and IC interpretation that are not relevant and not yet effective for
the Group’s and Company’s operations (continued)
• IC Interpretation 13 “Customer loyalty programmes” (effective from 1 January 2010) clarifies that where
goods or services are sold together with a customer loyalty incentive, the arrangement is a multiple element
arrangement and the consideration receivable from the customer is allocated between the components of the
arrangement using fair values.
• IC Interpretation 14 “FRS 119 The limit on a defined benefit asset, minimum funding requirements and their
interaction” (effective from 1 January 2010) provides guidance on assessing the limit in FRS 119 on the amount
of the surplus that can be recognised as an asset.
• IC Interpretation 15 “Agreements for construction of real estates” (effective from 1 July 2010) clarifies whether
FRS 118 “Revenue” or FRS 111 “Construction contracts” should be applied to particular transactions. It is
likely to result in FRS 118 being applied to a wider range of transactions.
• IC Interpretation 16 “Hedges of a net investment in a foreign operation” (effective from 1 July 2010) clarifies
the accounting treatment in respect of net investment hedging. This includes the fact that net investment
hedging relates to differences in functional currency not presentation currency, and hedging instruments may
be held by any entity in the group. The requirements of FRS 121 “The effects of changes in foreign exchange
rates” do apply to the hedged item.
• IC Interpretation 17 “Distribution of non-cash assets to owners” (effective from 1 July 2010) provides guidance
on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a
distribution of reserves or as dividends. FRS 5 has also been amended to require that assets are classified as
held for distribution only when they are available for distribution in their present condition and the distribution
is highly probable.
B ECONOMIC ENTITIES IN THE GROUP
(1) Subsidiaries
Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) in which
the Group has power to exercise control over the financial and operating policies so as to obtain benefits from
their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity.
Delcom Services Sdn. Bhd., a subsidiary company, is consolidated using the merger method of accounting as the
internal group reorganisation as defined by FRS 1222004 “Business Combinations” took place on/after 1 January
2002 and with agreement dates before 1 January 2006, and where the ultimate shareholders remain the same,
and the rights of each such shareholder relative to the others, are unchanged and the minorities’ share of net assets
of the Group is not altered by the transfer. The other subsidiaries are consolidated using the purchase method of
accounting.
Under the merger method of accounting, the results of subsidiaries are presented as if the merger had been
effected throughout the current and previous financial years. The assets and liabilities combined are accounted
for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer.
On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit
difference is classified as a non-distributable reserve. Any share premium, capital redemption reserve and any
other reserves which are attributable to share capital of the merged enterprises, to the extent that they have not
been capitalised by a debit difference, are reclassified and presented as movement in other capital reserves.