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080
SapuraCrest Petroleum Berhad
Annual Report 2010
noteS to the FinAnCiAl StAtementS
31 January 2010
2. SigniFiCAnt ACCounting PoliCieS (Cont’D)
2.2 Summary of significant accounting policies (cont’d)
(a) Subsidiaries and basis of consolidation (cont’d)
(ii) Basis of consolidation (cont’d)
Acquisitions of subsidiaries are accounted for using the purchase method. The purchase method of accounting involves
allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities
assumed at the date of acquisition. The cost of an acquisition is measured as the aggregate of the fair values, at the date
of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs
directly attributable to the acquisition.
Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in the
income statement.
Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is
measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the
acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.
Acquisition of subsidiaries that meets the conditions of a merger are accounted for using the merger method. Under
the merger method of accounting, the results of subsidiaries are presented as if the merger had been effected
throughout the current and previous years. In the consolidated financial statements, the cost of the merger is
cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded
as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve.
(b) Associates
An associate is an entity, that is neither a subsidiary nor a jointly controlled entity, in which the Group has significant
influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee
but not in control or joint control over those policies.
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting.
Under the equity method, the investment in associate is carried in the consolidated balance sheet at cost adjusted for postacquisition
changes in the Group’s share of net assets of the associate. The Group’s share of the net profit or loss of the
associate is recognised in the consolidated profit or loss account. Where there has been a change recognised directly in the
equity of the associate, the Group recognises its share of such changes.
In applying the equity method, unrealised gains and losses on transactions between the Group and the associate are
eliminated to the extent of the Group’s interest in the associate. After application of the equity method, the Group
determines whether it is necessary to recognise any impairment loss with respect to the Group’s net investment in the
associate. The 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.
Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. 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 in the period in which the investment is acquired.