Directors' Report - Alibaba

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.1 Basis of preparation (Continued)
The Group has not early adopted any of the above new standards, interpretations and amendments to the existing
standards in 2010. Management is in the process of making an assessment of their impact and is not yet in a position
to state whether any substantial changes to the Group’s significant accounting policies and presentation of the financial
information will be resulted.
2.2 Consolidation
The consolidated financial statements of the Group incorporate the financial statements of the Company and of all its direct
and indirect subsidiaries made up to December 31 and include the Group’s interests in associated companies and a jointly
controlled entity. Results of the subsidiaries, associated companies and the jointly controlled entity acquired or disposed
of during the year are dealt with in the consolidated statement of comprehensive income from the effective dates of
acquisition and up to the effective dates of disposal respectively.
Inter-company transactions, balances and unrealized gains on transactions between the consolidated entities or businesses
are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of subsidiaries, associated companies and the jointly controlled entity have been changed
where necessary to ensure consistency with the policies adopted by the Group.
(a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies 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 fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for the acquisitions of subsidiaries of the Group, except
for those acquisitions which are considered as a business combination under common control in a manner similar
to pooling-of-interests and with reference to the principles of merger accounting under Hong Kong Accounting
Guideline 5 “Merger Accounting for Common Control Combinations”.
(i) Acquisition method of accounting
The acquisition method of accounting is used to account for business combinations by the Group. The
consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the
fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are measured initially at their fair values at the acquisition date. On an acquisition-byacquisition
basis, the Group recognizes any non-controlling interests in the acquiree either at fair value or at the
non-controlling interests’ proportionate share of the acquiree’s net assets.
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Alibaba.com Limited Annual Report 2010