Annual Report 2011 - Hongkong Land

1 Principal Accounting Policies continued
Basis of preparation continued
Standards and amendments effective after 2011 which are relevant to the Group’s operations and yet to be adopted
continued
IAS 19 (amended 2011) ‘Employee Benefits’ (effective 1st January 2013) requires the assumed return on plan assets recognised
in the profit and loss to be the same as the rate used to discount the defined benefit obligation. It also requires actuarial gains
and losses to be recognised immediately in other comprehensive income and past service costs immediately in profit or
loss. Additional disclosures are required to present the characteristics of benefit plans, the amount recognised in the financial
statements, and the risks arising from defined benefit plans and multi-employer plans. The Group will apply the standard from
1st January 2013.
IAS 27 (2011) ‘Separate Financial Statements’ (effective 1st January 2013) supersedes IAS 27 (2008) and prescribes the
accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares
separate financial statements. There will be no impact on the consolidated financial statements as the changes only affect the
separate financial statements of the investing entity.
IAS 28 (2011) ‘Investments in Associates and Joint Ventures’ (effective 1st January 2013) supersedes IAS 28 (2008) and
prescribes the accounting for investments in associates and joint ventures and sets out the requirements for the application
of the equity method when accounting for investments in associates and joint ventures. The adoption of this standard is not
expected to have any significant impact on the results of the Group as the Group is already following the standard.
In addition to the above, the IASB has also issued IFRS 9 ‘Financial Instruments’ (2009) and IFRS 9 (2010) which are effective
from 1st January 2013. However, in August 2011, the IASB issued an exposure draft that proposes to delay the effective date
of IFRS 9, ‘Financial instruments’, to annual periods beginning on or after 1st January 2015. The original effective date was for
annual periods beginning on or after from 1st January 2013. This proposal is a result of the extension of the IASB’s timeline
for completing the remaining phases (for example, impairment and hedge accounting) of its project to replace IAS 39 beyond
June 2011. IFRS 9 (2009) is the first standard issued as part of a wider project to replace IAS 39. It retains but simplifies the
mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair
value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the
financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply. IFRS 9 (2010)
adds the requirements related to the classification and measurement of financial liabilities, and derecognition of financial assets
and liabilities, to the version issued in November 2009. It also includes those paragraphs of IAS 39 dealing with how to measure
fair value and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as the
requirements of IFRIC 9 ‘Remeasurement of Embedded Derivatives’. The Group will apply the standard from 1st January 2015.
The principal operating subsidiaries, associates and joint ventures have different functional currencies in line with the economic
environments of the locations in which they operate. The functional currency of the Company is United States dollars. The consolidated
financial statements are presented in United States dollars.
The Group’s reportable segments are set out in Note 4.
Basis of consolidation
i) The consolidated financial statements include the financial statements of the Company, its subsidiaries, and its associates
and joint ventures.
ii)
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The purchase
method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition includes
the fair value at the acquisition date of any contingent consideration. In a business combination achieved in stages, the Group
remeasures its previously held interest in the acquiree at its acquisition-date fair value and recognised the resulting gain or
loss in profit and loss. Changes in a parent’s ownership interest in a subsidiary that do not result in the loss of control are
accounted for as equity transactions. When control over a previous subsidiary is lost, any remaining interest in the entity
is remeasured at fair value and the resulting gain or loss is recognised in profit and loss.
All material intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group
companies have been eliminated. The cost of and related income arising from shares held in the Company by subsidiaries
are eliminated from shareholders’ funds and non-controlling interests, and profit respectively.
Annual Report 2011 27