Change - S P Setia Berhad

86
Annual report 2008
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 OCTOBER 2008
1. SIGNIFICANT ACCOUNTING POLICIES (cont’d))
(g)
Associated companies
An associated company is an entity in which the Group has significant influence and that is neither a subsidiary company nor
an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions
of the investee, but is not control or joint control over those policies. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when assessing whether the Group has significant influence.
In the Company’s separate financial statements, investments in associated companies are stated at cost less impairment
losses. Impairment losses are charged to income statement.
On disposal, the difference between the net disposal proceeds and the carrying amount of the associated company disposed
of is taken to the income statement.
Investments in associated companies are accounted for in the consolidated financial statements by the equity method of
accounting. Under the equity method, the investments in associated companies are initially recognised at cost and adjusted
thereafter for post-acquisition changes in the Group’s share of net assets of the associated companies.
The Group’s share of net profits or losses and changes recognised directly in the equity of the associated companies are
recognised in the consolidated income statement and consolidated statement of changes in equity, respectively.
An investment in an associated company is accounted for using the equity method from the date on which the Group
obtains significant influence until the date the Group ceases to have a significant influence over the associated company.
Premium relating to an associated company is included in the carrying value of the investment and it is not tested for
impairment separately. Instead, the entire carrying amount of the investment is tested for impairment in accordance with the
accounting policy set out in (v)(ii) below.
Discount on acquisition 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 associated company’s profit or loss in the period in which the investment
is acquired.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the
Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence
of impairment of the asset transferred.
Equity accounting is discontinued when the carrying amount of the investment in an associated company diminishes by
virtue of losses to zero, unless the Group has incurred legal or constructive obligations or made payments on behalf of the
associated company.
The results and reserves of associated companies are accounted for in the consolidated financial statements based on
audited and/or unaudited management financial statements made up to the end of the financial year and prepared using
accounting policies that conform to those used by the Group for like transactions in similar circumstances.