enl commercial limited annual report 2011 - Investing In Africa

Notes to the Financial Statements
Year ended June 30, 2011
(b) Investments in subsidiary companies (continued)
Consolidated financial statements
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 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-by-acquisition basis, the group recognises any non-controlling
interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the
acquiree’s net assets. Subsequent to acquisition, the carrying amount of non-controlling interests is the
amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent
changes in equity. Total comprehensive income is attributed to non-controlling interests even if this
results in the non-controlling interests having a deficit balance.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of
the group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the
fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference
is recognised directly on the statement of comprehensive income.
Inter-company transactions, balances and unrealised gains and losses on transactions between
group companies are eliminated. The accounting policies of subsidiaries have been amended where
necessary to ensure consistency with the policies adopted by the group.
Transactions and non-controlling interests
The group accounts for transactions with non-controlling interests as transactions with equity owners
of the group. For purchases from non-controlling interests, the difference between any consideration
paid and the relevant share of the carrying value of net assets of the subsidiary acquired is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
When the group ceases to have control or significant influence, any retained interests in the entity
is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. The
fair value is the initial carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised
in other comprehensive income in respect of that entity are accounted for as if the group had directly
disposed of the related assets or liabilities. This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit and loss.
(c)
Investments in associates
Separate financial statements of the investor
Investments in associated companies are carried at fair values. The carrying amount is reduced to
recognise any impairment in the value of individual investments.
Consolidated financial statements
An associate is an entity over which the group has significant influence but not control, or joint control.
Investments in associates are accounted for under the equity method.
The group’s investments in associates include goodwill (net of any accumulated impairment loss)
identified on acquisition. Investments in associates are initially recognised at cost as adjusted by post
acquisition changes in the group’s share of the net assets of the associates less any impairment in the
value of individual investments.
When the group’s share of losses exceeds its interest in an associate, the group discontinues
recognising further losses, unless it has incurred legal or constructive obligation or made payments
on behalf of the associate.
ENL Commercial Limited
Annual Report 2011
73