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62
Hamon Annual Report 2010
Subsidiaries
Subsidiaries are companies that are directly or indirectly
controlled. Control is deemed to exist as soon as the
parent owns, directly or indirectly through subsidiaries,
more than half of the voting power of an entity but as well
as soon as it has the power to govern the entity’s financial
and operating policies in order to obtain benefits from its
activities. Consolidation of the subsidiary companies
starts as of the moment when Hamon controls the entity
until the date on which that control ceases.
Joint Ventures
Entities for which the Group contractually shares control
with one or more co-contractor(s) qualify as joint ventures.
Contractual agreements of this kind ensure that strategic
financial and operating decisions require the unanimous
consent of all the co-contractors. Proportional consolidation
of the jointly controlled entities starts as of the moment joint
control is established until the date on which it ceases.
Associated Companies
Associated companies are the entities over which
Hamon exerts a significant influence by taking part in
the entity’s decisions, without holding control or joint
control. The significant influence is deemed to exist as
soon as the parent owns, directly or indirectly through
subsidiaries, more than twenty percent of the voting
power of an entity. Consolidation of the associated
companies is accounted for using the equity method
until the date on which the significant influence ceases.
Business combinations and changes
in ownership interests
Business combinations carried out prior to 1 January
2010 have been accounted for in accordance with
IFRS 3 prior to the revision effective 1 January 2010.
In accordance with IFRS 3 revised, these business
combinations have not been restated.
The Group applies the purchase method as defined in
IFRS 3 revised, which consists in recognizing the
identifiable assets acquired and liabilities assumed at
their fair values at the acquisition date, as well as any
non-controlling interest in the acquiree.
The main changes that have an impact on the Group’s
consolidated financial statements are as follows:
■ costs related to acquisitions of controlling interests
are expensed;
■ in the event of a business combination achieved in
stages, previously held equity interest in the acquiree
is re-measured at its acquisition-date fair value and
the resulting gain or loss, if any, is recognized in profit
or loss;
■ for each business combination, any non-controlling
interest in the acquiree is measured either at fair value
or at the proportionate share of the acquiree’s
identifiable net assets. Previously, only the latter
option was authorized. The Group will determine on a
case-by-case basis which option it will apply to
recognize non-controlling interests;
■ transactions (purchases or sales) of non-controlling
interests that do not result in a change of control are
recognized as transactions between shareholders.
Consequently, any difference between the fair value
of consideration paid or received and the carrying
amount corresponding to the non-controlling interest
is recognized directly in equity;
Changes introduced by this new standard led the Group
to create an “Impact of changes in consolidation scope”
line in the income statement which is presented as a
non-recurring item.
Put options on non controlling interests
Other non-current liabilities primarily include put
options granted by the Group to non controlling
interests. As no specific guidance is provided by IFRS,
the Group has adopted the following accounting
treatment for these commitments:
■ when the put option is initially granted, the present
value of the strike price is recognized as a non-current
liability, with a corresponding increase of goodwill;
■ at each balance sheet date, the amount of the
non-current liability is revised and any changes in the
amount are recorded with a corresponding adjustment
to goodwill;
■ payments of dividends to non controlling interests
result in an increase in goodwill;
■ in the consolidated income statement, non-controlling
interests are allocated their share in income. In the
consolidated balance sheet, the share in income
allocated to non controlling interests increases the
other non-current liability.
In the case of a fixed-price put, the liability corresponds
to the present value of the strike price.
In the case of a fair value or variable-price put, the
liability is measured based on estimates of the fair value
at the consolidated balance sheet date or contractual
conditions applicable to the exercise price based on the
latest available information.