omnia holdings annual report 2010 omnia holdings annu

1.5 Cost of sales
When inventories are sold, the carrying amount of those
inventories is recognised as an expense in the period in which
the related revenue is recognised. The amount of any writedown
of inventories to net realisable value and all losses of
inventories are recognised as an expense in the period in which
the write-down or loss occurs.
Other Accounting Policies
1.6 Basis of consolidation
Group financial statements include those of Omnia Holdings
Limited and its subsidiaries, joint ventures and associates.
1.6.1 Subsidiaries
Subsidiary undertakings (including special purpose entities),
which are those companies in which the Group, directly or
indirectly, has an interest of more than half of the voting rights,
or otherwise has power to exercise control over the financial and
operating policies, have been consolidated. 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.
Subsidiaries are no longer consolidated from the date that
control ceases.
The purchase method of accounting is used to account for
the acquisition of subsidiaries by the Group. The cost of the
acquisition is measured at the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed
at the date of exchange, plus costs directly attributable to
the acquisition. Identifiable assets and liabilities acquired and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The
excess of the cost of acquisition over the fair value of the
Group’s share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than
the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in the income
statement. Refer to note 1.7.1 for the accounting treatment
of goodwill. All intercompany transactions, balances and
unrealised surpluses or deficits on transactions between
Group companies are eliminated. Unrealised losses are also
eliminated.
Subsidiaries’ accounting policies have been changed where
necessary to ensure consistency with the policies adopted by
the Group.
The Group’s subsidiaries domiciled in Mali, Mauritania and
Senegal have December year ends as required by the respective
authorities.
The Group applies a policy of treating transactions with minority
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 acquired
of the carrying value of the net assets of the subsidiary is
recorded in equity. Gains or losses on disposals to noncontrolling
interests are also recorded in equity.
OMNIA ANNUAL REPORT 2010 81
1.6.2 Joint ventures
The Group’s interests in jointly controlled entities are accounted
for by proportionate consolidation.
The Group combines its share of the joint ventures’ individual
income and expenses, assets and liabilities and cash flows on a
line-by-line basis with similar items in the Group’s financial
statements.
The Group recognises the portion of gains or losses on the sale
of assets by the Group to the joint venture that is attributable to
other venturers. The Group does not recognise its share of
profits or losses from the joint venture that result from the
Group’s purchase of assets from the joint venture until it resells
the assets to an independent party. A loss on the transaction is
recognised immediately if it provides evidence of a reduction in
the net realisable value of current assets, or an impairment loss.
Joint ventures’ accounting policies have been changed where
necessary to ensure consistency with the policies adopted by
the Group.
1.6.3 Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding
of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of
accounting and are initially recognised at cost. The Group’s
investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or
losses is recognised in the income statement, and its share of
post-acquisition movement in reserves is recognised in reserves.
The cumulative post-acquisition movements are adjusted against
the carrying amount of the investment. When the Group’s share
of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group’s interest in
the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been
changed where necessary to ensure consistency with the
policies adopted by the Group.
The Group’s associate, Nalco Africa, has a December year end to
coincide with Nalco Company in the United States of America.
1.7 Intangible assets
1.7.1 Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary/associate at the date of the
acquisition. Goodwill on acquisitions of subsidiaries is included in
intangible assets. Goodwill on acquisition of associates is
included in investments in associates and is tested for
impairment as part of the overall balance. Goodwill is tested
annually on 30 September for impairment and whenever events
or circumstances indicate that the carrying value may not be