Illustrative Financial Statements 2011 - bdo singapore

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ABC SINGAPORE LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER <strong>2011</strong> (Continued) FRS 1: 112, 117 2. Summary of significant accounting policies (Continued) 2.3 Business Combinations (Continued) Commentary Business combinations involving entities under common control Where a business combination involves entities or businesses under common control, it is outside the scope of FRS 103 and may be accounted for using the pooling of interest method or the acquisition method (when the transaction has substance from the perspective of the reporting entity), please include the following accounting policy where the pooling of interest method is applied: RAP 12: 9 Business combinations involving entities under common control are accounted for by applying the pooling of interest method which involves the following: • the assets and liabilities of the combining entities are reflected at their carrying amounts. • no adjustments are made to reflect the fair values, or recognise any new assets or liabilities. • no goodwill is recognised as a result of the combination. • any difference between the consideration paid/transferred and the equity `acquired' is reflected within the equity as merger reserve. • the statement of comprehensive income reflects the results of the combining entities for the full year, irrespective of when the combination took place. • comparatives are presented as if the entities had always been combined since the date the entities had come under common control. Contingent liabilities recognised in a business combination Where there are contingent liabilities assumed in the business combination, please include the following accounting policy: FRS 103: 56 A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of: • the amount that would be recognised in accordance with the accounting policy for provisions set out in Note 2.23; or • the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with guidance for revenue recognition. 34 | P a g e
ABC SINGAPORE LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER <strong>2011</strong> (Continued) FRS 1: 112, 117 2. Summary of significant accounting policies (Continued) 2.4 Revenue recognition FRS 18: 9, 10 Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sale of goods FRS 18: 14 Revenue from the sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership of the goods and retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Rendering of services FRS 18: 20 Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined as follows: • installation fees are recognised by reference to the stage of completion of the installation, determined as the proportion of the total time expected to install that has elapsed at the end of the financial year; • income from providing financial guarantee is recognised in the profit or loss over the guarantee period on a straight line basis; and • revenue from construction contracts is recognised in accordance with the Group’s accounting policy on construction contracts (see below). Interest income FRS 18: 30(a) Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Dividend income FRS 18: 30 (c) Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established. Royalties FRS 18: 30 (b) Royalty income is recognised on an accrual basis in accordance with the substance of the relevant agreement. Royalties determined on a time basis are recognised on a straight-line basis over the period of the agreement. Royalty arrangements that are based on production, sales and other measures are recognised by reference to the underlying arrangement. Rental income FRS 17: 50; INT FRS 15: 5 Rental income from investment property is recognised on a straight-line basis over the term of the relevant lease. 35 | P a g e
Page 1 and 2: 24 ILLUSTRATIVE FINANCIAL STATEMENT
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