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) 2.13 Intangible assets (Continued) Commentary Please include the following accounting policies, where applicable: (i) Club memberships FRS 38: 107 Club memberships are stated at cost less any impairment loss. (ii) Trademarks and licences FRS 38: 74 FRS 38: 97 Trademarks and licences are stated at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to profit or loss using the straight-line method over 15 to 2 years, which is the shorter of their estimated useful lives and periods of contractual rights. (iii) Intangible assets acquired in a business combination FRS 38: 33, 34 FRS 103: 45 FRS 38: 33 FRS 38: 74 Intangible assets acquired in a business combination are identified and recognised separately from goodwill if the assets and their fair values can be measured reliably. The cost of such intangible assets is their fair value as at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. (iv) Land use right 1 FRS 38: 74 FRS 38: 97 FRS 38: 97 Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over the lease term of 25 years. 1 It is assumed that the lease does not transfer substantially all the risks and rewards incidental to ownership of land. Therefore, the lease is an operating lease and the payments made on acquiring the land-use right represent prepaid lease payments. (v) Gain from bargain purchase FRS 103: 34 Gain from bargain purchase represents the excess of the Group’s interest in the net fair value of the identifiable net assets and contingent liabilities of the subsidiaries acquired over the cost of the acquisition at the date of acquisition. The gain is recognised directly in profit or loss unless it arose from acquisitions that took place prior to 1 January 2001 where such gain was adjusted to retained profits in the year of acquisition and is not recognised in profit or loss on disposal. 42 | 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) 2.14 Associates FRS 28: 2 FRS 28: 13 FRS 28: 11 FRS 28: 29, 30 FRS 28: 22 Associates are entities over which the Group has significant influence, but that is neither a subsidiary nor an interest in 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 results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held-for-sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment loss of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are not recognised, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Where a Group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate. This applies to unrealised losses which are also eliminated but only to the extent that there is no impairment. 2.15 Joint venture FRS 31: 3 FRS 31: 15 FRS 31: 24 FRS 31: 30 FRS 31: 42 A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control, which is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. Where a Group entity undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably. Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using proportionate consolidation, except when the investment is classified as held-for-sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. The Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-line basis. Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary (see above). FRS 31: 49 Where the Group transacts with its jointly controlled entities, unrealised profits are eliminated to the extent of the Group’s interest in the joint venture. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no impairment. 43 | P a g e
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