Annual Report 2012 - IOI Group

NOTES TO THEFINANCIAL STATEMENTS5. SIGNIFICANT ACCOUNTING POLICIES (Continued)5.1 Basis of Consolidation (Continued)5.1.3 AssociatesAssociates are entities in which the Group and the Company have significant influence and that is neither subsidiariesnor interest in jointly controlled entities. Significant influence is the power to participate in the financial and operatingpolicy decisions of the investees but is not control or joint control over those policies.In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses, ifany. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts isincluded in profit or loss.Investments in associates are accounted for in the consolidated financial statements using the equity method ofaccounting based on the latest financial statements of the associates concerned, from the date significant influencecommences until the date the Group ceases to have significant influence over the associates. The investments inassociates in the consolidated statement of financial position are initially recognised at cost and adjusted thereafter forthe post acquisition changes in the Group’s share of net assets of the investments.The interest in associates is the carrying amount of the investments in associates under the equity method togetherwith any long-term interest that, in substance, form part of the Group’s net interest in the associates.The excess of the cost of investment over the Group’s share of the net fair value of net assets of the associates’identifiable assets, liabilities and contingent liabilities at the date of acquisition represents goodwill. Goodwill relatingto the associate is included in the carrying amount of the investment and is not amortised. The excess of the Group’sshare of the net fair value of the net assets of the associates’ identifiable assets, liabilities and contingent liabilities overthe cost of investment at the date of acquisition is recognised in consolidated profit or loss.The Group’s share of results of the associates during the financial year is recognised in consolidated profit or loss, afteradjustments to align the accounting policies with those of the Group, from the date that significant influencecommences until the date that significant influence ceases. Distributions received from the associates reduce thecarrying amount of the investments. Adjustments to the carrying amount may also be necessary for changes in theGroup’s proportionate interest in the associate arising from changes in the associate’s equity that have not beenrecognised in the associate’s profit or loss. Such changes include those arising from the revaluation of property, plantand equipment and from foreign currency translation differences. The Group’s share of those changes is recogniseddirectly in equity of the Group.When the Group’s share of losses exceeds its interest in the associate, the carrying amount of that interest is reducedto nil and the Group does not recognise further losses unless it has incurred legal or constructive obligations or madepayments on its behalf.The most recent available financial statements of the associates are used by the Group in applying the equity method.Where the reporting period of the financial statements are not coterminous, the share of results is arrived at using thelatest financial statements for which the difference in reporting period is no more than three (3) months. Adjustmentsare made for the effects of any significant transactions or events that occur between the intervening periods.Upon disposal of an investment in associate, the difference between the net disposal proceeds and its carrying amountis included in profit or loss.134IOI CORPORATION BERHADAnnual Report 2012