Annual Report 2012 - IOI Group

5. SIGNIFICANT ACCOUNTING POLICIES (Continued)5.1 Basis of Consolidation (Continued)5.1.4 Jointly controlled entitiesJointly controlled entities are joint ventures that involve the establishment of a corporation, partnership or other entityover which there is a contractually agreed sharing or joint control over the economic activities of the entities. Jointcontrol exists when strategic financial and operational decisions relating to the activities require the unanimousconsent of all the parties sharing control.In the Company’s separate financial statements, investments in jointly controlled entities are stated at cost lessimpairment losses, if any.Jointly controlled entities are accounted for in the consolidated financial statements using the equity method ofaccounting. The consolidated financial statements include the Group’s share of the income and expenses of the equityaccounted jointly controlled entities, after adjustments to align the accounting policies with those of the Group, fromthe date that joint control commences until the date that joint control ceases.The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that isattributable to the other venturers. The Group does not recognise its share of profits or losses from the joint venturethat result from the purchase of assets by the Group from the joint venture until it resells the assets to an independentparty. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in thenet realisable value of current assets or an impairment loss. When necessary, in applying the equity method,adjustments are made to the financial statements of the jointly controlled entity to ensure consistency of accountingpolicies with those of the Group.Adjustments to the carrying amount may also be necessary for changes in the Group’s proportionate interest in thejointly controlled entity arising from changes in the jointly controlled entity’s equity that have not been recognised inthe jointly controlled entity’s profit or loss. Such changes include those arising from the revaluation of property, plantand equipment and from foreign exchange translation differences. The Group’s share of those changes is recogniseddirectly in equity of the Group.Upon disposal of such investment, the difference between the net disposal proceeds and its carrying amount isincluded in profit or loss.5.1.5 Transactions eliminated on consolidationIntragroup transactions and balances and the resulting unrealised gains are eliminated on consolidation. Unrealisedlosses resulting from intragroup transactions are also eliminated unless cost cannot be recovered.Unrealised profits arising on transactions between the Group and its associates and jointly controlled entities, whichare included in the carrying amount of the related assets and liabilities are eliminated partially to the extent of theGroup’s interests in the associates and jointly controlled entities. Unrealised losses on such transactions are alsoeliminated partially unless cost cannot be recovered.Annual Report 2012IOI CORPORATION BERHAD 135