2012 Annual Report - ZTE

ZTE CORPORATIONNotes to Financial Statements(Prepared under Hong Kong Financial Reporting Standards)31 December 20122.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)Joint venturesA joint venture is an entity set up by contractual arrangement, whereby the Group and other parties undertakean economic activity. The joint venture operates as a separate entity in which the Group and the otherparties have an interest.The joint venture agreement between the venturers stipulates the capital contributions of the joint ventureparties, the duration of the joint venture and the basis on which the assets are to be realised upon itsdissolution. The profits and losses from the joint venture’s operations and any distributions of surplus assetsare shared by the venturers, either in proportion to their respective capital contributions, or in accordancewith the terms of the joint venture agreement.A joint venture is treated as:(a)(b)(c)(d)a subsidiary, if the Group/Company has unilateral control, directly or indirectly, over the joint venture;a jointly-controlled entity, if the Group/Company does not have unilateral control, but has joint control,directly or indirectly, over the joint venture;an associate, if the Group/Company does not have unilateral or joint control, but holds, directly orindirectly, generally not less than 20% of the joint venture’s registered capital and is in a position toexercise significant influence over the joint venture; oran equity investment accounted for in accordance with HKAS 39, if the Group/Company holds, directlyor indirectly, less than 20% of the joint venture’s registered capital and has neither joint control of, noris in a position to exercise significant influence over, the joint venture.Jointly-controlled entitiesA jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participatingparties having unilateral control over the economic activity of the jointly-controlled entity.The Group’s investments in jointly-controlled entities are stated in the consolidated statement of financialposition at the Group’s share of net assets under the equity method of accounting, less any impairment losses.The Group’s share of the post-acquisition results and reserves of jointly-controlled entities is included in theconsolidated profit or loss and consolidated reserves, respectively. Unrealised gains and losses resulting fromtransactions between the Group and its jointly-controlled entities are eliminated to the extent of the Group’sinvestments in the jointly-controlled entities, except where unrealised losses provide evidence of impairmentof the asset transferred. Goodwill arising from the acquisition of jointly-controlled entities is included as partof the Group’s investments in jointly-controlled entities.The results of jointly-controlled entities are included in the Company’s profit or loss to the extent of dividendsreceived and receivable. The Company’s investments in jointly-controlled entities are treated as non-currentassets and are stated at cost less any impairment losses.330