0175 Geely Automobile Holdings Limited Annual Report 2011

Annual Report 2011Geely Automobile Holdings LimitedNOTES TO THE CONSOLIDATEDFINANCIAL STATEMENTSFor the year ended 31 December 20115. Significant Accounting Policies (Continued)(b)GoodwillGoodwill arising in a business combination is recognised as an asset at the date that control is acquired (theacquisition date). Goodwill is measured as the excess of the aggregate of the fair value of the considerationtransferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’spreviously held equity interest in the acquiree (if any) over the Group’s interest in the net fair value of theacquiree’s identifiable assets and liabilities measured as at the acquisition date.If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceedsthe sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and thefair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognisedimmediately in profit or loss as a bargain purchase gain.Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generatingunits and is tested annually for impairment. In respect of associates, the carrying amount of goodwill isincluded in the carrying amount of the interest in the associate.On disposal of a cash-generating unit or an associate, any attributable amount of purchased goodwill isincluded in the calculation of the profit or loss on disposal.(c)Interests in associatesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary noran interest in a joint venture. Significant influence is the power to participate in the financial and operatingpolicy decisions of the investee but is not control or joint control over these policies.The results and assets and liabilities of associates are incorporated in these consolidated financial statementsusing the equity method of accounting. Under the equity method, investment in associates are carried inthe consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share ofthe net assets of the associate, less any identified impairment loss. When the Group’s share of losses ofan associate equals or exceeds its interest in that associate (which includes any long-term interests that, insubstance, form part of the Group’s net investment in the associate), the Group discontinues recognisingits share of further losses. An additional share of losses is provided for and a liability is recognised onlyto the extent that the Group has incurred legal or constructive obligations or made payments on behalfof that associate.Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets,liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised asgoodwill, which is included within the carrying amount of the investment.Where a group entity transacts with an associate of the Group, profits and losses are eliminated to theextent of the Group’s interest in the relevant associate.Where necessary, adjustments are made to the financial statements of associates to bring their accountingpolicies in line with those used by the Group.68