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2. Accounting policiesThe interest of minority shareholders in the acquiree is initiallymeasured at the minority’s proportion of the net fair value ofthe assets, liabilities and contingent liabilities recognised.Investments in associatesAn associate is an entity over which the Group hassignificant influence and that is neither a subsidiary noran interest in a joint venture. Significant influence is thepower to participate in the financial and operating policydecisions of the investee but is not control or joint controlover those policies.The results and assets and liabilities of associates areincorporated in these financial statements using theequity method of accounting. Under the equity method,investments in associates are carried in the consolidatedbalance sheet at cost as adjusted for post-acquisitionchanges in the Group’s share of the net assets of theassociate, less any impairment in the value of individualinvestments. Losses of an associate in excess of the Group’sinterest in that associate (which includes any long-terminterests that, in substance, form part of the Group’s netinvestment in the associate) are not recognised, unlessthe Group has incurred legal or constructive obligationsor made payments on behalf of the associate.Any excess of the cost of acquisition over the Group’s shareof the net fair value of the identifiable assets, liabilitiesand contingent liabilities of the associate recognised atthe date of acquisition is recognised as goodwill. Thegoodwill is included within the carrying amount of theinvestment and is assessed for impairment as part of theinvestment. Any excess of the Group’s share of the net fairvalue of the identifiable assets, liabilities and contingentliabilities over the cost of acquisition, after reassessment,is recognised immediately in profit or loss.Where a group entity transacts with an associate of theGroup, profits and losses are eliminated to the extent ofthe Group’s interest in the relevant associate.Interests in joint venturesA joint venture is a contractual arrangement whereby theGroup and other parties undertake an economic activitythat is subject to joint control, that is when the strategicfinancial and operating policy decisions relating to theactivities of the joint venture require the unanimousconsent of the parties sharing control.Where a Group entity undertakes its activities underjoint venture arrangements directly, the Group’s shareof jointly controlled assets and any liabilities incurredjointly with other venturers are recognised in the financialstatements of the relevant entity and classified accordingto their nature. Liabilities and expenses incurreddirectly in respect of interests in jointly controlled assetsare accounted for on an accrual basis. Income from thesale or use of the Group’s share of the output of jointlycontrolled assets, and its share of joint venture expenses,are recognised when it is probable that the economicbenefits associated with the transactions will flowto/from the Group and their amount can be measuredreliably.Joint venture arrangements that involve the establishmentof a separate entity in which each venturer hasan interest are referred to as jointly controlled entities.The Group reports its interests in jointly controlled entitiesusing proportionate consolidation. The Group’sshare of the assets, liabilities, income and expenses ofjointly controlled entities are combined with the equivalentitems in the consolidated financial statements on aline-by-line basis.Any goodwill arising on the acquisition of the Group’sinterest in a jointly controlled entity is accounted for inaccordance with the Group’s accounting policy for goodwillarising on the acquisition of a subsidiary (see below).Where the Group transacts with its jointly controlledentities, unrealised profits and losses are eliminated tothe extent of the Group’s interest in the joint venture.The Company’s and the Group’s proportion of developmentexpenditure incurred through exploration and productionjoint venture arrangements are included withinproperty, plant and equipment - oil and gas properties.96 Financial report