Rising Above

NOTES TO FINANCIAL STATEMENTSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 20072. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)2.4 Group accounting (Continued)(c)Associated company and joint venture companyAn associated company is an entity, not being a subsidiary or a joint venture company, in which the Group has significantinfluence. This generally coincides with the Group having 20% or more of the voting power or has representation on theboard of directors.A joint venture company is a contractual arrangement whereby two or more parties undertake an economic activity that issubject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimousconsent of the parties sharing control.The Group’s investment in an associated company and a joint venture company are accounted for using the equity method.Under the equity method, the investments in an associated company and joint venture company are carried in the balancesheet at cost plus post-acquisition changes in the Group’s share of net assets of the associated company and joint venturecompany. The Group’s share of the profit or loss of the associated company and joint venture company are recognised inthe consolidated income statement. Where there has been a change recognised directly in the equity of the associatedcompany and joint venture company, the Group recognises its share of such changes. After application of the equitymethod, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group’s netinvestment in the associated company and joint venture company. The associated company and joint venture companyare equity accounted for from the date the Group obtains significant influence until the date the Group ceases to havesignificant influence over the associated company and joint venture company.Goodwill relating to an associated company and a joint venture company is included in the carrying amount of theinvestment.Any excess of the Group’s share of the net fair value of the associated company’s and joint venture company’s identifiableassets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of theinvestment and is instead included as income in the determination of the Group’s share of the associated company’s andjoint venture company’s profit or loss in the year in which the investment is acquired.When the Group’s share of losses in an associated company and a joint venture company equals or exceeds its interestin the associated company and joint venture company, including any other unsecured receivables, the Group does notrecognise further losses, unless it has incurred obligations or made payments on behalf of the associated company andjoint venture company.The most recent available audited financial statements of the associated company and joint venture company are usedby the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminouswith those of the Group, the share of results is arrived at from the last audited financial statements availableand management financial statements to the end of the accounting year. Consistent accounting polices are applied for liketransactions and events in similar circumstances.2.5 Property, plant and equipment(a)Measurement(i)(ii)All items of property, plant and equipment are initially recognised at cost and subsequently carried at cost lessaccumulated depreciation and accumulated impairment losses.Components of costsThe cost of an item of property, plant and equipment includes its purchase price and any cost that is directlyattributable to bringing the asset to the location and condition necessary for it to be capable of operating in themanner intended by management. The projected cost of dismantling, removal or restoration is also included as partof the cost of property, plant and equipment if the obligation for the dismantling, removal or restoration is incurred asa consequence of acquiring or using the asset. Cost may also include any gains/losses on qualifying cash flow hedgesof foreign currency purchases of property, plant and equipment that are transferred from the hedging reserve.48 YANTAI RAFFLES SHIPYARD LIMITED