Annual report - front page - Jubilee Insurance

NOTES TO THE FINANCIAL STATEMENTSAS AT 31ST DECEMBER 2011 (CONTINUED)2.2. CONSOLIDATIONa) SubsidiariesSubsidiaries are all entities over which the Group has the power to govern the financial and operating policies (so as to obtainbenefits from its activities) generally accompanying a shareholding of more than one half of the voting rights. Subsidiariesare fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the datethe control ceases.The Group uses the acquisition method of accounting to account for business combinations. The consideration transferredfor the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interestsissued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingentconsideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilitiesand contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.On an acquisition-by-acquisition basis, the Group recognizes any non-controlling interest in the acquiree either at fair valueor at the non-controlling interest’s proportionate share of the acquiree’s net assets.Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in considerationarising from contingent consideration amendments. Cost also includes direct attributable costs of investment.The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisitiondate fair value over any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiablenet assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in thecase of a bargain purchase, the difference is recognized directly in profit or loss.Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated.Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted bythe Group.Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in considerationarising from contingent consideration amendments. Cost also includes direct attributable costs of investment.b) Investment in AssociatesAssociates are all entities over which the Group has significant influence but not control, generally accompanying ashareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equitymethod of accounting and are initially recognised at cost. The Group’s investments in associates include goodwill identifiedon acquisition net of all accumulated impaired losses.The Group’s share of its associates’ post-acquisition income statement is recognised in the profit and loss account, and itsshare of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movementsare adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals orexceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses,unless it has incurred obligations or made payments on behalf of the associateUnrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interestin the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of theasset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with thepolicies adopted by the Group.Dilution of gains and losses arising from investment in associates are recognised in the income statement.c) Functional currency and translation of foreign currencies(i)(ii)Functional and presentation currencyItems included in the financial statements of each of the Group’s entities are measured using the currency of theprimary economic environment in which the entity operates (‘the functional currency’). The consolidated financialstatements are presented in Kenya Shillings, which is the Company’s functional and presentation currency.Transactions and balancesForeign currency transactions are translated into the functional currency of the respective entity using the exchangerates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement ofsuch transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominatedin foreign currencies are recognized in the income statement.JUBILEE HOLDINGS LIMITEDAnnual Report and Financial Statements 2011 25