DOOSAN HEAVY INDUSTRIES & CONSTRUCTION CO., LTD. AND ...

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Doosan Heavy Industries & Construction Co., Ltd. and SubsidiariesNotes to the Consolidated Financial StatementsFor the years ended December 31, 2012 and 20113. Significant Accounting Policies, Continued(1) Consolidation, continued(b) Business combination, continued- Indemnification assets are recognized and measured on the same basis as the indemnified liability orasset- Reacquired rights are measured in accordance with special provisions- Liabilities or equity instruments related to share-based payment transactions are measured inaccordance with the method in K-IFRS No. 1102 Share-based Payment- Assets held for sale are measured at fair value less costs to sell in accordance with K-IFRS No. 1105Non-current Assets Held for SaleAs of the acquisition date, non-controlling interests in the acquiree are measured as the non-controllinginterests' proportionate share of the acquiree's identifiable net assets.The consideration transferred in a business combination shall be measured at fair value, which shall becalculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilitiesincurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer.However, any portion of the acquirer's share-based payment awards exchanged for awards held by theacquiree's employees that are included in consideration transferred in the business combination shall bemeasured in accordance with the method described above rather than at fair value.Acquisition-related costs are costs the acquirer incurs to effect a business combination. Those costs includefinder's fees; advisory, legal, accounting, valuation and other professional or consulting fees; generaladministrative costs, including the costs of maintaining an internal acquisitions department; and costs ofregistering and issuing debt and equity securities. Acquisition-related costs, other than those associatedwith the issue of debt or equity securities, are expensed in the periods in which the costs are incurred andthe services are received. The costs to issue debt or equity securities are recognized in accordance with K-IFRS No.1032 Financial Instruments: Presentation and K-IFRS No.1039 Financial Instruments: Recognitionand Measurement.(ii) GoodwillThe Group measures goodwill at the acquisition date as:- The fair value of the consideration transferred; plus- The recognized amount of any non-controlling interests in the acquiree; plus- If the business combination is achieved in stages, the fair value of the pre-existing equity interest in theacquiree; less- The net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed.When the excess is negative, bargain purchase gain is recognized immediately in profit or loss.18
Doosan Heavy Industries & Construction Co., Ltd. and SubsidiariesNotes to the Consolidated Financial StatementsFor the years ended December 31, 2012 and 20113. Significant Accounting Policies, Continued(1) Consolidation, continued(c) Acquisitions from entities under common controlBusiness combinations arising from transfers of interests in entities that are under the control of theshareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning ofthe earliest comparative period presented or, if later, at the date that common control was established; forthis purpose comparatives are revised. The assets and liabilities acquired are recognized at the carryingamounts recognized previously in the Group controlling shareholder’s consolidated financial statements.The components of equity of the acquired entities are added to the same components within Group equityexcept that any share capital of the acquired entities is recognized as part of share premium.(2) Associates and jointly controlled entitiesAn associate is an entity in which the Group has significant influence, but not control, over the entity’sfinancial and operating policies. Significant influence is presumed to exist when the Group holds between20 and 50 percent of the voting power of another entity.Joint ventures are those entities over whose activities the Group has joint control, established by contractualagreement, and require unanimous consent for strategic financial and operating decisions.The investment in an associate is initially recognized at cost and the carrying amount is increased ordecreased to recognize the Group’s share of the profit or loss and changes in equity of the associate after thedate of acquisition. Intra-group balances and transactions, and any unrealized income and expenses arisingfrom intra-group transactions, are eliminated in preparing the consolidated financial statements. Intra-grouplosses recognized as expense if intra-group losses indicate an impairment that requires recognition in theconsolidated financial statements.If an associate uses accounting policies different from those of the Company for like transactions and eventsin similar circumstances, appropriate adjustments are made to its financial statements in applying the equitymethod.When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amountof that interest, including any long-term investments, is reduced to nil and the recognition of further losses isdiscontinued except to the extent that the Group has an obligation or has to make payments on behalf of theinvestee for further losses.(3) Foreign currencies(i) Foreign currency transactionsTransactions in foreign currencies are translated to the respective functional currencies of the Group entitiesat exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreigncurrencies are retranslated to the functional currency using the reporting date’s exchange rate. Nonmonetaryassets and liabilities denominated in foreign currencies that are measured at fair value areretranslated to the functional currency at the exchange rate at the date that the fair value was determined.19
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