FY 2012 - Investor Relations - NIS

investment income and (iii) measures and evaluates its investments on a fair value basis. An investment entitywill be required to account for its subsidiaries at fair value through profit or loss, and to consolidate only thosesubsidiaries that provide services that are related to the entity’s investment activities. IFRS 12 was amended tointroduce new disclosures, including any significant judgements made in determining whether an entity is aninvestment entity and information about financial or other support to an unconsolidated subsidiary, whetherintended or already provided to the subsidiary.Unless otherwise described above, the new standards and interpretations are not expected to affect significantly theGroup’s consolidated financial statements.2.3. Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessingperformance of the operating segments in accordance with new governance structure that the Parent has adoptedduring 2012 in compliance with the new Company law of the Republic of Serbia, are the Parent’s Board of Directors andthe General Manager Advisory Board.2.4. Consolidation(1) SubsidiariesSubsidiaries are all entities over which the Group has power to govern the financial and operating policies in order tomake profit from their activity. Subsidiaries are fully consolidated from the date on which control is transferred to theGroup until the date that control ceases.Inter-group transactions, balances and unrealized gains on transactions between Group companies are eliminatedduring the preparation of consolidated financial statements.Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adoptedby the Group.(2) Non-controlling interestsIn consolidated financial statements, non-controlling interests in subisidiaries are presented separatly from Groupequity as non-controlling interests (note 18).(3) AssociatesAssociates are all entities over which the Parent has significant influence but not control, generally accompanying ashareholding of between 20% and 50% of the voting rights.Associates are all entities where the Parent performs common control determined by contract, and where consensusdecides on operating and financial policies.Investments in associates are accounted for using the equity method.2.5. Foreign currency translation(1) Functional and presentation currencyItems included in the consolidated financial statements of each of the Group’s entities are measured using the currencyof the primary economic environment in which the entity operates ( the functional currency’). The consolidated financialstatements are presented in RSD, which is the Group’s presentation currency.(2) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rate prevailing at the dateof the transaction or valuation where items are re-measured. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at the end of the period exchange rates of monetary assets andliabilities denominated in foreign currencies are recognised in the Consolidated Income Statement.Foreign exchange gains and losses that relate to borrowings, cash and cash equivalents and other monetary assets andliabilities are presented in the Consolidated Income Statement within “financial income or expenses“.(3) Group EntitiesThe result and financial position of all group companies whose functional currency is different from the Group'spresentation currency are calculated as follows:--assets and liabilities are translated into the RSD using the exchange rate as at the date of that ConsolidatedBalance Sheet;--income and expenses are transleted at average exchange rates and all resulting foreign exchangedifferences are rocognized in reserves as separate items in equity.2.6. Business combinationsThe Group applies the acquisition method to account for business combinations. The consideration transferred for theacquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners ofthe acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of anyasset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities andcontingent liabilities assumed in a business combination are measured initially at their fair values at the acquisitiondate.Acquisition-related costs are expensed as incurred.2.7. GoodwillGoodwill is measured by deducting the net assets of the acquiree from the aggregate of the consideration transferredfor the acquiree, the amount of non-controlling interest in the acquiree and fair value of an interest in the acquireeheld immediately before the acquisition date. Any negative amount (“bargain purchase”) is recognized in ConsolidatedIncome Statement, after the Group’s Management identified all assets acquired and all liabilities and contingent liabilitiesassumed and reviewed the appropriateness of their measurement.The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Suchamounts are generally recognised in Consolidated Income Statement. Transaction costs, other than those associatedwith the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensedas incurred.244 • FINANCIAL STATEMENTS Annual report for 2012Annual report for 2012FINANCIAL STATEMENTS • 245