Annual Report - Li Ning

Notes to the Consolidated Financial Statements (Continued)
(All amounts in RMB unless otherwise stated)
2. Summary of significant accounting policies (Continued)
2.2 Consolidation
The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to
31 December.
(a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more than one half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
In the Company’s balance sheet, investments in subsidiaries are stated at cost less provision for impairment losses.
The results of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.
(b) Transactions and minority interests
The Group applies a policy of treating transactions with minority interests as transactions with parties external to the
Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the consolidated
income statement. Purchases from minority interests result in goodwill, being the difference between any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.
(c) Joint ventures
The Group’s interests in jointly controlled entities (‘‘JCE’’) are accounted for by proportionate consolidation. The
Group combines its share of the JCE’s individual income and expenses, assets and liabilities and cash flows on a lineby-line
basis with similar items in the Group’s financial statements. The Group recognises the portion of gains or
losses on the sale of assets by the Group to the JCE that it is attributable to the other venturers. The Group does not
recognise its share of profits or losses from the joint venture that result from the Group’spurchaseofassetsfromthe
joint venture until the Group resells the assets to an independent party. However, a loss on the transaction is
recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or
an impairment loss.
In the Company’s balance sheet, investments in JCE are stated at cost less provision for impairment losses. The
assets of the JCE are accounted for by the Company on the basis of dividend received and receivable.
2.3 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks
and returns that are different from those of other business segments. A geographical segment is engaged in providing
products or services within a particular economic environment that are subject to risks and returns that are different from
those segments operating in other economic environments.
2.4 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of the
primary economic environment in which the entity operates (the ‘‘functional currency’’). The consolidated financial
statements are presented in Renminbi, which is the functional and the presentation currency of the Company.
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