Annual Report 2010 - Baltika Breweries

Notes to the Consolidated Financial Statements for the year ended 31 December 2010
(e) Changes in accounting policies and presentation
With effect from 1 January 2010, the Group changed its accounting
policies in the following areas:
accounting for business combinations
accounting for leases of land
distribution of non-cash assets to owners of the Group
(i) Accounting for business combinations
From 1 January 2010 the Group has applied IFRS 3 Business
Combinations (2008) in accounting for business combinations. The
change in accounting policy has been applied prospectively and has had
no material impact on earnings per share.
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which control
is transferred to the Group. Control is the power to govern the financial
and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, the Group takes into consideration
potential voting rights that currently are exercisable.
Acquisitions on or after 1 January 2010
For acquisitions on or after 1 January 2010, the Group measures
goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the
acquiree; plus, if the business combination is achieved in stages,
the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable
assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised
immediately in profit or loss.
The consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are generally
recognised in profit or loss.
3. Significant accounting policies
The accounting policies set out below have been consistently applied
to all periods presented in these consolidated financial statements, and
have been applied consistently by Group entities, except as explained
in note 2(e), which addresses changes in accounting policies.
Certain comparative amounts have been reclassified to conform with
the current year’s presentation in the amount of RUB 71,417 thousand
resulting in an increase of revenue and an increase of cost of sales for
the same amount.
Management believes that such presentation is more appropriate.
(a) Basis of consolidation
(i) Business combinations
The Group has changed its accounting policy with respect to accounting
for business combinations. See note 2(e)(i) for further details.
Costs related to the acquisition, other than those associated with the
issue of debt or equity securities, that the Group incurs in connection
with a business combination, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the
acquisition date. If the contingent consideration is classified as equity,
it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes to the fair value of the contingent
consideration are recognised in profit or loss.
For the measurement of goodwill prior to 1 January 2010, see note 3(f)
(i).
(ii) Accounting for leases of land
The amendment to IAs 17 Leases regarding the leases of land
became effective from 1 January 2010. The amendment removed
the earlier exemption which allowed leases of land to be classified
as operating leases regardless of the length of the lease term. The
amended guidance requires all existing leases of land to be reassessed
and reclassified if necessary as finance leases if the finance lease
classification criteria are met. At 1 January 2010, the Group reassessed
all existing land lease contracts and as a result it was assessed that
existing land lease contracts do not qualify as finance lease contracts
and, therefore, the classification was not changed (see note 25).
(f) Accounting policies for new transactions and events
Distributions of non-cash assets to owners of the Company
From 1 January 2010 the Group has applied IFRIC 17 Distributions
of Non-cash Assets to Owners in accounting for distributions of non-cash
assets to owners of the Company. The new accounting policy has been
applied prospectively.
The Group measures a liability to distribute non-cash assets as a dividend
to the owners of the Company at the fair value of the assets to be
distributed. The carrying amount of the dividend is remeasured at each
reporting date and at the settlement date, with any changes recognised
directly in equity as adjustments to the amount of the distribution. On
settlement of the transaction, the Group recognises the difference, if any,
between the carrying amount of the assets distributed and the carrying
amount of the liability in profit or loss.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that
control ceases. The accounting policies of subsidiaries have been
changed when necessary to align them with the policies adopted by the
Group. Losses applicable to the non-controlling interests in a subsidiary
are allocated to the non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
(iii) Loss of control
Upon the loss of control, the Group derecognises the assets and
liabilities of the subsidiary, any non-controlling interests and the other
components of equity related to the subsidiary. Any surplus or deficit
arising on the loss of control is recognised in profit or loss. If the Group
retains any interest in the previous subsidiary, then such interest
is measured at fair value at the date that control is loSt. Subsequently it
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