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SEE HUP SENG LIMITED
Annual Report 2012
46
Notes to the Financial Statements
31 DECEMBER 2012
2 Significant Accounting Policies (Continued)
(c) Group Accounting (Continued)
(iii) Associated company
Associated company is an entity over which the Group has significant influence, but not control,
generally accompanied by a shareholding giving rise to between and including 20% and 50%
of the voting rights. Investment in an associated company is accounted for in the consolidated
financial statements using the equity method of accounting. Investment in an associated company
in the consolidated balance sheet includes goodwill (net of any accumulated impairment losses)
identified on acquisition and is assessed for impairment as part of the investment.
Investment in an associated company is initially recognised at cost. The cost of an acquisition is
measured at the fair value of the assets given, equity instruments issued or liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill on
an associated company represents the excess of the cost of acquisition of the associates over
the Group’s share of the fair value of the identifiable net assets of the associates and is included
in the carrying amount of the investment.
In applying the equity method of accounting, the Group’s share of its associated company’s post-
acquisition profits or losses is recognised in the statement of comprehensive income and its share
of post-acquisition movements in reserves is recognised in equity directly. These post-acquisition
movements are adjusted against the carrying amount of the investment. When the Group’s share
of losses in the associated company equals or exceeds its interest in the associated company,
including any other unsecured non-current receivables, the Group does not recognise further
losses, unless it has obligations or has made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated company are eliminated to
the extent of the Group’s interest in the associated company. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred. The accounting
policies of the associated company have been changed where necessary to ensure consistency
with the accounting policies adopted by the Group.
After application of the equity method, the Group determines whether it is necessary to recognise
an additional impairment loss on the Group’s investment in its associated company. The Group
determines at each balance sheet date whether there is any objective evidence that the investment
in the associated company is impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associated company and its
carrying value and recognises the amount in profit or loss.
The financial statements of the associated company are prepared as the same reporting date as
the Company. Where necessary, adjustments are made to bring the accounting policies in line
with those of the Group.