Integrated Reports Senwes Financial Review 2018 - Page 61

FINANCIAL REVIEW to recognise an impairment loss on the group’s investments in its joint ventures. The group determines at each reporting date whether there is any objective evidence that the investments in joint ventures are impaired. If this is the case the group calculates the amount of impairment as the difference between the recoverable amount of joint ventures and its carrying value and recognises the amount in profit or loss. to recognise an impairment loss on the group’s investment in its associate. The group determines at each reporting date whether there is any objective evidence that the in- vestments in the associate are impaired. If this is the case the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and then recognises the amount in profit or loss. Upon loss of joint control over the joint venture, the group measures and recognises any remaining investment at its fair value. Any difference between the carrying amount of the joint venture upon loss of joint control and the fair value of the retained investment and proceeds from disposal, is recognised in profit or loss. Upon loss of significant influence over the associate, the group measures and recognises any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from disposal, is recognised in profit or loss. The company’s interests in joint ventures are accounted for at cost. The company’s investment in its associate is accounted for at cost. 2.1.2 ASSOCIATE The group’s investments in its associate are accounted for using the equity method of accounting. An associate is an entity in which the group has significant influence. Signi­­- f­i­­cant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. Acquisition of shares in investments is reflected as available-for-sale financial assets until significant influence is obtained in that investment, thereafter that investment is recognised as an associate. Under the equity method, the investment in the associate is initially recognised in the statement of financial position at cost. Subsequent to acquisition date the carrying amount of the investment is adjusted with the post acquisition changes in the group’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is not amortised or separately tested for impair- ment. The share of the results of operations of the associate is reflected in profit or loss. This is the profit or loss attributable to equity holders of associates and is therefore profit after tax and non-controlling interests in the subsidiaries of the associates. Adjust- ments are made where the accounting period and accounting policies of the associate are not in line with those of the group. Where a change in other comprehensive income of the associate was recognised, the group recognises its share of any changes and discloses this, where applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the group and its associate are eliminated to the extent of the interest in the associate. After application of the equity method, the group determines whether it is necessary 2.1.3 BUSINESS COMBINATIONS Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measu red at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identi­- fiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the group acquires a business, it assesses the financial assets and liabilities as- sumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. It is then considered in the determination of goodwill. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recog- nition and Measurement, is measured at fair value with changes in fair value recognised in profit or loss. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is clas- sified as equity is not remeasured and subsequent settlement is accounted for within equity. FINANCIAL REVIEW 61