Annual Report 2015
FINANCIAL SECTION
113
3 PRINCIPAL ACCOUNTING POLICIES
(continued)
(a) Consolidation
(continued)
(ii) Joint arrangements
Under HKFRS 11, interests in joint arrangements are classified as either joint ventures or joint operations
depending on the contractual rights and obligations of each investor.
(1) Joint ventures
The Group recognises its interests in joint ventures using equity method of accounting. Interests
in joint ventures are stated in the consolidated financial statements at cost (including goodwill on
acquisition) plus the share of post-acquisition results and movements in other comprehensive
income less provision for impairment losses. Goodwill represents the excess of the cost of an
acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired joint
ventures at the date of acquisition.
The Group’s interests in joint ventures include the loans and advances to the joint ventures which,
in substance, form part of the Group’s interests in the joint ventures. The loans and advances to
the joint ventures are a form of commercial arrangement between the parties to the joint ventures
to finance the development of projects and viewed as a mean by which the Group invests in the
relevant projects.
The share of post-acquisition results and other comprehensive income is based on the relevant profit
sharing ratios which vary according to the nature of the joint ventures set out as follows:
(a) Equity joint ventures/joint ventures in wholly foreign owned enterprises
Equity joint ventures/joint ventures in wholly foreign owned enterprises are joint ventures in
respect of which the capital contribution ratios of the venturers are defined in the joint venture
contracts and the profit sharing ratios and share of net assets of the venturers are in proportion
to the capital contribution ratios.
(b) Co-operative joint ventures
Co-operative joint ventures are joint ventures in respect of which the profit sharing ratios of the
venturers and share of net assets upon the expiration of the joint venture periods are not in
proportion to their capital contribution ratios but are as defined in the joint venture contracts.
(c) Companies limited by shares
Companies limited by shares are limited liability companies in respect of which each
shareholder’s beneficial interests therein is in accordance with the amount of the voting share
capital held thereby.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint
venture (which includes any long-term interests that, in substance, form part of the Group’s net
investment in the joint ventures), the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the joint ventures.
The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint
venture that 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 purchase of assets from the joint venture until
it 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.
