NewWorld Development Company Limited
FINANCIAL SECTION
114
3 PRINCIPAL ACCOUNTING POLICIES
(continued)
(a) Consolidation
(continued)
(ii) Joint arrangements
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(1) Joint ventures
(continued)
For equity accounting purpose, accounting policies of joint ventures have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The Company’s interests in joint ventures are stated at cost less provision for impairment losses.
The results of joint ventures are accounted for by the Company on the basis of dividend received
and receivable.
(2) Joint operations
The assets that the Group has the rights and liabilities that the Group has the obligations in relation
to the joint operations are recognised in the consolidated statement of financial position on an
accrual basis and classified according to the nature of the item. The share of expenses that the
Group incurs and its share of income that it earns from the joint operations are included in the
consolidated income statement.
(iii) Associated companies
An associated company is a company other than a subsidiary and a joint venture, in which the Group has
significant influence, but not control, exercised through representatives on the board of directors.
Interests in associated companies are accounted for by the equity method of accounting and are
initially recognised at cost. The Group’s interests in associated companies include goodwill (net of any
accumulated impairment loss) identified on acquisition. 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 associated
companies at the date of acquisition. The interests in associated companies also include long-term
interest that, in substance, form part of the Group’s net investment in the associated companies.
The Group’s share of its associated companies’ post acquisition profits or losses is recognised in the
consolidated income statement, and the share of post-acquisition movements in other comprehensive
income is recognised in the consolidated statement of comprehensive income. The cumulative post-
acquisition movements are adjusted against the carrying amount of the investment. When the share of
losses in an associated company equals or exceeds its interests in the associated company, including any
other unsecured receivable, the Group does not recognise further losses, unless it has incurred legal and
constructive obligations or made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated to
the extent of the Group’s interests in the associated companies. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the asset transferred. For equity accounting
purpose, accounting policies of associated companies have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The Company’s interests in associated companies are stated at cost less provision for impairment losses.
The results of associated companies are accounted for by the Company on the basis of dividend income
received and receivable.
Gains or losses on deemed disposal on dilution arising from interests in associated companies are
recognised in the consolidated income statement.
The cost of an associated company acquired in stages is measured as the sum of consideration paid for
each purchase plus a share of investee’s profits and other equity movements.
The Group ceases to use the equity method from the date an investment ceases to be an associated
company that is the date on which the Group ceases to have significant influence over the associated
company or on the date it is classified as held for sale.
