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Notes to the Financial Statements (cont’d)<br />
For the financial year ended 31 December 2011<br />
2. Summary of significant accounting policies (cont’d)<br />
2.6 Subsidiaries<br />
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to<br />
obtain benefits from its activities.<br />
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment<br />
losses.<br />
2.7 Associates<br />
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An<br />
associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases<br />
to have significant influence over the associate.<br />
The Group’s investments in associates are accounted for using the equity method based on audited or management<br />
financial statements of the associates. Under the equity method, the investment in associates is measured in the<br />
statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of the associates.<br />
Goodwill relating to associates is included in the carrying amount of the investment. Any excess of the Group’s share of<br />
the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment<br />
is excluded from the carrying amount of the investment and is instead included as income in the determination of the<br />
Group’s share of the associate’s profit or loss for the period in which the investment is acquired.<br />
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not<br />
recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.<br />
After application of the equity method, the Group determines whether it is necessary to recognise an additional<br />
impairment loss on the Group’s investment in its associates. The Group determines at each reporting date whether<br />
there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates<br />
the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and<br />
recognises the amount in profit or loss.<br />
The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary,<br />
adjustments are made to bring the accounting policies in line with those of the Group.<br />
In the Company’s separate financial statements, investments in associates are stated at cost less impairment losses. On<br />
disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in<br />
profit or loss.<br />
2.8 Jointly controlled entity<br />
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject<br />
to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous<br />
consent of the parties sharing control.<br />
A jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity<br />
in which each venturer has an interest. The entity operates in the same way as other entities, except that a contractual<br />
arrangement between the venturers establishes joint control over the economic activity of the entity.<br />
Investments in jointly controlled entities are accounted for in the consolidated financial statements using the equity<br />
method of accounting as described in Note 2.7.<br />
The financial statements of the jointly controlled entities are prepared as of the same reporting date as the Company.<br />
Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.<br />
In the Company’s separate financial statements, its investment in jointly controlled entities is stated at cost less<br />
impairment losses. On disposal of such investment, the difference between net disposal proceeds and the carrying<br />
amount is included in profit or loss.<br />
MALAYSIA SMELTING CORPORATION (43072-A) • ANNUAL REPORT 2011 89