ANNUAL REPORT 2008 - Gorenje Group

85
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in
these consolidated financial statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable are taken into account. The
financial statements of subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases. The accounting policies of subsidiaries
have been changed when necessary to align them with the policies adopted by the Group.
(ii) Acquisitions from entities under common control
Business combinations arising from transfers of interests in entities that are under the control of
the shareholder that controls the Group are accounted for as if the acquisition had occurred at the
beginning of the earliest comparative period presented or, if later, at the date that common control
was established; for this purpose comparatives are restated. The assets and liabilities acquired
are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s
consolidated financial statements. The components of equity of the acquired entities are added
to the same components within Group equity except that any share capital of the acquired entities
is recognised as part of share premium. Any cash paid for the acquisition is recognised directly
in equity.
(iii) Jointly controlled operations
A jointly controlled operation is a joint venture carried on by each venturer using its own assets in
pursuit of the joint operations. The consolidated financial statements include the assets that the
Group controls and the liabilities that it incurs in the course of pursuing the joint operation, and the
expenses that the Group incurs and its share of the income that it earns from the joint operation.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements. Unrealised
gains arising from transactions with equity accounted investees are eliminated against the investment
to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the
same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities
at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated
in foreign currencies at the reporting date are retranslated to the functional currency at the exchange
rate at that date. The foreign currency gain or loss on monetary items is the difference between
amortised cost in the functional currency at the beginning of the period, adjusted for effective
interest and payments during the period, and the amortised cost in foreign currency translated
at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are retranslated to the functional currency at the
exchange rate at the date that the fair value was determined. Foreign currency differences arising
on retranslation are recognised in profit or loss, except for differences arising on the retranslation of
available-for-sale equity instruments, a financial liability designated as a hedge of the net investment
in a foreign operation, or qualifying cash flow hedges, which are recognised directly in equity.