Annual Report (Complete) - MYCRON Steel Berhad

Notes to the Financial Statements
30 June 2010
(continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b)
Basis of consolidation (continued)
(ii)
Associates
Associates are those corporations, partnerships or other entities in which the Group exercises significant influence,
but which it does not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.
Significant influence is the power to participate in the financial and operating policy decisions of the associates but
not the power to exercise control over those policies.
Investment in associates is accounted for using the equity method of accounting based on management accounts
and is initially recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net
of any accumulated impairment loss (see Note 2 (c)).
Dilution gains and losses in associates are recognised in equity.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its
share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals
or exceeds its interest in the associate, including any other unsecured receivables, the Group’s interest is reduced
to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of impairment
of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial
statements of associates to ensure consistency of accounting policies with those of the Group.
For incremental interest in an associate, the date of acquisition is the purchase date at each stage and goodwill is
calculated at each purchase date based on the fair value of assets and liabilities identified. There is no ‘step up to
fair value’ of the net assets for the previously acquired stake and the share of profits and equity movements for the
previously acquired stake are recorded directly through equity.
(c)
Goodwill
Goodwill represents the excess of the cost of acquisition of subsidiaries and associates over the fair value of the Group’s
share of the identifiable net assets at the date of acquisition. Goodwill on acquisitions of subsidiaries occurring on or after 1
February 2006 are included in the balance sheet as intangible assets. Goodwill on acquisition of associate occurring on or
after 1 February 2006 is included in the carrying amount of the associate and such goodwill is tested for impairment as part
of the overall balance. Goodwill on acquisitions of subsidiaries that occurred prior to 1 February 2006 was charged to the
income statement in the period it arises.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on
goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to
the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business
combination in which the goodwill arose. See accounting policy Note 2 (k) on impairment of assets.
(d)
Property, plant and equipment
(i)
Measurement basis
Property, plant and equipment are initially stated at cost. Land and buildings, plant and machinery and electrical
installation are subsequently shown at fair value, based on periodic, but at least once in every five years by external
valuers or when the fair value of the revalued assets differ materially from its carrying value. Any accumulated
depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net
amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at
cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the items.
pg 56 | Mycron Steel Berhad