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