Annual Report 2005 - Leeden Limited

Notes to the Financial Statements- 31 December 2005372.4 Principles of consolidation (cont’d)Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost ofbusiness combination is recognised in the profi t and loss account on the date of acquisition.Minority interests represent the portion of profi t or loss and net assets in subsidiary companies not held by the Group. They arepresented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separatelydisclosed in the consolidated profi t and loss account.2.5 Subsidiary companiesA subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts fromits activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, orcontrols more than half of the voting power, or controls the composition of the board of directors.ACE DYNAMICS LIMITEDIn the Company’s separate fi nancial statements, investments in subsidiary companies are accounted for at cost less any impairmentlosses.2.6 Associated companiesAn associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. This generally coincideswith the Group having 20% or more of the voting power, or has representation on the board of directors.The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment inassociate is carried in the consolidated balance sheet at cost plus post-acquisition changes in the Group’s share of net assets ofthe associate. The Group’s share of the profi t or loss of the associate is recognised in the consolidated profi t and loss account.Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes.After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment losswith respect to the Group’s net investment in the associate. The associate is equity accounted for from the date the Group obtainssignifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.Goodwill relating to an associate is included in the carrying amount of the investment.Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over thecost of the investment is excluded from the carrying amount of the investment and is instead included as income in the determinationof the Group’s share of the associate’s profi t or loss in the period in which the investment is acquired.When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecuredreceivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of theassociate.The most recent available audited fi nancial statements of the associates are used by the Group in applying the equity method. Wherethe dates of the audited fi nancial statements used are not co-terminous with those of the Group, the share of results is arrived at fromthe last audited fi nancial statements available and un-audited management fi nancial statements to the end of the accounting period.Consistent accounting policies are applied for like transactions and events in similar circumstances.In the Company’s separate fi nancial statements, investments in associates are accounted for at cost less impairment losses.ANNUAL REPORT 2005