perspective perspective - ChartNexus

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(b) Basis of consolidation (cont’d)
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All inter-company transactions, balances and unrealised gains on transactions are eliminated; unrealised losses are also
eliminated unless costs cannot be recovered in which case such costs are charged to the income statement immediately.
Where necessary, accounting policies for subsidiary companies have been changed to ensure consistency with the policies
adopted by the Group.
Minority interests are measured at the minority shareholders’ share of the post acquisition fair values of the identifiable
assets and liabilities of the acquiree. Separate disclosure is made of minority interests.
(c) Accounting for associated companies
Associated companies are companies in which the Group exercises significant influence and which are neither subsidiary
companies nor joint ventures of the Group. Significant influence is the power to participate in the financial and operating
policy decisions of the associated companies but not control over those policies. Investments in associated companies are
accounted for in the consolidated financial statements using the equity method of accounting.
Equity accounting involves recognising in the income statement the Group’s share of the results of associated companies
for the financial year. The Group’s investments in associated companies are carried in the balance sheet at an amount that
reflects its share of the net assets of the associated companies. Equity accounting is discontinued when the carrying
amount of the investment in an associated company reaches zero, unless the Group has incurred obligations or guaranteed
obligations in respect of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the
Group’s interest in the associated companies; unrealised losses are also eliminated unless the transaction provides evidence
of impairment of the asset transferred in which case such impairment is charged to the income statement immediately.
Where necessary, in applying the equity method of accounting, adjustments are made to the financial statements of
associated companies to ensure consistency of accounting policies with those of the Group.
(d) Goodwill on consolidation
Goodwill arising on consolidation represents the excess of the cost of acquisition over the fair values of the Group’s share of
the subsidiary and associated companies’ identifiable net assets at the date of acquisition.
Goodwill arising on consolidation is firstly written off against capital reserve arising on consolidation to the extent of the
amount maintained in the balance sheet. In all other cases, goodwill arising on consolidation is charged to the income
statement immediately.
Negative goodwill represents the excess of the fair values of the Group’s share of the subsidiary and associated companies’
identifiable net assets over the cost of acquisition at the date of acquisition.
Negative goodwill is credited to capital reserve arising on consolidation.
(e) Revenue recognition
Revenue from sale of development properties is recognised net of discounts, based on the percentage of completion method.
The stage of completion is measured by reference to the physical proportion of work completed as a percentage of total
physical work of the project as certified by duly appointed consultants.
Revenue from sale of completed properties is recognised net of discounts, in accordance with the terms of the sale and
purchase agreements. The sales consideration of completed properties under instalment schemes are recorded at their fair
values, which is determined by discounting all future receipts using an imputed rate of interest. The difference between
the fair value and the nominal value of the sales consideration is recognised as interest income and taken to the income
statement on a time proportion basis that takes into account the effective yield on the receivables arising from the sale of
completed properties under the instalment schemes over the term of the instalment period.
Revenue from construction contracts is recognised based on the percentage of completion method. The stage of completion
is measured by reference to the proportion that the contract costs incurred for work performed to date bears to the
estimated total costs for the contract as certified by duly appointed consultants.
UNITED MALAYAN LAND BHD