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AirAsia X Berhad • Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
AS AT 31 DECEMBER 2014
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group but not yet effective
(continued)
• MFRS 9 ‘Financial Instruments’ (effective from 1 January 2018) will replace MFRS 139 “Financial Instruments: Recognition and Measurement”. The complete
version of MFRS 9 was issued in November 2014.
MFRS 9 retains but simplifies the mixed measurement model in MFRS 139 and establishes three primary measurement categories for financial assets: amortised
cost, fair value through profit or loss and fair value through other comprehensive income (“OCI”). The basis of classification depends on the entity’s business
model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are always measured at fair value through profit
or loss with an irrevocable option at inception to present changes in fair value in OCI (provided the instrument is not held for trading). A debt instrument is
measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest.
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised cost accounting for most financial liabilities, with bifurcation
of embedded derivatives. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an
entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
There is now a new expected credit losses model on impairment for all financial assets that replaces the incurred loss impairment model used in MFRS 139.
The expected credit losses model is forward-looking and eliminates the need for a trigger event to have occurred before credit losses are recognised.
• MFRS 15 ‘Revenue from contracts with customers’ (effective from 1 January 2017) deals with revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from
the good or service. The standard replaces MFRS 118 ‘Revenue’ and MFRS 111 ‘Construction contracts’ and related interpretations.
The Group and the Company are in the process of assessing the full impact of the above standards, amendments to published standards and interpretations on the
financial statements of the Group and of the Company in the year of initial application.
(d)
Basis of consolidation
(i)
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-
controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the
recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured
to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the
contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139 either in profit or loss or as a change to other
comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
