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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)
(d)
Basis of consolidation (continued)
(i)
Subsidiaries (continued)
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous
equity interest in the acquiree over the fair value of the identifiable net assets acquired is recognised as goodwill. If the total of consideration transferred,
non-controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of
a bargain purchase, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated.
Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.
(ii)
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50%
of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially
recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of
acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other
comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive
income is recognised in other comprehensive income with a corresponding adjustment to 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 does not recognise further losses,
unless it has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group
resumes recognising its share of those profits only after its share of profits equals the share of losses not recognised.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the
Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount
adjacent to ‘share of results of associates’ in the income statement.
Profits and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group’s financial statements
only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Dilution gains and losses arising from investments in associates are recognised in profit or loss.
(iii)
Joint arrangements
A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with one or more parties, where decisions about
the relevant activities relating to the joint arrangement require unanimous consent of the parties sharing control. The classification of a joint arrangement as a
joint operation or a joint venture depends upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement whereby the
joint venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the joint operators have rights to the assets
and obligations for the liabilities, relating to the arrangement.
The Group’s interest in a joint venture is accounted for in the financial statements using the equity method of accounting. Under the equity method of
accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the group’s share of the post-acquisition profits or
losses and movements in other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures
(which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the joint ventures. If the joint venture subsequently reports profits, the Group resumes
recognising its share of those profits only after its share of profits equals the share of losses not recognised. Where an entity loses joint control over a joint
venture but retains significant influence, the Group does not re-measure its continued ownership interest at fair value.
