Straco Corporation Limited • Annual Report 2014
46
NOTES TO THE FINANCIAL STATEMENTS
3
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied
consistently by the Group entities, except as explained in note 2.5, which addresses changes in the accounting policies.
3.1 Consolidation
Business combinations
Business combinations are accounted for using the acquisition method in accordance with FRS 103
Business Combinations
as at the acquisition date,
which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.
The Group measures goodwill at the acquisition date as:
•
the fair value of the consideration transferred; plus
•
the recognised amount of any non-controlling interests in the acquiree; plus
•
if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree, over the net recognised
amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised
in profit or loss.
Any contingent consideration payable is recognised at fair value at the acquisition date and included in the consideration transferred. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value
of the contingent consideration are recognised in profit or loss.
When share-based payment awards (replacement awards) are exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate
to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the
business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of
the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event
of liquidation are measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s
identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis. All other non-controlling
interests are measured at acquisition-date fair value, unless another measurement basis is required by FRSs.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a
business combination are expensed as incurred.
