NOTES TO
FINANCIAL STATEMENTS
December 31, 2015
59
CITIC ENVIROTECH LTD.
Annual
Report
2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.4 Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration
transferred in a business combination is measured at fair value, which is calculated as the sum of the
acquisition date fair values of assets transferred by the Group, liabilities incurred by the Group to the
former owners of the acquiree, and equity interests issued by the Group in exchange for control of
the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Where applicable, the consideration for the acquisition includes any asset or liability resulting from
a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent
changes in such fair values are adjusted against the cost of acquisition where they qualify as
measurement period adjustments (see below). The subsequent accounting for changes in the fair
value of the contingent consideration that do not qualify as measurement period adjustments
depends on how the contingent consideration is classified. Contingent consideration that is
classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement
is accounted for within equity. Contingent consideration that is classified as an asset or a liability
is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments:
Recognition and Measurement, or FRS 37 Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages, the Group’s previously held interests in the
acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains
control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss, where such treatment would be appropriate
if that interest were disposed of.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at
their fair value, except that:
deferred tax assets or liabilities and liabilities or assets related to employee benefit
arrangements are recognised and measured in accordance with FRS 12
Income Taxes
and
FRS 19
Employee Benefits
respectively;
liabilities or equity instruments related to share-based payment transactions of the acquire
or the replacement of an acquiree’s share-based payment awards transactions with share-
based payment awards transactions of the acquirer in accordance with the method in FRS 102
Share-based Payment
at the acquisition date; and
assets (or disposal groups) that are classified as held for sale in accordance with FRS 105
Non-current Assets Held for Sale and Discontinued Operations
are measured in accordance
with that standard.
Goodwill is measured as the excess of the sum of the fair value of the consideration transferred in
the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair
value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value
of the acquiree’s identifiable assets and liabilities. In instances where the latter amount exceeds the
former, the excess is recognised as “Gain from bargain purchase” in profit or loss on the acquisition
date.
Non-controlling interests that are present ownership interests and entitle their holders to a
proportionate share of the entities net assets in the event of liquidation may be initially measured
either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts
of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-
by-transaction basis. Other types of non-controlling interests are measured at fair value or, when
applicable, on the basis specified in another FRS.
