BAKERTECHNOLOGYLIMITED
ANNUALREPORT2013
85
Notes to the
Financial Statements
for the financial year ended 31December 2013
2.
Summaryof significantaccounting policies (cont’d)
2.3 Basis of consolidation andbusiness combination (cont’d)
(b)
Business combinations
Business combinations from 1 January 2010
Business combinations are accounted for by applying the acquisitionmethod. Identifiable assets acquired and liabilities
assumed in a business combination aremeasured initially at their fair values at the acquisition date. Acquisition-related
costs are recognised as expenses in the periods inwhich the costs are incurred and the services are received.
When theGroup acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will
be recognised in accordance with FRS 39 either in profit or loss or as a change to other comprehensive income. If the
contingent consideration is classified as equity, it is not remeasureduntil it is finally settledwithin equity.
Inbusiness combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value
at the acquisition date and any correspondinggainor loss is recognised inprofit or loss.
The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any),
that are present ownership interests and entitle their holders to a proportionate share of net assets in the events of
liquidation, is recognisedon the acquisitiondate at fair value, or at the non-controlling interest’s proportionate share of
the acquiree’s identifiable net assets. Other components of non-controlling interests are measured at their acquisition
date fair value, unless anothermeasurement basis is required by another FRS.
Any 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 is recorded as goodwill. The
accountingpolicy for goodwill is set out inNote2.8. In instanceswhere the latter amount exceeds the former, theexcess
is recognised as gainon bargain purchase inprofit or loss on the acquisitiondate.
In comparison to the abovementioned requirements, the following differences applied:
– Business combinations are accounted for by applying the purchasemethod. Transaction costs directly attributable
to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly known as minority
interest) wasmeasured at the proportionate share of the acquiree’s identifiable net assets.
– Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values
relating to previously held interests are treated as a revaluation and recognised in equity. Any additional acquired
share of interest did not affect previously recognised goodwill.
– When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree
were not reassessed on acquisition unless the business combination resulted in a change in the terms of the
contract that significantlymodified the cash flows that otherwisewould have been required under the contract.
– Contingent considerationwas recognised if, andonly if, theGrouphadapresent obligation, theeconomicoutflow
was more likely than not and a reliable estimate was determinable. Subsequent adjustments to the contingent
considerationwere recognised as part of goodwill.
