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TEHO INTERNATIONAL INC LTD Annual Report 2012 35
Notes to the
Financial Statements
30 June 2012
2. Summary of Signifcant Accounting Policies (Continued)
Business Combinations
A business combination is transaction or other event which requires that the assets
acquired and liabilities assumed constitute a business. It is accounted for by applying
the acquisition method of accounting. The cost of a business combination includes the
fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the acquirer, in exchange for control of the acquiree. The
acquisition-related costs are expensed in the periods in which the costs are incurred
and the services are received except for any costs to issue debt or equity securities
are recognised in accordance with FRS 32 and FRS 39. As of the acquisition date,
the acquirer recognises, separately from goodwill, the identifiable assets acquired,
the liabilities assumed and any non-controlling interest in the acquiree measured at
acquisition-date fair values as defined in and that meet the conditions for recognition
under FRS 103. Goodwill is an asset representing the future economic benefits arising
from other assets acquired in a business combination that are not individually identified
and separately recognised. If the acquirer has made a gain from a bargain purchase that
gain is recognised in profit or loss. If there is gain on bargain purchase, for the gain on
bargain purchase a reassessment is made of the identification and measurement of the
acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of
the cost of the business combination and any excess remaining after this reassessment
is recognised immediately in profit or loss.
Subsidiaries
A subsidiary is an entity including unincorporated and special purpose entity that is
controlled by the group. Control is the power to govern the financial and operating policies
of an entity so as to obtain benefits from its activities accompanying a shareholding of
more than one half of the voting rights or the ability to appoint or remove the majority of
the members of the board of directors or to cast the majority of votes at meetings of the
board of directors. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the group controls
another entity.
In the company’s own separate financial statements, an investment in a subsidiary
is accounted for at cost less any allowance for impairment in value. Impairment loss
recognised in profit or loss for a subsidiary is reversed only if there has been a change
in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. The net book value of the investment in a subsidiary
is not necessarily indicative of the amount that would be realised in a current market.
2. Summary of Signifcant Accounting Policies (Continued)
Goodwill
Goodwill is recognised as of the acquisition date measured as the excess of (a) over
(b); (a) being the aggregate of: (i) the consideration transferred which generally requires
acquisition-date fair value; (ii) the amount of any non-controlling interest in the acquiree
measured in accordance with FRS 103 (measured either at fair value or as the non-
controlling interest’s proportionate share of the acquiree’s net identifiable assets); and
(iii) in a business combination achieved in stages, the acquisition-date fair value of the
acquirer’s previously held equity interest in the acquiree; and (b) being the net of the
acquisition-date amounts of the identifiable assets acquired and the liabilities assumed
measured in accordance with this FRS 103.
After initial recognition, goodwill acquired in a business combination is measured at
cost less any accumulated impairment losses. Goodwill is not amortised. Irrespective
of whether there is any indication of impairment, goodwill (and also an intangible asset
with an indefinite useful life or an intangible asset not yet available for use) are tested for
impairment, at least annually. Goodwill impairment is not reversed in any circumstances.
For the purpose of impairment testing and since the acquisition date of the business
combination, goodwill is allocated to each cash-generating unit, or groups of cash-
generating units that are expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the acquiree were assigned to those
units or groups of units. Each unit or group of units to which the goodwill is so allocated
represent the lowest level within the entity at which the goodwill is monitored for internal
management purposes and is not larger than a segment.