Huawei 2015 Annual Report Download - page 59

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The Group controls a subsidiary when it is
exposed, or has rights, to variable returns from
its involvement with the entity and has the
ability to affect those returns through its power
over the entity. When assessing whether the
Group has power, only substantive rights are
considered.
The Group uses the acquisition method to
account for subsidiaries. The difference between
the fair value of the consideration paid and the
fair value of assets, liabilities and contingent
liabilities acquired is recorded as goodwill as
stated in note 14. Transaction costs incurred in
an acquisition are included in operating costs.
Non-controlling interests represent the carrying
value of the net assets of subsidiaries attributable
to non-controlling shareholders. They are not
held at fair value.
When the Group transfers control of a subsidiary,
it is accounted for as a disposal of the entire
interest in that subsidiary, with a resulting gain
or loss being recognised in profit or loss. Any
interest retained in that former subsidiary at the
date when control is lost is recognised at fair
value or, when appropriate, the cost on initial
recognition of an investment in an associate or
joint venture (see note 3(d)).
(d) Associates and joint ventures
An associate is an entity in which the Group
has significant influence, but not control or
joint control, over its management, including
participation in the financial and operating policy
decisions.
A joint venture is an arrangement whereby the
Group and other parties contractually agree
to share control of the arrangement, and have
rights to the net assets of the arrangement.
An investment in an associate or a joint venture
is accounted for in the consolidated financial
statements using the equity method.
Unrealised profits and losses resulting from
transactions between the Group and its
associates and joint ventures are eliminated to
the extent of the Group's interest in the investee,
except where unrealised losses provide evidence
of an impairment of the asset transferred, in
which case they are recognised immediately in
profit or loss.
(e) Financial instruments
(i) Recognition and derecognition
Financial instruments, comprising financial assets
and financial liabilities are recognised in the
consolidated statement of financial position
when the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when
the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive
the contractual cash flows in a transaction in
which substantially all of the risks and rewards of
ownership of the financial asset are transferred or
where it neither transfers nor retains substantially
all of the risks and rewards of ownership and
loses control. When control is retained, the
Group continues to recognise the financial asset
to the extent of its continuing involvement.
The Group derecognises a financial liability
when its contractual obligations are discharged,
cancelled, or expire.
Financial assets and financial liabilities are
offset and the net amount presented in the
consolidated statement of financial position
when, and only when, the Group currently has a
legally enforceable right to set off the recognised
amounts and intends either to settle them on a
net basis or to realise the asset and settle the
liability simultaneously.