Lenovo 2012 Annual Report Download - page 114

2011/12 Annual Report Lenovo Group Limited
112
NOTES TO THE FINANCIAL STATEMENTS
1 Basis of preparation (continued)
Changes in presentation (continued)
For presentation of segment assets and liabilities, assets and liabilities of certain entities performing centralized functions for
the Group, previously included in market segments based on their respective geographical locations, have been reclassified
to unallocated assets and liabilities. Management considers this is more appropriate in light of their increased roles as
centralized functions. The amounts of assets and liabilities of US$2,717 million and US$4,373 million (2011: US$2,023 million
and US$3,627 million) previously included in respective market segments have been reclassified as unallocated.
The comparative information has been reclassified to conform to the current year’s presentation.
2 Significant accounting policies
The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies
have been consistently applied to all the years presented.
(a) Subsidiaries
(i) Consolidation
The consolidated financial statements include the financial statements of the Company and all of its subsidiaries
made up to March 31.
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the
financial and operating policies generally accompanying a shareholding of more than one half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. The Group also assesses existence of control where it does
not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of
de-facto control. De-facto control may arise from circumstances such as enhanced minority rights or contractual
terms between shareholders, etc.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
Inter-company transactions and balances are eliminated. Profits and losses resulting from inter-company
transactions that are recognized in assets are also eliminated.
Adjustments have been made to the financial statements of subsidiaries when necessary to align their accounting
policies to ensure consistency with the policies adopted by the Group.
(ii) Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes
the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the
recognized amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquirer’s previously held equity interest in the acquiree is
re-measured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability
is recognized in the consolidated income statement or as a change to other comprehensive income. Contingent
consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within
equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable
net assets acquired is recorded as goodwill (Note 2(g)(i)). If it is less than the fair value of the net assets of
the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income
statement.