Lenovo 2016 Annual Report Download - page 171

169
2015/16 Annual Report Lenovo Group Limited
2 SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Translation of foreign currencies
(i) Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional currency”).
The financial statements of the Company and of the Group are presented in United States dollars, which
is the Company’s functional and the Group’s presentation currency.
(ii) Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in
the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net
investment hedges.
All foreign exchange gains and losses that relate to monetary assets and liabilities denominated in
foreign currency are presented in the income statement within “Other operating expenses – net”.
Changes in the fair value of monetary securities denominated in foreign currency classified as
available-for-sale are analyzed between translation differences resulting from changes in the amortized
cost of the security and other changes in the carrying amount of the security. Translation differences
related to changes in the amortized cost are recognized in the income statement, and other changes
in the carrying amount are recognized as other comprehensive income/expense and included in the
investment revaluation reserve in equity.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value
through profit or loss are recognized in the income statement as part of the fair value gain or loss.
Translation differences on non-monetary financial assets such as equities classified as available-for-sale
are recognized as other comprehensive income/expense and included in the investment revaluation
reserve in equity.
(iii) The results and financial position of all the group entities that have a functional currency different from
the Group’s presentation currency are translated into the presentation currency as follows:
– assets and liabilities for each balance sheet presented are translated at the closing rate at the date
of that balance sheet;
– income and expenses for each income statement are translated at average exchange rates (unless
this average is not a reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are translated at the rates on the dates of
the transactions); and
– all resulting exchange differences are recognized as other comprehensive income/expense.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets
and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are
recognized as other comprehensive income/expense and included in the exchange reserve in equity.
(iv) On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a foreign
operation, or a disposal involving loss of control over a subsidiary, loss of joint control of a joint venture,
or loss of significant influence over an associate that includes a foreign operation), all of the exchange
differences accumulated in equity in respect of that operation attributable to the equity holders of the
Company are reclassified to the consolidated income statement.
In the case of a partial disposal that does not result in the Group losing control over a subsidiary
that includes a foreign operation, the proportionate share of accumulated exchange differences are
re-attributed to non-controlling interests and are not recognized in the consolidated income statement.
For all other partial disposals (that is, reductions in the Group’s ownership interest in an associate or a
joint venture that do not result in the Group losing influence or joint control), the proportionate share of
the accumulated exchange differences is reclassified to the consolidated income statement.