Huawei 2013 Annual Report Download - page 62

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Notes to the Consolidated Financial Statements Summary
(f) 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. Under the equity method, the
investment is initially recorded at cost,
adjusted for any excess of the Group’s
share of the acquisition-date fair values
of the investee’s identifiable net assets
over the cost of the investment (if any).
Thereafter, the investment is adjusted for
the post acquisition change in the Group’s
share of the investee’s net assets and any
impairment loss relating to the investment
(see note 1(l)). Any acquisition-date excess
over cost, the Group’s share of the post-
acquisition, post-tax results of the investees
and any impairment losses for the year are
recognised in the consolidated statement of
profit or loss, whereas the Group’s share of
the post-acquisition post-tax items of the
investees’ other comprehensive income is
recognised in the consolidated statement
of profit or loss and other comprehensive
income.
When the Group’s share of losses equals
or exceeds its interest in the associate or
the joint venture, the Group’s interest is
reduced to nil and recognition of further
losses is discontinued except to the extent
that the Group has incurred legal or
constructive obligations or made payments
on behalf of the investee. For this purpose,
the Group’s interest is the carrying amount
of the investment under the equity method
together with the Group’s long-term
interests that in substance form part of the
Group’s net investment in the associate or
the joint venture.
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.
If an investment in an associate becomes an
investment in a joint venture or vice versa,
retained interest is not remeasured. Instead,
the investment continues to be accounted
for under the equity method.
In other cases, when the Group ceases to
have significant influence over an associate
or joint control over a joint venture, it is
accounted for as a disposal of the entire
interest in that investee, with a resulting
gain or loss being recognised in profit or
loss. Any interest retained in that former
investee at the date when significant
influence or joint control is lost is recognised
at fair value and this amount is regarded as
the fair value on initial recognition of a
financial asset (see note 1(o)).