Singapore Airlines 2011 Annual Report Download - page 104

SINGAPORE AIRLINES
102
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
2 Summary of Significant Accounting Policies (continued)
(d) Subsidiary, associated and joint venture companies
In the Company’s separate financial statements, investment in subsidiary and associated companies
are accounted for at cost less accumulated impairment losses.
A subsidiary company is defined as an entity over which the Group has the power to govern the
financial and operating policies so as to obtain benefits from its activities, generally accompanied by a
shareholding giving rise to the majority of the voting rights.
An associated company is defined as an entity, not being a subsidiary company or joint venture
company, in which the Group has significant influence, but not control, generally accompanied by
a shareholding giving rise to not less than 20% of the voting rights. A list of the Group’s associated
companies is shown in Note 24 to the financial statements.
The Group’s investments in associated companies are accounted for using the equity method. Under
the equity method, the investment in associated company is measured in the statement of financial
position at cost plus post-acquisition changes in the Group’s share of net assets of the associated
company. Goodwill relating to an associated company is included in the carrying amount of the
investment and is neither amortised nor tested individually for impairment. Any excess of the Group’s
share of the net fair value of the associated company’s identifiable assets, liabilities and contingent
liabilities over the cost of investment is deducted from the carrying amount of the investment and is
recognised as income as part of the Group’s share of profit or loss of the associated company in the
period in which the investment is acquired.
When the Group’s share of losses in an associated company equals or exceeds its interest in the
associated company, the Group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associated company.
After application of the equity method, the Group determines whether it is necessary to recognise
an additional impairment loss on the Group’s investment in its associated companies. The Group
determines at the end of each reporting period whether there is any objective evidence that the
investment in the associated company is impaired. If this is the case, the Group calculates the amount
of impairment as the difference between the recoverable amount of the associated company and its
carrying value and recognises the amount in the profit and loss account.
A joint venture company is a contractual arrangement whereby two or more parties undertake an
economic activity that is subject to joint control, where the strategic financial and operating decisions
relating to the activity require the unanimous consent of the parties sharing control. A list of the
Group’s joint venture companies is shown in Note 25 to the financial statements.
The Group’s share of the results of the joint venture companies is recognised in the consolidated
financial statements under the equity method on the same basis as associated companies.
The most recently available audited financial statements of the associated and joint venture companies
are used by the Group in applying the equity method. Where the dates of the audited financial
statements used are not co-terminous with those of the Group, the share of results is arrived at from
the last audited financial statements available and unaudited management financial statements to the
end of the accounting period. Where necessary, adjustments are made to bring the accounting policies
in line with those of the Group.