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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
Notes
to the Group annual financial statements
continued
For the year ended 31 May 2017
2.
Group composition
Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an
entity when the Group is exposed to, 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. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for
the acquisition of a subsidiary is the fair value 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 recognises 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 recognised
amounts of acquiree’s identifiable net assets. If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the
acquisition date; any gains or losses arising from such remeasurement are recognised in profit or loss.
Acquisition-related costs are expensed as incurred.
Any contingent consideration to be transferred is recognised 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 are recognised in
profit or loss in other income or other expenses.
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. If the total consideration transferred, non-controlling interest recognised
and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the
case of a bargain purchase, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been
adjusted to conform with the Group’s accounting policies.
The Company accounts for investment in subsidiaries at cost, less accumulated impairment losses.
(b) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity
transactions, i.e. transactions with the owners in their capacity as owners. The difference between fair value of any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in
equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(c) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date
when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture
or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that
entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that
amounts previously recognised in other comprehensive income are reclassified to profit or loss.