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KUWAIT ENERGY plc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2014
17
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the acquisition
is measured at the aggregate of the consideration transferred, measured at acquisition date fair value and the amount
of any non-controlling interest in the acquiree. For each business combination the acquirer measures the non-
controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net
assets. Acquisition related costs are recognised in the consolidated statement of income as incurred.
Where appropriate, the cost of acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against
the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the
fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant
IFRSs. Changes in the fair value of contingent consideration classified as equity are not recognised.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under
IFRS 3 (revised 2008) are recognised at their fair value at the acquisition date, except for non-current assets (or
disposal groups) that are classified as held for sale in accordance with “IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations”, which are measured at fair value less costs to sell.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities
are recognised, to reflect new information obtained about facts and circumstances that existed as at the acquisition
date that, if known, would have affected the amounts recognised as at that date.
The measurement period is the period from the date of acquisition to the date the Group receives complete
information about facts and circumstances that existed as at the acquisition date and is subject to a maximum of one
year.
Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired entity are
remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if
any, is recognised in the consolidated statement of income. Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in equity are reclassified to the consolidated statement of
income, where such treatment would be appropriate if that interest is disposed of.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over
the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after
reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the
fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in
profit or loss as a bargain purchase gain.
Interests in joint ventures
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties
sharing control.
The considerations made in determining joint control are similar to those necessary to determine control over
subsidiaries.
The Group’s investments in joint ventures are accounted for using the equity method.
Under the equity method, the investment in a joint venture is initially recognised at cost. The carrying amount of the
investment is adjusted to recognise changes in the Group’s share of net assets of the joint venture since the acquisition
date. Goodwill relating to the joint venture is included in the carrying amount of the investment and is neither
amortised nor individually tested for impairment.