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KUWAIT ENERGY PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2016
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 year 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 year 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 year (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 year 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.
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.
Interest in joint arrangements
A joint arrangement is one in which two or more parties have joint control. Joint control is the contractually agreed
sharing of control of an arrangement, which exists only when decisions about the relevant activities require the
unanimous consent of the parties sharing control.
Most of the Group’s activities are conducted through joint operations, whereby the parties that have joint control of
the arrangement have the rights to the assets, and obligations for the liabilities, relating to the arrangement. The Group
reports its interests in joint operations using proportionate consolidation – the Group’s share of the assets, liabilities,
income and expenses of the joint operation are combined with the equivalent items in the consolidated financial
statements on a line-by-line basis.
A joint venture, which normally involves the establishment of a separate legal entity, is a contractual arrangement
whereby the parties that have joint control of the arrangement have the rights to the arrangement’s net assets. The
results, assets and liabilities of a joint venture are incorporated in the consolidated financial statements using the
equity method of accounting.
Where the Group transacts with its joint operations, unrealised profits and losses are eliminated to the extent of the
Group’s interest in the joint operation