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2.
Summary of significant accounting policies (cont’d.)
2.4 Basis of consolidation (cont’d.)
2.4.3 Joint arrangements
A joint arrangement is an arrangement of which there is contractually agreed sharing of control by the Group with one or
more parties, where decisions about the relevant activities relating to the joint arrangement require unanimous consent
of the parties sharing control. The classification of a joint arrangement as a joint operation or a joint venture depends
upon the rights and obligations of the parties to the arrangement. A joint venture is a joint arrangement whereby the joint
venturers have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the joint
operators have rights to the assets and obligations for the liabilities, relating to the arrangement.
The Group’s interest in a joint venture is accounted for in the financial statements using the equity method of accounting.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter
to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes
any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does
not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. If the
joint venture subsequently reports profits, the Group resumes recognising its share of those profits only after its share
of profits equals the share of losses not recognised. Where an entity loses joint control over a joint venture but retains
significant influence, the Group does not remeasure its continued ownership interest at fair value.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s
interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to
ensure consistency with the policies adopted by the Group.
2.4.4 Associates
Associates are all entities over which the Group has significant influence but not control or joint control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted
using the equity method of accounting together with any long-term interests that, in substance, form part of the Group’s
net investment in the associate. In this regard, a receivable for which settlement is neither planned nor likely to occur in
the foreseeable future is, in substance, an extension of the Group’s investment in that associate. This does not include
receivable for which adequate collateral exists. Under the equity method, the investment is initially recognised at cost,
and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee
after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of
the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition
movements in other comprehensive income is recognised in other comprehensive income with a corresponding
adjustment to the carrying amount of the investment.When the Group’s share of losses in an associate equals or exceeds
its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses,
unless it has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate
subsequently reports profits, the Group resumes recognising its share of those profits only after its share of profits
equals the share of losses not recognised.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate
is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value and recognises the amount adjacent to ‘share of results of associates’ in
the income statement.
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AirAsia Berhad
REPORTS AND FINANCIAL STATEMENTS