Acquisition or Merger and Disposal of Subsidiary

1. The results of operations of a subsidiary should be included in the consolidated financial statements based on the method of accounting prescribed in FRS 122₂₀₀₄, Business Combinations. The results of operations of a subsidiary disposed of should be included in the consolidated financial statements up to the date of disposal.

2. In an acquisition, the results of operations of a subsidiary are included in the consolidated financial statements as from the date of acquisition, which is the date on which control of the acquired subsidiary is effectively transferred to the buyer, in accordance with FRS 122₂₀₀₄, Business Combinations. In a merger, the results of operations of a subsidiary are consolidated as if the subsidiary has always been part of the group (see FRS 122₂₀₀₄, Business Combinations for details of the prescribed treatments).

3. The results of operations of a subsidiary disposed of are included in the consolidated income statement until the date of disposal which is the date on which the parent ceases to have control of the subsidiary. A subsidiary should continue to be consolidated even if its net assets are negative or the parent has the intention to either liquidate or dispose of the subsidiary in the foreseeable future. The difference between the proceeds from the disposal of the subsidiary and the carrying amount of its assets less liabilities, together with any goodwill, as of the date of disposal is recognised in the consolidated income statement as the gain or loss on the disposal of the subsidiary.

4. In order to ensure the comparability of the financial statements from one accounting period to the next, supplementary information is often provided about the effect of the acquisition or merger and disposal of subsidiaries on the financial position at the reporting date and the results for the reporting period and on the corresponding amounts for the preceding period.

5. An investment in an enterprise should be accounted for in accordance with FRS 125₂₀₀₄, Accounting for Investments, from the date that it ceases to fall within the definition of a subsidiary and does not become an associate as defined in FRS 128₂₀₀₄, Investments in Associates.

6. The carrying amount of the investment at the date that it ceases to be a subsidiary is regarded as cost thereafter. This carrying amount should include any share of previously consolidated post-acquisition results attributable to the interests that are retained by the investor.

Minority Interests

1. Minority interests should be presented in the consolidated balance sheet separately from liabilities and the parent shareholders equity. Minority interests in the income of the group should also be separately presented.

2. The measurement of minority interests should be based on the prescribed standards in FRS 122₂₀₀₄, Business Combinations. The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in the equity of the subsidiary. The excess, and any further losses applicable to the minority, are charged against the majority interest except to the extent that the minority has a binding obligation to, and is able to, make good the losses. If the subsidiary subsequently reports profits, its the majority interest is allocated all such profits until the minority's share of losses previously absorbed by the majority has been recovered.

1. If a subsidiary has outstanding cumulative preference shares which are held outside the group, the parent computes its share of profits or losses after adjusting for the subsidiary's preference dividends, whether or not dividends have been declared.

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