Income Taxes

1. Income taxes arising from investments in associates and from partial eliminations of unrealised profits or losses are accounted for in accordance with FRS 112₂₀₀₄, Income Taxes.

Contingencies

1. In accordance with the FRS 137₂₀₀₄, Provisions, Contingent Liabilities and Contingent Assets, the investor discloses:

   1. its share of the contingent liabilities and capital commitments of an associate for which it is also contingently liable; and

   2. those contingent liabilities that arise because the investor is severally liable for all the liabilities of the associate.

Disclosure

1. In addition to the disclosure required by paragraph 14, the following disclosures should be made in the Notes:

   1. an appropriate listing and description of significant associates including the proportion of ownership interest and, if different, the proportion of voting power held;

   2. any reciprocal shareholdings between an investor and its associates; and

   3. the methods used to account for such investments.

1. Investments in associates accounted for using the equity method should be classified as long-term assets and disclosed as a separate item in the balance sheet. In addition, in the consolidated balance sheet, the investing group's interests in associates should be analysed and the following, separately disclosed:

   1. the group's share of the net assets other than goodwill of the associates;

   2. the group's share of any goodwill in the associates own financial statements or consolidated financial statements; and

   3. the goodwill or negative goodwill on acquisition of the group's interests in the associates, to the extent that it has not already been amortised or written-off.

1. The investor's share of the profits or losses and taxes of such investments should be disclosed as a separate item in the income statement. The investor's share of any extraordinary or prior period items should also be separately disclosed. In addition, the investor share of items of income and expenses included in the share of profit before taxes of the associates of such size, nature or incidence as set out by other Financial Reporting Standards should also be disclosed.

   Unrecognised amounts of an investor's share of losses of an associate for the period and cumulatively should be disclosed in the notes to the financial statements.

2. A reporting enterprise that owns significant associates is encouraged to disclose voluntarily the assets, liabilities, revenue and expenses of the associates. Any such disclosure should be in the notes to the financial statements. Guidance on the components of these items is provided in FRS 101₂₀₀₄, Presentation of Financial Statements.

Transitional Provision

1. When the adoption of this Financial Reporting Standard constitutes a change in accounting policy, the effects of the change in accounting policy should be applied retrospectively and the corresponding amounts should be adjusted for the change in policy. If it is not practicable to do so, the effects of the new policy should be applied prospectively to all existing and new associates.

   In disclosing the goodwill or negative goodwill arising on acquisition of existing associates, fair value of net assets acquired should be applied to the extent that it is practicable. If it is not practicable to do so, book value may be used and that fact should be disclosed.

Effective Date

1. This Financial Reporting Standard becomes operative for financial statements covering periods beginning on or after 1 January, 2000.

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