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Notes to the Consolidated Financial Statements

31st March 2015

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Subsidiaries

2.2.1 Consolidation

A subsidiary is an entity (including a structured entity) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power
over the entity. Subsidiaries are consolidated from the date on which control is transferred to
the Group. They are deconsolidated from the date that control ceases.

(a) Business combinations

The Group applies the acquisition method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair values of the
assets transferred, the liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquiree on an acquisition-by-
acquisition basis. Non-controlling interests in the acquiree that are present ownership
interests and entitle their holders to a proportionate share of the entity’s net assets
in the event of liquidation are measured at either fair value or the present ownership
interests’ proportionate share in the recognised amounts of the acquiree’s identifiable
net assets.

All other components of non-controlling interests are measured at their acquisition date
fair values, unless another measurement basis is required by HKFRS.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquirer’s previously held equity
interest in the acquiree is remeasured to fair value at the acquisition date through
consolidated income statement.

Any contingent consideration to be transferred by the Group is recognised at fair
value at the acquisition date. Subsequent changes to the fair value of the contingent
consideration that is deemed to be an asset or liability is recognised in accordance
with HKAS 39 either in consolidated income statement or as a change to other
comprehensive income. Contingent consideration that is classified as equity is not
remeasured, and its subsequent settlement is accounted for within equity.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2015 37