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Notes to the Consolidated Financial Statements

31st March 2016

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (Continued)

(iii) New Hong Kong Companies Ordinance (Cap.622)

In addition, the requirements of Part 9 “Accounts and Audit” of the new Hong Kong
Companies Ordinance (Cap. 622) come into operation during the financial year, as a result,
there are changes to presentation and disclosures of certain information in the consolidated
financial statements.

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.

ALCO HOLDINGS LIMITED ANNUAL REPORT 2016 35