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Notes to the Consolidated Financial Statements

31st March 2016

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Subsidiaries (Continued)

2.2.1 Consolidation (Continued)

(a) Business combinations (Continued)

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.

The excess of the consideration transferred, the amount of any non-controlling interest
in the acquiree and the acquisition-date fair value of any previous equity interest in
the acquiree over the fair value of the identifiable net assets acquired is recorded as
goodwill. If the total of consideration transferred, non-controlling interest recognised
and previously held interest measured is less than the fair value of the net assets of
the subsidiary acquired in the case of a bargain purchase, the difference is recognised
directly in the consolidated income statement.

Intra-group transactions, balances and unrealised gains/losses on transactions between
group companies are eliminated. When necessary, amounts reported by subsidiaries
have been adjusted to conform with the Group’s accounting policies.

(b) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are
accounted for as equity transactions – that is, as transactions with the owners in their
capacity as owners. The difference between fair value of any consideration paid and
the relevant share acquired of the carrying amount of net assets of the subsidiary is
recorded in equity. Gains or losses on disposals to non-controlling interests are also
recorded in equity.

36 ALCO HOLDINGS LIMITED ANNUAL REPORT 2016