NOTES TO FINANCIAL STATEMENTS
30 June 2015
Annual Report 2015
Karin Technology Holdings Limited
61
2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
BUSINESS COMBINATIONS AND GOODWILL
Business combinations are accounted for using the acquisition method. The consideration transferred is measured
at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the
Group and liabilities assumed by the Group to the former owners of the acquiree. For each business combination,
the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership
interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value
or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling
interests are measured at fair value. Acquisition-related costs are expensed as incurred.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of
the acquiree.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the
amount recognised for non-controlling interests and any fair value of the Group’s previously held equity interests
in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration
and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment,
recognised in profit or loss as a gain on bargain purchase.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested
for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired. The Group performs its annual impairment test of goodwill as at 30 June. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the
synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those
units or groups of units.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-
generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group
of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss
recognised for goodwill is not reversed in a subsequent period.
Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of
the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included
in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed
of in these circumstances is measured based on the relative value of the operation disposed of and the portion
of the cash-generating unit retained.
