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Washington H. Soul Pattinson and Company Limited
Annual Report 2016
56
Notes to the Financial Statements
Basis of consolidation
The consolidated financial statements of the Group incorporates the financial statements of Washington H. Soul
Pattinson and Company Limited and its subsidiaries, and equity accounts its associates. A diagram is set out in
note 3, listing the main subsidiaries and associates.
i. Controlled entities (Subsidiaries)
Subsidiaries are all entities 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 to direct the activities of the entity.
Subsidiaries are consolidated from the date on which control is obtained to the date on which control is disposed.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that
may exist.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the income statement,
statement of comprehensive income, statement of changes in equity and statement of financial position respectively.
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions
with equity owners of the Group. For purchases from non-controlling interests, the difference between any
consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
deducted from equity. For disposals to non- controlling interests, differences between any proceeds received
and the relevant share of non-controlling interests are also recorded in equity.
ii. Joint arrangements
A joint arrangement is an arrangement where two or more parties share control. Joint arrangements are classified
as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of
each investor, rather than the legal structure.
Joint operations
A joint operation is a joint arrangement in which the parties that share joint control, have rights to the assets,
and obligations for the liabilities relating to the arrangement. The Group recognises its direct right to the assets,
liabilities; revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities,
revenues and expenses. These have been incorporated into the Group’s financial statements under the appro-
priate headings.
Joint ventures
A joint venture is a joint arrangement in which the parties that share joint control have rights to the net assets
of the arrangement. Interests in joint ventures are accounted for using the equity method, after initially being
recognised at cost.
iii. Associates
Associates are all entities over which the Group has significant influence and are neither subsidiaries nor
jointly controlled. This is generally the case where the Group holds between 20% and 50% of the voting rights.
Investments in associates are accounted for in the consolidated financial statements using the equity method of
accounting, after initially being recognised at cost. The Group’s investment in associates includes goodwill (net of
any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement and
its share of post-acquisition other comprehensive income is recognised in other comprehensive income. The
cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends
received/receivable from associates are recognised in the consolidated financial statements by reducing the
carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any
unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.