KUWAIT ENERGY plc GROUP
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2011
F-131
33.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Business combinations (continued)
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3 (revised 2008) are recognised at their fair value at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in accordance with
“
IFRS 5
Non-current Assets
Held for Sale and Discontinued Operations”
, which are measured at fair value less costs to sell.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which
the combination occurs, the Group reports provisional amounts for the items for which the accounting is
incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional
assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that
existed as at the acquisition date that, if known, would have affected the amounts recognised as at that date.
The measurement period is the period from the date of acquisition to the date the Group receives complete
information about facts and circumstances that existed as at the acquisition date and is subject to a maximum of
one year.
Where a business combination is achieved in stages, the Group’s previously-held interests in the acquired
entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the
resulting gain or loss, if any, is recognised in the consolidated statement of income. Amounts arising from
interests in the acquiree prior to the acquisition date that have previously been recognised in equity are
reclassified to the consolidated statement of income, where such treatment would be appropriate if that interest
is disposed of.
In accordance with normal oil exploration and production industry practice, identifiable assets and liabilities
are ascribed fair values, and the balance of the fair value of the consideration given is typically allocated as the
fair value attributable to the oil and gas properties and related hydrocarbon reserves and therefore, goodwill
does not normally arise on acquisitions.
Interests in joint ventures
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic
activity that is subject to joint control, that is when the strategic financial and operating policy decisions relating
to the activities of the joint venture require the unanimous consent of the parties sharing control.
Where a Group entity undertakes its activities under joint venture arrangements directly, the Group’s share of
jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial
statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred
directly in respect of interests in jointly controlled assets are accounted for on an accrual basis. Income from the
sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture expenses,
are recognised when it is probable that the economic benefits associated with the transactions will flow to/from
the Group and their amount can be measured reliably.
Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an
interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities
using proportionate consolidation
.
The Group’s share of the assets, liabilities, income and expenses of jointly
controlled entities are combined with the equivalent items in the consolidated financial statements on a line-by-
line basis.
Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the
extent of the Group’s interest in the joint venture.
