notes to the financial statements
for the financial year ended 31 December 2014 (Continued)
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.2 Changes in accounting policies and disclosures (continued)
(b)
Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and Company but not yet
effective (continued)
• MFRS 9 Financial Instruments “Classification and Measurement of Financial Assets and Financial Liabilities” will replace MFRS 139 “Financial
instruments: Recognition and Measurement”. MFRS 9 retains but simplifies the mixed measurement model and establishes three primary
measurement categories for financial assets: amortise cost, fair value through Other Comprehensive Income (“OCI”) and fair value through
profit & loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial
asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception
to present changes in fair value through OCI. There is now a new expected credit losses model that replaces the incurred loss impairment model
used in MFRS 139.
For financial liabilities there were no change to classification and measurement except for the recognition of changes in own credit risk in other
comprehensive income, for liabilities designated at fair value through profit or loss.
MFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for the “hedged ratio” to be the same as the one management actually use
for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under MFRS 139.
This standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The Group and the
Company are yet to assess MFRS 9’s full impact.
2.3 Subsidiaries
Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) over which the Group has power to exercise control over
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Potential voting rights are
considered when assessing control only when such rights are substantive.
In the Company’s separate financial statements, investments in subsidiaries are stated at cost less accumulated impairment losses, if any. Where an indication
of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.15
on impairment of non-financial assets.
Subsidiaries acquired from other companies within Wah Seong Corporation Berhad Group as part of the restructuring scheme is accounted for under the
“Predecessor Accounting” method as these were entities under common control. Under the predecessor method of accounting, the subsidiaries are consolidated
as if the subsidiaries have always been part of Wah Seong Corporation Berhad Group.
Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, subsidiaries are fully consolidated from
the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the
fair value of the assets given, equity interests issued and liabilities incurred or assumed at the date of exchange. Acquisition-related costs are expensed to
profit or loss as and when incurred. The cost of acquisition 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 date
of acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is
reflected as goodwill in the statement of financial position – see accounting policy 2.12 (a) on goodwill. If the cost of acquisition is less than the fair value of
the Group’s share of identifiable net assets of the subsidiary acquired, the difference is recognised directly in the profit or loss.
If a business combination achieved in stages, the previously held equity interest in the acquiree is remeasured to its fair value on the date it becomes a
subsidiary and the resulting gain or loss is recognised in profit or loss.
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Wah Seong Corporation Berhad • Annual Report 2014
