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(b) Impairment testing
Intangible assets with indefinite useful lives being goodwill and quota (note 17) are required to be tested for impairment at least
annually. This requires an estimation of the recoverable amount of the quota based on the higher of value in use or fair value
less costs to sell. The determination of the recoverable amount of the quota requires significant estimation and judgement.
(c) Investments in joint ventures and associates
The consolidated financial statements include the Group’s accounts and all other entities in which the Group has a controlling
financial interest, except where the control over the operations is limited by significant participating interests held by another
investor in such operations. Where the Group does not have control, either because of significant participating interests by
other parties or the presence of only significant influence or where there is joint control over an entity, the entity is accounted
for using the equity method for associates, or proportionate consolidation for joint ventures. Controlling financial interest in an
entity is evaluated first by considering whether the entity is a special purpose entity (SPE), a joint venture or an associate
under IFRS.
Judgements and uncertainties
There are a number of areas where significant judgement is exercised to establish whether an entity needs to be consolidated
or reported under the equity method of accounting or proportionate consolidation. In order to establish whether an entity is a
consolidated subsidiary, a joint venture or an associate, key areas of judgement include:
• Qualitative analysis of an entity including review of, among other factors, its capital structure, contractual terms, which
interests create or absorb variability, related party relationships and design of the entity;
• Rights of partners regarding significant business decisions, including disposals and acquisitions of assets;
• Board and management representation;
• Ability to make financing decisions; and
• Operating and capital budget approvals and contractual rights of other parties.
The exercise of judgement on these areas determines whether a particular entity is consolidated or accounted for under the
equity method.
2.4 Principles of consolidation
(a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial
and operating policies, generally accompanying a shareholding of more than one‑half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
de‑consolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred
for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition‑related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an
acquisition‑by‑acquisition basis, the Group recognises any non‑controlling interest in the acquiree either at fair value or at the
non‑controlling interest’s proportionate share of the acquiree’s net assets.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising
from contingent consideration amendments. Cost also includes direct attributable costs of investment.
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 Group’s share of the identifiable net assets
acquired is recorded as goodwill. If this 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 statement of comprehensive income.
2. Summary of significant accounting policies (continued)
waikato raupatu lands trust
notes to the financial statements
f o r t h e y e a r e n d e d 3 1 m a r c h 2 0 1 4
