Page 89 - China Mobile Limited - Annual Report 2012

China Mobile Limited
Annual Report 2012
83
Notes to the Financial Statements
(Expressed in Renminbi unless otherwise indicated)
1 Significant Accounting Policies (Continued)
(d) Associates and jointly controlled entities
An associate is an entity in which the Group has significant influence, but not control or joint control, over its
management, including participation in the financial and operating policy decisions.
A jointly controlled entity is an entity which operates under a contractual arrangement between the Group or the
Company and other parties, where the contractual arrangement establishes that the Group or the Company and
one or more of the other parties share joint control over the economic activity of the entity.
An investment in an associate or a jointly controlled entity is accounted for in the consolidated financial
statements under the equity method.
Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Group’s
share of the acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if
any). Thereafter, the investment is adjusted for the post-acquisition change in the Group’s share of the investee’s
net assets and any impairment loss relating to the investment (see notes 1(j)). The Group’s share of the post-
acquisition, post-tax results of the investee and any impairment losses for the year are recognized as share of
profit or loss in the consolidated statement of comprehensive income, whereas the Group’s share of the post-
acquisition post-tax items of the investee’s other comprehensive income is recognized as other comprehensive
income in the consolidated statement of comprehensive income.
When the Group’s share of losses exceeds its interest in the associate or the jointly controlled entity, the Group’s
interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the
Group’s interest in the investee is the carrying amount of the investment under the equity method together with
the Group’s long-term interests that in substance form part of the Group’s net investment in the associate or the
jointly controlled entity.
Unrealized profits and losses resulting from transactions between the Group and its associates and a jointly
controlled entity are eliminated to the extent of the Group’s interest in the investee, except where unrealized
losses provide evidence of an impairment of the asset transferred, in which case they are recognized immediately
in profit or loss.
In the Company’s balance sheet, investment in an associate or a jointly controlled entity are stated at cost less
impairment losses (see note 1(j)).