CapitaLand Investment Limited - Annual Report 2021

155 CapitaLand Investment Limited 154 Annual Report 2021 Notes to the Financial Statements Notes to the Financial Statements 2 INTERNAL RESTRUCTURING AND BASIS OF PREPARATION OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued) Pursuant to the Internal Restructuring, the Company increased its share capital to $10,760 million for the settlement of outstanding loans as well as transfer consideration of the entities transferred from CL and its subsidiaries to the Group. Following the completion of the Internal Restructuring of the CapitaLand Group, the Company became the holding company of the Combining Entities. Please refer to page D-16 of Introductory Document dated 17 July 2021 issued by the Group (Introductory Document) for the list of the Combining Entities. The Company, together with the Combining Entities, are hereinafter referred to as the Group. The Group resulting from the above Internal Restructuring is regarded as a continuing entity in 2020 and 2021 as the Group is ultimately controlled by the immediate holding company, CapitaLand Group Pte. Ltd., both before and after the Internal Restructuring. The comparative information presented in these consolidated financial statements relate to the combined financial statements of the Group for the year ended 31 December 2020 which have been prepared using the principles of merger accounting on the basis that the Internal Restructuring, which transfers the interest in the Combining Entities under common control to the Company has been effected before the start of the earliest period presented, or the dates of incorporation of the Combining Entities, or the dates when common control is established, whichever is later. The accounting policy for merger accounting is described in note 3.2(f). In applying merger accounting and preparing the consolidated financial statements, the Group recognised the assets, liabilities and equity of the Combining Entities at their respective historical carrying amounts, adjusted for 22.9% of the interest in CICT and 24.0% of the interest in CapitaLand China Trust (CLCT) which were deemed to be transferred by the CapitaLand Group to the Group before the start of the earliest period presented. CICT and CLCT have been accounted for as associates in the Group’s consolidated financial statements. This adjustment was made to reflect the relevant economic activities of the continuing Group and continuity of the financial information presented. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Basis of preparation a) Statement of compliance The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (International) (SFRS(I)) and International Financial Reporting Standards (IFRS). SFRS(I) are issued by the Accounting Standards Council and comprise standards and interpretations that are equivalent to International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB). All references to SFRS(I) and IFRS are subsequently referred to as SFRS(I) in these financial statements unless otherwise stated. b) Basis of measurement The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below. c) Functional and presentation currency These financial statements are presented in Singapore Dollars, which is the Company’s functional currency. All financial information presented in Singapore Dollars have been rounded to the nearest million, unless otherwise stated. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.1 Basis of preparation (continued) d) Use of estimates and judgements The preparation of the financial statements in conformity with SFRS(I) requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: Note 7 – consolidation; whether the Group has control over the investee Note 10 – recognition of deferred tax assets Note 3.2(a), 31 – accounting for acquisitions as business combinations or asset acquisitions Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: Note 5 – measurement of recoverable amounts of goodwill Note 6, 32 – determination of fair value of investment properties Note 31 – determination of fair value of assets, liabilities and contingent liabilities acquired in business combinations Note 32 – determination of fair value of financial instruments The accounting policies set out below have been applied consistently by the Group entities to all periods presented in these financial statements, except as explained in note 39 which address changes in accounting policies. 3.2 Basis of consolidation (a) Business combinations and property acquisitions The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. In determining whether a particular set of activities and assets or acquisition of a property is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a “concentration test” that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Goodwill arising from business combinations are measured as described in note 3.5(a).