## Notes to the financial statements (cont’d) 

For the year ended 30 June 2012 

Control of an entity is identified where the Group has the power to govern the financial and operating policies of that entity so as to obtain benefits from its activities, generally accompanying a shareholding of more than half of the voting rights. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable. 

The benefit funds, and any trusts controlled by those funds, are treated as statutory funds in accordance with the Life Insurance Act 1995. These statutory funds, in addition to the statutory funds of the life insurance business conducted by the Group, are shown separately from shareholder funds in the notes to the financial statements. 

Refer to Note 3(k) Contract classification for information in relation to the different accounting treatment of investment contracts with discretionary participating features. 

## (i) Business combinations 

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. 

The Group measures goodwill at the acquisition date as: 

• the fair value of the consideration transferred; plus 

• the recognised amount of any non-controlling interests in the acquiree; plus 

• if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less 

• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. 

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. 

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. 

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. 

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquiree’s replacement 

awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service. 

## (ii) Non-controlling interests 

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. 

## (iii) Subsidiaries 

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. 

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. 

## (iv) Employee Share Trust (the “Trust”) 

The Group has formed a trust to administer the Group’s employee share scheme. The trust is consolidated, as the substance of the relationship is that the trust is controlled by the Group. Shares held by the Trust are disclosed as treasury shares and are deducted from share capital. 

## (v) Investments in associates (equity-accounted investees) 

Associates are those entities over which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 per cent of the voting power of another entity. 

Investments in its associates are accounted for using the equity method (equity-accounted investees) and are initially recognised at cost. The cost of the investment includes transaction costs. 

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. 

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that 

