Bank Islam Integrated Annual Report 2020

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.1 Basis of preparation (continued) Significant areas of estimation, uncertainty and critical judgements used in applying accounting policies that have significant effect in determining the amount recognised in the financial statements are described in the following notes: • • Note 2.22 and Note 40 – Fair value of financial instruments • • Note 2.9 – Impairment • • Note 11 – Deferred tax assets 2.2 Basis of consolidation (a) Subsidiaries Subsidiaries are entities, including structured entities, controlled by the Bank. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The Group controls an entity when it is exposed, or has rights, to 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. The Group also considers it has de facto power over an investee when, despite not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect the investee’s return. Investments in subsidiaries are measured in the Bank’s statement of financial position at cost less impairment losses, if any. Where there is indication of impairment, the carrying amount of the investment is assessed. A write down is made if the carrying amount exceeds its recoverable amount. (b) Business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which control is transferred to the Group. For new acquisitions, the Group measures the cost of 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. For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair value or at proportionate share of the acquiree’s identifiable net assets at the acquisition date. Transaction costs, 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. Notes to the financial statements for the financial year ended 31 December 2020 202 Financ ial Statement s Accountabi l i t y Addi t ional Informat ion