2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.2 Changes in accounting policies and effects arising from the adoption of new and revised MFRSs (cont’d.) Effective for annual periods beginning on or after 1 April 2021 • Amendments to MFRS 16: Leases (COVID-19 Related Rent Concessions beyond 30 June 2021) The adoption of the above pronouncements did not have any significant financial impact to the Group and the Corporation other than as set out below: (i) Amendments to MFRS 7: Financial Instruments: Disclosures, Amendments to MFRS 9: Financial Instruments, Amendments to MFRS 139: Financial Instruments: Recognition and Measurement and Amendments to MFRS 16: Leases (Interest Rate Benchmark Reform - Phase 2) At 31 December 2021, the Group has interest rate swap arrangements to hedge its USD London Interbank Offered Rate (“LIBOR”) risk. The Group expects that indexation of the hedged items and hedging instruments to USD LIBOR will be replaced with a risk free rate. Whenever the replacement occurs, the Group expects to apply the amendments related to hedge accounting. However, there is uncertainty about when and how replacement may occur. When the change occurs to the hedged item or the hedging instrument, the Group will remeasure the cumulative change in fair value of the hedged item or the fair value of the interest rate swap, respectively based on the risk free rate. Hedging relationships may experience hedge ineffectiveness if there is a timing or other mismatch between the transition of the hedge item and that of the hedging instrument to the risk free rate. Under the Amendments to MFRS 7, MFRS 9, MFRS 139 and MFRS 16: (Interest Rate Benchmark Reform – Phase 2), entities will account for these changes by updating the effective interest rate without the recognition of an immediate gain or loss in the income statement. This applies only to such a change and only to the extent that it is necessary as a direct consequence of interest rate benchmark reform, and the new basis is economically equivalent to the previous basis. The Group will apply these amendments in future periods as and when they become applicable. As of 31 December 2021, the Group and the Corporation have had no transactions for which the benchmark rate had been replaced with an alternative benchmark rate. 2.3 Summary of significant accounting policies The accounting policies set out below have been applied consistently to the periods presented in these financial statements by the Group and the Corporation, unless otherwise stated. (a) Subsidiaries and basis of consolidation (i) Subsidiaries Subsidiaries are entities including structured entities controlled by the Corporation. The Corporation controls an entity when it is exposed to, 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. 2. SIGNIFICANT ACCOUNTING POLICIES (CONT'D.) 2.3 Summary of significant accounting policies (cont’d.) (a) Subsidiaries and basis of consolidation (cont’d.) (i) Subsidiaries (cont’d.) The Corporation 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. In the Corporation’s separate financial statements, investments in subsidiaries are measured at cost less impairment losses, unless the investment is classified as held for sale or distribution. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in the income statement. (ii) Basis of consolidation The consolidated financial statements comprise the financial statements of the Corporation and its subsidiaries as at the reporting date. The financial statements of the subsidiaries are prepared for the same reporting date as the Corporation. Subsidiaries are consolidated from the date of acquisition, being the date which the Corporation obtains control and continue to be consolidated until the date that such control ceases. All intercompany transactions are eliminated on consolidation and hence, revenue and profits relate to external transactions only. Unrealised losses resulting from intercompany transactions are also eliminated, except for instances where cost cannot be recovered. A business combination is a transaction or other event in which an acquirer obtains control of one or more businesses. 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 and the Corporation. The identifiable assets acquired and liabilities assumed are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the aggregate of the fair value of the consideration transferred and the amount of any non-controlling interests in the acquiree. Non-controlling interests are stated either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date. When a business combination is achieved in stages, the Group and the Corporation remeasure their previously held non-controlling equity interest in the acquiree at fair value at the acquisition date, with any resulting gain or loss recognised in the income statement. Increase in the Group’s and the Corporation’s ownership interest in an existing subsidiary is accounted for as equity transactions, with differences between the fair value of consideration paid and the Group’s and the Corporation’s proportionate share of net assets acquired, recognised directly in equity. Transaction costs, other than those associated with the issuance of debt or equity securities, that the Group and the Corporation incur in connection with a business combination are expensed as incurred. NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2021 31 December 2021 MISC Berhad 310 Integrated Annual Report 2021 MISC Berhad Integrated Annual Report 2021 311 FINANCIAL STATEMENTS FINANCIAL STATEMENTS
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