Axiata Group Berhad - Annual Report 2016

FINANCIAL STATEMENTS

Axiata Group Berhad | Annual Report 2016

153

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

(b) Critical accounting estimates and assumptions (continued)

(v) Contingent liabilities

Determination of the treatment of contingent liabilities is based on the Group’s view of the expected outcome of contingencies after

consulting legal counsel for litigation cases and internal and external experts of the Group for matters in the ordinary course of business.

Please refer to Note 29 and Note 36(d) to the financial statements for legal proceedings that the Group is involved in as at the end of

each reporting period.

(vi) Fair value of derivatives and other financial instruments

Certain financial instruments such as investments and derivative financial instruments are carried on the statement of financial position

at fair value, with changes in fair value reflected in the profit or loss.

Fair values are estimated by reference in part to published price quotations and in part by using valuation techniques. The fair value of

financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation

techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market

conditions existing at the end of each financial reporting period.

(vii) Provision for dismantling, removal or restoration

Fair value estimates of provision for dismantling, removal or restoration generally involve discounted future cash flows, and periodic

accretion of such liabilities due to the passage of time is recorded as finance cost. The significant assumptions used in estimating the

provision are: timing of assets removals; cost of assets removals; expected inflation rates; and the discount rates. There can be no

assurances that actual costs and the probability of incurring obligations will not differ from these estimates.

INCORPORATIONS, ACQUISITIONS, DISSOLUTIONS AND DILUTIONS OF INTERESTS

(a) Incorporations, acquisitions, dissolutions and dilutions of interests during the financial year

(i) Dilution of equity interest and additional investment in Axiata (Cambodia) Holdings Limited [formerly known as Glasswool

Holdings Limited] (“Glasswool”)

On 13 December 2013, Axiata Investments (Cambodia) Limited (“AIC”), a wholly-owned subsidiary of the Company entered into

a Co-operation Agreement with Glasswool (holding company of Smart Axiata Ltd.) and Southern Coast Ventures Inc. (“SCV”). In

accordance with the Co-operation Agreement, Glasswool shall issue to SCV the following additional ordinary shares in Glasswool

subject to no material adverse event as defined in the Co-operation Agreement having occurred prior to the First, Second and Third

anniversary from 19 February 2013 as below:

58 Ordinary Shares following the First Completion Date;

ii)

60 Ordinary Shares following the Second Completion Date; and

iii) 64 Ordinary Shares following the Third Completion Date.

On 8 December 2015, AIC acquired 218 ordinary shares from SCV for a total consideration of RM379.4 million (USD90.0 million).

Effectively, the Group’s equity interest in Glasswool increased from 84.99% to 95.28%. The Group recorded a decrease in consolidated

retained earnings of RM281.1 million and NCI amounting to RM98.3 million in the previous financial year.

On 22 February 2016 (2015: 26 February 2015), Glasswool issued 64 (2015: 60) ordinary shares to SCV resulting in the Group’s equity

interest in Glasswool decreased from 95.28% to 92.48% (2015: 87.46% to 84.99%). As the result, the Group recorded a decrease in

consolidated retained earnings of RM8.9 million (2015: RM0.4 million) and an increase in NCI amounting to RM28.0 million (2015: RM16.9

million) during the financial year.