Creative 2000 Annual Report Download - page 20

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of Creative Technology Ltd and Creative’s subsidiaries under its
effective control from their respective dates of acquisition, after elimination of intercompany transactions and balances. The
consolidated financial statements are presented in accordance with accounting principles generally accepted in the United
States of America (“US GAAP”). The preparation of financial statements in accordance with the generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Creative
conducts a substantial portion of its business in United States dollars (“US$” or “$”). All dollar amounts included in the
financial statements and in the notes herein are United States dollars unless designated as Singapore dollars (“S$”). Creative’s
fiscal year-end is June 30. Creative generally operates on a thirteen week calendar closing on the Friday closest to the natural
calendar quarter. For convenience, all quarters are described by their natural calendar dates.
Foreign exchange
The functional currency of Creative and its subsidiaries is the US dollar and accordingly, gains and losses resulting from the
translation of accounts designated in currencies other than the functional currency are reflected in the determination of net
income (loss). Included in interest and other expenses for fiscals 2000, 1999 and 1998, are exchange (losses) gains of ($7.0
million), ($2.3 million) and $2.2 million, respectively.
At June 30, 2000, monetary assets and liabilities of Creative are denominated in the following currencies:
Approximate Percentage of $ Balance Denominated in:
US$ S$ EURO Other Currencies
Cash and cash equivalents 90 % 3 % 2 % 5 %
Accounts receivable, less allowances 55 % 2 % 31 % 12 %
Total current liabilities 68 % 23 % 2 % 7 %
Long-term obligations – 100 % – –
The exchange rates for the S$ and Euro utilized in translating the balance sheet at June 30, 2000, expressed in US$ per one
S$ and Euro was 0.5790 and 0.9500.
Cash equivalents
Cash equivalents consist of highly liquid investment instruments with maturities of three months or less. All deposits are
in short term deposit and money market accounts with various banks. This diversification of risk is consistent with Creative’s
policy to maintain liquidity and ensure the safety of principal. Included in cash equivalents as of June 30, 2000 and 1999,
are fixed rate deposits of $205.0 million and $243.2 million, respectively.
Marketable Securities
Creative determines the appropriate classification of marketable securities at the time of acquisition and evaluates such
designation at each balance sheet date. For all periods presented, Creative has classified marketable securities as trading
securities, and accordingly such securities are stated at their market values based on the last transacted prices at each balance
sheet date. The resulting net unrealized gains or losses on marketable securities are included in earnings in the period they
are incurred.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS