Creative 2001 Annual Report Download - page 18

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18
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
US GAAP 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 monetary assets and liabilities denominated in currencies other than the US dollar are
reflected in the determination of net income (loss). Creative enters into forward exchange contracts to reduce its
exposure to foreign exchange translation gains and losses. Forward exchange contracts are marked to market each
period and the resulting gains and losses are included in the determination of net income or loss. No forward
exchange contracts were outstanding at June 30, 2001. Included in interest and other expenses for fiscal years 2001,
2000 and 1999 are exchange losses of $3.7 million, $7.0 million and $2.3 million respectively.
At June 30, 2001, 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 86 % 3 % 3 % 8 %
Accounts receivable, less allowances 76 % 2 % 9 % 13 %
Total current liabilities 70 % 21 % 2 % 7 %
Long-term obligations – 100 % – –
The exchange rates for the S$ and Euro utilized in translating the balance sheet at June 30, 2001, expressed in US$
per one S$ and Euro was 0.5490 and 0.8469, respectively.
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, 2001 and 2000 are fixed rate deposits of $132.7 million and $205.0 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS