Creative 2009 Annual Report Download - page 22

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CREATIVE฀TECHNOLOGY฀LTD฀AND฀ITS฀SUBSIDIARIES
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.2 Group accounting (cont’d)
(c) Associated companies (cont’d)
In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profits or
losses are recognised in the income statement and its share of post-acquisition movements in reserves is recognised in
equity directly. These post-acquisition movements are adjusted against the carrying amount of the investment. When the
Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any
other unsecured non-current receivables, the Group does not recognise further losses, unless it has obligations or has made
payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s
interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associated companies have been changed where necessary to
ensure consistency with the accounting policies adopted by the Group.
Dilution gains and losses arising from investments in associated companies are recognised in the income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on investments
in associated companies in the separate financial statements of the Company.
2.3 Intangible assets
(a) Goodwill on acquisitions
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets,
liabilities and contingent liabilities of the acquired subsidiaries and associated companies at the date of acquisition.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment
losses.
Goodwill on associated companies is included in the carrying amount of the investments.
Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill relating
to the entity sold.
(b) Acquired trademarks and licenses
Trademarks and licenses acquired are initially recognised at cost and are subsequently carried at cost less accumulated
amortisation and accumulated impairment losses. These costs are amortised to the income statement using the straight-line
method over the shorter of the contractual rights and estimated useful lives of the assets, ranging from one to ten years.
The amortisation period and amortisation method are reviewed at least at each balance sheet date. The effects of any revision
are recognised in the income statement when the changes arise.
2.4 Impairment of non-financial assets
(a) Goodwill
Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. Goodwill
included in the carrying amount of an investment in an associated company is tested for impairment as part of the investment,
rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating-units (“CGU”)
expected to benefit from synergies arising from the business combination.
NOTES TO THE FINANCIAL STATEMENTS
– For the financial year ended 30 June 2009
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