Creative 2009 Annual Report Download - page 24

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24
CREATIVE฀TECHNOLOGY฀LTD฀AND฀ITS฀SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
– For the financial year ended 30 June 2009
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.6 Financial assets (cont’d)
(ii) Financial assets, available-for-sale
Financial assets, available-for-sale are non-derivatives that are either designated in this category or not classified in
any of the other categories. They are presented as non-current assets unless management intends to dispose of the
assets within 12 months after the balance sheet date.
(b) Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to
purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset,
the difference between the carrying amount and the sale proceeds is recognised in the income statement. Any amount in the
fair value reserve relating to that asset is transferred to the income statement.
(c) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs.
(d) Subsequent measurement
Financial assets, available-for-sale are subsequently carried at fair value. Loans and receivables are subsequently carried at
amortised cost using the effective interest method.
Interest and dividend income on financial assets, available-for-sale are recognised separately in the income statement. Changes
in fair values of available-for-sale equity securities are recognised in the fair value reserve, together with the related currency
translation differences.
(e) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial
assets is impaired and recognises an allowance for impairment when such evidence exists.
(i) Loans and receivables
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant
delay in payments are objective evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated
as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the
original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are recognised against the same line item in the income
statement.
The allowance for impairment loss account is reduced through the income statement in a subsequent period when the
amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of
the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised
cost, had no impairment been recognised in prior periods.
(ii) Financial assets, available-for-sale
Significant or prolonged declines in the fair value of the security below its cost and the disappearance of an active
trading market for the security are objective evidence that the security is impaired.
AR09 pg1-64_Final.indd 24 10/2/2009 10:38:07 AM