Creative 2009 Annual Report Download - page 28

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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)
2.18 Employee compensation
The Group’s contributions are recognised as employee compensation expense when they are due, unless they can be capitalised
as an asset.
(a) Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate
entities such as the Central Provident Fund or Pension on a mandatory, contractual or voluntary basis. The Group has no
further payment obligations once the contributions have been paid.
(b) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received
in exchange for the grant of options is recognised as an expense in the income statement with a corresponding increase
in shareholders’ equity over the vesting period. The total amount to be recognised over the vesting period is determined
by reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions are included
in the estimation of the number of shares under options that are expected to become exercisable on the vesting date. At
each balance sheet date, the Group revises its estimates of the number of shares under options that are expected to become
exercisable on the vesting date and recognises the impact of the revision of the estimates in the income statement, with a
corresponding adjustment to shareholders’ equity over the remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised
in the share option reserve are credited to share capital account when new ordinary shares are issued, or to the “treasury
shares” account when treasury shares are re-issued to the employees.
2.19 Currency translation
(a) Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of the primary
economic environment in which the entity operates (“functional currency”). The functional currency of the Company is the
United States Dollar (“US$”), which reflects the economic environment in which the activities of the Company are largely
exposed to. The financial statements are presented in United States Dollar.
(b) Transactions and balances
Transactions in a currency other than the United States Dollar (“foreign currency”) are translated into the United States
Dollar using the exchange rates at the dates of the transactions. Currency translation differences from the settlement of such
transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates
at the balance sheet date are recognised in the income statement.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates prevailing at the
date when the fair values are determined.
(c) Translation of Group entities’ financial statements
The results and financial position of all the Group’s entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
(i) Assets and liabilities are translated at the closing exchange rates prevailing at the date of the balance sheet;
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