Creative 2009 Annual Report Download - page 31

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CREATIVE฀TECHNOLOGY฀LTD฀AND฀ITS฀SUBSIDIARIES
When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or
cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.
(g) Assessment of the probability of the outcome of current litigation
The Group records provisions for loss contingencies when it is probable that a liability has been incurred and the amount
of loss can be reasonably estimated.
(h) Income taxes
In preparing its financial statements, the Group estimates its income taxes for each of the jurisdictions in which it operates.
This involves estimating the actual current tax exposure, assessing temporary differences resulting from differing treatment
of items, such as reserves and provisions for tax and accounting purposes and accounting for uncertainty in income taxes.
These differences result in current and deferred income tax liabilities, which are included within the Group’s consolidated
balance sheet. The Group recognises deferred income tax assets on carried forward tax losses to the extent there are sufficient
estimated future taxable profits and/or taxable temporary differences against which the tax losses can be utilised. The Group’s
income tax liabilities were US$2,203,000 (2008: US$5,287,000) and deferred income tax liabilities were US$29,510,000
(2008: US$29,746,000) at 30 June 2009.
4. EXPENSES BY NATURE
฀ Group
฀ ฀ 2009฀ 2008฀
฀ US$’000฀ US$’000
฀ Amortisation฀of฀intangible฀assets฀(Note฀19)฀ 75฀ 303
฀ Depreciation฀of฀property฀and฀equipment฀(Note฀18)฀ 8,260฀ 9,720
฀ Employee฀compensation฀(Note฀5)฀ 117,950฀ 153,323
฀ Advertising฀expenses฀ 8,399฀ 21,439
฀ Rental฀expenses฀on฀operating฀leases฀ 19,025฀ 8,875
฀ Research฀and฀development฀expenses฀ 12,780฀ 9,211
฀ Travel,฀entertainment฀and฀transportation฀expenses฀ 5,094฀ 8,187
฀ Write-off฀/฀write-down฀for฀inventory฀obsolescence฀ 4,252฀ 8,497
฀ Allowance฀for฀impairment฀of฀trade฀receivables฀and฀bad฀debts฀written฀off฀฀
฀ (reversal฀of฀allowance฀for฀impairment฀of฀trade฀receivables)฀ 2,460฀ (1,171)
฀ Restructuring฀expenses฀–฀other฀exit฀costs฀ 2,665฀ 4,261
฀ Freight฀charges฀ 19,556฀ 35,602
฀ Legal฀fees฀ 4,635฀ 6,156
฀ Chairman’s฀gift฀of฀shares฀to฀employees฀ –฀ 3,774
฀ Insurance฀ 1,322฀ 1,891฀
Warranty฀ 6,103฀ 18,779
The restructuring charges of US$11,168,000 in the financial year ended 30 June 2009 comprised termination benefits and
costs associated with headcount reductions, primarily in the Group’s global field organisations and facilities costs from
consolidation of certain international offices. Termination benefits of US$8,503,000 represented the costs of involuntary
termination benefits and other exit costs of US$2,665,000 comprised mainly of lease cancellation charges imposed on non-
cancellable operating leases.
The restructuring charges was US$11,668,000 in the financial year ended 30 June 2008 of which US$2,002,000 was charged
to cost of goods sold and the balance of US$9,666,000 was recorded as restructuring charges in the operating expenses.
Termination benefits of US$7,407,000 represented the costs of involuntary termination benefits and other exit costs of
US$4,261,000 comprised mainly of lease cancellation charges imposed on non-cancellable operating leases.
A substantial portion of restructuring charges was related to the selling, general and administrative function for both financial
years ended 30 June 2009 and 2008.
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