Creative 2010 Annual Report Download - page 27

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
(i) Loans and receivables
Loans and receivables are non-derivative nancial assets with xed or determinable payments that are not quoted
in an active market. They are presented as current assets, except for those maturing later than 12 months after the
balance sheet date which are presented as non-current assets. Loans and receivables are presented as “cash and cash
equivalents”, “trade receivables”, “amounts due from subsidiaries”, other receivables and loan within “other current
assets” and “other non-current receivables” on the balance sheet.
(ii) Financial assets, available-for-sale
Financial assets, available-for-sale are non-derivatives that are either designated in this category or not classied 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 nancial 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 ows from the nancial assets have expired or have been
transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a nancial asset,
the difference between the carrying amount and the sale proceeds is recognised in prot or loss. Any amount in the fair
value reserve relating to that asset is transferred to prot or loss.
(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 nancial assets, available-for-sale are recognised separately in prot or loss. 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 nancial asset or a group of nancial
assets is impaired and recognises an allowance for impairment when such evidence exists.
(i) Loans and receivables
Signicant nancial difculties of the debtor, probability that the debtor will enter bankruptcy, and default or signicant
delay in payments are objective evidence that these nancial 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 ows, 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 prot or loss.
The allowance for impairment loss account is reduced through prot or loss 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.