Creative 2010 Annual Report Download - page 29

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29
CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
(d) Disposal
On disposal of an item of property and equipment, the difference between the disposal proceeds and its carrying amount is
recognised in prot or loss when incurred.
2.10 Trade and other payables
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective
interest method.
2.11 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least
12 months after the balance sheet date.
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in prot or loss over the
period of the borrowings using the effective interest method.
2.12 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
more likely than not that an outow of resources will be required to settle the obligation and the amount has been reliably
estimated. Changes in the estimated timing or amount of the expenditure or discount rate are recognised in prot or loss
when the changes arise.
(a) Warranties
The warranty provision represents management’s best estimate of probable liability under its product warranties. Management
determines the warranty provision based on known product failures (if any), historical experience, and other currently
available evidence.
(b) Provision for legal claims and fees
Management records provisions when it is probable that a liability has been incurred and the amount of loss can be reasonably
estimated.
(c) Other provisions
Other provisions are measured at the present value of the expenditure expected to be required to settle the obligation using
a pre-tax discount rate that reects the current market assessment of the time value of money and the risks specic to the
obligation. The increase in the provision due to the passage of time is recognised in prot or loss.
2.13 Fairvalueestimationofnancialassetsandliabilities
The fair values of nancial instruments traded in active markets are based on quoted market prices at the balance sheet
date. The quoted market prices used for nancial assets are the current bid prices; the appropriate quoted market prices for
nancial liabilities are the current asking prices.
The fair values of nancial instruments that are not traded in an active market are determined by using valuation techniques.
The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance
sheet date.
The fair values of current nancial assets and liabilities carried at amortised cost approximate their carrying amounts.