Creative 2010 Annual Report Download - page 34

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
basis for the investment is established. Fair values for listed equity securities are determined using quoted market prices. Fair
values for unlisted equity securities are determined by using valuation techniques. The Group uses a variety of methods, such as
asset values, and makes assumptions that are based on market conditions existing at each balance sheet date.
In order to determine whether a decline in value is other-than-temporary, the Group evaluates, among other factors: the
duration and extent to which the fair value has been less than the carrying value; the nancial condition of and business
outlook for the company, including key operational and cash ow metrics, current market conditions and future trends in the
company’s industry, and the company’s relative competitive position within the industry; and the Group’s intent and ability
to retain the investment for a period of time sufcient to allow for any anticipated recovery in fair value. The carrying
amount of the Group’s nancial assets, available-for-sale at 30 June 2010 was US$33,895,000 (2009: US$27,753,000).
 (f) Impairmentofnon-nancialassets
The Group assesses whether there are any indicators of impairment for all non-nancial assets at each reporting date.
Goodwill and other intangibles are tested for impairment annually and at other times when such indicators exist. Other
non-nancial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.
When value-in-use calculations are undertaken, management must estimate the expected future cash ows from the asset or
cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash ows.
(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 nancial 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 sufcient estimated future taxable prots and/or
taxable temporary differences against which the tax losses can be utilised. The Group’s income tax liabilities were US$2,235,000
(2009: US$2,203,000) and deferred income tax liabilities were US$21,202,000 (2009: US$29,510,000) at 30 June 2010.
4. EXPENSES BY NATURE
Group
2010 2009
US$’000 US$’000
Amortisation of intangible assets (Note 19) 478 75
Depreciation of property and equipment (Note 18) 10,704 8,260
Employee compensation (Note 5) 82,611 117,950
Advertising expenses 5,497 8,399
Rental expenses on operating leases 15,124 19,025
Research and development expenses 9,972 12,780
Travel, entertainment and transportation expenses 3,046 5,094
(Reversal of inventory write-o / write-down) / inventory write-o / write-down (3,527) 4,252
Allowance for impairment of trade receivables and bad debts written o (Note 29(b)) 273 2,460
Restructuring expenses – other exit costs – 2,665
Freight charges 11,468 19,556
Legal fees 3,386 4,635
Insurance 776 1,322
Warranty (Note 22(a)) 1,915 6,103
notes to tHe fInAncIAl stAteMents
– For the nancial year ended 30 June 2010
3. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS (cont’d)
 (e) Impairmentofnancialassets,available-for-sale(cont’d)