Creative 2014 Annual Report Download - page 29

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
(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.
2.12 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.
2.13 Revenue recognition
Sales comprise the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the
Group’s activities. Sales are presented net of value-added tax, rebates and discounts, and after eliminating sales within the
Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, the Group
has delivered the products to the customers, the customers have accepted the products, signicant risks and rewards of
ownership have been transferred and when it is probable that the collectability of the related receivables is reasonably
assured. License income is recognised based on the consideration in relation to the assignment of rights for a xed fee; this
revenue is recognised upon completion of the contract.
Allowances are provided for estimated returns and discounts based on historical experience, current economic trends and
changes in customer demand and acceptance of its products. Such allowances are adjusted periodically to reect actual and
anticipated experience. When recognising revenue, the Group records estimated reductions to revenue for customer and
distributor programs and incentive offerings, including price protection, promotions, other volume-based incentives and
rebates.
2.14 Research and development costs
As the Group cannot denitively distinguish the research phase from the development phase of its internal projects to create
intangible assets, the Group treats the expenditure on its internal projects as if they were incurred in the research phase only.
Accordingly, all research and development costs are recognised as an expense when incurred.
2.15 Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the
tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and
their carrying amounts in the nancial statements except when the deferred income tax arises from the initial recognition of
goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable
prot or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and associated
companies, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.