Huawei 2011 Annual Report Download - page 47

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without any fixed repayment terms or the effect
of discounting would be immaterial. In such cases,
the receivables are stated at cost less impairment
losses for bad and doubtful debts.
(o) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially
at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised cost with any
difference between the amount initially recognised
and redemption value being recognised in the
consolidated income statement over the period
of the borrowings, together with any interest and
fees payable, using the effective interest method.
(p) Trade and other payables
Trade and other payables are initially recognised
at fair value and thereafter stated at amortised
cost unless the effect of discounting would be
immaterial, in which case they are stated at cost.
(q) Cash and cash equivalents
Cash and cash equivalents comprise cash at
bank and on hand and call deposits with banks.
Bank overdrafts that are repayable on demand
and form an integral part of the Group’s cash
management are also included as a component of
cash and cash equivalents for the purpose of the
consolidated cash ow statement.
(r) Employee benets
i) Short term employee benets and contributions
to dened contribution retirement plans
Salaries, annual bonuses, paid annual leave and
contributions to dened contribution retirement
plans are accrued in the year in which the
associated services are rendered by employees.
Where payment or settlement is deferred and
the effect would be material, these amounts are
stated at their present values.
ii) Dened benet plan obligations
The Group’s net obligation in respect of dened
benefit plans is calculated separately for each
plan by estimating the amount of future benet
that employees have earned in return for their
service in the current and prior periods; that
benefit is discounted to determine the present
value and the fair value of any plan assets is
deducted. The discount rate is the yield at the
balance sheet date on high quality corporate
bonds that have maturity dates approximating
the terms of the Group’s obligations. The
calculation is performed by management using
the projected unit credit method.
When the benefits of a plan are improved, the
portion of the increased benet relating to past
service by employees is recognised as an expense
in prot or loss on a straight line basis over the
average period until the benets become vested.
If the benefits vest immediately, the expense is
recognised immediately in prot or loss.
In calculating the Group’s obligation in respect
of a plan, any actuarial gain or loss is recognised
in prot or loss immediately.
(s) Provisions and contingent liabilities
i) Provision for product warranties
The Group provides warranty on its products for
a period typically covers 12 to 24 months. The
warranty generally includes parts, labour and
service centre support. The Group estimates the
costs that may be incurred under its warranty
obligations and records a liability in the amount
of such costs at the time revenue is recognised.
Factors that affect the Group’s warranty liability
include the number of installed units, historical
and anticipated rates of warranty claims. The
Group periodically assesses the adequacy of
its recorded warranty liabilities and adjusts the
amounts as necessary.
ii) Other provisions and contingent liabilities
Provisions are recognised for other liabilities of
uncertain timing or amount when the Group has
a legal or constructive obligation arising as a result
of a past event, it is probable that an outow of
economic benefits will be required to settle the
obligation and a reliable estimate can be made.
Where the time value of money is material,
provisions are stated at the present value of the
expenditure expected to settle the obligation.
Where it is not probable that an outow of economic
Consolidated Financial Statements Summary and Notes