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Notes to the Financial Statements
46 VTech Holdings Ltd Annual Report 2005
16 Provisions
At 31st March 2005, provisions of US$41.2 million (2004: US$40.7
million) includes provisions for defective goods returns of
US$37.2 million (2004: US$36.0 million).
Defective
goods returns
US$ million
At 1st April 2004 36.0
Effect of changes in exchange rate 0.2
Additional provisions 29.7
Unused amounts reversed (4.1)
Charged to income statement 25.6
Utilised during the year (24.6)
At 31st March 2005 37.2
The Group undertakes to repair or replace items that fail to
perform satisfactorily in accordance with the terms of the sale. A
provision is recognised for expected return claims, which
included cost of repairing or replacing defective goods, loss of
margin and cost of materials scrapped, based on past
experience of the level of repairs and returns.
17 Pension Schemes
The Group operated a defined benefit scheme and a defined
contribution scheme in Hong Kong. The defined contribution
scheme operated in Hong Kong complied with the
requirements under the Mandatory Provident Fund (“MPF”)
Ordinance. For the defined contribution schemes operated for
overseas employees and Hong Kong employees under the MPF
Ordinance, the retirement benefit costs expensed in the income
statement amounted to US$1.7 million (2004: US$1.5 million)
and US$0.2 million (2004: US$0.2 million) respectively. For the
defined benefit scheme (“the Scheme”) operated for Hong Kong
employees, contributions made by the Group during the year
were calculated based on advice from Watson Wyatt Hong Kong
Limited (“Watson Wyatt”), independent actuaries and
consultants. The Scheme is valued annually. The latest actuarial
valuation was completed by Watson Wyatt as at 31st March
2005 using the projected unit credit method.
For the defined benefit scheme, the amounts recognised in the
balance sheet are as follows:
2005 2004
Note US$ million US$ million
Fair value of the Scheme assets 12.0 11.3
Present value of funded defined
benefit obligations (13.4) (12.3)
Unrecognised actuarial gains 3.1 2.6
Assets recognised in the
balance sheet 14 1.7 1.6
The amounts recognised
in the income statement are
as follows:
Current service cost 1.3 1.3
Interest cost 0.6 0.6
Expected return on plan assets (0.8) (0.6)
Net actuarial losses recognised
in the year 0.1 0.2
Expenses recognised in the
income statement* 21.2 1.5
The actual return on plan assets
was as follows:
Expected return on plan assets 0.8 0.6
Actuarial gains on plan assets 0.1 2.6
Actual return on plan assets 0.9 3.2
Movement in the assets recognised
in the balance sheet:
At 1st April 1.6 1.8
Expenses recognised in the income
statement* (1.2) (1.5)
Contributions paid 1.3 1.3
At 31st March 1.7 1.6
2005 2004
The principal actuarial assumptions
used for accounting purposes
were:
Discount rate 4.8% 5.0%
Expected return on plan assets 7.0% 7.0%
Future salary increases 5.0% 5.0%