Vtech 2007 Annual Report Download - page 35

VTech Holdings Ltd
Annual Report 2007 33
PRINCIPAL ACCOUNTING POLICIES (continued)
I Tangible Assets and Depreciation
Land and buildings are stated at cost or valuation performed
by professional valuers every three years less amounts provided
for depreciation except in the case of freehold land which is
not depreciated. In the intervening years the directors review
the carrying value and adjustment is made where there has
been a material change. The valuations are on an open market
value basis and are incorporated in the fi nancial statements.
Increases in valuation are credited to the revaluation reserve;
decreases are fi rst set off against increases on earlier valuations
in respect of the same assets and thereafter are charged
to the consolidated income statement. Upon the disposal
of a revalued property, the relevant portion of the realised
revaluation reserve in respect of previous revaluations is
transferred from revaluation reserve to revenue reserve.
All other tangible assets are stated at cost less accumulated
depreciation and impairment losses (see note (K)).
Gains or losses arising from the retirement or disposal of
tangible assets are determined as the difference between the
estimated net disposal proceeds and the carrying amount of
the assets and are recognised in the income statement on the
date of retirement or disposal.
Depreciation is calculated to write off the cost or revalued
amount of assets on a straight-line basis over their estimated
useful lives which are as follows:
Long-term leasehold buildings Lease term
Freehold buildings, short-term 10 to 30 years or lease
leasehold buildings and term, if shorter
leasehold improvements
Machinery and equipment 3 to 5 years
Computers, motor vehicles, 3 to 7 years
furniture and fi xtures
Moulds 1 year
J Leases
Leases of property, plant and equipment in terms of which
that the Group assumes substantially all the risks and rewards
of ownership are classifi ed as fi nance leases. Property, plant
and equipment acquired by way of fi nance lease is stated at
an amount equal to the lower of its fair value and the present
value of the minimum lease payments at inception of the
lease less accumulated depreciation and impairment losses
(see note (K)). Finance charges are charged to the income
statement in proportion of the capital balances outstanding.
Leases of assets under which all the benefi ts and risks of
ownership are effectively retained by the lessor are classifi ed
as operating leases. Payments made under operating leases
(net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period
of the lease.
Leasehold land payments are up-front payments to acquire
long-term leasehold interests in land. These payments are
stated at cost and are amortised on a straight-line basis over
the respective period of the leases.
When an operating lease is terminated before the lease
period has expired, any payment required to be made to the
lessor by way of penalty is recognised as an expense in the
period in which the termination takes place.
K Impairment of Assets
The carrying amounts of the Group’s assets including
property, plant and equipment and other non-current assets,
including goodwill and other intangible assets, are reviewed
at each balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated. An impairment loss is
recognised whenever the carrying amount of an asset exceeds
its recoverable amount. Impairment losses are recognised in
the income statement.
The recoverable amount is the greater of the asset’s net
selling price and value in use. In assessing value in use, the
estimated future cash fl ows are discounted to their present
value using a pre-tax discounted rate that refl ects current
market assessments of the time value of money and the risks
specifi c to the asset.
An impairment loss is reversed if there has been a favourable
change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had
been recognised.
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