Vtech 2007 Annual Report Download - page 38

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Notes to the Financial Statements
VTech Holdings Ltd
Annual Report 2007
36
PRINCIPAL ACCOUNTING POLICIES (continued)
U Financial Instruments (continued)
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges and that are highly effective,
are recorded in the consolidated income statement, along
with any changes in the fair value of the hedged asset or
liability that is attributable to the hedged risk.
Changes in the fair value of derivatives that are designated
and qualify as cash fl ow hedges and that are highly effective,
are recognised in the hedging reserve. Where the forecasted
transaction or fi rm commitment results in the recognition
of an asset or of a liability, the gains and losses previously
deferred in hedging reserve are transferred from hedging
reserve and included in the initial measurement of the cost of
the asset or liability. Otherwise, amounts deferred in hedging
reserve are transferred to the consolidated income statement
and classifi ed as revenue or expense in the same periods
during which the hedged fi rm commitment or forecasted
transaction affects the consolidated income statement.
If certain derivative transactions, while providing effective
economic hedges under the Group’s policies, do not qualify
for hedge accounting under the specifi c rules in IAS 39,
“Financial Instruments: Recognition and Measurement”,
changes in the fair value of these derivative instruments
are recognised immediately in the consolidated income
statement.
When a hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting under
IAS 39, any cumulative gain or loss existing in the hedging
reserve at that time remains in the hedging reserve and is
recognised, when the committed or forecasted transaction
ultimately is recognised in the consolidated income statement.
However, if a committed or forecasted transaction is no
longer expected to occur, the cumulative gain or loss that was
reported in the hedging reserve is immediately transferred to
the consolidated income statement.
The Group documents at the inception of the transaction
the relationship between hedging instruments and hedged
items, as well as risk management objective and strategy for
undertaking various hedge transactions.
V Borrowings
Borrowings are recognised as the proceeds are received, net
of transaction costs incurred.
W Dividends
Dividends proposed or declared after the balance sheet date
are not recognised as a liability at the balance sheet date.
X Segment Reporting
A segment is a distinguishable component of the Group that
is engaged either in providing products or services (business
segment), or in providing products or services within a
particular economic environment (geographical segment),
which is subject to risks and rewards that are different from
those of other segments.
Y Related Parties
For the purposes of these fi nancial statements, a party is
considered to be related to the Group if:
(i) the party has the ability, directly or indirectly through
one or more intermediates, to control the Group or
exercise signifi cant infl uence over the Group in making
fi nancial and operating policy decisions, or has joint
control over the Group;
(ii) the Group and the party are subject to common control;
(iii) the party is an associate of the Group or a joint venture
in which the Group is a venturer;
(iv) the party is a member of key management personnel
of the Group or the Group’s parent or a close family
member of such an individual or is an entity under the
control, joint control or signifi cant infl uence of such
individuals;
(v) the party is a close family member of a party referred
to in (i) or is an entity under the control, joint control or
signifi cant infl uence of such individuals; or
(vi) the party is a post-employment benefi t plan which is for
the benefi t of employees of the Group or of any entity
that is a related party of the Group.
Close family members of an individual are those family
members who may be expected to infl uence, or be infl uenced
by, that individual in their dealings with the entity.
12aVtechCFS&Notes(E).indd36 2007/7/511:43:24PM