Vtech 2011 Annual Report Download - page 38

Notes to the Financial Statements
36 VTech Holdings Ltd Annual Report 2011
Principal Accounting Policies
A Principal Activities and Organisation
The Group’s principal activities and operating segments are set
out in note 1 to the financial statements.
The Company was incorporated in Bermuda. In view of the
international nature of the Group’s operations, the financial
statements are presented in United States dollars.
B Statement of Compliance
These financial statements have been prepared in accordance
with International Financial Reporting Standards (“IFRSs”)
promulgated by the International Accounting Standards Board
(“IASB”). IFRSs includes International Accounting Standards
(“IASs”) and related Interpretations. These financial statements
also comply with the disclosure requirements of the Hong Kong
Companies Ordinance and the applicable disclosure provisions
of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”).
The IASB has issued new and revised IFRS, amendments and
interpretations that are first effective or available for early
adoption for the current accounting period of the Group and the
Company. Of these, the following developments are relevant to
the Group’s financial statements:
IFRSs (Amendments) Improvements to IFRSs 2009
IFRS 3 (Revised) Business combination
IAS 27 (Revised) Consolidated and separate
financial statements
IAS 39 (Amendment) Eligible hedged items
The improvements to IFRSs 2009 consist of further amendments
to existing standards, including amendments to IAS 17 Leases.
The amendment to IAS 17 requires the land element of long
term leases to be classified as a finance lease rather than an
operating lease if it transfers substantially all the risks and rewards
of ownership. In accordance with the transitional provisions
set out in the amendment to IAS 17, the Group reassessed the
classification of unexpired leasehold land as at 1 April 2010 based
on information that existed at the inception of these leases.
Leasehold land that qualifies for finance lease classification has
been reclassified from leasehold land payments to tangible
assets – land and buildings and has been measured using the
revaluation model on a retrospective basis. The adoption of
revised IAS 17 has led to a reclassification of prepaid leases of
US$1.6 million to tangible assets – land and buildings and has
had no significant financial impact to the Group’s consolidated
income statements for the current and prior periods.
The other developments resulted in changes in accounting
policies but none of these changes in policy have a material
impact on the current or previous periods, as described below:
a. As a result of the adoption of revised IAS 27 which is applied
as from 1 April 2010, the Group accounts for any changes in a
parent company’s interest in subsidiaries that do not result in
changes of control as a transaction with equity shareholders
(the non-controlling interests) in their capacity as owners
and therefore no goodwill is recognised or remeasured as a
result of such transactions. Previously the Group treated such
transactions as step-up transactions and partial disposals,
respectively. A gain or loss on disposal is recognised in the
consolidated income statement only if the disposal results in
a loss of control of a subsidiary.
b. The impact of the revised IFRS 3 (in respect of recognition
of acquiree’s deferred tax assets) and the revised IAS 27
(in respect of allocation of losses to non-controlling interests
(previously known as minority interests) in excess of their
equity interest) have had no material impact as there is
no requirement to restate amounts recorded in previous
periods and no such deferred tax assets or losses arose in the
current period.
c. The amendment to IAS 39 (“IAS 39 (amended)”) provides
additional guidance on when a financial item can be
designated as a hedged item and on assessing hedge
effectiveness. The adoption of IAS 39 (amended) had no
significant impact on the financial statements of the Group.
The Group has not applied any new standard or Interpretation that
is not yet effective for the current accounting period (note 25).
C Basis of Preparation of the Financial Statements
These financial statements are prepared on the historical cost
basis as modified by the revaluation of certain properties and
derivative financial instruments stated at their fair value as
explained in the accounting policies set out below.
The preparation of the financial statements in conformity with
IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making
the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future periods
if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs
that have significant effect on the financial statements and major
sources of estimation uncertainty are discussed in note 26.
D Basis of Consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries and controlled
special purpose entities and the Group’s interests in associates.
All significant inter-company balances and transactions and any
unrealised gains arising from inter-company transactions are
eliminated on consolidation.
Subsidiaries and controlled special purpose entities are entities
controlled by the Group. Control exists when the Group has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable are taken
into account.