Vtech 2012 Annual Report Download - page 44

42 VTech Holdings Ltd Annual Report 2012
Notes to the Financial Statements
Expenditure on development activities is capitalised only if the
product or process is clearly defined, technically and commercially
feasible, the attributable expenditure is separately identifiable and
the Group has sufficient resources and the intention to complete
development. The expenditure capitalised includes the cost of
materials, direct labour and an appropriate proportion of overheads
which are directly attributable to development activities. Capitalised
development costs are stated at cost less accumulated amortisation
and impairment losses (see note (K)). Development expenditure
that does not meet the above criteria is recognised as an expense
in the period in which it is incurred.
Amortisation is calculated to write off capitalised development
costs on a straight-line basis over their estimated useful lives,
commencing from the date when the products are put into
commercial production.
G Translation of Foreign Currencies
Foreign currency transactions during the year are translated into
United States dollars at the foreign exchange rates ruling at the
transaction dates. Monetary assets and liabilities denominated in
foreign currencies are translated into United States dollars at the
foreign exchange rates ruling at the balance sheet date. Exchange
gains and losses are recognised in profit or loss.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the foreign
exchange rates ruling at the transactions dates. Non-monetary
assets and liabilities denominated in foreign currencies that are
stated at fair value are translated using the foreign exchange rates
ruling at the dates the fair value was determined.
The results of foreign operations are translated into United States
dollars at the exchange rates approximating the foreign exchange
rates ruling at the dates of the transactions. Balance sheet items are
translated into United States dollars at the closing foreign
exchange rates at the balance sheet date.
On disposal of a foreign operation, the cumulative amount of the
exchange differences relating to that foreign operation is
reclassified from equity to profit or loss when the profit or loss on
disposal is recognised.
H Tangible Assets and Depreciation
The following properties held for own use are stated at their
revalued amount, being their fair value at the date of the
revaluation less any subsequent accumulated depreciation:
– freehold land and buildings; and
– medium-term leasehold land and buildings.
Revaluations are performed with sufficient regularity to ensure that
the carrying amount of these assets does not differ materially from
that which would be determined using fair values at the balance
sheet date.
Principal Accounting Policies (Continued)
D Basis of Consolidation (Continued)
When the Group loses control of a subsidiary, it is accounted for as
a disposal of the entire interest in that subsidiary, with a resulting
gain or loss being recognised in profit or loss. Any interest retained
in that former subsidiary at the date when control is lost is
recognised at fair value and this amount is regarded as the fair
value on initial recognition of a financial asset or, when appropriate,
the cost on initial recognition of an investment in an associate or a
jointly controlled entity.
Investments in subsidiaries are stated at cost less impairment losses
(see note (K)) in the Company’s balance sheet.
Associates are those entities, not being subsidiaries, in which the
Group exercises significant influence, but not control, over the
financial and operating policies. The consolidated financial
statements include the Group’s share of the total recognised gains
and losses of associates under the equity method, from the date
that significant influence commences until the date that significant
influence ceases. When the Group’s share of losses exceeds the
carrying amount of the associate, the carrying amount is reduced
to nil and recognition of further losses is discontinued except to
the extent that the Group has incurred obligations in respect of
that associate.
Investments in associates are stated at cost less impairment losses
(see note (K)) in the Company’s balance sheet.
E Revenue Recognition
Revenue is measured at the fair value of the consideration received
or receivable. Provided it is probable that the economic benefits
will flow to the Group and the revenue and costs, if applicable, can
be measured reliably, revenue is recognised in profit or loss as
follows:
i. Revenue from the sale of goods is recognised when the
significant risks and rewards of ownership have been
transferred to the buyer. Revenue is stated net of sales taxes,
returns, rebates and discounts, after eliminating sales within
the Group.
ii. Revenue from the provision of services is recognised when the
services are rendered.
iii. Interest income is recognised as it accrues using the effective
interest method.
iv. Dividend income is recognised when the Group’s right to
receive payment is established.
F Research and Development
Research and development costs comprise all costs that are
directly attributable to research and development activities or that
can be allocated on a reasonable basis to such activities.
Expenditure on research activities is recognised as an expense in
the period in which it is incurred.