Vtech 2012 Annual Report Download - page 48

46 VTech Holdings Ltd Annual Report 2012
Notes to the Financial Statements
For vesting of forfeited or unallocated shares regranted, the related
costs of the forfeited or unallocated shares regranted are credited
to Shares held for Share Purchase Scheme, and the related fair
value of the shares regranted are debited to capital reserve. The
difference between the cost and the fair value of the shares
regranted is credited to share premium if the fair value is higher
than the cost or debited against retained earnings if the fair value is
less than the cost.
U Derivative Financial Instruments
Derivative financial instruments are recognised initially at fair value.
At each balance sheet date the fair value is remeasured. The gain
or loss on remeasurement to fair value is recognised immediately
in profit or loss, except where the derivatives qualify for cash flow
hedge accounting or hedge the net investment in a foreign
operation, in which case recognition of any resultant gain or loss
depends on the nature of the item being hedged.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of
the variability in cash flows of a recognised asset or liability or a
highly probable forecast transaction or the foreign currency risk of
a committed future transaction, the effective portion of any gains
or losses on remeasurement of the derivative financial instrument
to fair value are recognised in other comprehensive income and
accumulated separately in equity in the hedging reserve. The
ineffective portion of any gain or loss is recognised immediately in
profit or loss.
If a hedge of a forecast transaction subsequently results in the
recognition of a non-financial asset or non-financial liability, the
associated gain or loss is reclassified from equity to be included in
the initial cost or other carrying amount of the non-financial asset
or liability.
If a hedge of a forecast transaction subsequently results in the
recognition of a financial asset or a financial liability, the associated
gain or loss is reclassified from equity to profit or loss in the same
period or periods during which the asset acquired or liability
assumed affects profit or loss (such as when interest income or
expense is recognised).
For cash flow hedges, other than those covered by the preceding
two policy statements, the associated gain or loss is reclassified
from equity to profit or loss in the same period or periods during
which the hedged forecast transaction affects profit or loss.
When a hedging instrument expires or is sold, terminated or
exercised, or the entity revokes designation of the hedge
relationship but the hedged forecast transaction is still expected to
occur, the cumulative gain or loss at that point remains in equity
until the transaction occurs and it is recognised in accordance with
the above policy. If the hedged transaction is no longer expected
to take place, the cumulative unrealised gain or loss is reclassified
from equity to profit or loss immediately.
V Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less
attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any
difference between the amount initially recognised and
redemption value being recognised in profit or loss over the period
of the borrowings, together with any interest and fees payable,
using the effective interest method.
Principal Accounting Policies (Continued)
S Employee Benefits (Continued)
(iii) Equity and equity related compensation benefits
The fair value of share options granted to employees is
recognised as an employee cost with a corresponding
increase in a capital reserve within equity. The fair value is
measured at grant date using the Black-Scholes option pricing
model, taking into account the terms and conditions upon
which the options were granted. Where the employees have
to meet vesting conditions before becoming unconditionally
entitled to the share options, the total estimated fair value of
the share option is spread over the vesting period, taking into
account the probability that the options will vest.
During the vesting period, the number of share options that is
expected to vest is reviewed. Any adjustment to the
cumulative fair value recognised in prior years is charged/
credited to the consolidated income statement for the year of
the review, unless the original employee expenses qualify for
recognition as an asset, with a corresponding adjustment to
the capital reserve. On vesting date, the amount recognised as
an expense is adjusted to reflect the actual number of share
options that vest (with a corresponding adjustment to the
capital reserve) except where forfeiture is only due to not
achieving vesting conditions that relate to the market price of
the Company’s shares. The equity amount is recognised in the
capital reserve until either the option is exercised (when it is
transferred to the share premium account) or the option
expires (when it is released directly to retained profits).
At the end of balance sheet date, the Group revises its
estimates of the number of shares of the Company granted
under the Share Purchase Scheme (“Awarded Shares”) that are
expected to ultimately vest. Any resulting adjustment to the
cumulative fair value recognised in prior years is charged/
credited to employee share-based compensation expense in
the current year, with a corresponding adjustment to capital
reserve.
T Shares held for Share Purchase Scheme
Where the VTech Share Purchase Scheme Trust purchases shares of
the Company from the market, the consideration paid, including
any directly attributable incremental costs, is presented as Shares
held for Share Purchase Scheme and deducted from total equity.
Upon vesting, the related costs of the vested Awarded Shares
recognised as employee share-based compensation expenses are
credited to Shares held for Share Purchase Scheme, with a
corresponding decrease in capital reserve for shares purchased
with contributions paid to the VTech Share Purchase Scheme Trust,
and decrease in retained profits for shares purchased through
reinvesting dividends received on the vested Awarded Shares.