Vtech 2015 Annual Report Download - page 55

VTech Holdings Limited Annual Report 2015 53
Principal Accounting Policies (Continued)
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 ow 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.
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
Operating segments, and the amounts of each segment item
reported in the financial statements, are identified from the
financial information provided regularly to the Group’s most senior
executive management for the purposes of allocating resources to,
and performance assessment.
Individually material operating segments are not aggregated
for financial reporting purposes unless the segments have
similar economic characteristics and are similar in respect of
the nature of products and services, the nature of production
processes, the type or class of customers, the methods used to
distribute the products or provide the services, and the nature of
the regularity environment. Operating segments which are not
individually material may be aggregated if they share a majority of
these criteria.
Y Related Parties
(a) A person, or a close member of that person’s family, is related
to the Group if that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the
Group or the Group’s parent.
(b) An entity is related to the Group if any of the following
conditions apply:
(i) The entity and the Group are members of the same
group (which means that each parent, subsidiary and
fellow subsidiary is related to the others).
(ii) One entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a
group of which the other entity is a member).
(iii) Both entities are joint ventures of the same third party.
(iv) One entity is a joint venture of a third entity and the other
entity is an associate of the third entity.
(v) The entity is a post-employment benefit plan for the
benefit of employees of either the Group or an entity
related to the Group.
(vi) The entity is controlled or jointly controlled by a person
identified in (a).
(vii) A person identified in (a)(i) has significant influence
over the entity or is a member of the key management
personnel of the entity (or of a parent of the entity).
Close members of the family of a person are those family members
who may be expected to influence, or be influenced by, that
person in their dealings with the entity.