Creative 1999 Annual Report Download - page 24

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22
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of Creative Technology Ltd and Creative’s subsidiaries under its effective control
from their respective dates of acquisition, after elimination of intercompany transactions and balances. The consolidated financial
statements are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The
preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could
differ from those estimates. Creative conducts a substantial portion of its business in United States dollars (“US$ or $”). All dollar amounts
included in the financial statements and in the notes herein are United States dollars unless designated as Singapore dollars (“S$”). Creative’s
fiscal year-end is June 30. Creative generally operates on a thirteen week calendar closing on the Friday closest to the natural calendar
quarter. For convenience, all quarters are described by their natural calendar dates.
Foreign exchange
The functional currency of Creative and its subsidiaries is the US dollar and accordingly, gains and losses resulting from the translation
of accounts designated in currencies other than the functional currency are reflected in the determination of net income (loss). Included
in interest and other expenses for fiscal 1999, 1998 and 1997, are exchange gains (losses) of ($2.3 million), $2.2 million, and $1.3 million,
respectively.
At June 30, 1999, monetary assets and liabilities of Creative are denominated in the following currencies:
Approximate Percentage of $ Balance Denominated in:
US$ S$ Other Currencies
Cash and cash equivalents 96% 1% 3%
Accounts receivable, less allowances 72% 1% 27%
Total current liabilities 74% 19% 7%
Long-term obligations 6% 94% –
The exchange rate for the S$ utilized in translating the balance sheet at June 30, 1999, expressed in US$ per one S$ was 0.5882.
Cash equivalents
Cash equivalents consist of highly liquid investment instruments with maturities of three months or less. All deposits are in short term
deposit and money market accounts with various banks. This diversification of risk is consistent with Creative’s policy to maintain liquidity
and ensure the safety of principal. Included in cash equivalents as of June 30, 1999 and 1998, are fixed deposits of $243.2 million and
$384.0 million, respectively.
Fair value of financial instruments
Creative measures its financial assets and liabilities in accordance with generally accepted accounting principles. For certain of Creative’s
financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued expenses, the carrying amounts
approximate fair value due to their short maturities. The amounts shown for long term obligations also approximate fair value because
current interest rates charged to Creative for debts of similar maturities are substantially the same.
Notes to Consolidated Financial Statements