Creative 2001 Annual Report Download - page 22

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22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
Recently issued accounting pronouncements (Cont’d)
In December 1999, the Securities and Exchange Commission’s (“SEC”) staff issued Staff Accounting Bulletin (“SAB”)
No. 101, “Revenue Recognition in Financial Statements.” SAB No. 101 provides the staff’s views in applying generally
accepted accounting principles to selected revenue recognition issues. Creative adopted SAB No. 101 effective from
the first quarter of fiscal year 2001. There was no material impact from the adoption of this statement on Creative’s
consolidated financial statements.
In June 1998, the FASB issued SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.” This
Statement requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value.
Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. SFAS 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000 and cannot be applied retroactively. There was no material impact from
the adoption of this statement on Creative’s consolidated financial statements.
NOTE 2 – NET (LOSS) INCOME PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128 (“SFAS 128”) “Earnings per Share”,
Creative reports both basic earnings per share and diluted earnings per share. Basic earnings per share is computed
using the weighted average number of Ordinary Shares outstanding during the period. Diluted earnings per share
is computed using the weighted average number of ordinary and potentially dilutive ordinary equivalent shares
outstanding during the period. Ordinary equivalent shares are excluded from the computation if their effect is anti-
dilutive. In computing the diluted earnings per share, the treasury stock method is used to determine, based on
average stock prices for the respective periods, the ordinary equivalent shares to be purchased using proceeds received
from the exercise of such equivalent shares. Other than the dilutive effect of stock options, there are no other
financial instruments that would impact the weighted average number of ordinary shares outstanding used for
computing diluted earnings per share. The potentially dilutive ordinary equivalent shares outstanding under the
employee share purchase plan were not material.
Following is a reconciliation between the average number of ordinary shares outstanding and equivalent shares
outstanding (in ’000):
As of June 30
2001 2000 1999
Weighted average ordinary shares outstanding 79,049 82,028 89,818
Weighted average dilutive stock options outstanding – 4,584 2,423
Weighted average ordinary shares and
equivalent outstanding 79,049 86,612 92,241
For the fiscal year 2001, approximately 2.0 million potentially dilutive shares were excluded from the determination
of diluted net loss per share, as the effect of including such shares is anti-dilutive.