Creative 2010 Annual Report Download - page 24

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
in the nancial statements. Accordingly, these changes do not have any impact on the nancial statements for the current
nancial year.
Amendment to FRS 107 Improving Disclosures about Financial Statements (effective for annual periods beginning on or
after 1 January 2009). The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In
particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy (see
note 29). The adoption of the amendment results in additional disclosures but does not have an impact on the accounting
policies and measurement bases adopted by the Group.
FRS 108, Operating Segments (effective for annual periods beginning on or after 1 January 2009) replaces FRS 14, Segment
Reporting, and requires a ‘management approach’, under which segment information is presented on the same basis as that
used for internal reporting purposes. Segment revenue, segment prots and segment assets are also measured on a basis that
is consistent with internal reporting. This standard was early adopted by the Group in the previous nancial year.
2.2 Group accounting
(a) Subsidiaries
Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the nancial and
operating policies, generally accompanied by a shareholding giving rise to a majority of the voting rights. The existence
and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the
Group controls another entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the dates
of exchange, plus costs directly attributable to the acquisition. Identiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition, irrespective
of the extent of non-controlling interests. Please refer to the paragraph “Intangible assets – Goodwill on acquisitions” for
the accounting policy on goodwill on acquisition of subsidiaries.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from
the date on which control ceases.
In preparing the consolidated nancial statements, transactions, balances and unrealised gains on transactions between
group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the assets
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the
interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in
the consolidated income statement, consolidated statement of comprehensive income, statement of changes in equity and
balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests
in a subsidiary, even if this results in the non-controlling interests having a decit balance.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on investments
in subsidiaries in the separate nancial statements of the Company.
(b) Transactions with non-controlling interests
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are
accounted for as transactions with equity owners of the Group. Any difference between the change in the carrying amounts
of the non-controlling interests and the fair value of the consideration paid or received is recognised in a separate reserve
within equity attributable to the equity holders of the Company.
notes to tHe fInAncIAl stAteMents
– For the nancial year ended 30 June 2010
2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2.1 Basis of preparation (cont’d)