Creative 2011 Annual Report Download - page 27

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
(d) Subsequent measurement
Financial assets, available-for-sale are subsequently carried at fair value. Loans and receivables are subsequently carried at
amortised cost using the effective interest method.
Interest and dividend income on nancial assets, available-for-sale are recognised separately in prot or loss. Changes in
fair values of available-for-sale equity securities are recognised in the fair value reserve, together with the related currency
translation differences.
(e) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a nancial asset or a group of nancial
assets is impaired and recognises an allowance for impairment when such evidence exists.
(i) Loans and receivables
Signicant nancial difculties of the debtor, probability that the debtor will enter bankruptcy, and default or signicant
delay in payments are objective evidence that these nancial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated
as the difference between the carrying amount and the present value of estimated future cash ows, discounted at the
original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are recognised against the same line item in prot or loss.
The allowance for impairment loss account is reduced through prot or loss in a subsequent period when the amount
of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset
previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had
no impairment been recognised in prior periods.
(ii) Financial assets, available-for-sale
A signicant or prolonged decline in the fair value of an equity security below its cost is considered as an indicator
that the available-for-sale nancial asset is impaired.
If any evidence of impairment exists, the cumulative loss that was recognised in the fair value reserve is reclassied
to prot or loss. The cumulative loss is measured as the difference between the acquisition cost (net of any principal
repayments and amortisation) and the current fair value, less any impairment loss previously recognised as an expense.
The impairment losses recognised as an expense on equity securities are not reversed through prot or loss.
2.7 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using standard cost, appropriately
adjusted at the balance sheet date to approximate actual cost on a weighted average basis. In the case of nished products
and work-in-progress, cost includes materials, direct labour and an appropriate proportion of production overheads. Net
realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.8 Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are carried at cost less accumulated impairment losses in the Company’s
balance sheet. On disposal of investments in subsidiaries and associated companies, the difference between disposal proceeds
and the carrying amounts of the investments are recognised in prot or loss.