Creative 2015 Annual Report Download - page 29

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CREATIVE TECHNOLOGY LTD AND ITS SUBSIDIARIES
2.11 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
more likely than not that an outow of resources will be required to settle the obligation and the amount has been reliably
estimated. Changes in the estimated timing or amount of the expenditure or discount rate are recognised in prot or loss
when the changes arise.
(a) Warranties
The warranty provision represents management’s best estimate of probable liability under its product warranties. Management
determines the warranty provision based on known product failures (if any), historical experience, and other currently
available evidence.
(b) Provision for legal claims and fees
Management records provisions when it is probable that a liability has been incurred and the amount of loss can be reasonably
estimated.
(c) Other provisions
Other provisions are measured at the present value of the expenditure expected to be required to settle the obligation using
a pre-tax discount rate that reects the current market assessment of the time value of money and the risks specic to the
obligation. The increase in the provision due to the passage of time is recognised in prot or loss.
2.12 Fairvalueestimationofnancialassetsandliabilities
The fair values of nancial instruments traded in active markets are based on quoted market prices at the balance sheet
date. The quoted market prices used for nancial assets are the current bid prices; the appropriate quoted market prices for
nancial liabilities are the current asking prices.
The fair values of nancial instruments that are not traded in an active market are determined by using valuation techniques. The
Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date.
The fair values of current nancial assets and liabilities carried at amortised cost approximate their carrying amounts.
2.13 Revenue recognition
Sales comprise the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the
Group’s activities. Sales are presented net of value-added tax, rebates and discounts, and after eliminating sales within the
Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, the Group
has delivered the products to the customers, the customers have accepted the products, signicant risks and rewards of
ownership have been transferred and when it is probable that the collectability of the related receivables is reasonably
assured. License income is recognised based on the consideration in relation to the assignment of rights for a xed fee; this
revenue is recognised upon completion of the contract.
Allowances are provided for estimated returns and discounts based on historical experience, current economic trends and changes
in customer demand and acceptance of its products. Such allowances are adjusted periodically to reect actual and anticipated
experience. When recognising revenue, the Group records estimated reductions to revenue for customer and distributor programs
and incentive offerings, including price protection, promotions, other volume-based incentives and rebates.
2.14 Research and development costs
As the Group cannot denitively distinguish the research phase from the development phase of its internal projects to create
intangible assets, the Group treats the expenditure on its internal projects as if they were incurred in the research phase only.
Accordingly, all research and development costs are recognised as an expense when incurred.