Vtech 2001 Annual Report Download - page 39

D. NEGATIVE GOODWILL (Continued)
To the extent that negative goodwill does not relate to identifiable expected future losses and expenses at the
date of acquisition, negative goodwill will be recognized as income in the income statement on a systematic
basis over the remaining useful life of the identifiable acquired depreciable/amortizable assets. The amount of
any negative goodwill in excess of the fair values of acquired identifiable non-monetary assets will be
recognized as income immediately.
The gain or loss on disposal of a subsidiary or an associate includes the unamortized balance of negative
goodwill relating to the subsidiary or associate disposed of.
E. FOREIGN CURRENCIES
Transactions denominated in foreign currencies are translated at exchange rates ruling at the transaction
dates. Monetary assets and liabilities denominated in foreign currencies are translated into United States
dollars at the rates of exchange ruling at the balance sheet date. Income statements of foreign entities are
translated into the Group's reporting currency at average exchange rates for the year and balance sheets are
translated at the year end exchange rates ruling at the balance sheet date.
Net exchange differences arising from the translation of the financial statements of subsidiaries and associates
expressed in foreign currencies are taken directly to exchange reserve. All other exchange differences are
dealt with in the consolidated income statement.
F. REVENUE RECOGNITION
Revenue from sale of goods is recognized when the significant risks and rewards of ownership of the goods
are transferred to customers.
Interest and dividend income is recognized on an accruals basis. Rental income is recognized on a straight
line basis over the lease term.
G. RESEARCH AND DEVELOPMENT
Research and development costs other than purchased research and development costs on acquisitions, are
written off as incurred.
H. INTANGIBLE ASSETS
Intangibles represent purchased research and development on acquisition of businesses and is initially
recognized at cost, being the fair value at date of acquisition. After initial recognition, purchased research and
development is carried at cost less any accumulated amortization and any accumulated impairment losses.
Amortization commences when the developed product is ready for its intended use.
I. TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets other than investment properties (refer to J below) are stated at cost or valuation less
amounts provided for depreciation except in the case of freehold land which is not depreciated. Where the
carrying amount of these assets is greater than their estimated recoverable amount it is written down
immediately to their recoverable amount. Gains and losses on disposal of these assets are determined by
reference to their carrying amounts.
Freehold and long-term leasehold land and buildings are stated at valuation performed by professional valuers
every three years. In the intervening years the directors review the carrying value of land and buildings and
adjustment is made where there has been a material change. The valuations are on an open market value basis
and are incorporated in the annual financial statements. Increases in valuation are credited to the revaluation
reserve; decreases are first set off against increases on earlier valuations in respect of the same asset and
thereafter are debited to the income statement. Upon the disposal of a property, the relevant portion of the
realized revaluation reserve in respect of previous revaluations is transferred from revaluation reserve to
revenue reserves.
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VTech Holdings Ltd Annual Report 2001
Principal Accounting Policies