Vtech 2001 Annual Report Download - page 40

I. TANGIBLE FIXED ASSETS AND DEPRECIATION (Continued)
Depreciation is calculated on a monthly basis to write off the cost or valuation of assets on a straight line basis
over their estimated useful lives which are as follows:
Long-term leasehold land Lease term
Freehold and long-term leasehold buildings, short-term
leaseholds and leasehold improvements 10 to 30 years or lease term, if shorter
Machinery and equipment 3 to 5 years
Motor vehicles, furniture and fixtures 3 to 7 years
Moulds 1 year
J. INVESTMENT PROPERTIES
Investment properties are interests in land and buildings which are held for their investment potential.
Investment properties held under long leases are stated at valuation performed by professional valuers
annually. The valuations are on an open market value basis related to individual properties and are
incorporated in the annual financial statements. Increases in valuation are credited to the investment properties
revaluation reserve; decreases are first set off against previous increases on earlier valuations and thereafter
are debited to the income statement. Upon the disposal of an investment property, the relevant portion of the
investment properties revaluation reserve realized in respect of previous valuations is transferred from the
revaluation reserve to revenue reserves.
K. LEASES
Leases of property, plant and equipment that substantially transfer to the Group all the benefits and risks of
ownership of assets, other than legal title, are accounted for as finance leases. At the inception of a finance
lease, the fair value of the asset is recorded together with the obligation, excluding the interest element, to pay
future rentals. Finance charges are debited to the income statement in proportion to the capital balances
outstanding.
Leases of assets under which all the benefits and risks of ownership are effectively retained by the lessor are
classified as operating leases. Payments made under leases are charged to the income statement on a straight
line basis over the period of lease.
When an operating lease is terminated before the lease period has expired, any payment required to be made
to the lessor by way of penalty is recognized as an expense in the period in which the termination takes place.
L. IMPAIRMENT OF ASSETS
Property, plant and equipment and other non-current assets, including goodwill and other intangible assets are
reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. Assets whose carrying values exceed their recoverable amount are written
down to amounts expected to be generated by the assets.
M. OTHER INVESTMENTS
Other investments are held for the long term and stated at cost less provision, if any, for permanent diminution
in value. Where there is a permanent diminution in value of an investment, it is recognized as an expense in the
period in which the diminution is identified. On disposal of an investment, the difference between the net
disposal proceeds and the carrying amount is charged or credited to the income statement.
N. STOCKS
Stocks are stated at the lower of cost and net realizable value. Cost, calculated on the weighted average or the
first in first out basis, comprises materials, direct labour and an appropriate proportion of all production
overhead expenditure. Net realizable value is determined on the basis of anticipated sales proceeds in the
ordinary course of business less estimates of costs to completion and selling expenses.
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Principal Accounting Policies