Vtech 2001 Annual Report Download - page 41

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O. TRADE DEBTORS
Trade debtors are carried at anticipated realizable value. An estimate is made for doubtful receivables based
on a review of all outstanding amounts at the year end. Bad debts are written off during the year in which they
are identified.
P. CASH AND CASH EQUIVALENTS
For the purpose of the cash flow statement, cash and cash equivalents comprise cash at bank and deposits,
net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in current liabilities.
Q. PROVISIONS
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount of the obligation can be made.
The Group recognizes the estimated liability on all products of the Group still under warranty at the balance
sheet date. This provision is calculated based on past experience of the level of repairs and returns.
The Group provides for expenses related to closure of business locations and reorganizations of the
Company's operations which are subject to detailed formal plans that are under implementation or have been
communicated to those affected by the plans. Provision is made when it is probable that an outflow of
economic benefits will arise and the amounts can be reliably estimated.
R. DEFERRED TAXATION
Deferred taxation is provided under the liability method in respect of temporary differences between the tax
bases of assets and liabilities and their carrying values for financial reporting purposes.
A deferred tax asset is only recognized to the extent that it is probable that future taxable profit will be available
against which the deferred tax asset can be utilized.
Provision for withholding tax which could arise on the remittance of earnings retained overseas is only made
where there is a current intention to remit such earnings.
S. RETIREMENT BENEFIT COSTS
The Group operates a number of defined contribution retirement schemes throughout the world and a defined
benefit retirement scheme in Hong Kong. The assets of all schemes are held separately from those of the
company and its subsidiaries.
For short-term employee benefits, the Group recognizes the expected costs of accumulating compensated
absences when employees render a service that increases their entitlement to future compensated absences,
measured as the additional amount that the Group expects to pay as a result of the unused entitlement that has
accumulated at the balance sheet date.
39
VTech Holdings Ltd Annual Report 2001
Principal Accounting Policies