Vtech 2001 Annual Report Download - page 42

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S. RETIREMENT BENEFIT COSTS (Continued)
For long-term employee benefits, pension costs arising under the defined benefit scheme are assessed using
the projected unit credit method. Under this method, the cost of providing pensions is charged to the income
statement so as to spread the regular cost over the service lives of employees in accordance with the advice of
qualifed actuaries who carry out a full valuation of the plan every year. Plan assets are measured at fair value.
Pension obligations are measured as the present value of the estimated future cash flows of benefits derived
from employee past service, with reference to market yields on high quality corporate bonds which have terms
to maturity approximating the terms of the related liability. All actuarial gains and losses are spread forward
over the average remaining service lives of employees. The net asset or liability resulting from the valuation of
the plan is recognized in the Group's balance sheet.
Contributions relating to the defined contribution schemes are charged to the income statement in the year to
which they relate.
T. DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses forward foreign exchange contracts in its management of currency risks. Unrealized gains and
losses on forward contracts to hedge specific future currency transactions are deferred against the matching
losses and gains on the specific transactions.
U. DIVIDENDS
Dividends proposed or declared after the balance sheet date are not recognized as a liability at the balance
sheet date.
V. COMPARATIVES
Depreciation on moulds for new products that ultimately go into production has now been included within cost
of sales instead of within research and development expenses and accordingly, US$7.8 million has been
reclassified from research and development expenses to cost of sales for the year ended 31st March 2000.
40
Principal Accounting Policies