Vtech 2002 Annual Report Download - page 38

VTech Holdings Ltd36
Principal Accounting Policies
A BASIS OF PREPARATION
The consolidated financial statements are prepared in accordance with International Accounting Standards (IAS) and under the historical
cost convention, except as disclosed in the accounting policies below.
In 2002, the Group adopted IAS 39, “Financial Instruments: Recognition and Measurement” and IAS 40 “Investment Property”. The effect of
adopting these standards is summarized in note 21 to the financial statements. Further information is disclosed in the accounting policies
on tangible assets, investment properties and financial instruments.
The Company is incorporated in Bermuda. In view of the international nature of the Group’s operations, the amounts shown in the Group’s
financial statements are presented in the United States Dollars.
The Group’s separable segments are set out in note 1 to the financial statements.
B BASIS OF CONSOLIDATION
Consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries together with the Group’s share
of the results and retained post acquisition reserves of its associates under the equity method of accounting, drawn up for the year ended
31st March. The results of subsidiaries and associates are included from the effective dates of acquisition up to the effective dates of
disposal.
Subsidiaries
Subsidiaries are those companies in which the Group, directly or indirectly, has an interest held for the long term, of more than 50% of the
voting rights and is able to exercise control over the operations. Separate disclosure is made of minority interests. Investments in
subsidiaries are stated at cost less provision for impairment losses in the Company’s balance sheet.
Associates
Associates are those companies, not being subsidiaries, in which the Group has an attributable interest of 20% or more of the voting rights
held for the long term or over which the Group exercises significant influence, but which it does not control. The Group’s investments in
associates are included in the consolidated balance sheet at the Group’s share of attributable net assets. Income from associates is included
in the consolidated income statement at the Group’s share of profits less losses of associates. Investments in associates are stated at cost less
provision for impairment losses in the Company’s balance sheet.
C GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired
subsidiary or associate at the date of acquisition. Goodwill on acquisitions is reported in the balance sheet as an intangible asset and
amortized using the straight line method over its estimated useful life not exceeding five years. Goodwill on acquisitions which occurred
prior to 1st April 1996 was charged direct to reserves in the year of acquisition.
The profit or loss on disposal of a subsidiary or an associate is calculated by reference to the net assets at the date of disposal including the
attributable amount of goodwill which remains unamortized but does not include any attributable goodwill previously eliminated against reserves.
The carrying amount of goodwill is reviewed annually and written down for permanent impairment where it is considered necessary.
D NEGATIVE GOODWILL
Negative goodwill represents the excess, as at the date of acquisition, of the Group’s interest in the fair values of the identifiable assets and
liabilities acquired over the cost of the acquisition.
To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the plan for an acquisition
and can be measured reliably, but which do not represent identifiable liabilities at the date of acquisition, that portion of negative goodwill
will be recognized as income in the income statement when the future losses and expenses are recognized.
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.