Vtech 2003 Annual Report Download - page 48

VTech Holdings Ltd46
Notes to the Financial Statements
21 RESERVES
Group Company
2003 2002 2003 2002
Note US$ million US$ million US$ million US$ million
Share premium 74.3 74.3 74.3 74.3
Other properties
revaluation reserve 6.8 6.6 ——
Revenue reserve 41.9 4.2 46.3 36.6
Exchange reserve (6.8) (6.6 ) (1.2 ) (1.2 )
Hedging reserve —(0.4 ) ——
116.2 78.1 119.4 109.7
An analysis of movements
in reserves is set
out below:
Share premium
Brought forward 74.3 74.2 74.3 74.2
Placing of shares —0.1 —0.1
Carried forward 74.3 74.3 74.3 74.3
Other properties
revaluation reserve
Brought forward 6.6 10.6 ——
Disposal of properties
previously revalued (0.3) (2.8 ) ——
Deferred tax reversed
upon disposal of a
property previously
revalued —0.4 ——
Surplus/(deficit) arising
on revaluation of
other properties 9 0.5 (1.6 ) ——
Carried forward 6.8 6.6 ——
Revenue reserve
Brought forward 4.2 (9.8 ) 36.6 35.3
Profit attributable to
shareholders 40.8 11.2 13.1 1.3
Dividends 7 (3.4 ) —(3.4 ) —
Disposal of properties
previously revalued 0.3 2.8 ——
Carried forward 41.9 4.2 46.3 36.6
Exchange reserve
Brought forward (6.6 ) (6.4 ) (1.2) (1.2 )
Exchange translation
differences (0.2) (0.2 ) ——
Carried forward (6.8 ) (6.6 ) (1.2) (1.2 )
Hedging reserve
Brought forward (0.4 ) 0.3 ——
Transfer to income
statement 2 0.4 (0.3 ) ——
Fair value losses arising
during the year —(0.4 ) ——
Carried forward —(0.4 ) ——
Reserves of the company available for distribution to
shareholders amounted to US$46.3 million (2002:US$36.6
million).
22 FINANCIAL INSTRUMENTS The Group enters into foreign
exchange contracts and interest rate swaps to hedge certain
exposures on fluctuations of foreign currency exchange rates and
interest rates respectively. The Group does not use derivative
financial instruments for speculative purposes.
Credit risk Financial assets which potentially subject the Group
to credit risk consist principally of cash, short-term deposits and
trade receivables. The Group’s cash equivalents and short-term
deposits are placed with major financial institutions. Trade
receivables are presented net of the allowance for doubtful
receivables. Credit risk with respect to trade receivables is limited
due to the large number of customers comprising the Group’s
customer base and their dispersion across different industries
and geographical areas. Accordingly, the Group has no significant
concentration of credit risk. In addition, credit risks are mitigated
by the use of insurance plans.
The Group manages these risks by monitoring credit ratings and
limiting the aggregate risk to any individual counterparty.
Foreign exchange risk The Group enters into foreign exchange
contracts in order to manage its exposure to fluctuations in
foreign currency exchange rates on specific transactions. Foreign
exchange contracts are matched with anticipated future cash
flows in foreign currencies, primarily from sales.
Interest rate risk The Group’s income and operating cash flows
are affected by the change in market interest rates in relation to
its interest-bearing loans. The Group uses interest rate swaps as
cash flow hedges of future interest payments to convert certain
borrowings from floating rates to fixed rates.
Fair values The fair value of interest rate swaps is calculated as
the present value of the estimated future cash flows. The fair
value of forward foreign exchange contracts is determined using
forward exchange market rates at the balance sheet date.
Derivative financial instruments Forward foreign exchange
contracts and interest rate swaps contracts were designated as
cash flow hedges and remeasured to fair values.
The net fair values of derivative financial instruments at 31st
March designated for cash flow hedges were as follows:
2003 2002
Positive Negative Positive Negative
fair value fair value fair value fair value
Note US$ million US$ million US$ million US$ million
Forward foreign
exchange contracts 15 ——0.5 —
Interest rate swaps 16 ——— (0.9 )
——0.5 (0.9 )
Forward foreign exchange contracts The net fair value gains at 31st
March 2003 on open forward foreign exchange contracts which
hedge anticipated future foreign currency sales and purchases will
be transferred from the hedging reserve to the consolidated income
statement when the forecasted sales and purchases occur, at various
dates between 1 month to 6 months from the balance sheet date.
At 31st March 2003, there were no outstanding forward foreign
exchange contracts (2002: contract amount of US$22.8 million).