Vtech 2004 Annual Report Download - page 36

Notes to the
Financial
Statements
VTech Holdings Ltd Annual Report 2004
34
Principal Accounting Policies /
Notes to the Financial Statements
1 SEGMENT INFORMATION Revenue represents turnover
of the Group derived from the amounts received and receivable for
sale of goods and rendering of services to third parties.
The principal activity of the Group is the design, manufacture and
distribution of consumer electronic products. The
telecommunication and electronic products business is the
principal business segment of the Group.
Primary reporting format — business segments
Year ended 31st March 2004
Telecommunication
and electronic Other
products activities Total
US$ million US$ million US$ million
i Segment revenue 913.0 2.2 915.2
Segment result 55.6 0.2 55.8
Unallocated corporate
expenses (6.3)
Operating profit 49.5
Net finance income 0.4
Profit from ordinary
activities before taxation 49.9
Taxation (3.6)
Profit from ordinary
activities after taxation 46.3
Minority interest —
Profit attributable to shareholders 46.3
ii Segment assets 335.6 1.3 336.9
Associates —0.1 0.1
Unallocated assets 85.2
Total assets 422.2
Segment liabilities 234.8 1.5 236.3
Unallocated liabilities 23.3
Total liabilities 259.6
iii Capital expenditure, depreciation
and other non-cash expenses
Capital expenditure 19.1 0.4 19.5
Depreciation 17.2 0.7 17.9
Amortisation of leasehold
land payments —0.1 0.1
Other non-cash expenses 5.1 —5.1
The Group evaluates the performance and allocates resources to its
operating segments. There are no sales or transactions between
the business segments. Corporate administrative costs and assets
are not allocated to the operating segments.
Segment assets consist primarily of tangible assets, stocks,
receivables and operating cash. Segment liabilities comprise
operating liabilities and exclude items such as taxation. Capital
expenditure comprises additions to moulds, machinery and
equipment, and other assets.
Changes in the fair value of derivatives that are designated and
qualify as cash flow hedges and that are highly effective, are
recognised in the hedging reserve. Where the forecasted
transaction or firm commitment results in the recognition of an
asset or of a liability, the gains and losses previously deferred in
hedging reserve are transferred from hedging reserve and included
in the initial measurement of the cost of the asset or liability.
Otherwise, amounts deferred in hedging reserve are transferred to
the consolidated income statement and classified as revenue or
expense in the same periods during which the hedged firm
commitment or forecasted transaction affects the consolidated
income statement.
If certain derivative transactions, while providing effective
economic hedges under the Group’s policies, do not qualify for
hedge accounting under the specific rules in IAS 39, “Financial
Instruments: Recognition and Measurement”, changes in the fair
value of these derivative instruments are recognised immediately
in the consolidated income statement.
When a hedging instrument expires or is sold, or when a hedge no
longer meets the criteria for hedge accounting under IAS 39, any
cumulative gain or loss existing in the hedging reserve at that time
remains in the hedging reserve and is recognised, when the
committed or forecasted transaction ultimately is recognised in the
consolidated income statement. However, if a committed or
forecasted transaction is no longer expected to occur, the
cumulative gain or loss that was reported in the hedging reserve is
immediately transferred to the consolidated income statement.
The Group documents at the inception of the transaction the
relationship between hedging instruments and hedged items, as
well as risk management objective and strategy for undertaking
various hedge transactions.
V BORROWINGS Borrowings are recognised as the
proceeds are received, net of transaction costs incurred.
W DIVIDENDS Dividends proposed or declared after the
balance sheet date are not recognised as a liability at the balance
sheet date.
X SEGMENT REPORTING A segment is a distinguishable
component of the Group that is engaged either in providing
products or services (business segment), or in providing products
or services within a particular economic environment
(geographical segment), which is subject to risks and rewards that
are different from those of other segments.