Vtech 2005 Annual Report Download - page 37

Notes to the Financial Statements
35
VTech Holdings Ltd Annual Report 2005
Principal Accounting Policies (continued)
A Principal Activities, Organisation and Basis of
Preparation (continued)
(ii) IFRS2 requires the Group to recognise the share-based
payment transaction, from the date of the grant until the
vesting date. The measurement of the share-based
payment transaction (e.g. grant of the share options) is
based on the fair value of the equity instruments
measured at grant date, where IFRS2 requires a valuation
model to be applied.
For the accounting periods beginning 1st April 2005, the
Group will adopt the requirements of IFRS2 and will take
advantage of the transitional provisions of IFRS2. The
preliminary assessment indicates that the adoption of IFRS2
and other new IFRS would not have a significant impact on its
financial position as at 31st March 2005 and its results of
operations for the year then ended.
The preparation of the financial statements in accordance with IFRS
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the year. Actual results could differ from these estimates.
B Basis of 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. All significant inter-company balances and
transactions and any unrealised gains arising from inter-
company transactions are eliminated on consolidation.
Subsidiaries are those entities controlled by the Company.
Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control effectively
commences until the date that control effectively ceases, and
the share attributable to minority interests is deducted from or
added to profit after taxation. Investments in subsidiaries are
stated at cost less impairment losses (see note (I)) in the
Company’s balance sheet.
Associates are those entities, not being subsidiaries, in which
the Group exercises significant influence, but not control, over
the financial and operating policies. The consolidated financial
statements include the Group’s share of the total recognised
gains and losses of associates under the equity method, from
the date that significant influence commences until the date
that significant influence ceases. When the Group’s share of
losses exceeds the carrying amount of the associate, the
carrying amount is reduced to nil and recognition of further
losses is discontinued except to the extent that the Group has
incurred obligations in respect of that associate. Investments in
associates are stated at cost less impairment losses (see note (I))
in the company’s balance sheet.
C Foreign Currencies Transactions denominated in
foreign currencies are translated into United States dollars at the
foreign exchange rates ruling at the transaction dates. Monetary
assets and liabilities denominated in foreign currencies are
translated into United States dollars at the rates of exchange
ruling at the balance sheet date. Income statements of foreign
entities are translated into the Group’s reporting currency at
average exchange rates for the year and balance sheets are
translated at the exchange rates ruling at the balance sheet
date.
Net exchange differences arising from the translation of the
financial statements of subsidiaries and associates expressed in
foreign currencies are taken directly to exchange reserve.
All other exchange differences are dealt with in the
income statement.
D Revenue Recognition Revenue from the sale of goods
is recognised in the income statement when the significant risks
and rewards of ownership have been transferred to the buyer.
Revenue is stated net of sales taxes and discounts, after
eliminating sales within the Group.
Revenue from the provision of services is recognised when the
services are rendered.
Interest income is recognised on a time-apportioned basis that
takes into account the effective yield on the asset. Dividend
income is recognised when the Group’s right to receive
payment is established.