Vtech 2006 Annual Report Download - page 37

Consolidated Financial Statements Notes to the Financial
Statements
VTech Holdings Ltd Annual Report 200634
Principal Accounting Policies
A Principal Activities and Organisation
The Group’s principal activities and separable segments are set
out in note 1 to the financial statements.
The Company was incorporated in Bermuda. In view of the
international nature of the Group’s operations, the financial
statements are presented in United States dollars, rounded to
the nearest million.
B Statement of Compliance
The accompanying financial statements have been prepared
in accordance with International Financial Reporting
Standards (“IFRS”) promulgated by the International
Accounting Standards Board. IFRS includes International
Accounting Standards (“IAS”) and related Interpretations.
These financial statements also comply with the disclosure
requirements of the Hong Kong Companies Ordinance and
the applicable disclosure provisions of the Rules Governing
the Listing of Securities on The Stock Exchange of Hong
Kong Limited and the Bermuda Companies Act 1981.
The accounting policies described in note (C) to (X) have
been consistently applied by the Group except for the
accounting policy changes for the adoption of International
Financial Reporting Standard 2 – Share-based payment
(“IFRS2”). In prior years, no amounts were recognised when
employees (which term includes directors) were granted
share options over shares in the company. If the employees
chose to exercise the options, the nominal amount of share
capital and share premium were credited only to the extent
of the option’s exercise price receivable.
With effect from 1st January 2005, in order to comply with
IFRS2, the Group recognises the fair value of such share
options as an expense in the consolidated income statement.
A corresponding increase is recognised in a capital reserve
within equity. Employees are required to meet vesting
conditions before they become entitled to the options and the
Group recognises the fair value of the options granted over
the vesting period. The Group has taken advantage of the
transitional provisions of IFRS2 in respect of share options and
has applied IFRS2 only to share options granted after 7th
November 2002 that had not vested on or before 1st January
2005. The effect of the revised policy has decreased
consolidated profits for the year ended 31st March 2006 by
US$1.6 million with the corresponding amounts credited to
the capital reserve. The adoption of IFRS2 has no significant
impact on the Group’s financial position as at 31st March
2005 and its results of operations for the year then ended.
Consolidated Cash Flow Statement
For the year ended 31st March 2006
2006 2005
Note US$ million US$ million
Operating activities
Operating profit 136.2 62.7
Depreciation charges 2 19.0 18.2
Amortisation of leasehold
land payments 2 0.1 –
Loss on disposal of tangible assets 2 0.6 –
Gain on disposal of subsidiaries 2 –(1.0)
Gain on disposal of assets
held for sale 2 –(0.8)
Increase in stocks (9.6) (28.1)
Increase in debtors and
prepayments (7.9) (21.8)
Increase in creditors and accruals 36.4 31.0
Increase in provisions 8.1 0.5
Cash generated from
operations 182.9 60.7
Interest received 3.9 1.3
Interest paid –(0.3)
Taxes paid (10.6) (12.1)
Net cash generated from
operating activities 176.2 49.6
Investing activities
Proceeds from disposal of
tangible assets 0.2 0.3
Proceeds from disposal of
assets held for sale –8.8
Proceeds from disposal of
subsidiaries –1.0
Purchase of tangible assets 8 (31.5) (21.5)
Purchase of leasehold land
payments 9 (0.6) –
Net cash used in investing
activities (31.9) (11.4)
Financing activities
Net repayment of borrowings (0.2) (2.4)
Proceeds from issued shares
upon exercise of share options 13.2 –
Proceeds from issued shares
upon exercise of warrants 3.3 –
Dividends paid 6 (42.3) (18.1)
Net cash used in financing
activities (26.0) (20.5)
Effect of exchange rate changes 0.2 1.0
Increase in cash and cash
equivalents 118.5 18.7
Cash and cash equivalents at
beginning of the year 123.9 105.2
Cash and cash equivalents at
end of the year 242.4 123.9
Analysis of the balance of cash
and cash equivalents
Cash at bank and deposits 242.4 123.9
The notes on pages 34 to 53 form part of these financial
statements.