Vtech 2006 Annual Report Download - page 42

VTech Holdings Ltd Annual Report 2006 39
Principal Accounting Policies (continued)
U Financial Instruments (continued)
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.
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 2006
Telecommunication
and electronic Other
products activities Total
US$ million US$ million US$ million
i Segment revenue 1,203.7 0.9 1,204.6
Segment result 138.2 0.2 138.4
Unallocated corporate
expenses (2.2)
Operating profit 136.2
Net finance income 3.9
Profit before taxation 140.1
Taxation (11.3)
Profit attributable to
shareholders 128.8
ii Segment assets 439.2 0.8 440.0
Associates – 0.1 0.1
Unallocated assets 195.1
Total assets 635.2
Segment liabilities 309.0 0.9 309.9
Unallocated liabilities 19.1
Total liabilities 329.0
iii Capital expenditure,
depreciation,
amortisation and
other non-cash
expenses
Capital expenditure 32.0 0.1 32.1
Depreciation 18.5 0.5 19.0
Amortisation of
leasehold land
payments 0.1 – 0.1
Other non-cash expenses 12.3 1.6 13.9
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.