Vtech 2008 Annual Report Download - page 34

NOTES TO THE FINANCIAL STATEMENTS
VTech Holdings Ltd Annual Report 2008
32
PRINCIPAL ACCOUNTING POLICIES CONTINUED
G 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 the exchange rates approximating
the foreign exchange rates ruling at the dates of the transactions
and balance sheets are translated at the exchange rates ruling at
the balance sheet date.
Net exchange di erences arising from the translation of the
 nancial statements of subsidiaries and associates expressed
in foreign currencies are taken directly to exchange reserve.
All other exchange di erences are dealt with in the income
statement.
On disposal of a foreign operation, the cumulative amount of
the exchange di erences recognised in exchange reserve which
relate to that foreign operation is included in the calculation of
the pro t or loss on disposal.
H Intangible Assets
Intangible assets that are acquired by the Group are carried at
cost less any accumulated amortisation and any impairment
losses (see note (K)). Amortisation commences from the date
when the developed product is available for use.
I Tangible Assets and Depreciation
Land and buildings are stated at cost or valuation performed
by professional valuers every three years less amounts provided
for depreciation except in the case of freehold land which is
not depreciated. In the intervening years the directors review
the carrying value and adjustment is made where there has
been a material change. The valuations are on an open market
value basis and are incorporated in the  nancial statements.
Increases in valuation are credited to the revaluation reserve;
decreases are  rst set o against increases on earlier valuations
in respect of the same assets and thereafter are charged
to the consolidated income statement. Upon the disposal
of a revalued property, the relevant portion of the realised
revaluation reserve in respect of previous revaluations is
transferred from revaluation reserve to revenue reserve.
All other tangible assets are stated at cost less accumulated
depreciation and impairment losses (see note (K)).
Depreciation is calculated to write o the cost or revalued
amount of assets on a straight-line basis over their estimated
useful lives which are as follows:
Long-term leasehold buildings Lease term
Freehold buildings, short-term 10 to 30 years or lease term,
leasehold buildings and if shorter
leasehold improvements
Machinery and equipment 3 to 5 years
Computers, motor vehicles, 3 to 7 years
furniture and  xtures
Moulds 1 year
Gains or losses arising from the retirement or disposal of
tangible assets are determined as the di erence between the
estimated net disposal proceeds and the carrying amount of the
assets and are recognised in the income statement on the date
of retirement or disposal.
Where parts of a tangible asset have di erent useful lives, the
cost or valuation of the item is allocated on a reasonable basis
between the parts and each part is depreciated separately.
Both the useful life of an asset and its residual value, if any, are
reviewed annually.
J Leases
Leases of property, plant and equipment in terms of which
that the Group assumes substantially all the risks and rewards
of ownership are classi ed as  nance leases. Property, plant
and equipment acquired by way of  nance lease is stated at
an amount equal to the lower of its fair value and the present
value of the minimum lease payments at inception of the lease
less accumulated depreciation and impairment losses (see note
(K)). Finance charges are charged to the income statement in
proportion of the capital balances outstanding.
Leases of assets under which all the bene ts and risks of
ownership are e ectively retained by the lessor are classi ed as
operating leases. Payments made under operating leases (net
of any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the period of the
lease.
Leasehold land payments are up-front payments to acquire
long-term leasehold interests in land. These payments are
stated at cost and are amortised on a straight-line basis over the
respective period of the leases.
When an operating lease is terminated before the lease period
has expired, any payment required to be made to the lessor
by way of penalty is recognised as an expense in the period in
which the termination takes place.