Vtech 2009 Annual Report Download - page 39

VTech Holdings Ltd Annual Report 2009 37
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
H 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
financial statements. Increases in valuation are credited to
the revaluation reserve; decreases are first set off 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 off 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
leasehold buildings and
leasehold improvements
10 to 30 years or
lease term,
if shorter
Moulds 1 year
Machinery and equipment 3 to 5 years
Computers, motor vehicles,
furniture and fixtures 3 to 7 years
Where parts of a tangible asset have different 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.
Gains or losses arising from the retirement or disposal of
tangible assets are determined as the difference 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.
I Construction in Progress
Construction in progress represents land and buildings
under development and are stated at cost less impairment
losses (see note (K)). Cost comprises the construction costs
of buildings and costs paid to acquire land use rights.
Building construction costs are transferred to leasehold
buildings when the assets are completed and put into
operational use and depreciation will be provided at the
appropriate rates in accordance with the depreciation
policies specified in note (H).
Costs paid to acquire land use rights are transferred to
leasehold land payments upon obtaining the land use
right certificates and amortisation will be provided at the
appropriate rates in accordance with the amortisation
policies specified in note (J).
No depreciation or amortisation is provided in respect of
construction in progress.
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 classified as finance leases.
Property, plant and equipment acquired by way of finance
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 benefits and risks of
ownership are effectively retained by the lessor are classified
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.
K Impairment of Assets
(i) Impairment of receivables and other financial assets
Impairment losses for bad and doubtful debts are
recognised when there is objective evidence of
impairment and are measured as the difference
between the carrying amount of the financial asset
and the estimated future cash flows, discounted at
the asset’s original effective interest rate where the
effect of discounting is material. Objective evidence
of impairment includes observable data that comes to
the attention of the Group about events that have an
impact on the asset’s estimated future cash flows such
as significant financial difficulty of the debtor.