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40 VTech Holdings Ltd Annual Report 2009
NOTES TO THE FINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
T Derivative Financial Instruments (Continued)
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges and that are highly effective,
are recorded in the income statement, along with any
changes in the fair value of the hedged asset or liability that
is attributable to the hedged risk.
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 income statement
and classified as revenue or expense in the same periods
during which the hedged firm commitment or forecasted
transaction affects the 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”
(“IAS 39”), changes in the fair value of these derivative
instruments are recognised immediately in the 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
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 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.
U Borrowings
Borrowings are recognised as the proceeds are received, net
of transaction costs incurred.
V Dividends
Dividends proposed or declared after the balance sheet date
are not recognised as a liability at the balance sheet date.
W 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.
X Related Parties
For the purposes of these financial statements, a party is
considered to be related to the Group if:
(i) the party has the ability, directly or indirectly through
one or more intermediates, to control the Group or
exercise significant influence over the Group in making
financial and operating policy decisions, or has joint
control over the Group;
(ii) the Group and the party are subject to common
control;
(iii) the party is an associate of the Group or a joint venture
in which the Group is a venturer;
(iv) the party is a member of key management personnel
of the Group or the Group’s parent, or a close family
member of such an individual, or is an entity under
the control, joint control or significant influence of
such individuals;
(v) the party is a close family member of a party referred
to in (i) or is an entity under the control, joint control
or significant influence of such individuals; or
(vi) the party is a post-employment benefit plan which is
for the benefit of employees of the Group or of any
entity that is a related party of the Group.
Close family members of an individual are those family
members who may be expected to influence, or be
influenced by, that individual in their dealings with
the entity.