Vtech 2010 Annual Report Download - page 42

40 VTech Holdings Ltd Annual Report 2010
Notes to the Financial Statements
Principal Accounting Policies (Continued)
C Basis of Preparation of the Financial Statements
These financial statements are prepared on the historical cost
basis as modified by the revaluation of certain properties,
financial assets and liabilities designated at fair value through
profit or loss and derivative financial instruments stated at their
fair value.
The preparation of the financial statements in conformity with
IFRSs requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience
and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis
of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision
affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs
that have significant effect on the financial statements and major
sources of estimation uncertainty are discussed in note 28.
D Changes in Accounting Policies
The IASB has issued the following new, revised and amended
IFRSs that are first effective for the current accounting period
of the Group and the Company and are relevant to the Group’s
financial statements:
IAS 1 (Revised) Presentation of financial statements
IFRS 7 (Amendment) Improving disclosures about financial
instruments
IFRS 8 Operating segments
IAS 1 (Revised) – Presentation of financial statements
As a result of the adoption of IAS 1 (Revised), details of changes
in equity during the period arising from transactions with equity
shareholders in their capacity as such have been presented
separately from all other income and expenses in a revised
consolidated statement of changes in equity. All other items
of income and expense are presented in the consolidated
income statement, if they are recognised as part of profit or
loss for the period, or otherwise in a new primary statement,
the consolidated statement of comprehensive income.
Corresponding amounts have been restated to conform to the
new presentation.
This change in presentation has no effect on reported profit
or loss, total income and expense or net assets for any period
presented.
IFRS 7 (Amendment) – Improving disclosures about financial
instruments
As a result of the adoption of the amendments to IFRS 7, the
financial statements include expanded disclosures in note
20(e) about the fair value measurement of the Group’s financial
instruments, categorising these fair value measurements
into a three-level fair value hierarchy according to the extent
to which they are based on observable market data. The
Group has taken advantage of the transitional provisions set
out in the amendments to IFRS 7, under which comparative
information for the newly required disclosures about the fair
value measurements of the financial instruments has not been
provided.
IFRS 8 – Operating segments
IFRS 8, which replaces IAS 14, Segment Reporting, requires
segment disclosure to be based on the way that the Group’s chief
operating decision maker regards and manages the Group, with
the amounts reported for each reportable segment being the
measures reported to the Group’s chief operating decision maker
for the purposes of assessing segment performance and making
decisions about operating matters. The superseded standard,
IAS14, Segment Reporting, required the Group to identify
primary and secondary segments. In previous years, the Group’s
segment disclosure was based on geographical segments. The
Group concluded that the operating segments determined
in accordance with IFRS 8 are the same as the geographical
segments previously identified under IAS 14. Accordingly, the
adoption of IFRS 8 has not resulted in a redesignation of the
Group’s reportable segments as compared with the reportable
segments determined in accordance with IAS 14 and any change
in the basis of measurement of segment profit or loss.
The adoption of other new and revised IFRSs has had no material
effect on the reported results and financial position of the Group
for the current or prior accounting periods.
E Basis of Consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries together with
the Group’s share of the results and retained post acquisition
reserves of its associates under the equity method of accounting
drawn up for the year ended 31 March 2010. All significant
intercompany balances and transactions and any unrealised
gains arising from intercompany transactions are eliminated on
consolidation.
Subsidiaries are those entities controlled by the Company.
Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control effectively
commences until the date that control effectively ceases, and the
share attributable to minority interests is deducted from or added
to profit after taxation. Investments in subsidiaries are stated
at cost less impairment losses (see note (L)) in the Company’s
balance sheet.