Vtech 2012 Annual Report Download - page 47

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VTech Holdings Ltd Annual Report 2012
The amount of deferred tax recognised is measured based on the
expected manner of realisation or settlement of the carrying
amount of the assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date. Deferred tax
assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at each
balance sheet date and is reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow the
related tax benefit to be utilised. Any such reduction is reversed to
the extent that it becomes probable that sufficient taxable profits
will be available.
Additional income taxes that arise from the distribution of
dividends are recognised when the liability to pay the related
dividends is recognised.
Current tax balances and deferred tax balances, and movements
therein, are presented separately from each other and are not
offset. Current tax assets are offset against current tax liabilities, and
deferred tax assets against deferred tax liabilities if, and only if, the
Group has the legally enforceable right to set off current tax assets
against current tax liabilities.
S Employee Benefits
The Group operates a number of defined contribution retirement
schemes throughout the world, including Hong Kong, and a
defined benefit retirement scheme in Hong Kong. The assets of all
schemes are held separately from those of the Company and its
subsidiaries.
(i) Defined contribution schemes
Contributions to the defined contribution schemes are at
various funding rates that are in accordance with the local
practice and regulations. Contributions relating to the defined
contribution schemes are charged to profit or loss as incurred.
(ii) Defined benefit schemes
For long-term employee benefits, the Group’s net obligations
arising under the defined benefit scheme are assessed and
calculated by a qualified actuary using the projected unit
credit method. Under this method, the cost of providing
pensions is charged to profit or loss so as to spread the regular
cost over the service lives of employees in accordance with
the advice of qualified actuaries who carry out a full valuation
of the plan every year. Plan assets are measured at fair value.
Pension obligations are measured as the present value of the
estimated future cash flows of benefits derived from employee
past service, with reference to market yields on high quality
corporate bonds which have terms to maturity approximating
the terms of the related liability. When the benefits of a plan
are improved, the portion of the increased benefit relating to
past service by employees is recognised as an expense in
profit or loss on a straight-line basis over the average period
until the benefits become vested. If the benefits vest
immediately, the expense is recognised immediately in profit
or loss.
Principal Accounting Policies (Continued)
Q Provisions and Contingent Liabilities (Continued)
(ii) Other provisions and contingent liabilities
Provisions are recognised for other liabilities of uncertain
timing or amount when the Group has a legal or constructive
obligation as a result of past events, it is probable that an
outflow of economic benefits will be required to settle the
obligation, and a reliable estimate of the amount of the
obligation can be made.
The Group recognises the estimated liability on expected
return claims with respect to products sold. This provision is
calculated based on past experience of the level of repairs and
returns.
The Group recognises the expected costs of accumulating
compensated absences when employees render a service
that increases their entitlement to future compensated
absences, measured as the additional amount that the Group
expects to pay as a result of the unused entitlement that has
accumulated at the balance sheet date.
Where it is not probable that an outflow of economic benefits
will be required, or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the
probability of outflow of economic benefits is remote. Possible
obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more future events,
are also disclosed as contingent liabilities unless the
probability of outflow of economic benefits is remote.
R Income Tax
Income tax for the year comprises current tax and movements in
deferred tax assets and liabilities. Current tax and movements in
deferred tax assets and liabilities are recognised in profit or loss
except to the extent that they relate to items recognised in other
comprehensive income or directly in equity, in which case the
relevant amounts of tax are recognised in other comprehensive
income or directly in equity, respectively.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect
of previous years.
Deferred tax assets and liabilities arise from deductible and taxable
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the tax bases
respectively. Deferred tax assets also arise from unused tax losses
and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities and
all deferred tax assets, to the extent that it is probable that future
taxable profits will be available against which the asset can be
utilised, are recognised. Future taxable profits that may be capable
to support the recognition of deferred tax assets arising from
deductible temporary differences include those that will arise from
the reversal of existing taxable temporary differences.
The limited exceptions to recognition of deferred tax assets and
liabilities are those temporary differences arising from goodwill not
deductible for tax purposes and the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit (provided
that they are not part of a business combination).