Vtech 2012 Annual Report Download - page 64

62 VTech Holdings Ltd Annual Report 2012
Notes to the Financial Statements
19 Financial Risk Management and Fair Values
(Continued)
(d) Liquidity risk (Continued)
Derivative financial instruments
Forward foreign exchange contracts were recognised initially at fair
value. At each balance sheet date the fair value is remeasured. The
positive fair value of derivative financial instruments designated as
fair value through profit or loss and cash flow hedges at 31 March
2012 were US$Nil (2011: US$0.1 million) and US$1.4 million (2011:
US$0.3 million) respectively.
(e) Fair values
The fair values of trade debtors, deposits and cash and trade
creditors and accruals approximate their carrying amounts due to
the short-term maturities of these assets and liabilities.
The fair value of forward foreign exchange contracts is determined
using forward exchange market rates at the balance sheet date.
All financial instruments are carried at amounts not materially
different from their fair values as at 31 March 2011 and 31 March
2012. Given these terms it is not meaningful to disclose the fair
values.
Financial instruments carried at fair value
IFRS 7, Financial Instruments: Disclosures, requires the carrying value
of financial instruments measured at fair value at balance sheet date
across the three levels of the fair value hierarchy as defined in IFRS 7,
with the fair value of each financial instrument categorised in its
entirety based on the lowest level of input that is significant to that
fair value measurement. The levels are defined as follows:
• Level1(highestlevel):fairvaluesmeasuredusingquoted
prices (unadjusted) in active markets for identical financial
instruments.
• Level2:fairvaluesmeasuredusingquotedpricesinactive
markets for similar financial instruments, or using valuation
techniques in which all significant inputs are directly or
indirectly based on observable market data.
• Level3(lowestlevel):fairvaluesmeasuredusingvaluation
techniques in which any significant input is not based on
observable market data.
At 31 March 2011 and 31 March 2012, the fair values of all forward
foreign exchange contracts are categorised as level 2.
20 Commitments
2012 2011
US$ million US$ million
(i) Capital commitments for
property, plant and equipment
Authorised but not contracted for 24.5 55.9
Contracted but not provided for 8.4 6.5
32.9 62.4
(ii) Operating lease commitments
The future aggregate minimum
lease payments under
non-cancellable operating
leases are as follows:
Land and buildings
In one year or less 14.9 14.6
Between one and two years 13.9 12.9
Between two and five years 31.2 32.1
In more than five years 36.5 36.7
96.5 96.3
In November 2010, the Group has entered into agreements with an
independent third party in the PRC to lease factory premises in
Houjie, Dongguan comprising several factory buildings. There are a
number of leases which expire in 2016, 2022, 2030 and 2031
respectively. The lease expiring in 2016 is not cancellable. The lease
expiring in 2022 can be cancelled on six months’ notice without
penalty. The lease expiring in 2030 and 2031 have a non-cancellable
period of first ten years. The operating lease commitments
above include total commitments over the non-cancellable
period of the lease terms.
In November 2010, the Group entered into an agreement with an
independent third party in the PRC whereby the PRC party
constructed in phases and leases to the Group a production facility
in Liaobu, Dongguan. There are a number of leases which expire in
2030 and 2031 respectively. The lease expiring in 2030 has a
non-cancellable period of first ten years. The lease expiring in 2031
is not cancellable. The operating lease commitments above include
total commitments over the non-cancellable period of the lease
terms.
Under a Brand License Agreement expiring on 31 March 2015, a
wholly-owned subsidiary of the Group is required to make royalty
payments to AT&T Intellectual Property II, L.P., calculated as a
percentage of net sales, as defined, of the relevant categories of
products, subject to certain minimum aggregate royalty payments.
The percentage of net sales payable varies over time and between
products. There is no maximum royalty payment. The annual
minimum royalty payment is determined based on a percentage of
the preceding year’s earned royalty payment (calculated based on
the preceding year’s net sales payable). The Brand License
Agreement may be extended for an additional term of five years.
Certain wholly-owned subsidiaries of the Group (the “licensees”)
entered into certain licensing agreements with various third party
licensors for the granting of certain rights to use the relevant
cartoon characters in the Group’s electronic learning products.
Under these licensing agreements, the licensees are required to
make royalty payments to the licensors, calculated as a percentage
of net sales of the relevant character licensed products, subject to
certain minimum aggregate royalty payments. The percentage of
royalty payable varies over time and between licensed characters.
There is no maximum royalty payment. The aggregate minimum
royalty payments as at 31 March 2012 amount to US$4.0 million
(2011: US$2.6 million), of which US$2.9 million and US$1.1 million
are payable in the financial years ended 31 March 2013 and 2014
respectively.