Vtech 2013 Annual Report Download - page 49

Notes to the Financial Statements
47
VTech Holdings Ltd Annual Report 2013
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 24.
D Basis of Consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries and controlled
special purpose entities and the Group’s interests in associates.
All significant inter-company balances and transactions and any
unrealised gains arising from inter-company transactions are
eliminated on consolidation.
Subsidiaries and controlled special purpose entities are entities
controlled by the Group. Control exists when the Group has the
power to govern the financial and operating policies of an entity so
as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable are taken into
account.
Investments in a subsidiary and a controlled special purpose entity
are consolidated into the consolidated financial statements from
the date that control commences until the date that control ceases.
The assets and liabilities of the controlled special purpose entity,
VTech Share Purchase Scheme Trust, are included in the Group’s
balance sheet and the shares held by the VTech Share Purchase
Scheme Trust are presented as a deduction in equity as Shares held
for Share Purchase Scheme.
Non-controlling interests (previously known as “minority interests”)
represent the equity in a subsidiary not attributable directly or
indirectly to the Company, and in respect of which the Group has
not agreed any additional terms with the holders of those interests
which would result in the Group as a whole having a contractual
obligation in respect of those interests that meets the definition of
a financial liability.
Changes in the Group’s interests in a subsidiary that do not result
in a loss of control are accounted for as equity transactions,
whereby adjustments are made to the amounts of controlling and
non-controlling interests within consolidated equity to reflect the
change in relative interests, but no adjustments are made to
goodwill and no gain or loss is recognised.
When the Group loses control of a subsidiary, it is accounted for as
a disposal of the entire interest in that subsidiary, with a resulting
gain or loss being recognised in profit or loss. Any interest retained
in that former subsidiary at the date when control is lost is
recognised at fair value and this amount is regarded as the fair
value on initial recognition of a financial asset or, when appropriate,
the cost on initial recognition of an investment in an associate or a
jointly controlled entity.
Investments in subsidiaries in the Company’s balance sheet are
stated at cost less impairment losses (see note (K)).
Associates are those entities, not being subsidiaries, in which the
Group exercises significant influence, but not control, over the
financial and operating policies. The consolidated financial
statements include the Group’s share of the total recognised gains
and losses of associates under the equity method, from the date
that significant influence commences until the date that significant
influence ceases. When the Group’s share of losses exceeds the
carrying amount of the associate, the carrying amount is reduced
to nil and recognition of further losses is discontinued except to
the extent that the Group has incurred obligations in respect of
that associate.
Principal Accounting Policies
A Principal Activities and Organisation
The Group’s principal activities and operating segments are set out
in note 1 to the financial statements.
The Company was incorporated in Bermuda. In view of the
international nature of the Group’s operations, the financial
statements are presented in United States dollars.
B Statement of Compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards (“IFRSs”) promulgated
by the International Accounting Standards Board (“IASB”). IFRSs
includes International Accounting Standards (“IASs”) and related
Interpretations. These financial statements also comply with the
disclosure requirements of the Hong Kong Companies Ordinance
and the applicable disclosure provisions of the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited
(the “Listing Rules”).
The IASB has issued certain new and revised IFRSs and new
interpretations that are first effective for the current accounting
period of the Group and the Company. Of these, the following
development is relevant to the Group’s financial statements:
– Amendments to IFRS 7, Financial instruments: Disclosures
– Transfer of financial assets
The amendments to IFRS 7 require certain disclosures to be
included in the financial statements in respect of transferred
financial assets that are not derecognised in their entirety and for
any continuing involvement in transferred financial assets that are
derecognised in their entirety, irrespective of when the related
transfer transaction occurred. However, an entity need not provide
the disclosures for the comparative period in the first year of
adoption. The Group did not have any significant transfers of
financial assets in previous periods or the current period which
require disclosure in the current accounting period under the
amendments.
The Group has not applied any new standard, amendment or
interpretation that is not yet effective for the current accounting
period (note 23).
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 and derivative
financial instruments stated at their fair value as explained in the
accounting policies set out below.
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.