Vtech 2013 Annual Report Download - page 72

70 VTech Holdings Ltd Annual Report 2013
Notes to the Financial Statements
24 Accounting Estimates and Judgements
The presentation of 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.
Notes 15, 16 and 18 contain information about the assumptions
and their risk factors relating to pension scheme obligations, fair
value of share options granted and financial instruments. Other key
sources of estimation uncertainty are as follows:
Provision for defective goods returns
The Group recognises provision for expected return claims, which
included cost of repairing or replacing defective goods, loss of
margin and cost of materials scrapped, based on past experience
of the level of repairs and returns. The Group uses all available
information in determining an amount that is a reasonable
approximation of the costs including estimates based on
reasonable historical information and supportable assumptions.
Changes in these estimates could have a significant impact on the
provision and could result in additional charges or reversal of
provision in future years.
Estimated useful lives of tangible assets
The Group estimates the useful lives of tangible assets based on
the periods over which the assets are expected to be available for
use. The Group reviews annually their estimated useful lives, based
on factors that include asset utilisation, internal technical
evaluation, technological changes, environmental and anticipated
use of the assets tempered by related industry benchmark
information. It is possible that future results of operation could be
materially affected by changes in these estimates brought about
by changes in factors mentioned. A reduction in the estimated
useful lives of tangible assets would increase depreciation charges
and decrease non-current assets.
Impairment of assets
The Group reviews internal and external sources of information at
each balance sheet date to identify indications that assets may be
impaired or an impairment loss previously recognised no longer
exists or may have decreased. The Group estimates the asset’s
recoverable amount when any such indication exists. The
recoverable amount of an asset, or of the cash-generating unit to
which it belongs, is the greater of its fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of time value of
money and these risks specific to the assets. The preparation of
projected future cash flows involves the estimation of future
revenue and operating costs which are based on reasonable
assumptions supported by information available to the Group.
Changes in the estimates would result in additional impairment
provisions or reversal of impairment in future years.
Deferred tax assets
The Group reviews the carrying amounts of deferred taxes at each
balance sheet date and consider the amount of deferred tax assets
to the extent that it is no longer probable that sufficient taxable
income will be available to allow all or part of the deferred tax
assets to be utilised. However, there is no assurance that the Group
will generate sufficient taxable income to allow all or part of its
deferred tax assets to be utilised.
23 Possible Impact of Amendments, New
Standards and Interpretations Issued but
not yet Effective for the Annual Accounting
Period ended 31 March 2013
Up to the date of issue of these financial statements, the IASB has
issued a number of amendments, new standards and new
interpretations which are not yet effective for the accounting
period ended 31 March 2013 and which have not been adopted in
these financial statements.
Of these developments, the following relate to matters that may
be relevant to the Group’s operations and financial statements:
Effective for
accounting
periods
beginning
on or after
Amendments to IAS 1, Presentation of financial
statements – Presentation of items of other
comprehensive income
1 July 2012
IFRS 10, Consolidated financial statements 1 January 2013
IFRS 11, Joint arrangements 1 January 2013
IFRS 12, Disclosure of interests in other entities 1 January 2013
IFRS 13, Fair value measurement 1 January 2013
IAS 27, Separate financial statements (2011) 1 January 2013
IAS 28, Investments in associates and
joint venture (2011) 1 January 2013
Revised IAS 19, Employee benefits 1 January 2013
Annual Improvements to IFRSs 2009 - 2011 Cycle 1 January 2013
Amendments to IFRS 7, Financial instruments:
Disclosures – Offsetting financial assets and
financial liabilities
1 January 2013
Amendments to IAS 32, Financial instruments:
Presentation – Offsetting financial assets and
financial liabilities
1 January 2014
IFRS 9 Financial instruments 1 January 2015
The Group is in the process of making an assessment of what the
impact of these amendments is expected to be in the period of
initial application. So far it has concluded that the adoption of
them is unlikely to have a significant impact on the consolidated
financial statements except for the following:
Revised IAS 19, Employee benefits
Revised IAS 19 introduces a number of amendments to the
accounting for employee benefits. Among them, revised IAS 19
eliminates the “corridor method” under which the recognition of
actuarial gains and losses relating to defined benefit schemes
could be deferred and recognised in profit or loss over the
expected average remaining service lives of employees. Under the
revised standard, all actuarial gains and losses are required to be
recognised immediately in other comprehensive income. This will
change the Group’s accounting for defined benefit scheme under
which the corridor method is currently applied. The revised IAS 19
is effective as for the accounting period beginning from 1 April
2013, and retrospective adoption is required. Upon retrospective
adoption of the revised IAS 19, the Group’s revenue reserve as at
1 April 2012 and 31 March 2013 will decrease by US$10.6 million
and US$8.9 million respectively to US$369.5 million and US$383.2
million respectively.