Vtech 2014 Annual Report Download - page 47

45VTech Holdings Limited Annual Report 2014
Principal Accounting Policies (Continued)
D Basis of Consolidation (Continued)
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 venture.
Investments in subsidiaries in the Company’s balance sheet are
stated at cost less impairment losses (see note (K)).
E Revenue Recognition
Revenue is measured at the fair value of the consideration received
or receivable. Provided it is probable that the economic benefits
will flow to the Group and the revenue and costs, if applicable,
can be measured reliably, revenue is recognised in profit or loss
as follows:
i. Revenue from the sale of goods is recognised when the
significant risks and rewards of ownership have been
transferred to the buyer. Revenue is stated net of sales taxes,
returns, rebates and discounts, after eliminating sales within
the Group.
ii. Revenue from the provision of services is recognised when
the services are rendered.
iii. Interest income is recognised as it accrues using the effective
interest method.
iv. Dividend income is recognised when the Group’s right to
receive payment is established.
F Research and Development
Research and development costs comprise all costs that are
directly attributable to research and development activities or that
can be allocated on a reasonable basis to such activities.
Expenditure on research activities is recognised as an expense in
the period in which it is incurred.
Expenditure on development activities is capitalised only if the
product or process is clearly defined, technically and commercially
feasible, the attributable expenditure is separately identifiable
and the Group has sufficient resources and the intention to
complete development. The expenditure capitalised includes the
cost of materials, direct labour and an appropriate proportion
of overheads which are directly attributable to development
activities. Capitalised development costs are stated at cost less
accumulated amortisation and impairment losses (see note (K)).
Development expenditure that does not meet the above criteria is
recognised as an expense in the period in which it is incurred.
Amortisation is calculated to write off capitalised development
costs on a straight-line basis over their estimated useful lives,
commencing from the date when the products are put into
commercial production.
G Translation of Foreign Currencies
Foreign currency transactions during the year are translated into
United States dollars at the foreign exchange rates ruling at the
transaction dates. Monetary assets and liabilities denominated in
foreign currencies are translated into United States dollars at the
foreign exchange rates ruling at the balance sheet date. Exchange
gains and losses are recognised in profit or loss.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the foreign
exchange rates ruling at the transactions dates. Non-monetary
assets and liabilities denominated in foreign currencies that are
stated at fair value are translated using the foreign exchange rates
ruling at the dates the fair value was determined.
The results of foreign operations are translated into United States
dollars at the exchange rates approximating the foreign exchange
rates ruling at the dates of the transactions. Balance sheet items
are translated into United States dollars at the closing foreign
exchange rates at the balance sheet date.
On disposal of a foreign operation, the cumulative amount of
the exchange differences relating to that foreign operation is
reclassified from equity to profit or loss when the profit or loss on
disposal is recognised.
H Tangible Assets and Depreciation
The following properties held for own use are stated at their
revalued amount, being their fair value at the date of the
revaluation less any subsequent accumulated depreciation:
– freehold land and buildings; and
– medium-term leasehold land and buildings.
Revaluations are performed with sufficient regularity to ensure that
the carrying amount of these assets does not differ materially from
that which would be determined using fair values at the balance
sheet date.
The following items of tangible assets are stated at cost less
accumulated depreciation and impairment losses (see note (K)):
– short-term leasehold buildings held for own use which are
situated on leasehold land classified as held under operating
leases; and
– other items of tangible assets.
Changes arising on the revaluation of properties held for own
use are generally dealt with in other comprehensive income and
are accumulated separately in equity in the property revaluation
reserve. The only exceptions are as follows:
– When a deficit arises on revaluation, it will be charged to profit
or loss to the extent that it exceeds the amount held in the
reserve in respect of that same asset immediately prior to the
revaluation; and
– When a surplus arises on revaluation, it will be credited to
profit or loss to the extent that a deficit on revaluation in
respect of that same asset had previously been charged to
profit or loss.