Vtech 2014 Annual Report Download - page 50

48 VTech Holdings Limited Annual Report 2014
Notes to the Financial Statements
Principal Accounting Policies (Continued)
R Income Tax (Continued)
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 scheme
The Group’s net obligation in respect of defined benefit
retirement scheme is calculated separately for each scheme
by estimating the amount of future benefit that employees
have earned in return for their service in the current and prior
periods; that benefit is discounted to determine the present
value and the fair value of any scheme assets is deducted.
The calculation is performed by a qualified actuary using the
projected unit credit method. When the calculation results in
a benefit to the Group, the recognised asset is limited to the
present value of economic benefits available in the form of
any future refunds from the scheme or reductions in future
contributions to the scheme.
Service cost and net interest expense (income) on the net
defined benefit liability (asset) are recognised in profit or loss
and allocates by function as part of “cost of sales”, “selling and
distribution costs” or “administrative and other operating
expenses”. Current service cost is measured as the increase in
the present value of the defined benefit obligation resulting
from employee service in the current period. When the
benefits of a scheme are changed, or when a scheme is
curtailed, the portion of the changed benefit related to past
service by employees, or the gain or loss on curtailment, is
recognised as an expense in profit or loss at the earlier of
when the scheme amendment or curtailment occurs and
when related restructuring costs or termination benefits are
recognised. Net interest expense (income) for the period is
determined by applying the discount rate used to measure
the defined benefit obligation at the beginning of the
reporting period to the net defined benefit liability (asset). The
discount rate is the yield at the end of the reporting period
on high quality corporate bonds that have maturity dates
approximating the terms of the Group’s obligations.
Remeasurements arising from defined benefit retirement
scheme are recognised in other comprehensive income and
reflected immediately in revenue reserve. Remeasurements
comprise actuarial gains and losses, the return on scheme
assets (excluding amounts included in net interest on the net
defined benefit liability (asset)) and any change in the effect of
the asset ceiling (excluding amounts included in net interest
on the net defined benefit liability (asset)).
(iii) Equity and equity related compensation benefits
For share options granted under the 2001 Scheme and 2011
Scheme, the fair value of share options granted to employees
is recognised as an employee cost with a corresponding
increase in a capital reserve within equity. The fair value is
measured at grant date using the Black-Scholes option pricing
model, taking into account the terms and conditions upon
which the options were granted. Where the employees have
to meet vesting conditions before becoming unconditionally
entitled to the share options, the total estimated fair value of
the share option is spread over the vesting period, taking into
account the probability that the options will vest.
During the vesting period, the number of share options
that is expected to vest is reviewed. Any adjustment to the
cumulative fair value recognised in prior years is charged/
credited to the consolidated income statement for the year of
the review, unless the original employee expenses qualify for
recognition as an asset, with a corresponding adjustment to
the capital reserve. On vesting date, the amount recognised
as an expense is adjusted to reflect the actual number of
share options that vest (with a corresponding adjustment to
the capital reserve) except where forfeiture is only due to not
achieving vesting conditions that relate to the market price
of the Company’s shares. The equity amount is recognised in
the capital reserve until either the option is exercised (when
it is transferred to the share premium account) or the option
expires (when it is released directly to revenue reserve).
At the end of the reporting period, the Group revises its
estimates of the number of shares of the Company granted
under the Share Purchase Scheme (“Awarded Shares”) that
are expected to ultimately vest. Any resulting adjustment to
the cumulative fair value recognised in prior years is charged/
credited to employee share-based compensation expense in
the current year, with a corresponding adjustment to capital
reserve.
T Share held for Share Purchase Scheme
Where the VTech Share Purchase Scheme Trust purchases shares of
the Company from the market, the consideration paid, including
any directly attributable incremental costs, is presented as Shares
held for Share Purchase Scheme and deducted from total equity.
Upon vesting, the related costs of the vested Awarded Shares
recognised as employee share-based compensation expenses are
credited to Shares held for Share Purchase Scheme and decrease
in revenue reserve for shares purchased through reinvesting
dividends received on the vested Awarded Shares.
For vesting of forfeited or unallocated shares regranted, the
related costs of the forfeited or unallocated shares regranted are
credited to Shares held for Share Purchase Scheme, and the related
fair value of the shares regranted are debited to capital reserve.
The difference between the cost and the fair value of the shares
regranted is credited to share premium if the fair value is higher
than the cost or debited against revenue reserve if the fair value is
less than the cost.