notes to the financial statements - Singapore Technologies ...

204 SIMPLY SMARTERNOTES TO THE FINANCIAL STATEMENTS31 December 2011(Currency - Singapore dollars unless otherwise stated)41. Other reserves (continued)Group2011 2010$’000 $’000iii.Foreign currency translation differences arise from:- Translation of quasi equity loans forming part of net investments in foreign entities (9,529) (2,423)- Translation of foreign currency loans used as hedging instruments for effective netinvestment hedges (5,487) 7,005- Translation of foreign entities 33,763 (84,873)18,747 (80,291)Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreignsubsidiaries whose functional currencies are different from that of the Group’s presentation currency.As at 31 December 2011, bonds amounting to $257.4 million (US$198.1 million) (2010: $134.0 million (US$103.9 million)) have been designated asa hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries (“US subsidiaries”) and are being used to hedge the Group’sexposure to foreign exchange risk on this investment. Gain or loss on the re-translation of these bonds is transferred to other comprehensive income tooffset any gain or loss on translation on the net investment in the US subsidiaries. There is no ineffectiveness in the hedge during the year.Statutory reserveIn accordance with foreign Enterprise Law application to the wholly-owned subsidiaries in the People’s Republic of China (“PRC”), certain subsidiaries arerequired to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits as determined in accordance with theapplicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries’registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registeredcapital of the subsidiaries. The SRF is not available for standard distribution to shareholders.In accordance with the Law of the PRC on Joint Ventures Using Chinese and Foreign Investment applicable to certain subsidiaries, appropriations fromthe net profits are made to the Reserve Fund and the Enterprise Expansion Fund, after offsetting accumulated losses from prior years (if any), and beforeprofit distributions to the investors. The percentage to be appropriated to the Reserve Fund and the Enterprise Expansion Fund is to be determined by theBoard of Directors of the PRC entities.Fair value reserveFair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired as well as theportion of the fair value changes on the derivative financial instruments designated as hedging instruments in cash flow hedges that are determined tobe an effective hedge.Share-based payment reserveShare-based payment reserve represents the equity-settled share options, performance shares and restricted shares granted to employees and nonexecutivedirectors. The reserve is made up of the cumulative value of services received from employees recorded on grant of equity-settled share options,performance shares and restricted shares. The expense for services received will be recognised over the vesting periods.