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Financial statements

Notes to the consolidated financial statements

1. General Information

CSR plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Churchill House, Cambridge Business Park, Cowley Road, Cambridge, CB4 0WZ, United Kingdom. The nature of the Group’s operations and its principal activities are set out in note 6.

These financial statements are presented in US dollars because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the policies set out in note 3.

Going concern

The financial statements have been prepared on the going concern basis. The directors have considered future cash forecasts and revenue projections, based on prudent market data, in their consideration of going concern. The issues surrounding going concern are discussed regularly by the Board and were evaluated as part of the Group’s budget for the next financial year and the Group’s longer term plans.

Note 33 includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of the financial instruments and hedging activities; and its exposure to credit risk. Management is currently of the opinion that the Group has adequate financial resources and a robust policy towards treasury risk and cash flow management. The Group has $412.4 million of cash and cash equivalents, including treasury deposits and investments, as at 1 January 2010 and no debt liabilities. The directors believe that the Group is adequately placed to manage its business risks successfully despite the current uncertain economic outlook and challenging macro economic conditions.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2. Adoption of New and Revised Standards

In the current financial period, the Group has adopted International Financial Reporting Standard 2 (amended) “Share-based payment – vesting conditions and cancellations”, International Accounting Standard 1 “Presentation of Financial Statements” (revised 2007), Amendments to International Financial Reporting Standard 7 “Financial Instruments” and both International Financial Reporting Standard 3 “Business Combinations” (as revised in 2008) and International Accounting Standard 27 “Consolidated and separate financial statements” (as revised in 2008) in advance of their effective date.

The amendments to IFRS 2 require, amongst other things, the acceleration of share-based payment charges relating to employees who cease to contribute to a SAYE scheme. The application of this Standard has not required a restatement of comparative periods.

The main change affecting CSR as a result of adopting IAS 1 (revised) requires the presentation of a statement of changes in equity as a primary statement, separate from the income statement and statement of comprehensive income. As a result, a consolidated statement of changes in equity has been included as a primary statement, showing changes in each component of equity for each period presented.

Due to the retrospective restatement of segments following the internal reorganisation outlined in note 6, in line with IAS 1 (revised), CSR has presented an opening balance sheet position as at 28 December 2007 and the associated accompanying opening position in the notes to the financial statements. There is no impact on the opening balance sheet position as a result of this restatement. A balance sheet as at 30 December 2006 has not been presented as the restatement of segment information had no impact on the balance sheet as at this date.

The impact of the early adoption of IFRS 3 (revised) and IAS 27 (revised) has resulted in some changes to the Group’s accounting policies and in accordance with the transitional provisions of IFRS 3(2008), that Standard has been applied prospectively to business combinations for which the acquisition date is on or after 3 January 2009:

The impact of IFRS 3(2008) Business Combinations has been:

  • to change the basis for allocating a portion of the purchase consideration in a business combination to replacement share-based payment awards granted at the time of the combination;
  • to require that acquisition-related costs be accounted for separately from the business combination, generally leading to those costs being expensed when incurred.
  • to remove the requirement to adjust goodwill when recognising deferred tax assets for losses subsequent to the initial acquisition accounting for acquisitions under either IFRS 3(2008) or IFRS 3 (as issued in 2004) subsequent to 3 January 2009.

The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk.

Standards not affecting the reported results nor the financial position:

The following new and revised Standards and Interpretations have been adopted in the current period. Their adoption has not had any significant impact on the amounts reported in these financial statements but may impact the accounting for future transactions and arrangements.

Table contents: Amendments to IAS 39, Financial instrument: Recognition and Measurement and IFRS 7 Financial Instruments:, Disclosures, IAS 38 (amended), Intangible Assets, IAS 40 (amended), Investment property, IAS 20 (amended), Accounting for Government Grants and Disclosure of, Government Assistance, IAS23 (revised 2007) Borrowing Costs, IAS 32 (amended)/IAS 1, Puttable Financial Instruments and Obligations Arising on, Liquidation, IAS 39 (amended), Financial instruments: Recognition and Measurement, Eligible Hedged Items, IFRIC 9 (amended)/ IAS 39 (amended), Reassessment of Embedded Derivatives and Financial, Instruments: Recognition and Measurement, IFRIC 15, Agreements for the Construction of Real Estate, IFRIC 16, Hedges of a Net Investment in a Foreign Operation, IFRIC 18, Transfers of Assets from customers.

Standards

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not yet been applied in these financial statements were in issue but not yet effective (and in some cases, had not yet been adopted by the EU):

Table contents: IFRS 9, Financial Instruments, IFRIC 14, Prepayments of a minimum funding requirements, IFRIC 19, Extinguishing financial liabilities with equity instruments, IFRS 2 (amended), Group cash-settled Share-based payment transactions, IFRS 1 (amended), Additional exemptions for first-time adopters, IAS 32 (amended), Classification of Rights Issues, IAS 24 (amended), Related Party Disclosures, Improvements to IFRSs (April 2009).

Standards

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

3. Accounting Policies

Basis of Accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (“IASB”) and as adopted by the European Union (EU).

The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments. The principal accounting policies adopted are set out below. The financial statements cover the 52 week period from 3 January 2009 to 1 January 2010; the comparatives are presented for the 53 week period from 29 December 2007 to 2 January 2009 and for the 52 week period from 30 December 2006 to 28 December 2007. The financial statements are reported on a 52 or 53 week basis to be consistent with the Group’s internal reporting.

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of CSR plc (the Company) and entities controlled by the Company (its subsidiaries, together the Group) drawn up to the dates indicated in the primary financial statements. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

Business Combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for the control of the acquiree. Acquisition-related costs are recognised in the profit or loss as incurred for acquisitions that have occurred since the adoption of IFRS 3 (revised). Previous acquisitions have not been restated.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against cost of acquisition where they qualify as measurement period adjustments (see below). All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Changes in the fair value of contingent consideration classified in equity are not recognised.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 (2008) are recognised at their fair value at the acquisition date, except that:

  • Deferred tax assets and liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income taxes and IAS 19 Employee Benefits respectively;
  • Liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with IFRS 2 Share-based Payment;
  • Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised to reflect new information obtained about facts and circumstances that existed as at the acquisition date that, if known, would have affected the amounts recognised as of that date.

The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date – and is subject to a maximum of one year.

The transition provisions given in IFRS 3 (2008) are such that the rules governing the treatment of contingent consideration for pre-adoption business combinations do not change.

Where there are acquiree share-based payment awards that will be exchanged for awards held by the Group, the fair value of the outstanding awards is allocated between consideration and post-combination service in accordance with IFRS 3 (revised 2008).

The Group recognises a contingent liability as of the acquisition date if there is a present obligation that arises from past events and its fair value can be measured reliably in accordance with IFRS 3 (revised 2008).

Goodwill

Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest (if any) in the entity over the net of the acquisition-date amounts of identifiable assets acquired and the liabilities assumed.

If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest (if any), the excess is recognised in profit or loss as a bargain purchase made.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested annually or more frequently when there is an indication that the unit may be impaired. To determine the recoverable amount of the cash-generating unit, the Group uses discounted projected cash flows based on approved budgets and projections covering a period up to five years and estimates growth rates, terminal growth rates and discount rates specific to the economic environment within which the cashgenerating unit is operating. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Revenue Recognition

Revenue is recognised when it is probable that economic benefits will flow to the Group and delivery has occurred or the service has been provided, the sales price is fixed or determinable, and collectibility is reasonably assured. These criteria are generally met at the time the product is shipped and delivered to the customer and, depending on the delivery conditions, title and risk have passed to the customer and acceptance of the product, when contractually required, has been obtained, or, in cases where such acceptance is not contractually required, when management has established that all aforementioned conditions for revenue recognition have been met and no further post-shipment obligations exist other than obligations under warranty. Examples of the above-mentioned delivery conditions are “Free on Board point of delivery” and “Costs, Insurance Paid point of delivery”, where the point of delivery may be the shipping warehouse or any other point of destination as agreed in the contract with the customer and where title and risk in the goods pass to the customer.

Revenues are recorded net of sales taxes, customer discounts, rebates and similar charges. For products for which a right of return exists during a defined period, revenue recognition is determined based on the historical pattern of actual returns, or in cases where such information is lacking, revenue recognition is postponed until the return period has lapsed. Return policies are typically based on customary return arrangements in local markets. Revenue is shown net of estimated provision for credit notes and returns.

A provision for product warranty is made at the time of revenue recognition and reflects the estimated costs of replacement and free of charge services that will be incurred by the Company with respect to the sold products.

Royalty income, which is generally earned based upon a percentage of sales or a fixed amount per royalty earning product, is recognised upon shipment by the licencee.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement.

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.

Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term.

Foreign Currencies

The functional currency of CSR plc is the US dollar and this is also the presentation currency for the consolidated financial statements. Transactions in currencies other than US dollars are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in the net profit or loss for the period except for exchange differences on transactions entered into to hedge certain foreign currency risks (see policy on Hedge Accounting).

In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts (see Financial Instruments policy for details of the Group’s accounting policies in respect of such derivative financial instruments).

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Currency translation differences are recognised directly in equity.

Operating (Loss) Profit

Operating (loss) profit is stated before investment income and finance costs.

The income statement has been presented with certain items split out as separate line items. Management believes that this presentation aids the understanding of the Group’s financial performance and this presentation is used for internal performance evaluation. Items that have been split out on the face of the income statement are the amortisation of acquired intangible assets, share-based payment charges under IFRS 2, charges associated with integration and restructuring, acquisition fees, in 2008 and 2007 the deferred tax adjustment to goodwill, in 2008 the asset impairment and in 2007, the patent dispute settlement.

Retirement Benefit Costs

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Differences between contributions payable in the period and contributions actually paid are shown as either accruals or prepayments in the balance sheet.

Taxation

The tax expense represents the sum of the current tax expense and the deferred tax expense for the period.

The tax payable is based on taxable (loss) profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income and expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences, unused carried forward tax losses and unused carried forward tax credits can be utilised. However, such assets and liabilities are not recognised if the temporary differences arise from:

  • the initial recognition of goodwill;
  • the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit;
  • investments in subsidiaries and associates, and interests in joint ventures, where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Judgement is required when determining the provision for taxes as the tax treatment of some transactions cannot be finally determined until a formal resolution has been reached with the tax authorities. Tax benefits are not recognised unless it is probable that the benefit will be obtained. Tax provisions are made if it is probable that a liability will arise and the liability can be reliably measured. The Group reviews each significant tax liability or benefit to assess the appropriate accounting treatment.

Government grants, by means of tax relief for research and development expenditure, are recognised as income as qualifying expenditures are made.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost of the assets, less estimated residual value, over their estimated useful lives, using the straight line method, on the following basis:

Table contents: Computer equipment, 2 to 3 years, Test equipment, 2 to 5 years, Office equipment, 3 years, Furniture and fittings, 5 years, Leasehold improvements, Minimum lease period.

Property, Plant and Equipment

Residual values are the estimated amount that the Group would obtain from disposal of the asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life, based on prices prevailing at the balance sheet date.

In general residual values are zero or negligible, due to the technical and specialised nature of assets held. Residual values are reviewed annually.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Assets in the course of construction are carried at cost less any recognised impairment losses. Costs included are those that directly relate to the construction of the asset. Depreciation of these assets commences when the assets are ready for their intended use.

Other Intangible Assets

Other intangible fixed assets are stated at cost or fair value for items acquired in business combinations, net of amortisation and any provision for impairment. No amortisation is provided on assets in the course of construction. On other intangible fixed assets, amortisation is provided at rates calculated to write off the cost or fair value, less estimated residual value, of each asset on a straight line basis over its expected useful life as follows:

Table contents: Software licences, Licence term, Customer contracts and relationships, 3 to 4 years, Purchased R&D, 4 to 10 years, Internally developed technology, 3 years, Purchased developed technology, 3 to 4 years, Trade names, 2 years.

Assets

Residual values are the estimated amount that the Group would obtain from disposal of the asset, after deducting estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life, based on prices prevailing at the balance sheet date.

In general residual values are zero or negligible, due to the technical and specialised nature of assets held. Residual values are reviewed annually.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Assets in the course of construction are carried at cost net of any provision for impairment. Costs included are those that directly relate to the construction or production of the asset. Amortisation of these assets commences when the assets are ready for their intended use.

Research and Development Expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally generated intangible asset arising from the Group’s product development is recognised only if all of the following conditions are met:

  • an asset is created that can be identified (such as a new device or software);
  • the project from which the asset arises meets the Group’s criteria for assessing technical feasibility;
  • it is probable that the asset created will generate future economic benefits; and
  • the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight line basis over their useful lives. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.

Impairment of Tangible and Intangible Assets Excluding Goodwill

At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of 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 values using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. After the recognition of an impairment loss, any depreciation or amortisation charge for the asset is adjusted for future periods to allocate the asset’s revised carrying value, less estimated residual value, on a systematic basis, over its remaining useful life.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but the reversal is limited so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in-first-out (FIFO) method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Financial Instruments

Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Loans and Receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment or appropriate allowances for estimated irrecoverable amounts. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Treasury deposits and investments
Treasury deposits and investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, including transaction costs.

Treasury deposits and investments consist of money market deposits in USD, GBP and obligations of the United States government treasury with original maturities of over ninety days. Interest income is recorded as it accrues over the period of the investment at rates fixed at the time of inception.

Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily available convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial Assets at FVTPL (Fair Value Through Profit and Loss)
Financial Assets are classified as FVTPL where the asset liability has been designated as FVTPL.

A financial asset may be designated as FVTPL upon initial recognition if:

  • Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
  • The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the Group is provided internally on that basis; or
  • It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated FVTPL.

Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. Fair value is determined in the manner described in note 33.

Derecognition of Financial Assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay.

Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired when there is objective evidence that, as a result of one or more events that have occurred after the initial recognition of the asset, the estimated future cash flows of the investment have been impaired. Objective evidence of impairment could include significant financial difficulty of the issuer or the counterparty; or default or delinquency in interest or principal payments; or it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Financial Liabilities and Equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

Trade Payables
Trade payables are not interest bearing and are initially measured at fair value, net of transaction cost.

Subsequently these are measured at amortised cost using the effective interest method, with interest recognised on an effective yield basis.

Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.

Financial Liabilities at FVTPL (Fair Value Through Profit and Loss)
Financial liabilities are classified as FVTPL where the financial liability has been designated as FVTPL.

A financial liability may be designated as FVTPL upon initial recognition if:

  • Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
  • The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the Group is provided internally on that basis; or
  • It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss.

Derecognition of Financial Liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire.

Derivative Financial Instruments
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates. The Group uses foreign exchange forward contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes. Further details of derivative financial instruments are disclosed in note 33 to the financial statements.

The use of financial derivatives is governed by the Group’s policies approved by the Board of directors, which provides written principles on the use of financial derivatives. The Group’s policy is to hedge between 75% and 90% of forecast GBP expenditure for the following 11 to 15 months.

Derivative financial instruments are initially recorded at fair value at the date a derivative contract is entered into and are subsequently remeasured to fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

Hedge Accounting
Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in cash flows of the hedged item.

Note 18 sets out details of the fair values of the derivative instruments used for hedging purposes.

Movements in the hedging reserve in equity are also detailed in the statement of changes in equity.

Cash Flow Hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Amounts deferred in equity are recycled into profit or loss in the periods when the hedged item is recognised in profit or loss. When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

Provisions

Provisions for warranty and returns costs are recognised at the date of sale of the relevant products, at the directors’ best estimate of the expenditure required to settle the Group’s liability.

Provision is made for onerous contracts at the fair value of the minimum unavoidable payments, net of any amounts recoverable. Where amounts are known and timings certain, onerous amounts are accrued instead.

Share-Based Payment

The Group has applied the requirements of IFRS 2 Share-based Payment. In accordance with the transitional provisions, IFRS 2 has been applied to all grants of equity instruments after 7 November 2002 that were unvested as of 1 January 2005.

The Group issues equity-settled share-based payments to certain employees, including share options with non-market based vesting conditions. Equity settled share-based payments are measured at the fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.

For grants where options vest in instalments over the vesting period, each instalment is treated as a separate grant, which results in fair value of each instalment being spread across the vesting period of that instalment.

Fair value is measured by use of a Black-Scholes model for most of share options in issue. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

For certain share options which include TSR related condition the fair value is estimated through the use of a Monte-Carlo simulation.

For a business combination where there are acquiree share-based payment awards that will be exchanged for awards held by the Group, the fair value of the outstanding awards is allocated between consideration and post-combination service in accordance with IFRS 3 (revised 2008) using the valuation techniques described in IFRS 2. The allocation of the fair value of the options outstanding to consideration results in a credit to equity in the share-based payment reserve.

Employee Benefit Trust

The Group has established an employee benefit trust which is a separately administered trust and is funded by loans from Group companies. The assets of the trust comprise shares in CSR plc and cash balances. The Group recognises assets and liabilities of the trust in the consolidated accounts and shares held by the trust are recorded at cost as a deduction from shareholders’ equity.

Contingent liabilities

A contingent liability may arise where there is possible obligation that arises from past events, whose occurrence or non-occurrence will only be confirmed by uncertain future events or where a present obligation arises from past events but where an outflow of resources from the Group is not probable and/or the amount of the obligation cannot be reliably measured. The Group recognises liabilities where there is a present obligation and an outflow of resources from the Group is probable and can be reliably measured.

4. Critical Accounting Judgements and Key Sources of Estimation and Uncertainty

These consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB and as adopted by the European Union (EU).

The preparation of financial statements requires the directors to make estimates and assumptions about future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities.

Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgement based on various assumptions and other factors such as historical experience, current and expected economic conditions. The directors constantly re-evaluate these significant factors and make adjustments where facts and circumstances dictate. The directors believe that the following accounting policies are critical due to the degree of estimation required and / or the potential material impact they may have on the Group’s financial position and performance.

Inventory Valuation

Inventories are stated at the lower of cost and net realisable value. Provisions for excess or obsolete inventory are recorded based upon assumptions about future demand and market conditions.

The level of inventory provisioning required is sensitive to changes in the forecast sales of particular products which is dependent on changes in conditions in the Group’s markets. If changes in actual market conditions are less favourable than those projected, additional inventory provisions may be required; similarly if changes in actual market conditions are more favourable than predicted, the Group may be able to release a proportion of the inventory provision.

Business Combinations and Goodwill Impairments

The amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the contingent liabilities assumed. The Group uses judgement, estimates and involves external specialists in determining the fair value of identifiable assets and liabilities acquired in a business combination, as well as calculating the fair value of the purchase consideration on acquisition.

Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to indefinite lived and finite lived intangible assets.

The Group assesses the carrying value of identifiable intangible assets, long-lived assets and goodwill annually, or more frequently if events or changes in circumstances indicate that such carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following:

  • significant under performance relative to historical or projected future results;
  • significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
  • significantly negative industry or economic trends.

This assessment is based upon projections of anticipated discounted future cash flows. The most significant variables in determining cash flows are future growth in sales, discount rates, terminal values, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows.

The Group determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons. Terminal values are based on the expected life of products and forecasted life cycle and forecasted cash flows over that period. While the Group believes that its assumptions are appropriate, such amounts estimated could differ materially from what will actually occur in the future. In assessing goodwill, these discounted cash flows are prepared at a cashgenerating unit level.

Note 13 to the financial statements provides further disclosures on the assumptions underlying the impairment review and the allocation of goodwill by reportable segments.

Provisions for Returns and Warranty Claims

The Group provides for the estimated cost of returns and product warranties at the time revenue is recognised. The Group’s products are covered by product warranty plans of varying periods, depending on local practices and regulations. While the Group engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our warranty obligations are affected by actual product failure rates (field failure rates) and by material usage and service delivery costs incurred in correcting a product failure.

The Group’s warranty provision is established based upon its best estimates of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. As the Group continuously introduces new products which incorporate complex technology, and as local laws, regulations and practices may change, it will be increasingly difficult to anticipate our failure rates, the length of warranty periods and repair costs. While the Group believes that its warranty provisions are adequate and that the judgements applied are appropriate, the ultimate cost of product warranty could differ materially from our estimates. When the actual warranty cost of our products is lower than we originally anticipated, the Group releases an appropriate proportion of the provision, and if the warranty cost is higher than anticipated, the Group increases the provision.

Accounting for Share-based Payments

The Group applies IFRS 2 “Share-based payments” in relation to the accounting for share-based payments in respect of options and share awards granted after 7 November 2002 and which had not vested as at 1 January 2005.

Under IFRS 2, the share-based compensation is measured at the grant date, based on the estimated fair value of the award, and is recognised as an expense over the employee’s requisite service period.

The fair value of most of the options granted is measured by use of a Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The expected life used in the model has been adjusted, based on management’s best estimate for the effects of non-transferability, exercise restrictions and, behavioural considerations. The volatility used in the model is based on movements in the Group’s share price for a period matching that of the vesting period of the options. The riskfree interest rate used is the implied yield currently available on zero-coupon government issues in the UK, with a remaining term equal to the expected term of the option being valued (based on the option’s remaining contractual life and taking into account the effects of expected early exercise). For certain share awards which include total shareholder return related conditions, the fair value is estimated through the use of a Monte-Carlo simulation.

The amount recognised as an expense is adjusted to reflect the actual number of shares that vest.

Non-market vesting conditions are included in assumptions about the number of shares that are expected to become exercisable. The estimates of the number of share options and awards that are expected to become exercisable are reviewed at each balance sheet date. The impact of the revision of original estimates, if any, is recognised in the income statement and a corresponding adjustment to equity. Note 31 to the Consolidated Financial Statements provides details on the valuation assumptions made for each grant of share options and awards during the period.

Share Options and Taxation
In the UK and US the Group is entitled to a tax deduction for amounts treated as compensation on exercise of certain employees’ share options under each jurisdiction’s tax rules. This gives rise to a temporary difference between the accounting and tax bases and hence a deferred tax asset is recorded. This asset is calculated by comparing the estimated amount of tax deduction to be obtained in the future (based on the share price at the balance sheet date) with the share-based payment expense recorded in the income statement. If the amount of estimated future tax deduction exceeds the cumulative amount of share-based payment expense at the statutory rate, the excess is recorded directly in equity, against retained earnings.

No share-based payment expense is recorded in respect of options granted before 7 November 2002. Nevertheless, tax deductions have arisen and will continue to arise on these options. The tax effects in relation to these options are recorded directly in equity against retained earnings.

Revenue recognition

Sales are recognised when the significant risks and rewards of ownership have transferred to the buyer, continuing managerial involvement usually associated with ownership and effective control have ceased, the amount of revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the Group and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

This requires the Group to assess at the point of delivery whether these criteria have been met. When the Group determines that such criteria have been met, revenue is recognised. The Group records estimated reductions to revenue for pricing agreements, price protection, other volume based rebates and expected returns. Estimated sales adjustments for volume based discount programs are based largely on shipment information.

Income Taxes

The Group is subject to the income tax laws of the various tax jurisdictions in which we operate, principally the United Kingdom. These laws are complex and subject to different interpretations by taxpayers and tax authorities. When establishing income tax provisions, we therefore make a number of judgments and interpretations about the application and interaction of these laws. Changes in these tax laws or our interpretations of these laws and the resolution of future tax audits could significantly impact our effective tax rate and the results of operations in a given period.

The Group estimates its income taxes in each of the jurisdictions in which it operates. This process involves estimating its current tax liability together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in the recognition of deferred tax assets and liabilities, which are included within the consolidated balance sheet to the extent that we believe they are recoverable.

In recognising deferred tax assets, the Group considers profit forecasts including the effect of exchange rate fluctuations on sales and external market conditions. Where it is probable that a position may be successfully challenged by revenue authorities, a tax provision is created for the tax on the probable adjustment.

Management’s judgement is required in determining the provision for income taxes, deferred tax assets and liabilities. Deferred tax assets have been recognised where management believes there are sufficient taxable temporary differences or convincing other evidence that sufficient taxable profit will be available in future to realise deferred tax assets.

Although the deferred tax assets which have been recognised are considered realisable, actual amounts could be reduced if future taxable income is lower than expected. This can materially affect the Group’s reported net income and financial position.

Hedge Accounting for Financial Instruments

The financial instruments that are used in hedging transactions are assessed both at inception and quarterly thereafter to ensure they are effective in offsetting changes in either the fair value or cash flows of the related underlying exposures. Hedge accounting is used for foreign currency risk exposures and for firm and forecast commitments to hedge foreign currency risk exposures. Management’s judgement is required to determine whether a future transaction is probable. External market data is applied in measuring the hedge effectiveness of financial instruments. Hedge ineffectiveness is recognised immediately in the income statement. Refer to note 33 for details of the hedging relationships as well as the impact of the hedge on the pre-tax profit or loss for the period.

Litigation and claims

The Group may be subject to claims, legal actions and complaints, including patent infringements, arising in the normal course of business. The likelihood and ultimate outcome of such occurrences is not presently determinable therefore the Group uses estimation and judgement on whether any of these claims or litigation should result in a contingent liability being recognised.

Issues can, and do, take many years to resolve. Significant items of litigation and claims on which the Group has exercised accounting judgement in respect of whether or not to recognise a contingent liability are discussed in note 27. The inherent uncertainty regarding the outcome of these items means eventual resolution could differ from the accounting estimates and therefore impact the Group’s results and cash flows.

5. Revenue

Table contents: Sale of goods, Royalties, Investment income.

Revenue

Investment income is interest on bank deposits.

6. Segmental Reporting

CSR is a leading provider of multifunction connectivity, audio and location platforms.

Products and Services from which Reportable Segments Derive their Revenues

Following an internal reorganisation in the first half of 2009, the reportable segments of CSR changed from those shown in the 2008 Annual Report and accordingly, the prior period disclosures have been restated.

The Group’s new reportable segments under IFRS 8 Operating Segments are as follows:

Table contents: Handset Business Unit (HBU), Audio and Consumer Business Unit (ACBU), Automotive and PND (APBU), Mobile Handsets, Headsets, PC and Consumer Applications, Automotive and Personal Navigation Device (PND) applications.

Segmental Reporting
Segment Revenues and Results

The reportable segments previously disclosed were Cellular and Non-Cellular.

The handset and headset businesses were previously included within the Cellular segment prior to the internal reorganisation and have now been split between HBU and ACBU. The Non-Cellular reportable segment has now been split between the ACBU and APBU reportable segments.

The following is an analysis of the Group’s revenue and results by reportable segment:

Table contents: Revenue, Total segment revenue, Result, Underlying operating profit, Share-based payment charges, Amortisation of acquired intangible assets, Integration and restructuring, Acquisition-related fees, Operating loss, Investment income (note 5), Finance costs (note 10), Loss before tax.

Segment Revenues and Results

The Group discloses underlying operating profit as the measure of segment result as this is the measure used in the decisionmaking and resource allocation process of the Chief Operating Decision Maker, which is the Group’s Chief Executive Officer.

Investment income and finance costs are not allocated to reportable segments for the purposes of reporting to the Group’s Chief Executive Officer.

A substantial proportion of R&D costs are allocated to the handset business unit. Other operating costs are allocated on activity. This method of cost allocation is used to report costs to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of segment performance.

The accounting policies for the reportable segments are the same as the Group’s accounting policies.

Underlying operating profit represents operating profit earned by each segment without allocation, in each period, of acquisitionrelated fees, share-based payment charges, integration and restructuring charges, charges related to the amortisation of acquired intangible assets, the adjustment to goodwill in respect of deferred tax in 2007 and 2008, the asset impairment charges in 2008, and in 2007, the patent dispute settlement.

The following is an analysis of the Group’s revenue and results by reportable segment in the 53 weeks ended 2 January 2009 restated for the changes in reportable segments:

Table contents: Revenue, Total segment revenue, Result, Underlying operating profit, Share-based payment charges, Amortisation of acquired intangible assets, Integration and restructuring, Deferred tax adjustment to goodwill, Asset impairment, Operating loss, Investment income (note 5), Finance costs (note 10), Loss before tax.

reportable segments

The following is an analysis of the Group’s revenue and results by reportable segment in the 52 weeks ended 28 December 2007 restated for the changes in reportable segments:

Table contents: Revenue, Total segment revenue, Result, Underlying operating profit, Share-based payment charges, Amortisation of acquired intangible assets, Deferred tax adjustment to goodwill, Patent dispute settlement, Operating profit, Investment income (note 5), Finance costs (note 10), Profit before tax.

reportable segments
Segment Assets

Table contents: HBU, ACBU, APBU, Total segment assets, Deferred tax asset, Derivative financial instruments, Other receivables, Corporation tax debtor, Treasury deposits and investments, Cash and cash equivalents, Total assets.

Segment Assets

Assets allocated to reportable segments are goodwill (allocation is described in note 14), property, plant and equipment, intangible assets, trade receivables and inventory. All other assets are unallocated. Assets are allocated to the segment which has responsibility for their control.

No information is provided for segment liabilities as this measure is not provided to the chief operating decision maker.

Other Segment Information

Table contents: Depreciation of tangible fixed assets and amortisation of intangible assets, Additions to non-current assets, Depreciation of tangible fixed assets and amortisation of intangible assets, Additions to non-current assets, Depreciation of tangible fixed assets and amortisation of intangible assets, Additions to non-current assets.

Other Segment Information
Revenues from Major Products and Services

The Group’s revenues from its major products and services were as follows:

Table contents: Sale of integrated circuits, Sale of software, Royalties, Consolidated revenue (excluding investment income).

Revenues from Major Products and Services
Geographical Information

The Group operates in four principal geographical areas – the UK (country of domicile), Rest of Europe, the Americas and Asia. The Group’s revenue from external customers and information about its segment assets (non-current assets excluding deferred tax assets and other financial assets) by geographical location is detailed below:

Table contents: UK, Rest of Europe, Finland, Germany, Hungary, Other, USA, Americas (excluding USA), Asia, China and Hong Kong, Taiwan, Korea, Japan, Other Asia Pacific.

Geographical Information

Revenues are attributed to geographical areas on the basis of the customer’s manufacturing location.

Table contents: UK, rest of Europe, USA, Asia.

Geographical Information

Non-current assets being goodwill, property, plant and equipment and other intangible assets are attributed to the location where they are situated.

Information About Major Customers

In 2009, included in revenues arising from HBU are revenues of approximately $67.8 million (11% of revenues) relating to the Group’s largest customer. In 2008 and 2007, revenues in HBU, APBU and ACBU relating to the Group’s largest customer were, in 2008, $135.0 million, (19% of revenues) and in, 2007: $220.1 million, (26% of revenues).

In 2009 revenues of approximately $63.9 million (11% of revenues) were included within both the HBU and ACBU segments which arose from sales to the Group’s second largest customer. In 2008, revenues of approximately $75.6 million (11% of revenues) were included within both the HBU and ACBU segments which arose from sales to the Group’s second largest customer. In 2007 only the largest customer of the Group exceeded 10% of revenue in the 52 week period. Revenue from the top five customers represents 43% of revenues (2008: 50%; 2007: 52%).

7. (Loss) Profit for the Period

(Loss) profit for the period has been arrived at after charging (crediting):

Table contents: Net foreign exchange (gains) losses, Research and development costs, Depreciation of property, plant and equipment, Loss on disposal of property, plant and equipment, Loss on disposal of intangible assets, Patent dispute settlement, Integration and restructuring (see note 29), Impairment of assets (see note 30), Acquisition fees, Amortisation of intangible assets, Staff costs (see note 9), Cost of inventories recognised as expense, Write-downs of inventories recognised as an expense, Auditors’ remuneration for audit services (see note 8), Deferred tax adjustment to goodwill (see note 13).

(Loss) Profit for the Period

8. Auditors’ remuneration

Table contents: Fees payable to the Company’s auditors for the audit of the Company’s annual accounts, Fees payable to the Company’s auditors and their associates for other services to the Group, The audit of the Company’s subsidiaries pursuant to legislation, Total audit fee, Interim Review, Tax services, Corporate finance services, SEC regulatory reporting accounting, UK reporting accountant, Due diligence, Other, Total non audit fees.

Auditors’ remuneration

9. Staff Costs

The average monthly number of employees (including executive directors) was:

Table contents: Research and development, Sales and marketing, General and administrative.

Staff Costs

Their aggregate remuneration comprised:

Table contents: Salaries, Social security costs, Other pension costs, Share option charges.

aggregate remuneration

* Share option charges for the 53 weeks ended 2 January 2009 include $0.2 million included within “Restructuring charges” (see note 30).

10. Finance Costs

Table contents: Interest expense and similar charges, Unwinding of discount on contingent consideration, Unwinding of discount on onerous lease provision, Interest payable on acquisition loan notes, Foreign exchange (gains) losses.

Finance Costs

11. Taxation

Table contents: Current income tax (recoverable) payable for the year, Current income tax benefit recognised in equity (note 25), Current income tax charge, Adjustment in respect of current income tax of prior years, Total current income tax (credit) charge, Deferred tax (credit) charge, Deferred tax rate change impact, Adjustment in respect of deferred tax of prior years, Total deferred tax charge (credit) (note 19), Total tax (credit) charge.

taxation

Corporation tax is calculated at 28.0% (2008: 28.5%; 2007: 30%); of the estimated assessable (loss) profit for the year.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The (credit) charge for the year can be reconciled to the (loss) profit per the income statement as follows:

Table contents: (Loss) profit before tax, Tax at the UK corporation tax rate of 28.0% (2008: 28.5%, 2007: 30%), Tax benefit of additional specific tax reliefs, Non taxable income on intercompany financing, Effect of different tax rates of subsidiaries operating in other tax jurisdictions, Adjustments to tax charge in respect of prior years, Impairment of goodwill, Deferred tax rate adjustments, Non-deductible expenses, De-recognition of tax losses, Acquisition related legal and professional costs, Tax (credit) expense and effective tax rate for the period .

credit charge

In March 2007, the UK Government announced that they would introduce legislation that reduced the corporation tax rate to 28% from 1 April 2008. This legislation was fully enacted. The deferred tax assets and liabilities, previously stated at 30% of the temporary differences were remeasured to 28% of those amounts. In addition, the blended current tax rate for the 53 weeks ended 2 January 2009 reduced to 28.5%.

Adjustments to tax charge in respect of prior periods is due to the tax effect of acquisition accounting adjustments in 2009, the revision of the estimated tax benefits of research and development claims in 2008 and 2009 and remeasuring foreign exchange impacts on the recognised tax provisions in 2008.

Non-deductible expenses include items not deductible for tax purposes such as legal and professional fees, and in 2008 and 2007, the unwinding of the discount on the contingent consideration and also some share option expenses. In 2007, this also included additional provision related to uncertain tax positions.

$1.6 million of current tax benefit has been recognised in equity for a prior year deduction agreed with the tax authorities for the share option gains of a former employee. We are in continuing discussions regarding an additional amount related to share option gains which if agreed would give a further benefit of up to five times the amount already recognised.

12. Earnings Per Share

The calculations of earnings per share are based on the following data:

Table contents: Earnings, (Loss) earnings for the financial period, Number of shares, Weighted average number of shares:, For basic earnings per share, Effect of dilutive potential ordinary shares - share options, For diluted earnings per share.

Earnings Per Share

The dilutive effect of potential ordinary shares is nil as a loss has been made in the 52 weeks ended 1 January 2010 (53 weeks ended 2 January 2009: nil) however there were 3,520,499 potentially dilutive options at 1 January 2010 (2 January 2009: 1,993,152; 28 December 2007: 4,906,720).

13. Goodwill

Table contents: Cost and carrying amount, At 30 December 2006, Recognition on acquisition of subsidiaries, Adjustment for recognition of deferred tax asset, At 28 December 2007, Impairment losses for the period, Adjustment for recognition of deferred tax asset, At 2 January 2009, Recognised on acquisition of SiRF Technology Holdings Inc., Adjustment to estimated contingent consideration, Adjustment of deferred tax (note 19), At 1 January 2010.

Goodwill

At the time of the acquisitions of Clarity Technologies in 2005 and CPS Limited and NordNav Technologies AB in 2007, the acquired entities included brought forward tax losses. SiRF Technology Holdings Inc also included brought forward tax losses on acquisition in 2009.

These were recognised only to the extent that deferred tax liabilities related to temporary timing differences existed. During 2007 and 2008, a further deferred tax asset was recognised for some of these losses related to Clarity Technologies Inc, and NordNav Technologies AB, and, in accordance with IFRS 3 (as issued in 2004), an equivalent adjustment was made to goodwill. This resulted in a charge of $978,000 in 2008 (2007: $279,000) that was included within administrative expenses. During 2009, CSR plc implemented IFRS 3 (revised), this has resulted in a prospective change in accounting, and current year and future deferred tax adjustments will not impact goodwill.

The estimated contingent consideration related to the 2007 acquisition of NordNav Technologies AB, in line with current forecasts of the amount due under the sale and purchase agreement (note 22).

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

Table contents: Reportable segments and cash generating units, HBU, ACBU, APBU.

Goodwill

In 2006, goodwill acquired in a business combination was allocated to the single cash-generating unit. As a result of an internal reorganisation at the end of 2006, goodwill was reallocated to the cash generating units expected to receive the benefit based on the relative fair value of each cash generating unit. Following the acquisition of SiRF Technology Holdings Inc, there was a further internal reorganisation; existing goodwill was allocated to the appropriate new cash generating units which integrated the previous cash generating units and new SiRF goodwill arising on that acquisition was allocated to the cash generating units expected to receive the future benefits of the acquisition such as the expected revenue synergies and cost savings.

Goodwill of $139.6 million was recognised on the acquisition of SiRF during 2009. Of this, $84.1 million was allocated to the handset cash generating unit, $12.8 million was allocated to the audio and consumer cash generating unit and $42.7 million was allocated to the automotive and PND cash generating unit, based on the expected future benefits for these cash generating units.

Also during the period, the estimated remaining consideration payable on the NordNav acquisition was adjusted from $17.5 million to $nil in line with current forecasts of the amount due under the sale and purchase agreement, this adjustment decreased the goodwill allocated to the handset cash generating unit.

The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. Following the annual impairment test which takes place in the fourth quarter of each year, it was determined that no further impairment of goodwill is required.

The recoverable amount of each cash-generating unit is determined from a value in use calculation. The key assumptions for the value in use calculations are those regarding the discount rates, terminal growth rates, future growth in sales and expected changes to selling prices and direct costs during the period. These assumptions have been revised in the year in light of the continuing difficult economic conditions, this has resulted in more conservative estimates about the future and specifically a reduction in the terminal growth rate used for the impairment calculation. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to CSR.

Changes in selling prices and direct costs are based on historical information and expectations of future changes in the market.

The Group has conducted sensitivity analysis on a variety of scenarios on the impairment test of each CGU’s carrying value. The sensitivity analysis demonstrates that sufficient headroom exists to ensure the carrying value exceeds the recoverable amount for all reasonable scenarios likely to occur.

For all cash generating units the Group prepares cash flow forecasts derived from the most recent financial budget approved by management for the next year and extrapolates cash flow forecasts for the following four years, based on long range plans. These long range plans are based on recent reports on the markets we operate in produced by independent analysts. Management uses this information to produce realistic plans when combined with internal and customer specific information. The key factor in the cash flow forecasts is the ability to forecast revenue. A terminal value is included for the period beyond five years from the balance sheet date based on the estimated cash flow in the fifth year and a terminal growth rate of 1.5% (2008: 2.5%). This terminal growth rate does not exceed the average long-term growth rate for the relevant markets.

The rate used to discount the forecast cash flows is 9% (2008: 9%; 2007: 9%).

14. Other Intangible Assets

Table contents: Cost, At 29 December 2006, Additions, Acquired with acquisition of subsidiary, Disposals, At 28 December 2007, Additions, Disposals, At 2 January 2009, Additions, Disposals, Transfers, Acquired with acquisition of subsidiary, At 1 January 2010, Amortisation, At 29 December 2006, Charge for the year, Disposals, At 28 December 2007, Charge for the year, Disposals, Impairment losses, At 2 January 2009, Charge for the year, Disposals, At 1 January 2010, Carrying amount, At 1 January, At 2 January 2009, At 28 December 2007.

Other Intangible Assets

Leased assets included above:

Other Intangible Assets

The impairment losses of $12.6 million in 2008 are included within “Administrative expenses” in the income statement and relate to acquisition-related intangible assets and software licences which were written off as the result of the Operational Assessment in 2008.

At 1 January 2010, the Group had entered into contractual commitments for the acquisition of other intangible assets amounting to $973,000 (2008:$ nil; 2007: $ nil).

15. Property, Plant and Equipment

Table contents: Cost, At 29 December 2006, Additions, Disposals, Acquired with acquisition of subsidiary, At 28 December 2007, Additions, Disposals, Transfers, At 2 January 2009, Additions, Disposals, Acquired with acquisition of subsidiary, At 1 January 2010, Depreciation, At 29 December 2006, Charge for the year, Disposals, Acquired with acquisition of subsidiary, At 28 December 2007, Charge for the year, Disposals, Impairment losses, At 2 January 2009, Charge for the year, Disposals, At 1 January 2010, Carrying amount, At 1 January 2010, At 2 January 2009, At 28 December 2007.

Property, Plant and Equipment

Leased assets included above:

Table contents: Carrying amount, At 1 January 2010, At 2 January 2009, At 28 December 2007.

Property, Plant and Equipment

At 1 January 2010, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to $31,000 (2008: $nil; 2007: $nil).

The impairment losses in 2008 of $3.4 million were included within “Administrative expenses” in the income statement and relate to tangible assets which have been written down to their recoverable amount as a result of the Operational Assessment which took place in 2008 (see note 30). Their recoverable amount was the fair value of the assets less their estimated costs to sell, with the fair value less their estimated costs to sell being determined by reference to an active market for those assets.

16. Inventories

Table contents: Raw materials, Work in progress, Finished goods.

Inventories

17. Other Financial Assets

Trade and other receivables

Table contents: Amounts receivable for sale of goods and software, Amounts receivable for royalties, Total trade receivables, VAT, Other debtors, Prepayments and accrued income.

Other Financial Assets

The average credit period taken on trade receivables is 40 days (2008: 58 days; 2007: 37 days). An allowance has been made for estimated irrecoverable amounts within trade receivables of $114,000 (2008: $3,000; 2007: $3,000). This allowance has been determined by reference to past default experience. An allowance for credit notes and price adjustments has also been made within trade receivables of $557,000 (2008: $1,902,000; 2007: $150,000).

Before accepting any new customers, the Group uses a credit scoring system to assess the potential customer’s credit quality and define credit limits by customer. Credit limits and credit quality are regularly reviewed.

It is the policy of the Group to only transact with creditworthy entities to mitigate the risk of default associated with trade receivables. The Group provides for trade receivables based on amounts estimated as irrecoverable determined by reference to past default experience.

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Cash and Cash Equivalents

Bank balances and cash comprise cash held by the Group and short term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value.

Treasury Deposits and Investment

Treasury deposits and investments represent bank deposits and obligations of the United States treasury with an original maturity of over three months. Some of these amounts are held as FVTPL assets (see note 33).

Credit Risk

The Group’s principal financial assets are bank balances and cash, treasury deposits and trade and other receivables.

The credit risk on liquid funds and derivative financial instruments is actively managed to limit the associated risk and counterparties are banks with high credit ratings assigned by international credit rating agencies.

Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Table contents: Total trade receivables, Cash and cash equivalents, Treasury deposits and investments, Derivative financial instruments.

Exposure to credit risk

The maximum exposure to credit risk for total trade receivables at the reporting date by geographic region was:

Table contents: Europe, USA, Asia, Other.

Exposure to credit risk

The Group’s exposure to credit risk is spread over a number of counterparties and customers with limited concentrations.

The Group’s largest customer accounts for $1.6 million of trade receivables at 1 January 2010 (2 January 2009: $7.5 million; 28 December 2007: $18.4 million).

Impairment Losses
The aging of total trade receivables at the reporting date was:

Table contents: Not past due, Past due 1-30 days, Past due 31-60 days, Past due 61-90 days, Past due 91-120 days, More than 121 days past due.

Impairment Losses

The movement in the allowances in respect of trade receivables during the period was as follows:

Table contents: Balance at the beginning of the period, Utilised in the period, Additional provisions in the period, Balance at the end of the period.

Impairment Losses

Included in the Group’s trade receivables balance are debtors with a carrying amount of $12,022,000 (2008: $7,590,000; 2007: $2,719,000) which are past due but for which the Group has not provided, as there has been no significant change in the credit quality of the receivables and the amounts are still considered recoverable. $8.7 million of the past due but not provided trade receivables were received within two weeks of the balance sheet date (2008: $6.0 million; 2007: $1.9 million).

Based on past experience, the Group believes that no impairment allowance is necessary in respect of trade receivables not past due, other than for credit notes or price adjustments.

18. Derivative Financial Instruments

Currency Derivatives

The Group utilises currency derivatives to hedge significant future transactions and cash flows. The instruments purchased are denominated in GBP.

At the balance sheet date, the total notional amount of outstanding forward foreign exchange contracts that the Group has committed is as below:

Table contents: Forward foreign exchange contracts.

Currency Derivatives

These arrangements are designed to address significant exchange exposures for the next 15 months (2008: 13 months) and are renewed on a rolling basis to cover between 11 and 15 months forward.

At the balance sheet date, the fair value of the Group’s currency derivatives is shown below:

Derivatives that are designated and effective as hedging instruments carried at fair value

Table contents: Derivatives that are designated and effective as hedging instruments carried at fair value, Forward foreign exchange contracts – assets, liabilities.

Currency Derivatives

The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to a net asset of $1,890,000 (2008: liability of $26,043,000; 2007:net liability of $899,000) has been deferred in equity.

Net amounts of $5,186,000 (2008: $3,876,000; 2007: $748,000) and $277,000 (2008: $183,000; 2007: $88,000) respectively have been transferred to operating expenses in the income statement and fixed assets in respect of contracts maturing in the period.

Financial assets (liabilities) Carried at Fair Value Through Profit or Loss (FVTPL)

Table contents: Financial assets (liabilities) Carried at Fair Value Through Profit or Loss (FVTPL), Forward foreign exchange contracts.

Currency Derivatives

The forward foreign exchange contracts carried at FVTPL in 2008 were previously designated as effective cash flow hedges but became ineffective as a result of the October 2008 restructuring programme. Further details of derivative financial instruments are given in note 33.

19. Deferred Tax

The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the period and prior reporting period:

Table contents: At 29 December 2006, Credit (charge) to income, (Charge) credit to equity, Acquisition of subsidiary, Deferred tax rate adjustment to income, Deferred tax rate adjustment to equity, At 28 December 2007, Credit (charge) to income, (Charge) credit to equity, At 2 January 2009, Credit (charge) to income, Credit (charge) to equity, On acquisition, Adjustments to prior period acquisition accounting (note 13), At 1 January 2010.

Deferred Tax

Certain deferred tax assets and liabilities have been offset where they relate to the same taxation authority and net settlement and offset is permitted. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

Table contents: Deferred tax liabilities, Deferred tax assets.

Deferred Tax

At the balance sheet date, the Group has unused tax losses of $261,542,000 (2008: $126,588,000; 2007:$175,564,000) available for offset against future profits. A deferred tax asset has been recognised in respect of $39,334,000 (2008: $4,416,000; 2007: $7,793,000) of such losses. No deferred tax asset has been recognised in respect of the remaining $222,208,000 (2008: $122,442,000; 2007: $167,771,000) due to the unpredictability of future profit streams within certain subsidiary entities. Included in unrecognised tax losses are losses of $107,647,000 (2008: $34,381,000; 2007: $47,819,000) that will expire in 5-20 years. Other losses may be carried forward indefinitely.

At the balance sheet date, no deferred tax liability has been recognised on temporary differences of $3,239,000 ( 2008: $22,974,000, 2007: $14,754,000) relating to the unremitted earnings of overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in the foreseeable future. The temporary differences at 1 January 2010 are significantly reduced from the previous year as a result of a change to UK tax legislation which largely exempts from UK tax, overseas dividends received on or after 1 July 2009. The temporary differences at 1 January 2010 represent only the unremitted earnings of those overseas subsidiaries where remittance to the UK of those earnings may still result in a tax liability, principally as a result of dividend withholding taxes levied by the overseas tax jurisdictions in which those subsidiaries operate.

As of 1 January 2010, the Group recognized deferred tax assets that exceed deferred tax liabilities by $4,341,000 in entities which have suffered a loss in the current period. This is based on management’s assessment that it is probable that the respective entities will have taxable profits against which the unused tax losses and deductible temporary differences can be utilized. Generally, in determining the amounts of deferred tax assets to be recognized, management uses profitability information and, if relevant, forecasted operating results, based upon approved business plans, including a review of the tax planning opportunities and other relevant considerations.

20. Obligations Under Finance Leases

Table contents: Amounts payable under finance leases:, Within one year, In the second to fifth years inclusive, Less: future finance charges, Present value of lease, Less: Amount due for settlement within 12 months (shown under current liabilities), Amount due for settlement after 12 months.

Obligations

It is the Group’s policy to lease certain of its equipment under finance leases and purchase certain software licences under agreements containing deferred payment terms. The average lease term is 3.0 years. Interest rates are fixed at the contract date; all of the agreements containing deferred payment terms are interest free. For the period ended 1 January 2010, the average effective borrowing rate was 0% (2008: 0.14%). All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

Lease obligations with a present value of $326,000 (2008: $1,350,000; 2007: $1,045,000) are denominated in Sterling. All other obligations are denominated in US dollars.

The Group’s obligations under finance leases are secured by the lessors’ right over the leased assets.

21. Other Financial Liabilities

Trade and Other Payables

Table contents: Trade creditors, Other taxation and social security, Other payables, Inventory accruals, Other accruals and deferred income.

Trade and Other Payables

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 61 days (2008: 64 days; 2007: 54 days).

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

For most suppliers, no interest is charged on trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time-frame.

22. Contingent Consideration

Table contents: Amounts included within current liabilities, Amounts included within non-current liabilities.

Contingent Consideration

The contingent consideration related to milestone payments for the acquisition of NordNav Technologies AB. The consideration will be settled in instalments if certain performance criteria are achieved before September 2010. In the previous reporting period, it was believed these performance criteria would be met. As at 1 January 2010, management considers the payment of the consideration a remote possibility.

23. Provisions

Table contents: At 30 December 2006, On acquisition of subsidiary, Additional provision in the period, Released in the period, Utilised in period, At 28 December 2007, Additional provision in the period (note 29), Utilised in period, At 2 January 2009, Additional provision in the period, On acquisition of subsidiary, Utilised in period, At 1 January 2010, Amounts included within current liabilities, Amounts included within non-current liabilities.

Provisions
Onerous Lease Provision

The Group has provided for the discounted anticipated costs of satisfying the terms of any onerous leases, less any anticipated income from subletting the buildings. It is anticipated that the provision will be used over the remaining lease terms (6 years). The 2009 additional provision relates to onerous lease charges for buildings being vacated as part of the integration and restructuring activities that took place after the acquisition of SiRF Technology Holdings, Inc. in June 2009.

Returns and Warranty Provision

The Group provides for the anticipated costs associated with contractual liabilities under standard warranty terms. It is anticipated that the provision will be utilised within one year (see note 4).

Onerous Contract Provision

The Group has provided for the remaining costs due under a contract signed by SiRF Technology Inc in 2008. It was concluded prior to the completion of the acquisition that the intellectual property licensed under the contract was not going to be utilised in any SiRF products. There are no benefits expected to be realised from this contract. The payments are expected to be made during 2010.

24. Called-up Share Capital

Company

Authorised Share Capital

Table contents: 350,000,000 (2 January 2009 and 28 December 2007: 185,000,000) Ordinary Shares of £0.001 each—equity.

Authorised Share Capital

Allotted, Called-up and Fully Paid:

Table contents: 182,187,878 (2 January 2009: 132,890,821; 28 December 2007:132,073,576) Ordinary Shares of £0.001 each—equity.

Allotted, Called-up and Fully Paid
Changes to Share Capital:

Equity Shares:
1,638,801 Ordinary Shares were issued from employee option exercises between 3 January 2009 and 1 January 2010. Consideration was $2,253,576, at a premium of $2,250,987.

47,658,256 ordinary shares were issued on 26 June 2009 and admitted to trading on the London Stock Exchange. These shares represented the equity consideration for the acquisition of SiRF Technology Holdings Inc. (note 35) and represented a consideration of $271,524,109, at a premium of $271,446,364.

Fees of $1,847,406 were incurred as a consequence of the share issue and have been shown as a deduction from equity against share premium.

On the same date, 133,678,208 of CSR plc shares in issue were delisted and readmitted to the London Stock Exchange in accordance with the Listing Rules, as the acquisition of SiRF Technology Holdings Inc. represented a reverse takeover under the Listing Rules. The transaction is not treated as a reverse takeover for accounting purposes.

The Company has one class of ordinary shares which carry no right to fixed income.

The following options and share awards over Ordinary Shares of £0.001 have been granted and were outstanding at the end of the period:

Table contents: 21 February 2000 to 4 October 2000, 3 November 2000 to 15 January 2002, 25 November 2002 to 10 November 2003, 18 November 2003 to 2 February 2004, 26 February 2004, 30 June 2004, 30 September 2004, 5 May 2005, 1 March 2006, 25 May 2006, 2 August 2006, 1 November 2006, 15 November 2006, 28 February 2007, 28 March 2007, 9 May 2007, 5 June 2007, 1 August 2007, 14 November 2007, 10 December 2007, 5 March 2008, 28 March 2008, 11 June 2008, 4 August 2008, 12 August 2008, 25 September 2008, 4 November 2008, 12 March 2009, 13 March 2009, 26 June 2009, 4 August 2009, 1 September 2009.

options and share awards

1 These options have vesting conditions based on the Company’s performance against comparator companies based on TSR rankings over the vesting period.
2 These options have vesting conditions based on EPS growth over the vesting period.
3 These options have been issued as part of the Company’s SAYE scheme.

Exercise period: Vested options and share awards are exercisable within ten years from the grant date, SAYE options are exercisable within 6 months of the vesting date.

25. Reserves

Table contents: At 30 December 2006, Share issues (net of share issue costs), Share-based payment, Deferred tax benefit on share option gains, Current tax benefit taken directly to equity on share option gains, Purchase of own shares, Current tax on hedging reserves, Deferred tax on hedging reserve, Effective tax rate adjustment, Loss on cash flow hedges, Transferred to income statement in respect of cash flow hedges, Profit for the period, At 28 December 2007 , Share issues (net of share issue costs) , Share-based payment, Deferred tax benefit on share option gains, Current tax, benefit taken directly to equity on share option gains, Purchase of own shares, Deferred tax on hedging reserve, Loss on cash flow hedges, Transferred to income statement in respect of cash flow hedges, Loss for the period, 2 January, 2009, Share issues (net of share issue costs), Share-based payment, Acquisition-related share-based payment, Deferred tax benefit on share option gains, Current tax benefit taken directly to equity on share option gains, Current tax benefit relating to prior years taken directly to equity on share option gains, Gain on cash flow hedges, Deferred tax on hedging reserve, Transferred to income statement in respect of cash flow hedges, Loss for the period, 1 January, 2010.

Reserves

A tax reserve has been included to show movements in equity caused by tax adjustments reflecting movements in tax not recorded in the income statement.

The share premium account, capital redemption reserve and hedging reserve are not distributable. The merger reserve arose on the combination of CSR plc and Cambridge Silicon Radio Limited and is not distributable.

The Employee Benefit Trust Reserve represents the cost of shares in CSR plc purchased in the market and held by the CSR plc Employee Benefit Trust to satisfy options under the Group’s share option schemes. Between 18 March 2008 and 25 March 2008, the CSR Employee Benefit Trust (“the Trust”) purchased 3,222,813 ordinary shares at prices between £3.37 and £3.03. On 3 May 2007, the Trust purchased 334,890 ordinary shares at an average price of £7.41 pence per share. Between 6 June 2007 and 7 June 2007, the Trust purchased 336,425 ordinary shares at an average price of £7.38 per share. Between 26 September 2007 and 28 September 2007, the Trust purchased 795,452 ordinary shares at an average price of £6.24 per share.

The shares acquired by the Trust do not represent treasury shares for the purposes of the Companies Act and therefore remain as issued share capital.

For accounting purposes, the treatment of the shares acquired by the Trust is different. In preparing the consolidated Group accounts, the shares held by the Trust are treated as a deduction in shareholders’ equity.

26. Notes to the Cash Flow Statement

Table contents: Net (loss) profit for the period, Adjustments for:, Investment income, Finance costs, Income tax (credit) expense, Operating (loss) profit, Depreciation of property, plant and equipment, Amortisation of intangible assets, Impairment of assets, Deferred tax transfer to goodwill, Loss on disposal of property, plant and equipment, Loss on disposal of intangible assets, Share related charges, Increase (decrease) in provisions, Operating cash flows before movements in working capital, Decrease in inventories, Decrease in receivables, Increase (decrease) in payables, Cash generated by operations, Foreign taxes paid, Corporation tax paid, Interest paid, R&D tax credit received, Net cash from operating activities.

Cash Flow Statement

Cash and cash equivalents (which are presented as a single class of asset on the face of the balance sheet) comprise cash at bank and other short term highly liquid investments with an original maturity of three months or less.

Acquisition of subsidiaries in the 53 weeks to 2 January 2009 represents payments of contingent consideration arising from prior period acquisitions.

In the 52 weeks to 1 January 2010, additions to software licences during the year amounting to $nil were purchased under staged payment plans (2 January 2009: $nil; 28 December 2007: $2,260,000;).

The acquisition of SiRF Technology Holdings Inc in the 52 weeks ended 1 January 2010 (see note 35) was a significant non cash transaction in the period as the consideration for the transaction was satisfied through the issuance of additional shares (see note 24).

27. Contingent liabilities

Patent disputes

Broadcom Corp. v. SiRF Technology, Inc. and CSR plc, Case No. SACV08-546 (Central District of California, filed 14 May 2008)
On 14 May 2008, Broadcom Corporation (“Broadcom”) sued SiRF Technology, Inc. (“SiRF”) alleging infringement of four Broadcom patents. The suit, captioned Broadcom Corporation v. SiRF Technology, Inc., Case No. SACV08-546, is pending in the Federal District Court for the Central District of California. SiRF responded to Broadcom’s Complaint on 4 June 2008, denying infringement and alleging counterclaims seeking, inter alia, judicial declarations that SiRF does not infringe the patents-in-suit and that the patents are invalid.

On 13 October 2009, Broadcom filed a First Amended Complaint (“FAC”) adding CSR plc (“CSR”) as a defendant and asserting additional claims for false advertising under the Lanham Act, California Business and Professions Code section 17500, et. seq. (false advertising), and California Business and Professions Code section 17200, et seq. (unfair competition). Broadcom asserted each of its original and new claims against both SiRF and CSR.

SiRF and CSR responded to Broadcom’s FAC on 28 October 2009, denying infringement and alleging counterclaims seeking, inter alia, declarations that SiRF and CSR do not infringe and that the patents are invalid. SiRF also asserted new counterclaims for (1) false advertising under the Lanham Act and California Business and Professions Code sections 17200, et seq. and 17500, et seq., and for (2) frivolous litigation under section 17200.

The trial of this matter has been set for 16 November 2010. It is not possible to predict the outcome of the litigation with any level of certainty. The Group intends to defend itself vigorously. No provision has been made in these financial statements because, it is not possible to make a reliable estimate of the outcome of this litigation.

No provision was included as part of the acquisition accounting as it is not possible and was not possible at the time of the acquisition to make a reliable estimate of the outcome of this litigation.

In the Matter of CERTAIN GPS DEVICES AND PRODUCTS CONTAINING SAME, Investigation No. 337-TA-602 (initiated 7 May 2007)
On 7 May 2007, the International Trade Commission (“ITC”) initiated an investigation of SiRF and other entities based on a complaint filed by Global Locate, Inc. (“Global Locate”). Global Locate’s complaint alleged a violation of the Tariff Act of 1930 (19 U.S.C. § 1337) based on SiRF’s alleged infringement of six patents. Broadcom later joined the action as a complainant, following its acquisition of Global Locate. On 8 August 2008, the administrative law judge (“ALJ”) issued an initial determination on Broadcom/Global Locate’s claims, finding a violation of section 1337 with respect to the asserted patents. On 22 August 2008, the ALJ issued a recommended determination on remedy and bonding that, among other things, recommended an importation ban with respect to certain of the allegedly infringing SiRF products.

On 15 January 2009, the ITC (1) issued a limited exclusion order prohibiting the entry by SiRF and the other named respondents of unlicensed SiRF GPS chips, and products incorporating them, that had been found to infringe various claims of the asserted patents and (2) issued a cease-and-desist order against SiRF. Finally, for any temporary importation of the relevant products during the Presidential review period for the ITC’s decision, the ITC set the bond at 100% of the value of the imported products.

The ITC’s decision became final on 16 March 2009, at the conclusion of the Presidential review period. On 1 May 2009, SiRF filed an appeal with the United States Court of Appeals for the Federal Circuit asking that the Federal Circuit reverse the ITC’s findings with respect to all six asserted patents. On 4 November 2009, the Federal Circuit heard oral argument of SiRF’s appeal, which remains pending. The Group continues to defend itself vigorously.

No provision has been made in these financial statements because it is not possible to make a reliable estimate of the outcome of these legal proceedings.

Securities Actions

a) U.S. District Court Cases
In February 2008, multiple putative class action lawsuits were filed in the United States District Court for the Northern District of California against SiRF and certain of its officers and directors at that time. These complaints allege that SiRF, and certain of its officers and directors, made misleading statements and/or omissions relating to its business and operating results in violation of the federal securities laws. These federal cases were consolidated and on 8 January 2010, the court granted final approval of a negotiated settlement, which required SiRF to pay $2,900,000, inclusive of attorneys fees, all of which was covered by SiRF’s insurance.

b) California State Court Cases
Two consolidated shareholder derivative lawsuits were filed in February 2008 in the Superior Court of the State of California (Santa Clara County) against certain of SiRF’s officers and directors at that time. These two lawsuits were consolidated with two shareholder lawsuits filed in February 2009 relating to the SiRF-CSR Merger Agreement. On 22 May 2009, SiRF signed a Memorandum of Understanding pursuant to which it agreed to settle all of the aforementioned California state court litigation for $385,000. The parties entered into a stipulation of settlement on 21 October 2009, and the settlement was preliminarily approved by the court on 23 December 2009. The court has scheduled a hearing on 16 April 2010 for consideration of final approval of the settlement. SiRF continues to deny all allegations of liability, and denies that plaintiffs have suffered any damages. Any settlement would be entirely covered by SiRF’s insurance.

28. Operating Lease Arrangements

Table contents: Minimum lease payments under operating leases recognised in the income statement for the year.

Operating Lease Arrangements

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Table contents: Within one year, In the second to fifth years inclusive, After five years.

Operating Lease Arrangements

Operating lease payments represent rentals payable by the Group for certain of its office properties, office equipment and software licences. Leases are negotiated for an average term of 3.35 years and rentals are fixed for an average of 3.35 years.

29. Integration and restructuring

A restructuring program was implemented at the end of Q2 2009, following the acquisition of SiRF Technology Holdings Inc. This led to almost 100 employees leaving the Group. The headcount reductions were implemented following careful consideration of the long-term strategic objectives and shorter term targets for 2009 and 2010. This planning commenced prior to the acquisition date to ensure that once the Group was able to operate as a single business, the Group could integrate and restructure as quickly as possible and ensure that the core projects of the enlarged Group were adequately resourced.

The main components of the $12.2 million charge were onerous lease charges of $2.2 million, severance costs of $4.3 million, consultancy and legal costs of $4.5 million and $1.2 million of other integration related costs. Approximately 100 employees left the Group as part of the 2009 combined integration and restructuring programme spread through [all] functions mostly in the UK and US.

At 1 January 2010, there were $0.6 million of accruals in respect of remaining payments to be made to employees under the integration and restructuring programme; cash outflows relating to the onerous leases of buildings being vacated are expected to occur in the next year.

In 2008, CSR plc announced a restructuring programme in the fourth quarter with the aim of reducing ongoing operating expenses by around $20 million in 2009. This was successfully completed and delivered the predicted savings. Approximately 100 employees left the Group as part of the 2008 restructuring programme spread through all functions mostly in the UK, US and Sweden. A one-time restructuring charge of $14.4 million was recorded in 2008 including $5.6 million of severance, $3.3 million of currency hedging charges (due to the reduction in Sterling requirements in 2009) and $3.9 million of onerous lease and building-related charges for buildings being vacated as part of the restructuring. At 2 January 2009, there were no payments remaining to be made to employees under the restructuring programme; cash outflows relating to the onerous leases of buildings being vacated are expected to occur in the next six years.

30. Impairment of Assets

During 2008, a non-cash impairment charge of $52.9 million was recorded. This resulted from the decision to discontinue investment in UbiNetics’ protocol software development programme following the recommendations of the Operational Assessment in April 2008.

During the Assessment, the Group looked at its market in great detail and consulted widely to review the opportunities for winning in the global market for wireless solutions. The Group undertook in-depth discussions with customers on all continents, and asked the leading customers where they anticipated the most growth. The Group also carried out an analysis of its own capabilities and identified strengths and weaknesses to determine our future strategy.

The impairment was charged to administrative expenses in the consolidated income statement.

31. Share-Based Payments

CSR plc has grants and awards in the following Share Schemes which result in charges to the Income Statement:

Global Share Option Scheme

The Company has a share option scheme for all employees of the Group, under which share options were issued prior to flotation, at a price based on the most recent private funding round. All employees were granted options on joining CSR. These options had a vesting period of five years, with 20% of options vesting one year after grant, then the remainder vesting in equal quarterly instalments over the remaining four years. Other options (in addition to those related to employees joining) were also granted under this scheme. In all cases if the options remain unexercised after a period of ten years from the date of grant, the options lapse. Options are forfeited if the employee leaves the Group before the options vest. No grants have been made under this scheme since flotation.

Company Share Option Plan (CSOP)

The Company introduced a new scheme at flotation called the CSR plc Share Option Plan. The following grants have been made under the scheme:

Flotation Grant
On the Company’s flotation in February 2004, the Company issued share options to all employees, at a price based on the share price on the day of flotation. The vesting period was three years. If the options remain unexercised after a period of ten years from the date of grant, the options lapse. Options are forfeited if the employee leaves the Group before the options vest.

Performance Grants
On the Company’s flotation in February 2004, and in May 2005, May 2006, May 2007, June 2008 and certain other dates (relating to employees joining) the Company issued share options at a price based on the average share price over the preceding three days. For options granted between 2004 and 2008, the vesting period of these grants is three years and vesting is dependent upon meeting certain EPS based performance conditions. If the options remain unexercised after a period of ten years from the date of grant, the options lapse. Options are forfeited if the employee leaves the Group before the options vest.

With the decision to extend the grant of share awards with accompanying performance conditions to other employees, the Committee had decided that for grants in 2009, the performance condition for vesting would be changed to Total Shareholder Return (TSR).

The vesting period of these share options remains three years. The vesting of the options is also subject to the Group satisfying a performance condition based on the Total Shareholder Return of the Company’s shares when compared to a group of companies selected at the time an award is first granted. In order for the shares to vest, the Group must have met or exceeded certain TSR thresholds when compared with the TSR performance of the group of other companies.

Starter Grants
The Company grants options to new starters to assist in recruitment. Options are exercisable at a price equal to the average share price on the three days preceding the grant date. The vesting period of the options is over a period of five years with 40% vesting after two years and 5% vesting each quarter thereafter. If the options remain unexercised after a period of 10 years from the date of grant, the options lapse. Grants are forfeited if the employee leaves the Group before the options vest. The Company has also issued starter grants to senior employees that vest after three years. No starter grants with these characteristics were issued in the current period.

CSR Share Award Plan

In May 2005, following approval of shareholders at the 2005 Annual General Meeting, the Company introduced the CSR plc Share Award Plan, which allows for options to be granted for exercise at a future date at a price equivalent to the nominal value of the Company’s shares of £0.001. The following awards have been made:

Retention Awards
The Company issues certain employees with rights to purchase shares at nominal value (£0.001) as a method of staff retention. The vesting period of these share awards is either two or three years. If the share awards remain unexercised after a period of ten years from the date of grant, the awards lapse. Awards are forfeited if the employee leaves the Group before the options vest.

Performance Awards
The Company issues certain employees with rights to purchase shares at nominal value (£0.001) as a method of staff incentivisation. The vesting period of these share awards is three years. For grants between 2005 and 2008, the vesting of the awards is also subject to the Group satisfying two performance conditions. The first is the Total Shareholder Return of the Company’s shares when compared to a group of companies selected at the time an award is first granted. The second is improvement in the underlying financial performance of the Group. In order for the shares to vest, the Group must have met or exceeded certain TSR thresholds when compared with the TSR performance of the group of other companies. In the event the Group satisfies any one of the TSR thresholds, the Remuneration Committee then considers the extent of any improvement in the underlying financial performance of the Group.

In 2009, the Company issued certain employees with rights to purchase shares at nominal value. The vesting period of these grants is three years and vesting is dependent upon meeting certain EPS based performance conditions.

If the options remain unexercised after a period of ten years from the date of grant, the options lapse. Options are forfeited if the employee leaves the Group before the options vest.

Starter Awards
The Company grants rights to new starters to purchase shares at nominal value (£0.001) to assist recruitment. The vesting period of these awards is two years. If the share awards remain unexercised after a period of ten years from the date of grant, the awards lapse. Awards are forfeited if the employee leaves the Group before the options vest.

SAYE Schemes

The Company operates a SAYE scheme, whereby UK employees are allowed to subscribe to a monthly savings amount for a period of three years; at the end of the three year period, the employee is allowed to either receive their saved amount plus interest or purchase shares in the Company at a price based on the average share price on the three days prior to commencement of the SAYE scheme, discounted by 20%. This scheme is open to all employees subject to Inland Revenue approved limits on total investment, and invitations are issued at regular intervals. Employees have a period of six months following the conclusion of the scheme to exercise their option to purchase shares.

Employee Stock Purchase Plan (ESPP)

The Company operates an ESPP scheme for its US employees whereby eligible employees are allowed to have salary withholdings of up to 15% of cash compensation to purchase ordinary shares in the Company at a price equal to 85% of the lower of the fair market value of the shares on the first trading day of the offering period or the fair market value on the purchase date.

SiRF Technology Holdings Inc., plans

For purely historic purposes of settling pre-acquisition obligations of option and award exercise, the Company has assumed all the obligations of the former SiRF Technology Holdings Inc. under pre-existing plans utilised by SiRF which comprise the 1995 Stock plan, the 2004 Stock Incentive Plan, the TrueSpan 2004 Stock Incentive Plan and the Centrality 1999 Stock Plan. The Company will not issue any options or awards under these plans going forward. All contractual terms of the assumed options remain the same, except for the converted number of shares and exercise price which were based on an exchange ratio determined as part of the merger agreement.

Details of the share options outstanding during the year are as follows:

Table contents: Outstanding at beginning of period, Granted during the period, Replacement options granted to SiRF employees on acquisition, Forfeited during the period, Exercised during the period, Outstanding at the end of the period, Exercisable at the end of the period.

share options outstanding

The weighted average share price at the date of exercise for share options exercised during the period was £3.43 (2008: £3.56; 2007: £8.63).

The options outstanding at 1 January 2010 had a weighted average remaining contractual life of 7 years (2008: 8 years; 2007: 7 years).

In 2009, options were granted on 12 March, 16 March, 26 June, 4 August and 1 September. The aggregate estimated fair value of the options granted on those dates is $15,308,000. The weighted average fair value of these options was $1.78. In 2008, options were granted on 5 March, 28 March, 11 June, 4 August, 12 August, 25 September and 4 November. The aggregate estimated fair value of the options granted on those dates is $9,504,000. The weighted average fair value of these options was $3.01. In 2007, options were granted on 28 February, 28 March, 9 May, 5 June, 1 August, 14 November and 10 December. The aggregate estimated fair value of the options granted on those dates is $10,567,000. The weighted average fair value of these options was $5.25.

The fair values of the share option and share award grants were based on the following inputs:

SAYE Schemes

The inputs to the Black-Scholes model are as follows:

Table contents: Weighted average share price (£), Weighted average exercise price (£), Expected volatility, Expected life, Risk free rate, Expected dividends.

SAYE Schemes

Expected volatility was determined by calculating the historical volatility of the Group’s share price over a three year period, equivalent to the vesting period of the options. The expected life used in the model has been adjusted based on management’s best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Company Share Option Plan (CSOP)

The inputs to the Black-Scholes model are as follows:

Table contents: Weighted average share price (£), Weighted average exercise price (£), Expected volatility, Expected life, Risk free rate, Expected dividends.

CSOP

Expected volatility was determined by calculating the historical volatility of the Group’s share price over a time period equivalent to the vesting period of the options. The expected life used in the model has been adjusted based on management’s best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The adjustments for the performance conditions are reflected in the proportion of options anticipated to vest.

For options issued in 2009, the fair value was based upon Monte-Carlo simulation of the performance of the 38 comparator companies included in the TSR conditions of the award. The Monte Carlo simulation incorporates a range of other assumptions based on the TSR comparator companies; those assumptions given above relate to the Group.

Expected volatility for each Company was determined by calculating the historical volatility of the individual Company’s share price over the 3 years from the date of grant.

Starter Grants

The inputs to the Black-Scholes model are as follows:

Table contents: Weighted average share price (£), Weighted average exercise price (£), Expected volatility, Expected life, Risk free rate, Expected dividends.

Starter Grants

Expected volatility was determined by calculating the historical volatility of the Group’s share price over a time period equivalent to the vesting period of the options The expected life used in the model has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

Retention Awards and Starter Awards

The fair value was based upon the share price on the date of grant.

Performance Awards

Table contents: Weighted average share price (£), Weighted average exercise price (£), Expected volatility, Expected life, Risk free rate, Expected dividends.

Performance Awards

For pre-2009 awards, the fair value was based upon Monte-Carlo simulation of the performance of the 38 comparator companies included in the TSR conditions of the award. Expected volatility for each Company was determined by calculating the historical volatility of the individual Company’s share price over the 3 years from the date of grant.

For awards issued in 2009, the fair value was based on the share price on the date of grant as the performance conditions were market based.

ESPP scheme

The fair value of the ESPP awards was based upon the Monte Carlo simulation of the likely gain to be made by each employee over the course of the scheme.

Share Option Charges

The Group recognised total expenses of $10,581,000 (2008: $7,586,000; 2007: $9,275,000;) related to equity-settled share-based payment transactions.

32. Retirement Benefits Scheme

The Group operates a defined contribution retirement benefit scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in funds under the control of trustees.

The total cost recorded in the income statement of $6,551,000 (2008: $7,221,000; 2007: $5,935,000) represents contributions payable to this scheme by the Group at rates specified in the rules of the plan. As at 1 January 2010, contributions of $nil (2 January 2009: $nil; 28 December 2007: $nil) due in respect of the current reporting period had not been paid over to the scheme.

33. Financial Instruments

Financial Risk Management

The Group has exposure to the following risks from its use of financial instruments:

  • Credit risk
  • Market risk
  • Liquidity risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management framework in relation to the risks faced by the Group.

Capital Risk Management

The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. CSR intends to reinvest its cash balances in the business either through higher levels of investment in working capital and fixed assets or through further M&A activity to support the long-term ambitions of the Group. The capital structure of the Group consists of cash and cash equivalents, treasury deposits and equity attributable to the equity holders of CSR plc, comprising issued share capital, reserves and retained earnings as disclosed in notes 24 and 25. The Group is not subject to any externally imposed capital requirements.

As a result of the funds raised through the initial public offering in March 2004, subsequent positive operating cash flows and the cash and cash equivalents acquired with SiRF Technology Holdings Inc, the Group has a total of $412.4 million of treasury deposits and cash and cash equivalents as at 1 January 2010 (2 January 2009: $261.9 million; 28 December 2007: $245.4 million).

Significant Accounting Policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the financial statements.

Table contents: Financial assets, Loans and receivables (including cash and cash equivalents and treasury deposits), Derivative instruments in designated hedge accounting relationships, Fair value through profit and loss (FVTPL), Financial liabilities, Derivative instruments in designated hedge accounting relationships, Amortised cost, Fair value through, profit and loss (FVTPL).

Significant Accounting Policies
Market Risk

Market risk is the risk that changes in market prices, such as foreign currency exchange rates and interest rate risk will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

Market risk exposures are measured using sensitivity analysis.

Foreign Currency Risk Management

Substantially all of the Group’s sales and costs of sales are denominated in US dollars, the functional currency of all the entities within the Group. A substantial proportion of the Group’s fixed costs are denominated in Sterling and the majority of the remainder is non-USD denominated. This exposure to different currencies may result in gains or losses with respect to movements in foreign exchange rates and the impact of such fluctuations could be material. Accordingly, the Group enters into hedging transactions pursuant to which it purchases Sterling under forward purchase contracts in order to cover the majority of its Sterling exposure.

The carrying amounts of the Group’s Sterling denominated monetary assets and liabilities at the reporting date are as follows:

Table contents: GBP sterling.

foreign currency risk management

The following significant exchange rates applied during the period:

Table contents: GBP: USD.

significant exchange rates
Foreign Currency Sensitivity Analysis

A 10 percent strengthening of the US dollar against GBP sterling would have decreased equity and profit or increased loss after tax by the amounts shown below as at the reporting date shown. In management’s opinion, this is a reasonably possible change given current market conditions.

This analysis assumes that all other variables, in particular interest rates and other foreign currencies, remain constant. The analysis is performed on the same basis for 2008 and 2007.

Table contents: GBP, 1 January 2010, 2 January 2009, 28 December 2007.

analysis

A 10 percent weakening of the US dollar against GBP sterling would have had the equal but opposite effect, on the basis that all the other variables remain constant.

The movement in loss for the period is mainly attributable to the Group’s exposure to exchange movements in sterling denominated monetary assets and liabilities. The movement in equity is mainly as a result of the changes in fair value of forward foreign exchange contracts.

Forward Foreign Exchange Contracts

The following table indicates the periods in which the cash flows associated with derivatives that are cash flow or fair value hedges are expected to occur:

Table contents: Cash flow hedges, 1 January 2010, 2 January 2009, 28 December 2007, Forward foreign exchange contracts $'000,Forward foreign exchange contracts £'000.

Forward Foreign Exchange Contracts

The Directors consider the periods in which the cash flows associated with the derivatives that are cash flow hedges are expected to occur approximate the periods when the cash flows associated with those cash flows are likely to impact profit or loss.

Interest Rate Risk Management

The Group has no significant direct exposure to fluctuations in interest rates other than those on interest-bearing cash balances. The majority of cash balances are held at fixed rates of interest and the effective rate of interest on those cash balances in the period was 0.54% (53 weeks ended 2 January 2009: 4.67%; 52 weeks ended 28 December 2007: 5.16%).

Credit risk

Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of investment grade and above for Treasury management purposes. This information is supplied by independent rating agencies where available and if not available, the Group uses other publicly financial available information and its own trading records to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and credit exposure is controlled by counterparty limits.

The credit risk on liquid funds and derivative financial instruments is limited because counterparties are banks with high credit ratings assigned by international credit rating agencies.

For cash and cash equivalents and treasury deposits, the Company only transacts with entities that are equivalent to investment grade and above.

Disclosures related to the credit risk associated with trade receivables are in note 17.

Liquidity risk

Liquidity Risk Management
The Group manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual cash flows and matching the maturity of financial assets and liabilities. The Group has no significant borrowings from third parties and therefore liquidity risk is not considered a significant risk at this time. The table below details the Group’s remaining contractual maturity for it non-derivative financial liabilities with agreed repayment periods. The tables have been prepared based on undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

Table contents: 1 January 2010, Obligations under finance, Other payables, Onerous lease provision (undiscounted), 2 January 2009, Obligations under, finance leases, Contingent consideration (note 22) (undiscounted), Other payables, Onerous lease provision, (undiscounted), 28 December 2007, Obligations under finance leases, Contingent consideration (note 22), (undiscounted), Unsecured loan notes issued on acquisition of, CPS, Other payables, Onerous lease provision (undiscounted).

Liquidity Risk Management

Fair Value of Financial Instruments
The fair values of financial assets and liabilities are determined as follows:

Trade receivables and trade and other payables: The carrying amount of these short-term financial instruments approximates their fair value.

Derivatives: The fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using an appropriate discount rate.

The carrying amounts of financial assets and liabilities in the financial statements approximates their fair values.

The following table provides an analysis of the financial assets, specifically money market funds and marketable debt instruments that are measured on a recurring basis, subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable as at 1 January 2010:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3 fair value measurements are those derived from valuation techniques that include significant inputs for the asset and liability that are not based on observable market data (unobservable inputs).

Table contents: 1 January 2010, Financial assets at FVTPL, United States government fixed income debt securities.

FVTPL

1 Included within Treasury Deposits on the CSR Consolidated balance sheet

34. Related Party Transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Remuneration of key management personnel

The remuneration of the directors, who are the key management personnel of the Group, is set out below:

Table contents: Short-term employee benefits, Post-employment benefits, Other long-term benefits, Termination benefits, Share-based payment.

Remuneration

Prior to the acquisition of SiRF Technology Holdings Inc, Diosdado Banatao held an interest in SiRF common stock and in options to acquire SiRF common stock granted pursuant to option plans operated by SiRF and which were subsequently assumed by CSR.

With effect from completion on 26 June 2009, these interests were converted into a holding of 1,590,049 CSR ordinary shares and 46,081 options to acquire CSR ordinary shares.

Prior to the acquisition of SiRF Technology Holdings Inc, Kanwar Chadha held an interest in SiRF common stock and in options to acquire SiRF common stock granted pursuant to option plans operated by SiRF and which were subsequently assumed by CSR.

With effect from completion on 26 June 2009, these interests were converted into a holding of 633,510 CSR ordinary shares and 478,010 options to acquire CSR ordinary shares.

During 2009, Joep van Beurden (CEO) became Vice Chairman of the Global Semiconductor Alliance (GSA). CSR plc has paid membership fees of $32,600 to the GSA in the course of 2009. These transactions were at arms length.

During 2007, an escrow payment of $11,158 was made to John Scarisbrick (formerly CEO of CSR plc) in relation to the 2005 acquisition of UbiNetics (VPT) Limited.

On 12 January 2007, the Company paid John Scarisbrick (formerly CEO of CSR plc) $49,477 for 2,388,188 E shares in Cambridge Positioning Systems Limited as part of the acquisition of Cambridge Positioning Systems Limited.

35. Acquisition of subsidiary

SiRF Technology Holdings, Inc. (under IFRS 3 (revised 2008))

On 26 June 2009, the Group acquired 100% of the issued share capital of SiRF Technology Holdings, Inc, a semiconductor supplier of Global Positioning System or GPS based location technology solutions, for a consideration of $281.5 million. Each share of SiRF common stock was exchanged for 0.741 of a CSR plc ordinary share, par value £0.001 per share. The acquisition provides CSR with leading capability in GPS which complements CSR’s existing Bluetooth and Wi-Fi solutions. The Group exchanged 47,658,246 shares in CSR plc for 100% of the issued share capital of SiRF Technology Holdings Inc at a CSR plc share price of £3.4925 and exchange rate of 1.6313 US dollars to GBP.

Table contents: Recognised amounts of identifiable assets acquired and liabilities assumed at fair value, Financial assets, Inventory, Property, plant and equipment, Intangible assets, Financial liabilities, Net assets acquired, Allocation to goodwill, Total consideration, Purchase price:, Fair value of shares issued, Fair value of share options exchanged, Less: unvested portion of the fair value of share options, Less: excess of fair value of vested share options over the original awards, Net cash inflow arising on acquisition, Cash and cash equivalents acquired, Directly attributable costs.

Acquisition

Cash and cash equivalents acquired totalled $66.5 million. Treasury deposits and investments of $45.0 million were also acquired giving a total of $111.5 million of cash, cash equivalents, treasury deposits and investments acquired.

The goodwill arising on the acquisition of SiRF Technology Holdings Inc, is attributable to the anticipated profitability of the Group’s products in the GPS market and the anticipated future operating synergies from the combination. It is not anticipated that the goodwill will be tax deductible.

SiRF Technology Holdings Inc contributed $130.0 million to revenue and a profit of $21.4 million to loss before tax for the period between the date of acquisition and the balance sheet date.

If the acquisition of SiRF Technology Holdings Inc had been completed on the first day of the accounting period, Group revenues for the period would have been $683.9 million and Group loss would have been $14.1 million but this does not reflect any synergistic benefits of the acquisition.

A contingent liability has not been recognised on acquisition for the litigation described in note 27 as the fair value of the liability cannot be reliably measured as it was not possible at the time of the acquisition and has not been possible since to make a reliable estimate of the outcome of this litigation due to the inherent uncertainty of litigation and the early stage of proceedings.

Cambridge Positioning Systems Limited (under IFRS 3 as issued in 2004)

On 12 January 2007, the Group acquired 100% of the issued share capital of Cambridge Positioning Systems Limited for a consideration of $35.0 million.

Table contents: Property, plant and equipment, Intangible assets, Deferred tax adjustment on fair value adjustments, Current assets, Current liabilities, Net assets acquired, Allocation to goodwill, Total consideration, Satisfied by:, Cash and cash, equivalents, Loan notes, Directly attributable costs, Net cash outflow arising on acquisition, Cash consideration, Working capital adjustment, Repayment of Cambridge Positioning Systems loans on acquisition, Cash and cash equivalents, acquired, Partial repayment of loan notes, Directly attributable costs.

Cambridge Positioning Systems

The goodwill of $28.8 million arising on the acquisition of Cambridge Positioning Systems Limited is attributable to the anticipated profitability resulting from Cambridge Positioning System Limited’s specialised GPS location system technology. The value of the assembled workforce of Cambridge Positioning Systems Limited was not recognised as a separately identifiable intangible assets and its value was subsumed into goodwill.

Cambridge Positioning Systems Limited contributed $488,000 to revenues and reduced the Group’s profit before tax by $1,625,000 between the date of acquisition and the balance sheet date.

If the acquisition of Cambridge Positioning Systems Limited had been completed on the first day of the financial period, Group revenues for the period would have been $848,631,000 and Group profit attributable to equity holders of the parent would have been $111,998,000.

NordNav Technologies AB (under IFRS 3 as issued in 2004)

On 12 January 2007, the Group acquired 100% of the issued share capital of NordNav Technologies AB for a consideration of $40.0 million and contingent deferred consideration of $35.0 million.

Table contents: Property, plant and equipment, Intangible assets, Deferred tax adjustment on fair value adjustments, Current assets, Current liabilities, Net assets acquired, Allocation to goodwill, Total consideration, Satisfied by:, Cash and cash, equivalents, Directly attributable costs, Contingent consideration (discounted) (note 22), Net cash outflow arising on acquisition, Cash consideration, Working capital adjustments, Contingent consideration (note 22), Directly, attributable costs, Cash and cash equivalents acquired.

NordNav

The goodwill of $63.7 million arising on the acquisition of NordNav Technologies AB is attributable to the anticipated profitability resulting from NordNav Technologies AB’s software-based GPS solution. The value of the assembled workforce of NordNav Technologies AB was not recognised as a separately identifiable intangible assets and its value was subsumed into goodwill.

NordNav Technologies AB contributed $191,000 to revenues and reduced the Group’s profit before tax by $2,330,000 between the date of acquisition and the balance sheet date.

If the acquisition of NordNav Technologies AB had been completed on the first day of the financial period, Group revenues for the period would have been $848,625,000 and Group profit attributable to equity holders of the parent would have been $112,355,000.

36. Patent Dispute Settlement

During 2007, the Group reached an agreement with the Washington Research Foundation (WRF) to settle the patent infringement suit issued against 12 of the Group’s customers. The complaint referred to certain U.S. patents owned by the University of Washington claimed to be relevant to Bluetooth chips.

The Group remained of the view that WRF’s infringement suit was without merit. Notwithstanding this, the Group believed that an early resolution of the claim was both in the Group and the Group’s customers best interests and accordingly a payment of $15.0 million was made in April 2007.

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