CSR 20-F/A 2012 FY Annual report (foreign) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F/A

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: 28 December 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from            to            

Commission file number 001-35265

CSR plc

(Exact name of Registrant as specified in its charter)

ENGLAND

(Jurisdiction of incorporation or organization)

Churchill House, Cambridge Business Park, Cowley Road, Cambridge, CB4 0WZ, England,

Tel: +44 (0) 1223 692 000

(Address of principal executive offices)

Adam R. Dolinko, General Counsel – Tel: +44 (0) 1223 692 000, Fax: +44 (0) 1223 692 001

Churchill House, Cambridge Business Park, Cowley Road, Cambridge CB4 0WZ, England

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on which Registered
Ordinary shares, par value £0.001 per share	NASDAQ Global Select Market*

* Listed, not for trading, but only in connection with the registration of the American Depositary Shares, each representing four (4) ordinary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary Shares, par value £0.001 181,896,339

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes  ¨    No  x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Not Applicable.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x Accelerated filer  ¨ Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  ¨ International Financial Reporting Standards as issued by the International Accounting Standards Board  x Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ¨    No  ¨

Explanatory Note

This Amendment No. 1 on Form 20-F/A (the “Amendment”) amends the 2012 annual report (the “2012 Report”) on Form 20-F of CSR plc (the “Company”) as originally filed with the Securities and Exchange Commission on March 28, 2013. The Amendment does not contain any changes to the consolidated financial statements of the Company at and for the 52 week period ended 28 December 2012 (the “Consolidated Financial Statements”) or any prior period.Other than as expressly set forth below, the Amendment does not, and does not purport to, revise, update, amend or restate the information presented in any item of the 2012 Report or reflect any events that have occurred since the filing of the 2012 Report. The 2012 Report inadvertently duplicated the attestation report issued by Deloitte LLP, the Company’s independent registered public accounting firm, on management’s assessment of the Company’s internal control over financial reporting (the “ICFR Report”) required under Item 15(c) of Form 20-F. The Amendment replaces, on page 81, the duplicate ICFR Report with the audit report (the “Audit Report”) issued by Deloitte LLP on February 20, 2013 in respect of the Company’s Consolidated Financial Statements required under Item 8 of the
Form 20-F. The Amendment includes the Consolidated Financial Statements. The Company filed as exhibit 15.1 to the 2012 Report the consent issued by Deloitte LLP to the incorporation by reference of the Audit Report and the ICFR Report in the Company’s Registration Statements on Form S-8.

Financial statements

Financial and other information — consolidated financial statements
81	Report of Independent Registered Public Accounting Firm
83	Consolidated income statement
84	Consolidated statement of comprehensive income
85	Consolidated balance sheet
86	Consolidated statement of changes in equity
88	Consolidated cash flow statement
89	Notes to the consolidated financial statements

CSR plc Annual Report and Financial Statements 2012

Financial statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of CSR plc

We have audited the accompanying consolidated balance sheets of CSR plc and subsidiaries (the “Company”) at 28 December 2012 and 30 December 2011, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements for each of the 52 week periods ended 28 December 2012, 30 December 2011 and 31 December 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CSR plc and subsidiaries at 28 December 2012 and 30 December 2011 and the results of their operations and their cash flows for each of the 52 week periods ended 28 December 2012, 30 December 2011 and 31 December 2010, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of 28 December 2012, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 20 February 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte LLP

London, United Kingdom

20 February 2013

  www.csr.com 80 81

Financial statements

Consolidated income statement

	Notes		52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Revenue		5,6		1,025,356			845,190			800,608
Amortisation of acquired intangible assets				(11,342	)		(8,224	)		(5,663	)
Fair value adjustment to inventory				–			(28,187	)		–
Other cost of sales				(504,937	)		(424,044	)		(418,367	)
Total cost of sales				(516,279	)		(460,455	)		(424,030	)
Gross profit				509,077			384,735			376,578
Research and development (‘R&D’) expenses:
Other research and development expenses				(272,328	)		(228,573	)		(189,187	)
Share-based payment charges				(14,894	)		(7,665	)		(5,760	)
Amortisation of acquired intangible assets				(3,124	)		(5,525	)		(4,980	)
Total research and development expenses				(290,346	)		(241,763	)		(199,927	)
Sales, general and administrative expenses (‘SG&A’):
Other sales, general and administrative expenses				(174,062	)		(143,367	)		(114,078	)
Share-based payment charges				(12,859	)		(6,465	)		(4,062	)
Amortisation of acquired intangible assets				(8,266	)		(4,932	)		(3,494	)
Integration and restructuring expenses		33		(27,523	)		(33,721	)		(1,085	)
Acquisition or disposal related fees				–			(13,004	)		(397	)
Litigation and patent settlements charges				(15,500	)		(6,000	)		(59,788	)
Litigation settlement income				–			14,532			–
De-recognition of contingent consideration				–			1,620			–
Other operating income				214			–			–
Total sales, general and administrative expenses				(237,996	)		(191,337	)		(182,904	)
Gain on disposal of development operations in handset connectivity and location		38		127,178			–			–
Operating profit (loss)				107,913			(48,365	)		(6,253	)
Investment income		10		1,161			1,627			812
Other gains and losses		11		14			320			640
Exchange losses				(395	)		(748	)		(186	)
Finance costs		12		(6,711	)		(4,298	)		(718	)
Profit (loss) before tax				101,982			(51,464	)		(5,705	)
Tax		14		(50,749	)		85,330			22,331
Profit for the period		7		51,233			33,866			16,626
Earnings per share
				$			$			$
Basic		15		0.26			0.19			0.09
Diluted		15		0.25			0.19			0.09

The results are all derived from continuing operations. The profit for the period and the profit for the prior periods are wholly attributable to equity holders of the parent company, CSR plc.

  www.csr.com 82 83

Financial statements

continued

Consolidated statement of comprehensive income

	Notes		52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Profit for the period				51,233			33,866			16,626
Other comprehensive income
Gain (loss) on cash flow hedges		29		4,935			1,661			(3,108	)
Net tax on cash flow hedges in statement of comprehensive income		29		(1,210	)		(427	)		870
Transferred to income statement in respect of cash flow hedges		29		(1,040	)		(4,184	)		726
Tax on items transferred from statement of comprehensive income		29		253			1,080			(199	)
Actuarial losses in defined benefit plans		35		(919	)		(435	)		–
Pension scheme assets above the threshold		35		(656	)		–			–
Total comprehensive income for the period				52,596			31,561			14,915

The total comprehensive income for all periods is wholly attributable to equity holders of the parent company, CSR plc.

CSR plc Annual Report and Financial Statements 2012

Financial statements

Consolidated balance sheet

	Notes		28 December 2012 $’000			30 December 2011 $’000
Non-current assets
Goodwill		16		181,877			332,749
Other intangible assets		17		120,673			127,747
Property, plant and equipment		18		26,349			34,520
Investments		19		3,719			3,610
Deferred tax asset		24		89,193			118,442
Long term asset		20		31,000			–
				452,811			617,068
Current assets
Inventories		21		87,850			120,347
Derivative financial instruments		23		2,702			148
Trade and other receivables		22		117,706			123,797
Corporation tax debtor				6,379			11,808
Treasury deposits and investments		22		18,491			65,938
Cash and cash equivalents		22		314,760			211,907
				547,888			533,945
Total assets				1,000,699			1,151,013
Current liabilities
Trade and other payables		26		227,777			180,621
Current tax liabilities				14,509			9,613
Obligations under finance leases		25		1,393			16
Derivative financial instruments		23		–			1,585
Provisions		27		16,742			29,495
				260,421			221,330
Net current assets				287,467			312,615
Non-current liabilities
Trade and other payables		26		35,846			49,590
Deferred tax liability		24		4,891			–
Long-term provisions		27		4,395			1,926
Obligations under finance leases		25		170			143
Defined benefit pension scheme deficit		35		42			117
				45,344			51,776
Total liabilities				305,765			273,106
Net assets				694,934			877,907
Equity
Share capital		28		317			372
Share premium account		29		523,654			473,462
Capital redemption reserve		29		1,029			950
Merger reserve		29		61,574			61,574
Employee benefit trust reserve		29		(19,163	)		(33,971	)
Hedging reserve		29		2,495			(1,400	)
Share-based payment reserve		29		112,677			88,197
Tax reserve		29		41,630			41,583
Treasury shares		29		(86,929	)		(84,660	)
Retained earnings		29		57,650			331,800
Total equity				694,934			877,907

The consolidated financial statements of CSR plc were approved by the Board of directors and authorised for issue on 20 February 2013.

They were signed on its behalf by:

Will Gardiner                                                                                           Ron Mackintosh

  www.csr.com 84 85

Financial statements

continued

Consolidated statement of changes in equity

Called-up share capital $’000

Share premium account $’000

Capital redemption reserve $’000

Merger reserve $’000

Employee Benefit Trust reserve $’000

Hedging reserve $’000

Share - based payment reserve $’000

Tax reserve $’000

Treasury shares $’000

Retained earnings $’000

Total $’000

At 31 December 2011

372

473,462

950

61,574

(33,971

)

(1,400

)

88,197

41,583

(84,660

)

331,800

877,907

Profit for the period

–

–

–

–

–

–

–

–

–

51,233

51,233

Other comprehensive income for the period

–

–

–

–

–

3,895

–

(957

)

–

(1,575

)

1,363

Total comprehensive income for the period

–

–

–

–

–

3,895

–

(957

)

–

49,658

52,596

Share issues (net of share issue costs)

24

48,642

–

–

–

–

–

–

–

–

48,666

Repurchase and cancellation of ordinary shares under tender offer

(79

)

–

79

–

–

–

–

–

–

(284,278

)

(284,278

)

Share issue costs

–

1,550

–

–

–

–

–

–

–

(1,839

)

(289

)

Shares issued from Employee Benefit Trust Reserve

–

–

–

–

14,808

–

–

–

–

(13,158

)

1,650

Credit to equity for equity-settled share-based payments

–

–

–

–

–

–

24,480

–

–

–

24,480

Shares issued from Treasury

–

–

–

–

–

–

–

–

7,203

(3,268

)

3,935

Purchase of Treasury Shares

–

–

–

–

–

–

–

–

(9,472

)

–

(9,472

)

Effective rate adjustment

–

–

–

–

–

–

–

(5

)

–

–

(5

)

Credit to equity on recognition of losses

–

–

–

–

–

–

–

436

–

–

436

Deferred tax on share-based payment transactions

–

–

–

–

–

–

–

573

–

–

573

Equity dividends issued to shareholders

–

–

–

–

–

–

–

–

–

(21,265

)

(21,265

)

At 28 December 2012

317

523,654

1,029

61,574

(19,163

)

2,495

112,677

41,630

(86,929

)

57,650

694,934

CSR plc Annual Report and Financial Statements 2012

Consolidated statement of changes in equity

Financial statements

Called-up share capital $’000

Share premium account $’000

Capital redemption reserve $’000

Merger reserve $’000

Employee Benefit Trust reserve $’000

Hedging reserve $’000

Share – based payment reserve $’000

Tax reserve $’000

Treasury shares $’000

Retained earnings $’000

Total $’000

At 1 January 2011

322

368,615

950

61,574

(39,064

)

1,123

58,038

41,641

(37,487

)

318,852

774,564

Profit for the period

–

–

–

–

–

–

–

–

–

33,866

33,866

Other comprehensive income for the period

–

–

–

–

–

(2,523

)

–

653

–

(435

)

(2,305

)

Total comprehensive income for the period

–

–

–

–

–

(2,523

)

–

653

–

33,431

31,561

Share issues (net of share issue costs)

50

104,847

–

–

–

–

–

–

–

–

104,897

Shares issued from Employee Benefit Trust Reserve

–

–

–

–

5,093

–

–

–

–

(4,134

)

959

Credit to equity for equity-settled share-based payments

–

–

–

–

–

–

13,583

–

–

–

13,583

Credit to equity for equity-settled share-based payments on acquisition

–

–

–

–

–

–

16,576

–

–

–

16,576

Purchase of Treasury Shares

–

–

–

–

–

–

–

–

(47,173

)

–

(47,173

)

Effective rate adjustment

–

–

–

–

–

–

–

(66

)

–

–

(66

)

Deferred tax on share-based payment transactions

–

–

–

–

–

–

–

(645

)

–

–

(645

)

Current tax benefit taken directly to equity on share option gains

–

–

–

–

–

–

–

(162

)

–

–

(162

)

Credit to equity on recognition of losses

–

–

–

–

–

–

–

162

–

–

162

Equity dividends issued to shareholders

–

–

–

–

–

–

–

–

–

(16,349

)

(16,349

)

At 30 December 2011

372

473,462

950

61,574

(33,971

)

(1,400

)

88,197

41,583

(84,660

)

331,800

877,907

At 2 January 2010

318

363,032

950

61,574

(40,224

)

3,505

48,446

33,433

-

303,077

774,111

Profit for the period

–

–

–

–

–

–

–

–

–

16,626

16,626

Other comprehensive income for the period

–

–

–

–

–

(2,382

)

–

671

–

–

(1,711

)

Total comprehensive income for the period

–

–

–

–

–

(2,382

)

–

671

–

16,626

14,915

Share issues (net of share issue costs)

4

5,583

–

–

–

–

–

–

–

–

5,587

Shares issued from Employee Benefit Trust Reserve

–

–

–

–

1,160

–

–

–

–

(851

)

309

Credit to equity for equity-settled share-based payments

–

–

–

–

–

–

9,592

–

–

–

9,592

Purchase of Treasury Shares

–

–

–

–

–

–

–

–

(37,487

)

–

(37,487

)

Effective rate adjustment

–

–

–

–

–

–

–

(12

)

–

–

(12

)

Current tax benefit relating to prior years taken directly to equity on share option gains

–

–

–

–

–

–

–

7,367

–

–

7,367

Deferred tax on share-based payment transactions

–

–

–

–

–

–

–

182

–

–

182

At 31 December 2010

322

368,615

950

61,574

(39,064

)

1,123

58,038

41,641

(37,487

)

318,852

774,564

  www.csr.com 86 87

Financial statements

continued

Consolidated cash flow statement

	Notes		52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Net cash from operating activities		30		73,928			12,640			77,907
Investing activities
Interest received				1,163			1,299			790
Proceeds on disposal of property, plant and equipment				73			–			–
Purchase of treasury deposits (including treasury deposits acquired with subsidiary)				(111,629	)		(180,980	)		(728,990	)
Sales of treasury deposits				159,076			413,786			703,560
Purchases of property, plant and equipment				(12,019	)		(14,573	)		(7,750	)
Purchases of intangible assets				(13,610	)		(4,245	)		(6,771	)
Disposal of development operations		38		271,323			–			–
Acquisition of UK based capabilities in DDFA				(2,667	)		–			–
Stamp duty				126			–			–
Acquisition of subsidiaries, net of cash acquired		39		–			(123,862	)		(1,902	)
Purchase of investment				(109	)		(2,610	)		(1,000	)
Net cash from (used in) investing activities				291,727			88,815			(42,063	)
Financing activities
Repayments of obligations under finance leases				(540	)		–			(318	)
Repayment of borrowings		39		–			–			(2,041	)
Purchase of treasury shares				(9,471	)		(47,511	)		(37,487	)
Proceeds on issue of shares				48,659			1,365			5,661
Proceeds on issue of shares from the Employee Benefit Trust				553			1,380			225
Proceeds on issue of shares from Treasury				3,935			–			–
Repurchase of ordinary shares through tender offer				(284,278	)		–			–
Equity dividends paid to shareholders				(21,265	)		(16,349	)		–
Net cash used in financing activities				(262,407	)		(61,115	)		(33,960	)
Net increase in cash and cash equivalents				103,248			40,340			1,884
Cash and cash equivalents at beginning of period				211,907			172,315			170,601
Effect of foreign exchange rate changes				(395	)		(748	)		(170	)
Cash and cash equivalents at end of period				314,760			211,907			172,315

CSR plc Annual Report and Financial Statements 2012

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

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 36 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 $333.3 million of cash and cash equivalents, including treasury deposits and investments, as at 2012 and no debt liabilities.

The directors believe that the Group is securely placed to manage its business risks successfully despite continuing uncertainties with the economic outlook and challenging macro economic conditions.

After considering the above factors, 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

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.

IFRS 7 (amended)	Amendments enhancing disclosures about transfers of financial assets
IFRS 1 (amended)	Additional exemption for entities ceasing to suffer from severe hyperinflation
IFRS 1 (amended)	Replacement of ‘fixed dates’ for certain exceptions with ‘the date  of transition to IFRSs’

IAS 1 requires a third comparative to be included within the consolidated balance sheet along with notes in the instance that any previously reported financial information is restated or represented. In the current year, the Group changed its segments in accordance with IFRS 8 and this triggers this requirement. However, management have concluded that the addition of the 2010 comparative information would not provide the user of the consolidated financial statements with any additional helpful information or enhance the overall clarity of the consolidated financial statements, given a full explanation of the impact of IFRS 8.

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Financial statements

Notes to the consolidated financial statements continued

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):

IFRS 1 (amended)	First-time Adoption of International Financial Reporting Standards
IFRS 7 (amended)	Financial Instruments (Disclosures)
IFRS 9	Financial Instruments
IFRS 10	Consolidated Financial Statements
IFRS 11	Joint Arrangements
IFRS 12	Disclosure of Interests in Other Entities
IFRS 13	Fair Value Measurement
IAS 1 (amended)	Presentation of Financial Statements
IAS 12 (amended)	Income Taxes
IAS 16 (amended)	Property, Plant and Equipment
IAS 19 (amended)	Employee benefits
IAS 27 (amended)	Separate Financial Statements
IAS 28 (amended)	Investments in Associates and Joint Ventures
IAS 32 (amended)	Offsetting financial assets and liabilities
IAS 34 (amended)	Interim Financial Reporting
Improvements to IFRSs (May 2012)

The adoption of both IFRS 9 and IFRS 13 will impact both the measurements and disclosures of Financial Instruments.

The directors anticipate that the adoption of the other Standards and Interpretations listed above 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 31 December 2011 to 28 December 2012; the comparatives are presented for the 52 week period from 1 January 2011 to 30 December 2011 and income statement comparatives for the 52 week period from 2 January 2010 to 31 December 2010. 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 sales, general and administrative expenses as incurred for acquisitions that have occurred since the adoption of IFRS 3 (2008). 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 12Income taxes and IAS 19Employee Benefits respectively;

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Financial statements

• 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 2Share-based Payment; and

• assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5Non-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.

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.

The Group recognises a contingent liability on the consolidated balance sheet as of the acquisition date if there is a present obligation that arises from past events and its fair value can be measured reliably.

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 gain.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from 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 cash-generating 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 part or whole of a CGU, the attributable amount is included in the determination of 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 collectability 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 as long as recovery is reasonably assured.

When a transaction requires the delivery of more than one product or service (multiple components), the revenue recognition criteria are applied to the separately identifiable components. A component is considered to be separately identifiable if the product or service delivered has stand-alone value to that customer and the fair value associated with the product or service can be measured reliably. The amount recognised as revenue for each component is the fair value of the element in relation to the fair value of the arrangement as a whole.

We determine the fair value of our maintenance obligations with reference to substantive renewal rates within the agreement or objective evidence of fair value. In instances where we are unable to determine the fair value of our maintenance obligations, revenue for the entire arrangement is recognised ratably over the term of the arrangement. We recognise maintenance and support revenue ratably over the term of the arrangement.

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Financial statements

Notes to the consolidated financial statements continued

Software license revenue is recognised fully upon delivery, where there is no obligation to provide ongoing technical support or software upgrades or enhancements. If technical support, software upgrades and enhancements are sold with the software license, revenue will be recognised for each identified component based on the relative fair value of the delivered component for which consideration is received or receivable. With regards to technical support, the revenue would be recognised ratably over the term of the arrangement.

Non-Recurring Engineering (NRE) revenue is recognised in line with the stage of completion.

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 all entities in the Group 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.

Government Grants

Government grants are not recognised until there is reasonable assurance the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants towards staff and marketing costs are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense.

Operating Result

Operating profit (loss) is stated before investment income, exchange gains (losses), other gains and losses, finance costs and tax.

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, charges relating to a fair value adjustment to inventory, charges relating to patent settlements, the de-recognition of contingent consideration and litigation settlement income and charges.

Retirement Benefit Costs

The Group has both a defined contribution retirement scheme and a defined benefit plan. The defined benefit plan represents severance payments required under Israeli law to employees who joined the Israeli subsidiary prior to 2007 who leave the Group involuntarily. These severance payments are funded by investment funds held in the name of each employee, with the Company liable for meeting any shortfall. This meets the definition of a post employment defined benefit plan under IAS 19.

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.

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Financial statements

An asset or liability is recognised in the Consolidated Balance Sheet in relation to the defined benefit scheme, as the present value of the defined benefit obligation, less the fair value of plan assets at the Balance Sheet date. The financing cost, service cost and expected returns on plan assets are recognised within the Income statement in the period in which they arise.

Actuarial gains and losses are recognised in full in the consolidated statement of comprehensive income in the period in which they arise.

Where the carrying amount of scheme assets exceed the present value of the future benefits that are expected to flow to the scheme from those assets (the ‘asset ceiling’), the surplus is recognised in full in the consolidated statement of comprehensive income in the period in which this arises.

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 profit for the period. Taxable profit differs from net profit before tax 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; or

• 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 in other comprehensive income or directly to equity, in which case deferred tax is also dealt with in other comprehensive income or 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.

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:

Computer equipment	2 to 3 years
Test equipment	2 to 5 years
Office equipment	3 years
Furniture and fittings	5 years
Leasehold improvements	Shorter useful life or minimum lease period

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.

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Financial statements

Notes to the consolidated financial statements continued

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:

Software licences and intellectual property	Licence term or 3 to 5 years where a perpetual licence
Customer contracts and relationships	3 to 4 years
Purchased IPR&D	4 to 10 years
Internally developed technology	3 years
Purchased developed technology	3 to 4 years
Trade names	2 to 5 years

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.

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Financial statements

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 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 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. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘other gains and losses’ line in the income statement. Fair value is determined in the manner described in note 36.

Available for sale financial assets

The Group has investments in unlisted shares that are not traded in an active market but are classified as AFS financial assets and stated at fair value (because the directors consider that fair value can be reliably measured). Fair value is determined in the manner described in note 36. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments revaluation reserve with the exception of impairment losses, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognised in the investments revaluation reserve is reclassified into profit or loss.

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, other than those held at FVTPL, 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.

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Financial statements

Notes to the consolidated financial statements continued

Trade Payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. 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.

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 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 36 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 23 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 are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

CSR plc Annual Report and Financial Statements 2012

Financial statements

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.

A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

Share-Based Payment

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 Total Shareholder Return (TSR) related conditions the fair value is estimated through the use of a Monte-Carlo simulation.

Save-As-You-Earn ‘SAYE’ share options granted to employees are treated as cancelled when employees cease to contribute to the scheme. This results in accelerated recognition of the expenses that would have arisen over the remainder of the original vesting period.

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 (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.

For cash-settled share-based payments, the Group recognises a liability for the goods or services acquired, measured initially at the fair value of the liability. At each balance sheet date until the liability is settled, and at the date of settlement, the fair value of the liability is re-measured, with any changes in fair value recognised in profit or loss for the period.

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 and assets

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. In these circumstances, the Group discloses the nature of such contingent liabilities. 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.

A contingent asset may arise where, as a result of past events, there is a possible asset which will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events which are not entirely within the control of the Group. In these circumstances, the Group discloses the nature of such contingent assets. The Group recognises an asset when an inflow of economic benefits is recognised as virtually certain.

Treasury shares

The Group holds shares in its own equity that it has reacquired as part of a share buy-back programme. The shares are shown as a deduction in equity and are measured at the fair value of the shares purchased and transaction costs.

Dividend distribution

A dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are committed to be paid. In the case of a final dividend distribution, this will also be the period in which the dividends are approved by the Company’s shareholders. Interim dividends are recorded in the period in which they are approved and paid.

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

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Financial statements

Notes to the consolidated financial statements continued

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

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;

• Group market capitalisation being less than the carrying value of net assets; and

• significantly negative industry or economic trends.

The recoverable amounts of the Group’s CGUs are determined from value in use calculations based upon cash flow forecasts derived from the most recent financial budget approved by management and the Board of Directors for the next year and longer range financial plans covering the subsequent four years that have been reviewed and approved by management and the Board of Directors. The key assumptions for the value in use calculations are those regarding the growth in future sales, projected production costs, operating expenditures, the discount rates and terminal growth rates.

The Group determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons, where these risks cannot be reflected in cashflows. Terminal values are based on the forecasted cash flows in the final year of the five year long range plan. 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 cash-generating unit level.

Note 16 to the financial statements provides further disclosures on the assumptions underlying the impairment review and the allocation of goodwill by reportable segments.

Accounting for Share-based Payments

The fair value of some 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 risk-free 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).

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. Where there are indicators that there have been changes to non-market vesting conditions, subsequent to the grant date, the amount recognised as an expense is adjusted to reflect the actual number of shares that vest.

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.

CSR plc Annual Report and Financial Statements 2012

Financial statements

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.

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.

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.

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 it is probable 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 could materially affect the Group’s reported net income and financial position.

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 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 31. 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

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Sale of integrated circuits		964,774		808,463		782,332
Sale of software		8,142		7,953		10,444
Royalties		52,440		28,774		7,832
		1,025,356		845,190		800,608
Investment income		1,161		1,627		812
		1,026,517		846,817		801,420

6. Segmental Reporting

CSR is a leading provider of platform technology solutions for the consumer electronics market.

Products from which Reportable Segments Derive their Revenues

During the year the internal reporting structures of the Group were reorganised changing the nature and content of information used by the Chief Executive, who is our Chief operating decision maker, to assess operational performance and allocate resource; this has caused a change in the identification of Operating Segments as defined under IFRS 8. In our opinion each operating segment is a reporting segment, therefore the results of the new Operating Segments are Voice & Music, Consumer, Automotive and Legacy are reported below; results from 2011 and 2010 have been restated into this new structure.

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

Voice & Music	Mono and Stereo Audio
Automotive	Automotive and Personal Navigation Device (PND) applications
Consumer	Cameras, Gaming, Document Imaging, Indoors Location, Bluetooth Smart and other consumer.applications
Legacy Products Group (LPG)	Legacy Home Entertainment, Handset Connectivity and Handset Location (components)

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Financial statements

Notes to the consolidated financial statements continued

Segment Revenues and Results

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

52 weeks ended 28 December 2012	Automotive $’000		Consumer $’000			Voice & Music $’000		LPG $’000		Unallocated $’000			Consolidated $’000
Revenue
Total segment revenue		212,178		258,732			190,119		364,327		–			1,025,356
Segment result
Underlying operating profit (loss)		3,245		(15,643	)		75,115		11,312		–			74,029
Share-based payment charges											(27,753	)		(27,753	)
Amortisation of acquired intangible assets											(22,732	)		(22,732	)
Integration and restructuring											(27,523	)		(27,523	)
Litigation and patent settlement charges											(15,500	)		(15,500	)
Other operating income											214			214
Disposal of development operations (note 38)											127,178			127,178
Operating profit														107,913
Investment income (note 5)														1,161
Other gains and losses (note 11)														14
Exchange losses														(395	)
Finance costs (note 12)														(6,711	)
Profit before tax														101,982

The Group discloses underlying operating profit as the performance measure of segment result as this is the measure used in the decision-making 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.

There is no intra-segment revenue.

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

Segment underlying operating profit represents operating profit earned by each segment without allocation, in each period, of acquisition-related fees, share-based payment charges, litigation and patent settlements, integration and restructuring charges, charges related to the amortisation of acquired intangible assets, charges related to the fair value adjustment to inventory and the de-recognition of contingent consideration.

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

52 weeks ended 30 December 2011	Automotive $’000		Consumer $’000			Voice & Music $’000		LPG $’000			Unallocated $’000			Consolidated $’000
Revenue
Total segment revenue		205,045		165,555			149,853		324,737			–			845,190
Segment result
Underlying operating profit (loss)		10,625		(7,999	)		59,496		(12,916	)		–			49,206
Fair value adjustment to inventory												(28,187	)		(28,187	)
Share-based payment charges												(14,130	)		(14,130	)
Amortisation of acquired intangible assets												(18,681	)		(18,681	)
Integration and restructuring												(33,721	)		(33,721	)
Acquisition-related fees												(13,004	)		(13,004	)
Litigation settlement												14,532			14,532
Patent settlements												(6,000	)		(6,000	)
De-recognition of contingent consideration												1,620			1,620
Operating loss															(48,365	)
Investment income (note 5)															1,627
Other gains and losses (note 11)															320
Exchange losses															(748	)
Finance costs (note 12)															(4,298	)
Loss before tax															(51,464	)

CSR plc Annual Report and Financial Statements 2012

Financial statements

The following is an analysis of the Group’s revenue and results by reportable segment in the 52 weeks ended 31 December 2010.

52 weeks ended 31 December 2010	Automotive $’000		Consumer $’000		Voice & Music $’000		LPG $’000			Unallocated $’000			Consolidated $’000
Revenue
Total segment revenue		223,071		100,124		138,264		339,149			–			800,608
Segment result
Underlying operating profit		44,819		9,442		47,874		(23,159	)		–			78,976
Share-based payment charges											(9,822	)		(9,822	)
Amortisation of acquired intangible assets											(14,137	)		(14,137	)
Integration and restructuring											(1,085	)		(1,085	)
Acquisition-related fees											(397	)		(397	)
Litigation settlement											(59,788	)		(59,788	)
Operating loss														(6,253	)
Investment income (note 5)														812
Other gains and losses (note 11)														640
Exchange losses														(186	)
Finance costs (note 12)														(718	)
Loss before tax														(5,705	)

Underlying operating profit includes depreciation and amortisation of other intangible assets, which have been apportioned to the reportable segments as follows:

Depreciation and amortisation of other intangible assets	Automotive $’000		Consumer $’000		Voice & Music $’000		LPG $’000		Total $’000
52 weeks ended 28 December 2012		4,950		6,036		4,436		8,502		23,924
52 weeks ended 30 December 2011		6,318		5,101		4,617		10,007		26,043
52 weeks ended 31 December 2010		6,689		3,003		4,146		10,170		24,008

No information is provided for segment assets and liabilities as these measures are not provided to the chief operating decision maker.

Revenues from Major Products

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

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Sale of integrated circuits		964,774		808,463		782,332
Sale of software		8,142		7,953		10,444
Royalties		52,440		28,774		7,832
Consolidated revenue (excluding investment income)		1,025,356		845,190		800,608

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:

Revenue	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
UK		156		185		6,655
Rest of Europe		39,057		60,508		110,171
USA (including the Americas)		82,969		89,498		92,316
Asia		903,174		694,999		591,466
		1,025,356		845,190		800,608

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

Non – current assets	28 December 2012 $’000		30 December 2011 $’000		31 December 2010 $’000
UK		160,175		267,753		276,829
Rest of Europe		632		1,674		614
USA (including the Americas)		107,652		142,860		4,460
Asia		95,159		86,339		8,172
		363,618		498,626		290,075

Non-current assets, being goodwill, property, plant and equipment, long term assets, and other intangible assets (excluding deferred tax assets) are attributed to the location where they are situated.

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Financial statements

Notes to the consolidated financial statements continued

Information About Major Customers

In 2012, included in revenues arising from Consumer and LPG are revenues of approximately $113.9 million (2011: $87.3 million, 2010: $115.2 million), representing 11% (2011: 10%, 2010: 14%) of revenue relating to the Group’s largest customer.

In 2012, 2011 and 2010 only the largest customer of the Group exceeded 10% of revenue in the 52 week period.

Revenue from the top five customers represents 30% of revenues (2011: 38%; 2010: 42%).

7. Profit for the Period

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

	52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Net foreign exchange losses		1,638			2,799			2,485
Government grants towards staff and marketing costs		(671	)		(9	)		(142	)
Research and development costs		290,346			241,763			199,927
Depreciation of property, plant and equipment		16,171			18,371			20,091
Loss on disposal of property, plant and equipment		916			62			580
Loss on disposal of intangible assets		–			23			135
Amortisation of intangible assets		30,485			26,353			18,054
Staff costs (see note 9)		314,055			228,369			170,791
Cost of inventories recognised as expense		468,500			394,618			397,971
Write-downs of inventories recognised as an expense net of movement in inventory provisions		(2,267	)		9,086			2,474
Auditor’s remuneration for audit services (see note 8)		993			1,051			789

8. Auditor’s remuneration

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts		68		85		78
Fees payable to the Company’s auditor and their associates for other services to the Group
– The audit of the Company’s subsidiaries pursuant to legislation		678		788		505
– Services pursuant to section 404 of the Sarbanes-Oxley Act		137		134		162
Total audit fees		883		1,007		745
Other services
– Audit related assurance		110		44		44
– Taxation compliance services		157		42		47
– Other taxation advisory services		515		424		347
– Other assurance services		–		284		–
– Corporate finance services		350		2,096		–
Total non audit fees		1,132		2,890		438

The audit related assurance fees refer to fees for the performance of an interim review. Tax compliance fees relate to assistance in the filing of group subsidiary statutory tax returns. Fees for other taxation services and corporate finance services predominantly relate to the disposal of development operations in handset connectivity and location to Samsung.

9. Staff Costs

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

	52 weeks ended 28 December 2012 Number		52 weeks ended 30 December 2011 Number		52 weeks ended 31 December 2010 Number
Research and development		1,654		1,422		1,052
Sales and marketing		548		410		260
General and administrative		272		214		151
		2,474		2,046		1,463

CSR plc Annual Report and Financial Statements 2012

Financial statements

Their aggregate remuneration comprised:

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Salaries		262,670		193,258		142,221
Social security costs		17,541		13,607		11,704
Other pension costs		8,109		7,586		7,231
Share based payment charges		25,735		13,918		9,635
		314,055		228,369		170,791

10. Investment revenue

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Short term bank deposits		636		735		316
Treasury deposits and investments		32		618		496
Expected return on plan assets		493		274		–
		1,161		1,627		812

11. Other gains and losses

	52 weeks ended 28 December 2012 $’000	52 weeks ended 30 December 2011 $’000	52 weeks ended 31 December 2010 $’000
Change in the fair value of investments designated as FVTPL on initial recognition	14	320	640

12. Finance Costs

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Interest expense and similar charges		594		418		493
Unwinding of discount on contingent consideration		–		53		15
Unwinding of discount on onerous lease provision		255		252		210
Unwinding of discount on litigation accrual		2,330		2,525		–
Unwinding of discount on intangible asset accrual		463		438		–
Unwinding of discount on defined benefit pension deficit		459		274		–
Unwinding of discount on acquisition fair value adjustments		512		–		–
Loss on purchase of treasury shares		–		338		–
Option premium cost		2,098		–		–
		6,711		4,298		718

13. Dividends

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Proposed final dividend for the 52 weeks ended 28 December 2012 of $0.08 per share		13,267		–		–
Interim dividend for the 26 weeks ended 30 June 2012 of 2.3p per share		7,648		–		–
Final dividend for the 52 weeks ended 30 December 2011 of 4.41p per share		–		13,617		–
Interim dividend for the 26 weeks ended 1 July 2011 of 2p per share		–		5,376		–
Final dividend for the 52 weeks ended 31 December 2010 of 4p per share		–		–		10,973
		20,915		18,993		10,973

The proposed final dividend of $0.08 per share is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in the financial statements.

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Financial statements

Notes to the consolidated financial statements continued

14. Taxation

	52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Current income tax payable		16,861			2,143			2,383
Adjustment in respect of current income tax of prior years		(299	)		2,171			(1,780	)
Total current income tax charge		16,562			4,314			603
Deferred tax charge (credit)		45,373			(6,751	)		(19,073	)
Deferred tax benefit on recognition of previously unrecognized tax losses and temporary differences		(16,456	)		(78,664	)		(12,172	)
Deferred tax expense from de-recognition of tax losses		0			900			5,048
Deferred tax rate change		1,817			1,843			531
Adjustment in respect of deferred tax of prior years		3,453			(6,972	)		2,732
Total deferred tax charge (credit) (note 24)		34,187			(89,644	)		(22,934	)
Total tax charge (credit)		50,749			(85,330	)		(22,331	)

Corporation tax is calculated at 24.5% (2011: 26.5%; 2010: 28.0%); of the estimated assessable loss for the period.

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

The credit for the period can be reconciled to the Profit (loss) per the income statement as follows:

	52 weeks ended 28 December 2012						52 weeks ended 30 December 2011						52 weeks ended 31 December 2010
	$’000			%			$’000			%			$’000			%
Profit/(Loss) before tax		101,982			100.0			(51,464	)		100.0			(5,705	)		100.0
Tax at the UK corporation tax rate of 24.5% (2011: 26.5%, 2010: 28%)		24,984			24.5			(13,638	)		26.5			(1,597	)		28.0
Tax benefit of research and development expenditure		(11,456	)		(11.2	)		(7,529	)		14.6			(7,337	)		128.6
Effect of different tax rates of subsidiaries operating in other tax jurisdictions		6,834			6.7			5,441			(10.6	)		(10,908	)		191.2
Adjustments to tax charge in respect of prior years		3,154			3.1			(4,801	)		9.3			952			(16.7	)
Effect of tax holidays in foreign jurisdictions		–			–			–			–			(450	)		7.9
Non-deductible expenses		8,736			8.6			8,027			(15.6	)		3,602			(63.1	)
Recognition of previously unrecognized tax losses and temporary differences		(16,456	)		(16.1	)		(78,664	)		152.9			(12,172	)		213.2
Current year tax losses not recognised		9,626			9.4			3,091			(6.0	)		–			–
Deferred tax rate change		1,817			1.8			1,843			(3.6	)		531			(9.3	)
De-recognition of tax losses		–			–			900			(1.7	)		5,048			(88.4	)
Foreign witholding tax		6,397			6.3			–			–			–			–
Non-deductible costs and goodwill disposal relating to the disposal of development operations in handset connectivity and location		17,113			16.7			–			–			–			–
Tax charge (credit) and effective tax rate for the period		50,749			49.8			(85,330	)		165.8			(22,331	)		391.4

Finance Act 2012 enacted reductions in the UK corporation tax rate from 25% to 24% from 1 April 2012 and 23% from 1 April 2013. The effect of the new rate is to reduce the deferred tax asset by $1.9m.

An additional change to the main rate of UK corporation tax is proposed, to reduce the rate to 22% by 1 April 2014 and 21% by 1 April 2015. These changes had not been substantially enacted by the Balance Sheet date and consequently, not included in these financial statements.

The effect of this decrease in the tax rate to 21% on the Group’s deferred tax assets has been assessed and the impact is a reduction in the deferred tax asset of $469,794 (2011: $2,675,547).

In addition to the amounts charged to the income statement, the following amounts relating to tax have been recognised directly in other comprehensive income:

Deferred tax	52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Arising on income and expenses recognised in other comprehensive income:
Net tax on cash flow hedges		(1,210	)		(427	)		870
Reclassifications from equity to profit or loss:
Relating to cash flow hedges		253			1,080			(199	)
Total income tax recognised directly in other comprehensive income		(957	)		653			671

CSR plc Annual Report and Financial Statements 2012

Financial statements

In addition to the amount charged to the income statement and other comprehensive income, the following amounts relating to tax have been recognised directly in equity:

Current tax	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Current tax benefit taken to equity on share option gains.		–		162			–
Deferred tax
Deferred tax benefit (reduction) on share option gains		573		(645	)		182
Total income tax recognised directly in equity		573		(483	)		182

15. Earnings Per Share

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

Earnings	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Profit for the period		51,233		33,866		16,626
Number of shares	Number of shares		Number of shares		Number of shares
Weighted average number of shares:
For basic earnings per share		197,238,649		178,198,771		178,074,862
Effect of dilutive potential ordinary shares – share options		5,992,855		3,195,201		2,959,012
For diluted earnings per share		203,231,504		181,393,972		181,033,874

16. Goodwill

Cost	$’000
At 31 December 2010		261,558
Recognised on acquisition of Zoran Corporation (note 39)		108,098
At 30 December 2011		369,656
Derecognised on disposal of development operations in handset connectivity and handset location		(151,477	)
Adjustment to Goodwill recognised on acquisition of Zoran Corporation		605
At 28 December 2012		218,784
Accumulated impairment losses
At 31 December 2010, 30 December 2011 and 28 December 2012		(36,907	)
Carrying Amount
At 28 December 2012		181,877
At 30 December 2011		332,749
At 31 December 2010		224,651

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units that are expected to benefit from that business combination. Further disclosures are provided below for all cash generating units where the Group holds an individual goodwill item relating to a CGU which is significant, which management considers to be 10% of the total net book value in comparison with the Group’s total carrying value of goodwill, or, where there are no significant allocations of goodwill at a lower level, for groups of cash generating units within a reportable segment. The carrying amount of goodwill has been allocated as follows:

Reportable segments and cash generating units	28 December 2012 $’000		30 December 2011 $’000
– Automotive Business Group		51,404		51,404
– Consumer Business Group
Printers		58,161		57,840
Cameras		50,537		50,258
Other Consumer CGUs		9,505		12,770
– Voice & Music Business Group		12,270		9,000
– Legacy Product Group		–		151,477
		181,877		332,749

Goodwill of $ 151.5 million allocated to the Legacy product group cash generating unit was derecognised following the disposal of development operations in handset connectivity and handset location to Samsung during 2012. There is now no goodwill allocated to this cash generating unit.

Goodwill of $108.7 million was recognised on the acquisition of Zoran during 2011, of which $0.6m was recognised due to a change in the fair value of assets acquired identified during 2012. Of the total goodwill, $50.5 million was allocated to the Cameras cash generating unit and $58.2 million was allocated to the Printers cash generating units based on the relative fair value of these cash generating units. Following this acquisition and the subsequent announcement that the Group would discontinue investment in digital television systems-on-a-chip and in silicon tuners, an internal reorganisation was completed which affected the cash generating units of the Group. Goodwill balances present at the time of the acquisition were reallocated to new cash generating units or to groups of cash generating units where they represented the lowest level at which goodwill was monitored.

In 2010 goodwill of $3.2 million was recognised on the acquisition of APT Licencing Limited and was allocated to the Consumer cash generating unit (which at the time excluded Printers), as this unit was expected to realise the benefits of the acquisition.

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Financial statements

Notes to the consolidated financial statements continued

The Group tests goodwill for impairment on an annual basis or more frequently if there are indications that goodwill might be impaired. At various times during 2012, the net assets of the Group have exceeded its market capitalisation and management have performed additional impairment testing. Following the tests throughout the year and the annual impairment test which takes place in the fourth quarter of each year, it was determined that no impairment of goodwill is required.

Estimation Methodology

The recoverable amounts of the Group’s CGUs are determined from value in use calculations based upon cash flow forecasts derived from the most recent financial budget approved by management and the Board of Directors for the next year and longer range financial plans covering the subsequent four years that have been reviewed and approved by management and the Board of Directors. The key assumptions for the value in use calculations are those regarding the growth in future sales, projected production costs, operating expenditures, the discount rates and terminal growth rates.

Future sales are estimated based on recent reports on the markets the Group operates in, produced by independent analysts and containing estimates for market size for a number of different technologies in different end markets. These external estimates are compared with internal estimates to produce a considered view of available market size and likely market shares. Management uses this information, combined with internal customer specific information regarding design wins, projected changes in market share based on current positions and forecast technology penetration rates, to derive its best assessment of the future sales and gross margins. A terminal value is included for the period beyond five years from the balance sheet date based upon the estimated cashflows in the fifth year and a terminal growth rate.

Variation in selling prices and direct costs are based on well established trends in the semiconductor industry as well as management’s experience of how pricing and direct costs vary over a product’s lifecycle, incorporating the impacts of already quoted selling prices and the result of discussions with suppliers on future direct cost movements.

Projected operating expenditures are consistent with the long term operating model of the Group, specifically R&D expense of approximately 25% (2011: 23%; 2010: 20%) of revenue and SG&A expense of around 12% (2011: 10%; 2010: 10%) of revenue. Approved forecasts assume the Group reaches these ratios over a period of a number of years. The actual operating costs for the group were 52% in 2012 (2011: 44%), with the full-year absorption of the Zoran cost base only partially offset by synergy savings achieved during the year. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the group, specifically using a weighted average cost of capital and estimating risk free rates based on US Treasury Bonds, using published equity betas for the group and making a reasonable estimate of the Equity Risk Premium. Management has concluded that it is appropriate to use a pre tax discount rate of 11.7%, which fully reflects the risk profile of the Group. In the prior period, management concluded that it was appropriate to use a different discount rate for the former CSR and the former Zoran businesses, reflecting their differing level of confidence that risk is fully incorporated into the forecast cash flows.

Within the former CSR business, as the forecast cash flows had been adjusted for the risks specific to each cash generating unit, with the discount rate reflecting the risk specific to the former CSR business as a whole, the pre-tax rate used to discount the forecast cash flows was 11%. Within the former Zoran business, management attached a greater degree of risk to the acquired cash generating units, the pre-tax rate used to discount the forecast cash flows was 13%. This has been calculated on a basis which is consistent with the assumptions used in valuing the acquired intangible assets, as outlined in note 39.

During 2012 management reviewed the long term growth rates in the markets in which the Group operates; as much of our business operates in Asian markets where growth rates are typically higher it was concluded that 3.5% was an appropriate terminal growth rate to use across the business (2011: 3.5%). While growth rates have fallen globally due to the macro economic situation, this rate is below the long term growth rate projected for our major markets.

The estimation methodology is the same for all cash generating units.

The Group has conducted sensitivity analysis on a variety of scenarios when completing the annual impairment review. The directors have concluded that there are no cash generating units where reasonably possible changes in assumptions would cause the carrying amount of goodwill to exceed value in use.

CSR plc Annual Report and Financial Statements 2012

Financial statements

17. Other Intangible Assets

	Internally Developed Technology $’000		Trade names $’000		Purchased Developed Technology $’000		Purchased in process research and development $’000			Customer contracts and relationships $’000			Software licences and intellectual property $’000			Assets in the course of construction $’000			Total $’000
Cost
At 31 December 2010		4,723		2,450		12,800		41,250			14,200			22,475			1,175			99,073
Additions		–		–		–		–			–			19,341			–			19,341
Disposals		–		–		–		(13,400	)		(2,000	)		–			(87	)		(15,487	)
Transfers		–		–		–		–			–			782			(782	)		–
Acquired with acquisition of subsidiary		–		3,060		51,380		9,240			35,077			493			26			99,276
At 30 December 2011		4,723		5,510		64,180		37,090			47,277			43,091			332			202,203
Additions		–		–		250		3,540			–			25,216			118			29,124
Disposals		–		–		–		–			–			(189	)		–			(189	)
Disposal of development operations		–		–		–		–			–			(2,700	)		–			(2,700	)
Transfers		–		–		–		–			–			160			(160	)		–
At 28 December 2012		4,723		5,510		64,430		40,630			47,277			65,578			290			228,438
Amortisation
At 31 December 2010		1,568		1,770		6,047		33,587			6,804			13,227			–			63,003
Charge for the year		1,526		805		6,383		6,501			4,994			6,144			–			26,353
Impairment loss		–		–		–		500			–			–			–			500
Disposals		–		–		–		(13,400	)		(2,000	)		–			–			(15,400	)
At 30 December 2011		3,094		2,575		12,430		27,188			9,798			19,371			–			74,456
Charge for the year		1,392		802		10,195		3,855			7,879			6,362			–			30,485
Impairment loss		–		–		–		–			–			2,300			–			2,300
Disposals		–		–		–		–			–			(189	)		–			(189	)
Disposal of development operations (1)		–		–		–		713			–			–			–			713
Transfers		237		–		–		–			–			(237	)		–			–
At 28 December 2012		4,723		3,377		22,625		31,756			17,677			27,607			–			107,765
Carrying amount
At 28 December 2012		–		2,133		41,805		8,874			29,600			37,971			290			120,673
At 30 December 2011		1,629		2,935		51,750		9,902			37,479			23,720			332			127,747
At 31 December 2010		3,155		680		6,753		7,663			7,396			9,248			1,175			36,070
Leased assets included above:
At 28 December 2012		–		–		–		–			–			1,099			–			1,099
At 30 December 2011		–		–		–		–			–			237			–			237

(1) this relates to accelerated amortisation on assets as part of the disposal of development operations.

The impairment charge of $2.3 million (which is included within Integration and restructuring costs as disclosed in note 33) is in relation to certain CCL Licenses held by the Group. Following the disposal of development operations in handset connectivity and location, management reassessed the carrying value of it’s intangible assets associated with the Handsets business line, now within the Legacy Product Group. It was identified that the carrying amount of these assets was no longer recoverable and the assets have been fully impaired accordingly.

In the first quarter of 2012, the Group purchased capabilities in digital class D audio amplifier technology from Diodes Inc. An addition of $0.3m in Purchased Developed Technology and an addition of $2.5 million in Purchased in Process Research & Development was recognised as a consequence of this transaction.

The impairment charge of $0.5 million (this is included within Integration and restructuring in note 33), recognised in the 52 week period ended 30 December 2011, is in relation to intangibles acquired as part of the acquisition of Zoran Corporation. Following the public announcement of the discontinuation of the Group’s investment in both Digital TV and silicon tuners, management reassessed the valuation of the intangible assets associated with the Legacy Product Group. It had been identified that the carrying amount of certain of these assets was not fully recoverable and accordingly an impairment charge had been recognised in the prior period.

In the first quarter of 2011, along with other wireless semiconductor companies, CSR negotiated a confidential settlement agreement with Wi-LAN to dismiss all litigation against CSR and its customers and obtain a multi-year licensing arrangement with respect to Wi-LAN’s wireless patent portfolio, resulting in an increase in software licences and purchased intellectual property during the prior period.

At 28 December 2012, the Group had entered into contractual commitments for the acquisition of other intangible assets amounting to $nil (2011: $nil).

  www.csr.com 106 107

Financial statements

Notes to the consolidated financial statements continued

18. Property, Plant and Equipment

	Test equipment $’000			Leasehold improvements $’000			Furniture and fittings $’000			Computer equipment $’000			Office equipment $’000			Total $’000
Cost
At 31 December 2010		85,295			9,660			4,049			25,352			3,783			128,139
Additions		8,636			2,218			539			3,147			399			14,939
Disposals		(403	)		(1,128	)		(152	)		(3,262	)		(67	)		(5,012	)
Acquired with acquisition of subsidiary		6,362			1,075			620			4,335			59			12,451
At 30 December 2011		99,890			11,825			5,056			29,572			4,174			150,517
Additions		6,355			1,534			707			2,737			686			12,019
Disposals		(861	)		(1,749	)		(2,249	)		(2,059	)		(324	)		(7,242	)
Disposal of development operations		(9,574	)		(52	)		(429	)		(618	)		(32	)		(10,705	)
At 28 December 2012		95,810			11,558			3,085			29,632			4,504			144,589
Depreciation
At 31 December 2010		66,475			6,618			2,950			21,638			2,104			99,785
Charge for the year		11,106			1,977			670			3,994			624			18,371
Impairment loss		1,253			7			6			510			–			1,776
Disposals		(371	)		(327	)		(126	)		(3,025	)		(86	)		(3,935	)
At 30 December 2011		78,463			8,275			3,500			23,117			2,642			115,997
Charge for the year		10,168			2,237			426			2,710			630			16,171
Disposals		(796	)		(1,471	)		(1,779	)		(2,043	)		(237	)		(6,326	)
Disposal of development operations		(6,620	)		(9	)		(387	)		(586	)		–			(7,602	)
At 28 December 2012		81,215			9,032			1,760			23,198			3,035			118,240
Carrying amount
At 28 December 2012		14,595			2,526			1,325			6,434			1,469			26,349
At 30 December 2011		21,427			3,550			1,556			6,455			1,532			34,520
At 31 December 2010		18,820			3,042			1,099			3,714			1,679			28,354
Leased assets included above:
Carrying amount
At 28 December 2012		–			–			–			–			127			127
At 30 December 2011		–			–			–			–			238			238

The impairment charge of $1.8 million recorded within the prior year comparatives (which is part of the Integration and Restructuring expense discussed in note 33) is in relation to items of property plant and equipment associated with the Legacy Product Group. As a consequence of the decision to discontinue the investment in both Digital TV and silicon tuners, these items were no longer required and accordingly an impairment charge was recognised in the prior period.

At 28 December 2012, the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to $930,000 (30 December 2011: $1,030,000).

19. Investments

Available for sale investments carried at fair value	28 December 2012 $’000		30 December 2011 $’000
Shares in unquoted equity securities		3,719		3,610

20. Long-term assets

28 December 2012 $’000		30 December 2011 $’000
	31,000		–

As part of the disposal of development operations in handset connectivity and location, $31 million of the cash consideration was not received directly into CSR, but was placed by Samsung into an escrow account for use against future potential warranty claims from third parties. CSR has full rights over this cash, which will revert to CSR if unused after 36 months.

The escrow account will be closed in October 2015, which is 36 months after the disposal of the development operations in handset connectivity and location, unless there are open and unsettled claims, in which case funds will be retained within the escrow account to settle these. Any new claims arising after 36 months will be settled by Samsung, with no further liability to the Group. There were no claims, either filed or outstanding, at the Balance Sheet date.

The Group has rights over any interest arising on the balance in escrow account and hence there is no requirement to discount the long term asset.

CSR plc Annual Report and Financial Statements 2012

Financial statements

The amounts held in escrow have been included as a component of the consideration for the disposal of development operations in handset connectivity and location, see note 38.

21. Inventories

	28 December 2012 $’000		30 December 2011 $’000
Raw materials		25,973		36,631
Work in progress		23,016		22,576
Finished goods		38,861		61,140
		87,850		120,347

22. Other Financial Assets

Trade and other receivables	28 December 2012 $’000		30 December 2011 $’000
Amounts receivable for sale of goods and software		80,003		86,144
Amounts receivable for royalties		14,926		12,344
Total trade receivables		94,929		98,488
VAT		2,810		3,432
Other debtors		5,897		5,534
Prepayments and accrued income		14,070		16,343
		117,706		123,797

The average credit period taken on trade receivables is 39 days (30 December 2011: 40 days). A specific allowance has been made for estimated irrecoverable amounts within trade receivables of $449,000 (30 December 2011: $156,000). 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 $350,000 (30 December 2011: $400,000).

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 36).

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:

	28 December 2012 $’000		30 December 2011 $’000
Total trade receivables		94,929		98,488
VAT and other debtors		8,707		8,966
Cash and cash equivalents		314,760		211,907
Treasury deposits and investments		18,491		65,938
Derivative financial instruments		2,702		148
		439,589		385,447

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

	28 December 2012 $’000		30 December 2011 $’000
Europe		11,597		6,083
USA		11,202		9,079
Asia		70,177		78,149
Other		1,953		5,177
		94,929		98,488

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

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Financial statements

Notes to the consolidated financial statements continued

The Group’s largest customer accounts for $7.9 million of trade receivables at 28 December 2012 (30 December 2011: $8.7 million).

Impairment Losses

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

	Gross 28 December 2012 $’000		Impairment 28 December 2012 $’000			Gross 30 December 2011 $’000		Impairment 30 December 2011 $’000
Not past due		91,839		(516	)		89,082		(200	)
Past due 1 – 30 days		2,969		(175	)		8,051		(200	)
Past due 31 – 60 days		432		–			1,199		–
Past due 61 – 90 days		160		(28	)		248		–
Past due 91 – 120 days		9		–			85		–
More than 121 days past due		319		(80	)		379		(156	)
		95,728		(799	)		99,044		(556	)

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

	28 December 2012 $’000			30 December 2011 $’000
Balance at the beginning of the period		556			450
Utilised in the period		(2,852	)		(1,366	)
Additional provisions in the period		3,095			1,472
Balance at the end of the period		799			556

Included in the Group’s trade receivables balance are debtors with a carrying amount of $3.6 million (2011: $9.6 million) 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. $2.8 million of the past due but not provided trade receivables were received within two weeks of the balance sheet date (2011: $6.8 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.

23. 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, designated in hedging relationships, that the Group has committed is as below:

	28 December 2012 $’000		30 December 2011 $’000
Forward foreign exchange contracts		100,641		107,631

These arrangements are designed to address significant exchange exposures for the next 12 months (2011: 15 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

	28 December 2012 $’000		30 December 2011 $’000
Forward foreign exchange contracts
Assets		2,496		148
Liabilities		–		(1,550	)
		2,496		(1,402	)

The fair value of currency derivatives that are designated and effective as cash flow hedges amounting to a net asset of $2,496,000 (2011: net liability of $1,402,000) has been deferred in equity.

Net amounts of $49,000 (2011: $4,020,000; 2010: $1,231,000;) and $991,000 (2011: $165,000; 2010: $85,000;) respectively have been transferred to operating expenses in the income statement and fixed assets in respect of contracts maturing in the period.

CSR plc Annual Report and Financial Statements 2012

Financial statements

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

	28 December 2012 $’000		30 December 2011 $’000
Forward foreign exchange contracts		206		(35	)

Further details of derivative financial instruments are given in note 36.

24. 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:

	Property, plant and equipment $’000			Share-based payment $’000			Intangibles $’000			Tax losses and R&D credits $’000			Hedging differences $’000			Other short- term temporary differences $’000			Total $’000
At 31 December 2010		903			1,764			(8,088	)		33,230			(304	)		611			28,116
Credit (charge) to income		8,229			(528	)		5,990			52,403			–			25,393			91,487
(Charge) credit to equity		–			(645	)		–			162			–			–			(483	)
Credit to other comprehensive income		–			–			–			–			653			–			653
Acquisition of subsidiary		24			–			(28,506	)		27,680			–			1,380			578
Effect of change in tax rate – equity		–			37			–			(114	)		11			–			(66	)
Effect of change in tax rate – income		(462	)		30			702			(2,065	)		–			(48	)		(1,843	)
At 30 December 2011		8,694			658			(29,902	)		111,296			360			27,336			118,442
(Charge) credit to income		(264	)		1,673			6,055			(34,918	)		–			(4,916	)		(32,370	)
Credit to equity		–			573			–			436			–			–			1,009
(Charge) to other comprehensive income		–			–			–			–			(957	)		–			(957	)
Effect of change in tax rate – equity		–			(35	)		–			–			30			–			(5	)
Effect of change in tax rate – income		(683	)		(155	)		2,964			(5,591	)		–			1,648			(1,817	)
At 28 December 2012		7,747			2,714			(20,883	)		71,223			(567	)		24,068			84,302

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:

	28 December 2012 $’000			30 December 2011 $’000
Deferred tax assets		89,193			118,442
Deferred tax liabilities		(4,891	)		–
		84,302			118,442

At the balance sheet date, the Group has unused tax losses of $539,850,605 (2011: $551,303,822) and unused tax credits of $33,945,792 (2011: $54,549,718) available for offset against future profits. A deferred tax asset has been recognised in respect of $220,215,473 (2011: $366,179,161) of the tax losses and $8,491,641 of tax credits (2011:$nil). No deferred tax asset has been recognised in respect of the remaining unused tax losses of $319,635,132 (2011: $185,124,661) and unused tax credits of $25,454,151 (2011: $54,549,718) due to either a history of tax losses or it is not considered probable that there will be sufficient future taxable profits to realise the benefit of deferred tax assets within certain subsidiary entities. Included in unrecognised tax losses and unrecognised tax credits are tax losses of $72,278,400 (2011: $21,179,182) and tax credits of $25,454,151 (2011: $54,549,718) that will expire in 5-19 years. Other losses may be carried forward indefinitely.

At the balance sheet date, no deferred tax liability has been recognised on temporary differences of $31,784,663 (2011: $31,955,166) 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 28 December 2012 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.

The recognition of the deferred tax asset is based on management’s assessment of historic profitability, forecasted operating results based upon approved business plans and a review of the tax planning opportunities. Based on this, management concluded that there is convincing evidence for the recognition of deferred tax assets in excess of the deferred tax liability by $21,318,597, in entities that have suffered a loss in the current or preceding periods.

  www.csr.com 110 111

Financial statements

Notes to the consolidated financial statements continued

25. Obligations Under Finance Leases

	Minimum lease payments				Present value of minimum lease payments
	28 December 2012 $’000		30 December 2011 $’000		28 December 2012 $’000			30 December 2011 $’000
Amounts payable under finance leases:
Within one year		1,393		16		1,393			16
In the second to fifth years inclusive		170		143		170			143
		1,563		159		1,563			159
Less: future finance charges		–		–		–			–
Present value of lease		1,563		159		1,563			159
Less: Amount due for settlement within 12 months (shown under current liabilities)						(1,393	)		(16	)
Amount due for settlement after 12 months						170			143

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 (2011: 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 28 December 2012, the average effective borrowing rate was 0% (2011: 0%). 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 $1,226,000 (2011: $123,000) are denominated in Sterling. All other obligations are denominated in either Japanese Yen or US Dollars.

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

26. Other Financial Liabilities

Trade and Other Payables

	28 December 2012 $’000		30 December 2011 $’000
Trade creditors		65,911		74,023
Other taxation and social security		7,007		2,489
Other payables		1,693		937
Inventory accruals		12,948		9,036
Other accruals and deferred income		176,064		143,726
		263,623		230,211
Analysed as:	28 December 2012 $‘000		30 December 2011 $‘000
Amounts due for settlement within 12 months (shown under current liabilities)		227,777		180,621
Amounts due for settlement after 12 months		35,846		49,590
		263,623		230,211

Trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 44 days (2011: 48 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.

CSR plc Annual Report and Financial Statements 2012

Financial statements

27. Provisions

	Onerous lease provision $’000			Returns and warranty provision $’000			Litigation provision $’000			Restructuring provision $’000			Total $’000
At 31 December 2010		3,090			3,995			–			–			7,085
Additional provision in the period		72			3,219			–			21,683			24,974
Unwinding of discount		252			–			–			–			252
On acquisition of subsidiary		1,337			–			11,986			10,951			24,274
Utilised in period		(1,533	)		(2,674	)		(686	)		(20,271	)		(25,164	)
At 30 December 2011		3,218			4,540			11,300			12,363			31,421
Additional provision in the period		3,656			3,552			8,000			1,876			17,084
Unwinding of discount		255			–			–			–			255
Released in the period		(1,103	)		–			–			–			(1,103	)
Utilised in period		(1,393	)		(2,340	)		(9,412	)		(13,375	)		(26,520	)
At 28 December 2012		4,633			5,752			9,888			864			21,137

	28 December 2012 $’000		30 December 2011 $’000
Amounts included within current liabilities		16,742		29,495
Amounts included within non-current liabilities		4,395		1,926
		21,137		31,421

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 provisions will be used over the remaining lease terms. Discount rates have been applied with reference to the rates on government bonds, with maturities corresponding to the remaining lease terms, which prevail in the jurisdiction of the lease.

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 3).

Litigation Provision

Through the acquisition of Zoran Corporation, the group assumed the obligation to meet any liabilities that may arise as a consequence of continuing SEC investigations of former executives of Microtune Inc., a subsidiary undertaking. The investigations were still ongoing at the balance sheet date and it is uncertain when the provision will be utilised.

Restructuring Provision

A restructuring programme was implemented in the prior period, following the acquisition of Zoran Corporation. In December 2011, a decision was taken to discontinue investment in the digital television and silicon tuners business lines which had been acquired with Zoran and a further restructuring programme commenced.

As at 30 December 2011, approximately 30% of the 800 affected employees had left the Group’s employment and a further 20% left on 31 December 2011. The remainder of the affected employees had left the Group’s employment during the period ended 28 December 2012, however there are further anticipated costs that have yet to be utilised.

28. Called-up Share Capital

Company

Authorised Share Capital

	28 December 2012 £’000		30 December 2011 £’000
350,000,000 (30 December 2011: 350,000,000) Ordinary Shares of £0.001 each – equity		350		350
Allotted, Called-up and Fully Paid:
	28 December 2012 $’000		30 December 2011 $’000
181,896,339 (30 December 2011: 215,667,851) Ordinary Shares of £0.001 each – equity		317		372

Changes to Share Capital:

Equity Shares:

5,383,876 Ordinary Shares were issued from employee option exercises between 31 December 2011 and 28 December 2012. Consideration was $14,258,091 at a premium of $14,249,586.

9,925,000 ordinary shares were issued on 5 October 2012 and admitted to trading on the London Stock Exchange. These shares represented an equity investment on the part of Samsung, which was completed on the same date as the disposal of the Group’s handset connectivity and location development operations, also to Samsung. Consideration was $34,407,990 at a premium of $34,392,560.

On 30 November 2012, 49,080,388 ordinary shares (including ordinary shares represented by ADSs) were accepted for purchase by J.P.Morgan Cazenove. Under the terms of the tender offer, on 30 November 2012, CSR plc repurchased all 49,080,388 ordinary shares from J.P. Morgan Cazenove. CSR plc cancelled 49,080,388 ordinary shares on 30 November 2012. The consideration for the cancelled shares was $284,277,959 at a premium of $284,198,993.

  www.csr.com 112 113

Financial statements

Notes to the consolidated financial statements continued

The Company has one class of ordinary shares which carries 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:

Grant date	Number of shares subject to option or share award		Exercise price per share £		Vesting period
25 November 2002 to 1 November 2003		7,000		1.01000		5 years
18 November 2003 to 2 February 2004		10,370		1.02500		5 years
26 February 2004		73,000		2.35000		3 years
26 February 2004		13,230		2.35000		3 years	2
26 February 2004		28,900		2.00000		3 years
26 February 2004		76,770		2.00000		3 years	2
30 September 2004		15,000		3.62500		3 years	2
05 May 2005		109,300		3.21000		3 years	2
05 May 2005		21,400		0.00100		3 years
05 May 2005		8,627		0.00100		3 years	1
01 March 2006		25,000		9.05000		3 years
25 May 2006		334,220		12.41000		5 years
25 May 2006		5,580		0.00100		3 years
02 August 2006		18,422		11.09670		5 years
15 November 2006		70,294		6.27000		5 years
28 February 2007		30,621		7.68000		5 years
09 May 2007		29,695		7.57000		5 years
05 June 2007		18,914		0.00100		3 years
01 August 2007		39,303		7.29000		5 years
14 November 2007		68,819		6.44500		5 years
05 March 2008		40,776		3.16000		5 years
11 June 2008		18,605		3.11000		3 years	2
11 June 2008		52,439		0.00100		3 years
11 June 2008		41,178		0.00100		2 years
04 November 2008		8,331		0.00100		2 years
04 November 2008		4,646		2.04500		3 years
26 June 2009		1,634,417		Various		Various
15 March 2010		596,690		0.00100		3 years	2
15 March 2010		474,733		4.84300		3 years	1
15 March 2010		352,842		0.00100		3 years
15 March 2010		17,643		4.84300		3 years
01 May 2010		18,959		3.91250		3 years	3
13 May 2010		8,000		0.00100		3 years	2
13 May 2010		9,200		0.00100		3 years
03 September 2010		65,757		2.99800		3 years	2
03 September 2010		50,299		0.00100		3 years
03 September 2010		60,750		0.00100		3 years	2
15 March 2011		173,250		0.00100		2 years
15 March 2011		1,482,915		0.00100		3 years
15 March 2011		113,577		3.78500		3 years
1 May 2011		107,031		3.04800		3 years	3
31 August 2011		125,374		0.00100		Various
31 August 2011		1,224,424		0.00100		Various	5
31 August 2011		56,537		Various		Various
31 August 2011		7,891,456		Various		Various
6 September 2011		178,468		0.00100		2 years
6 September 2011		129,345		2.14000		3 years
6 September 2011		1,759,105		2.14000		3 years	4
16 December 2011		242,651		0.00100		2 years
16 December 2011		643,429		1.90700		3 years
21 March 2012		2,148,641		0.00100		3 years
21 March 2012		1,896,477		2.47500		3 years	4
21 March 2012		99,626		0.00100		Various	1

CSR plc Annual Report and Financial Statements 2012

Financial statements

Grant date	Number of shares subject to option or share award		Exercise price per share £		Vesting period
21 March 2012		45,101		2.47500		3 years
21 March 2012		245,462		0.00100		3 years	6
29 March 2012		11,275		0.00100		3 years
1 May 2012		902,011		2.00800		3 years
21 August 2012		165,674		0.00100		2 years
21 August 2012		103,406		3.26000		3 years
21 August 2012		103,840		0.00100		Various
25 October 2012		1,430,429		0.00100		Various
25 October 2012		66,253		0.00100		2 years
25 October 2012		34,604		3.36500		3 years
		25,840,091

¹  These options or awards have vesting conditions based on the Company’s performance against comparator companies based on TSR rankings over the vesting period.

²  These options or awards 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.

⁴  These options have vesting conditions based on the growth of the Company’s share price over the vesting period.

⁵  The obligation for these options was assumed as a result of the acquisition of Zoran Corporation. Outstanding share options for non-European employees of Zoran Corporation were converted to options to acquire American depositary shares of CSR (or “CSR ADSs”) and outstanding Restricted Stock Units were converted to CSR Contingent Share Awards that can be settled in CSR ADSs. Each CSR ADS represents four CSR ordinary shares.

⁶  These awards have been issued as part of the Company’s Executive Incentive Plan.

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.

  www.csr.com 114 115

Financial statements

Notes to the consolidated financial statements continued

29. Reserves

Share premium account $’000

Capital redemption reserve $’000

Merger reserve $’000

Employee Benefit Trust reserve $’000

Hedging reserve $’000

Share - based payment reserve $’000

Tax reserve $’000

Treasury shares $’000

Retained earnings $’000

Total $’000

At 31 December 2010

368,615

950

61,574

(39,064

)

1,123

58,038

41,641

(37,487

)

318,852

774,242

Share issues (net of share issue costs)

104,847

–

–

–

–

–

–

–

–

104,847

Shares issued from Employee Benefit Trust Reserve

–

–

–

5,093

–

–

–

–

(4,134

)

959

Credit to equity for equity-settled share-based payments

–

–

–

–

–

13,583

–

–

–

13,583

Credit to equity for equity-settled share-based payments arising on acquisition

–

–

–

–

–

16,576

–

–

–

16,576

Purchase of Treasury Shares

–

–

–

–

–

–

–

(47,173

)

–

(47,173

)

Effective rate adjustment

–

–

–

–

–

–

(66

)

–

–

(66

)

Deferred tax on share-based payment transactions

–

–

–

–

–

–

(645

)

–

–

(645

)

Gain on cash flow hedges

–

–

–

–

1,661

–

–

–

–

1,661

Deferred tax on hedging reserve

–

–

–

–

–

–

653

–

–

653

Transferred to income statement in respect of cash flow hedges

–

–

–

–

(4,184

)

–

–

–

–

(4,184

)

Current tax benefit taken directly to equity on share option gains

–

–

–

–

–

–

(162

)

–

–

(162

)

Credit to equity on recognition of losses

–

–

–

–

–

–

162

–

–

162

Actuarial losses on defined benefit pension deficit

–

–

–

–

–

–

–

–

(435

)

(435

)

Profit for the period

–

–

–

–

–

–

–

–

33,866

33,866

Equity dividends issued to shareholders

–

–

–

–

–

–

–

–

(16,349

)

(16,349

)

At 30 December 2011

473,462

950

61,574

(33,971

)

(1,400

)

88,197

41,583

(84,660

)

331,800

877,535

Share issues (net of share issue costs)

48,642

–

–

–

–

–

–

–

–

48,642

Repurchase and cancellation of ordinary shares under tender offer (net of costs)

–

79

–

–

–

–

–

–

(284,278

)

(284,199

)

Share issue costs

1,550

–

–

–

–

–

–

–

(1,839

)

(289

)

Shares issued from Employee Benefit Trust Reserve

–

–

–

14,808

–

–

–

–

(13,158

)

1,650

Shares issued from Treasury

–

–

–

–

–

–

–

7,203

(3,268

)

3,935

Purchase of Treasury Shares

–

–

–

–

–

–

–

(9,472

)

–

(9,472

)

Credit to equity for equity-settled share-based payments

–

–

–

–

–

24,480

–

–

–

24,480

Gain on cash flow hedges

–

–

–

–

4,935

–

–

–

–

4,935

Deferred tax on hedging reserve

–

–

–

–

–

–

(957

)

–

–

(957

)

Transferred to income statement in respect of cash flow hedges

–

–

–

–

(1,040

)

–

–

–

–

(1,040

)

Effective rate adjustment

–

–

–

–

–

–

(5

)

–

–

(5

)

Credit to equity on recognition of losses

–

–

–

–

–

–

436

–

–

436

Deferred tax on share-based payment transactions

–

–

–

–

–

–

573

–

–

573

Actuarial losses on defined benefit pension deficit

–

–

–

–

–

–

–

–

(919

)

(919

)

Scheme assets above the threshold

–

–

–

–

–

–

–

–

(656

)

(656

)

Profit for the period

–

–

–

–

–

–

–

–

51,233

51,233

Equity dividends issued to shareholders

–

–

–

–

–

–

–

–

(21,265

)

(21,265

)

At 28 December 2012

523,654

1,029

61,574

(19,163

)

2,495

112,677

41,630

(86,929

)

57,650

694,617

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.

1,556,014 ordinary shares were issued from the Employee Benefit Trust in 2012 to satisfy employee option exercises (2011: 729,031 ordinary shares).

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.

At 28 December 2012, the Group had purchased 17,391,884 shares which are held in Treasury at a cost of $94.1 million.

1,336,885 ordinary shares were issued from Treasury in 2012 to satisfy employee option exercises (2011: nil).

CSR plc Annual Report and Financial Statements 2012

Financial statements

30. Notes to Cash Flow Statement

	52 weeks ended 28 December 2012 $’000			52 weeks ended 30 December 2011 $’000			52 weeks ended 31 December 2010 $’000
Net profit for the period		51,233			33,866			16,626
Adjustments for:
Investment income		(1,161	)		(1,627	)		(812	)
Finance costs		7,106			5,046			904
Other gains and losses		(14	)		(320	)		(640	)
Income tax charge (credit)		50,749			(85,330	)		(22,331	)
Operating profit (loss)		107,913			(48,365	)		(6,253	)
Depreciation of property, plant and equipment		16,171			18,371			20,091
Amortisation of intangible assets		30,485			26,352			18,054
Loss on disposal of property, plant and equipment		916			62			279
Loss on disposal of intangible assets		–			24			135
Share related charges		24,480			13,583			9,592
Impairment of assets		2,300			2,276			–
De-recognition of contingent consideration		–			(1,620	)		–
Profit on disposal of development operations		(127,178	)		–			–
(Decrease) increase in provisions		(13,284	)		(342	)		2,227
Operating cash flows before movements in working capital		41,803			10,341			44,125
Decrease (increase) in inventories		32,497			27,788			(12,961	)
Decrease (increase) in receivables		6,635			27,322			(6,678	)
(Decrease) increase in payables		(2,998	)		(49,298	)		46,093
Cash generated by operations		77,937			16,153			70,579
Foreign taxes paid		(5,645	)		(3,063	)		(1,127	)
Corporation taxes received		4,733			–			8,691
Grant income received		–			–			131
Interest paid		(3,097	)		(450	)		(662	)
R&D tax credit received		–			–			295
Net cash from operating activities		73,928			12,640			77,907

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.

The acquisition of Zoran Corporation in the 52 weeks ended 30 December 2011 (see note 39) was a significant non cash transaction in the period as the consideration for the transaction was partly satisfied through the issuance of additional shares.

31. Contingent Liabilities

Intellectual property litigation is commonplace in our industry and poses risks and uncertainties that may materially and adversely affect or disrupt our business, customer relationships, expenses or results of operations. We are regularly involved in pending and threatened litigation in the course of our business and industry, which litigation may be inherently uncertain. With respect to both existing and future litigation, we will continue vigorously to defend ourselves and/or take other steps as we believe are in the overall interests of CSR and its shareholders.

The Company and its subsidiaries are currently involved in a number of legal proceedings as disclosed below. Other than these the Company and its subsidiaries are not involved in any legal or arbitration proceedings which may have, or have had in the 12 months preceding the date of this report, a significant effect on the financial statements. Further, other than as disclosed below, due to inherent uncertainties, no accurate qualification of any cost, or timing of such cost, which may arise from any of the legal proceedings outlined below can be made.

As of 19 October 2012, all lawsuits involving Bandspeed have been settled in their entirety as to CSR, including with respect to customers’ use of CSR products.

After the year end, on 31 December 2012, the Group signed a full and final settlement in respect of litigation with MOSAID Technologies Incorporated. The $7.5 million cost of this settlement was included within accruals in the financial statements and was fully paid in January 2013.

In 2011 Freescale Semiconductor, Inc. filed three investigations in the International Trade Commission in which it named Zoran or its customers as respondents, Inv. No. 337-TA-709, Inv. No. 337-TA-786 and Inv. No. 337-TA-822. In each ITC investigation, Freescale accused Zoran’s products of infringing US Patent No. 5,467,455. This patent expires on 3 November 2013.

Freescale failed to prevail in each of the three investigations and the ITC did not find any violation of the relevant statute, Section 337 of the Tariff Act of 1930.

As parallel proceedings to its three ITC investigations, Freescale filed three district court cases of which one remains in the US District Court for the Western District of Texas (“Western District of Texas I”) and involves US Patent No. 5,467,455.

  www.csr.com 116 117

Financial statements

Notes to the consolidated financial statements continued

On 10 July 2012, Freescale filed an amended complaint against CSR in the US District Court for the Western District of Texas (Case No. 1:12-CV-604; “Western District of Texas II”), alleging infringement of four US patents. Western District of Texas I has been consolidated with Western District of Texas II and a trial date has not been scheduled.

On 21 May 2012, CSR filed a patent infringement complaint against Freescale in the US District Court for the Northern District of California (Case No. 12-CV-02619). CSR is asserting four US patents against Freescale in this case. A trial date has not been scheduled.

On 12 September 2012, Freescale filed a complaint against CSR in New York state court requesting a declaratory judgment disputing the termination of a decade old license agreement. Trial has not been set.

A number of patent portfolio non-practising entities have filed patent infringement cases against CSR and/or Zoran. These cases are in various stages and include many other defendants. Plaintiffs in these cases, the filing dates of their respective complaints – all filed in the US District Court for the Eastern District of Texas (except HSM Portfolio/Technology Property’s lawsuit against Zoran in the US District Court for Delaware) – and the scheduled trial dates are as follows: Advanced Processor Technologies (Filed 26 January 2011; Trial scheduled for Q3 2013); Azure Networks and Tri-County Excelsior Foundation (Filed 22 March 2011; Trial scheduled for Q4 2013); HSM Portfolio and Technology Property (Filed 1 September 2011; Trial scheduled for Q1 2015).

No provision has been recorded for any of the cases above as cash outflow has not been deemed probable at the balance sheet date.

32. Operating Lease Arrangements

The group as a lessee

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Minimum lease payments under operating leases recognised in the income statement for the year		32,803		27,219		23,591

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:

	28 December 2012 $’000		30 December 2011 $’000		31 December 2010 $’000
Within one year		29,412		33,352		24,483
In the second to fifth years inclusive		38,269		69,639		31,852
After five years		5,723		6,729		4,713
		73,404		109,720		61,048

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 3.68 years (2011: 3.35 years, 2010: 3.35 years) and rentals are fixed for an average of 3.20 years (2011: 2.85 years, 2010: 3.11 years).

The group as a lessor

Certain of the group’s office properties under operating lease have been sub-let to third party tenants. Rental income has been recognised from these sub-leases in the income statement as follows:

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Lease income from operating leases recognised in the income statement for the year		1,099		796		208

At the balance sheet date, the group had contracted with tenants for the following future minimum lease payments:

	28 December 2012 $’000		30 December 2011 $’000		31 December 2010 $’000
In the second to fifth years inclusive		3,560		1,495		471
		5,572		2,367		642

33. Integration and Restructuring

During 2012 the Group continued with the restructuring programmes that were announced in 2011 following the Zoran acquisition and discontinued investment in DTV and silicon tuners. Integration and restructuring costs of approximately $25.2 million were incurred during the period ended 28 December 2012, of which the main components were severance charges, onerous leases, and consultancy and legal costs. Through this expenditure the Group continued to reduce its ongoing cost base through reducing headcount and office locations, optimising legal entity structures, aligning employee benefits across the group, and amalgamating CSR and Zoran processes and IT systems. An additional $2.3 million of restructuring charges was recorded as a result of the impairment of licences following the disposal of handset development operations to Samsung.

CSR plc Annual Report and Financial Statements 2012

Financial statements

In addition, the Group charged $12.4 million to the restructuring provisions set up in the prior year as the majority of employees affected by these programmes left the Group during the period ending 28 December 2012 (see note 27). A provision of $0.9 million remains and it is expected that this will be fully utilised by the end of 2013.

In 2011, a charge of $33.7 million was recorded in relation to integration and restructuring programmes. The main components were $21.7 million of severance costs, $9.6 million of consultancy and legal costs and $1.9 million of fixed asset impairments. At 30 December 2011 a provision of $12.4 million in respect of these severance payments was held (see note 27).

In 2010, a decision was taken to close the NordNav Technologies AB office in Sweden, which lead to approximately 10 employees leaving the Group. A charge of $1.1 million was recorded in relation to the closure, most of which related to severance costs. At 31 December 2010, $1.1 million was accrued and paid during 2011.

34. Share – Based Payments

Equity-settled share option schemes

CSR plc has grants and awards in the following Share Schemes which result in charges to the Consolidated 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 in February 2004, at a price based on the most recent private funding round. These options had a vesting period of five years and 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. Options granted under this plan have a three year vesting period and lapse on the tenth anniversary of the grant date, unless otherwise indicated below. Options are generally forfeited on cessation of employment.

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.

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, vesting is dependent upon meeting certain EPS based performance conditions.

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

The vesting of the options is 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.

For grants from 2011 onwards, the Committee decided that a new performance condition, Absolute Total Shareholder Return (ATSR), be introduced.

The vesting of the options is also subject to the Group satisfying a performance condition, based on the Absolute Total Shareholder Return of the Company’s shares, when compared to the average share price of the Company for the three months prior to the date that an award is first granted. In order for the shares to vest, the Group must have met or exceeded certain ATSR thresholds when compared to the Company’s average share price for the three months prior to the date the award is first granted.

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.

The Company has also issued starter grants to senior employees that vest after three years. 215,009 starter grants with these characteristics were issued in the current period (2011: 101,540 starter grants; 2010: no grants).

CSR Share Award Plan

In May 2005, 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. Grants between 2005 and 2008 were subject to i) the satisfaction of a TSR condition (relative to a comparator group of companies); and ii) an improvement in the underlying financial performance of the Group. These awards have all lapsed.

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Financial statements

Notes to the consolidated financial statements continued

From 2009 onwards, 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) and Global Share Purchase Plan (GSPP)

The Company introduced the GSPP and amended and restated the ESPP in August 2012 following the approval of shareholders at the 2012 Annual General Meeting. These plans allow eligible employees to purchase shares in the Company at a 15% discount to the lower of the share prices on the first day of an offering period (typically a two year period) or at the end of a savings period (there are typically two one year savings period in each offering period). The purchase of shares is funded by payroll deductions made from net pay over a savings period. There is a limit on the aggregate payroll deductions per participant per savings period of $15,000.

Executive Incentive Plan (EIP)

The Company introduced this plan for its executive directors and senior management team following the approval of shareholders at the General Meeting in August 2011. The plan has two elements, element A and element B, both of which have a maximum payout of 125% of the participant’s salary. The percentage of the payout is determined according to the Group’s satisfaction of certain performance conditions and the participant achieving certain objectives. Element A is settled in cash or shares (executive directors are required to take payment in shares until they have satisfied their minimum shareholding requirement) and is paid annually. Element B is settled in shares following the end of the third year of the plan. A maximum forfeiture of 50% will be applied in each of the second and third plan years if the Group does not meet certain performance conditions. The share price at which shares are paid out at is the 30 day average share price for the period finishing on the end of the plan year. This scheme vests over a period of 39 months.

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.

Zoran Corporation plans

Under the terms of the merger agreement, all outstanding RSUs and share options granted by Zoran were assumed by CSR and converted into RSUs and options exercisable for, at the election of CSR, either CSR ADSs or CSR ordinary shares. All contractual terms of the assumed options remain the same, except for the converted number of shares or ADSs and exercise prices which were based on an exchange ratio determined as part of the merger agreement. The plans utilized by Zoran comprise the 1993 Stock Option Plan, the 2000 Nonstatutory Stock Option Plan, the 2005 Equity Incentive Plan, the 2005 Outside Directors Equity Plan, the Oak Technology 1994 Stock Option Plan, the Oak Technology 1994 Outside Directors Stock Option Plan, the Oak Technology 2002 Stock Option Plan for Teralogic Group, the Microtune, Inc. 200 Stock Plan and 2010 Microtune, Inc. 2010 Stock Plan. No options or awards will be granted under these plans going forward.

	28 December 2012					30 December 2011					31 December 2010
	Number of share options			Weighted average exercise price (£)		Number of share options			Weighted average exercise price (£)		Number of share options			Weighted average exercise price (£)
Outstanding at beginning of period		35,809,423			3.12		13,562,737			4.09		16,256,257			4.57
Granted during the period		10,437,960			1.06		6,459,394			1.22		3,387,428			1.63
Replacement options granted to Zoran employees on acquisition		–			–		22,106,662			4.54		–			–
Forfeited during the period		(12,130,517	)		2.40		(4,650,904	)		2.53		(3,145,074	)		5.35
Exercised during the period		(8,276,775	)		1.87		(1,668,466	)		0.61		(2,935,874	)		1.20
Outstanding at the end of the period		25,840,091			3.08		35,809,423			3.12		13,562,737			4.09
Exercisable at the end of the period		9,908,854			6.24		16,953,139			2.93		4,306,187			9.35

CSR plc Annual Report and Financial Statements 2012

Financial statements

The weighted average share price at the date of exercise for share options exercised during the period was £2.89 (2011: £3.34; 2010: £4.08).

The options outstanding at 28 December 2012 had a weighted average remaining contractual life of 5 years (2011: 6 years; 2010: 7 years).

In 2012, options were granted on 21 and 29 March, 1 May, 21 August and 25 October. The aggregate estimated fair value of the options granted on those dates is $23,550,315. The weighted average fair value of these options is $2.62. In 2011, options were granted on 15 March, 1 May and 6 September. The aggregate estimated fair value of the options granted on those dates is $19,355,000. The weighted average fair value of these options is $2.99. In 2010, options were granted on 15 March, 1 May, 13 May, 11 June and 3 September. The aggregate estimated fair value of the options granted on those dates is $9,012,000. The weighted average fair value of these options is $4.72.

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:

	52 weeks ended 28 December 2012		52 weeks ended 30 December 2011		52 weeks ended 31 December 2010
Weighted average share price (£)		2.23		3.74		4.30
Weighted average exercise price (£)		2.01		3.05		3.91
Expected volatility		45%		52%		57%
Expected life		3 years		3 years		3 years
Risk free rate		2.28%		2.56%		2.80%
Expected dividends		3%		2%		0%

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:

	52 weeks ended 28 December 2012		52 weeks ended 30 December 2011		52 weeks ended 31 December 2010
Weighted average share price (£)		2.46 – 3.36		2.12 – 3.77		2.98 – 4.65
Weighted average exercise price (£)		2.48 – 3.37		2.14 – 3.76		2.99 – 4.84
Expected volatility		44% – 45%		40% – 53%		57%
Expected life		3 years		3 years		3–4 years
Risk free rate		2.13% – 2.38%		2.47% – 2.70%		2.30% – 2.95%
Expected dividends		1.9% – 2.6%		2% – 2.8%		0%

Expected volatility was determined by calculating the historical volatility of the Group’s share price over a time period equivalent to the expected term 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 and 2010, the fair value was based upon Monte-Carlo simulation of the performance of the 37 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. For options issued in 2011 and 2012, the fair value was based upon the Monte-Carlo simulation of the performance of the Company’s share price against the ATSR conditions specified in the award, using the assumptions included above.

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.

Retention Awards and Starter Awards

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

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 from 2009 onwards, 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 is based on the maximum cash value that each participant is eligible to accrue under the scheme rules.

Share Option Charges

The Group recognised total expenses of $24,480,000 (2011: $13,583,000; 2010: $9,592,000;) related to equity- settled share-based payment transactions.

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Financial statements

Notes to the consolidated financial statements continued

Cash-settled share-based payments

The Group issues to certain employees cash-settled share awards that require the Group to pay the value of the share awards to the employee on the date of the exercise after a specified vesting period. The Group has recorded a liability of $1,502,000 in 2012 (2011: $371,000, 2010: $47,000). Fair value of the awards is determined using the market value of the awards at the balance sheet date. The Group recorded a total expense of $1,185,000 in 2012 (2011: $335,000, 2010: $47,000l).

35. Retirement Benefit Obligations

a) Defined contribution schemes

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 $8,109,000 (2011: $7,304,000; 2010: $7,231,000) represents contributions payable to this scheme by the Group at rates specified in the rules of the plan. As at 28 December 2012, contributions of $nil (30 December 2011: $nil) due in respect of the current reporting period had not been paid over to the scheme.

b) Defined benefit plan

As a consequence of the Group’s acquisition of Zoran on 31 August 2011, the Group has assumed the obligation for a defined benefit plan in Zoran Microelectronics Limited. Under Israeli law, there is a requirement to make severance payments to all employees who leave a company involuntarily. There is no such requirement for those employees who leave the company voluntarily. Severance payments are calculated based on varying factors, namely the length of employee service and salary and are funded entirely by individual investment funds held in the name of the employee by the Group. The Group does not hold a central fund to finance this obligation.

Where there are insufficient funds in these investment funds to meet involuntary severance obligations, there is a legal obligation for the Company to finance this shortfall. This therefore meets the definition of a post employment benefit and more specifically a defined benefit plan, under IAS 19.

The obligation for the company to make up the shortfall in severance payments of this nature is restricted to employees who joined the Company prior to 2007. Though there is no obligation for the Company to make severance payments for employees leaving voluntarily, the assets accumulated in the employee’s fund are returned to the employee when leaving the Company. Severance payments to employees who joined subsequent to 2007, have been accounted for as a defined contribution employment plan

The valuation of the deficit in the balance sheet is based on the most recent actuarial valuation of the Plan as updated to take account of the market value of the assets and the present value of the liabilities of the Plan at 28 December 2012. The financial assumptions used to calculate plan liabilities and plan assets under IAS 19 are:

	28 December 2012		30 December 2011
Salary increase (p.a.)		3.00%		3.00%
Discount rate (p.a.)		4.60%		5.00%
Expected return on assets (p.a.)		4.60%		5.00%
Inflation (p.a.)		2.75%		2.51%
Voluntary withdrawals (p.a.)		6.45%		6.45%
Involuntary withdrawals (p.a.)		1.05%		1.05%
Normal retirement age – Men		67 years		67 years
– Women		64 years		64 years

The discount rate and expected return on assets assumptions are based on 10 year Israeli government bond yields.

The analysis of movement in the deficit in the scheme for the year is:

	$‘000
Deficit at 31 December 2010		–
Acquisition		81
Contributions paid		(491	)
Benefits paid		(190	)
Current service cost		282
Actuarial losses		435
Deficit at 30 December 2011		117
Expected return on plan assets net of interest cost		(34	)
Contributions paid		(1,442	)
Benefits paid		(936	)
Current service cost		762
Assets above the threshold		656
Actuarial losses		919
Deficit at 28 December 2012		42

CSR plc Annual Report and Financial Statements 2012

Financial statements

The reconciliation of plan assets is as follows:
	$‘000
Market value at 31 December 2010		–
Acquisition		13,437
Benefit payments		(839	)
Company contributions		491
Expected return on assets		274
Actuarial losses		(1,016	)
Market value at 30 December 2011		12,347
Benefit payments		(6,959	)
Company contributions		1,442
Expected return on assets		493
Plan assets above surplus		(656	)
Actuarial gains		2,341
Market value at 28 December 2012		9,008

The reconciliation of plan liabilities during the year is as follows:
	$‘000
Plan liabilities at 31 December 2010		–
Acquisition		13,518
Current service cost		282
Interest cost		274
Benefits paid		(1,029	)
Actuarial gains		(581	)
Plan liabilities at 30 December 2011		12,464
Current service cost		762
Interest cost		459
Benefits paid		(7,895	)
Actuarial losses		3,260
Plan liabilities at 28 December 2012		9,050

The expected return on the plan assets is evaluated in accordance with the type of investment fund held in the name of employees of the Group’s Israeli subsidiary (Zoran Microelectronics Limited), as opposed to the structure of assets held within the investment funds. This approach has been adopted in the absence of a central fund. An analysis demonstrating the fair value of the portfolio of investments in the name of employees is provided below:

	28 December 2012				30 December 2011
	$‘000		%		$‘000		%
Old Pension Plan		631		7		1,111		9
New Pension Plan		2,702		30		3,581		29
Provident Funds “Manager Insurance” before 2004		5,135		57		6,915		56
Provident Funds “Manager Insurance” after 2004		450		5		617		5
Provident Funds “Kuput Gemel”		90		1		123		1
		9,008		100		12,347		100

The estimated amounts of contributions expected to be paid to the scheme during the current financial year is $1.8 million (2011:$2.1 million).

The following is analysis of the charges to profit or loss and other comprehensive income:

Income statement	28 December 2012 $‘000			30 December 2011 $‘000
Analysis of amounts chargeable to operating profit (loss):
Current service cost		(762	)		(282	)
Analysis of amounts (charged)/credited to other finance income and costs:
Interest on Plan liabilities		(459	)		(274	)
Expected return on assets in the Plan		493			274
Total chargeable to the income statement before deduction of tax		(728	)		(282	)
Analysis of amounts recognised in the consolidated statement of comprehensive income:
Actuarial losses		(919	)		(435	)
Pension scheme assets above the threshold		(656	)		–
Total actuarial loss recognised in the consolidated statement of comprehensive income		(1,575	)		(435	)
Cumulative actuarial loss recognised in the consolidated statement of comprehensive income		(2,010	)		(435	)

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Financial statements

Notes to the consolidated financial statements continued

36. 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 28 and 29. The Group is not subject to any externally imposed capital requirements.

The Group has a total of $333.3 million of treasury deposits and cash and cash equivalents as at 28 December 2012 (30 December 2011: $277.8 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

	28 December 2012 $’000			30 December 2011 $’000
Financial assets
Available for sale		3,719			3,610
Loans and receivables (including cash and cash equivalents and treasury deposits)		460,659			365,922
Derivative instruments in designated hedge accounting relationships		2,496			148
Fair value through profit and loss (FVTPL)		4,333			15,938
		471,207			385,618
Financial liabilities
Derivative instruments in designated hedge accounting relationships		–			(1,550	)
Amortised cost		(209,695	)		(212,183	)
Fair value through profit and loss (FVTPL)		–			(35	)
		(209,695	)		(213,768	)

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 a significant proportion 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:

	Liabilities						Assets
	28 December 2012 £’000			30 December 2011 £’000			28 December 2012 £’000		30 December 2011 £’000
GBP sterling		(6,615	)		(6,740	)		1,799		5,675

CSR plc Annual Report and Financial Statements 2012

Financial statements

The following significant exchange rates applied during the period:

	Weighted average forward contract rate (contracts maturing in the period)				Period end spot rate
	28 December 2012 $’000		30 December 2011 $’000		28 December 2012 $’000		30 December 2011 $’000
GBP: USD		1.5731		1.5428		1.6157		1.5535

Foreign Currency Sensitivity Analysis

A 10 percent strengthening of the US dollar against GBP sterling would have decreased equity and profit or increased equity and profit 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 2011.

28 December 2012	Equity $’000			Profit or (loss) $’000
GBP		(6,881	)		(316	)
30 December 2011	Equity $’000			Profit or (loss) $’000
GBP		(7,834	)		2,693

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 hedges are expected to occur:

Cash flow hedges	Carrying amount			Expected cash flows		3 months or less		3-6 months			6-12 months			More than one year
28 December 2012
Forward foreign exchange contracts $’000		–			64,000		15,500		15,000			33,500			–
Forward foreign exchange contracts £’000		–			100,641		24,107		23,490			53,044			–
Fair value $’000		2,702			–		926		732			1,044			–
Average exchange rate		–			1.5725		1.5553		1.566			1.5834			–
30 December 2011
Forward foreign exchange contracts $’000		–			107,631		24,049		24,708			48,831			10,043
Forward foreign exchange contracts £’000		–			68,500		15,500		15,500			31,000			6,500
Fair value $’000		(1,437	)		–		20		(683	)		(795	)		21
Average exchange rate		–			1.5741		1.5521		1.5935			1.5753			1.5450

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 0.27% (52 weeks ended 30 December 2011: 0.16%; 52 weeks ended 31 December 2010 : 0.22%).

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 available financial 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 22.

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Financial statements

Notes to the consolidated financial statements continued

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 its 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.

28 December 2012	Weighted average effective interest rate %		Less than one month $’000		1-2 months $’000		2-3 months $’000		3-6 months $’000		More than 6 months $’000		Total $’000
Obligations under finance leases		–		–		340		167		–		1,056		1,563
Litigation accrual (undiscounted)		–		3,125		–		—		3,125		34,375		40,625
Other payables		–		1,762		–		4,766		775		14,463		21,766
Onerous lease provision (undiscounted)		–		87		83		105		282		5,103		5,660
				4,974		423		5,038		4,182		54,997		69,614
30 December 2011	Weighted average effective interest rate %		Less than one month $’000		1-2 months $’000		2-3 months $’000		3-6 months $’000		More than 6 months $’000		Total $’000
Obligations under finance leases		–		–		–		–		–		159		159
Litigation accrual (undiscounted)		–		3,125		–		–		3,125		46,875		53,125
Other payables		–		2,080		–		2,319		775		16,969		22,143
Onerous lease provision (undiscounted)		–		10		10		10		29		3,385		3,444
				5,215		10		2,329		3,929		67,388		78,871

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:

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).

28 December 2012	Quoted prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1) $’000		(Level 2) $’000		(Level 3) $’000		Total $’000
Financial assets at FVTPL
United States government fixed income debt securities (1)		4,127		–		–		4,127
Derivative instruments in designated hedge accounting relationships		–		2,496		–		2,496
Fair value through profit and loss (FVTPL)		–		206		–		206
Available for sale financial assets
Shares in unquoted equity securities		–		–		3,719		3,719

CSR plc Annual Report and Financial Statements 2012

Financial statements

30 December 2011	Quoted prices in Active Markets for Identical Assets		Significant Other Observable Inputs			Significant Unobservable Inputs
	(Level 1) $’000		(Level 2) $’000			(Level 3) $’000		Total $’000
Financial assets at FVTPL
United States government fixed income debt securities (1)		15,938		–			–		15,938
Derivative instruments in designated hedge accounting relationships		–		148			–		148
Available for sale financial assets
Shares in unquoted equity securities		–		–			3,610		3,610
Financial liabilities at FVTPL
Derivative instruments in designated hedge accounting relationships		–		(1,550	)		–		(1,550	)
Fair value through profit and loss (FVTPL)		–		(35	)		–		(35	)

(1) Included within Treasury deposits within the consolidated balance sheet.

The fair value of the unquoted equity shares can be determined as management monitors the ongoing investments by oversight involvement in the investees and due to the recent nature of the purchase, by either the Group or other equity holders of the investees.

Reconciliation of Level 3 fair value measurements of financial assets:

	Available for sale Unquoted equities $’000
Balance at 31 December 2010		1,000
Total gains and losses:
Purchases		2,610
Balance at 30 December 2011		3,610
Total gains and losses:
Purchases		109
Balance at 28 December 2012		3,719

37. 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:

	52 weeks ended 28 December 2012 $’000		52 weeks ended 30 December 2011 $’000		52 weeks ended 31 December 2010 $’000
Short-term employee benefits		5,004		6,558		4,582
Post-employment benefits		173		182		228
Share-based payment		3,721		765		1,398
		8,898		7,505		6,208

During 2011, Joep van Beurden (CEO) was appointed Chairman of the Global Semiconductor Alliance (GSA). Prior to this, Joep had held the position of Vice Chairman of this organisation since 2009. CSR plc has paid membership fees of $25,000 to the GSA during the course of 2012 (2011: $25,000), sponsorship fees of $22,100 (2011: $17,100) and conference fees of $2,985 (2011: $nil).

Prior to the acquisition of Zoran Corporation, Levy Gerzberg held an interest in Zoran common stock and in options to acquire Zoran common stock pursuant to option plans operated by Zoran and which were subsequently assumed by Zoran.

With effect from completion on 31 August 2011, these interests were converted into 120,737 shares and 1,015,318 options to acquire CSR ADSs.

Dividends totalling $143,287 (2011: $237,671) were paid in the year in respect of ordinary shares held by the Company’s directors.

38. Disposal of Development Operations

On 17 July 2012, the Group entered into a conditional binding agreement with Samsung, for the transfer of development operations in handset connectivity and location, including 311 people, together with certain rights over the Group’s technology in these areas. None of the revenues associated with the Group’s existing handset products were transferred as part of the transaction. This transaction was completed on 4 October 2012.

The Consideration is subject to adjustment by up to US$10 million in certain circumstances relating to the achievement of contractual milestones. At the balance sheet date the fair value of the probabilities of these possible circumstances and their outcomes were assessed and deemed to be less than $100,000.

The disposal was effected so that the Group could concentrate investment and resources on its five high growth markets of Voice & Music, Automotive Infotainment, Indoors Location, Imaging and Bluetooth Smart, accelerate its higher margin platform strategy and improve the Group’s overall market position.

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Financial statements

Notes to the consolidated financial statements continued

The net assets transferred on 4 October 2012 are as follows:

	$’000
Attributable goodwill		151,477
Financial assets		2,877
Property, plant and equipment		3,103
Intangible assets		3,413
Financial liabilities		(1,713	)
Net assets disposed		159,157
Additional liabilities recognised on disposal1		23,665
Gain on disposal of development operations in handset connectivity and handset location		127,178
Total consideration		310,000
Purchase price:
Cash and cash equivalents		272,900
Cash held in an escrow account		31,000
Witholding tax receivable		6,100
		310,000
Net cash inflow arising on disposal:
Consideration received in cash and cash equivalents		272,900
Disposed cash and cash equivalents		(1,577	)
Directly attributable costs		(13,122	)
		258,201

¹  Additional liabilities recognised on disposal primarily consists of additional employee compensation, incurred in conjunction with the transfer of 311 employees to Samsung, and professional fees incurred for the Samsung Transaction

The gain on the disposal of these development operations in handset connectivity and location has been recognised within the Group’s operating profit for the period ended 28 December 2012.

As part of the transaction, the Group’s entire shareholding in Cambridge Silicon Radio Sarl was transferred to Samsung. The gain recognised on this disposal was $8.5 million and this was recognised within the Group’s operating profit, as part of the total gain on disposal of development operations in handset connectivity and location.

Prior to disposal the costs of these development operations have been disclosed in the Legacy operating segment.

39. Acquisition of Subsidiary

Zoran Corporation

On 31 August 2011, the Group acquired 100% of the issued share capital of Zoran Corporation (“Zoran”), a semiconductor supplier of video and imaging technology for cameras, televisions, silicon tuners and printing, for a consideration of $440.5 million.

The acquisition of Zoran provides CSR with imaging technology, which will complement CSR’s existing wireless connectivity, audio and location technologies and gives greater access to new markets which require location and wireless connectivity.

Each share of Zoran common stock was exchanged for 0.589 of a CSR plc ordinary share, par value £0.001 per share and a total cash payment of $316.4m. The Group issued 29,774,144 shares in CSR plc as part of this consideration at a CSR plc share price of £2.215 and exchange rate of 1.6304 US dollars to GBP.

CSR plc Annual Report and Financial Statements 2012

Financial statements

The acquisition note is shown below:

Recognised amounts of assets acquired and liabilities assumed at fair value	$’000
Financial assets		271,287
Inventory		62,833
Property, plant and equipment		12,451
Intangible assets		99,276
Financial liabilities		(114,005	)
Net assets acquired		331,842
Allocation to goodwill		108,703
Total consideration		440,545
Purchase price:
Cash		316,445
Fair value of shares issued		107,524
Fair value of share options exchanged		16,576
		440,545
Net cash outflow arising on acquisition
Cash consideration		(316,445	)
Cash and cash equivalents acquired		192,583
Directly attributable costs		(18,513	)
		(142,375	)

Cash and cash equivalents acquired totalled $192.6 million. Treasury and investments of $30.6 million were also acquired, giving a total of $223.2 million of cash, cash equivalents, treasury deposits and investments acquired.

The goodwill arising on the acquisition is attributable to future income from new customer contracts, the acquired workforce and future technology that has yet to be designed or even conceived. It is not anticipated that any of the goodwill will be deductible for income tax purposes.

The gross value of financial assets acquired includes receivables with a fair value of $32.1 million and a gross contractual value of $32.1 million. The best estimate at the acquisition date of the contractual cash flows not to be collected is $0 million. The amount of goodwill recognised on acquisition was revised to $108.7m (30 December 2011: $108.1m), due to a change in the fair value of assets acquired, amounting to $0.6m identified during 2012. Prior period comparatives have not been restated because the amount is not material.

Attributable costs amount to $18.5 million and have been charged to SG&A and to the share premium account.

Zoran Corporation contributed $111.4 million to revenue and a profit of $20.3 million between the date of acquisition and 30 December 2011.

If the acquisition of Zoran Corporation had been completed on the first day of the accounting period, Group revenues for the 52 week period ended 30 December 2011 would have been $1,074.5 million and the Group loss would have been $50.0 million. This does not reflect any synergistic benefits of the acquisition for the period prior to the acquisition.

APT Licensing Limited

On 20 July 2010, CSR plc acquired 100% of the issued share capital of APT Licensing Limited (APT), a leading ultra-high quality codec developer, for a consideration of $3.9 million. The acquisition will enhance CSR’s technical capability in audio codecs and strengthen the Group’s presence in mobile and wireless audio streaming.

The acquisition note is shown below:

Recognised amounts of identifiable assets acquired and liabilities assumed	$’000
Financial assets		813
Property, plant and equipment		117
Intangible assets		2,500
Financial liabilities		(2,760	)
		670
Goodwill		3,200
Total consideration		3,870
Satisfied by:
Cash		2,330
Contingent consideration arrangement		1,540
Total consideration transferred		3,870
Net cash outflow arising on acquisition
Cash consideration		(2,330	)
Cash and cash equivalents acquired		428
		(1,902	)

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Financial statements

Notes to the consolidated financial statements continued

The fair value of the financial assets includes trade receivables with a fair value of $0.11 million and a gross contractual value of $0.14 million. The best estimate, at the acquisition date of the contractual cash flows not to be collected is $0.03 million.

The goodwill of $3.2 million arising from the acquisition is attributable to future customer contracts, the development of future apt-X technology and the assembled APT workforce which are not recognisable as an asset. None of the goodwill recognised is expected to be deductible for income tax purposes.

The contingent consideration arrangement was dependent on the volume of shipments of APT products in the period from the acquisition date to 31 December 2011.

The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between $nil and $3.0 million and is payable on 31 December 2011.

The fair value of the contingent consideration arrangement of $1.54 million was estimated on the basis of a probability weighted forecast of the number of units of APT products to be sold in the earn-out period, discounted at 3.4%. This was not paid.

Acquisition-related costs included within administrative expenses in the CSR plc consolidated income statement for the 52 weeks ended 31 December 2010 amounted to $0.4 million.

As a condition of the acquisition agreement, CSR re-paid $2.0 million of outstanding loans of APT on completion of the acquisition.

APT Licensing Limited contributed $0.2 million to revenue and a loss of $0.2 million to the Group’s profit for the period between the date of the acquisition and the balance sheet date.

If the acquisition of APT Licensing Limited had been completed on the first day of the accounting period, Group revenues for the period ended 31 December 2010 would have been $801.0 million and Group profit would have been $15.3 million.

CSR plc Annual Report and Financial Statements 2012

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this amended annual report on its behalf.

CSR plc
(Registrant)
	/s/ Will Gardiner
Name:	Will Gardiner
Title:	Chief Financial Officer
Date:	18 June 2013