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Acer Incorporated 2008 Annual Report110
Financial Standing
Acer Incorporated 2008 Annual Report 111
5. Transactions with Related Parties
(1) Names of related parties and their relationship with the Company
Name Relationship with the Company
Wistron Corporation (“Wistron”) Investee of the Company accounted for by equity method
Cowin Worldwide Corporation (“COWIN”) Subsidiary of Wistron
Wistron InfoComm (Kunshan) Co., Ltd. (“WKS”) Subsidiary of Wistron
Wistron InfoComm Technology (Kunshan) Co., Ltd. (“WIKS”) Subsidiary of Wistron
Bluechip Infotech Pty Ltd. (“SAL”) Investee of the Company accounted for by equity method
e-Life Mall Corp. (“eLIFE”) Investee of the Company accounted for by equity method
iD Softcapital Inc. Its chairman is one of the Company’s supervisors
All directors, supervisors, chief executive ofcers and executive
vice presidents The Consolidated Companies’ main management
(2) Signicant transactions with related parties as of and for the years ended December 31, 2007 and 2008, are
summarized below:
(a) Net sales, and related notes and accounts receivable
(i) Net sales to:
2007 2008
NT$ NT$ US$
SAL 1,088,886 758,797 23,121
eLIFE 992,647 885,662 26,987
COWIN 153,920 462,430 14,091
WKS 358,247 - -
WIKS 185,804 - -
Other (individually less than 5%) 266,334 114,486 3,489
3,045,838 2,221,375 67,688
Trading terms with related parties are not significantly different from the terms with third-party
customers.
(ii) Notes and accounts receivable from:
December 31, 2007 December 31, 2008
NT$ NT$ US$
eLIFE 190,277 159,182 4,850
COWIN 86,676 329,848 10,051
Wistron - 248,930 7,585
SAL 82,230 64,529 1,966
Others (individually less than 5%) 89,298 38,976 1,188
448,481 841,465 25,640
(b) Purchases and related notes and accounts payable
(i) Purchases from:
2007 2008
NT$ NT$ US$
Wistron 14,788,985 25,228,683 768,745
Others 296,079 270 8
15,085,064 25,228,953 768,753
The trading terms with related parties are not comparable to the trading terms with third parties as the
specications of products are different.
In 2007 and 2008, the Consolidated Companies sold raw material to Wistron and purchased back the
nished goods after manufacture. To avoid overstating the revenues, sales of raw material to Wistron
amounting to NT$58,666,096 and NT$88,579,887 for the years ended December 31, 2007 and 2008,
respectively, were excluded from the consolidated revenues. Having legally enforceable rights, the
Consolidated Companies offset the outstanding receivables and payables resulting from the above-
mentioned transactions. The offset resulted in a payable balance.
(ii) Notes and accounts payable to:
December 31, 2007 December 31, 2008
NT$ NT$ US$
Wistron 4,510,376 7,681,059 234,050
Others 73,239 69,161 2,108
4,583,615 7,750,220 236,158
(c) Spin-off of assets
On February 28, 2002, AI spun off its design, manufacturing and services business from its Acer-brand
business and transferred the related operating assets and liabilities to Wistron. The Company agreed with
Wistron that Wistron is obligated to pay for the deferred income tax assets being transferred only when
they are actually utilized. In 2006, the ROC income tax authorities examined and rejected Wistron’s
claim of investment credits transferred from the spin-off in the income tax returns for 2002, 2003, and
2004. Wistron disagreed with the assessment and led a request with the tax authorities for a recheck of
its 2002, 2003 and 2004 income tax returns. To be conservative, the Company recognized income tax
expense of NT$875,802 based on total tax impact estimated in 2006 and provided a valuation allowance
of NT$385,043 against the receivables from Wistron as of December 31, 2007 and 2008. The remaining
balance of $490,759 was recorded as income tax expense and other payables to related parties.
In 2008, as a result of the recheck on the 2002 income tax returns led by Wistron, the tax authorities
decided that the deferred tax assets resulting from the spin-off could be utilized. As a result, the Company
revaluated the recoverability of the deferred tax assets and accordingly reversed the valuation allowance
and other payables to related parties amounting to NT$511,425, and recognized a reduction of current
income tax expense by the same amount.