Acer 2010 Annual Report Download - page 53

ACER INCORPORATED 2010 ANNUAL REPORT
102
FINANCIAL STANDING
103
(14) Intangible assets
Goodwill
Trademarks
and
trade names Patents
Customer
Relationships
Channel
Resources Others Total
NT$ NT$ NT$ NT$ NT$ NT$ NT$
Balance at January 1, 2009 22,574,040 8,067,556 692,838 1,517,349 - 1,894,982 34,746,765
Additions - - 369,000 - - 2,536,507 2,905,507
Adjustments made
subsequent to business
acquisition (138,067) - - - - - (138,067)
Disposals (9,624) - (39,275) - - (9,759) (58,658)
Reclassication - - - - - 16,867 16,867
Effect of exchange rate
changes (448,895) (161,298) (3,073) (28,110) - (6,842) (648,218)
Amortization - (43,793) (217,701) (178,933) - (939,701) (1,380,128)
Balance at December 31,
2009 21,977,454 7,862,465 801,789 1,310,306 - 3,492,054 35,444,068
Additions - - 272 - - 264,162 264,434
Acquisitions from business
combination 2,143,875 2,386,473 - - 1,342,391 74,577 5,947,316
Disposals (1,770,123) - - - - (5,892) (1,776,015)
Reclassication - - 351,500 - - 21,389 372,889
Effect of exchange rate
changes (1,873,735) (95,741) (6,752) (95,530) (81,953) (255,057) (2,408,768)
Amortization - (109,897) (272,594) (172,263) (36,156) (860,079) (1,450,989)
Balance at December 31,
2010 20,477,471 10,043,300 874,215 1,042,513 1,224,282 2,731,154 36,392,935
(a) On December 6, 2007, the Consolidated Companies entered into a Basic Term Agreement with the
International Olympic Committee regarding participation in the Olympic Partners Program (the “Top
Programme”). Pursuant to such agreement, the Consolidated Companies have agreed to pay a certain amount
of money in cash, merchandise and service to obtain marketing rights and become one of the partners
in the “Top Programme” for the period from January 1, 2009 to December 31, 2012. Such expenditure
on sponsorship was capitalized as “Intangible Assets” in the accompanying consolidated financial
statements, and amortized using the straight-line method during the aforementioned four-year period.
(b) Purchase of Founder Technology Group Corp.’s PC business in China and the related assets
The Company, together with its subsidiaries Acer Greater China (B.V.I.) Corp., Acer Computer
(Shanghai) Ltd. and Acer (Chongqing) Ltd. (collectively as “Acer”) formally contracted with Founder
Group, Founder Technology Group Corp., and their subsidiaries (collectively as “Founder”) to purchase
for NT$5,946,316 the PC business and the related assets, and transfer the related employees of Founder
Technology Group Corp. in China, which include the following:
(1) Seven-year exclusive license in Founder PC business and products related trademarks owned by
Founder Group;
(2) Founder PC business and IT systems, trade names, copyrights, and domain names of Founder’s
products;
(3) Intangible assets such as customer lists and distribution channel resources of Founder Technology
Group’s PC business;
(4) Intangible assets such as customer lists and distribution channel resources of Founder Group and its
non-related partners; and
(5) Product warranties.
The purchase of Founder’s PC business in China was accounted for in accordance with ROC SFAS No.
25 “Accounting for Business Combination”, under which, the excess of the purchase price and direct
transaction costs over the fair value of net identiable assets was recognized as goodwill.
The following represents the allocation of the purchase price to the assets acquired and goodwill at the
date of purchase:
NT$ NT$
Purchase cost 5,947,316
The identiable assets purchased:
Intangible assets – Trademark 2,386,473
Intangible assets – Channel resources 1,342,391
Other intangible assets 74,577 3,803,441
Goodwill 2,143,875
Pro forma information
The following unaudited pro forma financial information of 2009 and 2010 presents the combined
results of operations as if the purchase of Founder’s PC business and related assets had occurred as of
the beginning of each of the scal years presented:
2009 2010
NT$ NT$
Revenue 605,540,935 648,713,091
Income from continuing operations before income tax 14,226,101 19,032,363
Income from continuing operations after income tax 10,582,693 14,800,672
Basic earnings per common share (in New Taiwan dollars) 4.02 5.59
(c) Adjustment to goodwill
In 2009, the Consolidated Companies made adjustments to decrease deferred charges by NT$33,768 and
to decrease current liabilities by NT$174,307 resulted from the acquisition of Packard Bell B.V., which
also decreased goodwill by NT$140,539. Additionally, the Consolidated Companies made adjustments
to increase the fair value of outstanding employee stock options assumed through the acquisition of
ETEN in 2009, which increased goodwill by NT$2,472.
In 2010, the Consolidated Companies utilized the net operating loss carryforwards (NOLs) acquired
from the acquisition of Gateway Inc., and consequently eliminated the valuation allowance of deferred
tax assets related to NOLs recognized on the acquisition date against goodwill by NT$1,770,123.
(d) Impairment test
For the purpose of impairment testing, goodwill and trademarks and trade names with indenite useful
lives are allocated to the Consolidated Companies’ cash-generating units (CGUs) that are expected to
benet from the synergies of the business combination. The carrying amounts of signicant goodwill