Asus 2008 Annual Report Download - page 201

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ASUSTEK COMPUTER INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(In thousands of New Taiwan dollars unless otherwise stated)
5. In Feb., 2009, Ability Enterprise Co., Ltd. acquired the shares of the long-term investment
under the equity method-Avy Precision Technology Inc. for $178,000 thousand.
6. In Feb. and Mar., 2009, Ability Enterprise Co., Ltd. sold the shares of the long-term
investment under the equity method-ASHINE PRECISION CO., LTD. for $178,000
thousand and noncurrent assets held for sale for $360,000 thousand.
X. OTHER SIGNIFICANT MATTERS
1. RISKS MANAGEMENT OBJECTIVE AND POLICIES
Derivative financial instruments held by the Company and subsidiaries are forward exchange
contracts, foreign currency options and currency swap contracts. The Company’s and
subsidiaries’ principal financial instruments, other than derivatives, comprise of cash and cash
equivalents, financial assets at fair value through profit or loss, available-for-sale financial
asset and bank loans. The main purpose of these financial instruments is to manage the
financing for the Company’s and subsidiaries’ operations. The Company and subsidiaries
also hold various other financial assets and liabilities such as accounts receivable and
accounts payable, which arose directly from its operations.
The main risks arising from the Company’s and subsidiaries' financial instruments are foreign
currency risk, commodity price risk, credit risk, liquidity risk and cash flow risk from
fluctuations in interest rate.
(1) Foreign currency risk
The Company and subsidiaries expose to foreign currency risks arising from purchases
or sales denominated in foreign currencies. The Company and subsidiaries use the
principle of natural hedge to mitigate the risk and utilize spot or forward contracts to
hedge foreign currency risk. The notional amounts of the foreign currency contracts
are the same as the amounts of the hedged items. In principle, The Company and
subsidiaries do not enter into any forward contracts for commitments of uncertain nature.
The Company and subsidiaries enter into forward currency contracts to hedge the
exchange rate risk of assets, liabilities and commitments denominated in foreign
currencies. The Company’s and subsidiaries’ hedging strategy is to avoid most market
price risks. The Company and subsidiaries use the derivatives that have highest
negative correlation with the hedged items as hedging instruments and evaluate the
hedge effectiveness periodically.