Asus 2009 Annual Report Download - page 125

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ASUSTEK COMPUTER INC.
Notes to Financial Statements
The gains resulting from the valuation of financial instruments using a valuation technique
amounted to $210,629 and $862,836 for the years ended December 31, 2009 and 2008,
respectively.
D. Information about financial risk
(a) Market risk
(i) The main currency for purchases and sales of the Company is the US dollar. The
Company uses the principle of natural hedge to mitigate the risk and utilizes spot or
forward contracts to hedge foreign currency risk. The forward contracts’ duration
corresponds to the Company’ s foreign currency assets’ and liabilities’ due date and
future cash flows. The exchange gains and losses resulting from foreign currency
assets and liabilities will be offset by the exchanges gains and losses resulting from the
forward contracts. Thus, the market risk of foreign currency exchange rate changes
does not have material impact on the Company.
(ii) The open-end funds and stocks of listed companies held by the Company are classified
as financial assets measured at fair value through profit or loss and available-for-sale
financial assets. As these assets are measured at fair value, the Company has risk
exposure related to changes in fair value in an equity securities market.
(b) Credit risk
(i) Credit risk means the potential loss of the Company if the counterpart involved in that
transaction defaults. Since the Company’ s derivative financial instrument agreements
are entered into with financial institutions with good credit ratings, management
believes that there is no significant credit risk from these transactions.
(ii) The primary potential credit risk is from financial instruments like cash, bank deposits,
equity securities under non-equity method, and accounts receivable. The Company
deposits cash in different financial institutions. Equity securities under non-equity
method were funds and listed stock issued by companies with good credit ratings.
The Company manages credit risk exposure related to each financial institution and
believes that there is no significant concentration of credit risk of cash and equity
securities. The customers of the Company have good credit and profit records. The
Company is able to evaluate the financial condition of these customers in order to
reduce credit risk of accounts receivable.
(c) Liquidity risk
(i) The Company’ s objective is to maintain a balance of funding continuity and flexibility
through the use of financial instruments such as cash and cash in bank, and bonds
payable.