HTC 2007 Annual Report Download - page 62

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118
be debited proportionately according to the
share ratio. The difference should be credited to
capital surplus or debited to capital surplus
and/or retained earnings.
>
F
or
e
i
gn Curr
e
n
c
i
e
s
The financial statements of foreign operations
are translated into New Taiwan dollars at the
following exchange rates:
a. Assets and liabilities - at exchange rates
prevailing on the balance sheet date;
b. Stockholders' equity - at historical exchange
rates;
c. Dividends - at the exchange rate prevailing on
the dividend declaration date; and
d. Income and expenses - at average exchange
rates for the year.
Exchange differences arising from the
translation of the financial statements of foreign
operations are recognized as a separate
component of stockholders' equity. Such
exchange differences are recognized as gain or
loss in the year in which the foreign operations
are disposed of.
Nonderivative foreign-currency transactions are
recorded in New Taiwan dollars at the rates of
exchange in effect when the transactions occur.
Exchange differences arising from the
settlement of foreign-currency assets and
liabilities are recognized as gain or loss.
At the balance sheet date, foreign-currency
monetary assets and liabilities are revalued at
prevailing exchange rates, and the exchange
differences are recognized as gain or loss.
At the balance sheet date, foreign-currency
nonmonetary assets (such as equity
instruments) and liabilities that are measured at
fair value are revalued at prevailing exchange
rates, with the exchange differences recognized
as follows:
a. Under stockholders' equity if the changes in
fair value are recognized in stockholders'
equity;
b. As gain or loss if the change in fair value is
recognized as gain or loss.
Foreign-currency nonmonetary assets and
liabilities that are carried at cost continue to be
stated at exchange rates at the trade dates.
If the functional currency of an equity-method
investee is a foreign currency, translation
adjustments will result from the translation of the
investee's financial statements into the reporting
AN OVERVIEW OFTHE COMPANY'S FINANCIAL STATUS
119
currency of the Company. These adjustments
are accumulated and reported as a separate
component of stockholders' equity.
> M
e
rg
e
rs
The Company's acquisition of IA Style, Inc. was
accounted for using the Statement of Financial
Accounting Standards No. 25 - "Business
Combinations - Accounting Treatment under the
Purchase Method," and measured at the fair
value of the business acquired. The net assets
and net liabilities of the acquired entity were
accounted for in the balance sheet as an
increase in additional paid-in capital from
merger (credit) and as a decrease in retained
earnings (debit), respectively.
> R
e
c
l
a
ss
i
f
i
c
a
t
i
ons
Certain 2005 and 2006 accounts have been
reclassified to be consistent with the
presentation of the financial statements as of
and for the year ended December 31, 2007.
3.TRANSLATION INTO U.S. DOLLARS
The financial statements are stated in New Taiwan
dollars. The translation of the 2007 New Taiwan
dollar amounts into U.S. dollar amounts are included
solely for the convenience of readers, using the
noon buying rate of NT$ 32.43 to US$1.00 quoted
by the Bank of Taiwan on December 31, 2007. The
convenience translation should not be construed as
representations that the New Taiwan dollar amounts
have been, could have been, or could in the future
be, converted into U.S. dollars at this or any other
exchange rate.
4.ACCOUNTING CHANGES
a. SFAS Nos. 37 and 38
Effective January 1, 2007, the Company
adopted the newly released Statements of
Financial Accounting Standards ("Statements
" or SFAS) No. 37 - "Intangible Assets" and
No. 38 - "Noncurrent Assets Held for Sale and
Discontinued Operations." These accounting
changes had no material effect on the
Company's financial statements as of and for
the year ended December 31, 2007.
b. SFAS Nos. 34 and 36
On January 1, 2006, the Company adopted
the newly released SFAS No. 34 -
"Accounting for Financial Instruments" and
No. 36 - "Disclosure and Presentation of
Financial Instruments" and related revisions of
previously released Statements.
VI
FINANCEI INDEPENDENT AUDITORS' REPORT
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