HTC 2008 Annual Report Download - page 77

Financial Information | 19
18 | 2008 Annual Report
1.ORGANIZATION AND OPERATIONS
HTC Corporation (the “Company,” formerly High
Tech Computer Corporation until June 13, 2008)
was incorporated on May 15, 1997 under the
Company Law of the Republic of China to design,
manufacture and sell smart handheld devices. In
March 2002, the Company’s stock was listed on the
Taiwan Stock Exchange. On November 19, 2003,
the Company started trading Global Depositary
Receipts on the Luxembourg Stock Exchange.
To have synergies with companies in similar
industries, lower operating costs and expenses, and
enhance competitiveness and research and
development capabilities, the Company’s Board of
Directors proposed on October 31, 2003 to merge
the Company with IA Style, Inc. The effective
merger date was March 1, 2004.
The Company had 4,590, 5,569 and 8,285
employees as of December 31, 2006, 2007 and
2008, respectively.
2.SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The financial statements have been prepared in
conformity with the Guidelines Governing the
Preparation of Financial Reports by Securities
Issuers, Business Accounting Law, Guidelines
Governing Business Accounting, and accounting
principles generally accepted in the Republic of
China (“ROC”). Under these guidelines, law and
principles, certain estimates and assumptions have
been used for the allowance for doubtful accounts,
allowance for loss on inventories, depreciation of
Properties, royalty, pension cost, allowance for
product warranties, bonuses to employees, etc.
Actual results may differ from these estimates.
The accompanying financial statements were
originally presented in more than one set of Chinese
reports. For readers’ convenience, the
accompanying financial statements have been
translated into English from the original Chinese
version prepared and used in the ROC. If
inconsistencies arise between the English version
and the Chinese version or if differences arise in the
interpretations between the two versions, the
Chinese version of the financial statements shall
prevail. However, the accompanying financial
statements do not include the English translation of
the additional footnote disclosures that are not
required under ROC generally accepted accounting
principles but are required by the Securities and
Futures Bureau for their oversight purposes.
The Company’s significant accounting policies are
summarized as follows:
Current/Noncurrent Assets and Liabilities
Current assets include cash, cash equivalents, and
those assets held primarily for trading purposes or to
be realized, sold or consumed within one year from
the balance sheet date. All other assets such as
Properties and intangible assets are classified as
noncurrent. Current liabilities are obligations
incurred for trading purposes or to be settled within
one year from the balance sheet date. All other
liabilities are classified as noncurrent.
Financial Assets/Liabilities at Fair Value through
Profit or Loss
Financial instruments classified as financial assets
or financial liabilities at fair value through profit or
loss (“FVTPL”) include financial assets or financial
liabilities held for trading and those designated as at
FVTPL on initial recognition. The Company
recognizes a financial asset or a financial liability on
its balance sheet when the Company becomes a
party to the contractual provisions of the financial
instrument. A financial asset is derecognized when
the Company has lost control of its contractual rights
over the financial asset. A financial liability is
derecognized when the obligation specified in the
relevant contract is discharged, cancelled or
expired.
Financial instruments at FVTPL are initially
measured at fair value. Transaction costs directly
attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognized
immediately in profit or loss. At each balance sheet
date subsequent to initial recognition, financial
assets or financial liabilities at FVTPL are
remeasured at fair value, with changes in fair value
recognized directly in profit or loss in the year in
which they arise. Cash dividends received
subsequently (including those received in the year of
investment) are recognized as income for the year.
On derecognition of a financial asset or a financial
liability, the difference between its carrying amount
and the sum of the consideration received and
receivable or consideration paid and payable is
recognized in profit or loss.
A derivative that does not meet the criteria for hedge
accounting is classified as a financial asset or a
financial liability held for trading. If the fair value of
the derivative is positive, the derivative is recognized
as a financial asset; otherwise, the derivative is
recognized as a financial liability.
Fair values of financial assets and financial liabilities
at the balance sheet date are determined as follows:
publicly traded stocks - at closing prices; open-end
mutual funds - at net asset values; bonds - at prices
quoted by the Taiwan GreTai Securities Market; and
financial assets and financial liabilities without
quoted prices in an active market - at values
determined using valuation techniques.
Available-for-Sale Financial Assets
Available-for-sale financial assets are initially
measured at fair value plus transaction costs that
are directly attributable to the acquisition. At each
balance sheet date subsequent to initial recognition,
available-for-sale financial assets are remeasured at
fair value, with changes in fair value recognized in
equity until the financial assets are disposed of, at
which time, the cumulative gain or loss previously
recognized in equity is included in profit or loss for
the year.