HTC 2008 Annual Report Download - page 78

Financial Information | 21
20 | 2008 Annual Report
The recognition, derecognition and the fair value
bases of available-for-sale financial assets are
similar to those of financial assets at FVTPL.
Cash dividends are recognized on the stockholders’
resolutions, except for dividends distributed from the
pre-acquisition profit, which are treated as a
reduction of investment cost. Stock dividends are
not recognized as investment income but are
recorded as an increase in the number of shares.
The total number of shares subsequent to the
increase is used for recalculation of cost per share.
An impairment loss is recognized when there is
objective evidence that the financial asset is
impaired. Any subsequent decrease in impairment
loss for an equity instrument classified as
available-for-sale is recognized directly in equity.
Revenue Recognition, Accounts Receivable and
Allowance for Doubtful Accounts
Revenue from sales of goods is recognized when
the Company has transferred to the buyer the
significant risks and rewards of ownership of the
goods, primarily upon shipment, because the
earnings process has been completed and the
economic benefits associated with the transaction
have been realized or are realizable.
Revenue is measured at the fair value of the
consideration received or receivable and represents
amounts agreed between the Company and the
customers for goods sold in the normal course of
business, net of sales discounts and volume rebates.
For trade receivables due within one year from the
balance sheet date, as the nominal value of the
consideration to be received approximates its fair
value and transactions are frequent, fair value of the
consideration is not determined by discounting all
future receipts using an imputed rate of interest.
An allowance for doubtful accounts is provided on
the basis of a review of the collectability of accounts
receivable. The Company assesses the probability
of collections of accounts receivable by examining
the aging analysis of the outstanding receivables
and assessing the value of the collateral provided by
customers.
Inventories
Inventories consist of raw materials, supplies,
finished goods and work-in-process. Before
January 1, 2008, inventories were stated at the
lower of cost or market value (replacement cost or
net realizable value). Any write-down was made
on a category by category basis. Market value
meant replacement cost for raw materials and
supplies and net realizable value for finished goods
and work in process. As stated in note 4, effective
January 1, 2008, inventories are stated at the lower
of cost or net realizable value. Inventory
write-downs are made item by item, except where it
may be appropriate to group similar or related items.
Net realizable value is the estimated selling price of
inventories less all estimated costs of completion
and costs necessary to make the sale. Inventories
are recorded and adjusted to approximate
weighted-average cost on the balance sheet date.
Financial Assets Carried At Cost
Investments in equity instruments with no quoted
prices in an active market and with fair values that
cannot be reliably measured, such as non-publicly
traded stocks and stocks traded in the emerging
stock market, are measured at their original cost.
The accounting treatment for dividends on financial
assets carried at cost is similar to that for dividends
on available-for-sale financial assets. An
impairment loss is recognized when there is
objective evidence that the asset is impaired. A
reversal of this impairment loss is disallowed.
Bond investments not quoted in an active
market
Bond investments not quoted in an active market are
stated at amortized cost and are classified as
current or noncurrent based on their maturities.
Bond investments not quoted in an active market-
current are investments receiving fixed or
determinable amounts. Other features of these bond
investments are as follows:
a.The bond investments have not been designated
as at fair value through profit or loss.
b.The bond investments have not been designated
as available for sale.
Those investments that are noncurrent are classified
as bond investment not quoted in an active market-
noncurrent under funds and investments.
Investments Accounted for by the Equity Method
Investments in which the Company holds 20 percent
or more of the investees’ voting shares or exercises
significant influence over the investees’ operating
and financial policy decisions are accounted for by
the equity method.
Prior to January 1, 2006, the difference between the
acquisition cost and the Company’s proportionate
share in the investee’s equity was amortized by the
straight-line method over five years. Effective
January 1, 2006, pursuant to the revised Statement
of Financial Accounting Standard (“SFAS”) No. 5,
“Long-term Investments Accounted for by Equity
Method”, the acquisition cost is allocated to the
assets acquired and liabilities assumed based on
their fair values at the date of acquisition, and the
excess of the acquisition cost over the fair value of
the identifiable net assets acquired is recognized as
goodwill. Goodwill is not being amortized. The
excess of the fair value of the net identifiable assets
acquired over the acquisition cost is used to reduce
the fair value of each of the noncurrent assets
acquired (except for financial assets other than
investments accounted for by the equity method,
noncurrent assets held for sale, deferred income tax
assets, prepaid pension or other postretirement
benefit) in proportion to the respective fair values of
the noncurrent assets, with any excess recognized
as an extraordinary gain. Effective January 1, 2006,
the accounting treatment for the unamortized
investment premium arising on acquisitions before
January 1, 2006 is the same as that for goodwill and
the premium is no longer being amortized. For any