HTC 2009 Annual Report Download - page 65

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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.
The recognition, derecognition and the fair value bases of available-for-sale
financial assets are the same with 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 thenumber 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. Cost is determined using the
moving-average method.
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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.
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HTC CORPORATION
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008 AND 2009
(In Thousands, Unless Stated Otherwise)
1. ORGANIZATION AND OPERATIONS
HTC Corporation (the ³Company´) was incorporated on May 15, 1997 under
the Company Law of the Republic of China to design, manufacture and sell
smart handheld devices. In 1998, the Company had an initial public offering
and, 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.
The Company had 8,285 and 7,284 employees as of December 31, 2008
and 2009, 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.
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:
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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.
Cash Equivalents
Cash equivalents, consisting of repurchase agreements collateralized by
bonds, are highly liquid financial instruments with maturities of three months
or less when acquired and with carrying amounts that approximate their fair
values.
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.
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