HTC 2009 Annual Report Download - page 74


Based on the Income Tax Act of the ROC, the investment and
research and development tax credits can be carried forward for
four years. The total credits used in each year cannot exceed half
of the estimated income tax provision, except in the last year.

Valuation allowance is based on management’s evaluation of the
amount of tax credits that can be carried forward for four years,
based on the Company’s financial forecasts.
The income taxes in 2008 and 2009 were as follows:
2,008 2,009
NT$ NT$ US$(Note 3)
Current income tax $ 3,396,417 $ 3,211,563 $ 100,393
Increase in deferred
income tax assets (431,528) (503,703) (15,746)
Overestimation of prior
year’s income tax (9,759) (104,298) (3,260)
Income tax $ 2,955,130 $ 2,603,562 $ 81,387
The integrated income tax information is as follows:

2,008 2,009
NT$ NT$ US$(Note 3)
Balance of imputation
credit account (ICA) $ 4,365,460 $ 1,702,246 $ 53,212
Unappropriated
earnings generated
from 1998 44,626,182 38,364,099 1,199,253
Actual/estimated
creditable ratio
(including income tax
payable)
10.55% 12.71% 12.71%
(Actual ratio) (Estimated
ratio)
(Estimated ratio)

For distribution of earnings generated on or after January 1, 1998,
the ratio for the imputation credits allocated to stockholders of the
Company is based on the balance of the ICA as of the date of
dividend distribution. The expected creditable ratio for the 2009
earnings may be adjusted, depending on the ICA balance on the
date of dividend distribution.
23. EARNINGS PER SHARE
Earnings per share (EPS) before tax and after tax are calculated by
dividing net income by the weighted average number of common
shares outstanding which includes the deduction of the effect of
treasury stock during each year. The weighted average number
of shares used in EPS calculation was 791,855 thousand shares
and 787,367 thousand shares for the years ended December 31,
2008 and 2009, respectively. EPS for the year ended December
31, 2008 were calculated after the average number of shares
outstanding was adjusted retroactively for the effect of stock
dividend distribution in 2009.
The Accounting Research and Development Foundation issued
Interpretation 2007-052 that requires companies to recognize
bonuses paid to employees, directors and supervisors as
compensation expenses beginning January 1, 2008. These
bonuses were previously recorded as appropriations from
earnings. If the Company may settle the bonus to employees by
cash or shares, the Company should presume that the entire
amount of the bonus will be settled in shares and the resulting
potential shares should be included in the weighted average
number of shares outstanding used in the calculation of diluted
EPS, if the shares have a dilutive effect. The number of shares is
estimated by dividing the entire amount of the bonus by the closing
price of the shares at the balance sheet date. Such dilutive
effects of the potential shares needs to be included in the
calculation of diluted EPS until the stockholders resolve the
number of shares to be distributed to employees at their meeting
in the following year. The related EPS information for the years
ended December 31, 2008 and 2009 was as follows:


)LQDQFLDO,QIRUPDWLRQ

The alternative minimum tax (AMT) imposed under the AMT Act is a supplemental tax levied at a rate of 10% which is payable if the income tax
payable determined pursuant to the Income Tax Law is below the minimum amount prescribed under the AMT Act. The taxable income for
calculating the AMT includes most of the income that is exempted from income tax under various laws and statutes. The Company has considered
the impact of the AMT Act in the determination of its tax liabilities. As a result, the current income tax payable as of December 31, 2008 and 2009
should be NT$3,396,417 thousand and NT$3,211,563 thousand (US$100,393 thousand), respectively.
In May 2009, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a profit-seeking enterprise’s income tax
rate from 25% to 20%, effective 2010. Deductible temporary differences and tax credit carryforwards that gave rise to deferred tax assets as of
December 31, 2008 and 2009 were as follows:
2,008 2,009
NT$ NT$ US$(Note 3)
Temporary differences
Provision for loss on decline in value of inventory $ 405,806 $ 625,052 $ 19,539
Unrealized marketing expenses 1,452,633 1,714,593 53,598
Unrealized reserve for warranty expense 1,306,466 1,057,512 33,057
Capitalized expense 58,190 40,734 1,273
Unrealized royalties 1,535,925 1,691,142 52,865
Unrealized bad-debt expenses 26,503 147,309 4,605
Unrealized exchange loss, net - 155,801 4,870
Unrealized valuation loss on financial instruments 128,521 --
Other 12,465 43,237 1,352
Tax credit carryforwards 2,196,808 3,056,328 95,540
Total deferred tax assets 7,123,317 8,531,708 266,699
Less: Valuation allowance ( 5,679,417 )( 6,623,210 ) ( 207,040 )
Total deferred tax assets, net 1,443,900 1,908,498 59,659
Deferred tax liabilities
Unrealized pension cost ( 29,284 )( 27,531 ) ( 861 )
Unrealized valuation gain on financial instruments - ( 3,626 ) ( 113 )
Unrealized exchange gain, net ( 40,978 )--
1,373,638 1,877,341 58,685
Less: Current portion ( 552,494 )( 811,240 ) ( 25,359 )
Deferred tax assets - noncurrent $ 821,144 $ 1,066,101 $ 33,326
Details of the tax credit carryforwards were as follows:
Year of Validity Period 2008 2009
Occurrence NT$ NT$ US$(Note 3)
2007 2007-2011 $ 201,506 $ 201,506 $ 6,299
2008 2008-2012 1,995,302 831,154 25,982
2009 2009-2013 - 2,023,668 63,259
$ 2,196,808 $ 3,056,328 $ 95,540

)LQDQFLDO,QIRUPDWLRQ