HTC 2009 Annual Report Download - page 90

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These unquoted equity instruments were not carried at fair value
because their fair value could not be reliably measured; thus, the
Company accounted for these investments by the cost method.
13. BOND INVESTMENTS NOT QUOTED IN AN ACTIVE MARKET
A bond investment not quoted in an active market as of December
31, 2008 and 2009 was as follows:
2008 2009
NT$ NT$ US$(Note 3)
Bond investment $ - $- $ -
Less: Current portion - --
$-$- $ -
The Company bought a 12-month bond issued by Vitamin D Inc.
with 6% annual interest for NT$33,030 thousand (US$1,000
thousand). The unquoted debt instrument was not carried at fair
value because its fair value could not be reliably measured.
In April 2008, the Company made a new investment of US$350
thousand and transferred its bond investment of US$1,000
thousand to convertible preferred stocks issued by Vitamin D Inc.
As a result, the Company acquired 27% equity interest in Vitamin D
Inc. and can exercise significant influence over this investee. The
Company accounts for this investment by the equity method.
14. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD
The investment accounted for by the equity method as of December 31, 2008 and 2009 was as follows:
2008 2009
Carrying Value
Ownership
Percentage Original Cost Carrying Value
Ownership
Percentage
NT$ NT$ US$ (Note 3) NT$ US$ (Note 3)
Equity method
Vitamin D Inc. $ 39,906 26.02 $ 40,986 $ 1,281 $ - $ - 25.59
Prepayment of long-term investment - 245,000 7,659 245,000 7,659
$ 39,906 $ 285,986 $ 8,940 $ 245,000 $ 7,659
In April 2008, the Company made a new investment of US$350
thousand and transferred its bond investment of US$1,000
thousand to convertible preferred stocks issued by Vitamin D Inc.
As a result, the Company acquired 27.27% equity interest in Vitamin
D Inc. for NT$40,986 thousand, enabling the Company to exercise
significant influence over this investee. Thus, the Company
accounts for this investment by the equity method. In September
2008, January 2009 and June 2009, Vitamin D Inc. issued new
convertible preferred shares, but the Company did not buy any of
these shares. The Company’s ownership percentage thus declined
from 27.27% to 25.59%, and there was a capital surplus -
long-term equity investments of NT$1,689 thousand, NT$187
thousand (US$6 thousand)
and NT$484 thousand (US$15 thousand) in September 2008,
January 2009 and June 2009, respectively. In addition, the
Company determined that the recoverable amount of this
investment in 2009 was less than its carrying amount and thus
recognized an impairment loss of NT$30,944 thousand (US$967
thousand).
In December 2009, the Company invested in Huada Digital
Corporation for NT$245,000 thousand (US$7,659 thousand).
Because the registration of the investment was not completed on
December 31, 2009, the investment was temporarily accounted for
as “prepayments for long-term investments.”
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10. INVENTORIES
Inventories as of December 31, 2008 and 2009 were as follows:
2008 2009
NT$ NT$ US$(Note 3)
Finished goods $ 1,666,089 $ 1,518,702 $ 47,474
Work-in-process 2,472,925 1,832,625 57,287
Raw materials 6,019,910 4,805,209 150,210
Inventory in transit - 650,222 20,326
10,158,924 8,806,758 275,297
Less: Valuation
allowance (1,908,587 )( 3,249,045 ) ( 101,564 )
$ 8,250,337 $ 5,557,713 $ 173,733
The write-down of inventories to their net realizable value amounted
to NT$1,258,148 and NT$1,853,579 thousand (US$57,942 thousand)
and was recognized as cost of sales for the years ended December
31, 2008 and 2009, respectively.
11. PREPAYMENTS
Prepayments as of December 31, 2008 and 2009 were as follows:
2008 2009
NT$ NT$ US$(Note 3)
Royalty $ 976,824 $ 3,044,563 $ 95,173
Software and
hardware
maintenance 88,554
85,797 2,682
Marketing 1,234 41,707 1,304
Molding equipment 80,420 37,052 1,158
Export 6,420 21,219 663
Rent 8,885 15,318 479
Net input VAT 35,517 15,301 478
Materials purchases 16,440 13,084 409
Service 27,322 3,294 103
Others 43,867 64,314 2,010
$ 1,285,483 $ 3,341,649 $ 104,459
Prepayments for royalty were primarily for discount purposes and
were classified as current or noncurrent on the basis of their
maturities. As of December 31, 2009, noncurrent prepayments of
NT$1,843,170 thousand (US$57,617 thousand) had been classified as
other assets (Note 30 has more information).
Prepayments for others were primarily travel and insurance expenses.
12. FINANCIAL ASSETS CARRIED AT COST
Financial assets carried at cost as of December 31, 2008 and 2009
were as follows:
2008 2009
NT$ NT$
US$ (Note 3)
Hua-Chuang Automobile
Information Technical
Center Co., Ltd. $ 500,000 $ 500,000 $ 15,630
Melodis
Corporation. -
63,980 2,000
Answer Online, Inc. 1,192 1,192 37
$ 501,192 $ 565,172 $ 17,667
In January 2007, the Company acquired 10% equity interest in
Hua-Chuang Automobile Information Technical Center Co., Ltd. for
NT$500,000 thousand. The Company also signed a joint venture
agreement with Yulon Group, the main stockholder of Hua-Chuang.
Under the agreement, the Company and Yulon Group may, between
January 1, 2010 and December 31, 2011, submit written requests to
each other for Yulon Group to buy back NT$300,000 thousand at
original price, some of Hua-Chuang’s shares bought by the Company.
The buy-back proposed by Yulon Group becomes effective with a
consensus from the Company.
In March 2004, the Company merged with IA Style, Inc. and acquired
1.82% equity interest in Answer Online, Inc for NT$1,192 thousand as
a result of the merger.
In July 2009, the Company acquired 4.37% equity interest in Melodis
Corporation for NT$63,980 thousand (US$2,000 thousand).
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