HTC 2011 Annual Report Download - page 98

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. All regular way purchases or sales of financial
assets are recognized and derecognized on a trade date basis.
The recognition, derecognition and the fair value bases of
available-for-sale financial assets are the same as those for
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.
8. 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 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 collectibility of accounts receivable. The Company
assesses the probability of collections of accounts receivable
by making an aging analysis of the outstanding receivables and
assessing the value of the collateral provided by customers.
As discussed in Note 4 to the financial statements, on January 1, 2011,
the Company adopted the third-time revised Statement of Financial
Accounting Standards (SFAS) No. 34 - "Financial Instruments:
Recognition and Measurement." One of the main revisions is that
the impairment of receivables originated by the Company should
be covered by SFAS No. 34. Accounts receivable are assessed for
impairment at the end of each reporting period and considered to be
impaired when there is objective evidence that, as a result of one or
more events that occurred after the initial recognition of the accounts
receivable, the estimated future cash flows of the asset have been
affected. Objective evidence of impairment could include:
1. Significant financial difficulty of the debtor;
2. Accounts receivable becoming overdue; or
3. It becoming probable that the debtor will enter into
bankruptcy or financial reorganization.
Accounts receivable that are assessed not to be impaired
individually are further assessed for impairment on a collective
basis. Objective evidence of impairment for a portfolio of
accounts receivable could include the Company's past experience
of collecting payments, an increase in the number of delayed
payments, as well as observable changes in national or local
economic conditions that correlate with defaults on receivables.
The amount of the impairment loss recognized is the difference
between the asset carrying amount and the present value of
estimated future cash flows, after taking into account the related
collateral and guarantees, discounted at the receivable's original
effective interest rate.
The carrying amount of the accounts receivable is reduced through
the use of an allowance account. When accounts receivable are
considered uncollectible, they are written off against the allowance
account. Recoveries of amounts previously written off are credited
to the allowance account. Changes in the carrying amount of the
allowance account are recognized as bad debt in profit or loss.
9. Inventories
Inventories consist of raw materials, supplies, finished goods
and work-in-process and 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.
10. Held-to-maturity Financial Assets
Held-to-maturity financial assets are carried at amortized cost
using the effective interest method. Held-to-maturity financial
assets are initially measured at fair value plus transaction costs
that are directly attributable to the acquisition. Profit or loss is
recognized when the financial assets are derecognized, impaired,
or amortized. All regular way purchases or sales of financial
assets are accounted for using a trade date basis.
An impairment loss is recognized when there is objective evidence
that the investment is impaired. The impairment loss is reversed if an
increase in the investment's recoverable amount is due to an event
which occurred after the impairment loss was recognized; however,
the adjusted carrying amount of the investment may not exceed
the carrying amount that would have been determined had no
impairment loss been recognized for the investment in prior years.
Exchange differences arising from the translation of the financial
statements of foreign operations are recognized as a separate
component of stockholders' equity. Such exchange differences
are recognized as gain or loss in the year in which the foreign
operations are disposed of.
Nonderivative foreign-currency transactions are recorded in
New Taiwan dollars at the rates of exchange in effect when
the transactions occur. Exchange differences arising from
the settlement of foreign-currency assets and liabilities are
recognized as gain or loss.
At the balance sheet date, foreign-currency monetary assets and
liabilities are revalued using prevailing exchange rates and the
exchange differences are recognized in profit or loss.
At the balance sheet date, foreign-currency nonmonetary assets
(such as equity instruments) and liabilities that are measured at
fair value are revalued using prevailing exchange rates, with the
exchange differences treated as follows:
a. Recognized in stockholders' equity if the changes in fair value
are recognized in stockholders' equity; and
b. Recognized in profit and loss if the changes in fair value are
recognized in profit or loss.
Foreign-currency nonmonetary assets and liabilities that are
carried at cost continue to be stated at exchange rates at the
trade dates.
If the functional currency of an equity-method investee is a foreign
currency, translation adjustments will result from the translation of
the investee's financial statements into the reporting currency of
the Company. These adjustments are accumulated and reported
as a separate component of stockholders' equity.
4. Accounting Estimates
Under the above 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, income tax, royalty, pension cost, loss on pending
litigations, 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.
5. 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.
6. 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 plus transaction costs that are directly attributable to the
acquisition. 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. All regular way purchases
or sales of financial assets are recognized and derecognized on a
trade date basis.
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.
7. 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
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