HTC 2012 Annual Report Download - page 111

In April 2011, HTC bought land approximately 49 thousand square meters adjacent to its Taoyuan plant for NT$1,770,000
thousand, the price based on the appraisal report, from an unrelated party, to build a complete technology park and meet
future capacity expansion requirements.
The construction of a new office building and factory was completed in June 2012, and a construction amount of
NT$5,615,958 thousand (US$192,796 thousand) was transferred from prepayments for construction in progress to buildings
and structures.
There were no interests capitalized in 2011 and 2012.
17. INTANGIBLE ASSETS
Movement of intangible assets for 2011 and 2012 were as follows:
2011
Patents Goodwill Deferred
Pension Cost Other Total
NT$ NT$ NT$ NT$ NT$
Cost
Balance, beginning of year $220,943 $569,311 $416 $228,850 $1,019,520
Additions
Acquisition 2,282,409 - 11,951 2,294,360
Difference between the cost of investments and the
Company's share in investees' net assets 9,033,450 10,240,332 603,852 19,877,634
Owned by acquirees 21,527 - 62,929 84,456
Adjustments of acquisition cost - 81,183 - 81,183
The changes in deferred pension cost - - (74) - (74)
Translation adjustment 50,211 15,052 4,380 69,643
Balance, end of year 11,608,540 10,905,878 342 911,962 23,426,722
Accumulated amortization
Balance, beginning of year 12,362 - - - 12,362
Amortization 443,551 - - 330,812 774,363
Owned by acquirees 475 - - 475
Translation adjustment 54 - - (14,634) (14,580)
Balance, end of year 456,442 - - 316,178 772,620
Accumulated impairment losses
Balance, beginning of year - 71,508 - - 71,508
Impairment losses - 18,608 - - 18,608
Translation adjustment - 3,198 - - 3,198
Balance, end of year - 93,314 - - 93,314
Net book value, end of year $11,152,098 $10,812,564 $342 $595784 $22,560,788
In December 2009, HTC acquired 100% equity interest in Huada Digital Corporation ("Huada"), whose main business is
software services, for NT$245,000 thousand and accounted for this investment by the equity method. In September 2011,
HTC increased this investment by NT$5,000 thousand. As of December 31, 2012, HTC's investment in Huada had amounted
to NT$250,000 thousand. In September 2011, the Fair Trade Commission approved an investment by Chunghwa Telecom
Co., Ltd. ("CHT") in Huada and the registration of this investment was completed in October 2011. After CHT's investment,
HTC's ownership percentage declined from 100% to 50%. In March 2012, Huada held a stockholders' meeting and re-elected
its directors and supervisors. As a result, the investment type was changed to joint venture and the Company continued to
account for this investment by the equity method.
In September 2011, through HTC America Holding Inc., HTC acquired 20% equity interest in SYNCTV Corporation for US$2,500
thousand and accounted for this investment by the equity method. In 2012, the Company determined that the recoverable
amount of this investment was less than its carrying amount and thus recognized an impairment loss of NT$56,687 thousand
(US$1,946 thousand).
In October 2011, HTC acquired, through HTC America Holding Inc., 50.14% equity interest in Beats Electronics, LLC.
("Beats") for US$300,000 thousand. In July 2012, HTC sold back 25% of Beats shares to the founding members of Beats
for US$150,000 thousand with a cost amounting to US$157,144 thousand (including initial investment cost of US$150,000
thousand and an accumulated gain of US$7,144 thousand on equity method investment). This transaction resulted in a loss
on disposal of US$7,144 thousand (NT$214,268 thousand).
Three-year non-recourse secured promissory notes (the "Notes"), totaling US$150,000 thousand (NT$4,369,350 thousand),
were issued by the buying party and accounted for under "long-term receivable". These Notes, payable at the maturity in
three years, bear interest based on LIBOR plus 1% and was secured by pledge of interest obtained by the buying party in
this transaction. After the transaction, HTC indirectly remained 25.14% of the shareholdings in Beats and accounted for this
investment by the equity method.
In 2011 and 2012, gain (loss) on equity method investments were as follows:
2011 2012
NT$ NT$ US$ (Note 3)
Huada Digital Corporation $- ($9,380) ($322)
SYNCTV Corporation (3,961) (11,979) (411)
Beats Electronics, LLC 408,837 14,035
($3,961) $387,478 $13,302
The financial statements of equity-method investees had been examined by independent auditors, except SYNCTV Corporation.
16. PROPERTIES
Properties as of December 31, 2011 and 2012 were as follows:
2011 2012
Carrying Value Cost Accumulated
Depreciation Carrying Value
NT$ NT$ NT$ NT$ US$ (Note 3)
Land $7,614,167 $7,615,546 $- $7,615,546 $261,442
Buildings and structures 4,990,887 11,817,745 1,302,517 10,515,228 360,988
Machinery and equipment 5,907,321 13,308,358 6,980,635 6,327,723 217,231
Computer equipment 353,729 943,107 544,607 398,500 13,680
Transportation equipment 3,922 7,038 4,151 2,887 99
Furniture and fixtures 166,877 452,511 262,857 189,654 6,511
Leased assets 919 2,765 733 2,032 70
Leasehold improvements 343,718 545,705 177,994 367,711 12,624
Prepayments for construction-in-progress and equipment in transit 2,130,938 232,011 - 232,011 7,965
$21,512,478 $34,924,786 $9,273,494 $25,651,292 $880,610
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