HTC 2012 Annual Report Download - page 118

27. RELATED-PARTY TRANSACTIONS
(1) The related parties were as follows:
Related Party Relationship with the Company
Xander International Corp. Chairperson is an immediate relative of HTC's chairperson
VIA Technologies, Inc. Same chairperson as HTC's
Chander Electronics Corp. Same chairperson as HTC's
Way-Lien Technology Co., Ltd. Significant stockholder of HTC
Captec Partners Management Corp. Main director is the chairperson of HTC
WTI Investment International, Ltd. Its significant stockholder in substance is HTC's chairperson
VIABASE CO., LTD. Chairperson of its parent company is the same as HTC's
Faith Hope & Love Limited Its significant stockholder in substance is HTC's chairperson
Wozai Information Technology (Beijing), LLC Its significant stockholder in substance is HTC's chairperson
Openmoko, Inc. Its significant stockholder in substance is HTC's chairperson
VIA Telecom Company Limited Its significant stockholder in substance is HTC's chairperson
Beats Electronics, LLC HTC has lost control of the subsidiary since August 2012, due to partial disposal of its
shares, and accounted for the investment by equity method.
Employees’ Welfare Committee Employees' Welfare Committee of HTC
HTC Cultural and Educational Foundation A non-profit organization with over one third of its total funds donated by the Company
HTC Social Welfare and Charity Foundation A nonprofit organization with over one third of its total funds donated by the Company
(2) Major transactions with related parties are summarized below:
Purchases of Inventories and Services
2011 2012
Amount % to Total Net
Purchases Amount % to Total Net
Purchases
Related Party NT$ NT$ US$ (Note 3)
VIA Telecom Company Limited $- - $63,675 $2,186 -
Chander Electronics Corp. 172,540 - - - -
$172,540 - $63,675 $2,186 -
Terms of payment and purchase prices for both related and third parties were similar.
Sales and Services Provided
2011 2012
Amount % to Total
Revenues Amount % to Total
Revenues
Related Party NT$ NT$ US$ (Note 3)
Faith Hope & Love Limited $- - $2,236,688 $76,786 1
Employees' Welfare Committee 52,540 - 220,037 7,554 -
Others 2,721 - 6,283 215 -
$55,261 - $2,463,008 $84,555 1
The selling prices for products sold to related parties were similar to those sold to third parties, except for HTC
Employees' Welfare Committee. The selling prices for products sold to Faith Hope & Love Limited have no comparison
with those sold to third parties. The collection terms for products sold to related parties were similar to those for sales
to third parties, except Faith Hope & Love Limited.
The fair values of financial instruments at fair value through profit or loss or available for sale, hedging derivative
financial instruments and held-to-maturity financial assets are based on quoted market prices in an active market, and
their fair values can be reliably measured. If the securities do not have market prices, fair value is measured on the basis
of other financial information. The Company uses estimates and assumptions that are consistent with information that
market participants would use in setting a price for these securities with no quoted market prices.
Financial assets carried at cost are investments in unquoted shares, which have no quoted prices in an active market
and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.
(3) Fair Values of Financial Instruments Based on Quoted Market Prices or Estimates Made through Valuation
Methods
Fair Values Based on
Quoted Market Prices
Fair Values Based on
Estimates Made through Valuation Methods
December 31 December 31
2011 2012 2011 2012
NT$ NT$ US$ (Note 3) NT$ NT$ US$ (Note 3)
Assets
Financial assets at fair value through profit or loss
- current $- $- $- $256,868 $6,950 $238
Available-for-sale financial assets - current 736,031 37,902 1,301 - - -
Held-to-maturity financial assets - current - 101,436 3,482 - - -
Available-for-sale financial assets - non-current 279 197 7 - - -
Held-to-maturity financial assets - non-current 203,783 - - - - -
Financial assets carried at cost - non-current - - - 3,408,654 4,304,907 147,788
The Company recognized unrealized gains of NT$3,824 thousand and NT$6,777 thousand (US$232 thousand) in
stockholders' equity for the changes in fair value of available-for-sale financial assets in 2011 and 2012, respectively.
As of December 31, 2011 and 2012, financial assets exposed to fair value interest rate risk amounted to NT$204,597
thousand and NT$101,459 thousand (US$3,483 thousand), respectively, and financial assets exposed to cash flow
interest rate risk amounted to NT$59,356,763 thousand and NT$21,275,356 thousand (US$730,384 thousand),
respectively.
(4) Financial Risks
a. Market risk
The Company uses forward exchange contracts for hedging purposes, i.e., to reduce any adverse effect of exchange
rate fluctuations of accounts receivable/payable. The gains on these contracts compensate for the losses on the
hedged items and vice versa. Thus, market risk is not material.
b. Credit risk
Credit risk represents the potential loss that would be incurred by the Company if the counter-parties breach contracts.
Some factors affecting credit risk are credit risk concentration, components of financial assets and the amounts of
contracts. The counter-parties to the foregoing financial instruments are reputable financial institutions and business
organizations. Thus, credit risk is not expected to be material.
c. Liquidity risk
The Company's operating funds are deemed sufficient to meet the cash flow demand; thus, liquidity risk is not
considered significant.
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