HTC 2013 Annual Report Download - page 101

FINANCIAL INFORMATION FINANCIAL INFORMATION
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Pension cost for an interim period is calculated
on a year-to-date basis by using the actuarially
determined pension cost rate at the end of the
prior financial year, adjusted for significant market
fluctuations since that time and for significant
curtailments, settlements, or other significant one-
time events.'
Share-based Payment Arrangements
Share-based payment transactions of the Company
Equity-settled share-based payments to employees
are measured at the fair value of the equity
instruments at the grant date.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on
a straight-line basis over the vesting period, based
on the Company's estimate of equity instruments
that will eventually vest, with a corresponding
increase in capital surplus - employee share options.
The fair value determined at the grant date of the
equity-settled share-based payments is recognized
as an expense in full at the grant date when the
share options granted vest immediately.
At the end of each reporting period, the Company
revises its estimate of the number of equity
instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognized
in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding
adjustment to the capital surplus - employee share
options.
Taxation
Income tax expense represents the sum of the tax
currently payable and deferred tax.
a. Current tax
According to the Income Tax Law, an additional tax
at 10% of unappropriated earnings is provided for
as income tax in the year the stockholders approve
to retain the earnings.
reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to
allow all or part of the asset to be recovered. A
previously unrecognized deferred tax asset is also
reviewed at the end of each reporting period and
recognized to the to the extent that it has become
probable that future taxable profit will allow the
deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured
at the tax rates that are expected to apply in the
period in which the liability is settled or the asset
realized, based on tax rates (and tax laws) that
have been enacted or substantively enacted by
the end of the reporting period. The measurement
of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner
in which the Company expects, at the end of the
reporting period, to recover or settle the carrying
amount of its assets and liabilities.
c. Current and deferred tax for the year
Current and deferred tax are recognized in profit
or loss, except when they relate to items that
are recognized in other comprehensive income
or directly in equity, in which case, the current
and deferred tax are also recognized in other
comprehensive income or directly in equity
respectively. Where current tax or deferred tax
arises from the initial accounting for a business
combination, the tax effect is included in the
accounting for the business combination.
Accrued Marketing Expenses
The Company accrues marketing expenses on the
basis of agreements and any known factors that
would significantly affect the accruals. In addition,
depending on the nature of relevant events, the
accrued marketing expenses are accounted for as an
increase in marketing expenses or as a decrease in
revenues.
Adjustments of prior years' tax liabilities are
added to or deducted from the current year's tax
provision.
b.Deferred tax
Deferred tax is recognized on temporary
differences between the carrying amounts of
assets and liabilities in the parent company only
financial statements and the corresponding tax
bases used in the computation of taxable profit.
Deferred tax liabilities are generally recognized for
all taxable temporary differences. Deferred tax
assets are generally recognized for all deductible
temporary differences, unused loss carry forward
and unused tax credits for purchases of machinery,
equipment and technology, research and
development expenditures, and personnel training
expenditures to the extent that it is probable that
taxable profits will be available against which
those deductible temporary differences can be
utilized. Such deferred tax assets and liabilities are
not recognized if the temporary difference arises
from goodwill or from the initial recognition (other
than in a business combination) of other assets
and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable
temporary differences associated with investments
in subsidiaries and associates, and interests in joint
ventures, except where the Company is able to
control the reversal of the temporary difference
and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred
tax assets arising from deductible temporary
differences associated with such investments and
interests are only recognized to the extent that
it is probable that there will be sufficient taxable
profits against which to utilize the benefits of the
temporary differences and they are expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
Treasury Stock
When the Company acquires its outstanding shares
that have not been disposed or retired, treasury
stock is stated at cost and shown as a deduction
in stockholders' equity. When treasury shares are
sold, if the selling price is above the book value, the
difference should be credited to the capital surplus
- treasury stock transactions. If the selling price is
below the book value, the difference should first be
offset against capital surplus from the same class
of treasury stock transactions, and the remainder, if
any, debited to retained earnings. The carrying value
of treasury stock is calculated using the weighted-
average approach in accordance with the purpose of
the acquisition.
When the Company's treasury stock is retired, the
treasury stock account should be credited, and
the capital surplus - premium on stock account
and capital stock account should be debited
proportionately according to the share ratio. The
carrying value of treasury stock in excess of the sum
of its par value and premium on stock should first be
offset against capital surplus from the same class of
treasury stock transactions, and the remainder, if any,
debited to retained earnings. The sum of the par
value and premium on treasury stock in excess of its
carrying value should be credited to capital surplus
from the same class of treasury stock transactions.
5. CRITICAL ACCOUNTING
JUDGEMENTS AND KEY
SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Company's accounting
policies, which are described in Note 4, the
management is required to make judgments,
estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and
associated assumptions are based on historical
experience and other factors that are considered
to be relevant. Actual results may differ from these
estimates.