HTC 2013 Annual Report Download - page 135

FINANCIAL INFORMATION FINANCIAL INFORMATION
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a. Warranty provisions
The Company provides warranty service for
one year to two years. The warranty liability
is estimated on the basis of evaluation of
the products under warranty, past warranty
experience, and pertinent factors.
b. Provisions for contingent loss on purchase orders
The provision for contingent loss on purchase
orders is estimated after taking into account
the effects of changes in the product market,
evaluating the foregoing effects on inventory
management and adjusting the Company's
purchases.
Revenue Recognition
Revenue is measured at the fair value of the
consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates
and other similar allowances. Sales returns are
recognized at the time of sale provided the seller
can reliably estimate future returns and recognizes
a liability for returns based on previous experience
and other relevant factors.
Revenue from the sale of goods is recognized
when the goods are delivered and titles have
passed, at which time all the following conditions
are satisfied:
‧ The Company has transferred to the buyer the
significant risks and rewards of ownership of the
goods;
‧ The Company retains neither continuing
managerial involvement to the degree usually
associated with ownership nor effective control
over the goods sold;
‧ The amount of revenue can be measured
reliably;
‧ It is probable that the economic benefits
associated with the transaction will flow to the
Company; and
‧ The costs incurred or to be incurred in respect
of the transaction can be measured reliably.
The Company does not recognize sales revenue on
materials delivered to subcontractors because
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.
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 consolidated 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
this delivery does not involve a transfer of risks
and rewards of materials ownership.
Specifically, sales of goods are recognized when
goods are delivered and title has been passed.
Retirement Benefit Costs
Payments to defined contribution retirement
benefit plans are recognized as an expense when
employees have rendered service entitling them to
the contributions.
For defined benefit retirement benefit plans, the
cost of providing benefits is determined using
the Projected Unit Credit Method, with actuarial
valuations being carried out at the end of each
reporting period. Actuarial gains and losses on
the defined benefit obligation are recognized
immediately in other comprehensive income. Past
service cost is recognized immediately to the
extent that the benefits are already vested, and
otherwise is amortized on a straight-line basis
over the average period until the benefits become
vested.
The retirement benefit obligation recognized in the
consolidated balance sheet represents the present
value of the defined benefit obligation as adjusted
for unrecognized past service cost, and as reduced
by the fair value of plan assets.
Curtailment or settlement gains or losses on the
defined benefit plan are recognized when the
curtailment or settlement occurs.
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
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
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