HTC 2013 Annual Report Download - page 136

FINANCIAL INFORMATION FINANCIAL INFORMATION
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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.
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
a. Accrued marketing and advertising expenses
The Company recognizes sale of goods as the
conditions are met. For information on the
principles of revenue recognition, please refer
to Note 4 "revenue recognition" section. The
related marketing and advertising expenses
recognized as reduction of sales amount or
as current expenses are estimated on the
basis of agreement, past experience and any
known factors. The Company reviews the
reasonableness of the estimation periodically.
As of December 31, 2013, December 31, 2012
and January 1, 2012, the carrying amounts of
accrued marketing and advertising expenses
were NT$22,592,673 thousand, NT$20,872,536
thousand and NT$29,104,665 thousand,
respectively.
b. Allowances for doubtful debts
Receivables are assessed for impairment at the
end of each reporting period and considered
impaired when there is objective evidence that,
as a result of one or more events that occurred
after the initial recognition of the receivables,
the estimated future cash flows of the asset
have been affected.
As of December 31, 2013, December 31, 2012
and January 1, 2012, the carrying amounts
of allowances for doubtful debts were
NT$3,050,907 thousand, NT$2,086,085
thousand and NT$1,555,008 thousand,
respectively.
c. Impairment of tangible and intangible assets
other than goodwill
The Company measures the useful life of
individual assets and the probable future
economic benefits in a specific asset group,
which depends on subjective judgment,
asset characteristics and industry, during the
impairment testing process. Any change
in accounting estimates due to economic
circumstances and business strategies might
cause material impairment in the future.
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.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to
accounting estimates are recognized in the period
in which the estimate is revised if the revision
affects only that period, or in the period of the
revision and future periods if the revision affects
both current and future periods.
The following are the key assumptions concerning
the future, and other key sources of estimation
uncertainty at the end of the reporting period,
that have a significant risk of causing a material
adjustment to the carrying amounts of assets and
liabilities within the next financial year.
The Company recognized impairment loss
on tangible and intangible assets other than
goodwill for NT$273,046 thousand and
NT$1,255,732 thousand for the years ended
December 31, 2013 and 2012, respectively.
d. Impairment of goodwill
Test of impairment on goodwill depends on
the subjective judgment of management.
The management uses subjective judgment
to identify cash-generating units, allocates
assets and liabilities to cash-generating units,
allocates goodwill to cash-generating units,
and determines recoverable amount of a cash-
generating unit.
As of December 31, 2013, December 31, 2012
and January 1, 2012, the carrying amounts
of goodwill were NT$174,253 thousand,
NT$1,534,366 thousand and NT$10,812,564
thousand, after deduction of accumulated
impairment losses of NT$700,531 thousand,
NT$147,195 thousand and NT$93,314 thousand,
respectively. The Company recognized an
impairment loss on goodwill for NT$591,306
thousand and NT$57,621 thousand for the
years ended December 31, 2013 and 2012,
respectively.
e. Valuation of inventories
Inventories are measured at the lower of cost or
net realizable value. Judgment and estimation
are applied in the determination of net
realizable value at the end of reporting period.
Inventories are usually written down to net
realizable value item by item if those inventories
are damaged, have become wholly or partially
obsolete, or if their selling prices have declined.
As of December 31, 2013, December 31, 2012
and January 1, 2012, the carrying amounts of
inventories were NT$23,599,558 thousand,
NT$23,809,377 thousand and NT$28,430,590
thousand, respectively.