HTC 2014 Annual Report Download - page 140

• Financial information Financial information •
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30. RELATED-PARTY TRANSACTIONS
Balance transactions, revenue and expenses between HTC
and its subsidiaries, which are related parties of HTC, have
been eliminated on consolidation and are not disclosed
in this note. Except disclosed in other notes, details of
transactions between the Company and other related parties
are disclosed below.
Operating Sales
For the Year Ended
December 31
2014 2013
Main management $ 2,430 $ 2,002
Other related parties - Employees’
Welfare Committee 22,404 23,454
Other related parties - other related
parties’ chairperson or its significant
stockholder, is HTC’s chairperson 10,463 12,439
$ 35,297 $ 37,895
The following balances of trade receivables from related
parties were outstanding at the end of the reporting period:
December 31
2014 2013
Other related parties - other related
parties’ chairperson or its significant
stockholder, is HTC’s chairperson $ 925 $ 1,309
The selling prices for products sold to related parties
were lower than those sold to third parties, except some
related parties have no comparison with those sold to third
parties. No guarantees had been given or received for trade
receivables from related parties. No bad debt expense had
been recognized for the years ended December 31, 2014 and
2013 for the amounts owed by related parties.
Purchase
For the Year Ended
December 31
2014 2013
Other related parties - other related
parties’ chairperson or its significant
stockholder, is HTC’s chairperson $ 4,454 $ 62,030
The following balances of trade payables from related parties
were outstanding at the end of the reporting period:
Other Related-party Transactions
a. To enhance product diversity, the Company entered
into a trademark and technology license agreement
with associate. The royalty expense was NT$219,026
thousand for the year ended December 31, 2013.
b. Other related parties provide business consulting
service to the Company. The business consulting service
fees were NT$1,400 thousand and NT$2,748 thousand
for the years ended December 31, 2014 and 2013,
respectively.
c. The Company leased staff dormitory owned by a related
party under an operating lease agreement. The term of
the lease agreement is from April 2012 to March 2015
and the rental payment is determined at the prevailing
rates in the surrounding area. The Company recognized
and paid rental expenses amounting to NT$5,209
thousand for the years ended December 31, 2014 and
2013, each.
d. Other related parties provided marketing and
advertising services to the Company. The marketing
expense was NT$16,150 thousand for the year ended
December 31, 2014. As of December 31, 2014, the
amount of unpaid marketing expense was NT$158
thousand.
e. In October, 2013, the Company sold back all of shares
in Beats Electronics, LLC to Beats Electronics, LLC
for US$265,000 thousand. This transaction resulted
in the recognition of a gain on disposal amounting to
NT$2,637,673 thousand. For the related information,
please refer to Note 14.
31. PLEDGED ASSETS
To protect the rights and interests of its employees, In
September 2012, the Company deposited unpaid employee
bonus in a new trust account. The Company had paid the
employee bonus and closed the trust account in August 2014.
The trust account, which is under other current financial
assets, had amounted to NT$2,359,041 thousand as of
December 31, 2013.
As of December 31, 2014 and 2013 the Company had provided
time deposits of NT$664 thousand and NT$1,090 thousand
had been classified as other current financial assets,
respectively, as collateral for rental deposits.
December 31
2014 2013
Other related parties - other related
parties’ chairperson or its significant
stockholder, is HTC’s chairperson $ - $ 8,303
Purchase prices for related parties and third parties were
similar. The outstanding of trade payables to related parties
are unsecured and will be settled in cash.
Loans to Related Parties
On July 19, 2012, the Company’s board of directors passed
a resolution to offer US$225,000 thousand short-term loan
to Beats Electronics, LLC to support the transition of Beats
Electronics, LLC into a product company. This loan was
secured by all the assets of Beats Electronics, LLC. Term
loan must be repaid in full no later than one year from
signing date of loan agreement and the repayment can be
made in full at any time during the term of the loan or at
the repayment date. The calculation of interest is based on
LIBOR plus 1.5%, 3.5%, 5.5% and 7.5% for the first quarter to
the fourth quarter, respectively. The principal and interest
were received in full in June 2013. The interest income
amounted to NT$211,139 thousand for the year ended
December 31, 2013.
Compensation of Key Management Personnel
For the Year Ended
December 31
2014 2013
Short-term benefits
Post-employment benefits
Termination benefits
Share-based payments
$ 528,353
2,381
-
60,921
$ 577,638
2,979
165
5,634
$ 591,655 $ 586,416
The remuneration of directors and key executives was
determined by the remuneration committee having regard
to the performance of individuals and market trends.
Property, Plant and Equipment Acquired
For the Year Ended
December 31
2014 2013
Other related parties - other related
parties’ chairperson or its significant
stockholder, is HTC’s chairperson $ - $ 3,238
32. COMMITMENTS, CONTINGENCIES
AND SIGNIFICANT CONTRACTS
Lawsuit
a. In April 2008, IPCom GMBH & CO., KG (“IPCom”)
filed a multi-claim lawsuit against the Company with
the District Court of Mannheim, Germany, alleging that
the Company infringed IPCom’s patents. In November
2008, the Company filed declaratory judgment action
for non-infringement and invalidity against three of
IPCom’s patents with the Washington Court, District of
Columbia.
In October 2010, IPCom filed a new complaint against
the Company alleging patent infringement of patent
owned by IPCom in District Court of Dusseldorf,
Germany.
In June 2011, IPCom filed a new complaint against
the Company alleging patent infringement of patent
owned by IPCom with the High Court in London, the
United Kingdom. In September 2011, the Company filed
declaratory judgment action for non-infringement and
invalidity in Milan, Italy. Legal proceedings in above-
mentioned courts in Germany and the United Kingdom
are still ongoing. The Company evaluated the lawsuits
and considered the risk of patents-in-suits are low. Also,
preliminary injunction and summary judgment against
the Company are very unlikely.
In March 2012, Washington Court granted on the
Company’s summary judgment motion and ruled on
non-infringement of two of patents-in-suit. As for the
third patents-in-suit, the Washington Court has granted
a stay on case pending appeal decision. In January 2014,
the Court of Appeal for the Federal Circuit affirmed the
Washington Court’s decision.
As of the date that the board of directors approved and
authorized for issuing consolidated financial statements,
there had been no critical hearing nor had a court
decision been made, except for the above.
b. On the basis of its past experience and consultations
with its legal counsel, the Company has measured
the possible effects of the contingent lawsuits on its
business and financial condition.