HTC 2015 Annual Report Download - page 125

Financial information
Financial information
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other comprehensive income from the effective date of
acquisition up to the effective date of disposal, as appropriate.
When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with those used by the Company.
All intra-group transactions, balances, income and expenses
are eliminated in full upon consolidation.
Changes in the Company's ownership interests in subsidiaries
that do not result in the Company losing control over the
subsidiaries are accounted for as equity transactions. The
carrying amounts of the Company's interests and the non-
controlling interests are adjusted to reflect the changes in
their relative interests in the subsidiaries. Any difference
between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or
received is recognized directly in equity and attributed to
owners of the Company.
When the Company loses control of a subsidiary, a gain or
loss is recognized in profit or loss and is calculated as the
difference between (i) the aggregate of the fair value of the
consideration received and any investment retained in the
former subsidiary at its fair value at the date when control is
lost and (ii) the assets (including any goodwill) and liabilities
and any non-controlling interests of the former subsidiary
at their carrying amounts at the date when control is lost.
The Company accounts for all amounts recognized in other
comprehensive income in relation to that subsidiary on the
same basis as would be required if the Company had directly
disposed of the related assets or liabilities.
The fair value of any investment retained in the former
subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting
under IAS 39 “Financial Instruments: Recognition and
Measurement” or, when applicable, the cost on initial
recognition of an investment in an associate or a joint venture.
See Note 15 for the detailed information of subsidiaries
(including the percentage of ownership and main business).
Business Combinations
Acquisitions of businesses are accounted for using the
acquisition method. Acquisition-related costs are generally
recognized in profit or loss as incurred.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree over the net
of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after re-assessment,
the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer's
previously held interest in the acquiree, the excess is
recognized immediately in profit or loss as a bargain purchase
gain.
Non-controlling interests are initially measured either at fair
value or at the non-controlling interests' proportionate share
of the fair value of the acquiree's identifiable net assets.
Foreign Currencies
In preparing the financial statements of each individual group
entity, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognized at the
rates of exchange prevailing at the dates of the transactions.
At the end of each reporting period, monetary items
denominated in foreign currencies are retranslated at
the rates prevailing at that date. Exchange differences on
monetary items arising from settlement or translation are
recognized in profit or loss in the period in which they arise
except for:
a. Exchange differences on transactions entered into in
order to hedge certain foreign currency risks (please refer
to Note 4 Hedge accounting section); and
b. Exchange differences on monetary items receivable from
or payable to a foreign operation for which settlement
is neither planned nor likely to occur in the foreseeable
future (therefore forming part of the net investment in
the foreign operation), which are recognized initially in
other comprehensive income and reclassified from equity
to profit or loss on disposal of the net investments.
Non-monetary items measured at fair value that are
denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined.
Exchange differences arising on the retranslation of non-
monetary items are included in profit or loss for the period
except for exchange differences arising from the retranslation
of non-monetary items in respect of which gains and losses are
recognized directly in other comprehensive income, in which
case, the exchange differences are also recognized directly in
other comprehensive income.
Non-monetary items that are measured at historical cost in a
foreign currency are not retranslated.
For the purposes of presenting consolidated financial
statements, the assets and liabilities of the Company's
foreign operations are translated into New Taiwan dollars
using exchange rates prevailing at the end of each reporting
period. Income and expense items are translated at the
average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the
exchange rates at the dates of the transactions are used.
Exchange differences arising, if any, are recognized in other
comprehensive income and accumulated in equity (attributed
to the owners of the Company and non-controlling interests
as appropriate).
On the disposal of a foreign operation (i.e. a disposal of the
Company's entire interest in a foreign operation, or a disposal
involving loss of control over a subsidiary that includes a
foreign operation, or a partial disposal of an interest in a joint
arrangement or an associate that includes a foreign operation
of which the retained interest becomes a financial asset), all of
the exchange differences accumulated in equity in respect of
that operation attributable to the owners of the Company are
reclassified to profit or loss.
In relation to a partial disposal of a subsidiary that does not
result in the Company losing control over the subsidiary, the
proportionate share of accumulated exchange differences is
re-attributed to non-controlling interests of the subsidiary
and is not recognized in profit or loss. For all other partial
disposals, the proportionate share of the accumulated
exchange differences recognized in other comprehensive
income is reclassified to profit or loss.
Goodwill and fair value adjustments on identifiable assets
and liabilities acquired arising on the acquisition of a foreign
operation are treated as assets and liabilities of the foreign
operation and translated at the rate of exchange prevailing at
the end of each reporting period. Exchange differences arising
are recognized in other comprehensive income.
Inventories
Inventories consist of raw materials, finished goods and work-
in-process and are stated at the lower of cost or net realizable
value. Inventory write-downs are made by item, except where
it may be appropriate to group similar or related items. Net
realizable value is the estimated selling price of inventories
less all estimated costs of completion and costs necessary to
make the sale. Inventories are recorded at weighted-average
cost on the balance sheet date.
Investments in Associates and Joint Ventures
An associate is an entity over which the Company has
significant influence and that is neither a subsidiary nor
an interest in a joint venture. Joint venture is a joint
arrangement whereby the Company and other parties that
have joint control of the arrangement have rights to the net
assets of the arrangement.
The Company uses the equity method to account for its
investments in associates and joint ventures.
Under the equity method, investments in an associate and
a joint venture are initially recognized in the consolidated
balance sheet at cost and adjusted thereafter to recognize the
Company's share of the profit or loss and other comprehensive
income of the associate and joint venture. The Company also
recognizes the changes in the equity of associates and joint
venture attributable to the Company.
When the Company subscribes for additional new shares of
the associate and joint venture at a percentage different from
its existing ownership percentage, the resulting carrying
amount of the investment differs from the amount of the
Company's proportionate interest in the associate and
joint venture. The Company records such a difference as
an adjustment to investments accounted for by the equity
method, with a corresponding amount charged or credited
to capital surplus. If the Company's ownership interest
is reduced due to the additional subscription of the new
shares of associate and joint venture, the proportionate
amount of the gains or losses previously recognized in other
comprehensive income in relation to that associate and joint
venture is reclassified to profit or loss on the same basis as
would be required if the investee had directly disposed of the
related assets or liabilities. When the adjustment should be
debited to capital surplus, but the capital surplus recognized
from investments accounted for by the equity method is
insufficient, the shortage is debited to retained earnings.
When the Company's share of losses of an associate and a
joint venture equals or exceeds its interest in that associate
and joint venture (which includes any carrying amount of
the investment accounted for by the equity method and long-
term interests that, in substance, form part of the Company's
net investment in the associate and joint venture), the
Company discontinues recognizing its share of further losses.
Additional losses and liabilities are recognized only to the
extent that the Company has incurred legal obligations, or
constructive obligations, or made payments on behalf of that
associate and joint venture.
Any excess of the cost of acquisition over the Company's
share of the net fair value of the identifiable assets, liabilities