HTC 2015 Annual Report Download - page 129

Financial information
Financial information
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The Company does not recognize sales revenue on materials
delivered to subcontractors because 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.
Employee Benefits
Short-term employee benefits
Liabilities recognized in respect of short-term employee
benefits are measured at the undiscounted amount of the
benefits expected to be paid in exchange for the related
service.
Retirement benefits
Payments to defined contribution retirement benefit plans
are recognized as an expense when employees have rendered
service entitling them to the contributions.
Defined benefit costs (including service cost, net interest and
remeasurement) under the defined benefit retirement benefit
plans are determined using the projected unit credit method.
Service cost (including current service cost and net interest
on the net defined benefit liability (asset) are recognized
as employee benefits expense in the period they occur.
Remeasurement, comprising actuarial gains and losses and
the return on plan assets (excluding interest), is recognized
in other comprehensive income in the period in which they
occur. Remeasurement recognized in other comprehensive
income is reflected immediately in retained earnings and will
not be reclassified to profit or loss.
Net defined benefit liability (asset) represents the actual
deficit (surplus) in the Company's defined benefit plan. Any
surplus resulting from this calculation is limited to the present
value of any refunds from the plans or reductions in future
contributions to the plans.
Termination benefits
A liability for a termination benefit is recognized at the earlier
of when the Company can no longer withdraw the offer of the
termination benefit and when the Company recognizes any
related restructuring costs.
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.
Restricted shares for employees are recognized as an unearned
employ's bonus on the date of grant, with a corresponding
increase in capital surplus - restricted shares for employees.
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
and capital surplus - restricted shares for employees.
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 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 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 Share
When the Company acquires its outstanding shares that
have not been disposed or retired, treasury share 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 share 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 share transactions,
and the remainder, if any, debited to retained earnings.
The carrying value of treasury share is calculated using the
weighted-average approach in accordance with the purpose of
the acquisition.
When the Company's treasury share is retired, the treasury
share 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 share 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 share
transactions, and the remainder, if any, debited to retained
earnings. The sum of the par value and premium on treasury
share in excess of its carrying value should be credited
to capital surplus from the same class of treasury share
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 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