HTC 2015 Annual Report Download - page 99

Financial information
Financial information
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• Determine the transaction price;
• Allocate the transaction price to the performance
obligations in the contracts; and
• Recognize revenue when the entity satisfies a per-
formance obligation.
When IFRS 15 is effective, an entity may elect to apply
this Standard either retrospectively to each prior
reporting period presented or retrospectively with the
cumulative effect of initially applying this Standard
recognized at the date of initial application.
Except for the above impact, as of the date the financial
statements were authorized for issue, the Company
is continuously assessing the possible impact that the
application of other standards and interpretations will have on
the Company's financial position and financial performance,
and will disclose the relevant impact when the assessment is
completed.
4. SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
The parent company only financial statements have been
prepared in accordance with the Regulations Governing the
Preparation of Financial Reports by Securities Issuers.
Basis of Preparation
The parent company only financial statements have been
prepared on the historical cost basis except for financial
instruments that are measured at fair values.
The fair value measurements are grouped into Levels 1 to
3 based on the degree to which the fair value measurement
inputs are observable and the significance of the inputs to the
fair value measurement in its entirety, which are described as
follows:
a. Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities;
b. Level 2 inputs are inputs other than quoted prices
included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
c. Level 3 inputs are unobservable inputs for the asset or
liability.
When preparing its parent company only financial statements,
the Company used equity method to account for its
investment in subsidiaries, associates and jointly controlled
entities. In order for the amounts of the net profit for the year,
other comprehensive income for the year and total equity in
the parent company only financial statements to be the same
with the amounts attributable to the owner of the Company
in its consolidated financial statements, adjustments arising
from the differences in accounting treatment between parent
company only basis and consolidated basis were made to
investments accounted for by equity method, share of profit
or loss of subsidiaries, associates and joint ventures, share of
other comprehensive income of subsidiaries, associates and
joint ventures and accumulated earnings, as appropriate, in
the parent company only financial statements.
For readers' convenience, the accompanying parent company
only financial statements have been translated into English
from the original Chinese version prepared and used in the
Republic of China. If inconsistencies arise between the
English version and the Chinese version or if differences arise
in the interpretations between the two versions, the Chinese
version of the parent company only financial statements shall
prevail. However, the accompanying parent company only
financial statements do not include the English translation
of the additional footnote disclosures that are not required
under accounting principles and practices generally applied
in the Republic of China but are required by the Securities and
Futures Bureau for their oversight purposes.
Classification of Current and Non-current Assets
and Liabilities
Current assets include:
a. Assets held primarily for trading purposes;
b. Assets to be realized within twelve months after the
reporting period; and
c. Cash and cash equivalents unless the asset is restricted
from being exchanged or used to settle a liability for at
least twelve months after the reporting period.
Current liabilities are:
a. Liabilities held primarily for the purpose of trading;
b. Liabilities due to be settled within twelve months after
the reporting period, even if an agreement to refinance, or
to reschedule payments, on a long-term basis is completed
after the reporting period and before the financial
statements are authorized for issue; and
c. Liabilities for which the Company does not have an
unconditional right to defer settlement for at least twelve
months after the reporting period. Terms of a liability
that could, at the option of the counterparty, result in its
settlement by the issue of equity instruments do not affect
its classification.
Recognition and Measurement” are subsequently
measured at amortized cost or fair value. Under IFRS
9, the requirement for the classification of financial
assets is stated below.
For the Company's debt instruments that have
contractual cash flows that are solely payments
of principal and interest on the principal amount
outstanding, their classification and measurement are
as follows:
a. For debt instruments, if they are held within a
business model whose objective is to collect the
contractual cash flows, the financial assets are
measured at amortized cost and are assessed
for impairment continuously with impairment
loss recognized in profit or loss, if any. Interest
revenue is recognized in profit or loss by using the
effective interest method;
b. For debt instruments, if they are held within a
business model whose objective is achieved by
both the collecting of contractual cash flows
and the selling of financial assets, the financial
assets are measured at fair value through other
comprehensive income (FVTOCI) and are
assessed for impairment. Interest revenue is
recognized in profit or loss by using the effective
interest method, and other gain or loss shall be
recognized in other comprehensive income,
except for impairment gains or losses and foreign
exchange gains and losses. When the debt
instruments are derecognized or reclassified, the
cumulative gain or loss previously recognized in
other comprehensive income is reclassified from
equity to profit or loss.
Except for above, all other financial assets are
measured at fair value through profit or loss.
However, the Company may make an irrevocable
election to present subsequent changes in the fair
value of an equity investment (that is not held for
trading) in other comprehensive income, with only
dividend income generally recognized in profit or loss.
No subsequent impairment assessment is required,
and the cumulative gain or loss previously recognized
in other comprehensive income cannot be reclassified
from equity to profit or loss.
The impairment of financial assets
IFRS 9 requires that impairment loss on financial
assets is recognized by using the “Expected Credit
Losses Model”. The credit loss allowance is required
for financial assets measured at amortized cost,
financial assets mandatorily measured at FVTOCI,
lease receivables, contract assets arising from IFRS 15
“Revenue from Contracts with Customers”, certain
written loan commitments and financial guarantee
contracts. A loss allowance for the 12-month
expected credit losses is required for a financial asset
if its credit risk has not increased significantly since
initial recognition. A loss allowance for full lifetime
expected credit losses is required for a financial asset
if its credit risk has increased significantly since initial
recognition and is not low. However, a loss allowance
for full lifetime expected credit losses is required for
trade receivables that do not constitute a financing
transaction.
For purchased or originated credit-impaired financial
assets, the Company takes into account the expected
credit losses on initial recognition in calculating the
credit-adjusted effective interest rate. Subsequently,
any changes in expected losses are recognized as
a loss allowance with a corresponding gain or loss
recognized in profit or loss.
Hedge accounting
The main changes in hedge accounting amended the
application requirements for hedge accounting to
better reflect the entity's risk management activities.
Compared with IAS 39, the main changes include: (1)
enhancing types of transactions eligible for hedge
accounting, specifically broadening the risk eligible
for hedge accounting of non-financial items; (2)
changing the way hedging derivative instruments are
accounted for to reduce profit or loss volatility; and (3)
replacing retrospective effectiveness assessment with
the principle of economic relationship between the
hedging instrument and the hedged item.
2. IFRS 15 “Revenue from Contracts with
Customers”
IFRS 15 establishes principles for recognizing revenue
that apply to all contracts with customers, and will
supersedes IAS 18 “Revenue”, IAS 11 “Construction
Contracts” and a number of revenue-related
interpretations from January 1, 2018.
When applying IFRS 15, an entity shall recognize
revenue by applying the following steps:
• Identify the contract with the customer;
• Identify the performance obligations in the
contract;