Consolidated Financial Statements - Acer Group

More documents

Recommendations

Info

52ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)(v) Derivative financial instrumentsThe fair value is determined using a valuation technique, with estimates and assumptionsconsistent with those used by market participants and are readily available to the ConsolidatedCompanies. The fair value of foreign currency forward contracts is computed individuallybased on the maturity date, the spot rate, and the swap points based on quotes provided byBloomberg.The fair value of option contracts is estimated based on market price provided by financialinstitutions. Financial institutions use the evaluation models and assumptions to estimate themarket price of the individual contract.(vi) Long-term debtThe carrying value of long-term debt with floating interest rates approximates the market value.(vii) Bonds payableThe fair value of convertible bonds payable is estimated based on the 2-Factor Quad TreeApproach, which considered the expected volatility and risk-free interest rate.(c) For the years ended December 31, 2011 and 2010, gain (loss) on valuation financial assets andliabilities using a valuation technique amounted to NT$1,659,720 and NT$(1,899,825), respectively.(d) Disclosure of financial risks(i) Market riskPublicly traded stocks held by the Consolidated Companies classified as “available-for-salefinancial assets” are valued at fair value. Therefore, the Consolidated Companies wereexposed to the risk of price fluctuation in the securities market.The Consolidated Companies are engaged in purchase and sale transactions which areprincipally denominated in US dollars and Euros. The Consolidated Companies entered intoforeign currency forward contracts and other derivate instrument contracts to manage themarket exchange rate fluctuations of foreign-currency assets and liabilities. The length andamounts of aforementioned derivative transactions were in line with the settlement date of theConsolidated Companies‟ recorded foreign currency assets and liabilities and future cash flows.Gains or losses from these financial derivatives are expected to substantially offset those fromthe hedged assets or liabilities.(Continued)
53ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)(ii) Credit riskThe Consolidated Companies‟ credit risk is mainly from potential breach of contract by thecounter-party associated with cash, equity investment, and derivative transactions. In order tocontrol its exposure to the credit risk of each financial institution, the Consolidated Companiesmaintain cash with various financial institutions and hold equity investments in the form ofstocks issued by companies with high credit quality. As a result, the concentration of creditrisks related to cash and equity investments is not significant. Furthermore, the banksundertaking the derivative transactions are reputable financial institutions; therefore, theexposure related to the potential default by those counter-parties is not considered significant.The Consolidated Companies primarily sell and market the multi-branded IT products throughdistributors in different geographic areas. Also, management of the Consolidated Companiescontinuously evaluates the credit quality of their customers in order to minimize credit risk. Asa result, management believes that there is no significant concentration of credit risk.(iii) Liquidity riskThe Consolidated Companies‟ capital and operating funds are sufficient to fulfill their contractpayment obligations. Therefore, management believes that there is no significant liquidityrisk.The available-for-sale financial assets held by the Consolidated Companies are equity securitieswhich are publicly traded and can be liquidated quickly at a price close to the fair market value.In contrast, the financial assets carried at cost are not publicly traded and are exposed toliquidity risk.Derivative financial instruments are intended to hedge the exchange rate risk resulting fromassets and liabilities denominated in foreign currency and cash flows resulting from anticipatedtransactions in foreign currency. The length of the contracts is in line with the payment dateof the Consolidated Companies‟ assets and liabilities denominated in foreign currency and theanticipated cash flows. At the maturity date of the derivative contract, the ConsolidatedCompanies will settle these contracts using the foreign currencies arising from the hedgedassets and liabilities denominated in foreign currency, and therefore, the liquidity risk is notsignificant.(iv) Cash flow risk related to the fluctuation of interest ratesThe Consolidated Companies‟ short-term borrowings and long-term debt carried floatinginterest rates. As a result, the effective rate changes along with the fluctuation of the marketinterest rates and thereby influences the Consolidated Companies‟ future cash flow. If themarket interest rate increases by 1%, cash outflows in respect of these interest payments wouldincrease by approximately NT$94,812 per annum.(Continued)
Page 2 and 3:
Independent Auditors’ ReportThe B
Page 4 and 5:
ACER INCORPORATED AND SUBSIDIARIESC
Page 6 and 7:
ACER INCORPORATED AND SUBSIDIARIESC
Page 8 and 9: 2ACER INCORPORATED AND SUBSIDIARIES
Page 16 and 17: 10ACER INCORPORATED AND SUBSIDIARIE
Page 70: 63ACER INCORPORATED AND SUBSIDIARIE
show all

Consolidated Financial Statements - Acer Group

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?