FARGLORY LAND DEVELOPMENT CO., LTD. AND SUBSIDIARIES

Transcription

FARGLORY LAND DEVELOPMENT CO.,LTD. AND SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS ANDREPORT OF INDEPENDENT ACCOUNTANTSDECEMBER 31, 2011 AND -----------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanyingfinancial statements have been translated into English from the original Chinese version prepared and used inthe Republic of China. In the event of any discrepancy between the English version and the originalChinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’report and financial statements shall prevail.

Note : Farglory Dome issued common stock in February and June, 2011, and the Companyand the subsidiary - Farglory Construction obtained partial of additional shares. As aresult, the Company held directly and indirectly more than 50% of the voting shares ofFarglory Dome. Therefore, the Company has included Farglory Dome as aconsolidated entity starting from 2011.C.D.E.F.G.H.Subsidiaries not included in the consolidated financial statements: None.Adjustments for subsidiaries with different balance sheet dates and accounting policy: None.Special operating risks in foreign subsidiaries: None.Nature and extent of the restrictions on fund remittance from subsidiaries to the parentcompany: None.Contents of subsidiaries’ securities issued by the parent company: None.Information on new issuance of convertible bonds and common stock by subsidiaries: InAugust, 2010, the shareholders of Farglory Construction resolved to issue common stocks inthe amount of 610,000. The shareholders of Farglory Dome resolved to issue commonstocks in the amount of 200,000 and 500,000 in November, 2010 and April, 2011,respectively.(2) Classification of current and non-current itemsA. Assets that meet one of the following criteria are classified as current assets; otherwise, theyare classified as non-current assets:(a) Assets arising from operating activities that are expected to be realized or consumed, orare intended to be sold within the normal operating cycle;(b) Assets held mainly for trading purposes;(c) Assets that are expected to be realized within twelve months from the balance sheet date;(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those thatare to be exchanged or used to pay off liabilities more than twelve months after thebalance sheet date.B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise,they are classified as non-current liabilities:(a) Liabilities arising from operating activities that are expected to be paid off within thenormal operating cycle;(b) Liabilities arising mainly from trading activities;(c) Liabilities that are to be paid off within twelve months from the balance sheet date;(d) Liabilities for which the repayment date cannot be extended unconditionally to morethan twelve months after the balance sheet date.C. Since the normal operating cycle from constructing to selling the properties is usually morethan one year, the assets and liabilities relating to construction or long-term constructioncontracts are classified as current and non-current items based on the operating cycle. Otherassets and liabilities are classified based on the period of one year.(3) Foreign currency transactionsA. Transactions denominated in foreign currencies are translated into functional currency at thespot exchange rates prevailing at the transaction dates. Exchange gains or losses due to thedifference between the exchange rate on the transaction date and the exchange rate on the dateof actual receipt and payment are recognized in current year’s profit or loss.B. Monetary assets and liabilities denominated in foreign currencies are translated at the spotexchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized inprofit or loss. However, exchange gains or losses on overseas inter-company accounts that are,in nature, deemed long-term is accounted for as a reduction in stockholders’ equity. 10

C.For non-monetary assets and liabilities measured at fair value with differences recognized inprofit or loss, any exchange component arising from translation at the spot rate prevailing atthe balance sheet date shall be recognized in profit or loss. Conversely, for non-monetaryassets and liabilities measured at fair value with differences recognized directly in equity, anyexchange component arising from translation at the spot rate prevailing at the balance sheetdate shall be recognized directly in equity. However, non-monetary items that are measured ona historical cost basis are translated using the exchange rate at the date of the transaction.D. The financial statements of foreign subsidiaries are translated into New Taiwan dollars usingthe exchange rates at the balance sheet date except for equity accounts, which are translated athistorical rates. Dividends are translated at the rates prevailing at the date of declaration. Profitand loss accounts are translated at weighted-average rates of the year. The resulting translationadjustments are recorded as “cumulative translation adjustments” under stockholders’ equity,and recorded as a component of statement of income when sold or liquidated.(4) Financial assets and financial liabilities at fair value through profit or lossA. Financial assets and financial liabilities at fair value through profit or loss are recognized andderecognized using trade date accounting and are recognized initially at fair value.B. These financial instruments are subsequently remeasured and stated at fair value, and the gainor loss is recognized in profit or loss. The fair values of listed stocks, OTC stocks, closed-endmutual funds, and depository receipts are determined by the closing prices at the balance sheetdate. The fair value of open-end mutual funds is based on the net asset value at the balancesheet date.C. For a derivative that does not meet the criteria for hedge accounting, it is initially recognized atfair value on the date the derivative contract is entered into and is subsequently remeasured atits fair value. If a derivative is a non-option derivative, the fair value initially recognized iszero.D. For call options, put options, conversion price resetting options and non-equity conversionoptions embedded in bonds payable issued by the Company, please refer to Note 2 (18).(5) Notes, accounts and other receivablesA. Notes and accounts receivable are claims resulting from the sale of goods or services.Receivables arising from transactions other than the sale of goods or services are classified asother receivables. Notes, accounts and other receivables are recognized initially at fair valueand subsequently measured at amortized cost using the effective interest method, lessprovision for impairment.B. The Group assesses at each balance sheet date whether there is any objective evidence that afinancial asset or a group of financial assets is impaired. If such evidence exists, a provisionfor impairment of financial asset is recognized. The amount of impairment loss is determinedbased on the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows, discounted at the original effective interest rate. When the fair value of theasset subsequently increases and the increase can be objectively related to an event occurringafter the impairment loss was recognized in profit or loss, the impairment loss shall bereversed to the extent of the loss previously recognized in profit or loss. Such recovery ofimpairment loss shall not result to the asset’s carrying amount greater than its amortized costwhere no impairment loss was recognized. Subsequent recoveries of amounts previouslywritten off are recognized in profit or loss.(6) InventoriesThe inventories include “land held for construction”, “construction in progress”, and “buildings andland held for sale.” Gains or losses arising from construction contracts are recognized using thepercentage of completion method. Inventories are stated at cost and evaluated at the lower of cost ornet realizable value at the end of period. The individual item approach is used in the comparison of 11

cost and net realizable value. The calculation of net realizable value is based on the estimatedselling price in the normal course of business, net of estimated costs of completion and estimatedselling expenses. The interest costs related to construction in progress are capitalized in accordancewith the generally accepted accounting principles.(7) Long-term construction contractsA. For the construction contracts that the Company enters into, the percentage of completionmethod is used when the construction lasts for more than one year and the profit or loss can bereliably estimated. Under the percentage of completion method, the percentage of completionis measured at the proportion that the costs incurred for work performed to date compared tothe total estimated construction cost. For other construction contracts, the completed-contractmethod is used. When it is probable that the estimated contract costs will exceed the totalcontract price, under both methods, the expected loss is recognized immediately.B. When the construction in progress exceeds the progress billings received under the samecontract, the progress billings received is presented as a deduction from the construction inprogress in arriving at the amount classified as current asset. When the progress billingsreceived exceeds the construction in progress, the construction in progress is presented as adeduction from progress billings received under the same contract in arriving at the amountclassified as current liability.(8) Joint controlling interestThe subsidiary and other enterprises jointly undertake the construction of Taipei Cultural GymArea – Big-sized Indoor Gym and set up a joint project office to establish and keep the accountingrecords and books with respect to the project transactions. The Company recognizes assets,liabilities, revenues and costs related to the project in proportion to its joint undertaking percentageat the end of each month.(9) Deferred selling expenseThe selling expenses related to the pre-sale of land and buildings are deferred until the gains andlosses from the sale are recognized.(10) Financial assets carried at costA. The financial assets are recognized or derecognized using the trade date accounting and arerecognized initially at fair value plus transaction costs that are directly attributable to theacquisition of the financial assets.B. If there is any objective evidence that the financial assets are impaired, the impairment loss isrecognized in profit or loss. Such impairment loss shall not be reversed.(11) Long-term equity investments accounted for under the equity methodA. Long-term equity investments in which the Company holds more than 20% of the investeecompany’s voting shares or has the ability to exercise significant influence on the investeecompany are accounted for under the equity method. Effective January 1, 2006, the excess ofthe acquisition cost over the investee company's fair values of identifiable net assets is treatedas goodwill. Goodwill is subject to impairment assessment annually. Retrospectiveadjustment for prior years is not required.Long-term equity investments in which the Company holds more than 50% of the investeecompany’s voting shares or has the ability to control the investee’s operational decisions areaccounted for under the equity method and included in the quarterly consolidated financialstatements.B. Upon the disposal of a long-term investment, the difference between the carrying amount andsales price is recorded as gain or loss from disposal of long-term investments. The capitalreserve arising from long-term equity investment is transferred to gain or loss according tothe disposal proportion. 12

C.Exchange differences arising from translation of the financial statements of overseas investeecompanies accounted for under the equity method are recorded as “cumulative translationadjustments” under stockholders’ equity. Please refer to Note 2 (3).(12) Property, plant, and equipmentA. The property, plant, and equipment are stated at cost. Interest incurred on the loans used tobring the assets to the condition and location necessary for their intended uses are capitalized.B. Depreciation is provided under the straight-line method based on the assets’ estimatedeconomic useful lives. The estimated economic useful lives of property held for lease building are 50 60 years while that of the other property, plant, and equipment are 3 8 years.C. Major improvements and renewals are capitalized and depreciated accordingly. Maintenanceand repairs are expensed as incurred. The gains and losses from the sale or disposal of assetsare recognized in profit or loss.(13) Land-use right (shown as “other intangible assets”)The land-use right is the royalty paid to use the land for the construction of properties for leases orsale and is amortized over the effective period. During the construction period, the royalty isamortized to the construction cost. After the completion of the construction, the royalty isamortized to the rental cost based on the proportion of rented out properties. For the portion thathas not yet been rented, the related royalty is amortized to operating expense. When a property issold, the royalty is transferred to the operating cost based on the percentage of the property’sconstruction cost over total construction cost.(14) Idle assetsProperty, plant, and equipment not used in operations are reclassified to “other assets” at the lowerof the net realizable value or carrying amount. Depreciation provided on these assets is charged tonon-operating expense.(15) Deferred expenses

30.06.2012 · (11) Long-term equity investments accounted for under the equity method A. Long-term equity investments in which the Company holds more than 20% of the investee company’s voting shares or has the ability to exercise significant influence on the investee company are accounted for under the equity method. Effective January 1, 2006, the excess of