Farglory Land Development Co., Ltd. and Subsidiaries Consolidated Financial Statements and Report of Independent Accountants December 31, 2012 and 2011
Total Page:16
File Type:pdf, Size:1020Kb
FARGLORY LAND DEVELOPMENT CO., LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2012 AND 2011 ------------------------------------------------------------------------------------------------------------------------------------ For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail. FAGLORY LAND DEVELOPMENT CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2012 AND 2011 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED) 1. HISTORY AND ORGANIZATION Farglory Land Development Co., Ltd. (the “Company”) was incorporated under the provisions of the Company Law of the Republic of China (“ROC”) in August 1978. The Company was renamed from Metropolitan Construction Co., Ltd. to Farglory Land Development Co., Ltd. in December 2005 after obtaining the approval from the regulatory agency. The Company is primarily engaged in selling and leasing commercial buildings and public housing constructed by commissioned construction contractors. The Company’s shares have been traded on the GreTai Securities Market (formerly-Over-The -Counter Securities Exchange) since December 1999 and were transferred to be traded on the Taiwan Stock Exchange on August 6, 2007. As of December 31, 2012, the Company and its subsidiaries included in the consolidated financial statements had approximately 330 employees. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements of the Company and its subsidiaries (collectively referred herein as the “Group”) are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and accounting principles generally accepted in the Republic of China. The Group’s significant accounting policies are summarized below: (1) Basis for preparation of consolidated financial statements A. All majority-owned subsidiaries and controlled entities are included in the consolidated financial statements. Effective January 1, 2008, the Company prepares consolidated financial statements on a quarterly basis. The income (loss) of the subsidiaries is included in the consolidated statement of income effective on the date the Company gains control over the subsidiaries. The income (loss) of the subsidiaries is excluded from the consolidated statement of income effective on the date the Company loses control over the subsidiaries. Significant inter-company transactions, assets, and liabilities arising from inter-company transactions are eliminated. B. Subsidiaries included in the consolidated financial statements and their changes for the years ended December 31, 2012 and 2011: ~9~ Ownership (%) Investor Subsidiary Main activities December December 31, 2012 31, 2011 Farglory Land Farglory Construction contractor 99.20% 99.20% Development Co., Construction Co., for both domestic and Ltd. Ltd. (Farglory foreign civil works as Construction) well as hydraulic works Farglory Land Farglory Dome Co., Public works and 70.30% 57.57% Development Co., Ltd. (Farglory specific area Ltd. Dome) (Note) development and Farglory construction Construction Co., Ltd. C. Subsidiaries not included in the consolidated financial statements: None. D. Adjustments for subsidiaries with different balance sheet dates and accounting policy: None. E. Special operating risks in foreign subsidiaries: None. F. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent company: None. G. Contents of subsidiaries’ securities issued by the parent company: None. H. Information on new issuance of convertible bonds and common stock by subsidiaries: The shareholders of Farglory Dome resolved to issue common stocks in the amount of $500,000 and $600,000 in April, 2011 and July, 2012, respectively. (2) Classification of current and non-current items A. Assets that meet one of the following criteria are classified as current assets; otherwise, they are classified as non-current assets: (a) Assets arising from operating activities that are expected to be realized or consumed, or are 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 that are to be exchanged or used to pay off liabilities more than twelve months after the balance 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 the normal 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 more than twelve months after the balance sheet date. C. Since the normal operating cycle from constructing to selling the properties is usually more than one year, the assets and liabilities relating to construction or long-term construction contracts are classified as current and non-current items based on the operating cycle. Other assets and liabilities are classified based on the period of one year. ~10~ (3) Foreign currency transactions A. Transactions denominated in foreign currencies are translated into functional currency at the spot exchange rates prevailing at the transaction dates. Exchange gains or losses due to the difference between the exchange rate on the transaction date and the exchange rate on the date of 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 spot exchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized in profit 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. C. For non-monetary assets and liabilities measured at fair value with differences recognized in profit or loss, any exchange component arising from translation at the spot rate prevailing at the balance sheet date shall be recognized in profit or loss. Conversely, for non-monetary assets and liabilities measured at fair value with differences recognized directly in equity, any exchange component arising from translation at the spot rate prevailing at the balance sheet date shall be recognized directly in equity. However, non-monetary items that are measured on a 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 using the exchange rates at the balance sheet date except for equity accounts, which are translated at historical rates. Dividends are translated at the rates prevailing at the date of declaration. Profit and loss accounts are translated at weighted-average rates of the year. The resulting translation adjustments 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 loss A. Financial assets and financial liabilities at fair value through profit or loss are recognized and derecognized 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 gain or loss is recognized in profit or loss. The fair values of listed stocks, OTC stocks, closed-end mutual funds, and depository receipts are determined by the closing prices at the balance sheet date. The fair value of open-end mutual funds is based on the net asset value at the balance sheet date. C. For a derivative that does not meet the criteria for hedge accounting, it is initially recognized at fair value on the date the derivative contract is entered into and is subsequently remeasured at its fair value. If a derivative is a non-option derivative, the fair value initially recognized is zero. D. For call options, put options, conversion price resetting options and non-equity conversion options embedded in bonds payable issued by the Company, please refer to Note 2 (18). (5) Notes, accounts and other receivables A. 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 as other receivables. Notes, accounts and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. B. The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. If such