HTC Corporation Electronics Company

Introduction 

HTC Corporation is a consumer Electronics Company located in Taiwan. The Company was founded in 1997 and began as an original design manufacturer and original equipment manufacturer, designing and manufacturing laptop computers. Its journey of mobile phones manufactures started with a Windows-based phone until it became a co-founding member of Open handset manufacturers and mobile network operators dedicated to the development of Android mobile system.

Moreover, it HTC is a technology company that designs, manufactures, assembles, processes, and sells smart mobile devices in Taiwan and internationally. The company also offers PDA phones, smartphones and handheld phones among other internet services. Apart from its products HTC Corporation provides marketing, repair and sales services: smart mobile services: online media services: smart mobile devices examination and techniques consultation services, together with human resources management services. HTC is also involved in research, design, and development of software application and graphics technology, which accounts for a quarter of its employees.

Currently, HTC products mainly include smartphones and tablets, despite the competition from Samsung and Apple Inc which have diluted its share in the market, reaching only 7.2% by April 2014.Hence started to diversify its business beyond smartphones, partnering with Valve to produce virtual reality platform known as HTC Vive. After the collaboration which resulted to the production of a pixel smartphone, HTC sold about half of its design, research talent and exclusive right to smartphone related IP, to Google in 2017 for the US $ 1.1 billion.

HTC has stood out in the market due to its resilience in innovation and pursuit of brilliance in design and game-changing mobile experiences for consumers. The company is visionary and willing to take risks to venture into new markets and come up with new products that are not unique to the consumer but also meet their taste.

Accounting Methods and Principals 

Accrual basis accounting - In most instances, GAAP requires that use of accrual basis accounting rather than cash basis accounting. Accrual basis accounting adheres to the revenue recognition, matching and cost principles and includes the financial aspects of each business in the accounting period in it occurs, assuming when the cash changes hands. Under cash basis accounting, revenues usually accounted for only when the company receives money and expenses recognized when the company pays with the money or its equivalent.

Revenue recognition principle - According to the accounting policy, revenue from the sales is recognized when the principal risks and change of ownership to the buyers. The conditions of risks and property transferred to a part of the customers, which accounts for 72.21% of the Company's parent-only operating revenues are more complicated than those applied to sale transactions. Since, the recognition of revenue has a significant influence on the parent company only financial statements for the year ended December 31, 2016; the revenue recognition was deemed to be a critical audit matter. The compliance of accounting treatments and the policy of revenue recognition by the Company have been verified by reviewing the relevant contractual provisions.

The principle of conservatism - in accounting, own judgment must be used to record transactions that require estimation. The number of years the equipment will remain productive and the portion of accounts receivable that will never be paid. In financial reporting, the principle of conservatism is followed, which necessitates that less optimistic estimate chosen when two assessments are interpreted to be equally likely. Losses and costs such as warranty repairs are recorded when probable and reasonably estimated while gains are recorded when utilized.

Going concern principle- Financial statements are prepared under the assumption that the company will remain in business indefinitely. Therefore, assets do not need to be auctioned at fire sale values, and debt does not need to be paid off before maturity. This principle leads to the classification of assets and liabilities as short-term and more extended, where longterm assets are supposed to be held for more than one year while long-term liabilities are due in less than one year.

Financial Statement Analysis 

HTC financial statements of 2016 and 2015 noted some differences. Therefore, it is important to evaluate the balance sheet to realize its financial position. The current assets which included, cash debt investments, trade receivables, inventories and other current assets in 2016 amounted to $68,562,382 while in 2015 it was 86,439,402. The figures represented a decrease of 1% in the current assets in 2016. Non- current assets which include, property, land and equipment, investment properties, intangible assets, long-term receivables and other non-current assets amounted to $3,586,800 in 2016 compared to $42,953,681 in 2015, this was also a 1% decrease in the value of assets that year. Total assets in 20116 amounted to % 103,149,182 compared to % 129,393,083, this represented an increase in assets in 2016.

Current liabilities in 2016 amounted to $50,838,808 compared to 462,664,620 in 2015, a 1% decrease while long-term liabilities totaled $7,686 in 2016 and $18,306 in 2015. Total liabilities were % 50,838,808 in 2016 and $ 62, 682,926 in 2015, this meant that HTC Corporation and its subsidiaries had reduced its level of borrowing hence reduced liabilities.

HTC corporation equity declined 1% in value in 2016 $51,771,506 compared to its equity in 2015($64,792,095) despite capital surplus growing from 15,505,853 to 15,614,641, while retained earnings stabilized at $ 18,297,655 treasury shares were not issued that year due to the loss experienced in 2015. The share capital declined in 2016 from $8,318,695 in 2015 to $8,220,087. Cash flows: In 2016, HTC continuously suffered loss with continuous net cash outflow for operating activities and decreased overall asset & liability in comparison to 2015, so that cash flow ratios all decrease in comparison to 2015. Cash flows from operating activities accounted $9,619,512 in 2016 while in 2015 it was $13,052,483, while cash flows from investing activities were $6,421,941 in value in 2016 and $ (6,496,769) in 2015, which represented an increase in cash used for investments. The net cash used for financing activities in 2016 was $ 444,922 and $ 528,622 in 2015.

HTC continuously suffered the loss in 2016, such that the net cash outflows for operating activities, which results in decreased quick ratio and liquidity ratio. Moreover, since revenue keeps on declining due to high competition in its industrial environment, ending payables related to inventory purchasing and operating expenses decreased with ending assets in the same proportion thus, there has been an insignificant alteration in the debt ratio. In this term, to reduce cost and increase operating efficiency efficiently, partial lands are disposed of. Moreover, the capital expense is controlled strictly to result in decreased real properties, plants, and equipment.

Furthermore, long-term fund decreased with real properties, plants, and equipment in the same proportion in this term, so that the percentage of the long-term fund to real properties, plants and equipment ratio does not change significantly. In analyzing the capital structure of the company, the debt ratio in 2016 was 50% while in 2015 it was 49% and the long-term fund to fixed assets ratio was 493% for both years. While the liquidity analysis; the current ratio was 81% in 2016 and 93% in 2015 and the quick ratio was 54% and 62% respectively.

The independent auditors report concluded they had audited consolidated financial statements of HTC Corporation and its subsidiaries (collectively referred, which comprise the consolidated balance sheets as of December 31, 2016, and 2015, and the Consolidated Income Statements, changes in equity and cash flows for 2015 and 2016. There were some critical areas of principle accounting audit; the fundamental principles of accounting that the auditor highlighted were and the going concern, revenue recognition principles. The consolidated financial statements present fairly, the consolidated financial position of the Company as of December 31, 2016, and 2015, and their consolidated financial performance and their consolidated cash flows for the years ended.

HTC Corporation is at its best performance currently and considering its share investment it is worth investing in. The company has diversified in various aspects of the technological mark. Thus, it is forging towards a future of greatness in the market where it will control a more significant share of the market. The company should, however, consider its positioning in the market diversity to ensure its survival last, by cushioning the shocks brought about by its competitors.

Balance Sheet 

Statement of Comprehensive Income