Chunghwa together with its subsidiaries are hereinafter referred to collectively as the “Company”. Minority  interests in the aforementioned subsidiaries are presented as a separate component of stockholders’ equity.  As of December 31, 2009 and 2010, the Company had 27,915 and 28,134 employees, respectively.  The accompanying consolidated financial statements were prepared in conformity with the Guidelines  Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally  accepted in the ROC (“ROC GAAP”). The preparation of consolidated financial statements requires  management to make reasonable estimates and assumptions on allowances for doubtful accounts, valuation  allowances on inventories, depreciation of property, plant and equipment, impairment of assets, bonuses paid  to employees, directors and supervisors, pension plans and income tax, etc. These estimates and assumptions  are inherently uncertain and actual results may differ significantly. The significant accounting policies are  summarized as follows:  The accompanying consolidated financial statements include the accounts of all directly and indirectly  majority owned subsidiaries of Chunghwa, and the accounts of investees in which the Company’s ownership  percentage is less than 50% but over which the Company has a controlling interest. All significant  intercompany transactions and balances are eliminated upon consolidation.  The consolidated financial statements for the year ended December 31, 2009 include the accounts of  Chunghwa, SENAO, SIS, SIHK, CIYP, CHIEF, Unigate, CHIEF (HK), CIC, CHSI, Concord, GNSS  (Shanghai), CHTG, DHT, SHE, LED, CHTS, CHTJ, IFE, CHI, CHPT, CIHC, COI, New Prospect, Prime  Asia, and CHC. The consolidated financial statements for the year ended December 31, 2010 include the  accounts of Chunghwa, SENAO, SIS, SIHK, CIYP, CHIEF, Unigate, CHIEF (HK), CIC, CHSI, Concord,  GNSS (Shanghai), CHTG, DHT, SHE, LED, YYRP, CHTS, CHTJ, IFE, IESA, IEHK, CHI, CHPT,  CHPT(US), CIHC, COI, New Prospect, Prime Asia and CHC.  For foreign subsidiaries using their local currency as their functional currency, assets and liabilities are  translated into New Taiwan dollars at the exchange rates in effect on the balance sheet date; stockholders’  equity accounts are translated into New Taiwan dollars at historical exchange rates and income statement  accounts are translated into New Taiwan dollars at average exchange rates during the year.  Acquisitions are accounted for using the purchase method of accounting. The cost of the acquisition is  measured at the aggregate of the fair values, at the date of exchange, of assets given and liabilities incurred or  assumed, by the Company in exchange for control of the acquiree, plus any costs directly attributable to the  business combination. The acquiree’s identifiable assets and liabilities are recognized at their fair values at  the acquisition date.  Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of  the cost of the business combination over the Company’s interest in the net fair value of the identifiable net  assets.  The interest of minority stockholders in the acquiree is initially measured at historical cost.  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Principle of Consolidation Business Combination F-19