Leading Networking And Telecommunications Equipment And Services Company Accounting Essay


A business model describes the rationale of how an organization creates, delivers, and captures value. Along with the globalization and the development of the internet, as a telecome company, huawei facing both challenges and opportunities. Huaweis business strategy can easily described as innovation and expansion, Huawei has over 140,000 employees, around 46% of whom are engaged in research and development. It has 20 R&D institutes in countries including China, Germany and the United States, in 2011 it invested around US$3.74 billion in R&D. Huawei is also good at capturing profit from its innovation, by finding Investment and partnerships all over the world, it currently serves 45 of the world's 50 largest telecoms operators.

Asset is defined as resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity There are two types of assets recorded on the balance sheet, current asset and non current asset. Current assets are short-term assets that is expected to be converted into cash within a year. In the huaweis annual report, current asset includes inventories, trade and other receivables, financial assets held for trading, loans receivable and cash & cash equilvalent. Inventories are mechandise held for resale or for use within a business. Huaweis inventories consist of raw material, work in progress, finished goods and goods delivered but not completely installed. Also, huaweis inventories are carried at the lower of cost and net realisable value which is a consequence of the prudence convention. Next is Cash & cash equilvalent, Cash equivalents are defined as assets that are readily convertible into cash. Huaweis Cash and cash equivalants comprise cash at bank and on hand and fixed deposits with banks. Cash is important because its provides a company with liquidity and solvency, helping company survive in bad economic condition. Financial assets held for trading which were acquired or incurred principally for the purpose of selling, are part of a portfolio with evidence of short-term profit-taking or are derivatives, are measured at fair value through profit or loss. in huaweis annual report, financial assets held for trading mainly comprise investments in wealth management products issued by banks. Account receivable is an amount due from a customer, in huawei's annual report, account receivable are divided into loan receivables and trade and other receivables. Account receivable within a year is counted as current asset and it over a year as non-current asset. The provison for doubtful debt is reported as a deduction from trade receivables.

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Non-current asset are long-term assets that are expected to be used for more than one year. Huaweis non-current assets consist of property, plant and equipment, intangible assets and goodwill, trade and other receivables, loan recevables and so on. An intangible asset is an identifiable non-monetary asset without physical substance. An intangible asset shall be recognised if it is probable that the expected future economics benefits that are attributes to the asset will flow to the entity and the cost of the asset can be measured realiably. Huawei's intangible assets includes goodwill, softwae, patents and tradmark. While goodwill is often considered as an unidentifiable asset, it is listed as an asset on huawei's balance sheet because this goodwill is acquired from the purchase of Symantec stake in joint venture for $530 milllon. In addition, amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets' useful lives. Investments in associates and jointly controlled entities are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Huawei has focused on expanding its mobile technology and networking solutions through a number of partnerships. Eg. In 2008, Huawei launched a joint venture with UK-based marine engineering company, Global Marine Systems, to deliver undersea network equipment and related services. property, plant and equipment are tangible asset that are held for use in the production , for rental, or for administrative pruposes. Huaweis property, plant and equipment mainlu includes land and buildings, machinery and electronic equipment, construction in progress and leasehold improvement. In regards to these assets, the property, plant and equipment have depreciation. Depreciation is the systematic allocation of depreciable amount of an asset over its useful life. In huaweis annual report, depreciation is calculated by using the straight line method (the cost of items of property, plant and equipment less their estimated residual value over their estimated useful lives). Eg. Buildings are estimated to have 20 years of lives and estimated rate of residual value is 5%. Although huawei and most of the big companies are using the straight-line method of depreciation, the straight-line method is not suitable for some fast growing industries eg.telecommunication. Withing the developpment of technology, straight line method become less efficient and realistic.There are certain reasons to support this idea. First, considering the change in inflation and interest rate and increase in maintenance costsstraight line method is not scientific in theory. Actually, profit are being moved factitiously in advance. Secondly, withing the upgrading of machine, even if the machine does not reach its useful life, it also needs to be eliminated. If the straight line cannot show the realistic image to the decider, they would make wrong decisions such as keeping the old products, rather than updating it. Eventually they will miss the business opportunities and let the profit down. However, if we caluclated the depreciation of something with relatively equal value of depreciation eg building. Straight line method works.

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In 2011, huawei's annual sales revenue amounted to CNY203,927 million(USD32,396million), an 11.7% increase over the previous year. Among them, approximately 32% from the Chinese market and 68% from the overseas markets. Huaweis business is to provides products, solutions and services. Revenues are mainly generated from its three business segements, Telecom Networks, building telecommunications networks; Global Services, offering global equipment, operational services, and consulting services for enterprise customers; and Devices, manufacturing electronic communications devices.In addition to its three core businesses, Huawei launched its Enterprise business in 2010 to provide network infrastructure, fixed and wireless communication, data center, and cloud computing solutions for global telecommunications customers. As of the start of 2010, approximately 80% of the world's top 50 telecoms companies work with Huawei incude BT, Vodafone, Motorola and T-Mobile.