Acer 2008 Annual Report Download - page 41

Acer Incorporated 2008 Annual Report78
Financial Standing
Acer Incorporated 2008 Annual Report 79
off is less than the sum of both the par value and capital surplus premium, if any, of the stock retired, the
difference is accounted for as an increase in capital surplus ‒ treasury stock.
The Company’s common stock held by its subsidiaries is accounted for as treasury stock. Cash dividends
paid by the Company to its consolidated subsidiaries that hold the treasury stock are accounted for as capital
surplus ‒ treasury stock.
(18) Revenue recognition
Revenue from sales of products is recognized at the time products are delivered and the signicant risks and
rewards of ownership are transferred to customers. Revenue generated from service is recognized when the
service is provided and the amount becomes billable.
(19) Employee bonuses and directors’ and supervisors’ remuneration
Employee bonuses and directors’ and supervisors’ remuneration appropriated after January 1, 2008, are
accounted for according to Interpretation (96) 052 issued by the Accounting Research and Development
Foundation. The Company estimates the amount of employee bonuses and directors’ and supervisors’
remuneration according to the Interpretation and recognizes it as operating expense. Differences between
the amount approved in the shareholders’ meeting and recognized in the financial statements, if any, are
accounted for as changes in accounting estimates and recognized in prot or loss.
(20) Share-based payment transactions
Effective January 1, 2008, the Company adopted SFAS No. 39 “Accounting for Share-based Payment” for its
share-based payments granted on or after January 1, 2008.
Equity-settled share-based payments are measured at fair value at the date of grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed over the vesting period,
and the corresponding increase in equity is recognized. The vesting period is the period during which all
the specified vesting conditions of the share-based payment arrangement are to be satisfied. The vesting
conditions include service conditions and performance conditions (including market conditions). When
estimating the fair value of the transactions, vesting conditions, other than market conditions, shall not be
taken into account.
For cash-settled share-based payments, a liability equal to the portion of the services received is recognized
at its current fair value determined at each balance sheet date and at the date of settlement, with any changes
in the fair value recognized in prot or loss of the period.
Fair value is measured by the use of the Black-Scholes or the binomial option pricing model, based on
management’s best estimate of the exercise price, expected term, underlying share price, expected volatility,
expected dividends, risk-free interest rate, and any other inputs to the model.
(21) Administrative expenses
The Company’s administrative expenses include direct expenses incurred for the business unit within the
Company and expenses incurred for managing the investee companies. To reect the operating income of
the Consolidated Companies, administrative expenses are divided into two parts. The rst part, representing
the direct expenses incurred for the Consolidated Companies, is included as administrative expenses in
the accompanying consolidated statements of income. The second part, representing expenses incurred
for managing the investee companies, is presented as a reduction of net investment income (loss) in the
consolidated statements of income.
(22) Retirement plan
(a) Dened benet retirement plans
The Company and its domestic subsidiaries established individual noncontributory defined benefit
retirement plans (the “Plans”) and retirement fund administration committees. The Plans provide for
lump-sum retirement benefits to retiring employees based on length of service, age, and certain other
factors. In accordance with the requirements of the ROC Labor Standards Law, the funding of retirement
plans by the Company and its domestic subsidiaries is based on a percentage of employees’ total salaries.
The funds are deposited with Bank of Taiwan or other banks.
Under the dened benet retirement plan, the Consolidated Companies recognize a minimum pension
liability equal to the amount by which the actuarial present value of the accumulated benet obligation
exceeds the fair value of the retirement plan’s assets. The Consolidated Companies also recognize the net
periodic pension cost based on an actuarial calculation.
(b) Dened contribution retirement plans
Starting from July 1, 2005, pursuant to the ROC Labor Pension Act (the “New System”), employees
who elected to participate in the New System or commenced working after July 1, 2005, are subject to a
dened contribution plan under the New System. For the dened contribution plan, the Company and its
domestic subsidiaries contribute monthly an amount equal to 6% of each employee’s monthly salary to an
individual labor pension fund account.
Most of the Company’s foreign subsidiaries adopt defined contribution retirement plans. These plans
are funded in accordance with the regulations of their respective countries. Contributions made for the
dened contribution retirement plans are expensed as incurred.
(23) Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax is determined
based on differences between the nancial statements and tax basis of assets and liabilities using enacted
tax rates in effect during the years in which the differences are expected to reverse. The income tax effects
resulting from taxable temporary differences are recognized as deferred income tax liabilities. The income
tax effects resulting from deductible temporary differences, net operating loss carryforwards, and income
tax credits are recognized as deferred income tax assets. The realization of the deferred income tax assets is
evaluated, and if it is considered more likely than not that the asset will not realized, a valuation allowance is
recognized accordingly.
Classification of the deferred income tax assets or liabilities as current or noncurrent is based on the
classication of the related asset or liability. If the deferred income tax asset or liability is not directly related
to a specic asset or liability, then the classication is based on the asset’s or liability’s expected realization
date.
The investment tax credits granted for purchases of equipment, research and development expenses, and
training expenses are recognized in the current period.
According to the ROC Income Tax Act, undistributed earnings, if any, earned after December 31, 1997, are
subject to an additional 10% retained earnings tax. The surtax is accounted for as income tax expense in the
following year when the stockholders decide not to distribute the earnings.