Acer 2009 Annual Report Download - page 40

operationally and for nancial reporting purposes, from the rest of the entity. A component that previously was
held for use will have been one or more cash-generating units.
(11) Equity method investments
Long-term equity investments in which the Consolidated Companies, directly or indirectly, own 20% or more of
the investee’s voting shares, or less than 20% of the investee’s voting shares but are able to exercise signicant
inuence over the investee’s operating and nancial policies, are accounted for using the equity method. Prior
to January 1, 2006, differences between the acquisition cost and net equity of the investee that could not be
attributed to any reason were amortized over ve years as investment income or losses.
Effective January 1, 2006, the Consolidated Companies adopted amended SFAS No. 5 “Accounting for Long-
term Investments under Equity Method”, under which, the investment cost in excess of fair values of identiable
net assets is recorded as investor-level goodwill. Investor-level goodwill is no longer amortized but tested for
impairment. Differences between investment cost and net equity of the investee in the previous investments that
cannot be attributed to any reason and were originally amortized over ve years are no longer amortized starting
from January 1, 2006.
When an equity-method investment is disposed of, the difference between the selling price and the book value
of the equity-method investment is recognized as disposal gain or loss in the accompanying consolidated
statements of income. If there are capital surplus and separate components of shareholders’ equity resulting
from such equity investments, they are charged as a reduction to disposal gain/loss based on the disposal ratio of
investments.
If an investee company issues new shares and the Company does not acquire new shares in proportion to its
original ownership percentage, the Company’s equity in the investee’s net assets will be changed. The change
in the equity interest is used to adjust the capital surplus and long-term investment accounts. If the Company’s
capital surplus is insufcient to offset the adjustment to long-term investment, the difference is charged as a
reduction of retained earnings.
Unrealized gains and losses resulting from transactions between the Consolidated Companies and investees
accounted for under the equity method are deferred to the extent of the Company’s ownership. The gains and
losses resulting from depreciable or amortizable assets are recognized over the estimated useful lives of such
assets. Gains and losses from other assets are recognized when realized.
(12) Capital leases
For capital leases, where the Consolidated Companies act as the lessor, the Consolidated Companies account for
all periodic rental payments plus bargain purchase price or estimated residual value as lease payment receivables.
The present value of all lease payment receivables, discounted at the implicit interest rate, is recorded as revenue.
The difference between the lease payment receivables and the revenue is the unearned interest revenue, which is
recognized over the lease term using the effective interest method.
(13) Property, plant and equipment, property leased to others, and property not in use
Property, plant and equipment are stated at acquisition cost. Interest expense related to the purchase and
construction of property, plant and equipment is capitalized and included in the cost of the related asset.
Signicant renewals, improvements and replacements are capitalized. Maintenance and repair costs are charged
to expense as incurred. Gains and losses on the disposal of property, plant and equipment are recorded in the
non-operating section in the accompanying consolidated statements of income.
Commencing from November 20, 2008, the Company capitalizes retirement or recovery obligation for newly
acquired property and equipment in accordance with Interpretation (2008) 340 issued by the Accounting
Research and Development Foundation. A component which is significant in relation to the total cost of the
property and equipment and for which a different depreciation method or rate is appropriate is depreciated
separately. The estimated useful lives, depreciation method and residual value are evaluated at the end of each
year and any changes thereof are accounted for as changes in accounting estimates.
Depreciation is provided for property, plant and equipment, property leased to others, and property not used
in operation over the estimated useful life using the straight-line method. The estimated useful lives of the
respective classes of assets are as follows: buildings and improvements--30 to 50 years; computer equipment and
machinery--3 to 5 years; transportation equipment--3 to 5 years; ofce and other equipment--3 to 10 years; and
leasehold improvement--1 to 10 years.
Property leased to others and property not used in operation are classied to other assets and continue to be
depreciated and are subject to an impairment test.
(14) Intangible assets
Goodwill is recognized when the Purchase price exceeds the fair value of identiable net assets acquired in a
business combination. In accordance with the SFAS No. 25 “Accounting for Business Combinations”, goodwill
is no longer amortized but is tested for impairment annually.
Other intangible assets, including patents, trademarks and trade names, customer relationships, developed
technology and purchased software, are initially stated at cost. Intangible assets with finite useful lives are
amortized over the following estimated useful life using the straight-line method from the date that the asset is
available for use: patents: 4 to 16 years; acquired software: 1 to 3 years; customer relationships: 7 to 10 years;
developed technology: 10 years; and trademarks and trade names: 20 years.
The Gateway, Packard Bell and Eten trademarks and trade names are intangible assets with indenite useful
lives. Such intangible assets are not amortized, but are tested for impairment annually. The useful life of an
intangible asset not subject to amortization shall be reviewed annually at each fiscal year-end to determine
whether events and circumstances continue to support an indenite useful life assessment for that asset. Any
change in the useful life assessment from indenite to nite is accounted for as a change in accounting estimate.
(15) Non-nancial asset impairment
The Consolidated Companies assess at each balance sheet date whether there is any indication that and asset
may have been impaired. If any such indication exists, the Consolidated Companies estimate the recoverable
amount of the assets. An impairment loss is recognized for an asset whose carrying amount is higher than the
recoverable amount. If there is any evidence that the impairment loss no longer exists or has decreased, the
amount previously recognized as impairment is reversed and the carrying amount of the asset is increased to the
recoverable amount. The increase in the carrying amount shall not exceed the depreciated or amortized balance
of the assets had no impairment loss been recognized in prior periods.
Goodwill and assets that have an indenite useful life are tested annually for impairment. An impairment loss is
recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. A subsequent
reversal of the impairment loss is prohibited.
(16) Deferred charges
Deferred charges are stated at cost and primarily consist of improvements to ofce buildings and other deferred
charges. These costs are amortized using the straight-line method over their estimated useful lives.
(17) Treasury stock
Common stock repurchased by the Company is accounted for at acquisition cost. Upon disposal of the treasury
stock, the sale proceeds in excess of cost are accounted for as capital surplus ‒ treasury stock. If the sale
proceeds are less than cost, the deciency is accounted for as a reduction of the remaining balance of capital
surplus ‒ treasury stock. If the remaining balance of capital surplus ‒ treasury stock is insufcient to cover the
deciency, the remainder is recorded as a reduction of retained earnings. The cost of treasury stock is computed
using the weighted-average method.
Acer Incorporated 2009 Annual Report
74.
Acer Incorporated 2009 Annual Report
75. Financial Standing