Asus 2009 Annual Report Download - page 161

157
ASUSTeK COMPUTER INC. AND SUBSIDIARIES
Notes to Financial Statements
(Continued)
(15) Convertible bonds payable
According to R.O.C. SFAS No. 36 “Financial Instruments: Disclosure and Presentation” and
Interpretation (95) 078 by the Accounting Research and Development Foundation (ARDF),
convertible bonds with a put option issued by the Group before December 31, 2005, are accounted
for in accordance with SFAS No. 21. The derivative instrument embedded in a non-derivative host
debt instrument is not separated from the equity component of the instrument. Costs incurred for
the issuance of redeemable convertible bonds are deferred and amortized during the period
between the issuance date and the last redeemable date.
Bonds issued after January 1, 2006, are accounted for in accordance with R.O.C. SFAS No. 36 and
Interpretations (95) 290, (97) 331 and (98) 046 by the ARDF as follows:
A. The issuance costs are allocated to the related liability and equity components in proportion of
the initially recognized amounts.
B. Convertible bonds bearing a clause on conversion price adjustment based on stock market price
do not include the equity component. For the liability components, the fair value of the
conversion right and call/put option is determined firs; then the book value of main debt
component is determined based on the net amount of the issuance price after deducting the fair
value of the call/put option and conversion right with a clause on price adjustment.
C. Convertible bonds are subsequently measured at amortized cost. Derivatives with call/put
options and conversion rights with a clause on price adjustment are recognized as “financial
liabilities at fair value through profit or loss” and are subsequently measured at fair value.
Movements in the fair value of the derivatives are recognized as “gain/ (loss) on valuation of
financial liabilities”.
D. If the bondholder exercises the right to convert the bonds ahead of the maturity date of the
bonds, the book value of the liability component i s a d j u s t e d to the value on the conversion
date, which serves as the basis for the recording of the issuance of common stock so that no
conversion gain and loss is recognized thereon.
E. If the bondholder is eligible to exercise the put option within one year, the bonds payable are
reclassified as current liability. When the put option expires, those bonds payable are reclassified
as long-term liability if the liability meets the definition of long-term liability.
(16) Retirement plan
The Company and domestic subsidiaries make monthly contributions to the pension fund at 2% of
the total monthly salaries and wages as required by the Labor Standards Law. The fund is
administrated by the Employees Retirement Fund Committee. This pension fund is considered
absolutely separate from the Company after contribution; therefore, it is not included in the
accompanying financial statements.