Asus 2010 Annual Report Download - page 99

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(7) Long-term equity investments accounted for under equity method
A. Long-term investments are accounted for under the equity method when the percentage of
ownership held by the Company and its subsidiaries exceeds 20% or if the Company and
its subsidiaries own less than 20% of the investee’s common stock but have significant
influence on the investee’s operations. If an investee company accounted for under the
equity method issues new shares and the Company does not purchase new shares
proportionately, then the investment percentage, and therefore the equity in net assets of
the investee, will be changed. The effect of such change is adjusted against the additional
paid-in capital resulting from long-term equity investments or retained earnings.
B. The difference between the cost of the investment and the amount of underlying equity in
net assets of an investee attributed to depreciable, depletable, or amortizable assets is
amortized over the estimated remaining economic years. The difference attributed to the
carrying amount in excess of or lower than the fair value of assets is written off entirely
when the difference disappear. The cost of investment in excess of the fair value of
identifiable net assets is recognized as goodwill and is no longer amortized. The
difference attributed to the fair value of identifiable net assets in excess of the cost of
investment causes a proportional decrease in the carrying amount of non-current assets.
When the carrying amount of non-current assets is reduced to zero, the remaining
difference is recorded as extraordinary gain or loss.
C. When the equity of long-term equity investment under the equity method including
unrealized gain on financial instruments, foreign currency translation adjustments, net
loss not recognized as pension cost, and unrealized losses on cash flow hedges is changed,
the changes in percentage of ownership are reflected in those related accounts and
long-term equity investment under the equity method.
D. Unrealized inter-company profits or losses resulting from transactions between the
Company and investees accounted for under the equity method are accounted in
unrealized gain on inter-affiliate accounts and deferred until realized.
E. The investees over which the Company has control are accounted for under the equity
method. The Company prepares consolidated financial statements on a quarterly basis.
(8) Property, plant and equipment, leased assets and idle assets
A. Property, plant and equipment are stated at cost. Cost associated with significant additions,
improvements, and replacements to property, plant and equipment are capitalized.
Expenditures for regular repairs and maintenance are charged against operating income.
B. Property, plant and equipment leased to other parties under operating leases are classified
as leased assets. The related depreciation is provided under the straight-line method based
on the assets’ estimated useful lives and accounted for as a reduction of rental income.
Property, plant and equipment not currently used in operations are transferred to idle
assets. The cost, accumulated depreciation, and accumulated impairment of the original
assets not currently used in operations are all transferred to idle assets, and depreciated.
C. Depreciation is provided under the straight-line method over the estimated lives of the
assets. Salvage value of the fully depreciated assets that are still in use is depreciated