Crucial 2012 Annual Report Download - page 259

14
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
Company recognized a gain of $7,833 on the terminated capital lease agreement, which was classified under
non-operating income and gains - others.
(b) On June 18, 2009, the Company signed an amended long-term lease agreement with NTC and MeiYa
Technology Corp. (MTC) which was originally contracted by NTC directly with MTC on the lease of building,
facilities and land located on the land numbered 348, 348-1 and 348-3, Hwa-Ya Section, Kueishan Valley,
Taoyuan County. This amended lease agreement, which took effect retroactively from January 1, 2009, includes
the renewal term. Initial lease term is from January 1, 2009 to December 31, 2018 but the Company is entitled
to renew this amended lease agreement for an unlimited number of consecutive additional terms of five years
each by providing written notice of the Company's intention to renew the lease term commencing from January
1, 2019. In addition, the Company has an exclusive option to purchase the leased assets for a total purchase
price of US$50,000 thousand on and after January 1, 2024. Also, the rental due for the entire year of 2009 has
been waived. Initial yearly rentals for the leased building including facilities and land were US$13,010 thousand
and US$1,990 thousand, respectively from January 1, 2010 to December 31, 2018; the first yearly renewal
rentals for the leased building including facilities and land were US$8,010 thousand and US$1,990 thousand,
respectively from January 1, 2019 to December 31, 2023; the subsequent yearly renewal rentals for the leased
building including facilities and land were US$10 thousand and US$1,990 thousand commencing from January
1, 2024. The amended lease agreement for the building including facilities is treated as a capital lease because
(a) the present value of the periodic rental payments made since the inception date is at least 90% of the market
value of the leased assets and (b) the lease term is equal to 75% or more of the total estimated economic life
of the leased assets. The land is treated as an operating lease because the fair value of the land is 25 percent
or more of the total fair value of the leased property at the inception of the lease. The total present value of
lease payables from the capital lease of the building including facilities was $2,656,223; the implicit interest
rate was 10.56%. The fair value of the leased assets at the beginning of the lease period was $2,656,223. The
Company recognized interest expenses from lease payables of $291,824, $294,788 and $280,007, for the years
ended December 31, 2009, 2010 and 2011, respectively.
(c) As of December 31, 2010 and 2011, the details of these lease payables were as follows:
December 31,
2010 2011
Lease payables $ 2,813,506 2,664,183
Less: current portion of lease payables (149,323) (165,728)
Lease payables-long-term $ 2,664,183 2,498,455
(d) For the years ended December 31, 2009, 2010 and 2011, the lease expenses for the operating lease of the land
(classified under manufacturing overhead) were $0, $63,351 and $59,289, respectively.