D-Link 2001 Annual Report Download - page 41

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9
D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Classification of deferred income tax assets or liabilities as current or non-current is based on the
classification of the related asset or liability. If the deferred income tax asset or liability is not
directly related to a specific asset or liability, then the classification is based on the asset’ s or
liability’ s expected realization date.
According to the ROC Income Tax Law, undistributed earnings of D-Link and its subsidiaries in the
ROC are subject to an additional 10 percent corporate income surtax. The surtax is charged to
income tax expense after the appropriation of earnings is approved by the stockholders in the
following year.
(14) Government grants
Government grants are recognized as non-operating income in the accompanying consolidated
statements of income based on the ratio of actual costs incurred to date to the most recent estimate of
total costs which they are intended to compensate.
(15) Net income per common share
Net income per common share is computed based on the weighted-average number of common
shares outstanding during the period. The effect on net income per common share from the increase
of stock through the issuance of stock dividends from unappropriated earnings, capital surplus and
employee bonuses is computed retroactively.
Convertible bonds are included in the computation of net income per common share if the bonds
have a dilutive effect on net income per common share of more than 3 percent.
For primary earnings per share, the numerator should be calculated by adding back interest expense,
net of tax, of convertible bonds that are common stock equivalents and have dilutive effects on net
income. The denominator is the weighted-average number of shares outstanding of common stock
and potentially dilutive common stock equivalents that are assumed to be fully converted. The zero
coupon convertible bonds issued in 2001 are included in the calculation. However, the convertible
bonds issued in 1999 are not common stock equivalents.
For fully diluted earnings per share, the denominator should include common stocks, potentially
dilutive common stock equivalents and potentially dilutive securities assumed to be totally converted
that are not common stock equivalents. In addition to common stock, both the zero coupon
convertible bonds issued in 2001 and the convertible bonds issued in 1999 are included in the
calculation.