D-Link 2005 Annual Report Download - page 33
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D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
(c) Foreign currency transactions and translation
D-Link and its subsidiaries record transactions in their respective local currencies. Foreign
currency transactions are recorded at the exchange rate prevailing on the transaction date. At
the balance sheet date, monetary assets and liabilities denominated in foreign currencies are
translated using the exchange rates on that date. The resulting exchange gains or losses from
settlement of such transactions or translation of monetary assets and liabilities are reflected in the
accompanying consolidated statements of income.
The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the
exchange rates prevailing on the balance sheet date, with the exception of stockholders’ equity,
which is translated at historical rates, and revenues, costs and expenses, which are translated at
the weighted-average exchange rates during the reporting period. Translation differences
resulting from the translation of such financial statements into New Taiwan dollars are recorded
as an accumulated translation adjustment, a separate component of stockholders’ equity.
(d) Distinction between current and non-current items
Assets to be realized within 12 months subsequent to the balance sheet date or to be available for
sale or for consumption during the normal course of an operating cycle are classified as current
assets. Liabilities to be redeemed within 12 months subsequent to the balance sheet date, and
obligations incurred but to be redeemed during the normal course of an operating cycle are
classified as current liabilities. Items not classified as current assets (liabilities) are classified as
non-current assets (liabilities).
(e) Cash equivalents
D-Link considers all highly liquid investments, such as investments in bonds with repurchase
agreements, with a maturity of three months or less to be cash equivalents.
(f) Short-term investments
Short-term investments are stated at the lower of cost or market value. Market value is
determined using the net asset value of open-end mutual funds on the last day of the period, the
average closing price of the last month of the period for domestic publicly listed securities, and
the closing price on the last day of the period for foreign publicly listed securities.
(g) Allowance for doubtful accounts and accrued warranty liability for maintenance
The allowance for doubtful accounts is provided based on accounts receivable aging analysis and
the expected collectibility of accounts receivable.
The warranty liability for maintenance is accrued based on historical experience, sales revenue,
and the warranty period of products.