D-Link 2005 Annual Report Download - page 36
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D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
unrealized gains and losses on these contracts resulting from actual settlement or balance
sheet date translation are charged or credited to current operations.
(2) Foreign currency option contracts
Foreign currency option contracts are not for trading purposes. For those contracts entered
into to hedge the risk related to assets and liabilities, gain or losses on these contracts
resulting from actual exercise and settlement are charged or credited to current operations.
Contracts which are entered into to hedge such risk but do not meet the relevant criteria are
marked to market on the balance sheet date. The differences between the market value and
book value are charged or credited to current operations.
(n) Retirement plan
D-Link, DTI and Alpha have established employee noncontributory defined benefit retirement
plans (the “Plans”) covering all regular employees in Taiwan. In accordance with the Plans,
employees are eligible for retirement or are required to retire after reach certain age or service
requirements. Payments of retirement benefits are based on the number of service years and the
average salary for the six-month period before the employee’s retirement. Each employee earns
two months of salary for the first fifteen years of service, and one month of salary for each year
of service thereafter. The maximum retirement benefit is 45 months of salary.
Effective July 1, 2005, D-Link, DTI and Alpha became subject to the “Labor Pension Act” (the
“Act”), which prescribes a defined contribution pension scheme for those employees who were
covered by the Labor Standards Law prior to the enforcement of the Act but elect to be subject to
the pension mechanism under the Act and for those employees who are employed after the
enforcement of the Act. In accordance with the Act, D-Link, DTI and Alpha contribute monthly
to the Labor Pension Fund for the employee individual pension fund accounts at the minimum
rate of 6% of the employee's monthly wages. However, D-Link, DTI and Alpha have not yet
revised their pension plans to reflect the Act, thus any matter that is not covered by their pension
plans is transacted in accordance with the Act.
In accordance with the Labor Standards Law, D-Link, DTI and Alpha contribute 2% of wages to
a pension fund maintained with the Central Trust of China on a monthly basis. Retirement
benefits are paid firstly from the pension fund. After transferring the ODM/OEM operations
and employees to Alpha, D-Link suspended its contribution to the pension fund until October
2006.
Under the defined benefit pension plan, D-Link, DTI and Alpha have adopted ROC Statement of
Financial Accounting Standards (“SFAS”) No. 18 “Accounting for Pensions.” SFAS No. 18
requires D-Link, DTI and Alpha to perform an actuarial calculation of their pension obligation as
of each fiscal year-end. Based on the actuarial calculation, D-Link, DTI and Alpha recognize
net periodic pension costs. YMI, YCI, DTVIC and DHCL did not recognize pension expense
since they have no employees.