D-Link 2005 Annual Report Download - page 37
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D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Certain of D-Link’s foreign subsidiaries have defined contribution retirement plans. These
plans are funded in accordance with the regulations of their respective countries. Contributions
to these plans are expensed as incurred.
For their defined contribution pension plans, D-Link and its subsidiaries contribute to the Labor
Pension Fund at the rate of 6% of each employee's monthly wages and recognize the contribution
as current pension expense.
(o) Revenue recognition
Revenue is recognized when title to the products and the risks and rewards of ownership are
transferred to the customers, which occurs principally at the time of shipment. Allowances and
related provisions for sales returns are estimated based on historical experience. Such
provisions are deducted from sales in the year the products are sold.
(p) Income taxes
Income taxes are accounted for under the asset and liability method. Deferred income taxes are
determined based on differences between the financial statements and tax basis of assets and
liabilities using enacted tax rates in effect during the years in which the differences are expected
to reverse. The income tax effects resulting from taxable temporary differences are recognized
as deferred income tax liabilities. The income tax effects resulting from deductible temporary
differences, net operating loss carryforwards, and income tax credits are recognized as deferred
income tax assets. The realization of deferred income tax assets is evaluated, and if it is
considered more likely than not that the deferred tax assets will not be realized, a valuation
allowance is recognized accordingly.
Classification of deferred income tax assets or liabilities as current or noncurrent 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 expected
realization date of such asset or liability.
Income tax expense is reduced by investment tax credits in the year in which the credits arise.
According to the ROC Income Tax Law, undistributed earnings of D-Link and its subsidiaries in
the ROC are subject to an additional ten 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.
Income tax of D-Link and its subsidiaries is based on the tax laws of various countries. Income
tax is declared on an individual company basis. Income tax expense of D-Link and its
subsidiaries is the sum of income tax expense of the companies included in the consolidation.