Kia 2001 Annual Report Download - page 24
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44 45
or fair value subsequently recovers, in the case of an unlisted security, the increase in value is recorded
in current operations, up the amount of the previously recognized impairment loss, and in the case of a
listed security, the increase in value is recorded in capital adjustments.
Equity securities held for investment that are in companies in which the Company is able to exercise sig-
nificant influence over the operating and financial policies of the investees are accounted for using the
equity method, except investment equity securities in affiliates whose total assets (non-consolidated
basis) are less than the required level of 7,000 million and the differences arising from the use of the
equity method are not considered material which are stated at cost. The Company's share in the net
income or net loss of investees is reflected in current operations. Changes in the retained earnings, capi-
tal surplus or other capital accounts of investees are accounted for as an adjustment to retained earn-
ings or to capital adjustments.
Through December 31, 2000, the accounting for certain investments accounted for using the equity
method was based on the financial statements of investees as of a date earlier than the Company's bal-
ance sheet date since the investees had not yet prepared financial statements as of that date. In 2001,
the Company used financial statements of investees, which are the same as the Company's balance
sheet date in applying the equity method. As a result of this change, in 2001, the Company's beginning
accumulated deficit increased by 39,555 million ($29,828 thousand), net income increased by
59,026 million ($44,511 thousand), and earnings per share increased by 152 ($0.11), in comparison
with previous accounting method.
Debt securities held for investment are classified as either held-to-maturity investment debt securities or
available for sale investment debt securities at the time of purchase. Held-to-maturity debt securities are
stated at acquisition cost, as determined by the moving average method. When the face value of a held-
to-maturity investment debt security differs from its acquisition cost, the effective interest method is
applied to amortize the difference over the remaining term of the security. Available-for-sale investment
debt securities are stated at fair value, resulting valuation gain or loss reported as a capital adjustment
within shareholder' equity.
However, if the fair value of a held-to-maturity or an available-for-sale investment debt security declines
compared to the acquisition cost and is not expected to recover (impaired investment security), the car-
rying value of the debt security is adjusted to fair value, with the resulting valuation gain or loss charged
to current operations. If the fair value of the security subsequently recovers, in the case of a held-to-
maturity debt security, the increase in value is recorded in current operations, up to the amount of the
previously recognized impairment loss, and in the case of an available-for-sale debt security, the
increase in value is recorded in capital adjustments.
The lower of acquisition cost of investments in treasury stock funds and the fair value of treasury stock
included in a fund is accounted for as treasury stock in capital adjustments.
Property, Plant and Equipment and Related Depreciation
Property, plant and equipment are stated at cost, except for the effects of upward revaluations in accor-
dance with the Asset Revaluation Law of Korea to give accounting recognition to the loss in purchasing
power of the Korean won. Routine maintenance and repairs are expensed as incurred. Expenditures that
result in the enhancement of the value or extension of the useful lives of the facilities involved are treated
as additions to property, plant and equipment.
The Company capitalizes interest as part of the cost of constructing major facilities and equipment. The
interest expense capitalized is 21,344 million (16,095 thousand) and 22,092 million (16,659
thousand) in 2001 and 2000, respectively.
Depreciation is computed using the straight-line method based on the estimated useful lives of the
assets as follows
Intangibles
Intangible assets are stated at cost, net of amortization computed using the straight-line method over the
economic useful lives of the related assets from date of usage. Development costs, incurred in conjunc-
tion with development of new products or technologies and others, are amortized over the economic
useful life (not to exceed 5 years) from the date of usage of the related products, using the straight-line
method. Ordinary development and research costs are expensed as incurred.
Valuation of Receivables and Payables at Present Value
Receivables and payables arising from long-term installment transactions, long-term cash loans (borrow-
ings) and other similar loan (borrowing) transactions are stated at present value, if the difference
between nominal value and present value is material. The present value discount is amortized using the
effective interest rate method, and the amortization is included in interest expense or interest income.
The Company's long-term accounts receivable, including current portion, are stated net of unamortized
present value discounts of 5,601million ($4,224 thousand) and 11,925 million ($8,993 thousand) as
of December 31, 2001 and 2000, respectively, using an interest rate of 10.0 percent and 11.8 percent,
respectively.
Accrued Product Warranties and Liabilities
The Company generally provides a warranty to the ultimate consumer with each product and accrues
warranty expense at the time of sale based on actual claims history. In addition, the Company accrues
product liability expense with respect to its potential product liability claims in North America. Actual war-
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
NOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
20~40
15
5
5
5
Buildings and structures
Machinery and equipment
Vehicles
Tools, dies and molds
Office equipment
Useful Lives (years)