LG 2001 Annual Report Download - page 56

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ยป56
LG Electronics Inc. The
43
rd Annual Report
Notes to Financial Statements
for the years ended December 31, 2001 and 2000
products of which the estimated future benefits are probable are recognized as intangible assets.
Amortization of development costs is computed using the straight-line method over five years from the
commencement of commercial production of related products. Such costs are subject to continual analysis of
recoverability. In the event that such amounts are estimated to be not recoverable, they are written-down or
written-off.
Intangible Assets
Intangible assets are stated at cost, net of accumulated amortization. Amortization is computed using the
straight-line method over the estimated useful lives ranging from five to ten years.
Discounts (Premiums) on Debentures
Discounts (premiums) on debentures are amortized using the effective interest rate method over the
repayment period of the debentures. The amortized amount is included in interest expense.
Treasury Debentures
When treasury debentures are acquired, the face value and any discount or premium are subtracted
from the related accounts. The difference between the book value and acquisition cost of the treasury
debentures is charged to current operations as a gain or loss on redemption of debentures.
Treasury stock
Treasury stocks are stated at cost and recorded as capital adjustment in shareholders equity. Gain on
disposal of treasury stock is recorded as capital surplus. Any loss on disposal of treasury stock is offset
against prior gains on disposal of treasury stock included in capital surplus. The remaining loss is offset
against retained earnings.
Product Warranty Provision
The Company provides product warranties relating to product defects for a specified period of time after
sale. Estimated costs of product warranties are charged to current operations at the time of sale and are
included in the accompanying balance sheet as a product warranty provision.
Accrued Severance Benefits
Employees and directors with more than one year of service are entitled to receive a lump-sum severance
payment upon termination of their employment with the Company, based on their length of service and rate
of pay at the time of termination. Accrued severance benefits represent the amount which would be payable
assuming all eligible employees and directors were to terminate their employment as of the balance sheet
date.
Contributions made under the National Pension Plan and severance insurance deposits are deducted
from accrued severance benefits. Contributed amounts are refunded from the National Pension Plan and the
insurance companies to employees on their retirement.