LG 2003 Annual Report Download - page 62

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Notes to Non-Consolidated Financial Statements
For the years ended December 31, 2003 and 2002
event that such amounts are not estimated to be recoverable, they are written-down to their net realizable value.
Intangible Assets
Intangible assets are stated at acquisition cost, net of accumulated amortization. Acquisition cost is the total of
the production or purchase cost and other incidental expenses. Amortization is computed using the straight-line
method over the estimated useful lives, which range from five to ten years.
The Company assesses the potential impairment of intangible assets when there is evidence that events or
changes in circumstances have made the recovery of an asset’s carrying value to be unlikely. An impairment loss is
recorded as a reduction in the carrying value of the related asset and charged to current operations. However, the
recovery of the impaired assets would be recorded in current operations up to the cost of the asset, net of
amortization before impairment, when the estimated value of the assets exceeds the carrying value after
impairment.
The Company deducted the remaining balance of organization costs from retained earnings, in accordance with
the newly established Statement of Korean Financial Accounting Standards (“SKFAS”) No. 3, Intangible Assets,
effective from January 1, 2003. The effect of this adoption of SKFAS No. 3 was to increase net income for the year
ended December 31, 2003 and decrease retained earnings as of December 31, 2003 by ￦1,476 million and
￦1,795 million, respectively.
Borrowing Costs
Interest and other financial costs incurred on borrowings used to acquire property, plant and equipment,
intangible assets and investments are all charged to expense as incurred.
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 Stock
Treasury stock are stated at cost and recorded as a capital adjustment in shareholders’ equity. Gain on disposal
of treasury stock is recorded as a 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
The Company provides warranties against product defects for a specified period of time after the sale.
Estimated costs of product warranties are charged to current operations at the time of sale and are included in the
accompanying non-consolidated balance sheets as a product warranty reserve.
Accrued Severance Benefits
Employees and directors with at least 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