Samsung 1998 Annual Report Download - page 41

1. The Company
Samsung Electronics Co., Ltd. (the“Company”) is incorporated
under the laws of the Republic of Korea to manufacture and sell
electronic goods, communication facilities, semi-conductors,
telecommunication equipment and other similar products.
The Company’s stock is publicly traded, and all issued and out-
standing shares are listed on the Korean Stock Exchange.
Under the Articles of Incorporation, the Company is autho-
rized to issue 500,000,000 shares of capital stock (par value:￦5,000),
of which 100,000,000 shares are cumulative, participating preferred
stock, which are non-voting and entitled to a minimum cash
dividend (9% of par value).
The non-cumulative, non-voting preferred stock issued on or before
February 28, 1997 is entitled to an additional cash dividend (1%
of par value) over common stock. At December 31, 1998,
124,773,633 shares of common stock and 23,893,427 shares of
such preferred stock were issued and outstanding.
In addition, the Company is authorized to issue convertible
debentures and debentures with stock purchase options up to
￦4,000,000 million and ￦2,000,000 million, respectively. The
Company is authorized to issue depository receipts free from any
preemptive rights by shareholders. Also, in case of issuing capi-
tal stocks through the exercise of stock option or general pub-
lic subscription and issuing capital stocks to domestic and foreign
financial institutions for urgent fund raising or co-operating com-
panies for technical assistance, the Company is authorized to issue
capital stocks free from any preemptive rights by shareholders.
No debenture with stock purchase options have been issued as
of December 31, 1998.
The Company has a stock option plan under which options to
purchase shares of common stock may be granted to key employ-
ees up to maximum 1% of issued shares per employee by the
approval of shareholders meeting. No stock option has been
endowed as of December 31, 1998.
The Company issued 11,700,000 shares of common stock for cash
at ￦38,900 per share on June 5, 1998 and 15,000,000 shares of
common stock for cash at ￦29,300 per shares on September 25,
1998. In addition, the Company issued 3,593 shares of common
stock through the conversion of foreign currency convertible bonds
in the amount of US$ 500,000 in 1998 (see Note 11). The cash
received in excess of par value of ￦761,130 million and the con-
version price in excess of par value of ￦426 million were cred-
ited to other capital surplus.
As of December 31, 1998, ￦330,046,214 thousand (face value of
US$377,060,000) of convertible bonds are outstanding (see Note 11).
2. Summary of Significant Accounting Policies
The significant accounting policies followed by the Company in
the preparation of its financial statements are summarized below.
Basis of Financial Statement Presentation -
The official accounting records of the Company, on which the
Korean language financial statements are based, are maintained
in Korean Won in accordance with the laws and regulations of
the Republic of Korea.
For the convenience of the reader, the accompanying financial state-
ments have been condensed, restructured and translated into English
from the Korean language financial statements. Certain supple-
mentary information included in the Korean language financial state-
ments not required for a fair presentation of the Company’s finan-
cial position or results of operations and cash flows is not pre-
sented in the accompanying financial statements.
Such financial statements are not intended to present the finan-
cial position and results of operations and cash flows in accor-
dance with accounting principles and practices generally accept-
ed in countries and jurisdictions other than the Republic of
Korea.
The preparation of financial statements requires management to
make estimates and assumptions that effect amounts reported
therein. Due to the inherent uncertainty involved in making esti-
mates, actual results reported in future periods may differ from
those estimates.
Marketable Securities -
Marketable securities are stated at cost, which approximates mar-
ket value.
Allowance for Doubtful Accounts -
The Company provides an allowance for doubtful accounts and
notes receivable based on the aggregate estimated collectibility
of the amountsreceivable.
Inventory Valuation -
Inventory are stated at the lower of cost or market, cost being
determined by the average cost method, except for materials in
transit which are stated at actual cost as determined by the spe-
cific identification method.
Property, Plant and Equipment and Related Depreciation -
Property, plant and equipment are stated at cost, except for cer-
tain assets subject to upward revaluation in accordance with the
Asset Revaluation Law. The revaluation presents production
facilities and other buildings at their depreciated replacement cost,
and land at the prevailing market price, as of the effective date
of revaluation. The revaluation increment, net of revaluation
tax, is first applied to offset accumulated deficit, if any, and the
remainder may either be credited to capital surplus which are trans-
ferred to common stock or may be credited to deferred foreign
currency translation losses.
A new basis for calculating depreciation is established for reval-
NOTES TO FINANCIAL STATEMENTS
40
December 31, 1998 and 1997