Samsung 1998 Annual Report Download - page 43

Discounts and Premiums on Debentures and Adjustment
Account for Conversion Rights -
Discounts and premiums on debentures represent the difference
between the issue price and par value of debentures. Discounts
and premiums on debentures are amortized over the redemp-
tion period of the related debentures using the straight-line
method. The amortized amounts from discount on debentures
are recorded as interest expenses and the amortized amounts
from premiums on debentures are deducted from interest
expenses.
The Company records a consideration for conversion rights and
an adjustment account for conversion rights which represents the
difference between the nominal value and the discounted present
value at market return rate or guaranteed return rate, if any, of con-
vertible debentures. These amounts are reported as an adjustment
account to debentures, and credited to shareholders’ equity.
The adjustment account for conversion rights is amortized using
the effective interest rate method and is recognized as interest
expense. When convertible debentures are converted, the con-
sideration for conversion rights is offset against the related
adjustment account for conversion rights and the remainder is
presented as other capital surplus.
Foreign Currency Translation -
Monetary assets and liabilities denominated in foreign currencies
are translated into Korean Won at the basic rates in effect at the
balance sheet date (in case of U.S. Dollars, US$1 to 1,207.80),
and resulting translation gains and losses are recognized currently.
However, translation gains or losses on long-term monetary
assets and liabilities denominated in foreign currencies, which result-
ed from significant changes in the exchange rate in 1997 were
deferred. Subsequent gains or losses incurred for the same mon-
etary assets and liabilities in 1998 were offset against the deferred
amount carried forward from 1997 and the net amount remain-
ing is to be amortized over the maturities of the corresponding
assets and liabilities using the straight-line method.
Foreign currency convertible debentures are translated at a
fixed exchange rate for conversion in accordance with account-
ing practices prevailing in the Republic of Korea.
Income Taxes -
The provision for income taxes is comprised of corporate tax,
resident tax and agriculture and fishery development special tax
surcharges, payable in the current year. In conformity with
accounting practices prevailing in the Republic of Korea, the
Company does not recognize deferred income taxes arising
from temporary differences between amounts reported for
financial accounting and income tax reporting purposes.
Investment tax credits are recognized as a reduction of income
tax expense in the year in which they are utilized.
Earnings Per Share -
Earnings per share are computed, after deduction of dividends
declared non-voting preferred stock, using the weighted average
number of common shares outstanding during the period.
Product Warranties and Performance Guarantees -
In conformity with accounting practices prevailing in the Republic
of Korea, costs related to repairs, service and other work
required in accordance with product warranties and perfor-
mance guarantees are charged to expense when incurred.
Prior Period Error Corrections -
Pursuant to the revised generally accepted financial accounting
standards effective January 1, 1997, the Company recorded pri-
or period error corrections as extraordinary income or loss. Prior
period error corrections include refinements of estimates used
in prior years and the resolution of matters outstanding from pri-
or years.
Significant Changes in Financial Accounting Standards -
In December 1998, significant changes to the financial account-
ing standards in Korea were announced which will change
accounting principles generally accepted in Korea to be more con-
sistent with International Accounting Standards. These changes,
including accounting for investment securities, foreign currency
translation, impairment of long-lived assets,
deferred assets, goodwill, and prior period adjustments are
effective for years beginning on or after January 1, 1999. The cumu-
lative effect on prior years of these changes in accounting poli-
cies will be charged or credited to retained earnings, with dis-
closure on the effect of the change on prior years’ net income.
In addition, recognition of income tax expenses and deferred income
taxes will be applied in accordance with the provision of the
Addendum of the Financial Accounting Standards of the Republic
of Korea.
3. Amounts Stated in U.S. Dollars
The Company operates primarily in Korean Won and its official
accounting records are maintained in Korean Won. The US
Dollar amounts are provided herein as supplementary informa-
tion solely for the convenience of the reader. For both 1998 and
1997, Won amounts are expressed in US Dollars at the rate of
￦1,207:US$1, the rate in effect on December 31, 1998. This pre-
sentation is not in accordance with accounting principles gener-
ally accepted in either Korea or the United States, and should not
be construed as a representation that the Won amounts shown
could be converted, realized or settled in US Dollars at these rates.
The 1997 U.S.Dollar amounts, which were previously expressed
at ￦1,415:US$1, the rate prevailing on December 31, 1997,
have been restated to reflect the exchange rate in effect on
December 31, 1998.
NOTES TO FINANCIAL STATEMENTS
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