Samsung 1998 Annual Report Download - page 53

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The Company recorded ￦115,678 million of consideration for conversion rights, the difference between nominal value and the
discounted present value at the 5.558% guaranteed return rate, as an adjustment to debentures and shareholders’ equity related
to the issuance of foreign currency convertible bonds. The conversion rights account is amortized using the effective interest
method and amortization of ￦8,607 million was recognized as interest expense during 1998.
During 1998, US$ 500,000 of convertible bonds were converted to common stocks at the conversion price of ￦123,635 per
share (see Note 1).
In relation with the conversion to common stock, the Company recorded ￦10 million as other capital surplus, the difference
between conversion rights and related consideration for conversion rights.
12. Commitments and Contingencies
•At December 31, 1998, the Company was contingently liable for guarantees of indebtedness, principally for affiliated companies,
approximating ￦74,800 million and US$ 2,578,905 thousand. In addition, the Company is contingently liable for accounts and
notes receivable sold with recourse, but not matured, approximating ￦9,846 million.
•At December 31, 1998, the Company has entered into technical assistance agreements with certain foreign companies. Total
royalty expense related to these agreements incurred during 1998 amounts to approximately ￦684,640 million.
•At December 31, 1998, the Company has entered into lease agreements with several
leasing companies which are recognized as direct financing leases. These lease
agreements are summarized as follows:
Millions of Korean Won
Depreciation Expense
Accounts Acquisition Cost Charged to 1998 Operations
Machinery and equipment 1,919,018 172,421
Scheduled future lease payments, net of interest, under these lease arrangements which are included with long-term debt
(see Note 10) at December 31, 1998 are as follows:
Thousands of Korean Won
1999 380,327,142
2000 418,023,819
2001 383,387,108
2002 218,500,549
Thereafter 37,934,752
1,438,173,370
In addition, at December 31, 1998, the Company has entered into lease agreements which are recognized as operating leases.
Related rental payments are charged to operations as incurred. Rental expense under operating lease agreements amounts to
￦1,334 million in 1998, and future rental payments are as follows :
Thousands of US Dollar
1999 465
2000 323
2001 107
895
•As of December 31, 1998, the Company has entered into forward exchange contracts (buying amounts of US$ 271,900thousand
and HKD 469,040 thousand and selling amounts of US$ 60,000 thousand, ￦133,974 million, HKD 642,160 thousand and CNY
799,935 thousand), Currency SWAP contracts (buying amounts of DM 434,840thousand and selling amounts of US$ 265,279
thousand) and Interest SWAP contracts amounting to US$1,400,000 thousand and ￥20,000,000 thousand with certain financial
institutions. The unrealized losses expected from the above forward exchange and SWAP contracts are approximately ￦37,513
NOTES TO FINANCIAL STATEMENTS
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