Samsung 1998 Annual Report Download - page 55

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(C) The Financial Control Regulations for listed companies require the Company to appropriate as a reserve for improvement of
financial structure an amount equal to at least 50% of the net extraordinary gain on disposal of property, plant and equipment and
10% of net earnings for each year until the Company’s net worth equals 30% of total assets. This reserve is not available for
payment of cash dividends, but may be transferred to capital stock or used to reduce accumulated deficit, if any.
(D) Pursuant to Korean tax laws, the Company is allowed to claim the amounts of retained earnings appropriated for reserves
for overseas market development, overseas investment losses, technology development and export losses as deductions in
determining taxable income. These amounts are not available for dividends until used for the specified purposes or reversed.
(E) The reserve for facilities represents amounts appropriated by the Company for capital expenditures and may be used for any
purpose through shareholders’ resolution.
14. Dividends
At December 31, 1998, the Company’s income available for dividends under the Commercial Code in the Republic of Korea
amounts to ￦2,785,556 million and dividend propensity is approximately 28.02%.
For the year ended December 31, 1998, a cash dividend of ￦87,760 million (Common stock : 12%, Preferred stock : 13%) is
proposed for the general stockholders’ meeting to be held on March 20, 1999.
15. Treasury stock
At December 31, 1998, the Company acquired 3,449,625 shares of common stock and 869,693 shares of non-voting preferred
stock under the authorization of the Board of Directors. This treasury stock is recorded as a capital adjustment and will be sold
subject to stock market conditions.
16. Income Taxes
The statutory income tax rate, including resident tax surcharges, applicable to the Company in 1998 is approximately 30.8%.
However, the actual income tax expense reported by the Company differs from the expected income tax computed at the
statutory income tax rate as follows:
Tax Rates (%) Thousands of Korean Won
1998 1997 1998 1997
Income tax expense computed
at the statutory rate 30.8 30.8 126,543,747 47,315,180
Reversal of special reserves
appropriated for tax purposes (see Note 13) 35.0 29.3 143,681,969 44,980,391
Investment tax credits (19.2) (21.5) (79,115,643) (33,056,154)
Capitalized interest expense (6.1) (11.4) (25,289,979) (17,570,762)
Foreign exchange losses (22.6) (13.9) (92,852,879) (21,340,190)
Timing differences from revenue recognition (1.9) (0.1) (7,946,305) (279,448)
Invested stock reduction loss 8.4 - 34,689,080 -
Non-deductible donations - 12.0 - 18,490,365
Others, net (0.6) (5.6) (2,069,707) (8,423,577)
Income tax, as reported 23.8 19.6 97,640,283 30,115,805
The accumulated temporary differences between amounts reported for financial accounting and for tax purposes at December
31, 1998 are approximately ￦1,191,845 million, and their effect will be to increase future taxable income. These differences arise
primarily in connection with foreign exchange losses and the appropriation of various reserves for tax purposes (see Note 13)
NOTES TO FINANCIAL STATEMENTS
54