Samsung 2005 Annual Report Download - page 116

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114
(F) As of December 31, 2005, the Company has various
lease agreements that are recognized as operating leases.
Related rental payments are charged to current operations as
incurred. Future rental expenses under these non-cancelable
operating lease agreements amounted to \228,951 million
as of December 31, 2005.
(G) Samsung Card Co., Ltd. maintains a lease financing
business with lease receivables related chips to such business
recorded as short-term and long-term financing receivables
(notes 8 and 11). Scheduled future lease revenue from these
operating lease arrangements are as follows:
(H) As of December 31, 2005, the Company holds a contract
to supply NAND Flash Memory chips to Apple Computer, Inc.
from 2007 to 2009. The Company received \505,950 million
as advance for the contract, and has recognized this amount
as long-term advances received.
(I) As of December 31, 2005, the Company maintains credit
insurance against its approved foreign customers on behalf
of its affiliates and subsidiary companies with Korea Export
Insurance Co.
(J) As of December 31, 2005, the Company has forward
exchange contracts to manage the exposure to changes
in currency exchanges rates in accordance with its foreign
currency risk management policy. The use of foreign currency
forward contracts allows the Company to reduce its exposure
to the risk that it may be adversely affected by changes in
exchange rates.
In addition, the Company has interest rate swap contracts
and foreign currency swap contract to reduce the impact of
changes in floating rates on long-term debt and borrowings,
and interest rate swap contracts and foreign currency swap
contracts to reduce the impact of changes in the fair-value
risk on fixed rate long-term debt.
A summary of derivative transactions as of and for the year
ended December 31, 2005 and 2004, follows:
Of the amounts charged to capital adjustments from the
valuation of interest rate swap contracts, a loss of
\19 million will be realized by December 31, 2006.
(K) SEC and 30 other Samsung Group affiliates
(the “Affiliates”) entered into an agreement with the institutional
creditors (the “Creditors”) of Samsung Motors Inc. (“SMI”) in
September 1999. In accordance with this agreement, SEC
and the Affiliates agreed to sell 3,500,000 shares of Samsung
Life Insurance Co., Ltd., which were previously transferred
to the Creditors in connection with the petition for court
receivership of SMI by December 31, 2000. In the event that
the sales proceeds fall short of \2,450 billion, SEC and the
Affiliates have agreed to compensate the Creditors for the
shortfall by other means, including the participation in any
equity offering or subordinated debentures issued by the
Creditors. Any excess proceeds over \2,450 billion are to be
distributed to SEC and the Affiliates. In the event of delays,
interest on the agreed sales proceed amount of \2,450 billion
has been agreed to be paid to the Creditors by SEC and
the Affiliates. As of the balance sheet date, these transferred
shares of Samsung Life Insurance Co., Ltd. have not yet been
sold. As a result, on December 9, 2005, the Creditors filed a
civil lawsuit against Mr. Lee Kun-Hee the chairman of SEC,
SEC and 27 other Samsung Group Companies, for losses
arising from breach of this agreement.
The Creditors are claiming for the agreed sales proceed
amount of \2,450 billion and damages for delays amounting
to \2,287.9 billion, both with interest of 6% per annum from
January 1, 2001 until the date SEC was served with court
papers and 20% per annum thereafter until settlement. The
interest on the damages for delays has been calculated on a
Year (in millions of Korean won)
2006 \166,600
2007 117,352
2008 45,736
Thereafter 939
\330,627
2005 2004
Type Asset
Liability
Gain (loss) on
Valuation (I/S)
Gain (loss) on
Valuation (B/S)
Asset
Liability
Forward
exchange
\ 5,704 \ 6,255 - \ 4,859
(7,361) (7,519) - (10,228)
Interest rate
swap
9,228 - 8,386 8,009
(6,202) (112) (5,249) (23,087)
Currency
swap
- - - 868
(5,480) (5,480) - (19,621)
(in millions of Korean won)