Samsung 2005 Annual Report Download - page 122

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120
The fair value of each option grant was estimated using the
Black-Scholes option-pricing model based on the date of the
grant using the following assumptions:
The compensation expense related to stock options
amounted to \59,439 million for the year ended December
31, 2005, and is estimated to be \18,224 million for the
periods thereafter.
Samsung Card Co. Ltd., a domestic subsidiary, has
granted 375,000 shares in stock options over two periods.
The exercise price and the number of shares granted to
employees and directors of Samsung Capital Co., Ltd. as
part of the merger in 2004 have been adjusted by 227,395
shares using the ratio of merger. The compensation expense
recognized by Samsung Card Co., Ltd. is \2 million (2004:
\111 million) for the year ended December 31, 2005. The
stock options of \1,231 million according to the SEC’s
ownership ratio are included in a separate component of
shareholders’ equity as other capital adjustments.
Note 26: Income Tax
The statutory income tax rate applicable to the Company,
including resident surtax, is approximately 27.5%.
Income tax expense for the years ended December 31, 2005
and 2004, consists of the following:
The following table reconciles the expected amount of income
tax expense based on Korean normal income tax rates to
the actual amount of taxes recorded by the Company for the
years ended December 31, 2005 and 2004:
(in millions of Korean won) 2005 2004
Current income tax \1,586,753 \2,271,972
Increase (decrease) in
deferred income taxes (358,394) (54,132)
Items charged directly to
shareholders’ equity (10,113) (10,555)
\1,218,246 \2,207,285
(in millions of Korean won) 2005 2004
Income before taxes \8,125,313 \12,376,158
Statutory tax rate 27.5% 29.7%
Expected taxes
at statutory rate 2,234,461 3,675,719
Tax credit (1,292,932) (1,680,419)
Others, net 276,717 211,985
Actual taxes \1,218,246 \2,207,285
Effective tax rate 15.0% 17.8%
Date of the Grant
2000 2001 2002 2003 2004 2005
March 16 March 9 February 28 March 25 March 7 April 16 October 15 December 20
Risk-free
interest rates 9.08% 6.04% 5.71% 6.44% 4.62% 4.60% 3.56% 4.95%
Expected stock
price volatility 69.48% 74.46% 64.97% 64.90% 60.08% 43.09% 42.46% 32.71%
Expected life 4 years 4 years 3 years 3 years 3 years 3 years 3 years 3 years
Expected
dividend yield 0.39% 0.89% 0.73% 0.74% 1.25% 0.73% 0.99% 1.14%