Samsung 2005 Annual Report Download - page 94

92
surplus or transferred to common stock. A new basis for
calculating depreciation is established for revalued assets.
Depreciation is computed using the straight-line method over
the following estimated useful lives:
Maintenance and Repairs
Routine maintenance and repairs are charged to expense as
incurred. Expenditures which enhance the value or extend the
useful life of the related assets are capitalized.
Intangible Assets
Intangible assets are amortized on a straight-line basis over
the following estimated useful lives:
Lease Transactions
A lease which has substantially non-cancelable terms, and
transfers the benefits and risks incidental to ownership from
lessor to lessee is classified as a financing lease. All other
leases are classified as operating leases.
Financing lease receivables are recorded at fair value.
Accrued interest is recognized over the lease period using the
effective interest rate method.
Machinery and equipment acquired under capital lease
agreements are recorded at cost as property, plant and
equipment and depreciated using the straight-line method
over their estimated useful lives. In addition, the aggregate
lease payments are recorded as obligations under capital
leases, net of accrued interest. Accrued interest is amortized
over the lease period using the effective interest rate method.
Machinery and equipment acquired under operating
lease agreements are not included in property, plant and
equipment. Rather, the related lease rentals are charged to
expense when incurred.
Discounts and Premiums on Debentures
The difference between the face amount and the proceeds
upon the issuance of a debenture is treated as either a
discount or premium of the debenture, which is amortized
over the term of the debenture using the effective interest
rate method. The discount or premium is reported in the
balance sheet as a direct deduction from or addition to the
face amount of the debenture. Amortization of the discount or
premium is treated as part of interest expense.
Convertible Bonds
The Company separately recognizes the value of conversion
rights when issuing convertible bonds. The conversion rights
compensation, which is calculated by deducting the present
value of general bonds from the issue price of convertible
bonds, is stated as capital surplus. The conversion rights
adjustment is deducted from the par value and the put premium
is added to the par value of convertible bonds. Amortization
of the conversion right adjustment is treated as part of interest
expense over the term of the bonds using effective interest
rate method.
However, for convertible bonds issued before December 31,
2002, the previous standard is applied.
Stock and Debenture Issuance Costs
Stock issuance costs are charged directly to paid-in capital in
excess of par value. Debenture issuance costs are recorded
as a reduction of the proceeds from the issuance of the
debenture.
Government Grants
Government grants received for the development of certain
technologies are recorded as accrued income, and offset
against relevant development costs as they are incurred.
Accrued Severance Benefits
Employees and directors with at least one year of service are
entitled to receive a lump-sum payment upon termination of
their employment with the SEC, its Korean subsidiaries and
certain foreign subsidiaries, based on their length of service
and rate of pay at the time of termination. Accrued severance
benefits represent the amount which would be payable
assuming all eligible employees and directors were to
terminate their employment as of the balance sheet date.
Estimated useful lives
Buildings and auxiliary facilities 15, 30 years
Structures 15 years
Machinery and equipment 5 years
Tools and fixtures 5 years
Vehicles 5 years
Estimated useful lives
Goodwill 5 years
Intellectual property rights 10 years
Other intangible assets 5 years