Samsung 2006 Annual Report Download - page 92

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available-for-sale securities and held-to-maturity securities are
classified as long-term investments, except those securities that
mature or are certain to be disposed of within one year which are
classified as current assets.
Cost is measured at the market value upon acquisition, including
incidental costs, and is determined using the average cost
method.
Available-for-sale securities are stated at fair value, while non-
marketable equity securities are stated at cost. Unrealized holding
gains and losses on available-for-sale securities are reported
in a separate component of shareholders’ equity under capital
adjustments, which are to be included in current operations
upon the disposal or impairment of the securities. In the case of
available-for-sale debt securities, the difference between
the acquisition cost after amortization, using the effective interest
rate method, and the fair value is reported as a capital adjustment.
Impairment resulting from the decline in realizable value below
the acquisition cost, net of amortization, are included in current
operations.
Equity-Method Investments
In the consolidated financial statements of the Company,
investments in business entities in which the Company has
the ability to exercise a significant influence over the operating and
financial policies are accounted for using the equity method of
accounting.
Under the equity method, the original investment is recorded at
cost and adjusted by the Company’s share in the net book value
of the investee with a corresponding charge to current operations,
a separate component of shareholders’ equity, or retained
earnings, depending on the nature of the underlying change in
the net book value. All significant unrealized profits arising from
intercompany transactions between the Company and its
equity-method investee and subsidiaries are fully eliminated.
Differences between the investment amounts and corresponding
capital amounts of the investee at the date of acquisition of
the investment are recorded as part of investments and are
amortized over five years using the straight-line method.
However, differences which occur from additional investments
made after the Company obtains control and the investment
becomes a subsidiary are reported in a separate component of
shareholders’ equity, and are not included in the determination of
the results of operations.
Assets and liabilities of the Company’s foreign investees are
translated at current exchange rates, while income and expenses
are translated at average rates for the year. Adjustments resulting
from the translation process are reported in a separate component
of shareholders’ equity, and are not included in the determination
of the results of operations.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts and
notes receivable based on the aggregate estimated collectibility of
the receivables.
Inventory Valuation
Inventories are stated at the lower of cost or net realizable value.
Cost is determined using the average cost method, except for
materials-in-transit which are stated at actual cost as determined
using the specific identification method. Losses on valuation of
inventories and losses on inventory obsolescence are recorded as
part of cost of sales.
Property, Plant and Equipment and Related Depreciation
Property, plant and equipment are stated at cost, except for
certain assets subject to upward revaluation in accordance with
the Asset Revaluation Law of Korea. The revaluation presents
production facilities and other buildings at their depreciated
replacement cost, and land at the prevailing market price, as of
the effective date of revaluation. The revaluation increment, net of
revaluation tax, is first applied to offset accumulated deficit and
deferred foreign exchange losses, if any. The remainder may be
credited to other capital 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.
Estimated useful lives
Buildings and auxiliary facilities 15 and 30 years
Structures 15 years
Machinery and equipment 5 years
Tools and fixtures 5 years
Vehicles 5 years