Samsung 2006 Annual Report Download - page 95

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the purpose of cash-flow hedges, which is recorded as an
adjustment to shareholders’ equity.
All derivative instruments are accounted for at fair value with
the resulting valuation gain or loss recorded as an asset or
liability. If the derivative instrument is not designated as a hedging
instrument, the gain or loss is recognized in earnings in the period
of change. Fair value hedge accounting is applied to a derivative
instrument with the purpose of hedging the exposure to changes
in the fair value of an asset or a liability or a firm commitment
(hedged item) that is attributable to a particular risk.
The gain or loss, both on the hedging derivative instrument and
on the hedged item attributable to the hedged risk, is reflected in
current operations. Cash flow hedge accounting is applied to
a derivative instrument with the purpose of hedging the exposure
to variability in expected future cash flows of an asset or a liability
or a forecasted transaction that is attributable to a particular risk.
The effective portion of the gain or loss on a derivative instrument
designated as a cash flow hedge is recorded as a capital
adjustment and the ineffective portion is recorded in current
operations. The effective portion of the gain or loss recorded as
a capital adjustment is reclassified to current operations in
the same period during which the hedged forecasted transaction
affects earnings. If the hedged transaction results in
the acquisition of an asset or the incurrence of a liability,
the gain or loss recognized as a capital adjustment is added to or
deducted from the asset or the liability.
Asset Impairment
When the book value of an asset is significant greater than its
recoverable value due to obsolescence, physical damage or
the abrupt decline in the market value of the asset, the decline in
value is deducted from the book value and recognized as an asset
impairment loss in the current year.
Note 3 United States Dollar Amounts
SEC and its Korean subsidiaries operate primarily in Korean
won and its official accounting records are maintained in Korean
won. The U.S. dollar amounts, provided herein, represent
supplementary information solely for the convenience of
the reader. All won amounts are expressed in U.S. dollars
at the rate of \929 to US$1, the exchange rate in effect on
December 31, 2006. Such presentation is not in accordance with
generally accepted accounting principles in either the Republic
of Korea or the United States, and should not be construed as
a representation that the won amounts shown could be readily
converted, realized or settled in U.S. dollars at this or at any
other rate.
The 2005 U.S. dollar amounts, which were previously expressed
at \1,013 to US$1, the rate in effect on December 31, 2005, have
been restated to reflect the exchange rate in effect on December
31, 2006.
Note 4 Cash Subject to Withdrawal Restrictions
Cash in banks subject to withdrawal restrictions as of December
31, 2006 and 2005, consist of the following:
Note 5 : Short-Term Available-For-Sale Securities and
Short-Term Held-To-Maturity Securities
Short-term available-for-sale securities as of December 31, 2006
and 2005, consist of the following:
(In millions of Korean won)
2006 2005
Short-term
financial
intruments
Government-sponsored
R&D projects \31,425 \33,525
Other activities 26,493 15,732
\57,918 \49,257
Long-term
financial
instruments
Government-sponsored
R&D projects - \8,826
Special deposits 77 133
Other activities 330 -
\407 \8,959
\58,325 \58,216
2006 2005
Financial institution bonds ¹\589,697 \585,225
Fair-value investments - 166,199
Beneficiary certificates ²1,469,084 1,114,543
ABS subordinated securities - 13,680
Others - 51,155
\2,058,781 \1,930,802
(In millions of Korean won)
¹ Includes accrued interest income amounting to \5,022 million (2005: \3,551 million).
² Beneficiary certificates as of December 31, 2006 and 2005, consist of the following: