Samsung 2007 Annual Report Download - page 88

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
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:
LEASES
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 the present value of
minimum lease payments. Accrued interest is recognized over the
lease period using the effective interest rate method.
Operating lease assets are recognized as property, plant and
equipment and depreciated using the same depreciation method
used for other similar assets. Revenues from operating lease
assets are recognized on a reasonable basis to reflect patterns of
benefits over the lease term.
DISCOUNTS AND PREMIUMS ON DEBENTURES
The difference between the face value and the proceeds on issu-
ance of a debenture is treated as either a discount or premium on
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 value 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.
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 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.
In accordance with the National Pension Act, a certain portion of the
accrued severance benefits is deposited with the National Pension
Fund and deducted from the accrued severance benefits liability.
REVENUE RECOGNITION
Sales of products and merchandise are recognized upon delivery
when the significant risks and rewards of ownership of the goods
are transferred to the buyer. Revenue from installation service
contracts is recognized using the percentage-of-completion
method.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are trans-
lated into Korean won at the rate of exchange in effect as of the
balance sheet date. Gains and losses resulting from the transla-
tion are reflected as either income or expense for the period.
TRANSLATION OF FOREIGN OPERATIONS
Accounts of foreign subsidiaries are maintained in the currencies
of the countries in which they operate. In translating the foreign
currency financial statements of these subsidiaries into Korean
won, income and expenses are translated at the average rate
for the year and assets and liabilities are translated at the rate
prevailing on the balance sheet date. Resulting translation gains
or losses are recorded as a cumulative translation adjustment
presented as part of shareholders’ equity.
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
Estimated useful lives
Goodwill 5 years
Intellectual property rights 10 years
Other intangible assets 5 years