Samsung 2011 Annual Report Download - page 28

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(2) Assets classified as available-for-sale
The Company assesses at the end of each reporting period whether there
is objective evidence that a financial asset or a group of financial assets
is impaired. In the case of equity investments classified as available-for-
sale, a significant or prolonged decline in the fair value of the security
below its cost is also evidence that the assets are impaired. If any such
evidence exists for available-for-sale financial assets, the cumulative loss
– measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset previously
recognized in profit or loss – is removed from equity and recognized
in the consolidated statement of income. Impairment losses on equity
instruments recognized in the consolidated statement of income are not
reversed through the consolidated statement of income. If, in a
subsequent period, the fair value of a debt instrument classified as
available-for-sale increases and the increase can be objectively related to
an event occurring after the impairment loss was recognized in profit or
loss, the impairment loss is reversed through the consolidated statement
of income.
E) Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows
from the investments have expired or have been transferred and the
company has transferred substantially all risks and rewards of ownership
(if substantially not all risks and rewards of ownership have not been
transferred, the Company should assess its control to ensure whether the
derecognition criteria have not been met due to its continuing involvement
with the investments).
Since the Company retains substantially all risks and rewards associated
with the receivables in factoring arrangements with recourse. Financial
liabilities that arise when a transfer of such receivables does not qualify
for derecognition. Such liabilities are classified as mortgage payables in
the consolidated balance sheet.
2.7 Trade Receivables
Trade receivables are amounts due from customers for merchandise sold
or services performed in the ordinary course of business. If collection
is expected in one year or less (or in the normal operating cycle of the
Company if longer), they are classified as current assets. If not, they
are presented as noncurrent assets. Non-current trade receivables are
recognized initially at fair value and subsequently measured at amortized
cost using the effective interest method, less provision for impairment.
2.8 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is
determined using the average cost method, except for materials-in-transit.
The cost of finished goods and work in progress comprises design costs,
raw materials, direct labor, other direct costs and related production
overheads (based on normal operating capacity). It excludes costs of idle
plant, and abnormal waste. Net realizable value is the estimated selling
price in the ordinary course of business, less applicable variable selling
expenses.
Inventories are reduced for the estimated losses arising from excess,
obsolescence, and the decline in value. This reduction is determined by
estimating market value based on future customer demand. The losses on
inventory obsolescence are recorded as a part of cost of sales.
2.9 Disposal Groups Classified as Held for Sale
When the carrying amount of certain assets and liabilities are expected
to be recovered through sale and the sale of a disposable group is highly
probable, such assets and liabilities are classified as held for sale and
measured at the lower of its carrying amount and fair value.
2.10 Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses. Historical cost
includes expenditure that is directly attributable to the acquisition of the
items. Subsequent costs are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the
Company and the cost of the item can be measured reliably.
Capitalized interest is added to the cost of the underlying assets. The
acquisition cost of property, plant and equipment acquired under a finance
lease is determined at the lower of the present value of the minimum lease
payments and the fair market value of the leased asset at the inception of
the lease. Property, plant and equipment acquired under a finance lease,
leasehold improvements are depreciated over the shorter of the lease term
or useful life.
Land is not depreciated. Depreciation on other assets is calculated using
the straight-line method to allocate their cost to their residual values over
their estimated useful lives, as follows :
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
The assets’ residual values and useful lives are reviewed, and adjusted
if appropriate, at the end of each reporting period. An asset’s carrying
amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing the proceeds
with the carrying amount and are recognized within the statement of
income.
2.11 Intangible Assets
A) Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the group’s share of the net identifiable assets of the
acquired subsidiary at the date of acquisition. Goodwill on acquisitions
of subsidiaries is included in intangible assets. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is not amortized as the carrying amount of accumulated
goodwill amortization presented shall be adjusted against the original
cost of goodwill. Goodwill is tested annually for impairment and carried
at cost less accumulated impairment losses. Goodwill is tested for
impairment annually or more frequently if there is any indication that it
may be impaired. Goodwill is tested for impairment by comparing the
carrying amount of the cash-generating unit with the recoverable amount,
which is the higher of its fair value less costs to sell and its value in use.
An impairment loss is immediately recognized and is not subsequently
reversed.
B) Capitalized development costs
The Company capitalizes certain development costs when outcome of
development plan is for practical enhancement, probability of technical
and commercial achievement for the development plans are high, and the
necessary cost is reliably estimable. Capitalized costs, comprising direct
labor and related overhead, are amortized by straight-line method over
their useful lives. In presentation, accumulated amortization amount and
accumulated impairment amount are deducted from capitalized costs
associated with development activities.
C) Other intangible assets
Certain membership dues is regarded as having an indefinite useful life
because there is no foreseeable limit to the period over which the asset is
expected to generate net cash inflows for the entity; such assets are not
amortized.
Trademarks and licenses, which are separately acquired, are presented at
historical cost. Trademarks and licenses which are acquired in business
combinations are recorded at the fair value at the acquisition date. They
have definite useful lives and are measured at cost less any accumulated
amortization and amortized on a straight-line basis over their 5 or 10 year
estimated useful lives.
The contractual customer relationships were acquired in a business
combination, and are recognized at fair value at the acquisition date. The
contractual relationships have a definite useful life and are recorded at
cost less any accumulated amortization and amortized on a straight-line
basis over the estimated period of the customer relationship.
Software is capitalized and amortized using the straight-line method
over their useful lives, generally 5 to 10 years. Where an indication of
impairment exists, the carrying amount of any intangible asset is assessed
and written down its recoverable amount.
2.12 Impairment of Non-financial Assets
Assets that have an indefinite useful life, for example goodwill, are not
subject to amortization and are tested annually for impairment. Assets that
are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash-
generating units). Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at each
reporting date.
2.13 Financial Liabilities
A) Financial liabilities at fair value through profit or loss
Financial liabilities are acquired or incurred principally for the purpose of
selling or repurchasing in the near term. Financial liabilities at fair value
through profit or loss of the Company consist of financial instruments
which contain non-derivative financial assets or embedded derivatives.
B) Financial liabilities measured at amortized cost
Unless financial liabilities arise when transfer of financial assets or financial
liabilities at fair value through profit or loss do not qualify for derecognition,
all non-derivative financial liabilities are classified as financial liabilities
measured at amortized cost. If a transfer does not result in derecognition,
the Company continues to recognize the transferred asset and recognize
a financial liabilities for the consideration received. Financial liabilities
measured at amortized cost, due within twelve months after the balance
sheet date, are classified as current liabilities. Otherwise, they are
classified as long-term liabilities.
2.14 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs.
Borrowings are subsequently measured at amortized cost; any difference
between cost and the redemption value is recognized in the statement
of income over the period of the borrowings using the effective interest
method. If the Company has an indefinite right to defer payment for a
period longer than 12 months after the end of the reporting date, such
liabilities are recorded as non-current liabilities. Otherwise, they are
recorded as current liabilities.
2.15 Employee Benefits
The Company has either defined benefit or defined contribution plans
at respective company level. A defined contribution plan is a pension
plan under which the Company pays fixed contributions into a separate
entity. The Company has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the current
and prior periods. A defined benefit plan is a pension plan that is not a
defined contribution plan. Typically defined benefit plans define an amount
of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and
compensation.
The liabilities recognized in the statement financial position in respect of
defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan
assets, together with adjustments for unrecognized past-service costs.
The defined benefit obligation is calculated annually by independent
actuaries using the projected unit credit method. The present value of
the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds
that are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating to the terms of the related
pension liability.
Actuarial gains and losses are recognized using the corridor approach.
The company recognizes actuarial gains and losses in excess of a de
minimis over the remaining working lives of employees. The de minimis