Samsung 2013 Annual Report Download - page 31

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2013 SAMSUNG ELECTRONICS ANNUAL REPORT
2.10 Disposal Group Held-for-Sale
Non-current assets (or disposal group) are classied as assets held-for-
sale when their carrying amount is to be recovered principally through a
sale transaction and a sale is considered highly probable. The assets are
measured at the lower amount between their carrying amount and the fair
value less costs to sell.
2.11 Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses.
Historical cost includes expenditures that are 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 benets associated with
the item will ow to the Company and the cost of the item can be
measured reliably. The carrying amount of those parts that are replaced
is derecognized and repairs and maintenance expenses are recognized in
prot or loss in the period they are incurred.
Depreciation on tangible assets is calculated using the straight-line method
to allocate the difference between their cost and their residual values over
their estimated useful lives. Land is not depreciated. Costs that are directly
attributable to the acquisition, construction or production of a qualifying
asset, including capitalized interest costs, form part of the cost of that asset
and are amortized over the estimated useful lives.
The Company’s policy is that property, plant and equipment should be
depreciated over the following estimated useful lives:
Estimated useful lives
Buildings and structures 15, 30 years
Machinery and equipment 5 years
Others 5 years
The depreciation method, residual values and useful lives of property,
plant and equipment 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 as part of other
non-operating income and expenses.
2.12 Intangible Assets
Goodwill represents the excess of the cost of an acquisition over the fair
value of the group’s share of the net identiable assets of the acquired
subsidiary, associates, joint ventures and businesses at the date of
acquisition.
Goodwill on acquisitions of subsidiaries and businesses is included in
intangible assets and goodwill on acquisition of associates and joint
ventures are included in the investments in associates and joint ventures.
Intangible assets, except for goodwill, are initially recognized at their
historical cost and carried at cost less accumulated amortization and
accumulated impairment losses.
Internally generated development costs are the aggregate costs recognized
after meeting the asset recognition criteria, including technical feasibility,
and determined to have future economic benets. Membership rights are
regarded as intangible assets with indenite useful life and not amortized
because there is no foreseeable limit to the period over which the assets
are expected to be utilized. Intangible assets with denite useful life such as
trademarks and licenses are amortized using the straight-line method over
their estimated useful lives.
The Company’s policy is that intangible assets should be amortized over
the following estimated useful lives:
Estimated useful lives
Development costs 2 years
Trademarks, licenses and other intangible assets 5-10 years
2.13 Impairment of Non-Financial Assets
Goodwill or intangible assets with indenite useful life 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 identiable cash ows (cash-generating
units). Non-nancial assets other than goodwill that suffered impairment are
reviewed for possible reversal of the impairment at each reporting date.
2.14 Financial Liabilities
(A) Classication and measurement
Financial liabilities at fair value through prot or loss are nancial
instruments held for trading. Financial liabilities are classied in this
category if incurred principally for the purpose of repurchasing them in the
near term. Derivatives that are not designated as hedges or bifurcated from
nancial instruments containing embedded derivatives are also categorized
as held-for-trading.
The Company classies non-derivative nancial liabilities, except for
nancial liabilities at fair value through prot or loss, nancial guarantee
contracts and nancial liabilities that arise when a transfer of nancial
assets does not qualify for derecognition, as nancial liabilities carried at
amortized cost and presented as ‘trade payables’, ‘borrowings’, and ‘other
nancial liabilities’ in the statement of nancial position.
(B) Derecognition
Financial liabilities are removed from the statement of nancial position
when it is extinguished, for example, when the obligation specied in
the contract is discharged, cancelled or expired or when the terms of
an existing nancial liability are substantially modied.
2.15 Trade Payables
Trade payables are amounts due to suppliers for merchandise purchased or
services received in the ordinary course of business. If payment is expected
in one year or less (or in the normal operating cycle of the Company if
longer), they are classied as current liabilities. If not, they are presented as
non-current liabilities. Non-current trade payables are recognized initially at
fair value and subsequently measured at amortized cost using the effective
interest method.
2.16 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs
and 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 indenite 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.
2.17 Provisions
A provision is recognized when the Company has a present legal or
constructive obligation as a result of a past event, it is probable that
an outow of resources embodying economic benets will be required to
settle the obligation, and a reliable estimate can be made of the amount of
the obligation. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of the expenditures expected
to be required to settle the obligation using a pre-tax rate that reects
current market assessments of the time value of money and the risks
specic to the obligation. The increase in the provision due to passage of
time is recognized as interest expense.
When it is probable that an outow of economic benets will occur due to
a present obligation resulting from a past event, and the amount is
reasonably estimable, a corresponding provision is recognized in
the nancial statements. However, when such outow is dependent upon
a future event, that is not certain to occur, or cannot be reliably estimated,
a disclosure regarding the contingent liability is made in the notes to
the nancial statements.
2.18 Net Dened Benet Liabilities
The Company has a variety of retirement pension plans including dened
benet or dened contribution plans. A dened contribution plan is
a pension plan under which the Company pays xed contributions into
a separate entity. The Company has no legal or constructive obligations to
pay further contributions if the fund does not hold sufcient assets to pay all
employees the benets relating to employee service in the current and prior
periods. For dened contribution plans, the Company pays contributions to
annuity plans that are managed either publicly or privately on a mandatory,
contractual or voluntary basis. The Company has no further future payment
obligations once the contributions have been paid. The contributions are
recognized as employee benet expense when they are due.
Prepaid contributions are recognized as an asset to the extent that a cash
refund or a reduction in the future payments is available.
A dened benet plan is a pension plan that is not a dened contribution
plan. Typically dened benet plans dene an amount of pension benet
that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and compensation. The liability
recognized in the statement of nancial position in respect to dened
benet pension plans is the present value of the dened benet obligation at
the end of the reporting period less the fair value of plan assets. The dened
benet obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the dened benet
obligation is determined by discounting the estimated future cash outows
using interest rates of high-quality corporate bonds that are denominated
in the currency in which the benets will be paid and that have terms to
maturity approximating to the terms of the related pension obligation.
Actuarial gains and losses resulting from the changes in actuarial
assumptions, and the differences between the previous actuarial
assumptions and what has actually occurred, are recognized in other
comprehensive income in the period in which they were incurred.
Past service costs are immediately recognized in prot or loss.
2.19 Financial Guarantee Contract
Financial guarantee contracts are contracts that require the issuer to make
specied payments to reimburse the holder for a loss it incurs because
a specied debtor fails to make payments when due. Financial guarantees
are initially recognized in the nancial statements at fair value on the date
the guarantee was given. If the amount measured in subsequent periods
exceeds the unamortized balance of the amount initially recognized,
the excess is classied as other nancial liability.
2.20 Current and Deferred Tax
The tax expense for the period comprises current and deferred tax.
Tax is recognized on the prot for the period in the statement of income,
except to the extent that it relates to items recognized in other
comprehensive income or directly in equity, in which case the tax is also
recognized in other comprehensive income or directly in equity, respectively.
The tax expense is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period.
Deferred tax is recognized for temporary differences arising between
the tax bases of assets and liabilities and their carrying amounts as
expected tax consequences at the recovery or settlement of the carrying
amounts of the assets and liabilities. However, deferred tax assets and
liabilities are not recognized if they arise from initial recognition of an asset
or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable prot or
loss. Deferred tax assets are recognized only to the extent that it is probable
that future taxable prot will be available against which the temporary
differences can be utilized.
A deferred tax liability is recognized for taxable temporary differences
associated with investments in subsidiaries, associates, and interests in
joint ventures, except to the extent that the Company is able to control
the timing of the reversal of the temporary differences and it is probable
that the temporary difference will not reverse in the foreseeable future.
In addition, a deferred tax asset is recognized for deductible temporary
differences arising from such investments to the extent that it is probable
the temporary difference will reverse in the foreseeable future and taxable
prot will be available against which the temporary difference can be utilized.