Crucial 2011 Annual Report Download - page 155

5
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
bargain purchase price or lessee’
s guaranteed residual value or (b) the fair market value of leased assets at the lease inception
date, whichever is lower. The depreciation period is restricted to the lease term, rather than the estimated useful life of the
assets, unless the lease provides for transfer of title or includes a bargain purchase option.
Under a capital lease, the Company, as the lessor, records all installments plus bargain purchase price or guaranteed residual
value as the lease receivables. The implicit interest rate is used to calculate the present value of lease receivables as the cost
of leased assets transferred. The difference between the total amount of lease receivables and the cost of leased assets
transferred is recognized as unrealized interest income and is then recognized as realized interest income using the interest
method over the lease term.
(l) Employee retirement plan
The Company has established an employee noncontributory defined benefit retirement plan (the “Plan”) covering full-
time
employees in the Republic of China. In accordance with the Plan, employees are eligible for retirement or are required to
retire after meeting certain age or service requirements. Payments of retirement benefits are based on years of service and the
average salary for the last six months before the employee’s retirement. Each employee gets 2 months’
salary for each
service year for the first 15 years, and 1 month’s salary for each service year thereafter. A lump-
sum retirement benefit is
paid through the retirement fund.
Starting from July 1, 2005, the enforcement of the newly enacted Labor Pension Act (the “New Act”)
stipulates those
employees covered by the defined contribution plan as follows:
In accordance with the New Act, the rate of contribution by an employer to an individual labor pension fund account per
month shall not be less than 6% of the worker’
s monthly wages. The Plan has not been modified to conform to the New Act.
For those provisions of the New Act not currently included in the Plan, the Company follows the New Act. The Company
contributes monthly to the individual labor pension fund at the rate of 6% of paid salaries and wages. This fund is deposited
with Bureau of Labor Insurance.
The Company applies the guidance in Statement of Financial Accounting Standards (SFAS) No. 18 “
Accounting for
Pensions” for its defined benefit retirement plan. SFAS No. 18 requires an actuarial calculation of the Company’
s pension
obligation at the end of each year. Based on the actuarial calculation, the Company recognizes a minimum pension liability
and net periodic pension costs. The Company provides monthly contributions to the retirement fund at the rate of 2% of paid
salaries and wages. This fund is deposited with Bank of Taiwan.
(Continued)
(i) Employees who were covered by the Plan and opt to be subject to the pension mechanism under the New Act;
(ii)
Employees who are employed after the enforcement date of the New Act.