Crucial 2011 Annual Report Download - page 163

13
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
facilities and land were US$13,010 thousand and US$1,990 thousand, respectively from January 1, 2010 to December 31,
2018; the first yearly renewal rentals for the leased building including facilities and land
(Continued)
(e)
The bases for the capitalization of interests for the years ended December 31, 2008, 2009 and 2010, were as follows:
For the years ended December31,
2008 2009 2010
Total interest expenses
$
2,266,597
1,635,108
1,412,072
Capitalized interest (charged to construction in progress)
126,580
12,426
107,009
Capitalized interest rates
2.9490%~3.6625%
1.5938%~2.3679%
1.8815%~2.1342%
(f)
The property, plant and equipment pledged to secure bank loans were described in note 14.
(9)
Leased Assets and Lease Payables
(a)
The Company signed a long-
term lease agreement with NTC to lease and use a portion of the building and land located on
the land numbered 348, 348-2 and 348-4, Hwa-
Ya Section, Kueishan Valley, Taoyuan County. The lease term
commences on July 1, 2005, and will expire on February 28, 2029 (including the period when the agreement can be
automatically extended), a total lease period of 284 months. The lease agreement for the building is treated as a capital
lease because (a) the present value of the periodic rental payments made since the inception date is at least 90% of the
market value of the leased assets and (b) the lease term is equal to 75% or more of the total estimated economic life of
the leased assets. The lease for the land is treated as an operating lease because the fair value of the land is 25 percent or
more of the total fair value of the leased property at the inception of the lease. The monthly rentals for the leased
building and land were $775 and $357, respectively. On June 18, 2009, the July 1, 2005 lease agreement was terminated
and a new lease agreement was executed by the same parties. This new lease agreement, including the same properties as
those of the old lease agreement, covers a lease term commencing retroactively from January 1, 2009. Management had
valuated this new lease agreement for purposes of accounting. The result thereof disclosed that the total present value of
lease payables from the lease of the building was $135,996; the implicit interest rate was 4.46% and the fair value of the
leased assets at the beginning of the lease period was $135,996. Therefore, the Company recognized a gain of $7,833 on
the terminated capital lease agreement, which was classified under non-operating income and gains - others.
(b)
On June 18, 2009, the Company signed an amended long-
term lease agreement with NTC and MeiYa Technology Corp.
(MTC) which was originally contracted by NTC directly with MTC on the lease of building, facilities and land located on
the land numbered 348, 348-1 and 348-3, Hwa-
Ya Section, Kueishan Valley, Taoyuan County. This amended lease
agreement, which took effect retroactively from January 1, 2009, includes the renewal term. Initial lease term is from
January 1, 2009 to December 31, 2018 but the Company is entitled to renew this amended lease agreement for an unlimited
number of consecutive additional terms of five years each by providing written notice of the Company’
s intention to renew
the lease term commencing from January 1, 2019. In addition, the Company has an exclusive option to purchase the leased
assets for a total purchase price of US$50,000 thousand on and after January 1, 2024. Also, the rental due for the entire year
of 2009 has been waived. Initial yearly rentals for the leased building including