Crucial 2012 Annual Report Download - page 256

11
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
(6) Inventories, net
December 31,
2010 2011
Work in process $ 4,919,468 4,144,234
Less: allowance for inventory (928,856) (1,481,918)
Sub-total 3,990,612 2,662,316
Raw materials 513,213 486,161
Less: allowance for inventory (1,311) (5,487)
Sub-total 511,902 480,674
Materials and supplies in transit 3,150 —
Total $ 4,505,664 3,142,990
For the years ended December 31, 2010 and 2011, the Company recognized a loss from devaluation of inventories
of $797,068 and $557,238, respectively, which were debited to cost of goods sold as the carrying value of inventories
exceeded the net realizable value thereof. In addition, in 2009, the net realizable value of inventories has increased
because the factor that caused the inventory devaluation in prior period has improved, therefore, the Company
recognized a gain from recovery in the value of inventories of $1,767,684, which was credited to cost of goods
sold for the year ended December 31, 2009.
(7) Lease Receivables
(a) The Company signed a long-term lease agreement with Nanya Technology Corp. (NTC) to lease out a portion
of the building and land (including supplemental equipment) located at No. 667, Fuhsing 3rd Road, Hwa-
Ya Technology Park, Kueishan Valley, Taoyuan County. The lease term is effective from July 1, 2005, and
will expire on December 31, 2034 (including the period when the lease is automatically extended), a total
lease period of 354 months. The lease agreement for the building is treated as a capital lease because the
present value of the periodic rental payments since the inception date is at least 90% of the market value of
the leased assets. 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
lease of building and land were $2,058 and $310, respectively.
(b) The initial total amount of lease receivables for the capital lease of the building was $728,587, with implicit
interest rate of 5.88%. The cost of leased assets transferred was $345,637 (including the net book value of
the building and miscellaneous equipment of $277,372 and $68,265, respectively). The difference of $382,950
between the total amount of lease receivables and the cost of leased assets transferred was recognized as
unrealized interest income and is amortized over the lease period. Interest income recognized for the years
ended December 31, 2009, 2010 and 2011 amounted to $19,175, $18,841 and $18,487, respectively, which
was classified under non-operating income and gains - interest income.