Crucial 2012 Annual Report Download - page 258

13
INOTERA MEMORIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
(c) Fixed and intangible assets are normally assessed for any impairment each year. Also, idle assets - machinery
and equipment based on book value were provided with a 100% impairment loss provision.
(d) Idle assets as of December 31, 2010 and 2011 consisted of the following:
December 31,
2010 2011
Land $ 1,686,190 1,686,190
Original cost of machinery and equipment 53,876 3,244
Less: accumulated depreciation (45,654) (1,352)
impairment loss (8,222) (1,892)
$ 1,686,190 1,686,190
(e) The bases for the capitalization of interests for the years ended December 31, 2009, 2010 and 2011, were as
follows:
For the years ended December31,
2009 2010 2011
Total interest expenses $ 1,635,108 1,412,072 1,727,354
Capitalized interest (charged to construction in progress) 12,426 107,009 82,993
Capitalized interest rates 1.5938%~2.3679% 1.8815%~2.1342% 1.7786%~1.9398%
(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