D-Link 2001 Annual Report Download - page 38

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6
D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Property, plant and equipment
Property, plant and equipment are stated at cost. Cost associated with significant additions,
improvements, and replacements to property, plant and equipment are capitalized. Interest costs
related to the construction of property, plant and equipment are capitalized and included in the cost
of the related asset. Except for DCI’ s depreciation, which is calculated using the declining-balance
method, depreciation by D-Link and its subsidiaries is provided using the straight-line method over
the estimated useful lives of the respective assets.
Gains or losses on the disposal of property, plant and equipment are accounted for as non-operating
income or losses in the accompanying consolidated statements of income. Before 2001, such gains,
net of related income taxes, were transferred to capital surplus in the year of disposal in accordance
with the Company Law of the ROC.
Property, plant and equipment held for lease are recorded as other assets and are stated at the lower
of carrying amount or net realizable value.
(9) Deferred expenses
The purchased costs of software and intellectual property are recorded as deferred expenses and are
amortized over periods ranging from three to five years, on a straight-line basis.
Issue costs of convertible bonds with a redemption right are amortized by using the straight-line
method over the period from the bond issue date to the expiration date of the redemption right.
When the bondholders exercise the conversion right or the redemption right of the bonds before
maturity, the proportionate issue costs not yet amortized are recognized at that date.
(10) Convertible bonds
For convertible bonds issued with an option allowing the bondholders to redeem their bonds for cash
at a premium over par value, the premium is amortized over the period from the issuance of such
bonds to the initial redemption date.
When the bondholders exercise their conversion right, the amounts of unamortized issue costs,
forfeited unpaid interest, reserve for redemption premium and par value of the extinguished bonds
are transferred to stockholders’ equity. The excess of such amounts over the par value of the
certificates for conversion of convertible bond is recorded as capital surplus in the accompanying
consolidated balance sheets.
(11) Financial derivatives
(a) Forward foreign currency exchange contracts