D-Link 2004 Annual Report Download - page 32

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4
D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
(2) The spin-off
The accounting treatment for D-Link’ s spin-off of ODM/OEM operations to establish Alpha and
obtaining the common stock of Alpha in return was based on the net book values of the assets
transferred (less impairment loss, if any) minus the liabilities as the cost of acquiring Alpha’ s
common stock. There were no exchange gains or losses.
(3) Cash equivalents
D-Link considers all highly liquid investments, such as investments in bonds with repurchase
agreements, with a maturity of three months or less to be cash equivalents.
(4) Foreign currency transactions and translation
D-Link and its subsidiaries record transactions in their respective local currencies. Foreign
currency transactions are recorded at the exchange rate prevailing on the transaction date. At the
balance sheet date, monetary assets and liabilities denominated in foreign currencies are
translated using the exchange rates on that date. The resulting exchange gains or losses from
settlement of such transactions or translation of monetary assets and liabilities are reflected in the
accompanying consolidated statements of income.
The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the
exchange rates prevailing on the balance sheet date, with the exception of stockholders’ equity,
which is translated at historical rates, and revenues, costs and expenses, which are translated at
the weighted-average exchange rates during the reporting period. Translation differences
resulting from the translation of such financial statements into New Taiwan dollars are recorded
as a foreign currency translation adjustment, a separate component of stockholders’ equity.
(5) Short-term investments
Short-term investments are stated at the lower of cost or market value. Market value is
determined using the net asset value of open-end mutual funds on the last day of the period, and
the average closing price of the last month of the period for domestic publicly listed securities
and the closing price on the last day of the period for foreign publicly listed securities.
(6) Allowance for doubtful accounts
The allowance for doubtful accounts is provided based on accounts receivable aging analysis and
the expected collectibility of accounts receivable.