D-Link 2004 Annual Report Download - page 58

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30
D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
The notional principals of the above derivative contracts were only reflected in the
unsettled contracts. The fair value of the financial instruments disclosed herein is not
necessarily representative of the potential gain or loss that could be realized under
current credit and market price risks. D-Link and subsidiaries do not believe a
significant loss on the above financial derivative contracts will occur.
(2) Non-derivative financial instruments
D-Link and subsidiaries’ non-derivative financial assets include cash and cash equivalents, short-
term investments, notes and accounts receivable, receivables from related parties, restricted assets,
other financial assets, and long-term investments. D-Link and subsidiaries’ non-derivative
financial liabilities consist of short-term borrowings, notes and accounts payable, payables to
related parties, bonds payable, and long-term debts.
The following methods and assumptions were used to estimate the fair value of each class of
non-derivative financial instruments:
(a) The carrying amounts of cash and cash equivalents, notes and accounts receivable, restricted
assets, other financial assets (pledged time deposits), notes and accounts payable, and short-
term borrowings approximate their fair value due to the short-term nature of these items.
(b) The fair value of short-term investments is based on publicly quoted market prices. Refer to
note 4 for the fair value of short-term investments as of December 31, 2003 and 2004.
(c) It is not practicable to determine the fair value of long-term investments when these
investments are not publicly traded.
(d) Except for the first issuance of domestic guaranteed straight bonds, the fair values of bonds
payable are based on quoted market prices.
(e) The fair value of long-term debts is based on the discount value of expected cash flows.
(f) The fair value of lease obligations payable approximates their carrying value.