D-Link 2005 Annual Report Download - page 35
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D-LINK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
The useful lives of property, plant and equipment are as follows:
(a) Buildings and improvements: 5~55 years.
(b) Machinery and equipment: 3~10 years.
(c) Transportation, office equipment and others: 2~10 years.
Property, plant and equipment held for lease are recorded as other assets and are evaluated on the
basis of cost. Depreciation of property, plant and equipment held for lease is provided for by
using the straight-line method over the estimated useful lives of the assets.
Property, plant and equipment not in use are classified as idle assets and are stated at the lower of
carrying amount or net realizable value.
Depreciation of assets held for lease and idle assets is recorded as non-operating expense.
(k) Deferred expenses
The purchase costs of software and mold development costs are recorded as deferred expenses
and are amortized over periods ranging from two to five years, on a straight-line basis.
Issuance 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 issuance costs not yet amortized are recognized at that date.
(l) 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 issuance 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 bonds is recorded as capital surplus in the
accompanying consolidated balance sheets.
(m) Financial derivatives
(1) Forward foreign currency exchange contracts
Forward foreign currency exchange contracts are purchased to hedge currency fluctuations
affecting foreign currency receivables and payables. These forward exchange contract
receivables and payables are recorded at the spot rate at the date of inception. The
difference between the forward and the spot rate on the date the contract is entered into is
amortized as an exchange gain or loss over the term of the contract. Realized and