D-Link 2014 Annual Report Download - page 35

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12
D-LINK CORPORATION AND SUBSIDIARIES
Notes to the consolidated financial statements
(Continued)
(iii) Other financial liabilities
Financial liabilities that are not classified as held-for-trading or measured at fair value
through profit or loss, which comprise loans and account payable, and other payables, are
measured at fair value plus any directly attributable transaction cost at the time of initial
recognition. Subsequent to initial recognition, they are measured at amortized cost
calculated using the effective interest method. Interest expense not capitalised as capital
cost is recognized in non-operating income and expense, and is included in other gains and
losses.
(iv) Derecognition of financial liabilities
The Consolidated Company derecognizes a financial liability when its contractual
obligation has been discharged or cancelled, or expires. The difference between the
carrying amount of a financial liability removed and the consideration paid (including any
non-cash assets transferred or liabilities assumed) is recognized in non-operating income
and expense, and is included in other gains and losses.
(v) Offsetting of financial assets and liabilities
The Consolidated Company presents financial assets and liabilities on a net basis when the
Consolidated Company has the legally enforceable right to offset and intends to settle such
financial assets and liabilities on a net basis or to realize the assets and settle the liabilities
simultaneously.
(3) Derivative financial instruments
The Consolidated Company holds derivative financial instruments to hedge its foreign currency
exposures. Derivatives are recognized initially at fair value and attributable transaction costs are
recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are recognized in non-operating income and expense,
and are included in other gains and losses. When the fair value of a derivative instrument is
positive, it is classified as a financial asset, and when the fair value is negative, it is classified as a
financial liability.
Embedded derivatives are separated from the host contract and accounted for separately when the
economic characteristics and risk of the host contract and the embedded derivatives are not
closely related, and the host contract is measured as at fair value through profit or loss.
(i) Inventories
The cost of inventories shall comprise all costs of purchase and other costs incurred in bring the
inventories to their present location and condition. Inventories are stated at the lower of cost or net
realizable value. Inventory write-downs are made on an item-by-item basis. Cost is determined using
the weighted-average method. Net realizable value is based on the estimated selling price of
inventories, less, all further costs to completion and all relevant marketing and selling costs. Related
expenses/losses and incomes of inventory are included in the cost of sales.