Contents - MiTAC

11) Deferred charges
A. Telephone installation expenditure are amortized on a straight-line method over
5 years.
B. Mold expenses are amortized on a straight-line method over 2 years.
C. Convertible bond issuance costs are deferred and amortized on a straight-line
method over the life of the bonds.
D. Software is amortized on a straight-line method over 5 years.
12) Convertible bonds
A. When bonds are redeemed before maturity, the excess of the stated redemption
price over the par value is recognized as interest expense and compensation
interest payable using the effective interest method during the period from the
issue date to the last day of redemption period.
B. When an investor exercises his/her conversion right, the book value of bonds is
credited to common stock at an amount equal to the par value of the stock and
the excess is credited to capital reserve; no gain or loss is recognized on bond
conversion.
C. For convertible bonds with redemption options, the right of redemption becomes
invalid if the investor failed to exercise his/her redemption right during the
redemption period. The balance of the compensation interest payable is
amortized over the period from the date following the redemption period to the
maturity date using the effective interest method.
13) Retirement plan
The Company maintains defined benefit retirement plans covering all regular
employees. The contributions to an independent fund are deposited with the
Central Trust of China, as the custodian. Net pension cost is recognized, which
includes service cost, interest cost, expected return on plan assets and amortization
of net asset or obligation at transition, based on an actuarial valuation.
14) Product service warranty
Product service warranty liability is based on past years' service cost records.
Service warranty expense is included in the current year's operating expense.
15) Income tax
A. Provision for income tax includes deferred income tax resulting from items
reported in different periods for tax and financial reporting purposes, loss
carryforwards and investment tax credits. A valuation allowance on deferred
income tax assets is provided to the extent that it is more likely than not that the
future tax benefit will not be realized. Over or under provisions of prior years’
income tax liabilities are included in the current year's income tax expense.
B. Investment tax credits arising from the acquisition of machinery and equipment,
research and development expense, and employee training expenses are charged
to deferred income tax assets and credited to income tax expense in the year that
the investment tax credits arise.
C. Under the imputation tax system, the additional 10% additional income tax on
undistributed earnings is included in income tax-expense in the year that the
shareholders resolved to retain the earnings.
16) Recognition of revenue, cost and expenses
Revenue is recognized when goods are shipped or installed. The related costs and
expenses are recognized as incurred.
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