Contents - MiTAC

17) Treasury stock
A. Treasury stock is stated at cost using the weighted average method and is
reported as a deduction under stockholders’ equity.
B. When treasury stock is disposed of, the related gain is credited to “capital
reserve-treasury stock transaction” and any loss is offset against this capital
reserve account. However, when the balance of this capital reserve account is
insufficient to offset the loss, then the remaining amount should be charged
against retained earnings.
C. When treasury stock is retired, the treasury stock account is credited and all
capital account balance related to the treasury shares, including capital reserve
from paid-in capital in excess of par are debited on a proportionate basis. When
the book value of treasury stock is higher than capital account balance,
including additional paid-in capital in excess of par, the difference is debited to
offset against this capital reserve from treasury stock. However, when the
balance of this capital reserve account is insufficient to offset the difference,
then the remaining amount should be charged against retained earnings. When
the book value of treasury stock is less than the capital account balance,
including additional paid-in capital in excess of par, the difference is credited to
capital reserve from treasury stock.
D. Effective January 1, 2003, the Company’s stock traded by subsidiaries was
accounted for as treasury stock when preparing financial statements, and the
disclosure of pro forma information for treating the treasury stocks described
above as an investment is also enclosed in the income statement.
18) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and reported amounts of
revenues and expenses during the reported period. Actual results could differ from
those estimates.
3. EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES
1) Prior to January 1, 2001, the Company’s stocks traded by subsidiaries was recorded as
investments. Effective January 1, 2002, pursuant to the regulations of R.O.C. Securities
and Futures Commission (“SFC”) and Financial Accounting Standard (“SFAS”) No. 30,
“Accounting Standard for Treasury Stock,” the Company’s stock traded by subsidiaries
should be recorded as treasury stock, and no gain or loss can be recognized in profit and
loss accounts. As a result of this change of accounting principle, long-term investment
decreased $328,241, treasury stock increased $246,094, capital reserve-treasury stock
transaction increased $1,019 as of December 31, 2002 and net income decreased
$82,966 for the year ended December 31, 2002.
2) Effective January 2002, the Company adopted revised R.O.C. SFAS No.24, “Earnings
per share” under which the calculation of diluted earnings per share is changed. The
change in accounting principle did not have any impact on the assets and liabilities as of
December 31, 2002 or on the profit and loss for the year ended December 31, 2002.
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