1999 Annual Report - Delta Electronics

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3) The investee company, Delta Networks, Inc.(DNI) of which the Company owns more than 50% of the voting
rights in 1998, did not meet the criteria for consolidation described above. In 1999, DNI met such criteria for
consolidation and was included in the consolidated financial statements. Due to the change in consolidated
entities, the 1998 consolidated financial statements were restated to include the financial statements of DNI and
conform with the presentation adopted for 1999.
Translation of financial statements of foreign subsidiaries
Assets and liabilities of the foreign subsidiaries are translated into New Taiwan dollars using the exchange rate at the
balance sheet date; equity accounts are translated at historical rates, except for beginning retained earnings which are
transferred from prior year's ending retained earnings, and profit and loss accounts which are translated using
weighted average rate. Exchange differences are recorded as translation adjustments and are included as a
component of the stockholders' equity.
Translation of foreign currency transactions
The accounts of the Company and its subsidiaries are maintained in their functional currencies. Receivables, other
monetary assets and liabilities denominated in foreign currencies are translated into their functional currencies at the
rates of exchange prevailing at the balance sheet date. Transactions denominated in foreign currency, except forward
exchange contracts, are translated into their functional currencies at the exchange rates prevailing at the transaction
dates. Foreign currency gains or losses are included in current net income.
Forward currency option contracts
Premiums and discounts on option contracts are recorded at cost. Premiums and discounts and unrealized gains and
losses on option contracts entered into for hedging purposes are deferred and amortized over the contract period on a
straight line basis.
Forward exchange contracts
Forward exchange contracts entered into for hedging purposes are recorded using the spot rate on the contract date.
Discounts or premiums on forward contracts are amortized over the periods of the contract. Gains or losses on
forward contracts are determined by the difference between the spot rate at the balance sheet date and the spot rate at
the date of inception of the contract. Exchange gains or losses are included in current net income.
Cross currency swap contracts
Cross currency swap contracts entered into for hedging purposes are recorded using the contract rate on the contract
date and recorded as accrued receivable and accrued payable, respectively. Interest receivable and interest payable
are accrued in accordance with the contract rate. Gains or losses on cross currency swap contracts are determined by
the difference between the spot rate at the balance sheet date and the spot rate at the date of inception of the contract.
Exchange gains or losses are included in current net income.
Cash equivalents
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and
with maturity dates that do not present significant risk of change in value because of changes in interest rates.
Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on an evaluation of the collectibility of ending balances of notes
receivable, accounts receivable and other receivables.