1999 Annual Report - Delta Electronics

transition is amortized equally over 15 years. The pension fund is managed by an independently administered
pension fund association.
Convertible bonds
1) The excess of estimated redemption price over the par value is recognized as interest expense at the effective
interest rate and a liability is recorded as "Interest Payable on Redemption". If there are two or more redemption
prices, the highest redemption price is used. Variance between book value as of redemption day and actual
redemption price is recognized as current year's interest expense.
2) When a bondholder exercises his/her conversion rights, 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.
3) The related issuance costs for convertible bonds are recorded as deferred charges, and are amortized over the life
of the bonds. The unamortized bonds issuance costs related to the bonds converted or redeemed before the
maturity date are transferred to expense upon conversion or redemption.
4) For convertible bonds with redemption rights, the right of redemption lapses if the investor fails to exercise his/her
redemption right, and the balance of Interest Payable on Redemption is amortized over the period from the date
following the redemption period to maturity date using the effective interest rate.
Income tax
1) The provision for income tax includes deferred tax resulting from items reported in different periods for tax and
financial reporting purposes. Deferred income tax assets or liabilities are further classified into current and
noncurrent items based on the classifications of the related assets or liabilities or on the expected reversal date of
the temporary differences and are presented on the financial statements as net balance. Valuation allowance for
deferred income tax assets is recognized if it is more likely than not that the tax benefits will not be realized.
2) According to the new Taiwan imputation tax system, any undistributed current earnings, on tax basis, of the
Company derived on or after January 1, 1998 is subject to an additional 10% corporate tax if the earnings are not
distributed before a specific time and is recorded as current income tax expense in the period the stockholders
approved a resolution to retain the earnings.
3) The income tax of the foreign subsidiary and its subsidiaries are calculated based on the local policies.
4) Over or under provision of prior years' income tax liabilities is included in the current year's income tax expense.
Revenue, costs and expenses recognition
Revenue is recognized when the earning process is completed and realized or realizable. Costs and expenses are
recorded as incurred. Research and development costs are expensed as incurred, except for costs of machinery used
inR&Dwhich are capitalized.
3. CHANGES IN ACCOUNTING PRINCIPLES
As described in Note 2, the subsidiary, DNI did not meet the criteria for consolidation in 1998 and, therefore, the
long-term investment in DNI was accounted for under the equity method. In 1999, DNI met the criteria for
consolidation and its 1999 financial statements were then included in the consolidation. Due to the change in the
reporting entities in 1999, the 1998 consolidated financial statements have been restated to include the 1998 financial
statements of DNI. DNI was in pre-operating stage in 1998 because it had not commenced its main operating
activities and, therefore, the effect of the change in reporting entities change was immaterial.
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