LDK Solar Co., Ltd. - Asia Europe Clean Energy (Solar) Advisory Co ...

LDK SOLAR CO., LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005
AND THE YEAR ENDED DECEMBER 31, 2006
(Amounts in US$ thousands, except share and per share data)
The Group has chosen the U.S. dollar as its reporting currency. Accordingly assets and liabilities are
translated using exchange rates in effect at each period end and average exchange rates are used for the
statements of operations. Translation adjustments resulting from translation of these financial statements are
reflected as foreign currency translation adjustment in other comprehensive income.
(d) Commitments and contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other
sources are recorded when it is probable that a liability has been incurred and the amount of the assessment
can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as
incurred.
(e) Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and on hand and certificates of deposit with an initial
term of less than three months when purchased, which are unrestricted as to withdrawal and use.
(f) Pledged bank deposits
Pledged bank deposits represent amounts held by a bank, which are not available for the Group's use, as
security for issuance of letters of credit. Upon maturity of the letters of credit which generally range within
six months, the cash is available for the use by the Group.
(g) Trade accounts receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts
collected on trade accounts receivable are included in net cash provided by operating activities in the
consolidated statements of cash flows. Allowance for doubtful accounts is provided based on the Group's best
estimate of the amount of probable credit losses in the Group's existing accounts receivable. The Group
determines the allowance by analyzing specific customer accounts that have known or potential collection
issues.
(h) Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the weighted average
method.
(i) Property, plant and equipment, net
Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment.
Depreciation is calculated using the straight-line method over the following estimated useful lives, taking
into account the assets' estimated residual value:
Buildings ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 30 years
Plant and machinery ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10 years
Furniture, fixture and office equipmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5 years
Motor vehicles ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6 years
F-11