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)
(loss) income per share is calculated by dividing net (loss) income available to ordinary shareholders by the
weighted average number of ordinary shares and dilutive ordinary share equivalents outstanding during the
period. Ordinary share equivalents consist of the ordinary shares issuable upon the conversion of the
convertible preferred shares (using the as-converted method) and ordinary shares issuable upon the exercise
of outstanding share options and warrants (using the treasury stock method). Ordinary share equivalents in
the diluted net (loss) income per share computation are excluded to the extent that their effect would be antidilutive.
(z) Segment reporting
The Group uses the management approach in determining reportable operating segments. The management
approach considers the internal organization and reporting used by the Group's chief operating decision
maker for making operating decisions, allocating resources and assessing performance as the source for
determining the Group's reportable segments. Management, including the chief operating decision maker,
reviews operating results solely by monthly revenue (but not by sub-product type) and operating results of
JXLDK, the operating subsidiary in the PRC. As such, management has determined that JXLDK is the
Group's only operating segment, as that term is defined by Statement of Financial Accounting Standard
No. 131, ""Disclosure about Segments of an Enterprise and Related Information''.
(aa) Start-up costs
The Group expensed all costs incurred in connection with start-up activities, including preproduction
costs associated with new manufacturing facilities. Preproduction costs including the design, formulation and
testing of new products or process alternatives are included in research and development expenses.
Preproduction costs including facility and employee costs incurred in connection with constructing new
manufacturing plants are included in general and administrative expenses. The Group made first commercial
sale on April 28, 2006 and was no longer in the development stage.
(ab) Recently issued accounting pronouncement
In September 2006, the FASB issued SFAS No. 157, ""Fair Value Measurements''. SFAS No. 157
defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 with earlier application encouraged. The Group is
currently evaluating the impact, if any, of this statement on the consolidated financial statements.
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements (""SAB 108''), to address diversity in practice in quantifying financial statement
misstatements. SAB 108 requires that misstatements are to be quantified based on their impact on the
financial statements and related disclosures. SAB 108 is effective as of the end of 2006 fiscal year, allowing a
one-time transitional cumulative effect adjustment to retained earnings as of January 1, 2006 for errors that
were not previously deemed material, but are material under the guidance in SAB 108. The Group does not
expect the initial adoption of SAB 108 to affect the Group's consolidated financial condition or results of
operations.
In June 2006, the FASB issued FIN 48, ""Accounting for Uncertainty in Income Taxes Ì an Interpretation
of FASB Statements No. 109'', which clarifies the accounting for uncertainty in tax positions. This
interpretation requires that the Group recognizes in the consolidated financial statements the impact of a tax
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