Letter To Shareholders - Mitac

C. When a company’s treasury stock is retired, the treasury stock account should
be credited, and the capital surplus- premium on stock account and capital stock
account should be debited proportionately according to the share ratio. An
excess of the carrying value of treasury stock over the sum of its par value and
premium on stock should first be offset against capital surplus from the same
class of treasury stock transactions, and the remainder, if any, debited to retained
earnings. An excess of the sum of the par value and premium on stock of
treasury stock over its carrying value should be credited to capital surplus from
the same class of treasury stock transactions.
D. The cost of treasury stock is accounted for on a weighted-average basis.
E. When the Company recognizes investment income (loss) and prepares financial
statements, it regards the shares of the Company held by subsidiaries as treasury
stocks and discloses the pro forma information in the statement of income about
the condition assuming that the shares of the Company held by subsidiaries are
regarded as investments instead of treasury stocks.
26) 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 amounts of assets and liabilities and the disclosures of contingent assets
and liabilities at the date of the financial statements and the amounts of revenues
and expenses during the reporting period. Actual results could differ from those
assumptions and estimates.
27) Business combination
The Group adopted the R.O.C. SFAS No. 25, “Accounting for Business
Combination - Purchase Method” to account for any business combination
transactions.
3. EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
1) Inventories
Effective January 1, 2009, the Group adopted the amendments to R.O.C. SFAS No. 10,
“Accounting for Inventories”. This change in accounting principle had no material effect
on net income for the year ended December 31, 2009.
2) Share-based payment ─ employee compensation plan
Effective January 1, 2008, the Group adopted R.O.C. SFAS No. 39, “Accounting for
Share-based Payment”. This change in accounting principle had no material effect on
net income for the year ended December 31, 2008.
3) Employees’ bonuses and directors’ and supervisors’ remuneration
Effective January 1, 2008, the Group adopted EITF96-052 of the Accounting Research
and Development Foundation, R.O.C., dated March 16, 2007. As a result of the adoption
of EITF96-052, net income decreased by $17,080 and earnings per share decreased by
$0.01 dollar for the year ended December 31, 2008.
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