ANNUAL REPORT 2004 - ELMOS Semiconductor AG

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MANAGEMENT BOARD ELMOS – THE COMPANY THE ELMOS SHARE CORPORATE GOVERNANCE 84 Revenue recognition Revenues are recognized when products are shipped to customers or, if not coinci- ding, when the risk of loss transfers to customers. Within the framework of consign- ment agreements with customers, revenues are recognized only with the withdrawal of the products by the customer. Product warranty Provision for product warranty is recognized as a liability at the time of sale based on the relation of warranty expense to sales in the past. Research and development The costs associated with research and development projects for new products and significant product improvements are expensed as incurred and included in research and development expenses. Research and development expenses reimbursed by customers amounted to 4,203 thousand Euro in 2004 (4,233 thousand Euro in 2003). Intangible assets (software) Costs incurred for the production and development of computer software and software applications embedded in products to be sold or otherwise marketed – pri- marily software embedded in a semiconductor – are capitalized after technological feasibility is established and research and development on the product into which the software will be integrated is completed. Capitalization is only carried out for projects realized by customers’ orders. These costs are amortized on a linear basis from production start over the estimated useful lives, principally over seven years. Expenses of 1,790,979 Euro related to software development were capitalized in 2004 (previous year 3,557,000 Euro). Capitalized software development was written off to an amount of 929,256 Euro in 2004 (previous year 477,127 Euro). The book value of capitalized software development comes to 5,508,481 Euro as of December 31, 2004 (12/31/2003: 4,646,758 Euro). Costs incurred for patent application and the acquisition of design and process technology are capitalized. Capitalized costs are written off applying the straight-line method over the specifically shortest period considering the estimated useful life of the technology, the patent protection term, or the term of the contract, yet over a maximum of 18 years. As of December 31, 2004 the capitalized book value of process technology purchased as property, plant and equipment came to 9,242,689 Euro, in comparison with 9,653,935 Euro as of December 31, 2003.
GROUP STATUS REPORT FINANCIAL STATEMENTS GROUP STRUCTURE GLOSSARY Financial statements ÿ Notes Auditor’s certificate Goodwill Goodwill represents the excess of the purchase price of acquired companies over the fair value of acquired assets and liabilities. It is not regularly written off but reviewed annually or more frequently if impairment indicators arise, with regard to the neces- sity of extraordinary depreciation. The company’s goodwill results from the acquisition of Silicon Microstructures, Inc. to an amount of 7,622,344 Euro. In the fiscal year 2004 the remaining minority interest in ELMOS North America and eurasem B.V. was acquired by the parent company. An increase of goodwill to an amount of 692,055 Euro arises from these acquisitions. Funding ELMOS receives public funds used for the financing of research and development projects as well as the acquisition of real estate and tangible assets. Funds are classi- fied as other liabilities until utilized. Public funds used for research and development projects are stated as other income (491,468 Euro in 2004 and 565,947 Euro in 2003), while funds used for investments in property, plant and equipment are recorded by a reduction of the purchase costs. Share-based compensation The company records compensation expense for its employee share-based compensation plans using the intrinsic value method in accordance with Accounting Prin- ciples Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25). Under APB No. 25 generally no compensation expense is recognized if the exercise price of share options equals or exceeds the estimated fair value of the underlying shares on the date of grant. Retirement obligations There is a direct assurance to the Management Board members (benefit primacy) stated under accrued liabilities in compliance with SFAS No. 87. “Projected benefit obligation” and “accumulated benefit obligation” come to 2,212,928 Euro as of De- cember 31, 2004 (12/31/2003: 1,536,650 Euro). “Prior service costs” no yet recorded amount to 475,752 Euro (2003: 539,898 Euro). The “additional minimum liability” is 434,014 Euro as of balance-sheet date. The interest rate comes to five percent annually and the indexation of the pension is 1.5 percent annually. Length of employment expenses as recorded in the income statement amounted to 83,804 Euro (2003: 93,263 Euro), interest expense was 76,833 Euro (2003: 86,732 Euro). Prior service costs to be offset were entered to an amount of 64,146 in 2004 and 2003. As of December 31, 2004 there are actuarial gains of altogether 41,738 Euro not realized. elmos annual report 2004 85
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ANNUAL REPORT 2004
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Five-year overview ELMOS Group acco
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ÿ Chronicle 2004 1 ST QUARTER 2 ND
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ÿ Table of contents MANAGEMENT BOA
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MANAGEMENT BOARD ELMOS - THE COMPAN
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ELMOS IS A PART OF YOUR CAR’S FUT
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ELMOS NETWORKS YOUR CAR EFFECTIVELY
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GROUP STATUS REPORT FINANCIAL STATE
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ELMOS ASSISTS YOUR DRIVING At night
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ELMOS ASSISTS YOUR DRIVING Innovati
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ELMOS CONNECTS ELECTRONICS WITH MEC
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ANNUAL REPORT 2004 - ELMOS Semiconductor AG

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