Consolidated Financial Statements - Acer Group

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12ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)(12) InventoriesThe cost of inventories comprises all costs of purchase and other costs incurred in bringing theinventories to their present location and condition. Inventories are measured individually at the lowerof cost and net realizable value. Cost of inventory is determined using the weighted-average method.Net realizable value is determined based on the estimated selling price in the ordinary course ofbusiness, less all estimated costs of completion and selling expenses at the balance sheet date.(13) Non-current assets held for saleNon-current assets and groups of assets and liabilities which comprise disposal groups are classifiedas held for sale when the assets are available for immediate sale in their present condition subject onlyto terms that are usual and customary for sales of such assets (or disposal groups), and their salewithin one year is highly probable. Non-current assets or disposal groups classified as held for saleare measured at the lower of their book value or fair value less costs to sell, and ceased to bedepreciated or amortized. Non-current assets or disposal groups classified as held for sale arepresented separately on the consolidated balance sheets. Interest and other expenses attributable tothe liabilities of a disposal group classified as held for sale are continued to be recognized until therelated assets are disposed.An impairment loss is recognized for any initial or subsequent write-down of the assets (or disposalgroups) to fair value less costs to sell in the consolidated statements of operations. A gain from anysubsequent increase in fair value less costs to sell of an asset (or a disposal group) is recognized, butnot in excess of the cumulative impairment loss that has been recognized.(14) Equity method investmentsLong-term equity investments in which the Consolidated Companies, directly or indirectly, own 20%or more of the investee‟s voting shares, or less than 20% of the investee‟s voting shares but are able toexercise significant influence over the investee‟s operating and financial policies, are accounted forusing the equity method, unless there are evidences that indicate the Consolidated Companies have nosignificant influence over the investees.Effective January 1, 2006, under the amended ROC SFAS No. 5, “Long-term Investments underEquity Method,” the difference between acquisition cost and carrying amount of net equity of theinvestee as of the acquisition date is allocated proportionately based on the excess of fair value overthe carrying value of noncurrent assets on the investee‟s books. Allocated amounts are amortizedbased on the method used for the related assets. Any unallocated difference is treated asinvestor-level goodwill. If the allocation reduces non-current assets to zero value, the remainingexcess over acquisition cost is recognized as an extraordinary gain. Prior to January 1, 2006,investor-level goodwill was amortized over five years on a straight-line basis. Commencing January 1,2006, as required by the amended ROC SFAS No. 5, investor-level goodwill is no longer amortizedbut tested for impairment.Upon the sale of equity-method investment, the difference between the selling price and carryingamount of the investment at the date of sale is recognized as a disposal gain or loss. In proportion tothe percentage disposed of, capital surplus and other equity adjustment items arising from thelong-term investment are debited against disposal gain or loss.(Continued)
13ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)If an investee company issues new shares and the Company does not acquire new shares in proportionto its original ownership percentage, the Company‟s equity in the investee‟s net assets will bechanged. The change in the equity interest is adjusted through the capital surplus and long-terminvestment accounts. If the Company‟s capital surplus is insufficient to offset the adjustment tolong-term investment, the difference is charged as a reduction of retained earnings.Unrealized inter-company profits and losses resulting from transactions between the ConsolidatedCompanies and investees accounted for under the equity method are deferred to the extent of theConsolidated Companies‟ ownership. The profits and losses resulting from transactions relating todepreciable or amortizable assets are recognized over the estimated useful lives of such assets.Profits and losses arising from transactions relating to other assets are recognized when realized.(15) Capital leasesFor capital leases, where the Consolidated Companies act as the lessor, all periodic rental paymentsplus bargain purchase price or estimated residual value are accounted for as lease payment receivables.The present value of all lease payment receivables, discounted at the implicit interest rate, is recordedas revenue. The difference between the lease payment receivables and the revenue is the unearnedinterest revenue, which is then recognized as realized interest income over the lease term using theeffective interest method.(16) Property, plant and equipment, property leased to others, and property not in useProperty, plant and equipment are stated at acquisition cost. Interest expense related to the purchaseand construction of property, plant and equipment is capitalized and included in the cost of the relatedasset. Significant renewals, improvements and replacements are capitalized. Maintenance and repaircosts are charged to expense as incurred. Gains and losses on the disposal of property, plant andequipment are recorded in the non-operating section in the accompanying consolidated statements ofoperations.Commencing from November 20, 2008, the Consolidated Companies capitalize retirement orrecovery obligation for property and equipment in accordance with Interpretation (2008) 340 issuedby the Accounting Research and Development Foundation. A component which is deemedsignificant in relation to the total cost of the property and equipment and for which a differentdepreciation method or rate is adopted is depreciated separately.Depreciation is provided for property, plant and equipment, property leased to others, and propertynot in use over the estimated useful lives using the straight-line method. The range of the estimateduseful lives of the respective classes of assets is as follows: buildings and improvements - 30 to 50years; computer equipment and machinery - 3 to 10 years; and other equipment - 3 to 20 years.Property leased to others and property not in use are classified to other assets, which are depreciatedcontinuously and are subject to an impairment test.The estimated useful lives, depreciation method and residual value are evaluated at the end of eachyear and any changes thereof are accounted for as changes in accounting estimates.(Continued)
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Consolidated Financial Statements - Acer Group

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