Consolidated Financial Statements - Acer Group

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16ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)surplus-treasury stock. If the sales proceeds are less than cost, the deficiency is accounted for as areduction of the remaining balance of capital surplus-treasury stock. If the remaining balance ofcapital surplus-treasury stock is insufficient to cover the deficiency, the remainder is recorded as areduction of retained earnings. The cost of treasury stock is computed using the weighted-averagemethod.If treasury stock is retired, the weighted-average cost of the retired treasury stock is written off againstthe par value and the capital surplus premium, if any, of the stock retired on a pro rata basis. If theweighted-average cost written off exceeds the sum of the par value and the capital surplus, thedifference is accounted for as a reduction of capital surplus-treasury stock, or a reduction of retainedearnings for any deficiency where capital surplus-treasury stock is insufficient to cover thedifference. If the weighted-average cost written off is less than the sum of the par value and capitalsurplus, if any, of the stock retired, the difference is accounted for as an increase in capital surplustreasurystock.The Company‟s common stock held by its subsidiaries is accounted for as treasury stock. Cashdividends paid by the Company to its consolidated subsidiaries that hold the treasury stock areaccounted for as capital surplus-treasury stock.(22) Revenue recognitionRevenue from sales of products is recognized at the time products are delivered and the significantrisks and rewards of ownership are transferred to customers. Provisions for estimated sales returnsand allowances are recorded in the year the related revenue is recognized, based on historicalexperiences and management‟s judgment. Revenue generated from service rendered is recognizedwhen the service is provided and the amount becomes billable.(23) Employee bonuses and directors‟ and supervisors‟ remunerationEmployee bonuses and remuneration to directors and supervisors which are appropriated fromearnings are estimated and charged to operating expense according to Interpretation (2007) 052 issuedby the Accounting Research and Development Foundation. Differences between the amounts ofthese bonuses and remuneration approved by the shareholders in the subsequent year and thoserecognized in the year when such earnings are incurred and services are rendered, if any, areaccounted for as changes in accounting estimates and charged to profit or loss in the period duringwhich stockholders‟ approval is obtained.(24) Share-based payment transactionsThe Consolidated Companies adopted SFAS No. 39 “Accounting for Share-based Payment” forshare-based payment arrangements granted on or after January 1, 2008.Equity-settled share-based payments are measured at fair value at the date of grant. The fair valuedetermined at grant date is expensed over the vesting period, with a corresponding increase in equity.The vesting period is the period during which all the specified vesting conditions of the share-basedpayment arrangement are satisfied. Vesting conditions include service conditions and performance(Continued)
17ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)conditions (including market conditions). When estimating the fair value of an equity-settledshare-based award, only the effect of market conditions is considered.For cash-settled share-based payments, a liability equal to the portion of the services received isrecognized at its current fair value determined at each balance sheet date and at the date of settlement,with any changes in the fair value recognized in profit or loss of the period.Fair value of share-based award is measured using the Black-Scholes option-pricing model or thebinomial option pricing-model, which considers management‟s best estimate of the exercise price,expected term, underlying share price, expected volatility, expected dividends, and risk-free interestrate.(25) Administrative expensesThe Company‟s administrative expenses include direct expenses incurred for the business unit withinthe Consolidated Companies and expenses incurred for managing the investee companies. To reflectthe operating income of the Consolidated Companies, administrative expenses are divided into twoparts. The first part, representing the direct expenses incurred for the Consolidated Companies, isincluded as administrative expenses in the accompanying consolidated statements of operations.The second part, representing expenses incurred for managing the investee companies, is presented asa reduction of net investment income (loss) in the consolidated statements of operations.(26) Retirement plans(a) Defined benefit retirement plansPursuant to the ROC Labor Standards Law, the Company and subsidiaries located in the Republicof China established noncontributory defined benefit employee retirement plans (the “Plans”) andretirement fund administration committees. These Plans provide for lump-sum retirementbenefits to retiring employees based on length of service, age, and certain other factors. Thefunding of these retirement plans by the Company and subsidiaries located in the Republic ofChina is based on certain percentage of employees‟ total salaries. The funds are deposited withBank of Taiwan or other banks.For the defined benefit retirement plan, the Consolidated Companies recognize a minimumpension liability equal to the excess of the actuarial present value of the accumulated benefitobligation over the fair value of the retirement plan‟s assets. The Consolidated Companies alsorecognize the net periodic pension cost based on an actuarial calculation.(b) Defined contribution retirement plansStarting from July 1, 2005, pursuant to the ROC Labor Pension Act (the “New System”),employees who opted to participate in the New System or commenced working after July 1, 2005,are subject to a defined contribution plan under the New System. For the defined contributionplan, the Company and subsidiaries located in the Republic of China contribute monthly anamount equal to 6% of each employee‟s monthly salary to the employee‟s individual pensionfund account at the ROC Bureau of Labor Insurance. Most of the Company‟s foreignsubsidiaries adopt defined contribution retirement plans. These plans are funded in accordancewith the regulations of their respective country of establishment.(Continued)
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Consolidated Financial Statements - Acer Group

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