Consolidated Financial Statements - Acer Group

46ACER INCORPORATED AND SUBSIDIARIESNotes to Consolidated Financial Statements (continued)(c) Capital surplusDecember 31, 2011 December 31, 2010NT$ US$ NT$Share premium:Paid-in capital in excess of par value 2,613,288 86,276 2,262,989Surplus from merger 29,800,881 983,852 29,800,881Premium on common stock issued fromconversion of convertible bonds 4,552,585 150,300 4,552,585Forfeited interest from conversion ofconvertible bonds 1,006,210 33,219 1,006,210Surplus related to treasury stock transactions bysubsidiary companies 760,447 25,106 620,089Others:Employee stock options 804,001 26,543 632,175Conversion right of convertible bonds(note 4(16)) 295,494 9,755 295,494Surplus from equity-method investments 386,612 12,764 408,49240,219,518 1,327,815 39,578,915Pursuant to the amended Company Law, which was announced in January 2012, any realizedcapital surplus is initially used to cover accumulated deficit and the balance, if any, could betransferred to common stock as stock dividends or distributed by cash based on a resolutionapproved by the stockholders. Realized capital surplus includes the premium derived from theissuance of shares of stock in excess of par value and endowments received by the Company. Inaccordance with the Regulations Governing the Offering and Issuance of Securities by SecuritiesIssuers, distribution of stock dividend from capital reserve in any one year cannot exceed 10% ofpaid-in capital.(d) Legal reserve, special reserve, unappropriated earnings, and dividend policyThe Company‟s articles of incorporation stipulate that at least 10% of annual net income afterdeducting accumulated deficit, if any, must be retained as legal reserve until such retention equalsthe amount of authorized common stock. In addition, a special reserve shall be set aside inaccordance with applicable laws and regulations. The remaining balance of annual net income, ifany, can be distributed as follows:• at least 5% as employee bonuses; employees entitled to stock bonus may include subsidiaries‟employees that meet certain criteria set by the board of directors;• 1% as remuneration to directors and supervisors; and• the remainder, after retaining a certain portion for business considerations, as dividends tostockholders.(Continued)