49
2013
CPC
The Corporation recognizes earnings from OPIC-Houston (“Huffco”) and translation adjustments based
on the financial statements of Huffco for the same reporting period as that of the Corporation.
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Deferred Charges
Deferred charges are amortized over periods ranging from 5 to 27 years.
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Intangible Assets
Intangible assets acquired are initially recorded at cost and are amortized on a straight-line basis over
their estimated useful lives. Computer software and trademarks are amortized over five years.
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Pension Cost
Under a defined benefit pension plan, pension cost is recognized on the basis of actuarial calculations
without considering the planned privatization. The transition obligation is amortized over 17 years and
18 years, depending on the classification of employees. Under government regulations, the Corporation
may recognize additional pension cost to meet the additional pension obligation arising from the planned
privatization, but the additional pension cost should not affect the budgeted dividends to be distributed
to the government.
Under a defined contribution pension plan, the Corporation makes monthly contributions to employees’
individual pension accounts and records them as current expenses.
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Income Tax
The Corporation applies the intra-period and inter-period allocation methods to its income tax, whereby
(1) a portion of income tax expense is allocated to the cumulative effect of changes in accounting
principles; and (2) deferred income tax assets and liabilities are recognized for the tax effects of
temporary differences, unused loss carryforwards and unused tax credits. Valuation allowances are
provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be
realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the
classification of related asset or liability for financial reporting. However, if a deferred income tax asset
or liability does not relate to an asset or liability in the financial statements, then it is classified as current
or noncurrent based on the expected length of time before it is realized or settled.
Tax credits for purchases of machinery, equipment and technology, research and development
expenditures, and personnel training expenditures are recognized using the flow-through method.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
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Reclassifications
Certain accounts in the financial statements as of and for the year ended December 31, 2011 have
been reclassified to conform to the presentation of the financial statements as of and for the year ended
December 31, 2012.
