Samsung Electronics reflected a provision for special performance bonuses in the second quarter equal to about 10.5% of the cumulative operating profit for the first half of the year. It said, however, that not all of the provision was recognized as an expense on the second-quarter income statement.
At its second-quarter earnings conference call on the 30th, Samsung Electronics said, "In the first quarter, incentive negotiations were underway and the specifics had not been finalized, so we did not reflect the related provision," adding, "In the second quarter, we set aside special performance bonuses equivalent to about 10.5% of cumulative operating profit on a first-half cumulative basis."
Samsung Electronics explained that there is an accounting difference between when the performance bonus provision is set and when it is actually reflected as an expense on the income statement. Some of the performance bonus provision set in the second quarter was included in inventories and the cost of work in progress as manufacturing costs and labor expenses.
The company said, "The amount recognized as an expense on the actual second-quarter income statement is smaller than the total provision," and added, "The remaining provision that was capitalized will be recognized as cost of sales when the related inventory is sold to customers."
It added, "The size of the provision set in a given quarter does not necessarily match the size of the expense reflected in that quarter's income statement," noting, "Because the related expenses will be recognized in connection with inventory sales starting in the third quarter, there is an accounting particularity in the second-quarter profit and loss."