our investment amount for qualified equipment and technology. However, due to the expiration of the Statute for  Upgrading Industries at the end of 2009, we will no longer receive tax credits for new investments in automation,  employee training expenditures incurred, and equipment and technology purchased after January 2010. In  addition, tax credit rate for research and development expenditures incurred after January 1, 2010 has been  reduced to 15% from 30%, under the Statute for Innovating Industries enacted on May 12, 2010. As a result,  though our effective tax rate was 23.3%, 22.3% and 15.8% in 2008, 2009 and 2010, respectively, the smaller  scope of tax credits and lower tax credit rate will reduce the tax credits amount that we could benefit from in the  future. Therefore, we expect that our effective tax rate in the future will not be lower compared to that of 2010.  In 1997, the Income Tax Law of the Republic of China was amended to integrate corporate income tax and  stockholder dividend tax to eliminate the double taxation effect for resident stockholders of Taiwan companies.  Under the amendment, all retained earnings generated from January 1, 1998 and not distributed to stockholders  as dividends in the following year are assessed with a 10% retained earnings tax. See “Item 10. Additional  Information—E. Taxation—Republic of China Taxation—Dividends.” This has not had an impact on our  financial results of operations because of our high dividend payout policy.  Summarized below are our accounting policies that we believe are both important to the portrayal of  our financial results and involve the need for management to make estimates about the effect of matters that  are uncertain in nature. Actual results may differ from these estimates, judgments and assumptions. Certain  accounting policies are particularly critical because of their significance to our reported financial results and  the possibility that future events may differ significantly from the conditions and assumptions underlying the  estimates used and judgments made by our management in preparing our financial statements. The following  discussion should be read in conjunction with the consolidated financial statements and related notes, which are  included in this annual report.  We recognize revenues when we have persuasive evidence of an arrangement, the goods have been  delivered or the services have been rendered to the customer, the sales price is fixed or determinable and  collectability is reasonably assured. We measure revenues at the fair value of the consideration received or  receivable and represents amounts agreed between us and the customers for goods sold in the normal course of  business, net of sales discounts and volume rebates. The costs of providing services are recognized as incurred.  Usage revenues from fixed-line services (including local, domestic long distance and international long  distance), cellular services, Internet and data services and interconnection and call transfer fees from other  telecommunications companies and carriers are billed in arrears and are recognized based upon minutes of traffic  processed when the services are provided in accordance with contract terms.  We recognize other revenues as follows: (i) one-time subscriber connection fees (on fixed-line services)  are deferred and recognized over the average expected customer service periods, (ii) monthly fees (on fixed-line  services, wireless and Internet and data services) are accrued every month, and (iii) prepaid services (fixed line,  cellular and Internet) are recognized as income based upon actual usage by customers or when the right to use  those services expires. Where we enter into transactions which involve both the provision of air time bundled  with products such as 3G data card and handset, total consideration received from handsets in these arrangements  is allocated and measured using units of accounting within the arrangement based on relative fair values limited  to the amount that is not contingent upon the delivery of other items or services. Relative fair values are based  on the selling prices of 3G data cards and handsets sold on a standalone basis and the monthly fees on the  subscription contracts.  69 PART I Critical Accounting Policies  Revenue Recognition 