d. One-time connection fees income e.  Share-based compensation  1) The Company’s major stockholder, the MOTC made an offer to the Company’s employees to purchase shares of  common stock of the Company at a discount from the quoted market price in 2006.  2) One of the Company’s subsidiaries, SENAO, granted options to employees.  f.  Defined benefit pension plan  Similar to prepaid phone cards, according to the laws and regulations applicable to state-owned enterprises in Taiwan, the  Company recorded revenue from providing fixed line connection service at the time the service was performed. Upon  incorporation, net assets greater than capital stock was credited as additional paid-in capital. Part of additional paid-in  capital was from unearned revenues from connection fees as of that date. Upon privatization, unearned revenue generated  from one-time connection fees was deferred at the time of service performed and recognized as revenue over time as the  service is continuously performed in accordance with ROC GAAP. Under US GAAP, following the revenue recognition guidance, the above service revenue should be treated as deferred  income at the time of service rendered and the recognition of revenue should occur over time as the service is continuously  performed.  The GAAP adjustments related to one-time connection fees income subsequent to privatization are: (1) adjustments for  one time connection fees before incorporation from additional paid-in capital, and (2) adjustments for such transactions  occurred between incorporation and privatization from retained earnings which still have remaining expected customer  service periods.  Under ROC GAAP, such an offer was regarded as a transaction between stockholders and no entry was recorded on the  Company’s books and records.  Under US GAAP, the offer was deemed as compensation expense to employees and measured as the difference between  the fair value of common stock offered and the amount of the discounted price at the grant date in 2006.  Under ROC GAAP, employee stock option plans were accounted for using the intrinsic value method and no stock- based compensation expense was recognized for the employee stock options granted by its subsidiary under ROC  GAAP prior to January 1, 2008. In August 2007, the ARDF issued ROC SFAS No. 39, “Accounting for Share-based  Payment”, which required companies to record share-based payment transactions granted on or after January 1, 2008  using the fair value method. There is no impact of the adoption of this statement since the Company did not grant  options on or after January 1, 2008. Under US GAAP, the Company recognized compensation expense for such employee stock options granted by its  subsidiary using the fair value method in accordance with the share-based payment guidance. Pension accounting under ROC GAAP is similar in many respects to US GAAP. However, under ROC GAAP, companies  are not required to recognize the overfunded or underfunded positions of their defined benefit pension plans as an asset or  liability on the balance sheet.  PART III F-64