Brother International 2012 Annual Report Download - page 31

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(6) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trust, all of which mature or become due within three months of the date of acquisition.
(7) Inventories
Inventories are stated at the lower of cost or market. The company and consolidated manufacturing subsidiaries determine cost by the average method. The consolidated
sales subsidiaries determine cost by using the average method or the first-in, first-out method.
(8) Marketable and Investment Securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows:
iii) trading securities, which are held for the purpose of earning capital gains in the near term, are reported at fair value, and the related unrealized gains and losses are
included in earnings;
iii) held-to-maturity debt securities, which management has the positive intent and ability to hold to maturity, are reported at amortized cost; and
iii) available-for-sale securities with market values, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and
losses, net of applicable taxes, reported as a separate component of equity. Non-marketable available-for-sale securities are stated at cost determined by the moving
average method.
For other-than-temporary declines in fair value, marketable and investment securities are reduced to net realizable value by a charge to income.
(9) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is mainly computed by the declining-balance method.
The range of useful lives was principally from three to 50 years for buildings and structures, from four to 12 years for machinery and vehicles and from two to 20 years
for furniture and fixtures.
Depreciation of leased assets under finance leases is computed by the straight-line method over the lease period.
(10) Long-lived Assets
The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be
recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected
to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying
amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the
net selling price at disposition.
(11) Other Investments and Assets
Intangible assets and goodwill are carried at cost less accumulated amortization, which is calculated by the straight-line method.
(12) Bonuses to Directors and Corporate Auditors
Bonuses to directors and corporate auditors are accrued at the year-end to which such bonuses are attributable.
(13) Warranty Reserve
The Group provided a warranty reserve for repair service to cover all repair expenses based on the past warranty experience.
The warranty reserve was included in accrued expenses and amounted to ¥4,277 million ($52,159 thousand) and ¥6,023 million at March 31, 2012 and 2011,
respectively.
Notes to Consolidated Financial Statements
Brother Industries, Ltd. and Consolidated Subsidiaries
Year ended March 31, 2012