Brother International 2012 Annual Report Download - page 32

31
Notes to Consolidated Financial Statements
Brother Industries, Ltd. and Consolidated Subsidiaries
Year ended March 31, 2012 (14) Liability for Retirement Benefits
(i) Employees’ Retirement Benefits
The Company has a contributory funded pension plan and a defined contribution pension plan covering substantially all of its employees. Certain domestic consoli-
dated subsidiaries have non-contributory funded pension plans or unfunded retirement benefit plans. Also, certain foreign subsidiaries have defined benefit pension
plans and defined contribution pension plans.
The Company and certain consolidated subsidiaries account for the liability for retirement benefits based on projected benefit obligations and plan assets at the
consolidated balance sheet date. Certain small subsidiaries apply the simplified method to state the liability at the amount which would be paid if employees retired,
less plan assets at the consolidated balance sheet date.
(ii) Retirement Benefits for Directors and Corporate Auditors
Certain domestic consolidated subsidiaries provide retirement allowances for directors and corporate auditors. Retirement allowances for directors and corporate audi-
tors are recorded to state the liability which would be paid at the amount if they retired at each consolidated balance sheet date. The retirement benefits for directors
and corporate auditors are paid upon the approval of the shareholders.
(15) Asset Retirement Obligations
In March 2008, the ASBJ published the accounting standard for asset retirement obligations, ASBJ Statement No.18, “Accounting Standard for Asset Retirement Obligations”
and ASBJ Guidance No.21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined
as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and
is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future
asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement
obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement
obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of
the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of
the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted
cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard
was effective for fiscal years beginning on or after April 1, 2010.
(16) Stock Options
The ASBJ Statement No.8, “Accounting Standard for Stock Options” and related guidance are applicable to stock options granted on and after May 1, 2006. This standard
requires companies to recognize compensation expense for employee stock options based on the fair value at the date of grant and over the vesting period as consider-
ation for receiving goods or services. The standard also requires companies to account for stock options granted to non-employees based on the fair value of either the
stock option or the goods or services received. In the consolidated balance sheets, stock options are presented as stock acquisition rights as a separate component of
equity until exercised. The standard covers equity-settled, share-based payment transactions, but does not cover cash-settled, share-based payment transactions. In addi-
tion, the standard allows unlisted companies to measure options at their intrinsic value if they cannot reliably estimate fair value.
(17) R&D Costs
R&D costs are charged to income as incurred.
(18) Leases
In March 2007, the ASBJ issued ASBJ Statement No.13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions
issued in June 1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1, 2008.