Brother International 2013 Annual Report Download - page 34

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The Group applied the revised accounting standard effective April 1, 2008. In addition, the Group accounted for leases which existed at the transition date and does
not transfer ownership of the leased property to the lessee as operating lease transactions.
All other leases are accounted for as operating leases.
(20) Income Taxes
The provision for current income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets
and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
(21) Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consoli-
dated balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not
hedged by forward exchange contracts.
(22) Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for
equity, which is translated at the historical rate. Differences arising from such translation are shown as “Foreign currency translation adjustments” under accumulated other
comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the
average exchange rate.
(23) Derivative and Hedging Activities
The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange and interest rate. Foreign exchange forward contracts, interest
rate swap and currency option contracts are utilized by the Group to reduce foreign currency exchange and interest rate risks. The Group does not enter into derivatives for
trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: a) all derivatives are recognized as either assets or liabili-
ties and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statements of income and b) for derivatives used for hedg-
ing purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains
or losses on derivatives are deferred until maturity of the hedged transactions.
Foreign currency forward contracts and currency option contracts employed to hedge foreign exchange exposures are measured at fair value and unrealized gains/
losses are recognized in income. Foreign currency forward contracts and currency option contracts applied for forecasted (or committed) transactions are also measured at
fair value, but the unrealized gains/losses are deferred until the underlying transactions are completed.
(24) Per Share Information
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for
the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised. Diluted net income per share of common stock assumes full
exercise of outstanding warrants at the beginning of the year (or at the time of issuance).
Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective years including dividends to be
paid after the end of the year.
Notes to Consolidated Financial Statements
Brother Industries, Ltd. and Consolidated Subsidiaries
Year ended March 31, 2013