Canon 2002 Annual Report Download - page 74

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72
CANON INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Canon has entered into certain foreign exchange contracts
which do not meet the hedging criteria of SFAS 133 and 138.
Canon records these foreign exchange contracts on the balance
sheet at fair value. The changes in fair values are recorded in
earnings immediately. The notional amounts of those foreign
exchange contracts were ¥362,276 million ($3,018,967
thousand) and ¥202,932 million at December 31, 2002 and
2001.
Canon has entered into certain interest rate swap agreements
which do not meet the hedging criteria of SFAS 133 and 138.
Canon records these interest rate swap agreements on the
balance sheet at fair value. The changes in fair values are
recorded in earnings immediately. The notional amounts of those
interest rate swap agreements were ¥57,270 million ($477,250
thousand) and ¥62,788 million at December 31, 2002 and
2001. Canon recognized net losses related to those interest rate
swaps in the amount of ¥1,738 million ($14,483 thousand) and
¥2,521 million for the years ended December 31, 2002 and
2001 and classified such amount in other income (deductions).
Contract amounts of foreign exchange contracts and interest
rate swaps at December 31, 2002 and 2001 are set forth below:
Millions of yen
U.S. dollars Euro Other Total
2002:
To sell foreign currencies ¥262,408 138,631 21,757 422,796
To buy foreign currencies 3,586 2,307 759 6,652
Receive-fixed interest rate swaps ——180 180
Pay-fixed interest rate swaps 56,019 1,251 —57,270
2001:
To sell foreign currencies ¥117,810 115,475 17,603 250,888
To buy foreign currencies 11,554 1,593 596 13,743
Receive-fixed interest rate swaps ——21,548 21,548
Pay-fixed interest rate swaps 62,788 ——62,788
Thousands of U.S. dollars
U.S. dollars Euro Other Total
2002:
To sell foreign currencies $ 2,186,733 1,155,259 181,308 3,523,300
To buy foreign currencies 29,883 19,225 6,325 55,433
Receive-fixed interest rate swaps ——1,500 1,500
Pay-fixed interest rate swaps 466,825 10,425 —477,250
(19) Commitments and Contingent Liabilities
Canon provides guarantees to third parties of bank loans of its
employees, affiliated and other companies. The guarantees for
the employees are principally made for their housing loans. The
guarantees for the affiliated and other companies are made to
ensure that those companies operate with less risk of finance.
For each guarantee provided, Canon would have to perform
under the guarantee, if they default on a payment within the
contract periods of 1 year to 30 years for the employees with
housing loans and of 1 year to 15 years for the affiliated and
other companies. The maximum amount of undiscounted
payments Canon would have to make in the event of default is
¥49,919 million ($415,992 thousand) at December 31, 2002.
The carrying amounts of the liabilities recognized for Canon’s
obligations as a guarantor under those guarantees at December
31, 2002 were insignificant. Certain of those guarantees
secured by guarantees issued to Canon by other parties
amounted to ¥1,094 million ($9,117 thousand) at December
31, 2002.
Canon Inc. and its consolidated subsidiaries provide
guarantees to third parties of certain obligations of their
consolidated subsidiaries. At December 31, 2002, these
guarantees amounted to ¥23,634 million ($196,950
thousand). To a lesser extent, consolidated subsidiaries provide
guarantees to third parties of obligations of other consolidated
subsidiaries. All intercompany guarantees are eliminated in
consolidation and therefore are not reflected in the above figure.