Canon 2003 Annual Report Download - page 56

54
CANON INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
converted at beginning of the year or at time of issuance (if later),
and that all dilutive warrants were exercised (less the number of
treasury shares assumed to be purchased from the proceeds using
the average market price of the Company’s common shares).
(t) Use of Estimates
The preparation of the consolidated financial statements requires
management of Canon to make a number of estimates and
assumptions relating to the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the period. Significant
items subject to such estimates and assumptions include valuation
allowances for receivables, inventories and deferred tax assets;
impairment of long-lived assets; environmental liabilities; valuation
of derivative instruments; and assets and obligations related to
employee benefits. Actual results could differ from those estimates.
(
u) Environmental Liabilities
Liabilities for environmental remediation and other environmental
costs are accrued when environmental assessments or remedial
efforts are probable and the cost can be reasonably estimated.
Such liabilities are adjusted as further information develops or
circumstances change. Costs of future obligations are not
discounted to their present values.
(v) Reclassification
Certain reclassifications have been made to the prior years’
consolidated financial statements to conform with the presentation
used for the year ended December 31, 2003.
the consolidated balance sheet at its fair value, and gains and
losses that were accumulated in other comprehensive income
(loss) are recognized immediately in earnings. In all other
situations in which hedge accounting is discontinued, Canon
continues to carry the derivative at its fair value on the
consolidated balance sheet, and recognizes any changes in its fair
value in earnings.
Canon also uses certain derivative financial instruments which
do not meet the hedging criteria of SFAS 133 and 138. Canon
records these derivative financial instruments on the consolidated
balance sheet at fair value. The changes in fair values are recorded
in earnings immediately.
The cumulative effect adjustment upon the adoption of SFAS
133 and 138 on January 1, 2001 resulted in an increase to net
income of approximately ¥3,692 million and a decrease to other
comprehensive income (loss) of approximately ¥2,401 million,
which are net of the related income tax effect of ¥2,674 million
and ¥1,738 million, respectively.
(r) Issuance of Stock by Subsidiaries
The change in the Company’s proportionate share of subsidiary
equity resulting from issuance of stock by the subsidiaries is
accounted for as an equity transaction.
(s) Earnings per Share
Basic earnings per share have been computed by dividing net
income available to common stockholders by the weighted-average
number of common shares outstanding during each year. Diluted
earnings per share reflect the potential dilution and have been
computed on the basis that all convertible debentures were
(3) Foreign Operations
Amounts included in the consolidated financial statements
relating to subsidiaries operating in foreign countries are
summarized as follows:
Thousands of
Millions of yen U.S. dollars
2003 2002 2001 2003
Total assets ¥1,339,854 1,238,800 1,074,856 $12,522,000
Net assets 564,041 518,927 482,986 5,271,411
Net sales 2,341,221 2,151,062 2,048,993 21,880,570
Net income 74,274 58,883 31,903 694,150
(2) Financial Statement Translation
The consolidated financial statements presented herein are
expressed in yen and, solely for the convenience of the reader, have
been translated into United States dollars at the rate of ¥107 = U.S.
$1, the approximate exchange rate prevailing on the Tokyo Foreign
Exchange Market on December 30, 2003. This translation should
not be construed as a representation that the amounts shown could
be converted into United States dollars at such rate.