Canon 2003 Annual Report Download - page 77

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accumulated other comprehensive income (loss) into other income
(deductions), net of the related tax effect, is a net gain of ¥216 million
($2,019 thousand) for the year ended December 31, 2003. The
amounts of the hedging ineffectiveness is not material for the year
ended December 31, 2003. The sum of the amount of net gains or
losses excluded from the assessment of hedge effectiveness which
are also recorded in other income (deductions), net of the related tax
effect, is not material for the year ended December 31, 2003.
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 amount of those interest rate swap
agreements was ¥57,270 million at December 31, 2002. Canon
recognized net losses related to those interest rate swaps in the
amount of ¥94 million ($879 thousand), ¥1,738 million and ¥2,521
million for the years ended December 31, 2003, 2002 and 2001,
respectively, and classified such amount in other income
(deductions).
Contract amounts of foreign exchange contracts and interest rate
swaps at December 31, 2003 and 2002 are set forth below:
Millions of yen
U.S.$ euro Others Total
2003:
To sell foreign currencies ¥ 232,013 191,537 23,993 447,543
To buy foreign currencies 11,151 3,261 7,972 22,384
Receive-fixed interest rate swaps — 1,337 — 1,337
Pay-fixed interest rate swaps — 21,227 — 21,227
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
Thousands of U.S. dollars
U.S.$ euro Others Total
2003:
To sell foreign currencies $ 2,168,346 1,790,065 224,234 4,182,645
To buy foreign currencies 104,215 30,476 74,505 209,196
Receive-fixed interest rate swaps — 12,495 — 12,495
Pay-fixed interest rate swaps — 198,383 — 198,383
(19) Commitments and Contingent Liabilities
In November 2002, the Financial Accounting Standards Board
issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s
Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, as
interpretation of FASB Statements No. 5, 57, and 107 and
rescission of FASB Interpretation No. 34”. FIN 45 requires that a
liability be recorded in the guarantor’s balance sheet upon
issuance of a guarantee. The initial recognition and measurement
provisions of FIN 45 were applicable to guarantees issued or
modified after December 31, 2002.
Canon provides guarantees to third parties of bank loans of its
employees, affiliates and other companies. The guarantees for the
employees are principally made for their housing loans. The
guarantees of loans of its affiliates 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
a guarantee, if the borrower defaults on a payment within the
contract periods of 1 year to 30 years, in the case of employees with
housing loans, and of 1 year to 10 years, in the case of affiliates and
other companies. The maximum amount of undiscounted
payments Canon would have had to make in the event of default is
¥58,299 million ($544,850 thousand) at December 31, 2003. The
carrying amounts of the liabilities recognized for Canon’s obligations
as a guarantor under those guarantees at December 31, 2003 were
insignificant. Certain of those guarantees secured by guarantees
issued to Canon by other parties amounted to ¥950 million ($8,879
thousand) at December 31, 2003.
Canon Inc. and its consolidated subsidiaries provide guarantees
to third parties of certain obligations of their consolidated
subsidiaries. At December 31, 2003, these guarantees amounted to