Canon 2006 Annual Report Download - page 54

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52
Available-for-sale securities Millions of yen Thousands of U.S. dollars
Cost Fair Value Cost Fair Value
Due within one year ¥ 295 294 $ 2,478 2,470
Due after one year through five years 5,606 7,104 47,109 59,697
Due after five years 2,891 2,947 24,294 24,765
Equity securities 12,648 29,852 106,286 250,857
¥21,440 40,197 $180,167 337,789
Held-to-maturity securities Millions of yen Thousands of U.S. dollars
Cost Fair Value Cost Fair Value
Due within one year ¥10,151 10,151 $ 85,303 85,303
Due after one year through five years 10,311 10,311 86,647 86,647
¥20,462 20,462 $171,950 171,950
Equity Price Risk
Canon holds marketable securities included in current assets as
short-term investments, which consists generally of highly-liquid
and low-risk instruments. Investments included in noncurrent
assets are held as long-term investments. Canon does not hold
marketable securities and investments for trading purposes.
Maturities and fair values of such marketable securities and
investments were as follows at December 31, 2006.
Foreign Currency Exchange Rate and Interest
Rate Risk
Canon operates internationally, exposing it to the risk of changes
in foreign currency exchange rates and interest rates. Derivative
financial instruments are comprised principally of foreign cur-
rency exchange contracts and interest rate swaps utilized by the
Company and certain of its subsidiaries to reduce these risks.
Canon assesses foreign currency exchange rate risk and interest
rate risk by continually monitoring changes in these exposures
and by evaluating hedging opportunities. Canon does not hold
or issue derivative financial instruments for trading purposes.
Canon is also exposed to credit-related losses in the event of
non-performance by counterparties to derivative financial
instruments, but it is not expected that any counterparties will
fail to meet their obligations, because most of the counterparties
are internationally recognized financial institutions and contracts
are diversified across a number of major financial institutions.
Canon’s international operations expose Canon to the risk of
changes in foreign currency exchange rates. Canon uses foreign
exchange contracts to manage certain foreign currency exchange
exposures principally from the exchange of U.S. dollar and euro
into Japanese yen. These contracts are primarily used to hedge
the foreign currency exposure of forecasted intercompany sales
and intercompany trade receivables which are denominated in
foreign currencies. In accordance with Canon’s policy, a specific
portion of foreign currency exposure resulting from forecasted
intercompany sales are hedged using foreign exchange contracts
which principally mature within three months.
The following table provides information about Canon’s
major derivative financial instruments related to foreign currency
exchange transactions existing at December 31, 2006. All of
the foreign exchange contracts described in the following table
have a contractual maturity date in 2007.
Millions of yen
Forwards to sell foreign currencies:
U.S.$ euro Others Total
Contract amounts ¥392,402 286,148 38,586 717,136
Estimated fair value (6,692) (8,671) (392) (15,755)
Forwards to buy foreign currencies:
Contract amounts ¥34,004 3,204 13,981 51,189
Estimated fair value (310) (111) (1,051) (1,472)
Thousands of U.S. dollars
Forwards to sell foreign currencies:
U.S.$ euro Others Total
Contract amounts $3,297,496 2,404,605 324,252 6,026,353
Estimated fair value (56,235) (72,866) (3,294) (132,395)
Forwards to buy foreign currencies:
Contract amounts $ 285,748 26,924 117,488 430,160
Estimated fair value (2,605) (933) (8,832) (12,370)