Canon 2008 Annual Report Download - page 70

68
(a) Description o
f
Busines
s
Canon Inc. (the “Compan
y
”) and subsidiaries (collectivel
y
“Canon”)
is one of the world’s leading manufacturers in such fi elds as offi ce
imaging products, computer peripherals, business information
products, cameras, and optical related products. O
ffi
ce ima
g
in
g
products consist mainl
y
o
f
network multi
f
unction devices and
copying machines. Computer peripherals consist mainly of laser
beam and inkjet printers. Business information products consist
mainly o
f
computer in
f
ormation systems, document scanners and
calculators. Cameras consist mainl
y
o
f
di
g
ital sin
g
le-lens re
fl
ex
(“SLR”) cameras, compact di
g
ital cameras, interchan
g
eable
l
enses an
d
d
igita
l
vi
d
eo camcor
d
ers. Optica
l
an
d
ot
h
er pro
d
ucts
include semiconductor production equipment, mirror projection
mask ali
g
ners
f
or liquid cr
y
stal displa
y
(“LCD”) panels, broad
-
castin
g
equipment, medical equipment and lar
g
e
f
ormat printers.
Canon’s consolidated net sales for the
y
ears ended December 31,
2008, 2007 and 2006 were distributed as follows: offi ce imaging
products 27%, 29% and 28%, computer peripherals 36%, 34%
and 34%, business in
f
ormation products 2%, 2% and 3%,
cameras 25%, 26% an
d
25%, an
d
o
p
tica
l
an
d
ot
h
er
p
ro
d
ucts
10%, 9% an
d
10%, respective
l
y.
Sales are made principally under the Canon brand name,
almost entirel
y
throu
g
h sales subsidiaries. These subsidiaries are
responsible
f
or marketin
g
and distribution, and primaril
y
sell to
retai
l
d
ea
l
ers in t
h
eir geograp
h
ica
l
area. Approximate
l
y 76%, 77%
and 75% of consolidated net sales for the years ended December
31, 2008, 2007 and 2006 were generated outside Japan, with
28%
,
30% and 31% in the Americas
,
33%
,
33% and 31% in
Europe, an
d
15%, 14% an
d
13% in ot
h
er areas, respective
ly
.
Canon se
ll
s
l
aser
b
eam
p
rinters on an OEM
b
asis to
Hewlett-Packard Company; such sales constituted approximately
23%, 22% and 22% o
f
consolidated net sales
f
or the
y
ears
en
d
e
d
Decem
b
er 31, 2008, 2007 an
d
2006, respective
ly
.
Canon’s manufacturing operations are conducted primarily
at 25
p
lants in Ja
p
an and 18 overseas
p
lants which are located
in countries or regions such as the United States, Germany,
France, Taiwan, China, Mala
y
sia, Thailand and Vietnam
.
(
b
)
Basis of Presentatio
n
The Company and its domestic subsidiaries maintain their books
o
f
account in con
f
ormit
y
with
fi
nancial accountin
g
standards o
f
Japan. Forei
g
n subsidiaries maintain their books o
f
account in
conformit
y
with fi nancial accountin
g
standards of the countries
o
f
t
h
e
ir
do
mi
c
il
e.
Certain adjustments and reclassi
fi
cations have been incor
-
porated in the accompan
y
in
g
consolidated
fi
nancial statements
to conform with U.S.
g
enerall
y
accepted accountin
g
principles.
T
h
ese a
d
justments were not recor
d
e
d
in t
h
e statutory
b
oo
k
s
of account
.
(c) Principles o
f
Consolidatio
n
Th
e
co
n
so
li
dated
fi n
a
n
c
i
a
l
state
m
e
n
ts
in
c
l
ude
t
h
e
accou
n
ts
o
f
t
h
e
Company, its majority owned subsidiaries and those variable interest
entities where the Company or its consolidated subsidiaries are
the primar
y
bene
fi
ciaries under Financial Accountin
g
Standards
Board (“FASB”) Inter
p
retation No. 46 (revised December 2003),
“Consolidation o
f
Variable Interest Entities.” All si
g
ni
fi
cant
intercompany
b
a
l
ances an
d
transactions
h
ave
b
een e
l
iminate
d.
(
d
)
Use o
f
Estimate
s
The preparation o
f
the consolidated
fi
nancial statements in
conformit
y
with U.S.
g
enerall
y
accepted accountin
g
principles
requires management to ma
k
e estimates an
d
assumptions t
h
at
a
ff
ect the reported amounts o
f
assets and liabilities and the
disclosure o
f
contin
g
ent assets and liabilities at the date o
f
the
consolidated
fi
nancial statements and the reported amounts o
f
revenues and expenses during the period. Signifi cant estimates
and assum
p
tions are refl ected in valuation and disclosure of
revenue recognition, allowance
f
or doubt
f
ul receivables, valuation
o
f
inventories, impairment o
f
lon
g
-lived assets, environmental
liabilities, valuation of deferred tax assets, uncertain tax
p
ositions
and employee retirement and severance benefi t plans. Actual
results could differ materially from those estimates
.
(e) Translation o
f
Foreign Currencies
Assets and liabilities of the Company’s subsidiaries located outside
Japan with functional currencies other than Japanese yen are
translated into Japanese yen at the rates o
f
exchange in e
ff
ect at
the balance sheet date. Income and expense items are translated
at t
h
e avera
g
e exc
h
an
g
e rates prevai
l
in
g
d
urin
g
t
h
e
y
ear. Gains
and losses resulting from translation of fi nancial statements are
excluded from earnings and are reported in other comprehensive
income (loss)
.
Gains and losses resultin
g
f
rom
f
orei
g
n currenc
y
transactions,
including foreign exchange contracts, and translation of assets
and liabilities denominated in foreign currencies are included in
other income
(
deductions
)
in the consolidated statements o
f
income. Forei
g
n currenc
y
exchan
g
e losses, net were ¥11,212
million ($123,209 thousand), ¥31,943 million and ¥25,804
million for the years ended December 31, 2008, 2007 and
2006, respectively.
(
f
) Cash Equivalent
s
A
ll
h
ig
hl
y
l
iqui
d
investments acquire
d
wit
h
origina
l
maturities
of three months or less are considered to be cash e
q
uivalents.
Certain debt securities with original maturities o
f
less than three
months classi
fi
ed as available-
f
or-sale securities o
f
¥194
,
030
million ($2,132,198 thousand) and ¥164,610 million at December
31, 2008 an
d
2007, respective
l
y, are inc
l
u
d
e
d
in cas
h
an
d
cas
h
equivalents in the consolidated balance sheets. Additionally,
certain debt securities with ori
g
inal maturities o
f
less than three
months classi
fi
ed as held-to-maturit
y
securities o
f
¥997 million
($10,956 thousand) and ¥5,992 million at December 31, 2008
and 2007, respectively, are also included in cash and cash
equivalents. Fair value
f
or these securities approximates their cost
.
(g) Investment
s
Investments consist primarily of time deposits with original
maturities of more than three months, debt and marketable
equit
y
securities, investments in a
ffi
liated companies and non
-
mar
k
eta
bl
e equit
y
securities. Canon reports investments wit
h
maturities of less than one year as short-term investments
.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CANON INC. AND SUBSIDIARIES
1. Basis of Presentation and Si
g
nifi cant Accountin
g
Policies