Canon 2008 Annual Report Download - page 71

69
Canon classifi es investments in debt and marketable equity
securities as available-for-sale or held-to-maturity securities.
Canon does not hold any trading securities, which are bought
and held primaril
y
f
or the purpose o
f
sale in the near term
.
Av
a
il
ab
l
e
-f
o
r-
sa
l
e
secu
ri
t
i
es
a
r
e
r
eco
r
ded
at
f
a
ir v
a
l
ue
.
Unrealized holding gains and losses, net of the related tax effect,
are re
p
orted as a se
p
arate com
p
onent of other com
p
rehensive
income (loss) until realized. Held-to-maturit
y
securities are
recorded at amortized cost, ad
j
usted
f
or the amortization or
accretion of
p
remiums or discounts
.
Available-for-sale and held-to-maturity securities are regularly
reviewed
f
or other-than-temporary declines in carrying value
based on criteria that include the len
g
th o
f
time and the extent
to which the market value has been less than cost, the fi nancial
condition and near-term
p
ros
p
ects of the issuer and Canon’s
intent and ability to retain the investment for a period of time
su
ffi
cient to allow
f
or an
y
anticipated recover
y
in market value.
W
h
en suc
h
a
d
ec
l
ine exists, Canon reco
g
nizes an impairment
l
oss
to the extent by which the cost basis of the investment exceeds
t
h
e
f
a
ir v
a
l
ue
o
f
t
h
e
inv
est
m
e
n
t
. F
a
ir v
a
l
ue
i
s
dete
rmin
ed
based
on quoted market prices, projected discounted cash
fl
ows or
other valuation techniques as appropriate
.
Rea
l
ize
d
g
ains an
d
l
osses are
d
etermine
d
on t
h
e avera
g
e
cost method and refl ected in earnings
.
Investments in affi liated companies over which Canon has the
abilit
y
to exercise si
g
ni
fi
cant in
fl
uence, but does not hold a con
-
trollin
g
fi
nancial interest, are accounted
f
or b
y
the equit
y
method
.
Non-mar
k
eta
bl
e equity securities in companies over w
h
ic
h
Canon does not have the ability to exercise signifi cant infl uence
are stated at cost and reviewed periodically
f
or impairment
.
(h) Allowance for Doubtful Receivable
s
All
o
w
a
n
ce
f
o
r
doubt
f
u
l
t
r
ade
a
n
d
fi n
a
n
ce
r
ece
iv
ab
l
es
i
s
m
a
in
ta
in
ed
for all customers based on a combination of factors, including
a
g
in
g
anal
y
sis, macroeconomic conditions, si
g
ni
fi
cant one-time
events, and historical experience. An additional reserve
f
or
in
d
ivi
dual
accou
n
ts
i
s
r
eco
r
ded
w
he
n
Ca
n
o
n
beco
m
es
a
w
a
r
e
of a customer’s inability to meet its fi nancial obligations, such as
in the case o
f
bankruptcy
fi
lings. I
f
circumstances related to
customers chan
g
e, estimates o
f
the recoverabilit
y
o
f
receivables
would be further ad
j
usted. When all collection options are
ex
h
auste
d
inc
l
u
d
ing
l
ega
l
recourse, t
h
e accounts or portions
thereof are deemed to be uncollectable and charged against
the allowance
.
(i) Inventorie
s
Inv
e
n
to
ri
es
a
r
e
stated
at
t
h
e
l
o
w
e
r
o
f
cost
o
r m
a
rk
et
v
a
l
ue
.
Cost
i
s
determined by the average method
f
or domestic inventories and
principall
y
b
y
the
fi
rst-in,
fi
rst-out method
f
or overseas inventories.
(j) Impairment of Long-Lived Asset
s
Long-lived assets, such as property, plant and equipment, and
acquired intan
g
ibles sub
j
ect to amortization, are reviewed
f
or
impairment w
h
enever events or c
h
an
g
es in circumstances in
d
icate
that the carr
y
in
g
amount of an asset ma
y
not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison o
f
the carrying amount o
f
the asset and the estimated
undiscounted future cash fl ows expected to be generated by the
asset. If the carrying amount of the asset exceeds its estimated
undiscounted
f
uture cash
fl
ows, an impairment charge is recog
-
nized in the amount b
y
which the carr
y
in
g
amount o
f
the asset
exceeds the fair value of the asset. Assets to be disposed of b
y
sale are reported at the lower of the carrying amount or fair
value less costs to sell, and are no longer depreciated
.
(k) Property, Plant and Equipment and Accounting Chang
e
Property, p
l
ant an
d
equipment are state
d
at cost. Depreciation is
calculated principally by the declining-balance method, except
f
or certain assets which are depreciated by the straight-line
method over the estimated use
f
ul lives o
f
the assets
.
Effective April 1, 2007, the Compan
y
and its domestic
subsidiaries elected to change the declining-balance method of
depreciating machinery and equipment from the fi xed-percentage
-
on-declinin
g
base application to the 250% declinin
g
-balance
app
l
ication. Estimate
d
resi
d
ua
l
va
l
ues were a
l
so re
d
uce
d
in
conjunction wit
h
t
h
is c
h
ange. T
h
e Company an
d
its
d
omestic
subsidiaries believe that the 250% declining-balance application
is pre
f
erable because it provides a better matching o
f
the allocation
o
f
cost o
f
machiner
y
and equipment with associated revenues in
li
g
ht of increasin
g
l
y
short product life c
y
cles
.
In accordance with Statement of Financial Accounting
Standards
(
“SFAS”
)
No. 154, “Accounting Changes and Error
Corrections, a replacement o
f
APB Opinion No. 20 and FASB
Statement No.3,” t
h
is c
h
an
g
e in
d
epreciation met
h
o
d
s represente
d
a change in accounting estimate effected by a change in account
-
ing principle. Accordingly, the affects of the change have been
accounted
f
or prospectively beginning with the period o
f
change
and prior period results have not been restated. The chan
g
e in
d
e
p
reciation met
h
o
d
s cause
d
an increase in
d
e
p
reciation ex
p
ense
by ¥63,773 million for the year ended December 31, 2007.
Net income, basic net income per share and diluted net income
per share decreased b
y
¥32,321 million, ¥24.99 and ¥24.99,
respectivel
y
,
f
or the
y
ear ended December 31, 2007
.
The depreciation period ran
g
es from 3
y
ears to 60
y
ears for
buildings and 1 year to 20 years for machinery and equipment
.
Assets leased to others under operating leases are stated at
cost and depreciated to the estimated residual value o
f
the
assets b
y
the strai
g
ht-line method over the period ran
g
in
g
from
2
years to 5 years
.
(l) Goodwill and Other Intan
g
ible Asset
s
Goodwill and other intan
g
ible assets with inde
fi
nite use
f
ul lives
are not amortized, but are instead tested for impairment annuall
y
in the fourth quarter of each year, or more frequently if indicators
o
f
potential impairment exist. Intangible assets with
fi
nite use
f
ul
lives, consistin
g
primaril
y
o
f
so
f
tware and license
f
ees, are amor
-
tized usin
g
the strai
g
ht-line method over the estimated useful lives,
which range from 3 years to 5 years for software and 5 years to
10 years for license fees. Certain costs incurred in connection with
developin
g
or obtainin
g
internal use so
f
tware are capitalized.
These costs consist primaril
y
o
f
pa
y
ments made to third parties
and the salaries of emplo
y
ees workin
g
on such software develop
-
ment. Costs incurred in connection with developing internal use
so
f
tware are capitalized at the application development stage.