Canon 2008 Annual Report Download - page 95

93
The following methods and assumptions are used to estimate
t
he
f
air value in the above table
.
L
ong-term
d
e
b
t
T
he fair values of Canon’s long-term debt instruments are based
o
n the quoted price in the most active market or the present
v
alue o
f
f
uture cash
fl
ows associated with each instrument
d
iscounted usin
g
Canon’s current borrowin
g
rate for similar
d
ebt instruments of comparable maturity
.
F
orei
g
n exchan
g
e contract
s
T
he
f
air values o
f
f
orei
g
n exchan
g
e contracts, all o
f
which are
u
sed for purposes other than tradin
g
, are estimated b
y
obtainin
g
q
uotes from counter
p
arties or third
p
arties
.
Li
m
itatio
n
s
F
air value estimates are made at a specifi c point in time, based
o
n relevant market in
f
ormation and in
f
ormation about the
fi
nancial instruments. These estimates are sub
j
ective in nature
a
nd involve uncertainties and matters of signifi cant judgment
a
nd therefore cannot be determined with precision. Changes in
a
ssumptions could signi
fi
cantly a
ff
ect the estimates.
Co
n
ce
n
t
r
at
i
o
n
s
o
f
c
r
ed
i
t
ri
s
k
A
t December 31, 2008 and 2007, one customer accounted for
a
pproximately 19% and 16% o
f
consolidated trade receivables,
r
espectivel
y
. Althou
g
h Canon does not expect that the customer
w
ill
f
ail to meet its obli
g
ations, Canon is potentiall
y
exposed to
c
oncentrations of credit risk if the customer failed to
p
erform
a
ccording to the terms of the contracts.
SFAS 157 de
fi
nes
f
air value as the price that would be received
to sell an asset or paid to trans
f
er a liabilit
y
(an exit price) in the
principal or most advanta
g
eous market for the asset or liabilit
y
in an or
d
er
l
y transaction
b
etween mar
k
et participants at t
h
e
measurement date. SFAS 157 establishes a three-level fair value
hierarch
y
that prioritizes the inputs used to measure
f
air value
as
f
ollows
:
Level 1 — In
p
uts are
q
uoted
p
rices in active markets for identical
assets or liabilities
.
Level 2 — Inputs are quoted prices
f
or similar assets or liabilities
in active markets,
q
uoted
p
rices for identical or similar
assets or
l
ia
b
i
l
ities in mar
k
ets t
h
at are not active, in
p
uts
other than
q
uoted
p
rices that are observable, and in
p
uts
23. Fair Va
l
ue Measurement
s
that are derived principally from or corroborated by
observable market data by correlation or other means
.
Level 3 — Inputs are derived
f
rom valuation techniques in which
one or more si
g
nifi cant inputs or value drivers are
u
nobservable, which refl ect the reporting entity’s own
assumptions about the assumptions that market
participants would use in establishin
g
a price
.
A
ssets
a
n
d
Li
ab
i
l
i
t
i
es
M
easu
r
ed
at
F
a
ir V
alue
on a Recurr
i
n
g
Bas
is
The
f
ollowing table presents Canon’s assets and liabilities that
are measured at
f
air value on a recurrin
g
basis at December 31,
2008 consistent with the fair value hierarch
y
provisions of SFAS
N
o
. 157
.
M
illions of ye
n
Leve
l
1
L
eve
l
2 Leve
l
3
T
ota
l
Assets:
C
as
h
an
d
cas
h
equiva
l
ents ¥ — ¥ 194,030 ¥ — ¥ 194,030
I
nv
est
m
e
n
ts
14,108 981 1,516 16,605
D
e
r
i
v
ati
v
es
— 10,516 — 10,516
T
ota
l
assets ¥ 14,108 ¥ 205,527 ¥ 1,516 ¥ 221,151
Li
ab
ili
t
i
es
:
D
e
r
i
v
ati
v
es
¥ — ¥ 678 ¥ — ¥ 678
T
ota
l
l
ia
b
i
l
itie
s
¥ — ¥ 678 ¥ — ¥ 678