Casio 2001 Annual Report Download - page 24

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equity method are stated at moving-average cost. Other secu-
rities except for trading securities (hereafter,
“available-for-sale securities”) for which market value is
readily determinable are stated at market value as of the end
of the period with unrealized gains and losses, net of applica-
ble deferred tax assets or liabilities, not reflected in earnings
but directly reported as a separate component of sharehold-
ers’ equity. The cost of such securities sold is determined by
the moving-average method. Available-for-sale securities for
which market value is not readily determinable are stated pri-
marily at moving-average cost except for debt securities,
which are stated at amortized cost.
The effect of adopting this new accounting standard was
to increase income before income taxes and minority inter-
ests by ¥1,007 million ($8,121 thousand).
Upon applying the new standard, the Company and its
consolidated subsidiaries in Japan examined the intent of
holding each security at the beginning of the period and clas-
sified as held-to-maturity securities and available-for-sale
securities with maturity of one year or less, and short-term
highly liquidated available-for-securities like deposits. As a
result, securities included in the current assets decreased by
¥9,942 million ($80,177 thousand) and investment securities
increased by the same amount.
Derivatives and hedge accounting—The new accounting
standard for financial instruments, effective from the year
ended March 31, 2001, requires companies to state derivative
financial instruments at fair value and to recognize changes in
the fair value as gains or losses unless derivative financial
instruments are used for hedging purposes.
If derivative financial instruments are used as hedge and
meet certain hedging criteria, the Group defer recognition of
gains or losses resulting from changes in fair value of deriva-
tive financial instruments until the related losses or gains on
the hedged items are recognized.
Also, if interest rate swap contracts are used as hedge
and meet certain hedging criteria, the net amount to be paid
or received under the interest rate swap contract is added to
or deducted from the interest on the assets or liabilities for
which the swap contract was executed.
The Group use forward foreign currency contracts and
interest rate swaps as derivative financial instruments only for
the purpose of mitigating future risks of fluctuation of foreign
currency exchange rates with respect to foreign currency
assets and liabilities, and of interest rate increases with
respect to cash management.
Forward foreign currency and interest rate swap con-
tracts are subject to risks of foreign exchange rate changes
and interest rate changes, respectively.
The derivative transactions are executed and managed by
the Company’s Finance Department in accordance with the
established policies and within the specified limits on the
amounts of derivative transactions allowed.
Allowance for doubtful accounts—The allowance for doubtful
accounts is provided at an amount sufficient to cover proba-
ble losses on the collection of receivables. For the Group, the
amount of the allowance is determined based on past write-
off experience and an estimated amount of probable bad debt
based on a review of the collectibility of individual receivable.
Inventories—Inventories are stated principally at the lower of
cost (first-in, first-out) or market (replacement cost or net
realizable value).
Property, plant and equipment—Property, plant and equip-
ment is stated at cost. Depreciation is principally determined
by the declining-balance method at rates based on estimated
useful lives except for the following buildings and leased
equipment. The building of head office of the Company and
buildings, excluding building fixtures, acquired after March
31, 1998 are depreciated using the straight-line method.
Leased equipment is depreciated by the straight-line method
over the lease term.
Software costs— Software is categorized by the following
purposes and depreciated using the following two methods.
(Software for market sales) The production costs for
master product are capitalized and depreciated over no more
than 3 years by the projected revenue basis.
(Software for internal use) The acquisition costs of soft-
ware for internal use are depreciated over 5 years by the
straight-line method.
The amount of software costs is included in other assets
in consolidated balance sheets.
Employees’ severance and retirement benefits—Under the
terms of the employees’ severance and retirement plan, eli-
gible employees are entitled under most circumstances,
upon mandatory retirement or earlier voluntary severance, to
severance payments based on compensation at the time of
severance and years of service.
Employees’ severance and retirement benefits of the
Company and some of its consolidated subsidiaries are cov-
ered by two kinds of pension plans. And those of some of its
consolidated subsidiaries in Japan are covered by lump-sum
indemnities.
Prior to April 1, 2000, such companies recognized pen-
sion expense when, and to the extent, payments were made
to the pension plans. Remaining consolidated subsidiaries
mainly provide for the allowance for employees’ severance
and retirement benefits in amounts required had all employ-
ees retired voluntarily at the balance sheet date.
Effective April 1, 2000, the Company and its consolidated
subsidiaries in Japan adopted the new accounting standard,
“Opinion on Setting Accounting Standard for Employees’
Severance and Pension Benefits”, issued by the Business
Accounting Deliberation Council on June 16, 1998 (the “New
Accounting Standard”).
Under the New Accounting Standard, the liabilities and
expenses for severance and retirement benefits are deter-
mined based on the amounts actuarially calculated using
certain assumptions.