Casio 2005 Annual Report Download - page 27

Notes to Consolidated Financial Statements
Years ended March 31, 2005 and 2004 Casio Computer Co., Ltd. and Subsidiaries
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The Company and its consolidated domestic subsidiaries maintain their official accounting records in Japanese yen, and in accor-
dance with the provisions set forth in the Japanese Commercial Code, the Securities and Exchange Law, and accounting principles
and practices generally accepted in Japan (“Japanese GAAP”). The accounts of overseas consolidated subsidiaries are based on their
accounting records maintained in conformity with generally accepted accounting principles and practices prevailing in the respective
countries of domicile. Certain accounting principles and practices generally accepted in Japan are different from International
Financial Reporting Standards and standards in other countries in certain respects as to application and disclosure requirements.
The accompanying consolidated financial statements have been restructured and translated into English (with some expanded
descriptions and the inclusion of consolidated statements of shareholders’ equity) from the consolidated financial statements of the
Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of
Finance as required by the Securities and Exchange Law. Some supplementary information included in the statutory Japanese lan-
guage consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated
financial statements.
The translation of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2005, which was ¥107 to U.S.$1. The convenience translations should not be con-
strued as representations that the Japanese yen amounts have been, could have been, or could in the future be converted into U.S.
dollars at this or any other rate of exchange.
2. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements include the accounts of the Company and significant subsidiaries (together
with the Company, the “Group”) which the Company controls through majority voting right or existence of certain conditions.
Investments in affiliates of which the Company has the ability to exercise significant influence over operating and financial policies
are accounted for using the equity method.
In the elimination of investments in subsidiaries, the portion of assets and liabilities of a subsidiary attributable to the sub-
sidiary’s shares acquired by the Company are recorded based on the fair value as of the respective dates when such shares were
acquired. The amounts of assets and liabilities attributable to minority shareholders of the subsidiary are determined using the
financial statements of the subsidiary.
Material intercompany balances, transactions and profits have been eliminated in consolidation.
The difference between the cost and underlying fair value of the net equity of investments in subsidiaries at acquisition is
included in other assets and is amortized on a straight-line basis over five years.
Cash flow statements
In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and short-term highly liquid invest-
ments with maturities of not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies are translated at the current exchange rates at the balance
sheet date, and the translation gains and losses are credited or charged to income.
Assets and liabilities of foreign subsidiaries are translated into yen at the current exchange rate at the balance sheet date while
their revenue and expenses are translated at the average exchange rate for the period. Differences arising from such translation are
included in minority interests and shareholders’ equity as foreign currency translation adjustments.
Securities
Debt securities designated as held-to-maturity are carried at amortized cost. Other securities 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 applicable deferred tax assets or liabilities, not reflected in earnings but directly reported as
a separate component of shareholders’ equity. The cost of such securities sold is determined primarily by the moving-average
method. Available-for-sale securities for which market value is not readily determinable are stated primarily at moving-average cost
except for debt securities, which are stated at amortized cost.
Derivatives and hedge accounting
The accounting standard for financial instruments 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 hedges and meet certain hedging criteria, the Group defers recognition of gains
or losses resulting from changes in the fair value of derivative financial instruments until the related losses or gains on the hedged
items are recognized.
Also, if interest rate swap contracts are used as hedges 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 uses forward foreign currency contracts and interest rate swaps as derivative financial instruments only for the pur-
pose of mitigating future risks of fluctuations of foreign currency exchange rates with respect to foreign currency assets and liabili-
ties and of interest rate increases with respect to cash management.
Forward foreign currency and interest rate swap contracts are subject to risks of foreign exchange rate changes and interest
rate changes, respectively.
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ANNUAL REPORT 2005