Casio 2007 Annual Report Download - page 32

30 CASIO COMPUTER CO., LTD.
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.
The derivative transactions are executed and managed by the Company’s Finance Department in accordance with the estab-
lished 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 probable 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 proba-
ble bad debt based on a review of the collectibility of individual receivables.
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 equipment 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. The building of the head office of the Company and buildings,
excluding building fixtures, acquired after March 31, 1998 are depreciated using the straight-line method. The depreciation period
ranges from 2 years to 65 years for buildings and structures and 1 year to 20 years for machinery and equipment.
Software costs
Software is categorized by the following purposes and amortized using the following two methods.
Software for market sales: The production costs for the master product are capitalized and amortized over no more than 3
years on a projected revenue basis.
Software for internal use: The acquisition costs of software for internal use are amortized over 5 years using the straight-line
method.
The amount of software costs capitalized is included in other assets in the consolidated balance sheets.
Stock issuance expenses
Stock issuance expenses are charged to income as incurred. Stock issuance expenses are included in other expenses in the consoli-
dated statements of income.
Bond issuance expenses and bond premium
Bond issuance expenses are charged to income as incurred. Bond issuance expenses are included in other expenses in the consoli-
dated statements of income.
Bond premium was amortized using the straight-line method over the life of the bond (6 years and 10 months) however, bonds
with stock acquisition rights had been all converted by October 30, 2006.
Employees’ severance and retirement benefits
Under the terms of the employees’ severance and retirement plan, eligible 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 covered by two
kinds of pension plans which are employees’ pension fund plan and tax-qualified pension plan. And those of some of its consoli-
dated subsidiaries in Japan are covered by lump-sum indemnities.
The Company and its domestic consolidated subsidiaries received the permission from the Minister of Health, Labor and
Welfare, for release from the obligation of paying benefits for employees’ prior services relating to the substitutional portion of the
Welfare Pension Insurance Scheme. Concurrently, employees’ pension fund plan was changed to defined benefit corporate pension
fund plan.
The Company and its domestic consolidated subsidiaries provide defined contribution plan. In addition, the Company has estab-
lished an employee retirement benefits trust.
The liabilities and expenses for severance and retirement benefits are determined based on the amounts actuarially calculated
using certain assumptions.
The Company and its consolidated subsidiaries in Japan provided liabilities for severance and retirement benefits at March 31,
2001 based on the estimated amounts of projected benefit obligation and the fair value of the plan assets at that date.
The excess of the projected benefit obligation over the total of the fair value of pension assets as of April 1, 2000 and the liabili-
ties for severance and retirement benefits recorded as of April 1, 2000 (the “net transition obligation”). The net transition obliga-
tion is recognized in expenses in equal amounts over 10 years commencing with the year ended March 31, 2001.