Epson 2005 Annual Report Download - page 58

59Seiko Epson Annual Report 2005
(8) Impairment of long-lived assets
On August 9, 2002, the Business Accounting Council of Japan issued new accounting standards entitled “Statement
of Opinion on the Establishment of Accounting Standards for Impairment of Fixed Assets”. Further, on October 31,
2003, the Accounting Standards Board of Japan issued Financial Accounting Standards Implementation Guidance
No. 6 – “Application Guidance on Accounting Standards for Impairment of Fixed Assets”. Effective as of March 31,
2004, Epson has elected to early adopt these new accounting standards for impairment of fixed assets.
As a result of adopting the new accounting standards, property, plant and equipment at March 31, 2004
decreased by ¥1,671 million, and income before income taxes and minority interest for the year ended March 31,
2004 decreased by the same amount, as compared with the amount which would have been reported if the
previous standards had been applied consistently.
(9) Accrued bonuses
Accrued bonuses to employees are provided for the estimated amounts which Epson is obligated to pay to employees
after the fiscal year-end, based on services provided during the current period.
On March 9, 2004, the Accounting Standards Board of Japan issued new accounting standards concerning
accounting for bonuses to directors and statutory auditors, effective for the first fiscal year ending after this
standards issued. In the financial statements for fiscal years prior to April 1, 2003, “bonuses to directors and
statutory auditors”, which are determined through appropriation of retained earnings by resolution of general
shareholders’ meeting subsequent to fiscal year-end, are reflected in retained earnings of the current year. Under
the new accounting standards, “bonuses to directors and statutory auditors” are expensed as incurred. Effective as
of March 31, 2004, Epson has adopted the new accounting standards.
Effective as of March 31, 2004, accrued bonuses to directors and statutory auditors are provided for the estimated
amounts which Epson is obligated to pay to directors and statutory auditors subject to the resolution of general
shareholders’ meeting subsequent to the fiscal year-end.
(10) Accrued warranty costs
Epson provides an accrual for estimated future warranty costs based on the historical relationship of warranty
costs to net sales. Specific warranty provisions are made for those products where warranty expenses can be
specifically estimated.
(11) Income taxes
The provision for income taxes is computed based on income before income taxes and minority interest in the
consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and
liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the
tax basis of assets and liabilities.
On May 29, 2003, the Company obtained approval from the National tax agency to file a consolidated tax return
system effective from the year beginning April 1, 2003. The Company has adopted the consolidated tax return system
for the calculation of income taxes effective from the year ended March 31, 2004. Under the consolidated tax return
system, the Company consolidates all wholly owned domestic subsidiaries based on the Japanese tax regulations.
(12) Pension and severance costs
The Company and some of its Japanese subsidiaries recognize accrued pension and severance costs to employees
based on the actuarial valuation of projected benefit obligation and plan assets at fair value. Other Japanese
subsidiaries above recognize accrued pension and severance costs to employees based on the voluntary retirement
benefit payable at the year end.
Pension benefits are determined based on years of service, basic rates of pay and conditions under which the
termination occurs, and are payable at the option of the retiring employee either in a lump-sum amount or as an
annuity. Contributions to the plans are funded through several financial institutions in accordance with the applicable
laws and regulations.
Unrecognized prior service costs are amortized based on the straight-line method over a period of five years
beginning at the date of adoption of the plan amendment. Actuarial gains and losses are amortized based on the
straight-line method over a period of five years starting from the beginning of the subsequent year.