Epson 2009 Annual Report Download - page 69

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68
15. Research and development costs
Research and development costs, which are included in the cost of sales and selling, general and
administrative expenses, totaled ¥82,870 million and ¥82,058 million ($835,365 thousand) for the years
ended March 31, 2008 and 2009, respectively.
16. Business structure improvement expenses
The business structure improvement expenses for the year ended March 31, 2009, mainly comprised
impairment losses and reorganization cost of production sites as a result of structural reforms
accompanying strategic changes in the display and the semiconductor businesses.
17. Impairment loss
Epson’s business assets are generally grouped by business segment under the Company’s management
accounting system, and their cash flows are continuously monitored. Assets that Epson plans to sell and
idle assets are separately assessed for impairment on the individual asset level. Impairment tests are
performed for both types of assets. The net book value of a business asset is reduced to its recoverable
amount when there is substantial deterioration in the asset’s future earning potential due to adverse changes
in the marketplace resulting in lower product prices or due to a change in the utilization plan for the assets.
The carrying value of assets that Epson plans to sell and idle assets is reduced to its recoverable amount
when their net selling prices are substantially lower than their carrying values.
For the year ended March 31, 2008, Epson incurred an impairment loss on its liquid crystal panel
production equipment, production equipment planned for consolidation and idle assets. The carrying value
of these assets was reduced to its recoverable amount. A reduction in value of ¥10,783 million was
recognized in the impairment loss account. The reduction mainly comprised ¥5,023 million for buildings
and structures, ¥4,144 million for machinery, equipment and vehicles, ¥823 million for tools, furniture and
fixtures, and ¥591 million for land.
For the year ended March 31, 2009, Epson incurred an impairment loss on its liquid crystal display
production equipment, semiconductor production equipment, production equipment planned for
consolidation and idle assets. The carrying value of these assets was reduced to its recoverable amount. A
reduction in value of ¥73,839 million ($751,695 thousand) was recognized in the impairment loss account
and the business structure improvement expenses account. The reduction mainly comprised ¥31,744
million ($323,159 thousand) for buildings and structures, ¥24,809 million ($252,560 thousand) for
machinery, equipment and vehicles, ¥4,645 million ($47,286 thousand) for tools, furniture and fixtures,
¥6,235 million ($63,473 thousand) for land, ¥3,930 million ($40,008 thousand) for intangible assets. The
recoverable amounts are determined using their net selling prices and value in use, which were assessed on
the basis of reasonable estimates. The values in use were calculated by applying a 6.1% discount rate to the
assets’ expected future cash flows.