Epson 2011 Annual Report Download - page 53

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52
Investments in affiliates in which Epson has significant influence are accounted for using the equity method.
Consolidated income includes Epson’s current equity in net income or loss of affiliates after elimination of
significant unrealized inter-company profits.
The difference between the cost and the underlying net assets of investments in subsidiaries is recognized as
“goodwill” and is included in the intangible assets account (if the cost is in excess) or in the noncurrent liabilities
account (if the underlying net asset is in excess). Goodwill is amortized on a straight-line basis over a period of
five years.
(2) Foreign currency translation and transactions
Foreign currency transactions are translated using foreign exchange rates prevailing at the respective transaction
dates. Receivables and payables in foreign currencies are translated at the foreign exchange rates prevailing at
the respective balance sheet dates, and the resulting transaction gains or losses are included in income for the
current period.
All the assets and liabilities of foreign subsidiaries and affiliates are translated at the foreign exchange rates
prevailing at the respective balance sheet dates, and all the income and expense accounts are translated at the
average foreign exchange rates for the respective periods. Foreign currency translation adjustments are recorded
in the consolidated balance sheets as foreign currency translation adjustment and minority interests.
(3) Cash and cash equivalents
Cash and cash equivalents included in the consolidated financial statements comprise cash on hand, bank
deposits that may be withdrawn on demand, and highly liquid investments purchased with initial maturities of
three months or less, and which present low risk of fluctuation in value.
(4) Financial instruments
Investments in debt and equity securities
Investments in debt and equity securities are classified into three categories: 1) trading securities, 2)
held-to-maturity debt securities, or 3) other securities. These categories are treated differently for
purposes of measuring and accounting for changes in fair value.
Trading securities held for the purpose of generating profits from changes in market value are
recognized at their fair values in the consolidated balance sheets. Changes in unrealized gains and
losses are included in current income. Held-to-maturity debt securities are expected to be held to
maturity and are recognized at amortized cost computed based on the straight-line method in the
consolidated balance sheets. Other securities for which market quotations are available are recognized
at fair value in the consolidated balance sheets. Unrealized gains and losses for these other securities