Epson 2012 Annual Report Download - page 54

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53
Notes to Consolidated Financial Statements
1. Basis of presenting consolidated financial statements
(1) Nature of operations
Seiko Epson Corporation (the “Company”) was originally established as a manufacturer of watches but later
expanded its business to provide key devices and solutions for the digital color imaging markets through the
application of its proprietary technologies. The Company operates its manufacturing and sales business mainly in
Japan, the Americas, Europe and Asia/Oceania.
(2) Basis of presenting consolidated financial statements
The Company and its subsidiaries in Japan maintain their records and prepare their financial statements in
accordance with accounting principles generally accepted in Japan. Meanwhile its foreign subsidiaries maintain
their records and prepare their financial statements in conformity with International Financial Reporting
Standards or the generally accepted accounting principles in the United States. In addition, some items required
by Japanese standards should be adjusted in the consolidation process so that net income is accurately accounted
for, unless they are not material.
The amounts in the accompanying consolidated financial statements and the notes are rounded down.
2. Number of group companies
As of March 31, 2012, the Company had 89 consolidated subsidiaries. It has applied the equity method in respect
to one unconsolidated subsidiary and six affiliates.
3. Summary of significant accounting policies
(1) Consolidation and investments in affiliates
The accompanying consolidated financial statements include the accounts of the Company and those of its
subsidiaries that are controlled by Epson. Under the effective control approach, all majority-owned companies
are to be consolidated. Additionally, companies in which share ownership equals 50% or less may be required to
be consolidated in cases where such companies are effectively controlled by other companies through the
interests held by a party who has a close relationship with the parent in accordance with Japanese accounting
standards. All significant inter-company transactions and accounts, along with unrealized inter-company profits,
are eliminated upon consolidation.
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.