Fujitsu 2012 Annual Report Download - page 104

Free cash flow (the sum of cash flows from operating and invest-
ing activities) was positive ¥49.1 billion ($600 million), representing
a decrease of ¥64.2 billion year on year. Excluding one-time items,
such as proceeds from sales of investment securities, free cash flow
was a positive ¥43.5 billion ($531 million), representing a decrease
of ¥29.8 billion year on year.
Net cash used in financing activities amounted to ¥138.9 billion
($1,695 million), a decrease of ¥27.9 billion from the previous fiscal
year. Along with repayment of debt, the Company redeemed ¥100.0
billion in convertible bonds at maturity. For the redemption of the
convertible bonds, together with an allocation of cash on hand, the
Company issued ¥50.0 billion in straight bonds with maturity periods
of three and five years. During fiscal 2010, there was an expenditure
for the acquisition of shares from minority shareholders in conjunction
with the conversion of PFU Limited into a wholly owned subsidiary.
As a result of the above factors, cash and cash equivalents at the
end of fiscal 2011 totaled ¥266.6 billion ($3,252 million), down
¥91.8 billion from a year earlier.
To ensure efficient funding when the need for funds arises, the
Company views the maintenance of an appropriate level of liquidity
as an important policy with respect to its financing activities. “Liquid-
ity” refers to cash and cash equivalents and the total unused balance
of financing frameworks based on commitment lines established
with multiple financial institutions. As of March 31, 2012, the Group
had liquidity of ¥464.2 billion ($5,662 million), of which ¥266.6
billion ($3,252 million) was cash and cash equivalents and ¥197.5
billion ($2,409 million) was the yen value of unused commitment
lines.
To raise funds from global capital markets, the Group has
acquired bond ratings from Moody’s Investors Service (Moody’s),
Standard & Poor’s (S&P), and Rating and Investment Information,
Inc. (R&I). As of March 31, 2012, the Company had bond ratings
(long-term/short-term) of A3 (long-term) from Moody’s, A- (long-
term) from S&P, and A+ (long-term) and a-1 (short-term) from R&I.
4. Capital Expenditure
In fiscal 2011, capital expenditure totaled ¥140.6 billion ($1,715
million), an increase of 8.0% from ¥130.2 billion spent in the previ-
ous fiscal year. In the Technology Solutions segment, capital expendi-
tures totaled ¥73.4 billion ($895 million) for expansion of
datacenters in Japan, along with datacenters in Australia, Europe
and other regions. In the Ubiquitous Solutions segment, the Group
spent ¥15.6 billion ($191 million), mainly for new models of PCs and
mobile phones, along with manufacturing facilities for car audio and
navigation systems. In the Device Solutions segment, expenditures
totaled ¥47.2 billion ($576 million), mainly for LSI device manufac-
turing facilities and facilities to increase production of electronic
components.
5. Consolidated Subsidiaries
At the end of fiscal 2011, the number of consolidated subsidiaries in
Japan totaled 199, and the number outside Japan totaled 339, for a
total of 538 subsidiaries. This represents a net gain of three subsid-
iaries from 535 at the end of fiscal 2010, comprising 23 subsidiaries
added through acquisition or establishment, and 20 subsidiaries
removed through liquidation or sale. Fujitsu International Finance
(Netherlands) B.V., which had been a consolidated subsidiary until
fiscal 2010, was liquidated because it concluded its financing role for
the Fujitsu Group in Europe.
The number of affiliated companies accounted for by the
equity method as of the fiscal year-end totaled 18, three more
than a year earlier.
6. Critical Accounting Policies and Estimates
The accompanying consolidated financial statements of the Group have
been prepared in accordance with accounting principles and practices
generally accepted in Japan and the regulations under the Financial
Instruments and Exchange Law of Japan. The preparation of the con-
solidated financial statements requires management to make assump-
tions and estimates that affect the amount of the assets, liabilities,
contingent assets and contingent liabilities reported at the end of the
fiscal year, as well as the amount of revenue and expenses recognized
during that term. Actual results may differ from these estimates.
The following assumptions and estimates based on the application of
accounting principles are those that the management believes may
have a material impact on the consolidated financial statements.
Revenue Recognition
Revenue from sales of ICT systems and products, excluding custom-
ized software under development contracts, is recognized upon
acceptance by the customers, whereas revenue from sales of per-
sonal computers, other peripheral equipment and electronic devices
is recognized when the products are delivered to the customers.
Revenue from customized software under development contracts is
recognized on a percentage-of-completion basis.
The Group stringently assesses the potential revenue recoverable
on projects for which estimated costs have exceeded estimated
revenue, and recognizes the amounts assessed as non-recoverable
as losses. If the estimated costs relating to such contracts increase
further in the future, additional losses may be recognized.
Inventories
Inventories are carried at the acquisition cost. However, should the
net realizable value (“NRV”) at the fiscal year-end fall below that of
the acquisition cost, inventories are subsequently measured based
on the NRV, with the difference in value between the acquisition cost
and the NRV, in principle, booked as cost of sales. Inventories outside
the normal operating cycle are calculated at an NRV that reflects
future demand and market trends. The Group may experience sub-
stantial losses in cases where the NRV drops dramatically as a result
of deterioration in the market environment compared to forecasts.
102 FUJITSU LIMITED ANNUAL REPORT 2012