Hitachi 2005 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2005 Hitachi annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 86

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86

Hitachi, Ltd. Annual Report 2006 79
28. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions are used to estimate the fair values of financial instruments:
Investments in securities
The fair value of investments in securities is estimated based on quoted market prices for these or similar securities.
Long-term debt
The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows
using the Company’s and its subsidiaries’ incremental borrowing rates for similar borrowing arrangements.
Cash and cash equivalents, Trade receivables, Short-term debt and Trade payables
The carrying amount approximates the fair value because of the short maturity of these instruments.
Derivative financial instruments
The fair values of forward exchange contracts, cross currency swap agreements, interest rate swaps and option contracts
are estimated on the basis of the market prices of derivative financial instruments with similar contract conditions.
The carrying amounts and estimated fair values of the financial instruments as of March 31, 2006 and 2005 are as follows:
Millions of yen Thousands of U.S. dollars
2006 2005 2006
Carrying Estimated Carrying Estimated Carrying Estimated
amounts fair values amounts fair values amounts fair values
Investments in securities:
Short-term investments . . . . . ¥ 162,756 ¥ 162,756 ¥ 146,568 ¥ 146,568 $ 1,391,077 $ 1,391,077
Investments and advances . . 448,614 448,631 315,129 315,143 3,834,308 3,834,453
Derivatives (Assets):
Forward exchange
contracts . . . . . . . . . . . . . . . 1,429 1,429 683 683 12,214 12,214
Cross currency swap
agreements . . . . . . . . . . . . . 354 354 1,109 1,109 3,026 3,026
Interest rate swaps . . . . . . . . 1,960 1,960 1,407 1,407 16,752 16,752
Option contracts . . . . . . . . . . 11 11 ––94 94
Long-term debt . . . . . . . . . . . . . (1,666,517) (1,639,779) (1,825,895) (1,826,562) (14,243,735) (14,015,205)
Derivatives (Liabilities):
Forward exchange
contracts . . . . . . . . . . . . . . . (3,423) (3,423) (5,211) (5,211) (29,256) (29,256)
Cross currency swap
agreements . . . . . . . . . . . . . (8,764) (8,764) (6,478) (6,478) (74,906) (74,906)
Interest rate swaps . . . . . . . . (3,067) (3,067) (5,603) (5,603) (26,214) (26,214)
Option contracts . . . . . . . . . . (824) (824) (237) (237) (7,043) (7,043)
It is not practicable to estimate the fair value of investments in unlisted common stock because of the lack of a market
price and difficulty in estimating fair value without incurring excessive cost. The carrying amounts of these investments at
March 31, 2006 and 2005 totaled ¥79,321 million ($677,957 thousand) and ¥77,755 million, respectively.
27. CONCENTRATIONS OF CREDIT RISK
The Company and its subsidiaries generally do not have significant concentrations of credit risk to any counterparties
nor any regions because they are diversified and spread globally.