Konica Minolta 2005 Annual Report Download - page 45

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Konica Minolta Holdings, Inc. and Consolidated Subsidiaries
For the fiscal years ended March 31, 2005 and 2004
1. BASIS OF PRESENTING FINANCIAL STATEMENTS
On April 1, 2003, the former Konica Corporation spun off
its operating activities and shifted to a holding company
structure. Shortly thereafter, Konica Minolta Holdings, Inc.
was established on August 5, 2003, through a share
exchange with Minolta Co., Ltd. For accounting purposes,
the integration with Minolta Co., Ltd. became effective
September 30, 2003. Accordingly, the consolidated financial
statements for the first six months of the year ended March
31, 2004 do not include the results of Minolta Co., Ltd.
The accompanying consolidated financial statements of
Konica Minolta Holdings, Inc. (the “Company”) and its
subsidiaries (together, referred to as the “Companies”) are
prepared on the basis of accounting principles generally
accepted in Japan, which are different in certain respects to
the application and disclosure requirements of International
Financial Reporting Standards, and are compiled from the
consolidated financial statements prepared by the Company
as required by the Securities and Exchange Law of Japan.
Certain items presented in the consolidated financial
statements submitted to the Director of Kanto Finance
Bureau in Japan have been reclassified for the convenience
of readers outside of Japan.
Certain amounts previously reported have been
reclassified to conform with the current year classifications.
As permitted under the Securities and Exchange Law of
Japan, amounts of less than one million yen have been
omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both in yen and in
dollars) do not necessarily agree with the sums of the
individual amounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and, with certain exceptions which are
not material, those of its 122 subsidiaries in which it has
control. All significant intercompany transactions balances
and unrealized profits among the Companies are eliminated
in consolidation.
Investments in 13 unconsolidated subsidiaries and 2
significant affiliates are accounted for using the equity
method. Investments in 20 other unconsolidated
subsidiaries and 17 affiliates are stated at cost, since they
have no material effect on the consolidated financial
statements.
The excess of cost over the underlying investments in
subsidiaries is recognized as consolidation goodwill and is
amortized on a straight-line basis over a period not
exceeding 20 years.
(b) Translation of Foreign Currencies
Translation of Foreign Currency Transactions
All monetary assets and liabilities denominated in foreign
currencies, whether long-term or short-term, are translated
into Japanese yen at the exchange rates prevailing at the
balance sheet date and revenues and costs are translated
using the average exchange rate for the period.
Translation of Foreign Currency Financial Statements
The translations of foreign currency financial statements of
overseas consolidated subsidiaries and affiliates into
Japanese yen are made by applying the exchange rates
prevailing at the balance sheet dates for balance sheet
items, except common stock, additional paid-in capital and
retained earnings accounts, which are translated at the
historical rates, and the statements of income and retained
earnings are translated at average exchange rates.
(c) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statements
of cash flows consist of cash on hand, bank deposits able
to be withdrawn on demand and short-term investments
with an original maturity of three months or less, which
represent a minor risk of fluctuation in value.
(d) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided at the
amount of possible losses from uncollectible receivables
based on the management’s estimate.
(e) Inventories
The Company and its domestic consolidated subsidiaries
inventories are, in the main, recorded at cost as determined
by the periodic-average method. Overseas consolidated
subsidiaries’ inventories are recorded at the lower of cost or
market value, with cost determined by the first-in, first-out.
(f) Property, Plant and Equipment
Depreciation of property, plant and equipment for the
Company and domestic consolidated subsidiaries is
computed using the declining balance method, except for
depreciation of buildings acquired after April 1, 1998, based
on the estimated useful lives of assets.
Depreciation of buildings acquired after April 1, 1998 is
computed using the straight-line method. Depreciation for
foreign subsidiaries is computed using the straight-line
method.
Ordinary maintenance and repairs are charged to
income as incurred. Major replacements and improvements
are capitalized. When properties are retired or otherwise
disposed of, the property and related accumulated depre-
ciation accounts are relieved of the applicable amounts and
any differences are charged or credited to income.
(g) Accounting Standard for Impairment
of Fixed Assets
On August 9, 2002, the Business Accounting Council in
Japan issued “Opinion on Establishment of Asset-
Impairment Accounting Standards,” which requires that
certain fixed assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If the criterion
for impairment recognition is met, an impairment loss as
the difference between the carrying amount and the higher
of net discounted future cash flows or market value of the
asset shall be recognized in the consolidated statements of
income. In the case of the Company, this standard shall be