Konica Minolta 2010 Annual Report Download - page 39

1. BASIS OF PRESENTING FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Konica Minolta
Holdings, Inc., (the “Company”) and its consolidated subsidiaries (the
“Companies”) are prepared on the basis of accounting principles gener-
ally accepted in Japan, which are different in certain respects as to
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. Accounting principles generally accepted in
Japan allow consolidation of foreign subsidiaries based on their financial
statements in conformity with International Financial Reporting Stan-
dards or accounting principles generally accepted in the United States.
The accompanying consolidated financial statements incorporate
certain reclassifications in order to present them in a format that is more
appropriate to readers outside Japan. In addition, the notes to the
consolidated financial statements include information that is not
required under generally accepted accounting principles in Japan, but
which is provided herein as additional information.
As permitted under the Securities and Exchange Law of Japan,
amounts of less than one million 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 96 subsidiaries (105 subsidiaries for 2009) in which it has control. All
significant intercompany transactions, balances and unrealized profits
among the Companies are eliminated on consolidation.
Investments in 5 unconsolidated subsidiaries (6 unconsolidated subsid-
iaries for 2009) and 3 significant affiliates (3 significant affiliates for 2009)
are accounted for using the equity method of accounting. Investments in
other unconsolidated subsidiaries and affiliates are stated at cost, since
they have no material effect on the consolidated financial statements.
(b) Translation of Foreign Currencies
Translation of Foreign Currency Transactions and Balances
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 rates for the period.
Translation of Foreign Currency Financial Statements
The translation of foreign currency financial statements of overseas
consolidated subsidiaries into Japanese yen is 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 which are translated at
average exchange rates.
(c) Cash and Cash Equivalents
Cash and cash equivalents in the consolidated cash flow statements
includes cash on hand and short-term investments that are due for
redemption in three months or less and that are easily converted into
cash with little risk to a change in value.
(d) Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided for possible losses
from uncollectible receivables based on specific doubtful accounts and
considering historic experience.
(e) Inventories
Domestic consolidated subsidiaries’ inventories are mainly stated using
the cost price method (carrying amount in the balance sheet is calcu-
lated with consideration of write-down due to decreased profitability)
determined using the total average method. Overseas consolidated
subsidiaries’ inventories are mainly stated at the lower of cost or market
value or net realizable value, where cost is determined using the first-in,
first-out method.
(f) Property, Plant and Equipment
Depreciation of property, plant and equipment (excluding lease assets)
for the Company and domestic consolidated subsidiaries is calculated
using the declining balance method, except for depreciation of build-
ings acquired after April 1, 1998, which are depreciated on the
straight-line method over their estimated useful lives in accordance
with Japanese Corporate Tax Law. Depreciation of property, plant and
equipment (excluding lease assets) for overseas consolidated subsid-
iaries is calculated using the straight-line method.
For finance leases where ownership is not transferred, depreciation is
calculated by the straight-line method over the lease period utilizing a
residual value of zero. Regarding finance leases of the Company and its
domestic consolidated subsidiaries that do not transfer ownership and
for which the starting date for the lease transaction is prior to March 31,
2008, lease payments are recognized as an expense.
(g) Intangible Assets
Intangible assets are depreciated on the straight-line method. In addi-
tion, software is depreciated on the straight-line method over their
estimated useful lives (5 years).
(h) Goodwill or Negative Goodwill
Goodwill recognized by the Companies including foreign subsidiaries is
amortized on a straight-line basis over a period not to exceed 20 years.
(i) Income Taxes
Deferred income taxes are recognized based on temporary differences
between the tax basis of assets and liabilities and those as reported in
the consolidated financial statements.
(j) Research and Development Costs
Research and development costs are expensed as incurred.
(k) Financial Instruments
Derivatives
All derivatives are stated at fair market value, with changes in fair
market value included in net income for the period in which they arise,
except for derivatives that are designated as “hedging instruments” (see
Hedge Accounting below).
Securities
Investments by the Companies in equity securities issued by unconsoli-
dated subsidiaries and affiliates are accounted for using the equity
method of accounting; however, investments in certain unconsolidated
subsidiaries and affiliates are stated at cost due to the effect of the
application of the equity method of accounting being immaterial.
Held-to-maturity securities are recorded by the amortized cost
method (straight-line method).
Other securities for which market quotations are available are stated
at fair market value. Net unrealized gains or losses on these securities
are reported, net of tax, as a separate component of net assets.
Other securities for which market quotations are unavailable are
stated at cost, except in cases where the fair market value of equity
securities issued by unconsolidated subsidiaries and affiliates or other
securities has declined significantly and such impairment of value is
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Konica Minolta Holdings, Inc. and Consolidated Subsidiaries
For the fiscal years ended March 31, 2010 and 2009
KONICA MINOLTA HOLDINGS, INC. ANNUAL REPORT 2010 37