Konica Minolta 2012 Annual Report Download - page 39

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Net retirement benefi t costs for the years ended March 31, 2012 and
2011 are as follows:
Millions of yen
Thousands of
U.S. dollars
2012 2011 2012
a. Service costs ........................ ¥ 4,973 ¥ 4,468 $ 60,506
b. Interest costs ..................... 3,981 4,005 48,437
c. Expected return on plan assets ... (2,084) (2,105) (25,356)
d. Amortization of actuarial
differences
.......................... 2,089 3,086 25,417
e. Amortization of prior service costs .. (1,222) (1,626) (14,868)
f. Retirement benefi t costs
(a+b+c+d+e)
....................... 7,738 7,828 94,148
g. Gain/loss on changing to the
defi ned contribution pension plan
.. —0 —
h. Contributions to defi ned
contribution pension plans
........ 3,278 3,082 39,883
Total (f+g+h) .............................. ¥11,017 ¥10,911 $134,043
Note: Retirement benefi t costs of consolidated subsidiaries using a simplifi ed
method are included in “a. Service costs.”
Assumptions used in the calculation of the above information for the
main schemes of the Company and its domestic consolidated
subsidiaries are as follows:
2012 2011
Method of attributing retirement
benefi ts to periods of service
Periodic allocation
method for
projected benefi t
obligations
Periodic allocation
method for
projected benefi t
obligations
Discount rate Mainly 2.5% Mainly 2.5%
Expected rate of return on plan assets Mainly 1.25% Mainly 1.25%
Amortization of unrecognized
prior service cost Mainly 10 years Mainly 10 years
Amortization of unrecognized
actuarial differences Mainly 10 years Mainly 10 years
23. DERIVATIVES
The Companies utilize derivative instruments including foreign currency
exchange forward contracts, interest rate swaps, currency options and
currency swaps, to hedge against the adverse effects of fl uctuations in
foreign currency exchange rate and interest rate risk. Additionally, the
Companies have a policy of limiting the activity of such transactions to
only hedge identifi ed exposures and not to hold transactions for
speculative or trading purposes.
Risks associated with derivative transactions
Although the Companies are exposed to credit-related risks and risks
associated with the changes in interest rates and foreign exchange
rates, such derivative instruments are limited to hedging purposes only
and the risks associated with these transactions are limited. All
derivative contracts entered into by the Companies are with selected
major fi nancial institutions based upon their credit ratings and other
factors. Such credit-related risks are not anticipated to have a signifi cant
impact on the Companies’ results.
Risk control system for derivative transactions
In order to manage market and credit risks, the Finance Division of the
Company is responsible for setting or managing the position limits and
credit limits under the Company’s internal policies for derivative
instruments. Resources are assigned to each function, including
transaction execution, administration, and risk management,
independently, in order to clarify the responsibility and the role of each
function.
The principal policies on foreign currency exchange instruments and
other derivative instruments of the Company and its major subsidiaries
are approved by the Management Committee of the Company.
Additionally, a Committee which consists of management from the
Company and its major subsidiaries meets regularly to discuss the
principal policies on foreign currency exchange instruments and to
reaffi rm and reassess other derivative instruments and market risks. All
derivative instruments are reported monthly to the respective
responsible offi cer. Market risks and credit risks for other subsidiaries
are controlled and assessed based on internal rules. Derivative
instruments are approved by the respective president or equivalent of
each subsidiary.
Interest rate swap contracts and currency swap contracts are
approved by the Finance Manager of the Company and the President or
equivalent of other subsidiaries, respectively.