Nikon 2004 Annual Report Download - page 27

25
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Securities and
Exchange Law of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which
are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in 2003 financial statements to conform to classification used in 2004.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nikon Corporation (the “Company”)
is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of
readers outside Japan and have been made at the rate of ¥105.69 to U.S.$1, the rate of exchange at March 31, 2004. Such translations
should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Consolidation
The consolidated financial statements as of March 31, 2004 include the accounts of the Company and its 46 significant (45 in 2003) subsidiaries
(collectively the “Group”). Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to
exercise control over operations are fully consolidated, and those companies over which the Company has the ability to exercise significant
influence are accounted for by the equity method.
Investments in 3 associated companies (2 associated companies in 2003) are accounted for by the equity method. Investments in the
remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting had been applied to
the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The differences between the cost and underlying net equity of investments in consolidated subsidiaries and associated companies accounted
for by the equity method at acquisition (“Goodwill”) are charged to income when incurred, if they are small sum, and the others are being
amortized on a straight-line basis over 5 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in
assets resulting from transactions within the Group is eliminated.
(b) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit, commercial paper and mutual funds investing in bonds that represent
short-term investments, all of which mature or become due within three months of the date of acquisition.
(c) Marketable and Investment Securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows:
i) trading securities, which are held for the purpose of earning capital gains in the near term are reported at fair value, and the related
unrealized gains and losses are included in earnings,
ii) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are
reported at amortized cost and
iii) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate component of shareholders’ equity.
Non-marketable available-for-sale securities are stated principally at moving-average cost. For other than temporary declines in fair value,
investment securities are reduced to net realizable value by a charge to income.
(d) Inventories
Inventories of the Company and its domestic subsidiaries are stated at cost as determined principally using the average method, except for
work in process which is determined by the specific identification method. Inventories of foreign subsidiaries are stated at the lower of cost or
market as determined principally using the first-in, first-out method.
notes to consolidated financial statements
NIKON CORPORATION AND CONSOLIDATED SUBSIDIARIES
YEARS ENDED MARCH 31, 2004 AND 2003