Nikon 2008 Annual Report Download - page 37

Nikon Annual Report 2008 35
if certain “as if capitalized” information is disclosed in the
notes to the lessee’s financial statements.
(n) Bonuses to Directors and Corporate Auditors
Bonuses to directors and corporate auditors are accrued
at the year end to which such bonuses are attributable.
(o) Income Taxes
The provision for income taxes is computed based on
the pretax income included in the consolidated state-
ments of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differ-
ences between the carrying amounts and the tax bases
of assets and liabilities. Deferred taxes are measured
by applying currently enacted tax laws to the temporary
differences.
(p) Foreign Currency Transactions
All short-term and long-term monetary receivables and
payables denominated in foreign currencies are translated
into Japanese yen at the exchange rates at the balance
sheet date. The foreign exchange gains and losses from
translation are recognized in the statement of income to
the extent that they are not hedged by forward exchange
contracts.
(q) Foreign Currency Financial Statements
The balance sheet accounts of the consolidated for-
eign subsidiaries are translated into Japanese yen at
the current exchange rate as of balance sheet date
except for equity, which is translated at the historical
exchange rate.
Differences arising from such translation are shown as
“Foreign currency translation adjustments” in a separate
component of equity.
Revenue and expense accounts of consolidated foreign
subsidiaries are translated into Japanese yen at the aver-
age exchange rate.
(r) Derivatives and Hedging Activities
The Group enters into derivative financial instruments
(“derivatives”), including forward foreign exchange con-
tracts, currency options, foreign currency swaps and
interest rate swaps to hedge foreign exchange risk and
interest rate exposures. The Group does not hold or issue
derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency
transactions are classified and accounted for as follows:
(a) all derivatives, except those qualifying for hedge
accounting are recognized principally as either assets or
liabilities and measured at fair value, and gains or losses
on derivative transactions are recognized in the state-
ments of income and (b) for derivatives used for hedg-
ing purposes, if derivatives qualify for hedge accounting
because of high correlation and effectiveness between
the hedging instruments and the hedged items, gains or
losses on derivatives are deferred until maturity of the
hedged transactions.
The foreign exchange forward contracts and currency
option contracts employed to hedge foreign exchange
exposures for export sales and purchases are measured
at fair value and the related unrealized gains or losses are
recognized in income. Forward contracts entered into for
forecasted transactions are also measured at fair value,
but the unrealized gains or losses on qualifying hedges
are deferred until the underlying transactions are com-
pleted. The foreign currency swaps used to hedge the
foreign currency fluctuations of long-term debt denomi-
nated in foreign currencies are measured at fair value and
the unrealized gains or losses are included in the carrying
amounts of the debt. The interest rate swaps which qual-
ify for hedge accounting are measured at market value at
the balance sheet date, and the unrealized gains or losses
are deferred until maturity. The interest rate swaps which
qualify for hedge accounting and meet specific matching
criteria are not remeasured at market value but the dif-
ferential paid or received under the swap agreements are
recognized and included in interest expense or income.
(s) Per Share Information
Basic net income per share is computed by dividing
net income available to common shareholders by the
weighted-average number of common shares outstanding
for the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential
dilution that could occur if securities were exercised or
converted into common stock. Diluted net income per
share of common stock assumes full conversion of the
outstanding convertible notes and bonds at the beginning
of the year (or at the time of issuance) with an applicable
adjustment for related interest expense, net of tax and
full exercise of outstanding warrants.
Cash dividends per share presented in the accompa-
nying consolidated statements of income are dividends
applicable to the respective years including dividends to
be paid after the end of the year.
(t) New Accounting Pronouncements
Measurement of Inventories—Under generally accepted
accounting principles in Japan (“Japanese GAAP”), inven-
tories are currently measured either by the cost method,
or at the lower of cost or market. On July 5, 2006, the ASBJ
issued ASBJ Statement No.9, “Accounting Standard for
Measurement of Inventories,” which is effective for fis-
cal years beginning on or after April 1, 2008 with early
adoption permitted. This standard requires that inven-
tories held for sale in the ordinary course of business
be measured at the lower of cost or net selling value,
which is defined as the selling price less additional esti-
mated manufacturing costs and estimated direct selling
expenses. The replacement cost may be used in place of
the net selling value, if appropriate. The standard also
requires that inventories held for trading purposes be
measured at the market price.
Lease Accounting—On March 30, 2007, the ASBJ issued
ASBJ Statement No.13, “Accounting Standard for Lease
Transactions,” which revised the existing accounting
standard for lease transactions issued on June 17, 1993.
Under the existing accounting standard, finance leases
that deem to transfer ownership of the leased property
to the lessee are to be capitalized, however, other finance