Nikon 2008 Annual Report Download - page 43

Nikon Annual Report 2008 41
9. Equity
Since May 1, 2006, Japanese companies have been sub-
ject to the Corporate Law of Japan (the “Corporate Law”),
which reformed and replaced the Commercial Code of
Japan. The significant provisions in the Corporate Law
that affect financial and accounting matters are summa-
rized below;
(a) Dividends
Under the Corporate Law, companies can pay dividends at
any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders meeting.
For companies that meet certain criteria such as; (1) hav-
ing the Board of Directors, (2) having independent audi-
tors, (3) having the Board of Corporate Auditors, and (4)
the term of service of the directors is prescribed as one
year rather than two years of normal term by its articles
of incorporation, the Board of Directors of such company
may declare dividends (except for dividends in kind) at
any time during the fiscal year if the company has pre-
scribed so in its articles of incorporation. The Company
meets all the above criteria.
The Corporate Law permits companies to distribute
dividends-in-kind (non-cash assets) to shareholders sub-
ject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once
a year upon resolution by the Board of Directors if the
articles of incorporation of the company so stipulate.
The Corporate Law provides certain limitations on the
amounts available for dividends or the purchase of trea-
sury stock. The limitation is defined as the amount avail-
able for distribution to the shareholders, but the amount
of net assets after dividends must be maintained at no
less than ¥ 3 million.
(b) Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Corporate Law requires that an amount equal to 10%
of dividends must be appropriated as a legal reserve (a
component of retained earnings) or as additional paid-in
capital (a component of capital surplus) depending on the
equity account charged upon the payment of such divi-
dends until the total of aggregate amount of legal reserve
and additional paid-in capital equals 25% of the common
stock. Under the Corporate Law, the total amount of addi-
tional paid-in capital and legal reserve may be reversed
without limitation of such threshold. The Corporate Law
also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus and retained earn-
ings can be transferred among the accounts under certain
conditions upon resolution of the shareholders.
(c) Treasury Stock and Treasury Stock Acquisition Rights
The Corporate Law also provides for companies to pur-
chase treasury stock and dispose of such treasury stock
by resolution of the Board of Directors. The amount of
treasury stock purchased cannot exceed the amount
available for distribution to the shareholders which is
determined by specific formula.
Under the Corporate Law, stock acquisition rights,
which were previously presented as a liability, are now
presented as a separate component of equity.
The Corporate Law also provides that companies can
purchase both treasury stock acquisition rights and trea-
sury stock. Such treasury stock acquisition rights are
presented as a separate component of equity or deducted
directly from stock acquisition rights.