Nikon 2011 Annual Report Download - page 39

37Annual Report 2011Nikon CorporationFinancial Section
The Company applied this accounting standard effective
April 1, 2008. In addition, the Company adjusted the beginning
balance of retained earnings at April 1, 2008 as if this account-
ing standard had been retrospectively applied.
(c) Unification of Accounting Policies Applied to Foreign
Associated Companies for the Equity Method
In March 2008, the ASBJ issued ASBJ Statement No. 16,
“Accounting Standard for Equity Method of Accounting for
Investments”. The new standard requires adjustments to be
made to conform the associate’s accounting policies for simi-
lar transactions and events under similar circumstances to
those of the parent company when the associate’s financial
statements are used in applying the equity method unless it is
impracticable to determine adjustments. In addition, financial
statements prepared by foreign associated companies in
accordance with either International Financial Reporting
Standards or the generally accepted accounting principles
in the United States tentatively may be used in applying the
equity method if the following items are adjusted so that net
income is accounted for in accordance with Japanese GAAP
unless they are not material:
1) amortization of goodwill; 2) scheduled amortization of
actuarial gain or loss of pensions that has been directly
recorded in the equity; 3) expensing capitalized develop-
ment costs of R&D; 4) cancellation of the fair value model
accounting for property, plant, and equipment and invest-
ment properties and incorporation of the cost model
accounting; 5) recording the prior years’ effects of changes
in accounting policies in the income statement where retro-
spective adjustments to the financial statements have been
incorporated; and 6) exclusion of minority interests from
net income, if contained.
This standard was applicable to equity method of accounting
for fiscal years beginning on or after April 1, 2010. The Com-
pany applied this accounting standard effective April 2010.
(d) Business Combination
In October 2003, the Business Accounting Council (the “BAC”)
issued a Statement of Opinion, “Accounting for Business
Combinations,” and in December 2005, the ASBJ issued ASBJ
Statement No. 7, “Accounting Standard for Business Divesti-
tures” and ASBJ Guidance No. 10, “Guidance for Accounting
Standard for Business Combinations and Business Divesti-
tures.” The accounting standard for business combinations
allows companies to apply the pooling of interests method of
accounting only when certain specific criteria are met such
that the business combination is essentially regarded as a
uniting-of-interests. For business combinations that do not
meet the uniting-of-interests criteria, the business combina-
tion is considered to be an acquisition and the purchase
method of accounting is required. This standard also pre-
scribes the accounting for combinations of entities under
common control and for joint ventures.
In December 2008, the ASBJ issued a revised accounting
standard for business combinations, ASBJ Statement No. 21,
“Accounting Standard for Business Combinations”. Major
accounting changes under the revised accounting standard
are as follows: (1) The revised standard requires accounting
for business combinations only by the purchase method. As
a result, the pooling of interests method of accounting is no
longer allowed. (2) The current accounting standard accounts
for the research and development costs to be charged to
income as incurred. Under the revised standard, in-process
research and development (IPR&D) acquired in the business
combination is capitalized as an intangible asset. (3) The
previous accounting standard provided for a bargain purchase
gain (negative goodwill) to be systematically amortized over
a period not exceeding 20 years. Under the revised standard,
the acquire recognizes the bargain purchase gain in profit
or loss immediately on the acquisition date after reassessing
and confirming that all of the assets acquired and all of the
liabilities assumed have been identified after a review of the
procedures used in the purchase allocation. This standard
was applicable to business combinations undertaken on or
after April 1, 2010 with early adoption permitted for fiscal
years beginning on or after April 1, 2009. The Company
applied this accounting standard effective April 1, 2010.
(e) 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 invested in bonds
that represent short-term investments, all of which mature or
become due within three months of the date of acquisition.
(f) Investment Securities
Investment securities are classified and accounted for,
depending on management’s intent, as follows:
i) 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
ii) available-for-sale securities, which are not classified as
held to maturity securities, are reported at fair value,
with unrealized gains and losses, net of applicable taxes,
reported in a separate component of equity.
Non-marketable available-for-sale securities are stated at
cost determined by the moving-average method.
For other than temporary declines in fair value, investment
securities are reduced to net realizable value by a charge to
income.
The Company records investments in limited liability invest-
ment partnerships (deemed “investment securities” under
the provisions set forth in Article 2 Item 2 of the Financial
Instruments and Exchange Law) using the amount of interest
in such partnerships calculated based on ownership percent-
age and the most recent financial statements on the report
date stipulated in the partnership agreement.