Nikon 2012 Annual Report Download - page 41

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NIKON CORPORATION ANNUAL REPORT 2012
FINANCIAL SECTION
(r) Derivatives and Hedging Activities
The Group enters into derivative financial instruments
(“derivatives”), including foreign exchange forward contracts,
currency options, foreign currency swaps and interest rate
swaps to hedge foreign exchange risk and interest rate expo-
sures. The Group does not hold or issue derivatives for trading
or speculative purposes.
Derivatives and foreign currency transactions are classified
and accounted for as follows:
(a) all derivatives are recognized principally as either assets
or liabilities and remeasured at fair value, and gains or losses
on derivative transactions are recognized in the statements
of income and (b) for derivatives used for hedging purposes,
if derivatives qualify for hedge accounting because of high
correlation and effectiveness between the hedging instru-
ments 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 forecast transactions are
also measured at fair value, but the unrealized gains or losses
on qualifying hedges are deferred until the underlying trans-
actions have been completed. The foreign currency swaps
used to hedge the foreign currency fluctuations of long-term
debt denominated 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
qualify 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 differential paid or
received under the swap agreements is 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, retro-
actively 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 issu-
ance) with an applicable adjustment for related interest
expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to
the respective years including dividends to be paid after the
end of the year.
(t) Accounting Changes and Error Corrections
In December 2009, the ASBJ issued ASBJ Statement No. 24,
“Accounting Standard for Accounting Changes and Error
Corrections,” and ASBJ Guidance No. 24, “Guidance on
Accounting Standard for Accounting Changes and Error
Corrections.” Accounting treatments under this standard
and guidance are as follows:
(1) Changes in Accounting Policies
When a new accounting policy is applied with revision of
accounting standards, a new policy is applied retrospec-
tively unless the revised accounting standards include
specific transitional provisions. When the revised account-
ing standards include specific transitional provisions, an
entity shall comply with the specific transitional provisions.
(2) Changes in Presentations
When the presentation of financial statements is changed,
prior-period financial statements are reclassified in
accordance with the new presentation.
(3) Changes in Accounting Estimates
A change in an accounting estimate is accounted for in the
period of the change if the change affects that period only
and is accounted for prospectively if the change affects
both the period of the change and future periods.
(4) Corrections of Prior-Period Errors
When an error in prior-period financial statements is
discovered, those statements are restated.
This accounting standard and the guidance are applicable
to accounting changes and corrections of prior-period errors,
which are made from the beginning of the fiscal year that
begins on or after April 1, 2011.
(u) Accounting Change
In June 2010, the ASBJ issued revised ASBJ Statement No. 2
(revised 2006) Accounting Standard for Earnings Per Share,
ASBJ Guidance No. 4 (revised 2006) Guidance on Accounting
Standard for Earnings Per Share, and ASBJ PITF No. 9
(revised 2006) Practical Solution on Accounting for Earnings
Per Share, which were effective for fiscal years beginning
on or after April 1, 2011.
Effective April 1, 2011, the Company changed its method
of calculating diluted earnings per share from not including
the fair value of services to the assumed proceeds from the
exercise of dilutive stock options with service conditions to
including such fair value.
The effect of retrospective application of this accounting
policy change was immaterial.