Nissan 2007 Annual Report Download - page 57

(a) Basis of Presentation
Nissan Motor Co., Ltd. (the “Company”) and its domestic subsidiaries
maintain their books of account in conformity with the financial
accounting standards of Japan, and its foreign subsidiaries maintain
their books of account in conformity with those of their countries of
domicile.
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in Japan, which are different in certain respects as to the
application and disclosure requirements of International Financial
Reporting Standards, and have been compiled from the consolidated
financial statements prepared by the Company as required by the
Securities and Exchange Law of Japan.
Certain amounts in the prior years’ financial statements have been
reclassified to conform to the current year’s presentation.
(b) Principles of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the
accounts of the Company and any significant companies controlled
directly or indirectly by the Company. Companies over which the
Company exercises significant influence in terms of their operating
and financial policies have been included in the consolidated financial
statements on an equity basis. All significant intercompany balances
and transactions have been eliminated in consolidation.
The financial statements of the Company’s subsidiaries in certain
foreign countries including Mexico have been prepared based on
general price-level accounting. The related revaluation adjustments
made to reflect the effect of inflation in those countries in the
accompanying consolidated financial statements have been charged
or credited to operations and are directly reflected in valuation,
translation adjustments and others (retained earnings in 2005).
Investments in subsidiaries and affiliates which are not
consolidated or accounted for by the equity method are carried at
cost or less. Where there has been a permanent decline in the value
of such investments, the Company has written down the investments.
Differences between the cost and the underlying net equity at fair
value of investments in consolidated subsidiaries and in companies
which are accounted for by the equity method have been amortized
by the straight-line method over periods not exceeding 20 years.
(c) Foreign currency translation
The balance sheet accounts of the foreign consolidated subsidiaries
are translated into yen at the rates of exchange in effect at the
balance sheet date, except for the components of net assets
excluding minority interests (shareholders’ equity in 2005) which are
translated at their historical exchange rates. Revenue and expense
accounts are translated at the average rate of exchange in effect
during the year. Differences arising from the translation are
presented as translation adjustments and minority interests in its
consolidated financial statements.
(d) Cash equivalents
All highly liquid investments with maturity of three months or less
when purchased are considered cash equivalents.
(e) Inventories
Inventories are stated principally at the lower of cost or market, cost
being determined principally by the first-in, first-out method.
(f) Short-term investments and investment securities
Securities other than equity securities issued by subsidiaries and
affiliates are classified into three categories: trading, held-to-maturity
or other securities. Trading securities are carried at fair value and
held-to-maturity securities are carried at amortized cost. Marketable
securities classified as other securities are carried at fair value with
changes in unrealized holding gain or loss, net of the applicable
income taxes, included directly in net assets (shareholders’ equity in
2005). Non-marketable securities classified as other securities are
carried at cost. Cost of securities sold is determined by the moving
average method.
(g) Property, plant and equipment and depreciation
Depreciation of property, plant and equipment of the Company and its
consolidated subsidiaries is calculated principally by the straight-line
method based on the estimated useful lives and the residual value
determined by the Company. Significant renewals and additions are
capitalized at cost. Maintenance and repairs are charged to income.
(h) Leases
Noncancellable lease transactions that transfer substantially all risks
and rewards associated with the ownership of assets are accounted
for as finance leases. All other lease transactions are accounted for
as operating leases and relating payments are charged to income as
incurred.
(i) Retirement benefits
Accrued retirement benefits and prepaid pension cost for employees
have been recorded mainly at the amount calculated based on the
retirement benefit obligation and the fair value of the pension plan
assets as of balance sheet date, as adjusted for unrecognized net
retirement benefit obligation at transition, unrecognized actuarial gain
or loss, and unrecognized prior service cost. The retirement benefit
obligation is attributed to each period by the straight-line method over
the estimated years of service of the eligible employees. The net
retirement benefit obligation at transition is being amortized
principally over a period of 15 years by the straight-line method.
Actuarial gain or loss is amortized in the year following the year in
which the gain or loss is recognized primarily by the straight-line
method over periods which are shorter than the average remaining
years of service of the employees. Certain foreign consolidated
subsidiaries have adopted the corridor approach for the amortization
of actuarial gain and loss.
Prior service cost is being amortized as incurred by the straight-line
method over periods which are shorter than the average remaining
years of service of the employees.
(j) Income taxes
Deferred tax assets and liabilities have been recognized in the
consolidated financial statements with respect to the differences
between financial reporting and the tax bases of the assets and
liabilities, and were measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.
(k) Research and development costs
Research and development costs are charged to income when
incurred.
(l) Revenue recognition
Revenue is generally recognized on sales of products at the time of
shipment.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nissan Motor Co., Ltd. and Consolidated Subsidiaries
Fiscal year 2006 (Year ended March 31, 2007)
Nissan Annual Report 2006-2007 55
FINANCIAL SECTION»