Oki 2001 Annual Report Download - page 23

Oki Electric Industry Co., Ltd. Annual Report 2001 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Oki Electric Industry Co., Ltd., and consolidated subsidiaries
Where there has been permanent impairment in the value of such
investments, the Company has written down its investments to reflect
the impairment.
(c) Translation of foreign currencies
(1) The Company translates the revenue and expense accounts of the
foreign consolidated subsidiaries at the rates of exchange in effect at the
balance sheet date. The balance sheet accounts, except for the compo-
nents of shareholders’ equity, are also translated into yen at the rates
of exchange in effect at the balance sheet date. The components of
shareholders’ equity are translated at their historical exchange rates.
The differences arising from translation where two exchange
rates have been used are presented as translation adjustments in the
accompanying consolidated financial statements as a component of
shareholders’ equity.
(2) Current and non-current monetary assets and liabilities denominated
in foreign currencies of the Company and its domestic consolidated
subsidiaries are translated into yen at the rate in effect at the balance
sheet date, except for those hedged by forward foreign exchange con-
tracts, which are translated at the contracted rates.
All revenues and expenses are translated at the average rate for the
month prior to the transaction.
Gains and losses arising from exchange differences are credited or
charged to income in the year in which they are incurred, except for
those arising from forward foreign exchange contracts pertaining to
long-term debt, which are deferred and amortized over the periods of
the respective contracts.
(d) Cash equivalents
All highly liquid investments, generally with a maturity of three months
or less when purchased, which are readily convertible into known
amounts of cash and are so near maturity that they represent only an
insignificant risk of any change in value attributable to changes in
interest rates, are considered cash equivalents.
(e) Securities
Held-to-maturity securities are either amortized or accumulated to face
value. Other securities with quoted market prices are carried at market
value. The difference between the acquisition costs and the carrying
value of other securities, including unrealized gains and losses, is
recognized as a component of shareholders’ equity and is reflected as
“net unrealized holding gains on other securities.” The cost of other
securities sold is computed by the moving average method. Other
securities without quoted market prices are stated at cost based on the
moving average method.
(f) Inventories
Inventories are principally stated at cost determined by the following
methods:
Finished goods—Moving average method
Work in process—Specific-identification method
Raw materials and supplies—Last purchase price method
(g) Property, plant and equipment, and depreciation
Property, plant and equipment is recorded at cost, except that, as permit-
ted by the Corporation Tax Law of Japan, the cost of certain land and
machinery and equipment has been reduced to offset capital gains from
the disposal of certain assets.
Depreciation of property, plant and equipment is principally com-
puted by the declining-balance method over the estimated useful lives
1. Significant accounting policies
(a) Basis of preparation
Oki Electric Industry Co., Ltd. (the “Company”), and its domestic
consolidated subsidiaries (collectively the “Group” including its foreign
subsidiaries) maintain their accounting records and prepare their finan-
cial statements in accordance with accounting principles and practices
generally accepted in Japan and its foreign subsidiaries maintain their
books of account in conformity with those of their countries of domi-
cile. The accompanying consolidated financial statements have been
compiled from the consolidated financial statements filed with the
Prime Minister as required by the Securities and Exchange Law of
Japan and include certain additional financial information for the
convenience of readers outside Japan. Accordingly, the consolidated
financial position, results of operations and cash flows presented in the
accompanying financial statements may differ in certain material
aspects from accounting principles and practices generally accepted in
countries and jurisdictions other than Japan.
As permitted, amounts of less than one million yen have been
omitted. As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and in U.S. dollars) do not necessarily
agree with the sum of the individual amounts.
Certain amounts from prior years have been reclassified to conform
to the current year’s presentation.
In March 1998, the Business Accounting Deliberation Council of
Japan issued a new accounting standard for statements of cash flows,
which became effective the year ended March 31, 2000. Prior to the
issuance of this standard, there existed no accounting standard for the
preparation of statements of cash flows in Japan and, accordingly, the
Company and its subsidiaries had prepared their statements of cash
flows in a format similar to that required under accounting standards
generally accepted in the United States.
The Company and its subsidiaries adopted the new accounting
standard effective the year ended March 31, 2000. However, the
accompanying consolidated statement of cash flows for the years ended
March 31, 2001 and 2000 have not been prepared under the exact
format in accordance with the new standard because the Group consid-
ers that it is critical to maintain consistency with those prepared in prior
years and the concept and format are almost the same as those under the
new standard.
(b) Principles of consolidation and accounting for investments in
unconsolidated subsidiaries and affiliates
In accordance with the accounting standards for consolidation issued by
the Business Accounting Deliberation Council, effective April 1, 1999,
the accompanying consolidated financial statements include the accounts
of the Company and all its subsidiaries over which substantial control
is exerted through either majority ownership of voting stock and/or by
other means. However, the adoption of the new standards did not have
an impact on the consolidated financial statements for the year ended
March 31, 2000. All significant intercompany balances and transactions
have been eliminated in consolidation. After allocation to the respective
assets based on the fair value of such assets at their dates of acquisition,
the difference between the cost and the underlying equity in the net
assets acquired from subsidiaries and affiliates (companies over which
the Group has the ability to exercise significant influence) accounted for
on an equity basis is amortized by the straight-line method over a
certain period within 20 years if such difference is material.
Investments in certain unconsolidated subsidiaries and significant
affiliates are accounted for by the equity method. Other investments
in unconsolidated subsidiaries and affiliates are stated at cost or less.