Oki 2001 Annual Report Download - page 28

Oki Electric Industry Co., Ltd. Annual Report 2001
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9. Legal reserve and special reserves
Special reserves are stated in accordance with the Special Taxation Mea-
sures Law and the Commercial Code of Japan. The reserves are deducted
from taxable income when provided and reversed to taxable income in
subsequent years, which results in a deferral of income tax payments.
The Commercial Code of Japan provides that an amount equivalent to
at least 10% of all cash appropriations of retained earnings, and exactly
10% of interim cash dividends, be transferred to the legal reserve until the
reserve equals 25% of the stated amount of common stock. The Code also
provides that neither additional paid-in capital nor the legal reserve is
available for dividends, but both may be used to eliminate or reduce a
deficit by resolution of the shareholders or may be transferred to the
common stock by resolution of the Board of Directors.
Retained earnings in the accompanying financial statements include the
legal reserve of ¥7,793 million ($62,850 thousand) as of March 31, 2001.
10 . Depreciation
The provision for depreciation of property, plant and equipment for the
years ended March 31, 2001, 2000 and 1999 was as follows:
Thousands of
Millions of yen U.S. dollars
2001 2000 1999 2001
¥39,040 ¥37,771 ¥42,910 $314,845
11 . Research and development expenses
Research and development expenses for the years ended March 31,
2001, 2000 and 1999, were as follows:
Thousands of
Millions of yen U.S. dollars
2001 2000 1999 2001
¥29,842 ¥29,509 ¥40,912 $240,661
12 . Derivative and hedging activities
The Company and its subsidiaries primarily utilize comprehensive
forward foreign exchange and currency swap contracts to hedge their
exposure to foreign exchange fluctuations arising from operating
receivables and payables. The Company and its subsidiaries also utilize
interest swap contracts to avoid risks of interest rate fluctuations and to
equalize financial costs for each financial year regarding short-term and
long-term debt with variable interest rates. As a matter of policy, the
Company and its subsidiaries do not speculate in derivatives, which
may have huge market value fluctuations. The Company and its subsid-
iaries do not anticipate credit risk resulting from nonperformance by
any of the counterparties because all such counterparties are financial
institutions with high credit ratings. The Company and its subsidiaries
have internal rules for derivative transactions, which prescribe manag-
ers’ duties, management of transactions and a reporting system. The
derivative transactions are controlled daily by the financial section,
which has an internal control system to supervise the procedures and
transaction limits, and are confirmed to financial institutions by the
accounting section.
13 . Leases
Lease payments relating to finance leases accounted for as operating
leases in the accompanying consolidated financial statements amounted
to ¥4,572 million ($36,875 thousand), ¥6,124 million and ¥7,998 million
for the years ended March 31, 2001, 2000 and 1999, respectively.
Leased assets under finance leases accounted for as operating leases
were as follows:
Thousands of
Year ended March 31, 2001 Millions of yen U.S. dollars
Machinery and equipment ............................. ¥15,343 $123,739
Other .............................................................. 9 75
Less: Accumulated amortization ................... 7,625 61,492
....................................................................... ¥07,728 $062,322
Amortization is computed by applying the straight-line method over
the estimated useful lives of the related assets and assuming that the
Company guarantees a nil residual value at the end of the term of each
of the leases.
The following is a schedule of the future minimum lease payments
under finance leases accounted for as operating leases:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2002 ............................................................... ¥03,109 $025,074
2003 and thereafter ........................................ 4,618 37,248
....................................................................... ¥07,728 $062,322
The minimum rental payments subsequent to March 31, 2001
required under operating leases with noncancelable lease terms in
excess of one year are summarized as follows:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2002 ............................................................... ¥00,026 $000,212
2003 and thereafter ........................................ 40 323
....................................................................... ¥00,066 $000,536
14 . Contingent liabilities
At March 31, 2001, the Company and its consolidated subsidiaries had
the following contingent liabilities:
Thousands of
Millions of yen U.S. dollars
As endorsers of trade notes discounted
and endorsed ................................................ ¥01,002 $008,084
As guarantors of indebtedness of:
Unconsolidated subsidiaries and
affiliates ................................................. 3,037 24,499
Other ........................................................ 5,096 41,100
Debt assumption agreements with trustees.... 10,000 80,645
................................................................. ¥19,136 $154,328