Oki 2002 Annual Report Download - page 24

Oki Electric Industry Co., Ltd. Annual Report 200222
The differences arising from translation where two exchange
rates have been used are presented under translation adjustments as a
component of shareholders’ equity in the accompanying consolidated
financial statements.
(2) Current and noncurrent monetary assets and liabilities denominated
in foreign currencies of the Company and its domestic consolidated sub-
sidiaries are translated into yen at the exchange rates in effect at the bal-
ance sheet date, except for those hedged by forward foreign exchange
contracts 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 of
the respective assets. However, buildings (excluding leasehold improve-
ments) acquired after April 1, 1998 by the Group are depreciated by the
straight-line method over their estimated useful lives. Significant renew-
als and betterments are capitalized at cost. Maintenance and repairs are
charged to income.
(h) Intangible assets and amortization
Intangible assets, including capitalized computer software costs, are
amortized by the straight-line method over their estimated useful lives.
1. Significant accounting policies
(a) Basis of preparation
Oki Electric Industry Co., Ltd. (the “Company”), and its domestic
consolidated subsidiaries (collectively and including its foreign subsid-
iaries, the “Group”) maintain their accounting records and prepare their
financial statements in accordance with accounting principles and prac-
tices generally accepted and applied in Japan, and its foreign subsidiar-
ies maintain their books of account in conformity with those of their
countries of domicile. The accompanying consolidated financial state-
ments 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 infor-
mation 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 cer-
tain 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.
The accompanying consolidated statements of cash flows have
not been prepared under exactly the same format as that specified in the
Japanese standards for cash flows because the Group considers that it is
critical to maintain consistency between this year’s cash flow statement
and those prepared in prior years when there was no standard for state-
ments of cash flows in Japan. The accompanying consolidated state-
ments of cash flows are presented in a format similar to that required
under accounting standards generally accepted in the United States, and
the concept and format are almost the same as those required under the
Japanese standard.
(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 all subsidiaries over which substantial control is
exerted through either majority ownership of voting stock and/or by
other means. 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 and 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. Where
there has been permanent impairment in the value of such investments,
the Company has written them down 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 average rates of exchange in
effect during the year. The balance sheet accounts, except for the com-
ponents 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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Oki Electric Industry Co., Ltd., and consolidated subsidiaries