Oki 2009 Annual Report Download - page 37

Annual Report 2009 35
The transition difference arising from the initial adoption of the
accounting standard for retirement benefits is being amortized over a
period of 15 years except for certain domestic consolidated subsidiaries
which charged it to income when it was recognized or certain overseas
consolidated subsidiaries which charged it directly to retained earnings.
Actuarial gains and losses and prior service cost are amortized by
the straight-line method over periods of 13 to 14 years and 14 years,
respectively, which are within the estimated average remaining years of
service of the participants in the plans. The amortization of such gains
and losses is recognized in the year subsequent to the year in which
they arise.
Certain consolidated subsidiaries also provide an allowance for retire-
ment benefits for directors at the amount which would be required to
be paid if all directors retired at the balance sheet date based on the
Group’s internal regulations.
(k) Income taxes
Deferred income taxes are recognized by the asset and liability method
under which deferred tax assets and liabilities are determined based
on the difference between financial reporting and the tax bases of
the assets and liabilities, and are measured using the enacted tax rates
and laws which will be in effect when the differences are expected to
reverse.
(l) Hedge accounting
Forward foreign exchange contracts are accounted for by deferral
hedge accounting which requires that unrealized gains or losses be
deferred as assets or liabilities. Forward foreign exchange contracts
which meet certain criteria are accounted for by the allocation method
which is utilized to hedge against risks arising from fluctuation in
foreign currency exchange rates. Interest-rate swaps which meet the
required criteria are accounted for by a special method (as stipulated
in the accounting standard for financial instruments) as if the interest
rates applied to the interest-rate swaps had originally applied to the
underlying borrowings. Swap contracts are utilized to hedge market
risks which may arise in the future with respect to short-term and long-
term loans with variable interest rates.
The Group has developed hedging policies to control various aspects
of derivatives transactions, including levels of authorization and trans-
action volume. Based on these policies, the Group hedges risks arising
from fluctuation in foreign currency exchange rates and interest rates.
During the period from the inception of a hedge position to the assess-
ment of its effectiveness, the Group reviews the effectiveness of all its
hedging policies in order to monitor and control the cumulative cash
flows and to respond to any changes in the market.
(m) Changes in methods of accounting
(1) Effective the year ended March 31, 2009, the Company and its
domestic subsidiaries adopted the “Accounting Standard for Mea-
surement of Inventories” (Statement No.9, issued by the Accounting
Standards Board of Japan (ASBJ) on July 5, 2006).
This standard requires that inventories held for sale in ordinary
course of business be stated at the lower of cost or net selling
value, which is defined as the selling price less additional estimated
manufacturing costs and direct selling expenses.
As a result of adopting of this accounting standard, operating
income decreased by ¥3,670 million ($37,448 thousand), and loss
before income taxes increased by ¥12,726 million ($129,857 thou-
sand) for the year ended March 31, 2009.
(2) Effective the year ended March 31, 2009, the Company and certain
domestic consolidated subsidiaries have changed their estimated
useful lives for machinery and equipment to reflect the revision to
the Corporation Tax Law which went into effect on April 1, 2008.
This change had no significant impact on net loss for the year
ended March 31, 2009.
(3) Effective the year ended March 31, 2009, the Company and its
overseas subsidiaries adopted “Practical Solution on Unification
of Accounting Policies Applied to Foreign Subsidiaries for Con-
solidated Financial Statement” (Practical Issues Task Force No.18
issued by ASBJ on May 17, 2006). Under the accounting standards,
financial statements prepared by foreign subsidiaries in accordance
with International Financial Reporting Standards or the generally
accepted accounting principles in the United States may be used
for the consolidation process. In addition some items should be
adjusted in the consolidation process unless they are not material.
As a result of adopting of this accounting standard, no significant
impact was on net loss for the year ended March 31, 2009.
(4) Effective the year ended March 31, 2009, the Company and domes-
tic subsidiaries adopted the “Accounting Standard for Lease Trans-
actions” (Statement No.13 issued by ASBJ on March 30, 2007) and
“Guidance on Accounting Standard for Lease Transactions” (“Guid-
ance No.16 issued by ASBJ on March 30, 2007).
As a result of adopting of this accounting standard, no significant
impact was on net loss for the year ended March 31, 2009.
(5) Effective the year ended March 31, 2008, certain domestic consoli-
dated subsidiaries have changed their method of depreciation for
property, plant and equipment acquired on or after April 1, 2007
to reflect the revision to the Corporation Tax Law which went into
effect on April 1, 2007.
As a result of this change, both operating income and income
before income taxes, minority interests and equity in earnings of
affiliates decreased by ¥127 million for the year ended March 31,
2008 from the corresponding amounts which would have been
recorded under the previous method.
Property, plant and equipment acquired on or before March 31,
2007 are depreciated to their respective memorandum value by the
straight-line method over a period of 5 years from the year follow-
ing the year in which they have been depreciated down to 5% of
acquisition cost.
As a result of this change, both operating income and income
before income taxes decreased by ¥165 million for the year ended
March 31, 2008 from the corresponding amounts which would
have been recorded under the previous method.
(6) Effective the year ended March 31, 2007, the Company adopted an
accounting standard for the presentation of net assets in the bal-
ance sheet and the related implementation guidance. In addition,
effective the year ended March 31, 2007, the Company is required
to prepare consolidated statements of changes in net assets instead
of consolidated statements of shareholders’ equity.
(7) Effective the year ended March 31, 2007, the Company adopted
an accounting standard for business combinations and the related
implementation guidance.
(8) Effective the year ended March 31, 2007, the Company adopted
an accounting standard for share-based payments and the related
implementation guidance. The effect of the adoption of this stan-
dard was to increase operating loss, loss before income taxes,
minority interests and equity in losses of affiliates by ¥32 million for
the year ended March 31, 2007 over the corresponding amounts
which would have been recorded under the previous method.