Oki 2010 Annual Report Download - page 41
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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
retirement 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 deter-
mined 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 differ-
ences are expected to reverse.
(l) Hedge accounting
Forward foreign exchange contracts are accounted for by hedge
accounting which requires that unrealized gains or losses be
deferred as assets or liabilities. Forward foreign exchange con-
tracts 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 spe-
cial 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 authoriza-
tion and transaction 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 assessment 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, 2010, the Company and
domestic subsidiaries adopted the “Accounting Standard for
Construction Contracts” (Statement No.15 issued by the
Accounting Standards Board of Japan (ASBJ) on December 27,
2007) and “Guidance on Accounting Standard for Construction
Contracts” (Guidance No.18 issued by ASBJ on December 27,
2007). Under the new accounting standard and guidance, rev-
enues and costs of construction contracts that commenced on
or after April 1, 2009, of which the percentage of completion
can be reliably estimated, are recognized by the percentage-of-
completion method. The percentage of completion is
calculated at the cost incurred as a percentage of the estimat-
ed total cost.
As a result of adopting this accounting standard, no signifi-
cant impact was on net sales and net income for the year
ended March 31, 2010.
(2) From the year ended March 31, 2010, the Company and cer-
tain domestic consolidated subsidiaries have changed their
estimation method of raw materials and supplies from last pur-
chase price method to moving average method.
This change had no significant impact on net income for the
year ended March 31, 2010.
(3) Effective the year ended March 31, 2009, the Company and
domestic subsidiaries adopted the “Accounting Standard for
Measurement of Inventories” (Statement No.9, issued by ASBJ
on July 5, 2006).
This standard requires that inventories held for sale in ordi-
nary course of business be stated at the lower of cost or net
selling value, which is defined as the selling price less addition-
al estimated manufacturing costs and direct selling expenses.
As a result of adopting this accounting standard, operating
income decreased by ¥3,670 million, and loss before income
taxes increased by ¥12,726 million for the year ended March
31, 2009.
(4) 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.
(5) Effective the year ended March 31, 2009, the Company and
overseas subsidiaries adopted “Practical Solution on
Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statement” (Practical
Issues Task Force No.18 issued by ASBJ on May 17, 2006).
Under the accounting standards, financial statements pre-
pared by oversea 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 adjust-
ed in the consolidation process unless they are not material.
As a result of adopting this accounting standard, no signifi-
cant impact was on net loss for the year ended March 31, 2009.
(6) Effective the year ended March 31, 2009, the Company and
domestic subsidiaries adopted the “Accounting Standard for
Lease Transactions” (Statement No.13 issued by ASBJ on
March 30, 2007) and “Guidance on Accounting Standard for
Lease Transactions” (Guidance No.16 issued by ASBJ on
March 30, 2007).
As a result of adopting this accounting standard, no signifi-
cant impact was on net loss for the year ended March 31, 2009.
(7) Effective the year ended March 31, 2008, certain domestic
consolidated 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 following the year in which they have been depreciat-
ed 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.