Oki 2011 Annual Report Download - page 32

30 Annual Report 2011
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Oki Electric Industry Co., Ltd. and consolidated subsidiaries
March 31, 2011
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
The accompanying consolidated financial statements of Oki
Electric Industry Co., Ltd. (the “Company”) and consolidated sub-
sidiaries (the “Group”) have been prepared in accordance with
accounting principles generally accepted in Japan, which are dif-
ferent in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and
have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments
and Exchange Law of Japan.
As permitted, amounts of less than one million yen have been
omitted. As a result, the totals shown in the accompanying consol-
idated 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 con-
form to the current year’s presentation. The accompanying
consolidated statements of cash flows, which have not been pre-
pared under the same requirements as those specified in the
Japanese accounting standard for cash flows, are presented in a
format similar to that required under accounting standards gener-
ally accepted in the United States, and the concept and format are
almost identical to 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 significant subsidiaries over which
substantial control is exerted either through majority ownership of
voting stock and/or by other means. All significant intercompany
balances and transactions have been eliminated in consolidation.
Investment in 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 a
permanent decline in the value of such investments, the Company
has written them down to reflect the impairment.
(c) Foreign currency transactions
(1) The Company translates the revenue and expense accounts of
the overseas consolidated subsidiaries at the average rates of
exchange in effect during the year. The balance sheet
accounts, except for the components of nets assets excluding
minority interests in consolidated subsidiaries, are translated
into yen at the rates of exchange in effect at the balance sheet
date. The components of nets assets excluding minority inter-
ests in consolidated subsidiaries are translated at their
historical exchange rates. Differences arising from translation
where two exchange rates have been used are presented
under translation adjustments as a component of net assets.
(2) Current and non-current monetary assets and liabilities denom-
inated in foreign currencies of the Company and domestic
consolidated subsidiaries are translated into yen at the
exchange rates in effect at the balance 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 foreign exchange differences
are credited or charged to income in the year in which they are
made or 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 repre-
sent only an insignificant risk of any change in value attributable to
changes in interest rates, are considered cash equivalents.
(e) Securities
Held-to-maturity debt securities are either amortized or accumu-
lated to face value. Other securities with quoted market prices are
carried at market value. The difference between the acquisition
cost and the carrying value of other securities, net of the applica-
ble income taxes, is recognized as a component of net assets and
is reflected as “Net unrealized holding gain (loss) on other securi-
ties.” 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 follow-
ing methods. Refer to Note 1 (m) (5).
Finished goods - Moving average method
Work in process - Specific identification method
Raw materials and supplies - Moving average method
(g) Property, plant and equipment, and depreciation (Except for
assets leased)
Property, plant and equipment are recorded at cost. Depreciation
of property, plant and equipment is principally computed by the
declining balance method over the estimated useful lives of the
respective assets. However, buildings (excluding leasehold
improvements) acquired on or after April 1, 1998 by the Company
and domestic consolidated subsidiaries are depreciated by the
straight-line method over their respective estimated useful lives.
Significant renewals and betterments are capitalized at cost.
Maintenance and repairs are charged to income.
(h) Intangible assets and amortization (Except for assets leased)
Intangible assets, including capitalized computer software costs,
are amortized by the straight-line method over their respective
estimated useful lives.
(i) Leases
Depreciation of assets on finance leases which do not transfer
ownership of the leased assets to the lessee is calculated by the
straight-line method over the lease period with their residual value
of zero, except the leases started on or before March 31, 2008.
The leases which were started on or before March 31, 2008 are
principally accounted for as operating leases.
(j) Retirement benefits
The Group has retirement benefit plans covering substantially all
its employees.
An allowance for retirement benefits has been provided for
employees’ retirement benefits based on an estimate of the pro-
jected retirement benefit obligation and the pension fund assets.
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