Olympus 2006 Annual Report Download - page 38

36 OLYMPUS 2006
(g) PENSION AND RETIREMENT ALLOWANCE PLANS
Employees of the Company, certain domestic consolidated subsidiaries and foreign consolidated subsidiaries are covered by funded pension plans.
Employees of domestic consolidated subsidiaries, and directors of the Company and a couple of domestic consolidated subsidiaries are cov-
ered primarily by unfunded retirement allowance plans.
The amounts of pension payments and retirement allowances are generally determined on the basis of length of service and basic salary at the
time of termination of service.
It is the Company’s policy to fund amounts required to maintain sufficient plan assets to provide for accrued benefits based on a certain per-
centage of wage and salary costs. The plan assets consist principally of interest-bearing bonds and listed equity securities.
The Company and its consolidated subsidiaries provided allowance for employees’ severance and retirement benefits at March 31, 2006
based on the amounts of projected benefit obligation and the fair value of the plan assets at that date.
Allowance for employees’ severance and retirement benefits was included in the liability section of the consolidated balance sheets together with
severance and retirement allowance for directors as of March 31, 2006 and 2005.
(h) RETURN OF SUBSTITUTIONAL PORTION OF EMPLOYEES’ PENSION INSURANCE
Employees of Japanese companies are compulsorily included in the Welfare Pension Insurance Scheme operated by the government.
Employers are legally required to deduct employees’ welfare pension insurance contributions from their payroll and to pay them to the gov-
ernment together with employers’ own contributions. For companies that have established their own Employees’ Pension Fund, which meets
certain legal requirements, it is possible to transfer a part of their welfare pension insurance contributions (so-called substitutional portion of
the government’s scheme) to their own Employees’ Pension Fund under the government’s permission and supervision.
Based on the newly enacted Defined Benefit Corporate Pension Law, the Company decided to restructure its Employees’ Pension Fund,
and was permitted by the Minister of Health, Labour and Welfare on December 1, 2003 to be released from its obligation for payments for
the substitutional portion of the Employees’ Pension Insurance Scheme. Pension assets for the substitutional portion maintained by the
Employees’ Pension Fund were transferred back on February 27, 2004 to the government’s scheme. As a result, the Company recorded gains
amounting to ¥8,584 million.
(i) PROVISION FOR LOSSES ON BUSINESS RESTRUCTURING
To provide for the loss that will appear during the execution of restructuring of the Imaging Systems Business hereafter, the amount of
expected loss is appropriated. The main matters are write-off for inventories and special retirement allowance. Write-off for inventories was
deducted from inventories on the consolidated balance sheet as of March 31, 2005.
(j) RESEARCH AND DEVELOPMENT
Expenses relating to research and development activities are charged to income as incurred. Total amounts charged to income were ¥45,935
million ($399,435 thousand), ¥47,720 million and ¥38,671 million for the years ended March 31, 2006, 2005 and 2004, respectively.
(k) CERTAIN LEASE TRANSACTIONS
Finance leases that do not transfer titles to lessees are accounted for in the same manner as operating leases.
( l ) INCOME TAXES
The Company adopts the accounting standard that recognizes tax effects of temporary differences between the financial statement carrying
amounts and the tax basis of assets and liabilities. The provision for income taxes is computed based on the pretax income included in the
consolidated statements of operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences.
Part of subsidiaries adopted the consolidated taxation system.
(m) AMOUNTS PER SHARE
Basic earnings per share (EPS) is computed by dividing income available to common shareholders by the weighted-average number of com-
mon shares outstanding for each fiscal year. Diluted EPS is similar to basic EPS except that the weighted-average of common shares outstand-
ing is increased by the number of additional common shares that would have been outstanding if the potentially dilutive common shares had
been issued. For the years ended for March 31, 2006, 2005 and 2004, there were no dilutive common shares. Accordingly, the Company’s
basic and dilutive earnings per share computations are the same for the periods presented.
Cash dividends per common share are the amounts applicable to the respective periods.
(n) TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENT
In accordance with the accounting standards for foreign currency translations, assets and liabilities denominated in foreign functional curren-
cies are translated at exchange rates at the balance sheet date. Shareholders’ equity accounts are translated at historical exchange rates.
Revenues and expenses denominated in foreign functional currencies are translated at average exchange rates for each corresponding fiscal
year. Differences resulting from translation are presented as “Foreign currency translation adjustments” in shareholders’ equity of the accom-
panying consolidated balance sheets.
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