Olympus 2010 Annual Report Download - page 44

42 OLYMPUS 2010
(d) Sales of property, plant and equipment
In the years ended March 31, 2010 and 2009, “Sales of property, plant and equipment”, formerly shown as an independent item, was
included in “Other” of Cash Flows from Investing Activities. The amounts of “Sales of property, plant and equipment” included in “Other” of
Cash Flows from Investing Activities in fiscal 2010 and 2009 were immaterial.
(e) Payments for acquisition of subsidiaries
In the years ended March 31, 2010 and 2009, “Payments for acquisition of subsidiaries”, formerly included in “Purchases of investment
securities” and “Payments for additional acquisition of consolidated subsidiaries” of Cash Flows from Investing Activities, was shown as an
independent item. The amount of “Payment for acquisition of subsidiaries” included in “Purchases of investment securities” of Cash Flows
from Investing Activities in fiscal 2008 was ¥2,128 million.
(f) Payments for purchase of treasury stock
In the year ended March 31, 2009, “Payments for purchase of treasury stock”, formerly included in “Other” of Cash Flows from Financing
Activities, was shown as an independent item. The amount of “Payments for purchase of treasury stock” included in “Other” of cash flows
from financing activities in fiscal 2008 was immaterial.
In the year ended March 31, 2010, “Payments for purchase of treasury stock”, formerly shown as an independent item, was included in
“Other” of Cash Flows from Financing Activities. The amount of “Payments for purchase of treasury stock” included in “Other” of Cash Flows
from Financing Activities in fiscal 2010 was ¥21 million.
4. FINANCIAL INSTRUMENTS
Effective the fiscal year ended March 31, 2010, a new accounting standard for financial instruments and related implementation guidance
have been adopted.
For the year ended March 31, 2010
Overview
(1) Policy for financial instruments
In consideration of plans for capital investment, the Company and its consolidated subsidiaries (collectively, the “Group”) raise funds
through bank borrowings and issuance of bond. The Group manages temporary cash surpluses through low-risk financial assets. Further,
the Group raises short-term capital through bank borrowings. The Group uses derivatives for the purpose of reducing risk and does not
enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—notes and accounts receivable —are exposed to credit risk in relation to customers. In addition, the Group is exposed to
foreign currency exchange risk arising from receivables denominated in foreign currencies. In principle, the foreign currency exchange risks
deriving from the trade receivables denominated in foreign currencies are hedged by forward foreign exchange contracts.
Marketable securities and investment securities are exposed to market risk. Those securities are composed of mainly the shares of
common stock of other companies with which the Group has business relationships or affiliated companies and the investment trust fund.
The Group has also loans receivable from affiliated companies accounted for by the equity method.
Substantially all trade payables—notes and accounts payable—have payment due dates within one year. Although the Group is exposed
to foreign currency exchange risk arising from those payables denominated in foreign currencies, forward foreign exchange contracts are
arranged to reduce the risk.
Short-term borrowings are raised mainly in connection with business activities, and long-term debt is taken out principally for the
purpose of making capital investments. The repayment dates of the long-term debt extend up to 8.5 years from the balance sheet date.
Long-term debt with variable interest rates is exposed to interest rate fluctuation risk. However, to reduce such risk and fix interest expense
for long-term debt bearing interest at variable rates, the Group utilizes interest rate swap transactions as a hedging instrument.
Regarding derivatives, the Group enters into forward foreign exchange contracts to reduce the foreign currency exchange risk arising
from the receivables and payables denominated in foreign currencies. The Group also enters into interest rate swap transactions to reduce
fluctuation risk deriving from interest payable for long-term debt bearing interest at variable rates.
Information regarding the method of hedge accounting, hedging instruments and hedged items, hedging policy, and the assessment of
the effectiveness of hedging activities is found in Note 1 (e).
(3) Risk management for financial instruments
(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arising from receivables, each related division monitors credit
worthiness of their main customers periodically, and monitors due dates and outstanding balances by individual customer. In addition, the
Group is making efforts to identify and mitigate risks of bad debts from customers who are having financial difficulties.
At the balance sheet date, the carrying values of the financial assets represent the maximum credit risk exposures of the Group.
(b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign currencies, the Group identifies the foreign currency exchange risk for each