Olympus 2012 Annual Report Download - page 76

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(k) PROVISION FOR LOSS ON BUSINESS LIQUIDATION
Provision for loss on business liquidation is recorded to cover losses arising from the business liquidation to be carried out by certain subsidiaries of the Company at the expected
amount of these losses.
(l) RESEARCH AND DEVELOPMENT
Expenses relating to research and development activities are charged to income as incurred.
(m) LEASE TRANSACTIONS
Noncancellable lease transactions that transfer substantially all risks and rewards associated with the ownership of assets are accounted for as finance leases. All other lease
transactions are accounted for as operating leases and relating payments are charged to income as incurred.
Leased assets are depreciated over the term of the lease based on the straight-line method with no residual value.
The accounting treatment for finance lease contracts that do not transfer ownership to lessee which commenced on or before March 31, 2008 follows the same method as for
ordinary operating lease transactions.
(n) INCOME TAXES
The Company recognizes tax effects of temporary differences between the financial reporting and the tax bases of assets and liabilities by using the enacted tax rates and laws which
will be in effect when differences are expected to reverse.
The Company and certain subsidiaries adopted the consolidated taxation system, which allows companies to make tax payments on the combined profits or losses of the parent
company and its wholly owned domestic subsidiaries.
(o) CONSUMPTION TAXES
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(p) TRANSLATION OF FOREIGN CURRENCY FINANCIAL STATEMENTS
In accordance with the accounting standards for foreign currency translations, the balance sheet accounts of the foreign consolidated subsidiaries are translated at exchange rates as
of the balance sheet date. Net assets excluding minority interests are translated at historical exchange rates. Revenues and expenses are translated at average exchange rates for
each corresponding fiscal year. Differences arising from translation are presented as “Foreign currency translation adjustments” in a separate component of net assets.
2. CHANGES IN ACCOUNTING POLICIES
Effective April 1, 2011, the Company adopted the “Accounting Standard for Accounting Changes and Error Corrections” (Accounting Standards Board of Japan (“ASBJ”) Statement No.
24 issued on December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No.24 issued on December 4, 2009).
3. FINANCIAL INSTRUMENTS
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 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 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. In addition, the Group has 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, long-term debt, bonds and lease obligations are raised mainly in connection with business activities, and long-term debt is taken out principally for the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
OLYMPUS 󱚈 Annual Report 2012
74