Omron 2001 Annual Report Download - page 34

1. Summary of
Significant
Accounting
Policies
Notes to Consolidated Financial Statements
Omron Corporation and Subsidiaries
Basis of Financial Statements
The accompanying consolidated financial statements, stated in Japanese yen, include certain adjustments, not
recorded on the books of account, to present these statements in accordance with accounting principles generally
accepted in the United States of America, except for the omission of segment information required by Statement of
Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related
Information.”
Certain reclassifications have been made to amounts previously reported in order to conform to 2001 classifica-
tions.
Principles of Consolidation
The consolidated financial statements include the accounts of Omron Corporation (the “Company”) and its sub-
sidiaries (together the “Companies”). All significant intercompany accounts and transactions have been eliminated.
Costs in excess of the fair value of net assets acquired are amortized on a straight-line basis over five years.
The Companies’ investments in companies in which ownership is from 20% to 50% (associates) are stated at cost
plus equity in undistributed net income or loss.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those esti-
mates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or less, including
time deposits, commercial paper, securities purchased with resale agreements and money market instruments.
Short-Term Investments and Investment Securities
The Companies classify all of their marketable debt and equity securities as available-for-sale. Available-for-sale
securities are carried at market value with the corresponding recognition of net unrealized holding gains and losses
as a separate component of accumulated other comprehensive income, net of related taxes, until recognized.
Individual securities classified as available-for-sale are reduced to net realizable value by a charge to income for
other than temporary declines in fair value.
Other investments are stated at the lower of cost or estimated net realizable value. The cost of securities sold is
determined on the average cost basis.
Inventories
Inventories are stated at the lower of cost, determined by the first-in, first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment has been comput-
ed principally on a declining balance method based upon the estimated useful lives of the assets. The estimated
useful lives primarily range from 3 to 50 years for buildings and from 2 to 15 years for machinery and equipment.
Advertising Costs
Advertising costs are charged to earnings as incurred. Advertising expense was ¥8,796 million ($70,935 thousand),
¥8,428 million and ¥9,822 million for the years ended March 31, 2001, 2000 and 1999, respectively.
Termination and Retirement Benefits
Termination and retirement benefits are accounted for in accordance with SFAS No. 87, “Employers’ Accounting
for Pensions” and are disclosed in accordance with SFAS No. 132, “Employers’ Disclosures about Pensions and
Other Postretirement Benefits.” The provision for termination and retirement benefits includes those for directors
and corporate auditors of the Company.
Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts. Future tax benefits, such as net operating loss carryfor-
wards and tax credit carryforwards, are recognized to the extent that such benefits are more likely than not to be
realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the peri-
od that includes the enactment date.
32 Omron Corporation