Omron 2001 Annual Report Download - page 35

Derivatives
Currency derivatives (foreign exchange forward contracts and foreign currency options) are used to manage cur-
rency risk. Derivative contracts that do not qualify as hedges are marked to market with the related gains and loss-
es included in Foreign exchange loss, net in the consolidated statements of income.
Interest rate swaps are used to manage exposure to fluctuations in interest rates arising from the Companies’
existing debt. The amounts receivable or payable under interest rate swap agreements are recognized as adjust-
ments to interest expense.
In June 1998 the Financial Accounting Standards Board (“FASB”) issued SFAS No.133 “Accounting for Derivative
Instruments and Hedging Activities.” In June 2000 the FASB also issued SFAS No.138, “Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No.133.” Both standards
establish accounting and reporting standards for derivative instruments and for hedging activities, and require that
an entity recognizes all derivatives as either assets or liabilities in the balance sheet and measure these instruments
at fair market value. Changes in the fair market value of derivatives are recorded each period. SFAS No.133, as
amended, and No.138 are effective for fiscal years beginning after June 15, 2000. The Companies adopted SFAS
No.133 and No.138 as of April 1, 2001. The cumulative effect on retained earnings as of April 1, 2001, of adopting
SFAS No.133 and No.138 was immaterial to the consolidated financial statements.
Cash Dividends
Cash dividends are reflected in the consolidated financial statements at proposed amounts in the year to which
they are applicable, even though payment is not approved by shareholders until the annual general meeting of
shareholders held early in the following fiscal year. Resulting dividends payable are included in Other current liabili-
ties in the consolidated balance sheets.
Comprehensive Income
Comprehensive income consists of net income, foreign currency translation adjustments, minimum pension liabili-
ty adjustments and unrealized gains and losses on available-for-sale securities, and is presented in the consolidat-
ed statements of comprehensive income.
Nature of Operations
The Company is a multinational manufacturer of automation components, equipment and systems with advanced
computer, communications and control technologies. The Company conducts business in over 30 countries around
the world and strategically manages its worldwide operations through 5 regional management centers, Japan,
North America, Europe, Asia-Pacific and China. Products, classified by type and market, are organized into five
internal companies and one business development group, as described below.
Industrial Automation manufactures and sells control components and systems including programmable logic
controllers, sensors and switches used in automatic systems in industries. In the global market, the company offers
many services, such as those involving laborsaving automation, environmental protection, safety improvement, and
inspection-automization solutions for highly developed production systems.
Electronic Components manufactures and sells electric and electronic components found in such consumer
goods as home appliances and automobiles as well as such business equipment as telephone systems, vending
machines, and office equipment.
Social Systems Business encompasses the production and sale of automated teller machines, card authoriza-
tion terminals and point of sales systems for both domestic and overseas markets. Passing gates and automated
ticket machines and electronic panels and terminal displays for traffic information and monitoring purposes are also
produced for the domestic market.
Healthcare sells blood pressure monitors, digital thermometers, body-fat monitors, nebulizers and infra-red ther-
apy devices aimed at both the consumer and institutional markets.
Creative Service provides such outsourcing services as distribution, advertising and public relations, personnel,
information systems, administration, employee benefit schemes and accounting.
Business Development Group consists of businesses with high growth potential. The group provides the
peripheral equipment loaded in office automation equipment, card readers, modems, terminal adapters, scanners
and uninterrupted power supplies.
Revenue Recognition
The Companies recognize revenue when persuasive evidence of an arrangement including title transfer exists,
delivery has occurred, the sales price is fixed or determinable, and collectibility is probable. These criteria are met
when products are shipped or services are performed.
Omron Corporation 33