Omron 2001 Annual Report Download - page 40

8. Shareholders’
Equity
The expense recorded for the contributory termination and retirement plans included the following components
for the years ended March 31:
Thousands of
Millions of yen U.S. dollars
2001 2000 2001
Service cost, less employees’ contributions................................................... ¥ 8,846 ¥ 9,147 $ 71,339
Interest cost on projected benefit obligation................................................... 6,624 6,316 53,419
Expected return on plan assets....................................................................... (4,451) (4,088) (35,895)
Amortization .................................................................................................... 2,215 2,652 17,863
Net expense................................................................................................. ¥13,234 ¥14,027 $106,726
The Companies also have unfunded noncontributory termination plans administered by the Companies. These
plans provide lump-sum termination benefits and are paid at the earlier of the employee’s termination or manda-
tory retirement age, except for payments to directors and corporate auditors which require approval by the
shareholders before payment. The Companies record provisions for termination benefits sufficient to state the lia-
bility equal to the plans’ vested benefits, which exceed the plans’ accumulated benefit obligations.
The consolidated liability for the noncontributory termination plans as of March 31, 2001 and 2000 was ¥2,034
million ($16,406 thousand) and ¥1,813 million, respectively. The consolidated expense for the noncontributory
termination and retirement plans for the years ended March 31, 2001, 2000 and 1999 was ¥1,015 million ($8,185
thousand), ¥1,041 million and ¥84 million, respectively.
The Japanese Commercial Code (the “Code”) requires at least 50% of the issue price of new shares, with the
minimum of the par value thereof, to be recorded as common stock. The portion recorded as common stock is
determined by resolution of the Board of Directors. Proceeds in excess of the amounts designated as common
stock are credited to additional paid-in capital.
Under the Code, the Company is required to record an amount at least equal to 10% of the amounts paid as
an appropriation of retained earnings, including dividends and other distributions, to be appropriated and set
aside as a legal reserve until such reserve equals 25% of the common stock. This reserve is not available for divi-
dends but may be used to eliminate or reduce a deficit by resolution of the shareholders or may be transferred to
common stock by resolution of the Board of Directors.
The Company may transfer portions of additional paid-in capital and legal reserve to common stock by resolu-
tion of the Board of Directors. The Company may also transfer portions of unappropriated retained earnings,
available for dividends, to common stock by resolution of the shareholders.
Under the Code, the amount legally available for dividends is based on retained earnings as recorded in the
books of the Company for Japanese financial reporting purposes. At March 31, 2001, retained earnings amount-
ing to ¥85,285 million ($687,782 thousand) were available for future dividends subject to legal reserve require-
ments.
Stock Options
In June 1998, the Company introduced stock-based compensation plans. Stock options are granted to direc-
tors and certain officers to purchase shares of common stock at a price not less than market price at the date of
grant. Options are granted with vesting periods of 1-2 years. As of March 31, 2001, options outstanding are sum-
marized as follows:
Grant date Authorized and Option Exercisable Exercised and
granted shares exercise price term (forfeited) shares
June 25, 1998 158,000 ¥2,162 July 1, 1999 - 73,000
June 30, 2001
June 25, 1999 158,000 ¥1,839 July 1, 2001 - (5,000)
June 30, 2004
June 27, 2000 260,000 ¥2,936 July 1, 2002 - —
June 30, 2005
Pursuant to SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company has elected to
account for its stock option plan under APB Opinion No. 25, “Accounting for Stock Issued to Employees.”
Accordingly, no compensation cost has been recognized for this plan. Compensation cost for the plan deter-
mined based on the fair value of the options at the grant date consistent with SFAS No. 123 would have been
insignificant.
38 Omron Corporation