Omron 2002 Annual Report Download - page 34

Notes to Consolidated Financial Statements
Omron Corporation and Subsidiaries
Nature of Operations
Omron Corporation (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 manage-
ment 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.
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 2002 classifications.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries (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.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is established in amounts considered to be appropriate based primarily upon
the Companies’ past credit loss experience and an evaluation of potential losses in the receivables outstanding.
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 in the period in
which the decline is deemed to be other than temporary.
32 Omron Corporation
1. Summary of
Significant
Accounting
Policies