Omron 2003 Annual Report Download - page 44

Key assumptions utilized in calculating the actuarial present value of benefit obligations are as follows:
2003 2002 2001
Discount rate................................................................................................................ 2.0% 2.5% 3.0%
Compensation increase rate ........................................................................................ 2.0 3.0 3.0
Expected long-term rate of return on plan assets ....................................................... 3.0 4.0 4.0
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
2003 2002 2003
Service cost, less employees’ contributions................................................... ¥9,611 ¥8,401 $80,092
Interest cost on projected benefit obligation................................................... 5,804 6,042 48,367
Expected return on plan assets....................................................................... (4,072) (5,010) (33,933)
Amortization .................................................................................................... 2,742 1,681 22,850
Net expense................................................................................................. ¥14,085 ¥11,114 $117,376
Some part of the employees of European subsidiaries are covered by a defined benefit pension plan. The project-
ed benefit obligations for the plan and related fair value of plan assets were ¥1,315 million ($10,958 thousand) and
¥887 million ($7,392 thousand), respectively, at March 31, 2003 and ¥1,176 million and ¥793 million, respectively, at
March 31, 2002.
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 mandatory
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 liability equal to
the plans’ vested benefits, which exceed the plans’ accumulated benefit obligations.
Sum of the consolidated liability for the termination plans other than the funded contributory termination and
retirement plan in Japan, as of March 31, 2003 and 2002 was ¥3,348 million ($27,900 thousand) and ¥3,468 million,
respectively. The consolidated expense for the noncontributory termination and retirement plans for the years
ended March 31, 2003, 2002 and 2001 was ¥890 million ($7,417 thousand), ¥2,385 million and ¥1,015 million,
respectively.
Japanese companies are subject to the Japanese Commercial Code (the “Code”) to which certain amendments
became effective as from October 1, 2001. Prior to October 1, 2001, the Code required at least 50% of the issue
price of new shares, with a minimum of the par value thereof, to be designated as stated capital as determined by
resolution of the Board of Directors. Proceeds in excess of amounts designated as stated capital were credited to
additional paid-in capital. Effective October 1, 2001, the Code was revised and common stock par values were
eliminated resulting in all shares being recorded with no par value.
Prior to October 1, 2001, the Code also provided that an amount at least equal to 10% of the aggregate amount
of cash dividends and certain other cash payments which are made as an appropriation of retained earnings applic-
able to each fiscal period shall be appropriated and set aside as a legal reserve until such reserve equals 25% of
stated capital. Effective October 1, 2001, the revised Code allows for such appropriations to be set aside as a legal
reserve until the total additional paid-in capital and legal reserve equals 25% of stated capital. The amount of total
additional paid-in capital and legal reserve which exceeds 25% of stated capital can be transferred to retained
earnings by resolution of the shareholders, which may be available for dividends.
Under the Code, companies may issue new common shares to existing shareholders without consideration as a
stock split pursuant to a resolution of the Board of Directors. Prior to October 1, 2001, the amount calculated by
dividing the total amount of shareholders’ equity by the number of outstanding shares after the stock split could not
be less than ¥50. The revised Code eliminated this restriction.
Prior to October 1, 2001, the Code imposed certain restrictions on the repurchase and use of treasury stock.
Effective October 1, 2001, the Code eliminated these restrictions allowing companies to repurchase treasury stock
by a resolution of the shareholders at the general shareholders’ meeting and dispose of such treasury stock by res-
olution of the Board of Directors after March 31, 2002. The repurchased amount of treasury stock cannot exceed
the amount available for future dividend plus amount of stated capital, additional paid-in capital or legal reserve to
be reduced in the case where such reduction was resolved at the general shareholders’ meeting.
The Code permits companies to transfer a portion of additional paid-in capital and legal reserve to stated capital
by resolution of the Board of Directors. The Code also permits companies to transfer a portion of unappropriated
retained earnings, available for dividends, to stated capital by resolution of the shareholders.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the divi-
dends are applicable. Semiannual interim dividends may also be paid upon resolution of the Board of Directors,
subject to certain limitations imposed by the Code.
9. Shareholders’
Equity
42 • Omron Corporation