Pentax 2002 Annual Report Download - page 41

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k. Appropriations of Retained Earnings
Appropriations of retained earnings at each year end are
reflected in the consolidated financial statements for the
following year upon shareholders’ approval.
l. Foreign Currency Transactions
Prior to April 1, 2000, short-term receivables and payables
denominated in foreign currencies were translated into
Japanese yen at the current exchange rates at each balance
sheet date, while long-term receivables and payables denomi-
nated in foreign currencies were translated at historical rates.
Effective April 1, 2000, the Group adopted a revised
accounting standard for foreign currency transactions. In
accordance with the revised standard, all short-term and
long-term monetary receivables and payables denominated in
foreign currencies are translated into Japanese yen at the
exchange rates at the balance sheet date. The foreign ex-
change gains and losses from translation are recognized in the
income statement to the extent that they are not hedged by
forward exchange contracts.
As a result of adopting the new accounting standards for
foreign carrency transactions, there is no effect on income
before income taxes and minority interests for the year ended
March 31, 2001.
m. Foreign Currency Financial Statements
The balance sheet accounts of the consolidated overseas
subsidiaries and associated companies are translated into
Japanese yen at the current exchange rates as of the balance
sheet dates except for shareholders’ equity, which is trans-
lated at historical exchange rates. Differences arising from
such translation are shown as “Foreign currency translation
adjustments” in a separate component of shareholders’
equity.
Revenue and expense accounts of the consolidated overseas
subsidiaries and associated companies are translated into
Japanese yen at the monthly average exchange rates.
n. Derivatives and Hedging Activities
The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign
exchange forward contracts are utilized by the Group to
reduce foreign currency exchange risks. The Group does not
enter into derivatives for trading or speculative purposes.
Effective April 1, 2000, the Group adopted a new
accounting standard for derivative financial instruments and
a revised accounting standard for foreign currency transac-
tions. These standards require that: a) all derivatives be
recognized as either assets or liabilities and measured at fair
value, and gains or losses on derivative transactions are
recognized in the income statement and b) for derivatives
used for hedging purposes, if derivatives qualify for hedge
accounting because of high correlation and effectiveness
between the hedging instruments and the hedged items, gains
or losses on derivatives are deferred until maturity of the
hedged transactions.
The foreign exchange forward contracts employed to hedge
foreign exchange exposures for export sales are measured at
the fair value and the unrealized gains / losses are recognized
in income. Forward contracts applied for forecasted (or
committed) transactions are also measured at the fair value
but the unrealized gains / losses are deferred until the underly-
ing transactions are completed.
Long-term debt denominated in foreign currencies for
which foreign exchange forward contracts are used to hedge
the foreign currency fluctuations are translated at the con-
tracted rate if the forward contracts qualify for hedge
accounting.
The interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not remeasured at
market value but the differential paid or received under the
swap agreements are recognized and included in interest
expenses or income.
As a result of adopting the new accounting standards for
derivative financial instruments, there is no effect on income
before income taxes and minority interests for the year ended
March 31, 2001.
o. Per Share Information
The computation of net income per common share is based
on the weighted average number of shares outstanding during
each year. The average number of common shares used in the
computation was 116,123,361 shares, 116,123,456 shares
and 116,122,537 shares for the years ended March 31, 2002,
2001 and 2000, respectively.
Diluted net income per share is not disclosed because it is
anti-dilutive.
Cash dividends per common share presented in the accom-
panying consolidated statements of income are dividends
applicable to the respective years including dividends to be
paid after the end of the year.