Pentax 2005 Annual Report Download - page 56

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Notes to Consolidated Financial Statements
Hoya Corporation and Subsidiaries
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the
Japanese Securities and Exchange Law and its related accounting
regulations, and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to
application and disclosure requirements of International Financial
Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to the
consolidated financial statements issued domestically in order
to present them in a form which is more familiar to readers
outside Japan.
The consolidated financial statements are stated in Japanese
yen, the currency of the country in which Hoya Corporation (the
“Company”) is incorporated and operates. The translations of
Japanese yen amounts into U.S. dollar amounts are included solely
for the convenience of readers outside Japan and have been made
at the rate of ¥107 to U.S.$1, the approximate rate of exchange
at March 31, 2005. Such translations should not be construed as
representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.
Certain reclassifications have been made in the 2004 and 2003
consolidated financial statements to conform to the classifications
used in 2005. These reclassifications had no effect on previously
reported net income.
No. 1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
a. Consolidation—The consolidated financial statements as of
March 31, 2005 include the accounts of the Company and its 58
(55 in 2004 and 52 in 2003) subsidiaries (together, the “Group”).
Under the control or influence concept, those companies in
which the Company, directly or indirectly, is able to exercise con-
trol over operations are fully consolidated, and those companies
over which the Group has the ability to exercise significant
influence are accounted for by the equity method.
Investment in one (one in 2004 and two in 2003) associated
company in 2005 is accounted for by the equity method.
Investments in the remaining associated companies are stated at
cost. If the equity method of accounting had been applied to the
investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
The differences between the cost and underlying net equity of
investment in consolidated subsidiaries and associated companies
accounted for by the equity method are charged to income when
incurred.
All significant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized profits included in
assets resulting from transactions within the Group are eliminated.
b. Cash Equivalents—Cash equivalents are short-term invest-
ments that are readily convertible into cash and that are exposed
to insignificant risk of changes in value. Cash equivalents include
time deposits, certificate of deposits, commercial paper and
mutual funds investing in bonds, all of which mature or become
due within three months of the date of acquisition.
c. Inventories—Inventories are primarily stated at cost,
determined principally by the average method.
d. Investment Securities—Investment securities are classified
either as marketable available-for-sale securities or non-marketable
available-for-sale securities. Marketable available-for-sale securities
are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of sharehold-
ers’ equity. The cost of securities sold is determined based on the
moving-average method.
Non-marketable available-for-sale securities are stated at cost
determined by the moving-average method. For other than tem-
porary declines in fair value, investment securities are reduced to
net realizable value by a charge to income.
e. Property, Plant and Equipment—Property, plant and equip-
ment are stated at cost. Depreciation of property, plant and
equipment of the Company and its domestic subsidiaries is com-
puted substantially by the declining-balance method at rates based
on the estimated useful lives of the assets, while the straight-line
method is applied to buildings of the Company and its domestic
subsidiaries, and to main property, plant and equipment of consol-
idated foreign subsidiaries. The net book value of tangible fixed
assets depreciated by the straight-line method was approximately
56.3% of total tangible fixed assets in 2005, 45.1% in 2004 and
44.6% in 2003. The ranges of useful lives are from 10 to 50 years
for buildings and structures and from 5 to 10 years for machinery
and vehicles.
No. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES