Pentax 2005 Annual Report Download - page 58

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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.
o. Derivatives and Hedging Activities—The Group uses deriva-
tive financial instruments to manage its exposures to fluctuations
in foreign currency exchange rates. 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.
Derivative financial instruments and foreign currency transac-
tions are classified and accounted for as follows: (a) all derivatives
are recognized as either assets or liabilities and measured at fair
value, and gains or losses on derivative transactions are recognized
in the statements of income and (b) for derivatives used for hedg-
ing purposes, if derivatives qualify for hedge accounting because of
high correlation and effectiveness between the hedging instru-
ments 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 currency exchange rate 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 underlying
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 contracted rate if the
forward contracts qualify for hedge accounting.
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 agree-
ments is recognized and included in interest expense or income.
p. Per Share Information—Basic net income per share is com-
puted by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding
for the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that
could occur if the outstanding stock options were exercised into
common stock. Diluted net income per share of common stock
assumes full exercise of the outstanding stock options at the
beginning of the year (or at the time of grant).
Cash dividends per share presented in the accompanying con-
solidated statements of income are dividends applicable to the
respective years including dividends to be paid after the end of
the year.
(1) Reorganization of Subsidiaries
On June 30, 2003, the Company acquired the voting rights of
Hoya Candeo Optronics Corporation to become a consolidated
subsidiary, which had been accounted for by the equity method.
(2) Merger of the Company with Subsidiaries
On March 1, 2003, the Company merged with Hoya Techno
Process Corporation and two other companies, which had been
wholly owned unconsolidated subsidiaries of the Company.
(3) Transfer of Business
On March 31, 2003, a part of the hearing aid business in the eye
care field was transferred to a third party.
No. 3 REORGANIZATION