Ricoh 1998 Annual Report Download - page 49

Millions of yen
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15. COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 1998, Ricoh had outstanding contractual commitments for
acquisition or construction of plant, equipment and other assets aggregat-
ing ¥6,523 million ($49,417 thousand).
Ricoh is contingently liable for discounted trade notes receivable on a
full recourse basis with banks of ¥410 million ($3,106 thousand) as of
March 31, 1998. As of March 31, 1998, Ricoh is also contingently liable
as guarantor for employees’ housing loans of ¥2,181 million ($16,523
thousand) and an affiliate’s borrowing of ¥1,551 ($11,750 thousand).
Ricoh made rental payments totaling ¥31,119 million in fiscal 1996,
¥37,930 million in fiscal 1997 and ¥37,160 million ($281,515 thousand) in
fiscal 1998, under operating lease agreements for office space and
machinery and equipment, which are primarily cancellable and
renewable.
At March 31, 1998, the Company and certain of its subsidiaries were
parties to litigation involving routine matters, such as patent rights. In the
opinion of management, the ultimate liability, if any, resulting from such
litigation will not materially affect the consolidated financial position or
the results of operations of Ricoh.
16. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
(a) Cash and cash equivalents, Time deposits, Trade receivables,
Short-term borrowings, Trade payables and Accrued expenses
The carrying amounts approximate fair values because of the short matu-
rities of these instruments.
(b) Marketable securities and Investment securities
The fair value of the marketable securities and investment securities is
principally based on quoted market price.
(c) Installment loans
The fair value of the installment loans is based on the present value of fu-
ture cash flows using estimated interest rates and maturities, discounted
using estimated market discount rates. The carrying amounts
approximate the computed fair values (see Note 5).
(d) Long-term cash deposits
The fair value of the long-term cash deposits is based on the present val-
ue of future cash flows using estimated interest rates and maturities,
discounted using estimated market discount rates (see Note 10).
(e) Long-term indebtedness
The fair value of each of the long-term indebtedness instruments is based
on the quoted price in the most active market or the present value of
future cash flows associated with each instrument discounted using the
current borrowing rate for similar instruments of comparable maturity.
(f) Interest rate swap agreements
The fair value of interest rate swap agreements is estimated by obtaining
quotes from brokers.
(g) Foreign currency contracts
The fair value of foreign currency contracts (used for hedging purposes)
is estimated by obtaining quotes from brokers.
The estimated fair value of the financial instruments as of March 31,
1997 and 1998 is summarized as follows:
Marketable securities and Investment securities
Long-term cash deposits
Long-term indebtedness
Interest rate swap agreements—net credit
Foreign currency contracts—net credit
1998
Estimated
fair value
$1,056,462
210,356
(2,442,826)
(3,530)
(56,106)
Carrying
amount
$ 1,056,462
202,545
(2,238,909)
(1,765)
(63,061)
Estimated
fair value
¥ 139,453
27,767
(322,453)
(466)
(7,406)
Carrying
amount
¥ 139,453
26,736
(295,536)
(233)
(8,324)
Estimated
fair value
¥ 177,311
28,602
(418,665)
(4,727)
(6,473)
Carrying
amount
¥ 177,311
27,707
(386,918)
(144)
(7,479)
1997 1998
Thousands of
U.S. dollars
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and
matter of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
major financial institutions and, therefore, the Company and certain of its
subsidiaries are exposed to credit risk in the event of nonperformance by counterparties. However, the Company does not anticipate nonperformance by them.