Ricoh 2002 Annual Report Download - page 36

33
Ricoh Company, Ltd. and Consolidated Subsidiaries
Ricoh distributes its products prim arily through dom estic ( Japanese) and for-
eign sales subsidiaries. Overseas, Ricoh owns and distributes not only Ricoh brand
products but also other brands, such as Gestetner, Lanier and Savin.
Ricoh m anufactures its products prim arily in 15 plants in Japan and 7 plants
overseas, which are located in the United States, United Kingdom , France, and
China.
1 . NATURE OF OPERATIONS
Ricoh Com pany, Ltd. ( the “Company”) , was established in 1936, and is head-
quartered in Tokyo, Japan. The Company and its consolidated subsidiaries
( “Ricoh” as a consolidated group) is a worldwide supplier of office automation
equipment, including copiers, facsimile m achines, data processing system s, print-
ers and related supplies. Ricoh is also well known for its state-of-the-art electronic
devices, digital photographic equipment and others.
N o t e s t o C o n s o lid a t e d F in a n c ia l S t a t e m e n t s
2 . SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
of gains and losses on these contracts is reported as a component of accum ulated
other com prehensive income ( loss) and reclassified into earnings in the sam e pe-
riod the hedged transaction affects earnings. Any hedge ineffectiveness on cash
flow hedges is im mediately recognized in earnings. Ricoh also enters into deriva-
tive contracts that are not designated as hedging instrum ents. These derivative
contracts are recorded at fair value with the gain or loss recognized in current pe-
riod earnings. Ricoh does not hold any derivative instrum ents for trading purpos-
es. See Note 15 for further description of Ricoh’s specific program s to m anage risk
using derivative financial instruments.
On April 1, 2001, Ricoh adopted SFAS No. 133 and SFAS No. 138. The cum u-
lative effect adjustm ent upon the adoption of SFAS No. 133 and SFAS No. 138, net
of the related income tax effect, resulted in a decrease in net income of approxi-
mately ¥66 m illion ( $496 thousand) and a decrease in other comprehensive in-
come ( loss) of approximately ¥1,864 million ( $14,015 thousand) .
Prior to April 1, 2001, gains and losses on hedges of existing assets or liabili-
ties were included in the carrying am ounts of those assets or liabilities and were
ultim ately recognized in incom e as part of those carrying am ounts. Gains and
losses related to qualifying hedges of firm comm itments and anticipated transac-
tions were deferred and recognized in incom e, or as adjustm ents of carrying
amounts, when the hedged transaction occurred.
( e) Securities
Ricoh conform s with SFAS No.115, “Accounting for Certain Investments in Debt
and Equity Securities,” which requires investm ents in debt and certain equity se-
curities to be classified as either held-to-m aturity, trading, or available-for-sale se-
curities. As of March 31, 2001 and 2002, a substantial part of Ricoh’s investments
in debt and equity securities are classified as available-for-sale securities. Those
classified as available-for-sale are reported at fair value with unrealized gains and
losses, net of related taxes, excluded from earnings and reported in other compre-
hensive incom e ( loss) . Individual securities classified as available-for-sale are re-
duced to net realizable value for any other than tem porary declines in market
value.
Available-for-sale securities which are expected to be sold in one year are clas-
sified as current assets.
The cost of the securities sold was com puted based on the average cost of
each security held at the time of sale.
The non-marketable equity securities primarily relate to less than 20% owned
companies and are stated at cost.
( f) Inventor ies
Inventories are m ainly stated at the lower of average cost or m arket. Inventory
costs include raw materials, labor and m anufacturing overheads.
The accom panying consolidated financial statem ents of Ricoh have been pre-
pared in conform ity with accounting principles generally accepted in the United
States of Am erica, m odified for the accounting for stock splits ( see Note 2. ( o) be-
low) . Significant accounting and reporting policies are summ arized below:
( a) Principles of Consolidation
The consolidated financial statem ents include the accounts of Ricoh. Investments
in 20% to 50% owned companies are accounted for on the equity basis. All signifi-
cant intercompany balances and transactions have been eliminated in consolida-
tion.
The accounts of certain consolidated subsidiaries have been included on the
basis of fiscal periods ended three months or less prior to March 31, and signifi-
cant transactions after then are appropriately adjusted in consolidation.
( b) Revenue Recognition
Ricoh recognizes revenue when it has persuasive evidence of an arrangem ent, the
product has been shipped to and received by the customer or the services have
been provided to the customer, the sales price is fixed or determ inable and col-
lectibility is reasonably assured.
( c) Translation of Foreign Currency Accounts
Under the provisions of Statem ent of Financial Accounting Standards ( “SFAS”)
No. 52, “Foreign Currency Translation,” assets and liabilities are translated at the
exchange rates in effect at each fiscal year-end, and income and expenses are
translated at the average rates of exchange prevailing during each fiscal year. The
resulting translation adjustm ents are accum ulated as a part of other comprehen-
sive incom e ( loss) included in shareholders’ investm ent.
( d) Derivative Instruments and Hedging Activities
Ricoh currently manages its exposure to certain market risks, including foreign
exchange and interest rate risks, through the use of derivative instrum ents, and
beginning April 1, 2001, accounts for them in accordance with SFAS No. 133, “Ac-
counting for Derivative Instrum ents and Hedging Activities,” and No. 138, “Ac-
counting for Certain Derivative Instrum ents and Certain Hedging Activities.”
Ricoh enters into a derivative contract and designates the derivative as: ( 1) a
hedge of the fair value of a recognized asset or liability ( fair value hedge) , ( 2) a
hedge of the variability of cash flows that are to be paid in connection with a rec-
ognized liability ( cash flow hedge) , or ( 3) a derivative instrum ent that is not des-
ignated for hedge accounting treatm ent. For derivative contracts that are
designated and qualify as fair value hedges, the derivative instrum ent is marked-
to-m arket with gains and losses recognized in current period earnings to offset the
respective losses and gains recognized on the underlying exposure. For derivative
contracts that are designated and qualify as cash flow hedges, the effective portion