Ricoh 2005 Annual Report Download - page 33

plant and equipment is computed principally by using the declining-
balance method over the estimated useful lives. Most of the foreign
subsidiaries have adopted the straight-line method for computing
depreciation, which currently accounts for approximately 38% of the
consolidated depreciation expense. The depreciation period generally
ranges from 5 years to 50 years for buildings and 2 years to 12 years for
machinery and equipment.
Effective rates of depreciation for the years ended March 31, 2003, 2004
and 2005 are summarized below:
2003 2004 2005
Buildings 8.1% 8.1% 8 .5 %
Machinery and equipment 41.0 42.9 4 3 .8
Certain leased buildings, machinery and equipment are accounted for
as capital leases in conformity with SFAS No.13, “Accounting for
Leases.” The aggregate cost included in property, plant and equipment
and related accumulated depreciation as of March 31, 2004 and 2005
were as follows:
Thousands of
Millions of Yen U.S. Dollars
2004 2005 2005
Aggregate cost ¥7,151 ¥7,051 $65,897
Accumulated depreciation 4,504 4,615 43,131
The related future minimum lease payments and the present value of
the net minimum lease payments as of March 31, 2005 were ¥4,020
million ( $37,570 thousand) and ¥3,804 million ( $35,551 thousand) ,
respectively.
Ordinary maintenance and repairs are charged to expense as incurred.
Major replacements and improvements are capitalized. When
properties are retired or otherwise disposed of, the property and related
accumulated depreciation accounts are relieved of the applicable
amounts, and any differences are included in earnings.
( k) Goodwill and Other Intangible Assets
SFAS No.141, “Business Combinations” requires the use of only the
purchase method of accounting for business combinations and refines
the definition of intangible assets acquired in a purchase business
combination. SFAS No.142, “Goodwill and Other Intangible Assets”
eliminates the amortization of goodwill and instead requires annual
impairment testing thereof. SFAS 142 also requires acquired intangible
assets with a definite useful life to be amortized over their respective
estimated useful lives and reviewed for impairment in accordance with
SFAS No.144, “Accounting for the Impairment or Disposal of Long-
Lived Assets”. Any acquired intangible asset determined to have an
indefinite useful life is not amortized, but instead is tested for
impairment based on its fair value until its life would be determined to
no longer be indefinite.
Ricoh adopted the provisions of SFAS 141 and SFAS 142 as of April 1,
2002. In connection with the transitional impairment evaluation, SFAS
142 required Ricoh to perform an assessment of whether there was an
indication that goodwill was impaired as of April 1, 2002. To
accomplish this, Ricoh ( 1) identified its reporting units, ( 2) determined
the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and intangible assets, to
those reporting units, and ( 3) determined the fair value of each
reporting unit. Ricoh completed the transitional assessment by
September 30, 2002, and determined there was no indication that
goodwill had been impaired as of April 1, 2002. Ricoh also completed
the annual assessment for the years ended March 31, 2003, 2004 and
2005 and determined that no goodwill impairment charge was
necessary.
( l) Pension and Retirement Allowances Plans
The measurement of pension costs and liabilities is determined in
accordance with SFAS No.87, “Employers’ Accounting for Pensions.”
Under SFAS 87, changes in the amount of either the projected benefit
obligation or plan assets resulting from actual results different from
that assumed and from changes in assumptions can result in gains and
losses not yet recognized in the consolidated financial statements.
Amortization of an unrecognized net gain or loss is included as a
component of the net periodic benefit plan cost for a year if, as of the
beginning of the year, that unrecognized net gain or loss exceeds 10
percent of the greater of ( 1) the projected benefit obligation or ( 2) the
fair value of that plan’s assets. In such case, the amount of
amortization recognized is the resulting excess divided by the average
remaining service period of active employees expected to receive benefits
under the plan. The expected long-term rate of return on plan assets
used for pension accounting is determined based on the historical long-
term rate of return on plan assets. The discount rate is determined
based on the rates of return of high-quality fixed-income investments
currently available and expected to be available during the period to
maturity of the pension benefits.
In December 2003, the FASB issued SFAS No.132 ( revised) , “Employers’
Disclosures about Pensions and Other Postretirement Benefits.” SFAS
132 ( revised) prescribes employers’ disclosures about pension plans and
other postretirement benefit plans; it does not change the measurement
or recognition of those plans. The Statement retains and revises the
disclosure requirements contained in the original SFAS 132. It also
requires additional disclosures about the assets, obligations, cash flows,
and net periodic benefit cost of defined benefit pension plans and other
postretirement benefit plans. The Statement generally is effective for
fiscal years ending after December 15, 2003. Ricoh’s disclosures in Note
11 incorporate the requirements of SFAS 132 ( revised) .
( m) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences and carryforwards are expected to be realized or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
To Our Shareholders
and Customers
Review of Operations
(General Information by Business Area)
Technology Corporate Social
Responsibility Environment Financial Section
32
ANNUAL REPORT 2005