Ricoh 2007 Annual Report Download - page 39

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 30% 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, 2005, 2006
and 2007 are summarized below:
2005 2006 2007
Buildings 8.5% 8.9% 9.8%
Machinery and equipment 43.8 40.5 40.8
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, 2006 and 2007
were as follows:
Thousands of
Millions of Yen U.S. Dollars
2006 2007 2007
Aggregate cost ¥6,895 ¥7,341 $62,212
Accumulated depreciation 4,911 5,761 48,822
The related future minimum lease payments and the present value of
the net minimum lease payments as of March 31, 2007 were ¥1,735
million ($14,703 thousand) and ¥1,623 million ($13,754 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) Capitalized Software Costs
In accordance with Statement of Position (“SOP”) 98-1, “Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use”, Ricoh capitalizes qualifying cost of computer software. Costs
incurred during the application development stage as well as upgrades
and enhancements that results in additional functionality are
capitalized. The capitalized software is amortized on a straight line
basis over their estimated useful lives.
(l) 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 when an indication
of impairment is identified in accordance with SFAS No.144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”.
Other intangible assets with definite useful lives, consisting primarily of
software, patents, customer relationships and tradenames are amortized
on a straight line basis over 3 years to 20 years. Any acquired intangible
asset determined to have an indefinite useful life is not amortized, but
instead is tested annually for impairment based on its fair value until its
life would be determined to no longer be indefinite.
Ricoh completed its annual assessment of the carrying value of
indefinite-lived intangible assets, including goodwill for the years ended
March 31, 2005, 2006 and 2007 and determined that no impairment
charge was necessary.
(m) Pension and Retirement Allowances Plans
The measurement of pension costs and liabilities is determined in
accordance with SFAS No.87, “Employers’ Accounting for Pensions”
and SFAS No.158, “Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans.” Under SFAS 158, Ricoh recognized
the funded status (i.e., the difference between the fair value of plan
assets and the projected benefit obligations) of its pension fund plans as
of the end of fiscal year’s consolidated balance sheets, with a
corresponding adjustment in initially applying SFAS 158 to
accumulated other comprehensive income (loss), net of tax. 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.
(n) 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.
(o) Research and Development Expenses and Advertising
Costs
Research and development expenses and advertising costs are expensed
as incurred.
(p) Shipping and Handling Costs
Shipping and handling costs, which mainly include transportation to
customers, are included in selling, general and administrative expenses
on the consolidated statements of income.
(q) Impairment or Disposal of Long-Lived Assets
Long-lived assets and acquired intangible assets with a definite life are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset or group of assets may not
be recoverable. Recoverability of assets to be held and used is assessed by
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ANNUAL REPORT 2007