Sharp 2013 Annual Report Download - page 43

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Annual Report 2013 41
Financial Section
include all securities other than trading securities and held-to-
maturity securities.
Other securities with available fair market values are stated at
fair market value, which is calculated as the average of market
prices during the last month of the fiscal year. Unrealized holding
gains and losses on these securities are reported, net of applica-
ble income taxes, as a separate component of net assets. Real-
ized gains and losses on the sale of such securities are computed
principally using average cost.
Other securities with no available fair market values are stated
at average cost.
If the fair market value of other securities declines significantly,
such securities are stated at fair market value and the difference
between the fair market value and the carrying amount is rec-
ognized as loss in the period of decline. If the net asset value of
other securities with no available fair market values declines sig-
nificantly, the securities are written down to the net asset value
and charged to income. In these cases, the fair market value or
the net asset value is carried forward to the next year.
(f) Inventories
Inventories held by the Company and its domestic consolidated
subsidiaries are primarily measured at moving average cost (for
balance sheet valuation, in the event that an impairment is de-
termined inventories impairment is computed using net realiz-
able value). For overseas consolidated subsidiaries, inventories
are measured at the lower of moving average cost and net re-
alizable value.
(g) Depreciation and amortization
For the Company and its domestic consolidated subsidiar-
ies, depreciation of plant and equipment other than lease as-
sets is computed using the declining-balance method, except
for machinery and equipment at the LCD plants in Mie and
Kameyama and the buildings (excluding attached structures) ac-
quired by the Company and its domestic consolidated subsidiar-
ies on and after April 1, 1998; all of which are depreciated using
the straight-line method over the estimated useful life of the
asset. Properties at overseas consolidated subsidiaries are depre-
ciated using the straight-line method.
Maintenance and repairs, including minor renewals and bet-
terments, are charged to income as incurred.
Amortization of intangible assets except for lease assets is
computed using the straight-line method.
Software costs are included in other assets. Software used by
the Company is amortized using the straight-line method over
the estimated useful life of principally 5 years, and software em-
bedded in products is amortized over the forecasted sales quan-
tity.
Depreciation of lease assets under finance leases that do not
transfer ownership is computed using the straight-line method,
using the lease period as the depreciable life and the residual
value as zero. Lease payments are recognized as expenses for fi-
nance leases of the Company and its domestic consolidated sub-
sidiaries that do not transfer ownership for which the starting
date of the lease transaction is on and before March 31, 2008.
(h) Accrued bonuses
The Company and its domestic consolidated subsidiaries accrue
estimated amounts of employees’ bonuses based on the esti-
mated amounts to be paid in the subsequent period.
(i) Provision for loss on litigation
Out of possible future loss on litigation, the Company and its
domestic consolidated subsidiaries accrue estimated amounts
for possible future loss on litigation in amounts considered nec-
essary.
(j) Income taxes
The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes.
(k) Severance and pension benefits
The Company and its domestic consolidated subsidiaries have
primarily a trustee non-contributory defined benefit pension
plan for their employees to supplement a governmental welfare
pension plan.
Certain overseas consolidated subsidiaries primarily have de-
fined contribution pension plans and lump-sum retirement ben-
efit plans.
The Company and its domestic consolidated subsidiaries pro-