Suzuki 2006 Annual Report Download - page 35

SUZUKI MOTOR CORPORATION
(l) Income taxes
The provision for income taxes is computed based on the income before income taxes included in
Consolidated Statements of Income. The assets and liability approach is adopted to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
In making a valuation for the possibility of collection of deferred tax assets, the Company and its subsidiaries
estimate our future taxable income reasonably. If the estimated amount of future taxable income decrease,
deferred tax assets may decrease and income taxes expenses may be posted.
(m) Accrued retirement and severance benefits
In order to allow for payment of employees’ retirement benefits, based on the estimated amount of retirement
benefits liabilities and pension assets at the end of this fiscal year, the allowable amount which occurs at the end
of this fiscal year is appropriated.
With regard to prior service costs, the amount, prorated on a straight line basis over the period of average
length of employees’ remaining service years at the time when it occurs, is treated as expenses. As for the
actuarial differences, the amounts prorated on a straight line basis over the period of average length of
employees’ remaining service years in each year in which the differences occur are respectively treated as
expenses from the next term of the year in which they arise.
As for directors, the amount payable to be paid at the end of year is posted pursuant to the Company’s
regulations on the retirement allowance of directors.
Retirement benefit cost and retirement benefit obligation are calculated on the actuarial assumptions, which
include discount rate, assumed return of investment ratio, revaluation ratio, salary rise ratio, retirement ratio and
mortality ratio. Discount rate is decided on the basis of yield on low-risk, long-term bonds, and assumed return of
investment ratio is decided based on the investment policies of pension assets of each pension system etc.
Decreased yield on long-term bond leads to a decrease in discount rate and has an adverse influence on the
calculation of retirement benefit cost. However, the pension system adopted by the Company has a cash balance
type plan, and thus the revaluation ratio, which is one of the base ratios, can offset any adverse effects caused by
a decrease in the discount rate.
If the investment yield of pension assets is less than the assumed return of investment ratio, it will have an
adverse effect on the calculation of retirement benefit cost. But by focusing on low-risk investments, this influence
should be minimal in the case of the pension fund systems of the Company and its subsidiaries.
(n) Revenue recognition
Sales of products are generally recognized in the accounts as delivery is made.
(o) Amounts per share
Primary net income per share is computed based on the weighted average number of shares issued during
the respective years. Fully diluted net income per share is computed assuming that all convertible bonds were
converted into common stock, with an applicable adjustment for related interest expense and net of tax. Cash
dividends per share are the amounts applicable to the respective periods including dividends to be paid after the
end of the period.
(p) Cash and cash equivalents
All highly liquid investments with original maturities of three months or less when purchased are considered
cash and cash equivalents.
(q) Reclassification
Certain reclassifications of previously reported amounts are made to conform with current classifications.
CONSOLIDATED FINANCIAL STATEMENTS OF 2006
Finished products .................................................... ¥290,945 ¥229,098 $2,476,767
Work in process ....................................................... 19,483 17,063 165,863
Raw materials and others ........................................ 44,257 41,615 376,757
¥354,687 ¥287,777 $3,019,388
NOTE 3: Inventories
Inventories as of March 31, 2006 and 2005 were as follows:
2006 2005 2006
Thousands of
U.S. dollars
Millions of yen
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