Suzuki 2011 Annual Report Download - page 36

SUZUKI MOTOR CORPORATION 35
(g) Hedge accounting
Gains or losses arising from changes in fair value of the derivatives designated as “hedging instruments” are deferred
as an asset or liability and included in net profit or loss in the same period during which the gains and losses on the hedged
items or transactions are recognized.
The derivatives designated as hedging instruments by the Company and its subsidiaries are principally forward exchange
contracts and interest swaps. The related hedged items are foreign currency denominated transaction and borrowings.
The Company and its subsidiaries have a policy to utilize the above hedging instruments in order to reduce our exposure
to the risk of interest rate and foreign exchange fluctuation. Thus, our purchases of the hedging instruments are limited to, at
maximum, the amounts of the hedged items. The Company and its subsidiaries evaluate effectiveness of its hedging activities
by reference to the accumulated gains or losses on the hedging instruments and the related hedged items from the com-
mencement of the hedges.
(h) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term are translated into
Japanese yen at the exchange rates prevailing at the balance sheet date. Resulting gains and losses are included in net
income or loss for the period.
Assets and liabilities of the foreign subsidiaries and affiliates are translated into Japanese yen at the exchange rates pre-
vailing at the balance sheet date.
The components of net assets are translated into Japanese yen at their historical rates. Profit and loss accounts for the
year are translated into Japanese yen using the average exchange rate during the year. Differences in yen amounts arising
from the use of different rates are presented as “foreign currency translation adjustments” and “minority interests” in the net
assets.
(i) Inventories
Stated at cost mainly determined by the weighted average cost method (Figures on the consolidated balance sheet are
measured by the method of book devaluation based on the reduction of profitability)
(j) Method of depreciation and amortization of significant depreciable assets
a. Property, plant and equipment (excluding lease assets)
................. Mainly declining balance method for the Company and domestic subsidiaries and mainly straight-line
method for foreign subsidiaries
Buildings and structures 3 to 75 years
Machinery, equipment and vehicles 3 to 15 years
b. Intangible assets (excluding lease assets)
................. Straight line method
c. Lease assets
Finance lease which transfer ownership
................. The same method as depreciation and amortization of self-owned noncurrent assets
Finance lease which do not transfer ownership
................. Straight-line method with the lease period as the durable years. As to remaining value, lease assets with
guaranteed residual value under lease agreement is to be remaining value, and other lease assets, remain-
ing value zero is applied.
(k) Income taxes
The provision for income taxes is computed based on the income before income taxes included in the consolidated state-
ments 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
their 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.
(l) Provision for retirement benefits and provision for directors’ retirement benefits
In order to allow for payment of employees’ retirement benefits, based on 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 appropri-
ated.
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 expense. 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 fis-
cal year in which the differences occur are respectively treated as expenses from the next term of the fiscal year in which they
arise.
Consolidated Financial Statements