Suzuki 2014 Annual Report Download - page 41

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Consolidated Financial Statements
SUZUKI MOTOR CORPORATION 39
(h) Provision for disaster
Reasonably estimated amount is appropriated for anticipated loss mainly caused by relocation of plants and facilities located
in the Ryuyo Region in Iwata City, Shizuoka Prefecture where massive tsunami damages caused by Tokai and Tonankai Earth-
quake are anticipated.
(i) Provision for product liabilities
With regards to the products exported to North American market, to prepare for the payment of compensation, not covered
by “Product Liability Insurance” the anticipated amount to be borne by The Group is computed and provided on the basis of
actual results in the past.
(j) Provision for recycling expenses
The provision is appropriated for an estimated expense related to the recycle of products of The Company based on actual
sales.
(k) Short-term investment securities and Investment securities
The Company and its subsidiaries hold securities of listed companies, which have a risk of price uctuations, and non-listed
companies whose stock prices are difcult to be evaluated.
If we judge the decline in investment value is not temporary, we recognize revaluation loss based on the reasonable standard.
If the stock market falls, we may incur signicant loss on valuation of securities.
Securities have to be classied into four categories: trading securities; held-to-maturity debt securities; investments of The
Company in equity securities issued by consolidated subsidiaries and afliates; and available-for-sale securities.
According to this classication, securities held by The Company and its subsidiaries are available-for-sale securities. Avail-
able-for-sale securities for which market quotations are available are stated at market value method based on the market
values as of the consolidated account settlement date (The evaluation differences shall be reported as other comprehensive
income, and sales costs shall be calculated mainly by the moving average method).
Available-for-sale securities for which market quotations are unavailable are stated at cost by a moving average method.
(l) Hedge accounting
Gains or losses arising from changes in fair value of the derivatives designated as “hedging instruments” are deferred
until the gains and losses on the hedged items or transactions are recognized.
If foreign currency forward contracts meet certain criteria, exceptional hedge accounting is applied and these contracts
are handled together with hedged items.
The derivatives designated as hedging instruments by The Company and its subsidiaries are principally forward ex-
change contracts, interest swaps and cross currency interest rate 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 expo-
sure to the risk of interest rate and foreign exchange uctuation. 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 commencement of the hedges.
(m) 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 afliates are translated into Japanese yen at the exchange rates prevailing at the
balance sheet date.
The components of net assets are translated into Japanese yen at their historical rates. Prot and loss accounts for the scal year are
translated into Japanese yen using the average exchange rate during the scal 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.
(n) Inventories
Stated at cost mainly determined by the gross average method (Figures on the consolidated balance sheet are measured by
the method of book devaluation based on the reduction of protability).