Toshiba 2004 Annual Report Download - page 67

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65
20. CONSOLIDATION OF VIEs
During the year ended March 31, 2003, the Company entered into a sale and leaseback transaction with a VIE in
which certain manufacturing equipment was sold and leased back. Upon adoption of FIN 46R, the Company was
required to consolidate the VIE. As a result, the Company’s machinery and equipment, and other liabilities increased
by ¥37,988 million ($358,377 thousand), respectively, in the accompanying consolidated balance sheet as of March
31, 2004. The creditors of the VIE do not have recourse to the general credit of the Company.
21. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments outstanding at March 31, 2004 for the purchase of property, plant and equipment approximated
¥21,250 million ($200,472 thousand).
At March 31, 2004, contingent liabilities, other than guarantees disclosed in Note 22, approximated ¥9,634
million ($90,887 thousand) principally for recourse obligations related to notes receivable transferred.
The Company is a defendant in several pending lawsuits with respect to patent infringement, breaches of contract
and warranties and others. The Company’s management believes that there are meritorious defenses to all of these
actions. Based on the information currently available to both the Company and its legal counsel, management believes
that damages from such lawsuits, if any, would not have a material adverse effect on the financial position or the
results of operations of the Company.
22. GUARANTEES
> GUARANTEES OF UNCONSOLIDATED AFFILIATES AND THIRD PARTY DEBT The Company guarantees debt as
well as certain financial obligations of unconsolidated affiliates and third parties to support the sale of the Company’s
products and services. Expiration dates vary from 2004 to 2014 or terminate on payment and/or cancellation of the
obligation. A payment by the Company would be triggered by the failure of the guaranteed party to fulfill its obligation
under the guarantee. The maximum potential payment under these guarantees was ¥95,894 million ($904,660
thousand) as of March 31, 2004.
> GUARANTEES OF EMPLOYEES’ HOUSING LOANS The Company guarantees housing loans of its employees. The
term of the guarantees is equal to the term of the related loans which range from 5 to 30 years. A payment would be
triggered by failure of the guaranteed party to fulfill its obligation covered by the guarantee. The maximum potential
payments under these guarantees were ¥31,715 million ($299,198 thousand) as of March 31, 2004. However, the
Company expects that the majority of such payments would be reimbursed through the Company’s insurance policy.
> GUARANTEES OF TRANSFERRED CORPORATE BONDS The Company entered into a sale and assumption
agreement with an SPE during 2001. As a result, the Company was released from being a primary obligor for ¥20,178
million of the Company’s corporate bonds, which mature on various dates through 2008, and became secondarily
liable for these obligations. The maximum potential payment by the Company as a secondary obligor was ¥10,375
million ($97,877 thousand) at March 31, 2004.
> RESIDUAL VALUE GUARANTEES UNDER SALE AND LEASEBACK TRANSACTIONS The Company has entered into
several sale and leaseback transactions in which certain manufacturing equipment was sold and leased back. The
Company may be required to make payments for residual value guarantees in connection with these transactions. The
operating leases will expire on various dates through July 2006. The maximum potential payments by the Company for
such residual value guarantees were ¥21,167 million ($199,689 thousand) at March 31, 2004.
> GUARANTEES OF DEFAULTED NOTES AND ACCOUNTS RECEIVABLE The Company has transferred trade notes
receivable, trade accounts receivable and finance receivables under several securitization programs. Upon certain sales
of trade notes and accounts receivable, the Company holds a repurchase obligation, which the Company is required to
perform upon default of the trade notes and accounts receivable. The trade notes and accounts receivable generally
mature within three months. The maximum potential payment for such repurchase obligation was ¥12,610 million
($118,962 thousand) as of March 31, 2004.
The carrying amounts of the liabilities for the Company’s obligations under the guarantees described above at
March 31, 2004 were not significant.