Yamaha 1998 Annual Report Download - page 7

YAMAHA CONSOLIDATED FINANCIAL REPORT 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(a) Basis of presentation
YAMAHA CORPORATION (the “Company”) and its domestic
subsidiaries maintain their accounting records and prepare their
financial statements in accordance with accounting principles and
practices generally accepted in Japan, and its foreign subsidiaries
maintain their books of account in conformity with those of the
countries of their domicile. The accompanying consolidated
financial statements have been prepared from the financial state-
ments filed with the Ministry of Finance as required by the
Securities and Exchange Law of Japan. For the purposes of this
document, certain reclassifications have been made to present the
accompanying consolidated financial statements in a format
which is familiar to readers outside Japan.
As permitted, amounts of less than one million yen have been
omitted. As a result, the totals shown in the accompanying con-
solidated financial statements (both in yen and in U.S. dollars) do
not necessarily agree with the sum of the individual amounts.
(b) Basis of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the
accounts of the Company and its significant subsidiaries. All
significant intercompany balances and transactions have been
eliminated in consolidation. The Company’s investments in its
consolidated subsidiaries are eliminated to the underlying net
equity of the consolidated subsidiaries by the step-by-step method.
Certain foreign subsidiaries are consolidated on the basis of fis-
cal periods ending December 31, which differ from that of the
Company; however, the necessary adjustments are made when the
effect of the difference is material.
Investments in significant affiliates (companies owned 20% to
50%) are stated at cost plus equity in their undistributed earnings
or losses. Consolidated net income includes the Company’s equity
in the current net income or loss of such companies, after the
elimination of unrealized intercompany profits.
Investments in unconsolidated subsidiaries and affiliates not
accounted for by the equity method are carried at cost.
Internal profit arising from transactions of assets among the
consolidated group companies is fully eliminated. The excess of
cost over underlying net assets at the date of acquisition is amor-
tized over a period of five years on a straight-line basis if such
excess is material, or charged to income when incurred if such
excess is immaterial.
(c) Foreign currency translation
The revenue and expense accounts of the foreign consolidated
subsidiaries are translated into yen at the rate of exchange in effect
at the balance sheet date. The balance sheet accounts, except for
the components of shareholders’ equity, are also translated into
yen at the rate of exchange in effect at the balance sheet date. The
components of shareholders’ equity are translated at historical
exchange rates.
Current assets and liabilities of the Company and its domestic
subsidiaries denominated in foreign currencies are translated at
the exchange rates in effect at each balance sheet date when not
hedged by forward exchange contracts, or at the contracted rates
of exchange when hedged by forward exchange contracts. Other
noncurrent assets and liabilities of the Company and its domestic
subsidiaries denominated in foreign currencies are translated into
yen at the historical rates of exchange in effect at the dates of the
respective transactions.
(d) Marketable securities including those classified
as investment securities
Marketable securities are stated at cost or at the lower of cost or
market, cost being determined by the average method.
(e) Inventories
Inventories of the Company and the domestic consolidated sub-
sidiaries are stated principally at the lower of cost or market, cost
being determined by the last-in, first-out method. Inventories of
the foreign consolidated subsidiaries are stated principally at the
lower of cost or market, cost being determined by the moving
average method.
(f) Depreciation and amortization
Depreciation of property, plant and equipment is mainly comput-
ed by the declining-balance method based on the Corporation
Tax Law of Japan except that certain consolidated subsidiaries
employ the straight-line method at rates based on the estimated
useful lives of the respective assets.
(g) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount
sufficient to cover possible losses on the collection of receivables.
For the Company and its consolidated subsidiaries, the amount of
the allowance is determined based on (1) the maximum amount
permitted to be charged to income under the Corporation Tax
Law of Japan, (2) an estimated amount for probable doubtful
accounts based on a review of the collectibility of individual
receivables, and (3) an amount based on past experiences.
(h) Retirement benefits
Employees’ retirement benefits:
The Company and its consolidated subsidiaries have retirement
benefit plans covering substantially all their employees. Employees
of the consolidated subsidiaries who terminate their employment are
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YAMAHA Corporation and Consolidated Subsidiaries
March 31, 1998 and 1997