Yamaha 2006 Annual Report Download - page 50

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50
Other Income and Expenses
Net non-operating income recorded a year-on-year improvement of ¥5.5 billion, rising from
¥5.6 billion to ¥11.1 billion. This gain mainly came as a result of an increase of ¥5.7 billion, or
62.9%, in the equity in earnings of unconsolidated subsidiaries and affiliates, from ¥9.1 billion
to ¥14.8 billion.
An extraordinary gain of ¥0.6 billion was recorded as a result of gains on sales of invest-
ment securities, among others. Compared with fiscal 2005’s net extraordinary loss of ¥7.8
billion, the extraordinary gain in fiscal 2006 represented an improvement of ¥8.4 billion. There
were no special factors this year as in fiscal 2005, which included asset impairment losses
and extraordinary gains from the return of the substitutional portion of welfare pension fund
plans to the government.
Net Income
Income before income taxes and minority interests increased ¥2.3 billion, or 6.9%, year on
year, rising from ¥33.5 billion to ¥35.8 billion. Reflecting the increase in the nontaxable equity
in earnings of unconsolidated subsidiaries and affiliates, net income for the year increased
¥8.4 billion, or 42.8%, from ¥19.7 billion to ¥28.1 billion.
Foreign Exchange Rate Fluctuations and Risk Hedging
Sales at overseas consolidated subsidiaries are calculated using average exchange rates
recorded during the year, in which the yen fell ¥5 against the U.S. dollar compared with the
previous year, to ¥113 per $1. The year-on-year effect of this change was an increase of
¥5.0 billion in sales at overseas consolidated subsidiaries. The yen also depreciated against
the euro by ¥3 compared with the previous year, for an average exchange rate of ¥138 to
€1. This resulted in a year-on-year gain in sales of ¥1.3 billion. The net effect on sales of for-
eign exchange rate fluctuations, including fluctuations of the yen against such other curren-
cies as the Australian and Canadian dollars, was a gain of ¥10.7 billion over fiscal 2005.
Profits, meanwhile, also were affected by foreign exchange rate fluctuations. The average
yen-U.S. dollar settlement rate was ¥113 to $1, representing depreciation of ¥5, and the
average settlement rate for the euro was ¥135 to €1, representing depreciation of ¥2. The
effects on profits were gains of ¥0.2 billion and ¥0.8 billion, respectively. Including the effects
of other currencies, the net effect on profits of foreign exchange rate fluctuations was a gain
of ¥1.9 billion over fiscal 2005.
The Company undertakes most of its hedging operations against currency risks in Japan.
U.S. dollar-related currency fluctuation risks are hedged by marrying risk associated with dol-
lar receipts from exports with risk associated with dollar payments for imported products.
The Company hedges the value of risks associated with the euro and the Australian and
Canadian dollars by projecting related export revenues and purchasing relevant three-month
currency forwards.