Bridgestone 2003 Annual Report Download - page 34

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BRIDGESTONE
income; (ii) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are
reported at amortized cost; and (iii) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at
fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of shareholders' equity. The Companies do not
hold securities for trading purposes.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary declines in
fair value, investments in securities are reduced to net realizable value by a charge to income.
(f) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic subsidiaries is
computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, while the straight-line method is
applied to property, plant and equipment of foreign subsidiaries. Maintenance, repair and minor renewals are charged to income as incurred.
(g) Impairment of long-lived assets
In August 2002, the Business Accounting Council in Japan issued the Opinions on Accounting Standards for Impairment of Fixed Assets, which
require that fixed assets held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets or intangibles may not be recoverable. The opinions require the standards to be adopted for fiscal years beginning after March 31, 2005.
Early application is permitted for financial statements issued after March 30, 2004.
The impairment of long-lived assets for certain foreign subsidiaries is accounted for in accordance with Statement of Financial Accounting
Standards (“SFAS”) No.144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” issued by the Financial Accounting Standards Board
(the “FASB”) in the U.S., for the years ended December 31, 2003 and 2002, and in accordance with SFAS No.121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” for the year ended December 31, 2001. SFAS No.144 supersedes SFAS No.121, but the
fundamental provisions of SFAS No.121 which require long-lived assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable are
retained. The foreign subsidiaries adopted SFAS No.144 on January 1, 2002. The adoption of SFAS No.144 did not have a material effect on the
Company's consolidated financial position and results of operations.
(h) Goodwill
Goodwill recorded by subsidiaries and the excess of cost of the Company's investments in subsidiaries and affiliated companies over its equity in the
net assets at the respective dates of acquisition is being amortized over a period of 5 years on the straight-line basis.
(i) Provision for product warranties
The provision for product warranties, included in other liabilities, is estimated and recorded at the time of sale to provide for future potential costs,
such as costs related to after-sales services, in amounts considered to be appropriate based on the Companies' past experience.
(j) Retirement and pension plans
Japanese domestic companies
Employees serving with the Company and its domestic subsidiaries are generally entitled to lump-sum severance and, in certain cases, annuity pay-
ments on retirement, based on the rates of pay at the time of termination, years of service and certain other factors. Such benefits are principally
provided by funded defined benefit pension plans.
Effective January 1, 2001, the Company and its domestic subsidiaries adopted a new accounting standard for employees’ retirement benefits and
accounted for the liability for retirement benefits based on projected benefit obligations and plan assets at the balance sheet date.
The liability for retirement benefits to directors (members of the Board of Directors) and corporate auditors is provided for at the amount which
would be required, based on the Company’s regulations, in the event that all directors and corporate auditors terminated their offices at the balance
sheet date. Any amounts payable to directors and corporate auditors upon retirement are subject to approval at the general shareholders meeting.
Foreign subsidiaries
The funded defined benefit pension plans for the employees of certain foreign subsidiaries are accounted for in accordance with SFAS No.87,
“Employers’ Accounting for Pensions,” while the postretirement benefits other than pensions for all health care and life insurance benefit plans are
accounted for in accordance with SFAS No.106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” SFAS No.106 requires
the accrual of retiree postretirement benefits during the active service period of the employee. Other foreign subsidiaries have defined contribution
pension plans or severance indemnity plans which substantially cover all of their employees.
(k) Leases
Finance leases are capitalized, and the present value of the related payments is recorded as a liability. Amortization of capitalized leased assets is
computed substantially by the declining-balance method at rates based on the term of the lease.