Bridgestone 2003 Annual Report Download - page 51

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2003 ANNUAL REPORT
The significant differences between Japanese GAAP and U.S. GAAP that would apply to the Companies are as follows:
(a) Employers’ accounting for pensions
Under Japanese GAAP, accrued pension and liability for retirement benefits, with certain minor exceptions, resulting from companies’ defined benefit
pension plans have been determined based on the projected benefit obligation and plan assets at the balance sheet date. Net periodic pension costs
are attributed to each year of an employee’s service by the periodical straight-line basis that attributes the same amount of the pension benefits to
each year of service. Unrecognized actuarial net gain or loss that has not been recognized as a part of net periodic pension cost is amortized within
the average remaining service years of the employees. Under U.S. GAAP, such liability and costs are determined in accordance with SFAS No.87.
(b) Business combinations
Under Japanese GAAP, the Company accounted for business combinations using the pooling of interests method. Had the business combination been
accounted for in accordance with U.S. GAAP, it would be accounted for using the purchase method.
(c) Functional currency in highly inflationary economies
Under U.S. GAAP, the financial statements of a foreign entity in a highly inflationary economy shall be remeasured as if the functional currency were
the reporting currency. Accordingly, the financial statements of those entities shall be remeasured into the reporting currency. Such remeasurement
is not permissible under Japanese GAAP.
(d) Amortization/impairment of goodwill
Effective January 1, 1997, certain foreign subsidiaries changed the amortization period of certain goodwill from 40 years to 5 years. The cumulative
effect of the change of ¥98,872 million was treated retroactively by a charge to income in 1997. Until January 1, 2001, U.S. GAAP required that
goodwill be amortized over its estimated useful life, not to exceed 40 years.
In 2001, U.S. GAAP required impairment of certain goodwill in accordance with SFAS No.121. Under Japanese GAAP, the goodwill had already
been amortized fully in 1997.
Under U.S. GAAP, on January 1, 2002, the Companies adopted SFAS No.142, “Goodwill and Other Intangible Assets,” which eliminates amortization
of goodwill and certain other intangible assets, but requires annual testing for impairment (comparison of estimated fair value to carrying value).
Upon adoption, as a result of the transitional impairment test, certain foreign subsidiaries initially recognized an impairment loss of ¥15,519 million
as the cumulative effect of a change in accounting principle under U.S. GAAP.
(e) Impairment of long-lived assets
U.S. GAAP requires that 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. In performing the review for recoverability,
the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Such recognition and measurement of the impairment of long-lived assets to be held and used are
not permissible under Japanese GAAP.
(f) Derivative instruments and hedging activities
Under U.S. GAAP, all derivatives are recognized as either assets or liabilities in the statement of financial position and measured at fair value, and
those instruments qualify for hedge accounting if certain conditions are met. As to the forecasted transactions involving a parent company’s interest
in consolidated subsidiaries, the transactions are not eligible for designation as a hedged transaction, whereas such transactions shall be eligible for
designation as a hedged transaction under Japanese GAAP.
Under Japanese GAAP, hedged items can be translated at the contract rates in derivative instruments for derivative transactions designated as
hedging of foreign exchange exposure associated with a forecasted transaction. In addition, interest rate swaps which qualify for hedge accounting
and meet specific matching criteria are not remeasured at market value, but the differential paid or received under the swap agreements is recog-
nized and included in interest expenses or income. Such accounting treatment is not permissible under U.S. GAAP.
(g) Other adjustments
Other adjustments include inventory valuation, capitalization of leased assets, capitalization of interests and other items.