Bridgestone 2004 Annual Report Download - page 40

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Bridgestone Annual Report 2004
(d) Inventories
Inventories are substantially stated at cost determined by the moving-average method, while inventories held by subsidiaries in the U.S.
are substantially stated at the lower of cost, which is determined principally by the last-in, first-out method, or market.
(e) Investments in securities
Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (i) trading secu-
rities, which are held for the purpose of earning capital gains in the near term, are reported at fair value, and the related unrealized
gains and losses are included in income; (ii) held-to-maturity debt securities, which are expected to be held to maturity with the posi-
tive 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 issued a Statement of Opinion, “Accounting for Impairment of Fixed Assets”, and in
October 2003 the Accounting Standards Board of Japan (“ASBJ”) issued ASBJ Guidance No.6, “Guidance for Accounting Standard for
Impairment of Fixed Assets”. These new pronouncements are effective for fiscal years beginning on or after April 1, 2005, with early
adoption permitted for fiscal years ending on or after March 31, 2004.
The new accounting standard requires an entity to review its long-lived assets for impairment whenever events or changes in cir-
cumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recog-
nized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from
the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by
which the carrying amount of the asset or asset group exceeds its recoverable amount, which is the higher of the discounted cash flows
from the continued use and eventual disposition of the asset or asset group, or the net selling price at disposition.
The Company and its domestic subsidiaries expect to adopt these pronouncements at January 1, 2005 and is currently in the process
of assessing the effect of adoption of these pronouncements.
Management believes the adoption of these pronouncements will not have a material impact on the consolidated financial position
or results of operations of the Company.
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. which requires 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.
(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 mainly being amortized over a period of five 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.