Bridgestone 2004 Annual Report Download - page 41

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Financial Section
(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 payments 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 transitional obligation of ¥19,689 million, determined at January 1, 2001, is being amortized over ten years.
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 terminat-
ed 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 insur-
ance 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.
(l) Revenue recognition
Sales are recognized when products are shipped or when services are rendered to customers.
(m) Income taxes
The provision for income taxes is computed based on income before income taxes included in the consolidated statements of income.
The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of tem-
porary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred income taxes are measured by
applying currently enacted tax laws to the temporary differences. A valuation allowance is provided for any portion of the deferred tax
assets where it is considered more likely than not that they will not be realized.
(n) Bonuses to directors
Bonuses to directors are subject to approval at the general shareholders meeting and are accounted for by an appropriation of retained
earnings for the year in which the approval and payments are made in accordance with the Japanese Commercial Code (the “Code”).
(o) Appropriations of retained earnings
Appropriations of retained earnings are reflected in the consolidated financial statements for the following year after approval by the
shareholders in accordance with the Code.
(p) Foreign currency transactions
Short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the
exchange rates at the balance sheet date. The foreign currency exchange gains and losses from translation are recognized in income to
the extent that they are not hedged by foreign currency forward contracts or currency option contracts.
(q) Foreign currency financial statements
The balance sheet accounts of foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet
date except for shareholders’ equity, which is translated at the historical rate. Differences arising from such translation are shown as
foreign currency translation adjustments in a separate component of shareholders’ equity. Revenue and expense accounts of foreign
subsidiaries are translated into Japanese yen at the average annual exchange rate.