Canon 2005 Annual Report Download - page 73

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(12) Trade Payables
Trade payables are summarized as follows:
December 31 Thousands of
Millions of yen U.S. dollars
2005 2004 2005
Notes ¥ 17,567 51,081 $ 148,873
Accounts 487,559 414,315 4,131,856
¥505,126 465,396 $4,280,729
Year ended December 31 Thousands of
Millions of yen U.S. dollars
2005 2004 2003 2005
Service cost — benefits earned during the year ¥ 25,801 26,571 29,024 $ 218,652
Interest cost on projected benefit obligation 16,172 19,108 20,806 137,051
Expected return on plan assets (19,651) (17,054) (13,959) (166,534)
Amortization of unrecognized net obligation at transition 345 344 344 2,924
Amortization of prior service cost (8,007) (6,814) (5,515) (67,856)
Recognized actuarial loss 10,542 12,505 15,807 89,339
Settlement loss resulting from plan termination —2,784 — —
Settlement loss resulting from transfer of substitutional
portion of EPFs to the Japanese government —69,651 — —
¥ 25,202 107,095 46,507 $ 213,576
(13) Employee Retirement and Severance Benefits
The Company and certain of its subsidiaries have contributory
and noncontributory defined benefit plans covering substan-
tially all employees after one year of service. Other subsidiaries
sponsor unfunded retirement and severance plans. Benefits
payable under the plans are based on employee earnings and
years of service.
The contributory plans in Japan mainly represent the
Employees’ Pension Fund plans (“EPFs”), composed of the sub-
stitutional portions based on the pay-related part of the old
age pension benefits prescribed by the Welfare Pension Insur-
ance Law and the corporate portions based on contributory
defined benefit pension arrangements established at the discre-
tion of the Company and its subsidiaries. The substitutional
portions of the EPFs represent welfare pension plans carried on
behalf of the Japanese government. These contributory and
noncontributory plans are funded in conformity with the
funding requirements of applicable Japanese governmental
regulations.
In January 2003, the Emerging Issues Task Force reached a
final consensus on Issue No. 03-2 (“EITF 03-2”), “Accounting
for the Transfer to the Japanese Government of the Substitu-
tional Portion of Employee Pension Fund Liabilities,” which
addresses accounting for a transfer to the Japanese govern-
ment of a substitutional portion of an EPF. During the year
ended December 31, 2003, the Company and certain of its
domestic subsidiaries received approval from the government
for an exemption from the obligation to pay benefits for future
employee service related to the substitutional portion. During
the year ended December 31, 2004, the Company and certain
of its domestic subsidiaries received approval to separate the
remaining substitutional portion related to past service by their
employees. During the year ended December 31, 2004, the
Company and certain of its domestic subsidiaries also com-
pleted the transfer of the substitutional portion of the benefit
obligation and the related government-specified portion of the
plan assets which were computed by the government, and
were relieved of all related obligations. Canon has accounted
for the entire process at the completion of the transfer to the
government of the substitutional portion of the benefit obliga-
tion and the related plan assets as a single settlement transac-
tion in accordance with EITF 03-2. As a result, Canon
recognized a settlement loss of ¥69,651 million for the year
ended December 31, 2004, which is determined based on the
proportion of the projected benefit obligation settled to the
total projected benefit obligation immediately prior to the sep-
aration. Canon also recognized a subsidy from the government
of ¥86,792 million, which is calculated as the difference
between the obligation settled and the assets transferred to
the government. The net gain of ¥17,141 million is included in
selling, general and administrative expenses for the year ended
December 31, 2004.
Canon uses a measurement date of October 1 for the
majority of its plans.
Net periodic benefit cost for Canon’s employee retirement
and severance defined benefit plans for the years ended
December 31, 2005, 2004 and 2003 consisted of the following
components: