Canon 2005 Annual Report Download - page 87

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85
December 31 Millions of yen Thousand of U.S. dollars
2005 2004 2005
Carrying Estimated Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Amount Fair Value
Long-term debt, including current installments
¥(32,074) (35,194) (38,530) (44,620) $(271,813) (298,254)
Foreign exchange contracts:
Assets 2,250 2,250 4,875 4,875 19,068 19,068
Liabilities (10,062) (10,062) (11,020) (11,020) (85,271) (85,271)
The following methods and assumptions are used to esti-
mate the fair value in the above table.
Long-term debt
The fair values of Canon’s long-term debt instruments are
based on the quoted price in the most active market or the
present value of future cash flows associated with each instru-
ment discounted using Canon’s current borrowing rate for sim-
ilar debt instruments of comparable maturity.
Foreign exchange contracts
The fair values of foreign exchange contracts, all of which are
used for purposes other than trading, are estimated by obtain-
ing quotes from brokers.
Limitations
Fair value estimates are made at a specific point in time, based
on relevant market information and information about the
financial instruments. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment
and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Concentrations of credit risk
At December 31, 2005 and 2004, one customer accounted for
approximately 12% and 13% of consolidated trade receiv-
ables, respectively. Although Canon does not expect that the
customer will fail to meet its obligations, Canon is potentially
exposed to concentrations of credit risk if the customer failed
to perform according to the terms of the contracts.
(21) Disclosures about the Fair Value of Financial
Instruments and Concentrations of Credit Risk
Fair value of financial instruments
The estimated fair values of Canon’s financial instruments at
December 31, 2005 and 2004 are set forth below. The follow-
ing summary excludes cash and cash equivalents, trade receiv-
ables, finance receivables, noncurrent receivables, short-term
loans, trade payables, accrued expenses for which fair value
approximate their carrying amounts. The summary also
excludes marketable securities and investments which are dis-
closed in Note 4.
(22) Supplemental Cash Flow Information
For the years ended December 31, 2005, 2004 and 2003,
aggregate common stock and additional paid-in capital arising
from conversion of convertible debt amounted to ¥1,147
million ($9,720 thousand), ¥9,938 million and ¥3,297 million,
respectively.