Canon 2007 Annual Report Download - page 94

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92
20. Commitments and Contingent Liabilities
Commitments
At December 31, 2007, commitments outstanding for the
purchase of property, plant and equipment approximated
¥117,119 million ($1,027,360 thousand), and commitments
outstanding for the purchase of parts and raw materials
approximated ¥91,882 million ($805,982 thousand).
Canon occupies sales offices and other facilities under lease
arrangements accounted for as operating leases. Deposits
made under such arrangements aggregated ¥14,440 million
($126,667 thousand) and ¥13,648 million at December 31,
2007 and 2006, respectively, and are included in noncurrent
receivables in the accompanying consolidated balance sheets.
Rental expenses under the operating lease arrangements
amounted to ¥36,900 million ($323,684 thousand), ¥36,157
million and ¥38,297 million for the years ended December 31,
2007, 2006 and 2005, respectively.
Future minimum lease payments required under noncance-
lable operating leases that have initial or remaining lease terms
in excess of one year at December 31, 2007 are as follows:
Thousands of
Millions of yen U.S. dollars
Year ending December 31:
2008 ¥16,365 $143,553
2009 12,382 108,614
2010 7,637 66,991
2011 5,681 49,833
2012 4,055 35,570
Thereafter 11,281 98,957
Total future minimum lease payments ¥57,401 $503,518
Guarantees
Canon provides guarantees for bank loans of its employees,
affiliates and other companies. The guarantees for the employ-
ees are principally made for their housing loans. The guarantees
of loans of its affiliates and other companies are made to
ensure that those companies operate with less financial risk.
For each guarantee provided, Canon would have to perform
under a guarantee if the borrower defaults on a payment
within the contract periods of 1 year to 30 years, in the case of
employees with housing loans, and of 1 year to 10 years, in the
case of affiliates and other companies. The maximum amount
of undiscounted payments Canon would have had to make in
the event of default is ¥27,946 million ($245,140 thousand) at
December 31, 2007. The carrying amounts of the liabilities
recognized for Canon’s obligations as a guarantor under those
guarantees at December 31, 2007 were not significant.
Canon also issues contractual product warranties under
which it generally guarantees the performance of products
delivered and services rendered for a certain period or term.
Changes in accrued product warranty cost for the years ended
December 31, 2007 and 2006 are summarized as follows:
Years ended December 31 Thousands of
Millions of yen U.S. dollars
2007 2006 2007
Balance at beginning of year ¥ 18,144 ¥ 16,746 $ 159,158
Addition 31,053 18,686 272,395
Utilization (26,199) (18,377) (229,816)
Other (2,860) 1,089 (25,088)
Balance at end of year ¥ 20,138 ¥ 18,144 $ 176,649
Legal proceedings
In October 2003, a lawsuit was filed by a former employee
against the Company at the Tokyo District Court in Japan. The
lawsuit alleges that the former employee is entitled to ¥45,872
million ($402,386 thousand) as compensation for an invention
related to certain technology used by the Company, and the
former employee has sued for a partial payment of ¥1,000
million ($8,772 thousand) and interest thereon. On January 30,
2007, the Tokyo District Court in Japan ordered the Company
to pay the former employee approximately ¥33.5 million ($294
thousand) and interest thereon. On the same day, the Company
appealed the decision. This lawsuit is currently under trial in the
Intellectual Property High Court.
In Germany, Verwertungsgesellschaft Wort (“VG Wort”),
a collecting agency representing certain copyright holders, has
filed a series of lawsuits seeking to impose copyright levies
upon digital products such as PCs and printers, that allegedly
enable the reproduction of copyrighted materials, against the
companies importing and distributing these digital products. In
May 2004, VG Wort filed a civil lawsuit against Hewlett-Packard
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CANON INC. AND SUBSIDIARIES