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54 CANON ANNUAL REPORT 2009
Canon provides warranties of generally less than one year
against defects in materials and workmanship on most of its
consumer products. Estimated product warranty related costs
are established at the time revenue is recognized and is included
in selling, general and administrative expenses. Estimates for
accrued product warranty cost are primarily based on historical
experience, and are affected by ongoing product failure rates,
specifi c product class failures outside of the baseline experience,
material usage and service delivery costs incurred in correcting a
product failure. As of December 31, 2009, accrued product war-
ranty costs amounted to ¥13,944 million (U.S.$152 million).
At December 31, 2009, commitments outstanding for the
purchase of property, plant and equipment were approximately
¥21,839 million (U.S.$237 million), and commitments outstanding
for the purchase of parts and raw materials were approximately
¥64,226 million (U.S.$698 million), both for use in the ordinary
course of its business. Canon anticipates that funds needed to
fulfi ll these commitments will be generated internally through
operations.
During fi scal 2010, Canon expects to contribute ¥14,116
million (U.S.$153 million) to its Japanese defi ned benefi t pen-
sion plans and ¥3,650 million (U.S.$40 million) to its foreign
defi ned benefi t pension plans.
Canon’s management believes that current fi nancial resourc-
es, cash generated from operations and Canon’s potential
capacity for additional debt and/or equity fi nancing will be suffi -
cient to fund current and future capital requirements.
RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES
Canon is in the fourth year of the Excellent Global Corporation
Plan, its 5-year (2006–2010) management plan. The slogan of
the third phase (“Phase III”) is “Innovation & Sound Growth”
and there are four core strategies:
• Realize an overwhelming No.1 position worldwide in all
current core businesses;
• Expand operations through diversifi cation;
• Identify new business domains and accumulate necessary
technological capabilities; and
• Establish new production system to sustain global
competitiveness.
Canon is striving to implement the three R&D related strate-
gies as follows:
• Realize an overwhelming No.1 position worldwide in all
current core businesses: Pursue development of new
products which enable “cross-media imaging” by sophis-
ticated functional synergy among the variety of Canon’s
image handling products, benefi ting from the prolifera-
tion of broad band communication environment.
• Expand operations through diversifi cation: Focus on devel-
oping various types of display, including Surface-conduc-
tion Electron-emitter Display (“SED”) and Organic
Light-Emitting Diode displays (“OLED”).
• Identify new business domains and accumulate necessary
technological capabilities: Accumulate technological capa-
bility in each of the medical imaging sector, intelligent
robot industry and safety technology domain.
Canon is developing and strengthening relationships with
universities and other research institutes, such as Kyoto
University, Tokyo Institute of Technology, Stanford University and
the New Energy and Industrial Technology Development
Organization, to assist with fundamental research and to devel-
op cutting-edge technologies.
Canon has fully introduced 3D-CAD systems across the
Canon group, boosting R&D effi ciency to curtail product devel-
opment times and costs. Moreover, Canon enhanced and
evolved its simulation, measurement, and analysis technologies
by establishing leading-edge facilities, including one of Japan’s
highest-performance cluster computers. As such, Canon has
succeeded in further reducing the need for prototypes, dramati-
cally lowering costs and shortening product development lead
times.
Canon has R&D centers worldwide. Each R&D center is col-
laborating with other centers to achieve synergies, and is culti-
vating closer ties in fi elds ranging from basic research to product
development.
Canon’s consolidated R&D expenses were ¥304,600 million
(U.S.$3,311 million) in fi scal 2009, ¥374,025 million in fi scal
2008 and ¥368,261 million in fi scal 2007. The ratios of R&D
expenses to the consolidated total net sales for fi scal 2009,
2008 and 2007 were 9.5%, 9.1% and 8.2%, respectively.
Canon believes that new products protected by patents
will not easily allow competitors to compete with it, and will
give it an advantage in establishing standards in the market
and industry.
400,000
300,000
200,000
100,000
0
05 06 07 08 09
R&D Expenses
(Millions of yen)
374,025
304,600
286,476 308,307
368,261
Canon AR09_FS_0325_ipc .indd 54 10.3.26 2:47:03 PM