Canon 2009 Annual Report Download - page 69

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(a) Description of Business
Canon Inc. (the “Company”) and subsidiaries (collectively
“Canon”) is one of the world’s leading manufacturers in such
fi elds as offi ce products, consumer products and industry and
other products. Offi ce products consist mainly of network multi-
function devices (“MFDs”), copying machines, laser printers and
large format inkjet printers. Consumer products consist mainly
of digital single-lens refl ex (“SLR”) cameras, compact digital
cameras, interchangeable lenses, digital video camcorders, inkjet
multifunction peripherals, single function inkjet printers, image
scanners and broadcasting equipment. Industry and other prod-
ucts consist mainly of semiconductor production equipment,
mirror projection mask aligners for liquid crystal display (“LCD”)
panels, and medical equipment. Canon’s consolidated net sales
for the years ended December 31, 2009, 2008 and 2007 were
distributed as follows: the Offi ce Business Unit 51%, 55% and
55%, the Consumer Business Unit 41%, 35% and 36%, the
Industry and Others Business Unit 11%, 13% and 12%, and
elimination between segments 3%, 3% and 3%, respectively.
These percentages were computed by dividing segment net
sales, including intersegment sales, by consolidated net sales,
based on the segment operating results described in Note 22.
Sales are made principally under the Canon brand name,
almost entirely through sales subsidiaries. These subsidiaries are
responsible for marketing and distribution, and primarily sell to
retail dealers in their geographic area. Approximately 78%, 79%
and 79% of consolidated net sales for the years ended
December 31, 2009, 2008 and 2007 were generated outside
Japan, with 28%, 28% and 30% in the Americas, 31%, 33%
and 33% in Europe, and 19%, 18% and 16% in other areas,
respectively.
Canon sells laser printers on an OEM basis to Hewlett-
Packard Company; such sales constituted approximately 20%,
23% and 22% of consolidated net sales for the years ended
December 31, 2009, 2008 and 2007, respectively, and are
included in the Offi ce Business Unit.
Canon’s manufacturing operations are conducted primarily
at 25 plants in Japan and 16 overseas plants which are located
in countries or regions such as the United States, Germany,
France, Taiwan, China, Malaysia, Thailand and Vietnam.
(b) Basis of Presentation
The Company and its domestic subsidiaries maintain their books
of account in conformity with fi nancial accounting standards of
Japan. Foreign subsidiaries maintain their books of account in
conformity with fi nancial accounting standards of the countries
of their domicile.
Certain adjustments and reclassifi cations have been incorpo-
rated in the accompanying consolidated fi nancial statements to
conform with U.S. generally accepted accounting principles
(“GAAP”). These adjustments were not recorded in the statutory
books of account.
(c) Principles of Consolidation
The consolidated fi nancial statements include the accounts of
the Company, its majority owned subsidiaries and those variable
interest entities where the Company or its consolidated subsid-
iaries are the primary benefi ciaries. All signifi cant intercompany
balances and transactions have been eliminated.
(d) Use of Estimates
The preparation of the consolidated fi nancial statements in con-
formity with U.S. GAAP requires management to make esti-
mates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated fi nancial statements
and the reported amounts of revenues and expenses during the
period. Signifi cant estimates and assumptions are refl ected in
valuation and disclosure of revenue recognition, allowance for
doubtful receivables, valuation of inventories, impairment of
long-lived assets, environmental liabilities, valuation of deferred
tax assets, uncertain tax positions and employee retirement and
severance benefi t plans. Actual results could differ materially
from those estimates.
(e) Translation of Foreign Currencies
Assets and liabilities of the Company’s subsidiaries located out-
side Japan with functional currencies other than Japanese yen
are translated into Japanese yen at the rates of exchange in
effect at the balance sheet date. Income and expense items are
translated at the average exchange rates prevailing during the
year. Gains and losses resulting from translation of fi nancial
statements are excluded from earnings and are reported in other
comprehensive income (loss).
Gains and losses resulting from foreign currency transac-
tions, including foreign exchange contracts, and translation of
assets and liabilities denominated in foreign currencies are
included in other income (deductions) in the consolidated state-
ments of income. Foreign currency exchange gains and losses
was a net gain of ¥1,842 million ($20,022 thousand) for the
year ended December 31, 2009, and were net losses of ¥11,212
million and ¥31,943 million for the years ended December 31,
2008 and 2007, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CANON INC. AND SUBSIDIARIES
1. Basis of Presentation and Signifi cant Accounting Policies
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