Canon 2009 Annual Report Download - page 70

68 CANON ANNUAL REPORT 2009
(f) Cash Equivalents
All highly liquid investments acquired with original maturities of
three months or less are considered to be cash equivalents.
Certain debt securities with original maturities of less than three
months classifi ed as available-for-sale securities of ¥184,856 mil-
lion ($2,009,304 thousand) and ¥194,030 million at December
31, 2009 and 2008, respectively, are included in cash and cash
equivalents in the consolidated balance sheets. Additionally, cer-
tain debt securities with original maturities of less than three
months classifi ed as held-to-maturity securities of ¥999 million
($10,859 thousand) and ¥997 million at December 31, 2009
and 2008, respectively, are also included in cash and cash equiv-
alents. Fair value for these securities approximates their cost.
(g) Investments
Investments consist primarily of time deposits with original
maturities of more than three months, debt and marketable
equity securities, investments in affi liated companies and non-
marketable equity securities. Canon reports investments with
maturities of less than one year as short-term investments.
Canon classifi es investments in debt and marketable equity
securities as available-for-sale or held-to-maturity securities.
Canon does not hold any trading securities, which are bought
and held primarily for the purpose of sale in the near term.
Available-for-sale securities are recorded at fair value. Fair
value is determined based on quoted market prices, projected
discounted cash fl ows or other valuation techniques as appropri-
ate. Unrealized holding gains and losses, net of the related tax
effect, are reported as a separate component of other compre-
hensive income (loss) until realized. Held-to-maturity securities
are recorded at amortized cost, adjusted for amortization of pre-
miums and accretion of discounts.
Available-for-sale and held-to-maturity securities are regular-
ly reviewed for other-than-temporary declines in the carrying
amount based on criteria that include the length of time and the
extent to which the market value has been less than cost, the
fi nancial condition and near-term prospects of the issuer and
Canon’s intent and ability to retain the investment for a period
of time suffi cient to allow for any anticipated recovery in market
value. For debt securities for which the declines are deemed to
be other-than-temporary and there is no intent to sell, impair-
ments are separated into the amount related to credit loss,
which is recognized in earnings, and the amount related to all
other factors, which is recognized in other comprehensive
income (loss). For debt securities for which the declines are
deemed to be other-than-temporary and there is an intent to
sell, impairments in their entirety are recognized in earnings. For
equity securities for which the declines are deemed to be other-
than-temporary, impairments in their entirety are recognized in
earnings. Canon recognizes an impairment loss to the extent by
which the cost basis of the investment exceeds the fair value of
the investment.
Realized gains and losses are determined on the average
cost method and refl ected in earnings.
Investments in affi liated companies over which Canon has the
ability to exercise signifi cant infl uence, but does not hold a con-
trolling fi nancial interest, are accounted for by the equity method.
Non-marketable equity securities in companies over which
Canon does not have the ability to exercise signifi cant infl uence
are stated at cost and reviewed periodically for impairment.
(h) Allowance for Doubtful Receivables
Allowance for doubtful trade and fi nance receivables is main-
tained for all customers based on a combination of factors,
including aging analysis, macroeconomic conditions, signifi cant
one-time events, and historical experience. An additional reserve
for individual accounts is recorded when Canon becomes aware
of a customer’s inability to meet its fi nancial obligations, such as
in the case of bankruptcy fi lings. If circumstances related to cus-
tomers change, estimates of the recoverability of receivables
would be further adjusted. When all collection options are
exhausted including legal recourse, the accounts or portions
thereof are deemed to be uncollectable and charged against
the allowance.
(i) Inventories
Inventories are stated at the lower of cost or market value. Cost
is determined by the average method for domestic inventories
and principally by the fi rst-in, fi rst-out method for overseas
inventories.
(j) Impairment of Long-Lived Assets
Long-lived assets, such as property, plant and equipment, and
acquired intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indi-
cate that the carrying amount of an asset may not be recover-
able. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of the asset and the esti-
mated undiscounted future cash fl ows expected to be generat-
ed by the asset. If the carrying amount of the asset exceeds its
estimated undiscounted future cash fl ows, an impairment
charge is recognized in the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets
to be disposed of by sale are reported at the lower of the carry-
ing amount or fair value less costs to sell, and are no longer
depreciated.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CANON INC. AND SUBSIDIARIES
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