Canon 2009 Annual Report Download - page 96

94 CANON ANNUAL REPORT 2009
appealed further against said decision of the court of appeals
before the Federal Supreme Court. In December 2007, for a
similar Hewlett-Packard GmbH case relating to single-function
printers, the Federal Supreme Court delivered its judgment in
favor of Hewlett-Packard GmbH and dismissed VG Wort’s claim.
VG Wort has already fi led a constitutional complaint with the
Federal Constitutional Court against said judgment of the
Federal Supreme Court. Likewise, after rejection by the Federal
Supreme Court of an appeal by VG Wort in relation to Canon’s
single-function printers case in September 2008, VG Wort
lodged a claim before the Federal Constitutional Court. Canon
received a brief from the Federal Constitutional Court in
September 2009 to enable the Court to decide on whether to
accept the claim, and Canon responded to it in November 2009.
In 2007, an amendment of German copyright law was carried
out, and a new law has been effective from January 1, 2008 for
both multi-function printers and single-function printers. The
new law sets forth that the scope and tariff of copyright levies
will be agreed between industry and the collecting society.
Industry and the collecting society, based on the requirement
under the new law, reached an agreement in December 2008.
This agreement is applicable retroactively from January 1, 2008
and will remain effective through end of 2010. However, in
Canon’s assessment, the fi nal outcome of the court case regard-
ing the single-function printers sold in Germany before January
1, 2008 remains uncertain.
Canon is involved in various claims and legal actions, includ-
ing those noted above, arising in the ordinary course of busi-
ness. Canon has recorded provisions for liabilities when it is
probable that liabilities have been incurred and the amount of
loss can be reasonably estimated. Canon reviews these provi-
sions at least quarterly and adjusts these provisions to refl ect the
impact of the negotiations, settlements, rulings, advice of legal
counsel and other information and events pertaining to a partic-
ular case. Based on its experience, Canon believes that any dam-
age amounts claimed in the specifi c matters discussed above
and other outstanding matters are not a meaningful indicator of
Canon’s potential liability. In the opinion of management, the
ultimate disposition of outstanding matters would not have a
material adverse effect on Canon’s consolidated fi nancial posi-
tion, results of operations, or cash fl ows. However, litigation is
inherently unpredictable. While Canon believes that it has valid
defenses with respect to legal matters pending against it, it is
possible that Canon’s consolidated fi nancial position, results of
operations, or cash fl ows could be materially affected in any
particular period by the unfavorable resolution of one or more
of these matters.
Fair value of fi nancial instruments
The estimated fair values of Canon’s fi nancial instruments at
December 31, 2009 and 2008 are set forth below. The follow-
ing summary excludes cash and cash equivalents, trade receiv-
20. Disclosures about the Fair Value of Financial Instruments and Concentrations of Credit Risk
ables, fi nance receivables, noncurrent receivables, short-term
loans, trade payables and accrued expenses for which fair values
approximate their carrying amounts. The summary also excludes
investments which are disclosed in Note 3.
December 31 Millions of yen Thousand of U.S. dollars
2009 2008 2009
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Long-term debt, including current installments ¥ (9,781) ¥ (9,777) ¥ (13,743) ¥ (13,727) $ (106,315) $ (106,272)
Foreign exchange contracts:
Assets 752 752 10,516 10,516 8,174 8,174
Liabilities (7,210) (7,210) (678) (678) (78,370) (78,370)
The following methods and assumptions are used to estimate
the fair value in the above table.
Long-term debt
The fair values of Canon’s long-term debt instruments are based
on the present value of future cash fl ows associated with each
instrument discounted using current market borrowing rates for
similar debt instruments of comparable maturity.
Foreign exchange contracts
The fair values of foreign exchange contracts are measured
based on the market price obtained from fi nancial institutions.
Limitations
Fair value estimates are made at a specifi c point in time, based
on relevant market information and information about the
fi nancial instruments. These estimates are subjective in nature
and involve uncertainties and matters of signifi cant judgment
and therefore cannot be determined with precision. Changes in
assumptions could signifi cantly affect the estimates.
Concentrations of credit risk
At December 31, 2009 and 2008, one customer accounted for
approximately 22% and 19% of consolidated trade receivables,
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CANON INC. AND SUBSIDIARIES
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