Canon 2010 Annual Report Download - page 71
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Please find page 71 of the 2010 Canon annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.CANON ANNUAL REPORT 2010 69
(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 digi-
tal multifunction devices (“MFDs”), copying machines, laser
printers, large format inkjet printers and digital production
printers. Consumer products consist mainly of digital single-
lens refl ex (“SLR”) cameras, compact digital cameras, inter-
changeable lenses, digital video camcorders, inkjet
multifunction peripherals, single function inkjet printers, image
scanners and broadcasting equipment. Industry and other
products consist mainly of semiconductor lithography equip-
ment, lithography equipment for liquid crystal display (“LCD”)
panels, and medical equipment. Canon’s consolidated net sales
for the years ended December 31, 2010, 2009 and 2008 were
distributed as follows: the Offi ce Business Unit 54%, 51% and
55%, the Consumer Business Unit 38%, 41% and 35%, the
Industry and Others Business Unit 12%, 11% and 13%, and
elimination between segments 4%, 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 24.
Sales are made principally under the Canon brand name, almost
entirely through sales subsidiaries. These subsidiaries are responsi-
ble for marketing and distribution, and primarily sell to retail dealers
in their geographic area. Approximately 81%, 78% and 79% of con-
solidated net sales for the years ended December 31, 2010, 2009
and 2008 were generated outside Japan, with 28%, 28% and 28% in
the Americas, 32%, 31% and 33% in Europe, and 21%, 19% and 18%
in Asia and Oceania, respectively.
Canon sells laser printers on an OEM basis to Hewlett-
Packard Company; such sales constituted approximately 20%,
20% and 23% of consolidated net sales for the years ended
December 31, 2010, 2009 and 2008, respectively, and are
included in the Offi ce Business Unit.
Canon’s manufacturing operations are conducted primarily at 26
plants in Japan and 19 overseas plants which are located in coun-
tries or regions such as the United States, Germany, France,
Netherlands, 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 stan-
dards 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 statuto-
ry 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
conformity 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 state-
ments 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, valua-
tion of deferred tax assets, uncertain tax positions and employ-
ee retirement and severance benefi t obligations. 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
statements of income. Foreign currency exchange gains and
losses were net gains of ¥3,089 million ($38,136 thousand) and
¥1,842 million for the years ended December 31, 2010 and
2009, respectively, and was a net loss of ¥11,212 million for the
year ended December 31, 2008.
(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
¥249,907 million ($3,085,272 thousand) and ¥184,856 million at
December 31, 2010 and 2009, respectively, are included in cash
and cash equivalents in the consolidated balance sheets.
Additionally, certain debt securities with original maturities of
less than three months classifi ed as held-to-maturity securities
of ¥1,000 million ($12,346 thousand) and ¥999 million at
December 31, 2010 and 2009, respectively, are also included in
cash and cash equivalents. 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CANON INC. AND SUBSIDIARIES
1. Basis of Presentation and Signifi cant Accounting Policies