Canon 2011 Annual Report Download - page 52

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50 F I N A N C I A L S E C T I O N >F I N A N C I A L O V E R V I E W
All of Canon’s long-term debt is fixed rate debt. Canon
expects that fair value changes and cash flows resulting from
reasonable near-term changes in interest rates will be imma-
terial. Accordingly, Canon believes interest rate risk is
insignificant. See also Note 10 of the Notes to Consolidated
Financial Statements.
Changes in the fair value of derivative financial instru-
ments designated as cash flow hedges, including foreign
exchange contracts associated with forecasted intercompany
sales, are reported in accumulated other comprehensive
income (loss). These amounts are subsequently reclassified
into earnings through other income (deductions) in the same
period as the hedged items affect earnings. Substantially all
such amounts recorded in accumulated other comprehensive
income (loss) at year-end are expected to be recognized in
earnings over the next twelve months. Canon excludes the
time value component from the assessment of hedge effec-
tiveness. Changes in the fair value of a foreign exchange
contract for the period between the date that the forecasted
intercompany sales occur and its maturity date are recog-
nized in earnings and not considered hedge ineffectiveness.
The amount of the hedging ineffectiveness was not mate-
rial for the years ended December 31, 2011, 2010 and 2009.
The amounts of net losses excluded from the assessment of
hedge effectiveness (time value component) which was
recorded in other income (deductions) was ¥457 million
(U.S.$6 million), ¥302 million and ¥462 million for the years
ended December 31, 2011, 2010 and 2009, respectively.
Canon has entered into certain foreign currency exchange
contracts to manage its foreign currency exposures. These for-
eign currency exchange contracts have not been designated
as hedges. Accordingly, the changes in fair values of these
contracts are recorded in earnings immediately.
LOOKING FORWARD
Looking at prospects for the global economy, considerable
time will likely be required before the economies of devel-
oped nations such as the United States and Europe see an
accelerated economic recovery. As for emerging markets,
although these economies are expected to continue growing,
the pace of growth will likely slow down slightly. As for
Japan, the economy is expected to move towards a gradual
recovery, supported by reconstruction-based demand.
Amid these conditions, in 2012, the second year of Phase
IV (2011-2015) of our Excellent Global Corporation Plan,
Canon aims to again return to a path of growth, overcoming
such challenges as the earthquake and flooding. The
Company’s basic policy for this year is to pursue fundamental
reforms, embracing the challenging environment as an
opportunity to leap forward. Under this theme, we hope to
build a solid foundation for growth as a means to achieve our
Phase IV goals.
In order to achieve our targets, Canon has set and will
actively pursue the following eight priority goals.
%
Boost the competitiveness of current core products
, by
refining and further accelerating development and
design capabilities with the aid of information technolo-
gies to enable planning and timely launch of exceptional
products and services that are unmatched by the compe-
tition. We expect to focus on the creation of products and
services that integrate cloud computing to quickly seize
business opportunities in this new era.
%
Launch and expand new businesses
, by carving out new
business segments through the launch of strategic prod-
ucts, such as DreamLabo and the Cinema EOS System. As
for the practical application of promising new technolo-
gies, we aim to realize rapid commercialization and will
actively make use of M&A opportunities as needed.
%
Strengthen sales capacity in accordance with market
characteristics
, by expanding market share in developed
countries and expanding profits by strengthening direct
sales of Group companies, solutions, and service busi-
nesses. In emerging countries, we aim to achieve sales
growth that exceeds the pace of market growth by realiz-
ing sales methods and systems tailored to the actual
market conditions in each country.
%
Pursue cost reductions while accelerating the opti-
mization of global production
, by continuing to pursue
the strategies we have implemented to date, such as auto-
mated production and in-house production, and explore
cost-reduction methods based on new ideas and innova-
tive technologies. In addition, we will work to minimize
transportation costs while, at the same time, strive to
position manufacturing bases and allocate production in
ways that minimize costs and risks from a comprehen-
sive perspective, taking into account such factors as
exchange rates, tax policies, labor costs, procurement
and logistics.