Canon 2011 Annual Report Download - page 88

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86 F I N A N C I A L S E C T I O N >N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
Net income attributable to Canon Inc.
2010 2009
Millions of yen
Thousands of
U.S. dollars
2011
¥246,603
2011
¥
248,630 ¥131,647 $3,187,564
Years ended December 31
Average common shares outstanding
Effect of dilutive securities:
Stock options
Diluted common shares outstanding
Number of shares
1,234,817,434
50,603
1,234,868,037
1,215,832,419
60,552
1,215,892,971
1,234,481,836
—
1,234,481,836
Net income attributable to Canon Inc.
stockholders per share:
Basic
Diluted
Yen U.S. dollars
¥199.71
199.70
¥
204.49
204.48
¥106.64
106.64
$2.62
2.62
17. NET INCOME ATTRIBUTABLE TO CANON INC. STOCKHOLDERS PER SHARE
A reconciliation of the numerators and denominators of basic and diluted net income attributable to Canon Inc. stockhold-
ers per share computations is as follows:
The computation of diluted net income attributable to
Canon Inc. stockholders per share for the years ended
December 31, 2011 and 2010 excludes certain outstanding
stock options because the effect would be anti-dilutive. The
computation of diluted net income attributable to Canon
Inc. stockholders per share for the year ended December 31,
2009 excludes outstanding stock options because the effect
would be anti-dilutive.
18. DERIVATIVES AND HEDGING ACTIVITIES
Risk management policy
Canon operates internationally, exposing it to the risk of
changes in foreign currency exchange rates. Derivative finan-
cial instruments are comprised principally of foreign
exchange contracts utilized by the Company and certain of
its subsidiaries to reduce the risk. Canon assesses foreign cur-
rency exchange rate risk by continually monitoring changes
in the exposures and by evaluating hedging opportunities.
Canon does not hold or issue derivative financial instruments
for trading purposes. Canon is also exposed to credit-related
losses in the event of non-performance by counterparties to
derivative financial instruments, but it is not expected that
any counterparties will fail to meet their obligations. Most of
the counterparties are internationally recognized financial
institutions and selected by Canon taking into account their
financial condition, and contracts are diversified across a
number of major financial institutions.
Foreign currency exchange rate risk management
Canon’s international operations expose Canon to the risk of
changes in foreign currency exchange rates. Canon uses for-
eign exchange contracts to manage certain foreign currency
exchange exposures principally from the exchange of U.S.
dollars and euros into Japanese yen. These contracts are pri-
marily used to hedge the foreign currency exposure of
forecasted intercompany sales and intercompany trade
receivables that are denominated in foreign currencies. In
accordance with Canon’s policy, a specific portion of foreign
currency exposure resulting from forecasted intercompany
sales are hedged using foreign exchange contracts which
principally mature within three months.
Cash flow hedge
Changes in the fair value of derivative financial instruments
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 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 compo-
nent from the assessment of hedge effectiveness. 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 recognized in earnings and
not considered hedge ineffectiveness.