Canon 2013 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2013 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.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

Strategy FINANCIAL SECTION
86 Corporate DataBusiness Segment Corporate Structure
20. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an
orderly transaction between market participants at the mea-
surement date. A three-level fair value hierarchy that priori-
tizes the inputs used to measure fair value is as follows:
Level 1— Inputs are quoted prices in active markets for iden-
tical assets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabil-
ities in active markets, quoted prices for identical
or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that
are observable, and inputs that are derived princi-
pally from or corroborated by observable market
data by correlation or other means.
Level 3— Inputs are derived from valuation techniques in
which one or more significant inputs or value driv-
ers are unobservable, which reflect the reporting
entity’s own assumptions about the assumptions
that market participants would use in establishing
a price.
The following methods and assumptions are used to esti-
mate the fair value in the above table.
Long-term debt
Canon’s long-term debt instruments are classified as Level
2 instruments and valued based on the present value of
future cash flows associated with each instrument dis-
counted using current market borrowing rates for similar
debt instruments of comparable maturity. The levels are
more fully described in Note 20.
Foreign exchange contracts
The fair values of foreign exchange contracts are measured
based on the market price obtained from financial institutions.
Limitations of fair value estimates
Fair value estimates are made at a specific point in time,
based on relevant market information and information
about the financial instruments. These estimates are subjec-
tive in nature and involve uncertainties and matters of sig-
nificant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect
the estimates.
Concentrations of credit risk
At December 31, 2013 and 2012, one customer accounted
for approximately 15% and 18% of consolidated trade receiv-
ables, respectively. Although Canon does not expect that the
customer will fail to meet its obligations, Canon is poten-
tially exposed to concentrations of credit risk if the customer
failed to perform according to the terms of the contracts.
19. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATIONS
OF CREDIT RISK
Fair value of financial instruments
The estimated fair values of Canon’s financial instruments at December 31, 2013 and 2012 are set forth below. The follow-
ing summary excludes cash and cash equivalents, trade receivables, finance 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 Thousands of U.S. dollars
2013 2012 2013
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Long-term debt, including current installments ¥ (2,693) ¥ (2,693) ¥ (3,664) ¥ (3,654) $ (25,647) $ (25,647)
Foreign exchange contracts:
Assets 254 254 831 831 2,419 2,419
Liabilities (14,945) (14,945) (25,493) (25,493) (142,333) (142,333)