Canon 2014 Annual Report Download - page 46

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Canon provides warranties of generally less than one year
against defects in materials and workmanship on most of
its consumer products. Estimated product warranty related
costs are established at the time revenue are recognized and
are included in selling, general and administrative expenses.
Estimates for accrued product warranty costs are primarily
based on historical experience, and are affected by ongo-
ing product failure rates, specific product class failures out-
side of the baseline experience, material usage and service
delivery costs incurred in correcting a product failure. As of
December 31, 2014, accrued product warranty costs amount-
ed to ¥11,564 million.
At December 31, 2014, commitments outstanding for
the purchase of property, plant and equipment were
approximately ¥52,668 million, and commitments out-
standing for the purchase of parts and raw materials were
approximately ¥76,984 million, both for use in the ordi-
nary course of its business. Canon anticipates that funds
needed to fulfill these commitments will be generated
internally through operations.
During 2015, Canon expects to contribute ¥14,674 million
to its Japanese defined benefit pension plans and ¥11,583 mil-
lion to its foreign defined benefit pension plans.
Canon’s management believes that current financial
resources, cash generated from operations and Canon’s
potential capacity for additional debt and/or equity
financing will be sufficient to fund current and future
capital requirements.
RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES
Year 2014 marks the fourth year of the Excellent Global
Corporation Plan, Canon’s 5-year (2011-2015) management
plan. The slogan of the fourth phase (“Phase IV”) is “Aiming
for the Summit—Speed & Sound Growth” and there are three
core strategies related to R&D:
• Achieve the overwhelming No.1 position in all core busi-
nesses and expand related and peripheral businesses;
• Develop new business through globalized diversification
and establish the Three Regional Headquarters manage-
ment system; and
• Build the foundations of an environmentally advanced
corporation.
Canon has been striving to implement the three R&D
related strategies as follows:
• Achieve the overwhelming No.1 position in all core busi-
nesses and expand related and peripheral businesses:
Continue to introduce competitive products through
innovation and aim at gaining profit through solutions
and services.
• Develop new business through globalized diversifica-
tion and establish the Three Regional Headquarters
management system: Reinforce the businesses of medi-
cal imaging sector, industrial equipment sector and
network camera sector to develop into Canon’s new
pillars. Seek talents in Japan, US, and Europe to foster
promising technologies and enhance R&D capabilities
in global-scale dimensions by enabling product develop-
ment in specialized area of each region, with actively
utilizing M&A.
• Build the foundations of an environmentally advanced
corporation: Focus on energy-conserving, resource-saving,
and recycling technologies to create products with the
highest environmental performance.
Canon is pursuing collaboration among government,
industry and academia. Canon’s collaboration effort can
be seen in various activities such as fundamental research
and development of leading-edge technologies with top uni-
versities and research institutes around the world, includ-
ing Tokyo University, Kyoto University, Tokyo Institute of
Technology, Tohoku University, Stanford University, and
the University of Arizona, and also participation in the
“ImPACT” (Impulsing Paradigm Change through Disruptive
Technologies) program led by the Japanese government
where Canon’s physically-noninvasive and -nondestructive
imaging technology is selected as one of twelve R&D pro-
grams. Additionally, Canon is currently working on collabor-
ative research with Massachusetts General Hospital (“MGH”)
and Brigham and Women’s Hospital (“BWH”) to develop bio-
medical optical imaging and medical robotics technologies
at the Healthcare Optics Research Laboratory in Cambridge,
Massachusetts, founded in 2013.
Canon has fully introduced 3D-CAD systems across the
Canon Group, boosting R&D efficiency to curtail product
development times and costs. Moreover, Canon enhanced and
evolved its simulation, measurement, and analysis technol-
ogies by establishing leading-edge facilities, including one
of Japan’s highest-performance cluster computers. As such,
Canon has succeeded in further reducing the need for pro-
totypes, dramatically lowering costs and shortening product
development lead times.
R&D Expenses
(Billions of yen)
400
300
200
100
0
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FINANCIAL OVERVIEW