Canon 2014 Annual Report Download - page 48

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46
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
immaterial. Accordingly, Canon believes interest rate risk is
insignificant. See also Note 9 of the Notes to Consolidated
Financial Statements.
Changes in the fair value of derivative financial instru-
ments designated as cash flow hedges, including foreign
currency exchange contracts associated with forecasted
intercompany sales, are reported in accumulated other
comprehensive income (loss). These amounts are subse-
quently reclassified into earnings through other income
(deductions) in the same period as the hedged items affect
earnings. Substantially all such amounts recorded in accu-
mulated 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 effectiveness. Changes in the fair
value of a foreign currency exchange contract for the peri-
od between the date that the forecasted intercompany sales
occur and its maturity date are recognized in earnings and
not considered hedge ineffectiveness.
The amount of the hedging ineffectiveness was not materi-
al for the years ended December 31, 2014, 2013 and 2012. The
amounts of net losses excluded from the assessment of hedge
effectiveness (time value component) which was recorded
in other income (deductions) was ¥145 million, ¥111 mil-
lion and ¥221 million for the years ended December 31, 2014,
2013 and 2012, respectively.
Canon has entered into certain foreign currency exchange
contracts to manage its foreign currency exposures. These
foreign currency exchange contracts have not been designat-
ed as hedges. Accordingly, the changes in fair values of these
contracts are recorded in earnings immediately.
LOOKING FORWARD
As for the future of the global economy, although challeng-
ing conditions are expected to remain for some time in cer-
tain countries and regions, Canon anticipates sustained
economic growth in countries such as the U.S. among devel-
oped countries, and India and ASEAN countries among
emerging markets. Overall, the global economy is expected
to gradually move toward stable growth.
In the businesses in which Canon operates, demand for
MFDs is projected to continue to expand moderately, mainly
for color models, while demand in the laser printer market
is expected to remain at the same level as the previous year.
As for the digital camera market, although projections indi-
cate continued market contraction mainly for low-priced
compact models, demand for interchangeable-lens digital
cameras is expected to recover gradually. Looking at inkjet
printers, with Asian markets gradually recovering follow-
ing their extended period of stagnation, demand is expected
to remain in line with the previous year. As for the industri-
al equipment market, with manufacturers expected to con-
tinue making capital outlays for semiconductor lithography
equipment in response to increasing demand for memory
devices and image sensors, demand is expected to remain at
the same level as the previous year. And as for FPD lithogra-
phy equipment, demand is projected to increase as device
manufacturers boost capital investment amid growing pan-
el demand projected for 4K televisions and mobile devices.
Amid these conditions, 2015 is the final year of Phase
IV of the Excellent Global Corporation Plan and the year
in which the Canon EXPO will be held as the culmination
of the efforts carried out during Phase IV. In addition to
returning to a path of growth, Canon aims to bring Phase IV
to a successful close, further reinforcing its business foun-
dation to enable great strides beginning from next year.
Toward this objective, Canon will undertake the following
various measures.
• Reinforcing Existing Businesses Through the
Introduction of Innovative Products and Services
For MFDs and other office products, in addition to
improving hardware performance, efforts will be made
to build a framework that will enable the Company to
service as a one-stop shop that provides a broad range of
high-quality services. For cameras, efforts will be made
to comprehensively raise aspects such as image-quality,
visual expression, and operability. At the same time,
Canon will work to further strengthen the network
capabilities of these products. Additionally, to facilitate
the Company’s aim of becoming the all around leader in
printing, it will leverage its strength, derived from having
prepared a broad lineup, spanning consumer printers
to industrial printing. In the Industrial equipment area,
Canon will devise and execute concrete plans to concen-
trate technologies and strengthen the competitiveness of
Canon Group companies.
FINANCIAL OVERVIEW