Canon 2014 Annual Report Download - page 80

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78
Guarantees
Canon provides guarantees for bank loans of its employ-
ees, affiliates and other companies. The guarantees for the
employees are principally made for their housing loans. The
guarantees of loans of its affiliates and other companies
are made to ensure that those companies operate with less
financial risk.
For each guarantee provided, Canon would have to
perform under a guarantee if the borrower defaults on
a payment within the contract periods of 1 year to 30 years,
in the case of employees with housing loans, and 1 year to
5 years, in the case of affiliates and other companies. The
maximum amount of undiscounted payments Canon would
have had to make in the event of default is ¥8,951 million
at December 31, 2014. The carrying amounts of the liabili-
ties recognized for Canon’s obligations as a guarantor under
those guarantees at December 31, 2014 were not significant.
Canon also issues contractual product warranties under
which it generally guarantees the performance of products
delivered and services rendered for a certain period or term.
Legal proceedings
Canon is involved in various claims and legal actions aris-
ing in the ordinary course of business. Canon has recorded
provisions for liabilities when it is probable that liabili-
ties have been incurred and the amount of loss can be rea-
sonably estimated. Canon reviews these provisions at least
quarterly and adjusts these provisions to reflect the impact
of the negotiations, settlements, rulings, advice of legal
counsel and other information and events pertaining to
a particular case. Based on its experience, although litiga-
tion is inherently unpredictable, Canon believes that any
damage amounts claimed in outstanding matters are not a
meaningful indicator of Canon’s potential liability. In the
opinion of management, any reasonably possible range of
losses from outstanding matters would not have a material
adverse effect on Canon’s consolidated financial position,
results of operations, or cash flows.
Years ended December 31 Millions of yen
2014 2013
Balance at beginning of year ¥ 10,890 ¥ 12,163
Additions 15,699 13,467
Utilization (12,039) (12,922)
Other (2,986) (1,818)
Balance at end of year ¥ 11,564 ¥ 10,890
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, 2014 and 2013 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 2.
December 31 Millions of yen
2014 2013
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
Long-term debt, including current installments ¥ (2,163) ¥ (2,146) ¥ (2,693) ¥ (2,693)
Foreign exchange contracts:
Assets 265 265 254 254
Liabilities (11,167) (11,167) (14,945) (14,945)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in accrued product warranty costs for the years ended December 31, 2014 and 2013 are summarized as follows: