Canon 2015 Annual Report Download - page 77

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CANON ANNUAL REPORT 2015 75
STRATEGY BUSINESS SEGMENT CORPORATE STRUCTURE FINANCIAL SECTION CORPORATE DATA
16. NET INCOME ATTRIBUTABLE TO CANON INC. SHAREHOLDERS PER SHARE
A reconciliation of the numerators and denominators of basic and diluted net income attributable to Canon Inc. shareholders per
share computations is as follows:
The computation of diluted net income attributable to Canon Inc. shareholders per share for the years ended December 31,
2015, 2014 and 2013 excludes certain outstanding stock options because the effect would be anti-dilutive.
Years ended December 31 Millions of yen
2015 2014 2013
Net income attributable to Canon Inc. ¥ 220,209 ¥ 254,797 ¥ 230,483
Number of shares
Average common shares outstanding 1,092,017,955 1,112,509,931 1,147,933,835
Effect of dilutive securities:
Stock options 34,931 4,393 8,466
Diluted common shares outstanding 1,092,052,886 1,112,514,324 1,147,942,301
Yen
Net income attributable to Canon Inc. shareholders per share:
Basic ¥ 201.65 ¥ 229.03 ¥ 200.78
Diluted 201.65 229.03 200.78
17. DERIVATIVES AND HEDGING ACTIVITIES
Risk management policy
Canon operates internationally, exposing it to the risk of
changes in foreign currency exchange rates. Derivative financial
instruments are comprised principally of foreign exchange con-
tracts utilized by the Company and certain of its subsidiaries to
reduce the risk. Canon assesses foreign currency 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 instru-
ments, but it is not expected that any counterparties will fail to
meet their obligations. Most of the counterparties are interna-
tionally 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
foreign exchange contracts to manage certain foreign cur-
rency exchange exposures principally from the exchange of
U.S. dollars and euros into Japanese yen. These contracts
are primarily 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 com-
ponent 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.