Casio 2004 Annual Report Download - page 35

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ANNUAL REPORT 2004
9. EMPLOYEES’ SEVERANCE AND RETIREMENT BENEFITS
The liabilities for the employees’ severance and retirement benefits included in the liability section of the consolidated balance
sheets at March 31, 2004 and 2003 consists of the following:
Thousands of
Millions of Yen U.S. Dollars
2004 2003 2004
Projected benefit obligation........................................................................ ¥59,572 ¥97,229 $562,000
Unrecognized prior service costs ................................................................. 4,961 —46,802
Unrecognized actuarial differences ............................................................. (12,228) (29,469) (115,358)
Less fair value of pension assets.................................................................. (30,668) (40,567) (289,321)
Less unrecognized net transition obligation ................................................ (7,380) (13,698) (69,623)
Prepaid pension cost................................................................................... 35 13 330
Liabilities for the employees’ severance and retirement benefits............. ¥14,292 ¥13,508 $134,830
Included in the consolidated statements of income for the years ended March 31, 2004 and 2003 are employees’ severance and
retirement benefit expenses comprised of the following:
Thousands of
Millions of Yen U.S. Dollars
2004 2003 2004
Service cost—benefits earned during the year............................................. ¥3,736 ¥4,561 $35,245
Interest cost on projected benefit obligation ............................................... 2,244 2,586 21,170
Expected return on plan assets ................................................................... (1,551) (1,929) (14,632)
Amortization of prior service costs .............................................................. (363) —(3,425)
Amortization of actuarial differences .......................................................... 2,074 1,482 19,566
Amortization of net transition obligation .................................................... 1,780 1,957 16,793
Employees’ severance and retirement benefit expenses.......................... 7,920 8,657 74,717
Gain on the release from the substitutional portion of
the government’s Welfare Pension Insurance Scheme............................... (2,753) —(25,972)
Total...................................................................................................... ¥5,167 ¥8,657 $48,745
The discount rate and the rate of expected return on plan assets used by the Company are 2.5% and 4.5% in 2004 and 2.8%
and 4.5% in 2003, respectively.
The estimated amount of all retirement benefits to be paid at the future retirement date is allocated equally to each service
year using the estimated number of total service years. Actuarial gains and losses are to be recognized in expenses using the
straight-line method over 9–15 years (a certain period not exceeding the average of the estimated remaining service lives commenc-
ing with the next period). Prior service costs are to be recognized in expenses using the straight-line method over 13–15 years (a
certain period not exceeding the average of the estimated remaining service lives).
Based on the newly enacted Defined Benefit Corporate Pension Law, the Company and its domestic consolidated subsidiaries
decided to restructure their Employees’ Pension Fund and were permitted by the Minister of Health, Labor and Welfare to be
released from their future obligation for payments for the substitutional portion of the Welfare Pension Insurance Scheme. (The per-
mission date of The Company and a part of its domestic consolidated subsidiaries was January 26, 2004 and the permission date of
other its domestic consolidated subsidiaries was February 25, 2004.)
The Company and its domestic consolidated subsidiaries applied the transitional provisions as prescribed in paragraph 47-2 of
the JICPA Accounting Committee Report No. 13, “Practical Guideline for Accounting of Retirement Benefits (Interim Report),” and
the effect of transferring the substitutional portion was recognized on the date permission was received from the Ministry of
Health, Labor and Welfare. As a result, in the year ended March 31, 2004, the Company and its consolidated domestic subsidiaries
recorded gains on the release from the substitutional portion of the government’s Welfare Pension Insurance Scheme amounting to
¥2,753 million ($25,972 thousand), which was calculated based on the amount of the substitutional portion of the projected bene-
fit obligations as of the permission date, the related pension assets determined pursuant to the government formula, and the
related unrecognized items. The amount of pension plan assets expected to be transferred back to the government approximated
¥20,326 million ($191,755 thousand) as at March 31, 2004.
10. RETIREMENT BENEFITS FOR DIRECTORS AND CORPORATE AUDITORS
Effective April 1, 2002, the Company changed its accounting policy for retirement benefits for directors and corporate auditors.
Previously, retirement benefits to directors and corporate auditors were recognized after the approval at the shareholders’ meet-
ing and charged to income when paid.
Under the new policy, the Company and certain subsidiaries fully accrue retirement benefits if all directors and corporate audi-
tors had retired at each balance sheet date.
The cumulative effect of ¥2,295 million at the beginning is amortized on a straight-line basis over five years as other expenses.
The provision incurred during the current year ended March 31, 2003 was charged as selling, general and administrative expenses.
As a result of this accounting change, operating income and income before income taxes and minority interests for the year
ended March 31, 2003 decreased by ¥139 million and ¥598 million, respectively, compared with what would have been recorded
under the previous accounting policy.