Epson 2007 Annual Report Download - page 64

62 Seiko Epson Corporation
income tax laws.
The estimated useful lives of significant depreciable assets principally range from eight to fifty years for buildings
and structures and from two to eleven years for machinery and equipment.
(7) Intangible assets
Amortization of intangible assets is computed using the straight-line method. Amortization of software for internal
use is computed using the straight-line method over its estimated useful life, ranging from three to five years.
(8) Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the car-
rying amount of an asset may not be recoverable. This review is performed using estimates of future cash flows. If
the carrying value of a long-lived asset is considered to be impaired, an impairment charge is recorded for the
excess of the carrying value of the long-lived asset over its recoverable amount.
(9) Accrued bonuses
Accrued bonuses to employees are provided for the estimated amounts which Epson is obligated to pay to its
employees after the fiscal year-end for the services provided up to the balance sheet dates.
Accrued bonuses to directors and statutory auditors are provided for the estimated amounts which the
Company is obligated to pay to directors and statutory auditors subject to the resolution of general shareholders’
meeting subsequent to the fiscal year-end.
(10) Accrued warranty costs
Epson provides an accrual for estimated future warranty costs based on the historical relationship of warranty costs
to net sales. Specific warranty provisions are made for those products where warranty expenses can be specifically
estimated.
(11) Accrued litigation and related expenses
Accrued litigation and related expenses are mainly provided for the estimated future compensation payment and liti-
gation expenses.
(12) Income taxes
The provision for income taxes is computed based on income before income taxes and minority interest in the con-
solidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabili-
ties for the expected future tax consequences of temporary differences between the carrying amounts and the tax
basis of assets and liabilities.
The Company adopts the consolidated tax return system for the calculation of income taxes. Under the consoli-
dated tax return system, the Company consolidates all wholly owned domestic subsidiaries based on the Japanese
tax regulations.
(13) Pension and severance costs
The Company and some of its Japanese subsidiaries recognize accrued pension and severance costs to employ-
ees based on the actuarial valuation of projected benefit obligation and the fair value of plan assets. Other Japanese
subsidiaries recognize accrued pension and severance costs to employees based on the voluntary retirement
benefit payable at the year-end.
Pension benefits are determined based on years of service, basic rates of pay and conditions under which the
termination occurs, and are payable at the option of the retiring employee either in a lump-sum amount or as an
annuity. Contributions to the plans are funded through several financial institutions in accordance with the applicable
laws and regulations.
Unrecognized prior service costs are amortized based on the straight-line method over a period of five years
beginning at the date of adoption of the plan amendment. Actuarial gains and losses are amortized based on the
straight-line method over a period of five years starting from the beginning of the subsequent year.
Most of the Company’s foreign subsidiaries have various retirement plans, which are primarily defined contribu-
tion plans.