Epson 2010 Annual Report Download - page 51

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50
average foreign exchange rates for the respective periods. Foreign currency translation adjustments are recorded
in the consolidated balance sheets as translation adjustments and minority interest in subsidiaries.
(3) Cash and cash equivalents
Cash and cash equivalents included in the consolidated financial statements comprise cash on hand, bank
deposits that may be withdrawn on demand, and highly liquid investments purchased with initial maturities of
three months or less, and which present low risk of fluctuation in value.
(4) Financial instruments
(a) Investments in debt and equity securities
Investments in debt and equity securities are classified into three categories: 1) trading securities, 2)
held-to-maturity debt securities, or 3) other securities. These categories are treated differently for
purposes of measuring and accounting for changes in fair value.
Trading securities held for the purpose of generating profits from changes in market value are
recognized at their fair value in the consolidated balance sheets. Changes in unrealized gains and
losses are included in current income. Held-to-maturity debt securities are expected to be held to
maturity and are recognized at amortized cost computed based on the straight-line method in the
consolidated balance sheets. Other securities for which market quotations are available are recognized
at fair value in the consolidated balance sheets. Unrealized gains and losses for these other securities
are reported as a separate component of net assets, net of taxes. Other securities for which market
quotations are unavailable are stated at cost, primarily based on the moving-average cost method.
Other-than-temporary declines in the value of other securities are reflected in current income.
(b) Derivative instruments
Derivative instruments (i.e., forward exchange contracts, interest rate swaps and currency options) are
recognized as either assets or liabilities at their respective fair value at the date of contract, and gains
and losses arising from changes in fair value are recognized in earnings in the corresponding fiscal
period.
Interest rate swaps meeting certain hedging criteria are not recognized at their fair value under
exceptional processes recognized in Japanese accounting standards. The amounts received or paid for
such interest rate swap arrangements are charged or credited to interest expenses as incurred.
(c) Allowance for doubtful accounts
Allowance for doubtful accounts is calculated based on the aggregate amount of estimated credit
losses for doubtful receivables plus an amount for receivables other than doubtful receivables
calculated using historical write-off experience from certain prior periods.
(5) Inventories
Inventories are stated at the lower of cost or market value, where cost is primarily determined using the
weighted-average cost method.
(6) Property, plant and equipment
Property, plant and equipment, including significant renewals and improvements, are carried at cost less
accumulated depreciation. Maintenance and repairs, including minor renewals and improvements, are charged to
income as incurred. Depreciation of property, plant and equipment is mainly computed based on the
declining-balance method for the Company and its Japanese subsidiaries, and on the straight-line method for