Epson 2015 Annual Report Download - page 62

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(5) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments that are readily
convertible to known amounts of cash and subject to insignificant risk of change in value and due within three
months from the date of acquisition.
(6) Inventories
The cost of inventories includes all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition. Inventories are measured at the lower of cost or net realizable
value, and the costs are determined by using the weighted-average method. Net realizable value is determined as
the estimated selling price in the ordinary course of business less the estimated costs of completion and estimated
costs necessary to make the sale.
(7) Property, Plant and Equipment
Property, plant, and equipment is measured by using the cost model and is stated at cost less accumulated
depreciation and accumulated impairment losses.
The cost includes any costs directly attributable to the acquisition of the asset and dismantlement, removal and
restoration costs, as well as borrowing costs eligible for capitalisation.
Except for assets that are not subject to depreciation such as land, assets are depreciated using the straight-line
method over their estimated useful lives. The estimated useful lives of major asset items were as follows:
• Buildings and structures: 10 to 35 years
• Machinery and vehicles: 2 to 12 years
The estimated useful lives, depreciation method and residual value are reviewed at each fiscal year end and if there
are any changes made to the estimated useful lives, depreciation method and residual value, such changes are
accounted for on a prospective basis as changes in estimate.
(8) Intangible Assets
(A) Goodwill
Goodwill is measured at cost less accumulated impairment losses.
Goodwill is not amortised. It is allocated to cash-generating units that are identified according to locations and
types of businesses and tested for impairment annually or whenever there is any indication of impairment.
Impairment losses on goodwill are recognised as profit or loss in the consolidated statement of comprehensive
income and not reversed in subsequent periods.
(B) Intangible Assets other than Goodwill
Intangible assets are measured by using the cost model and are stated at cost less accumulated amortisation and
accumulated impairment losses.
Intangible assets acquired separately are measured at cost at the initial recognition, and the costs of intangible
assets acquired through business combinations are recognised at fair value at the acquisition date. Expenditures on
internally generated intangible assets are recognised as expenses in the period incurred, except for development
expense that satisfy the capitalisation criteria.
Intangible assets with finite useful lives are amortised using the straight-line method over their estimated useful
lives and are tested for impairment whenever there is any indication of impairment. The estimated useful lives and
amortisation method of intangible assets with finite useful lives are reviewed at fiscal year end, and the effect of
any changes in estimate would be accounted for on a prospective basis.
The estimated useful life of major intangible assets with finite useful lives was as follows:
• Software: 3 to 5 years
Intangible assets with indefinite useful lives and intangible assets that are not ready to use are not amortised, but
they are tested for impairment individually or by cash-generating unit annually or whenever there is any indication
of impairment.
(9) Leases
Leases are classified as finance leases whenever substantially all the risks and rewards incidental to ownership are
transferred to Epson. All other leases are classified as operating leases.
In finance lease transactions, leased assets and lease obligations are recognised in the consolidated statement of
financial position at the lower of the fair value of the leased property or the present value of the minimum lease
payments, each determined at the inception of the lease. Lease payments are apportioned between the finance cost
and the reduction of the lease obligations based on the effective interest method. Leased assets are depreciated
using the straight-line method over the shorter of their estimated useful lives or lease terms.