Fujitsu 2001 Annual Report Download - page 43

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The tax loss carryforwards included in deferred tax assets expire at various dates, but primarily extend for up to 20
years. Realization is dependent on the ability of the companies to generate sufficient taxable income prior to the
expiration of the tax loss carryforwards. A valuation allowance is recorded for certain deferred tax assets to the
carryforwards except for those expected to be realized.
Deferred tax liabilities is not provided on the undistributed profit of affiliates, as it is deemed that any distributions
will not give rise to tax liabilities.
Deferred tax assets is not provided on a valuation allowance for losses of subsidiaries, as the utilization of these losses
is currently not able to be determined.
12. Shareholders’ Equity
The changes in the number of issued shares of common stock during the years ended March 31, 1999, 2000 and
2001 are as follows: Number of shares
1999 2000 2001
Balance at beginning of year 1,862,355,910 1,884,139,404 1,962,939,607
Exercise of warrants 20,275,164 58,018,995 11,488,174
Conversion of convertible bonds 328,628 20,781,208 2,800,148
Increase arising from a merger 1,179,702 ——
Balance at end of year 1,884,139,404 1,962,939,607 1,977,227,929
The issuance of shares upon the conversion of convertible bonds and the exercise of stock purchase warrants are
accounted for by crediting an amount equal to at least 50% of the amount of each issuance to the common stock
account and the balance to the capital surplus account in accordance with a provision of the Commercial Code of
Japan, which became effective October 1, 1982.
Appropriations of retained earnings for the year ended March 31, 2001, which included year-end cash dividends of
¥9,886 million ($79,726 thousand), were recorded on the Company’s statutory books of account after approval at the
general shareholders’ meeting held on June 26, 2001, and will be included in the following year’s consolidated
balance sheet.
An increase arising from a merger during the year ended March 31, 1999 reflected the issuance of stock in
connection with the merger of Fujitsu Towa Electron Ltd. with the Company in October 1998.
13. Commitments and Contingent Liabilities
Commitments outstanding at March 31, 2001 for purchases of property, plant and equipment were approximately
¥76,405 million ($616,169 thousand).
Contingent liabilities for guarantee contracts amounted to ¥59,927million ($483,282 thousand) at March 31, 2001.
Of the total contingent liabilities, guarantees given for employees’ housing loans were ¥26,685 million ($215,202
thousand) in the aggregate.
14. Derivative Financial Instruments
Purpose of Derivative Trading
The Group enters into derivative transactions related to foreign currency exchange rates and interest rates in order to
reduce their risk exposure arising from fluctuations in these rates, to reduce the cost of the funds financed, and to
improve their return on invested funds.
Basic Policies for Derivative Trading
The Group basically enters into derivative transactions only to cover their actual requirements for the effective
management of receivables/liabilities, and not for speculative or dealing purposes.
The Group, in principle, has no intention to use derivative financial instruments that would increase market risks.
Furthermore, the counterparties to the derivative transactions are thoroughly assessed in terms of their credit risks.
Therefore, the Group believes that their derivative financial instruments entail minimal market and credit risks.
Control of Derivative Trading
The Group enters into derivative transactions based on regulations established by the Company, and control the risk of
the transaction by assessing the efficiency of their hedging.
Hedge accounting
The group has adopted hedge accounting for its derivative transactions.
Gain or loss on changes in the fair values of the hedging instruments which consist of forward exchange, option and
swap contracts and related complex contracts are recognized in income when the relating hedged items are reflected
in income.