Fujitsu 2004 Annual Report Download - page 42

40
FINANCIAL SECTION Notes to Consolidated Financial Statements
1. Significant Accounting Policies
(a) Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of Fujitsu Limited (the “Company”) and its consolidated subsidiaries
(together, the “Group”) have been prepared in accordance with accounting principles and practices generally accepted in
Japan and the regulations under the Securities and Exchange Law of Japan. The consolidated subsidiaries outside Japan have
adopted the accounting principles and practices in their respective countries. In presenting the accompanying consolidated
financial statements, certain items have been reclassified for the convenience of readers outside Japan.
Certain accounting principles and practices generally accepted in Japan are different from International Financial
Reporting Standards and accounting standards in other countries in certain respects as to application and disclosure
requirements. The differences between the accounting principles and practices adopted by the Group and those prescribed by
International Financial Reporting Standards are set forth in Note 2.
(b) Principles of consolidation
The consolidated financial statements include the accounts of the Company and with minor exceptions, those of its majority-
owned subsidiaries.
The acquisition of companies is accounted for by the purchase method. Goodwill represents the excess of the acquisition
cost over the fair value of the net assets of the acquired companies.
Investments in affiliates, with minor exceptions, are accounted for by the equity method.
(c) Cash equivalents
For the purpose of the statement of cash flows, the Group considers all short-term, highly liquid instruments with
a maturity of three months or less to be cash equivalents.
(d) Translation of foreign currency accounts
Receivables and payables denominated in foreign currencies are translated into Japanese yen at the foreign currency
exchange rates in effect at the respective balance sheet dates.
The assets and liabilities accounts of the consolidated subsidiaries outside Japan are translated into Japanese yen at the
exchange rates in effect at the respective balance sheet dates. Income and expense accounts are translated at the average
exchange rate during the year. The resulting translation adjustments are recorded in a separate component of shareholders’
equity as foreign currency translation adjustments.
(e) Revenue recognition
Revenue from sales of IT systems and products including software development contracts is recognized upon acceptance by
the customers, whereas revenue from sales of personal computers, other equipment and electronic devices is recognized
when the products are shipped.
(f) Marketable securities
Marketable securities included in “short-term investments” and “investments and long-term loans” are classified as either
held-to-maturity investments, which are the debt securities which the Group has the positive intent and ability to hold to
maturity, or available-for-sale securities, which are “equity securities” or “debt securities not classified as held-to-maturity.”
Held-to-maturity investments are stated at amortized cost, adjusted for the amortization of premium or accretion of discounts
to maturity. The cost of available-for-sale securities sold is calculated by the moving average method. Available-for-sale
securities are carried at fair market value, with the unrealized gains or losses, net of taxes, reported in a separate component
of shareholders’ equity.
(g) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount deemed sufficient to cover estimated future losses.
(h) Inventories
Finished goods are mainly stated at cost determined by the moving average method.
Work in process is mainly stated at cost determined by the specific identification method or the average cost method.
Raw materials are mainly stated at cost determined by the moving average method or the most recent purchase price method.
(i) Property, plant and equipment and depreciation
Property, plant and equipment, including renewals and additions, are carried at cost. Maintenance and repairs, including
minor renewals and improvements, are charged to income as incurred.
Depreciation is computed principally by the declining balance method at rates based on the estimated useful lives of the
respective assets, which vary according to their general classification, type of construction and function.
Certain property, plant and equipment are devalued based on consideration of their future usefulness.