Fujitsu 2005 Annual Report Download - page 43

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Annual Report 2005
Goodwill
Goodwill arising from the acquisition of a business is amortized
by the straight-line method over the period corresponding to
the premium of the acquired business. Losses may be recog-
nized when the business is withdrawn or sold by the Group, or
when the profitability of the acquired business decreases dur-
ing the period the Group expected the return.
Marketable Securities
Held-to-maturity investments, which are the debt securities which
the Group has the positive intent and ability to hold to maturity,
are stated at amortized cost, adjusted for the amortization of pre-
mium or discount to maturity. Available-for-sale securities, which
are “equity securities” or “debt securities not classified as held-to-
maturity,” are carried at fair market value as of the balance sheet
date of the fiscal year if a market price is available. If no market
price is available, they are carried at cost based on the moving
average method. Fluctuations in the market value of available-
for-sale securities for which market prices are available cause fluc-
tuations in the carrying value of marketable securities, resulting in
increases or decreases in shareholders’ equity. Impairment losses
are recognized on available-for-sale securities when the market
value or the net worth falls significantly and is proved to be unre-
coverable. If a significant decline in market value occurs and is
proved to be unrecoverable in the future, additional impairment
losses may need to be recognized.
Deferred Tax Assets
In fiscal 2001 and 2002, the Group posted large losses as a result
of a deterioration in operating performance and related business
restructuring charges. With respect to the timing difference on
tax loss carryforwards and others, an estimate has been made of
the amount of the deferred tax assets within the extent of which
the Group judges to be recoverable over the next five years. By
recording a valuation allowance for the amount exceeding the
projected recoverable amount, an appropriate level of deferred
tax assets is recorded. Future increases or decreases in the valua-
tion allowance may be made if projected taxable income decreases
or increases as a result of trends in future results. The deferred
tax asset is recognized based on the statutory tax rate. Future
revisions in the tax rate would result in increases or decreases of
the deferred tax asset.
Retirement Benefits
Retirement benefit costs and obligations are determined based
on certain actuarial assumptions. These assumptions include the
discount rate, rates of retirement, death rates, and the expected
rate of return on the plan assets. The discount rate for the
Company and its domestic subsidiaries is estimated based on the
market rate of return in Japan for long-term corporate bonds of a
certain rating. The expected rate of return is estimated based on
the weighted average of the expected rates of return for each type
of asset in which the pension funds are invested. When actual
results differ from the assumptions or when the assumptions are
changed, retirement benefit costs and obligations can be affected.
In the event an actuarial loss arises, the actuarial loss is amortized
using a straight-line method over employees’ average remaining
service period.
Retirement benefit costs and obligations are recognized in
conformity with the accounting principles and standards gener-
ally accepted in the respective countries where incurred. Any
future revisions to these accounting standards could impact the
recognized retirement benefit costs and obligations as well as
shareholders’ equity.
Provision for Loss on Repurchase of Computers
Certain computers manufactured by the Group are sold to Japan
Electronic Computer Co., Ltd. (JECC) and other leasing companies
for leasing to the ultimate users under contracts that require the
repurchase of the computers if they are returned by the users after
a certain period. Based on past experience, an estimated amount
for the loss arising from such repurchases is provided at the point
of sale and is recorded as a provision. If there are future changes in
the usage trends of the ultimate users, there may need to be addi-
tions or reductions to the provision.