Fujitsu 2006 Annual Report Download - page 55

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Annual Report 2006
Intangible Assets
Computer software for sale is amortized based on projected unit sales
volume during the period for which the projections are made. The pro-
jected unit sales volume is estimated based on a feasible sales plan, but
one-time losses may occur if anticipated unit sales fall short of the origi-
nal sales plan. Computer software for internal use is amortized by the
straight-line method over its estimated useful life. Losses may occur if
the actual useful life falls short of the initially estimated useful life.
Goodwill
Goodwill arising from the acquisition of a business, including those pur-
chased by consolidated subsidiaries, is amortized by the straight-line
method over the period corresponding to the premium of the acquired
business. Losses may be recognized when the business is withdrawn or
sold by the Group, or when the profitability of the acquired business
decreases during 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 premium 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
fluctuations in the carrying value of marketable securities, resulting in
increases or decreases in shareholders’ equity. Impairment losses are rec-
ognized on available-for-sale securities when the market value or the net
worth falls significantly and is proved to be unrecoverable. If a signifi-
cant 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
We record an appropriate balance of deferred tax assets against losses
carried forward and temporary differences. Future increases or decreases
in the balance of deferred tax assets may occur if projected taxable income
decreases or increases as a result of trends in future business results. In
addition, changes in the effective tax rate due to future revisions to taxa-
tion systems could result in increases or decreases of deferred tax assets.
Provision for Product Warranties
Some of the Company’s products are covered by contracts that require
us to repair or exchange them free of charge during a set period of time.
Based on past experience, we record a provision for estimated repair and
exchange expenses at the time of sale. The Group is taking steps to
strengthen quality management during the product development, manu-
facturing and procurement stages. However, should product defects or
other problems occur at a level in excess of that covered by the estimated
expenses, additional expenses may be incurred.
Retirement Benefits
Retirement benefit costs and obligations are determined based on cer-
tain actuarial assumptions. These assumptions include the discount rate,
rates of retirement, mortality rates, and the expected rate of return on
the plan assets. 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 remain-
ing service period. Furthermore, revisions to accounting standards in
countries where overseas subsidiaries are located and in Japan could
potentially impact the Company’s retirement benefit costs and obliga-
tions, 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.
Contracts with these companies require the buyback of the computers
if lease contracts are terminated. An estimated amount for the loss aris-
ing from such buybacks is provided at the time of sale and is recorded as
a provision. Any future changes in the usage trends of end-users may
result in additions or reductions to the provision.