Fujitsu 2010 Annual Report Download - page 116

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11. Commitments and Contingent Liabilities
Commitments outstanding at March 31, 2010 for purchase of property, plant and equipment were approximately ¥6,029 million ($64,828 thousand).
Contingent liabilities for guarantee contracts amounted to ¥3,877 million ($41,688 thousand) at March 31, 2010 and referred mainly to ¥3,807
million ($40,935 thousand) guarantees given for employees’ housing loans.
12. Financial Instruments
1. Status of financial instruments
(1) Policies for financial instruments
The Group carries out its financial activities in accordance with the “Fujitsu Group Treasury Policy,” and primarily obtains funds through bank
borrowing and the issuance of corporate bonds based on funding requirements of its business activities. After the adequate liquidity for its
business activities has been ensured, the Group invests temporary excess funds in financial assets with low risk. The Group utilizes derivative
transactions only for hedging purposes and not for speculative or dealing purposes.
(2) Description and risks of financial instruments
Trade receivables are exposed to customer credit risk. Additionally, some trade receivables are denominated in foreign currencies in conjunc-
tion with the export of products and exposed to exchange rate fluctuation risk. Investment securities are comprised primarily of shares in
companies with which the Group has business alliances and negotiable deposit. Shares are exposed to market price fluctuation risk and
financial risk of the company invested.
Trade liabilities such as payables, trade and accrued expenses are generally payable within one year. Some trade liabilities are denomi-
nated in foreign currencies in conjunction with the import of components and exposed to exchange rate fluctuation risk. Borrowings, corpo-
rate bonds, and lease obligation related to finance lease transactions are mainly for the purpose of obtaining working capital and preparing
for capital expenditures. Because some of the foregoing have a floating interest rate, they are exposed to interest rate fluctuation risk.
Derivative transactions consist primarily of the use of exchange forward contracts for the purpose of hedging exchange rate fluctuation
risk related to trade receivables and trade liabilities, currency swap contracts for the purpose of hedging exchange rate fluctuation risk
related to foreign currency denominated cash flow, and interest swap contracts for the purpose of hedging interest rate fluctuation risk
related to borrowings and corporate bonds.
(3) Risk management of financial instruments
(i) Management of credit risk
The Group strives to mitigate collection risk in accordance with credit management standards and procedures in selling goods and services.
A unit independent from the sales units assesses the credit standing of customers and manages collection dates and the balance outstand-
ing for each customer to ensure smooth and dependable collection of trade receivables. The counterparties to derivative transactions are
selected upon assessment of their credit risk. The amounts of the largest credit risks as of the reporting date are indicated in the balance
sheet values of the financial assets that are exposed to credit risk.
(ii) Management of market risk
The Group utilizes mainly exchange forward contracts in respect to trade receivables and trade liabilities denominated in foreign currencies to
mitigate exchange rate fluctuation risk monitored by each currency respectively, currency swap contracts to mitigate the foreign currency
exchange rate fluctuation risk of cash flow denominated in foreign currency, and interest swap contracts in respect to borrowings and corpo-
rate bonds to mitigate interest rate fluctuation risk. The Group regularly monitors the market price and the financial condition of the issuer in
respect to its securities and continuously reconsiders investment in each company, taking into account its relationship with the counterparty.
114 FUJITSU LIMITED Annual Report 2010
Notes to Consolidated Financial Statements