Fujitsu 2012 Annual Report Download - page 105

Property, Plant and Equipment
Depreciation for property, plant and equipment is computed princi-
pally by the straight-line method at rates based on the estimated
useful lives of the respective assets, reflecting the likely period over
which the value of the assets can be realized under normal business
conditions. In the future, some equipment and facilities may become
obsolete or may be repurposed as a result of technical innovation or
other factors. In such cases, their actual useful lives may be reduced
to shorter than their originally estimated useful lives. As such, there
is a risk that depreciation expenses may increase.
In addition, impairment losses may be recognized in cases in
which there is a decline in expected future cash flows from assets
due to production facilities becoming idle and a decrease in the
capacity utilization rate, associated with rapid changes in the operat-
ing environment or other factors, and business realignment.
Software
Computer software for sale is amortized by a method based on
projected sales volume over the estimated life. Computer software for
internal use is amortized by the straight-line method over the useful
life. Should actual sales volumes fail to meet initial projected vol-
umes, or should actual useful life in the future be less than the origi-
nal estimate, there is a risk that amortization expenses may increase.
Goodwill
Goodwill arising from the acquisition of a business, including those
purchased 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 if the profitability of the
acquired business decreases, or if the Group withdraws from or sells
the business during the period the Group expected the return.
Investment Securities
Held-to-maturity investments are stated at amortized cost, while
available-for-sale securities with market value are carried at fair
market value as of the balance sheet date. Available-for-sale securi-
ties without market value are carried at cost based on the moving-
average method. Fluctuations in the value of available-for-sale
securities with market value cause fluctuations in the carrying value
of investment securities, resulting in increases or decreases in net
assets. Impairment loss is recognized on available-for-sale securities
when the market value or the net worth falls significantly and is
considered to be unrecoverable. If a significant decline in market
value or net worth occurs and is expected to be unrecoverable in the
future, additional impairment losses may need to be recognized.
Deferred Tax Assets
The Group records 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 taxation systems could result in
increases or decreases of deferred tax assets.
Provision for Product Warranties
Some of the Group’s products are covered by contracts that require
the Group to repair or exchange them free of charge during a set
period of time. Based on past records, the Group recognizes a provi-
sion for estimated repair and exchange expenses at the time of sale.
The Group is taking steps to strengthen quality management during
the product development, manufacturing 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.
Provision for Construction Contract Losses
The Group records provisions for projected losses on customized
software under development contracts and construction contracts
that show an acute deterioration in profitability as of the fiscal year-
end. The Group is taking steps to curtail the emergence of new,
unprofitable projects by moving ahead with the standardization of its
business processes, establishing a check system as a dedicated
organizational component, and conducting risk management
throughout the entire progression of a project (beginning with busi-
ness negotiations). Notwithstanding these efforts, the Group may
incur additional losses in the event of an increase in estimated
project costs in the future.
Retirement Benefits
Retirement benefit costs and obligations are determined based on
certain actuarial assumptions. These assumptions include the dis-
count rate, rates of retirement, mortality rates, and the expected rate
of return on the plan assets. In the event an actuarial loss arises, it is
amortized using a straight-line method over employees’ average
remaining service period. When actual results differ from the
assumptions or when the assumptions are changed, retirement
benefit costs and obligations can be affected. In cases in which
revised accounting standards pertaining to retirement benefits are
applied, net assets and retirement benefit expenses are most likely
to be impacted.
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 com-
puters once lease contracts are terminated. An estimated amount
for the loss arising 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 changes to the provision.
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FUJITSU LIMITED ANNUAL REPORT 2012
Facts & Figures