Hitachi 2004 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2004 Hitachi annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 84

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84

33Hitachi, Ltd. Annual Report 2005
Notes to Consolidated Financial Statements
Hitachi, Ltd. and Subsidiaries
1. NATURE OF OPERATIONS
Hitachi, Ltd. (the Company) is a Japanese corporation, whose principal office is located in Japan. The Company’s and its
subsidiaries’ businesses are diverse, and include information and telecommunication systems, electronic devices, power
and industrial systems, digital media and consumer products, high functional materials and components, and other services
including financial services and logistics services.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The Company and its domestic subsidiaries maintain their books of account in conformity with the financial accounting
standards of Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile.
The consolidated financial statements presented herein have been prepared in a manner and reflect the adjustments
which are necessary to conform them with accounting principles generally accepted in the United States of America.
Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements. Actual results could
differ from those estimates.
(b) Principles of Consolidation
The consolidated financial statements as of and for the years ended March 31, 2005 and 2004 include the accounts of
the Company, its majority-owned subsidiaries and all variable interest entities (VIEs) for which any of the Company and
its consolidated entities are the primary beneficiary. The consolidated financial statements for the year ended March 31,
2003 include the accounts of the Company and its majority-owned subsidiaries. The consolidated financial statements
include accounts of certain subsidiaries, of which fiscal years differ from March 31 by 93 days or less, to either comply
with local statutory requirements or facilitate timely reporting. There have been no significant transactions, which would
materially affect the Company’s financial position and results of operations, with such subsidiaries during the period from
their fiscal year-end to March 31. Intercompany accounts and significant intercompany transactions have been eliminated
in consolidation.
A VIE is defined in Financial Accounting Standards Board (FASB) Interpretation No. 46 (revised December 2003), “Consolidation
of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51.” This interpretation addresses how a
business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than
voting rights and accordingly should consolidate the entity. The application of this interpretation did not have a material
effect on the Company’s consolidated financial statements as of and for the year ended March 31, 2004.
Investments in corporate joint ventures and affiliated companies that are accounted for using the equity method primarily
relate to 20% to 50% owned companies to which the Company has the ability to exercise significant influence over
operational and financial policies of the investee company. Investments of less than 20% or where the Company does
not have significant influence are accounted for using the cost method.
(c) Cash Equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments with insignificant
risk of changes in value which have maturities of generally three months or less when purchased to be cash equivalents.
(d) Allowance for doubtful receivables
Allowance for doubtful receivables, including both trade and investments in leases, is the Company’s and subsidiaries’
best estimate of the amount of probable credit losses in their existing receivables. The allowance is determined based
on, but are not limited to, historical collection experience adjusted for the effects of current economic environment,
assessment of inherent risks, aging and financial performance of debtors. Account balances are charged off against the
allowance after all means of collection have been exhausted and the potential for recovery is considered remote.