Isuzu 2005 Annual Report Download - page 24

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Isuzu Motors Limited Annual Report 2005
Notes to Consolidated Financial Statements
1. Basis of Presenting The Financial Statements
The accompanying consolidated financial statements of Isuzu Motors
Limited (“the Company”) and consolidated subsidiaries are prepared
on the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to application and disclo-
sure requirement of International Financial Reporting Standards, and
are compiled from the consolidated financial statements prepared
by the Company as required by the Securities and Exchange Law of
Japan. In addition, the notes to the consolidated financial statements
include information which is not required under accounting princi-
ples generally accepted in Japan but is presented herein as additional
information.
In order to facilitate the understanding of readers outside Japan,
certain reclassifications have been made to the consolidated financial
statements prepared for domestic purposes and relevant notes and
statements of stockholders’ equity and statements of cash flows have
been added.
The yen amounts are rounded down in millions. Therefore, total
or subtotal amounts do not correspond with the aggregation of such
account balances.
U.S. dollar amounts have been translated from Japanese yen for
convenience only at the rate of ¥107.39=US$1, the approximate
exchange rate prevailing on the Tokyo Foreign Exchange Market on
March 31, 2005. The translations should not be construed as a rep-
resentation that Japanese yen have been or could be converted into
U.S. dollars at that rate. The U.S. dollar amounts are then rounded
down in thousands.
Certain reclassifications have been made in the 2004 and 2003
financial statements to conform to the presentation for 2005.
2. Summary of Significant Accounting Policies
a) Consolidation
The consolidated financial statements include the accounts of the
Company and significant subsidiaries. All significant inter-company
balances and transactions have been eliminated in consolidation.
Investments in main unconsolidated subsidiary and significant affili-
ated companies (15% to 50% owned) are accounted for by the equity
method.
The differences at the time of acquisition between the cost and un-
derlying net equity of investments in consolidated subsidiaries and in
unconsolidated subsidiaries and affiliated companies accounted for
under the equity method are, as a rule, amortized over periods of five
years after appropriate adjustments.
b) Foreign Currency Translation
The Company has adopted the Financial Accounting Standard for
Foreign Currency Transactions in Japan effective from April 1, 2000.
Based on the accounting principle, foreign currency transaction
adjustments are recorded in ”Equity” or ”Minority Interest”.
c) Securities
The accounting standard for financial instruments requires that secu-
rities be classified into three categories: trading, held-to-maturity or
other securities.
Marketable securities classified as other securities are carried at fair
value with changes in unrealized holding gain or loss, net of the ap-
plicable income taxes, included directly in stockholders’ equity. Non-
marketable securities classified as other securities are carried at cost.
Cost of securities sold is determined by the moving average method
d) Inventories
Inventories of the Company are valued at cost using the periodic av-
erage method. Inventories of consolidated subsidiaries are principally
valued at cost using the specific identification method.
e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of
property, plant and equipment is principally computed by the straight-
line method over the applicable useful lives.
f) Software costs
Software used by the Company and its consolidated subsidiaries is
depreciated using the straight-line method, based on the useful
life as determined by the Company and its consolidated subsidiaries
(generally 5 years).
g) Leases
Finance lease transactions, except for those which meet the condi-
tions that the ownership of the lease assets is substantially transferred
to the lessee, are accounted for on a basis similar to ordinary rental
transactions.
h) Employees’ Retirement Benefits
Employees’ retirement benefits covering all employees are provided
through an unfunded lump-sum benefit plan and a funded pension
plan. Under the plans, eligible employees are entitled, under most
circumstances, to severance payments based on compensation at the
time of severance and years of service.
The Company has adopted the Financial Accounting Standard for
retirement benefits in Japan. In accordance with this standard, ac-
crued employees’ retirement benefits have been provided mainly at an
amount calculated based on the retirement benefit obligation and the
fair value of the pension plan assets adjusted for unrecognized actu-
arial gain or loss.
i) Income Taxes
Income taxes are accounted for on an accrual basis. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bas-
es. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those