Isuzu 2009 Annual Report Download - page 29

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Isuzu Motors Limited Annual Report 2009
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 disclosure
requirement of International Financial Reporting Standards, and are
compiled from the consolidated financial statements prepared by the
Company as required by the Financial Instruments and Exchange Law
of Japan. In addition, the notes to the consolidated financial state-
ments include information which is not required under accounting
principles generally accepted in Japan but is presented herein as addi-
tional 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 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 ¥98.23= US$1, the approximate
exchange rate prevailing on the Foreign Exchange Market on March 31,
2009. The translations should not be construed as a representation 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 2008 and 2007
financial statements to conform to the presentation for 2009.
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.
The excess of cost of investments in the subsidiaries and affiliates
over the fair value of the net assets of the acquired subsidiary at the
dates of acquisition, consolidation goodwill, is being amortized over
an estimated period not exceeding 20 years.
b) Foreign Currency Translation
Receivables and payables denominated in foreign currencies are trans-
lated into Japanese yen at the exchange rate of the balance sheet date,
and differences arising from the translation are included in the finan-
cial statements of income as a gain or loss. The Company translates
the balance sheet accounts of foreign consolidated subsidiaries into
Japanese yen at the exchange rate of the balance sheet date of each of
those subsidiaries. Financial statement of income accounts of consoli-
dated overseas subsidiaries are translated using the average exchange
rate of the statement of income’s period. Foreign currency translation
adjustments are included in the foreign currency translation adjust-
ments account and minority interests account in the balance sheet.
c) Investments
The accounting standard for financial instruments requires that securi-
ties be classified into three categories: marketable, 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 appli-
cable income taxes, included directly in net assets. Non-marketable
securities classified as other securities are carried at cost determined by
the moving average method.
d) Inventories
Inventories of the Company are valued at cost using the weighted
average method. (Balance sheet values are measured by the method
of devaluing book price to reflect decreases in profitability.) Inventories
of consolidated subsidiaries are principally valued at cost using the spe-
cific identification method. (Balance sheet values are measured by the
method of devaluing book price to reflect decreases in profitability.)
e) Property, Plant and Equipment (excluding lease assets)
Property, plant and equipment are stated at cost. Depreciation of
property, plant and equipment of the Company and its consolidated
subsidiaries is calculated principally by the straight-line method based
on the estimated useful lives. Depreciation of property, plant and
equipment of few consolidated subsidiaries is calculated by declining
balance method.
f) Software (excluding lease assets)
Software used by the Company and its consolidated subsidiaries is
amortized using the straight-line method, based on the estimated use-
ful life as determined by the Company and its consolidated subsidiaries
(generally 5 years).
g) Leases
Lease assets relating to finance lease transactions without transfer of
ownership are depreciated over the lease contract’s lifetime by the
straight-line method, assuming the residual value is zero.
In addition, lease transactions whose commencement dates were
on or prior to March 31, 2008 are accounted for on a basis similar to
that for 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 and its domestic consolidated companies have adopt-
ed the Financial Accounting Standard for retirement benefits in Japan.
In accordance with this standard, accrued employees’ retirement ben-
efits are provided mainly at an amount of projected benefit obligation
and the fair value of the pension plan assets at the end of the balance
sheet date. Prior service costs are being amortized as incurred by
straight-line method over periods, which are shorter than the average
remaining years of service of the eligible employees. Actuarial gains or
losses are amortized in the year following the year using the straight-