Isuzu 2011 Annual Report Download - page 27

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Isuzu Motors Limited ■ Annual Report 2011
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 require-
ment 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 statements include
information which is not required under accounting principles 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 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 con-
venience only at the rate of ¥83.15= US$1, the approximate exchange
rate prevailing on the Foreign Exchange Market on March 31, 2011. 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 2010 and 2009
financial statements to conform to the presentation for 2011.
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 bal-
ances 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 financial
statements of income as a gain or loss. The Company translates the bal-
ance sheet accounts of foreign consolidated subsidiaries into Japanese
yen at the exchange rate of the balance sheet date of each of those sub-
sidiaries. Financial statements of income accounts of consolidated over-
seas subsidiaries are translated using the average exchange rate of the
statements of income’s period. Foreign currency translation adjustments
are included in the foreign currency translation adjustments 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
applicable 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 aver-
age method. (Balance sheet values are measured by the method of
devaluing book value to reflect decreases in profitability.) Inventories of
consolidated subsidiaries are principally valued at cost using the specific
identification method. (Balance sheet values are measured by the meth-
od of devaluing book value 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 useful
lives 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 period 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 cir-
cumstances, 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 benefits
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-lined method
over the average of the remaining service lives of mainly 10 years com-
mencing with the following periods, which are shorter than the average
remaining years of service of the eligible employees.
Notes to Consolidated Financial Statements