Isuzu 2014 Annual Report Download - page 27

25
Financial
Section
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
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
convenience only at the rate of ¥102.92 = US$1, the approximate
exchange rate prevailing on the Foreign Exchange Market on March 31,
2014. 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 2013 financial
statements to conform to the presentation for 2014.
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 subsidiaries at the dates
of acquisition is recognized as a consolidation goodwill, which is being
amortized over an estimated periods not exceeding 20 years.
b) Foreign Currency Translation
Receivables and payables denominated in foreign currencies are
translated 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 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 statements of income accounts of
consolidated overseas subsidiaries are translated using the average
exchange rate of the statements of income’s period. Differences arising
from the translation are presented as foreign currency translation
adjustments and minority interests in the balance sheet.
c) Securities
The accounting standard for financial instruments requires that securities
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 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
average method. (Balance sheet values are measured by the lower of cost
or market method.) Inventories of consolidated subsidiaries are principally
valued at cost using the specific identification method. (Balance sheet
values are measured by the lower of cost or market method.)
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 the
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 (generally 5 years).
g) Leases
The Company, as a lessor, leases properties under arrangements. Sales
and cost of sales relating to finance lease transactions are recognized on
receipt of lease payments.
The Company is also a lessee of various assets. 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 operating lease.
h) Employees’ Retirement Benefits
The Company and its consolidated subsidiaries have defined benefit
pension plans. Consolidated subsidiaries have also defined contribution
pension plans.
The estimated amount of all retirement benefits to be paid at future
retirement dates is allocated equally to each service year using the
estimated number of total service years. Prior service costs are being
amortized as incurred by the 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 by the straight-line
method over periods within the average remaining years of service of
the eligible employees commencing with the following periods.
Some of the consolidated subsidiaries are adopting the simplified
method of calculating their retirement benefit obligations and its cost.
In the method, the amount which would be required to be paid
if all eligible employees of its subsidiaries voluntarily terminated their
employment as of the balance sheet date is recognized as retirement
benefit obligation.
Notes to Consolidated Financial Statements