Isuzu 2016 Annual Report Download - page 27

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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 ¥112.68 = US$1, the approximate
exchange rate prevailing on the Foreign Exchange Market on March 31,
2016. 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 2015 financial
statements to conform to the presentation for 2016.
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 non-controlling 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 an 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 to each service year using the benefit
formula method. 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 (about
Notes to Consolidated Financial Statements