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50 Victor Company of Japan, Limited
The maximum amount that the Company can distribute as divi-
dends is calculated based on the non-consolidated financial state-
ments of the Company and in accordance with the Code.
In accordance with customary practice in Japan, the appropria-
tions are not accrued in the financial statements for the period to
which they relate, but are recorded in the subsequent accounting
period after the stockholders’ approval has been obtained.
Retained earnings at March 31, 2005, include amounts represent-
ing the year-end cash dividends of ¥1,270 million ¥5.00 per share,
and directors’ bonuses of ¥71 million, which were approved at the
stockholders’ meeting held on June 29, 2005.
12DERIVATIVE FINANCIAL INSTRUMENTS
The Companies use derivative financial instruments in the normal
course of their business to manage the exposure to fluctuations in
foreign exchange rates and interest rates. The primary derivative
financial instruments used by the Companies are forward exchange
contracts, currency option contracts and interest rate swap con-
tracts.
The Company and certain of its overseas subsidiaries have
established regulations for financial transactions that specify the
persons with approval authority for derivative transactions. These
derivative transactions are executed and managed by the
Company’s accounting department and the member of the Board
of Directors in charge of finance. The results of all such transactions
are reported to the Director in charge of finance.
The following summarizes hedging derivative financial instru-
ments used by the Companies and items hedged:
Hedging instruments: Hedged items:
Forward exchange contracts Foreign currency trade
and currency option receivables and trade
contracts payables, future transaction
denominated in a foreign
currency
Interest rate swap contracts Interest on bonds
The Companies evaluate hedge effectiveness by comparing the
cumulative changes in cash flows from or the changes in fair value
of hedged items and the corresponding changes in the hedging
derivative instruments.
The following tables summarize fair value information as of
March 31, 2005 and 2004 of derivative transactions for which
hedge accounting has not been applied:
Millions of yen
Contract Fair Recognized
March 31, 2005 amount value gain (loss)
Swap contracts:
Receive floating/pay fixed ¥7,159 ¥98 ¥98
Millions of yen
Contract Fair Recognized
March 31, 2004 amount value gain (loss)
Swap contracts:
Receive floating/pay fixed ¥7,046 ¥(454) ¥(454)
Thousands of U.S. dollars
Contract Fair Recognized
March 31, 2005 amount value gain (loss)
Swap contracts:
Receive floating/pay fixed $66,907 $916 $916
The fair value of interest swap contracts is estimated based on
the quotes obtained from financial institutions.
13LEASE INFORMATION
Lessee:
The Companies lease certain buildings, machinery and equipment
and other assets under non-capitalized finance and operating leas-
es. Finance leases which do not transfer ownership to lessees are
not capitalized and are accounted for in the same manner as oper-
ating leases. Certain information for such non-capitalized finance
and operating leases is as follows.
(1) A summary of assumed amounts of acquisition cost, accumu-
lated depreciation and net book value at March 31, 2005 and 2004
is as follows:
Millions of yen
Acquisition Accumulated Net book
cost depreciation value
2005:
Buildings and structures ¥01,612 ¥00,782 ¥0,830
Machinery and equipment 15,842 9,945 5,897
Others 520 362 158
¥17,974 ¥11,089 ¥6,885
Millions of yen
Acquisition Accumulated Net book
cost depreciation value
2004:
Buildings and structures ¥01,860 ¥00,822 ¥1,038
Machinery and equipment 17,172 9,769 7,403
Others 418 248 170
¥19,450 ¥10,839 ¥8,611
Thousands of U.S. dollars
Acquisition Accumulated Net book
cost depreciation value
2005:
Buildings and structures $015,065 $007,308 $07,757
Machinery and equipment 148,056 92,944 55,112
Others 4,860 3,383 1,477
$167,981 $103,635 $64,346
(2) Future minimum lease payments under the non-capitalized
finance and operating leases at March 31, 2005 and 2004 are as
follows:
Thousands of
Millions of yen U.S. dollars
Finance leases 2005 2004 2005
Due within one year ¥3,054 ¥3,551 $28,542
Due after one year 3,899 5,241 36,439
¥6,953 ¥8,792 $64,981