JVC 2006 Annual Report Download - page 49

Victor Company of Japan, Limited 47
BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity with
accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to
application and disclosure requirements of International Financial Reporting Standards.
The accounts of overseas subsidiaries are based on their accounting records maintained in conformity with gen-
erally accepted accounting principles prevailing in the respective countries of domicile. The accompanying consoli-
dated financial statements have been restructured and translated into English (with some expanded descriptions
and the inclusion of consolidated statements of stockholders’ equity) from the consolidated financial statements of
Victor Company of Japan, Limited (“the Company”) prepared in accordance with Japanese GAAP and filed with
the appropriate Local Finance Bureau of the Ministry of Finance as required by the Securities and Exchange Law.
Some supplementary information included in the statutory Japanese language consolidated financial statements,
but not required for fair presentation, is not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at March 31, 2006, which was ¥117 to U.S.$1.00. The conven-
ience translations should not be construed as representations that the Japanese yen amounts have been, could
have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All sig-
nificant inter-company transactions, account balances and unrealized profits have been eliminated.
Investments in certain non-consolidated subsidiaries and affiliated companies (20% to 50% owned and certain
others 15% to 20% owned) are, with minor exceptions, stated at their underlying net equity value after elimination
of unrealized inter-company profits. The Company’s investments in its remaining subsidiaries and affiliated compa-
nies are immaterial in the aggregate, and are stated at cost or less.
The differences between acquisition cost and underlying net equity at the time of acquisition are generally being
amortized on the straight-line method over five years.
Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at exchange rates prevail-
ing at the balance sheet dates except for those hedged by foreign currency forward contracts, which are recorded
at contract rates.
Balance sheets of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rate
except for stockholders’ equity accounts, which are translated at the historical rates.
Statements of operations of consolidated overseas subsidiaries are translated at average rates except for trans-
actions with the Company, which are translated at the rates used by the Company.
The Company reports foreign currency translation adjustments in the stockholders’ equity and minority interests.
Cash and cash equivalents
In preparing the consolidated statements of cash flows for the years ended March 31, 2006, 2005 and 2004, cash
on hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three
months at the time of purchase are considered to be cash and cash equivalents.
Inventories
Inventories are stated at cost, which is determined primarily by the average-cost method.
Allowance for doubtful accounts
The Company and consolidated subsidiaries provide an allowance for doubtful accounts in an amount sufficient to
cover probable losses on collection. It consists of an estimated uncollectible amount with respect to certain identi-
fied doubtful receivables and an amount calculated using the actual percentage of collection losses with respect to
the other receivables.
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Notes to Consolidated Financial Statements
Victor Company of Japan, Limited and its consolidated subsidiaries
Years ended March 31, 2006, 2005 and 2004