Kenwood 2001 Annual Report Download - page 23

KENWOOD Corporation Annual Report 2001 21
Notes to the Consolidated Financial Statements
Kenwood Corporation and Consolidated Subsidiaries
For the Years ended March 31, 2001, 2000, and 1999
The following is a summary of the significant accounting policies
adopted by Kenwood Corporation ( the "Company") and its
consolidated subsidiaries in the preparation of the
accompanying consolidated financial statements.
(a)
Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have been
prepared based on the consolidated financial statements filed
with the Ministry of Finance as required by the Securities and
Exchange Law of Japan, which are prepared in conformity with
accounting principles and practices generally accepted in Japan,
which are different in certain respects as to application and
disclosure requirements of International Accounting Standards.
The consolidated financial statements are not intended to
present the financial position, results of operations and cash flows
in accordance with accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.
In preparing the accompanying consolidated financial
statements, certain reclassifications and rearrangements have
been made to present them in a form which is more familiar to
readers outside 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. Certain reclassifications
have been made to the 2000 and 1999 consolidated financial
statements to conform to the 2001 presentation.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which the Company is incorporated
and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of
 124 to $1, the
approximate rate of exchange at March 31, 2001. Such translations
should not be construed as representations that the Japanese yen
amounts could be converted into U.S. dollars at that or any other rate.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its significant 51 (42 in 2000 and 41 in 1999)
subsidiaries (together, the "Group").
Investments in an (one in 2000 and none in 1999)
unconsolidated subsidiary and an (one in 2000 and two in 1999)
associated company are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and
associated companies are stated at cost. If the equity method
of accounting had been applied to the investments in these
companies, the effect on the accompanying consolidated
financial statements would not have been material.
The excess of the cost of the Company's investments in
consolidated subsidiaries over its equity in the net assets until
March 31, 1999, is being amortized over 5 years.
Effective April 1, 1999, the excess of the cost of an acquisition
over the fair value of the net assets of the acquired subsidiary is
being amortized over 5 years.
All significant intercompany balances and transactions have
been eliminated in consolidation. All material intercompany profit
included in assets resulting from transactions within the Group is
eliminated.
(c) Cash Equivalents
Cash equivalents are short-term investments that are readily
convertible into cash and that are exposed to insignificant risk of
changes in value.
Cash equivalents include time deposits, certificate of deposits,
and commercial paper, all of which mature or become due
within three months of the date of acquisition.
(d) Foreign Currency Transactions
Prior to April 1, 2000, short-term receivables and payables
denominated in foreign currencies were translated into Japanese
yen at the current exchange rates at each balance sheet date,
while long-term receivables and payables denominated in foreign
currencies were translated at historical rates.
Effective April 1, 2000, the Group adopted a revised accounting
standard for foreign currency transactions. In accordance with
the revised standard, all short-term and long-term monetary
receivables and payables denominated in foreign currencies are
translated into Japanese yen at the exchange rates at the
balance sheet date. The foreign exchange gains and losses from
translation are recognized in the statement of operations.
(e) Foreign Currency Financial Statements
In translating the financial statements of foreign subsidiaries and
associated companies into Japanese yen, all assets and
liabilities and revenues and expenses are translated at the
current exchange rates in effect at each balance sheet date,
except for shareholders' equity which is translated at the
historical exchange rates in effect at the time of the transactions.
Prior to April 1, 2000, differences arising from such translation
were shown as "Financial statement translation adjustments" as
either all assets or liabilities in the balance sheet.
Effective April 1. 2000, such differences are shown as
"Financial statement translation adjustments" in a separate
component of shareholders' equity in accordance with the
revised accounting standard for foreign currency transactions.
(f) Inventories
Inventories maintained by the Company and its domestic
subsidiaries are principally stated at average cost. Inventories
maintained by foreign subsidiaries are principally stated at the
lower of cost, determined by the first-in, first-out method, or market.
(g) Depreciation
Depreciation of property, plant and equipment is principally
computed on the declining-balance method for the Company
and its domestic subsidiaries and on the straight-line method
for foreign subsidiaries over their estimated useful lives.
The estimated useful lives are as follows:
Buildings and structures3 to 60 years
Machinery and equipment2 to 15 years
Tools, furniture and fixtures2 to 20 years
Ordinary maintenance and repairs are charged to income as
incurred. Major replacements and betterments are capitalized.
Software for company use is carried at cost less accumulated
amortization, which is calculated by the straight-line method
principally over their estimated useful lives (5 years). Software
installed in products is carried at cost less accumulated
amortization, which is calculated by the proportion of the actual
sales volume of the products during the current year to the
estimated total sales volume over the estimated salable years of
the products or by the straight-line method over the estimated
salable years of the products (1 to 5 years), considering the
nature of the products.
(h) Marketable and Investment Securities
Prior to April 1, 2000, marketable and investment securities are
stated at cost, determined by the moving-average method.
Effective April 1, 2000, the Group adopted a new accounting
standard for financial instruments, including marketable and
investment securities. Under this standard, all securities are
classified as available-for-sale securities and are stated at cost,
determined principally by the moving-average method at March
31, 2001. The effect of adopting of the new standard was immaterial.
(i) Liability for Employees' Retirement Benefits
The Company has a contributory funded pension plan covering
substantially all of their employees. Prior to April 1, 2000, amounts
contributed to the plan were charged to income when paid.
1. Significant Accounting Policies