Nikon 2007 Annual Report Download - page 33

31NIKON ANNUAL REPORT 2007
1. 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, which are
different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
On December 27, 2005, the Accounting Standard Board of Japan (ASBJ) published a new accounting standard for the statement of
changes in equity, which is effective for fiscal years ending on or after May 1, 2006. The statement of shareholders’ equity, which was
previously voluntarily prepared in line with the international accounting practices, is now required under generally accepted accounting
principles in Japan and has been renamed “the statement of changes in equity” in the current fiscal year.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated
financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in 2006 financial statements to conform to classifications used in 2007.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nikon Corporation (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 approximate rate of ¥118.05 to U.S.$1, the rate of exchange at March 31,
2007. 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Consolidation
The consolidated financial statements as of March 31, 2007 include the accounts of the Company and its 49 significant (47 in 2006) subsidiaries
(collectively, the “Group”). Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and those companies over which the Company has the ability to exercise significant influence are
accounted for by the equity method.
Investments in 2 associated companies (2 associated companies in 2006) 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 be material.
The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition (“Goodwill”)
are charged to income when incurred, if they are small amounts in sum, and the others are being amortized on a straight-line basis over 5 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets
resulting from transactions within the Group is eliminated.
(b) 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, commercial paper and mutual funds investing in bonds that represent short-term
investments, all of which mature or become due within three months of the date of acquisition.
(c) Investment Securities
Investment securities are classified and accounted for, depending on management’s intent, as follows:
i ) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are
reported at amortized cost and
ii) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.
(d) Inventories
Inventories of the Company and its domestic subsidiaries are stated at cost as determined principally using the average method. Inventories of
foreign subsidiaries are stated at the lower of cost or market as determined principally using the average method.
(e) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic
subsidiaries is principally computed using the declining-balance method, while the straight-line method is applied to buildings (excluding facilities
incidental to buildings), and foreign subsidiaries apply the straight-line method, using rates based on the estimated useful lives of the assets.
The range of useful lives is principally from 30 to 40 years for buildings and from 5 to 10 years for machinery.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nikon Corporation and Consolidated Subsidiaries
Years ended March 31, 2007 and 2006