Nikon 2009 Annual Report Download - page 36

34 Nikon Annual Report 2009
acquisition and the purchase method of accounting is required.
This standard also prescribes the accounting for combinations of
entities under common control and for joint ventures.
(d) Cash Equivalents
Cash equivalents are short-term investments that are readily con-
vertible into cash and that are exposed to insignificant risk of
changes in value.
Cash equivalents include time deposits, certificates of deposit,
commercial paper and mutual funds invested in bonds that repre-
sent short-term investments, all of which mature or become due
within three months of the date of acquisition.
(e) 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 held
to maturity securities, are reported at fair value, with unre-
alized 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 secu-
rities are reduced to net realizable value by a charge to income.
The company records investments in limited liability invest-
ment partnerships (deemed “investment securities” under the
provisions set forth in Article 2 Item 2 of the Financial Instru-
ments and Exchange Law) using the amount of interest in such
partnerships calculated based on ownership percentage and the
most recent financial statements on the report date stipulated in
the partnership agreement.
(f) Inventories
Prior to April 1 2008, inventories of the Company and its domes-
tic subsidiaries were stated at cost, determined principally using
the average method. In July 2006, the ASBJ issued ASBJ State-
ment No.9, “Accounting Standard for Measurement of Invento-
ries”. This standard requires that inventories held for sale in the
ordinary course of business be measured at the lower of cost or net
selling value, which is defined as the selling price less additional
estimated manufacturing costs and estimated direct selling
expenses. The replacement cost may be used in place of the net
selling value, if appropriate. The standard was effective for fiscal
years beginning on or after April 1, 2008.
The Company and its domestic subsidiaries applied this new
accounting standard for measurement of inventories effective
April 1, 2008. The effect of this change was to decrease operating
income and income before income taxes by ¥11,060 million
($112,592 thousand) respectively.
Inventories of foreign subsidiaries are stated at the lower of cost
or market as determined principally using the average method.
In addition, loss on disposals of inventory and write-down of
inventory, which were previously included in non-operating
expenses, is included in cost of sales. As a result, operating income
decreased by ¥4,426 million ($45,058 thousand).
(g) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of
property, plant and equipment of the Company and its consoli-
dated 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. The useful lives for lease assets
are the terms of the respective leases.
(h) Long-lived Assets
The Group reviews its long-lived assets for impairment whenever
events or changes in circumstances indicate the carrying amount
of an asset or asset group may not be recoverable. An impairment
loss would be recognized if the carrying amount of an asset or
asset group exceeds the sum of the undiscounted future cash flows
expected to result from the continued use and eventual disposi-
tion of the asset or asset group.
The impairment loss would be measured as the amount by
which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the
continued use and eventual disposition of the asset or the net
selling price at disposition.
(i) Retirement and Pension Plans
The Company has a defined benefit corporate pension plan (cash
balance plan) and a defined contribution pension plan and its
consolidated domestic subsidiaries have non-contributory funded
pension plans. Certain foreign subsidiaries also have contributory
pension plans.
The Group accounts for the liability for retirement benefits
based on the projected benefit obligations and plan assets at the
balance sheet date. Retirement allowances for officers are recorded
to state the liability at the amount that would be required if all
officers retired at each balance sheet date.
As stated in 2(b), the company adjusted the amortization of
actuarial gain or loss of pensions that has been directly recorded
in the equity by foreign subsidiaries including the United States
in the consolidation process so that net income is accounted for in
accordance with Japanese GAAP.
(j) Retirement Allowances for Directors and Corporate
Auditors
Retirement allowances for directors and corporate auditors are
recorded to state the liability at the amount that would be required if
all directors and corporate auditors retired at each balance sheet date.
(k) Stock Options
On December 27, 2005, the ASBJ issued ASBJ Standard No.8,
“Accounting Standard for Stock Options” and related guidance.
The new standard and guidance are applicable to stock options
newly granted on and after May 1, 2006.