Nikon 2010 Annual Report Download - page 36

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(d) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible
into cash and that are exposed to insignifi cant risk of changes in value.
Cash equivalents include time deposits, certifi cates of deposit,
commercial paper and mutual funds invested in bonds that represent
short-term investments, all of which mature or become due within
three months of the date of acquisition.
(e) Investment Securities
Investment securities are classifi ed 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 classifi ed as held to
maturity 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.
The Company records investments in limited liability investment
partnerships (deemed “investment securities” under the provisions set
forth in Article 2 Item 2 of the Financial Instruments and Exchange
Law) using the amount of interest in such partnerships calculated
based on ownership percentage and the most recent fi nancial state-
ments on the report date stipulated in the partnership agreement.
(f) Inventories
Inventories of the Company and its domestic subsidiaries are stated at
the lower of cost, determined principally by the average method, or net
selling value. Inventories of foreign subsidiaries are stated at the lower
of cost or market as determined principally using the average method.
(g) 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 by the declining-balance
method, while the straight-line method is applied to buildings (exclud-
ing 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 fl ows expected to
result from the continued use and eventual disposition 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 fl ows from the continued use and
eventual disposition of the asset or the net selling price at disposition.
(i) Investment Property
In November 2008, the ASBJ issued ASBJ Statement No. 20 “Account-
ing Standard for Investment Property and Related Disclosures” and
issued ASBJ Guidance No. 23 “Guidance on Accounting Standard for
Investment Property and Related Disclosures”. This accounting standard
and the guidance are applicable to investment property and related
disclosures at the end of the fi scal years ending on or after March 31,
2010. The Company applied the new accounting standard and guidance
effective March 31, 2010.
(j) Retirement and Pension Plans
The Company has a defi ned benefi t corporate pension plan (cash
balance plan) and a defi ned contribution pension plan and its consoli-
dated domestic subsidiaries have non-contributory funded pension
plans. Certain foreign subsidiaries also have contributory pension plans.
The Group accounts for the liability for retirement benefi ts based on
the projected benefi t obligations and plan assets at the balance sheet
date. Retirement allowances for offi cers are recorded to state the
liability at the amount that would be required if all offi cers retired at
each balance sheet date.
As stated in 2 (b), the Company adjusted the amortization of actu-
arial gain or loss of pensions that has been directly recorded in the
equity by foreign subsidiaries including the United States in the con-
solidation process so that net income is accounted for in accordance
with Japanese GAAP.
In July 2008, the Accounting Standards Board of Japan (ASBJ) issued
an Accounting Standard—ASBJ Statement No. 19 Partial Amendments
to Accounting Standard for Retirement Benefi ts (Part 3). The objective
of the Accounting Standard is to remove the treatment, which provides
that an entity may use the discount rate determined taking into
consideration fl uctuations in the yield of bonds over a certain period,
in Note 6 of interpretive notes to the Accounting Standard for
Retirement Benefi ts.
(k) 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.
(l) Stock Options
In December 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.
This standard requires companies to recognize compensation
expense for employee stock options based on the fair value at the date
of grant and over the vesting period as consideration for receiving
goods or services. The standard also requires companies to account
for stock options granted to non-employees based on the fair value of