Nikon 2011 Annual Report Download - page 41

39Annual Report 2011Nikon CorporationFinancial Section
This standard requires companies to recognize compensa-
tion expense for employee stock options based on the fair
value at the date of grant and over the vesting period as con-
sideration 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 either the stock
option or the goods or services received. In the balance sheet,
the stock options are presented as stock acquisition rights as
a separate component of equity until exercised. The standard
covers equity-settled, share-based payment transactions, but
does not cover cash-settled, share-based payment transac-
tions. In addition, the standard allows unlisted companies to
measure options at their intrinsic value if they cannot reliably
estimate fair value.
The Company applied the new accounting standard for
stock options to those granted on and after May 1, 2006.
(n) Research and Development Costs
The Group is active in research and development, and such
costs are charged to income as incurred.
(o) Leases
In March 2007, the ASBJ issued ASBJ Statement No. 13,
“Accounting Standard for Lease Transactions”, which revised
the previous accounting standard for lease transactions
issued in June 1993. The revised accounting standard for
lease transactions was effective for fiscal years beginning
on or after April 1, 2008. The revised accounting standard
requires that all finance lease transactions should be capital-
ized to recognize lease assets and lease obligations in the
balance sheet. In addition, the revised accounting standard
permits leases which existed at the transition date and do not
transfer ownership of the leased property to the lessee to be
measured at the obligations under finance leases less interest
expense at the transition date and recorded as acquisition
cost of lease assets.
The Company and its domestic subsidiaries applied the
revised accounting standard effective April 1, 2008.
All other leases are accounted for as operating leases.
(p) Bonuses to Directors and Corporate Auditors
Bonuses to directors and corporate auditors are accrued
at the year end to which such bonuses are attributable.
(q) Income Taxes
The provision for income taxes is computed based on the
pretax income or loss included in the consolidated statements
of operations. The asset and liability approach is used to
recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabili-
ties. Deferred taxes are measured by applying currently
enacted tax laws to the temporary differences.
The Company and some subsidiaries files a tax return
under the consolidated corporate-tax system, which allows
companies to base tax payments on the combined profits
or losses of the Company and its wholly owned domestic
subsidiaries effective April 1, 2009 .
(r) Foreign Currency Transactions
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 income statement to the extent that they
are not hedged by forward exchange contracts.
(s) Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign
subsidiaries are translated into Japanese yen at the current
exchange rate as of the balance sheet date except for equity,
which is translated at the historical exchange rate. Differ-
ences arising from such translation are shown as “Foreign
currency translation adjustments” under accumulated other
comprehensive income in a separate component of equity.
Revenue and expense accounts of consolidated foreign
subsidiaries are translated into yen at the average exchange
rate.
(t) Derivatives and Hedging Activities
The Group enters into derivative financial instruments
(“derivatives”), including foreign exchange forward contracts,
currency options, foreign currency swaps and interest rate
swaps to hedge foreign exchange risk and interest rate
exposures. The Group does not hold or issue derivatives
for trading or speculative purposes.
Derivative financial instruments and foreign currency
transactions are classified and accounted for as follows:
(a) all derivatives are recognized principally as either assets
or liabilities and measured at fair value, and gains or losses
on derivative transactions are recognized in the statements
of operations and (b) for derivatives used for hedging pur-
poses, if derivatives qualify for hedge accounting because
of high correlation and effectiveness between the hedging
instruments and the hedged items, gains or losses on deriva-
tives are deferred until maturity of the hedged transactions.
The foreign exchange forward contracts and currency
option contracts employed to hedge foreign exchange expo-
sures for export sales and purchases are measured at fair
value and the related unrealized gains or losses are recog-
nized in income. Forward contracts applied into for forecasted
transactions are also measured at fair value, but the unreal-
ized gains or losses on qualifying hedges are deferred until
the underlying transactions are completed. The interest rate
swaps which qualify for hedge accounting are measured at
market value at the balance sheet date, and the unrealized
gains or losses are deferred until maturity. The interest rate