Nikon 2012 Annual Report Download - page 40

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NIKON CORPORATION ANNUAL REPORT 2012
the acquisition, construction, development and the normal
operation of a tangible fixed asset and is associated with the
retirement of such tangible fixed asset.
The asset retirement obligation is recognized as the sum of
the discounted cash flows required for the future asset retire-
ment and is recorded in the period in which the obligation is
incurred if a reasonable estimate can be made. If a reasonable
estimate of the asset retirement obligation cannot be made
in the period the asset retirement obligation is incurred, the
liability should be recognized when a reasonable estimate of
asset retirement obligation can be made. Upon initial recogni-
tion of a liability for an asset retirement obligation, an asset
retirement cost is capitalized by increasing the carrying
amount of the related fixed asset by the amount of the liability.
The asset retirement cost is subsequently allocated to
expense through depreciation over the remaining useful life
of the asset. Over time, the liability is accreted to its present
value each period. Any subsequent revisions to the timing or
the amount of the original estimate of undiscounted cash flows
are reflected as an increase or a decrease in the carrying
amount of the liability and the capitalized amount of the
related asset retirement cost.
(k) Stock Options
In December 2005, the ASBJ issued ASBJ Standard No. 8,
“Accounting Standard for Stock Options,” and related guid-
ance. The new standard and guidance are applicable to stock
options newly granted on and after May 1, 2006.
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.
(l) Research and Development Costs
The Group is active in research and development, and such
costs are charged to income as incurred.
(m) 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 finance lease
transactions should be capitalized 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.
All other leases are accounted for as operating leases.
(n) Bonuses to Directors and Corporate Auditors
Bonuses to directors and corporate auditors are accrued
at the year-end to which such bonuses are attributable.
(o) Income Taxes
The provision for income taxes is computed based on the
pretax income included in the consolidated statements of
income. 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 liabilities. Deferred
taxes are measured by applying currently enacted tax laws to
the temporary differences.
The Company and some subsidiaries file a tax return under
the consolidated corporate tax system, which allows compa-
nies to base tax payments on the combined profits or losses of
the Company and its wholly owned domestic subsidiaries.
(p) Foreign Currency Transactions
All short-term and long-term monetary receivables and pay-
ables denominated in foreign currencies are translated into
foreign currencies 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.
(q) Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign sub-
sidiaries 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. Differences
arising from such translation are shown as “Foreign currency
translation adjustments” under accumulated other compre-
hensive income in a separate component of equity.
Revenue and expense accounts of consolidated foreign sub-
sidiaries are translated into yen at the average exchange rate.