Nikon 2013 Annual Report Download - page 52

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14. Financial Instruments and Related Disclosures
(1) Group policy for financial instruments
The Group restricts fund management to short-term deposits,
and funding is mainly through bank loans and bond issuance.
Derivatives are used, not for speculative purposes, but to
hedge foreign exchange risk and interest rate exposures.
(2) Nature and extent of risks arising from financial instru-
ments and risk management for financial instruments
Receivables, such as trade notes and trade accounts, are
exposed to customer credit risk. The Group manages its credit
risk from receivables on the basis of internal guidelines, which
include monitoring of payment terms and balances of major
customers by each business administration department to
identify the default risk of customers at an early stage. Although
receivables in foreign currencies due to global operations are
exposed to the market risk of fluctuation in foreign currency
exchange rates, mainly the position, net of payables in foreign
currencies, is hedged, principally by using forward foreign
currency contracts.
Investment securities are exposed to the risk of market
price fluctuations but are managed by monitoring market
values and financial position of issuers on a regular basis.
In addition, securities other than held-to-maturity securities
are continually reviewed as to the situation, taking into account
the relationship between the Group and trading partners.
Payment terms of payables, such as trade notes and trade
accounts, are less than one year. Although payables in foreign
currencies, which involve the import of raw materials, are
exposed to the market risk of fluctuation in foreign currency
exchange rates, those risks are netted against the balance of
receivables denominated in the same foreign currency as
noted above.
Short-term borrowings are mainly related to working capi-
tal, and long-term debt is related primarily to working capital
and capital investment. Although debts of variable interest
rates are exposed to market risks from changes in variable
interest rates, some long-term debts among those risks are
mitigated by using derivatives of interest rate swaps to reduce
the risk of fluctuations in interest expenses and to adjust the
fixed interest. Please see “Summary of Significant Accounting
Policies, Derivatives and Hedging Activities” for more details
about hedging.
Derivative transactions entered into by the Group have been
made in accordance with internal policies that regulate the
authorization and credit limit amount. The counterparties to
the Group’s derivative contracts are limited to major interna-
tional financial institutions to reduce credit risk.
Accounts payables and debts are exposed to liquidity risk.
The Group manages its liquidity risk by contracting committed
lines of credit.
(3) Fair values of financial instruments
Carrying amounts, fair values and the differences between carrying amounts and fair values as of March 31, 2012 and 2013 were
as follows. The accounts deemed to be extremely difficult to calculate the fair values were not included in the following:
Millions of Yen
March 31, 2012
Carrying
Amount
Fair
Value
Unrealized
Gain/Loss
Cash and cash equivalents ¥131,711 ¥131,711
Notes and accounts receivable—trade 132,866 132,866
Investment securities 43,839 43,839
Investments in and advances to
unconsolidated subsidiaries
and associated companies 233 647 ¥ 414
Total ¥308,649 ¥309,063 ¥ 414
Short-term borrowings ¥ 13,650 ¥ 13,650
Notes and accounts payable—trade 155,338 155,338
Long-term loans 27,600 27,877 ¥ (277)
Bonds 40,000 41,206 (1,206)
Accrued expenses 54,752 54,752
Income taxes payable 15,076 15,076
Derivatives (3,478) (3,478)
Total ¥302,938 ¥304,421 ¥(1,483)