Nikon 2014 Annual Report Download - page 61

million ($14,931 thousand) was recorded, and asset for retirement
benefits of ¥1,557 million ($15,130 thousand) was recorded as of
March 31, 2014, and accumulated other comprehensive income for
the year ended March 31, 2014, decreased by ¥1,977 million
($19,209 thousand).
Due to the application of IAS19 “Employee Benefits” (amended
in June 16, 2011) on or after January 1, 2013, principally the
method of recognition with respect to actuarial gains and losses,
past service cost and interest cost and certain presentation were
changed from this fiscal year in certain overseas subsidiaries. This
accounting policy change is applied retrospectively and cumulative
effect is reflected to the beginning balance of equity. The effect of
this retrospective application on the consolidated financial state-
ments is immaterial.
(i) 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 receiv-
ing goods or services. The standard also requires companies to
account for stock options granted to nonemployees 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
transactions. In addition, the standard allows unlisted companies to
measure options at their intrinsic value if they cannot reliably esti-
mate fair value.
(j) Research and Development Costs
Research and development costs are charged to income as incurred.
(k) 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.
(l) Income Taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statement of income. The
asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of tempo-
rary differences between the carrying amounts and the tax bases of
assets and liabilities. Deferred taxes are measured by applying cur-
rently enacted tax laws to the temporary differences.
The Company and some foreign subsidiaries file a tax return
under the consolidated corporate tax system, which allows the com-
panies to base tax payments on the combined profits or losses of
the company and their wholly owned domestic subsidiaries.
(m) Foreign Currency Transactions
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into foreign cur-
rencies at the exchange rates at the balance sheet date. The foreign
exchange gains and losses from translation are recognized in the
consolidated statement of income to the extent that they are not
hedged by forward exchange contracts.
(n) 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. Differences 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 subsidiar-
ies are translated into yen at the average exchange rate.
(o) Derivatives and Hedging Activities
The Group enters into derivative financial instruments (“deriva-
tives”), 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 use derivatives for trading or speculative purposes.
Derivatives are classified and accounted for as follows: (a) all deriv-
atives are recognized principally as either assets or liabilities and
remeasured at fair value, and gains or losses on derivative transac-
tions are recognized in the statement of income, and (b) for deriva-
tives used for hedging purposes, 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.
Foreign exchange forward contracts and currency option contracts
employed to hedge foreign exchange exposures for export sales and
import purchases are measured at fair value and the related unreal-
ized gains or losses are recognized in income. Forward contracts
entered into for forecast transactions are also measured at fair
value, but the unrealized gains or losses on qualifying hedges are
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NIKON REPORT 2014