Nikon 2014 Annual Report Download - page 72

(3) Fair Values of Financial Instruments
Carrying amounts, fair values and the differences between carrying amounts and fair values as of March 31, 2013 and 2014 were as follows.
The accounts for which fair value is deemed to be extremely difficult to calculate were not included in the following:
Millions of Yen
March 31, 2013 Carrying Amount Fair Value
Unrealized
Gain/Loss
Cash and cash equivalents ¥110,095 ¥110,095
Notes and accounts receivable — trade 130,430 130,430
Investment securities 53,423 53,423
In vestments in and advances to
unconsolidated subsidiaries and
associated companies 233 568 ¥ 335
Total ¥294,181 ¥294,516 ¥ 335
Short-term borrowings ¥ 13,740 ¥ 13,740
Notes and accounts payable — trade 124,677 124,677
Long-term loans 27,600 27,940 ¥ (340)
Bonds 40,000 41,561 (1,561)
Accrued expenses 54,505 54,505
Income taxes payable 1,396 1,396
Derivatives (5,257) (5,257)
Total ¥256,661 ¥258,562 ¥(1,901)
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 Instruments
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 receiv-
ables on the basis of internal guidelines, which include monitoring
of payment terms and balances of major customers by each busi-
ness administration department to identify the default risk of cus-
tomers at an early stage. Although receivables in foreign currencies
due to global operations are exposed to the market risk of fluctua-
tion in foreign currency exchange rates, mainly the position net of
payables in foreign currencies is hedged, principally by using for-
ward foreign currency contracts.
Investment securities are exposed to the risk of market price fluc-
tuations but are managed by monitoring market values and the
financial position of issuers on a regular basis. In addition, securi-
ties 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 cur-
rencies, 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 denomi-
nated in the same foreign currency as noted above.
Short-term borrowings are mainly related to working capital, 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 inter-
est 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 authori-
zation and credit limit amount. The counterparties to the Group’s
derivative contracts are limited to major international financial insti-
tutions 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.
FINANCIAL INFORMATION
Notes to Consolidated Financial Statements
70 NIKON REPORT 2014