Nikon 2016 Annual Report Download - page 60

58 NIKON REPORT 2016
(j) 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 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 transactions. In addition, the stan-
dard allows unlisted companies to measure options at their intrinsic
value if they cannot reliably estimate fair value.
(k) Employee Stock Ownership Plan
The Company introduced a performance-based stock remuneration
system called “Executive Compensation BIP (Board Incentive Plan)
Trust” for its directors, etc., from June 2015, aiming to reinforce the
incentive closely linked to the achievement dened in the Medium-
Term Management Plan and sustainable enhancement of
corporate value.
The Executive Compensation BIP Trust is a stock incentive plan that
the delivery and payment of the Company’s shares and the cash equiva-
lent of the conversion value of those shares will be conducted every three
years based on the degree of accomplishment of business performance
in the nal scal year of the Medium-Term Management Plan.
The Executive Compensation BIP Trust is accounted for in accor-
dance with “Practical Solution on Transactions of Delivering the
Company’s Own Stock to Employees, etc. through Trusts” (PITF No.
30, March 26, 2015).
In accordance with PITF No. 30, upon transfer of treasury stock to
the employee stock ownership trust (the “Trust”) by the entity, any
difference between the book value and fair value of the treasury stock
shall be recorded in capital surplus. At year-end, the entity shall
record 1) the entity stock held by the Trust as treasury stock in equity,
2) all other assets and liabilities of the Trust on a line-by-line basis,
and 3) a liability/asset for the net of (i) any gain or loss on delivery of
the stock by the Trust to the employee shareholding association, (ii)
dividends received from the entity for the stock held by the Trust, and
(iii) any expenses relating to the Trust.
The Company’s shares held by the trust were recorded as treasury
stock under equity in the consolidated balance sheet at the carrying
amount of the trust. The carrying amount and the number of the
Company shares at the end of the year ended March 31, 2016 were
¥970 million and 576,900 shares, respectively.
(l) Research and Development Costs
Research and development costs are charged to income as incurred.
(m) Leases
Finance lease transactions are capitalized and recognized as lease
assets and lease obligations in the consolidated balance sheet.
All other leases are accounted for as operating leases.
(n) 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 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 foreign subsidiaries le a tax return under
the consolidated corporate tax system, which allows the companies to
base tax payments on the combined prots or losses of the Company
and their wholly owned domestic subsidiaries.
(o) Foreign Currency Transactions
All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into reporting
currencies, with which the Company and its consolidated subsidiaries
prepare for their separate nancial statements, at the exchange rates
as of 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.
(p) 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 accumu-
lated other comprehensive income in a separate component of equity.
Revenue and expense accounts of consolidated foreign subsidiaries
are translated into Japanese yen at the average exchange rate.
(q) Derivatives and Hedging Activities
The Group enters into derivative nancial instruments (“derivatives”),
including foreign exchange forward contracts, currency options, for-
eign 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.