Nikon 2016 Annual Report Download - page 61

59
NIKON REPORT 2016
Derivatives and foreign currency transactions are classied and
accounted for as follows: (i) all derivatives are recognized principally
as either assets or liabilities and remeasured at fair value, and gains or
losses on derivative transactions are recognized in the statement of
income and (ii) for derivatives used for hedging purposes, if deriva-
tives qualify for hedge accounting because of high correlation and
effectiveness between the hedging instruments and the hedged items,
gains or losses on derivatives are deferred until maturity of the
hedged transactions.
The 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
unrealized 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 deferred
until the underlying transactions have been completed. The foreign
currency swaps used to hedge the foreign currency uctuations of
long-term debt denominated in foreign currencies are measured at
fair value and the unrealized gains or losses are included in the carry-
ing amounts of the debt. The interest rate swaps which qualify for
hedge accounting are measured at market value at the balance sheet
date, and the unrealized gains or losses are deferred until maturity.
(r) Per Share Information
Basic net income per share is computed by dividing net income attrib-
utable to common shareholders by the weighted-average number of
common shares outstanding for the period, retroactively adjusted for
stock splits.
Diluted net income per share reects the potential dilution that
could occur if securities were exercised or converted into common
stock. Diluted net income per share of common stock assumes full
conversion of the outstanding convertible notes and bonds at the
beginning of the year (or at the time of issuance) with an applicable
adjustment for related interest expense, net of tax, and full exercise of
outstanding warrants.
Cash dividends per share presented in the accompanying consoli-
dated statement of income are dividends applicable to the respective
years including dividends to be paid after the end of the year.
(s) Accounting Changes and Error Corrections
In December 2009, the ASBJ issued ASBJ Statement No. 24,
“Accounting Standard for Accounting Changes and Error Corrections,”
and ASBJ Guidance No. 24, “Guidance on Accounting Standard for
Accounting Changes and Error Corrections.” Accounting treatments
under this standard and guidance are as follows:
(i) Changes in Accounting Policies:
When a new accounting policy is applied following revision of an
accounting standard, the new policy is applied retrospectively,
unless the revised accounting standard includes specic transi-
tional provisions, in which case the entity shall comply with the
specic transitional provisions.
(ii) Changes in Presentation
When the presentation of nancial statements is changed,
prior-period nancial statements are reclassied in accordance
with the new presentation.
(iii) Changes in Accounting Estimates
A change in an accounting estimate is accounted for in the period
of the change if the change affects that period only, and is
accounted for prospectively if the change affects both the period
of the change and future periods.
(iv) Corrections of Prior-Period Errors
When an error in prior-period nancial statements is discovered,
those statements are restated.
(t) New Accounting Pronouncements
Tax Effect Accounting
On December 28, 2015, the ASBJ issued ASBJ Guidance No. 26,
“Guidance on Recoverability of Deferred Tax Assets,” which included
certain revisions of the previous accounting and auditing guidance
issued by the Japanese Institute of Certied Public Accountants. While
the new guidance continues to follow the basic framework of the
previous guidance, it provides new guidance for the application of
judgment in assessing the recoverability of deferred tax assets.
The previous guidance provided a basic framework which included
certain specic restrictions on recognizing deferred tax assets depend-
ing on the company’s classication in respect of its protability, taxable
prot and temporary differences, etc.
The new guidance does not change such basic framework but, in
limited cases, allows companies to recognize deferred tax assets even
for a deductible temporary difference for which it was specically pro-
hibited to recognize a deferred tax asset under the previous guidance,
if the company can justify, with reasonable grounds, that it is probable
that the deductible temporary difference will be utilized against future
taxable prot in some future period.
The new guidance is effective for the beginning of annual periods
beginning on or after April 1, 2016. Earlier application is permitted for
annual periods ending on or after March 31, 2016. The new guidance
shall not be applied retrospectively and any adjustments from the
application of the new guidance at the beginning of the reporting
period shall be reected within retained earnings or accumulated
other comprehensive income at the beginning of the reporting period.
The Company expects to apply the new guidance on recoverability
of deferred tax assets effective April 1, 2016, and is in the process of
measuring the effects of applying the new guidance in future applica-
ble periods.
Notes to Consolidated Financial Statements
FINANCIAL AND CORPORATE DATA