Nikon 2016 Annual Report Download - page 72

70 NIKON REPORT 2016
15. Financial Instruments and Related Disclosures
(a) Group Policy for Financial Instruments
The Group restricts fund management to short-term deposits, and
funding is procured mainly through bank loans and bond issuance.
Derivatives are used, not for speculative purposes, but to hedge
foreign exchange risk and interest rate exposures.
(b) 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 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 uctuation in for-
eign currency exchange rates, 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 uctu-
ations but are managed by monitoring market values and nancial
position of issuers on a regular basis. In addition, securities other than
held-to-maturity securities are continually reviewed, 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 curren-
cies, which involve the import of raw materials, are exposed to the
market risk of uctuation 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 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 interest
rate swaps to reduce the risk of uctuations in interest expenses and
to adjust the xed interest. Please see “Summary of Signicant
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 con-
tracts are limited to major international nancial institutions to reduce
credit risk.
Accounts payable and debts are exposed to liquidity risk.
The Group manages its liquidity risk by contracting committed lines
of credit.
(c) Fair Values of Financial Instruments
Carrying amounts, fair values and the differences between carrying amounts and fair values as of March 31, 2015 and 2016 were as follows. The
accounts for which fair value is deemed to be extremely difcult to calculate are not included below:
Millions of Yen
March 31, 2015 Carrying Amount Fair Value
Unrealized
Gain / Loss
Cash and cash equivalents ¥259,625 ¥259,625 ¥
Notes and accounts receivable—trade 127,433 127,433
Investment securities 68,445 68,445
Total ¥455,503 ¥455,503 ¥
Notes and accounts payable—trade ¥113,724 ¥113,724
Short-term borrowings 13,600 13,600
Accrued expenses 58,455 58,455
Income taxes payable 5,038 5,038
Bonds 50,000 51,540 ¥(1,540)
Long-term loans 49,600 50,177 (577)
Total ¥286,256 ¥288,373 ¥(2,117)
Derivatives ¥ (4,161) ¥ (4,161) ¥