Oki 2007 Annual Report Download - page 36

Notes to Consolidated Financial Statements
Oki Electric Industry Co., Ltd. and consolidated subsidiaries
March 31, 2007
1.
SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
Oki Electric Industry Co., Ltd. (the “Company”) and its domestic
consolidated subsidiaries (collectively and including its overseas sub-
sidiaries, the “Group”) maintain their books of account in accordance
with accounting standards generally accepted in Japan, and its over-
seas subsidiaries maintain their books of account in conformity with
those of their respective countries of domicile. The accompanying
consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in Japan, which are dif-
ferent in certain respects as to the application and disclosure require-
ments of International Financial Reporting Standards, and have been
compiled from the consolidated financial statements prepared by the
Company as required by the Securities and Exchange Law of Japan.
As permitted, amounts of less than one million yen have been omit-
ted. As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and in U.S. dollars) do not necessar-
ily agree with the sum of the individual amounts.
Certain amounts from prior years have been reclassified to conform
to the current year’s presentation. The accompanying consolidated
statements of cash flows, which have not been prepared under the
same requirements as those specified in the Japanese accounting
standard for cash flows, are presented in a format similar to that
required under accounting standards generally accepted in the United
States, and the concept and format are almost identical to those
required under the Japanese standard.
(b) Principles of consolidation and accounting for investments in
unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the
accounts of the Company and all significant subsidiaries over which
substantial control is exerted either through majority ownership of
voting stock and/or by other means. All significant intercompany bal-
ances and transactions have been eliminated in consolidation.
Investments in certain unconsolidated subsidiaries and significant
affiliates are accounted for by the equity method. Other investments
in unconsolidated subsidiaries and affiliates are stated at cost or
less. Where there has been a permanent decline in the value of such
investments, the Company has written them down to reflect the
impairment.
(c) Foreign currency transactions
(1) The Company translates the revenue and expense accounts of
the overseas consolidated subsidiaries at the average rates of
exchange in effect during the year. The balance sheet accounts,
except for the components of shareholders’ equity, are translated
into yen at the rates of exchange in effect at the balance sheet
date. The components of shareholders’ equity are translated at
their historical exchange rates. Differences arising from translation
where two exchange rates have been used are presented under
translation adjustments as a component of net assets.
(2) Current and noncurrent monetary assets and liabilities denomi-
nated in foreign currencies of the Company and its domestic
consolidated subsidiaries are translated into yen at the exchange
rates in effect at the balance sheet date, except for those hedged
by forward foreign exchange contracts which are translated at the
contracted rates.
All revenues and expenses are translated at the average rate for
the month prior to the transaction.
Gains and losses arising from foreign exchange differences are
credited or charged to income in the year in which they are made
or incurred, except for those arising from forward foreign exchange
contracts pertaining to long-term debt which are deferred and
amortized over the periods of the respective contracts.
(d) Cash equivalents
All highly liquid investments, generally with a maturity of three months
or less when purchased, which are readily convertible into known
amounts of cash and are so near maturity that they represent only an
insignificant risk of any change in value attributable to changes in inter-
est rates, are considered cash equivalents.
(e) Securities
Held-to-maturity securities are either amortized or accumulated to
face value. Other securities with quoted market prices are carried at
market value. The difference between the acquisition cost and the car-
rying value of other securities, including unrealized gain and loss, net
of the applicable income taxes, is recognized as a component of net
assets and is reflected as “Net unrealized holding gain on other securi-
ties.” The cost of other securities sold is computed by the moving
average method. Other securities without quoted market prices are
stated at cost based on the moving average method.
(f) Inventories
Inventories are principally stated at cost determined by the following
methods:
Finished goods - Moving average method
Work in process - Specific identification method
Raw materials and supplies - Last purchase price method
(g) Property, plant and equipment, and depreciation
Property, plant and equipment is recorded at cost. Depreciation of
property, plant and equipment is principally computed by the declin-
ing balance method over the estimated useful lives of the respec-
tive assets. However, buildings (excluding leasehold improvements)
acquired after April 1, 1998 by the Company and its domestic con-
solidated subsidiaries are depreciated by the straight-line method over
their respective estimated useful lives. Significant renewals and bet-
terments are capitalized at cost. Maintenance and repairs are charged
to income.
(h) Intangible assets and amortization
Intangible assets, including capitalized computer software costs, are
amortized by the straight-line method over their respective estimated
useful lives.
(i) Leases
Noncancelable leases are primarily accounted for as operating leases
(regardless of whether such leases are classified as operating or
finance leases), except that leases which stipulate the transfer of
ownership of the leased property to the lessee are accounted for as
finance leases.
(j) Retirement benefits
The Group has retirement benefit plans covering substantially all its
employees.
An allowance for retirement benefits has been provided for employ-
ees’ retirement benefits based on an estimate of the projected retire-
ment benefit obligation and the pension fund assets.
35 Annual Report 2007