Olympus 2003 Annual Report Download - page 30

 OLYMPUS 2003
Effective April , , the Company and its consolidated subsidiaries adopted the Japanese accounting standard on accounting
for financial instruments (“Opinion Concerning Establishment of Accounting Standard for Financial Instruments” issued by the
Business Accounting Deliberation Council on January , ).
In accordance with the accounting standard, the Company and its consolidated subsidiaries examined the intent of holding securi-
ties and classified those securities into four categories.
H eld-to-maturity debt securities are stated at amortized cost. Equity securities issued by non-consolidated subsidiaries and affili-
ated companies are stated at moving-average cost. Available-for-sale securities with fair market values are stated at fair market value,
and those with no fair market values at moving-average cost. Unrealized gains and losses on these securities are reported, net of
applicable income taxes, as a separate component of the shareholders’ equity. Realized gain on sale of such securities is computed
using the moving-average cost.
As a result of adopting the accounting standard for financial instruments, income before income taxes increased by ¥, million
($, thousand).
(g) Inventories
Inventories are principally stated at the lower of cost (first-in first-out) or market.
(h) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is mainly computed by the declining balance method at rates based on
the estimated useful lives of the relevant assets. The effective annual rates of depreciation as of March , ,  and  were as
follows:
2003 2002 2001
Buildings and structures .......................................................................................... 6.5% 9.5% 8.8%
Machinery and equipment....................................................................................... 28.9% 41.5% 37.3%
(i) Pension and retirement allowance plans
Employees of the Company, certain domestic consolidated subsidiaries and foreign consolidated subsidiaries are covered by funded
pension plans.
Employees of domestic consolidated subsidiaries, and directors of the Company and a couple of domestic consolidated sub-
sidiaries are covered primarily by unfunded retirement allowance plans.
The amounts of pension payments and retirement allowances are generally determined on the basis of length of service and basic
salary at the time of termination of service.
It is the Company’s policy to fund amounts required to maintain sufficient plan assets to provide for accrued benefits based on a
certain percentage of wage and salary costs. The plan assets consist principally of interest-bearing bonds and listed equity securities.
Effective April , , the Company and its consolidated subsidiaries adopted the accounting standard, “Opinion on Setting
Accounting Standard for Employees’ Severance and Pension Benefits”, issued by the Business Accounting Deliberation Council on
June , . Under which allowance and expenses for severance and pension benefits are determined based on the amounts actuari-
ally calculated using certain assumptions.
The Company and its consolidated subsidiaries provided allowance for employees’ severance and retirement benefits at March ,
 based on the amounts of projected benefit obligation and the fair value of the plan assets at that date.
Net transition obligation amounting to ¥, million ($, thousand) will be recognized as expense in equal amounts over 
years commencing with the year ended March , .
As a result of the adoption of the accounting standard, in the fiscal year ended March , , severance and pension benefit
expense increased by ¥ million ($, thousand), operating income and income before income taxes decreased by ¥ million
($, thousand), respectively, compared with what would have been recorded under the previous accounting standard.
Allowance for employees’ severance and retirement benefits included in the liability section of the consolidated balance sheet
together with severance and retirement allowance for directors as of March ,  and .
(j) Return of substitutional portion of Employees’ Pension Insurance
Employees of Japanese companies are compulsorily included in the Welfare Pension Insurance Scheme operated by the government.
Employers are legally required to deduct employees’ welfare pension insurance contributions from their payroll and to pay them to the
government together with employers’ own contributions. For companies that have established their own Employees’ Pension Fund
which meets certain legal requirements, it is possible to transfer a part of their welfare pension insurance contributions (so-called sub-
stitutional portion of the government’s scheme) to their own Employees’ Pension Fund under the government’s permission and super-
vision.
Based on the newly enacted Defined Benefit Corporate Pension Law, the Company and its domestic consolidated subsidiaries
decided to restructure their Employees’ Pension Fund and were permitted by the Minister of H ealth, Labor and Welfare on February
,  to be released from their future obligation for payments for the substitutional portion of the Employees’ Pension Insurance
Scheme. Pension assets for the substitutional portion maintained by the Employees’ Pension Fund are to be transferred back to the
government’s scheme.
The Company and its domestic consolidated subsidiaries did not apply the transitional provisions as prescribed in paragraph -
of the JICPA Accounting Committee Report No., “Practical Guideline for Accounting of Retirement Benefits (Interim Report)”.
OLY MPUS AR03財務 for PDF 03.8.1 10:43 A M ページ 28