Olympus 2006 Annual Report Download - page 37

OLYMPUS 2006 35
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Olympus Corporation (the “Company”) and its consolidated domestic subsidiaries maintain their accounts and records in accordance with the
provisions set forth in the Japanese Securities and Exchange Law and its related accounting regulations and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure require-
ments of International Financial Reporting Standards. The accounts of overseas subsidiaries are based on their accounting records maintained
in conformity with generally accepted accounting principles prevailing in the respective countries of domicile.
The accompanying consolidated financial statements are a translation of the audited consolidated financial statements of the Company,
which were prepared in accordance with accounting principles and practices generally accepted in Japan, from the accounts and records
maintained by the Company and its consolidated subsidiaries and were filed with the appropriate Local Finance Bureau of the Ministry of
Finance as required by the Securities and Exchange Law. In preparing the accompanying consolidated financial statements, certain reclassifi-
cations have been made in the statutory Japanese language consolidated financial statements in order to present them in a form that is more
familiar to readers outside Japan.
The translation of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the
exchange rate of ¥115 to US$1.00. The convenience translations should not be construed as representations that the Japanese yen amounts
have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.
(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 its significant subsidiaries. All significant inter-
company balances and transactions have been eliminated in the consolidation.
The Company consolidates all significant investees which were controlled through substantial ownership of majority voting rights or exis-
tence of certain conditions.
Investments in certain unconsolidated subsidiaries and affiliated companies in which the Company has significant influence, but less than
a controlling interest, are accounted for using the equity method. Investments in companies in which the Company does not have significant
influence are accounted for at cost. The differences between acquisition cost and underlying net equity at the time of acquisition (“consoli-
dated adjustment accounts”) are generally being amortized on the straight-line method in the range of five to 20 years.
In the second half of fiscal 2005, ITX Corporation and its subsidiaries that were previously accounted for by the equity method became
new consolidated subsidiaries of the Company due to the additional acquisition of stock.
(c) CASH AND CASH EQUIVALENTS
In preparing the consolidated statements of cash flows, cash on hand, readily-available deposits and short-term highly liquid investments with
maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
Amortization of consolidated adjustment accounts, formerly included in other of cash flows from operating activities, is shown as an inde-
pendent item. Amount of amortization of consolidated adjustment accounts included in other of cash flows from operating activities in fiscal
2005 is ¥3,053 million.
Increase (decrease) in other payable, formerly shown as an independent item, is included in other of cash flows from operating activities.
Amount of increase (decrease) in other payable included in other of cash flows from operating activities in fiscal 2006 is ¥176 million.
(d) MARKETABLE AND INVESTMENT SECURITIES
In accordance with the accounting standard for financial instruments, the Company and its consolidated subsidiaries examined the intent of
holding securities and classified those securities into four categories.
Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by non-consolidated subsidiaries and affiliated com-
panies 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.
(e) INVENTORIES
Inventories are principally stated at the lower of cost (first-in first-out) or market.
(f) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are 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 31, 2006, 2005 and 2004 were as
follows:
2006 2005 2004
Buildings and structures ........................................................................................... 14.2% 12.2% 8.0%
Machinery and equipment........................................................................................ 33.0% 33.9% 29.9%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Olympus Corporation and Consolidated Subsidiaries
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