Olympus 2007 Annual Report Download - page 39

OLYMPUS 2007 37
(d) 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 in fiscal 2006 and net assets in fiscal 2007. Realized gain on sale of such securities is com-
puted using the moving-average cost method.
(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, 2007, 2006 and 2005 were as follows:
2007 2006 2005
Buildings and structures.............................................................................................. 7.9% 8.7% 9.5%
Machinery and equipment .......................................................................................... 32.0% 33.0% 33.9%
(g) 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, directors and corporate auditors of the Company and several domestic consolidated sub-
sidiaries are covered primarily by unfunded retirement allowance plans.
According to the approval at the Company’s Annual Shareholders’ Meeting on June 29, 2006, the Company terminated the policy relating
to retirement benefits to directors and corporate auditors of the Company.
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.
The Company and its consolidated subsidiaries provided allowance for employees’ severance and retirement benefits at March 31, 2007
based on the amounts of projected benefit obligation and the fair value of the plan assets at that date.
Allowance for employees’ severance and retirement benefits was included in the liability section of the consolidated balance sheets
together with severance and retirement allowance for directors and corporate auditors as of March 31, 2007 and 2006.
(h) PROVISION FOR LOSSES ON BUSINESS RESTRUCTURING
To provide for the loss that will appear during the execution of restructuring of the Imaging Systems Business hereafter, the amount of expected
loss is appropriated on the consolidated statement of operations for the year ended March 31, 2005. The main components are write-off for
inventories and special retirement allowance.
(i) RESEARCH AND DEVELOPMENT
Expenses relating to research and development activities are charged to income as incurred. Total amounts charged to income were ¥55,531
million ($462,758 thousand), ¥45,935 million and ¥47,720 million for the years ended March 31, 2007, 2006 and 2005, respectively.
(j) CERTAIN LEASE TRANSACTIONS
Finance leases that do not transfer titles to lessees are accounted for in the same manner as operating leases.
(k) INCOME TAXES
The Company adopts the accounting standard that recognizes tax effects of temporary differences between the financial statement carry-
ing amounts and the tax basis of assets and liabilities. The provision for income taxes is computed based on the pretax income included in
the consolidated statements of operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences.
In the year ended March 31, 2007, the Company adopted the consolidated taxation system designating Olympus Corporation as the par-
ent company. Some subsidiaries have applied the consolidated taxation system since before.