Olympus 2008 Annual Report Download - page 42

40 OLYMPUS 2008
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 Financial Instruments and Exchange Law (formerly, the 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 requirements 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 Financial Instruments and Exchange Law (formerly, the Securities and Exchange Law). In prepar-
ing the accompanying consolidated financial statements, certain reclassifications (with certain expanded disclosure and the inclusion of
the consolidated statements of shareholders’ equity for 2006) 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.
As discussed in Note2 (f), the consolidated statement of changes in net assets for the year ended March 31, 2007 has been prepared
in accordance with the new accounting standard. The accompanying consolidated statements of shareholder’s equity for the year ended
March 31, 2006 was voluntarily prepared for the purpose of inclusion in the consolidated financial statements, although such statements
were not required to be filed with the Local Finance Bureau.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using
the exchange rate of ¥105 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. For the year
ended March 31, 2008, the accounts of 205 (183 in 2007) subsidiaries have been included in the consolidated financial statements. 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
existence 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. For the year ended March 31, 2008, 15 (22 in 2007) affiliates were
accounted for by 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 (“goodwill”) are generally being
amortized on the straight-line method in the range of mainly 5 to 20 years.
(c) Cash and Cash Equivalents
In preparing the consolidated statements of cash flows, cash on hand, readily - available deposits and short-term highly liquid invest-
ments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.
(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
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 in fiscal 2006 and net assets in fiscal 2007 and 2008. Realized gain on
sale of such securities is computed using the moving-average cost method.
(e) Derivative and Hedge Accounting
Accounting standard for financial instruments requires companies to state derivative financial instruments at fair value and to recognize
changes in the fair value as gains and losses unless derivative financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges and meets hedging criteria, the Company and consolidated subsidiaries defer
recognition of gains and losses resulting from changes in fair value of derivative financial instruments until the related losses and gains on
the hedged items are recognized.
(f) Inventories
Inventories are principally stated at the lower of cost (first-in first-out) or market.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Olympus Corporation and Consolidated Subsidiaries