Omron 1999 Annual Report Download - page 33

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No. 132. Provision for termination and retirement benefits includes those for directors and corporate auditors
of the Company.
Stock Purchase Plan
In June 1998, the Company introduced stock-based compensation plans under which stock options are
granted to directors to purchase shares of common stock at a price not less than market price at the date of
grant. Pursuant to SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company has elected to
account for its stock option plan under APB Opinion No. 25, “Accounting for Stock Issued to Employees.”
Accordingly, no compensation cost has been recognized for this plan. Compensation cost for the plan deter-
mined based on the fair value of the options at the grant date consistent with SFAS No. 123 was immaterial.
Income Taxes
Deferred income taxes reflect the tax consequences on future years of differences between the tax bases
of assets and liabilities and their financial reporting amounts. Future tax benefits, such as net operating loss
carryforwards, are recognized to the extent that such benefits are more likely than not to be realized. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Derivatives
Currency derivatives (foreign exchange forward contracts and currency option contracts) are used to manage
currency risk. Gains and losses on hedges of existing assets or liabilities denominated in foreign currencies are
recognized in income currently, as are the offsetting foreign exchange losses and gains on the items hedged.
Gains and losses related to qualifying hedges of firm commitments denominated in foreign currencies are
deferred and are recognized as adjustments to the hedged transaction when such transaction occurs.
Derivative contracts that do not qualify as hedges are marked to market with the related gains and losses
included in Foreign exchange loss—net in the consolidated statements of income.
Interest rate swaps are used to manage exposure to fluctuations in interest rates arising from the
Companies’ existing debt. The amounts receivable or payable under interest rate swap agreements are recog-
nized as adjustments to interest expenses.
Cash Dividends
Cash dividends are reflected in the consolidated financial statements at proposed amounts in the years to
which they are applicable, even though payment is not approved by shareholders until the annual general
meeting of shareholders held early in the following fiscal year. Resulting dividends payable are included in
Other current liabilities in the consolidated balance sheets.
Comprehensive Income
The Companies adopted SFAS No. 130, “Reporting Comprehensive Income,” from the year beginning April 1,
1998. Comprehensive income consists of net income, foreign currency translation adjustments, minimum pen-
sion liability adjustments and unrealized gains and losses on available-for-sale securities, and is presented in
the consolidated statements of comprehensive income. SFAS No. 130 requires only additional disclosures in
the consolidated financial statements and does not affect the Companies’ financial position and results of
operations. All prior years’ consolidated financial statements have been reclassified to conform with the provi-
sions of SFAS No. 130.
Nature of Operations
The Company is a multinational manufacturer of automation components, equipment and systems with
advanced computer, communications and control technologies. The Company conducts business in over 30
countries around the world and strategically manages its worldwide operations through five regional manage-
ment centers: Japan, North America, Europe, Asia-Pacific and China. Products, classified by type and market,
are organized into five principal business units, as described below.
Control Components and Systems include a wide range of products, including sensors, relays, switches,
printed circuit boards and computer systems for factory automation. These products are primarily used by
manufacturers of electronic and high-technology equipment with certain products aimed at the consumer
and industrial markets.
Social Business encompasses the production and sale of automated teller machines, card authorization
terminals, point-of-sale systems and card readers for both domestic and overseas markets. Passing gates and
automated ticket machines as well as electronic panels and terminal displays for traffic information and moni-
toring purposes are also produced for the domestic market.