Omron 2005 Annual Report Download - page 54

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Nature of Operations
OMRON Corporation (the “Company”) is a multinational manufac-
turer 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 5 regional management centers in Japan, North America,
Europe, Asia-Pacific and China. Products, classified by type and
market, are organized into five internal companies and one busi-
ness development group, as described below.
Industrial Automation Business manufactures and sells
control components and systems including programmable logic
controllers, sensors and switches used in automatic systems in
industry. In the global market, the Company offers many services,
such as those involving labor-saving automation, environmental
protection, safety improvement, and inspection-automization
solutions for highly developed production systems.
Electronic Components Business manufactures and sells
electric and electronic components found in such consumer
goods as home appliances as well as such business equipment
as telephone systems, vending machines, and office equipment.
Automotive Electronic Components Business develops
and produces automotive electronic components and other com-
ponents for automobiles and automotive electronic components
manufacturers throughout the world.
Social Systems Solutions Business encompasses the sale
of automated teller machines and card authorization terminals
mainly for the domestic markets. Passing gates and automated
ticket machines and electronic panels and terminal displays for
traffic information and monitoring purposes are also supplied for
the domestic market.
Healthcare Business sells blood pressure monitors, digital
thermometers, body-fat monitors, nebulizers and infra-red thera-
py devices aimed at both the consumer and institutional markets.
Business Development Group consists of businesses with
high growth potential. The group provides the peripheral equip-
ment used in office automation equipment, modems, terminal
adapters, scanners and uninterrupted power supplies.
Basis of Financial Statements
The accompanying consolidated financial statements, stated in
Japanese yen, include certain adjustments, not recorded on the
books of account, to present these statements in accordance
with accounting principles generally accepted in the United
States of America, except for the omission of segment informa-
tion required by Statement of Financial Accounting Standards
(“SFAS”) No. 131, “Disclosures about Segments of an Enterprise
and Related Information.”
1. Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements
OMRON Corporation and Subsidiaries
Certain reclassifications have been made to amounts previ-
ously reported in order to conform to 2005 classifications.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its subsidiaries (together the “Companies”).
All significant intercompany accounts and transactions have
been eliminated.
Investments in which the Companies have a 20% to 50%
interest (affiliates) are accounted for using the equity method.
Use of Estimates
The preparation of consolidated financial statements in conformi-
ty with accounting principles generally accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabil-
ities and disclosure of contingent assets and liabilities at the date
of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents consist of highly liquid investments with original
maturities of three months or less, including time deposits, com-
mercial paper, securities purchased with resale agreements and
money market instruments.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is established in amounts
considered to be appropriate based primarily upon the
Companies’ past credit loss experience and an evaluation of
potential losses in the receivables outstanding.
Marketable Securities and Investments
The Companies classify all of their marketable debt and equity
securities as available-for-sale. Available-for-sale securities are
carried at market value with the corresponding recognition of
net unrealized holding gains and losses as a separate compo-
nent of accumulated other comprehensive income, net of relat-
ed taxes, until recognized. If necessary, individual securities
classified as available-for-sale are reduced to fair value by a
charge to income in the period in which the decline is deemed
to be other than temporary. The Companies principally consider
that an other-than-temporary impairment has occurred when the
decline in fair value below the carrying value continues for over
nine consecutive months. The Companies may also consider
other factors, including their ability and intent to hold the appli-
cable investment securities until maturity, and the severity of