Omron 2007 Annual Report Download - page 59

58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OMRON Corporation and Subsidiaries
1. Summary of Significant Accounting Policies
Nature of Operations
OMRON Corporation (the “Company”) is a multinational manu-
facturer of automation components, equipment and systems
with advanced computer, communications and control tech-
nologies. The Company conducts business in over 30 countries
around the world and strategically manages its worldwide oper-
ations through 5 regional management centers in Japan, North
America, Europe, Asia-Pacific and China. Products, classified by
type and market, are organized into five business segments and
one business 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 servic-
es, such as those involving labor-saving automation, environ-
mental protection, safety improvement, and inspection-automiza-
tion 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 card authorization terminals mainly for the domestic markets.
Passing gates, automated ticket machines, 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 therapy
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 information
required by Statement of Financial Accounting Standards
(“SFAS”) No. 131, “Disclosures about Segments of an Enterprise
and Related Information.” Certain reclassifications have been
made to amounts previously reported in order to conform to
2007 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 con-
formity with accounting principles generally accepted in the
United States of America requires management to make esti-
mates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and lia-
bilities 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 origi-
nal maturities of three months or less, including time deposits,
commercial 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 clas-
sified 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 con-
secutive months. The Companies may also consider other fac-
tors, including their ability and intent to hold the applicable invest-
ment securities until maturity, and the severity of the decline in
fair value.
Other investments are stated at the lower of cost or esti-
mated net realizable value. The cost of securities sold is deter-
mined on the average cost basis.
Inventories
Inventories are stated at the lower of cost, determined by the
first-in, first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation of
property, plant and equipment has been computed principally
on a declining balance method based upon the estimated useful
lives of the assets. The estimated useful lives primarily range
from 3 to 50 years for buildings and from 2 to 15 years for
machinery and equipment.