Omron 2007 Annual Report Download - page 71

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10. Shareholders’ Equity.
Japanese companies are subjected to the Corporate Low.
The Corporate Law requires that all shares of common stock
be issued with no par value and at least 50% of amount paid of
the issue price of new shares is required to be recorded as com-
mon stock and the remaining net proceeds are required to be
presented as additional paid-in capital, which is included in capi-
tal surplus. The Corporate Law permits Japanese companies,
upon approval of the Board of Directors, to issue shares to exist-
ing shareholders without consideration by way of a stock split.
Such issuance of shares generally does not give rise to changes
within the shareholders’ accounts.
The Corporate Law also requires that an amount equal to
10% of dividends must be appropriated as a legal reserve or as
additional paid-in capital (a component of capital surplus) depend-
ing on the equity account charged upon the payment of such
dividends until the total of aggregate amount of legal reserve
and additional paid-in capital equals 25% of the common stock.
Under the Corporate Law, the total amount of additional paid-in
capital and legal reserve may be reversed without limitation of
such threshold. The Corporate Law also provides that common
stock, legal reserve, additional paid-in capital, other capital surplus
and retained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.
The Corporate Law also provides for companies to purchase
treasury stock and dispose of such treasury stock by resolution
of the Board of Directors. The amount of treasury stock pur-
chased cannot exceed the amount available for distribution to
the shareholders which is determined by specific formula.
Under the Corporate Law, stock acquisition rights, which
were previously presented as a liability, are now presented as a
separate component of shareholders’ equity.
The Corporate Law also provides that companies can pur-
chase both treasury stock acquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate
component of shareholders’ equity or deducted directly from
stock acquisition rights.
Under the Corporate Law, companies can pay dividends at
any time during the fiscal year in addition to the year-end divi-
dend upon resolution at the shareholders meeting. For companies
that meet certain criteria such as; (1) having the Board of
Directors, (2) having independent auditors, (3) having the Board
of Corporate Auditors, and (4) the term of service of the directors
is prescribed as one year rather than two years of normal term by
its articles of incorporation, the Board of Directors may declare
dividends (except for dividends in kind) if the company has pre-
scribed so in its articles of incorporation.
The Corporate Law permits companies to distribute divi-
dends-in-kind (non-cash assets) to shareholders subject to a cer-
tain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year
upon resolution by the Board of Directors if the articles of incor-
poration of the company so stipulate. Under the Corporate Law,
certain limitations were imposed on the amount of capital surplus
and retained earnings available for dividends. The Corporate Law
also provides certain limitations on the amounts available for div-
idends or the purchase of treasury stock. The limitation is defined
as the amount available for distribution to the shareholders, but
the amount of net assets after dividends must be maintained at
no less than ¥3 million.
Certain employees of European subsidiaries are covered by a
defined benefit pension plan. The projected benefit obligation
for the plan and related fair value of plan assets were ¥2,687
million ($22,771 thousand) and ¥2,555 million ($21,653 thou-
sand), respectively, at March 31, 2007 and ¥2,812 million and
¥2,020 million, respectively, at March 31, 2006.
The Companies also have unfunded noncontributory termi-
nation plans administered by the Companies. These plans provide
lump-sum termination benefits are paid at the earlier of the
employee’s termination or mandatory retirement age, except
for payments to directors and corporate auditors which require
approval by the shareholders before payment. The Companies
record provisions for termination benefits sufficient to state the
liability equal to the plans’ vested benefits, which exceed the
plans’ accumulated benefit obligations.
The aggregate liability for the termination plans excluding
the funded contributory termination and retirement plan in Japan,
as of March 31, 2007 and 2006 was ¥5,383 million ($45,619
thousand) and ¥4,374 million, respectively. The aggregate net
periodic benefit cost for such plans for the years ended March
31, 2007, 2006 and 2005 was ¥1,167 million ($9,890 thousand),
¥618 million and ¥1,241 million, respectively.