Omron 2009 Annual Report Download - page 88

86
Notes to Consolidated Financial Statements
Omron Corporation and Subsidiaries
22. Fair Value Measurements
SFAS 157 “Fair Value Measurements” (“SFAS 157”)
defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measure-
ment date. SFAS 157 establishes a three-level fair value
hierarchy that prioritizes the inputs used to measure fair
value as follows:
Level 1— Inputs are quoted prices in active markets for
identical assets or liabilities.
Level 2— Inputs are quoted prices for similar assets or lia-
bilities in active markets, quoted prices for iden-
tical or similar assets or liabilities in markets that
are not active, inputs other than quoted prices
that are observable, and inputs that are derived
principally from or corroborated by observable
market data by correlation or other means.
Level 3— Inputs are significant to measure fair value of
assets or liabilities and unobservable.
Balance at beginning of year
Addition
Utilization
Balance at end of year
2009 2008 2009
Millions of yen
Thousands of
U.S. dollars
¥ 2,190
1,507
(2,078)
¥ 1,619
¥ 1,619
1,475
(1,593)
¥ 1,501
$ 16,520
15,051
(16,255)
$ 15,316
21. Commitments and Contingent Liabilities
The Company has commitments as of March 31, 2009
of approximately ¥16,727 million ($170,684 thousand)
related to contracts for outsourcing computer services
through 2013. The contracts require an annual service fee
of ¥4,385 million ($44,745 thousand) for the year ending
March 31, 2009. The annual service fee will gradually
decrease each year during the contract term to ¥4,209
million ($42,949 thousand) for the year ending March 31,
2013. The contract is cancelable at any time subject to a
penalty of 15% of aggregate service fees payable for the
remaining term of the contract.
The Company and certain of its subsidiaries are defen-
dants in several pending lawsuits. However, based upon
the information currently available to both the Company
and its legal counsel, management of the Company
believes that damages from such lawsuits, if any, would
not have a material effect on the consolidated financial
statements.
Concentration of Credit Risk
Financial instruments that potentially subject the
Companies to concentrations of credit risk consist
principally of short-term cash investments and trade
receivables. The Companies place their short-term cash
investments with high-credit-quality financial institutions.
Concentrations of credit risk with respect to trade
receivables, as approximately 52% of total sales are
concentrated in Japan, are limited due to the large
number of well-established customers and their
dispersion across many industries. The Company
normally requires customers to deposit funds to serve
as security for ongoing credit sales.
Guarantees
The Company provides guarantees for bank loans of other
companies. The guarantees for the other companies are
made to ensure that those companies operate with less
finance costs. The maximum payments in the event of
default is ¥712 million ($7,265 thousand) at March 31, 2009.
The carrying amounts of the liabilities recognized under
those guarantees at March 31, 2009 were immaterial.
Bank loans of ¥364 million ($3,714 thousand) of an
unaffiliated company were jointly and severally guaranteed
by the Company and six other unaffiliated companies.
According to an agreement between the seven companies,
any loss on these guarantees are to be borne equally
among the companies.
Product Warranties
The Companies issue contractual product warranties under
which they generally guarantee the performance of prod-
ucts delivered and services rendered for a certain period or
term. Changes in accrued product warranty cost for the
years ended March 31, 2009 and 2008 are summarized
as follows: