Omron 2010 Annual Report Download - page 80

80
Notes to Consolidated Financial Statements
Omron Corporation and Subsidiaries
Derivatives
Derivative instruments and hedging activities are account-
ed for in accordance with ASC No.815, “Derivatives and
Hedging”(previously SFAS No.133, “Accounting for
Derivative Instruments and Hedging Activities,” previously
SFAS No.138, “Accounting for Certain Derivative Instruments
and Certain Hedging Activities, an amendment of FASB
Statement No.133,” previously SFAS No.149, “Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities,” and previously SFAS No.161, “Disclosures
about Derivative Instruments and Hedging Activities-an
amendment of FASB Statement No.133”). This standard
establishes accounting and reporting standards for deriv-
ative instruments and for hedging activities, and requires
that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instru-
ments at fair value.
For foreign exchange forward contracts, foreign cur-
rency swaps and interest rate swaps on the date the
derivative contract is entered into, the Companies desig-
nate the derivative as a hedge of a forecasted transaction
or the variability of cash flows to be received or paid relat-
ed to a recognized asset or liability (“cash flow” hedge or
“foreign currency” hedge). The Companies formally doc-
ument all relationships between hedging instruments and
hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions.
This process includes linking all derivatives that are desig-
nated as cash flow or foreign currency hedges to specific
assets and liabilities on the consolidated balance sheet or
to specific firm commitments or forecasted transactions.
Based on the Companies’ policy, all foreign exchange for-
ward contracts, foreign currency swaps and interest rate
swaps entered into must be highly effective in offsetting
changes in cash flows of hedged items.
Changes in fair value of a derivative that is highly effec-
tive and that is designated and qualifies as a cash flow or
foreign currency hedge are recorded in other comprehen-
sive income (loss), until earnings are affected by the
variability in cash flows of the designated hedged item.
Cash Dividends
Cash dividends are reflected in the consolidated financial
statements at proposed amounts in the year to which they
are applicable, even though payment is not approved by
shareholders until the annual general meeting of share-
holders held early in the following fiscal year. Resulting
dividends payable are included in Other current liabilities
in the consolidated balance sheets.
Revenue Recognition
The Companies recognize revenue when persuasive evi-
dence of an arrangement exists, delivery has occurred and
title and risk of loss has transferred, the sales price is fixed
or determinable, and collectibility is probable.
Stock-Based Compensation
The Companies applied ASC No.718, “Compensation-Stock
Compensation” (previously revised SFAS No.123, “Share
Based Payment”), and recognized a stock-based com-
pensation cost measured by the fair value method.
Translation of Financial Statement Items of the
Company’s Subsidiaries Located Outside Japan into
Japanese Yen
Financial statements of the Company’s subsidiaries locat-
ed outside Japan are translated based upon ASC No.830,
“Foreign Currency Matters” (previously SFAS No.52,
“Foreign Currency Translation”). Assets and liabilities of
the subsidiaries are translated into Japanese yen at the
rates of exchange in effect at the balance sheet date.
Income and expense items are translated at the average
exchange rates prevailing during the year. And, gains and
losses resulting from translation of financial statements
are reported in Accumulated other comprehensive income
(loss) as Foreign currency translation adjustments.
Comprehensive Income (Loss)
The Companies apply ASC No.220, “Comprehensive
Income” (previously SFAS No.130, “Reporting Comprehensive
Income”). Comprehensive Income (Loss) is composed of
Net Income (Loss) attributable to shareholders, changes
in Foreign currency translation adjustments, changes in
Pension liability adjustments, changes in Unrealized gains
(losses) on available-for-sale securities and changes in Net
gains (losses) on derivative instruments. And Comprehensive
Income (Loss) is disclosed to Consolidated Statements of
Comprehensive Income (Loss).
New Accounting Standards
In June 2009, the FASB issued ASC No.105, “Generally
Accepted Accounting Principles” (previously SFAS No.168,
“The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles”).
ASC No.105 establishes rules that The ASC has become
the source of authoritative U.S.GAAP. ASC No.105 is
effective for fiscal years and interim periods ending after
September 15, 2009. The Companies modified references
that had been previously made to various former authori-
tative U.S. GAAP pronouncements to fit ASC No.105.
In October 2009, the FASB issued ASU No.2009-13,
“Multiple-Deliverable Revenue Arrangements-a consensus
of the FASB Emerging Issues Task Force (hereinafter EITF)”
(previously EITF ASU No.08-01, “Multiple-Deliverable
Revenue Arrangements”). ASU No.2009-13 modifies the
criteria for separating consideration under multiple-deliver-
able arrangements and requires allocation of the overall
consideration to each deliverable using the estimated sell-
ing price in the absence of vendor-specific objective
evidence or third-party evidence of selling price for deliv-
erables. As a result, the residual method of allocating
arrangement consideration will no longer be permitted. The
guidance also requires additional disclosures about how a
vendor allocates revenue in its arrangements and about the
significant judgments made and their impact on revenue
recognition. ASU No.2009-13 is effective for fiscal years
beginning on or after June 15, 2010. The provisions are
effective prospectively for revenue arrangements entered