Pioneer 2007 Annual Report Download - page 40

PIONEER CORPORATION39
and returns from end-users to certain dealers. The financial
impact of the future returns are estimated and reserved based
on historical experience.
Costs incurred by the Company in connection with sales
incentives related to the purchase or promotion of the
Company’s products are classified as a reduction of revenues in
accordance with Emerging Issues Task Force (“EITF”) Issue No.
01-9, “Accounting for Consideration Given by a Vendor to a
Customer (Including a Reseller of the Vendor’s Products).”
Such costs include the estimated cost of promotional discounts,
dealer price protection, dealer rebates, consumer rebates, cash
discounts, and support for dealers’ promotion of the
Company’s products. Sales incentives that are dependent on
future customer performance are estimated and recorded at
the later of when the original sale is recorded or when the
incentive is offered.
Cash and Cash Equivalents—
Cash and cash equivalents include cash on hand and deposits
in bank including time deposits. The Company considers all
time deposits with an original maturity of one year or less to be
cash equivalents. Such time deposits can be withdrawn at any
time without diminution of the principal amount.
Available-for-Sale Securities—
Under SFAS No. 115, “Accounting for Certain Investments in
Debt and Equity Securities,” all debt securities and marketable
equity securities held by the Company are classified as avail-
able-for-sale securities, and are carried at their fair values with
unrealized gains and losses reported in other comprehensive
income (loss). The cost of securities is determined using the
average-cost method.
The Company reviews the fair value of its available-for-sale
securities on a regular basis to determine if the fair value of
any individual security has declined below its cost and if such
decline is other than temporary. If the decline in value is
judged to be other than temporary, the cost basis of the secu-
rity is written down to fair value and the resulting realized loss
is included in the consolidated statements of operations. For
such marketable debt and equity securities, we assume the
decline is other than temporary when market value is less than
cost for a period of six months, or sooner depending on the
severity of decline or other factors.
Sundry Investments—
Sundry investments are stated at cost. The Company reviews
the investments for impairment when the events or changes in
circumstances that may have a significant adverse effect on the
value of those investments are identified. The investments are
written down if the value of investments is estimated to have
declined and such decline is other than temporary.
Inventories—
Inventories are valued at the lower of cost, which is deter-
mined principally by the average-cost method, or market,
which is net realizable value. Inventories are reviewed periodi-
cally and items considered to be slow moving or obsolete are
written down to market.
Property, Plant and Equipment and Depreciation—
Property, plant and equipment are stated at cost. Depreciation
is computed principally using the declining-balance method for
assets located in Japan and under the straight-line method for
assets located outside Japan, using rates based on the esti-
mated useful lives of the assets.
The principal ranges of estimated useful lives are as follows:
Buildings 15–65 years
Machinery and equipment 2–10 years
Goodwill and Other Intangible Assets—
Under SFAS No. 142, “Goodwill and Other Intangible Assets,”
acquired goodwill and other intangible assets that are deter-
mined to have an indefinite life are no longer amortized.
Instead, the carrying values of these assets are reviewed for
impairment at least annually, or more frequently if events or
changes in circumstances indicate that the asset might be
impaired. Intangible assets that are determined to have a defi-
nite life are amortized over their estimated useful lives. At
March 31, 2007, the Company had no goodwill. Amortization
of intangible assets with definite lives is computed using the
straight-line method with no residual value. The cost of patents
is amortized principally over seven years and software is amor-
tized principally over two to five years.