Pioneer 2008 Annual Report Download - page 41

Annual Report 2008 39
liabilities at the lowest level for which identifiable cash flows are
largely independent of the cash flows of other assets and
liabilities. When the sum of expected future cash flows is less
than the carrying amount of the asset group, an impairment
loss is recognized. Such impairment loss is measured as the
amount by which the carrying amount of the asset group
exceeds the fair value of the asset group.
Warranty Reserve—
The Company engages in extensive product quality programs
and processes including actively monitoring and evaluating the
quality of component suppliers. The Company’s warranty
obligation is affected by product failure rates and service costs
incurred in correcting product failure. The Company provides
for the estimated cost of product warranties at the time rev-
enue is recognized. These estimates are established using
historical information.
Long-Term Debt—
Premiums and issuance costs of long-term debt are amortized
over the term of long-term debt using the interest method.
Income Taxes—
Income taxes are provided based on the asset and liability
method of accounting. Deferred income taxes are recorded to
reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial
reporting amounts at year-end. These deferred taxes are mea-
sured by applying currently enacted tax laws. A valuation
allowance is established to reduce deferred tax assets if it is
more likely than not that all, or some portion, of such deferred
tax assets will not be realized.
The Company recognizes the financial statement effects
of tax positions when it is more likely than not, based on the
technical merits, that the tax positions will be sustained upon
examination by the tax authorities. Benefits from tax positions
that meet the more-likely-than-not recognition threshold are
measured at the largest amount of benefit that is greater than
50 percent likely of being realized upon settlement. Interest
and penalties accrued related to unrecognized tax benefits are
included in income taxes in the consolidated statements of
operations.
Research and Development Costs and Advertising Costs—
Research and development costs and advertising costs are
expensed as incurred.
Shipping and Handling Costs—
Shipping and handling costs totaled ¥16,512 million, ¥16,449
million and ¥16,482 million ($164,820 thousand) for the years
ended March 31, 2006, 2007 and 2008, respectively, and are
included in selling, general and administrative expenses in the
consolidated statements of operations.
Accounting for Stock-Based Compensation—
The Company accounted for its stock-based compensation
agreements using the fair value based method in accordance
with SFAS No. 123, “Accounting for Stock-Based Compen-
sation.” The Company adopted SFAS No. 123 (revised 2004),
“Share-Based Payment,” during the year ended March 31, 2007.
Net Income (Loss) per Share—
Basic net income (loss) per share has been computed by
dividing net income (loss) available to holders of common
stock by the weighted-average number of shares of common
stock outstanding during each year. Diluted net income (loss)
per share reflects the potential dilution and has been com-
puted on the basis that all dilutive potential common stocks
were exercised.
Derivatives—
Derivative financial instruments utilized by the Company are
comprised principally of forward exchange contracts, currency
options and currency swaps. Forward exchange contracts and
currency options, the majority of which mature within six
months, and currency swaps, which mature during 2008, are
utilized to hedge exposures to foreign exchange risk and inter-
est risk. The Company does not hold or issue derivative finan-
cial instruments for trading purposes.
The Company adopted SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as amended by
SFAS No. 138, “Accounting for Certain Derivative Instruments
and Certain Hedging Activities—an amendment of FASB
Statement No. 133,” and by SFAS No. 149, “Amendment of
SFAS No. 133 on Derivative Instruments and Hedging Activi-
ties.” Under SFAS No. 133, all derivative instruments are rec-
ognized in the balance sheet at their fair values and changes in
fair value are recognized immediately in earnings, unless the
derivatives qualify as hedges of future cash flows. For deriva-
tives qualifying as hedges of future cash flows, the effective
portion of changes in fair value is recorded in other compre-
hensive income, then recognized in earnings along with the
related effects of the hedged items. Any ineffective portion of
hedges is reported in earnings as it occurs.