Pioneer 2010 Annual Report Download - page 31

Notes to Consolidated Financial Statements
Pioneer Corporation and Subsidiaries
1. Basis of Presentation
a. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements have
been prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act and its
related accounting regulations and in conformity with account-
ing principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to applica-
tion and disclosure requirements of International Financial
Reporting Standards.
In preparing these consolidated financial statements,
certain reclassifications and rearrangements have been made
to the consolidated financial statements issued domestically
in order to present them in a form which is more familiar to
readers outside Japan. In addition, certain reclassifications
have been made in the 2009 financial statements to conform
to the classifications used in 2010.
The consolidated financial statements are stated in
Japanese yen, the currency of the country in which Pioneer
Corporation (Pioneer Kabushiki Kaisha; the “Company”) is
incorporated and operates. The translations of Japanese yen
amounts into U.S. dollar amounts are included solely for the
convenience of readers outside Japan and have been made
at the rate of ¥93 to $1.00, the approximate rate of exchange
at March 31, 2010. Such translations should not be construed
as representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.
b. Nature of Operations
The Company and its subsidiaries (together, the “Group”) are
engaged in the development, manufacture and sale of elec-
tronic products. The Group is a leading global manufacturer of
consumer- and business-use electronic products such as car
electronics and audio/video. The principal production activities
of the Group are carried out in Asia including Japan, the
United States, and Europe. The Group’s products are gener-
ally sold under its own brand names, principally “Pioneer.”
The principal markets for the Group are Japan, the United
States, Europe and Asia. The Group sells its products to
customers in consumer and commercial markets through its
sales offices in Japan, and its sales subsidiaries and indepen-
dent distributors overseas. On an OEM (original equipment
manufacturing) basis, the Group markets certain products,
such as car electronics products, to other companies.
Since fiscal 2009, the Company’s business performance
and financial position had triggered breaches of financial
covenants under a loan agreement with a number of lender
financial institutions. However, on March 29, 2010, the
Company signed a new loan agreement (by method of
syndication) with multiple financial institutions for a total loan
amount of ¥89.4 billion. With this loan agreement, the
breaches of financial covenants were resolved. The Company
was also able to secure stable funding with the assistance of
its lender banks.
The Company plans to use its own internal funds for the
redemption of ¥60 billion in the aggregate principal amount of
its convertible bonds due in March 2011, based on progress
with the sale of assets that have a low degree of relevance
to its main businesses. This includes the signing on March
30, 2010 of an agreement to sell the land and buildings of the
Company’s former head office in Meguro, Tokyo.
Furthermore, as a means of procuring growth funds, the
Company raised ¥34.9 billion by issuing new shares in
March 2010 through an international offering and third-
party allotments.
2. Summary of Significant Accounting Policies
a. Consolidation
The consolidated financial statements as of March 31, 2010
include the accounts of the Company and its 103 (116 in
2009) subsidiaries.
Under the control or influence concept, those companies
in which the Company, directly or indirectly, is able to exer-
cise control over operations are fully consolidated, and those
companies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
Investments in five (six in 2009) affiliated companies are
accounted for by the equity method. Investments in the
remaining affiliated companies are stated at cost. If the
equity method of accounting had been applied to the invest-
ments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
The excess of the cost of an acquisition over the fair value
of the net assets of the acquired subsidiary at the date of
acquisition is being amortized over 20 years.
All significant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within
the Group is eliminated.
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PIONEER CORPORATION Annual Report 2010