Pioneer 2010 Annual Report Download - page 32

b. Unification of Accounting Policies Applied to
Foreign Subsidiaries for the Consolidated
Financial Statements
In May 2006, the Accounting Standards Board of Japan (the
“ASBJ”) issued ASBJ Practical Issues Task Force (“PITF”)
No. 18, “Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements.” PITF No. 18 prescribes: (1) the
accounting policies and procedures applied to a parent com-
pany and its subsidiaries for similar transactions and events
under similar circumstances should in principle be unified for
the preparation of the consolidated financial statements,
(2) financial statements prepared by foreign subsidiaries in
accordance with either IFRS or U.S. GAAP tentatively may be
used for the consolidation process, (3) however, the following
items should be adjusted in the consolidation process so that
net income (loss) is accounted for in accordance with Japa-
nese GAAP unless they are not material: 1) amortization of
goodwill; 2) scheduled amortization of actuarial gain or loss of
pensions that has been directly recorded in the equity;
3) expensing capitalized development costs of research and
development costs; 4) cancellation of the fair value model
accounting for property, plant and equipment and investment
properties and incorporation of the cost model accounting;
5) recording the prior year’s effects of changes in accounting
policies in the income statement where retrospective adjust-
ments to financial statements have been incorporated; and
6) exclusion of minority interests from net income (loss), if
contained. PITF No. 18 was effective for fiscal years begin-
ning on or after April 1, 2008.
The Group applied this accounting standard effective April
1, 2008. The adoption of this standard is not expected to
have any material impact on the Group’s consolidated state-
ments of operations or financial position.
c. Cash Equivalents
Cash equivalents are short-term investments that are readily
convertible into cash and exposed to insignificant risk of
changes in value. Cash equivalents include time deposits which
become due within three months of the date of acquisition.
d. Investment Securities
Available-for-sale securities for which market quotations are
available are stated at fair value. Unrealized gain on these
securities is stated at net of tax effect and minority interests
as “unrealized gain on available-for-sale securities” on a
separate component of equity.
Available-for-sale securities for which market quotations
are unavailable are stated at cost by using the moving aver-
age method. For other than temporary declines in fair value,
investment securities are reduced to net realizable value by a
charge to income.
e. Allowance for Doubtful Receivables
The Group has provided an allowance for doubtful receivables
by the method based on the percentage of its own historical
bad debt loss against the balance of total receivables, plus the
amount deemed necessary to cover individual accounts
estimated to be uncollectible.
f. Inventories
Inventories are stated at the lower of cost, determined by the
average cost method for finished products, work in process
and raw materials and supplies, or net selling value.
g. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
of property, plant and equipment other than leased property
of the Company and its domestic subsidiaries is computed
principally using the declining-balance method based on the
estimated useful lives of the assets, while the straight-line
method is applied to property, plant and equipment of foreign
subsidiaries and leased property.
h. Long-lived Assets
The Group reviews its long-lived assets for impairment
whenever events or changes in circumstance indicate that the
carrying amount of an asset or asset group may not be
recoverable. An impairment loss would be recognized if the
carrying amount of an asset or asset group exceeds the sum
of the undiscounted future cash flows expected to result from
the continued use and eventual disposition of the asset or
asset group. The impairment loss would be measured as the
amount by which the carrying amount of the asset exceeds
its recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of
the asset or the net selling price at disposition.
i. Stock Issuance Costs
Stock issuance costs are amortized by the straight-line
method over three years.
j. Warranty Reserve
Provisions for warranty costs are recognized at the date of sale
of the relevant products, at the best estimate of the expendi-
ture required to settle the Group’s after-sales service obligation.
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PIONEER CORPORATION Annual Report 2010