Pioneer 2010 Annual Report Download - page 33

k. Retirement and Pension Plans
The Group sponsors both defined benefit pension plans and
defined contribution pension plans.
With respect to the defined benefit pension plan, the Group
accounts for the liability for employees’ retirement benefits
based on projected benefit obligations and plan assets at the
balance sheet date. Part of the changes in projected benefit
obligations and plan assets are not recognized when incurred,
but deferred and amortized on predetermined assumptions.
Net transitional obligation is being amortized in equal amounts
mainly over 15 years. Prior service cost is amortized using the
straight-line method over the average of the estimated remain-
ing service years (mainly 10 –15 years). Actuarial gain or loss is
primarily amortized using the straight-line method over the
average of the estimated remaining service years. The Group’s
net periodic retirement benefit costs consist of service cost,
interest cost, expected return on plan assets and amortization
of such deferred amounts.
With respect to the defined contribution plans, the
Group charges contributions to expenses when they are
paid or accrued.
In July 2008, the ASBJ issued ASBJ Statement No. 19,
“Partial Amendments to Accounting Standard for Retire-
ment Benefits (Part 3).” This standard stipulates that the
yield of high-credibility long-term bond which is the basis for
estimating the discount rate shall be that of government,
agency and high grade corporate bonds. The standard was
effective for fiscal years beginning on or after April 1, 2009
with early adoption permitted.
The Group applied this new accounting standard for the
discount rate effective April 1, 2009. The effect of this
change on the accompanying consolidated financial state-
ments was immaterial.
l. Research and Development Costs and
Intangible Assets
Research and development costs are charged to income as
incurred. Software for sale is amortized by the straight-line
method over 2–3 years, while software used by the Group is
amortized by the straight-line method over the estimated
useful life of five years. Intangible assets other than software
are amortized using the straight-line method.
m. Leases
On March 30, 2007, the ASBJ issued ASBJ Statement No. 13,
“Accounting Standard for Lease Transactions,” which revised
the former accounting standard for lease transactions issued
on June 17, 1993, and ASBJ Guidance No. 16, “Guidance on
Accounting Standard for Lease Transactions,” which revised
the former Guidance issued on January 18, 1994. The adoption
of the revised accounting standard was permitted for fiscal
years beginning on or after April 1, 2008. Accordingly, the
Group has applied the revised accounting standard from April
1, 2008.
n. Income Taxes
The provision for income taxes is computed based on the
pretax income included in the consolidated statements of
operations. The asset and liability approach is used to recog-
nize deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted
tax laws to the temporary differences. A valuation allowance
is established to reduce deferred tax assets if they are consid-
ered not to be recoverable.
o. Foreign Currency Translations
All short-term and long-term monetary receivables and pay-
ables denominated in foreign currencies are translated into
Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation
are recognized in the statements of operations to the extent
that they are not hedged by forward exchange contracts.
p. Foreign Currency Financial Statements
The balance sheet accounts of the foreign consolidated
subsidiaries are translated into Japanese yen at the current
exchange rate as of the balance sheet date except for
equity, which is translated at the historical rate. Differences
arising from such translations were shown as “Foreign
currency translation adjustments” in a separate component
of equity. Revenue and expense accounts of consolidated
foreign subsidiaries are translated into yen at the average
exchange rate.
q. Derivatives and Hedging Activities
The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest
rates. Foreign exchange forward contracts and currency
swaps are utilized by the Group to reduce foreign currency
exchange and interest rate risks associated with assets and
liabilities denominated in foreign currencies and debt obliga-
tions. The Group does not enter into derivatives for trading or
speculative purposes.
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PIONEER CORPORATION Annual Report 2010