Pioneer 2011 Annual Report Download - page 32

Pioneer Corporation Annual Report 2011
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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 R&D; 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 years’
effects of changes in accounting policies in the
income statement where retrospective adjustments
to financial statements have been incorporated;
and 6) exclusion of minority interests from net
income (loss) , if contained.
c. Unification of Accounting Policies Applied to
Foreign Associated Companies for the Equity
Method
In March 2008, the ASBJ issued ASBJ Statement
No. 16, “Accounting Standard for Equity Method of
Accounting for Investments”. The new standard
requires adjustments to be made to conform the
associate’s accounting policies for similar transac-
tions and events under similar circumstances to
those of the parent company when the associate’s
financial statements are used in applying the equity
method unless it is impracticable to determine
adjustments. In addition, financial statements pre-
pared by foreign associated companies in accor-
dance with either International Financial Reporting
Standards or the generally accepted accounting
principles in the United States of America tenta-
tively may be used in applying the equity method if
the following items are adjusted so that net income
is accounted for in accordance with Japanese 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 R&D; 4) cancellation of the
fair value model accounting for property, plant, and
equipment and investment properties and incorpo-
ration of the cost model accounting; 5) recording
the prior years’ effects of changes in accounting
policies in the income statement where retrospec-
tive adjustments to the financial statements have
been incorporated; and 6) exclusion of minority
interests from net income, if contained. This stan-
dard was applicable to equity method of account-
ing for fiscal years beginning on or after April 1,
2010.
The Company applied this accounting standard
effective April 1, 2010.
d. Business Combination
In October 2003, the Business Accounting Council
(the “BAC”) issued a Statement of Opinion,
“Accounting for Business Combinations”, and in
December 2005, the ASBJ issued ASBJ Statement
No.7, “Accounting Standard for Business Divesti-
tures” and ASBJ Guidance No.10, “Guidance on
Accounting Standard for Business Combinations
and Accounting Standard for Business Divesti-
tures”. The accounting standard for business com-
binations allowed companies to apply the pooling
of interests method of accounting only when cer-
tain specific criteria were met such that the business
combination was essentially regarded as a uniting-
of-interests. For business combinations that did not
meet the uniting-of-interests criteria, the business
combination was considered to be an acquisition
and the purchase method of accounting was
required. This standard also prescribed the account-
ing for combinations of entities under common
control and for joint ventures.
In December 2008, the ASBJ issued a revised
accounting standard for business combinations,
ASBJ Statement No.21, “Accounting Standard
for Business Combinations.” Major accounting
changes under the revised accounting standard are
as follows: (1) The revised standard requires
accounting for business combinations only by the
purchase method. As a result, the pooling of inter-
ests method of accounting is no longer allowed. (2)
The current accounting standard accounts for the
research and development costs to be charged to
income as incurred. Under the revised standard, in-
process research and development (IPR&D)
acquired in a business combination is capitalized as
an intangible asset. (3) The previous accounting
standard provided for a bargain purchase gain
(negative goodwill) to be systematically amortized
over a period not exceeding 20 years. Under the
revised standard, the acquirer recognizes the bar-
gain purchase gain in profit or loss immediately on
the acquisition date after reassessing and confirm-
ing that all of the assets acquired and all of the lia-
bilities assumed have been identified after a review
of the procedures used in the purchase allocation.
This standard was applicable to business combina-
tions undertaken on or after April 1, 2010 with early
adoption permitted for fiscal years beginning on or
after April 1, 2009.
The Company has applied this standard effec-
tive from April 1, 2010.
e. Cash Equivalents
Cash equivalents are short-term investments that
are readily convertible into cash and exposed to
insignificant risk of changes in value. Cash equiva-
lents include time deposits which become due
within three months of the date of acquisition.