Pioneer 2011 Annual Report Download - page 33

Pioneer Corporation Annual Report 2011 31
f. Investment Securities
Available-for-sale securities for which market quota-
tions are available are stated at fair value. Unreal-
ized gain (loss) on these securities is stated at net of
tax effect and minority interests as “unrealized gain
(loss) on available-for-sale securities” in a separate
component of equity. Available-for-sale securities
for which market quotations are unavailable are
stated at cost by using the moving average method.
For other than temporary declines in fair value,
investment securities are reduced to net realizable
value by a charge to income.
g. Allowance for Doubtful Receivables
The Group has provided an allowance for doubtful
receivables by the method based on the percent-
age 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.
h. Inventories
Inventories are stated at the lower of cost, deter-
mined by the average cost method for finished
products, work in process and raw materials and
supplies, or net selling value.
i. 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 esti-
mated useful lives of the assets, while the straight-
line method is applied to property, plant and equip-
ment of foreign subsidiaries and leased property.
j. Long-lived Assets
The Group reviews its long-lived assets for impair-
ment whenever events or changes in circumstance
indicate that the carrying amount of an asset or
asset group may not be recoverable. An impair-
ment 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 disposi-
tion 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 recov-
erable amount, which is the higher of the dis-
counted cash flows from the continued use and
eventual disposition of the asset or the net selling
price at disposition.
k. Warranty Reserve
Provisions for warranty costs are recognized at the
date of sale of the relevant products, at the best
estimate of the expenditure required to settle the
Group’s after-sales service obligation.
l. 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 employ-
ees’ retirement benefits based on projected benefit
obligations and plan assets at the balance sheet
date. Part of the changes in projected benefit obli-
gations and plan assets are not recognized when
incurred, but deferred and amortized under prede-
termined 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 esti-
mated remaining 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.
m. Asset Retirement Obligations
In March 2008, the ASBJ published the accounting
standard for asset retirement obligations, ASBJ
Statement No.18 “Accounting Standard for Asset
Retirement Obligations” and ASBJ Guidance No.21
“Guidance on Accounting Standard for Asset
Retirement Obligations”. Under this accounting
standard, an asset retirement obligation is defined
as a legal obligation imposed either by law or con-
tract that results from the acquisition, construction,
development and the normal operation of a tangi-
ble fixed asset and is associated with the retirement
of such tangible fixed asset. The asset retirement
obligation is recognized as the sum of the dis-
counted cash flows required for the future asset
retirement and is recorded in the period in which
the obligation is incurred if a reasonable estimate
can be made. If a reasonable estimate of the asset
retirement obligation cannot be made in the period
the asset retirement obligation is incurred, the lia-
bility should be recognized when a reasonable esti-
mate of asset retirement obligation can be made.
Upon initial recognition of a liability for an asset
retirement obligation, an asset retirement cost is
capitalized by increasing the carrying amount of the
Notes to Consolidated Financial Statements