Pioneer 2012 Annual Report Download - page 32

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; and 5)
exclusion of minority interests from net income (loss),
if contained in net income (loss).
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.” This standard requires
adjustments to be made to conform the associate’s
accounting policies for similar transactions 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 such adjustments. In
addition, financial statements prepared by foreign
associated companies in accordance with either
International Financial Reporting Standards or the
generally accepted accounting principles in the
United States of America tentatively 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
incorporation of the cost model accounting; and 5)
exclusion of minority interests from net income (loss),
if contained in net income (loss).
d. Business Combination
In October 2003, the Business Accounting Council
issued a Statement of Opinion, “Accounting
for Business Combinations,” and in December
2005, the ASBJ issued ASBJ Statement No. 7,
“Accounting Standard for Business Divestitures” and
ASBJ Guidance No. 10, “Guidance on Accounting
Standard for Business Combinations and Accounting
Standard for Business Divestitures.” The accounting
standard for business combinations allowed
companies to apply the pooling of interests method
of accounting only when certain 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 accounting 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 interests method of accounting
is no longer allowed. (2) The previous accounting
standard required research and development costs to
be charged to income as incurred. Under the revised
standard, in-process research and development
cost (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 bargain
purchase gain in profit or loss immediately on the
acquisition date after reassessing and confirming
that all of the assets acquired and all of the liabilities
assumed have been identified after a review of
the procedures used in the purchase allocation.
The revised standard was applicable to business
combinations undertaken on or after 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
equivalents include time deposits which become due
within three months of the date of acquisition.
f. Investment Securities
Available-for-sale securities for which market
quotations are available are stated at fair value.
Unrealized 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 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.
h. Inventories
Inventories are stated at the lower of cost, determined
30 Pioneer Corporation Annual Report 2012