Pioneer 2012 Annual Report Download - page 33

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
Japanese 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.
j. 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.
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 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 under
predetermined assumptions. Net transitional
obligation as of April 1, 2000, 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 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.
Following the abolishment of qualified retirement
pension plan, the Company and certain Japanese
subsidiaries transferred part of defined benefit
pension plans into defined contribution pension
plans effective January 1, 2012, and October 1,
2011, respectively, and also revised defined benefit
pension plan. Accordingly, ASBJ Guidance No. 1
“Account Processing for Transfers among Retirement
Benefit Plans” is applied. The effect of this transfer
was to decrease income before taxes and minority
interests by ¥3,908 million ($47,659 thousand) and
was recorded as loss on transfer of retirement benefit
plan in the statement of income for the year ended
March 31, 2012.
Due to this revision, projected benefit obligation
decreased by ¥8,126 million ($99,098 thousand)
and prior service gain occurred from this transition is
amortized over 10 years.
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 contract that results from the acquisition,
construction, development and the normal operation
of a tangible fixed asset and is associated with the
retirement of such tangible fixed asset. The asset
retirement obligation is recognized as the sum of the
discounted 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 liability
should be recognized when a reasonable estimate
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 related
fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life
of the asset. Over time, the liability is accreted to its
present value each period. Any subsequent revisions
to the timing or the amount of the original estimate of
undiscounted cash flows are reflected as an increase
or a decrease in the carrying amount of the liability
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Pioneer Corporation Annual Report 2012