Pioneer 2012 Annual Report Download - page 44

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(1) Group Policy for financial instruments
The Group has a policy to invest cash surplus, if
any, only in short-term deposits or other financial
instruments which have a similar nature. The Group
raises funds by bank loans and/or from capital
markets through bonds. Derivatives are used, not
for speculative purposes, to manage exposure to
financial risks as described in (2) below.
(2) Nature and extent of risks arising from
financial instruments
Receivables such as trade receivables are exposed
to customer credit risk. Although receivables in
foreign currencies are exposed to the market risk of
fluctuation in foreign currency exchange rates, the
position, net of payables in foreign currencies, is
hedged by using forward foreign currency contracts.
Investment securities, mainly equity instruments
in the companies with which the Company has
business and capital alliance, are exposed to the risk
of market price fluctuations.
Payment terms of payables, such as trade
payables, are less than one year. Payables in foreign
currencies arising from imports of raw materials and
finished products are exposed to the market risk of
fluctuation in foreign currency exchange rates.
Long-term loans bear floating interest rates, and
are exposed to variable interest rate risk based on
the short-term prime rate and TIBOR.
Derivatives include forward foreign currency
contracts which are used to manage exposure
to market risks from changes in foreign currency
exchange rates of receivables and payables and
currency swaps which are used to manage exposure
to market risks from changes in foreign currency
exchange rates of bank loans. Please see Note 15
for more detail about derivatives.
(3) Risk management for financial instruments
Credit risk management
Credit risk is the risk of economic loss arising from
a counterparty’s failure to repay or service debt
12. Leases
13. Loss on Disaster and Insurance Income for Disaster
14. Financial Instruments and Related Disclosures
The Group leases certain land, machinery and equipment, office space, warehouses, computer equipment and
employees’ residential facilities.
The minimum rental commitments under noncancellable operating leases at March 31, 2012, were as follows:
The Group recorded insurance proceeds, for which the amounts were fixed, on damaged property, plant and
equipment and inventories for its consolidated subsidiaries which were damaged by flooding that occurred in
Thailand during October 2011, as insurance income for disaster on the consolidated statement of income for the
year ended March 31, 2012.
A part of the insurance proceeds is still under negotiation to fix the amount with the insurer, which is not
recorded in the consolidated statement of income for the year ended March 31, 2012.
Loss on disaster consists of loss due to flooding that occurred in Thailand. A breakdown of loss on disaster for the
year ended March 31, 2012 was as follows:
Millions of Yen
Thousands of
U.S. Dollars
2012 2012
Operating leases:
Within one year ¥1,413 $17,232
Over one year 3,592 43,805
Total ¥5,005 $61,037
Millions of Yen
Thousands of
U.S. Dollars
2012 2012
Loss related to property, plant and equipment ¥1,767 $ 21,549
Loss related to inventories 4,727 57,646
Others 2,834 34,561
Total ¥9,328 $113,756
42 Pioneer Corporation Annual Report 2012