Pioneer 2014 Annual Report Download - page 33

h. Inventories
Inventories are stated at the lower of cost, determined
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 Japa-
nese 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 contin-
ued 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. Software for sales is amortized
using the straight-line method over the expected sell-
able period by product group of one to three years,
considering the expected sales volume trend based
on the life cycle of related products. Software for
internal use is amortized using the straight-line method
over an estimated useful life of five years.
k. Warranty Reserve
Provisions for warranty costs are recognized at the
date of sales of the relevant products, at the best esti-
mate 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 “Accrued pension and sev-
erance costs” based on projected benefit obligations
and plan assets at the consolidated balance sheet
date. The projected benefit obligations are attributed
to periods on a straight-line basis and a projected unit
credit method. 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 10–15 years within the
average of the estimated remaining service years.
Actuarial gain or loss is primarily amortized using the
straight-line method over 10–18 years within 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.
In May 2012, the ASBJ issued ASBJ Statement
No. 26, “Accounting Standard for Retirement Benefits”
and ASBJ Guidance No. 25, “Guidance on Account-
ing Standard for Retirement Benefits”, which replaced
the accounting standard for retirement benefits that
had been issued by the Business Accounting Council
in 1998 with an effective date of April 1, 2000,
and the other related practical guidance, and were
followed by partial amendments from time to time
through 2009.
(a) Under the revised accounting standard, actuarial
gains and losses and past service costs that are yet
to be recognized in profit or loss are recognized within
equity (“Accumulated other comprehensive income”),
after adjusting for tax effects, and any resulting defi-
cit or surplus is recognized as a liability (“Accrued
pension and severance costs”) or asset (“Asset for
retirement benefits”).
(b) The revised accounting standard does not change
how to recognize actuarial gains and losses and past
service costs in profit or loss. Those amounts are
recognized in profit or loss over a certain period no
longer than the expected average remaining service
period of the employees. However, actuarial gains
and losses and past service costs that arose in the
current period and have not yet been recognized in
profit or loss are included in other comprehensive
income and actuarial gains and losses and past service
costs that were recognized in other comprehensive
income in prior periods and then recognized in profit
or loss in the current period shall be treated as reclas-
sification adjustments.
(c) The revised accounting standard also made certain
amendments relating to the method of attributing
expected benefit to periods and relating to the discount
rate and expected future salary increases.
This accounting standard and the guidance for (a) and
(b) above are effective for the end of annual periods
beginning on or after April 1, 2013, and for (c) above
31
Pioneer Corporation
Annual Report 2014