Pioneer 2016 Annual Report Download - page 32

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 sal-
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 inter-
nal 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 on the
date of sales of the relevant products, based on 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 “Accrued pension
and severance costs” based on projected benefit
obligations and plan assets at the consolidated bal-
ance sheet date. The projected benefit obligations
are attributed to periods on a benefit formula basis.
Prior service cost is amortized using the straight-line
method over 10–14 years within the average of the
estimated remaining service years. Actuarial gain
or loss is primarily amortized using the straight-line
method over 9–23 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.
Certain consolidated subsidiaries apply the sim-
plified method in computing net defined benefit assets
or accrued pension and severance costs and retire-
ment benefit costs. Under this method, the severance
payment amount to be required at the year-end for
voluntary termination is deemed as projected benefit
obligation.
In May 2012, the ASBJ issued ASBJ Statement
No. 26, “Accounting Standard for Retirement Ben-
efits” and ASBJ Guidance No. 25, “Guidance on
Accounting Standard for Retirement Benefits,” which
e. Cash Equivalents
Cash equivalents are short-term investments that are
readily convertible into cash and exposed to insig-
nificant 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 quota-
tions are available are stated at fair value. Unrealized
gain (loss) on these securities is stated at net of tax
effect and noncontrolling interest 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, invest-
ment 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 bal-
ance of total receivables, plus the amount deemed
necessary to cover individual accounts receivables
estimated to be uncollectible.
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 based on the estimated useful lives of the
assets is applied to property, plant and equipment of
foreign subsidiaries. The useful lives for lease assets
are the terms of the respective leases.
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
30 Pioneer Corporation Annual Report 2016