Ricoh 1999 Annual Report Download - page 38

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Ricoh Company, Ltd. and Consolidated Subsidiaries
Ricoh distributes its products primarily through domestic (Japanese) and
foreign sales subsidiaries. Overseas, Ricoh owns and distributes not only
Ricoh brand products but also other brands, such as Gestetner and Savin.
Ricoh manufactures its products primarily in 15 plants in Japan and
eight plants overseas, which are located in the United States, United
Kingdom, France, and China.
1. NATURE OF OPERATIONS
Ricoh Company, Ltd. (the “Company”), was established in 1936, and is
headquartered in Tokyo, Japan. The Company and significant subsidiaries
(“Ricoh” as a consolidated group) is a worldwide supplier of office
automation equipment, including copiers, facsimile machines, data
processing systems, printers, and related supplies. Ricoh is also well known for
its state-of-the-art electronic devices, photographic equipment and others.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
(f) Plant and Equipment
Depreciation of plant and equipment is computed principally by using the
declining-balance method over the estimated useful lives. Most of the foreign
subsidiaries have adopted the straight-line method for computing deprecia-
tion, which currently accounts for approximately 29% of the consolidated
depreciation expense.
Effective rates of depreciation for the three years ended March 31, 1999
are summarized below:
The accompanying consolidated financial statements of the Company and its
consolidated subsidiaries have been prepared in conformity with accounting
principles generally accepted in the United States of America, modified for
the accounting for stock splits (see 2 (m) below). Significant accounting and
reporting policies are summarized below:
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Ricoh. Invest-
ments in generally 20% to 50% owned companies are accounted for on the
equity basis. All significant intercompany balances and transactions have
been eliminated in consolidation.
(b) Translation of Foreign Currency Accounts
Under the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 52, “Foreign Currency Translation,” assets and liabilities are
translated at the exchange rates in effect at each fiscal year-end, and income
and expenses are translated at the average rates of exchange prevailing
during each fiscal year. The resulting translation adjustments are accumulat-
ed as part of other comprehensive income (loss) included in shareholders’
investment.
(c) Derivatives
Ricoh enters into foreign currency contracts and interest rate swap
agreements to manage risk exposure. Gains and losses on hedges of existing
assets or liabilities are included in the carrying amounts of those assets or
liabilities and are ultimately recognized in income as part of those carrying
amounts. Gains and losses related to qualifying hedges of firm commitments
and anticipated transactions are deferred and recognized in income, or as
adjustments of carrying amounts, when the hedged transaction occurs.
(d) Securities
Ricoh conforms with SFAS No.115, “Accounting for Certain Investments
in Debt and Equity Securities,” which requires certain investments in debt
and equity securities to be classified as either held-to-maturity, trading, or
available-for-sale securities. As of March 31, 1998 and 1999, a substantial
part of Ricoh’s investments in debt and equity securities is classified to avail-
able-for-sale securities. Those classified as available-for-sale are reported at
fair value with unrealized gains and losses, net of related taxes, excluded from
earnings and reported in accumulated other comprehensive income (loss).
The cost of the securities sold was computed based on the average cost of
each security held at the time of sale.
(e) Inventories
Inventories are stated at the lower of average cost or market. Inventory costs
include raw materials, labor and manufacturing overheads.
Thousands of
U.S. dollars
1999
$ 57,504
25,479
Millions of yen
Aggregate cost
Accumulated depreciation ¥ 6,958
3,083
¥ 6,365
2,617
1999
1998
Certain leased buildings, machinery and equipment are accounted for as
capital leases in conformity with SFAS No. 13, “Accounting for Leases.” The
aggregate cost included in plant and equipment and related accumulated
depreciation as of March 31, 1998 and 1999 were as follows:
8.0%
38.3
1998
7.9%
36.8
1997
7.7%
36.2
1999
Buildings
Machinery and equipment
The related future minimum lease payments and the present value of
the net minimum lease payments as of March 31, 1999 were ¥5,784 million
($47,802 thousand) and ¥4,083 million ($33,744 thousand), respectively.
Ordinary maintenance and repairs are charged to income as incurred.
Major replacements and improvements are capitalized. When properties are
retired or otherwise disposed of, the property and related accumulated depre-
ciation accounts are relieved of the applicable amounts, and any differences
are included in other income or expenses.
(g) Goodwill
Ricoh has classified as goodwill the cost in excess of fair value of the net
assets of major companies acquired in purchase transactions. Goodwill is
being amortized on a straight-line method over the estimated periods
benefited, not to exceed 20 years.
(h) Pension and Retirement Allowances Plans
Ricoh conforms with SFAS No. 87, “Employers’ Accounting for Pensions” in
accounting for pension and retirement allowances plans.
In the year ended March 31, 1999, Ricoh adopted SFAS No. 132,
“Employers’ Disclosure about Pensions and Other Postretirement Benefits,”