Ricoh 2003 Annual Report Download - page 46

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Service costs
Interest costs
Expected return on plan assets
Net amortization
Settlement loss
Net periodic benefit cost
Thousands of
U.S. dollars
2 0 0 3
Millions of yen
2 0 0 3
20022001
¥ 1 6 ,9 4 3
1 4 ,2 9 2
( 9 ,7 6 3 )
5 ,0 8 1
( 3 5 )
¥ 2 6 ,5 1 8
$143,585
1 2 1 ,1 1 9
( 8 2 ,7 3 7 )
4 3 ,0 5 9
( 2 9 7 )
$224,729
¥15,449
11,706
( 13,410)
1,123
—
¥14,868
¥15,636
13,693
( 13,031)
4,707
183
¥21,188
The Japanese dom estic plans represented approxim ately 88% of the above total
projected benefit obligation as of March 31, 2003. The weighted-average discount
rate, rate of increase in compensation and expected long-term rate of return on
plan assets of the dom estic pension plans were 3.0%, 3.3% and 4.4%, respectively,
for the year ended March 31, 2002 and 2.2%, 3.4% and 2.9%, respectively, for the
year ended March 31, 2003.
The net periodic benefit costs of the defined benefit plans for the three years
ended March 31, 2003 consisted of the following com ponents:
In accordance with the provisions of SFAS 87, Ricoh recorded an adjustment
for m inimum pension liability at March 31, 2002 and 2003. This liability repre-
sents the excess of the accum ulated benefit obligations over the fair value of plan
assets and severance costs already recognized before recording the m inimum pen-
sion liability. This excess is primarily attributable to a substantial reduction in the
discount rate used in pension calculation and loss on plan assets. A corresponding
amount was recognized as an intangible asset to the extent of the unrecognized
prior service cost, and the balance was recorded as a com ponent of accumulated
other comprehensive incom e ( loss) , net of tax.
The projected benefit obligations, accum ulated benefit obligations, and fair
value of plan assets for the pension plans with accum ulated benefit obligations in
excess of plan assets were ¥335,517 million, ¥280,930 million and ¥208,712 m il-
lion, respectively, as of March 31, 2002 and ¥453,956 million ( $3,847,085 thou-
sand) , ¥387,481 million ( $3,283,737 thousand) and ¥218,058 million
( $1,847,949 thousand) , respectively, as of March 31, 2003.
Em ployees of certain dom estic subsidiaries not covered by the EPF plan and
directors of the Company are prim arily covered by unfunded retirement allow-
ances plans. The payments to directors are subject to shareholders’ approval.
As noted above, the domestic EPF plan is com posed of ( 1) a corporate defined
benefit portion established by Ricoh and ( 2) a substitutional portion based on ben-
efits prescribed by the government ( similar to social security benefits in the United
States) . Ricoh has been exempted from contributing to the Japanese Pension
Insurance ( “JPI”) program that would otherwise have been required if it had not
elected to fund the governm ent substitutional portion of the benefit through an
EPF arrangement. The plan assets of the EPF are invested and m anaged as a single
portfolio for the entire EPF and are not separately attributed to the substitutional
and corporate portions. The substitutional portion represents approxim ately 39% of
the total proj ected benefit obligation of the EPF as of March 31, 2003. In June 2001,
the Japanese pension law was am ended to permit an em ployer to elect to transfer
the entire substitutional portion benefit obligation from the EPF to the governm ent
together with a specified am ount of plan assets pursuant to a governm ent formula.
After such transfer, the em ployer would be required to m ake periodic contributions
to JPI, and the Japanese governm ent would be responsible for all benefit paym ents.
The corporate portion of the EPF would continue to exist exclusively as a corporate
defined benefit pension plan. In this regard, Ricoh has elected to transfer the sub-
stitutional portion of its EPF to the governm ent. The process of separating the sub-
stitutional portion from the corporate portion includes several phases. In January
2003, Ricoh received governm ent approval of exem ption from the obligation for
benefits related to future employee service with respect to the substitutional portion
of its EPF and is proceeding with the rem aining steps to effectuate the transfer
which is presently expected to be completed by the end of calendar year 2003.
Ricoh will account for the transfer in accordance with EITF 03-2 “Accounting for
the Transfer to the Japanese Government of the Substitutional Portion of Em ployee
Pension Fund Liabilities.” As specified in EITF 03-2, the entire separation process is
to be accounted for at the time of com pletion of the transfer to the governm ent of
the benefit obligation and related plan assets as a settlem ent in accordance with
SFAS No. 88 “Em ployers’ Accounting for Settlem ents and Curtailments of Defined
Benefit Pension Plans and for Term ination Benefits.” Accordingly, there has been
no effect on Ricoh’s consolidated financial statem ents for the fiscal year ended
March 31, 2003. The aggregate effect of this separation will be determined based on
the Company’s total pension benefits obligation as of the date the transfer is com -
pleted and the amount of plan assets required to be transferred. Based on the Com -
pany’s current estim ates as to the total amount of such pension benefits obligation
and the amount of plan assets required to be transferred, Ricoh’s m anagem ent
does not presently expect that this separation will have a significant effect on
Ricoh’s financial condition or results of operation. However, the final am ount of
the impact could be significantly different depending on any change in the
amounts of the pension benefit obligation or plan assets to be transferred.
The Japanese Commercial Code provides that an amount equal to at least 10% of
cash dividends and other distributions from retained earnings paid by the Company
and its domestic subsidiaries be appropriated as a legal reserve. No further appropri-
ation is required when the total amount of the legal reserve and additional paid-in
capital equals 25% of com mon stock. Legal reserves included in retained earnings
as of March 31, 2002 and 2003 were ¥16,815 million and ¥16,903 million
( $143,246 thousand) , respectively, and are restricted from being used as dividends.
Semiannual cash dividends are approved by the shareholders after the end of
each fiscal period or are declared by the Board of Directors after the end of each
interim six-m onth period. Such dividends are payable to shareholders of record at
the end of each such fiscal or interim six-m onth period. At the general meeting to
be held on June 26, 2003, the shareholders will be asked to approve the declaration
of a cash dividend ( ¥7 per share) on the com mon stock totaling ¥5,198 m illion
( $44,051 thousand) , which will be paid to shareholders of record as of March 31,
2003. The declaration of this dividend has not been reflected in the consolidated
financial statem ents as of March 31, 2003.
1 2 . SHAREHOLDERS’ INVESTMENT