Ricoh 2005 Annual Report Download - page 34

( n) Resear ch and Development Expenses and Advertising Costs
Research and development expenses and advertising costs are expensed
as incurred.
( o) Shipping and Handling Costs
Shipping and handling costs, which mainly include transportation to
customers, are included in selling, general and administrative expenses
on the consolidated statements of income.
( p) Impairment or Disposal of Long-Lived Assets
Long-lived assets and acquired intangible assets with a definite life are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset or group of assets may not
be recoverable. Recoverability of assets to be held and used is assessed by
comparing the carrying amount of an asset or asset group to the
expected future undiscounted net cash flows of the asset or group of
assets. If an asset or group of assets is considered to be impaired, the
impairment charge to be recognized is measured as the amount by
which the carrying amount of the asset or group of assets exceeds fair
value. Long-lived assets meeting the criteria to be considered as held for
sale are reported at the lower of their carrying amount or fair value less
costs to sell.
( q) Ear nings Per Shar e
Basic net income per common share is calculated by dividing net
income by the weighted-average number of shares outstanding during
the period. The calculation of diluted net income per common share is
similar to the calculation of basic net income per share, except that the
weighted-average number of shares outstanding includes the additional
dilution from potential common stock equivalents such as convertible
bonds.
Ricoh has no dilutive securities outstanding as of and for the years
ended March 31, 2004 and 2005, and therefore there is no difference
between basic and diluted net income per share.
( r) Non-cash Transactions
The following non-cash transactions have been excluded from the
consolidated statements of cash flows:
Thousands of
Millions of Yen U.S. Dollars
2003 2004 2005 2005
Conversion of
convertible bonds ¥32,905 ¥ – ¥ – $ –
Capital lease obligations incurred 1,697 75 865 8,084
Retirement of treasury stock 13,328 – – –
Issuance of treasury stock in
exchange for subsidiary’s stock – 3,930 2,545 23,785
Transfer of marketable equity
securities to employee retirement
benefit trust – 3,648 – –
( s) Use of Estimates
Management of the Company has made a number of estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, including impairment losses of long-lived assets
and the disclosures of fair value of financial instruments and
contingent assets and liabilities, to prepare these financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
The Company has identified five areas where it believes assumptions
and estimates are particularly critical to the consolidated financial
statements. These are determination of the allowance for doubtful
receivables, impairment of securities, impairment of long-lived assets
and goodwill, realizability of deferred tax assets and pension
accounting.
( t) Reclassification to Prior Year s’ Consolidated Financial
Statements
The accompanying consolidated balance sheet for the year ended
March 31,2004, reflects the reclassification of finance receivables
expected to be collected within one year from the balance sheet date, or
the current portion, previously included in investments and other assets
to current assets to conform with the presentation used for the year
ended March 31, 2005. The effect of this reclassification was to increase
total current assets by ¥154,122 million from ¥871,817 million to
¥1,025,939 million at March 31, 2004. This reclassification had no
effect on the consolidated statements of income and cash flows.
( u) New Accounting Standards
In March 2004, the EITF reached a consensus on EITF 03-1, “The
Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments.” EITF 03-1 provides guidance on other than
temporary impairment models for debt and marketable equity securities
accounted for under SFAS No. 115, “Accounting for Certain Investments
in Debt and Equity Securities,” and non-marketable securities
accounted for under the cost method. The EITF developed a basic
three-step model to evaluate whether an investment is other-than-
temporarily impaired. The Financial Accounting Standards Board
( “FASB”) issued FASB Staff Position EITF 03-1-1 in September 2004
which delayed the effective date of the recognition and measurement
provisions of EITF 03-1. The adoption of EITF 03-1 is not expected to
have a material effect on the Company’s consolidated results of
operations and financial position.
In November 2004, the FASB issued SFAS No.151, “Inventory Costs, an
amendment of ARB No. 43, Chapter 4” to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and
wasted material ( spoilage) . Among other provisions, the new rule
requires that items such as idle facility expense, excessive spoilage,
double freight, and rehandling cost be recognized as current period
charges regardless of whether they meet the criterion of “so abnormal”
as stated in ARB No. 43. In addition, SFAS 151 requires that the
allocation of fixed production overheads to the costs of conversion be
based on the normal capacity of the production facilities. SFAS 151 is
effective for fiscal years beginning after June 15, 2005 and is required to
be adopted by Ricoh in the first quarter beginning April 1, 2006. Ricoh
is currently determining the effect of SFAS 151 on the Ricoh’s
consolidated financial statements but does not expect the effect to be
material.
33 ANNUAL REPORT 2005