Ricoh 2006 Annual Report Download - page 34

( p) 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.
( q) 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 am ount 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 am ount 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 am ount by
which the carrying amount of the asset or group of assets exceeds fair
value. Long-lived assets m eeting the criteria to be considered as held for
sale are reported at the lower of their carrying am ount or fair value less
costs to sell.
( r) Earnings Per Shar e
Basic net incom e per com mon share is calculated by dividing net
incom e by the weighted-average number of shares outstanding during
the period. The calculation of diluted net income per comm on share is
sim ilar to the calculation of basic net incom e per share, except that the
weighted-average number of shares outstanding includes the additional
dilution from potential comm on stock equivalents such as convertible
bonds.
Ricoh has no dilutive securities outstanding as of and for the years
ended March 31, 2004, 2005 and 2006, and therefore there is no
difference between basic and diluted net incom e per share.
( s) Non- cash Tr ansactions
The following non-cash transactions have been excluded from the
consolidated statements of cash flows:
Thousands of
Millions of Yen U.S. Dollars
2004 2005 2006 2006
Capital lease obligations incurred ¥ 75 ¥ 865 ¥ 2 6 1 $ 2 ,2 3 1
Issuance of treasury stock in
exchange for subsidiary’s stock 3,930 2,545 905 7,735
Transfer of m arketable equity
securities to em ployee retirement
benefit trust 3,648 – – –
( t) Use of Estimates
Managem ent of the Company has m ade a number of estimates and
assum ptions that affect the reported am ounts of assets, liabilities,
revenues and expenses, including im pairm ent 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 U.S. generally accepted accounting principles. Actual
results could differ from those estim ates.
The Company has identified five areas where it believes assumptions
and estimates are particularly critical to the consolidated financial
statements. These are determ ination of the allowance for doubtful
receivables, impairment of securities, im pairm ent of long-lived assets
including goodwill, realizability of deferred tax assets and pension
accounting.
( u) New Accounting Standards
In November 2004, the FASB issued SFAS No.151, “Inventory Costs, an
amendment of ARB No. 43, Chapter 4” to clarify the accounting for
abnorm al am ounts of idle facility expense, freight, handling costs, and
wasted material ( spoilage) . Am ong 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 norm al capacity of the production facilities. SFAS 151 is
effective for the fiscal years beginning after June 15, 2005 and is
required to be adopted by Ricoh in the fiscal year beginning April 1,
2006. The adoption of SFAS 151 is not expected to have a m aterial
effect on the Com pany’s consolidated results of operations and financial
position.
In December 2004, the FASB issued SFAS No. 153, “Exchanges of
Nonm onetary Assets - an am endment of APB Opinion No. 29” ( “SFAS
153”) . SFAS 153 elim inates the exception from fair value measurem ent
for non-m onetary exchanges of similar productive assets in paragraph
21( b) of APB Opinion No. 29, “accounting for Nonmonetary
Transactions”, and replaces it with an exception for exchanges that do
not have comm ercial substance. SFAS 153 specifies that a non-
monetary exchange has comm ercial substance if the future cash flows
of the entity are expected to change significantly as a result of the
exchange. SFAS 153 is effective for the fiscal years beginning after June
15, 2005 and is required to be adopted by Ricoh in the fiscal year
beginning April 1, 2006. The adoption of SFAS 153 is not expected to
have a material effect on the Com pany’s consolidated results of
operations and financial position.
In May 2005, the FASB issued No. 154, “Accounting Changes and Error
Corrections - a replacem ent of APB Opinion No. 20 and SFAS No.3”.
SFAS 154 replaces APB 20, “Accounting Changes” and SFAS 3,
“Reporting Accounting Changes in Interim Financial Statem ents”, and
requires retrospective applications to prior periods’ financial statements
of a voluntary change in accounting principle unless it is
impracticable. SFAS 154 is effective for the fiscal years beginning after
Decem ber 15, 2005 and is required to be adopted by Ricoh in the fiscal
year beginning April 1, 2006. The adoption of SFAS 154 is not expected
to have a m aterial effect on the Com pany’s consolidated results of
operations and financial position.
In February 2006, the FASB issued SFAS No. 155, “Accounting for
Certain Hybrid Financial Instrum ents - an amendment of SFAS No. 133
and 140”. SFAS 155 amends SFAS 133, “Accounting for Derivative
Instruments and Hedging Activities” and SFAS 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”. SFAS 155 perm its fair value re-measurement for any hybrid
financial instrum ent that contains an embedded derivative, and
establishes a requirem ent to evaluate interests in securitized financial
33 ANNUAL REPORT 2006