Ricoh 2007 Annual Report Download - page 40

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.
(r) Earnings Per Share
Basic net income per share of common stock is calculated by dividing
net income by the weighted-average number of shares of common stock
outstanding during the period. The calculation of diluted net income
per share of common stock 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.
(s) 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
2005 2006 2007 2007
Capital lease obligations incurred ¥ 865 ¥ 261 ¥ 54 $ 458
Issuance of treasury stock in exchange
for subsidiary’s stock 2,545 905 --
(t) Use of Estimates
Management of Ricoh 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 U.S. generally accepted accounting principles. Actual
results could differ from those estimates.
Ricoh 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
including goodwill, realizability of deferred tax assets and pension
accounting.
(u) Discontinued Operations
On May 31, 2006, the Company’s subsidiary San-Ai Co., Ltd. sold its
digital content distribution business to Giga Networks Co., Ltd. (former
Mobile Alliance Co., Ltd.). As a result of the sale, the operating result of
the business units sold were reclassified to discontinued operations
pursuant to the requirement on SFAS 144, because Ricoh has no
significant continuing involvement in the operating sold.
Reclassifications have been made to the prior year's consolidated
statements of income and consolidated statements of cash flows to
conform the presentation used for the year ended March 31, 2007.
(v) Adoption of SAB 108
The Securities and Exchange Commission of the U.S. issued Staff
Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements” in September 2006. SAB 108 requires companies
to quantify misstatements using both the balance sheet approach and
the income statement approach (“dual” method), and to evaluate the
importance of misstatements taking into account relevant quantitative
and qualitative factors. Historically, the Company used the income
statement (“rollover”) approach to quantify misstatements. Upon
adoption, SAB 108 permits the Company to adjust the cumulative effect
of misstatements that were previously considered immaterial under the
rollover method that are now considered material under the dual
method. SAB 108 is effective for fiscal years ending after November 15,
2006. The Company adopted SAB 108 in the fourth quarter of fiscal
year 2007.
The Company and some of its domestic consolidated subsidiaries
previously set the residual value of tangible fixed assets at 5% of
acquisition cost in principle using the standards provided in the
Corporate Tax Law. However, based on an evaluation of residual values
realized from disposition of property, plant and equipment, Ricoh
concluded that the residual value of substantially all long lived assets is
negligible at the end of useful life. This misstatement was considered
immaterial to the Company’s historical consolidated financial
statements using the income statement approach.
Accordingly, Ricoh recorded an increase in accumulated depreciation of
¥11,464 million ($97,153 thousand) and an increase in deferred tax
(included in “Lease deposits and other”) of ¥4,675 million ($39,619
thousand) as of April 1, 2006 with a reduction of the beginning of year
balance of retained earnings of ¥6,464 million ($54,780 thousand).
(w) New Accounting Standards
In February 2006, the FASB issued SFAS No. 155, “Accounting for
Certain Hybrid Financial Instruments - an amendment of SFAS No. 133
and 140”. SFAS 155 amends SFAS 133 and SFAS 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”. SFAS 155 permits fair value re-measurement for any hybrid
financial instrument that contains an embedded derivative, and
establishes a requirement to evaluate interests in securitized financial
assets to identify interests that are freestanding derivatives or that are
hybrid financial instruments that contain an embedded derivative. SFAS
155 is effective for fiscal years beginning after September 15, 2006 and
is required to be adopted by Ricoh in fiscal year beginning April 1, 2007.
The Company is currently evaluating the effect that the adoption of
SFAS 155 will have on its consolidated results of operations and
financial condition.
In March 2006, the FASB issued SFAS No. 156, “Accounting for
Servicing of Financial Assets - an amendment of FASB Statement No.
140”. SFAS 156 amends SFAS 140, to clarify the accounting for servicing
assets and servicing liabilities. Among other provisions, the new
accounting standard requires all separately recognized servicing assets
and servicing liabilities to be initially measured at fair value, if
practicable. SFAS 156 is effective for the fiscal years beginning after
September 15, 2006 and is required to be adopted by Ricoh in fiscal year
beginning April 1, 2007. The Company is currently evaluating the effect
39 ANNUAL REPORT 2007