Ricoh 2007 Annual Report Download - page 59

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58
ANNUAL REPORT 2007
17. COMMITMENTS AND CONTINGENT LIABILITIES
Interest Rate Risk Management
Ricoh enters into interest rate swap agreements to hedge against the
potential adverse impacts of changes in fair value or cash flow
fluctuations on interest of its outstanding debt.
Fair Value Hedges
Changes in the fair value of derivative instruments and the related
hedged items designated and qualifying as fair value hedges are
included in other (income) expenses on the consolidated statements of
income. There is no hedging ineffectiveness nor are net gains or losses
excluded from the assessment of hedge effectiveness for the years ended
March 31, 2005, 2006 and 2007 as the critical terms of the interest rate
swap match the terms of the hedged debt obligations.
Cash Flow Hedges
Changes in the fair value of derivative instruments designated and
qualifying as cash flow hedges are included in accumulated other
comprehensive income (loss) on the consolidated balance sheets.
These amounts are reclassified into earnings as interest on the hedged
loans is paid. There is no hedging ineffectiveness nor are net gains or
losses excluded from the assessment of hedge effectiveness for the years
ended March 31, 2005, 2006 and 2007 as the critical terms of the
interest rate swap match the terms of the hedged debt obligations.
Ricoh expects that it will reclassify into earnings through other
expenses during the next 12 months approximately ¥23 million ($195
thousand) of the balance of accumulated other comprehensive income
as of March 31, 2007.
Undesignated Derivative Instruments
Derivative instruments not designated as hedging instruments are held
to reduce the risk relating to the variability in exchange rates on assets
and liabilities denominated in foreign currencies. Changes in the fair
value of these instruments are included in other (income) expenses on
the consolidated statement of income.
As of March 31, 2007, Ricoh had outstanding contractual
commitments for acquisition or construction of property, plant and
equipment and other assets aggregating ¥6,734 million ($57,068
thousand).
As of March 31, 2007, Ricoh was also contingently liable for certain
guarantees including employees housing loans of ¥1,092 million
($9,254 thousand).
Ricoh made rental payments totaling ¥39,000 million, ¥42,046 million
and ¥40,722 million ($345,102 thousand) for the years ended March
31, 2005, 2006and 2007, respectively, under cancelable and non-
cancelable operating lease agreements for office space and machinery
and equipment.
The minimum rental payments required under operating lease that
have lease terms in excess of one year as of March 31, 2007 are as
follows;
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
2008 ¥19,702 $169,966
2009 16,822 142,559
2010 12,029 101,941
2011 7,221 61,195
2012 6,145 52,076
2013 and thereafter 12,714 107,746
Total ¥74,633 $632,483
As of March 31, 2007, the Company and certain of its subsidiaries were
parties to litigation involving routine matters, such as patent rights. In
the opinion of management, the ultimate liability, if any, resulting
from such litigation will not materially affect the consolidated
financial position or the results of operations of Ricoh.