Ricoh 2008 Annual Report Download - page 37

Notes to Consolidated Financial Statements
Ricoh Company, Ltd. and Consolidated Subsidiaries
Ricoh Company, Ltd. (the “Company”) was established in 1936 and
is headquartered in Tokyo, Japan. The Company and its
consolidated subsidiaries (“Ricoh” as a consolidated group) is a
world-wide supplier of office automation equipment, including
copiers, facsimile machines, data processing systems, printers and
related supplies. Ricoh is also well known for its state-of-the-art
electronic devices, digital photographic equipment and other
products.Ricoh distributes its products primarily through domestic
(Japanese) and foreign sales subsidiaries. Overseas, Ricoh owns
and distributes not only Ricoh brand products but also other
brands, such as Gestetner, Lanier and Savin.
Ricoh manufactures its products primarily in 15 plants in Japan and
6 plants overseas, which are located in the United States, United
Kingdom, France and China.
To Our Shareholders
and Customers
Fiscal 2008 Highlights
Fiscal 2008 Milestones 16th Mid-Term
Management Plan
Corporate Governance /
CSR
Financial Section
Sustainable Environmental
Management
36
ANNUAL REPORT 2008
1. NATURE OF OPERATIONS
The accompanying consolidated financial statements of Ricoh have
been prepared in conformity with U.S. generally accepted
accounting principles. Significant accounting and reporting policies
are summarized below:
(a) Basis of Presentation
The accompanying consolidated financial statements for each of the
years in the three year period ended March 31, 2008 are presented
in Japanese yen, the functional currency of the Company and its
domestic subsidiaries. The translation of Japanese yen into U.S.
Dollar equivalents for the year ended March 31, 2008 is included
solely for the convenience of readers outside Japan and has been
made using the exchange rate of ¥100 to US$1, the approximate
rate of exchange prevailing at the Federal Reserve Bank of New
York on March 31, 2008.
The books of the Company and its domestic subsidiaries are
maintained in conformity with Japanese accounting principles and
practices, while foreign subsidiaries maintain their books in
conformity with the standards of their country of domicile.
The accompanying consolidated financial statements reflect
necessary adjustments, not recorded in the books, to present them
in conformity with U.S. generally accepted accounting principles.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and all majority-owned subsidiaries. The
accounts of variable interest entity as defined by the FASB
Interpretation (“FIN”) No. 46 (revised December 2003),
“Consolidated of Variable Interest Entities” are included in the
consolidated financial statements, if applicable. Investments in
entities in which Ricoh has the ability to exercise significant
influence over the entities’ operating and financial policies
(generally 20 to 50 % ownership) are accounted for on an equity
basis. All significant intercompany balances and transactions have
been eliminated in consolidation.
The accounts of certain consolidated subsidiaries have been
included on the basis of fiscal periods ended within three months
prior to March 31.
(c) Revenue Recognition
Ricoh generates revenue principally through the sale of equipment,
supplies and related services under separate contractual
arrangements for each. Ricoh recognizes revenue when (1) it has a
firm contract, (2) the product has been shipped to and accepted by
the customer or the service has been provided, (3) the sales price is
fixed or determinable and (4) amounts are reasonably assured of
collection.
Products sales is recognized at the time of delivery and installation
at the customer location. Equipment revenues are based on
established prices by product type and model and are net of
discounts. A sales return is accepted only when the equipment is
defective and does not meet Ricoh’s product performance
specifications. Other than installation, there are no customer
acceptance clauses in the sales contract.
Post sales and rentals result primarily from maintenance contracts
that are normally entered into at the time the equipment is sold.
Standard service fee prices are established depending on equipment
classification and include a cost value for the estimated services to
be performed based on historical experience plus a profit margin
thereon. As a matter of policy, Ricoh does not discount such prices.
On a monthly basis, maintenance service revenues are earned and
recognized by Ricoh and billed to the customer in accordance with
the contract and include a fixed monthly fee plus a variable amount
based on usage. The length of the contract ranges up to five-years,
however, most contracts are cancelable at any time by the customer
upon a short notice period. Leases not qualifying as sales-type
leases or direct financing leases are accounted for as operating
leases and related revenue is recognized over the lease term.
Ricoh enters into arrangements with multiple elements, which may
include any combination of products, equipment, installation and
maintenance. Ricoh allocates revenue to each element based on its
relative fair value if such element meets the criteria for treatment as
a separate unit of accounting as prescribed in Emerging Issues Task
Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with
Multiple Deliverables.” Pursuant to EITF 00-21, the delivered item in
a multiple element arrangement should be considered a separate
unit of accounting if all of the following criteria are met: (1) a
delivered item has value to customers on a stand-alone basis, (2)
there is objective and reliable evidence of fair value of an undelivered
item, and (3) the delivery of the undelivered item must be probable
and controlled by Ricoh if the arrangement includes the right of
return. The price charged when the element is sold separately
generally determines fair value. Otherwise, revenue is deferred until
the undelivered elements are fulfilled as a single unit of accounting.
Revenue from the sale of equipment under sales-type leases is
recognized as product sales at the inception of the lease. Other
revenue consists primarily of interest income on sales-type leases
and direct-financing leases, which are recognized as Other revenue
over the life of each respective lease using the interest method.
(d) Foreign Currency Translation
For foreign operations with functional currencies other than the
Japanese yen, assets and liabilities are translated at the exchange
rates in effect at each fiscal year-end, and income and expenses are
translated at the average rates of exchange prevailing during each
fiscal year. The resulting translation adjustments are included as a
2. SIGNIFICANT ACCOUNTING AND REPORTING POLICIES