Ricoh 2008 Annual Report Download - page 40

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 non-cash transactions related to capital lease obligation incurred
and issuance of treasury stock in exchange for subsidiary’s stock in
the amount of ¥261 million and ¥905 million, respectively, for the
year ended March 31, 2006 have been excluded from the
consolidated statements of cash flows. There were no significant
non-cash transactions for the years ended March 31, 2007 and 2008.
(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.). Because Ricoh has no
significant continuing involvement in the operation sold, the
operating result of the business units sold were reclassified to a
discontinued operation pursuant to the requirement of SFAS 144.
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, Ricoh used the income statement (“rollover”) approach
to quantify misstatements. Upon adoption, Ricoh recorded
adjustment for the cumulative effect of misstatements that were
previously considered immaterial under the rollover method that
were considered material under the dual method. Ricoh adopted
SAB 108 in the fourth quarter of the fiscal year ended March 31,
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
had been considered immaterial to Ricoh’s historical consolidated
financial statements using the income statement approach prior to
the adoption of SAB 108.
Accordingly, Ricoh recorded an increase in accumulated
depreciation of ¥11,464 million and an increase in deferred tax
assets (included in “Lease deposits and other”) of ¥4,675 million as
of April 1, 2006 with a net reduction of the beginning balance of
retained earnings of ¥6,464 million.
(w) New Accounting Standards
In June 2006, the FASB ratified the EITF consensus on EITF 06-2,
“Accounting for sabbatical Leave and Other Similar Benefits
Pursuant to FASB Statement No.43.” Accordingly, Ricoh recorded
an increase in the beginning balance of accrued expenses of ¥1,680
million ($16,800 thousand) and an increase in the beginning
balance of deferred tax assets (included in “Lease deposits and
other”) of ¥672 million ($6,720 thousand) as of April 1, 2007, with
a decrease in the beginning balance of retained earnings of ¥ 995
million ($9,950 thousand).
In September 2006, the FASB issued SFAS No.157, “Fair Value
Measurements,” which defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair value
measurements. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements,
where fair value is the relevant measurement attribute. SFAS 157
does not require any new fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and is
required to be adopted by Ricoh in fiscal year beginning April 1,
2008. In February 2008, the FASB issued Staff Positions (“FSP”)
No. FAS 157-1, “Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13” and No. FAS
157-2, “Effective Date of FASB Statement No. 157,” which delays
the effective date of SFAS 157 for all nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least
annually) and remove certain leasing transactions from its scope.
The adoption of SFAS 157 did not have a material effect on Ricoh’s
consolidated financial position or results of operations.
In September 2006, the FASB issued SFAS 158. SFAS 158 requires
companies to recognize an asset or liability for the overfunded or
underfunded status of their benefit plans in their financial
statements and to recognize changes in that funded status in
comprehensive income (loss) in the year in which the changes
occur. SFAS 158 also requires the measurement date for plan
assets and liabilities to coincide with the sponsor’s year-end. The
standard provides two transition alternatives related to the change
in measurement date provisions. The recognition of an asset and
liability related to the funded status provision is effective for fiscal
years ending after December 15, 2006. The effect of adoption of
SFAS 158 on Ricoh’s financial condition as of March 31, 2007 has
been included in the accompanying consolidated financial
statements. The change in measurement date provisions is
effective for fiscal years ending after December 15, 2008 and is
required to be adopted by Ricoh in fiscal year beginning April 1,
39 ANNUAL REPORT 2008