Ricoh 2009 Annual Report Download - page 43

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ANNUAL REPORT 2009
To Our Shareholders
and Customers
Fiscal 2009
Highlights
Progress of the
16th MTP
Creating New
Customer Value
RICOH
Milestones
Sustainable Environ-
mental Management
Corporate Social
Responsibility
Financial
Section
Effective rates of depreciation increased for the year ended March 31,
2009 mainly due to the commencement of the new manufacturing
facilities of the Company.
Certain leased buildings, machinery and equipment are accounted for
as capital leases in conformity with SFAS No.13, “Accounting for
Leases.” The aggregate cost included in property, plant and
equipment and related accumulated depreciation as of March 31,
2008 and 2009 are as follows:
The related future minimum lease payments and the present value
of the net minimum lease payments as of March 31, 2009 were
¥1,815 million ($18,333 thousand) and ¥1,758 million ($17,758
thousand), respectively.
Ordinary maintenance and repairs are charged to expense as
incurred. Major replacements and improvements are capitalized.
When properties are retired or otherwise disposed of, the property
and related accumulated depreciation accounts are relieved of the
applicable amounts, and any differences are included in earnings.
(k) Capitalized Software Costs
In accordance with Statement of Position (“SOP”) 98-1, “Accounting
for the Costs of Computer Software Developed or Obtained for
Internal Use,” Ricoh capitalizes qualifying cost of computer
software. Costs incurred during the application development stage
as well as upgrades and enhancements that results in additional
functionality are capitalized. The capitalized software is amortized
on a straight line basis generally from 3 years to 5 years.
(l) Goodwill and Other Intangible Assets
SFAS No.141, “Business Combinations” requires the use of the
purchase method of accounting for business combinations and
refines the definition of intangible assets acquired in a purchase
business combination. SFAS No.142, “Goodwill and Other Intangible
Assets” eliminates the amortization of goodwill and instead requires
goodwill to be tested at least annually for impairment. SFAS 142 also
requires acquired intangible assets with a definite useful life to be
amortized over their respective estimated useful lives and reviewed
for impairment when an indication of impairment is identified in
accordance with SFAS No.144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.” Other intangible assets with definite
useful lives, consisting primarily of software, patents, customer
relationships and trademarks are amortized on a straight line basis
over 1 year to 20 years. Any acquired intangible assets determined to
have an indefinite useful life are not amortized, but instead are tested
annually for impairment based on its fair value until its life would be
determined to no longer be indefinite. In performing the test, Ricoh
utilizes the two-step approach prescribed under SFAS 142. The first
step requires a comparison of the carrying value of the reporting
units to the fair value of these units. If the carrying value of a
reporting unit exceeds its fair value, Ricoh will perform the second
step of the goodwill impairment test to measure the amount of
impairment loss, if any.
Pursuant to the adoption of SFAS 142 on April 1, 2002, Ricoh
selected an annual goodwill impairment date of September 30. In the
fourth quarter of fiscal year 2009, Ricoh changed its annual
impairment measurement date to December 31. The change was
made to better align the impairment test date with Ricoh’ acquisition
of IKON Office Solutions, Inc. on October 31, 2008, which had a
significant impact on Ricoh’s financial statements. This change to the
date of Ricoh’s annual goodwill impairment test constitutes a change
in the method of applying an accounting principle, as discussed in
SFAS No.154, “Accounting Changes and Error Corrections” (SFAS
154). Ricoh believes that this change in accounting principle is
preferable.
SFAS 154 requires reporting a change in accounting principle
through retrospective application of the new accounting principle to
all periods, unless it is impractical to do so. However, the change in
the impairment measurement date had no impact on Ricoh’s prior
period financial statements, as no goodwill impairment changes had
been recorded in any prior period financial statements nor did the
change in annual impairment test date cause any impairments.
Furthermore, there were no impairment charges that resulted from
the December 31, 2008 impairment test, and no event indicating an
impairment has occurred subsequent to December 31, 2008.
Ricoh completed its annual impairment assessment of indefinite-lived
intangible assets for the years ended March 31, 2007, 2008 and 2009
and determined that no impairment charge was necessary.
(m) Pension and Retirement Allowances Plans
The measurement of pension costs and liabilities is determined in
accordance with SFAS No.87, “Employers’ Accounting for Pensions”
as amended by SFAS No.158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans”. Under SFAS 158
which was adopted effective March 31, 2007 Ricoh recognizes the
funded status (i.e., the difference between the fair value of plan assets
and the projected benefit obligations) of its pension fund plans as of
the end of fiscal year, with a corresponding adjustment to
accumulated other comprehensive income (loss), net of tax, and a
charge to other comprehensive income for periods subsequent to
adoption. The expected long-term rate of return on plan assets used
for pension accounting is determined based on the historical long-
term rate of return on plan assets. The discount rate is determined
based on the rates of return of high-quality fixed-income investments
currently available and expected to be available during the period to
maturity of the pension benefits.
For periods prior to the year ended March 31, 2009, Ricoh used a
December 31 measurement date for determining benefit obligations
and fair value of plan assets. Ricoh adopted the measurement date
provisions of SFAS No. 158 as of March 31, 2009.
(n) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences and carryforwards are expected
to be realized or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
On April 1, 2007, Ricoh adopted FIN 48, “Accounting for Uncertainty
in Income Taxes – an Interpretation of FASB Statement No. 109”,
which requires a more-likely-than-not threshold for financial
statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. Ricoh recognizes interest and
penalties related to unrecognized tax benefits in provision for
Thousands of
Millions of Yen U.S. Dollars
2008
2009 2009
Aggregate cost ¥7,269
¥6,003 $60,636
Accumulated depreciation 6,072
5,161 52,131