Sharp 2005 Annual Report Download - page 37

SHARP ANNUAL REPORT 2005 32
(a) Basis of presenting consolidated financial statements
Sharp Corporation (the “Company”) and its domestic
consolidated subsidiaries maintain their official accounting
records in Japanese yen and in accordance with the
provisions set forth in the Japanese Securities and
Exchange Law and its related accounting regulations, and in
conformity with accounting principles generally accepted in
Japan, (“Japanese GAAP”) which are different in certain
respects as to application and disclosure requirements of
International Financial Reporting Standards.
The accounts of overseas consolidated subsidiaries are
based on their accounting records maintained in conformity
with generally accepted accounting principles prevailing in
the respective countries of domicile. The accompanying
consolidated financial statements have been restructured
and translated into English (with some expanded
descriptions and the inclusion of consolidated statements of
shareholders’ equity) from the consolidated financial
statements of the Company prepared in accordance with
Japanese GAAP and filed with the appropriate Local
Finance Bureau of the Ministry of Finance as required by the
Securities and Exchange Law. Some supplementary
information included in the statutory Japanese language
consolidated financial statements, but not required for fair
presentation, is not presented in the accompanying
consolidated financial statements.
The translations of the Japanese yen amounts into U.S.
dollars are included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at March 31,
2005, which was ¥106 to U.S. $1.00. The convenience
translations should not be construed as representations that
the Japanese yen amounts have been, could have been, or
could in the future be, converted into U.S. dollars at this or any
other rate of exchange.
(b) Principles of consolidation
The accompanying consolidated financial statements
include the accounts of the Company and significant
companies over which the Company has power of control
through majority voting right or existence of certain
conditions evidencing control by the Company. Investments in
nonconsolidated subsidiaries and affiliates over which the
Company has the ability to exercise significant influence
over operating and financial policies of the investees, are
accounted for on the equity method.
In the elimination of investments in consolidated
subsidiaries, the assets and liabilities of the subsidiaries,
including the portion attributable to minority shareholders,
are evaluated using the fair value at the time the Company
acquired control of the respective subsidiaries.
Material intercompany balances, transactions and profits
have been eliminated in consolidation.
(c) Translation of foreign currencies
Monetary assets and liabilities denominated in foreign
currency are translated into Japanese yen at current rates at
each balance sheet date and the resulting translation gains or
losses are charged to income currently.
As to translation of financial statements of overseas
subsidiaries and affiliates, assets and liabilities are
translated at current rates at each balance sheet date,
shareholders’ equity accounts are translated at historical
rates, and revenues and expenses are translated at
average rates prevailing during the year. The resulting
foreign currency translation adjustments are shown as a
separate component of shareholders’ equity.
(d) Cash and cash equivalents
Cash and cash equivalents include cash on hand,
deposits placed with banks on demand and highly liquid
investments with insignificant risk of changes in value which
have maturities of three months or less when purchased.
(e) Short-term investments and investments in securities
Short-term investments consist of certificates of
deposits and interest-bearing securities.
Investments in securities consist principally of
marketable and nonmarketable equity securities and
interest-bearing securities.
The Company and its domestic consolidated
subsidiaries categorize those securities as “other securities”,
which, in principle, include all securities other than trading
securities and held-to-maturity securities.
Other securities with available fair market values are
1. Summary of Significant Accounting and Reporting Policies
Notes to Consolidated Financial Statements
Sharp Corporation and Consolidated Subsidiaries