Sharp 2007 Annual Report Download - page 50

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(a) Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of Sharp
Corporation (“the Company”) and its consolidated subsidiaries have
been prepared 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 cer-
tain respects as to application and disclosure requirements from
International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based
on their accounting records maintained in conformity with gener-
ally accepted accounting principles prevailing in the respective coun-
tries of domicile. The accompanying consolidated financial state-
ments have been restructured and translated into English (with cer-
tain expanded disclosure and the inclusion of the consolidated state-
ment of shareholders’ equity for the year ended March 31, 2006)
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. Certain 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 consolidated balance sheet as of March 31, 2007, which
has been prepared in accordance with the new accounting stan-
dard as discussed in Note 1. (o), is presented with the consolidated
balance sheet as of March 31, 2006, prepared in accordance with
the previous presentation rules.
Also, as discussed in Note 1. (o), the consolidated statement
of changes in net assets for the year ended March 31, 2007 has
been prepared in accordance with the new accounting standard.
The accompanying consolidated statement of shareholders’ equity
for the year ended March 31, 2006 was voluntarily prepared for the
purpose of inclusion in the consolidated financial statements
although such statements were not required to be filed with the Local
Finance Bureau.
The translation of the Japanese yen amounts into U.S. dollars
is included solely for the convenience of readers outside Japan, using
the prevailing exchange rate at March 31, 2007, which was ¥117
to U.S. $1.00. The convenience translation should not be construed
as representation 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 exis-
tence 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 attribu-
table 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 sub-
sidiaries 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 trans-
lated at average rates prevailing during the year. The resulting for-
eign currency translation adjustments are shown as a separate com-
ponent 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 insignifi-
cant 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 inter-
est-bearing securities.
Investments in securities consist principally of marketable and
nonmarketable equity securities and interest-bearing securities.
The Company and its domestic consolidated subsidiaries cat-
egorize those securities as “other securities,” which, in principle,
include all securities other than trading securities and held-to-matu-
rity securities.
Other securities with available fair market values are stated at
fair market value which is calculated as the average of market prices
during the last month of the fiscal year. Unrealized holding gains and
losses on these securities are reported, net of applicable income
taxes, as a separate component of shareholders’ equity. Realized
gains and losses on sales of such securities are principally computed
using average cost.
Other securities with no available fair market values are stated
at average cost, except for interest-bearing securities which are stated
at amortized cost, net of the amount considered not collectible.
If the fair market value of other securities declines significantly,
such securities are stated at fair market value and the difference
1. Summary of Significant Accounting and Reporting Policies
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sharp Corporation and Consolidated Subsidiaries