Sharp 2007 Annual Report Download - page 53

Sharp Annual Report 2007 51
2007 in accordance with the Additional New Accounting
Standards. The accompanying consolidated statement of share-
holders’ equity for the year ended March 31, 2006, which was
voluntarily prepared for inclusion in the consolidated financial state-
ments, has not been adapted to the new presentation rules of 2007.
(4) Royalty and Technical Assistance Fees and Related Costs
Royalty and technical assistance fees and the corresponding costs
originally included in “Other, net” of Other Income (Expenses) were
reclassified into “Net sales” and “Cost of sales, ”respectively, effec-
tive for the year ended March 31, 2007. This change was made
to provide more appropriate presentation or classification of
income and cost, since the currently increased income arises from
main business activities carried out by the Company and its
consolidated subsidiaries. With this change, for the year ended March
31, 2007, net sales are up by ¥15,614 million ($133,453 thousand),
cost of sales is up by ¥4,458 million ($38,103 thousand), and
operating income is up by ¥11,156 million ($95,350 thousand),
compared to the previous classification with no impact on income
before income taxes and minority interests for the year ended March
31, 2007. The effect of this change on segment information is stated
in Note 10. Segment Information.
(5) Method of Amortization for Bond Issue Cost
Previously, bond issue cost was fully expensed as incurred.
Effective for the year ended March 31, 2007, however, bond issue
cost is capitalized as deferred assets and amortized under the straight
line method over the redemption period due to the following rea-
sons; This change was made to recognize the effect of financing
cost over the redemption period and realize appropriate periodic
accounting of profit and loss. One is because expansion in scale of
bond issue led to increase in bond issue cost. Other reasons include
the fact that effect of bond issue cost lasts over redemption period,
rather than only when incurred, and that amortized cost method is
adopted for bonds, under which the difference of ¥5,000 million
($42,735 thousand) between the issue price and face value will be
amortized over the redemption period. With this change, for the year
ended March 31, 2007, income before income taxes and minority
interests is up by ¥4,865 million ($41,581 thousand), compared to
the previous method.
(p) Additional information
Previously, cost of software embedded in products was recognized
as manufacturing expense at the time of inspection due to practi-
cal convenience. Effective for the year ended March 31, 2007,
however, cost of software embedded in products is capitalized as
an asset when inspected and recognized as manufacturing
expense when the products with the embedded software are sold,
in accordance with “Accounting Standard for Research and
Development Costs.” This change was made due to the increase
in the amount of software embedded in products, as a result of
an increase of complicated and multifunctional products in this
fiscal year. With this change, for the year ended March 31, 2007,
operating income and income before income taxes and minority
interests are up by ¥10,455 million ($89,359 thousand), respectively,
compared to the previous method.
(q) Reclassifications
Certain prior year amounts have been reclassified to conform to 2007
presentation. These changes had no impact on previously
reported results of operations.