Sharp 2015 Annual Report Download - page 37

Notes to the Consolidated Financial Statements
The estimated amount of all retirement benefits to be paid at future retirement dates is allocated to
each service year based on a benefit formula.
Past service costs are amortized primarily using the straight-line method over the average of the esti-
mated remaining service years (14 years) commencing with the current period. Actuarial gains and losses
are primarily amortized using the straight-line method over the average of the estimated remaining
service years (14 years) commencing with the following period.
(n) Research and development expenses
Research and development expenses are charged to income as incurred. The research and development
expenses charged to income amounted to ¥132,124 million and ¥141,042 million for the years ended
March 31, 2014 and 2015, respectively.
(o) Derivative financial instruments
The Company and some of its consolidated subsidiaries use derivative financial instruments, including
foreign exchange forward contracts in order to hedge the risk of fluctuations in foreign currency ex-
change rates associated with assets and liabilities denominated in foreign currencies.
All derivative financial instruments are stated at fair value and recorded on the balance sheets. The
deferred method is used for recognizing gains and losses on hedging instruments and the hedged items.
When foreign exchange forward contracts meet certain conditions, the hedged items are stated at the
forward exchange contract rates.
Derivative financial instruments are used based on internal policies and procedures on risk control. The
risks of fluctuations in foreign currency exchange rates have been assumed to be completely hedged over
the period of hedging contracts as the major conditions of the hedging instruments and the hedged items
are consistent. Accordingly, an evaluation of the effectiveness of the hedging contracts is not required.
The credit risk of such derivatives is assessed as being low because the counterparties of these transac-
tions have good credit ratings with financial institutions.
(p) Method and Period for Amortization of Goodwill
Goodwill for which the effective term is possible to be estimated is amortized evenly over the estimated
term, while the other is amortized evenly over 5 years. However, if the amount is minor, the entire
amount is amortized during the period of occurrence.
(q) Changes in accounting policies
Effective from the year ended March 31, 2015, the Company and its domestic consolidated subsidiaries
adopted paragraph 35 of the “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26
on May 17, 2012) and paragraph 67 of the “Guidance on Accounting Standard for Retirement Benefits”
(ASBJ Statement No. 25 on March 26, 2015). The Company and its domestic consolidated subsidiaries
reviewed the method of calculating retirement benefit obligations and service costs, and changed the
method of attributing expected benefit to periods primarily from a point basis to a benefit formula basis.
In accordance with transitional accounting as stipulated in paragraph 37 of the Accounting Standard
for Retirement Benefits, the effect of the changes in the method of calculating retirement benefit obliga-
tions and service costs was recognized as an adjustment to retained earnings at the beginning of the
year ended March 31, 2015. This change had an immaterial impact on net defined benefit liability and
retained earnings at the beginning of the year ended March 31, 2015, as well as on financial statements
for the year ended March 31, 2015.
(r) Changes in accounting estimates
The Company and its domestic consolidated subsidiaries previously amortized actuarial gain/loss and
past service costs on severance and pension benefits over 15 years. Effective from the year ended March
31, 2015, the amortization period has been changed to 14 years because the average of the estimated
remaining service years decreased. This change had an immaterial impact on financial statements for the
year ended March 31, 2015.
(s) Reclassifications
Certain account balances in the financial statements and accompanying footnotes for the year ended March
31, 2014 have been reclassified to conform to the presentation for the fiscal year ended March 31, 2015.
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Notes to the Consolidated
Financial Statements
Financial Section
Segment Outline
Medium-Term Management Plan
for Fiscal 2015 through 2017
Investor Information
Directors, Audit & Supervisory Board
Members and Executive Officers
Risk Factors
Corporate Governance
Contents
Corporate Social
Responsibility (CSR)
Message to our Shareholders
Fiscal 2014 Review by
Product Group
Financial Highlights
SHARP Annual Report 2015
Consolidated
Subsidiaries
Independent Auditor’s
Report
Consolidated Statements of
Cash Flows
Consolidated Statements of
Changes in Net Assets
Consolidated Statements of
Comprehensive Income
Consolidated Statements of
Operations
Consolidated Balance Sheets
Financial Review
Five-Year Financial Summary