Toshiba 1997 Annual Report Download - page 39

37.
Work in process is stated at the lower of cost or estimated realizable value, cost being determined by accumulated production
costs for contract items and at production costs determined by the first-in, first-out method for regular production items.
In accordance with general industry practice, items with long manufacturing periods are included among inventories even
when not realizable within one year.
Property, plant and equipment and depreciation –
Property, plant and equipment, including significant renewals and additions, are carried at cost. When retired or otherwise disposed
of, the cost and related depreciation are cleared from the respective accounts and the net difference, less any amount realized on dis-
posal, is included in earnings. Maintenance and repairs, including minor renewals and betterments, are charged to income as incurred.
Depreciation is computed generally by a declining-balance method at rates based on the estimated useful lives of the related
assets, according to general class, type of construction and use.
Income taxes –
Deferred income taxes are recorded to reflect the expected future tax consequences of temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements, and are measured by applying currently enacted tax laws.
Liability for severance indemnities –
The company and its subsidiaries have various retirement benefit plans covering substantially all employees. Current service costs
of the retirement benefit plans are accrued in the period. Prior service costs resulting from amendments to the plans are amor-
tized over the average remaining service period of employees expected to receive benefits (See Note 8).
Earnings per share –
Net income per share amounts are based on the weighted-average number of common shares outstanding during each period,
appropriately adjusted for common stock equivalents.
In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128,
“Earnings per Share” which replaces the presentation of primary earnings per share (“EPS”) with a presentation of basic EPS, and
also requires dual presentation of basic EPS and diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. Basic EPS is computed based on the weighted-average number of shares of
common stock outstanding during each period. Diluted EPS assumes the dilution that would occur if securities or other contracts
to issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock. The com-
pany will adopt this statement for the fiscal year beginning April 1, 1997. Under the provisions of the new statement, basic EPS
for the years ended March 31, 1997 and 1996 would have been ¥20.84 ($0.168) and ¥28.08, respectively, and diluted EPS for
the same periods would have been ¥20.06 ($0.162) and ¥26.85, respectively.
Change in classification –
For the year ended March 31, 1997, royalty income, which was previously included in the consolidated statements of operations
and retained earnings under the caption “other income,” is included in “net sales.” Royalty income included in net sales for the
year ended March 31, 1997 amounted to ¥45,961 million ($370,653 thousand), while the comparable amount included in other
income for the year ended March 31, 1996, which was not reclassified, was ¥23,302 million.
3. U.S. dollar amounts:
U.S. dollar amounts are included solely for convenience. These translations should not be construed as representations that the
yen amounts actually represent, or have been or could be converted into, U.S. dollars. The amounts shown in U.S. dollars are
not intended to be computed in accordance with generally accepted accounting principles for the translation of foreign currency
amounts. The rate of ¥124=US$1, the approximate current rate of exchange at March 31, 1997, has been used throughout for
the purpose of presentation of the U.S. dollar amounts in the accompanying consolidated financial statements.
4. Marketable securities and other investments:
The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting
for Certain Investments in Debt and Equity Securities,” addressing the accounting and reporting for certain investments in debt
and equity securities classified as held-to-maturity, trading, or available-for-sale securities. Under SFAS No. 115, the debt and
equity securities owned by the company should be classified as available-for-sale securities and should be reported at fair value
with unrealized gains and losses, net of related taxes, excluded from earnings and reported in a separate component of share-
holders’ equity until realized. However, the company has not adopted this standard which became effective for the fiscal year
beginning April 1, 1994.