Toshiba 1998 Annual Report Download - page 40

38. Toshiba Corporation Annual Report 1998
1. COMPANY OPERATIONS:
Toshiba Corporation and its subsidiaries are engaged in research and developm ent, m anufacture an d sales of elec-
tron ic an d en ergy h igh-tech n ology products, which span (1) in form ation & com m un ication system s, (2) electron ic
devices & materials, (3) power & industrial systems, (4) con sum er products, an d (5) services & other. For th e year
en ded March 31, 1998, sales in in form ation & com m un ication system s represented th e most sign ificant portion at
over one-th ird of th e com pany’s total sales, wh ile sales in electronic devices & m aterials, power & industrial systems,
an d consum er products were approxim ately equal in amoun t. Sales in services & oth er were con siderably small com -
pared to th ose derived from oth er busin ess activities. Th e products are m an ufactured and marketed th rough out th e
world with approximately 60 percen t of sales in Japan an d th e rem ainder in North Am erica, Asia, Europe and elsewh ere.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Preparation of financial statem ents –
The com pan y and its dom estic subsidiaries m aintain their records an d prepare their fin ancial statem ents in accordance
with accoun tin g principles gen erally accepted in Japan, an d its foreign subsidiaries in conform ity with th ose of th e
coun tries of their dom icile.
Certain adjustm en ts an d reclassifications, includin g th ose relating to the tax effects of temporary differen ces and
th e accrual of certain expenses, have been in corporated in th e accom pan yin g con solidated fin ancial statem ents to
con form with accoun ting principles generally accepted in the Un ited States of America. These adjustm en ts were n ot
recorded in th e statutory books.
Basis of consolidation and investm ents in affiliated com panies –
The con solidated fin ancial statem ents in clude th e accounts of the com pan y and those of its subsidiaries. All sign ificant
intercom pany tran sactions and accounts are eliminated in con solidation.
In vestm en ts in affiliated com panies (20 to 50 percent-own ed com pan ies) in which the ability to exercise sig-
nifican t influence exists are stated at cost plus equity in un distributed earn in gs (losses). Net con solidated incom e
includes th e com pany’s equity in the curren t n et earn ings (losses) of such com panies, after elim ination of unrealized
intercom pany profits.
Goodwill recognized at the tim e of in vestm en ts in subsidiaries an d affiliated com panies is am ortized on a straight-line
basis over th e estimated period of ben efit.
Use of estim ates –
The preparation of the con solidated finan cial statem en ts in conform ity with accountin g principles gen erally accepted
in the United States of America requires m anagem en t to m ake estimates an d assum ption s th at affect th e reported
am oun ts of assets an d liabilities an d disclosure of contingent assets an d liabilities at th e date of the con solidated
finan cial statem en ts and the reported am oun ts of revenues an d expen ses during the reporting period. Actual results
could differ from th ose estimates.
Consolidated statem ent of cash flows –
For purposes of th e statemen t of cash flows, th e com pany con siders all high ly liquid investm en ts purchased with
origin al m aturities of three mon th s or less to be cash equivalents.
Foreign currency translation –
The assets an d liabilities of foreign subsidiaries th at operate in a local curren cy en viron m en t are tran slated in to
Japanese yen at applicable curren t exchange rates at year end. Incom e and expense item s are translated at average
exch ange rates prevailing during the year. The effects of these tran slation adjustm en ts are reported in th e cum ulative
tran slation adjustm en t com ponent of sh areh olders’ equity. Exch ange gain s an d losses resulting from foreign curren cy
tran sactions and translation of assets an d liabilities denom inated in foreign curren cies are included in th e consolidated
statem ents of operations.
Revenue recognition –
Sales of finished products, other than un der long-term con tracts, are recorded in th e accounts as shipm ents are made,
except for sales of certain products wh ich are recorded in th e accounts upon custom er acceptan ce.
Sales under lon g-term con tracts are gen erally recorded in th e accounts upon acceptance of equipm en t an d related
installation work for each contract stage.
Marketable securities and other investments –
Marketable equity securities in cluded in m arketable securities (curren t) and oth er investm en ts (non-current) are stated at
th e lower of cost or market in the aggregate. Oth er m arketable securities included in m arketable securities (curren t) are
Notes to Consolidated Financial Statements
Toshiba Corporation and its subsidiaries