Toshiba 1999 Annual Report Download - page 54

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52.
TOSHIBA ANNUAL REPORT 1999
Realized gains and losses on the sale of securities are based on the average cost of all the units of a particular security held at
the time of sale.
INVENTORIES –
Raw materials and finished products are stated at the lower of cost or market, cost being determined principally by the average
and first-in, first-out methods, respectively.
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 disposal, 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.
ACCRUED PENSION AND SEVERANCE COSTS –
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
amortized over the average remaining service period of employees expected to receive benefits (See Note 9).
NET INCOME PER SHARE –
Basic earnings per share (“EPS”) is computed based on the weighted-average number of shares of common stock outstanding
during each period. Diluted EPS assumes the dilution that could occur if dilutive convertible debentures were converted into
common stock.
FINANCIAL INSTRUMENTS –
The company uses a variety of derivative financial instruments, which include forward exchange contracts, interest rate swap
agreements and currency swap agreements, for the purpose of currency exchange rate and interest rate risk management. Refer
to Note 16 for descriptions of these financial instruments, including the methods used to account for them.
COMPREHENSIVE INCOME –
The company has adopted Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income,”
for the fiscal year beginning April 1, 1998. In this standard, comprehensive income is defined as total changes in shareholders’
equity except capital transactions. As discussed in Note 4, the company has not adopted SFAS No. 115, “Accounting for Certain
Investments in Debt and Equity Securities,” and consequently, the effects on shareholders’ equity as required under the provi-
sions of SFAS No. 115 are not included in comprehensive income. The company’s comprehensive income (loss) is comprised of
net income (loss) and other comprehensive income (loss) representing changes in foreign currency translation adjustments and
minimum pension liability adjustment. Comprehensive income (loss) and its components are disclosed in the consolidated state-
ments of shareholders’ equity and in Note 14.
NEW ACCOUNTING STANDARDS –
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, “Accounting for Derivative Instruments
and Hedging Activities.” SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedg-
ing activities. SFAS No. 133 requires that all derivatives be recognized as either assets or liabilities in the balance sheet and be
measured at fair value. The fair value adjustments are recorded in current earnings or other comprehensive income, depending
on whether a derivative instrument is designated as part of a hedge transaction and, if it is, the type of hedge transaction. In the
case of the company, this statement is effective for the fiscal year beginning April 1, 2000. At this stage, the impact from
adoption of this statement on the company’s financial position or results of operations is not estimable.