Toshiba 2001 Annual Report Download - page 49

Accrued Pension and Severance Costs—
The company and its subsidiaries have various retirement benefit plans covering substantially all em-
ployees. Current service costs of the retirement benefit plans are accrued in the period. The unrecognized
net obligation existing at initial application of SFAS No.87 and prior service costs resulting from amend-
ments to the plans are amortized over the average remaining service period of employees expected to
receive benefits. Unrecognized actuarial losses that exceed 10 percent of the greater of the projected
benefit obligation or the fair value of plan assets are also amortized over the average remaining service
period of employees expected to receive benefits.
Net Income Per Share—
Basic net income per share (EPS) is computed based on the weighted-average number of shares of com-
mon 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 con-
tracts, interest rate swap agreements and currency swap agreements, for the purpose of currency ex-
change rate and interest rate risk management. Refer to Note 17 for descriptions of these financial
instruments, including the methods used to account for them.
Comprehensive Income—
Under Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income,”
comprehensive income is defined as total changes in shareholders’ equity except capital transactions.
The company’s comprehensive income (loss) is comprised of net income (loss) and other comprehensive
income (loss) representing changes in unrelized gains on securities, foreign currency translation adjust-
ments and minimum pension liability adjustment. Comprehensive income (loss) and its components are
disclosed in the consolidated statements of shareholders’ equity and in Note 15.
Recent Pronouncements—
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 hedging activities. SFAS No. 133 requires that all deriva-
tives 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 June 1999, FASB issued SFAS No.137, “Accounting for Derivative Instruments
and Hedging Activities—Deferral of the Effective Date of SFAS No.133,” which defers the effective date
of SFAS No.133 for one year. Therefore, in the case of the company, SFAS No.133 is effective for the
fiscal year beginning April 1, 2001. Adoption of this statement will not have a material impact on the
company’s results of operations or financial condition.
In September 2000, FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities—a replacement of SFAS No. 125”. This statement revises the
criteria for accounting for securitizations, other financial asset transfers and collateral and introduces new
disclosures, but otherwise carries forward most of the provisions of SFAS No. 125. This statement is ef-
fective for recognition and reclassification of collateral and for disclosures relating to securitization trans-
actions and collateral for fiscal year ended March 31, 2001. Other provisions of this statement are
effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. Adoption of the portions of this statement will not have a material impact on the com-
pany’s results of operations or financial condition.
Reclassifications—
Certain reclassifications of previously reported amounts have been made to conform with current classifications.
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