Toshiba 2002 Annual Report Download - page 53

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51
TOSHIBA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended March 31, 2002:
Unrealized gains on securities:
Unrealized holding gains arising during year ¥ 10,052 ¥ (4,179) ¥ 5,873
Less: reclassification adjustment for gains
included in net loss (16,233) 6,818 (9,415)
Foreign currency translation adjustments:
Currency translation adjustments arising
during year 14,030 11 14,041
Less: reclassification adjustment for
gains included in net loss (54) — (54)
Minimum pension liability adjustment (139,471) 58,717 (80,754)
Unrealized losses on derivative instruments:
Unrealized losses arising during year (13,227) 5,481 (7,746)
Less: reclassification adjustment for
losses included in net loss 9,762 (4,104) 5,658
Other comprehensive income (loss) ¥(135,141) ¥62,744 ¥(72,397)
Thousands of U.S. dollars
Pre-tax Tax benefit Net-of-tax
amount (expense) amount
For the year ended March 31, 2003:
Unrealized gains on securities:
Unrealized holding losses arising
during year $ (238,917) $ 97,642 $ (141,275)
Less: reclassification adjustment for losses
included in net income 104,367 (42,675) 61,692
Foreign currency translation adjustments:
Currency translation adjustments arising
during year (169,692) (3,116) (172,808)
Less: reclassification adjustment for
losses included in net income 25,825 — 25,825
Minimum pension liability adjustment (1,812,392) 769,641 (1,042,751)
Unrealized losses on derivative instruments:
Unrealized losses arising during year (93,417) 39,867 (53,550)
Less: reclassification adjustment for
losses included in net income 97,234 (40,892) 56,342
Other comprehensive income (loss) $(2,086,992) $820,467 $(1,266,525)
(1) Derivative financial instruments
The Company operates internationally, giving rise to exposure to market risks from fluctuations in foreign currency
exchange and interest rates. In the normal course of its risk management efforts, the Company employs a variety
of derivative financial instruments, which are comprised principally of forward exchange contracts, interest rate swap
agreements, currency swap agreements, and currency options to reduce its exposures. The Company has
policies and procedures for risk management and the approval, reporting and monitoring of derivative financial instru-
ments. The Company’s policies prohibit holding or issuing derivative financial instruments for trading purposes.
The counterparties to the Company’s derivative transactions are financial institutions of high credit standing. The
Company does not anticipate any credit loss from nonperformance by the counterparties to forward exchange con-
tracts, interest rate swap agreements, currency swap agreements and currency options.
The Company has entered into forward exchange contracts with banks as hedges against fluctuations in foreign
currency exchange rates on monetary assets and liabilities denominated in foreign currencies. The forward
exchange contracts related to accounts receivable and payable, and commitments on future trade transactions
denominated in foreign currencies mature primarily within a few months of the balance sheet date.
Interest rate swap agreements, currency swap agreements, and currency options are used to limit the
Company’s exposure to losses in relation to underlying debt instruments and a certain foreign currency
denominated accounts receivable resulting from adverse fluctuations in foreign currency exchange and interest rates.
These agreements mature during the period 2003 to 2012.
Forward exchange contracts and certain interest rate swap agreements and currency swap agreements are des-
ignated as either fair value hedges or cash flow hedges depending on the foreign currency denominated
accounts receivable or commitments on future trade transactions and the interest rate characteristics of the under-
lying debt as discussed below.
Fair Value Hedge Strategy
The forward exchange contracts utilized by the Company effectively reduce fluctuation in fair value of accounts
receivable denominated in foreign currencies.
The interest rate swap agreements utilized by the Company effectively convert a portion of its fixed-rate debt to
a floating-rate basis.
Cash Flow Hedge Strategy
The forward exchange contracts utilized by the Company effectively reduce fluctuation in cash flow from com-
mitments on future trade transactions denominated in foreign currencies approximately for the next six months.
18.
FINANCIAL
INSTRUMENTS
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