Toshiba 2003 Annual Report Download - page 41

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TOSHIBA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Toshiba Corporation and its subsidiaries
1.
DESCRIPTION OF
BUSINESS
2.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
Toshiba Corporation and its subsidiaries (the “Company”) is engaged in research and development, manufacturing
and sales of high-technology electronic and energy products, which span (1) information & communications sys-
tems, (2) social infrastructure systems, (3) power systems, (4) digital media, (5) home appliances, (6) electronic
devices & components, and (7) others. For the year ended March 31, 2003, sales of digital media products rep-
resented the most significant portion of the Company’s total sales or approximately 26 percent. Electronic
devices & components represented approximately 20 percent of the Company’s total sales, while sales of
information & communications systems and social infrastructure systems were approximately equal in amount, each
representing approximately 15 percent of the Company’s total sales. Sales of home appliances and power systems
represented approximately 10 percent of the Company’s total sales. The Company’s products are manufactured
and marketed throughout the world with 59 percent of sales in Japan and the remainder in North America,
Asia, Europe and other parts of the world.
Preparation of Financial Statements
Toshiba Corporation and its domestic subsidiaries maintain their records and prepare their financial statements in
accordance with accounting principles generally accepted in Japan, and its foreign subsidiaries in conformity with
those of the countries of their domicile.
Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial state-
ments to conform with accounting principles generally accepted in the United States of America. These adjustments
were not recorded in the statutory books of account.
Basis of Consolidation and Investments in Affiliates
The consolidated financial statements include the accounts of Toshiba Corporation and those of its majority owned
subsidiaries. All significant intercompany transactions and accounts are eliminated in consolidation.
Investments in affiliates in which the ability to exercise significant influence exists are stated at cost plus equity in undis-
tributed earnings (losses). Net consolidated income (loss) includes the Company’s equity in the current net
earnings (losses) of such companies, after elimination of unrealized intercompany profits.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally
accepted in the Untied States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the con-
solidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents
All highly liquid investments with original maturities of three months or less at the date of purchase are considered
to be cash equivalents.
Foreign Currency Translation
The assets and liabilities of foreign consolidated subsidiaries and affiliates that operate in a local currency environment
are translated into Japanese yen at applicable current exchange rates at year end. Income and expense items are
translated at average exchange rates prevailing during the year. The effects of these translation adjustments are
included in other comprehensive income (loss) and reported as a component of shareholders’ equity. Exchange gains
and losses resulting from foreign currency transactions and translation of assets and liabilities denominated in foreign
currencies are included in other expenses in the consolidated statements of operations.
Allowance for Uncollectible Receivables
An allowance for uncollectible trade receivables is recorded based on a combination of the write-off history, aging
analysis, and an evaluation of any specific known troubled accounts. When all collection options are exhausted
including legal recourse, the accounts or portions thereof are deemed to be uncollectible and charged against the
allowance. An allowance for uncollectible finance receivables is provided based on past loss experience and the
estimation of value of the underlying collateral.
Marketable Securities and Other Investments
The Company classifies all of its marketable securities as available-for-sale which are reported at fair value, with
unrealized gains and losses included in accumulated other comprehensive income (loss), net of taxes. Other invest-
ments without quoted market prices are stated at cost. Realized gains or losses on the sale of securities are based
on the average cost of a particular security held at the time of sale.
Marketable securities and other investment securities are regularly reviewed for other-than-temporary declines in
carrying value based on criteria that include the length of time and the extent to which the market value has been
less than cost, the financial condition and near-term prospects of the issuer and the Company’s intent and abil-
ity to retain marketable securities and investment securities for a period of time sufficient to allow for any antici-
pated recovery in market value. When such a decline exists, the Company recognizes an impairment loss to the
extent of such decline.
Inventories
Raw materials, finished products and work in process for stock sales items are stated at the lower of cost or market,
cost being determined principally by the average method. Finished products and work in process for contract items
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