Toshiba 2003 Annual Report Download - page 42

are stated at the lower of cost or estimated realizable value, cost being determined by accumulated production costs.
In accordance with general industry practice, items with long manufacturing periods are included among inventories
even when not realizable within one year.
Depreciable Assets
Property, plant and equipment, including significant renewals and additions, are carried at cost. Maintenance and
repairs, including minor renewals and betterments, are expensed as incurred. Certain costs incurred in connection
with developing or obtaining internal use software are capitalized. These costs consist of payments made to third
parties and the salaries of employees working on such software development and are included under the caption
Other assets in the accompanying consolidated balance sheets.
Depreciation for property, plant and equipment is computed generally by the declining-balance method at
rates based on the following estimated useful lives of the assets: buildings, 3 to 50 years; machinery and
equipment, 2 to 20 years. Software is depreciated mainly using the straight-line method over the estimated use-
ful life of the asset, which is generally less than 5 years.
Impairment of Long-Lived Assets
Long-lived assets, other than goodwill and intangible assets with indefinite lives, are evaluated for impairment using
an estimate of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying
amount of such asset may not be recoverable. If the estimate of undiscounted cash flows is less than the carry-
ing amount of the assets, an impairment loss is recorded based on the fair value of the asset. Fair value is deter-
mined primarily by using the anticipated cash flows discounted at a rate commensurate with the risk involved. For
assets held for sale, an impairment loss is further increased by costs to sell. Long-lived assets to be disposed of
other than by sale are considered held and used until disposed of.
Intangible Assets
Intangible assets, mainly consisting of technical license fees, are amortized over the contractual periods or the esti-
mated useful lives on a straight-line basis without residual values. Weighted average amortization period for these
intangible assets was 5.3 years as of March 31, 2003. The Company reviews the carrying amount of indefinite lived
intangible assets for impairment whenever events or circumstances indicates that the carrying amount may not be
recoverable.
Income Taxes
The provision (benefit) for income taxes is computed based on the pre-tax income (loss) included in the consoli-
dated statements of operations. 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. The effect on deferred tax assets and lia-
bilities of a change in tax rates is recognized in income in the period that the change is enacted. Valuation allowances
are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
Accrued Pension and Severance Costs
The Company has various retirement benefit plans covering substantially all employees. Current service costs of
the retirement benefit plans are accrued in the period. The unrecognized net obligation existing at initial applica-
tion of Statement of Financial Accounting Standards (“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.
Additional Paid-in Capital
Under the Japanese Commercial Code, the entire amount of the issue price of shares is required to be accounted
for in the common stock account although a company in Japan may, by a resolution of its board of directors, account
for an amount not exceeding one-half of the issue price of the shares as additional paid-in capital.
Issuance of Stock by a Subsidiary
When a subsidiary issues stock to an unrelated third party, the Company’s ownership interest in the subsidiary
decreases; however, if the price per share is more or less than the Company’s average carrying amount per share,
the Company is required to adjust the carrying amount of its investment in the subsidiary. The Company recognizes
such gains or losses in income for the year in which the change in ownership interest occurs.
For the year ended March 31, 2002, a subsidiary sold its newly-issued common stock to a third party investor. In
connection with this transaction, the Company recognized a gain of ¥9,185 million and deferred taxes on this gain
of ¥3,867 million.
Net Income per Share
Basic net income 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, unless their inclusion would have an antidilutive effect.
Revenue Recognition
Revenue of mass-produced standard products is recognized when there is persuasive evidence of an arrangement,
the product has been delivered, the sales price is fixed or determinable, and collectibility is reasonably
assured. Mass-produced standard products are considered delivered to customers once they have been
shipped, and the title and risk of loss have transferred.
Revenue from services is recognized as the services are provided.
40 TOSHIBA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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