Toshiba 2004 Annual Report Download - page 49

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1. DESCRIPTION OF BUSINESS
Toshiba Corporation and its subsidiaries (collectively, the “ Company” ) is engaged in research and development,
manufacturing and sales of high-technology electronic and energy products, which span (1) digital products, (2)
electronic devices, (3) social infrastructure, (4) home appliances, and (5) others. For the year ended March 31, 2004,
sales of digital products represented the most significant portion of the Company’s total sales or approximately 33%.
Social infrastructure represented approximately 28%, electronic devices approximately 21%, and home appliances
approximately 10% of the Company’s total sales. The Company’s products are manufactured and marketed throughout
the world with 61% of its sales in Japan and the remainder in Asia, North America, Europe and other parts of the
world.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
> 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
statements 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 as of
March 31, 2003 and for the year then ended include the accounts of Toshiba Corporation and its majority-owned
subsidiaries. As a result of adopting Financial Accounting Standards Board (“ FASB” ) Interpretation No. 46 as revised
in December 2003, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51 (“ FIN 46R” ), the
consolidated financial statements of the Company as of March 31, 2004, include the accounts of Toshiba Corporation
and its majority-owned subsidiaries that are not considered variable interest entities (“ VIEs” ) and all VIEs for which the
Company is the primary beneficiary. All significant intercompany transactions and accounts are eliminated in
consolidation.
FIN 46R requires a VIE to be consolidated if a party with an ownership, contractual or other financial interest in
the VIE is obligated to absorb a majority of the risk of loss from the VIE’s activities, is entitled to receive a majority of
the VIE’s residual returns, or both. A variable interest holder that consolidates the VIE is called the primary beneficiary.
Upon consolidation, the primary beneficiary must initially record all of the VIE’s assets, liabilities and noncontrolling
interests at fair value and subsequently account for the VIE as if it were consolidated based on majority voting interest.
Investments in affiliates in which the ability to exercise significant influence exists are stated at cost plus equity in
undistributed 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 United 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 consolidated 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
income.
> 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 has
been 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Toshiba Corporation and its subsidiaries
March 31, 2004