Toshiba 2004 Annual Report Download - page 50

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comprehensive income (loss), net of taxes. Other investments 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 ability to retain
marketable securities and investment securities for a period of time sufficient to allow for any anticipated 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 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 useful 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 carrying amount of the assets, an impairment loss is recorded based on the fair value of the
asset. Fair value is determined 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 estimated useful lives on a straight-line basis. The weighted average amortization period for
these intangible assets was 6 years as of March 31, 2004. The Company reviews the carrying amount of indefinite-
lived intangible assets for impairment whenever events or circumstances indicate 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 consolidated statements of income. 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
liabilities 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 application of Statement of Financial Accounting Standards (“ SFAS” )
No. 87 and prior service costs resulting from amendments 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