Toshiba 2004 Annual Report Download - page 51

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average carrying amount per share, the Company is required to adjust the carrying amount of its investment in the
subsidiary. The Company accounts for such adjustments as gains or losses in income for the year in which the change
in ownership interest occurs rather than as a capital transaction with a charge or credit to additional paid-in capital.
> 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.
Revenue from the development of custom software products is recognized when the software product has been
delivered and accepted by the customer.
Revenue related to equipment that requires installation is recognized upon the completion of the installation of the
equipment.
Revenue under long-term contracts is recorded under the percentage of completion method. To measure the extent
of progress toward completion, the Company generally compares the costs incurred to date to estimated total costs to
complete based upon the most recent available information. A provision for contract losses is recorded in its entirety
when the loss first becomes evident.
Revenues from the sale of equipment under sales-type leases are recognized at the inception of the lease. Interest
on sales-type leases and direct financing leases is recognized to produce a constant periodic rate of return on the net
investment in the lease. Leases not qualifying as sales-type lease or direct financing lease are accounted for as
operating leases and related revenues are recognized over the lease term.
> SHIPPING AND HANDLING COSTS The Company includes shipping and handling costs which totaled ¥83,329
million ($786,123 thousand) and ¥88,760 million for the years ended March 31, 2004 and 2003, respectively in
selling, general and administrative expenses.
> DERIVATIVE FINANCIAL INSTRUMENTS The Company uses a variety of derivative financial instruments, which
include forward exchange contracts, interest rate swap agreements, currency swap agreements, and currency options
for the purpose of currency exchange rate and interest rate risk management. Refer to Note 18 for descriptions of these
financial instruments.
The Company recognizes all derivative financial instruments, such as forward exchange contracts, interest rate
swap agreements, currency swap agreements, and currency options in the consolidated financial statements at fair
value regardless of the purpose or intent for holding the derivative financial instruments. Changes in the fair value of
derivative financial instruments are either recognized periodically in income or in shareholders’ equity as a component
of other comprehensive income (loss) depending on whether the derivative financial instruments qualify for hedge
accounting, and if so, whether they qualify as a fair value hedge or a cash flow hedge. Changes in fair value of
derivative financial instruments accounted for as fair value hedges are recorded in income along with the portion of the
change in the fair value of the hedged item that relates to the hedged risk. Changes in fair value of derivative financial
instruments accounted for as cash flow hedges, to the extent they are effective as a hedge, are recorded in other
comprehensive income (loss), net of tax. Changes in the fair value of derivative financial instruments not qualifying as
a hedge are reported in income.
> SALES OF RECEIVABLES The Company enters into transactions to sell certain trade accounts receivable, trade
notes receivable and finance receivables. The Company may retain certain interests in these transactions. Gain or loss
on the sale of receivables is computed based on the allocated carrying amount of the receivables sold. Retained
interests are recorded at the allocated carrying value of the assets based on their relative fair values at the date of sale.
The Company estimates fair value based on the present value of future expected cash flows less credit losses.
> GUARANTEES Effective January 1, 2003, the Company adopted the FASB Interpretation No. 45 (“ FIN 45” ),
Guarantor’s Accounting and Disclosure Requirements for Guarantees. FIN 45 requires a company to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation it has undertaken in issuing the guarantee. The
adoption of FIN 45 did not have a material impact on the Company’s financial position and results of operations.
> RECLASSIFICATIONS Certain reclassifications to the prior year’s consolidated financial statements and related
footnote amounts have been made to conform to the presentation for the current year.