Toshiba 2005 Annual Report Download - page 62

20 Toshiba Corporation 130th Anniversary
Marketable securities and other investment securities are regularly reviewed for other-than-temporary declines in carrying
amount 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 products 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.
> PROPERTY, PLANT AND EQUIPMENT 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.
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.
> 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 flow is less than the carrying amount of the asset, 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.
> GOODWILL AND OTHER INTANGIBLE ASSETS In June 2001, the FASB issued Statement of Financial Accounting
Standards (“SFAS”) No.141, Business Combinations (“SFAS 141”), and SFAS No.142, Goodwill and Other Intangible
Assets (“SFAS 142”). SFAS 141 requires the use of the purchase method of accounting for business combinations.
SFAS 141 also specifies the types of acquired intangible assets that are required to be recognized and reported separately
from goodwill and those acquired intangible assets that are required to be included in goodwill. Under SFAS 142,
goodwill and recognized intangible assets determined to have an indefinite useful life are no longer amortized, but
instead are tested for impairment at least annually. Intangible assets with finite lives are amortized over their respective
estimated useful lives and reviewed for impairment in accordance with SFAS No.144, Accounting for the Impairment or
Disposal of Long Lived Assets.
> ENVIRONMENTAL LIABILITIES Liabilities for environmental remediation and other environmental costs are
accrued when environmental assessments or remedial efforts are probable and the costs can be reasonably estimated,
based on current law and existing technologies. Such liabilities are adjusted as further information develops or circumstances
change. Costs of future obligations are not discounted to their present values.
> 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 SFAS No. 87, Employers’ Accounting for Pensions, 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 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.