Toshiba 2007 Annual Report Download - page 87

21
20
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 deter-
mined 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 useful 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 impair-
ment 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
Goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least
annually. Intangible assets with finite useful lives, consisting primarily of core and current technology and software, are amor-
tized using the straight-line method over their respective contractual periods or estimated useful lives.
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 adjust-
ed as further information develops or circumstances change. Costs of future obligations are not discounted to their present values.
INCOME TAXES
The provision for income taxes is computed based on the pre-tax income 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 retire-
ment benefit plans are accrued in the period. The unrecognized net obligation existing at initial application of Statement of
Financial Accounting Standards (“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.
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.
NET INCOME PER SHARE
Basic net income per share (“EPS”) is computed based on the weighted-average number of shares of common stock out-
standing during each period. Diluted EPS assumes the dilution that could occur if stock acquisition rights were exercised to
issue common stock, unless their inclusion would have an antidilutive effect.
REVENUE RECOGNITION
Revenue of mass-produced standard products, such as digital products and electronic devices, is recognized when there is
persuasive evidence of an arrangement, the product has been delivered, the sales price is fixed or determinable, and collectibil-