Wacom 2006 Annual Report Download - page 25

W acom Co., Ltd. Annual Report 2006 24
1. Basis of presenting consolidated financial statements:
The accompanying consolidated financial statements have been
prepared from the consolidated financial statements of W acom
Co., Ltd. (the “Company”) filed with the D irector of the Kanto
Local Finance Bureau in accordance with the Securities and
Exchange Law of Japan and its related accounting regulations,
and in conformity with accounting principles and practices
generally accepted in Japan, which are different in certain
respects from the application and disclosure requirements of
International Financial Reporting Standards. In addition, the
consolidated statements of shareholders’ equity, which are not
required as part of the basic financial statements in Japan, are
presented herein for additional information.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to the
consolidated financial statements issued domestically in order
to present them in a form more familiar to readers outside
Japan. Some information, provided in the notes to the
consolidated financial statements, is not required under
accounting principles generally accepted in Japan, but is
presented for the convenience of the readers.
The consolidated financial statements are stated in Japanese
yen, the currency of the country in which the Company is
incorporated and principally operates. The translation of
Japanese yen amounts into U.S. dollar amounts is included
solely for the convenience of readers outside Japan and has
been calculated at the rate of JP¥ 117.47 = U.S.$1.00, the
approximate rate of exchange on March 31, 2006. Such
translations should not be construed as representations that
the Japanese yen amounts could have been or could be
converted into U.S. dollars at that or any other rate.
2. Summary of significant accounting policies:
(1) Consolidation
The consolidated financial statements include the accounts of
the Company and all of its majority-owned subsidiaries.
The assets and liabilities of its subsidiaries are incorporated into
the financial statements at fair value, and the difference
between the net assets at fair value and the investment
amounts is accounted for as goodwill, which is amortized
equally over 5 years.
All significant intercompany balances and transactions, and
unrealized profit, included in assets, have been eliminated on
consolidation.
O verseas-consolidated subsidiaries have adopted accounting
principles generally accepted in their respective countries and
no adjustments have been made to their financial statements
on consolidation, as allowed under accounting principles and
practices generally accepted in Japan.
(2) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments,
generally with original maturities of three months or less, that
are readily convertible to known amounts of cash and, thus, are
near maturity and present an insignificant risk of changes in
value.
(3) Financial investment
(a) Derivatives:
All derivatives are stated at fair value, with changes in fair
value included in net profit or loss in the period in which they
arise.
(b) Securities:
Securities held by the Company and its subsidiaries are
classified into four categories:
Trading securities are stated at fair value, with changes in fair
value included in net profit or loss for the period in which they
arise.
Held-to-maturity debt securities are stated at cost after
accounting for any premium or discount on acquisition, which is
amortized over the period to maturity.
Investments of the Company in equity securities issued by
affiliates are accounted for by the equity method.
O ther securities for which market price or quotations are
available are stated at fair value. N et unrealized gains and
losses on these securities are reported as a separate
component in shareholders’ equity at a net-of-tax amount.
O ther securities for which market price or quotations are
unavailable are stated at cost.
(4) Allowance for doubtful accounts
This allowance for doubtful accounts is provided for estimated
future losses based on past experience, and the allowance is
based on an evaluation of the collectability of individual
receivables.
(5) Inventories
Inventories held by the Company are stated at cost, which is
mainly determined by the average method.
Inventories held by foreign subsidiaries are stated at the lower
of cost or market value, which is determined by the FIFO
method.
Notes to Consolidated Financial Statements
W acom Co., Ltd. and Its Subsidiaries