Yamaha 2001 Annual Report Download - page 30

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(f) Inventories
Inventories of the Company and its domestic consolidated subsidiaries are stated principally at the lower of cost or market, cost
being determined by the last-in, first-out method. Inventories of the Company’s foreign consolidated subsidiaries are stated princi-
pally at the lower of cost or market, cost being determined by the moving average method.
(g) Depreciation and amortization
Depreciation of property, plant and equipment is mainly calculated by the declining-balance method except that certain consoli-
dated subsidiaries employ the straight-line method at rates based on the estimated useful lives of the respective assets.
Estimated useful lives: Building 31–50 years
Structures 10–30
Machinery 4–11
Equipment 5–6
(h) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount sufficient to cover possible losses on the collection of receivables.
For the Company and its consolidated subsidiaries, the amount of the allowance is determined based on (1) past write-off experi-
ence, (2) an estimated amount for probable doubtful accounts based on a review of the collectibility of individual receivables.
(i) Retirement benefits
Accrued employees’ retirement benefits: Effective the year ended March 31, 2001, the Company adopted a new accounting standard
for retirement benefits (“Opinion Concerning the Establishment of Accounting Standard for Retirement Benefits” issued by the
BADC on June 16, 1998). In accordance with this standard, accrued employees’ retirement benefits have been provided based on the
projected retirement benefit obligation and the pension fund assets. In prior years, retirement allowances have been provided at the
retirement benefits payable after excluding the portion covered by the pension plans at the year-end for employees, if all the employ-
ees terminated their services voluntarily.
The effect of the adoption of the new standard for retirement benefits was to decrease income before income taxes and minority
interests by ¥4,741 million (US$38,265 thousand) for the year ended March 31, 2001.
In addition, effective April 1, 2000, both the retirement benefits (as prior method of accounting) and accrued liabilities for the
pension plan were reclassified to accrued employees’ retirement benefits.
The transition difference of ¥2,820 million (US$22,760 thousand) resulting from the initial adoption of the new accounting
standard was fully charged to income as an other expense for the year ended March 31, 2001.
Actuarial gain and loss are amortized in the year following the year in which the gain or loss is recognized primarily by the straight-
line method over periods (principally 10 years) which are shorter than the average remaining years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method over periods (principally 10 years) which are shorter
than the average remaining years of service of the employees.
Directors’ and statutory auditors’ retirement benefits: The Company’s directors are generally entitled to receive lump-sum retirement
payments based on the Company’s internal rules. The Company provides a 100% allowance for retirement benefits for the directors
under its internal rules. Effective the year ended March 31, 2001, the Company separately discloses accrued retirement benefits for
directors and statutory auditors.
(j) Warranty reserve
The warranty reserve is provided to cover costs for possible repairs which may be claimed by customers after the Group companies’
sales. The amount of this reserve is estimated based on a percentage of the amount or volume of sales and after considering past
experience with repairs to products under warranty.
(k) Leases
Non-cancelable lease transactions are accounted for as operating leases regardless of whether such leases are classified as operating
or finance leases except that lease agreements which stipulate the transfer of ownership of the leased assets to the lessee are account-
ed for as finance leases.
(l) Income taxes
Deferred income taxes are recognized by the liability method. Under the liability method, deferred tax assets and liabilities are determined
based on the difference between financial reporting and the tax basis of the assets and liabilities and are measured using the enacted
tax rates and laws which will be in effect when the differences are expected to reverse.