Yamaha 2002 Annual Report Download - page 30

Yamaha Corporation Annual Report 2002 Notes to Consolidated Financial Statements
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The effect of the adoption of this new standard was to increase unrealized holding gain on securities in retained
earnings by ¥766 million, net of deferred income tax liability by ¥590 million, which represents the amount netted
against unrealized holding loss of ¥88 million brought forward from previous years when certain affiliates adopted
the new standard early.
Cost of securities sold is determined by the weighted average method.
(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 sub-
sidiaries are stated principally 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 calculated mainly by the declining-balance method (except that
certain consolidated subsidiaries employ the straight-line method) at rates based on the estimated useful lives of the
respective assets.
Estimated useful lives: Buildings 31–50 years (Attachment facilities: 15 years)
Structures 10–30
Machinery 4–11
Equipment 5–6 (Molds: 2)
(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 Group, the amount of the allowance is determined based on (1) past write-off experience and (2)
an estimated amount for probable specific doubtful accounts based on a review of the collectibility of the individual
receivables.
(i) Retirement benefits
Accrued employees’ retirement benefits: Accrued employees’ retirement benefits have been provided based on the pro-
jected retirement benefit obligation and the pension fund assets.
Prior service cost is being amortized as incurred by the straight-line method over periods (10 years) which are
shorter than the average remaining years of service of the employees participating in the plans.
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 (10 years) which are shorter than the average remaining years of service of the
employees participating in the plans.
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 retire-
ment benefits for the directors under its internal rules.
(j) Warranty reserve
The warranty reserve is provided to cover the cost of after-sale service and repairs which may be claimed by customers.
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 leases are accounted for as operating leases regardless of whether such leases are classified as oper-
ating or finance leases, except that lease agreements which stipulate the transfer of ownership of the leased assets to
the lessee are accounted 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.
(m) Derivative financial instruments
Derivative financial instruments are carried at fair value with any changes in unrealized gain or loss charged or credited
to operations, except for those which meet the criteria for deferral hedge accounting under which unrealized gain or
loss is deferred as an asset or a liability. Forward foreign exchange contracts that meet certain criteria are accounted
for by the allocation method, which is utilized to hedge against risk arising from fluctuations in foreign exchange rates.
The Group does not make an assessment of the effectiveness of its hedging activities because the relationship
between the anticipated cash flows fixed by hedging activities and the avoidance of market risk is so clear that there
is no need to evaluate the effectiveness of each hedge against the respective underlying hedged item.
(n) Appropriation of retained earnings
Under the Commercial Code of Japan (the “Code”), the appropriation of retained earnings with respect to a given
financial period is made by resolution of the shareholders at a general meeting held subsequent to the close of such
financial period. The accounts for that period do not, therefore, reflect such appropriation.