Yamaha 2003 Annual Report Download - page 33

ANNUAL REPORT 2003 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YAMAHA CORPORATION and Consolidated Subsidiaries
Years ended March 31, 2003 and 2002
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation
YAMAHA CORPORATION (the “Company”) and its domestic subsidiaries maintain their accounting records and
prepare their financial statements in accordance with accounting principles and practices generally accepted in
Japan, and its foreign subsidiaries maintain their books of account in conformity with those of their countries of domi-
cile. The Company and all consolidated subsidiaries are referred to as the “Group.” The accompanying consolidated
financial statements have been prepared from the financial statements filed with the Ministry of Finance as required
by the Securities and Exchange Law of Japan. Accordingly, the accompanying consolidated financial statements may
differ in certain significant respects from accounting principles and practices generally accepted in countries and
jurisdictions other than Japan. For the purposes of this document, certain reclassifications have been made to
present the accompanying consolidated financial statements in a format which is familiar to readers outside Japan.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals shown in the
accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily agree with the
sum of the individual amounts.
(b) Basis of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements include the accounts of the parent company and all its subsidiaries over which
substantial control is exerted either through majority ownership of voting stock and/or by other means. As a result,
the accompanying consolidated financial statements include the accounts of the Company and 84 and 82 consolidated
subsidiaries for the years ended March 31, 2003 and 2002, respectively.
Investments in affiliates (other than subsidiaries as defined above) whose decision-making and control over their
own operations is significantly affected by the Group in various ways are accounted for by the equity method. Investments
in two and three affiliates have been accounted for by the equity method for the years ended March 31, 2003 and 2002,
respectively.
Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are carried at cost.
Certain foreign subsidiaries are consolidated on the basis of fiscal periods ending December 31, which differ from
that of the Company; however, necessary adjustments are made when the effect of the difference is material.
All assets and liabilities of the subsidiaries are revalued at fair values on acquisition, if applicable, and the excess
of cost over underlying net assets at the date of acquisition is amortized over a period of five years on a straight-line
basis.
Change in Method of Accounting
Effective April 1, 2002, Yamaha Motor Co., Ltd. (“Yamaha Motor”), an affiliate of the Company, changed its
method of amortization of the excess of cost over net assets acquired for its subsidiaries from amortizing it over a
20-year period by the straight-line method to charging it to income as incurred. This change was made in order to
facilitate Yamaha Motors’ implementation of its new three-year medium-term management plan (from April 2002
to March 2005), which focuses on such management issues as “improving the profitability of existing businesses”
and “solidifying the foundation of businesses in Asian countries.” Furthermore, this change corresponds with similar
changes in its market structure in response to the intensifying global competition in the motorcycle business and other
businesses and to avoid any future risk arising from fluctuations in the investment market, particularly in strategically
targeted areas. In this way, Yamaha Motor aims to further strengthen its financial position.
The effect of this change was to decrease equity in earnings of unconsolidated subsidiaries and affiliates, income
before income taxes and minority interests and net income by ¥2,360 million ($19,634 thousand) from the corre-
sponding amounts which would have been recorded if the method applied in the previous year had been followed.
(c) Foreign currency translation
Monetary assets and liabilities of the Company and its domestic consolidated subsidiaries denominated in foreign
currencies are translated at the current exchange rates in effect at each balance sheet date if not hedged by forward
exchange contracts or at the contracted rates of exchange when hedged by forward exchange contracts. The resulting
foreign exchange gain or loss is recognized as other income or expense.
Assets and liabilities of the foreign consolidated subsidiaries are translated at the current exchange rates in effect
at each balance sheet date and revenue and expense accounts are translated at the average rate of exchange in effect
during the year. Translation adjustments are presented as a component of shareholders’ equity in the accompanying
consolidated financial statements.
(d) Cash and cash equivalents
All highly liquid investments, generally with a maturity of three months or less when purchased, which are readily
convertible into known amounts of cash and are so near maturity that they represent only an insignificant risk of any
change in value attributable to changes in interest rates, are considered cash equivalents.