Yamaha 2003 Annual Report Download - page 34

(e) Securities
Securities owned by the Group have been classified into two categories, held-to-maturity and other, in accordance
with the accounting standard for financial instruments which was announced by the Business Accounting Deliberation
Council on January 22, 1999 and adopted by the Group effective the year ended March 31, 2002. Under this stan-
dard, held-to-maturity debt securities are either amortized or accumulated to face value on a straight-line basis.
Marketable securities classified as other securities are carried at fair value with any changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly in shareholders’ equity. Non-marketable securities
classified as other securities are carried at cost. Under this accounting standard, if the fair value of the marketable
securities classified as other securities has declined significantly, such securities are written down to fair value, thus
establishing a new cost basis. The amount of each write-down is charged to income as an impairment loss unless the
fair value is deemed to be recoverable. The Company has established a policy for the recognition of an impairment
loss if the total declines more than 30% unless the fair value is deemed to be recoverable.
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 of the Company’s facilities related to its recreation business and 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 (Leasehold improvements: 15 years)
Structures 10–30
Machinery and equipment 4–11
Tools, furniture and fixtures 5–6 (Molds: 2 years)
(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 Yamaha Group, the amount of the allowance is determined based on the historical experience
with write-offs plus an estimate of specific probable 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 a period (10 years) which is short-
er 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 a period (10 years) which is 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 and statutory auditors are customarily
entitled to receive lump-sum retirement payments based on the Company’s internal rules. The Company provides a
100% allowance for retirement benefits for its directors and statutory auditors under its own internal regulations.
(j) Warranty reserve
A warranty reserve is provided to cover the cost of customers’ claims relating to after-sales service and repairs. The
amount of this reserve is estimated based on a percentage of the amount or volume of sales and after considering
historical experience with repairs of 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 leases which stipulate the transfer of ownership of the leased assets to the lessee
are accounted for as finance leases.
32 YAMAHA CORPORATION