Yamaha 2005 Annual Report Download - page 57

Yamaha Annual Report 2005 55
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 generally accepted in Japan, and its overseas subsidiaries maintain their
books of account in conformity with those of their countries of domicile. The Company and all consolidated subsidiaries are referred
to herein as the “Yamaha Group.” The accompanying consolidated financial statements are prepared on the basis of accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of
International Financial Reporting Standards, and are compiled from the consolidated statements prepared by the Company as
required by the Securities and Exchange Law of Japan. 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 consoli-
dated financial statements (both in yen and U.S. dollars) do not necessarily agree with the sums 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 subsidiaries over which it exerts substan-
tial control 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 86 and 89 consolidated subsidiaries for the years ended March 31,
2005 and 2004, respectively.
All significant intercompany balances and transactions have been eliminated in consolidation.
Investments in affiliates (other than subsidiaries as defined above) whose decision-making and control over their own operations is
significantly affected in various ways by the consolidated group are accounted for by the equity method. Investments in two affiliates
have been accounted for by the equity method for the years ended March 31, 2005 and 2004.
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 a balance sheet date, which differs
from that of the Company; however, the necessary adjustments are made when the effect of this difference is material.
All assets and liabilities of the subsidiaries are revalued at fair value on acquisition, if applicable, and the excess of cost over the
underlying net assets at the dates of acquisition is amortized over a period of five years on a straight-line basis.
(c) Foreign currency translation
Monetary assets and liabilities of the Company and its domestic consolidated subsidiaries denominated in foreign currencies are
translated at the exchange rates in effect at each balance sheet date if not hedged by forward foreign exchange contracts, or at the
contracted rates of exchange when hedged by forward foreign exchange contracts. The resulting exchange gain or loss is recog-
nized as other income or expense.
Assets and liabilities of the overseas consolidated subsidiaries are translated at the 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 adjust-
ments are presented as components of shareholders’ equity and minority interests in the 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.
(e) Securities
Securities owned by the Yamaha Group have been classified into two categories, held-to-maturity and other, in accordance with the
accounting standard for financial instruments. Under this standard, held-to-maturity debt securities are either amortized or accumu-
lated to face value by the straight-line method. 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-mar-
ketable securities classified as other securities are carried at cost. If the market 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 recoverable. The Company has estab-
lished a policy for the recognition of an impairment loss if the market value at the year-end has declined more than 30% unless the
fair value is deemed 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 overseas consolidated subsidiaries are stated princi-
pally at the lower of cost or market, cost being determined by the moving average method.
Notes to Consolidated Financial Statements Yamaha Corporation and Consolidated Subsidiaries
March 31, 2005