Yamaha 2007 Annual Report Download - page 33

63 Yamaha Annual Report 2007 64
(g) Depreciation and amortization
Depreciation of property, plant and equipment is calculated principally 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:
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.
The level of the provision is based on the historical experience with write-offs plus an estimate of specific probable doubtful
accounts determined by a review of the collectibility of individual receivables.
(i) Reserve for directors’ bonuses
To provide for the payment of bonuses to directors, the projected amount of such bonuses is set aside as a reserve.
(j) Product 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 after considering the historical experience with repairs
of products under warranty.
(k) Reserve for structural reform expenses
To provide for expenses arising due to business reorganization, etc., the projected amount of such expenses is set aside as a reserve.
(l) Accrued retirement benefits
Accrued employees’ retirement benefits: Accrued employees’ retirement benefits are provided based on the projected retirement
benefit obligation and the pension fund assets.
Prior service cost is amortized as incurred 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.
Actuarial gain or loss is 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.
Accrued directors’ retirement benefits: Effective the end of the Annual General Meeting of Shareholders held on June 27, 2006,
the Company has eliminated its retirement allowance system for directors. Note that the reserve for directors’ retirement
allowances, which was recorded on the balance sheets until the end of the above-mentioned shareholders’ meeting held on June
27, 2006 has now been included in “Other long-term liabilities” under “Long-term liabilities.”
(m) Leases
Non-cancelable leases are accounted for as operating leases regardless of whether such leases are classified as operating 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.
(n) Income taxes
Deferred income taxes are recognized by the asset and liability method. Under the asset and liability method, deferred tax assets
and liabilities are
determined based on the differences between financial reporting and the tax bases 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.
(o) Derivative financial instruments
Derivative financial instruments are carried at fair value with any changes in unrealized gain or loss charged or credited to opera-
tions, except for those which meet the criteria for deferral hedge accounting under which the unrealized gain or loss is deferred as
an asset or a liability. Forward foreign exchange contracts which meet certain criteria are accounted for by the allocation method
which is utilized to hedge against risk arising from fluctuation in foreign exchange rates.
The Yamaha Group does not conduct an assessment of the effectiveness of its hedging activities because the relationship
between the anticipated cash flows fixed by the hedging activities and the avoidance of market risk is so clear that there is no need
to evaluate the performance of each hedge against that of the underlying hedged item.
(p) Land revaluation
Pursuant to the “Law Concerning the Revaluation of Land,” land used for the business operations of the Company, two consolidat-
ed subsidiaries and an affiliate was revalued. The excess of the revalued carrying amount over the book value before revaluation has
been included in net assets.
This land revaluation was determined based on the official standard notice prices. It was conducted in accordance with the
relevant regulations of the Corporation Tax Law of Japan with certain adjustments as deemed necessary.
2. CHANGES IN METHOD OF ACCOUNTING
(1) Accounting Standard for Presentation of Net Assets in the Balance Sheet
Effective the fiscal year under review, the Company has adopted “Accounting Standard for Presentation of Net Assets in the
Balance Sheet” (Accounting Standards Board of Japan (ASBJ) Statement No. 5 issued on December 9, 2005) and “Guidance on
Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8 issued on December 9, 2005).
Total shareholders’ equity under the previous method of presentation was equivalent to ¥346,873 million at March 31, 2007.
Note that as a result of the revision in rules for the presentation of consolidated financial statements, the net assets section of
the consolidated balance sheets at March 31, 2007 and 2006 have been prepared in accordance with the revised rules.
(2) Accounting Standard for Directors’ Bonuses
Effective the fiscal year under review, the Company has adopted “Accounting Standard for Directors’ Bonuses” (ASBJ Statement
No. 4 issued on November 29, 2005).
As a result, operating income, and income before income taxes and minority interests decreased by ¥100 million from the
amounts which would have been recorded under the previous accounting standard.
4. U.S. DOLLAR AMOUNTS
Solely for the convenience of the reader, the accompanying financial statements for the year ended March 31, 2007 have been
presented in U.S. dollars by translating all yen amounts at ¥118.05 = U.S.$1.00, the exchange rate prevailing on March 31, 2007. This
translation should not be construed as a representation that yen have been, could have been, or could in the future be accompanying
converted into U.S. dollars at the above or any other rate.
3. CHANGES IN THE METHOD OF PRESENTATION
Consolidated Balance Sheets
The elimination of investments in and capital of consolidated subsidiaries that were presented as “Excess of cost over net assets
acquired” until the previous fiscal year has been included in “Goodwill” in the accompanying consolidated balance sheets at March 31,
2007 and 2006.
Consolidated Statements of Cash Flows
Amortization of the elimination of investments in and capital of consolidated subsidiaries that were presented as “Amortization for
excess of cost over net assets acquired” until the previous fiscal year has been included in “Amortization of goodwill” in the accompany-
ing consolidated statements of cash flows for the years ended March 31, 2007 and 2006.
Investments in and advances to unconsolidated subsidiaries and affiliates
Other
Investment securities
2007
$ 936,722
337,052
$1,273,774
2006
¥ 90,094
42,807
¥ 132,902
2007
¥ 110,580
39,789
¥ 150,369
Millions of Yen
Thousands of
U.S. Dollars
5. INVESTMENT SECURITIES
Investment securities at March 31, 2007 and 2006 were as follows: