Yamaha 2008 Annual Report Download - page 72

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70 Yamaha Corporation
(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 amor-
tized or accumulated 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 net
assets. Non-marketable securities classified as other securities are carried at cost. If the market value of marketable securi-
ties classified as other securities declines significantly, such securities are written down to their respective 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 established a policy for the recognition of impairment loss if the market
value at the year end has declined more than 30% and a recovery to fair value is not anticipated.
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 principally at the lower of cost or market, cost being determined by the moving average method.
(g) Depreciation
Depreciation of property, plant and equipment is calculated principally 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 (structures attached to buildings: 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 receiv-
ables. The amount 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 product 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 from business reorganization and so forth, 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 abolished its retirement allowance system for directors. Note that the reserve for directors’ retirement
allowances, which was recorded as “Directors’ retirement benefits” 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.”