Yamaha 2009 Annual Report Download - page 59

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(n) Income taxes
Deferred income taxes are recognized by the asset and liability method. Under this method, deferred tax assets and liabilities are deter-
mined 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 income,
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 effec-
tiveness 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.
2. CHANGES IN METHODS OF ACCOUNTING
(1) Method of Measurement of Inventories
Starting from April 1, 2008, the Company and its domestic consolidated subsidiaries have applied the “Accounting Standard for Mea-
surement of Inventories” (ASBJ Statement No. 9, issued by the ASBJ on July 5, 2006) and the method of measurement of inventories
was changed from the lower of cost or market method to the cost method (reducing book value of inventories when their contribution to
profitability declines), cost being determined by the last-in, first-out method. This change had no effect on profit and loss for the year
ended March 31, 2009.
(2) Accounting Standards for Lease Transactions
Starting from April 1, 2008, the Company and its domestic consolidated subsidiaries have applied the “Accounting Standard for Lease
Transactions” (ASBJ Statement No. 13, originally issued by the Business Accounting Council, First Session on June 17, 1993, and the
final revision issued on March 30, 2007), and “Implementation Guidance on Accounting Standard for Lease Transactions” (ASBJ Guid-
ance No. 16, originally issued by the Accounting Committee of the Japanese Institute of Certified Public Accountants on January 18,
1994, with the final revision issued on March 30, 2007). As a result, the accounting treatment for finance leases in which ownership is
not transferred to the lessee has been changed from methods applicable to ordinary lease transactions to methods applicable to ordi-
nary buying and selling transactions.
For finance leases in which ownership is not transferred to the lessee commencing on or before March 31, 2008, the Company
maintains its accounting treatments applicable to operating lease transaction. The effect of this change on profit and loss for the year
ended March 31, 2009 was not material.
(3) Application of Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated
Financial Statements
Starting from April 1, 2008, the Company has applied “Practical Solution on Unification of Accounting Policies Applied to Foreign Sub-
sidiaries for Consolidated Financial Statements” (Practical Issues Task Force, No. 18, issued by the ASBJ on May 17, 2006), and the
necessary revisions have been made in the consolidated financial statements.
The effect on profit and loss for the year ended March 31, 2009 and retained earnings at March 31, 2009 was not material.
In previous fiscal years, the landrights at certain overseas consolidated subsidiaries were included and presented in the item “Land,”
however, they are now included in the item “Other” item under “Investments and other assets,” and amounted to ¥1,503 million
($15,301 thousand) as of March 31, 2009.
(4) Change in Method of Depreciation
Effective the previous fiscal year, pursuant to the revision of the Corporate Tax Law of Japan (the “Tax Law”) which went into effect on
April 1, 2007, the Company and its domestic consolidated subsidiaries have adopted the declining-balance method for calculating
depreciation of tangible fixed assets acquired on or after April 1, 2007, using a rate that is 2.5 times that which would have been used if
the straight-line method had been applied.
As a result of this change, for the year ended March 31, 2008, operating income, and income before income taxes and minority
interests both decreased by ¥529 million and net income decreased by ¥349 million from the corresponding amounts which would have
been recorded under the previous method.
The effect of this change on segment information is disclosed in Note 24.
In addition, pursuant to the revision of the Tax Law which went into effect on April 1, 2007, effective April 1, 2007, the Company and
Annual Report 2009 57