Yamaha 2010 Annual Report Download - page 55

Notes to Consolidated Financial Statements
Yamaha Corporation and Consolidated Subsidiaries
Years ended March 31, 2010 and 2009
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 state-
ments in accordance with accounting principles generally accepted in Japan, and its overseas subsidiaries maintain their books of
account in conformity with those of their respective countries of domicile. The Company and all consolidated subsidiaries are referred to
herein as the “Yamaha Group.”
Effective the previous fiscal year, the Company has applied the new accounting standard “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (Practical Issues Task Force, No. 18, issued
by the ASBJ on May 17, 2006). Under the new accounting standard, the accompanying consolidated financial statements have been
prepared by using the accounts of overseas consolidated subsidiaries prepared in accordance with either International Financial Report-
ing Standards or generally accepted accounting principles in the United States as adjusted for certain items. See Note 2 (5). 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 financial statements prepared by the Company as required by the Financial Instruments 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 consolidated 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 accompanying consolidated financial statements include the accounts of the parent company and all subsidiaries over which it
exerts substantial control either through majority ownership of voting stock and/or by other means. As a result, the accompanying con-
solidated financial statements include the accounts of the Company and 84 consolidated subsidiaries for the year ended March 31,
2010 and 88 consolidated subsidiaries for the year ended March 31, 2009. 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 are significantly affected in various ways by the Yamaha Group are accounted for by the equity method.
Investments in one affiliate was accounted for by the equity method for the year ended March 31, 2010, and two affiliates were
accounted for by the equity method for the year ended March 31, 2009. Investments in unconsolidated subsidiaries and affiliates not
accounted for by the equity method are carried at cost. See Note 2 (1). Certain overseas subsidiaries are consolidated on the basis of
fiscal periods ending December 31, which differs from the balance sheet date of the Company; however, a financial closing as of and for
the year ended March 31 has been made and reported by these overseas subsidiaries for consolidation purposes. All assets and liabili-
ties of subsidiaries are revalued at fair value on acquisition and, if applicable, the excess of cost over the underlying net assets at the
respective dates of acquisition is presented as goodwill and 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 trans-
lated at the exchange rates in effect at each balance sheet date if not hedged by forward foreign exchange contracts, or at the con-
tracted rates of exchange when hedged by forward foreign exchange contracts. The resulting exchange gain or loss is recognized 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. The components of net assets excluding minority interests are translated at their historical exchange rates.
Revenue and expense accounts are translated at the average rates of exchange in effect during the year. Differences arising from trans-
lation are presented as translation adjustments and minority interests in the accompanying consolidated balance sheets.
(d) Cash and cash equivalents
Cash on hand and in banks, and 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 and cash equivalents.
(e) Securities
Securities owned by the Yamaha Group have been classified into two categories, held-to-maturity and available-for-sale, in accordance
with the accounting standard for financial instruments. Under this standard, held-to-maturity debt securities are either amortized or
accumulated to face value by the straight-line method. Marketable securities classified as available-for-sale 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 available-for-sale securities are carried at cost. If the market value of marketable securities classified
as available-for-sale 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 recover-
able. 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 cost method (method of reducing
book value when the contribution of inventories to profitability declines), cost being determined by the last-in, first-out method. Invento-
ries 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. See Note 2 (3).
(g) Depreciation
Depreciation of property, plant and equipment (excluding leased assets) 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.
Annual Report 2010 53
Financial Section