Yamaha 2011 Annual Report Download - page 67

65
Annual Report 2011
Estimated useful lives:
Buildings: 31 – 50 years (leasehold improvement: 15 years)
Structures: 10 – 30 years
Machinery and equipment: 4 – 9 years
Tools, furniture and fixtures: 5 – 6 years (molds: 2 years)
Depreciation of leased assets under finance leases, other than
those for which the ownership transfers to the lessee, is calculated by
the straight-line method over the lease period with the residual value
at zero.
(f) Allowance for doubtful accounts
To properly evaluate accounts receivable, the allowance for doubtful
accounts is provided at an amount sufficient to cover possible losses
on the collection of receivables. 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 collect-
ability of individual receivables.
(g) Provision for product warranties
Provision for product warranties is provided to cover the cost of cus-
tomers’ claims relating to after-sales service and repairs. The amount
of this provision is estimated based on a percentage of the amount or
volume of sales after considering the historical experience with repairs
of products under warranty.
(h) Provision for directors’ bonuses
Provision for directors’ bonuses is provided for the payment of bonuses
to directors. The projected amount is set aside as this provision.
(i) Provision for business restructuring expenses
Provision for business restructuring expenses is provided for the
expenses arising from business reorganization. The projected amount
is set aside as this provision.
(j) Provision for retirement benefits
Provision for employees’ retirement benefits is 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.
(k) Construction contracts
For the construction work in progress, if the outcome of the construc-
tion activity during the course of the construction is deemed certain,
the percentage-of-completion method is applied.
When the above condition is not met, the completed-contract
method is applied.
The method for estimating the amount recognized by the per-
centage of completion is based on the ratio of costs incurred to the
estimated total cost. See Note 2(a)(4).
(l) Criteria for presentation of finance leases (as Lessor)
For finance lease transactions where the Company or a consolidated
subsidiary is the lessor, in which ownership is not transferred to the
lessee, the leased assets are recorded as lease investment assets which
are included in the item “Other” under “Current assets.” Sales and cost
of sales related to these finance lease transactions are recognized at
the time the lease fees are received.
(m) 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.
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 translation are presented as
translation adjustments and minority interests in the accompanying
consolidated balance sheets.
(n) Derivative financial instruments
The Company and certain consolidated subsidiaries have entered
into various derivative transactions in order to manage certain risk
arising from adverse fluctuations in foreign currency exchange rates.
Derivative financial instruments are carried at fair value with changes
in unrealized gain or loss charged or credited to operations, except
for those which meet the criteria for deferral hedge accounting under
which unrealized gain or loss is deferred as a component of net assets.
Hedging instruments are forward foreign exchange contracts,
purchased options with foreign currency-denominated put and yen-
denominated call options. Hedged items are primarily forecast sales
denominated in foreign currencies, and receivables and payables
denominated in foreign currencies.
Forecast sales denominated in foreign currencies designated as
hedged items are accounted for by benchmark method. Translation
differences arising from forward foreign exchange contracts of receiv-
ables and payables denominated in foreign currencies are accounted
for by allocation method.
The Company and its consolidated subsidiaries manage their
derivative transactions in accordance with the Group’s management
policy and rules of each company. See Note 20.
Hedge effectiveness is not assessed if the anticipated cash flows
are fixed by hedging activities and the risk of changes in cash flows are
completely avoided.