Product Excellence and Global Expansion - Hitachi Koki Co., Ltd.

Significant components of deferred tax assets and liabilities as of March
31, 2010 and 2009 are as follows:
Millions of yen
Thousands of
U.S. dollars
2010 2009 2010
Deferred tax assets:
Retirement benefits.................................... ¥ 683 ¥ 639 $ 7,341
Accrued bonuses......................................... 673 718 7,233
Accrued expenses....................................... 515 575 5,535
Devaluation of inventories.......................... 965 1,120 10,372
Foreign tax credit carry-forward................. 481 195 5,170
Unrealized intercompany profit
of inventories............................................. 1,718 3,163 18,465
Tax loss carry-forward................................ 1,033 941 11,103
Others.......................................................... 870 844 9,351
Subtotal......................................................... 6,941 8,199 74,602
Valuation allowance...................................... (1,602) (1,620) (17,218)
Total deferred tax assets............................... 5,338 6,578 57,373
Deferred tax liabilities:
Retained earnings of overseas subsidiaries... (88) (106) (946)
Others.......................................................... (3) (77) (32)
Total deferred tax liabilities.......................... (92) (183) (989)
Net deferred tax assets................................. ¥ 5,246 ¥ 6,395 $ 56,384
10. CONTINGENT LIABILITIES
Guarantees of employees’ loans were ¥65 million ($699 thousand) and
¥72 million at March 31, 2010 and 2009, respectively.
Guarantees of trade notes discounted and endorsed in the ordinary
course of business were ¥42 million at March 31, 2009.
11. RETIREMENT BENEFITS AND RETIREMENT COSTS
Employees’ severance and retirement benefits included in the liability
section of the consolidated balance sheets as of March 31, 2010 and 2009
consist of the following:
Millions of yen
Thousands of
U.S. dollars
2010 2009 2010
Projected benefit obligation.......................... ¥(33,439) ¥(34,332) $(359,405)
Fair value of plan assets................................ 23,981 22,668 257,749
Unfunded benefit obligations........................ (9,457) (11,663) (101,644)
Unrecognized actuarial differences............... 8,378 10,854 90,048
Unrecognized prior service cost.................... (663) (734) (7,126)
Net retirement benefit obligation................. (1,742) (1,543) (18,723)
Prepaid pension costs.................................... (1,267) (1,557) (13,618)
Employees’ severance and
retirement benefits................................... ¥ (3,009) ¥ (3,101) $ (32,341)
Included in the consolidated statements of income for the years ended
March 31, 2010, 2009 and 2008 is a severance and retirement benefit
expense comprising the following:
Thousands of
Millions of yen
U.S. dollars
2010 2009 2008 2010
Service costs-benefits earned
during the year.......................... ¥ 986 ¥ 881 ¥ 905 $10,598
Interest cost on projected
benefit obligation..................... 863 908 953 9,276
Expected return on plan assets... (584) (741) (846) (6,277)
Amortization of actuarial differences... 1,002 611 407 10,770
Amortization of prior service costs... (70) (70) (66) (752)
Severance and retirement
benefit expense........................ 2,197 1,590 1,353 23,613
Loss on termination of
retirement benefit system........ — — 339 —
Total......................................... ¥2,197 ¥1,590 ¥1,692 $23,613
In addition to the severance and retirement benefits expense described
above, the Company and certain consolidated subsidiaries paid special
retirement benefits amounting to ¥2,032 million in 2009.
The discount rates used by the Company and certain consolidated
subsidiaries are principally 2.3%, 2.5% and 2.5% for the years ended March
31, 2010, 2009 and 2008, respectively. The rates of expected return on plan
assets used by the Company and certain consolidated subsidiaries are
principally 2.5%, 2.5% and 2.5% for the years ended March 31, 2010, 2009
and 2008, respectively. The estimated amount of all retirement benefits to
be paid at the future retirement date is allocated equally to each service
year using the estimated number of total service years. Actuarial gains and
losses are recognized as income or expense in equal amounts over 15 years
commencing from the succeeding period. Past service costs are recognized
as income or expense in equal amounts over 15 years.
12. SHAREHOLDERS’ EQUITY
Significant contents of the Japanese Corporate Law (the “Corporate
Law”) that affect financial and accounting matters are summarized below.
Under Japanese laws and regulations, the entire amount paid for new
shares is required to be designated as common stock. However, a company
may, by a resolution of the Board of Directors, designate an amount not
exceeding one-half of the price of the new shares as additional paid-in
capital, which is included in capital surplus.
Under the Corporate Law, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon resolution at
the shareholders’ meeting. For companies that meet certain criteria such as;
(1) having a Board of Directors, (2) having independent auditors, (3) having a
26 Hitachi Koki ANNUAL REPORT 2010