NO BORDER

11. Shareholders’ Equity
The Commercial Code of Japan (the “Code”) provides that an amount
equivalent to at least 10% of cash dividends paid and bonuses to directors
and statutory auditors, and exactly 10% of interim cash dividends
paid be appropriated to the legal reserve until the sum of additional paidin
capital and the legal reserve equals 25% of stated capital. The Code
also provides that additional paid-in capital and the legal reserve are not
available for dividends, but may be used to reduce a capital deficit by resolution
of the shareholders or may be capitalized by resolution of the
Board of Directors. The Code also stipulates that, to the extent that the
sum of the additional paid-in capital account and the legal reserve
exceeds 25% of the common stock account, the amount of any such
excess is available for appropriation by resolution of the shareholders.
Additional paid-in capital and the legal reserve are included in capital surplus
and retained earnings, respectively, in the accompanying consolidated
balance sheets and statements of shareholders’ equity. The legal
reserve of the Company was ¥6,280 million (US$53,460 thousand) at
March 31, 2006, 2005 and 2004.
The new Corporation Law of Japan (the “Law”), which superseded
most of the provisions of the Code, went into effect on May 1, 2006. The
Law stipulates requirements on distribution of earnings similar to those of
the Code. Under the Law, however, such distributions can be made at
any time by resolution of the shareholders, or by the Board of Directors if
certain conditions are met.
12. Research and Development Expenses
Expenses relating to research and development activities are charged to
income as incurred. Reserch and development expenses included in cost
of sales and selling, general and administrative expenses totaled ¥2,727
million (US$23,214 thousand), ¥2,697 million and ¥2,762 million for the
year ended March 31, 2006, 2005 and 2004, respectively.
13. Other Income (Expenses)
(a) Loss on impairment of fixed assets
The Group recognized loss on impairment of fixed assets for the year
ended March 31, 2006 as follows:
Location Usage Asset type
Uji City, Kyoto
Buildings, land
Golf course
Prefecture
and other
Natori City, Miyagi Prefecture,
Idle land
Land
and six other locations
The Group groups fixed assets by manufacturing unit or usage. The
Group also groups idle fixed assets individually.
Consequently, the Group has written down the operating fixed
assets whose profitability declined and idle fixed assets whose fair value
declined compared with their book values to their net recoverable value
and the Group recorded loss on impairment of fixed assets of ¥5,632
million ($47,944 thousand) in the consolidated statement of income for
the year ended March 31, 2006. This impairment loss was consisted of
losses on golf course and land not in use which had been included in
land of ¥4,872 million (US$41,474 thousand) and ¥760 million
(US$6,470 thousand), respectively. The impairment loss on golf course
was consisted of loss on buildings and structures of land and others of
¥1,346 million (US$11,458 thousand), ¥2,058 million (US$17,519 thousand)
and ¥1,468 million (US$12,497 thousand), respectively.
The recoverable value of the fixed assets presented in the above
table has been measured primarily at net realizable value based on
appraisals conducted by real estate appraisers for the significant assets
and tax assessment value after reasonable adjustments for other assets.
(b) Loss on revaluation of investments
Loss on revaluation of investments recognized in the consolidated
statement of income for the year ended March 31, 2006 represented
the revaluation losses on investments in Nissin Hualong Foods Co., Ltd.
and Hebei Nissin Hualong Paper Products Co., Ltd.
(c) Provision for accrued retirement benefits to directors
Provision for accrued retirement benefits for directors and statutory
auditors represented the additional provision due to the revision of the
internal rules for the retirement benefits for directors, which was made
during the year ended March 31, 2005.
ANNUAL REPORT 2006
41