Annual Report 2007 - Komatsu

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under certain loan agreements, the lender may require the
borrower to submit proposals for the payment of dividends and
other appropriations of earnings for the lender’s review and approval
before presentation to the shareholders. The companies
have never received such a request.
Annual maturities of long-term debt subsequent to March
31, 2007, excluding market value adjustments for balances subject
to qualifying fair value hedges of ¥1,581 million ($13,398
thousand) are as follows:
Thousands of
Year ending March 31 Millions of yen U.S. dollars
2008 ¥ 73,528 $ 623,119
2009 83,191 705,008
2010 50,594 428,763
2011 17,450 147,881
2012 21,018 178,119
2013 and thereafter 2,626 22,254
Total ¥248,407 $2,105,144
13. Liability for Pension and Other Retirement Benefits
The Company’s employees, with certain minor exceptions, are
covered by a severance payment and a defined benefit cash balance
pension plan. The plan provides that approximately 60% of
the employee benefits are payable as a pension payment, commencing
upon retirement at age 60 (mandatory retirement age)
and that the remaining benefits are payable as a lump-sum severance
payment based on remuneration, years of service and certain
other factors at the time of retirement. The plan also
provides for lump-sum severance payments, payable upon earlier
termination of employment.
Under the cash balance pension plan, each employee has an
account which is credited yearly based on the current rate of pay
and market-related interest rate.
Certain subsidiaries have various funded pension plans and/or
unfunded severance payment plans for their employees, which
are based on years of service and certain other factors. The
Company and certain subsidiaries’ funding policy is to contribute
the amounts to provide not only for benefits attributed to service
to date but also for those expected to be earned in the future.
At March 31, 2007, Komatsu adopted the recognition and
disclosure provisions of SFAS No. 158, “Employer’s Accounting
for Defined Benefit Pension and Other Postretirement Plans—an
amendment of SFAS No. 87, 88, 106, and 132(R)” (“SFAS No.
158”). SFAS No. 158 required Komatsu to recognize the funded
status (i.e. the difference between the projected benefit obligations
and the fair value of plan assets) of their pension plans in
the March 31, 2007 consolidated balance sheet, with a
corresponding adjustment to accumulated other comprehensive
income, net of tax.
The adjustment to accumulated other comprehensive income
(loss) at adoption represents the unrecognized actuarial net gain
or loss and unrecognized prior service cost, both of which were
previously netted against the plans’ funded status in the consolidated
balance sheet pursuant to the provisions of SFAS No. 87.
These amounts will be subsequently recognized as net periodic
benefit cost pursuant to Komatsu’s historical accounting policy
for amortizing such amounts. Further, actuarial gains and losses
that arise in subsequent periods and are not recognized as net
periodic benefit cost in the same periods will be recognized as a
component of other comprehensive income (loss). Those
amounts will be subsequently recognized as a component of net
periodic benefit cost on the same basis as the amounts recognized
in accumulated other comprehensive income (loss) at
adoption of SFAS No. 158.
SFAS No. 158 also requires that the benefit obligations and
the fair value of plan assets be measured as of the balance sheet
date. Komatsu will adopt the provisions of measurement date in
the year ending March 31, 2008. The change in the measurement
date of defined benefit pension and other postretirement
benefit plans is not expected to have a material impact on
Komatsu’s consolidated results of operations and financial condition
as Komatsu already uses a measurement date of March 31
for substantially all of its plans.
The incremental effects of adopting the provisions of SFAS No. 158 on the accompanying consolidated balance sheet at March 31,
2007 are presented in the following table.
Millions of yen
Thousands of U.S. dollars
Before After Before After
Application of Application of Application of Application of
SFAS No. 158 Adjustments SFAS No. 158 SFAS No. 158 Adjustments SFAS No. 158
Deferred income taxes and other assets ¥ 37,125 ¥ 67 ¥ 37,192 $ 314,618 $ 568 $ 315,186
Deferred income taxes and other current liabilities 181,577 952 182,529 1,538,788 8,068 1,546,856
Liability for pension and retirement benefits 28,795 8,988 37,783 244,026 76,169 320,195
Minority interests 19,758 16 19,774 167,440 136 167,576
Accumulated other comprehensive income (loss) (5,443) (9,857) (15,300) (46,127) (83,534) (129,661)
67 Annual Report 2007