Annual Report 1998 - Omron

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OMRON Corporation and Subsidiaries
1. Summary of
Significant
Accounting
Policies
Basis of Financial Statements The accompanying consolidated financial statements, stated in
Japanese yen, include certain adjustments, not recorded on the books of account, to present these
statements in accordance with accounting principles as generally accepted in the United States, except
for the omission of segment information as required by the Statement of Financial Accounting Standards
(“SFAS”) No. 14, “Financial Reporting for Segments of a Business Enterprise,” and except that the recognition
and measurement provisions of SFAS No. 115, “Accounting for Certain Investments in Debt and
Equity Securities,” have not been applied (see Note 4). The principal adjustments include accrual of
certain expenses, recognition of the value of warrants issued with bonds, accounting for termination and
retirement benefits, accrual of deferred income taxes relating to these adjustments and other temporary
differences, and accounting for prior years’ stock dividends at market value.
Certain reclassifications have been made to accounts previously reported in order to conform to 1998
classifications.
Principles of Consolidation The consolidated financial statements include the accounts of
OMRON Corporation (the “Company”) and its subsidiaries (together the “Companies”). All significant
intercompany accounts and transactions have been eliminated. Costs in excess of the fair value of net
assets acquired are amortized on a straight-line basis over five years.
The Companies’ investments in companies in which ownership is from 20% to 50% (associates) are
stated at cost plus equity in undistributed net income or loss.
Use of Estimates The preparation of consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents Cash equivalents consist of highly liquid investments with original maturities of
three months or less, including time deposits, securities purchased with resale agreements and money
market instruments.
Short-Term Investments and Investment Securities Marketable equity securities are carried at
the lower of aggregate cost or market. Other investments are stated at the lower of cost or estimated net
realizable value (see Note 4). The cost of securities sold is determined on the average cost basis.
Inventories
or market.
Inventories are stated at the lower of cost, determined by the first-in, first-out method,
Property, Plant and Equipment Property, plant and equipment is stated at cost. Depreciation of
property, plant and equipment has been computed principally on the declining balance method based
upon the estimated useful lives of the assets.
Advertising Costs Advertising costs are charged to earnings as incurred. Advertising expenses were
¥10,329 million ($78,250 thousand), ¥8,473 million and ¥7,477 million for the years ended March 31,
1998, 1997 and 1996, respectively.
Termination and Retirement Benefits Termination and retirement benefits are accounted for in
accordance with SFAS No. 87, “Employers’ Accounting for Pensions.” Provision for termination and
retirement benefits includes those for directors and corporate auditors of the Company.
Income Taxes Deferred income taxes reflect the tax consequences on future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts. Future tax benefits,
such as net operating loss carryforwards, are recognized to the extent that such benefits are more
likely than not to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
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