Eisai Co., Ltd. Annual Report 2001 - Eisai GmbH

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(e) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated
domestic subsidiaries is computed substantially by the declining-balance method at rates based on the estimated useful lives of the
assets, while the straight-line method is principally applied to the property, plant and equipment of consolidated foreign subsidiaries.
The range of useful lives of the Company and its consolidated domestic subsidiaries is principally from 15 to 65 years for buildings and
from 6 to 7 years for machinery and equipment.
(f) Leases
Leases related to the Company and its consolidated domestic subsidiaries are accounted for as operating leases. Under Japanese
accounting standards for leases, finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized,
while other finance leases are permitted to be accounted for as operating lease transactions if certain “as if capitalized” information
is disclosed in the notes to the lessee’s financial statements.
(g) Income taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset
and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently
enacted tax rates to the temporary differences.
(h) Retirement and Pension Plans
Under the employees’ retirement plans for the Company and certain consolidated subsidiaries, prior to April 1, 2000, the annual
provision for retirement benefits is calculated to state the liability for employees principally at the amount that would be required if all
employees voluntarily terminated their employment at each balance sheet date, less amounts funded by a contributory pension plan
disregarding a portion specified by government regulations
Effective April 1, 2000, the Company and its consolidated domestic subsidiaries adopted a new accounting standard for employees’
retirement benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date.
The transitional obligation in the amount of ¥32,358 million ($260,952 thousand), determined as of the beginning of year in the
Company, was offset by the contribution of certain available-for-sale securities with a fair value of ¥15,128 million ($122,000 thousand)
to the employee retirement benefit trusts for the Company’s contributory pension plans in April 2000, and a related non-cash gain of
¥1,383 million ($11,153 thousand) was recorded as “Gain on securities contributed to the retirement benefit trust”. The securities held
in this trust are qualified as plan assets. The remaining unfunded balance of ¥17,230 million ($138,952 thousand) as well as ¥772
million ($6,226 thousand) of the transitional obligaiton in the consolidated subsidiaries is being amortized over 5 years and charged to
income and presented as operating expenses in the statements of income. As a result, net periodic retirement benefit costs as
compared with the prior method, increased by ¥13,857 million ($111,750 thousand) and income before income taxes and minority
interests decreased by ¥14,006 million ($112,952 thousand).
Retirement benefits to directors and corporate auditors are provided at the amount which would be required if all directors and
corporate auditors retired at the balance sheet date.
(i) Appropriations of retained earnings
Appropriations of retained earnings are reflected in the financial statements for the following year upon shareholders’ approval.
(j) Research and development expenses
Research and development expenses are charged to income as incurred.
(k) Deferred charges
Stock issuance costs and start-up costs are charged to income as incurred.
Prior to April 1, 2000, certain subsidiaries capitalized start-up costs as deferred charges. Effective April 1, 2000, however, all the
start-up costs were charged to income to unify accounting policies of the Gourp. The effect of this change was to decrease income
before income taxes and minority interests for the year ended March 31, 2001, by ¥302 million ($2,435 thousand).
(l) Foreign currency transactions
Prior to April 1, 2000, short-term receivables and payables denominated in foreign currencies were translated into Japanese yen at the
current exchange rates at each balance sheet date, while long-term receivables and payables denominated in foreign currencies were
translated at historical rates.
Effective April 1, 2000, the Group adopted a revised accounting standard for foreign currency transactions. In accordance with the
revised standard, all short-term and long-term monetary receivables and payables denominated in foreign currencies are translated
into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are
recognized in the income statement to the extent that they are not hedged by forward exchange contracts.
(m) Foreign currency financial statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rates as
of the balance sheet date except for shareholders’ equity, which is translated at the historical rate.
Prior to April 1, 2000, differences arising from such translation were shown as “Foreign currency translation adjustments” as either
all asset or liability in the consolidated balance sheet.
Effective April 1, 2000, such differences are shown as “Foreign currency translation adjustments” in a separate component of
shareholders’ equity in accordance with the revised accounting standard for foreign currency transactions.
Revenue and expense accounts of the consolidated foreign subsidiaries are translated into yen at the average exchange rates.
Eisai Annual Report 2001