Issue of Annual Report 2010

(Accounting Standard for Leasing Transactions)
Effective from the year ended December 31, 2009, the Company has applied the “Accounting Standard for Leasing Transactions” (ASBJ
Statement No. 13, issued June 17, 1993; 1st Committee, Business Accounting Council; Revised March 30, 2007) and “Guidance on Accounting
Standard for Lease Transactions” (ASBJ Statement Guidance No. 16, issued January 18, 1994; Accounting System Committee, Japanese
Institute of Certified Public Accountants; revised March 30, 2007). Consequently, lease transactions have been accounted for in the same way
as ordinary purchase and sales transactions. Finance leases other than those that transfer ownership of the leased assets to the lessees,
entered into on or before December 31, 2008, continue to be treated in the same way as ordinary operating leases for accounting purposes.
This change had a negligible impact on earnings.
(Recognition of net sales)
Effective from the year ended December 31, 2008, sales incentives paid to clients (wholesalers and retailers) corresponding to retail prices for
soft drinks and other non-alcoholic beverages have been deducted from net sales. Previously, these incentives were treated as selling, general
and administrative (SG&A) expenses.
In recent years, competition in the retail market for soft drinks and other non-alcoholic beverages has escalated mainly because of stronger
corporate affiliations and consolidation in the wholesale and retail sectors. In this context, clients have called for larger price discounts. As a
result, the payment of sales incentives to clients based on retail prices, which are effectively discounts on retail prices, has become common in
the industry.
To break down aggregate sales incentives for soft drinks and other non-alcoholic beverages by client, product and other categories, the
Company has developed an invoice management system to classify sales incentives into amounts attributable to sales price discounts and
selling expenses.
Effective from the year ended December 31, 2008, the Company and the consolidated subsidiaries have adopted a new accounting method
to ensure that revenues and expenses are more properly categorized in line with the new invoice management system. Under the new method,
sales incentives attributable to retail price discounts are deducted from net sales.
As a result of this change, net sales and operating expenses were both ¥6,629 million lower than would have been recorded previously, but
there was no effect on operating income.
(Liabilities arising from gift vouchers, etc.)
Effective from the year ended December 31, 2008, the Company and the consolidated subsidiaries have applied the “Position Statement on the
Auditing Treatment of Reserves Stipulated in the Special Tax Measures Act, Statutory Allowances or Reserves, and Reserves for Directors’
Retirement Benefits” (Japanese Institute of Certified Public Accountants; Auditing and Assurance Practice Committee No. 42, April 13, 2007).
Accordingly, the Company and the consolidated subsidiaries have started recording the estimated value of unredeemed gift vouchers after a
certain time has elapsed under “Deposits received” on the balance sheet. Previously, the unredeemed gift vouchers were credited to income
after a certain time had elapsed.
As a result of this change, the Company and the consolidated subsidiaries recorded a provision for gift voucher redemptions of ¥746 million
under extraordinary losses in the year ended December 31, 2008.
(Translation of revenues and expenses of foreign subsidiaries and other entities)
Effective from the year ended December 31, 2008, the Company and the consolidated subsidiaries have adopted a new accounting method
for translating revenues and expenses of foreign subsidiaries and other entities into Japanese yen. Under the new method, revenues and
expenses are translated into Japanese yen at the average exchange rate for the fiscal year, not the prevailing exchange rate on the balance
sheet date as before.
This change was made to ensure that translations of revenues and expenses of foreign subsidiaries and other entities more truly portray the
Company and the consolidated subsidiaries’ operating results and financial position. This entails translation of revenues and expenses at the
average exchange rate, which is not susceptible to temporary forex fluctuations. The change reflected the increasing importance of foreign subsidiaries
and other entities, and the likelihood of fluctuations in prevailing exchange rates on the balance sheet date distorting the presentation
of the Company and the consolidated subsidiaries’ operating results and financial position.
As a result of this change, net sales and operating income were ¥5,207 million and ¥199 million higher, respectively, than would have been
recorded previously. Income before income taxes and minority interests and net income was ¥324 million and ¥392 million lower, respectively,
on the same basis.
SAPPORO HOLDINGS LIMITED
40 Annual Report 2010