Annual Report 2004 [PDF/1.1MB]

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Kawasho Corporation and Consolidated Subsidiaries
1. BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
Kawasho Corporation (the "Company") and its domestic subsidiaries maintain their books of account in conformity with the
financial accounting standards of Japan, and its overseas subsidiaries maintain their books of account in conformity with
those of their countries of domicile.
The accompanying consolidated financial statements of the Company and its consolidated subsidiaries (collectively, the
"Companies") have been prepared on the basis of accounting principles generally accepted in Japan, which are different in
certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are
compiled from the consolidated financial statements prepared by the Company as required by the Securities and Exchange
Law of Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form that is more familiar
to readers outside Japan.
The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of the readers outside Japan
and has been made at ¥105.69 = U.S.$1.00, the exchange rate prevailing on March 31, 2004. This translation should not
be construed as a representation that yen amounts have been, could have been, or could in the future be, converted into
U.S. dollars at the above or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the companies over which substantial control
is exerted, directly or indirectly, either through majority ownership of voting stock and/or by other means.
All significant intercompany balances and transactions have been eliminated in consolidation.
Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are stated at
cost plus equity in their undistributed earnings or losses. Consolidated net income or loss includes the Company's equity in
the current net income or loss of such companies after the elimination of unrealized intercompany profits.
All assets and liabilities of the consolidated subsidiaries are revalued on acquisition, if applicable, and any excess of cost
over the underlying net assets at the dates of acquisition is amortized over a period of five years on a straight-line basis if
the excess is material, or charged to income when incurred, if immaterial.
The balance sheet dates of certain consolidated subsidiaries are December 31 and January 31. Any significant differences
in intercompany accounts and transactions arising from intervening intercompany transactions during the periods from
January 1 through March 31 and February 1 through March 31 have been adjusted, if necessary.
At March 31, 2004 and 2003, the Company consolidated 100 and 119 subsidiaries, respectively, and excluded 23 and 4
subsidiaries from consolidation due to liquidation and a decrease in ownership, respectively. At March 31, 2004 and 2003,
the Company had 4 and 4 non-consolidated subsidiaries, and 26 and 29 affiliates, respectively, accounted for by the equity
method.
The assets and liabilities of the consolidated subsidiaries are revalued at fair value as of the date of acquisition of control
by the full value method.
b. Foreign Currency Translation
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate
in effect on the respective balance sheet dates. The financial statements of the overseas subsidiaries are translated into
Japanese yen at their historical rates for shareholders' equity, and at the year-end rates for other balance sheet accounts,
net income, and revenue and expense accounts.
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