Annual Report 2012 [PDF:5300KB] - FUNAI Global

e. Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered to be appropriate based on
the companies’ past credit loss experience and an evaluation of potential losses in the receivables outstanding.
f. Inventories—Inventories of the Company and its consolidated domestic subsidiaries are mainly stated at the lower of cost, determined
by the average method for finished products and work in process, and by the first-in, first-out method for raw materials, or net selling
value.
Inventories of the consolidated foreign subsidiaries are mainly stated at the lower of cost, determined by the first-in, first-out method,
or net selling value.
g. Investment Securities—Investment securities are classified and accounted for depending on management’s intent. All investment
securities are classified as available-for-sale securities.
Marketable available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in
a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary
declines in fair value, investment securities are reduced to net realizable value by a charge to income.
h. 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 while the straightline
method is applied to buildings acquired after April 1, 1998, at rates based on the estimated useful lives of the assets. Depreciation of
property, plant and equipment of consolidated foreign subsidiaries is principally computed by the straight-line method at rates based on
the estimated useful lives of the assets. The range of useful lives is principally from 3 to 50 years for buildings and structures and from 1
to 20 years for machinery, equipment and other.
Lease assets are depreciated by the straight-line method over the respective lease periods.
i. Patents—Patents are carried at cost less accumulated amortization, which is computed by the straight-line method over the estimated
useful lives.
j. Goodwil—Cost in excess of the net assets of subsidiaries acquired is amortized on a straight-line basis over 5 years.
k. Intangible Assets—Intangible assets are stated at cost. Amortization of intangible assets of the Company and its consolidated
subsidiaries is computed by the straight-line method. Amortization of software for internal use is computed by the straight-line method
based over the estimated useful life (5 years).
l. Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the
carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of
an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would be measured at the amount by which the carrying amount of the asset
exceeds its recoverable amount, which is the higher of the sum of the discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
m. Retirement and Pension Plans—The Company and certain consolidated domestic subsidiaries have non-contributory funded defined
benefit pension plans and unfunded retirement benefit plans for employees. Certain consolidated foreign subsidiaries also have defined
contributed pension plans.
Effective April 1, 2000, the Group 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 total transitional
obligation determined as of April 1, 2000 was charged to income when adopted, except that of a certain domestic subsidiary, which is
being amortized over 15 years.
Actuarial gains or losses are amortized by the straight-line method over a period within the average remaining years of service of the
employees (10 years) starting from the following period. Prior service cost is amortized by the straight-line method over a period within
the average remaining years of service of the employees (10 years).
Retirement allowances for directors, corporate auditors and executive officers are recorded to state the liability at the amount that
would be required if all directors, corporate auditors and executive officers retired at each balance sheet date.
As from beginning of the annual period beginning on April 1, 2011, the Company and its domestic consolidated subsidiaries have
transferred their respective retirement benefit plans from the tax-qualified pension plan to defined benefit pension plans. The effect of this
transfer on the consolidated statements of operations is immaterial.
n. Asset Retirement Obligations—In March 2008, the ASBJ published ASBJ Statement No. 18, “Accounting Standard for Asset
Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this
accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the
acquisition, construction, development and normal operation of a tangible fixed asset and is associated with the retirement of such
tangible fixed asset.
The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is
35 Annual Report 2012