FANUC2013E page 19/30

FANUC2013E

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FANUC2013E

Notes to the Consolidated Financial Statements1.Basis of preparationThe accompanying consolidated financial statements ofFANUC CORPORATION (the "Company") and itsconsolidated subsidiaries (together, the "Group") areprepared on the basis of accounting principles generallyaccepted in Japan, which are different in certain respectsas to the application and disclosure requirements ofInternational Financial Reporting Standards, and havebeen compiled from the consolidated financial statementsprepared by the Company as required by the FinancialInstruments and Exchange Law of Japan.In addition, the notes to the consolidated financialstatements include information which is not required underaccounting principles generally accepted in Japan but ispresented herein as additional information.In preparing the accompanying consolidated financials t a t e m e n t s , t h e C o m p a n y h a s m a d e c e r t a i nreclassifications and rearrangements to the consolidatedfinancial statements prepared in Japan in order to presentthem in a format which is more familiar to readers outsideJapan.2.Summary of significant accountingpolicies(a) Principles of consolidationThe consolidated financial statements include theaccounts of the Company and, with minor exceptions, thesubsidiaries under its control. Intercompany accounts andsignificant intercompany transactions have beeneliminated in consolidation.The investments in unconsolidated subsidiaries andaffiliated companies on which the Company exertssubstantial influence are, with minor exceptions, stated attheir underlying equity value.The excess of cost over the underlying net assets at thedates of investment in the subsidiaries is amortized over aperiod of five years.(b) Cash equivalentsThe Group considers all highly liquid investments with amaturity of three months or less when purchased to becashequivalents.(c) Translation of foreign currencyaccountsAll monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at theexchange rates in effect at the balance sheet date.Foreign exchange gain or loss on translation is recognizedin the consolidated statements of income.Assets and liabilities of the consolidated subsidiariesoutside Japan are translated into Japanese yen at theapplicable year-end rates except for shareholders' equitywhich is translated at the historical rates. Differencesarising from translation are reflected as "Foreign currencytranslation adjustments" in a separate component of netassets. Income and expense accounts are translated atthe average rates for the year.(d) Valuation of securitiesSecurities other than investments in affiliates areclassified as available-for-sale securities ("Othersecurities") and include securities other than tradingsecurities and securities held to maturity. Other securitieswhose fair value is readily determinable are stated at fairvalue with the corresponding unrealized gain or loss, netof taxes, recorded directly as a separate component of netassets. Other securities whose fair value is not readilydeterminable are stated at moving average cost. The costof other securities sold is calculated by the movingaverage method.(e) Allowance for doubtful accountsThe allowance for doubtful accounts is provided at anamount deemed sufficient to cover estimated future losses.(f) InventoriesRaw materials and purchased components are statedprimarily at cost determined by the most recent purchaseprice method.Work in progress is stated at actual cost which includesdirect costs for materials and labor and overheadmanufacturing costs including depreciation.Finished goods are stated principally at cost (thevaluationmethod)bytheaveragemethod.(g) Property, plant and equipment anddepreciationProperty, plant and equipment, including significantrenewals and additions, is stated at cost.Depreciation is computed principally by the decliningbalancemethod at rates based on the estimated usefullives of the respective assets which vary according togeneral classification, type of construction, and use.Maintenance and repairs, including minor renewals andimprovements, are charged to income as incurred.(h) Warranty reservesThe Group provides warranty reserves for goods soldunder warranty agreements. Estimates for these warrantyANNUAL REPORT 2013●17