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reserves are based primarily on historical experience. Inaddition, they are calculated with reference to currentinformation concerning specific issues.(i) Retirement benefitsThe allowance for employees' retirement benefits isprovided principally at an amount based on the retirementbenefit obligation and the fair value of the plan assets.Prior service cost is being amortized as incurred by thestraight-line method over a period (10-12 years) which isshorter than the estimated average remaining years ofservice of the eligible employees. Actuarial gain or loss isamortized in the year following the year in which the gainor loss is recognized primarily by the straight-line methodover a period (10-12 years) which is shorter than theestimated average remaining years of service of theeligible employees.(j) Revenue recognitionIn general, sales of products, other than those exported,are recognized in the accounts upon acceptance by thecustomers. Export sales are recognized as of therespective dates of shipment.(k) Income taxesDeferred income taxes are provided by the asset andliability method. Deferred income tax assets and liabilitiesare determined based on the temporary differencesbetween the financial statements and the tax bases of theassets and liabilities, using the enacted tax rates whichwill be in effect during the years in which the differencesare expected to reverse.(l) Net income per shareNet income per share is calculated based on the netincome available for distribution to shareholders ofcommon stock and the weighted-average number ofshares of common stock outstanding during the year.(m) Shareholders' equityThe Corporation Law of Japan provides that an amountequal to 10 % of the amount to be disbursed asdistributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legalreserve) be transferred to the capital reserve and the legalreserve, respectively, until the sum of the capital reserveand the legal reserve equals 25 % of the capital stockaccount. Such distributions can be made at any time byresolution of the shareholders, or by the Board of Directorsif certain conditions are met.3. U.S. dollar amountsThe Company and its domestic consolidatedsubsidiaries maintain their books of account in yen. TheU.S. dollar amounts included in the accompanyingconsolidated financial statements and the notes theretorepresent the arithmetic results of translating yen intodollars at \94 = U.S. $1.00, the approximate rate ofexchange prevailing on March 31, 2013.U.S. dollar amounts are presented solely for theconvenience of the reader and the translation is notintended to imply that assets and liabilities which originatein yen have been or could readily be converted, realized orsettled in U.S. dollars at the above or any other rate.4. Financial instrumentsBasic policy to manage financial instruments and relatedrisk(1) Group policy for financialinstrumentsThe Company and its consolidated subsidiaries rely ontheir own resources to finance operations,and do not enterintoanyderivativecontracts.(2) Nature and extent of risks arisingfrom financial instrumentsReceivables such as trade notes and trade accounts areexposed to customer credit risk and receivables in foreigncurrencies are exposed to the market risk of fluctuation inforeign currency exchange rates. Investment securities,which consist of stocks in companies with businessrelationships, are exposed to the risk of market pricefluctuations.Payables such as trade notes and trade accounts areduewithinoneyear.(3) Risk management for financialinstruments(I) Management of credit riskThe Group monitors due dates and manages balancesof receivables by customer on the basis of internalguideline and periodically checks credit risks of keycustomers taking into account their financial position andother factors.(ii) Management of market riskThe Group regularly monitors the market price and thefinancial condition of the issuer in respect to its securitiesand continuously reconsiders investment in each company,taking into account its relationship with the counterparty.18●ANNUAL REPORT 2013