The accompanying consolidated financial statements of Fujitsu Limited (the "Company")
and its consolidated subsidiaries (together, the "Group") have been prepared in
accordance with accounting principles and practices generally accepted in Japan and
the regulations of the Securities and Exchange Law of Japan. The accounting principles
and practices adopted by the foreign consolidated subsidiaries in their respective
countries basically conform to those in Japan. For the purpose of presenting the
accompanying consolidated financial statements, certain items have been reclassified
for the convenience of readers outside Japan.
The accounting principles and practices adopted by the Group are in conformity with
International Accounting Standards ("IAS"), except for certain differences which are
set forth in the relevant notes on accounting policies.
(b) Principles of consolidation
The consolidated financial statements include the accounts of the Company and, with
minor exceptions, those of its majority-owned subsidiaries, whether directly or
indirectly controlled. All intercompany accounts and transactions have been eliminated
in consolidation.
Investments in affiliates owned 20% to 50%, with minor exceptions, have been stated at
cost plus the equity in their respective undistributed earnings (losses) and reserves
since acquisition. Net income or loss includes the equity in the current net earnings
(losses) of such companies, after the elimination of unrealized intercompany profit.
The difference between the cost and the underlying equity in the net assets of subsidiaries
and affiliates accounted for on an equity basis is allocated to identifiable assets based on
the fair value at the date of acquisition. The unassigned residual value is recognized as
goodwill, and is being amortized on a straight-line basis over periods not exceeding 20 years.
(c) Cash Flow Statements
For the year ended March 31, 1995, the Company adopted IAS No.7 (revised 1992), "Cash
Flow Statements". The Company has presented consolidated statements of cash flows as
part of its consolidated financial statements, in place of the previously reported
statements of changes in financial position. The Company has restated the consolidated
financial statements for the years ended March 31, 1994 and 1993 in order to present
comparative consolidated statements of cash flows for each of the years in the three-year
period ended March 31, 1995.
For the purpose of the consolidated statements of cash flows, the Company considers all
short-term, highly liquid instruments with a maturity of three months or less to be cash
equivalents.
(d) Translation of foreign currency accounts
Current receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rates in effect at the respective balance sheet dates.
Non-current monetary items denominated in foreign currencies are translated into Japanese
yen at historical exchange rates. Had non-current receivables and payables been translated
at the exchange rates in effect at the balance sheet dates pursuant to IAS No.21, the
differences would not have been significant.
Asset and liability accounts of foreign consolidated subsidiaries are translated into
Japanese yen at the applicable fiscal year-end rates. Income and expense accounts are
translated at the average rate during the year.
(e) Revenue recognition
Revenues from sales of communications products and computer systems are generally recognized
upon acceptance by customers, while revenues from sales of personal computers and other
equipment and electronic devices are recognized when the products are shipped.
(f) Marketable securities
Marketable securities included in short-term investments, and investments and long-term loans
are stated at the lower of cost or market, cost being determined by the moving average method.
(g) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount that is deemed sufficient to
cover estimated future losses.
(h) Inventories
Finished goods are stated at cost not in excess of their market value. Cost is determined
by the actual cost method, the moving average method and the first-in, first-out method
("FIFO").
Work in process is stated at actual cost and cost determined by FIFO.
Raw materials are stated at cost not in excess of their market value. Cost is determined by
the moving average method, the most recent purchase price method and FIFO.
IAS No.2 requires that inventories be valued at the lower of historical cost or net realizable
value. Had IAS No.2 been applied, the difference in the aggregate value of the inventories
would not have been significant.
(i) Property, plant and equipment and depreciation
Property, plant and equipment, including renewals and additions, are carried at cost.
Depreciation is computed by the declining-balance method at rates based on the estimated useful
lives of the respective assets, which vary according to their general classification, type of
construction and function.
Maintenance and repairs, including minor renewals and improvements, are charged to income as
incurred.
(j) Retirement and severance benefits
Employees who terminate their services with the Group are generally entitled to annuities or
lump-sum severance payments based on their current basic rates of pay and length of service.
The Company and its domestic consolidated subsidiaries have contributory defined benefit plans
with insurance companies and trust banks to supplement the public welfare pension plan. The
plans entitle employees upon retirement to receive either a lump-sum payment, or annuity
payments for life, or a combination of both.
Most foreign consolidated subsidiaries have difined benefit plans and/or defined contribution
plans covering substantially all employees.
The cost of benefits for the annuities and lump-sum severance payments is currently funded or
accrued.
The accrued severance indemnities recorded in the balance sheets plus the pension plan assets
were sufficient to satisfy the benefit obligation for employees' services up to the balance
sheet dates.
(k) Provision for loss on repurchase of computers
A certain portion of the computers manufactured by the Group is sold to Japan Electronic
Computer Company Limited ("JECC") and other leasing companies and financial institutions for
leasing to the ultimate users under contracts which require that the Group repurchase the
computers if they are returned by the users after a certain period. Based on past experience,
an estimated amount for the losses arising from such repurchases is provided at the point of
sale and is charged to income.
(l) Income taxes
Effective April 1, 1992, the Company adopted the liability method of tax effect accounting to
recognize the effect of all temporary differences in the recognition of the tax basis assets
and liabilities and their financial reporting amounts. In prior years, with the exception of
the income taxes of certain foreign consolidated subsidiaries, income taxes had been accrued
on the basis of current income tax liabilities.
(m) Net income or loss per share
Net income or loss per share is computed based on the weighted average number of shares of
common stock outstanding during the respective years.
(n) Reclassifications
Certain reclassifications of previously reported amounts have been made to conform with
current classifications.
| Yen | U.S. dollars | |||
| (millions) | (thousands) | |||
| ______________________________________ | ___________ | |||
| 1994 | 1995 | 1995 | ||
|---|---|---|---|---|
| Current assets | 601,535 | 702,828 | 7,896,944 | |
| Other assets, including property, plant and equipment, net | 531,526 | 508,703 | 5,715,764 | |
| 1,133,061 | 1,211,531 | 13,612,708 | ||
| Current liabilities | 320,807 | 382,744 | 4,300,494 | |
| Long-term liabilities | 136,719 | 126,916 | 1,426,023 | |
| | 675,535 | 701,871 | 7,886,191 | |
| Yen | U.S. dollars | |||
| (millions) | (thousands) | |||
| _________________________________________________ | ___________ | |||
| 1993 | 1994 | 1995 | 1995 | |
| Net sales | 864,084 | 695,666 | 796,423 | 8,948,573 |
| Net income (loss) | 16,293 | (52,241) | 32,827 | 368,843 |
| Of the affiliates which are accounted for on an equity basis, the carrying and market values of the shares of the publicly listed companies at March 31, 1994 and 1995 were as follows: | ||||
| Yen | U.S. dollars | |||
| (millions) | (thousands) | |||
| ____________________________ | ___________ | |||
| 1994 | 1995 | 1995 | ||
| Carrying value | 246,657 | 279,620 | 3,141,798 | |
| Market value | 530,185 | 481,578 | 5,410,989 | |
| Yen | U.S. dollars | ||
| (millions) | (thousands) | ||
| _____________________ | ___________ | ||
| 1994 | 1995 | 1995 | |
|---|---|---|---|
| Loans, principally from banks, at interest rates ranging from 2.25% to 14.80% at March 31, 1994, and from 2.20% to 9.90% at March 31, 1995: | |||
| 1,496 | 2,675 | 30,056 | |
| 403,581 | 405,981 | 4,561,584 | |
| Commercial paper at interest rates ranging from 2.25% to 5.31% at March 31, 1994, and from 2.22% to 6.37% at March 31, 1995 | |||
| 54,394 | 42,020 | 472,135 | |
| 459,471 | 450,676 | 5,063,775 | |
| Long-term debt at March 31, 1994 and 1995 consisted of: | |||
| Yen | U.S. dollars | ||
| (millions) | (thousands) | ||
| _____________________ | ___________ | ||
| 1994 | 1995 | 1995 | |
| Loans, principally from banks and insurance companies, due from 1994 to 2025 at interest rates ranging from 1.25% to 8.30% at March 31, 1994 and 1995: | |||
| 30,205 | 19,140 | 215,056 | |
| 272,068 | 253,026 | 2,842,989 | |
| Bonds and notes issued by the Company: | |||
| 51 | 48 | 539 | |
| 824 | 737 | 8,281 | |
| 24,587 | - | - | |
| 39,782 | 39,782 | 446,989 | |
| 39,650 | 39,649 | 445,494 | |
| 35,000 | 34,998 | 393,236 | |
| - | 39,881 | 448,101 | |
| - | 40,000 | 449,438 | |
| - | 19,998 | 224,697 | |
| 50,000 | - | - | |
| 45,938 | - | - | |
| 29,579 | 29,579 | 332,348 | |
| 35,000 | 35,000 | 393,258 | |
| 30,000 | 30,000 | 337,079 | |
| 30,000 | 30,000 | 337,079 | |
| 50,000 | 50,000 | 561,798 | |
| 30,000 | 30,000 | 337,079 | |
| 30,000 | 30,000 | 337,079 | |
| 30,000 | 30,000 | 337,079 | |
| - | 20,000 | 224,719 | |
| - | 20,000 | 224,719 | |
| Bonds and notes issued by consolidated subsidiaries: | |||
| 200 | - | - | |
| 31,119 | 42,506 | 477,595 | |
| Less amounts due within one year | 177,385 | 120,678 | 1,355,933 |
| ___________ | ___________ | ___________ | |
| 656,618 | 713,666 | 8,018,719 | |
| Assets pledged as collateral for bank loans and long-term debt at March 31, 1994 and 1995 are summarized as follows: | |||
| Yen | U.S. dollars | ||
| (millions) | (thousands) | ||
| _____________________ | ___________ | ||
| 1994 | 1995 | 1995 | |
| Investments - noncurrent | 1,225 | 990 | 11,124 |
| Property, plant and equipment, net | 36,176 | 34,729 | 390,213 |
| ___________ | ___________ | ___________ | |
| 37,401 | 35,719 | 401,337 | |
As is customary in Japan, substantially all loans from banks (including short-term bank loans)
are made under general agreements which provide that, at the request of the banks, the borrower
is required to provide collateral or guarantors (or additional collateral or guarantors, as
appropriate) with respect to such loans, and that all assets pledged as collateral under such
agreements will be applicable to all present and future indebtedness to the banks concerned.
These general agreements further provide that the banks have the right, as the indebtedness
matures or becomes due prematurely by reason of default thereon, to offset deposits at the
banks against the indebtedness due to the banks.
The current conversion prices of the 51/2 per cent., 3 per cent., 1.3 per cent., 1.4 per cent.,
4.3 per cent., 1.9 per cent., 1.95 per cent. and 2.0 per cent. convertible bonds issued by the
Company are 499.70 Yen, 1,093.90 Yen, 1,751.50 Yen, 1,751.50 Yen, 1,144.90 Yen, 998.00 Yen, 998.00 Yen and 998.00 Yen
per share, respectively, and the current exercise prices of the warrants issued with the 4.1 per
cent. bonds and 3.0 per cent. notes are 1,144.90 Yen and 1,144.90 Yen per share, respectively. The
conversion and exercise prices referred to above are subject to adjustment in certain circumstances
including stock splits or free share distributions of common stock. At March 31, 1995, approximately
233 million shares of common stock were reserved for the conversion or exercise of all the
aforementioned convertible bonds and warrants.
Certain of the outstanding convertible bonds and notes can be repurchased at any time and may be
redeemed at the option of the Company, in whole or in part, at prices ranging from 103% to 100%
of their principal amounts.
The aggregate annual maturities of long-term debt subsequent to March 31, 1995 are summarized as
follows:
| Year ending | Yen | U.S. dollars |
| March 31 | (millions) | (thousands) |
| ____________________________________________________ | ||
| 1996 | 120,678 | 1,355,933 |
| 1997 | 109,895 | 1,234,775 |
| 1998 | 191,115 | 2,147,360 |
| 1999 | 146,212 | 1,642,831 |
| 2000 and thereafter | 266,444 | 2,993,753 |
The issuance of shares upon conversion of convertible debt and the exercise of stock purchase warrants
are accounted for by crediting an amount equal to at least 50% of the amount of the issue to the common
stock account and the balance to the capital surplus account in accordance with the provisions of the
Commercial Code of Japan effective October 1, 1982.
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Next Copyright (c) 1995 Fujitsu Limited. All Rights Reserved.8. Retirement and severance benefits
Accrued severance indemnities in the consolidated balance sheets comprise the principal pension plans
which are unfunded defined benefit plans. Under the plans, employees are entitled to lump-sum payments
based on current basic rates of pay and length of service. Accrued severance indemnities in the
consolidated balance sheets are stated at the present value of the vested benefit obligation which would
be required if all employees voluntarily terminated their employment at the balance sheet dates. Provisions
for employees' severance indemnities charged to income for the years ended March 31, 1993, 1994 and 1995,
amounted to 17,687 million Yen, 17,600 million Yen and 21,803 million Yen ($244,978 thousand), respectively.
In addition to the plans described above, substantially all employees of the Company and most domestic
subsidiaries are covered by contributory defined benefit plans which include a substitutional portion of
the National Welfare Pension Plan of Japan ("the NWP Plan"). The plans require that the liability reserve
and annual contributions be actuarially calculated by the open aggregate cost method for the substitutional
portion under the NWP Plan, and by the entry-age normal cost method for the remainder.
The liability reserve for the substitutional portion of the NWP Plan of the Company and certain subsidiaries
at March 31, 1993 and 1994, the most recent valuation date, was 167,862 million Yen and 182,149
million Yen ($2,046,618 thousand), respectively. The liability reserve for the remainder at March 31, 1
993 and 1994 was 125,286 million Yen and 151,434 million Yen ($1,701,506 thousand), respectively.
The aggregate fair value of the plan assets of the contributory defined benefit plans, primarily marketable
securities and loans, at March 31, 1993 and 1994 was 285,695 million Yen and 327,179 million Yen
($3,676,169 thousand), respectively.
The assumed rates of salary increase, expected long-term rate of return and discount rate for the above contributory
pension plans were from 2.2% to 5.3%, 4.6%, and 5.5%, respectively.
The balance of past service cost of 35,580 million Yen ($399,775 thousand) as of March 31, 1994 is being
amortized over 11 years. Amortization of past service cost for the years ended March 31, 1992, 1993 and 1994
totaled 3,661 million Yen, 3,919 million Yen and 4,409 million Yen ($49,539 thousand), respectively.
Most foreign subsidiaries have defined benefit pension plans and/or defined contribution pension plans covering
substantially all employees. The major plan is the ICL Group Pension Plan, which is a defined benefit plan.
The pension cost of the plan is assessed using the projected unit method. The plan is subject to formal
actuarial valuation and the fair value of the plan assets at April 5, 1994, the most recent valuation date,
was sufficient to satisfy the actuarial present value of the future benefit obligations.
In the year ended March 31, 1993, the Company adopted the tax effect accounting method for income taxes.
The Company elected to recognize the cumulative effect as of April 1, 1992 of this change in the accounting
method as a reduction of retained earnings for the year ended March 31, 1993.
Regarding the issuance of shares upon conversion of convertible debt before October 1, 1982, in
accordance with the provisions of the Commercial Code at that time, the par value of the shares
was credited to the common stock account and the balance of the issued amount to the capital
surplus account.
The Commercial Code of Japan provides that an amount equal to at least 10% of cash dividends and bonuses
to directors and statutory auditors paid by a company and its domestic subsidiaries from retained earnings
be appropriated to the legal reserve until the reserve equals 25% of common stock.
The appropriations of retained earnings for the year ended March 31, 1995, which include year-end dividends
of 9,084 million Yen ($102,067 thousand) were recorded on the Company's statutory books of account
after approval at the general shareholders' meeting held on June 29, 1995 and will be included in the
consolidated balance sheet in the following year.
In order to streamline the business structure, the Group has consolidated product lines and restructured operations.
As a result of such actions, 42,409 million Yen and 6,183 million Yen ($69,472 thousand) were charged to
other, net during the years ended March 31, 1994 and 1995, respectively. The charges related mainly to the
reorganization of manufacturing and office facilities and the disposition of assets.
Losses relating to the recovery and repair of damages from an earthquake which devastated Kobe in January
1995 amounted to 4,501 million Yen ($50,573 thousand) and are included in other, net for the year ended March 31, 1995.
13. Commitments and contingent liabilities
Commitments outstanding at March 31, 1995 for purchases of property, plant and equipment aggregated approximately
7,493 million Yen ($84,191 thousand).
Contingent liabilities guarantees given in the ordinary course of business and for employee loans amounted
to approximately 54,471 million Yen ($612,034 thousand) at March 31, 1995.
15. Subsequent event
A consolidated subsidiary, Fujitsu Finance (U.K.) PLC issued and is to issue a series of Euro Medium Term
Notes due 2002 as follows: 1,000 million Yen ($11,236 thousand) at 3.45% on May 15, 1995, 10,000
million Yen ($112,360 thousand) at 3.45% on June 22, 1995, and 10,000 million Yen ($112,360 thousand) at
3.00% and $16,000 thousand at the six-month U.S. dollar LIBOR plus 0.30% with up to a maximum rate of 9.50%, on July 3, 1995.