Sumitomo Dainippon Pharma Annual Report 2017

straight-line method over a period of mainly 14 years, which is within the average of the estimated remaining services years commencing with the current period. Actuarial gains and losses are amortized using the straight-line method over a period of mainly 14 years, which is within the average of the estimated remaining service years commencing in the following period. Some domestic consolidated subsidiaries use the simplied method for the calculation of projected benet obligation.j. Research and Development CostsResearch and development costs are charged to income as incurred. Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2017 and 2016 were ¥80,819 million ($721,598 thousand) and ¥82,034 million, respectively.k. Income TaxesThe asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted by the balance sheet date.l. Foreign Currency TranslationAll short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statements of income. Financial statements of overseas subsidiaries are translated into Japanese yen at the year-end rate for all assets and liabilities and at weighted average rates for income and expense accounts. Differences arising from such translation are shown as “Foreign currency translation adjustments” in a component of net assets.m. Derivative Financial InstrumentsForeign exchange contracts are utilized to hedge the risk exposure arising from uctuations in foreign exchange rates. Derivative nancial instruments are stated at fair value and accounted for using deferred hedge accounting. Recognition of gain or loss resulting from a change in fair value of a derivative nancial instrument is deferred until the loss or gain on the related hedged item is recognized if the derivative nancial instrument is used as a hedge and meets the hedging criteria. Foreign exchange contracts that the certain hedging criteria are accounted for under the allocation method. The allocation method requires recognized foreign currency receivables and payables to be translated using the corresponding foreign exchange contract rates. The effectiveness of hedges has been evaluated by comparing the accumulated changes in market value of hedged items with the accumulated changes in market value of hedging instruments. With regard to foreign exchange forward contracts, the effectiveness of such contracts has not been evaluated as critical terms for hedged items and hedging instruments are the same. The Group has established a hedging policy which includes policies and procedures for risk assessment and for the approval, reporting and monitoring of derivatives transactions. The Group does not hold or issue any derivative nancial instruments for speculative trading purposes.n. Per Share InformationBasic net income per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. The number of shares used in the calculation of net income per share was 397,300 thousand and 397,303 thousand for the years ended March 31, 2017 and 2016, respectively.Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.74Sumitomo Dainippon Pharma Co., Ltd. Annual Report 2017

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