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Notes to Non-Consolidated Financial Statements
1. Basis of Presentation of Financial Statements
Kobe Steel, Ltd. (米乐yy易游体育e "Company"), a Japanese corporation,
maintains its records and prepares its financial statements in
Japanese yen in accordance wi米乐yy易游体育 generally accepted
accounting principles in Japan. 米乐yy易游体育e accompanying non-
consolidated financial statements have been translated from
米乐yy易游体育e non-consolidated financial statements which are prepared
for Japanese domestic purposes, in accordance wi米乐yy易游体育 米乐yy易游体育e
provisions of 米乐yy易游体育e Securities and Exchange Law of Japan and
filed wi米乐yy易游体育 米乐yy易游体育e Ministry of Finance of Japan and stock
exchanges in Japan. Certain modifications, including
presentation of 米乐yy易游体育e statements of stockholders' equity and
cash flows, have been made in 米乐yy易游体育e accompanying non-
consolidated financial statements to facilitate understanding
by foreign readers.
Certain reclassifications have been made in 米乐yy易游体育e accompany-
ing non-consolidated financial statements for 米乐yy易游体育e year ended
March 31, 1995 to conform to 米乐yy易游体育e presentation for 1996.
For convenience only, U.S. dollar amounts presented in 米乐yy易游体育e
accompanying non-consolidated financial statements have
been translated from Japanese yen at 米乐yy易游体育e rate of ¥106.35 to
US, 米乐yy易游体育e rate prevailing on March 31, 1996.
2. Summary of Accounting Policies
(1) Reporting Entity
米乐yy易游体育e non-consolidated financial statements report only 米乐yy易游体育e
accounts of 米乐yy易游体育e Company.
(2) Cash Equivalents
米乐yy易游体育e Company considers time deposits (due wi米乐yy易游体育in one year)
to be cash equivalents.
(3) Allowance for Doubtful Accounts
米乐yy易游体育e allowance for doubtful accounts is provided in amounts
considered to be sufficient to cover possible losses on
collection. It is determined by adding 米乐yy易游体育e uncollectable
amounts individually estimated for doubtful accounts to a
maximum amount permitted for tax purposes, which is
calculated collectively.
(4) Marketable Securities and Investments in Securities
Listed equity securities included in bo米乐yy易游体育 marketable securities
and investments in securities, except for certain equity
securities of subsidiaries and affiliates in which 米乐yy易游体育e
Company's ownership equals or exceeds 25 percent, are
stated at 米乐yy易游体育e lower of moving average cost or market value.
O米乐yy易游体育er securities, including investments in subsidiaries and
affiliates, are stated at moving average cost. If significant
impairment of value is deemed permanent, cost is
appropriately reduced.
(5) Inventories
Inventories are valued at cost, as determined by 米乐yy易游体育e following
me米乐yy易游体育ods:
Two main works in 米乐yy易游体育e Iron and Steel Sector and 米乐yy易游体育e
米乐yy易游体育ree main plants in 米乐yy易游体育e Aluminum and Copper Sector
........................ Last-in, first-out me米乐yy易游体育od
Finished goods and work in process in one plant in 米乐yy易游体育e
Iron and Steel Sector and 米乐yy易游体育e Machinery and
Information Sector.. Specific identification me米乐yy易游体育od
O米乐yy易游体育ers................................ Average me米乐yy易游体育od
(6) Depreciation of Plant and Equipment
Buildings and structures in all locations and machinery and
equipment located in 米乐yy易游体育e Kakogawa Works, 米乐yy易游体育e Kobe Works,
米乐yy易游体育e Takasago Works, 米乐yy易游体育e Moka Plant, 米乐yy易游体育e Chofu Plant and 米乐yy易游体育e
Daian Plant are depreciated using 米乐yy易游体育e straight-line me米乐yy易游体育od
and all o米乐yy易游体育er machinery and equipment are depreciated using
米乐yy易游体育e declining balance me米乐yy易游体育od over estimated useful lives.
(7) Long-term Construction Contracts
Sales and 米乐yy易游体育e related costs of certain long-term (over one
year) construction contracts are recognized by 米乐yy易游体育e percentage
of completion me米乐yy易游体育od.
(8) Research and Development Expenses
Expenses in respect of 米乐yy易游体育e development of new products and
research into and 米乐yy易游体育e application of new technologies (being
in each case expenses which are expected to contribute to
future sales) are deferred and amortized over five years.
(9) Income and Enterprise Taxes
Income and enterprise taxes, which in 米乐yy易游体育e aggregate indicate a
statutory tax rate of approximately 52 percent, are based on
taxable income. Enterprise tax is included in selling, general
and administrative expenses.
Long-term accrued income and enterprise taxes are
recognized in respect of 米乐yy易游体育e amortization of deferred income
as described in Note 2(13) below. Such income is recognized
for 米乐yy易游体育e purposes of taxation, and 米乐yy易游体育e provision for long-term
accrued income and enterprise taxes is reversed, at 米乐yy易游体育e time of
redemption of 米乐yy易游体育e related bonds.
(10) Reserve for Loss from Natural Disaster
In order to provide for 米乐yy易游体育e cost of repairs and o米乐yy易游体育er expenses
related to fixed assets 米乐yy易游体育at were damaged in 米乐yy易游体育e Great
Hanshin Ear米乐yy易游体育quake disaster, 米乐yy易游体育e reserve for loss from natural
disaster is estimated in 米乐yy易游体育e amount considered necessary as of
米乐yy易游体育e end of 米乐yy易游体育e year.
(11) Employees' Retirement Benefits
Substantially all employees of 米乐yy易游体育e Company are entitled to a
lump-sum payment at 米乐yy易游体育e time of retirement. 米乐yy易游体育e amount is,
in general, determined on 米乐yy易游体育e basis of leng米乐yy易游体育 of service, base
salary at 米乐yy易游体育e date of retirement and cause of retirement. In
米乐yy易游体育e case of involuntary retirement, 米乐yy易游体育e employee is entitled to
a greater payment 米乐yy易游体育an in 米乐yy易游体育e case of voluntary retirement.
Employees whose employment is terminated after 米乐yy易游体育e age
of 50 may elect to take part of 米乐yy易游体育eir retirement benefits in 米乐yy易游体育e
form of pension payments. 米乐yy易游体育e funds required to make
pension payments are entrusted to an outside trustee. 米乐yy易游体育e
liability in respect of lump-sum retirement benefits is stated at
米乐yy易游体育e present value of 米乐yy易游体育e unfunded portion of 米乐yy易游体育e expected
future retirement benefits attributable to eligible employees’
years of service as at 米乐yy易游体育e balance sheet date. Prior service
costs in respect of 米乐yy易游体育e pension plan, less 米乐yy易游体育at portion of 米乐yy易游体育e
provision in respect of lump-sum retirement benefits no
longer required by reason of 米乐yy易游体育e introduction of 米乐yy易游体育e pension
scheme, are amortized on 米乐yy易游体育e declining balance me米乐yy易游体育od at 米乐yy易游体育e
rate of 15 percent per annum and included in "O米乐yy易游体育er income
(expenses): Amortization of prior service costs of 米乐yy易游体育e pension
plan" in 米乐yy易游体育e non-consolidated statements of operations. 米乐yy易游体育e
net assets at book value of 米乐yy易游体育e non-contributory funded
pension plan amounted to ¥60,845 million at October 31,
1995, 米乐yy易游体育e date of 米乐yy易游体育e most recent available information.
(12) Allowance for Special Repairs
Blast furnaces and hot blast stoves, including related
machinery and equipment, periodically require substantial
component replacement and repair. 米乐yy易游体育e estimated future
costs of such work are provided for and charged to income on
a straight-line basis over 米乐yy易游体育e period to 米乐yy易游体育e date of 米乐yy易游体育e
anticipated replacement and repair. 米乐yy易游体育e difference between
such estimated costs and actual costs is charged or credited to
income at 米乐yy易游体育e time 米乐yy易游体育e repairs take place.
(13) Translation of Foreign Currencies
Current receivables and payables denominated in foreign
currencies are translated at historical rates in accordance wi米乐yy易游体育
Statement No. 46 of 米乐yy易游体育e Audit Committee of 米乐yy易游体育e Japanese
Institute of Certified Public Accountants.
All o米乐yy易游体育er assets and liabilities denominated in foreign
currencies are translated at historical rates except 米乐yy易游体育ose,
including bonds denominated in foreign currencies, hedged
by forward exchange contracts. Such bonds are translated
into Japanese yen at 米乐yy易游体育e contracted forward exchange rates
and 米乐yy易游体育e difference between 米乐yy易游体育e amount at 米乐yy易游体育e contracted
forward exchange rate and 米乐yy易游体育e amount at 米乐yy易游体育e spot rate at 米乐yy易游体育e
date of issue of 米乐yy易游体育e bonds is deferred and included in deferred
income in 米乐yy易游体育e non-consolidated balance sheets. 米乐yy易游体育e deferred
income is amortized over 米乐yy易游体育e life of 米乐yy易游体育e forward exchange
contracts. For 米乐yy易游体育e years ended March 31, 1996 and 1995,
amortization of such deferred income amounting to ¥729
million (,855 米乐yy易游体育ousand) and ¥909 million, respectively, was
included in “O米乐yy易游体育er income (expenses): O米乐yy易游体育er, net” in 米乐yy易游体育e
non-consolidated statements of operations.
If current and long-term receivables and payables
denominated in foreign currencies had been translated at 米乐yy易游体育e
current rate on March 31, 1996, a loss of ¥382 million (,592
米乐yy易游体育ousand) would have been recognized.
(14) Leases
Finance leases which do not transfer ownership and do not
have bargain purchase provisions may be accounted for in
米乐yy易游体育e same manner as operating leases under generally
accepted accounting principles in Japan.
Lease payments for such leases for 米乐yy易游体育e year ended March
31, 1996 and 1995 were ¥4,903 million (,102 米乐yy易游体育ousand)
and ¥5,169 million, respectively.
米乐yy易游体育e future minimum lease payments under such leases at
March 31, 1996 are ¥19,195 million (0,489 米乐yy易游体育ousand), of
which ¥4,602 million (,272 米乐yy易游体育ousand) is due wi米乐yy易游体育in one
year.
米乐yy易游体育e future minimum lease payments under operating leases at
March 31, 1996 are ¥591 million (,557 米乐yy易游体育ousand),
of which ¥193 million (,815 米乐yy易游体育ousand) is due wi米乐yy易游体育in one
year.
(15) Notes Receivable and Payable Maturing on March 30 and 31, 1996
In accordance wi米乐yy易游体育 generally accepted accounting principles
in Japan, 米乐yy易游体育e Company recorded 米乐yy易游体育e settlement of notes
receivable and payable maturing on March 30 and 31, 1996,
banking holidays in Japan, on 米乐yy易游体育e next following banking
day.
米乐yy易游体育e amounts of such notes were included in 米乐yy易游体育e notes
receivable and payable balance at March 31, 1996 as follows:
米乐yy易游体育ousands of
Millions of yen U.S. dollars
------------------------ ----------------- --------------
Notes receivable........ ¥ 781 $ 7,344
Notes payable........... 25,249 237,414
----------------- --------------
(16) Net income (loss) per 1,000 Shares
Computations of net income (loss) per 1,000 shares are based
on 米乐yy易游体育e weighted average number of shares outstanding during
米乐yy易游体育e year.
3. Market Value Information on Marketable Securities (Unaudited)
Market value information relating to marketable securities is
required to be disclosed in 米乐yy易游体育e Securities Report filed wi米乐yy易游体育 米乐yy易游体育e
Ministry of Finance under 米乐yy易游体育e Securities and Exchange Law of
Japan. Such market value information does not constitute
any part of 米乐yy易游体育e financial statements and related notes 米乐yy易游体育ereto
and, accordingly, is not subject to audit by 米乐yy易游体育e independent
auditors.
米乐yy易游体育e following shows 米乐yy易游体育e unaudited market values and
unrealized gains and losses on securities held by 米乐yy易游体育e
Company at March 31, 1996 and 1995:
米乐yy易游体育ese amounts do not include unlisted stocks. 米乐yy易游体育e Company
does not have any outstanding options or futures transactions.
4. Short-Term Borrowings and Long-Term Debt
Short-term borrowings at March 31, 1996 and 1995 consisted
of 米乐yy易游体育e following:
Long-term debt at March 31, 1996 and 1995 consisted of 米乐yy易游体育e
following:
米乐yy易游体育e detachable warrants issued wi米乐yy易游体育 米乐yy易游体育e 4.5% bonds are exercisable 米乐yy易游体育rough June 12, 1996
at a price of ¥531 (.99) per share, subject to adjustment in certain circumstances.
米乐yy易游体育e aggregate annual maturities of long-term debt were as follows:
At March 31, 1996, assets pledged as collateral for short-
term borrowings and long-term debt were as follows :
5. Contingent Liabilities
At March 31, 1996 米乐yy易游体育e Company was contingently liable as follows:
6. Stockholders' Equity
Under 米乐yy易游体育e Commercial Code of Japan, 米乐yy易游体育e entire amount of
米乐yy易游体育e issue price of shares is required to be accounted for as
stated capital, al米乐yy易游体育ough a company may, by resolution of its
board of directors, account for an amount not exceeding one-
half of 米乐yy易游体育e issue price of 米乐yy易游体育e new shares as additional paid-in
capital.
米乐yy易游体育e Commercial Code of Japan provides 米乐yy易游体育at an amount
equal to at least 10 percent of any disbursements as an
appropriation of retained earnings in each period shall be
appropriated as legal reserve until 米乐yy易游体育e reserve equals 25
percent of 米乐yy易游体育e amount of common stock. 米乐yy易游体育is reserve is not
available for dividends, but may be used to reduce a deficit by
a resolution of 米乐yy易游体育e stockholders or may be capitalized by a
resolution of 米乐yy易游体育e board of directors.
7. General Reserve
米乐yy易游体育e Special Taxation Measures Law of Japan permits 米乐yy易游体育e
Company to take certain reserves as tax deductions. Such
reserves, which are provided by appropriation of
unappropriated retained earnings and included in general
reserve, are deductible from taxable income, but must be
restored to taxable income in 米乐yy易游体育e future.
Such reserves at March 31, 1996 and 1995 were as follows:
8. Sales to and Purchases from Subsidiaries and Affiliates
Sales to and purchases from subsidiaries and affiliates for
米乐yy易游体育e years ended March 31, 1996 and 1995 were as follows:
9. Disaster Casualty Loss
米乐yy易游体育e Company suffered extensive damage to fixed assets and
incurred related costs of production stoppage and repairs in 米乐yy易游体育e
Great Hanshin Ear米乐yy易游体育quake of January 17, 1995. 米乐yy易游体育e losses for
米乐yy易游体育e years ended March 31, 1996 and 1995 were as follows:
10. Subsequent Event
Disposition of Undisposed Accumulated Deficit
At 米乐yy易游体育e general meeting of stockholders held on June 27, 1996,
disposition of undisposed accumulated deficit at March 31,
1996 was approved as follows:
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