Suzuki 2004 Annual Report Download - page 32

SUZUKI MOTOR CORPORATION
(k)Income taxes
The provision for income taxes is computed based on the pretax income included in
consolidated statements of income. The assets and liability approach is adopted 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.
In making a valuation for the possibility of collection of deferred tax assets, the Company and its
subsidiaries estimate our future taxable income reasonably. If the estimated amount of future
taxable income decrease, deferred tax assets may decrease and income taxes expenses may be
posted.
(l)Accrued retirement & severance benefits
In order to allow for payment of employees' retirement benefits, based on estimated amount of
retirement benefits liabilities and pension assets at the end of this fiscal year, the allowable
amount which occurs at the end of this fiscal year is appropriated.
With regard to prior service costs, the amount, prorated on a straight line basis over the period
of average length of employees' remaining service years at the time when it occurs, is treated as
expense. As for the actuarial differences, the amounts prorated on a straight line basis over the
period of average length of employees' remaining service years in each year in which the
differences occur are respectively treated as expenses from the next term of the year in which
they arise.
As for Directors, the amount payable to be paid at the end of year is posted pursuant to the
Company's regulations on the retirement allowance of directors.
Retirement benefit cost and retirement benefit obligation are calculated on the actuarial
assumptions, which include discount rate, assumed return of investment ratio, revaluation ratio,
salary rise ratio, retirement ratio and mortality ratio. Discount rate is decided on the basis of yield
on low-risk, long-term bonds and assumed return of investment ratio is decided based on the
investment policies of pension assets of each pension system etc.
Decreased yield on long-term bond leads to a decrease in discount rate and has an adverse
influence on the calculation of retirement benefit cost. However, the pension system adopted by
the Company has a cash balance type plan, and thus the revaluation ratio, which is one of the
base ratios, can offset any adverse effects caused by a decrease in the discount rate.
If the investment yield of pension assets is less than the assumed return of investment ratio, it will
have an adverse effect on the calculation of retirement benefit cost.
But by focusing on low-risk investments, this influence should be minimal in the case of the
pension fund systems of the Company and its subsidiaries.
(m)Revenue recognition
Sales of products are generally recognized in the accounts as delivery is made.
(n)Amounts per share
Primary net income per share is computed based on the weighted average number of shares
issued during the respective years. Fully diluted net income per share is computed assuming that
all convertible bonds were converted into common stock, with an applicable adjustment for
related interest expense and net of tax.
Cash dividends per share are the amounts applicable to the respective periods including
dividends to be paid after the end of the period.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS