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In millions of yen In thousands of U.S. dollars
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1994 1995 1995
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Carrying Estimated Carrying Estimated Carrying Estimated
March 31 amount fair value amount fair value amount fair value
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Cash and cash equivalents...... Y 391,523 Y 391,523 Y 446,047 Y 446,047 $ 5,126,977 $ 5,126,977
Time deposits.................. 1,295 1,295 1,576 1,576 18,115 18,115
Marketable securities.......... 231,170 586,081 213,491 457,460 2,453,919 5,258,161
Notes and accounts
receivable, trade............ 981,931 981,931 950,515 950,515 10,925,460 10,925,460
Other current assets........... 25,156 25,156 31,554 31,554 362,690 362,690
Long-term receivables, trade... 36,950 39,122 28,388 27,711 326,299 318,517
Long-term loans................ 25,484 25,450 33,026 33,296 379,609 382,713
Short-term borrowings.......... (595,630) (595,630) (619,549) (619,549) (7,121,253) (7,121,253)
Notes and accounts
payable, trade............... (692,141) (692,141) (753,239) (753,239) (8,657,920) (8,657,920)
Employees' savings deposits.... (115,830) (115,830) (91,551) (91,551) (1,052,310) (1,052,310)
Accrued taxes on income........ (27,462) (27,462) (40,851) (40,851) (469,552) (469,552)
Other current liabilities...... (47,992) (47,992) (49,041) (49,041) (563,690) (563,690)
Long-term debt, including
current portion..............(1,140,806) (1,149,819) (1,143,040) (1,143,292) (13,138,391) (13,141,287)
Derivatives:
Forward exchange
contracts................... (11,528) (11,890) 6,344 6,279 72,920 72,172
Interest rate and currency
swap agreements............. 15,614 24,470 14,231 17,419 163,575 200,218
Option contractsãƒ
Purchased.................... 1,031 2,384 769 1,105 8,839 12,701
Written...................... (65) (55) (34) (277) (391) (3,184)
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The fair values of financial instruments at March 31, 1994 and 1995 are determined by using a variety of methods and assumptions such as reference to various market and other data as appropriate. For certain financial instruments, including cash and cash equivalents, time deposits, notes and accounts receivable and payable, trade, short-term borrowings, employees' savings deposits, accrued taxes on income and other current assets and liabilities, the carrying amount approximated fair value because of their short-term maturities. For marketable securities, fair value is determined based on quoted market prices. For long-term receivables, trade, and long-term loans included in investments and advances --- other, fair value is estimated using estimated discount values of future cash flows. For long-term debt, fair value is estimated using market quotes, or where market quotes are not available, using estimated discounted values of future cash flows for the same or similar types of instruments. Investment securities, included in investments and advances --- other, with aggregated carrying values of 73,601 million yen and 72,135 million yen ($829,138 thousand) at March 31, 1994 and 1995, respectively, consist of investment securities of Japan Electronic Computer Company, Limited as discussed in Note 3 and other numerous small investments in securities which are non-public companies. It is not practicable to estimate reasonably the fair values of these investments. Fair value of the forward exchange contracts is estimated by obtaining quotes for future contracts with similar maturities, and fair value of the interest rate and currency swap agreements is estimated based on the discounted amounts of net future cash flows, and fair value of the option contracts is estimated using pricing models based upon current market interest and foreign exchange rates.
In the normal course of business, the company enters into various derivative financial instruments in order to manage exposures resulting from fluctuations in foreign currency exchange rates and interest rates. The company does not hold or issue derivative financial instruments for trading purposes. The primary classes of derivatives used by the company are forward exchange contracts, interest rate swap agreements and options and currency swap agreements and options.
The forward exchange contracts have been entered into as hedges against the adverse impact of foreign currency fluctuations on monetary assets and liabilities arising from the company's operations. The company had outstanding forward exchange contracts which, at March 31, 1994, mature through October 1994 to purchase 98,171 million yen, principally U.S. Dollars, which is mainly comprised of the forward exchange contracts relating to unsecured bonds of U.S.$350,000 thousand, and to sell 137,663 million yen, principally U.S. Dollars, German Marks and U.K. Pounds, of various foreign currencies.
At March 31, 1995, the company had outstanding forward exchange contracts which mature through September 1995 to purchase 63,816 million yen ($733,517 thousand), principally U.S. Dollars, and to sell 114,620 million yen ($1,317,471 thousand), principally U.S. Dollars, German Marks and U.K. Pounds, of various foreign currencies.
The interest rate swap agreements are fully integrated with underlying debt obligation and designed to convert fixed rate debt into floating rate debt, or vice versa, so that exposures to losses resulting from fluctuations in interest rates are managed coupled with interest rate options. The currency swap agreements and options are designed to limit exposures to losses resulting from fluctuations in foreign currency exchange. The aggregate notional principal and principal amounts for interest rate swap agreements and currency swap agreements are 210,101 million yen and 228,241 million yen ($2,623,460 thousand) at March 31, 1994 and 1995, respectively. These agreements mature through 2007. The differentials to be paid or received related to interest swap agreements are accrued as interest rates change and are recognized over the lives of the agreements. The notional principal and principal amounts of option contracts for interest rates and foreign currencies are 96,036 million yen and 37,813 million yen ($434,632 thousand) at March 31, 1994 and 1995, respectively. These agreements mature through 2000.
The counterparties to the arrangements for derivative financial instruments are major financial institutions. As a normal business risk, the company is exposed to credit loss in the event of nonperformance by the counterparties; however, the company does not anticipate nonperformance by the counterparties to these agreements, and no material losses would be expected from such nonperformance.
