C
A
N
O
N
A
N
N
U
A
L
R
E
P
O
R
T
2
0
1
4
C A N O N A N N U A L R E P O R T 2 0 14
F i s c a l Ye a r E n d e d D e c e m b e r 3 1 , 2 0 14
F I N A N C I A L H I G H L I G H T S
Millions of yen
(except per share amounts)
Thousands of U.S. dollars
(except per share amounts)
2013
Change (%)
Net sales
Operating profit
Income before income taxes
Net income attributable to Canon Inc.
Net income attributable to Canon Inc.
stockholders per share:
—Basic
—Diluted
Total assets
Canon Inc. stockholders’ equity
2014
¥ 3,727,252
363,489
383,239
254,797
¥ 3,731,380
337,277
347,604
230,483
¥ 229.03
¥
200.78
229.03
¥ 4,460,618
¥ 2,978,184
200.78
¥ 4,242,710
¥ 2,910,262
-0.1
7.8
10.3
10.5
14.1
14.1
5.1
2.3
2014
$ 30,803,736
3,004,041
3,167,264
2,105,760
$
1.89
1.89
$ 36,864,612
$ 24,613,091
Notes:
1. Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
2. U.S. dollar amounts are translated from yen at the rate of JPY121=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of
December 30, 2014, solely for the convenience of the reader.
Net Sales
(Billions of yen)
Net Income Attributable to Canon Inc.
(Billions of yen)
4,000
3,000
2,000
1,000
0
300
200
100
0
300
200
100
0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Net Income Attributable to Canon Inc.
Stockholders per Share
(Yen)
ROE/ROA
(%)
10.0
8.0
6.0
4.0
0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Basic
Diluted
ROE
ROA
01
CO RPORAT E P R OF ILE
TA B L E O F C O N T E N T S
Canon develops, manufactures and markets a growing lineup of
copying machines, printers, cameras and industrial and other
equipment. Through these products, the Company meets grow-
ing customer needs that are becoming increasingly diversified and
sophisticated. Today, the Canon brand is recognized and trusted
throughout the world.
STRATEGY
02 TO OUR STOCKHOLDERS
BUSINESS
SEGMENT
10 AT A GLANCE
12 OFFICE BUSINESS UNIT
In 1996, Canon launched its Excellent Global Corporation
14 IMAGING SYSTEM BUSINESS UNIT
Plan with the aim of becoming a company worthy of admiration
16 INDUSTRY AND OTHERS BUSINESS UNIT
and respect the world over. Currently, the Company is work-
ing to achieve the overwhelming No. 1 position in its existing
core businesses and expand related and peripheral businesses by
strengthening its advanced solutions business, centered on inno-
vative products, and through other measures. At the same time,
Canon is nurturing its operations in the fields of medical equip-
ment and industrial equipment, to establish new core businesses.
The Company is working to fulfill its responsibilities to inves-
tors and society, emphasizing sound corporate governance and
stepping up the implementation of activities that contribute to
environmental and social sustainability.
CO RPORAT E P HIL OSOP HY: KYOSEI
Canon’s corporate philosophy is kyosei.
It conveys our dedication to seeing all people, regardless of cul-
ture, customs, language or race, harmoniously living and working
18 2014 TOPICS
CORPORATE
STRUCTURE
20 CORPORATE GOVERNANCE
24 RESEARCH & DEVELOPMENT
FINANCIAL
SECTION
26 PRODUCTION
28 SALES & MARKETING
30 CORPORATE SOCIAL RESPONSIBILITY
34 FINANCIAL OVERVIEW
48 TEN-YEAR FINANCIAL SUMMARY
50 CONSOLIDATED BALANCE SHEETS
51 CONSOLIDATED STATEMENTS OF
INCOME
51 CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME
52 CONSOLIDATED STATEMENTS OF
together in happiness into the future. Unfortunately, current fac-
EQUITY
tors related to economies, resources and the environment make
realizing kyosei difficult.
53 CONSOLIDATED STATEMENTS OF
CASH FLOWS
Canon strives to eliminate these factors through corporate activ-
54 NOTES TO CONSOLIDATED FINANCIAL
ities rooted in kyosei. Truly global companies must foster good
relations with customers and communities, as well as with govern-
ments, regions and the environment as part of their fulfillment of
social responsibilities.
For this reason, Canon’s goal is to contribute to global prosper-
ity and the well-being of mankind as we continue our efforts to
bring the world closer to achieving kyosei.
CO RPORAT E GOAL
Canon sees itself growing and prospering over the next 100, and
even 200, years. Toward this end, the Company has been promot-
ing its Excellent Global Corporation Plan, launching Phase IV of
the initiative in 2011. Building on the financial strengths that the
Company has continuously reinforced through the implementa-
tion of the plan, Canon aims to join the ranks of the world’s top
100 companies in terms of major management indicators.
STATEMENTS
84 SCHEDULE OF VALUATION AND
QUALIFYING ACCOUNTS
85 MANAGEMENT’S REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
86 REPORTS OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
CORPORATE
DATA
88 TRANSFER AND REGISTRAR’S OFFICE
88 STOCKHOLDER INFORMATION
89 MAJOR CONSOLIDATED SUBSIDIARIES
Cover Photo:
Tim Rayman, nature photographer Canon’s interchange-
able lens digital cameras and interchangeable lenses
have served and will be serving professional photogra-
phers around the world who use the latest technologies
to capture the best moments.
02 T O O U R S T O C K H O L D E R S
Fujio Mitarai
Chairman & CEO
Canon Inc.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
03
Canon will bring Phase IV of its Excellent Global
Corporation Plan to a close by building a solid
foundation for a return to a path of growth.
Performance in 2014
Despite expectations of an overall turnaround in the
in cost reductions.
global economy in 2014, particularly in the United
As a result, despite the various challenges we faced
States and Japan, the operating environment we faced
in 2014, including a decline in unit sales of digital
remained very challenging due to unforeseen devel-
cameras, we realized an increase in unit sales of office
opments, such as the conflict between Russia and
color multifunction devices (MFDs), posting consoli-
Ukraine. On the other hand, we saw the yen depreci-
dated net sales of ¥3,727.3 billion, around the same
ate further against both the U.S. dollar and the euro.
level as the previous year. Furthermore, the gross profit
In light of these circumstances, in accordance with our
ratio improved 1.7 points to 49.9%, approaching the
basic policy of emphasizing profit over sales, we made
record level we reached in 2007. At the time, the yen
a concerted Group-wide effort with various initiatives,
was even weaker than it is now, which points to the
including the creation of powerful hit products within
fact that Canon’s manufacturing power, which had suf-
current businesses, the thorough reinforcement of our
fered immediately after the Lehman crisis, is now back
global sales capabilities, and pursuit of a new dimension
on track and stronger than ever. Additionally, thanks
Cash Dividend
(Yen)
150
100
50
0
to ongoing rigorous expense cutting, operating profit
increased 7.8% to ¥363.5 billion while net income
climbed 10.5% to ¥254.8 billion. These figures are the
highest since the collapse of Lehman Brothers and
mark our second consecutive year-on-year increases for
both operating profit and net income.
Free cash flow, as well, increased ¥57.2 billion year
on year to ¥314.6 billion, exceeding net income for the
second successive year. Taking advantage of this ample
cash flow, we carried out three share buybacks in 2014,
purchasing some ¥150 billion worth of Company stock.
With a stockholders’ equity ratio of 66.8% at the end of
2014, we were able to maintain our sound, essentially
debt-free financial structure. Additionally, underscor-
ing our stable and proactive shareholder return pol-
2006
2007
2008
2009
2010
2011
2012
2013
2014
icy, we declared an annual cash dividend of ¥150.00 per
* The amount of annual cash dividend per share in 2006 has been adjusted to reflect
the three-for-two stock split made on July 1, 2006.
share, a ¥20.00 increase from 2013.
04 TO OUR STOCKHOLDERS
Excellent Global Corporation Plan
Canon launched the Excellent Global Corporation Plan
while also enabling us to become an essentially debt-
in 1996 and, over the nearly 20 years since it was intro-
free company.
duced, we have reinforced our business foundation
During Phase III (2006–2010), we sought to expand
through the Plan’s various phases.
Canon’s business scope, broadening our businesses
During Phase I (1996–2000), we focused on shifting
in the printing and medical equipment fields while
from nonconsolidated business management to consoli-
actively carrying out M&A activities.
dated business management while stressing the impor-
And in 2011, under the slogan “Aiming for the
tance of total optimization over partial optimization,
Summit: Speed & Sound Growth,” we embarked on Phase
and of profit over sales. By emphasizing the importance
IV, spanning the five-year period through 2015. Focusing
of cash-flow management and comprehensively elimi-
on the six key strategies explained below, Phase IV calls
nating waste, we were able to reduce our debt by more
for proactive, quick reforms ahead of the dramatically
than half while also significantly increasing productiv-
changing times, along with the achievement of sound
ity through the introduction of the cell production sys-
business growth through the further expansion of our
tem and other measures.
corporate scale while maintaining high profitability.
In Phase II (2001–2005), we focused on reinforcing
2015 is the final year of Phase IV. During the year, we
Canon’s product competitiveness. We fully digitalized
will make a concerted effort to improve our financial
our copying machine and camera offerings, laying
performance and build a robust foundation toward fur-
the groundwork for the successes that we enjoy today
ther growth in the future.
The Excellent Global Corporation Plan
Phase I
1996–2000
Phase II
2001–2005
Phase III
2006–2010
Strengthened our
Recognized the need
Strove to achieve “Sound
financial structure by
for digitalization and
Growth,” seeking high
thoroughly eliminating
raised product competi-
growth levels by estab-
wastefulness, with pro-
tiveness by enhancing
lishing new businesses
duction reforms playing
our development infra-
while raising the profit-
a major role, based on
structure and reinforc-
ability of existing busi-
changing our mindset
ing key components.
nesses. With the global
with a focus on total
optimization and profit-
ability.
economy plunging into
the global recession,
shifted direction towards
“improving the quality of
management.”
Set up
an even stronger
financial
structure
and increased
momentum
towards
a dramatic
leap forward
from now.
Phase IV
2011–2015
Tackle again the chal-
lenge of achieving
“Sound Growth”
through timely change
in advance of changes
in the times.
Slogan:
“Aiming for the Summit:
Speed & Sound
Growth”
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
05
Strategy
1
Achieving the overwhelming No. 1 position in all core businesses and expanding
related and peripheral businesses
In 2014, within the office MFD segment, we significantly
As for inkjet printers, having made our full-fledged
boosted unit sales of color machines through the addition
entry into the business inkjet printer market, we are
of color A4-model MFDs and color imagePRESS-series mod-
focusing on expanding our share within this segment. We
els to our product lineups. Moreover, Océ, which produces
are also working to increase sales of large-format printers,
such products as high-speed continuous feed commercial
for which we posted record-high unit sales in 2014.
printers, recorded healthy sales growth. In the growing
In the industrial equipment segment, we were able
market for office solutions, we continued strengthening
to boost our market share, buoyed by strong demand for
our hardware offerings while improving our ability to pro-
our semiconductor lithography systems used in the fab-
vide an extensive range of high-quality “one-stop” services.
rication of memory devices and image sensors, and con-
In the digital camera segment, unit sales of both inter-
tinued healthy sales of flat-panel-display lithography
changeable lens cameras and compact cameras declined
systems for large-sized panels, along with the launch
year on year. Nevertheless, we maintained the No. 1 posi-
of high-resolution machines used in the production of
tion in the global market with a 44% share for inter-
small- and medium-sized panels. Moreover, through the
changeable lens cameras and a 22% share for compact
enhancement of our nanoimprint lithography technol-
cameras*. Within this segment, we worked to improve
ogy, which makes possible the further miniaturization of
profitability, boosting sales of interchangeable lens digi-
electronic features, we are targeting the mass production
tal cameras with the new EOS 7D Mark II and other mod-
of next-generation semiconductor lithography systems.
els targeting advanced-amateur users, while reinforcing
As for the medical equipment sector, we have been
our compact camera lineup through the introduction of
increasing sales of new digital radiography systems,
high-value-added models that deliver exceptional image
including models featuring wireless static-image sensors
quality and high zoom magnification.
and dynamic-image sensors.
*Based on a Canon survey
Achieving the Overwhelming No.1 Position
Expand Existing Businesses
Cloud
Network
Compatibility
Alliance
Smartphone
Convenience
Expand Related and Peripheral Businesses
Cinema EOS
System
DreamLabo
Océ
The imageRUNNER ADVANCE series machines help make business
processes more effi cient through the handling of a range of docu-
ment-management tasks from a single device.
06
TO OUR STOCKHOLDERS
Strategy
2
Developing new business through globalized diversifi cation and establishing the Three
Regional Headquarters management system
Seeking to realize innovation beyond the boundaries
Molecular Imprints (now Canon Nanotechnologies),
of Japan, Canon is looking to Europe and the United
a company with expertise in nanoimprint technolo-
States to contribute to global growth through the cre-
gies that make possible high-resolution nanolithogra-
ation of new business in terms of both quality and
phy processes. In addition, to secure our No. 1 position
quantity within the framework of the Three Regional
in the global network video surveillance market, we
Headquarters management system. By maintaining a
acquired Milestone Systems, a world-leading provider
highly profitable structure, we aim to join the ranks of
of open platform video management software. In 2015,
the world’s top 100 companies in terms of all key mea-
we plan to acquire Axis AB, the global leader in network
sures of business performance.
video solutions.
In the United States, Canon Virginia is preparing to
We have also been focusing our energies on strength-
commence mass production of a DNA diagnostic system
ening our MR (mixed reality) system business, enhancing
developed by Canon U.S. Life Sciences, while in Europe,
these systems that merge the real and virtual worlds in
Océ is in the process of establishing its function as our
real time. Within the medical equipment segment, we
headquarters for commercial printers.
are working to swiftly establish our remote image-diag-
In the meantime, we will make effective use of our
nostic service business while accelerating our develop-
healthy cash flows to establish new businesses while pro-
ment efforts in such promising areas as photoacoustic
moting measures to nurture and expand them. In 2014,
tomography devices capable of the three-dimensional
with the aim of expediting the development of next-gen-
display of blood vessels.
eration semiconductor lithography systems, we acquired
Canon U.S. Life Sciences, Inc., Maryland, is carrying out research
and development for a DNA diagnostic system, using applications
of CMOS sensor and inkjet printer technologies.
The Network Cameras deliver high image quality, advanced function-
ality, and high performance, while being used in various places, such
as urban areas, offi ces, and public institutions, to provide new values.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
07
Establishing a world-leading globally optimized production system
Strategy
3
Based on a comprehensive evaluation of such factors as
to bring production back to Japan.
foreign exchange fluctuations, wages, taxation systems,
With respect to overseas production, in the Americas
infrastructure and country risk, Canon is building a
and Europe, we will make use of automated production
globally optimized production system from the perspec-
systems, primarily for consumables, to manufacture
tive of total optimization.
products locally. By shortening the distance from fac-
In the aftermath of the Lehman crisis, the yen’s
tory to market, we will be able to deliver products in a
appreciation gave rise to disparities in production costs
timely manner while reducing transportation costs and
between Japan and overseas countries. As manufactur-
inventory in transit. In Asia, in order to diffuse risk, we
ing in Japan became increasingly challenging, we began
are moving quickly to reassess the uneven distribution
shifting production overseas. As a result, production
of our production operations. Accordingly, we will read-
in Japan declined, accounting for 40% of total produc-
just production volumes between countries and regions
tion in 2014, down from 60% in 2007. But with the value
to achieve an optimal production distribution.
of the yen expected to remain low over the long term,
In addition to expanding the domain covered by auto-
we are bringing back manufacturing to Japan, particu-
mated production, to further bolster our manufacturing
larly for new products. Through the strong promotion
capabilities, we will broaden the scope of in-house man-
of automated production lines, robots and in-house pro-
ufacturing to include not only key parts, but also mass
duction, we are building a framework to realize a new
production items such as molded components.
dimension of cost reductions as we step up our efforts
Manufacturing Bases in the Globally Optimized Production Structure
Major Production Sites
08
TO OUR STOCKHOLDERS
Strategy
4
Comprehensively reinforcing global
sales capabilities
Strategy
5
Building the foundations of
an environmentally advanced
corporation
In developed countries, within the consumer segment,
In addition to fulfilling our social responsibilities to the
we will strengthen our response to diversifying sales
natural environment, Canon aims to be a company that
channels in line with the proliferation of online sales.
actively achieves corporate growth while protecting the
Additionally, to effectively satisfy the centralized pro-
environment. As we strive to raise the performance of our
curement needs of global corporations for office prod-
products, we develop energy-saving technologies and mate-
ucts, we are moving to swiftly train highly skilled sales
rials with low environmental burden to minimize our envi-
engineers capable of providing comprehensive con-
ronmental impact and cut carbon dioxide emissions.
sulting services, offering solutions not limited to hard-
During 2014, we reduced the use of raw materials by
ware, but including software as well. Moreover, for our
making products that were smaller and lighter, and accel-
global clients, we provide the same high-quality prod-
erated the modal shift from air- to ocean-based transport.
ucts, solutions and services worldwide.
As a result, we successfully achieved a year-on-year reduc-
Among emerging countries, we are finding diver-
tion in life-cycle CO2 emissions per product that exceeded
sity in terms of economic scale, levels of growth, mar-
our 3% target.
ket characteristics, cultures and customs. To respond
In 2015, Canon celebrates the 25th anniversary of the
to these differing circumstances in each country, we
launch of our pioneering toner cartridge recycling pro-
are working to develop diverse sales channels in accor-
gram. We now offer toner cartridge collection services in
dance with in-depth field investigations, including the
24 countries and carry out the localized recycling of car-
strengthening of our distributor sales network.
tridges in Japan, the United States, China and France. We
will also continue our efforts to be a leader in the areas of
waste reduction and efficient resource use.
The Volume of Returned Toner Cartridges
(Accumulated)
(Unit 1,000s of tons)
350
300
250
200
150
100
50
0
We are opening more Canon Image Square retail stores mainly in
Asian emerging countries. Visitors at the store can try our products
by themselves to see features and performances. (a shop in Vietnam)
1990
1995
2000
2005
2014
(Year)
*Data aggregation method changed after 2009.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
09
Strategy
6
Imparting a corporate culture, and
cultivating human resources befi tting
a truly excellent global company
In Conclusion
The global economic map is changing dramatically in
Since the Lehman crisis, Canon has built a rock-solid
line with rapid advances in globalization and network-
financial base in preparation for the next period of
ing. To continue developing as a truly excellent global
economic growth and has created many new busi-
company worthy of admiration and respect for 100, and
nesses with promising futures. In short, we have ful-
even 200, years, Canon must secure victory on the global
filled all the necessary conditions to make great
playing field and, toward this objective, our workforce
progress.
must continue to deliver innovation.
The global economy is expected to gradually regain
At Canon sales companies around the world, we
moment and head toward stable growth. We aim to
already have many locally hired employees in upper
ride this wave so that we will again be able to make
management positions. Especially in Europe, our largest
great strides during Phase V of our Excellent Global
regional market, the presidents of all of our sales com-
Corporation Plan, which will begin in 2016. To this
panies are from the region. Since 1980, moreover, we
end, we will accelerate the development of new busi-
have held our Tokyo Seminar management training pro-
nesses to return to the growth track in 2015, bringing
gram for managers of overseas Canon Group companies
Phase IV to a successful close by further reinforcing
to improve their managerial capabilities. We are work-
our business foundation.
ing to foster and impart Canon’s corporate culture, con-
We look forward to your continued understanding
tinuously embracing the challenge of innovation, while
and support.
nurturing global human resources who can excel on the
world stage.
Fujio Mitarai
Chairman & CEO
Canon Inc.
Managers from Group companies worldwide gather at the Canon
Global Management Institute in Japan to study corporate strategies
and engage in cross-cultural exchanges.
10 AT A G L A N C E
Business Units
Main Products
O FFI CE
B USI N ESS
U NI T
Office Multifunction Devices (MFDs)
Digital Production Printing Systems
Laser Printers
High Speed Continuous Feed Printers
I MA GI N G
S YSTEM
B USI N ESS
U NI T
I ND U STRY
A ND
O TH ERS
B USI N ESS
UNI T
Interchangeable Lens Digital Cameras
Digital Camcorders
Inkjet Printers
Multimedia Projectors
Semiconductor Lithography Equipment
Digital Radiography Systems
FPD (Flat Panel Display ) Lithography Equipment
Network Cameras
(cid:129)Office Multifunction Devices
(MFDs)
(cid:129)Laser Multifunction Printers
(MFPs)
(cid:129)Laser Printers
(cid:129)Digital Production Printing
Systems
(cid:129)High Speed Continuous Feed
Printers
(cid:129)Wide-Format Printers
(cid:129)Document Solutions
(cid:129)Interchangeable Lens Digital
Cameras
(cid:129)Digital Compact Cameras
(cid:129)Digital Camcorders
(cid:129)Digital Cinema Cameras
(cid:129)Interchangeable Lenses
(cid:129)Inkjet Printers
(cid:129)Large-Format Inkjet Printers
(cid:129)Commercial Photo Printers
(cid:129)Image Scanners
(cid:129)Multimedia Projectors
(cid:129)Broadcast Equipment
(cid:129)Calculators
(cid:129)Semiconductor Lithography
Equipment
(cid:129)FPD (Flat Panel Display)
Lithography Equipment
(cid:129)Digital Radiography Systems
(cid:129)Ophthalmic Equipment
(cid:129)Vacuum Thin-Film Deposition
Equipment
(cid:129)Organic LED (OLED) Panel
Manufacturing Equipment
(cid:129)Die Bonders
(cid:129)Micromotors
(cid:129)Network Cameras
(cid:129)Handy Terminals
(cid:129)Document Scanners
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
11
Outline
Composition of Sales (%)
Net Sales (Billions of yen)
In this segment, Canon offers a comprehensive
range of multifunction devices (MFDs), printers,
and other equipment featuring high image qual-
ity, high resolution, and high speed. Leveraging
these products, Canon works in close collabora-
tion with various Group companies and alliance
partners to deliver optimal solutions tailored to
match the customer’s business operations. These
include various document solutions, such as
office document management and the output of
records. At the same time, the Company provides
top-quality services and support in a swift and
reliable manner.
Canon’s offerings in this segment include digital
cameras, digital camcorders, digital cinema cam-
eras, interchangeable lenses, inkjet printers, and
calculators. Canon’s digital cameras, digital cam-
corders and digital cinema cameras, designed to
deliver unparalleled image quality, have earned
particularly high acclaim worldwide, thanks to
in-house developed lenses, CMOS image sensors,
and image processors. Also widely popular are
Canon’s inkjet printers, which are easy to use
and produce beautiful pictures at high speeds.
Applying optical technologies and image-
processing technologies amassed over many
years, Canon provides high-value-added products
to a wide range of industries. The Company is
already prominent globally as a manufacturer of
FPD (Flat panel display) lithography equipment
and semiconductor lithography equipment.
In addition, Canon is focusing on the medical
equipment field—one of its next generation core
businesses. The Company is aggressively pro-
moting sales of its cutting-edge digital radiogra-
phy systems and ophthalmic equipment, which
employ Canon’s highly regarded medical imag-
ing technologies.
55.8%
36.0%
10.7%
2,500
2,000
1,500
1,000
500
0
1,500
1,000
500
0
500
400
300
200
100
0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Note: The percentage figures for the three business units presented in the pie charts above do not add up to 100% because “Eliminations,” recorded
in consolidation accounting, were not included in calculation considerations.
12 O F F I C E B U S I N E S S U N I T
Canon has expanded the functions of its offi ce multifunction devices, which realize enhanced coordination with IT systems and are compatible
with various types of system application software, offering an optimal usage environment for all sorts of document-related tasks.
2014 Review
Amid healthy demand for office multifunction devices
(MFDs) underpinned by improved corporate results,
Canon launched the C350/C250-series models, the first
color A4 models in its imageRUNNER ADVANCE series.
The new models sold well, especially in Europe and
North America. Accordingly, we now have a full lineup
that can provide solutions for more precise office doc-
ument environments. The imageRUNNER ADVANCE
C5200 series of A3 models also performed well. As a
result, sales of office MFDs increased year on year.
In digital production printing systems, we released
the C800/C700 series, the first color models in the
imagePRESS series targeting the light production mar-
ket. The new models received worldwide acclaim, which
Net Sales (Billions of yen)
2,500
2,000
1,500
1,000
500
0
2012
2013
2014
helped generate significant sales growth for color print-
ers. Overall sales for digital production printing sys-
tems, including monochrome models, surpassed the
previous year.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
13
The imageRUNNER ADVANCE C350/C250,
fi rst A4 color multifunction device in
imageRUNNER ADVANCE series. It has the
same functions and user convenience as the
A3 multifunction device and contributes to
higher work effi ciency through system linkage.
The imagePRESS C800/C700, color multifunc-
tion device that delivers high-quality printing
through the use of new technology. Aimed at
the light-production market, it offers consis-
tently vivid colors even in mass volume print-
ing, it supports various paper types, and it is
well suited to a wide range of needs from com-
mercial printing to in-company printing.
The Océ ColorStream 3000 are high-speed,
continuous-feed commercial printers for appli-
cations requiring high speed and high quality
such as the printing of invoices, direct mail, etc.
as demanded by the data print services (DPS)
market.
Canon’s laser multifunction printers (MFPs) and laser
administrative processes using IT solutions such as
printers for small and mid-sized businesses performed
mobile technology, cloud computing, and social net-
well, driven by sales growth in Japan and the Americas.
working services (SNSs). Against this backdrop, Canon
In the area of OEM-brand laser MFPs and laser print-
will further strengthen its hardware product offerings
ers, difficult economic conditions, especially in Europe,
by measures such as releasing new products. Moreover,
restricted unit sales to previous-year levels. Sales of high-
we will improve the framework for the one-stop deliv-
end models increased, however, resulting in an overall
ery of comprehensive, high-quality services and solu-
sales increase.
tions all over the world.
Sales of Océ ColorStream 3000 series were solid
Océ has already built a strong position in high-volume
among high speed, continuous feed printers manufac-
document printing, such as direct mail, transaction,
tured by Océ.
and computer-aided design (CAD) printing. In addi-
As a result, consolidated sales for this business unit
tion to that, Océ plans to enter profitable new print-
amounted to ¥2,078.7 billion, up 3.9% from the previ-
ing sectors, including printing of graphic arts as well
ous year.
2015 Initiatives
The market for office MFDs is expected to expand for
as printing for packages and home decoration materi-
als. To achieve this smoothly, Océ further collaborates
with Canon.
In the OEM business, Canon will work for cost reduc-
the time being. At the same time, there is increasing
tions while making more compact products and provid-
need to outsource specific operations and modernize
ing highly competitive offerings.
14 I M A G I N G S Y S T E M B U S I N E S S U N I T
Canon’s interchangeable lens digital cameras, which use groundbreaking technology such as proprietary lenses, CMOS sensors, and image
processors, lead the world with their high image quality and contribute to sales.
2014 Review
In the interchangeable lens digital camera category, unit
sales declined year on year, impacted by a generally dif-
ficult market environment caused by weak economic
trends, particularly in Europe and China. Canon worked
actively to boost sales and further enhance our lineup
with the release of six new interchangeable lenses and the
launch of the EOS 7D Mark II, which boasts exceptional
high-speed continuous-shooting capabilities. As a result,
we maintained the No. 1*1 share of the world market.
As for digital compact cameras, Canon reported lower
sales in both volume and value terms amid a shrinking
market, but was successful in raising the sales ratio for
high-value-added products.
Regarding digital cinema cameras, Canon responded
Net Sales (Billions of yen)
1,500
1,000
500
0
2012
2013
2014
to changing market conditions, including the spread
of 4K models and the trend toward lower prices, and
posted healthy sales as a result. Broadcasting equipment
also sold well thanks to solid demand from the sports
sector and in emerging economies. During the year, we
unveiled the CN7x17KAS S zoom lens, which achieved
STRATEGY
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15
The EOS 7D Mark II is our fl agship model
equipped with an APS-C-size CMOS sensor
offering further enhancements in continuous
shooting and AF functions. The interchangeable
lens digital camera offers an excellent tracking
capability to capture moving subjects for deci-
sive shots.
The EF cinema lens CN7x17 KAS S is a high-
magnifi cation zoom lens compatible with
large-sensor cameras used for the production
of broadcasting content and motion pictures. It
is the fi rst EF cinema lens to be equipped with
a drive unit.
The DreamLabo commercial photo printer com-
bines high image quality and high speed to
provide excellent performance. It meets the
demands of the retail photo industry, includ-
ing the production of high-quality commercial
photo materials such as photobooks.
downsizing while maintaining 4K-resolution perfor-
make further refinements to its lenses, sensors, and
mance throughout the entire 7x zoom range. It received
image processors and also step up our responses to
quite a well response from the market.
trends such as cloud computing and SNSs. In digital
In inkjet printers, Canon launched new products that
compact cameras, we will enhance features of cameras’
have improved connectivity with mobile equipment and
core appeals, such as operability, image quality, and
models targeting female customers*2 as well as a new
image expression, to further distinguish our products
office brand MAXIFY in response to diversified demand
from smartphone cameras, while raising affinity with
in the market. Unit sales of inkjet printers declined mod-
mobile devices. In this way, we aim to achieve coexis-
erately amid delayed global economic recovery, but sales
tence and co-prosperity of these devices.
of consumables increased year on year.
With respect to the Cinema EOS System, we will fur-
Sales of large-format inkjet printers rose steadily due
ther expand sales in emerging countries as well as focus
partly to new contracts with large corporate customers,
on entering non-cinema-related sectors, such as news
which resulted in an increase in the net sales of consumables.
reporting and broadcasting.
However, the decline in unit sales of digital compact
In inkjet printers, we will step up rollouts targeting
cameras had a major impact, causing a 7.3% year-on-year
the office market, and in large-format inkjet printers we
decrease in consolidated sales for this business unit, to
will respond meticulously to industry needs in order to
¥1,343.2 billion.
*1 Based on a Canon survey.
*2 These models are sold only in Japan.
2015 Initiatives
In interchangeable lens digital cameras, Canon will
expand market share.
In DreamLabo commercial photo printers, Canon will
diversify sales methods including rental and leasing,
while building highly profitable business models such
as photobook services of editing and bookbinding.
16 I N D U S T R Y A N D O T H E R S B U S I N E S S U N I T
Canon, through its semiconductor lithography equipment, achieves ever higher levels of performance and functionality to meet the strict
cutting-edge demands of the industry, while focusing on the development of future technologies. These technologies also serve as a driving
force behind Canon’s optical and control technologies.
2014 Review
In the business of semiconductor lithography equipment,
unit sales of the FPA-5550iZ and FPA-6300ES6a increased
significantly year on year. This is because manufacturers
of memory devices continued making proactive capital
investments to address healthy demand for smartphones
and other mobile devices. As for FPD (Flat panel display)
lithography equipment, unit sales of the MPAsp-H800
series increased year on year, benefiting from major
growth in investment in equipment for manufacturing
large-sized panels, such as high-resolution 4K displays.
In medical equipment, Canon posted higher sales
than the previous year on the back of increased sales of
high-value-added products in its core digital radiography
systems operation; for example, high-image-quality wire-
Net Sales (Billions of yen)
500
400
300
200
100
0
2012
2013
2014
less models featuring automatic X-ray detection mode.
Furthermore, Canon augmented its lineup of net-
work cameras, adding new models suited to various
indoor environments, such as offices and large retail
stores, while working hard to boost sales. As a result,
the sales of last year significantly increased. In June
2014, Denmark-based Milestone Systems A/S, one of the
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17
The FPA-5550iZ i-line stepper employs the
FPA-5500 platform with proven high perfor-
mance and reliability, which enables high
throughput through such means as short
exposure times made possible by a high-
acceleration wafer stage.
The Network Camera lineup delivers high
image quality, advanced functionality, and high
performance, while reducing the bandwidth
burden on networks. It meets various needs in
many places such as urban areas, offi ces, pub-
lic institutions, factories, and shops.
The Wireless Digital Radiography System series
enables wireless transmission of imaging data
to computers and is suitable for various imag-
ing areas. Canon is focusing on this equipment.
world’s largest video management software companies,
of both i-line steppers and KrF scanners while reducing
became a member of the Canon Group, further strength-
costs in order to further expand market share in this
ening Canon’s network camera business.
field. Furthermore, aiming to adapt our next-generation
Sales of document scanners manufactured by Canon
lithography equipment for the high-volume manufac-
Electronics Inc. increased, helped by brisk sales in the
turing of leading edge devices, we will also strengthen
Middle East, South America, India, and other emerg-
our nanoimprint lithography technologies, which we
ing economies.
acquired through M&A in 2014. In FPD lithography
Both sales of semiconductor film deposition equipment
equipment sector, where 4K and 8K displays are expected
manufactured by Canon ANELVA Corporation and organic
to gather momentum, we will take the lead in increasing
LED (OLED) panel manufacturing equipment made by
resolution also for large-sized panels.
Canon Tokki Corporation declined as capital investments
In medical equipment, Canon will solidify its business
by corporate customers were postponed. However, sales of
foundation in preparation for future growth by focusing
factory automation (FA) systems and semiconductor man-
on high-value-added offerings such as dynamic imaging
ufacturing equipment made by Canon Machinery Inc.
technology in digital radiography systems and high-end
increased steadily on the back of favorable demand.
products in ophthalmic equipment. Furthermore, we
As a result, sales for this business unit increased 6.4%
will continue steadily preparing for the launch of DNA
year on year, to ¥398.8 billion.
diagnostic systems on the U.S. market.
2015 Initiatives
In the optical product field, the semiconductor lithog-
Systems in 2014. Moreover, in 2015 we plan to acquire
Axis AB, the global leader in network video solutions, to
raphy equipment market is expected to grow steadily. In
secure our No.1 position in the global network video sur-
response, Canon will bolster efforts to raise productivity
veillance market.
As for network cameras, we acquired Milestone
18 2 0 1 4 T O P I C S
OFFICE
BUSINESS UNIT
IMAGING SYSTEM
BUSINESS UNIT
imageRUNNER ADVANCE C7270 Offi ce MFD
EF lens-series lineup
Canon Signed Global Partnership
with Volkswagen for Managed
Print Services
Canon Achieved World First as EF
Interchangeable Lens Production
Surpasses 100 Million Mark*1
Canon signed a comprehensive agreement with
In April 2014, Canon became the first in the world to
German automobile manufacturer Volkswagen
reach the 100 million mark for production of inter-
AG, under which we are delivering Canon multi-
changeable EF lenses for EOS-series AF (autofocus) inter-
function office systems and laser printers to global
changeable lens cameras; the production began in 1987.
Volkswagen group offices and factories, while provid-
Canon’s EF lenses have continued to evolve over the
ing assorted solutions and services. The agreement
years, leading the industry through the incorporation
reflects Canon’s advanced technological capabilities
of a wide range of innovative technologies, including
and highly reliable equipment, which make possible
the world’s first items*2, such as Image Stabilizer (IS),
the same solutions in any region around the world,
Ultrasonic Motor (USM) which enables fast auto focusing,
as well as the new development of applications tai-
and built-in extender super-telephoto zoom lens. Canon
lored to meet unique customer needs. Another
has expanded the optical technologies incorporated in
highly recognized point was Canon’s proactive initia-
its EF lenses into new fields, launching EF Cinema Lenses
tives aimed at protecting the environment, including
for digital cinematography in January 2012, and EF-M
efforts to develop products that deliver high environ-
lenses for compact-system cameras in September 2012.
mental performance.
Furthermore, during the 12-year period from 2003
Since 2004, we have operated the Canon Global
to 2014, Canon maintained the No. 1 unit share of the
Services Division as a dedicated in-house organiza-
worldwide interchangeable lens digital camera mar-
tion tasked with responding to the business machine
ket*3. The Company will continue striving to produce
needs of customers with global business operations.
exceptional, highly reliable cameras and lenses that
The Division uses Canon’s sales channels and ser-
cater to the varying needs of photographers, from first-
vice networks across more than 220 countries and
time users to advanced amateurs and professionals.
regions to actively offer our globally unified, high-
quality services.
*1. Among interchangeable lenses, based on a Canon survey (as of
April 22, 2014).
*2. Among interchangeable lenses for interchangeable lens cameras,
based on a Canon survey.
*3. Based on a Canon survey.
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19
IMAGING SYSTEM
BUSINESS UNIT
INDUSTRY AND OTHERS
BUSINESS UNIT
Business inkjet printer MAXIFY MB5300 series
RV1100 3-D Machine Vision System
Canon Launched MAXIFY
Inkjet Printers for
Business Use
Canon Entered Machine
Vision Market with
Launch of RV1100
Canon unveiled MAXIFY, a new series of inkjet all-
Canon launched the RV1100 3-D Machine Vision
in-ones and printers for small- and medium-sized
System. It uses a new three-dimensional rec-
businesses. The lineup comprises five models, while
ognition technology that Canon has devel-
meeting business needs and offering high productiv-
oped based on its optical, image-recognition,
ity, high image quality, and high economic efficiency.
and information-processing technologies,
The MAXIFY series delivers significant increases
which were cultivated through the Company’s
in printing speed thanks to a newly developed
research and development of cameras and busi-
print head and efficient paper feed system. The
ness machines.
models contribute to enhanced office efficiency
The RV1100 makes possible high-speed, high-
through the large-capacity ink tanks and sheet cas-
precision, 3-D recognition of various objects
settes, which require fewer tank replacements and
arranged randomly in a pile on a production
minimize the need for paper refills. Furthermore,
line, including parts with curved features, parts
their dedicated pigment ink system, newly devel-
without distinguishing characteristics, and
oped by Canon, includes a high-density black ink
parts with complex structures. Encompassing
for improved legibility, which makes text clear and
a 3-D machine vision head, which acts as the
easy to read, and inks that do not smudge when
sensor, and vision recognition software which
overwritten by highlighter while hard to erase.
works as the processor, the system transmits rec-
Moreover, the color arrangement has been designed
ognition data to the controller of the robotic
to suit varied business needs, enabling vivid color
arm in the production line. Accordingly, the
printing of graphs, text, photographs, and web
RV1100 plays an important role in automating
pages. Reflecting Canon’s deep commitment to busi-
and expediting the supply of parts to produc-
ness needs, the MAXIFY series keeps ink costs and
tion lines, leading to improve productivity at
power consumption under control to deliver high
factories of each client manufacturer.
economy and environmental performance.
20 C O R P O R AT E G O V E R N A N C E
At a monthly meeting of all company executives, the CEO provides updates on earnings progress and important matters to implement in
the future as a way to share crucial information.
Canon maintains sound corporate
governance as part of efforts to
maximize its stockholders’ value
and become a truly excellent global
corporation.
Basic Policy
In order to establish a sound corporate governance struc-
ment strategies and policies while managing the overall
execution of the operations of the Company. The other
Representative Director is the Chief Financial Officer
(CFO), who controls financial matters.
Under the management of the CEO, each business
segment takes responsibilities of its operational man-
agement on a consolidated basis in an integrated struc-
ture covering everything from product development
to production and sales. In addition, the headquarters
supports and controls finance and accounting, qual-
ture and continuously raise corporate value, Canon
ity management, global environment, and global legal
believes that it is essential to improve management
administration, undertaking administrative functions.
transparency and strengthen functions to supervise and
The Board of Directors, consisting of 17 Directors as
monitor management. In this respect, a sense of eth-
of March 27, 2015, makes decisions on items prescribed
ics and mission held by each executive director and
in the Companies Act, including policies for establish-
employee is very important for the Company.
ing an internal control system, and other important
Representative Directors, Directors,
and Board of Directors
At Canon, the Chief Executive Officer (CEO), who is a
matters on execution of the operations of the Company.
Furthermore, the Board receives reports on execution of
the Company operations controlled by the CEO on a reg-
ular basis, and otherwise as necessary, and oversees such
Representative Director, decides the Company’s manage-
execution of the operations of the Company.
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FINANCIAL SECTION
CORPORATE DATA
21
Directors and Audit & Supervisory Board Members (as of March 27, 2015)
Chairman & CEO
Fujio Mitarai
Executive Vice President & CFO
Toshizo Tanaka
Group Executive of Finance & Accounting Headquarters
Group Executive of Facilities Management Headquarters
Group Executive of Human Resources Management &
Organization Headquarters
Senior Managing Directors
Yoroku Adachi
Chairman & CEO of Canon U.S.A., Inc.
Shigeyuki Matsumoto
Group Executive of Device Technology Development
Headquarters
Group Executive of Corporate R&D
Toshio Homma
Group Executive of Procurement Headquarters
Hideki Ozawa
President & CEO of Canon (China) Co., Ltd.
Masaya Maeda
Chief Executive of Image Communication Products
Operations
Managing Director
Yasuhiro Tani
Group Executive of Digital System
Technology Development Headquarters
Directors
Kenichi Nagasawa
Group Executive of Corporate Intellectual
Property & Legal Headquarters
Naoji Otsuka
Chief Executive of Inkjet Products
Operations
Masanori Yamada
Group Executive of Network Visual Solution
Business Promotion Headquarters
Aitake Wakiya
Deputy Group Executive of Finance &
Accounting Headquarters
Akiyoshi Kimura
Chief Executive of Office Imaging Products
Operations
Eiji Osanai
Group Executive of Production Engineering
Headquarters
Masaaki Nakamura
Deputy Group Executive of Human
Resources Management & Organization
Headquarters
Kunitaro Saida (Outside)
Attorney
Haruhiko Kato (Outside)
President & CEO of Japan Securities
Depository Center, Inc.
Audit & Supervisory Board Members
Makoto Araki
Kazuto Ono
Tadashi Ohe (Outside)
Osami Yoshida (Outside)
Kuniyoshi Kitamura (Outside)
Note: Although this annual report is on FY2014, the above list of Directors and Audit & Supervisory Board members is as of March 27, 2015.
The Company believes that well-developed knowl-
edge of conditions on the ground is the key to swift
and effective decision-making and appropriate busi-
ness monitoring. For this reason, most Directors are
Corporate Strategy Committee,
Risk Management Committee, and
Disclosure Committee
The Corporate Strategy Committee, consisting of
involved in execution of the operations of the Company
Representative Directors, Executive Directors, and some
as Group Executives or Chief Executives in charge of the
Executive Officers, functions as an advisory body to
Company’s main operations. In addition to that, Canon
the CEO. Among items to be decided by the CEO, the
also has two Outside Directors as independent directors*
Committee undertakes prior deliberations on important
who bring impartial perspectives to management that
matters pertaining to Canon Group strategies. Outside
would differ from those of Canon career veterans.
directors and outside Audit & Supervisory Board mem-
To help directors focus more effectively on manage-
bers attend the Corporate Strategy Committee meetings
ment and oversight, Canon has appointed Executive
and proffer their opinions.
Officers who separately undertake execution of the oper-
Based on its policy on establishment of an internal con-
ations of the Company. As of April 1, 2015, there will be
trol system, the Company set up the Risk Management
22 Executive Officers, including one woman.
Committee, which formulates policy and action proposals
* Independent directors: Stock exchanges in Japan require listed compa-
nies to appoint outside directors and/or outside Audit & Supervisory
Board members and to report their name. Outside directors and
Audit & Supervisory Board members should have no possible conflict
of interests with regular stockholders. People related to the parent
company or major business partners, consultants who receive large
remunerations from the company, and their close relatives cannot be
selected as independent directors.
for improvement of the risk management system in the
Canon Group under decisions of the Board of Directors.
The Risk Management Committee consists of three enti-
ties: the Financial Risk Management Subcommittee,
which improves systems on the credibility of finan-
cial reporting; the Compliance Subcommittee, which
22 CORPORATE GOVERNANCE
Governance Structure (as of January 1, 2015)
Elect/Dismiss
Board of Directors
19 Members
(Includes 2 Outside Members)
Elect/Dismiss
Approve/Supervise
Report
Representative Directors
CEO, COO, CFO, CTO
Consult
General Meeting of Shareholders
Audit
Audit
Elect/Dismiss
Elect/Dismiss
Audit & Supervisory Board
5 Members
(Includes 3 Outside Members)
Cooperation
Corporate Strategy Committee
Representative Directors,
Executive Directors, and
Executive Officers with
direct control of an organizational division
Cooperation
Accounting Auditors
(Audit Firm)
Instruct/Order
Approve/Supervise
Report
Report
Report
Risk Management Committee
Financial Risk Management
Subcommittee
Compliance Subcommittee
Business Risk Management
Subcommittee
Report
Cooperation
Report
Disclosure Committee
Cooperation
Financial
Audit
Corporate Audit Center
Internal Audit
Report
Executive Directors, Executive Officers, and each General Manager
Execution of the operations of the company
ensures thorough implementation of corporate eth-
Directors meetings, Corporate Strategy Committee meet-
ics and improves legal compliance systems; the Business
ings, and other relevant meetings, while receiving ver-
Risk Management Subcommittee, which improves sys-
bal reports from directors, reviewing important approval
tems prepared for overall business risks, including insuf-
documents, and examining the business and financial
ficient product quality and information leakage. The Risk
asset statuses of the Company and its subsidiaries. In
Management Committee verifies the risk management
these ways, the Audit & Supervisory Board meticulously
system and reports the status to the CEO.
checks directors’ and others’ execution of the company
In addition, the Disclosure Committee undertakes
operations, including establishment and operation of the
deliberations on information disclosure, including con-
internal control system, thus is fulfilling a management
tent and timing, to ensure timely and accurate disclo-
oversight function. The Board also works in close alliance
sure of important company information.
with the Internal Audit Division and the accounting audi-
tors to improve the efficacy of monitoring.
Audit & Supervisory Board
Canon is a “Company with an Audit & Supervisory Board.”
The Board consists of five members, three of which are
Internal Audit Division
The Corporate Audit Center, with about 70 members, is
independent Outside Audit & Supervisory Board mem-
the Company’s internal auditing arm. It conducts audits
bers. In accordance with auditing policies and plans
and evaluations and provides guidance on all opera-
decided at Audit & Supervisory Board meetings, mem-
tions and sectors without exception, including those of
bers of the Audit & Supervisory Board attend Board of
Group companies, from various perspectives, such as
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
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23
The San-Ji (“Three Selfs”) Spirit, passed down from the initiation of the company, is one of
Canon’s guiding principles. The three are “take the initiative and be proactive in all things”
(Self-motivation), “conduct oneself with responsibility and accountability” (Self-management),
and “understand one’s situation and role in all situations” (Self-awareness). (calligraphy by
Canon’s fi rst president, Takeshi Mitarai)
business efficacy and efficiency, compliance, and infor-
understanding one’s situation and role in it. In 2001,
mation security. Audits results are reported to the CEO
Canon established the Canon Group Code of Conduct,
and Audit & Supervisory Board and complement audits
inspired by the above Three Selfs. The Code has been
conducted by members of that board.
translated into 14 languages from Japanese, and each
Accounting Auditors
The Company has an auditing service contract with its
independent auditor, Ernst & Young ShinNihon LLC, to
Group company makes efforts to enforce the Code.
Countering Antisocial Forces
Canon has a basic policy prohibiting relationships of any
audit its financial statements. To check the validity of the
kind with antisocial forces that represent a threat to social
audits, the Company’s Audit & Supervisory Board members
order and security. To uphold this basic policy, Canon has
receive detailed explanations from the accounting auditors
established a department dedicated to activities aimed at
about the quality management system regarding audits.
countering such parties while reinforcing cooperative ties
With the aim of monitoring the independence of the
with applicable public authorities. In addition, Canon’s
accounting auditors, the Company introduced a prior
Employment Regulations include a clause prohibiting
approval system by the Audit & Supervisory Board for
such relationships, and the Company continues to step up
contents of auditing and other service contracts and rel-
efforts to ensure strict employee adherence.
evant fees. Based on “policies and procedures of the prior
approval for both auditing and non-auditing services,”
each contract is closely reviewed for prior approval.
Risk Management
As Canon expands its business on a global scale, busi-
ness and other risks to which it may be exposed con-
Compliance
Shortly after its founding, Canon established the San-Ji
tinue to diversify. In accordance with policies of its Risk
Management Committee, Canon calculates and investi-
(“Three Selfs”) Spirit principles: “self-motivation,” or taking
gates conceivable risks across the entire Group. Canon
the initiative and being proactive in all things; “self-man-
also strives to prevent or minimize the emergence of risk
agement,” or conducting oneself responsibly and being
by formulating company regulations and other rules
accountable for all one’s actions; and “self-awareness,” or
and conducting employee education.
24 R E S E A R C H & D E V E L O P M E N T
Canon works to improve pathological diagnosis, which determines the presence and spread of cancer by observing shapes and interconnections
of human cells. We are conducting R&D on an imaging mass spectrometer with high spatial resolution and high sensitivity that can detect a mass
of molecules and reconstruct its spectrum to form an image, allowing users to identify the two-dimensional distribution of substances in tissues.
Seeking to create a new Canon, the
Company is reinforcing an R&D structure
spanning Japan, the United States,
and Europe under the Three Regional
Headquarters management system. At
the same time, we are continuing to
tackle challenges to develop products for
professionals in unexplored fi elds.
Strengthening Our Global R&D Structure
Pursuing globalized diversification of its operations, Canon
is moving away from its existing structure, in which com-
petitive, technologically advanced products have been
made mostly in Japan. Today, we have established the foun-
dation of the Three Regional Headquarters management
system that leads to new businesses emerging from each
operation in Japan, the United States, and Europe.
In the United States, Canon has set up research insti-
2014 Top Ten U.S. Patent Holders by Company
tutes covering from basic research into unexplored fields
7,534
including healthcare to applied research on cutting-
4,952
4,055
edge technologies. In Europe, we will make further use of
existing R&D centers to advance R&D in new fields.
IBM*
Samsung
Electronics
CANON
Sony
Microsoft
Toshiba
QUALCOMM
Google
LG Electronics
Panasonic
3,224
2,829
2,608
2,590
2,566
2,122
2,095
*IBM is an abbreviation for International Business Machines Corporation.
Source: Preliminary data released by IFI CLAIMS Patent Services, a U.S.
research company specialized in patent information
R&D Expenses and Patents
Canon is bolstering R&D activities to enable the ongo-
ing development of innovative products and services.
In the year under review, R&D expenses amounted to
¥309.0 billion, up 0.9%, or ¥2.7 billion, from the pre-
vious year. The ratio of R&D expenses to net sales was
8.3%. This focus on R&D activities has cemented Canon’s
STRATEGY
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FINANCIAL SECTION
CORPORATE DATA
25
Canon’s 120-megapixel ultrahigh-resolution CMOS sensor for video recording can output full HD video in real time from any approximately
one-sixtieth-sized section of its total surface area. Accordingly, images captured with the sensor maintain high levels of defi nition and clar-
ity even when cropped or digitally magnifi ed.
high status in the field of intellectual property. In
2014, Canon was granted 4,055 patents in the United
Initiatives to Establish New Businesses
In the medical equipment field toward the establish-
States, ranking it third in the world and the top ranked
ment of new pillars of growth, we are conducting
Japanese company for a tenth consecutive year.
research in Japan into photoacoustic tomography (PAT)
Reinforcing Core Technologies
Canon is concentrating efforts on pre-competitive
technique for displaying blood vessels in three-dimen-
sional images, using laser radiation and ultrasonic detec-
tors. Canon in Japan is also conducting research into
fields areas, involving research that can take more
adaptive optics scanning laser ophthalmoscopy (AO-SLO),
than ten years. At the same time, the Company is con-
which enables examination of the retina at the cellular
tinually bolstering activities centered on key parts and
level. In the United States, we are complementing our
key devices in order to enhance the competitiveness of
work in DNA diagnostic systems with research in the
its products.
fields of biomedical optical imaging and medical robot-
For instance, we seek to boost the sensitivity, image
ics technologies, with the aim of developing new medi-
quality, and noise reduction of CMOS sensors for inter-
cal devices and commercializing them.
changeable lens digital cameras to realize new types
In the industrial equipment field, Canon applies
of visual expression for cameras. By raising the per-
its optical, capturing and imaging technologies to
formance levels of these devices to the full extent, we
advanced 3D measurement and recognition technolo-
are developing sensors applicable to functions used in
gies. The technologies are part of our ongoing research
such areas as medical research and surveillance and
on Super Machine Vision, which will serve as the eyes of
security. We are now promoting businesses of CMOS
intelligent robots.
sensor components.
26 P R O D U C T I O N
Canon works to maintain and expand production, actively introducing our automation technologies and extending them in high-value-added
products such as assembly of EF lens units. (the Utsunomiya Plant, Japan)
In addition to establishing a globally
optimized production system, Canon
seeks improved quality and productivity
by putting a priority on conducting
production operations itself to ensure the
progress of its manufacturing expertise.
Belief in “Internal Production”
In-House
Production
Automation
Man-Machine
Cell
(cid:115)(cid:0)(cid:35)(cid:79)(cid:83)(cid:84)(cid:0)(cid:50)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115)(cid:0)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)
(cid:0) (cid:36)(cid:73)(cid:70)(cid:70)(cid:69)(cid:82)(cid:69)(cid:78)(cid:84)(cid:73)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115)(cid:0)(cid:52)(cid:69)(cid:67)(cid:72)(cid:78)(cid:79)(cid:76)(cid:79)(cid:71)(cid:89)
(cid:0) (cid:48)(cid:82)(cid:79)(cid:84)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115)(cid:0)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:0) (cid:38)(cid:76)(cid:69)(cid:88)(cid:73)(cid:66)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89)
(cid:115)(cid:0)(cid:44)(cid:69)(cid:65)(cid:68)(cid:0)(cid:52)(cid:73)(cid:77)(cid:69)
(cid:0) (cid:50)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115)(cid:0)(cid:49)(cid:85)(cid:65)(cid:76)(cid:73)(cid:84)(cid:89)
(cid:0) (cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)
(cid:115)(cid:0)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:0) (cid:37)(cid:70)(cid:70)(cid:73)(cid:67)(cid:73)(cid:69)(cid:78)(cid:67)(cid:89)
(cid:0) (cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)
(cid:115)(cid:0)(cid:44)(cid:79)(cid:67)(cid:65)(cid:76)(cid:73)(cid:90)(cid:69)(cid:68)
(cid:0) (cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115)(cid:0)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:0) (cid:37)(cid:70)(cid:70)(cid:73)(cid:67)(cid:73)(cid:69)(cid:78)(cid:67)(cid:89)
(cid:0) (cid:41)(cid:77)(cid:80)(cid:82)(cid:79)(cid:86)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)
(cid:115)(cid:0)(cid:35)(cid:79)(cid:83)(cid:84)(cid:0)(cid:50)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:0) (cid:70)(cid:82)(cid:79)(cid:77)(cid:0)(cid:36)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78)
(cid:0) (cid:48)(cid:72)(cid:65)(cid:83)(cid:69)
(cid:115)(cid:0)(cid:44)(cid:69)(cid:65)(cid:68)(cid:0)(cid:52)(cid:73)(cid:77)(cid:69)
(cid:0) (cid:50)(cid:69)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115)(cid:0)(cid:38)(cid:85)(cid:82)(cid:84)(cid:72)(cid:69)(cid:82)
(cid:0) (cid:33)(cid:85)(cid:84)(cid:79)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)
Internal Production
Establishing a Globally Optimized
Production System
Canon aims to establish a globally optimized produc-
tion system that identifies the most suitable locations
for the production of individual products based on a
comprehensive assessment of various considerations.
These factors include cost, taxation, logistics, the ease
of parts procurement, and the workforce in each coun-
try and region. An optimized system will lead to addi-
tional improvements in productivity for the entire
Canon Group.
Improving Productivity
Canon continues to expedite production in optimal loca-
tions. At the same time, by putting a priority on con-
ducting production operations in-house, we proceed
to raise quality and reduce costs through progress in
manufacturing by making full use of the expertise and
insights of individual workers engaged in production.
To this end, the Company has adopted a cell production
system—an approach that fully utilizes the creativity of
STRATEGY
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27
Canon is participating in a next-generation ultra-large-telescope
project aimed at fostering unparalleled and new astronomical
research never seen before. Engaged in the project, Canon is press-
ing ahead with technological innovations in optical technologies
and systems for high-precision measurement and processing.
Committed to offer customers products that are safe while also
providing trust and satisfaction, Canon adheres stringent quality
control measures at every process, refl ecting its basic concept of
quality: “no claims, no trouble.” (the Tamagawa Offi ce, Japan)
individual workers. Canon continues to improve produc-
assembly of EF lens focus units and then basic process-
tivity by making efforts to increase production efficien-
ing of camera bodies.
cies in cell production while rolling out “man-machine
cell” production systems that integrate manual and
automated processes.
In the Americas and Europe, Canon accelerates local-
Environmental Friendly Manufacturing;
Enhanced Product Quality
Canon actively seeks to prioritize purchases of environ-
ized production of consumables such as toner cartridges
mentally conscious parts and materials as well as shift to
by using automated production lines. Our aim is to
transportation modes that have minimal environmental
deliver products timely while reducing transportation
impact. We also focus on manufacturing initiatives that
costs and inventory in transit.
are friendly to the global environment.
As for efforts to improve productivity in each region,
Creating top-quality products is a relentless chal-
Canon in Japan has introduced prototype-less pro-
lenge at Canon. Grinding and processing of lenses is
duction adopting simulation technology on super-
one of those that require advanced technologies. We
computer systems and has used 3D printers to make
have been entrusted with the responsibility of process-
prototypes. With these technologies, we are pursuing
ing the 30-meter-diameter multi-segment primary mir-
ideal product designs and significantly shorter develop-
ror to be incorporated in the Thirty Meter Telescope
ment times. Furthermore, with the aim of further cost
(TMT), currently under construction near the summit
reductions, we have expanded our in-house produc-
of Mauna Kea, Hawaii, and scheduled for completion
tion range from key parts including image sensors to
in 2021.
large-quantity-procured items including molded parts.
We have also deployed automated production lines for
28 S A L E S & M A R K E T I N G
Canon (China) Co., Ltd. actively joins camera shows including the China International Photograph & Electrical Imaging Machinery and
Technology Fair to promote our comprehensive capability as the leading imaging company.
Canon reinforces its sales and
marketing capabilities by providing
innovative products and advanced
solutions tailored to meet the
characteristics of each region.
Japan
In the year under review, sales in Japan amounted to
¥724.3 billion, equivalent to 19.4% of consolidated
net sales.
Due to the prolonged impact of the consumption tax
hike, the market for consumer products became more
challenging than in the previous year. Nevertheless,
Canon secured the top market shares of its main prod-
Composition of Sales by Region
ucts interchangeable lens digital cameras, compact digital
Asia and Oceania 23.5%
¥876.0 billion
The Americas 27.8%
¥1,036.5 billion
Net Sales
¥3,727.3
billion
Japan 19.4%
¥724.3 billion
Europe 29.3%
¥1,090.5 billion
cameras, and inkjet printers; our proactive sales promo-
tion efforts including user-oriented campaigns contrib-
uted to this achievement. In the B2B field, we advanced a
new business of 3D Solutions for manufacturers, which
combines 3D printers with computer graphics (CG) tech-
nologies. We also used our data centers to broaden our
cloud services. In one highlight, we provided infrastruc-
ture enabling observation of patients’ medical examina-
tion images from remote locations.
The Americas
Sales in the Americas came to ¥1,036.5 billion, or 27.8%
STRATEGY
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29
New Come and See brand identity unveiled at Photokina in
Cologne, Germany, September 2014 to inspire and engage the
180,000 visitors and hundreds of journalists.
Canon U.S.A. opened the Canon Experience Center in Costa Mesa,
California, as a new customer service operation center covering the
area of the West Coast.
of consolidated net sales.
in driving growth in network visual solutions. To appeal
Canon Americas has been making steady progress
to new consumers, a new brand identity was launched—
toward creating a regional headquarters that will han-
Come and See. A new cloud-based image management
dle product development, manufacturing, and sales
service, irista, was also launched in 2014. Canon strength-
functions. In 2014, we focused on enhancing customer
ened its sales and marketing in the Middle East through
services by opening new support service operations:
the formation of a new Canon sales company in Qatar.
the Canon Experience Center, in Southern California,
and our second U.S. call center, in New Mexico. We
also launched our new marketing slogan, Canon See
Asia and Oceania
In Asia and Oceania sales amounted to ¥876.0 billion
Impossible, and devised a brand strategy aimed at
(23.5% of consolidated net sales).
addressing changing markets and conveying new levels
Canon has started Asia Traveler Protection Program
of added value created by Canon.
(ATPP), seeking to offer added values to increasing inter-
national tourists in China and Southeast Asia. When our
Europe (Europe, Middle East, Africa)
In Europe sales amounted to ¥1,090.5 billion (29.3% of
customers buy Canon’s products such as cameras and
lenses in mainland China and visit overseas countries,
consolidated net sales).
they can use the repair service for free in eleven coun-
In 2014, Canon Europe increased market share in key
tries and regions in Asia.
segments, while also focusing on developing new oppor-
In Australia, Canon acquired a majority stake in
tunities for diversification and future growth. Canon’s
Harbour IT Pty. Ltd., one of the largest managed services
acquisition of Milestone Systems A/S, a world leader in
and cloud solutions providers, to enhance our business
video management software, was a major strategic step
services offering.
30 C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
Canon India Pvt. Ltd. rolls out continuously various community welfare programs in the three areas of eye care, education and environment
in villages without adequate educational and healthcare facilities. For example, we improve school facilities by setting up resource centers for
children and installing solar panels. We also help villagers by providing eye check-ups with Canon’s retinal cameras. (Ferozepur Namak Village)
Guided by its kyosei (“living and
working together for the common
good”) philosophy, Canon is promoting
CSR activities with the aim of becoming
a truly excellent corporation that is
admired and respected the world over.
Canon’s Basic Approach to CSR
Canon recognizes that its corporate activities are sup-
ported by the development of society as a whole, and
contributes to the realization of a better society as a
good corporate citizen, effectively leveraging its ad-
vanced technological strengths, global business deploy-
ment, and diverse, specialized human resources.
Environmental Activities
Canon Selected by CDP as Leading Company in
Climate Change Information Disclosure
In 2014, CDP, an international nonprofit organization
(NPO) that conducts environmental assessments, selected
Canon for the first time as a leading company in climate
change information disclosure under its environmental
ratings. Canon was recognized for its initiatives such as
the effort to ensure transparency by obtaining third par-
ty verification of its greenhouse gas emissions data.
LEED Certification
In February 2014, Canon Americas Headquarters re-
ceived the Gold certification of the international stan-
dard LEED (Leadership in Energy & Environmental
Design) as a highly resource-efficient, green building. In
Canon U.S.A. has made various efforts to reduce the environ-
mental impact of its headquarters building including incorporat-
ing natural light and installing a rainwater capture and storage
system that uses greenery.
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31
The “Eyes on Yellowstone”, an education and research program
in partnership with Yellowstone National Park, releases videos of
wildlife in their natural environment online. These videos are used
to educate children around the world.
Under the Tsuzuri Project, in 2014 Canon made high-resolution
reproductions of all 16 fusuma (sliding door) paintings of “Scene of
Rice Cultivation.” This work, believed to have been painted by Kano
Sanraku, are now in the possession of the Minneapolis Institute of
Art. Canon donated the reproductions to the Daikakuji Temple at
the former Saga Imperial Palace in Kyoto, Japan.
September 2014, the Canon U.S.A. distribution center in
Atlanta was the first facility to receive LEED certification
in the new “Building Design and Construction – Ware-
houses and Distribution Centers” category.
of Industrial Infrastructure grant and Pursuit of Ideals
grant. In 2014, 17 projects were selected for the fifth re-
search grant program.
Conservation Activities at National Parks in the
United States
Canon U.S.A. continues to provide support for environ-
mental protection activities in U.S. national parks. The
company began supporting Yellowstone National Park in
1995 and Acadia National Park in 2013. Canon imaging
equipment is used to observe wildlife, create video librar-
ies and support communication activities.
Social Contribution Activities
Canon conducts wide-ranging social contribution ac-
tivities in various parts of the world to help create a
better society.
Canon Foundation Announces Fifth Grant
Program Recipients
The Canon Foundation aims to contribute to the ongo-
ing prosperity and well-being of mankind. It has offered
two research grant programs, known as the Creation
The Tsuzuri Project
Canon and the non-profit organization Kyoto Culture
Association jointly promote a project called the “Tsu-
zuri Project” (Official title: Cultural Heritage Inheritance
Project). The aim of the project is to preserve original
cultural assets while maximizing the effective use of
high-resolution facsimiles of cultural assets. These fac-
similes are created by blending Canon’s latest digital
technology and traditional Japanese crafts, such as gold
leaf craftwork. As a result of the project, original cultur-
al assets can be kept in the more favorable environment
of museums while facsimiles can be used for education-
al purposes and public exhibits. Since the program be-
gan in 2007, the cumulative total of reproduced and
donated items has reached 31 (as of March 2015).
Partnership with the Red Cross EU Office
Canon Europe entered into a partnership agreement
with the Red Cross in 2006 after having been a longtime
supporter and endorser of the organization’s activities.
32
CORPORATE SOCIAL RESPONSIBILITY
Canon Europe supports the German Red Cross’s activities, such as
emergency response training for children, in preparation for natu-
ral disasters. ©Red Cross
With the aim of promoting innovation by incorporating the opinions
of our diverse human resources at all levels of decision-making,
Canon recognizes the individual aptitudes and skills of employees,
positively expanding the scope of activities of female staff.
The Company works with 16 Red Cross National Societ-
ies across Europe, giving support in a variety of ways,
from donating equipment to providing funding for edu-
cation and engagement projects for young people.
Canon Image Bridge
“Canon Image Bridge” is an initiative in which Canon
China and other members of the Canon Asia Marketing
Group serve as a bridge linking elementary and middle
school children in Asia by delivering their photo cards.
To date, around 5,600 children from 179 schools have tak-
en part in the photo card exchange project. Children take
photos and other children in foreign countries write mes-
sages on the pictures while exchanging photo cards. Canon
helps them make photo cards and send them abroad to
foster cross-cultural communication among children.
Addressing the Issue of Confl ict Minerals
Seeking to ensure that customers can use Canon prod-
ucts with peace of mind, the Canon Group works to-
gether with its business partners as well as industry
organizations to address the issue of conflict minerals.
In accordance with the U.S. Dodd-Frank Wall Street
Reform and Consumer Protection Act, Canon filed a re-
port at the end of May 2014 regarding the Company’s sta-
tus on this issue with the U.S. Securities and Exchange
Commission. This report is also made available on
Canon’s website.
Based on data gathered through February 2015 re-
garding products manufactured, or contracted to man-
ufacture, by the Canon Group, no specific parts or
materials have been found to have contributed to fund-
ing armed groups in conflict regions as defined by U.S.
legislation. Due, however, to the complex nature of the
supply chain, inquiries may not have reached a number
of smelters or refiners located upstream. In response,
Canon will enhance its collaboration efforts across var-
ious industries and support activities aimed at encour-
aging smelters to avoid using conflict minerals that
finance armed groups.
Cultivating Diverse Human Resources
Canon is committed to diversity of human resources. We
welcome people of all types—irrespective of race, gen-
der, age, customs, and value perceptions—and deploy
such differences to foster our growth as an organization.
Since 2012, we have engaged in in-house projects with
top priority on helping maximize the potential of wom-
en in the workplace. Initiatives in 2014 included internal
educational activities and leadership training for select-
ed female employees. We also held seminars for employ-
ees returning from childcare leave and their superiors.
F I N A N C I A L S E C T I O N
33
T A B L E O F C O N T E N T S
34
FINANCIAL OVERVIEW
48
TEN-YEAR FINANCIAL SUMMARY
50 CONSOLIDATED BALANCE SHEETS
51 CONSOLIDATED STATEMENTS OF INCOME
51 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
52 CONSOLIDATED STATEMENTS OF EQUITY
53 CONSOLIDATED STATEMENTS OF CASH FLOWS
54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
84
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
85 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
86 REPORTS OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
34 FINANCIAL OVERVIEW
GENERAL
The following discussion and analysis provides information
that management believes to be relevant to understanding
Canon’s consolidated financial condition and results of oper-
ations. References in this discussion to the “Company” are to
Canon Inc. and, unless otherwise indicated, references to the
financial condition or operating results of “Canon” refer to
Canon Inc. and its consolidated subsidiaries.
OVERVIEW
Canon is one of the world’s leading manufacturers of plain
paper copying machines, office multifunction devices
(“MFDs”), laser printers, cameras, inkjet printers, semicon-
ductor lithography equipment and FPD (Flat panel display)
lithography equipment. Canon earns revenues primarily
from the manufacture and sale of these products domesti-
cally and internationally. Canon’s basic management policy
is to contribute to the prosperity and well-being of the world
while endeavoring to become a truly excellent global corpo-
rate group targeting continued growth and development.
Canon divides its businesses into three segments: the
Office Business Unit, the Imaging System Business Unit, and
the Industry and Others Business Unit.
Economic environment
Looking back at the global economy in 2014, although the
United States and other developed countries were initial-
ly expected to bring about a return to a path of full-fledged
growth, such expectations came up short due to the ongo-
ing occurrence of such unforeseen circumstances as the con-
flict between Russia and Ukraine. In the U.S., despite the
negative impact of the major cold wave that struck at the
beginning of the year, the economy showed steady signs of
recovery, buoyed by the improvement in employment condi-
tions and healthy growth in consumer spending. In Europe,
the economy remained sluggish due to such factors as the
negative impact of Russia’s deteriorating economy on neigh-
boring euro area countries. The pace of economic expan-
sion in China was modest while other emerging countries in
Southeast Asia and South America faced slowdowns in mar-
ket growth due to economic stagnation. In Japan, with the
economy yet to recover from the decline following the rush
in demand leading up to the hike in the country’s consump-
tion tax, growth fell short of the rate recorded in the previ-
ous year.
Market environment
Looking at the markets in which Canon operates amid
these conditions, demand for MFDs and laser printers main-
tained steady growth. Demand for interchangeable-lens
digital cameras continued to face harsh conditions due to
the economic slowdown. Demand for digital compact cam-
eras continued to shrink in both developed countries and
emerging markets. Demand for inkjet printers, decreased
due to the sluggish economies of Asia and Europe. In the
industry and others sector, a rebound in capital investment
for both memory devices and image sensors led to a pick-
up in demand for semiconductor lithography equipment.
Additionally, demand for lithography equipment used in
the production of FPDs increased for large-size panels.
The average value of the yen during the year was ¥106.18
against the U.S. dollar, a year-on-year depreciation of approxi-
mately ¥8, and ¥140.62 against the euro, a year-on-year depre-
ciation of approximately ¥11.
Summary of operations
MFDs and laser printers enjoyed solid demand during the
year and industrial equipment sales increased significantly.
Within the shrinking market for interchangeable-lens digi-
tal cameras and digital compact cameras, less-than-expected
demand during the year-end shopping season led to a decline
in net sales. As a result, despite the positive effects of favor-
able currency exchange rates, net sales for the year decreased
by 0.1% year on year to ¥3,727.3 billion. The gross profit ratio,
however, rose 1.7 points year on year to 49.9% thanks to the
effects of ongoing cost-cutting efforts along with the depre-
ciation of the yen. Despite an increase in foreign-currency-
denominated operating expenses due to the depreciation
of the yen, Group-wide efforts to reduce spending contrib-
uted to limiting operating expenses to ¥1,498.0 billion, an
increase of just 2.5% year on year. As a result, operating prof-
it increased by 7.8% year on year to ¥363.5 billion. Other
income increased by ¥9.4 billion due to foreign currency
exchange gains while income before income taxes increased
by 10.3% to ¥383.2 billion. Net income attributable to Canon
Inc. increased by 10.5% to ¥254.8 billion. Accordingly, despite
the slight decline in net sales, Canon achieved profit growth.
Key performance indicators
The following are the key performance indicators (“KPIs”)
that Canon uses in managing its business. The changes from
year to year in these KPIs are set forth in the table shown on
page 35.
Revenues
As Canon pursues the goal to become a truly excellent glob-
al company, one indicator upon which Canon’s manage-
ment places strong emphasis is revenue. The following are
some of the KPIs related to revenue that management con-
siders to be important.
Net sales is one such KPI. Canon derives net sales primari-
ly from the sale of products and, to a lesser extent, provision
of services associated with its products. Sales vary depend-
ing on such factors as product demand, the number and
size of transactions within the reporting period, market
acceptance for new products, and changes in sales prices.
Other factors involved are market share and market envi-
ronment. In addition, management considers the evalua-
tion of net sales by segment to be important for the purpose
of assessing Canon’s sales performance in various segments,
STRATEGY
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35
taking into account recent market trends.
Gross profit ratio (ratio of gross profit to net sales) is
another KPI for Canon. Through its reforms of product devel-
opment, Canon has been striving to shorten product develop-
ment lead times in order to launch new, competitively priced
products at a faster pace. Furthermore, Canon has further
achieved cost reductions through enhancement of efficien-
cy in its production. Canon believes that these achievements
have contributed to improving Canon’s gross profit ratio, and
will continue pursuing the curtailment of product develop-
ment lead times and reductions of production costs.
Operating profit ratio (ratio of operating profit to net sales)
and R&D expense to net sales ratio are considered to be KPIs
by Canon. Canon is focusing on two areas for improvement.
Canon is striving to control and reduce its selling, general
and administrative expenses as its first key point. Secondly,
Canon’s R&D policy is designed to maintain adequate spend-
ing in core technology to sustain Canon’s leading position in
its current business areas and to exploit opportunities in oth-
er markets. Canon believes such investments will create the
basis for future success in its business and operations.
Cash flow management
Canon also places significant emphasis on cash flow manage-
ment. The following are the KPIs relating to cash flow man-
agement that Canon’s management believes to be important.
Inventory turnover measured in days is a KPI because
it measures the efficiency of supply chain management.
Inventories have inherent risks of becoming obsolete, physi-
cally damaged or otherwise decreasing significantly in val-
ue, which may adversely affect Canon’s operating results. To
mitigate these risks, management believes that it is crucial to
continue reducing work-in-process inventories by decreasing
production lead times in order to promptly recover related
product expenses, while balancing risks of supply chain dis-
ruptions by optimizing finished goods inventories in order to
avoid losing potential sales opportunities.
Canon’s management seeks to meet its liquidity and capi-
tal requirements primarily with cash flow from operations.
Management also seeks debt-free operations. For a manu-
facturing company like Canon, it generally takes consider-
able time to realize profit from a business due to lead times
required for R&D, manufacturing and sales has to be fol-
lowed for success. Therefore, management believes that it is
important to have sufficient financial strength so that the
Company does not have to rely on external funds. Canon
has continued to reduce its dependency on external funds
for capital investments in favor of generating the necessary
funds from its own operations.
Canon Inc. stockholders’ equity to total assets ratio is
another KPI for Canon. Canon believes that its stockholders’
equity to total assets ratio measures its long-term sustainabil-
ity. Canon also believes that achieving a high or rising stock-
holders’ equity ratio indicates that Canon has maintained a
strong financial position or further improved its ability to
fund debt obligations and other unexpected expenses. In the
long-term, Canon’s management believes a high stockhold-
ers’ equity ratio will enable the company to maintain a high
level of stable investments for its future operations and devel-
opment. As Canon puts strong emphasis on its R&D activities,
management believes that it is important to maintain a sta-
ble financial base and, accordingly, a high level of its stock-
holders’ equity to total assets ratio.
KEY PERFORMANCE INDICATORS
Net sales (Millions of yen)
Gross profit to net sales ratio
R&D expense to net sales ratio
Operating profit to net sales ratio
Inventory turnover measured in days
Debt to total assets ratio
Canon Inc. stockholders’ equity to total assets ratio
2014
2013
2012
2011
2010
¥3,727,252 ¥3,731,380
48.2%
8.2%
9.0%
52 days
0.1%
68.6%
49.9%
8.3%
9.8%
50 days
0.0%
66.8%
¥3,479,788
47.4%
8.5%
9.3%
57 days
0.1%
65.7%
¥3,557,433
48.8%
8.7%
10.6%
46 days
0.3%
64.9%
¥3,706,901
48.1%
8.5%
10.5%
35 days
0.3%
66.4%
Note: Inventory turnover measured in days is determined by: Inventory divided by net sales for the previous six months, multiplied by 182.5.
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
The consolidated financial statements are prepared in accor-
dance with U.S. generally accepted accounting principles
(“GAAP”) and based on the selection and application of sig-
nificant accounting policies which require management to
make significant estimates and assumptions. These estimates
and assumptions include future market conditions, net sales
growth rate, gross margin and discount rate. Though Canon
believes that the estimates and assumptions are reasonable,
actual future results may differ from these estimates and
assumptions. Canon believes that the following are the more
critical judgment areas in the application of its account-
ing policies that currently affect its financial condition and
results of operations.
36
FINANCIAL OVERVIEW
Revenue recognition
Canon generates revenue principally through the sale of
office and imaging system products, equipment, supplies,
and related services under separate contractual arrange-
ments. Canon recognizes revenue when persuasive evidence
of an arrangement exists, delivery has occurred and title and
risk of loss have been transferred to the customer or services
have been rendered, the sales price is fixed or determinable,
and collectibility is probable.
Revenue from sales of office products, such as office MFDs
and laser printers, and imaging system products, such as digi-
tal cameras and inkjet printers, is recognized upon shipment
or delivery, depending upon when title and risk of loss trans-
fer to the customer.
Revenue from sales of optical equipment, such as semi-
conductor lithography equipment and FPD lithography
equipment that are sold with customer acceptance provi-
sions related to their functionality, is recognized when the
equipment is installed at the customer site and the specific
criteria of the equipment functionality are successfully test-
ed and demonstrated by Canon. Service revenue is derived
primarily from separately priced product maintenance con-
tracts on equipment sold to customers and is measured at
the stated amount of the contract and recognized as servic-
es are provided.
Canon also offers separately priced product maintenance
contracts for most office products, for which the custom-
er typically pays a stated base service fee plus a variable
amount based on usage. Revenue from these service main-
tenance contracts is measured at the stated amount of the
contract and recognized as services are provided and vari-
able amounts are earned.
Revenue from the sale of equipment under sales-type leas-
es is recognized at the inception of the lease. Income on sales-
type leases and direct-financing leases is recognized over the
life of each respective lease using the interest method. Leases
not qualifying as sales-type leases or direct-financing leases
are accounted for as operating leases and the related revenue
is recognized ratably over the lease term. When equipment
leases are bundled with product maintenance contracts, rev-
enue is first allocated considering the relative fair value of
the lease and non-lease deliverables based upon the estimated
relative fair values of each element. Lease deliverables gener-
ally include equipment, financing and executory costs, while
non-lease deliverables generally consist of product mainte-
nance contracts and supplies.
For all other arrangements with multiple elements, Canon
allocates revenue to each element based on its relative sell-
ing price if such element meets the criteria for treatment as
a separate unit of accounting. Otherwise, revenue is deferred
until the undelivered elements are fulfilled and accounted
for as a single unit of accounting.
Canon records estimated reductions to sales at the time of
sale for sales incentive programs including product discounts,
customer promotions and volume-based rebates. Estimated
reductions to sales are based upon historical trends and other
known factors at the time of sale. In addition, Canon provides
price protection to certain resellers of its products, and records
reductions to sales for the estimated impact of price protec-
tion obligations when announced. In 2011, the sales incentive
program accruals were quite difficult to estimate compared to
prior years because of the significant fluctuation in consumer
product supplies from our manufacturing facilities, due to the
earthquake in Japan and the flooding in Thailand. Although
Canon utilized available data to produce its best estimate of
promotion payments to be claimed in 2012, actual claims in
2012 were not as high as Canon had estimated. Moreover, in
recent years, as a result of the market conditions and custom-
er preferences, usage of incentive programs has shifted from
mail-in rebates to instant rebates. Accordingly, the historical
data relating to mail-in-rebates could not be used to determine
instant rebates. Given the limited experience with instant
rebates, this led Canon to maintain its estimated accruals for
a longer period of time. As 2012 progressed and new informa-
tion became available, Canon reviewed the 2011 accrual bal-
ance in order to determine whether the accrual needed to be
revised during 2012. By using new additional statistical infor-
mation and gathering sales and inventory data from custom-
ers, Canon was able to revise its estimates.
Estimated product warranty costs are recorded at the time
revenue is recognized and are included in selling, general and
administrative expenses. Estimates for accrued product war-
ranty costs are based on historical experience, and are affected
by ongoing product failure rates, specific product class fail-
ures outside of the baseline experience, material usage and
service delivery costs incurred in correcting a product failure.
Allowance for doubtful receivables
Allowance for doubtful receivables is determined using a
combination of factors to ensure that Canon’s trade and
financing receivables are not overstated due to uncollectibil-
ity. These factors include the length of time receivables are
past due, the credit quality of customers, macroeconomic
conditions and historical experience. Also, Canon records spe-
cific reserves for individual accounts when Canon becomes
aware of a customer’s inability to meet its financial obliga-
tions to Canon, due for example to bankruptcy filings or dete-
rioration in the customer’s operating results or financial
position. If circumstances related to customers change, esti-
mates of the recoverability of receivables are further adjusted.
Valuation of inventories
Inventories are stated at the lower of cost or market value.
Cost is determined by the average method for domestic inven-
tories and principally the first-in, first-out method for over-
seas inventories. Market value is the estimated selling price
in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make a sale.
Canon routinely reviews its inventories for their salability
and for indications of obsolescence to determine if inven-
tories should be written-down to market value. Judgments
and estimates must be made and used in connection with
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
37
establishing such allowances in any accounting period. In
estimating the market value of its inventories, Canon consid-
ers the age of the inventories and the likelihood of spoilage
or changes in market demand for its inventories.
Impairment of long-lived assets
Long-lived assets, such as property, plant and equipment, and
acquired intangibles subject to amortization, are reviewed
for impairment whenever events or changes in circumstanc-
es indicate that the carrying amount of an asset may not
be recoverable. If the carrying amount of the asset exceeds
its estimated undiscounted future cash flows, an impair-
ment charge is recognized in the amount by which the car-
rying amount of the asset exceeds the fair value of the asset.
Determining the fair value of the asset involves the use of
estimates and assumptions.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation
is calculated principally by the declining-balance method,
except for certain assets which are depreciated by the straight-
line method over the estimated useful lives of the assets.
Goodwill and other intangible assets
Goodwill and other intangible assets with indefinite use-
ful lives are not amortized, but are instead tested for impair-
ment annually in the fourth quarter of each year, or more
frequently if indicators of potential impairment exist. Canon
performs its impairment test of goodwill using the two-step
approach at the reporting unit level, which is one level below
the operating segment level. All goodwill is assigned to the
reporting unit or units that benefit from the synergies aris-
ing from each business combination. If the carrying amount
assigned to the reporting unit exceeds the fair value of the
reporting unit, Canon performs the second step to measure
an impairment charge in the amount by which the carrying
amount of a reporting unit’s goodwill exceeds its implied fair
value. Fair value of a reporting unit is determined primari-
ly based on the discounted cash flow analysis which involves
estimates of projected future cash flows and discount rates.
Estimates of projected future cash flows are primarily based
on Canon’s forecast of future growth rates. Estimates of dis-
count rates are determined based on the weighted average
cost of capital, which considers primarily market and indus-
try data as well as specific risk factors. Intangible assets with
finite useful lives consist primarily of software, license fees,
patented technologies and customer relationships. Software
and license fees are amortized using the straight-line method
over the estimated useful lives, which range primarily from 3
years to 5 years for software and 5 years to 10 years for license
fees. Patented technologies are amortized using the straight-
line method principally over the estimated useful lives,
which range from 8 years to 16 years. Customer relationships
are amortized principally using the declining-balance meth-
od over the estimated useful life of 5 years.
Income tax uncertainties
Canon considers many factors when evaluating and estimat-
ing income tax uncertainties. These factors include an evalua-
tion of the technical merits of the tax positions as well as the
amounts and probabilities of the outcomes that could be real-
ized upon settlement. The actual resolutions of those uncer-
tainties will inevitably differ from those estimates, and such
differences may be material to the financial statements.
Valuation of deferred tax assets
Canon currently has significant deferred tax assets,
which are subject to periodic recoverability assessments.
Realization of Canon’s deferred tax assets is principally
dependent upon its achievement of projected future tax-
able income. Canon’s judgments regarding future profitabil-
ity may change due to future market conditions, its ability
to continue to successfully execute its operating restructur-
ing activities and other factors. Any changes in these factors
may require possible recognition of significant valuation
allowances to reduce the net carrying value of these deferred
tax asset balances. When Canon determines that certain
deferred tax assets may not be recoverable, the amounts,
which may not be realized, are charged to income tax
expense and will adversely affect net income.
Employee retirement and severance benefit plans
Canon has significant employee retirement and severance
benefit obligations that are recognized based on actuari-
al valuations. Inherent in these valuations are key assump-
tions, including discount rates and expected return on plan
assets. Management must consider current market condi-
tions, including changes in interest rates, in selecting these
assumptions. Other assumptions include assumed rate of
increase in compensation levels, mortality rate, and withdraw-
al rate. Changes in assumptions inherent in the valuation
are reasonably likely to occur from period to period. Actual
results that differ from the assumptions are accumulated and
amortized over future periods and, therefore, generally affect
future pension expenses. While management believes that the
assumptions used are appropriate, the differences may affect
employee retirement and severance benefit costs in the future.
In preparing its financial statements for 2014, Canon esti-
mated a weighted-average discount rate used to determine
benefit obligations of 1.1% for Japanese plans and 2.9% for
foreign plans and a weighted-average expected long-term
rate of return on plan assets of 3.1% for Japanese plans and
4.9% for foreign plans. In estimating the discount rate,
Canon uses available information about rates of return on
high-quality fixed-income government and corporate bonds
currently available and expected to be available during
the period to the maturity of the pension benefits. Canon
establishes the expected long-term rate of return on plan
assets based on management’s expectations of the long-
term return of the various plan asset categories in which it
invests. Management develops expectations with respect to
each plan asset category based on actual historical returns
38
FINANCIAL OVERVIEW
and its current expectations for future returns.
Decreases in discount rates lead to increases in actuarial
pension benefit obligations which, in turn, could lead to an
increase in service cost and amortization cost through amor-
tization of actuarial gain or loss, a decrease in interest cost,
and vice versa. For 2014, a decrease of 50 basis points in the
discount rate increases the projected benefit obligation by
approximately ¥91,609 million. The net effect of changes in
the discount rate, as well as the net effect of other changes in
actuarial assumptions and experience, is deferred until subse-
quent periods.
Decreases in expected returns on plan assets may increase
net periodic benefit cost by decreasing the expected return
amounts, while differences between expected value and actu-
al fair value of those assets could affect pension expense in
the following years, and vice versa. For 2014, a change of 50
basis points in the expected long-term rate of return on plan
assets would cause a change of approximately ¥4,218 mil-
lion in net periodic benefit cost. Canon multiplies manage-
ment’s expected long-term rate of return on plan assets by
the value of its plan assets to arrive at the expected return on
plan assets that is included in pension expense. Canon defers
recognition of the difference between this expected return
on plan assets and the actual return on plan assets. The net
deferral affects future pension expense.
Canon recognizes the funded status (i.e., the difference
between the fair value of plan assets and the projected bene-
fit obligations) of its pension plans in its consolidated balance
sheets, with a corresponding adjustment to accumulated oth-
er comprehensive income (loss), net of tax.
CONSOLIDATED RESULTS OF OPERATIONS
SUMMARY OF OPERATIONS
Net sales
Operating profit
Income before income taxes
Net income attributable to Canon Inc.
Sales
The shrinking market for interchangeable-lens digital cameras
and digital compact cameras, and less-than-expected demand
during the year-end shopping season led to a major decline in
net sales in Imaging System Business Unit. However, due to
the stable demand for MFDs and laser printers, and indus-
trial equipment sales along with the positive effects of favor-
able currency exchange rates, Canon’s consolidated net
sales in 2014 totaled ¥3,727,252 million, a slight decrease of
0.1% from the previous year.
Overseas operations are significant to Canon’s operating
results and generated 80.6% of total net sales in 2014. Such
sales are denominated in the applicable local currency and
are subject to fluctuations in the value of the yen relative to
those currencies. Despite efforts to reduce the impact of cur-
rency fluctuations on operating results, including localiza-
tion of manufacturing in some regions along with procuring
parts and materials from overseas suppliers, Canon believes
such fluctuations have had and will continue to have a signif-
icant effect on its results of operations.
The average value of the yen during the year was ¥106.18
against the U.S. dollar, a year-on-year depreciation of approx-
imately ¥8, and ¥140.62 against the euro, a year-on-year
depreciation of approximately ¥11. The effects of foreign
exchange rate fluctuations positively affected net sales by
Millions of yen
2014
¥3,727,252
363,489
383,239
254,797
change
-0.1%
+7.8%
+10.3%
+10.5%
2013
change
2012
¥3,731,380
337,277
347,604
230,483
+7.2%
+4.1%
+1.5%
+2.6%
¥3,479,788
323,856
342,557
224,564
approximately ¥186,000 million in 2014. This favorable
impact consisted of approximately ¥98,200 million for the
U.S. dollar denominated sales, ¥66,800 million for the euro
denominated sales and ¥21,000 million for other foreign
currency denominated sales.
Cost of sales
Cost of sales principally reflects the cost of raw materials,
parts and labor used by Canon in the manufacture of its
products. A portion of the raw materials used by Canon is
Return on Sales
(%)
9
6
3
0
2010
2011
2012
2013
2014
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
39
imported or includes imported materials. Many of these raw
materials are subject to fluctuations in world market prices
accompanied by fluctuations in foreign exchange rates that
may affect Canon’s cost of sales. Other components of cost
of sales include depreciation expenses, maintenance expens-
es, light and fuel expenses, and rent expenses. The ratio of
cost of sales to net sales for 2014 and 2013 was 50.1% and
51.8%, respectively.
Gross profit
Canon’s gross profit in 2014 increased by 3.5% to ¥1,861,472
million from 2013. The gross profit ratio also increased by 1.7
points year on year to 49.9%. The increase in the gross profit
ratio reflects ongoing cost-cutting efforts along with the posi-
tive effects of the depreciation of the yen.
Operating expenses
The major components of operating expenses are payroll,
R&D, advertising expenses and other marketing expens-
es. Despite the negative effect of depreciation of the yen,
group-wide efforts to thoroughly reduce spending contrib-
uted to limit the increase year on year to 2.5% to a total of
¥1,497,983 million.
Operating profit
Operating profit in 2014 increased 7.8% from 2013 to a total
of ¥363,489 million. The ratio of operating profit to net sales
increased 0.8% to 9.8% from 2013.
Other income (deductions)
Other income (deductions) for 2014 increased ¥9,423 mil-
lion to ¥19,750 million, mainly due to foreign currency
exchange gain.
Income before income taxes
Income before income taxes in 2014 was ¥383,239 million,
an increase of 10.3% from 2013, and constituted 10.3% of
net sales.
Income taxes
Provision for income taxes in 2014 increased by ¥9,912 mil-
lion from 2013. The effective tax rate during 2014 remained
consistent with 2013. The effective tax rate for 2014 was
30.8%, which was lower than the statutory tax rate in Japan.
This was mainly due to the tax credit for R&D expenses.
Net income attributable to Canon Inc.
As a result, net income attributable to Canon Inc. in 2014
increased by 10.5% to ¥254,797 million, which represents
6.8% of net sales.
Segment information
Canon divides its businesses into three segments: the Office
Business Unit, the Imaging System Business Unit and the
Industry and Others Business Unit.
(cid:129)The Office Business Unit mainly includes Office multifunc-
tion devices (“MFDs”) / Laser multifunction printers (“MFPs”) /
Laser printers / Digital production printing systems / High
speed continuous feed printers / Wide-format printers /
Document solutions
(cid:129)The Imaging System Business Unit mainly includes
Interchangeable lens digital cameras / Digital compact
cameras / Digital camcorders / Digital cinema cameras /
Interchangeable lenses / Inkjet printers / Large-format ink-
jet printers / Commercial photo printers / Image scanners /
Multimedia projectors / Broadcast equipment / Calculators
(cid:129)The Industry and Others Business Unit mainly includes
Semiconductor lithography equipment / FPD (Flat panel dis-
play) lithography equipment / Digital radiography systems /
Ophthalmic equipment / Vacuum thin-film deposition equip-
ment / Organic LED (“OLED”) panel manufacturing equip-
ment / Die bonders / Micromotors / Network cameras / Handy
terminals / Document scanners
Sales by Segment
(Billions of yen)
Sales by Geographic Area
(Billions of yen)
5,000
4,000
3,000
2,000
1,000
0
5,000
4,000
3,000
2,000
1,000
0
Office Business Unit
Imaging System
Business Unit
Industry and Others
Business Unit
Eliminations
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Japan
Americas
Europe
Asia and Oceania
40
FINANCIAL OVERVIEW
Sales by segment
Please refer to the table of sales by segment in Note 21 of the Notes to Consolidated Financial Statements.
Canon’s sales by segment are summarized as follows:
SALES BY SEGMENT
Office
Imaging System
Industry and Others
Eliminations
Total
Millions of yen
2014
¥2,078,732
1,343,194
398,765
(93,439)
¥3,727,252
change
+3.9%
-7.3%
+6.4%
—
-0.1%
2013
change
2012
¥2,000,073
1,448,938
374,870
(92,501)
¥3,731,380
+13.8%
+3.1%
-8.1%
—
+7.2%
¥1,757,575
1,405,971
407,840
(91,598)
¥3,479,788
Within the Office Business Unit, office MFDs sales increased
steadily from the year-ago period, led by healthy demand
for new imageRUNNER ADVANCE C350/C250-series models,
Canon’s first color A4 (letter and legal-sized)-model
imageRUNNER ADVANCE machines, and the imagePRESS
C800/C700, Canon’s first color models targeting the light
production market, along with the A3 (12” x 18”)-model
imageRUNNER ADVANCE C5200 series, which continues to
be well accepted in the market. The Océ ColorStream 3000
series of high-speed continuous-feed printers continued
to enjoy solid sales growth from the previous year. Among
laser printers, although color models and multifunction
models recorded sales growth, total sales volume decreased
slightly from the year-ago period owing to the decrease in
demand for monochrome models in European and other
markets that have suffered prolonged economic stagnation.
As a result, coupled with the positive effects of favorable
currency exchange rates, sales for the business unit totaled
¥2,078.7 billion, a year-on-year increase of 3.9%, while oper-
ating profit totaled ¥292.1 billion, an increase of 9.4%.
Within the Imaging System Business Unit, although sales
volume of interchangeable-lens digital cameras declined
owing to the shrinking market—in Japan as a result of the
reaction following the rush in demand prior to the con-
sumption tax increase, and in Europe and other markets
due to worsening economic conditions—the advanced-
amateur-model EOS 7D Mark II achieved healthy growth,
enabling Canon to maintain the market’s top share. Despite
a decline in total sales volume for digital compact cameras,
sales of high-added-value models featuring high image qual-
ity and high-magnification zoom capabilities, such as the
PowerShot G7 X and PowerShot SX60 HS/SX700 HS, record-
ed solid growth, contributing to an improvement in prof-
itability. Inkjet printer hardware sales increased for the
fourth quarter from the year-ago period thanks to the intro-
duction of new products for the year-end shopping season
and marketing tailored to geographical characteristics, but
sales volume for the year decreased due to economic slug-
gishness in Asia and Europe. Sales of consumable supplies
increased from the previous year owing to the steady accu-
mulation of printer units currently operating in the market.
As a result, including the positive effect of favorable cur-
rency change rates, sales for the business unit decreased by
7.3% to ¥1,343.2 billion year on year, while operating profit
declined 4.5% to ¥194.6 billion.
In the Industry and Others Business Unit, ongoing invest-
ment following the recovery in the second half of the previ-
ous year by memory device manufacturers led to increased
unit sales of semiconductor lithography equipment for
memory devices and image sensors. Amid increasing mar-
ket demand for higher definition tools, lithography systems
for the creation of high-definition mid- and small-size pan-
els, in addition to a model introduced in the second half of
the previous year for large panels, recorded healthy growth,
contributing to the boosting of both sales volume and mar-
ket share. In medical equipment, sales volume of new dig-
ital radiography systems, including wireless static-image
models and models capable of capturing dynamic imag-
es, grew steadily, fueling sales growth. Consequently, sales
for the business unit totaled ¥398.8 billion, an increase of
6.4% year on year, while operating profit, although showing
an improvement from the previous year, recorded a loss of
¥21.8 billion owing to investment, including R&D expenses,
into next-generation technologies.
Intersegment sales of ¥93,439 million, representing 2.5% of
total sales, are eliminated from total sales for the three seg-
ments, and are described as “Eliminations.”
Sales by geographic area
Please refer to the table of sales by geographic area in Note 21
of the Notes to Consolidated Financial Statements.
A geographical analysis indicates that net sales in 2014
are summarized as follows.
In Japan, although sales volume of digital compact cam-
eras declined, net sales increased by 1.2% from the previous
year due to solid growth in office MFDs.
In the Americas, despite the favorable effect from depreci-
ation of the yen against U.S. dollar and solid demand for ink-
jet printers, net sales decreased by 2.2% from the previous
year owing to the decline of compact digital camera market.
Despite the favorable effect from depreciation of the
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
41
yen against euros and solid demand for office MFDs in
sluggish economic condition, net sales decreased by 3.1%
from the previous year due to the price reduction of inter-
changeable-lens digital cameras and shrinking of digital
compact camera market in Europe.
In Asia and Oceania, although sales volume of
interchangeable-lens digital cameras and digital compact
cameras declined, net sales increased by 5.4% from the previ-
ous year due to solid demand for office MFDs coupled with
the positive effects of depreciation of the yen.
A summary of net sales by geographic area is provided below.
SALES BY REGION
Japan
Americas
Europe
Asia and Oceania
Total
2014
¥ 724,317
1,036,500
1,090,484
875,951
¥ 3,727,252
change
+1.2%
-2.2%
-3.1%
+5.4%
-0.1%
Millions of yen
2013
¥ 715,863
1,059,501
1,124,929
831,087
¥3,731,380
change
-0.6%
+12.7%
+10.9%
+3.2%
+7.2%
2012
¥ 720,286
939,873
1,014,038
805,591
¥3,479,788
Note: This summary of net sales by geographic area is determined by the location where the product is shipped to the customers.
Operating profit by segment
Please refer to the table of segment information in Note 21 of
the Notes to Consolidated Financial Statements.
Company and its domestic subsidiaries. Please refer to the
table of geographic information in Note 21 of the Notes to
Consolidated Financial Statements.
Operating profit for the Office Business Unit in 2014
increased by 9.4% to ¥292,057 million, resulting from the
sales increase including the positive effects of favorable cur-
rency exchange rates.
Despite operating profit for the Imaging System Business Unit in
2014 decreased by 4.5% to ¥194,601 million, in response to
the sales decline, operating profit ratio increased from previ-
ous year, owing to the improvement in profitability from the
sales shift to high-added-value models in camera, along with
the positive effects of favorable currency exchange rates.
Operating profit for the Industry and Others Business Unit in
2014, despite an improvement from the previous year result-
ed from sales increase, recorded a loss of ¥21,801 million
owing to investment, including R&D expenses, into next-
generation technologies.
FOREIGN OPERATIONS AND FOREIGN
CURRENCY TRANSACTIONS
Canon’s marketing activities are performed by subsidiaries in
various regions in local currencies, while the cost of sales is
generally in yen. Given Canon’s current operating structure,
appreciation of the yen has a negative impact on net sales
and the gross profit ratio. To reduce the financial risks from
changes in foreign exchange rates, Canon utilizes derivative
financial instruments, which consist principally of forward
currency exchange contracts.
The operating profit on foreign operation sales is usual-
ly lower than that from domestic operations because for-
eign operations consist mainly of marketing activities.
Marketing activities are generally less profitable than pro-
duction activities, which are mainly conducted by the
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by ¥55,671 million to
¥844,580 million in fiscal 2014 compared to the previous
year. Canon’s cash and cash equivalents are typically denomi-
nated in Japanese yen and in U.S. dollars, with the remainder
denominated in other currencies.
Net cash provided by operating activities increased by
¥76,285 million to ¥583,927 million in fiscal 2014 compared
to the previous year. The major component of Canon’s cash
inflow is cash received from customers, and the major com-
ponents of Canon’s cash outflow are payments for parts and
materials, selling, general and administrative expenses, R&D
expenses and income taxes.
For fiscal 2014, cash inflow from operating activities
increased, due to the increasing profit as well as an improve-
ment in working capital. There were no significant chang-
es in Canon’s collection rates. Cash outflow for payments for
parts and materials decreased, as a result of decreased inven-
tory level. Cash outflow for income taxes increased due to an
increase in taxable income.
Net cash used in investing activities increased by ¥19,086
million to ¥269,298 million in fiscal 2014. This reflects
the acquisition of Milestone Systems, to enhance Canon’s
network camera business, and several other companies.
Purchases of fixed assets were focused on items relevant to
new products.
Canon defines “free cash flow” as cash flows from
operating activities less cash flows from investing activi-
ties. For fiscal 2014, free cash flow totaled ¥314,629 mil-
lion as compared with ¥257,430 million for fiscal 2013.
Canon’s management recognizes that constant and inten-
sive investment in facilities and R&D is required to main-
tain and strengthen the competitiveness of its products.
42
FINANCIAL OVERVIEW
Canon has also commenced a public tender offer for all
of the issued shares of Axis AB on March 3, 2015, in order
to further ensure its goal of becoming the world lead-
er in network surveillance camera systems for consider-
ation of a maximum amount of approximately 23.6 billion
Swedish krona (approximately ¥333.7 billion with transla-
tion at the rate of ¥14.13 = 1 Swedish krona). Canon’s man-
agement seeks to meet its capital requirements, including
the acquisition of Axis AB, with generating cash flow prin-
cipally from its operating activities. Therefore, its capital
resources are primarily sourced from internally generat-
ed funds. Accordingly, Canon includes information with
regard to free cash flow as management frequently mon-
itors this indicator, and believes that such indicator is
beneficial to an investor’s understanding. Furthermore,
Canon’s management believes that this indicator is signif-
icant in understanding Canon’s current liquidity and the
alternatives of use in financing activities because it takes
into consideration its operating and investing activities.
Canon refers to this indicator together with relevant U.S.
GAAP financial measures shown in its consolidated state-
ments of cash flows and consolidated balance sheets for
cash availability analysis.
Net cash used in financing activities totaled ¥300,886 mil-
lion in fiscal 2014, mainly resulting from repurchase of trea-
sury stock of ¥149,813 million, and dividends of ¥145,790
million. The Company paid dividends in fiscal 2014 of
¥130.00 per share.
To the extent Canon relies on external funding for its
liquidity and capital requirements, it generally has access
to various funding sources, including the issuance of addi-
tional share capital, long-term debt or short-term loans.
While Canon has been able to obtain funding from its tradi-
tional financing sources and from the capital markets, and
believes it will continue to be able to do so in the future,
there can be no assurance that adverse economic or other
conditions will not affect Canon’s liquidity or long-term
funding in the future.
Short-term loans (including the current portion of long-
term debt) amounted to ¥1,018 million at December 31, 2014
compared with ¥1,299 million at December 31, 2013. Long-
term debt (excluding the current portion) amounted to
¥1,148 million at December 31, 2014 compared with ¥1,448
million at December 31, 2013.
Canon’s long-term debt mainly consists of lease obligations.
In order to facilitate access to global capital markets,
Canon obtains credit ratings from two rating agencies:
Moody’s Investors Services, Inc. (“Moody’s”) and Standard
and Poor’s Ratings Services (“S&P”). In addition, Canon main-
tains a rating from Rating and Investment Information, Inc.
(“R&I”), a rating agency in Japan, for access to the Japanese
capital market.
As of March 13, 2015, Canon’s debt ratings are:
Moody’s: Aa1 (long-term); S&P: AA (long-term), A-1+ (short-
term); and R&I: AA+ (long-term). Canon does not have
any rating downgrade triggers that would accelerate the
maturity of a material amount of its debt. A downgrade in
Canon’s credit ratings or outlook could, however, increase
the cost of its borrowings.
Canon’s management policy in recent periods to opti-
mize inventory levels is intended to maintain an appro-
priate balance among relevant imperatives, including
minimizing working capital, avoiding undue exposure to
the risk of inventory obsolescence, and maintaining the
ability to sustain sales despite the occurrence of unexpect-
ed disasters.
Reflecting the foregoing circumstances, Canon’s total
inventory turnover ratios were 50, 52, and 57 days at the
end of the fiscal years 2014, 2013, and 2012, respectively
and the improvements over the last three years are in line
with Canon’s expectations and its revised inventory man-
agement policy.
Increase in Property,
Plant and Equipment
(Billions of yen)
Working Capital Ratio
Return on Canon Inc.
Stockholders’ Equity
(%)
300
200
100
0
3.0
2.5
2.0
1.5
1.0
0.5
0
12
9
6
3
0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
43
Increase in property, plant and equipment on an accru-
al basis in 2014 amounted to ¥182,343 million compared
with ¥188,826 million in 2013 and ¥270,457 million in 2012.
For 2015, Canon projects its increase in property, plant and
equipment will be approximately ¥205,000 million.
Employer contributions to Canon’s worldwide defined ben-
efit pension plans were ¥22,146 million in 2014, ¥48,515
million in 2013 and ¥30,421 million in 2012. Employer con-
tributions to Canon’s worldwide defined contribution pen-
sion plans were ¥15,077 million in 2014, ¥14,383 million in
2013, and ¥13,021 million in 2012. In addition, employer
contributions to the multiemployer pension plan in which
certain subsidiaries in Netherlands participated were ¥2,815
million in 2014.
Working capital in 2014 increased by ¥32,919 million to
¥1,470,554 million, compared with ¥1,437,635 million in
2013 and ¥1,237,821 million in 2012. Canon believes its work-
ing capital will be sufficient for its requirements for the fore-
seeable future. Canon’s capital requirements are primarily
dependent on management’s business plans regarding the
levels and timing of purchases of fixed assets and invest-
ments. The working capital ratio (ratio of current assets to
current liabilities) for 2014 was 2.60 compared to 2.69 for
2013 and to 2.47 for 2012.
Return on assets (net income attributable to Canon Inc.
divided by the average of total assets) was 5.9% in 2014,
compared to 5.6% in 2013 and 5.7% in 2012.
Return on Canon Inc. stockholders’ equity (net income
attributable to Canon Inc. divided by the average of total
Canon Inc. stockholders’ equity) was 8.7% in 2014 compared
with 8.4% in 2013 and 8.7% in 2012.
The debt to total assets ratio was 0.0%, 0.1% and 0.1% as of
December 31, 2014, 2013 and 2012, respectively. Canon had
short-term loans and long-term debt of ¥2,166 million as of
December 31, 2014, ¥2,747 million as of December 31, 2013
and ¥3,983 million as of December 31, 2012.
OFF-BALANCE SHEET ARRANGEMENTS
As part of its ongoing business, Canon does not participate
in transactions that generate relationships with unconsol-
idated entities or financial partnerships, such as entities
often referred to as structured finance or special purpose
entities established for the purpose of facilitating off-
balance sheet arrangements or other contractually narrow
or limited purposes.
Canon provides guarantees for bank loans of its employ-
ees, affiliates and other companies. Canon will have to
perform under a guarantee if the borrower defaults on a pay-
ment within the contract periods of 1 year to 30 years in the
case of employees with housing loans, and 1 year to 5 years
in the case of affiliates and other companies. The maximum
amount of undiscounted payments Canon would have had to
make in the event of default by all borrowers was ¥8,951 mil-
lion at December 31, 2014. The carrying amounts of the liabil-
ities recognized for Canon’s obligations as a guarantor under
those guarantees at December 31, 2014 were insignificant.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following summarizes Canon’s contractual obligations at December 31, 2014.
Millions of yen
Contractual obligations:
Long-term debt:
Capital lease obligations
Other long-term debt
Operating lease obligations
Purchase commitments for:
Property, plant and equipment
Parts and raw materials
Other long-term liabilities:
Contribution to defined benefit pension plans
Total
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
Payments due by period
¥
2,018
145
85,719
52,668
76,984
26,257
¥ 243,791
¥
956
59
26,450
¥
808
60
34,508
¥
251
24
14,528
¥
3
2
10,233
52,668
76,984
—
—
—
—
—
—
26,257
¥183,374
—
¥35,376
—
¥14,803
—
¥10,238
Note: The table does not include provisions for uncertain tax positions and related accrued interest and penalties, as the specific timing of future payments
related to these obligations cannot be projected with reasonable certainty. See Note 12, Income Taxes in the Notes to Consolidated Financial Statements
for further details. Contribution to defined benefit pension plans reflects the expected amount only for the next fiscal year, since contributions
beyond the next fiscal year are not currently determinable due to uncertainties related to changes in actuarial assumptions, returns on plan assets and
changes to plan membership.
44
FINANCIAL OVERVIEW
Canon provides warranties of generally less than one year
against defects in materials and workmanship on most of
its consumer products. Estimated product warranty related
costs are established at the time revenue are recognized and
are included in selling, general and administrative expenses.
Estimates for accrued product warranty costs are primarily
based on historical experience, and are affected by ongo-
ing product failure rates, specific product class failures out-
side of the baseline experience, material usage and service
delivery costs incurred in correcting a product failure. As of
December 31, 2014, accrued product warranty costs amount-
ed to ¥11,564 million.
At December 31, 2014, commitments outstanding for
the purchase of property, plant and equipment were
approximately ¥52,668 million, and commitments out-
standing for the purchase of parts and raw materials were
approximately ¥76,984 million, both for use in the ordi-
nary course of its business. Canon anticipates that funds
needed to fulfill these commitments will be generated
internally through operations.
During 2015, Canon expects to contribute ¥14,674 million
to its Japanese defined benefit pension plans and ¥11,583 mil-
lion to its foreign defined benefit pension plans.
Canon’s management believes that current financial
resources, cash generated from operations and Canon’s
potential capacity for additional debt and/or equity
financing will be sufficient to fund current and future
capital requirements.
RESEARCH AND DEVELOPMENT, PATENTS AND
LICENSES
Year 2014 marks the fourth year of the Excellent Global
Corporation Plan, Canon’s 5-year (2011-2015) management
plan. The slogan of the fourth phase (“Phase IV”) is “Aiming
for the Summit—Speed & Sound Growth” and there are three
core strategies related to R&D:
(cid:129) Achieve the overwhelming No.1 position in all core busi-
nesses and expand related and peripheral businesses;
(cid:129) Develop new business through globalized diversification
and establish the Three Regional Headquarters manage-
ment system; and
(cid:129) Build the foundations of an environmentally advanced
corporation.
Canon has been striving to implement the three R&D
related strategies as follows:
(cid:129) Achieve the overwhelming No.1 position in all core busi-
nesses and expand related and peripheral businesses:
Continue to introduce competitive products through
innovation and aim at gaining profit through solutions
and services.
(cid:129) Develop new business through globalized diversifica-
tion and establish the Three Regional Headquarters
management system: Reinforce the businesses of medi-
cal imaging sector, industrial equipment sector and
network camera sector to develop into Canon’s new
pillars. Seek talents in Japan, US, and Europe to foster
promising technologies and enhance R&D capabilities
in global-scale dimensions by enabling product develop-
ment in specialized area of each region, with actively
utilizing M&A.
(cid:129) Build the foundations of an environmentally advanced
corporation: Focus on energy-conserving, resource-saving,
and recycling technologies to create products with the
highest environmental performance.
Canon is pursuing collaboration among government,
industry and academia. Canon’s collaboration effort can
be seen in various activities such as fundamental research
and development of leading-edge technologies with top uni-
versities and research institutes around the world, includ-
ing Tokyo University, Kyoto University, Tokyo Institute of
Technology, Tohoku University, Stanford University, and
the University of Arizona, and also participation in the
“ImPACT” (Impulsing Paradigm Change through Disruptive
Technologies) program led by the Japanese government
where Canon’s physically-noninvasive and -nondestructive
imaging technology is selected as one of twelve R&D pro-
grams. Additionally, Canon is currently working on collabor-
ative research with Massachusetts General Hospital (“MGH”)
and Brigham and Women’s Hospital (“BWH”) to develop bio-
medical optical imaging and medical robotics technologies
at the Healthcare Optics Research Laboratory in Cambridge,
Massachusetts, founded in 2013.
Canon has fully introduced 3D-CAD systems across the
Canon Group, boosting R&D efficiency to curtail product
development times and costs. Moreover, Canon enhanced and
evolved its simulation, measurement, and analysis technol-
ogies by establishing leading-edge facilities, including one
of Japan’s highest-performance cluster computers. As such,
Canon has succeeded in further reducing the need for pro-
totypes, dramatically lowering costs and shortening product
development lead times.
R&D Expenses
(Billions of yen)
400
300
200
100
0
2010
2011
2012
2013
2014
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
45
Canon’s consolidated R&D expenses were ¥308,979 mil-
lion in 2014, ¥306,324 million in 2013 and ¥296,464 mil-
lion in 2012. The ratios of R&D expenses to the consolidated
total net sales for 2014, 2013 and 2012 were 8.3%, 8.2% and
8.5%, respectively.
Canon believes that new products protected by patents
will not easily allow competitors to compete with them, and
will give them an advantage in establishing standards in the
market and industry.
Canon obtained the third greatest number of private sec-
tor patents in 2014, according to the United States patent
annual list, released by IFI CLAIMS® Patent Services.
MARKET RISK EXPOSURES
Canon is exposed to market risks, including changes in for-
eign currency exchange rates, interest rates and prices of
marketable securities and investments. In order to hedge
the risks of changes in foreign currency exchange rates,
Canon uses derivative financial instruments.
Equity price risk
Canon holds marketable securities included in current
assets, which consist generally of highly-liquid and low-risk
instruments. Investments included in noncurrent assets are
held as long-term investments. Canon does not hold mar-
ketable securities and investments for trading purposes.
Maturities and fair values of such marketable securities and investments with original maturities of more than three
months, all of which were classified as available-for-sale securities, were as follows at December 31, 2014.
Available-for-sale securities
Debt securities
Due after five years
Fund trusts
Equity securities
Millions of yen
Cost
Fair value
¥
843
84
20,905
¥21,832
¥
961
84
40,653
¥41,698
Foreign currency exchange rate and
interest rate risk
Canon operates internationally, exposing it to the risk of
changes in foreign currency exchange rates. Derivative finan-
cial instruments are comprised principally of foreign curren-
cy exchange contracts utilized by the Company and certain of
its subsidiaries to reduce the risk. Canon assesses foreign cur-
rency exchange rate risk by continually monitoring chang-
es in the exposures and by evaluating hedging opportunities.
Canon does not hold or issue derivative financial instruments
for trading purposes. Canon is also exposed to credit-related
losses in the event of non-performance by counterparties to
derivative financial instruments, but it is not expected that
any counterparties will fail to meet their obligations. Most of
the counterparties are internationally recognized financial
institutions and selected by Canon taking into account their
financial condition, and contracts are diversified across a
number of major financial institutions.
Canon’s international operations expose Canon to the risk
of changes in foreign currency exchange rates. Canon uses
foreign exchange contracts to manage certain foreign cur-
rency exchange exposures principally from the exchange
of U.S. dollars and euros into Japanese yen. These contracts
are primarily used to hedge the foreign currency exposure
of forecasted intercompany sales and intercompany trade
receivables which are denominated in foreign currencies. In
accordance with Canon’s policy, a specific portion of foreign
currency exposure resulting from forecasted intercompa-
ny sales are hedged using foreign exchange contracts which
principally mature within three months.
The following table provides information about Canon’s major derivative financial instruments related to foreign cur-
rency exchange transactions existing at December 31, 2014. All of the foreign exchange contracts described in the following
table have a contractual maturity date in 2015.
Millions of yen
Forwards to sell foreign currencies:
Contract amounts
Estimated fair value
Forwards to buy foreign currencies:
Contract amounts
Estimated fair value
U.S.$
Euro
Others
Total
¥193,195
(8,300)
¥141,815
(2,457)
¥23,852
(423)
¥358,862
(11,180)
¥ 12,018
316
¥ 9,347
(38)
¥
—
—
¥ 21,365
278
46
FINANCIAL OVERVIEW
All of Canon’s long-term debt is fixed rate debt. Canon
expects that fair value changes and cash flows resulting
from reasonable near-term changes in interest rates will be
immaterial. Accordingly, Canon believes interest rate risk is
insignificant. See also Note 9 of the Notes to Consolidated
Financial Statements.
Changes in the fair value of derivative financial instru-
ments designated as cash flow hedges, including foreign
currency exchange contracts associated with forecasted
intercompany sales, are reported in accumulated other
comprehensive income (loss). These amounts are subse-
quently reclassified into earnings through other income
(deductions) in the same period as the hedged items affect
earnings. Substantially all such amounts recorded in accu-
mulated other comprehensive income (loss) at year-end are
expected to be recognized in earnings over the next twelve
months. Canon excludes the time value component from
the assessment of hedge effectiveness. Changes in the fair
value of a foreign currency exchange contract for the peri-
od between the date that the forecasted intercompany sales
occur and its maturity date are recognized in earnings and
not considered hedge ineffectiveness.
The amount of the hedging ineffectiveness was not materi-
al for the years ended December 31, 2014, 2013 and 2012. The
amounts of net losses excluded from the assessment of hedge
effectiveness (time value component) which was recorded
in other income (deductions) was ¥145 million, ¥111 mil-
lion and ¥221 million for the years ended December 31, 2014,
2013 and 2012, respectively.
Canon has entered into certain foreign currency exchange
contracts to manage its foreign currency exposures. These
foreign currency exchange contracts have not been designat-
ed as hedges. Accordingly, the changes in fair values of these
contracts are recorded in earnings immediately.
LOOKING FORWARD
As for the future of the global economy, although challeng-
ing conditions are expected to remain for some time in cer-
tain countries and regions, Canon anticipates sustained
economic growth in countries such as the U.S. among devel-
oped countries, and India and ASEAN countries among
emerging markets. Overall, the global economy is expected
to gradually move toward stable growth.
In the businesses in which Canon operates, demand for
MFDs is projected to continue to expand moderately, mainly
for color models, while demand in the laser printer market
is expected to remain at the same level as the previous year.
As for the digital camera market, although projections indi-
cate continued market contraction mainly for low-priced
compact models, demand for interchangeable-lens digital
cameras is expected to recover gradually. Looking at inkjet
printers, with Asian markets gradually recovering follow-
ing their extended period of stagnation, demand is expected
to remain in line with the previous year. As for the industri-
al equipment market, with manufacturers expected to con-
tinue making capital outlays for semiconductor lithography
equipment in response to increasing demand for memory
devices and image sensors, demand is expected to remain at
the same level as the previous year. And as for FPD lithogra-
phy equipment, demand is projected to increase as device
manufacturers boost capital investment amid growing pan-
el demand projected for 4K televisions and mobile devices.
Amid these conditions, 2015 is the final year of Phase
IV of the Excellent Global Corporation Plan and the year
in which the Canon EXPO will be held as the culmination
of the efforts carried out during Phase IV. In addition to
returning to a path of growth, Canon aims to bring Phase IV
to a successful close, further reinforcing its business foun-
dation to enable great strides beginning from next year.
Toward this objective, Canon will undertake the following
various measures.
(cid:129) Reinforcing Existing Businesses Through the
Introduction of Innovative Products and Services
For MFDs and other office products, in addition to
improving hardware performance, efforts will be made
to build a framework that will enable the Company to
service as a one-stop shop that provides a broad range of
high-quality services. For cameras, efforts will be made
to comprehensively raise aspects such as image-quality,
visual expression, and operability. At the same time,
Canon will work to further strengthen the network
capabilities of these products. Additionally, to facilitate
the Company’s aim of becoming the all around leader in
printing, it will leverage its strength, derived from having
prepared a broad lineup, spanning consumer printers
to industrial printing. In the Industrial equipment area,
Canon will devise and execute concrete plans to concen-
trate technologies and strengthen the competitiveness of
Canon Group companies.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
47
In addition to these measures, Canon will promote other
initiatives such as product quality reforms to win top custom-
er approval, information security improvement, and human
resource development.
Forward looking statements
The foregoing discussion and other disclosure in this report
contains forward-looking statements that reflect manage-
ment’s current views with respect to certain future events
and financial performance. Actual results may differ materi-
ally from those projected or implied in the forward-looking
statements. Further, certain forward-looking statements are
based upon assumptions of future events that may not prove
to be accurate. The following important factors could cause
actual results to differ materially from those projected or
implied in any forward-looking statements: foreign currency
exchange rate fluctuations; the uncertainty of Canon’s abil-
ity to implement its plans to localize production and other
measures to reduce the impact of foreign currency exchange
rate fluctuations; uncertainty as to economic conditions in
Canon’s major markets; uncertainty of continued demand for
Canon’s high-value-added products; Canon’s ability to con-
tinue to develop products and to market products that incor-
porate new technology on a timely basis, are competitively
priced, and achieve market acceptance; the possibility of
losses resulting from foreign currency transactions designed
to reduce financial risks from changes in foreign currency
exchange rates; and inventory risk due to shifts in market
demand.
(cid:129) Expanding New and Future Businesses and Further
Cultivating Technologies that will Pave the Way to
the Future
Canon aims to produce next-generation lithography
equipment in volume by strengthening nanoimprint
technology that realizes further reduction in process
geometries. In the area of network camera systems,
Canon will work to enhance its product lineup and
develop solutions that address customer needs. With
regard to the MR (Mixed Reality) System, Canon will
identify industries that can leverage the strength of
this system, and will strive to make the system the de
facto standard design tool in those industries. In the
medical field, the Company will accelerating develop,
focusing on promising themes such as photoacoustic
tomography, which facilitates the viewing of vascular
conditions in 3D. The Company will work to expand
and steadily cultivate new businesses mainly targeting
the B2B field, such as Super Machine Vision, a system
capable of high-accuracy three-dimensional recognition
of objects for potential use in production sites, and 4K
reference displays.
(cid:129) Strengthening Global Marketing Capabilities Through
Unified Effort Between Product Operations and Sales
Companies
In developed countries, Canon aims to gain share in
both consumer and office segments. In the consumer
segment, Canon will address the popularity of online
shopping and other trends that are contributing to the
diversification of sales channels. In the office segment,
Canon will strengthen its response towards centralized
procurement of office equipment by global corporations.
In emerging markets, Canon will promote enhancement
of its various sales networks and product lineup, in line
with situations in each country and region.
(cid:129) Accelerating a New Dimension of Cost-reduction
Activities
In the area of procurement, Canon aims to reduce total
costs, further deploying measures focused on reducing
costs from the stage of product development. In the
prototyping process, Canon will create next-generation
development methodologies, through such means as
expanding the application of simulation technologies as
well as employing 3D printing. In production, Canon will
realize further cost reduction by expanding the applica-
tion of automation equipment and through measures
aimed at the in-house production of molded parts and
production equipment.
(cid:129) Building a Globally Optimized Production System
To maintain an optimized production system, Canon
will take steps to revive domestic production, promoting
measures such as automation and in-house production,
while building new structural dimensions of cost reduc-
tion. At the same time, Canon will promote localized
production through the use of automation equipment
in the U.S. and Europe.
48
TEN-YEAR FINANCIAL SUMMARY
Net sales:
Domestic
Overseas
Total
Percentage of previous year
Net income attributable to Canon Inc.
Percentage of sales
Advertising
Research and development expenses
Depreciation of property, plant and equipment
Increase in property, plant and equipment
Long-term debt, excluding current installments
Canon Inc. stockholders’ equity
Total assets
Per share data:
Net income attributable to Canon Inc.
stockholders per share:
Basic
Diluted
Dividend per share
Stock price:
High
Low
Millions of yen (except per share amounts)
2014
2013
2012
2011
¥ 724,317
3,002,935
3,727,252
99.9%
¥ 715,863
3,015,517
3,731,380
107.2%
¥ 720,286
2,759,502
3,479,788
97.8%
¥ 694,450
2,862,983
3,557,433
96.0%
254,797
6.8%
79,765
308,979
213,739
182,343
230,483
6.2%
224,564
6.5%
248,630
7.0%
86,398
306,324
223,158
188,826
83,134
296,464
211,973
270,457
81,232
307,800
210,179
226,869
¥
1,148
2,978,184
4,460,618
¥
1,448
2,910,262
4,242,710
¥
2,117
2,598,026
3,955,503
¥
3,368
2,551,132
3,930,727
¥
229.03
229.03
150.00
¥
¥ 200.78
200.78
130.00
4,045
2,889
4,115
2,913
191.34
191.34
130.00
4,015
2,308
¥
204.49
204.48
120.00
4,280
3,220
Average number of common shares in thousands
Number of employees
1,112,510
191,889
1,147,934
194,151
1,173,648
196,968
1,215,832
198,307
Common Stock Price Range (Tokyo Stock Exchange)
(Yen)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
49
2010
2009
2008
2007
2006
2005
¥ 695,749
3,011,152
3,706,901
115.5%
¥ 702,344
2,506,857
3,209,201
78.4%
¥ 868,280
3,225,881
4,094,161
91.4%
¥ 947,587
3,533,759
4,481,346
107.8%
¥ 932,290
3,224,469
4,156,759
110.7%
¥ 856,205
2,897,986
3,754,191
108.3%
246,603
6.7%
94,794
315,817
232,327
158,976
131,647
4.1%
309,148
7.6%
488,332
10.9%
455,325
11.0%
384,096
10.2%
78,009
304,600
277,399
216,128
112,810
374,025
304,622
361,988
132,429
368,261
309,815
428,549
116,809
308,307
235,804
379,657
106,250
286,476
205,727
383,784
¥
4,131
2,645,782
3,983,820
¥
4,912
2,688,109
3,847,557
¥
8,423
2,659,792
3,969,934
¥
8,680
2,922,336
4,512,625
¥
15,789
2,986,606
4,521,915
¥
27,082
2,604,682
4,043,553
¥
199.71
199.70
120.00
4,520
3,205
¥
106.64
106.64
110.00
4,070
2,115
¥
246.21
246.20
110.00
5,820
2,215
¥
377.59
377.53
110.00
7,450
5,190
¥
341.95
341.84
83.33
6,780
4,567
¥
288.63
288.36
66.67
4,780
3,460
Thousands of U.S. dollars
(except per share amounts)
2014
$ 5,986,091
24,817,645
30,803,736
99.9%
2,105,760
6.8%
659,215
2,553,545
1,766,438
1,506,967
$
9,488
24,613,091
36,864,612
$
1.89
1.89
1.24
33.43
23.88
1,234,817
197,386
1,234,482
168,879
1,255,626
166,980
1,293,296
131,352
1,331,542
118,499
1,330,761
115,583
Notes: 1. U.S. dollar amounts are translated from yen at the rate of U.S.$1 = JPY121, the approximate exchange rate on the Tokyo Foreign Exchange Market as of
December 30, 2014.
2. The Company made a three-for-two stock split on July 1, 2006. The average number of common shares and the per share data for the periods prior to
the stock split have been adjusted to reflect the stock split.
50 CONSOLIDATED BALANCE SHEETS
Canon Inc. and Subsidiaries
December 31, 2014 and 2013
ASSETS
Current assets:
Cash and cash equivalents (Note 1)
Short-term investments (Note 2)
Trade receivables, net (Note 3)
Inventories (Note 4)
Prepaid expenses and other current assets (Notes 6, 12 and 17)
Total current assets
Noncurrent receivables (Note 18)
Investments (Note 2)
Property, plant and equipment, net (Notes 5 and 6)
Intangible assets, net (Notes 7 and 8)
Other assets (Notes 6, 7, 8, 11 and 12)
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Millions of yen
2014
2013
¥ 844,580
71,863
625,675
528,167
321,648
2,391,933
29,785
65,176
1,269,529
177,288
526,907
¥ 4,460,618
¥ 788,909
47,914
608,741
553,773
286,605
2,285,942
19,276
70,358
1,278,730
145,075
443,329
¥ 4,242,710
Short-term loans and current portion of long-term debt (Note 9)
¥
1,018
¥
1,299
Trade payables (Note 10)
Accrued income taxes (Note 12)
Accrued expenses (Notes 11 and 18)
Other current liabilities (Notes 5, 12 and 17)
Total current liabilities
Long-term debt, excluding current installments (Note 9)
Accrued pension and severance cost (Note 11)
Other noncurrent liabilities (Notes 7 and 12)
Total liabilities
Commitments and contingent liabilities (Note 18)
Equity:
Canon Inc. stockholders’ equity:
Common stock
Authorized 3,000,000,000 shares; issued 1,333,763,464 shares in 2014 and 2013
Additional paid-in capital
Legal reserve (Note 13)
Retained earnings (Note 13)
Accumulated other comprehensive income (loss) (Note 14)
Treasury stock, at cost; 241,931,637 shares in 2014 and 196,764,060 shares in 2013
Total Canon Inc. stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying Notes to Consolidated Financial Statements.
310,214
57,212
345,237
207,698
921,379
1,148
280,928
116,405
1,319,860
307,157
53,196
315,536
171,119
848,307
1,448
229,664
96,514
1,175,933
174,762
401,563
64,599
3,320,392
28,286
(1,011,418)
2,978,184
162,574
3,140,758
¥ 4,460,618
174,762
402,029
63,091
3,212,692
(80,646)
(861,666)
2,910,262
156,515
3,066,777
¥ 4,242,710
CONSOLIDATED STATEMENTS OF INCOME
Canon Inc. and Subsidiaries
Years ended December 31, 2014, 2013 and 2012
51
Millions of yen
Net sales
Cost of sales (Notes 5, 8, 11 and 18)
Gross profit
Operating expenses (Notes 1, 5, 8, 11, 15 and 18):
Selling, general and administrative expenses
Research and development expenses
Operating profit
Other income (deductions):
Interest and dividend income
Interest expense
Other, net (Notes 1, 2, 17 and 20)
Income before income taxes
Income taxes (Note 12)
Consolidated net income
Less: Net income attributable to noncontrolling interests
Net income attributable to Canon Inc.
Net income attributable to Canon Inc. stockholders per share (Note 16):
Basic
Diluted
Cash dividends per share
See accompanying Notes to Consolidated Financial Statements.
2014
2013
¥ 3,727,252 ¥ 3,731,380 ¥ 3,479,788
1,829,822
1,649,966
1,865,780
1,861,472
1,932,959
1,798,421
2012
1,189,004
308,979
1,497,983
363,489
1,154,820
306,324
1,461,144
337,277
1,029,646
296,464
1,326,110
323,856
7,906
(500)
12,344
19,750
383,239
118,000
265,239
6,579
(550)
4,298
10,327
347,604
6,792
(1,022)
12,931
18,701
342,557
108,088
239,516
110,112
232,445
10,442
7,881
¥ 254,797 ¥ 230,483 ¥ 224,564
9,033
Yen
¥ 229.03 ¥ 200.78 ¥
229.03
150.00
200.78
130.00
191.34
191.34
130.00
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Canon Inc. and Subsidiaries
Years ended December 31, 2014, 2013 and 2012
Consolidated net income
Other comprehensive income (loss), net of tax (Note 14):
Foreign currency translation adjustments
Net unrealized gains and losses on securities
Net gains and losses on derivative instruments
Pension liability adjustments
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Canon Inc.
See accompanying Notes to Consolidated Financial Statements.
Millions of yen
2014
¥ 265,239
2013
2012
¥ 239,516
¥ 232,445
143,834
2,524
(195)
(37,985)
108,178
373,417
9,666
¥ 363,751
251,576
6,612
2,056
32,669
292,913
532,429
14,688
¥ 517,741
133,735
3,265
(4,880)
(12,787)
119,333
351,778
10,824
¥ 340,954
52 CONSOLIDATED STATEMENTS OF EQUITY
Canon Inc. and Subsidiaries
Years ended December 31, 2014, 2013 and 2012
Millions of yen
Balance at December 31, 2011
Equity transactions with noncontrolling
interests and other
Dividends paid to Canon Inc. stockholders
Dividends paid to noncontrolling interests
Transfer to legal reserve
Comprehensive income:
Net income
Other comprehensive income (loss),
net of tax (Note 14):
Foreign currency translation
adjustments
Net unrealized gains and losses
on securities
Net gains and losses
on derivative instruments
Pension liability adjustments
Total comprehensive income
Repurchase of treasury stock, net
Balance at December 31, 2012
Equity transactions with noncontrolling
interests and other
Dividends to Canon Inc. stockholders
Dividends to noncontrolling interests
Transfer to legal reserve
Comprehensive income:
Net income
Other comprehensive income,
net of tax (Note 14):
Foreign currency translation
adjustments
Net unrealized gains and losses
on securities
Net gains and losses
on derivative instruments
Pension liability adjustments
Total comprehensive income
Repurchase of treasury stock, net
Balance at December 31, 2013
Equity transactions with noncontrolling
interests and other
Dividends to Canon Inc. stockholders
Dividends to noncontrolling interests
Transfer to legal reserve
Comprehensive income:
Net income
Other comprehensive income (loss),
net of tax (Note 14):
Foreign currency translation
adjustments
Net unrealized gains and losses
on securities
Net gains and losses
on derivative instruments
Pension liability adjustments
Total comprehensive income
Repurchase of treasury stock, net
Balance at December 31, 2014
Accumulated
other
comprehensive
Legal
income (loss)
reserve
¥ 174,762 ¥ 401,572 ¥ 59,004 ¥ 3,059,298 ¥ (481,773)
Additional
paid-in
capital
Common
stock
Retained
earnings
Treasury
stock
¥ (661,731)
Total
Canon Inc.
stockholders’
equity
Noncontrolling
interests
¥ 2,551,132 ¥ 162,535 ¥ 2,713,667
Total
equity
(16)
152
(1,866)
(1,730)
(13,591)
(142,362)
2,659
(2,659)
(142,362)
—
(3,492)
(15,321)
(142,362)
(3,492)
—
224,564
224,564
7,881
232,445
132,704
132,704
1,031
133,735
3,148
(4,882)
(14,580)
174,762
401,547
61,663 3,138,976 (367,249)
(9)
(17)
3,148
117
3,265
(4,882)
(14,580)
340,954
(149,968)
2,598,026
2
1,793
10,824
(4,880)
(12,787)
351,778
(149,968)
156,276 2,754,302
(149,942)
(811,673)
489
295
(655)
129
(11,182)
(155,627)
1,428
(1,428)
(155,627)
—
(3,267)
(11,053)
(155,627)
(3,267)
—
230,483
230,483
9,033
239,516
249,791
249,791
1,785
251,576
6,097
2,056
29,314
174,762
402,029
63,091 3,212,692
(80,646)
(7)
(7)
6,097
515
6,612
2,056
29,314
517,741
(50,007)
2,910,262
—
3,355
14,688
2,056
32,669
532,429
(50,007)
156,515 3,066,777
(49,993)
(861,666)
(420)
216
(22)
(226)
(658)
(145,790)
1,508
(1,508)
(145,790)
—
(2,949)
(884)
(145,790)
(2,949)
—
254,797
254,797
10,442
265,239
142,813
142,813
1,021
143,834
2,301
2,301
223
2,524
(195)
(37,985)
373,417
(149,813)
¥ 174,762 ¥ 401,563 ¥ 64,599 ¥ 3,320,392 ¥ 28,286 ¥ (1,011,418) ¥ 2,978,184 ¥ 162,574 ¥ 3,140,758
(195)
(35,965)
363,751
(149,813)
(2,020)
9,666
(195)
(35,965)
(149,752)
—
(15)
(46)
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Canon Inc. and Subsidiaries
Years ended December 31, 2014, 2013 and 2012
53
Cash flows from operating activities:
Consolidated net income
Adjustments to reconcile consolidated net income to net cash provided by
operating activities:
Depreciation and amortization
Loss on disposal of fixed assets
Impairment loss of investments
Equity in (earnings) losses of affiliated companies
Deferred income taxes
Decrease in trade receivables
(Increase) decrease in inventories
Decrease in trade payables
Increase (decrease) in accrued income taxes
Increase (decrease) in accrued expenses
Increase (decrease) in accrued (prepaid) pension and severance cost
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of fixed assets (Note 5)
Proceeds from sale of fixed assets (Note 5)
Purchases of available-for-sale securities
Proceeds from sale and maturity of available-for-sale securities
(Increase) decrease in time deposits, net
Acquisitions of subsidiaries, net of cash acquired (Note 7)
Purchases of other investments
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of long-term debt
Repayments of long-term debt
Decrease in short-term loans, net
Dividends paid
Repurchases of treasury stock, net
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure for cash flow information:
Cash paid during the year for:
Interest
Income taxes
See accompanying Notes to Consolidated Financial Statements.
Millions of yen
2014
2013
2012
¥ 265,239
¥ 239,516
¥ 232,445
263,480
12,429
12
(478)
8,929
9,323
59,004
(24,620)
3,586
11,124
(6,305)
(17,796)
583,927
(218,362)
3,994
(311)
2,606
(14,223)
(54,772)
—
11,770
(269,298)
1,377
(2,152)
(54)
(145,790)
(149,813)
(4,454)
(300,886)
41,928
55,671
788,909
¥ 844,580
275,173
10,638
39
664
16,791
45,040
85,577
(108,622)
(9,432)
(15,635)
(15,568)
(16,539)
507,642
(233,175)
1,763
(5,771)
4,528
(12,483)
(4,914)
(296)
136
(250,212)
1,483
(2,334)
(547)
(155,627)
(50,007)
(15,149)
(222,181)
86,982
122,231
666,678
¥ 788,909
258,133
11,242
1,527
(610)
7,487
5,030
(24,805)
(102,293)
12,427
(30,089)
5,515
8,068
384,077
(316,211)
4,861
(417)
344
103,137
(704)
(796)
(2,954)
(212,740)
614
(3,732)
(5,055)
(142,362)
(149,968)
(19,236)
(319,739)
41,853
(106,549)
773,227
¥ 666,678
462
¥
111,819
¥
500
108,950
¥ 1,084
98,096
54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Canon Inc. and Subsidiaries
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Canon Inc. (the “Company”) and subsidiaries (collective-
ly “Canon”) is one of the world’s leading manufacturers in
such fields as office products, imaging system products and
industry and other products. Office products consist mainly
of office multifunction devices (“MFDs”), laser multifunction
printers (“MFPs”), laser printers, digital production printing
systems, high speed continuous feed printers, wide-format
printers and document solutions. Imaging system products
consist mainly of interchangeable lens digital cameras, digi-
tal compact cameras, digital camcorders, digital cinema cam-
eras, interchangeable lenses, inkjet printers, large-format
inkjet printers, commercial photo printers, image scanners,
multimedia projectors, broadcast equipment and calculators.
Industry and other products consist mainly of semiconductor
lithography equipment, FPD (Flat panel display) lithography
equipment, digital radiography systems, ophthalmic equip-
ment, vacuum thin-film deposition equipment, organic LED
(“OLED”) panel manufacturing equipment, die bonders, micro-
motors, network cameras, handy terminals and document
scanners. Canon’s consolidated net sales for the years ended
December 31, 2014, 2013 and 2012 were distributed as follows:
the Office Business Unit 55.8%, 53.6% and 50.5%, the Imaging
System Business Unit 36.0%, 38.8% and 40.4%, the Industry
and Others Business Unit 10.7%, 10.0% and 11.7%, and elimi-
nation between segments 2.5%, 2.4% and 2.6%, respectively.
These percentages were computed by dividing segment net
sales, including intersegment sales, by consolidated net sales,
based on the segment operating results described in Note 21.
Sales are made principally under the Canon brand name,
almost entirely through sales subsidiaries. These subsidiar-
ies are responsible for marketing and distribution, and pri-
marily sell to retail dealers in their geographic area. 80.6%,
80.8% and 79.3% of consolidated net sales for the years end-
ed December 31, 2014, 2013 and 2012 were generated outside
Japan, with 27.8%, 28.4% and 27.0% in the Americas, 29.3%,
30.1% and 29.1% in Europe, and 23.5%, 22.3% and 23.2% in
Asia and Oceania, respectively.
Canon sells laser printers on an OEM basis to Hewlett-
Packard Company; such sales constituted 17.4%, 17.6% and
17.0% of consolidated net sales for the years ended December
31, 2014, 2013 and 2012, respectively, and are included in the
Office Business Unit.
Canon’s manufacturing operations are conducted pri-
marily at 28 plants in Japan and 18 overseas plants which
are located in countries or regions such as the United States,
Germany, France, the Netherlands, Taiwan, China, Malaysia,
Thailand, Vietnam and Philippines.
(b) Basis of Presentation
The Company and its domestic subsidiaries maintain their
books of account in conformity with financial account-
ing standards of Japan. Foreign subsidiaries maintain their
books of account in conformity with financial accounting
standards of the countries of their domicile.
Certain adjustments and reclassifications have been incor-
porated in the accompanying consolidated financial state-
ments to conform with U.S. generally accepted accounting
principles (“GAAP”). These adjustments were not recorded in
the statutory books of account.
(c) Principles of Consolidation
The consolidated financial statements include the accounts of
the Company, its majority owned subsidiaries and those vari-
able interest entities where the Company or its consolidated
subsidiaries are the primary beneficiaries. All significant inter-
company balances and transactions have been eliminated.
(d) Use of Estimates
The preparation of the consolidated financial statements in
conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the consolidated financial state-
ments and the reported amounts of revenues and expenses
during the period. Significant estimates and assumptions are
reflected in valuation and disclosure of revenue recognition,
allowance for doubtful receivables, valuation of inventories,
impairment of long-lived assets, environmental liabilities,
valuation of deferred tax assets, uncertain tax positions
and employee retirement and severance benefit obligations.
Actual results could differ materially from those estimates.
(e) Translation of Foreign Currencies
Assets and liabilities of the Company’s subsidiaries located
outside Japan with functional currencies other than Japanese
yen are translated into Japanese yen at the rates of exchange
in effect at the balance sheet date. Income and expense items
are translated at the average exchange rates prevailing during
the year. Gains and losses resulting from translation of finan-
cial statements are excluded from earnings and are reported
in other comprehensive income (loss).
Gains and losses resulting from foreign currency transac-
tions, including foreign exchange contracts, and translation
of assets and liabilities denominated in foreign currencies
are included in other income (deductions) in the consolidat-
ed statements of income. Foreign currency exchange gains
and losses were a net gain of ¥2,628 million for the year end-
ed December 31, 2014, a net loss of ¥1,992 million for the year
ended December 31, 2013 and a net gain of ¥9,130 million for
the year ended December 31, 2012, respectively.
(f) Cash Equivalents
All highly liquid investments acquired with original maturi-
ties of three months or less are considered to be cash equiva-
lents. Certain debt securities with original maturities of less
than three months, classified as available-for-sale securities of
¥139,240 million and ¥183,078 million at December 31, 2014
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
55
and 2013, respectively, are included in cash and cash equiva-
lents in the consolidated balance sheets.
(g) Investments
Investments consist primarily of time deposits with original
maturities of more than three months, debt and marketable
equity securities, investments in affiliated companies and non-
marketable equity securities. Canon reports investments with
maturities of less than one year as short-term investments.
Canon classifies investments in debt and marketable equi-
ty securities as available-for-sale or held-to-maturity securities.
Canon does not hold any trading securities, which are bought
and held primarily for the purpose of sale in the near term.
Available-for-sale securities are recorded at fair value. Fair
value is determined based on quoted market prices, projected
discounted cash flows or other valuation techniques as appro-
priate. Unrealized holding gains and losses, net of the related
tax effect, are reported as a separate component of accumulat-
ed other comprehensive income (loss) until realized. Held-to-
maturity securities are recorded at amortized cost, adjusted
for amortization of premiums and accretion of discounts.
Available-for-sale and held-to-maturity securities are regu-
larly reviewed for other-than-temporary declines in the car-
rying amount based on criteria that include the length of
time and the extent to which the market value has been less
than cost, the financial condition and near-term prospects of
the issuer and Canon’s intent and ability to retain the invest-
ment for a period of time sufficient to allow for any anticipat-
ed recovery in market value. For debt securities for which the
declines are deemed to be other-than-temporary and there is
no intent to sell, impairments are separated into the amount
related to credit loss, which is recognized in earnings, and
the amount related to all other factors, which is recognized
in other comprehensive income (loss). For debt securities for
which the declines are deemed to be other-than-temporary
and there is an intent to sell, impairments in their entirety
are recognized in earnings. For equity securities for which the
declines are deemed to be other-than-temporary, impairments
in their entirety are recognized in earnings. Canon recogniz-
es an impairment loss to the extent by which the cost basis of
the investment exceeds the fair value of the investment.
Realized gains and losses are determined by the average
cost method and reflected in earnings.
Investments in affiliated companies over which Canon has
the ability to exercise significant influence, but does not hold
a controlling financial interest, are accounted for by the equi-
ty method.
Non-marketable equity securities in companies over
which Canon does not have the ability to exercise signifi-
cant influence are stated at cost and reviewed periodically
for impairment.
(h) Allowance for Doubtful Receivables
Allowance for doubtful trade and finance receivables is main-
tained for all customers based on a combination of factors,
including aging analysis, macroeconomic conditions and
historical experience. An additional reserve for individual
accounts is recorded when Canon becomes aware of a custom-
er’s inability to meet its financial obligations, such as in the
case of bankruptcy filings. If circumstances related to custom-
ers change, estimates of the recoverability of receivables would
be further adjusted. When all collection options are exhausted
including legal recourse, the accounts or portions thereof are
deemed to be uncollectable and charged against the allowance.
(i) Inventories
Inventories are stated at the lower of cost or market value.
Cost is determined by the average method for domestic inven-
tories and principally by the first-in, first-out method for over-
seas inventories.
(j) Impairment of Long-Lived Assets
Long-lived assets, such as property, plant and equipment,
and acquired intangible assets subject to amortization, are
reviewed for impairment whenever events or changes in cir-
cumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of
the asset and the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount
of the asset exceeds its estimated undiscounted future cash
flows, an impairment charge is recognized in the amount by
which the carrying amount of the asset exceeds the fair val-
ue of the asset. Assets to be disposed of by sale are reported
at the lower of the carrying amount or fair value less costs to
sell, and are no longer depreciated.
(k) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
is calculated principally by the declining-balance method,
except for certain assets which are depreciated by the straight-
line method over the estimated useful lives of the assets.
The depreciation period ranges from 3 years to 60 years for
buildings and 1 year to 20 years for machinery and equipment.
Assets leased to others under operating leases are stated
at cost and depreciated to the estimated residual value of the
assets by the straight-line method over the lease term, gener-
ally from 2 years to 5 years.
(l) Goodwill and Other Intangible Assets
Goodwill and other intangible assets with indefinite useful
lives are not amortized, but are instead tested for impairment
annually in the fourth quarter of each year, or more frequent-
ly if indicators of potential impairment exist. Canon performs
its impairment test of goodwill using the two-step approach
at the reporting unit level, which is one level below the oper-
ating segment level. All goodwill is assigned to the report-
ing unit or units that benefit from the synergies arising from
each business combination. If the carrying amount assigned
to the reporting unit exceeds the fair value of the reporting
unit, Canon performs the second step to measure an impair-
ment charge in the amount by which the carrying amount of
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a reporting unit’s goodwill exceeds its implied fair value.
Intangible assets with finite useful lives consist primarily
of software, license fees, patented technologies and customer
relationships. Software and license fees are amortized using
the straight-line method over the estimated useful lives,
which range primarily from 3 years to 5 years for software
and 5 years to 10 years for license fees. Patented technolo-
gies are amortized using the straight-line method principal-
ly over the estimated useful lives, which range from 8 years
to 16 years. Customer relationships are amortized principally
using the declining-balance method over the estimated use-
ful life of 5 years. Certain costs incurred in connection with
developing or obtaining internal-use software are capitalized.
These costs consist primarily of payments made to third par-
ties and the salaries of employees working on such software
development. Costs incurred in connection with developing
internal-use software are capitalized at the application devel-
opment stage. In addition, Canon develops or obtains certain
software to be sold where related costs are capitalized after
establishment of technological feasibility.
(m) Environmental Liabilities
Liabilities for environmental remediation and other environ-
mental costs are accrued when environmental assessments or
remedial efforts are probable and the costs can be reasonably
estimated. Such liabilities are adjusted as further informa-
tion develops or circumstances change. Costs of future obliga-
tions are not discounted to their present values.
(n) Income Taxes
Deferred tax assets and liabilities are recognized for the esti-
mated future tax consequences attributable to differences
between the financial statement carrying amounts of exist-
ing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period
that includes the enactment date. Canon records a valuation
allowance to reduce the deferred tax assets to the amount
that is more likely than not realizable.
Canon recognizes the financial statement effects of tax
positions when it is more likely than not, based on the techni-
cal merits, that the tax positions will be sustained upon exam-
ination by the tax authorities. Benefits from tax positions that
meet the more-likely-than-not recognition threshold are mea-
sured at the largest amount of benefit that is greater than
50% likely of being realized upon settlement. Interest and pen-
alties accrued related to unrecognized tax benefits are includ-
ed in income taxes in the consolidated statements of income.
(o) Stock-Based Compensation
Canon measures stock-based compensation cost at the grant
date, based on the fair value of the award, and recognizes the
cost on a straight-line basis over the requisite service period,
which is the vesting period.
(p) Net Income Attributable to Canon Inc.
Stockholders per Share
Basic net income attributable to Canon Inc. stockholders
per share is computed by dividing net income attributable
to Canon Inc. by the weighted-average number of common
shares outstanding during each year. Diluted net income
attributable to Canon Inc. stockholders per share includes the
effect from potential issuances of common stock based on the
assumptions that all stock options were exercised.
(q) Revenue Recognition
Canon generates revenue principally through the sale of
office and imaging system products, equipment, supplies,
and related services under separate contractual arrange-
ments. Canon recognizes revenue when persuasive evidence
of an arrangement exists, delivery has occurred and title and
risk of loss have been transferred to the customer or services
have been rendered, the sales price is fixed or determinable,
and collectibility is probable.
Revenue from sales of office products, such as office MFDs
and laser printers, and imaging system products, such as digi-
tal cameras and inkjet printers, is recognized upon shipment
or delivery, depending upon when title and risk of loss trans-
fer to the customer.
Canon also offers separately priced product maintenance
contracts for most office products, for which the custom-
er typically pays a stated base service fee plus a variable
amount based on usage. Revenue from these service main-
tenance contracts is measured at the stated amount of the
contract and recognized as services are provided and vari-
able amounts are earned.
Revenue from the sale of equipment under sales-type leas-
es is recognized at the inception of the lease. Income on sales-
type leases and direct-financing leases is recognized over the
life of each respective lease using the interest method. Leases
not qualifying as sales-type leases or direct-financing leases
are accounted for as operating leases and related revenue is
recognized ratably over the lease term. When equipment leas-
es are bundled with product maintenance contracts, revenue
is allocated based upon the estimated relative fair value of
the lease and non-lease deliverables. Lease deliverables gener-
ally include equipment, financing and executory costs, while
non-lease deliverables generally consist of product mainte-
nance contracts and supplies.
Revenue from sales of optical equipment, such as semicon-
ductor lithography equipment and FPD lithography equip-
ment that are sold with customer acceptance provisions
related to their functionality, is recognized when the equip-
ment is installed at the customer site and the specific criteria
of the equipment functionality are successfully tested and dem-
onstrated by Canon. Service revenue is derived primarily from
separately priced product maintenance contracts on equip-
ment sold to customers and is measured at the stated amount
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
57
of the contract and recognized as services are provided.
For all other arrangements with multiple elements, Canon
allocates revenue to each element based on its relative sell-
ing price if such element meets the criteria for treatment as
a separate unit of accounting. Otherwise, revenue is deferred
until the undelivered elements are fulfilled and accounted
for as a single unit of accounting.
Canon records estimated reductions to sales at the time of
sale for sales incentive programs including product discounts,
customer promotions and volume-based rebates. Estimated
reductions to sales are based upon historical trends and other
known factors at the time of sale. Canon regularly adjusts its
estimates each period in the ordinary course of establishing
sales incentive program accruals based on current informa-
tion. During the year ended December 31, 2012, Canon revised
its estimates for sales incentive program accruals based on
new information which was not available at the time that the
accrual was established due to unique circumstances, such
as the earthquake in Japan and the flooding in Thailand that
occurred in 2011 as well as a recent shift in usage of incentive
programs from mail-in rebates to instant rebates. This change
in estimate caused an increase in net income attributable to
Canon Inc. of ¥10,785 million, and an increase in basic and
diluted net income attributable to Canon Inc. stockholders
per share of ¥9.19 each. During the years ended December 31,
2014 and 2013, such adjustments were not significant. Canon
also provides price protection to certain resellers of its prod-
ucts, and records reductions to sales for the estimated impact
of price protection obligations when announced.
Estimated product warranty costs are recorded at the time
revenue is recognized and are included in selling, general
and administrative expenses in the consolidated statements
of income. Estimates for accrued product warranty costs are
based on historical experience, and are affected by ongoing
product failure rates, specific product class failures outside of
the baseline experience, material usage and service delivery
costs incurred in correcting a product failure.
Taxes collected from customers and remitted to govern-
mental authorities are excluded from revenues in the consoli-
dated statements of income.
(r) Research and Development Costs
Research and development costs are expensed as incurred.
(s) Advertising Costs
Advertising costs are expensed as incurred. Advertising
expenses were ¥79,765 million, ¥86,398 million and ¥83,134
million for the years ended December 31, 2014, 2013 and
2012, respectively.
(t) Shipping and Handling Costs
Shipping and handling costs totaled ¥49,576 million, ¥47,460
million and ¥38,499 million for the years ended December
31, 2014, 2013 and 2012, respectively, and are included in sell-
ing, general and administrative expenses in the consolidated
statements of income.
(u) Derivative Financial Instruments
All derivatives are recognized at fair value and are included
in prepaid expenses and other current assets, or other cur-
rent liabilities in the consolidated balance sheets.
Canon uses and designates certain derivatives as a hedge of
a forecasted transaction or the variability of cash flows to be
received or paid related to a recognized asset or liability (“cash
flow” hedge). Canon formally documents all relationships
between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking vari-
ous hedge transactions. Canon also formally assesses, both at
the hedge’s inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items.
When it is determined that a derivative is not highly effective
as a hedge or that it has ceased to be a highly effective hedge,
Canon discontinues hedge accounting prospectively. Changes
in the fair value of a derivative that is designated and quali-
fies as a cash flow hedge are recorded in other comprehen-
sive income (loss), until earnings are affected by the variability
in cash flows of the hedged item. Gains and losses from hedg-
ing ineffectiveness are included in other income (deductions).
Gains and losses related to the components of hedging instru-
ments excluded from the assessment of hedge effectiveness
are included in other income (deductions).
Canon also uses certain derivative financial instruments
which are not designated as hedges. The changes in fair val-
ues of these derivative financial instruments are immediately
recorded in earnings.
Canon classifies cash flows from derivatives as cash flows
from operating activities in the consolidated statements of
cash flows.
(v) Guarantees
Canon recognizes, at the inception of a guarantee, a liability
for the fair value of the obligation it has undertaken in issu-
ing guarantees.
(w) Recently Issued Accounting Guidance
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued a new accounting standard related to reve-
nue from contracts with customers. This standard requires
an entity to recognize revenue when promised goods or ser-
vices are transferred to customers in an amount that reflects
the consideration to which the entity expects to be entitled in
exchange for those goods or services. This standard is effective
for annual reporting periods beginning after December 15,
2016 and is required to be adopted by Canon from the quarter
beginning January 1, 2017. Early adoption is not permitted.
This standard may be applied retrospectively to each prior
reporting period presented or retrospectively with the cumu-
lative effect of initially applying this standard recognized at
the date of initial application. Canon has not selected a tran-
sition method and is currently evaluating the effect that the
adoption of this standard will have on its consolidated results
of operations and financial condition.
58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENTS
The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale securities
included in investments by major security type at December 31, 2014 and 2013 were as follows:
December 31
Millions of yen
2014: Noncurrent:
Government bonds
Corporate bonds
Fund trusts
Equity securities
Millions of yen
2013: Noncurrent:
Government bonds
Corporate bonds
Fund trusts
Equity securities
Cost
Gross unrealized
holding gains
Gross unrealized
holding losses
¥
331
¥
—
153
—
19,765
¥ 19,918
¥ 6
29
—
17
¥ 52
Gross unrealized
holding gains
Gross unrealized
holding losses
¥
—
16
—
16,450
¥ 16,466
¥ 31
26
—
26
¥ 83
512
84
20,905
¥ 21,832
Cost
¥
338
491
68
18,112
¥ 19,009
Fair value
¥
325
636
84
40,653
¥ 41,698
Fair value
¥
307
481
68
34,536
¥ 35,392
Maturities of available-for-sale debt securities included in investments in the accompanying consolidated balance sheets
were as follows at December 31, 2014:
December 31
Due after five years
Millions of yen
Cost
¥ 843
¥ 843
Fair value
¥ 961
¥ 961
Gross realized gains were ¥2,540 million, ¥2,360 million
and ¥238 million for the years ended December 31, 2014, 2013
and 2012, respectively. Gross realized losses, including write-
downs for impairments that were other-than-temporary,
were ¥31 million, ¥2 million and ¥1,545 million for the years
ended December 31, 2014, 2013 and 2012, respectively.
At December 31, 2014, substantially all of the available-for-
sale securities with unrealized losses had been in a continu-
ous unrealized loss position for less than twelve months.
Time deposits with original maturities of more than
three months are ¥71,863 million and ¥47,914 million at
December 31, 2014 and 2013, respectively, and are included
in short-term investments in the accompanying consolidat-
ed balance sheets.
Aggregate cost of non-marketable equity securities
accounted for under the cost method totaled ¥1,164 million
and ¥14,794 million at December 31, 2014 and 2013, respec-
tively. These investments were not evaluated for impair-
ment at December 31, 2014 and 2013, respectively, because (a)
Canon did not estimate the fair value of those investments as
it was not practicable to estimate the fair value of the invest-
ments and (b) Canon did not identify any events or chang-
es in circumstances that might have had significant adverse
effects on the fair value of those investments.
Investments in affiliated companies accounted for by the
equity method amounted to ¥20,863 million and ¥18,937
million at December 31, 2014 and 2013, respectively. Canon’s
share of the net earnings (losses) in affiliated companies
accounted for by the equity method, included in other
income (deductions), were earnings of ¥478 million, losses of
¥664 million and earnings of ¥610 million for the years end-
ed December 31, 2014, 2013 and 2012, respectively.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
59
3. TRADE RECEIVABLES
Trade receivables are summarized as follows:
December 31
Notes
Accounts
Less allowance for doubtful receivables
4. INVENTORIES
Inventories are summarized as follows:
December 31
Finished goods
Work in process
Raw materials
Millions of yen
2014
¥ 18,476
619,321
637,797
(12,122)
¥ 625,675
2013
¥ 15,461
606,010
621,471
(12,730)
¥ 608,741
Millions of yen
2014
¥ 363,685
144,394
20,088
¥ 528,167
2013
¥ 406,443
128,120
19,210
¥ 553,773
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation and are summarized as follows:
December 31
Land
Buildings
Machinery and equipment
Construction in progress
Less accumulated depreciation
Millions of yen
2014
¥ 286,336
1,609,667
1,822,026
70,759
3,788,788
(2,519,259)
¥ 1,269,529
2013
¥ 282,484
1,570,024
1,736,107
73,645
3,662,260
(2,383,530)
¥ 1,278,730
Depreciation expenses for the years ended December 31,
2014, 2013 and 2012 were ¥213,739 million, ¥223,158 mil-
lion and ¥211,973 million, respectively.
Amounts due for purchases of property, plant and
equipment were ¥40,483 million and ¥33,585 million at
December 31, 2014 and 2013, respectively, and are included
in other current liabilities in the accompanying consolidat-
ed balance sheets. Fixed assets presented in the consolidated
statements of cash flows include property, plant and equip-
ment and intangible assets.
60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. FINANCE RECEIVABLES AND OPERATING LEASES
Finance receivables represent financing leases which consist
of sales-type leases and direct-financing leases resulting from
the sales of Canon’s and complementary third-party products
primarily in foreign countries. These receivables typically
have terms ranging from 1 year to 6 years.
The components of the finance receivables, which are included in prepaid expenses and other current assets, and other
assets in the accompanying consolidated balance sheets, are as follows:
December 31
Millions of yen
Total minimum lease payments receivable
Unguaranteed residual values
Executory costs
Unearned income
Less allowance for credit losses
Less current portion
The activity in the allowance for credit losses is as follows:
Years ended December 31
Balance at beginning of year
Charge-offs
Provision
Other
Balance at end of year
2014
¥ 308,733
13,924
(1,680)
(31,919)
289,058
(6,276)
282,782
(102,920)
¥ 179,862
2013
¥ 278,621
9,566
(2,184)
(29,875)
256,128
(7,323)
248,805
(91,025)
¥ 157,780
Millions of yen
2014
¥ 7,323
(1,171)
154
(30)
¥ 6,276
2013
¥ 6,908
(1,278)
212
1,481
¥ 7,323
Canon has policies in place to ensure that its products
are sold to customers with an appropriate credit history,
and continuously monitors its customers’ credit quality
based on information including length of period in arrears,
macroeconomic conditions, initiation of legal proceedings
against customers and bankruptcy filings. The allowance
for credit losses of finance receivables are evaluated col-
lectively based on historical experience of credit losses. An
additional reserve for individual accounts is recorded when
Canon becomes aware of a customer’s inability to meet its
financial obligations, such as in the case of bankruptcy fil-
ings. Finance receivables which are past due or individual-
ly evaluated for impairment at December 31, 2014 and 2013
are not significant.
The cost of equipment leased to customers under operat-
ing leases included in property, plant and equipment, net
at December 31, 2014 and 2013 was ¥113,997 million and
¥103,403 million, respectively. Accumulated depreciation on
equipment under operating leases at December 31, 2014 and
2013 was ¥87,338 million and ¥78,821 million, respectively.
The following is a schedule by year of the future minimum lease payments to be received under financing leases and non-
cancelable operating leases at December 31, 2014.
Year ending December 31:
2015
2016
2017
2018
2019
Thereafter
Millions of yen
Financing leases
Operating leases
¥ 121,619
90,955
56,672
28,688
10,013
786
¥ 308,733
¥ 8,541
4,585
3,064
1,450
678
220
¥ 18,538
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
61
7. ACQUISITIONS
During the year ended December 31, 2014, Canon acquired
several companies for a total cash consideration of ¥70,671
million, of which ¥30,696 million, ¥8,789 million, and
¥4,633 million was attributed to intangible assets, the relat-
ed deferred tax liabilities, and other net assets acquired,
respectively, and the residual amount of ¥44,131 million
was recorded as goodwill. The goodwill recorded is attrib-
utable primarily to expected synergies from the combined
operations of the acquired companies and Canon. None of
the goodwill is expected to be deductible for tax purposes.
Total acquisition-related costs were expensed as incurred
and were not significant.
Intangible assets acquired, which are subject to amor-
tization, consist of software of ¥13,290 million, customer
relationships of ¥1,628 million and other intangible assets
of ¥3,841 million. Canon has estimated the weighted aver-
age amortization period for the software and customer
relationships to be 7 years and 6 years, respectively. The
weighted average amortization period for all intangible
assets is approximately 9 years. Intangible assets acquired,
which are not subject to amortization, consist of in-process
research and development of ¥11,937 million.
The results of operations of the acquired companies were
included in Canon’s consolidated financial statements from
the respective acquisition dates and were not material. Pro
forma results of operations have not been disclosed because
the effects of these acquisitions were not material, individu-
ally and in the aggregate.
8. GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets subject to amortization acquired during
the years ended December 31, 2014 and 2013, including
those recorded from businesses acquired, totaled ¥62,189
million and ¥42,630 million, which primarily consist of
software of ¥54,686 million and ¥37,419 million, respective-
ly. The weighted average amortization periods for intangible
assets in total acquired during the years ended December
31, 2014 and 2013 are approximately 5 years and 4 years,
respectively. The weighted average amortization periods
for software acquired during the years ended December 31,
2014 and 2013 are approximately 4 years.
The components of intangible assets subject to amortization at December 31, 2014 and 2013 were as follows:
December 31
Millions of yen
Software
Customer relationships
Patented technologies
License fees
Other
2014
2013
Gross carrying
amount
¥ 312,069
53,494
13,059
11,765
36,625
¥ 427,012
Accumulated
amortization
¥ 185,885
46,713
9,052
7,860
18,281
¥ 267,791
Gross carrying
amount
¥ 271,425
50,792
29,067
13,194
32,319
¥ 396,797
Accumulated
amortization
¥ 167,411
39,957
24,027
7,902
16,094
¥ 255,391
Aggregate amortization expense for the years ended
December 31, 2014, 2013 and 2012 was ¥49,741 million,
¥52,015 million and ¥46,160 million, respectively. Estimated
amortization expense for intangible assets currently held
for the next five years ending December 31 is ¥41,498 mil-
lion in 2015, ¥32,853 million in 2016, ¥22,583 million in
2017, ¥14,115 million in 2018, and ¥8,457 million in 2019.
Intangible assets not subject to amortization other than
goodwill at December 31, 2014 were ¥18,067 million, which
primarily consist of in-process research and development
recorded from businesses acquired. Intangible assets not
subject to amortization other than goodwill at December
31, 2013 were not significant.
Goodwill is included in other assets in the consolidated
balance sheets. For management reporting purposes, good-
will is not allocated to the segments. Goodwill has been allo-
cated to its respective segment for impairment testing.
62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The changes in the carrying amount of goodwill by segment for the years ended December 31, 2014 and 2013 were as follows:
Years ended December 31
Millions of yen
2014: Balance at beginning of year
Goodwill acquired during the year
Translation adjustments and other
Balance at end of year
Millions of yen
2013: Balance at beginning of year
Goodwill acquired during the year
Translation adjustments and other
Balance at end of year
Office
¥ 139,412
3,971
1,952
¥ 145,335
Office
¥ 111,348
4,083
23,981
¥ 139,412
Imaging
System
¥ 13,877
7,424
479
¥ 21,780
Imaging
System
¥ 12,674
—
1,203
¥ 13,877
Industry and
Others
¥ 8,351
32,736
3,134
¥ 44,221
Industry and
Others
¥ 6,821
—
1,530
¥ 8,351
Total
¥ 161,640
44,131
5,565
¥ 211,336
Total
¥ 130,843
4,083
26,714
¥ 161,640
9. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans consisting of bank borrowings at December 31, 2014 and 2013 were ¥3 million and ¥54 million, respectively.
Long-term debt consisted of the following:
December 31
Millions of yen
2014
2013
Loans, principally from banks, maturing in installments through 2024; bearing weighted
average interest of 2.79% and 1.15% at December 31, 2014 and 2013, respectively
Capital lease obligations
Less current portion
¥ 145
2,018
2,163
(1,015)
¥ 1,148
The aggregate annual maturities of long-term debt outstanding at December 31, 2014 were as follows:
Year ending December 31:
2015
2016
2017
2018
2019
Thereafter
¥ 211
2,482
2,693
(1,245)
¥ 1,448
Millions of yen
¥ 1,015
519
349
200
75
5
¥ 2,163
Both short-term and long-term bank loans are made
under general agreements which provide that security and
guarantees for present and future indebtedness will be giv-
en upon request of the bank, and that the bank shall have
the right to offset cash deposits against obligations that
have become due or, in the event of default, against all obli-
gations due to the bank.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
63
10. TRADE PAYABLES
Trade payables are summarized as follows:
December 31
Notes
Accounts
Millions of yen
2014
¥ 14,112
296,102
¥ 310,214
2013
¥ 8,005
299,152
¥ 307,157
11. EMPLOYEE RETIREMENT AND SEVERANCE BENEFITS
The Company and certain of its subsidiaries have contrib-
utory and noncontributory defined benefit pension plans
covering substantially all of their employees. Benefits pay-
able under the plans are based on employee earnings and
years of service. The Company and certain of its subsidiaries
also have defined contribution pension plans covering sub-
stantially all of their employees.
Effective January 1, 2014, defined benefit pension plans
of certain subsidiaries in the Netherlands were terminated,
and the related plan assets and obligations were transferred
to a multiemployer pension plan for the industry in which
these subsidiaries operate. As a result, the Company record-
ed a gain on curtailments and settlements of ¥9,370 million
in selling, general and administrative expenses in the con-
solidated statement of income for the year ended December
31, 2014.
Obligations and funded status
Reconciliations of beginning and ending balances of the benefit obligations and the fair value of the plan assets are as follows:
December 31
Change in benefit obligations:
Benefit obligations at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Actuarial loss
Benefits paid
Curtailments and settlements
Foreign currency exchange rate changes
Benefit obligations at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participants’ contributions
Benefits paid
Settlements
Foreign currency exchange rate changes
Fair value of plan assets at end of year
Funded status at end of year
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2013
2014
2013
¥ 486,572 ¥ 364,609
9,448
¥ 684,842 ¥ 651,520
26,005
11,655
26,445
10,772
—
59,496
(21,224)
—
—
760,331 684,842
14,959
(19,297)
—
6,801
10,654
1,522
44,580
(7,352)
— (191,179)
— 13,064
98,901
364,662 486,572
14,299
2,617
8,981
(9,415)
(2,868)
19,810
581,996 495,452
84,382
43,714
15,676
—
(19,265)
—
—
622,121 581,996
¥ (138,210) ¥ (102,846)
(17,648)
360,527 249,534
20,640
—
17,851
6,470
1,522
(7,041)
— (165,640)
—
7,732
28,705
2,617
(9,106)
(2,656)
70,793
221,421 360,527
¥ (143,241)
¥ (126,045)
64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts recognized in the consolidated balance sheets at December 31, 2014 and 2013 are as follows:
December 31
Other assets
Accrued expenses
Accrued pension and severance cost
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2013
2014
¥
559
532 ¥
—
(138,742) (103,405)
¥ (138,210) ¥ (102,846)
¥
—
— ¥
(1,055)
2013
1,106
(892)
(142,186)
¥ (143,241)
(126,259)
¥ (126,045)
Amounts recognized in accumulated other comprehensive income (loss) at December 31, 2014 and 2013 before the effect of
income taxes are as follows:
December 31
Actuarial loss
Prior service credit
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2013
¥ 209,829 ¥ 186,052
(105,327)
¥ 117,302 ¥ 80,725
(92,527)
2014
¥ 69,287
(57)
¥ 69,230
2013
¥ 50,344
(118)
¥ 50,226
The accumulated benefit obligation for all defined benefit plans was as follows:
December 31
Accumulated benefit obligation
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2013
2014
2013
¥ 720,034 ¥ 631,887
¥ 343,023 ¥ 464,195
The projected benefit obligations and the fair value of plan assets for the pension plans with projected benefit obliga-
tions in excess of plan assets, and the accumulated benefit obligations and the fair value of plan assets for the pension plans
with accumulated benefit obligations in excess of plan assets are as follows:
December 31
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2013
2014
2013
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations
Fair value of plan assets
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligations
Fair value of plan assets
¥ 756,941 ¥ 676,308
572,903
618,199
¥ 364,662 ¥ 485,466
358,315
221,421
¥ 716,940 ¥ 611,602
560,093
618,199
¥ 339,305 ¥ 463,089
358,315
216,560
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
65
Components of net periodic benefit cost and other amounts recognized in other comprehensive
income (loss)
Net periodic benefit cost for Canon’s employee retirement and severance defined benefit plans for the years ended
December 31, 2014, 2013 and 2012 consisted of the following components:
Years ended December 31
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Amortization of actuarial loss
(Gain) loss on curtailments and settlements
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2013
2012
2014
2013
2012
¥ 26,445 ¥ 26,005 ¥ 25,738 ¥ 6,801 ¥ 9,448 ¥ 5,884
13,176
11,655
14,299
10,772
(18,018)
(12,800)
10,023
—
11,788
(13,791)
(13,079)
16,277
—
10,654
(10,637)
(61)
1,698
(9,370)
(15,273)
(12,306)
13,546
—
¥ 16,422 ¥ 23,627 ¥ 26,933 ¥
(13,949)
(11,806)
(143)
(116)
1,351
2,005
—
146
(915) ¥ 11,806 ¥ 8,489
Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss) for the years ended
December 31, 2014, 2013 and 2012 are summarized as follows:
Years ended December 31
Current year actuarial (gain) loss
Amortization of actuarial loss
Amortization of prior service credit
Curtailments and settlements
Japanese plans
Millions of yen
Foreign plans
Millions of yen
2014
2012
2013
¥ 33,800 ¥ (54,150) ¥ (21,753)
(16,277)
13,079
—
(10,023) (13,546)
12,800 12,306
—
—
¥ 36,577 ¥ (55,390) ¥ (24,951)
2014
2013
¥ 37,366 ¥ 2,290 ¥ 31,661
(1,351)
(2,005)
2012
(1,698)
61
(16,725)
¥ 19,004 ¥
143
(358)
116
—
70 ¥ 30,426
The estimated prior service credit and actuarial loss for the defined benefit pension plans that will be amortized from
accumulated other comprehensive income (loss) into net periodic benefit cost over the next year are summarized as follows:
Prior service credit
Actuarial loss
Assumptions
Weighted-average assumptions used to determine benefit obligations are as follows:
Japanese plans
Foreign plans
Millions of yen
Millions of yen
¥ (12,591)
¥
(55)
11,031
1,993
December 31
Discount rate
Assumed rate of increase in future compensation levels
Japanese plans
Foreign plans
2014
1.1%
3.0%
2013
1.6%
3.0%
2014
2.9%
2.0%
2013
3.8%
2.3%
66
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted-average assumptions used to determine net periodic benefit cost are as follows:
Years ended December 31
Discount rate
Assumed rate of increase in future compensation levels
Expected long-term rate of return on plan assets
Canon determines the expected long-term rate of return
based on the expected long-term return of the various asset
categories in which it invests. Canon considers the current
expectations for future returns and the actual historical
returns of each plan asset category.
Plan assets
Canon’s investment policies are designed to ensure ade-
quate plan assets are available to provide future payments
of pension benefits to eligible participants. Taking into
account the expected long-term rate of return on plan
assets, Canon formulates a “model” portfolio comprised of
the optimal combination of equity securities and debt secu-
rities. Plan assets are invested in individual equity and debt
securities using the guidelines of the “model” portfolio in
order to produce a total return that will match the expect-
ed return on a mid-term to long-term basis. Canon evalu-
ates the gap between expected return and actual return
of invested plan assets on an annual basis to determine if
such differences necessitate a revision in the formulation of
the “model” portfolio. Canon revises the “model” portfolio
when and to the extent considered necessary to achieve the
expected long-term rate of return on plan assets.
Canon’s model portfolio for Japanese plans consists
of three major components: approximately 20% is invest-
ed in equity securities, approximately 55% is invested in
debt securities, and approximately 25% is invested in other
investment vehicles, primarily consisting of investments in
life insurance company general accounts.
Japanese plans
Foreign plans
2014
1.6%
3.0%
3.1%
2013
1.8%
3.0%
3.1%
2012
1.9%
3.0%
3.1%
2014
3.9%
2.3%
4.9%
2013
3.6%
2.2%
5.2%
2012
4.6%
2.4%
5.4%
Outside Japan, investment policies vary by country, but
the long-term investment objectives and strategies remain
consistent. Canon’s model portfolio for foreign plans has
been developed as follows: approximately 30% is invest-
ed in equity securities, approximately 50% is invested in
debt securities, and approximately 20% is invested in other
investment vehicles, primarily consisting of investments in
real estate assets.
The equity securities are selected primarily from stocks
that are listed on the securities exchanges. Prior to invest-
ing, Canon has investigated the business condition of the
investee companies, and appropriately diversified invest-
ments by type of industry and other relevant factors. The
debt securities are selected primarily from government
bonds, public debt instruments, and corporate bonds. Prior
to investing, Canon has investigated the quality of the issue,
including rating, interest rate, and repayment dates, and
has appropriately diversified the investments. Pooled funds
are selected using strategies consistent with the equity and
debt securities described above. As for investments in life
insurance company general accounts, the contracts with
the insurance companies include a guaranteed interest rate
and return of capital. With respect to investments in foreign
investment vehicles, Canon has investigated the stability
of the underlying governments and economies, the market
characteristics such as settlement systems and the taxation
systems. For each such investment, Canon has selected the
appropriate investment country and currency.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
67
The three levels of input used to measure fair value are more fully described in Note 20. The fair values of Canon’s pension
plan assets at December 31, 2014 and 2013, by asset category, are as follows:
December 31, 2014
Millions of yen
Japanese plans
Foreign plans
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Equity securities:
Japanese companies (a)
Foreign companies
Pooled funds (b)
Debt securities:
Government bonds (c)
Municipal bonds
Corporate bonds
Pooled funds (d)
Mortgage backed securities
(and other asset backed
securities)
Life insurance company
general accounts
Other assets
¥ 51,805 ¥
10,233
—
— ¥ — ¥ 51,805
10,233
—
124,388
124,388
—
—
— ¥
¥
31,963
—
—
—
74,744
143,431
—
—
—
—
573
11,775
118,606
—
—
—
—
143,431
573
11,775
118,606
7,899
—
—
—
—
3,221
24,014
23,260
¥ —
—
—
—
—
—
—
¥
—
31,963
74,744
7,899
3,221
24,014
23,260
—
12,310
—
12,310
—
—
—
—
—
—
123,575
25,425
¥ 205,469 ¥ 415,052 ¥ 1,600 ¥ 622,121
123,575
23,825
—
1,600
—
—
7,049
49,271
¥ 39,862 ¥ 181,559
—
—
¥ —
7,049
49,271
¥ 221,421
December 31, 2013
Millions of yen
Japanese plans
Foreign plans
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Equity securities:
Japanese companies (e)
Foreign companies
Pooled funds (f)
Debt securities:
Government bonds (g)
Municipal bonds
Corporate bonds
Pooled funds (h)
Mortgage backed securities
(and other asset backed
securities)
Life insurance company
general accounts
Other assets
¥ 51,159 ¥
10,347
—
—
—
145,417
¥ — ¥ 51,159 ¥
— ¥
—
—
10,347 43,681
—
145,417
—
—
104,933
124,800
—
—
—
—
1,027
10,543
101,583
—
—
—
—
124,800 44,192
—
1,027
—
10,543
—
101,583
—
2,246
32,921
57,518
¥ —
—
—
—
—
—
—
¥
—
43,681
104,933
44,192
2,246
32,921
57,518
—
9,569
—
9,569
—
5,098
—
5,098
—
—
109,097
17,636
¥ 186,306 ¥ 394,872
—
818
15,420
54,518
¥ 818 ¥ 581,996 ¥ 87,873 ¥ 272,654
109,097
18,454
—
—
—
—
¥ —
15,420
54,518
¥ 360,527
(a) The plan’s equity securities include common stock of the
Company and certain of its subsidiaries in the amounts
of ¥197 million.
(b) These funds invest in listed equity securities consisting of
approximately 25% Japanese companies and 75% foreign
companies for Japanese plans, and mainly foreign com-
panies for foreign plans.
(c) This class includes approximately 85% Japanese gov-
ernment bonds and 15% foreign government bonds for
Japanese plans, and mainly foreign government bonds
for foreign plans.
(d) These funds invest in approximately 25% Japanese gov-
ernment bonds, 50% foreign government bonds, 5%
Japanese municipal bonds, and 20% corporate bonds for
Japanese plans. These funds invest in approximately 85%
foreign government bonds and 15% corporate bonds for
foreign plans.
(e) The plan’s equity securities include common stock of the
Company and certain of its subsidiaries in the amounts
of ¥572 million.
(f) These funds invest in listed equity securities consisting of
approximately 25% Japanese companies and 75% foreign
68
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
companies for Japanese plans, and mainly foreign com-
panies for foreign plans.
(g) This class includes approximately 85% Japanese gov-
ernment bonds and 15% foreign government bonds for
Japanese plans, and mainly foreign government bonds
for foreign plans.
(h) These funds invest in approximately 30% Japanese govern-
ment bonds, 50% foreign government bonds, 5% Japanese
municipal bonds, and 15% corporate bonds for Japanese
plans. These funds invest in approximately 85% foreign gov-
ernment bonds and 15% corporate bonds for foreign plans.
Each level into which assets are categorized is based on
inputs used to measure the fair value of the assets, and does
not necessarily indicate the risks or ratings of the assets.
Level 1 assets are comprised principally of equity securities
and government bonds, which are valued using unadjusted
quoted market prices in active markets with sufficient volume
and frequency of transactions. Level 2 assets are comprised
principally of pooled funds that invest in equity and debt secu-
rities, corporate bonds and investments in life insurance com-
pany general accounts. Pooled funds are valued at their net
asset values that are calculated by the sponsor of the fund and
have daily liquidity. Corporate bonds are valued using quot-
ed prices for identical assets in markets that are not active.
Investments in life insurance company general accounts are
valued at conversion value.
The fair value of Level 3 assets, consisting of hedge funds,
was ¥1,600 million and ¥818 million at December 31, 2014
and 2013, respectively. Amounts of actual returns on, and
purchases and sales of, these assets during the years ended
December 31, 2014 and 2013 were not significant.
Contributions
Canon expects to contribute ¥14,674 million to its Japanese defined benefit pension plans and ¥11,583 million to its foreign
defined benefit pension plans for the year ending December 31, 2015.
Estimated future benefit payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Year ending December 31:
2015
2016
2017
2018
2019
2020–2024
Japanese plans
Millions of yen
¥ 18,521
20,326
21,610
23,826
25,989
163,611
Foreign plans
Millions of yen
¥ 7,351
7,704
7,889
8,446
9,035
54,765
Multiemployer pension plans
Effective January 1, 2014, certain subsidiaries in the
Netherlands participated in a multiemployer pension plan
determined in accordance with collective bargaining agree-
ments for the industry in which these subsidiaries operate.
The collective bargaining agreements have no expiration
date. Canon is not liable for other participating employers’
obligations under the terms and conditions of the agreements.
The amount of contributions to the multiemployer pension
plan which was expensed for the year ended December 31,
2014 was ¥2,815 million.
Defined contribution plans
The amounts of cost recognized for the defined contribu-
tion pension plans of the Company and certain of its sub-
sidiaries for the years ended December 31, 2014, 2013 and
2012 were ¥15,077 million, ¥14,383 million and ¥13,021
million, respectively.
12. INCOME TAXES
Domestic and foreign components of income before income taxes and the current and deferred income tax expense (benefit)
attributable to such income are summarized as follows:
Years ended December 31
2014: Income before income taxes
Income taxes:
Current
Deferred
Japanese
¥ 277,041
¥ 83,221
6,796
¥ 90,017
Millions of yen
Foreign
¥ 106,198
¥ 25,850
2,133
¥ 27,983
Total
¥ 383,239
¥ 109,071
8,929
¥ 118,000
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
69
Years ended December 31
2013: Income before income taxes
Income taxes:
Current
Deferred
Japanese
¥ 251,351
¥ 75,134
4,005
¥ 79,139
Millions of yen
Foreign
¥ 96,253
¥ 16,163
12,786
¥ 28,949
Total
¥ 347,604
¥ 91,297
16,791
¥ 108,088
2012: Income before income taxes
¥ 257,640
¥ 84,917
¥ 342,557
Income taxes:
Current
Deferred
¥ 73,573
13,900
¥ 87,473
¥ 29,052
(6,413)
¥ 22,639
¥ 102,625
7,487
¥ 110,112
The Company and its domestic subsidiaries are subject to a
number of income taxes, which, in the aggregate, represent a
statutory income tax rate of approximately 38% for the years
ended December 31, 2014 and 2013, respectively, and approxi-
mately 40% for the year ended December 31, 2012.
Amendments to the Japanese tax regulations were enact-
ed into law on November 30, 2011. As a result of these
amendments, the statutory income tax rate was reduced
from approximately 40% to 38% effective from the year
ended December 31, 2013, and to approximately 35% effec-
tive from the year ending December 31, 2016. On March 20,
2014, further amendments were enacted into law, and the
reduction of the statutory income tax rate to approximately
35% became effective one year earlier, from the year ending
December 31, 2015. Consequently, the statutory income tax
rate utilized for deferred tax assets and liabilities which were
expected to be settled or realized in the period from January
1, 2015 is approximately 35%. The adjustments of deferred
tax assets and liabilities for this further amendment to tax
law, which were reflected in income taxes for the year ended
December 31, 2014, were not material.
A reconciliation of the Japanese statutory income tax rate and the effective income tax rate as a percentage of income
before income taxes is as follows:
Years ended December 31
Japanese statutory income tax rate
Increase (reduction) in income taxes resulting from:
Expenses not deductible for tax purposes
Income of foreign subsidiaries taxed at lower than
Japanese statutory tax rate
Tax credit for research and development expenses
Change in valuation allowance
Other
Effective income tax rate
2014
38.0%
0.7
(3.7)
(5.0)
(0.5)
1.3
30.8%
2013
38.0%
0.9
(3.3)
(5.4)
0.2
0.7
31.1%
2012
40.0%
0.8
(4.3)
(5.7)
(1.7)
3.0
32.1%
Net deferred income tax assets and liabilities are included in the accompanying consolidated balance sheets under the
following captions:
December 31
Millions of yen
Prepaid expenses and other current assets
Other assets
Other current liabilities
Other noncurrent liabilities
2014
¥ 61,943
117,636
(3,456)
(80,459)
¥ 95,664
2013
¥ 61,902
103,539
(3,621)
(63,129)
¥ 98,691
70
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at December
31, 2014 and 2013 are presented below:
December 31
Deferred tax assets:
Inventories
Accrued business tax
Accrued pension and severance cost
Research and development—costs capitalized for tax purposes
Property, plant and equipment
Accrued expenses
Net operating losses carried forward
Other
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Undistributed earnings of foreign subsidiaries
Net unrealized gains on securities
Tax deductible reserve
Financing lease revenue
Prepaid pension and severance cost
Other
Total deferred tax liabilities
Net deferred tax assets
Millions of yen
2014
2013
¥ 16,085
3,951
79,392
8,616
29,558
43,706
38,351
34,673
254,332
(37,498)
216,834
(10,368)
(6,801)
(5,696)
(58,958)
(1,671)
(37,676)
(121,170)
¥ 95,664
¥ 12,988
4,448
59,964
10,978
26,626
37,153
38,439
44,482
235,078
(35,055)
200,023
(10,876)
(5,740)
(6,160)
(50,605)
(671)
(27,280)
(101,332)
¥ 98,691
The net changes in the total valuation allowance were an
increase of ¥2,443 million for the year ended December 31,
2014, and an increase of ¥2,888 million for the year ended
December 31, 2013, and a decrease of ¥1,621 million for the
year ended December 31, 2012.
Based upon the level of historical taxable income and pro-
jections for future taxable income over the periods which
the net deductible temporary differences are expected to
reverse, management believes it is more likely than not that
Canon will realize the benefits of these deferred tax assets,
net of the existing valuation allowance, at December 31,
2014. At December 31, 2014, Canon had net operating loss-
es which can be carried forward for income tax purposes of
¥194,572 million to reduce future taxable income.
Periods available to reduce future taxable income vary in each tax jurisdiction and generally range from one year to an
indefinite period as follows:
Within one year
After one year through five years
After five years through ten years
After ten years through twenty years
Indefinite period
Total
Millions of yen
¥ 1,211
31,393
60,913
63,783
37,272
¥ 194,572
Income taxes have not been accrued on undistributed
earnings of domestic subsidiaries as the tax law provides a
means by which the dividends from a domestic subsidiary
can be received tax free.
Canon has not recognized deferred tax liabilities of
¥28,318 million for a portion of undistributed earnings of
foreign subsidiaries that arose for the year ended December
31, 2014 and prior years because Canon currently does not
expect to have such amounts distributed or paid as divi-
dends to the Company in the foreseeable future. Deferred
tax liabilities will be recognized when Canon expects that
it will realize those undistributed earnings in a taxable
manner, such as through receipt of dividends or sale of
the investments. At December 31, 2014, such undistributed
earnings of these subsidiaries were ¥961,917 million.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
71
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Years ended December 31
Balance at beginning of year
Additions for tax positions of the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with tax authorities
Other
Balance at end of year
2014
¥ 6,201
1,649
216
(114)
(1,808)
287
¥ 6,431
Millions of yen
2013
¥ 7,711
312
388
(3,141)
(347)
1,278
¥ 6,201
2012
¥ 2,933
869
4,903
(1,546)
(41)
593
¥ 7,711
The total amounts of unrecognized tax benefits that would
reduce the effective tax rate, if recognized, are ¥6,431 million
and ¥6,201 million at December 31, 2014 and 2013, respectively.
Although Canon believes its estimates and assumptions of
unrecognized tax benefits are reasonable, uncertainty regard-
ing the final determination of tax audit settlements and any
related litigation could affect the effective tax rate in a future
period. Based on each of the items of which Canon is aware at
December 31, 2014, no significant changes to the unrecognized
tax benefits are expected within the next twelve months.
Canon recognizes interest and penalties accrued related to
unrecognized tax benefits in income taxes. Both interest and
penalties accrued at December 31, 2014 and 2013, and inter-
est and penalties included in income taxes for the years ended
December 31, 2014, 2013 and 2012 are not significant.
Canon files income tax returns in Japan and various foreign
tax jurisdictions. In Japan, Canon is no longer subject to reg-
ular income tax examinations by the tax authority for years
before 2012. While there has been no specific indication by the
tax authority that Canon will be subject to a transfer pricing
examination in the near future, the tax authority could con-
duct a transfer pricing examination for years after 2007. In oth-
er major foreign tax jurisdictions, including the United States
and the Netherlands, Canon is no longer subject to income
tax examinations by tax authorities for years before 2006 with
few exceptions. The tax authorities are currently conducting
income tax examinations of Canon’s income tax returns for
years after 2005 in major foreign tax jurisdictions.
13. LEGAL RESERVE AND RETAINED EARNINGS
The Corporation Law of Japan provides that an amount
equal to 10% of distributions from retained earnings paid
by the Company and its Japanese subsidiaries be appropriat-
ed as a legal reserve. No further appropriations are required
when the total amount of the additional paid-in capital and
the legal reserve equals 25% of their respective stated capital.
The Corporation Law of Japan also provides that additional
paid-in capital and legal reserve are available for appropria-
tions by resolution of the stockholders. Certain foreign sub-
sidiaries are also required to appropriate their earnings to
legal reserves under the laws of their respective countries.
Cash dividends and appropriations to the legal
reserve charged to retained earnings for the years end-
ed December 31, 2014, 2013 and 2012 represent dividends
paid out during those years and the related appropria-
tions to the legal reserve. Retained earnings at December
31, 2014 did not reflect current year-end dividends in the
amount of ¥92,806 million which were approved by the
stockholders in March 2015.
The amount available for dividends under the
Corporation Law of Japan is based on the amount record-
ed in the Company’s nonconsolidated books of account in
accordance with financial accounting standards of Japan.
Such amount was ¥935,504 million at December 31, 2014.
Retained earnings at December 31, 2014 included
Canon’s equity in undistributed earnings of affiliated com-
panies accounted for by the equity method in the amount
of ¥16,919 million.
14. OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss) for the year ended December 31, 2012 are as follows:
Millions of yen
Balance at December 31, 2011
Adjustments for the year
Balance at December 31, 2012
Foreign
currency translation
adjustments
Unrealized gains
and losses
on securities
Gains and
losses on
derivative instruments
¥ (378,863)
131,129
¥ (247,734)
¥ 1,003
3,143
¥ 4,146
¥ 455
(4,917)
¥ (4,462)
Pension
liability
adjustments
¥ (104,368)
(14,831)
¥ (119,199)
Total
¥ (481,773)
114,524
¥ (367,249)
72
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Changes in accumulated other comprehensive income (loss) for the years ended December 31, 2014 and 2013 are as follows:
Millions of yen
Balance at December 31, 2012
Equity transactions with
noncontrolling interests and other
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other comprehensive
income (loss)
Net change during the year
Balance at December 31, 2013
Equity transactions with
noncontrolling interests and other
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other comprehensive
income (loss)
Net change during the year
Balance at December 31, 2014
Foreign
currency translation
adjustments
Unrealized gains
and losses
on securities
Gains and
losses on
derivative instruments
Pension
liability
adjustments
Total
¥ (247,734)
¥ 4,146
¥ (4,462)
¥ (119,199)
¥ (367,249)
(323)
(1)
(2)
(329)
(655)
249,791
7,449
(7,551)
27,153
276,842
—
249,468
1,734
(1,352)
6,096
10,242
9,607
2,054
(2,408)
2,161
28,985
(90,214)
10,416
286,603
(80,646)
10
3
—
(35)
(22)
142,813
3,933
(2,204)
(47,840)
96,702
—
142,823
¥ 144,557
(1,632)
2,304
¥ 12,546
2,009
(195)
¥ (2,603)
11,875
(36,000)
12,252
108,932
¥ (126,214)
¥ 28,286
Reclassifications out of accumulated other comprehensive income (loss) for the years ended December 31, 2014 and 2013
are as follows:
Years ended December 31
Amount reclassified from accumulated
other comprehensive income (loss)*1
Millions of yen
Unrealized gains and losses on securities
Gains and losses on derivative instruments
Pension liability adjustments
2014
¥ (2,509)
879
(1,630)
(2)
(1,632)
3,260
(1,248)
2,012
(3)
2,009
15,585
(3,710)
11,875
2013
Affected line items in consolidated statements of income
¥ (2,358)
613
(1,745)
393
(1,352)
15,387
(5,780)
9,607
—
9,607
3,460
(1,037)
2,423
(262)
2,161
Other, net
Income taxes
Consolidated net income
Net income attributable to noncontrolling interests
Net income attributable to Canon Inc.
Other, net
Income taxes
Consolidated net income
Net income attributable to noncontrolling interests
Net income attributable to Canon Inc.
See Note 11
Income taxes
Consolidated net income
Net income attributable to noncontrolling interests
Net income attributable to Canon Inc.
—
11,875
Total amount reclassified, net of
tax and noncontrolling interests
¥ 12,252
¥ 10,416
*1 Amounts in parentheses indicate gains in consolidated statements of income.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
73
Tax effects allocated to each component of other comprehensive income (loss) and reclassification adjustments, includ-
ing amounts attributable to noncontrolling interests, are as follows:
Years ended December 31
2014:
Foreign currency translation adjustments
Net unrealized gains and losses on securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Net gains and losses on derivative instruments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Pension liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Other comprehensive income (loss)
2013:
Foreign currency translation adjustments
Net unrealized gains and losses on securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Net gains and losses on derivative instruments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Pension liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Other comprehensive income (loss)
2012:
Foreign currency translation adjustments
Net unrealized gains and losses on securities:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Net gains and losses on derivative instruments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Pension liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses realized in net income
Net change during the year
Other comprehensive income (loss)
Before-tax
amount
Millions of yen
Tax (expense)
or benefit
Net-of-tax
amount
¥ 144,826
¥
(992)
¥ 143,834
6,379
(2,509)
3,870
(3,309)
3,260
(49)
(71,166)
15,585
(55,581)
¥ 93,066
(2,225)
879
(1,346)
1,102
(1,248)
(146)
21,306
(3,710)
17,596
¥ 15,112
4,154
(1,630)
2,524
(2,207)
2,012
(195)
(49,860)
11,875
(37,985)
¥ 108,178
¥ 253,707
¥ (2,131)
¥ 251,576
12,669
(2,358)
10,311
(12,145)
15,387
3,242
51,860
3,460
55,320
¥ 322,580
(4,312)
613
(3,699)
4,594
(5,780)
(1,186)
(21,614)
(1,037)
(22,651)
¥ (29,667)
8,357
(1,745)
6,612
(7,551)
9,607
2,056
30,246
2,423
32,669
¥ 292,913
¥ 134,930
¥ (1,195)
¥ 133,735
3,418
1,307
4,725
(10,647)
2,440
(8,207)
(13,888)
4,433
(9,455)
¥ 121,993
(1,004)
(456)
(1,460)
4,041
(714)
3,327
(1,738)
(1,594)
(3,332)
¥ (2,660)
2,414
851
3,265
(6,606)
1,726
(4,880)
(15,626)
2,839
(12,787)
¥ 119,333
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. STOCK-BASED COMPENSATION
On May 1, 2011, based on the approval of the stockholders,
the Company granted stock options to its directors, execu-
tive officers and certain employees to acquire 912,000 shares
of common stock. These option awards vest after two years
of continued service beginning on the grant date and have
a four year exercisable period. The grant-date fair value per
share of the stock options granted during the year ended
December 31, 2011 was ¥772.
On May 1, 2010, based on the approval of the stockholders,
the Company granted stock options to its directors, execu-
tive officers and certain employees to acquire 890,000 shares
of common stock. These option awards vest after two years
of continued service beginning on the grant date and have
a four year exercisable period. The grant-date fair value per
share of the stock options granted during the year ended
December 31, 2010 was ¥988.
On May 1, 2009, based on the approval of the stockholders,
the Company granted stock options to its directors, execu-
tive officers and certain employees to acquire 954,000 shares
of common stock. These option awards vest after two years
of continued service beginning on the grant date and have
a four year exercisable period. The grant-date fair value per
share of the stock options granted during the year ended
December 31, 2009 was ¥699.
On May 1, 2008, based on the approval of the stockholders,
the Company granted stock options to its directors, execu-
tive officers and certain employees to acquire 592,000 shares
of common stock. These option awards vest after two years
of continued service beginning on the grant date and have
a four year exercisable period. The grant-date fair value per
share of the stock options granted during the year ended
December 31, 2008 was ¥1,247.
The compensation cost recognized for these stock options
for the years ended December 31, 2014, 2013 and 2012 was
nil, ¥95 million and ¥364 million, respectively, and is includ-
ed in selling, general and administrative expenses in the con-
solidated statements of income.
A summary of option activity under the stock option plans as of and for the years ended December 31, 2014, 2013 and
2012 is presented below:
Outstanding at January 1, 2012
Exercised
Forfeited
Outstanding at December 31, 2012
Exercised
Forfeited
Outstanding at December 31, 2013
Exercised
Forfeited/Expired
Outstanding at December 31, 2014
Exercisable at December 31, 2014
Shares
Weighted-average
exercise price
Yen
3,042,200
¥ 4,268
Weighted-average
remaining
contractual
term
Year
2.0
Aggregate
intrinsic value
Millions of yen
¥ 88
(10,800)
(305,000)
2,726,400
(8,600)
(60,400)
2,657,400
(67,200)
(728,400)
1,861,800
1,861,800
3,287
4,493
4,247
3,287
4,461
4,245
3,287
4,869
¥ 4,036
¥ 4,036
1.6
37
1.0
28
0.7
0.7
¥ 248
¥ 248
At December 31, 2014, all outstanding option awards were vested.
The total fair value of shares vested during the years ended December 31, 2014, 2013 and 2012 was nil, ¥570 million and
¥848 million, respectively. Cash received from the exercise of stock options for the years ended December 31, 2014, 2013 and
2012 was ¥221 million, ¥28 million and ¥35 million, respectively.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
75
16. NET INCOME ATTRIBUTABLE TO CANON INC. STOCKHOLDERS PER SHARE
A reconciliation of the numerators and denominators of basic and diluted net income attributable to Canon Inc. stockhold-
ers per share computations is as follows:
Years ended December 31
Net income attributable to Canon Inc.
Average common shares outstanding
Effect of dilutive securities:
Stock options
Diluted common shares outstanding
Net income attributable to Canon Inc. stockholders per share:
Basic
Diluted
Millions of yen
2014
¥ 254,797
2013
2012
¥ 230,483
¥ 224,564
Number of shares
1,112,509,931
1,147,933,835
1,173,647,835
4,393
1,112,514,324
8,466
20,574
1,147,942,301
1,173,668,409
Yen
¥ 200.78
200.78
¥ 229.03
229.03
¥ 191.34
191.34
The computation of diluted net income attributable to Canon Inc. stockholders per share for the years ended December
31, 2014, 2013 and 2012 excludes certain outstanding stock options because the effect would be anti-dilutive.
17. DERIVATIVES AND HEDGING ACTIVITIES
Risk management policy
Canon operates internationally, exposing it to the risk of
changes in foreign currency exchange rates. Derivative
financial instruments are comprised principally of foreign
exchange contracts utilized by the Company and certain
of its subsidiaries to reduce the risk. Canon assesses for-
eign currency exchange rate risk by continually monitoring
changes in the exposures and by evaluating hedging oppor-
tunities. Canon does not hold or issue derivative financial
instruments for trading purposes. Canon is also exposed
to credit-related losses in the event of non-performance by
counterparties to derivative financial instruments, but it is
not expected that any counterparties will fail to meet their
obligations. Most of the counterparties are internationally
recognized financial institutions and selected by Canon tak-
ing into account their financial condition, and contracts are
diversified across a number of major financial institutions.
Foreign currency exchange rate risk management
Canon’s international operations expose Canon to the risk
of changes in foreign currency exchange rates. Canon uses
foreign exchange contracts to manage certain foreign cur-
rency exchange exposures principally from the exchange
of U.S. dollars and euros into Japanese yen. These contracts
are primarily used to hedge the foreign currency expo-
sure of forecasted intercompany sales and intercompany
trade receivables that are denominated in foreign curren-
cies. In accordance with Canon’s policy, a specific portion
of foreign currency exposure resulting from forecasted
intercompany sales are hedged using foreign exchange
contracts which principally mature within three months.
Cash flow hedge
Changes in the fair value of derivative financial instru-
ments designated as cash flow hedges, including foreign
exchange contracts associated with forecasted intercom-
pany sales, are reported in accumulated other compre-
hensive income (loss). These amounts are subsequently
reclassified into earnings through other income (deduc-
tions) in the same period as the hedged items affect earn-
ings. Substantially all amounts recorded in accumulated
other comprehensive income (loss) at year-end are expected
to be recognized in earnings over the next twelve months.
Canon excludes the time value component from the assess-
ment of hedge effectiveness. Changes in the fair value of a
foreign exchange contract for the period between the date
that the forecasted intercompany sales occur and its matu-
76
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rity date are recognized in earnings and not considered
hedge ineffectiveness.
Derivatives not designated as hedges
Canon has entered into certain foreign exchange con-
tracts to primarily offset the earnings impact related to
fluctuations in foreign currency exchange rates associat-
ed with certain assets denominated in foreign currencies.
Although these foreign exchange contracts have not been
designated as hedges as required in order to apply hedge
accounting, the contracts are effective from an econom-
ic perspective. The changes in the fair value of these con-
tracts are recorded in earnings immediately.
Contract amounts of foreign exchange contracts at December 31, 2014 and 2013 are set forth below:
December 31
To sell foreign currencies
To buy foreign currencies
Millions of yen
2014
¥ 358,862
21,365
2013
¥ 374,699
44,726
Fair value of derivative instruments in the consolidated balance sheets
The following tables present Canon’s derivative instruments measured at gross fair value as reflected in the consolidated
balance sheets at December 31, 2014 and 2013.
Derivatives designated as hedging instruments
December 31
Assets:
Foreign exchange contracts
Liabilities:
Balance sheet location
2014
Prepaid expenses and other current assets
¥
8
Foreign exchange contracts
Other current liabilities
1,597
Derivatives not designated as hedging instruments
December 31
Fair value
Millions of yen
2013
¥ 44
2,267
Fair value
Millions of yen
Assets:
Foreign exchange contracts
Liabilities:
Balance sheet location
2014
2013
Prepaid expenses and other current assets
¥ 257
¥
210
Foreign exchange contracts
Other current liabilities
9,570
12,678
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
77
Effect of derivative instruments in the consolidated statements of income
The following tables present the effect of Canon’s derivative instruments in the consolidated statements of income for the
years ended December 31, 2014, 2013 and 2012.
Derivatives in cash flow hedging relationships
Years ended December 31
Gain (loss) recognized
in OCI (effective portion)
Gain (loss) reclassified from
accumulated OCI into income
(effective portion)
Gain (loss) recognized in income
(ineffective portion and amount excluded
from effectiveness testing)
Millions of yen
Amount
Location
Amount
Location
Amount
2014: Foreign exchange
contracts
2013: Foreign exchange
contracts
2012: Foreign exchange
contracts
¥
(49)
Other, net
¥ (3,260)
Other, net
¥ (145)
3,242
Other, net
(15,387)
Other, net
(8,207)
Other, net
(2,440)
Other, net
(111)
(221)
Derivatives not designated as hedging instruments
Years ended December 31
Foreign exchange contracts
Gain (loss) recognized in income on derivative
Millions of yen
Location
Other, net
2014
¥(21,728)
2013
2012
¥(61,787)
¥(30,602)
18. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
At December 31, 2014, commitments outstanding for the
purchase of property, plant and equipment approximat-
ed ¥52,668 million, and commitments outstanding for
the purchase of parts and raw materials approximated
¥76,984 million.
Canon occupies sales offices and other facilities under
lease arrangements accounted for as operating leases.
Deposits made under such arrangements aggregated
¥13,847 million and ¥13,448 million at December 31,
2014 and 2013, respectively, and are included in noncur-
rent receivables in the accompanying consolidated balance
sheets. Rental expenses under such operating lease arrange-
ments amounted to ¥43,215 million, ¥44,562 million and
¥40,273 million for the years ended December 31, 2014,
2013 and 2012, respectively.
Future minimum lease payments required under noncancelable operating leases that have initial or remaining lease
terms in excess of one year at December 31, 2014 are as follows:
Year ending December 31:
2015
2016
2017
2018
2019
Thereafter
Total future minimum lease payments
Millions of yen
¥ 26,450
18,937
15,571
8,753
5,775
10,233
¥ 85,719
78
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Guarantees
Canon provides guarantees for bank loans of its employ-
ees, affiliates and other companies. The guarantees for the
employees are principally made for their housing loans. The
guarantees of loans of its affiliates and other companies
are made to ensure that those companies operate with less
financial risk.
For each guarantee provided, Canon would have to
perform under a guarantee if the borrower defaults on
a payment within the contract periods of 1 year to 30 years,
in the case of employees with housing loans, and 1 year to
5 years, in the case of affiliates and other companies. The
maximum amount of undiscounted payments Canon would
have had to make in the event of default is ¥8,951 million
at December 31, 2014. The carrying amounts of the liabili-
ties recognized for Canon’s obligations as a guarantor under
those guarantees at December 31, 2014 were not significant.
Canon also issues contractual product warranties under
which it generally guarantees the performance of products
delivered and services rendered for a certain period or term.
Changes in accrued product warranty costs for the years ended December 31, 2014 and 2013 are summarized as follows:
Years ended December 31
Millions of yen
Balance at beginning of year
Additions
Utilization
Other
Balance at end of year
2014
¥ 10,890
15,699
(12,039)
(2,986)
¥ 11,564
2013
¥ 12,163
13,467
(12,922)
(1,818)
¥ 10,890
Legal proceedings
Canon is involved in various claims and legal actions aris-
ing in the ordinary course of business. Canon has recorded
provisions for liabilities when it is probable that liabili-
ties have been incurred and the amount of loss can be rea-
sonably estimated. Canon reviews these provisions at least
quarterly and adjusts these provisions to reflect the impact
of the negotiations, settlements, rulings, advice of legal
counsel and other information and events pertaining to
a particular case. Based on its experience, although litiga-
tion is inherently unpredictable, Canon believes that any
damage amounts claimed in outstanding matters are not a
meaningful indicator of Canon’s potential liability. In the
opinion of management, any reasonably possible range of
losses from outstanding matters would not have a material
adverse effect on Canon’s consolidated financial position,
results of operations, or cash flows.
19. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATIONS
OF CREDIT RISK
Fair value of financial instruments
The estimated fair values of Canon’s financial instruments at December 31, 2014 and 2013 are set forth below. The follow-
ing summary excludes cash and cash equivalents, trade receivables, finance receivables, noncurrent receivables, short-term
loans, trade payables and accrued expenses for which fair values approximate their carrying amounts. The summary also
excludes investments which are disclosed in Note 2.
December 31
Long-term debt, including current installments
Foreign exchange contracts:
Assets
Liabilities
Millions of yen
2014
2013
Carrying
amount
¥ (2,163)
Estimated
fair value
¥ (2,146)
Carrying
amount
Estimated
fair value
¥ (2,693)
¥ (2,693)
265
265
(11,167)
(11,167)
254
254
(14,945)
(14,945)
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
79
The following methods and assumptions are used to esti-
mate the fair value in the above table.
Long-term debt
Canon’s long-term debt instruments are classified as Level
2 instruments and valued based on the present value of
future cash flows associated with each instrument discount-
ed using current market borrowing rates for similar debt
instruments of comparable maturity. The levels are more
fully described in Note 20.
Foreign exchange contracts
The fair values of foreign exchange contracts are measured
using quotes obtained from counterparties or third parties,
which are periodically validated by pricing models using
observable market inputs, such as foreign currency exchange
rates and interest rates, based on market approach.
Limitations of fair value estimates
Fair value estimates are made at a specific point in time,
based on relevant market information and information
about the financial instruments. These estimates are sub-
jective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly
affect the estimates.
Concentrations of credit risk
At December 31, 2014 and 2013, one customer account-
ed for approximately 16% and 15% of consolidated trade
receivables, respectively. Although Canon does not expect
that the customer will fail to meet its obligations, Canon
is potentially exposed to concentrations of credit risk if
the customer failed to perform according to the terms of
the contracts.
20. FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset
or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an
orderly transaction between market participants at the mea-
surement date. A three-level fair value hierarchy that priori-
tizes the inputs used to measure fair value is as follows:
or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that
are observable, and inputs that are derived princi-
pally from or corroborated by observable market
data by correlation or other means.
Level 3— Inputs are derived from valuation techniques in
Level 1— Inputs are quoted prices in active markets for iden-
tical assets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabil-
ities in active markets, quoted prices for identical
which one or more significant inputs or value
drivers are unobservable, which reflect the report-
ing entity’s own assumptions about the assump-
tions that market participants would use in
establishing a price.
Assets and liabilities measured at fair value on a recurring basis
The following tables present Canon’s assets and liabilities that are measured at fair value on a recurring basis consistent
with the fair value hierarchy at December 31, 2014 and 2013.
December 31
Millions of yen
2014: Assets:
Cash and cash equivalents
Available-for-sale (noncurrent):
Government bonds
Corporate bonds
Fund trusts
Equity securities
Derivatives
Total assets
Liabilities:
Derivatives
Total liabilities
Level 1
Level 2
¥
—
¥ 139,240
325
—
12
40,653
—
¥ 40,990
¥
¥
—
—
—
162
72
—
265
¥ 139,739
¥ 11,167
¥ 11,167
Level 3
¥ —
—
474
—
—
—
¥ 474
¥ —
¥ —
Total
¥ 139,240
325
636
84
40,653
265
¥ 181,203
¥ 11,167
¥ 11,167
80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Millions of yen
2013: Assets:
Cash and cash equivalents
Available-for-sale (noncurrent):
Government bonds
Corporate bonds
Fund trusts
Equity securities
Derivatives
Total assets
Liabilities:
Derivatives
Total liabilities
Level 1
Level 2
¥
—
¥ 183,078
307
—
11
34,536
—
¥ 34,854
¥
¥
—
—
—
141
57
—
254
¥ 183,530
¥ 14,945
¥ 14,945
Level 3
¥ —
—
340
—
—
—
¥ 340
¥ —
¥ —
Total
¥ 183,078
307
481
68
34,536
254
¥ 218,724
¥ 14,945
¥ 14,945
Level 1 investments are comprised principally of Japanese
equity securities, which are valued using an unadjusted
quoted market price in active markets with sufficient vol-
ume and frequency of transactions. Level 2 cash and cash
equivalents are valued based on market approach, using
quoted prices for identical assets in markets that are not
active. Level 3 investments are mainly comprised of corpo-
rate bonds, which are valued based on cost approach, using
unobservable inputs as the market for the assets was not
active at the measurement date.
Derivative financial instruments are comprised of for-
eign exchange contracts. Level 2 derivatives are valued using
quotes obtained from counterparties or third parties, which
are periodically validated by pricing models using observ-
able market inputs, such as foreign currency exchange rates
and interest rates, based on market approach.
The following table presents the changes in Level 3 assets measured on a recurring basis, consisting primarily of corpo-
rate bonds, for the years ended December 31, 2014 and 2013.
Years ended December 31
Millions of yen
Balance at beginning of year
Total gains or losses (realized or unrealized):
Included in earnings
Included in other comprehensive income (loss)
Purchases, issuances, and settlements
Balance at end of year
2014
¥ 340
—
(18)
152
¥ 474
2013
¥ 444
1
36
(141)
¥ 340
Gains and losses included in earnings are mainly relat-
ed to corporate bonds still held at December 31, 2014 and
2013, and are reported in “Other, net” in the consolidated
statements of income.
Assets and liabilities measured at fair value on a
nonrecurring basis
During the years ended December 31, 2014 and 2013, there
were no circumstances that required any significant assets or
liabilities to be measured at fair value on a nonrecurring basis.
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
81
21. SEGMENT INFORMATION
Canon operates its business in three segments: the Office
Business Unit, the Imaging System Business Unit, and the
Industry and Others Business Unit, which are based on the
organizational structure and information reviewed by Canon’s
management to evaluate results and allocate resources.
The primary products included in each segment are as follows:
Office Business Unit:
Office multifunction devices (MFDs) / Laser multifunction
printers (MFPs) / Laser printers / Digital production print-
ing systems / High speed continuous feed printers / Wide-
format printers / Document solutions
Imaging System Business Unit:
Interchangeable lens digital cameras / Digital compact
cameras / Digital camcorders / Digital cinema cameras /
Interchangeable lenses / Inkjet printers / Large-format ink-
jet printers / Commercial photo printers / Image scanners /
Multimedia projectors / Broadcast equipment / Calculators
Industry and Others Business Unit:
Semiconductor lithography equipment / FPD (Flat pan-
el display) lithography equipment / Digital radiography
systems / Ophthalmic equipment / Vacuum thin-film
deposition equipment / Organic LED (OLED) panel man-
ufacturing equipment / Die bonders / Micromotors /
Network cameras / Handy terminals / Document scanners
The accounting policies of the segments are substantially
the same as those described in the significant accounting pol-
icies in Note 1. Canon evaluates performance of, and allocates
resources to, each segment based on operating profit.
Information about operating results and assets for each segment as of and for the years ended December 31, 2014, 2013
and 2012 is as follows:
Millions of yen
2014: Net sales:
External customers
Intersegment
Total
Operating cost and expenses
Operating profit
Total assets
Depreciation and amortization
Capital expenditures
Office
¥ 2,075,788
2,944
2,078,732
1,786,675
¥ 292,057
¥ 1,025,499
87,058
69,704
2013: Net sales:
External customers
Intersegment
Total
Operating cost and expenses
Operating profit
Total assets
Depreciation and amortization
Capital expenditures
¥ 1,993,898
6,175
2,000,073
1,733,165
¥ 266,908
¥ 954,803
88,344
54,644
2012: Net sales:
External customers
Intersegment
Total
Operating cost and expenses
Operating profit
Total assets
Depreciation and amortization
Capital expenditures
¥ 1,751,960
5,615
1,757,575
1,553,997
¥ 203,578
¥ 927,543
77,660
58,402
Imaging
System
Industry and
Others
Corporate and
eliminations
¥ 1,342,501
693
1,343,194
1,148,593
¥ 194,601
¥ 517,524
53,912
31,124
¥ 1,448,186
752
1,448,938
1,245,144
¥ 203,794
¥ 584,856
56,564
44,112
¥ 1,404,394
1,577
1,405,971
1,195,653
¥ 210,318
¥ 614,328
53,664
58,142
¥ 308,963
89,802
398,765
420,566
¥ (21,801)
¥ 342,695
37,544
15,976
¥ 289,296
85,574
374,870
400,201
¥ (25,331)
¥ 328,202
37,072
27,040
¥ 323,434
84,406
407,840
401,930
¥ 5,910
¥ 337,899
34,264
44,086
¥
—
(93,439)
(93,439)
7,929
¥ (101,368)
¥ 2,574,900
84,966
107,956
¥
—
(92,501)
(92,501)
15,593
¥ (108,094)
¥ 2,374,849
93,193
101,682
¥
—
(91,598)
(91,598)
4,352
¥
(95,950)
¥ 2,075,733
92,545
146,031
Consolidated
¥ 3,727,252
—
3,727,252
3,363,763
¥ 363,489
¥ 4,460,618
263,480
224,760
¥ 3,731,380
—
3,731,380
3,394,103
¥ 337,277
¥ 4,242,710
275,173
227,478
¥ 3,479,788
—
3,479,788
3,155,932
¥ 323,856
¥ 3,955,503
258,133
306,661
82
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intersegment sales are recorded at the same prices used
in transactions with third parties. Expenses not directly
associated with specific segments are allocated based on the
most reasonable measures applicable. Corporate expenses
include certain corporate research and development expens-
es. Segment assets are based on those directly associated
with each segment. Corporate assets primarily consist of
cash and cash equivalents, investments, deferred tax assets,
goodwill and corporate properties. Capital expenditures
represent the additions to property, plant and equipment
and intangible assets measured on an accrual basis.
In 2013, based on the realignment of Canon’s inter-
nal reporting structure, certain financial assets were
transferred from Corporate to the Office Business Unit.
Accordingly, corresponding amounts of total assets as of
December 31, 2012 were reclassified.
Information about product sales to external customers by business unit for the years ended December 31, 2014, 2013 and
2012 is as follows:
Years ended December 31
Office
Monochrome copiers
Color copiers
Printers
Others
Total
Imaging System
Cameras
Inkjet printers
Others
Total
Industry and Others
Lithography equipment
Others
Total
Consolidated
Millions of yen
2014
2013
2012
¥ 322,398
401,447
862,000
489,943
2,075,788
861,196
366,946
114,359
1,342,501
90,395
218,568
308,963
¥ 3,727,252
¥ 312,973
¥ 274,021
381,848
841,436
457,641
1,993,898
324,851
766,382
386,706
1,751,960
973,517
990,549
363,070
111,599
312,429
101,416
1,448,186
1,404,394
62,116
227,180
289,296
¥ 3,731,380
62,892
260,542
323,434
¥ 3,479,788
Information by major geographic area as of and for the years ended December 31, 2014, 2013 and 2012 is as follows:
Net sales:
Japan
Americas
Europe
Asia and Oceania
Total
Long-lived assets:
Japan
Americas
Europe
Asia and Oceania
Total
Millions of yen
2014
2013
2012
¥ 724,317
1,036,500
1,090,484
875,951
¥ 3,727,252
¥ 715,863
1,059,501
1,124,929
831,087
¥ 720,286
939,873
1,014,038
805,591
¥ 3,731,380
¥ 3,479,788
¥ 950,719
¥ 984,231
¥ 1,032,598
157,748
127,700
210,650
131,660
111,609
196,305
112,163
91,904
159,435
¥ 1,446,817
¥ 1,423,805
¥ 1,396,100
STRATEGY
BUSINESS SEGMENT
CORPORATE STRUCTURE
FINANCIAL SECTION
CORPORATE DATA
83
Net sales are attributed to areas based on the location
where the product is shipped to the customers. Other than
in Japan and the United States, Canon does not conduct
business in any individual country in which its sales in
that country exceed 10% of consolidated net sales. Net sales
in the United States were ¥938,411 million, ¥960,213 mil-
lion and ¥763,870 million for the years ended December 31,
2014, 2013 and 2012, respectively.
Long-lived assets represent property, plant and equip-
ment and intangible assets for each geographic area.
The following information is based on the location of the Company and its subsidiaries as of and for the years ended
December 31, 2014, 2013 and 2012. In addition to the disclosure requirements under U.S. GAAP, Canon discloses this infor-
mation in order to provide financial statements users with useful information.
Millions of yen
2014: Net sales:
External customers
Intersegment
Total
Japan
Americas
Europe
Asia and
Oceania
Corporate and
eliminations
Consolidated
¥ 836,801 ¥ 1,033,797 ¥ 1,088,293 ¥ 768,361 ¥
— ¥ 3,727,252
1,752,378
8,738
59,493
821,600
(2,642,209)
—
2,589,179
1,042,535
1,147,786
1,589,961
(2,642,209)
3,727,252
Operating cost and expenses
2,245,930
1,018,661
1,135,515
1,522,244
(2,558,587)
3,363,763
Operating profit
Total assets
2013: Net sales:
¥ 343,249 ¥
23,874 ¥
12,271 ¥
67,717 ¥
(83,622) ¥ 363,489
¥ 1,134,484 ¥ 531,122 ¥ 484,858 ¥ 674,672 ¥ 1,635,482 ¥ 4,460,618
External customers
¥ 797,501 ¥ 1,056,096 ¥ 1,124,603 ¥ 753,180 ¥
— ¥ 3,731,380
Intersegment
Total
1,855,181
11,774
53,281
881,765
(2,802,001)
—
2,652,682
1,067,870
1,177,884
1,634,945
(2,802,001)
3,731,380
Operating cost and expenses
2,326,351
1,043,487
1,171,357
1,574,125
(2,721,217)
3,394,103
Operating profit
Total assets
¥ 326,331 ¥ 24,383 ¥
6,527 ¥ 60,820 ¥
(80,784) ¥ 337,277
¥ 1,152,398 ¥ 447,039 ¥ 496,549 ¥ 631,827 ¥ 1,514,897 ¥ 4,242,710
2012: Net sales:
External customers
¥ 834,406 ¥ 932,987 ¥ 1,010,922 ¥ 701,473 ¥
— ¥ 3,479,788
Intersegment
Total
1,829,834
23,767
5,650
781,836
(2,641,087)
—
2,664,240
956,754
1,016,572
1,483,309
(2,641,087)
3,479,788
Operating cost and expenses
2,336,536
937,111
972,585
1,437,527
(2,527,827)
3,155,932
Operating profit
Total assets
¥ 327,704 ¥ 19,643 ¥ 43,987 ¥ 45,782 ¥
(113,260) ¥ 323,856
¥ 1,206,702 ¥ 339,918 ¥ 457,592 ¥ 548,583 ¥ 1,402,708 ¥ 3,955,503
22. SUBSEQUENT EVENT
On March 3, 2015, the Company commenced a public ten-
der offer for all of the issued shares of Axis AB (“Axis”),
a Sweden-based company listed on Nasdaq Stockholm, a
global leader in the network video solutions industry, for
a consideration of 340 Swedish krona (¥4,804) in cash per
share or a maximum amount of approximately 23.6 billion
Swedish krona (approximately ¥333.7 billion). Through the
transaction, the Company aims to make Axis a consolidat-
ed subsidiary, acquiring 100% of Axis’s issued shares. The
Company views its network surveillance camera business as
a promising new business area for Canon. Corresponding
Japanese yen amounts as noted above are translated at the
rate of ¥14.13 = 1 Swedish krona.
84 SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31
Millions of yen
2014: Allowance for doubtful receivables
Trade receivables
Finance receivables
2013: Allowance for doubtful receivables
Trade receivables
Finance receivables
2012: Allowance for doubtful receivables
Trade receivables
Finance receivables
Balance at
beginning of period
Addition-charged
to income
Deduction bad debts
written off
Translation
adjustments and other
Balance at
end of period
¥ 12,730
7,323
¥ 12,970
6,908
¥ 11,563
7,039
¥ 878
154
¥ 1,235
212
¥ 2,149
1,922
¥ (2,236)
(1,171)
¥ (4,173)
(1,278)
¥ (2,382)
(1,304)
¥ 750
(30)
¥ 2,698
1,481
¥ 1,640
(749)
¥ 12,122
6,276
¥ 12,730
7,323
¥ 12,970
6,908
MANAGEMENT’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
85
The management of Canon is responsible for establishing and maintaining adequate internal control over financial report-
ing. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Securities Exchange Act of
1934, as amended, as a process designed by, or under the supervision of, the company’s principal executive and principal
financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpos-
es in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) pro-
vide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Canon’s management assessed the effectiveness of internal control over financial reporting as of December 31, 2014. In mak-
ing this assessment, management used the criteria established in internal Control–Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”).
Based on its assessment, management concluded that, as of December 31, 2014, Canon’s internal control over financial
reporting was effective based on the COSO criteria.
Canon’s independent registered public accounting firm, Ernst & Young ShinNihon LLC, has issued an audit report on the
effectiveness of Canon’s internal control over financial reporting.
86
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of
Canon Inc.
We have audited the accompanying consolidated balance sheets of Canon Inc. and subsidiaries as of December 31, 2014 and 2013,
and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in
the period ended December 31, 2014. Our audits also included the schedule of valuation and qualifying accounts (the “schedule”).
These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial state-
ments are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Canon Inc. and subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting princi-
ples. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Canon
Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 frame-
work) and our report dated March 27, 2015 expressed an unqualified opinion thereon.
March 27, 2015
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
87
The Board of Directors and Stockholders of
Canon Inc.
We have audited Canon Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on crite-
ria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). Canon Inc. and subsidiaries’ management is responsible for maintaining effec-
tive internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effec-
tiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the cir-
cumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabil-
ity of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assur-
ance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could
have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, pro-
jections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Canon Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the con-
solidated balance sheets of Canon Inc. and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements
of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2014, and
our report dated March 27, 2015 expressed an unqualified opinion thereon.
March 27, 2015
88 TRANSFER AND
REGISTRAR’S OFFICE
STOCKHOLDER
INFORMATION
Canon Inc.
30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501, Japan
Stock Exchange Listings:
Tokyo, Nagoya, Fukuoka, Sapporo and New York
stock exchanges
Manager of the Register of Shareholders
Mizuho Trust & Banking Co., Ltd.
2-1, Yaesu 1-chome, Chuo-ku, Tokyo 103-8670, Japan
Depositary and Agent with Respect to American
Depositary Receipts for Common Shares
JPMorgan Chase Bank, N.A.
1 Chase Manhattan Plaza, Floor 58, New York, N.Y.
10005-1401, U.S.A.
American Depositary Receipts are traded on the New York
Stock Exchange (CAJ).
Ordinary General Meeting of Shareholders:
March 27, 2015, in Tokyo
Further Information:
For publications or information, please contact the
Public Affairs Headquarters, Canon Inc., Tokyo,
or access Canon’s Website at
www.canon.com
MAJOR CONSOLIDATED SUBSIDIARIES
(As of December 31, 2014)
89
Marketing & Other
Canon Marketing Japan Inc.
Canon System and Support Inc.
Canon Software Inc.
Canon IT Solutions Inc.
Canon U.S.A., Inc.
Canon Canada Inc.
Canon Solutions America, Inc.
Canon Latin America, Inc.*
Canon Europa N.V.
Canon Europe Ltd.
Canon Ru LLC
Canon (UK) Ltd.
Canon Deutschland GmbH
Canon (Schweiz) AG
Canon Nederland N.V.
Canon France S.A.S.
Canon Middle East FZ-LLC
Canon (China) Co., Ltd.
Canon Hongkong Co., Ltd.
Canon Singapore Pte. Ltd.
Canon Australia Pty. Ltd.
* Canon Latin America, Inc. was merged into Canon U.S.A.,
Inc. on January 1, 2015.
Manufacturing
Canon Precision Inc.
Fukushima Canon Inc.
Canon Chemicals Inc.
Canon Components, Inc.
Canon Electronics Inc.
Canon Finetech Inc.
Nisca Corporation
Canon Tokki Corporation
Canon ANELVA Corporation
Nagahama Canon Inc.
Canon Machinery Inc.
Oita Canon Materials Inc.
Oita Canon Inc.
Nagasaki Canon Inc.
Canon Virginia, Inc.
Canon Bretagne S.A.S.
Océ-Technologies B.V.
OPTOPOL Technology Sp. z o.o.
Canon Dalian Business Machines, Inc.
Canon (Suzhou) Inc.
Canon Zhongshan Business Machines Co., Ltd.
Canon Zhuhai, Inc.
Canon Inc., Taiwan
Canon Vietnam Co., Ltd.
Canon Hi-Tech (Thailand) Ltd.
Canon Opto (Malaysia) Sdn. Bhd.
Canon Prachinburi (Thailand) Ltd.
Canon Business Machines (Philippines), Inc.
Research & Development
Canon Research Centre France S.A.S.
Canon Information Systems Research Australia Pty. Ltd.
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CANON INC. 30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501, Japan
©Canon Inc. 2015 PUB.BEP024-01 0415