FINANCIAL SECTION Notes to Consolidated Financial Statements 2. Differences with International Financial Reporting Standards Software development contracts  Inventories Impairment of assets Goodwill Retirement benefits (Note 10) 3. U.S. Dollar Amounts 4. Marketable Securities The Company and its consolidated subsidiaries in Japan maintain their books of account in yen. The U.S. dollar amounts included in the accompanying consolidated financial statements and the notes thereto represent the arithmetic results of translating yen into U.S. dollars at ·106 = US$1, the approxima te exchange rate at March 31, 2004. The U.S. dollar amounts are presented solely for the convenience of readers and the translation is not intended to imply that the assets and liabilities which originated in yen have been or could readily be converted, realized or settled in U.S. dollars at the above or any other rate. Under IAS 19, the unrecognized net obligation upon the application of a new accounting standard should be recognized immediately. The accounting procedure for this obligation is indicated in Note 10.  As a result of future revisions of IFRS/IAS or the other effects, there is a possibility that certain differences may arise for the accounting procedures that are not discussed above (such as financial instruments). Under IFRS 3, goodwill should not be amortized and the impairment rule should be applied in accordance with IAS 36. The Group amortizes goodwill by the straight-line method over periods not exceeding 20 years as indicated in section (j) of “Significant Accounting Policies” and does not apply the impair ment rule. Under IAS 36, upon impairment of assets, the book value should be devaluated to the recoverable amount. The impairment rule will not be applied mandatorily in Japan until the year ended March 31, 2006. Therefore the effects on the aggregate value of assets based on IAS 36 are not calculated. However, the Group takes into consideration the recoverability of assets based on future business activities. Under IAS 2, inventories should be stated at the lower of their historical cost or net realizable value. The Group evaluates inventories mainly at cost as indicated in section (h) of “Sign ificant Accounting Policies.” The effects on the aggregate valu e of inventories based on IAS 2 are not calculated. However, the Group takes into consideration the recoverability of inventories based on future business environments. Under IAS 11, revenue and costs associated with construction contracts should be recognized by the percentage-of- completion method when the outcome of the contracts can be estimated reliably. The Group generally recognizes revenue and costs associated with software development contracts, which should be accounted for as construction contracts under IAS 11, at the acceptance by the customers as indicated in section (e) of “Significant Accounting Policies.” In addition, under IAS 11, the expected loss should be recognized immediately when it is probable that total contract costs will exceed total contract revenue. The Group recognized the expected loss from the software development contracts which were proved to be unprofitable at March 31, 2004 as “restructur ing charges.” The Group is discussing the requirements for adoption of International Financial Reporting Standards. The Group believes at present that there are certain differences between the accounting principles and practices adopted by the Group and those prescribed by International Financial Reporting Standards (“IFR S/IAS”) at March 31, 2004, which are presented below. This note is out of scope of the audit. 42 Yen U.S. Dollars (millions) (thousands) 2003 2004 2004 Held-to-maturity investments Carrying value (Amortized cost) · 1,509 · 2,208 $ 20,830 Market value 1,506 2,225 20,990 Net unrealized gain (loss)  · (3) ·1 7 $ 160 Available-for-sale securities Acquisition costs ·79,214 · 64,794 $ 611,264 Carrying value (Market value)  82,981 317,891 2,998,972 Net unrealized gain  · 3,767 ·253,097 $2,387,708 At March 31, 2003 and 2004, marketable securities included in “ short-term investments” and “other investments and long- term loans” were as follows: After a certain portion of shares in Fanuc Ltd. was sold for the year ended March 31, 2004, the remaining shares were stated as available-for-sale securities. At March 31, 2004, available-for-sale securities’ acquisition costs, carrying value (market value) and net unrealized gain on investments in Fanuc Ltd. were ·379 million ($3,576 thousand), ·218,585 million ($2,062,123 thousand) and ·218,206 million ($2,058,547 thousand ), respectively.