2.2.0.25falsefalse0218 - Disclosure - Derivatives and Hedging Activitiestruefalsefalse1falsefalseJPYfalsefalse1/1/2010 - 12/31/2010 JPY (¥) JPY (¥) / shares ¥Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0000016988duration2010-01-01T00:00:002010-12-31T00:00:00JPYStandardhttp://www.xbrl.org/2003/iso4217JPYiso42170PureStandardhttp://www.xbrl.org/2003/instancepurexbrli0SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0JPYEPSDividehttp://www.xbrl.org/2003/iso4217JPYiso4217http://www.xbrl.org/2003/instancesharesxbrli0JPYJPY¥2true0us-gaap_DerivativeInstrumentsAndHedgesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalseDerivatives and Hedging Activities [Abstract]3false0us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>18. Derivatives and Hedging Activities</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b><i>Risk management policy</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">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 foreign currency exchange rate risk by continually monitoring changes 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. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Foreign currency exchange rate risk management</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">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 currency 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 that are denominated in foreign currencies. 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. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Cash flow hedge</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Changes in the fair value of derivative financial instruments designated as cash flow hedges, including foreign exchange contracts associated with forecasted intercompany sales, are reported in accumulated other comprehensive income (loss). These amounts are subsequently reclassified into earnings through other income (deductions) in the same period as the hedged items affect earnings. Substantially all amounts recorded in accumulated other comprehensive income (loss) at year-end are expected to be recognized in earnings over the next 12 months. Canon excludes the time value component from the assessment 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 maturity date are recognized in earnings and not considered hedge ineffectiveness. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Derivatives not designated as hedges</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Canon has entered into certain foreign exchange contracts to primarily offset the earnings impact related to fluctuations in foreign currency exchange rates associated 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 economic perspective. The changes in the fair value of these contracts are recorded in earnings immediately. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Contract amounts of foreign exchange contracts as of December 31, 2010 and 2009 are set forth below: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="56%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="15%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>(Millions of yen)</b></td> <td> </td> </tr>   <tr valign="bottom"> <td colspan="3"> <div style="margin-left:15px; text-indent:-15px">To sell foreign currencies </div></td> <td> </td> <td align="left"><b>¥</b></td> <td align="right"><b>466,361</b></td> <td> </td> <td> </td> <td align="left">¥</td> <td align="right">494,314</td> <td> </td> </tr> <tr valign="bottom"> <td colspan="3"> <div style="margin-left:15px; text-indent:-15px">To buy foreign currencies </div></td> <td> </td> <td> </td> <td align="right"><b>48,686</b></td> <td> </td> <td> </td> <td> </td> <td align="right">30,978</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Fair value of derivative instruments in the consolidated balance sheets</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables present Canon’s derivative instruments measured at gross fair value as reflected in the consolidated balance sheets as of December 31, 2010 and 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Derivatives designated as hedging instruments</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="51%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="13%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Fair value</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Balance sheet location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>(Millions of yen)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Assets: </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Prepaid expenses and other current assets</td> <td> </td> <td align="left"> </td> <td align="right"><b>¥2,487</b></td> <td> </td> <td> </td> <td align="left"> </td> <td align="right">¥  —</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities: </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Other current liabilities</td> <td> </td> <td> </td> <td align="right"><b>426</b></td> <td> </td> <td> </td> <td> </td> <td align="right">644</td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 12pt; margin-top: 0pt"> </div> <div align="center" style="font-size: 12pt; margin-top: 0pt"> </div> <div align="left" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 0pt"> <b> <i> </i> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Derivatives not designated as hedging instruments</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="51%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="10%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="13%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Fair value</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>December 31</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Balance sheet location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>(Millions of yen)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Assets: </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Prepaid expenses and other current assets</td> <td> </td> <td align="left"><b>¥</b></td> <td align="right"><b>9,463</b></td> <td> </td> <td> </td> <td align="left">¥</td> <td align="right">752</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Liabilities: </div></td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Other current liabilities</td> <td> </td> <td> </td> <td align="right"><b>487</b></td> <td> </td> <td> </td> <td> </td> <td align="right">6,566</td> <td> </td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Effect of derivative instruments on the consolidated statements of income</i></b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The following tables present the effect of Canon’s derivative instruments on the consolidated statements of income for the years ended December 31, 2010 and 2009. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Derivatives in cash flow hedging relationships</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>Years ended December 31</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b>Gain (loss) recognized in </b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b> </b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b> </b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b>income (ineffective</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Gain (loss)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b>Gain (loss) reclassified from</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b>portion and amount</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>recognized in OCI</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b>accumulated OCI into income</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4"><b>excluded from</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(effective portion)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>(effective portion)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="4" style="border-bottom: 1px solid #000000"><b>effectiveness testing)</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="14"><b>(Millions of yen)</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>2010:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="left"><b>¥</b></td> <td align="right"><b>1,419</b></td> <td> </td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Other, net</td> <td> </td> <td align="left"><b>¥</b></td> <td align="right"><b>6,990</b></td> <td> </td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Other, net</td> <td> </td> <td nowrap="nowrap" align="left"><b>¥</b></td> <td align="right"><b>(302</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2009: </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td nowrap="nowrap" align="left">¥</td> <td align="right">(2,372</td> <td nowrap="nowrap">)</td> <td> </td> <td align="left" valign="top">Other, net</td> <td> </td> <td align="left">¥</td> <td align="right">2,670</td> <td> </td> <td> </td> <td align="left" valign="top">Other, net</td> <td> </td> <td nowrap="nowrap" align="left">¥</td> <td align="right">(462</td> <td nowrap="nowrap">)</td> </tr>  </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The amount of the hedging ineffectiveness was not material for the year ended December 31, 2008. The amount of net gains or losses excluded from the assessment of hedge effectiveness (time value component) which was recorded in other income (deductions) was net losses of ¥3,701 million for the year ended December 31, 2008. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><u>Derivatives not designated as hedging instruments</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Gain (loss) recognized <br /> in income on derivative</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Years ended December 31</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="6"><b>(Millions of yen)</b></td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Foreign exchange contracts </div></td> <td> </td> <td align="left" valign="top" nowrap="nowrap">Other, net</td> <td> </td> <td align="left"><b>¥</b></td> <td align="right"><b>50,794</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">¥</td> <td align="right">(8,638</td> <td nowrap="nowrap">)</td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center" style="font-size: 12pt; margin-top: 0pt"> </div> <div align="center" style="font-size: 12pt; margin-top: 0pt"> </div> </div>  <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 45 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 falsefalseDerivatives and Hedging Activities12Derivatives and Hedging ActivitiesUnKnownUnKnownUnKnownUnKnownfalsetrue