Lease transactions that do not transfer ownership, contracted before January 1, 2009, continue to be accounted for as operating leases. The adoption of the new standards had no material effect to operating income and income before income taxes and minority interests. (k) Retirement benefits for employees and directors Accrued retirement benefits for employees are provided mainly at an amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of the balance sheet date, as adjusted for the unrecognized net retirement benefit obligation at transition and unrecognized actuarial gain or loss. The retirement benefit obligation is attributed to each period by the straight-line method over the estimated years of service of the eligible employees. When pension plan assets are less than retirement benefit obligation as adjusted for the unrecognized actuarial gain or loss, the amount is booked as accrued retirement benefits and when pension plan assets are more than retirement benefit obligation as adjusted for the unrecognized actuarial gain or loss, the amount is booked as prepaid pension cost. Actuarial gain or loss of the Company is amortized in the year following the year in which the gain or loss is recognized by the straight-line method over the average remaining years of service of the eligible employees (13 to 15 years). Actuarial gain and loss of two consolidated subsidiaries are amortized by the straight-line method over a period (5 years and 10 years, respectively) which is shorter than the average remaining years of service of the eligible employees. In addition, directors and corporate auditors of the Company and certain consolidated subsidiaries are customarily entitled to lump-sum payments under the unfunded retirement benefits plans. The provision for retirement benefits for these officers has been made at estimated amounts. On April 1, 2004, the Company changed its rules for tax-qualified pension plans and lump-sum payment plans. As a result, unrecognized prior year service cost to reduce the retirement benefit obligation was incurred. The unrecognized prior year service cost is being amortized by the straight-line method over a period (14 years) which is shorter than the average remaining years of service of the eligible employees. On April 1, 2005, one consolidated subsidiary changed its rules for tax-qualified pension plans and lump-sum payment plans. As a result, unrecognized prior year service cost to reduce the retirement benefit obligation was incurred. The unrecognized prior year service cost is being amortized by the straight-line method over a period (5 years) which is shorter than the average remaining years of service of the eligible employees. (l) Derivative financial instruments The Company has entered into various contracts of derivative financial instruments in order to manage certain risks arising from adverse fluctuations in foreign currency exchange rates and interest rates. Derivative financial instruments are carried at fair value with any changes in unrealized gain or loss charged or credited to income, unless when those which meet certain hedging criteria for special accounting treatment under which any differences paid or received on the interest rate swaps are recognized as adjustments to interest expense over the life of such swaps, thereby adjusting the effective interest rate on the hedged items, which are the underlying borrowings. Receivables and payables hedged by qualified forward foreign exchange contracts are translated at the rates of the corresponding foreign exchange contracts. (m) Appropriation of retained earnings Under Corporation Law of Japan, the appropriation of retained earnings with respect to a given financial year is made by resolution of the shareholders at a general meeting to be held subsequent to the close of such financial year. The accounts for that year do not, therefore, reflect such appropriations. 3. U.S. Dollar Amounts The translation of yen amounts into U.S. dollar amounts is made at \92.10 = U.S.$1.00, the approximate exchange rate at December 31, 2009, and included solely for convenience. The translation should not be construed as a representation that yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate. 4. Investment Securities (a) At December 31, 2009 and 2008, held-to-maturity securities for which market prices were available were summarized as follows: Millions of yen December 31, 2009 Carrying value Market value Unrecognized gain Unrecognized gain: Corporate bonds............................... \102 \103 \ 0 Unrecognized loss: Corporate bonds............................... . . . Total................................................................. \102 \103 \ 0 Thousands of U.S. dollars December 31, 2009 Carrying value Market value Unrecognized gain Unrecognized gain: Corporate bonds............................... $1,111 $1,119 $ 8 Unrecognized loss: Corporate bonds............................... . . . Total................................................................. $1,111 $1,119 $ 8 Millions of yen December 31, 2008 Carrying value Market value Unrecognized gain Unrecognized gain: Corporate bonds............................... \ . \ . \. Unrecognized loss: Corporate bonds............................... 103 100 (2) Total................................................................. \103 \100 \ (2) (b) Marketable securities classified as other securities as of December 31, 2009 and 2008 were summarized as follows: Millions of yen December 31, 2009 Acquisition cost Carrying value Unrealized gain (loss) Securities whose carrying value exceeds their acquisition cost: Stock......................................................... \3,572 \ 6,882 \3,309 Securities whose acquisition cost exceeds their carrying value: Stock......................................................... 4,279 3,228 (1,051) Total................................................................. \7,852 \10,110 \2,258 Thousands of U.S. dollars December 31, 2009 Acquisition cost Carrying value Unrealized gain (loss) Securities whose carrying value exceeds their acquisition cost: Stock......................................................... $38,790 $ 74,723 $35,933 Securities whose acquisition cost exceeds their carrying value: Stock......................................................... 46,466 35,051 (11,415) Total................................................................. $85,256 $109,774 $24,517 Toagosei Co., Ltd. 31