The Company and its consolidated subsidiaries have grouped business-use assets according to the minimum independent cash-flow-generating unit and have identified idle assets as one group for the purpose of accounting for impairment of property, plant and equipment on an individual basis. When there is a decrease in profitability, no specific plan for future use or the book value of such idle assets is less than their respective recoverable amounts, the book value of the assets is written down to its recoverable amount. The assets listed in the above tables were written down to their respective recoverable amounts and \2,419 million (U.S.$29,688 thousand) and \2,486 million of impairment losses were recognized in the statements of income for the years ended December 31, 2010 and 2009, respectively. The impairment loss consisted of \680 million (U.S.$8,352 thousand) for buildings and structures, \389 million (U.S.$4,784 thousand) for machinery and equipment, \1,186 million (U.S.$14,559 thousand) for land, \4 million (U.S.$49 thousand) for other and \158 million (U.S.$1,942 thousand) for removal cost for the year ended December 31, 2010 and consisted of \657 million for buildings, \1,074 million for machinery and equipment, \63 million for other and \689 million for removal cost for the year ended December 31, 2009. The impairment loss for idle assets was measured based on the valuation of the assets using the valuation techniques of a real estate appraiser and the memorandum value of the idle assets. 7. Loss on Discontinued Operations Loss on discontinued operations, amounting to \490 million for the year ended December 31, 2009, consisted of inventory valuation loss and its related disposal cost due to the cessation of operations of facilities for chlorinated organic products. 8. Financial Instruments 1. Matters related to the status of financial instruments (1) Policies on financial instruments When managing surplus funds, the Group limits the application of such funds to highly secure financial assets that, mainly short-term bank deposits, and it procures funds mainly through bank borrowings. Derivative transactions are used to hedge interest fluctuation risk present in borrowings, but are not used for speculative or trading purposes. (2) Description of financial instruments and associated risks Notes and accounts receivable, which represent trade receivables, are exposed to client-based credit risk. Furthermore, foreign currency denominated trade receivables are also subject to exchange rate fluctuation risks. In order to counter such risk, foreign currency borrowings are used when necessary as a means of hedging the net position of foreign currency denominated trade payables. Securities and investment securities are primarily negotiable deposits, held-to-maturity securities and shares related to businesses, and are thus exposed to risk stemming from fluctuations in market value. Notes and accounts payable, which represent trade payables, are due within one year. A portion of these are foreign currency denominated items related to payment for raw material imports, which are subject to exchange rate fluctuation risk. These are constantly maintained within the balance of receivables denominated in the same foreign currencies. Borrowings are used to procure funds necessary for operational transactions and capital expenditures. A portion of these bearing variable interest rates are exposed to interest rate fluctuation risk. Derivative transactions (interest rate swap transactions) are used as a means of hedging. The interest rate swap transactions are entered into hedge in order to risk associated with fluctuations in interest rates on borrowings. Information on hedge accounting-related matters such as hedging instruments, hedged items, hedging policies and methods of assessing the effectiveness of hedging can be found in Note2 (I). (3) Risk management systems related to financial instruments (a) Management of credit risk (risk associated with non-performance of a contract by a business partner etc.) The departments in charge of Company operations regularly monitor the trade receivable status of all business partners in accordance with the Regulations on Selling in order to identify business partner-based credit risk associated with the deterioration of financial circumstances or other causes at an early stage and reduce it. In the case of the consolidated subsidiaries, their divisions or accounting departments also manage the financial and credit status of their business partners pursuant to their own regulations. As held-to-maturity securities consist only of those with a high credit rating, the credit risk of such securities is very small. Derivative transactions are entered into only with highly rated financial institutions. The maximum credit risk value as of the date of closing of consolidated accounts for the current term is expressed by the value of financial assets in the consolidated balance sheet which are subject to credit risk. (b) Management of market risk (risk associated with exchange rate and interest rate fluctuations) When necessary, the Company uses borrowings denominated in foreign currencies to hedge its foreign currency denominated trade receivables and trade payables. Interest rate swaps are used to reduce risk associated with fluctuations in interest expenses related to borrowings. The Company regularly monitors the fair value of securities and investment securities, and the financial condition of the issuers (its business partners). Derivative transactions are individually approved by the director of finance and accounting before being entered into by the finance and accounting department, and their position and profit/loss situation are managed regularly. (c) Management of liquidity risk associated with procuring funds (the risk of being unable to execute a payment on the due date) The Company and its consolidated subsidiaries have formulated cash flow management plans and manage liquidity risk by, for example, keeping a certain amount of cash reserves on hand. The conclusion of commitment line agreements with a total value of \10 billion also serves to reduce liquidity risk. (4) Supplementary information regarding the fair value of financial instruments The fair value of financial instruments consists of their market price-based value, and, if a market price is not available, their logically calculated value. Variable factors are incorporated into the calculations of the fair value, and different fair values are possible depending on the differing assumptions used. 2. Fair value of financial instruments The fair value and carrying value of financial instruments and the difference between both values are shown below. Financial instruments whose fair value is extremely difficult to determine, are not included in the table below. Millions of yen December 31, 2010 Carrying value Fair value Difference (1) Cash and cash equivalents...................... \14,055 \14,055 . (2) Notes and accounts receivable............ 44,495 44,495 . (3) Securities and investment securities: (i) Held-to-maturity securities................. 101 103 \ 1 (ii) Other securities........................................ 19,026 19,026 . (4) Overdue loans receivable........................ 8,753 Allowance for doubtful receivables (*).... (5,688) 3,065 3,065 . Total assets............................................................... 80,745 80,746 1 (1) Notes and accounts payable................. 14,828 14,828 . (2) Short-term bank loans................................ 7,481 7,481 . (3) Long-term debt.............................................. 6,020 6,067 47 Total liabilities......................................................... \28,330 \28,377 \47 Total derivative transactions.......................... . . . 34 Annual Report 2010