15 years). Actuarial gain or 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, prior service costs are expensed using the straight-line method over the average remaining years of service of the eligible employees (5 to 17 years). The prior service cost of one consolidated subsidiary is expensed using the straight-line method over the average remaining years of service of the eligible employees (15 years). In addition, directors of the Company and one consolidated subsidiary 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. (m) 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 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. (n) 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. Accounting Standards Issued but Not Yet Effective Accounting standard for retirement benefits “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26 issued on May 17, 2012) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25 issued on May 17, 2012). Under the revised accounting standard, actuarial gains and losses and unrecognized prior service costs that are yet to be recognized in profit or loss shall be recognized within net assets (accumulated other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized as a liability or asset. The retirement benefit obligation can be attributed to each period by the benefit formula basis by the straight-line method and the calculation method for the discount rate shall be changed. The Company expects to apply the revised accounting standard from the fiscal year ended December 31, 2014 and apply the revised calculation method for the projected benefit obligation and service cost from beginning of the fiscal year ended December 31, 2015. As of December 31, 2013, the Company is in the process of measuring the effects of applying the revised accounting standard for on financial statements. 4. U.S. Dollar Amounts The translation of yen amounts into U.S. dollar amounts is made at \105.39 = U.S.$1.00, the approximate exchange rate at December 31, 2013, and is 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. 5. Inventories Inventories at December 31, 2013 and 2012 were as follows: Millions of yen Thousands of U.S. dollars 2013 2012 2013 Merchandise and finished products.... \10,991 \10,981 $104,294 Work in process............................................. 340 414 3,233 Raw materials and supplies.................... 4,462 4,593 42,347 \15,795 \15,989 $149,874 6. Property, Plant and Equipment Property, plant and equipment, net at December 31, 2013 and 2012 were summarized as follows: Millions of yen Thousands of U.S. dollars 2013 2012 2013 Land...................................................................... \17,801 \17,299 $168,914 Buildings and structures.......................... 19,982 20,096 189,607 Machinery, equipment and other...... 20,068 20,798 190,420 Construction in progress......................... 7,863 7,637 74,612 Leased assets................................................... 185 234 1,755 \65,901 \66,065 $625,309 7. Selling Expenses The components of selling expenses for the years ended December 31, 2013 and 2012 were as follows: Millions of yen Thousands of U.S. dollars 2013 2012 2013 Transportation expenses......................... \8,471 \8,603 $80,382 Salaries................................................................. 1,917 2,163 18,195 Bonuses.............................................................. 722 709 6,859 Depreciation and amortization........... 138 208 1,312 Retirement benefit expenses................ 175 198 1,661 8. General and Administrative Expenses The components of general and administrative expenses for the years ended December 31, 2013 and 2012 were as follows: Millions of yen Thousands of U.S. dollars 2013 2012 2013 Salaries................................................................. \2,154 \2,262 $20,439 Bonuses.............................................................. 983 1,025 9,336 Depreciation and amortization........... 1,039 1,093 9,861 Retirement benefit expenses................ 278 333 2,642 Amortization of goodwill........................ 9 9 94 9. Compensation Income The Company recorded compensation income for the year ended December 31, 2013 and 2012 on payments made to a consolidated subsidiary from the Tokyo Electric Power Company pertaining to the accident at the Fukushima Daiichi and Daini Nuclear Power Stations. Toagosei Co., Ltd. 39