UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F/A

(Amendment No. 1)

o		REGISTRATION STATEMENT PURSUANT TO
		SECTION 12(b)
		OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
		OR
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended December 31, 2009

		OR
o		TRANSITION REPORT PURSUANT TO SECTION 13
		OR 15(d)
		OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from                      to
		OR
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13
		OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		Date of event requiring this shell company report

Commission file number 001-15122

CANON KABUSHIKI KAISHA

(Exact name of Registrant in Japanese as specified in its charter)

CANON INC.

(Exact name of Registrant in English as specified in its charter)

JAPAN
(Jurisdiction of incorporation or organization)

30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501, Japan
(Address of principal executive offices)

Shinichiro Hanabusa, +81-3-3758-2111, +81-3-5482-9680, 30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501, Japan

(Name, Telephone, Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class		Name of each exchange on which registered
(1) Common Stock (the “shares”)		New York Stock Exchange*
(2) American Depositary Shares (“ADSs”), each of which represents one share		New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None
(Title of Class)

Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.
None
(Title of Class)

* Not for trading, but only for technical purposes in connection with the registration of ADSs.

     Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2009, 1,234,475,463 shares of common stock, including 50,443,092
ADSs, were outstanding.

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes þ       No o

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o       No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ       No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ       Accelerated filer o       Non-accelerated filer o

     Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

          þ U.S. GAAP
          o International Financial Reporting Standards as issued by the International Accounting Standards Board
          o Other

     If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17       o Item 18

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

 

 

TABLE OF CONTENTS

		Page number
Explanatory Note			1
Item 18. Financial Statements			62
Report of Independent Registered Public Accounting Firm			63
Consolidated Balance Sheets			65
Consolidated Statements of Income			66
Consolidated Statements of Equity			67
Consolidated Statements of Cash Flows			69
Notes to Consolidated Financial Statements			70
Schedule II — Valuation and Qualifying Accounts			106
Item 19. Exhibits			107
SIGNATURES			108
EXHIBIT INDEX			109

Explanatory Note

     This Amendment No. 1 on Form 20-F/A has been filed by Canon Inc. (the “Company”) to amend the annual report on Form 20-F for the fiscal year ended December 31, 2009 filed on March 30, 2010. This amendment presents Item 18. The only change to Item 18 is to add the conformed signature of our independent registered public accounting firm, Ernst & Young ShinNihon LLC, to the audit reports.

     The Company does not intend to revise, update, amend or restate the information presented in any other items of such annual report on Form 20-F or reflect any events that have occurred after the filing of such annual report on Form 20-F. Among other things, forward-looking statements and risk factors contained in such annual report on Form 20-F have not been revised to reflect events, results or developments that have occurred or facts that became known to the Company after filing such annual report on Form 20-F, and such forward-looking statements and risk factors should be read in their historical context.

Item 18. Financial Statements

Consolidated financial statements of Canon Inc. and Subsidiaries:		Page number
Reports of Ernst & Young ShinNihon LLC, Independent Registered Public Accounting Firm			63
Consolidated Balance Sheets as of December 31, 2009 and 2008			65
Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007			66
Consolidated Statements of Equity for the years ended December 31, 2009, 2008 and 2007			67
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007			69
Notes to Consolidated Financial Statements			70
Schedule:
Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2009, 2008 and 2007			106

     All other schedules are omitted as permitted by the rules and regulations of the Securities and Exchange Commission as not applicable.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Canon Inc.

We have audited the accompanying consolidated balance sheets of Canon Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 18. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our report dated March 16, 2009, we expressed an opinion that, except for the omission of segment reporting information, the 2008 and 2007 consolidated financial statements presented fairly, in all material respects, the consolidated financial position, results of operations and cash flows of Canon Inc. and subsidiaries, in conformity with U.S. generally accepted accounting principles. As described in Note 21, in 2009 the Company adopted segment reporting guidance and revised the disclosures in its 2008 and 2007 consolidated financial statements to conform with U.S. generally accepted accounting principles. Accordingly, our present opinion on the 2008 and 2007 consolidated financial statements, as presented herein, is unqualified rather than qualified.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Canon Inc. and subsidiaries at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in 2009 the Company adopted new accounting guidance for noncontrolling interests in consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Canon Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 30, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young ShinNihon LLC

Tokyo, Japan
March 30, 2010

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Canon Inc.

We have audited Canon Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Canon Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Canon Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Canon Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of income, equity, and cash flows for each of the three years in the period ended December 31, 2009, and our report dated March 30, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young ShinNihon LLC

Tokyo, Japan
March 30, 2010

Canon Inc. and Subsidiaries

Consolidated Balance Sheets

		December 31
		2009				2008
						(As adjusted) (Note 1)
		(Millions of yen)
Assets
Current assets:
Cash and cash equivalents (Note 1)		¥	795,034			¥	679,196
Short-term investments (Note 2)			19,089				7,651
Trade receivables, net (Note 3)			556,572				595,422
Inventories (Note 4)			373,241				506,919
Prepaid expenses and other current assets (Notes 6 and 11)			273,843				275,660
Total current assets			2,017,779				2,064,848
Noncurrent receivables (Note 18)			14,936				14,752
Investments (Note 2)			114,066				88,825
Property, plant and equipment, net (Notes 5 and 6)			1,269,785				1,357,186
Intangible assets, net (Note 7 )			117,396				119,140
Other assets (Notes 6, 7, 10 and 11)			313,595				325,183
Total assets		¥	3,847,557			¥	3,969,934
Liabilities and equity
Current liabilities:
Short-term loans and current portion of long-term debt (Note 8)		¥	4,869			¥	5,540
Trade payables (Note 9)			339,113				406,746
Accrued income taxes (Note 11)			50,105				69,961
Accrued expenses (Notes 10 and 18)			274,300				277,117
Other current liabilities (Notes 5 and 11)			115,303				184,636
Total current liabilities			783,690				944,000
Long-term debt, excluding current installments (Note 8)			4,912				8,423
Accrued pension and severance cost (Note 10)			115,904				110,784
Other noncurrent liabilities (Note 11)			63,651				55,745
Total liabilities			968,157				1,118,952
Commitments and contingent liabilities (Note 18)
Equity:
Canon Inc. stockholders’ equity:
Common stock
Authorized 3,000,000,000 shares; issued 1,333,763,464 shares in 2009 and in 2008 (Note 12)			174,762				174,762
Additional paid-in capital (Note 12)			404,293				403,790
Legal reserve (Note 13)			54,687				53,706
Retained earnings (Note 13)			2,871,437				2,876,576
Accumulated other comprehensive income (loss) (Note 14)			(260,818	)			(292,820	)
Treasury stock, at cost; 99,288,001 shares in 2009 and 99,275,245 shares in 2008			(556,252	)			(556,222	)
Total Canon Inc. stockholders’ equity			2,688,109				2,659,792
Noncontrolling interests			191,291				191,190
Total equity			2,879,400				2,850,982
Total liabilities and equity		¥	3,847,557			¥	3,969,934

See accompanying Notes to Consolidated Financial Statements.

Canon Inc. and Subsidiaries

Consolidated Statements of Income

		Years ended December 31
		2009				2008				2007
						(As adjusted) (Note 1)
						(Millions of yen)
Net sales		¥	3,209,201			¥	4,094,161			¥	4,481,346
Cost of sales (Notes 5, 7, 10 and 18)			1,781,808				2,156,153				2,234,365
Gross profit			1,427,393				1,938,008				2,246,981
Operating expenses (Notes 1, 5, 7, 10, 15 and 18):
Selling, general and administrative expenses			905,738				1,067,909				1,122,047
Research and development expenses			304,600				374,025				368,261
			1,210,338				1,441,934				1,490,308
Operating profit			217,055				496,074				756,673
Other income (deductions):
Interest and dividend income			5,202				19,442				32,819
Interest expense			(336	)			(837	)			(1,471	)
Other, net (Notes 1, 2 and 17)			(2,566	)			(33,532	)			(19,633	)
			2,300				(14,927	)			11,715
Income before income taxes			219,355				481,147				768,388
Income taxes (Note 11)			84,122				160,788				264,258
Consolidated net income			135,233				320,359				504,130
Less: Net income attributable to noncontrolling interests			3,586				11,211				15,798
Net income attributable to Canon Inc.		¥	131,647			¥	309,148			¥	488,332
						(Yen)
Net income attributable to Canon Inc. stockholders per share (Note 16):
Basic		¥	106.64			¥	246.21			¥	377.59
Diluted			106.64				246.20				377.53
Cash dividends per share			110.00				110.00				110.00

See accompanying Notes to Consolidated Financial Statements.

Canon Inc. and Subsidiaries

Consolidated Statements of Equity

																		Accumulated								Total
						Additional												other								Canon Inc.				Non-
		Common				paid-in				Legal				Retained				comprehensive				Treasury				stockholders’				controlling				Total
		stock				capital				reserve				earnings				income (loss)				stock				equity				interests				equity
		(Millions of yen)
Balance at December 31, 2006		¥	174,603			¥	403,510			¥	43,600			¥	2,368,047			¥	2,718			¥	(5,872	)		¥	2,986,606			¥	216,801			¥	3,203,407
Cumulative effect of a change in accounting principle — adoption of accounting guidance for sabbatical leave and other similar benefits, net of tax															(2,204	)											(2,204	)							(2,204	)
Conversion of convertible debt			95				95																				190								190
Equity transactions with noncontrolling interests and other							(617	)																			(617	)			(12,185	)			(12,802	)
Dividends paid to Canon Inc. stockholders															(131,612	)											(131,612	)							(131,612	)
Dividends paid to noncontrolling interests																															(4,612	)			(4,612	)
Transfer to legal reserve											2,417				(2,417	)											—								—
Comprehensive income:
Net income															488,332												488,332				15,798				504,130
Other comprehensive income (loss), net of tax (Note 14):
Foreign currency translation adjustments																			(62	)							(62	)			(26	)			(88	)
Net unrealized gains and losses on securities																			(1,778	)							(1,778	)			(577	)			(2,355	)
Net gains and losses on derivative instruments																			814								814				7				821
Pension liability adjustments																			32,978								32,978				7,664				40,642
Total comprehensive income																											520,284				22,866				543,150
Repurchase of treasury stock, net							3																(450,314	)			(450,311	)							(450,311	)
Balance at December 31, 2007			174,698				402,991				46,017				2,720,146				34,670				(456,186	)			2,922,336				222,870				3,145,206
Conversion of convertible debt			64				63																				127								127
Equity transactions with noncontrolling interests and other							761																				761				(26,218	)			(25,457	)
Dividends paid to Canon Inc. stockholders															(145,024	)											(145,024	)							(145,024	)
Dividends paid to noncontrolling interests																															(5,123	)			(5,123	)
Transfer to legal reserve											7,689				(7,689	)											—								—
Comprehensive income (loss):
Net income															309,148												309,148				11,211				320,359
Other comprehensive income (loss), net of tax (Note 14):
Foreign currency translation adjustments																			(258,764	)							(258,764	)			(1,911	)			(260,675	)
Net unrealized gains and losses on securities																			(5,152	)							(5,152	)			(690	)			(5,842	)
Net gains and losses on derivative instruments																			2,342								2,342				—				2,342
Pension liability adjustments																			(65,916	)							(65,916	)			(8,949	)			(74,865	)
Total comprehensive income (loss)																											(18,342	)			(339	)			(18,681	)
Repurchase of treasury stock, net							(25	)							(5	)							(100,036	)			(100,066	)							(100,066	)
Balance at December 31, 2008		¥	174,762			¥	403,790			¥	53,706			¥	2,876,576			¥	(292,820	)		¥	(556,222	)		¥	2,659,792			¥	191,190			¥	2,850,982

Canon Inc. and Subsidiaries

Consolidated Statements of Equity (continued)

																		Accumulated								Total
						Additional												other								Canon Inc.				Non-
		Common				paid-in				Legal				Retained				comprehensive				Treasury				stockholders’				controlling				Total
		stock				capital				reserve				earnings				income (loss)				stock				equity				interests				equity
																		(Millions of yen)
Balance at December 31, 2008		¥	174,762			¥	403,790			¥	53,706			¥	2,876,576			¥	(292,820	)		¥	(556,222	)		¥	2,659,792			¥	191,190			¥	2,850,982
Equity transactions with noncontrolling interests and other							503																				503				(1,376	)			(873	)
Dividends paid to Canon Inc. stockholders															(135,793	)											(135,793	)							(135,793	)
Dividends paid to noncontrolling interests																															(3,326	)			(3,326	)
Transfer to legal reserve											981				(981	)											—								—
Comprehensive income:
Net income															131,647												131,647				3,586				135,233
Other comprehensive income (loss), net of tax (Note 14):
Foreign currency translation adjustments																			33,340								33,340				30				33,370
Net unrealized gains and losses on securities																			2,150								2,150				67				2,217
Net gains and losses on derivative instruments																			(1,422	)							(1,422	)			(1	)			(1,423	)
Pension liability adjustments																			(2,066	)							(2,066	)			1,121				(945	)
Total comprehensive income																											163,649				4,803				168,452
Repurchase of treasury stock, net															(12	)							(30	)			(42	)							(42	)
Balance at December 31, 2009		¥	174,762			¥	404,293			¥	54,687			¥	2,871,437			¥	(260,818	)		¥	(556,252	)		¥	2,688,109			¥	191,291			¥	2,879,400

See accompanying Notes to Consolidated Financial Statements.

Canon Inc. and Subsidiaries

Consolidated Statements of Cash Flows

		Years ended December 31
		2009				2008				2007
						(As adjusted) (Note 1)
		(Millions of yen)
Cash flows from operating activities:
Consolidated net income		¥	135,233			¥	320,359			¥	504,130
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Depreciation and amortization			315,393				341,337				341,694
Loss on disposal of property, plant and equipment			8,215				11,811				9,985
Impairment loss of fixed assets (Note 5)			15,466				13,503				15,908
Deferred income taxes			20,712				(32,497	)			(35,021	)
Equity in (earnings) losses of affiliated companies			12,649				20,047				(5,634	)
(Increase) decrease in trade receivables			48,244				83,521				(10,722	)
(Increase) decrease in inventories			143,580				49,547				(26,643	)
Increase (decrease) in trade payables			(76,843	)			(36,719	)			21,136
Increase (decrease) in accrued income taxes			(21,023	)			(77,340	)			14,988
Increase (decrease) in accrued expenses			(9,827	)			(30,694	)			43,035
Increase (decrease) in accrued (prepaid) pension and severance cost			4,765				(12,128	)			(15,387	)
Other, net			14,671				(34,063	)			(18,200	)
Net cash provided by operating activities			611,235				616,684				839,269
Cash flows from investing activities:
Purchases of fixed assets (Note 5)			(327,983	)			(428,168	)			(474,285	)
Proceeds from sale of fixed assets (Note 5)			8,893				7,453				9,635
Purchases of available-for-sale securities			(3,253	)			(7,307	)			(2,281	)
Proceeds from sale and maturity of available-for-sale securities			2,460				4,320				8,614
Proceeds from maturity of held-to-maturity securities			—				10,000				10,000
(Increase) decrease in time deposits, net			(11,345	)			2,892				31,681
Acquisitions of subsidiaries, net of cash acquired			(2,979	)			(5,999	)			(15,675	)
Purchases of other investments			(37,981	)			(45,473	)			(2,432	)
Other, net			1,944				(10,198	)			2,258
Net cash used in investing activities			(370,244	)			(472,480	)			(432,485	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			3,361				6,841				2,635
Repayments of long-term debt			(6,282	)			(15,397	)			(13,046	)
Decrease in short-term loans, net			(280	)			(2,643	)			(358	)
Dividends paid			(135,793	)			(145,024	)			(131,612	)
Repurchases of treasury stock, net			(42	)			(100,066	)			(450,311	)
Other, net			(3,343	)			(21,276	)			(11,691	)
Net cash used in financing activities			(142,379	)			(277,565	)			(604,383	)
Effect of exchange rate changes on cash and cash equivalents			17,226				(131,906	)			(13,564	)
Net change in cash and cash equivalents			115,838				(265,267	)			(211,163	)
Cash and cash equivalents at beginning of year			679,196				944,463				1,155,626
Cash and cash equivalents at end of year		¥	795,034			¥	679,196			¥	944,463
Supplemental disclosure for cash flow information :
Cash paid during the year for:
Interest		¥	384			¥	901			¥	1,476
Income taxes			82,906				263,392				273,888

See accompanying Notes to Consolidated Financial Statements.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1.

Basis of Presentation and Significant Accounting Policies

(a)		Description of Business
		Canon Inc. (the “Company”) and subsidiaries (collectively “Canon”) is one of the world’s leading manufacturers in such fields as office products, consumer products and industry and other products. Office products consist mainly of network multifunction devices (“MFDs”), copying machines, laser printers and large format inkjet printers. Consumer products consist mainly of digital single-lens reflex (“SLR”) cameras, compact digital cameras, interchangeable lenses, digital video camcorders, inkjet multifunction peripherals, single function inkjet printers, image scanners and broadcasting equipment. Industry and other products consist mainly of semiconductor production equipment, mirror projection mask aligners for liquid crystal display (“LCD”) panels, and medical equipment. Canon’s consolidated net sales for the years ended December 31, 2009, 2008 and 2007 were distributed as follows: the Office Business Unit 51%, 55% and 55%, the Consumer Business Unit 41%, 35% and 36%, the Industry and Others Business Unit 11%, 13% and 12%, and elimination between segments 3%, 3% and 3%, respectively. These percentages were computed by dividing segment net sales, including intersegment sales, by consolidated net sales, based on the segment operating results described in Note 21.
		Sales are made principally under the Canon brand name, almost entirely through sales subsidiaries. These subsidiaries are responsible for marketing and distribution, and primarily sell to retail dealers in their geographic area. Approximately 78%, 79% and 79% of consolidated net sales for the years ended December 31, 2009, 2008 and 2007 were generated outside Japan, with 28%, 28% and 30% in the Americas, 31%, 33% and 33% in Europe, and 19%, 18% and 16% in other areas, respectively.
		Canon sells laser printers on an OEM basis to Hewlett-Packard Company; such sales constituted approximately 20%, 23% and 22% of consolidated net sales for the years ended December 31, 2009, 2008 and 2007, respectively, and are included in the Office Business Unit.
		Canon’s manufacturing operations are conducted primarily at 25 plants in Japan and 16 overseas plants which are located in countries or regions such as the United States, Germany, France, Taiwan, China, Malaysia, Thailand and Vietnam.
(b)		Basis of Presentation
		The Company and its domestic subsidiaries maintain their books of account in conformity with financial accounting standards of Japan. Foreign subsidiaries maintain their books of account in conformity with financial accounting standards of the countries of their domicile.
		Certain adjustments and reclassifications have been incorporated in the accompanying consolidated financial statements to conform with U.S. generally accepted accounting principles (“GAAP”). These adjustments were not recorded in the statutory books of account.
(c)		Principles of Consolidation
		The consolidated financial statements include the accounts of the Company, its majority owned subsidiaries and those variable interest entities where the Company or its consolidated subsidiaries are the primary beneficiaries. All significant intercompany balances and transactions have been eliminated.
(d)		Use of Estimates
		The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant estimates and assumptions are reflected in valuation and disclosure of revenue recognition, allowance for doubtful receivables, valuation of inventories, impairment of long-lived assets, environmental liabilities, valuation of deferred tax assets, uncertain tax positions and employee retirement and severance benefit plans. Actual results could differ materially from those estimates.
(e)		Translation of Foreign Currencies
		Assets and liabilities of the Company’s subsidiaries located outside Japan with functional currencies other than Japanese yen are translated into Japanese yen at the rates of exchange in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the year. Gains and losses resulting from translation of financial statements are excluded from earnings and are reported in other comprehensive income (loss).
		Gains and losses resulting from foreign currency transactions, including foreign exchange contracts, and translation of assets and liabilities denominated in foreign currencies are included in other income (deductions) in the consolidated statements of income. Foreign currency exchange gains and losses was a net gain of ¥1,842 million for the year ended December 31, 2009, and were net losses of ¥11,212 million and ¥31,943 million for the years ended December 31, 2008 and 2007, respectively.
(f)		Cash Equivalents
		All highly liquid investments acquired with original maturities of three months or less are considered to be cash equivalents. Certain debt securities with original maturities of less than three months classified as available-for-sale securities of ¥184,856 million and ¥194,030 million at December 31, 2009 and 2008, respectively, are included in cash and cash equivalents in the consolidated balance sheets. Additionally, certain debt securities with original maturities of less than three months classified as held-to-maturity securities of ¥999 million and ¥997 million at December 31, 2009 and 2008, respectively, are also included in cash and cash equivalents. Fair value for these securities approximates their cost.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1.		Basis of Presentation and Significant Accounting Policies (continued)
(g)		Investments
		Investments consist primarily of time deposits with original maturities of more than three months, debt and marketable equity securities, investments in affiliated companies and non-marketable equity securities. Canon reports investments with maturities of less than one year as short-term investments.
		Canon classifies investments in debt and marketable equity securities as available-for-sale or held-to-maturity securities. Canon does not hold any trading securities, which are bought and held primarily for the purpose of sale in the near term.
		Available-for-sale securities are recorded at fair value. Fair value is determined based on quoted market prices, projected discounted cash flows or other valuation techniques as appropriate. Unrealized holding gains and losses, net of the related tax effect, are reported as a separate component of other comprehensive income (loss) until realized. Held-to-maturity securities are recorded at amortized cost, adjusted for amortization of premiums and accretion of discounts.
		Available-for-sale and held-to-maturity securities are regularly reviewed for other-than-temporary declines in the carrying amount based on criteria that include the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and Canon’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value. For debt securities for which the declines are deemed to be other-than-temporary and there is no intent to sell, impairments are separated into the amount related to credit loss, which is recognized in earnings, and the amount related to all other factors, which is recognized in other comprehensive income (loss). For debt securities for which the declines are deemed to be other-than-temporary and there is an intent to sell, impairments in their entirety are recognized in earnings. For equity securities for which the declines are deemed to be other-than-temporary, impairments in their entirety are recognized in earnings. Canon recognizes an impairment loss to the extent by which the cost basis of the investment exceeds the fair value of the investment.
		Realized gains and losses are determined on the average cost method and reflected in earnings.
		Investments in affiliated companies over which Canon has the ability to exercise significant influence, but does not hold a controlling financial interest, are accounted for by the equity method.
		Non-marketable equity securities in companies over which Canon does not have the ability to exercise significant influence are stated at cost and reviewed periodically for impairment.
(h)		Allowance for Doubtful Receivables
		Allowance for doubtful trade and finance receivables is maintained for all customers based on a combination of factors, including aging analysis, macroeconomic conditions, significant one-time events, and historical experience. An additional reserve for individual accounts is recorded when Canon becomes aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings. If circumstances related to customers change, estimates of the recoverability of receivables would be further adjusted. When all collection options are exhausted including legal recourse, the accounts or portions thereof are deemed to be uncollectable and charged against the allowance.
(i)		Inventories
		Inventories are stated at the lower of cost or market value. Cost is determined by the average method for domestic inventories and principally by the first-in, first-out method for overseas inventories.
(j)		Impairment of Long-Lived Assets
		Long-lived assets, such as property, plant and equipment, and acquired intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset and the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.
(k)		Property, Plant and Equipment
		Property, plant and equipment are stated at cost. Depreciation is calculated principally by the declining-balance method, except for certain assets which are depreciated by the straight-line method over the estimated useful lives of the assets.
		The depreciation period ranges from 3 years to 60 years for buildings and 1 year to 20 years for machinery and equipment.
		Assets leased to others under operating leases are stated at cost and depreciated to the estimated residual value of the assets by the straight-line method over the period ranging from 2 years to 5 years.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1.		Basis of Presentation and Significant Accounting Policies (continued)
(l)		Goodwill and Other Intangible Assets
		Goodwill and other intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment annually in the fourth quarter of each year, or more frequently if indicators of potential impairment exist. Canon performs its impairment test of goodwill at the reporting unit level, which is one level below the operating segment level. All goodwill is assigned to the reporting unit or units that benefit from the synergies arising from each business combination. Intangible assets with finite useful lives, consisting primarily of software and license fees, are amortized using the straight-line method over the estimated useful lives, which range from 3 years to 5 years for software and 5 years to 10 years for license fees. Certain costs incurred in connection with developing or obtaining internal use software are capitalized. These costs consist primarily of payments made to third parties and the salaries of employees working on such software development. Costs incurred in connection with developing internal use software are capitalized at the application development stage. In addition, Canon develops or obtains certain software to be sold where related costs are capitalized after establishment of technological feasibility.
(m)		Environmental Liabilities
		Liabilities for environmental remediation and other environmental costs are accrued when environmental assessments or remedial efforts are probable and the costs can be reasonably estimated. Such liabilities are adjusted as further information develops or circumstances change. Costs of future obligations are not discounted to their present values.
(n)		Income Taxes
		Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Canon records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not realizable.
		Canon recognizes the financial statement effects of tax positions when it is more likely than not, based on the technical merits, that the tax positions will be sustained upon examination by the tax authorities. Benefits from tax positions that meet the more-likely-than-not recognition threshold are measured at the largest amount of benefit that is greater than 50% likely of being realized upon settlement. Interest and penalties accrued related to unrecognized tax benefits are included in income taxes in the consolidated statements of income.
(o)		Stock-Based Compensation
		Canon measures stock-based compensation cost at the grant date, based on the fair value of the award, and recognizes the cost on a straight-line basis over the requisite service period, which is the vesting period.
(p)		Net Income Attributable to Canon Inc. Stockholders per Share
		Basic net income attributable to Canon Inc. stockholders per share is computed by dividing net income attributable to Canon Inc. by the weighted-average number of common shares outstanding during each year. Diluted net income attributable to Canon Inc. stockholders per share includes the effect from potential issuances of common stock based on the assumptions that all convertible debentures were converted into common stock and all stock options were exercised.
(q)		Revenue Recognition
		Canon generates revenue principally through the sale of office and consumer products, equipment, supplies, and related services under separate contractual arrangements. Canon recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred and title and risk of loss have been transferred to the customer or services have been rendered, the sales price is fixed or determinable, and collectibility is probable.
		Revenue from sales of office products, such as office network digital MFDs and laser printers, and consumer products, such as digital cameras and inkjet multifunction peripherals, is recognized upon shipment or delivery, depending upon when title and risk of loss transfer to the customer.
		Revenue from sales of optical equipment, such as steppers and aligners that are sold with customer acceptance provisions related to their functionality, is recognized when the equipment is installed at the customer site and the specific criteria of the equipment functionality are successfully tested and demonstrated by Canon. Service revenue is derived primarily from separately priced product maintenance contracts on equipment sold to customers and is measured at the stated amount of the contract and recognized as services are provided.
		Canon also offers separately priced product maintenance contracts for most office products, for which the customer typically pays a stated base service fee plus a variable amount based on usage. Revenue from these service maintenance contracts is measured at the stated amount of the contract and recognized as services are provided and variable amounts are earned.
		Revenue from the sale of equipment under sales-type leases is recognized at the inception of the lease. Income on sales-type leases and direct-financing leases is recognized over the life of each respective lease using the interest method. Leases not qualifying as sales-type leases or direct-financing leases are accounted for as operating leases and related revenue is recognized ratably over the lease term. When equipment leases are bundled with product maintenance contracts, revenue is first allocated considering the relative fair value of the lease and non-lease deliverables based upon the estimated relative fair values of each element. Lease deliverables generally include equipment, financing and executory costs, while non-lease deliverables generally consist of product maintenance contracts and supplies.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1.		Basis of Presentation and Significant Accounting Policies (continued)
(q)		Revenue Recognition (continued)
		For all other arrangements with multiple elements, Canon allocates revenue to each element based on its relative fair value if such element meets the criteria for treatment as a separate unit of accounting. Otherwise, revenue is deferred until the undelivered elements are fulfilled and accounted for as a single unit of accounting.
		Canon records estimated reductions to sales at the time of sale for sales incentive programs including product discounts, customer promotions and volume-based rebates. Estimated reductions in sales are based upon historical trends and other known factors at the time of sale. In addition, Canon provides price protection to certain resellers of its products, and records reductions to sales for the estimated impact of price protection obligations when announced.
		Estimated product warranty costs are recorded at the time revenue is recognized and are included in selling, general and administrative expenses in the consolidated statements of income. Estimates for accrued product warranty costs are based on historical experience, and are affected by ongoing product failure rates, specific product class failures outside of the baseline experience, material usage and service delivery costs incurred in correcting a product failure.
		Taxes collected from customers and remitted to governmental authorities are excluded from revenues in the consolidated statements of income.
(r)		Research and Development Costs
		Research and development costs are expensed as incurred.
(s)		Advertising Costs
		Advertising costs are expensed as incurred. Advertising expenses were ¥78,009 million, ¥112,810 million and ¥132,429 million for the years ended December 31, 2009, 2008 and 2007, respectively.
(t)		Shipping and Handling Costs
		Shipping and handling costs totaled ¥45,966 million, ¥62,128 million and ¥63,708 million for the years ended December 31, 2009, 2008 and 2007, respectively, and are included in selling, general and administrative expenses in the consolidated statements of income.
(u)		Derivative Financial Instruments
		All derivatives are recognized at fair value and are included in prepaid expenses and other current assets, or other current liabilities in the consolidated balance sheets.
		Canon uses and designates certain derivatives as a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge). Canon formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. Canon also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, Canon discontinues hedge accounting prospectively. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income (loss), until earnings are affected by the variability in cash flows of the hedged item. Gains and losses from hedging ineffectiveness are included in other income (deductions). Gains and losses related to the components of hedging instruments excluded from the assessment of hedge effectiveness are included in other income (deductions).
		Canon also uses certain derivative financial instruments which are not designated as hedges. The changes in fair values of these derivative financial instruments are immediately recorded in earnings.
		Canon classifies cash flows from derivatives as cash flows from operating activities in the consolidated statements of cash flows.
(v)		Guarantees
		Canon recognizes, at the inception of a guarantee, a liability for the fair value of the obligation it has undertaken in issuing guarantees.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

1.		Basis of Presentation and Significant Accounting Policies (continued)
(w)		Recently Issued Accounting Guidance
		In June 2009, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (“ASC”). The ASC has become the source of authoritative U.S.GAAP. Additionally, rules and interpretive releases of the U.S. Securities and Exchange Commission (“SEC”) under authority of the federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The ASC did not change current U.S GAAP, but was intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. This Codification is effective for fiscal years and interim periods ending after September 15, 2009 and was adopted by Canon beginning from the quarter ended September 30, 2009. This adoption did not have a material impact on Canon’s consolidated results of operations and financial condition. However, throughout the notes to the consolidated financial statements, references that were previously made to various former authoritative U.S. GAAP pronouncements have been removed.
		In December 2007, the FASB issued new accounting guidance for business combinations. This guidance establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired in a business combination. This guidance also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This guidance is effective for fiscal years beginning on or after December 15, 2008 and was adopted by Canon for any business combinations with an acquisition date on or after January 1, 2009. This adoption did not have a material impact on Canon’s consolidated results of operations and financial condition.
		In December 2007, the FASB issued new accounting guidance for noncontrolling interests in consolidated financial statements. This guidance establishes accounting and reporting guidance for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. This guidance also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This guidance is effective for fiscal years beginning on or after December 15, 2008 on a prospective basis, except for certain presentation and disclosure requirements, which must be applied retrospectively for all periods presented, and was adopted by Canon in the first quarter beginning January 1, 2009. Upon the adoption of this guidance, noncontrolling interests, which were previously referred to as minority interests and classified between total liabilities and stockholders’ equity on the consolidated balance sheets, are now included as a separate component of total equity. In addition, consolidated net income on the consolidated statements of income now includes the net income (loss) attributable to noncontrolling interests. These financial statement presentation requirements have been adopted retrospectively and prior year amounts in the consolidated financial statements have been reclassified or adjusted to conform to this guidance. This adoption did not have a material impact on Canon’s consolidated results of operations and financial condition.
		In October 2009, the FASB issued new accounting guidance for revenue recognition under multiple-deliverable arrangements. This guidance modifies the criteria for separating consideration under multiple-deliverable arrangements and requires allocation of the overall consideration to each deliverable using the estimated selling price in the absence of vendor-specific objective evidence or third-party evidence of selling price for deliverables. As a result, the residual method of allocating arrangement consideration will no longer be permitted. The guidance also requires additional disclosures about how a vendor allocates revenue in its arrangements and about the significant judgments made and their impact on revenue recognition. This guidance is effective for fiscal years beginning on or after June 15, 2010 and is required to be adopted by Canon no later than the first quarter beginning January 1, 2011 (with early adoption permitted). The provisions are effective prospectively for revenue arrangements entered into or materially modified after the effective date, or retrospectively for all prior periods. Canon is currently evaluating the effect that the adoption of this guidance will have on its consolidated results of operations and financial condition.
		In October 2009, the FASB issued new accounting guidance for software revenue recognition. This guidance modifies the scope of the software revenue recognition guidance to exclude from its requirements non-software components of tangible products and software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality. This guidance is effective for fiscal years beginning on or after June 15, 2010 and is required to be adopted by Canon no later than the first quarter beginning January 1, 2011 (with early adoption permitted) using the same effective date and the same transition method used to adopt the guidance for revenue recognition under multiple-deliverable arrangements. Canon is currently evaluating the effect that the adoption of this guidance will have on its consolidated results of operations and financial condition.
(x)		Reclassifications
		Certain reclassifications have been made to the prior years’ consolidated statements of cash flows to conform to the current year presentation.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Investments

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale securities included in short-term investments and investments by major security type at December 31, 2009 and 2008 were as follows:

		December 31, 2009
						Gross				Gross
						unrealized				unrealized				Fair
		Cost				holding gains				holding losses				value
		(Millions of yen)
Current:
Government bonds		¥	222			¥	—			¥	—			¥	222
Noncurrent:
Government bonds		¥	225			¥	—			¥	21			¥	204
Corporate bonds			1,397				27				55				1,369
Fund trusts			2,275				300				7				2,568
Equity securities			11,932				7,295				1,501				17,726
		¥	15,829			¥	7,622			¥	1,584			¥	21,867
		December 31, 2008
						Gross unrealized				Gross unrealized				Fair
		Cost				holding gains				holding losses				value
						(Millions of yen)
Current:
Government bonds		¥	1			¥	—			¥	—			¥	1
Fund trusts			133				16				—				149
		¥	134			¥	16			¥	—			¥	150
Noncurrent:
Government bonds		¥	431			¥	—			¥	18			¥	413
Corporate bonds			1,593				27				32				1,588
Fund trusts			2,366				40				170				2,236
Equity securities			10,522				2,532				836				12,218
		¥	14,912			¥	2,599			¥	1,056			¥	16,455

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

2. Investments (continued)

Maturities of available-for-sale debt securities and fund trusts included in short-term investments and investments in the accompanying consolidated balance sheets were as follows at December 31, 2009:

		Cost				Fair value
		(Millions of yen)
Due within one year		¥	222			¥	222
Due after one year through five years			3,274				3,568
Due after five years through ten years			623				573
		¥	4,119			¥	4,363

Gross realized gains were ¥277 million, ¥116 million and ¥1,512 million for the years ended December 31, 2009, 2008 and 2007, respectively. Gross realized losses, including write-downs for impairments that were other than temporary, were ¥2,482 million and ¥7,868 million for the years ended December 31, 2009 and 2008, respectively, and were not significant for the year ended December 31, 2007.

At December 31, 2009, substantially all of the available-for-sale securities with unrealized losses had been in a continuous unrealized loss position for less than 12 months.

Time deposits with original maturities of more than three months are ¥18,852 million and ¥7,430 million at December 31, 2009 and 2008, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

Aggregate cost of non-marketable equity securities accounted for under the cost method totaled ¥28,567 million and ¥10,684 million at December 31, 2009 and 2008, respectively. Investments with an aggregate cost of ¥28,087 million were not evaluated for impairment because (a) Canon did not estimate the fair value of those investments as it was not practicable to estimate the fair value of the investments and (b) Canon did not identify any events or changes in circumstances that might have had significant adverse effects on the fair value of those investments.

Investments in affiliated companies accounted for by the equity method amounted to ¥61,595 million and ¥59,428 million at December 31, 2009 and 2008, respectively. Canon’s share of the net earnings (losses) in affiliated companies accounted for by the equity method, included in other income (deductions), were losses of ¥12,649 million and ¥20,047 million for the years ended December 31, 2009 and 2008, respectively, and earnings of ¥5,634 million for the year ended December 31, 2007.

3. Trade Receivables

Trade receivables are summarized as follows:

		December 31
		2009				2008
		(Millions of yen)
Notes		¥	13,037			¥	20,303
Accounts			554,878				584,437
			567,915				604,740
Less allowance for doubtful receivables			(11,343	)			(9,318	)
		¥	556,572			¥	595,422

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

4. Inventories

Inventories are summarized as follows:

		December 31
		2009				2008
		(Millions of yen)
Finished goods		¥	228,161			¥	316,533
Work in process			129,824				171,511
Raw materials			15,256				18,875
		¥	373,241			¥	506,919

5. Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and are summarized as follows:

		December 31
		2009				2008
		(Millions of yen)
Land		¥	258,824			¥	247,602
Buildings			1,299,154				1,268,388
Machinery and equipment			1,422,076				1,395,451
Construction in progress			105,713				81,346
			3,085,767				2,992,787
Less accumulated depreciation			(1,815,982	)			(1,635,601	)
		¥	1,269,785			¥	1,357,186

Depreciation expense for the years ended December 31, 2009, 2008 and 2007 was ¥277,399 million, ¥304,622 million and ¥309,815 million, respectively.

Amounts due for purchases of property, plant and equipment were ¥29,030 million and ¥98,398 million at December 31, 2009 and 2008, respectively, and are included in other current liabilities in the accompanying consolidated balance sheets. Fixed assets presented in the consolidated statements of cash flows include property, plant and equipment and intangible assets.

As a result of continued sluggish demand in the semiconductor manufacturing industry and diminished profitability of the semiconductor production equipment business, Canon recognized impairment losses related primarily to property, plant and equipment of its semiconductor production equipment business, which are included in the results of the Industry and Others Business Unit for the year ended December 31, 2009. Long-lived assets with a carrying amount of ¥15,390 million were written down to their fair value of zero, which was estimated using discounted future cash flows expected to be generated over their remaining useful life. The impairment losses were included in selling, general and administrative expenses in the consolidated statement of income.

Canon also recognized impairment losses of ¥11,164 million related primarily to property, plant and equipment of its semiconductor production equipment business, which are included in the results of the Industry and Others Business Unit for the year ended December 31, 2008, mainly as a result of declining demand in the semiconductor manufacturing industry. The impairment losses were estimated using discounted cash flows and included in selling, general and administrative expenses in the consolidated statement of income.

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

6. Finance Receivables and Operating Leases

Finance receivables represent financing leases which consist of sales-type leases and direct-financing leases resulting from the marketing of Canon’s and complementary third-party products. These receivables typically have terms ranging from 1 year to 6 years. The components of the finance receivables, which are included in prepaid expenses and other current assets, and other assets in the accompanying consolidated balance sheets, are as follows:

		December 31
		2009				2008
		(Millions of yen)
Total minimum lease payments receivable		¥	206,267			¥	198,611
Unguaranteed residual values			14,630				16,310
Executory costs			(1,973	)			(1,729	)
Unearned income			(26,994	)			(26,658	)
			191,930				186,534
Less allowance for doubtful receivables			(9,023	)			(8,268	)
			182,907				178,266
Less current portion			(65,146	)			(59,608	)
		¥	117,761			¥	118,658

The cost of equipment leased to customers under operating leases included in property, plant and equipment, net at December 31, 2009 and 2008 was ¥53,807 million and ¥50,388 million, respectively. Accumulated depreciation on equipment under operating leases at December 31, 2009 and 2008 was ¥39,992 million and ¥37,284 million, respectively.

The following is a schedule by year of the future minimum lease payments to be received under financing leases and non-cancelable operating leases at December 31, 2009.

		Financing leases				Operating leases
		(Millions of yen)
Year ending December 31:
2010		¥	82,058			¥	4,685
2011			59,342				2,304
2012			38,834				1,627
2013			18,580				814
2014			6,396				51
Thereafter			1,057				10
		¥	206,267			¥	9,491

Canon Inc. and Subsidiaries

Notes to Consolidated Financial Statements (continued)

7. Goodwill and Other Intangible Assets

Intangible assets developed or acquired during the year ended December 31, 2009 totaled ¥43,461 million, which are subject to amortization and primarily consist of software of ¥39,303 million , which is mainly for internal use, and license fees of ¥2,797 million, in addition to those recorded from acquired businesses. The weighted average amortization period for software, license fees and intangible assets in total is approximately 4 years, 7 years and 4 years, respectively.

The components of intangible assets subject to amortization at December 31, 2009 and 2008 were as follows:

		December 31, 2009								December 31, 2008
		Gross								Gross
		carrying				Accumulated				carrying				Accumulated
		amount				amortization				amount				amortization
		(Millions of yen)
Software		¥	198,276			¥	114,410			¥	187,920			¥	103,535
License fees			23,889				13,546				21,537				11,104
Other			30,610				8,258				34,341				10,925
		¥	252,775			¥	136,214			¥	243,798			¥	125,564

Aggregate amortization expense for the years ended December 31, 2009, 2008 and 2007 was ¥37,994 million, ¥36,715 million and ¥31,879 million, respectively. Estimated amortization expense for intangible assets currently held for the next five years ending December 31 is ¥36,633 million in 2010, ¥26,309 million in 2011, ¥16,959 million in 2012, ¥10,846 million in 2013, and ¥6,411 million in 2014.

Intangible assets not subject to amortization other than goodwill at December 31, 2009 and 2008 were not significant.

The changes in the carrying amount of goodwill, which is included in other assets in the consolidated balance sheets, for the years ended December 31, 2009 and 2008 were as follows:

		Years ended December 31
		2009				2008
		(Millions of yen)
Balance at beginning of year		¥	50,754			¥	56,783
Goodwill acquired during the year			4,805				4,975
Translation adjustments and other			312				(11,004	)
Balance at end of year		¥	55,871			¥	50,754