The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and based on the selection and application of significant accounting policies which require management to
make significant estimates and assumptions. These estimates and assumptions include future market conditions, net sales growth rate, gross margin and discount rate. Though Canon believes that the estimates and assumptions are reasonable, actual future results may differ from these estimates and assumptions. Canon believes that the following are the more critical judgment areas in the application of its accounting policies that currently affect its financial condition and results of operations.