FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

[Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

[Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

[If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-....................

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

*Print the name and title of the signing officer under his signature.

The following materials are included.

1. Quarterly Report filed with the Japanese government pursuant to the Financial Instruments and Exchange Law of Japan For the second quarter ended June 30, 2018

[English summary with full translation of consolidated financial information]

Quarterly Report filed with the Japanese government

pursuant to

the Financial Instruments and Exchange Law of Japan

For the second quarter ended

June 30, 2018

CANON INC.

Tokyo, Japan

CONTENTS

Disclaimer Regarding Forward-Looking Statements

This quarterly report includes forward-looking statements (within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934) concerning Canon Inc. (the “Company”) and its subsidiaries (collectively “Canon”). To the extent that statements in this quarterly report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on the current assumptions and beliefs of Canon in light of the information currently available to them, and involve known and unknown risks, uncertainties and other factors. Such risks, uncertainties and other factors may cause Canon’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Canon undertakes no obligation to publicly update any forward-looking statements after the date of this quarterly report. Investors are advised to consult any further disclosures by Canon in its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

The risks, uncertainties and other factors referred to above include, but are not limited to, foreign currency exchange rate fluctuations; the uncertainty of Canon’s ability to implement its plans to localize production and other measures to reduce the impact of foreign currency exchange rate fluctuations; uncertainty as to economic conditions in Canon’s major markets; uncertainty of continued demand for Canon’s high-value-added products; Canon’s ability to continue to develop products and to market products that incorporate new technology on a timely basis, are competitively priced, and achieve market acceptance; the possibility of losses resulting from foreign currency transactions designed to reduce financial risks from changes in foreign currency exchange rates; disasters, outages or similar events; and inventory risk due to disruptions in supply chains and shifts in market demand.

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I . Corporate Information

Notes:

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Canon prepares quarterly consolidated financial statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Financial information presented in sections “II. The Business” is also in conformity with U.S.GAAP.

The Canon Group (consisting of the Company, 379 consolidated subsidiaries, and 8 affiliates accounted for using the equity method, as of June 30, 2018, collectively, the “Group”) is engaged in development, manufacturing, sales, and servicing activities in areas such as office, imaging systems, medical systems, and industrial equipment. No material change in Canon’s business has occurred during the six months ended June 30, 2018.

No additions or removals of significant group entities have occurred during the six months ended June 30, 2018.

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No material changes are recognized pursuant to the risk factors of Canon’s business indicated in the Annual Securities Report (Yukashoken Houkokusho) of the previous fiscal year.

No material contracts were entered into during the six months ended June 30, 2018.

Looking back at the global economy in the second quarter of 2018, the U.S. economy continued to grow steadily as corporate earnings and employment conditions improved. In Europe, unemployment rate remained at a low level, mainly in Germany and the U.K., and the economy continued to recover moderately, mainly driven by domestic demand. The Chinese economy rallied due to improving consumer spending as personal income increased, and the economies of emerging countries continued to realize moderate growth. In Japan, capital investment increased moderately due to increasing exports. As a result, the global economy overall continued to realize moderate recovery.

As for the markets in which Canon operates amid these conditions, demand for office multifunction devices (“MFDs”) remained at around the same level as the previous year, while demand for laser printers continued to recover, mainly in emerging countries. The market for cameras continued to decline while the market for inkjet printers achieved moderate growth. Additionally, while demand for medical equipment remained at around the same level as the previous year in Japan, demand was solid in other markets. Within the Industry and Others sector, capital investment in semiconductor lithography equipment increased and the demand for network cameras also enjoyed solid growth.

The average values of the yen during the second quarter and the first half of the year were ¥109.14 and ¥108.61 against the U.S. dollar, respectively, year-on-year appreciation of approximately ¥2 and ¥4, and ¥129.97 and ¥131.45 against the euro, respectively, year-on-year depreciation of approximately ¥8 and ¥10.

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[Second quarter results]

During the second quarter, unit sales of office MFDs increased compared with the same period of the previous year due to the expanded sales of color models. Additionally, unit sales of laser printers increased compared with the same period of the previous year, supported by the steady sales of newly launched models, as demand recovered in emerging countries. Total sales volume of interchangeable-lens digital cameras decreased compared with the same period of the previous year due to the shrinking market, however sales of mirrorless cameras increased mainly supported by sales of new products. Looking at inkjet printers, unit sales decreased compared with the same period of the previous year, mainly due to a review of our distribution channels. For medical equipment, diagnostic ultrasound systems experienced solid demand, mainly outside of Japan, achieving increased sales compared with the same period of the previous year. For industrial equipment, sales of semiconductor lithography equipment increased significantly, compared with the same period of the previous year, thanks to favorable market conditions, and sales of network cameras increased steadily. Under these conditions, second-quarter net sales increased by 1.4% year on year to ¥1,006.4 billion. The gross profit ratio dropped by 2.7 points to 47.2% and gross profit decreased by 4.1% year on year to ¥474.6 billion due to mainly the fact that certain costs that were under operating expenses have been reclassified under cost of sales by adopting new accounting standards related to revenue recognitions. Operating expenses decreased by 6.1% year on year to ¥376.6 billion, thanks to continuous Group-wide cost down efforts and efforts to reduce spending as well as the impact of the aforementioned reclassification of figures as part of the adoption of new accounting standards. As a result, second-quarter operating profit increased by 4.4% to ¥98.0 billion. Other income (deductions) increased by ¥6.4 billion, mainly due to foreign currency exchange gains, while income before income taxes increased by 10.6% year on year to ¥110.1 billion and net income attributable to Canon Inc. increased by 12.3% to ¥77.7 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥71.93 for the second quarter, a year-on-year increase of ¥8.40.

[First-half results]

During the first half, unit sales of office MFDs increased compared with the same period of the previous year due to the expanded sales of color models. Additionally, unit sales of laser printers increased compared with the same period of the previous year, supported by the steady sales of newly launched models, as demand recovered in emerging countries. Total sales volume of interchangeable-lens digital cameras decreased compared with the same period of the previous year due to the shrinking market, however sales of mirrorless cameras increased mainly supported by sales of new products. Looking at inkjet printers, unit sales decreased compared with the same period of the previous year, mainly due to a review of our distribution channels. For medical equipment, diagnostic ultrasound systems experienced solid demand, mainly outside of Japan. However, sales overall decreased compared with the same period of the previous year mainly because sales for the first quarter of the previous year were particularly high. For industrial equipment, sales of semiconductor lithography equipment increased significantly, compared with the same period of the previous year, thanks to favorable market conditions, and sales of network cameras increased steadily. Under these conditions, net sales for the first half of the year increased by 0.1% year on year to ¥1,967.1 billion. The gross profit ratio dropped by 2.3 points to 46.7% and gross profit decreased by 4.5% year on year to ¥919.2 billion due to mainly the fact that certain costs that were under operating expenses have been reclassified under cost of sales by adopting new accounting standards related to revenue recognitions. Operating expenses decreased by 6.5% year on year to ¥744.2 billion, thanks to continuous Group-wide cost down efforts and efforts to reduce spending as well as the impact of the aforementioned reclassification of figures as part of the adoption of new accounting standards. As a result, first-half operating profit increased by 4.8% to ¥175.0 billion. Other income (deductions) increased by ¥10.3 billion, mainly due to foreign currency exchange gains, while income before income taxes increased by 10.3% year on year to ¥195.9 billion and net income attributable to Canon Inc. increased by 8.5% to ¥134.8 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥124.83 for the first half, a year-on-year increase of ¥10.85.

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Looking at Canon’s first-half performance by business unit, starting with the Office Business Unit, unit sales of office MFDs increased from the same period of the previous year, supported by such models as the newly launched next-generation A3 (12”x18”) color imageRUNNER ADVANCE C3500 series and, the imageRUNNER C3020 series, strategic models for emerging countries. In commercial printing, sales of the newly launched Océ-produced Colorado 1640, wide-format roll-to-roll printer, were solid. As for laser printers, sales increased compared with the same period of the previous year, supported by steady sales of new models that achieved low power consumption, compact body designs and high productivity, and steady sales of consumables. Under these conditions, sales for the combined first six months of the year totaled ¥935.4 billion, a year-on-year increase of 0.8%, while operating profit totaled ¥114.9 billion, a year-on-year increase of 3.2%.

Within the Imaging System Business Unit, unit sales volume of interchangeable-lens digital cameras decreased compared with the same period of the previous year, due to the gradually shrinking market. However, Canon maintained the top share in the overall interchangeable-lens digital camera market, mainly in the United States, Europe and Japan. Within this, as for mirrorless cameras, the newly launched EOS Kiss M, an entry-level model with shooting functions matching those of higher-level models, enjoyed strong demand. As for digital compact cameras, although unit sales decreased compared with the same period of the previous year amid the shrinking market, sales of such high-value-added models as the PowerShot G-series enjoyed solid demand. For inkjet printers, although demand was strong for refillable ink tank models and large format inkjet printers, overall unit sales decreased compared with the same period of the previous year due to a review of distribution channels. As a result, sales for the business unit totaled ¥482.3 billion, a year-on-year decrease of 8.1%, while operating profit totaled ¥59.5 billion, a year-on-year decrease of 23.5%.

Within the Medical System Business Unit, although Canon Medical Systems Corporation’s computed tomography (“CT”) products maintained the top share in the Japanese market and sales of the newly launched diagnostic ultrasound systems, Aplio i-series, equipped with proprietary high-resolution imaging technology, grew steadily mainly outside of Japan, sales for the first half decreased, mainly due to the fact that sales for the first quarter of the previous year were particularly high. As a result, sales for the business unit totaled ¥211.8 billion, a year-on-year decrease of 3.9%, while operating profit totaled ¥12.4 billion, a year-on-year increase of 23.6%, mainly thanks to a shift in sales strategy away from selling low profitability models to pursue improvements in profitability.

In the Industry and Others Business Unit, unit sales of semiconductor lithography equipment increased significantly from the same period of the previous year supported by active capital investment due to increasing demand for memory devices. Additionally, manufacturing equipment for Organic LED (“OLED”) panels enjoyed solid sales. As for network cameras, Axis enjoyed solid sales amid increasing market demand. Consequently, sales for the business unit totaled ¥388.8 billion, a year-on-year increase of 16.1%, while operating profit totaled ¥42.9 billion, a year-on-year increase of 96.3%.

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Cash Flows

During the first half of 2018, cash flow from operating activities totaled ¥164.9 billion, a decrease of ¥144.3 billion compared with the same period of the previous year, owing to increase of working capital and payment of income taxes. Cash flow from investing activities decreased ¥18.1 billion a year-on-year to ¥89.7 billion as a result of a decrease in the amount of time deposits included in short-term investments. Accordingly, free cash flow totaled ¥75.1 billion, a decrease of ¥126.2 billion compared with the corresponding year-ago period.

Cash flow from financing activities recorded an outlay of ¥144.5 billion, mainly owing to the dividend payout, and the repayment of long-term debt.

Owing to these factors, as well as the impact from foreign currency translation adjustments, cash and cash equivalents decreased by ¥84.3 billion to ¥637.5 billion from the end of the previous year.

Non-GAAP Financial Measures

We have reported our financial results in accordance with U.S. GAAP. In addition, we have discussed our results using “free cash flow,” which is a non-GAAP measure.

We believe this measure, which takes into consideration the Company’s operating and investing activities, is beneficial to an investor’s understanding of Canon’s current liquidity and the alternatives of use in financing activities.

A reconciliation of this non-GAAP financial measure and the most directly comparable measures calculated and presented in accordance with U.S. GAAP are set forth on the following table.

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Management Issues to be Addressed

No material changes or issues with respect to business operations and finances have occurred during the six months ended June 30, 2018.

Research and Development Expenditures

Canon’s research and development expenditures for the six months ended June 30, 2018 totaled ¥155.2 billion.

Property, Plant and Equipment

There were no significant changes to the status of existing major property, plant and equipment during the first half of 2018.

There were no significant new constructions of property, plant and equipment, which were in progress as of December 31, 2017 and were completed during the six months ended June 30, 2018.

There were no significant changes in the plans relevant to the retirement of property, plant and equipment during the six months ended June 30, 2018. Moreover, there were no significant additional plans for new construction or retirement of property, plant and equipment during the six months ended June 30, 2018.

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III . Company Information

Total number of authorized shares is 3,000,000,000 shares. The common stock of Canon is listed on the Tokyo, Nagoya, Fukuoka, Sapporo and New York Stock Exchanges. Total issued shares are as follows:

Stock Acquisition Rights

The descriptions of the stock option plans as of June 30, 2018 are below.

The Stock Option Plan Approved on March 29, 2018

1. Grantees of share options

The Company’s 5 directors (excluding outside directors) and 28 executive officers.

2. Number of share options

The number of share options that the Board of Directors are authorized to issue is 740.

3. Number of shares acquired upon exercise of a share option

The number of shares acquired upon exercise of one share option (the “Allotted Number of Shares”) is 100 common shares, and the total number of shares to be delivered due to the exercise of share options is 74,000 common shares. However, in the case that the Company conducts a share split (including an allotment without consideration (musho-wariate) of shares of common stock of the Company; the same shall apply to all references to the share split herein) or share consolidation on and after the date of shareholders’ resolution adopting the proposal at the above-mentioned General Meeting of Shareholders (the “Resolution Date”), the number of shares acquired shall be adjusted in accordance with the following formula, rounding down any fraction of less than one share resulting from such adjustment.

In addition to the above, in any event that makes it necessary to adjust the number of shares acquired, including a merger and company split, on and after the Resolution Date, the Company may make appropriate adjustment to the Number of Shares Acquired within a reasonable range.

4. Cash payment for share options (yen)

The cash payment required for each stock acquisition right shall be ¥1 per share to be acquired upon exercise of each stock acquisition right, multiplied by the number of shares acquired.

5. Period during which share options are exercisable

The exercise period of stock acquisition rights shall be determined by the Board of Directors, but shall not exceed 30 years from the day immediately following the allotment date of stock acquisition rights.

6. Issue price and amount of increased stated capital (yen)

The issue price and amount of increased stated capital per share is ¥2,949 and ¥1,475, respectively. The issue price is total amount of the exercise price of each stock acquisition (¥1 per share) and the fair value of the stock acquisition rights at the allotment date (¥2,948 per share). In addition, the amount of capital to be increased due to the issuance of shares upon exercise of the stock acquisition rights shall be a half of the maximum amount of capital increase, etc, which is calculated in accordance with Article 17, Paragraph 1 of the Ordinance on Company Accounting, and any fraction less than ¥1 arising therefrom shall be rounded up to the nearest ¥1.

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7. Other conditions for exercise of share options

(i)  Those to whom stock acquisition rights are allotted (the “Holder(s)”) shall be entitled to exercise all the stock acquisition rights together within 10 days (in case the last day is not a business day, the following business day) from the day immediately following the day when they cease to hold any position as a director or an executive officer of the Company.

(ii)  In the event that the Company recognizes any violation of laws and regulations, misconduct of the duties, act conflicting with the duty of due care or duty of loyalty, or any other act equivalent thereto of the Holder, the Company may limit, subject to a resolution by the Board of Directors of the Company, the number of offered stock acquisition rights that may be exercised by such Holder.

8. Restriction on acquisition of share options by transfer

An acquisition of share options by way of transfer requires the approval of the Board of Directors.

Exercise status of bonds with share subscription rights containing an adjustable exercise price clause

Not applicable.

Rights Plan

Not applicable.

Change in Issued Shares, Common Stock and Additional Paid in Capital

Major Shareholders

Notes:

1: Apart from the above shares, The Dai-Ichi Life Insurance Company, Limited held 6,180,000 shares contributed to a trust fund for its retirement and severance plans.

2: Moxley and Co. LLC is a nominee of JPMorgan Chase Bank, which is the depositary of Canon’s ADRs (American Depositary Receipts).

3: Apart from the above shares, Mizuho Bank, Ltd., held 9,057,000 shares contributed to a trust fund for its retirement and severance plans.

4: Apart from the above shares, the Company owns 254,010,388 shares (19.04% of total issued shares) of treasury stock.

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Voting Rights

Note:

In “Fractional unit shares” under “Number of shares,” 88 shares of treasury stock are included.

Treasury Stock, etc.

There were no changes in members of directors and auditors between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2017 and the end of this quarter.

Change in functions of director is below:

There were no changes in members of executive officers between the filing date of the Annual Securities Report (Yukashoken Houkokusho) for the fiscal year ended December 31, 2017 and the end of this quarter.

Changes in functions of executive officers are below:

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The Number of Directors and Executive Officers by Gender

Males: 46, Females: 2 (Females account for 4.2% of the total.)

Based on the number of Directors and Executive Officers as of June 30, 2018.

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IV . Financial Statements (Unaudited)

Index of Consolidated Financial Statements of Canon Inc. and Subsidiaries:

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CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets

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CANON INC. AND SUBSIDIARIES

Consolidated Balance Sheets (continued)

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CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

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CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income

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CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

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CANON INC. AND SUBSIDIARIES

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income

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CANON INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company issued convertible debentures in the United States in May 1969 and established a program in which its American Depositary Receipts (ADRs) were traded in the U.S. over-the-counter market. Since then, under the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, the Company has prepared its annual consolidated financial statements in accordance with U.S. GAAP and filed them with the U.S. Securities and Exchange Commission on Form 20-F. The Company’s ADRs were listed on the NYSE in September 2000 after being quoted on NASDAQ from February 1972 to September 2000.

Canon’s quarterly consolidated financial statements are prepared in accordance with the recognition and measurement criteria of accounting principles generally accepted in the United States. Certain disclosures have been omitted.

The number of consolidated subsidiaries and affiliated companies that were accounted for by the equity method as of June 30, 2018 and December 31, 2017 are summarized as follows:

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.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Recently adopted accounting guidance

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Section C – Background Information and Basis for Conclusions, which is a new accounting standard related to revenue from contracts with customers, as amended. (Accounting Standards Codification (“ASC”) 606) This standard requires an entity to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Canon adopted this standard from the quarter beginning January 1, 2018 with modified retrospective method of adoption to contracts that were not completed as of the adoption. The cumulative-effects to the retained earnings and the impact on the consolidated result of operations for the six and three months ended June 30, 2018 from the adoption of this standard were not material. For further information, please refer to Note 10.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which is an amendment which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes the requirement that equity investments that do not result in consolidation and are not accounted for under the equity method be measured at fair value with changes in the fair value recognized in net income. Canon adopted this standard from the quarter beginning January 1, 2018, and Canon recognized a cumulative-effect adjustment to retained earnings of ¥5,343 million as of January 1, 2018 for the after-tax unrealized gains of available-for-sale equity securities previously recognized in accumulated other comprehensive income.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-entity Transfers of Assets other than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in this guidance eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included in the scope of this guidance are intellectual property and property, plant, and equipment. The amendments in this guidance should be applied on a modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. Canon adopted this standard from the quarter beginning January 1, 2018. The adoption of this guidance did not have a material impact on its consolidated results of operation and financial condition.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires an entity to disaggregate the service cost component from the other components of net benefit cost and present it in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented separately from the service cost component, such as in other income (deductions) in the income statement. The amendments also allow only the service cost component to be eligible for capitalization (for example, as a cost of internally manufactured inventory). The amendments are to be applied retrospectively for the presentation of the service cost component and the other components of net benefit cost, and prospectively for the capitalization of the service cost component of net benefit cost. Canon adopted this guidance from the quarter beginning January 1, 2018. The adoption of the new presentation requirement of the service cost component and the other components of net benefit cost resulted in reclassification of ¥1,080 million from cost of sales, ¥2,214 million from selling, general and administrative expenses and ¥1,668 million from research and development expenses into other income (deductions) for the six months ended June 30, 2017, and reclassification of ¥545 million from cost of sales, ¥1,107 million from selling, general and administrative expenses and ¥835 million from research and development expenses into other income (deductions) for the three months ended June 30, 2017, respectively. Please refer to Note 16 for additional information. The adoption of the capitalization of the service cost component of net benefit cost did not have a material impact on its consolidated results of operations and financial condition.

Recently issued accounting guidance not yet adopted

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Section A – Leases: Amendments to the FASB Accounting Standards Codification, which requires lessees to recognize most leases on their balance sheets but recognize expenses on their income statements in a manner similar to current guidance. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. The new guidance is required to be applied with a modified retrospective approach. The guidance is effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted. Canon currently plans to adopt the guidance from the quarter beginning after January 1, 2019. The adoption of the guidance is expected to have an impact on its consolidated balance sheet by recognizing right-of-use assets and lease liabilities for non-cancelable operating leases. Canon is currently evaluating the effect that the adoption of the guidance will have on its consolidated results of operations and financial condition.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amends existing guidance to simplify the application of the hedge accounting in certain situations and enable an entity to better portray the economic results of an entity’s risk management activities in its financial statements. This guidance eliminates the requirement to separately measure and report hedge ineffectiveness, and requires an entity to present the earnings effect of the hedging instrument in the same income statement line item which the earnings effect of the hedged item is reported. This guidance is effective for annual reporting periods beginning after December 15, 2018, and early adoption is permitted. Canon is currently evaluating the adoption date and the effect that the adoption of this guidance will have on its consolidated results of operations and financial condition.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

The cost, gross unrealized holding gains, gross unrealized holding losses and fair value for available-for-sale debt securities included in investments by major security type at June 30, 2018 and December 31, 2017 are as follows:

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Maturities of available-for-sale debt securities included in investments in the accompanying consolidated balance sheets are as follows at June 30, 2018:

Realized gains and losses related to debt securities are determined using the average cost method and are reflected in earnings. The unrealized and realized gains and losses were not significant for the six months ended June 30, 2018 and 2017, respectively.

The portion of unrealized and realized gains and losses related to equity securities for the six months and three months ended June 30, 2018 are as follows:

Aggregate cost of non-marketable equity securities accounted for under the cost method totaled ¥3,760 million at December 31, 2017.

From the quarter beginning January 1, 2018, Canon measures non-marketable equity securities without readily determinable fair value at cost, minus impairment, if any, plus or minus changes resulting from observables price changes in orderly transactions for the identical or a similar investment of the same issuer. The carrying amount of these investments totaled ¥4,019 million at June 30, 2018. Canon did not recognize any impairment or other adjustments during the six months ended June 30, 2018.

Time deposits with original maturities of more than three months are ¥181 million and ¥743 million at June 30, 2018 and December 31, 2017, respectively, and are included in short-term investments in the accompanying consolidated balance sheets.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Trade receivables are summarized as follows:

Inventories are summarized as follows:

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

Fixed assets presented in the consolidated statements of cash flows includes property, plant and equipment and intangible assets.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Trade payables are summarized as follows:

Canon has revolving credit facilities expiring in December 2021. Canon prepaid ¥50,000 million of the loan with cash flows generated during the first half of 2018. The outstanding loans under the credit facilities are ¥440,000 million at a floating interest of 0.06% and Canon has no unused credit facilities as of June 30, 2018.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

The change in the carrying amount of total equity, equity attributable to Canon Inc. shareholders and equity attributable to noncontrolling interests in the consolidated balance sheets for the six months ended June 30, 2018 and 2017 are as follows:

* Represents the impact of adopting the new accounting standard related to the revenue recognition and financial instruments. Please refer to Note 1(c) and Note 9 for more detailed information.

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

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CANON INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (continued)

Changes in accumulated other comprehensive income (loss) for the six months ended June 30, 2018 and 2017 are as follows:

* Represents the impact of adopting the new accounting standard related to financial instruments. Please refer to Note 1(c) for more detailed information.