Mitsubishi 2009 Annual Report Download - page 42

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(f) Depreciation and amortization
Property, plant and equipment (excluding the leased assets):
Depreciation of property, plant and equipment (excluding the leased assets) is principally calculated using the declining balance
method or the straight line method over the estimated useful life of the respective assets for MMC and its domestic consolidated
subsidiaries. Depreciation is principally calculated using the straight line method for the overseas consolidated subsidiaries.
The useful lives of the assets are based on estimated life of assets for MMC and are determined in accordance with the Corporate
Tax Law at its domestic consolidated subsidiaries. The useful lives of the assets are determined based on the expected useful lives for
the overseas consolidated subsidiaries.
Intangible fixed assets (excluding the leased assets):
Intangible fixed assets (excluding the leased assets) are amortized using the straight line method for MMC and its domestic consoli-
dated subsidiaries and using the straight line method primarily over the availability period estimated for each investment at the over-
seas subsidiaries. Software intended for use by MMC and its domestic consolidated subsidiaries is amortized using the straight line
method over a period of 5 years.
Leased assets:
Assets recognized under finance leases that do not involve transfer of ownership to the lessee, are depreciated using the straight line
method based on the contract term of the lease agreement. If the guaranteed residual value is determined in the lease agreement, the
said guaranteed residual value is deemed as the residual value of such leased assets. If the residual value is not determined, it is
deemed to be zero.
(g) Allowance for doubtful accounts
The allowance for doubtful accounts has been provided based on MMC and its consolidated subsidiaries’ historical experience with
respect to write-offs and an estimate of the amount of specific uncollectible accounts.
(h) Allowance for product warranties
The allowance for product warranty claims has been calculated based on MMC and its consolidated subsidiaries’ historical experience
and estimations with respect to future costs relating to claims.
(i) Retirement benefits
Accrued retirement benefits for employees at March 31, 2009 and 2008 are calculated based on the retirement benefits obligation and
the fair value of the pension plan assets estimated at year end.
Prior service cost is being amortized using the straight line method over periods of 1 to 21 years. These periods are within the
estimated average remaining service years of the employees.
Actuarial gains and losses are being amortized using the straight line method over the periods of 5 to 21 years. These periods are
within the estimated average remaining service years of the employees.
(j) Accrual for retirement benefits for directors and corporate auditors
Before the termination of the retirement benefits plan for directors and corporate auditors in the fiscal year ended March 2007, certain
directors and corporate auditors of MMC and its domestic consolidated subsidiaries had been customarily entitled to lump-sum pay-
ments under their respective unfunded severance benefit plans subject to the stockholders’ approval. Due to the termination of the
plan and partial deduction of the provision, further provision has been no longer needed and the outstanding balance of the provision
represents only a portion of benefit payments reserved before the plan’s termination.
(k) Translation of foreign currency accounts
The accounts of the consolidated foreign subsidiaries are translated into Yen as follows:
a. Asset and liability items are translated at the rate of exchange in effect on March 31;
b. Components of stockholders’ equity are translated at their historical rates at acquisition or upon occurrence; and
c. Revenues, expenses and cash flow items are translated at the average rate for the financial period. Translation adjustments are
included in “Net assets”.
40 MITSUBISHI MOTORS CORPORATION Annual Report 2009