Mazda 2007 Annual Report Download - page 68
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if all the directors and corporate auditors retired at the end of this fiscal year, is recognized.
Income taxes
Deferred tax assets and liabilities are recognized to reflect the estimated tax effects attributable to
temporary differences and carryforwards. Deferred tax assets and liabilities are measured using the
enacted tax rates that will be in effect when the temporary differences are expected to reverse. The
measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that
are not expected to be realized.
Research and development costs
Research and development costs are charged to income when incurred. For the years ended March 31,
2007, 2006 and 2005, research and development costs were ¥107,553 million ($911,466 thousand),
¥95,730 million and ¥90,841 million, respectively.
Derivatives and hedge accounting
Derivative financial instruments are mainly stated at fair value and changes in the fair value are
recognized as gains or losses unless derivative financial instruments are used for hedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the
Domestic Companies defer recognition of gains or losses resulting from changes in fair value of
derivative financial instruments until the related losses or gains on the hedged items are recognized.
Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net
amount to be paid or received under the interest rate swap contract is added to or deducted from the
interest on the assets or liabilities for which the swap contract was executed.
Leases
Finance leases which do not transfer ownership and do not have bargain purchase provisions are
accounted for in the same manner as operating leases in accordance with generally accepted
accounting principles in Japan.
Amounts per share of common stock
The computations of net income per share of common stock are based on the average number of
shares outstanding during each fiscal year. Diluted net income per share of common stock is computed
based on the average number of shares outstanding during each fiscal year after giving effect to the
diluting potential of common shares to be issued upon the exercise of stock acquisition rights and
stock options.
Cash dividends per share represent actual amounts applicable to the respective years.
3. Adoption of New Accounting Standards
Adoption of new accounting standard for impairment of fixed assets
Commencing in the year ended March 31, 2006, the Domestic Companies adopted the new accounting
standard for impairment of fixed assets (“Opinion Concerning Establishment of Accounting Standard for
Impairment of Fixed Assets”issued by the Business Accounting Deliberation Council on August 9,
2002) and the implementation guidance for the accounting standard for impairment of fixed assets
(the Financial Accounting Standard Implementation Guidance No. 6 issued by the Accounting
Standards Board of Japan on October 31, 2003).
The new accounting standard requires that fixed assets be reviewed for impairment whenever events