Mazda 2008 Annual Report Download - page 72

Income taxes
Income taxes comprise corporation, enterprise and inhabitants 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, 2008, 2007
and 2006, research and development costs were ¥114,400 million ($1,144,000 thousand), ¥107,553 million and
¥95,730 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.
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 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 (“ASBJ”) on October 31, 2003).
The new accounting standard requires that fixed assets be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. An impairment
loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted
future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The
impairment loss would be measured at the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset
or the net selling price at disposition.
The effect of adopting the new accounting standard on the consolidated statement of income for the year ended
March 31, 2006 was to decrease income before income taxes by ¥21,891 million. (See Note 7)
Also, the impaired fixed assets are presented in the consolidated balance sheet net of accumulated impairment in
accordance with the revised standard for preparation of consolidated financial statements.

                       