Mazda 2014 Annual Report Download - page 44

11. Financial Accounting
Including the financial accounting factors set
out below, the Group’s operating results and
financial position could be affected by finan-
cial accounting assessment of its assets and
liabilities as well as changes in or new appli-
cations of accounting standards.
(i) Deferred Tax Assets
Provided on deductible temporary differences,
deferred tax assets are recorded by assessing
the likelihood of recovery based on expecta-
tions of future taxable income. However, the
amount of deferred tax assets could be reduced
by, for example, the recording of valuation
allowances against deferred tax assets in the
event that they are judged to be unrecover-
able due to a deterioration in business condi-
tions or in the event of tax reforms that include
changes in tax rates. This could adversely affect
the Group’s business results and financial
position.
(ii) Impairment of Long-Lived Assets
With regard to long-lived assets, should the car-
rying amount be considered to be unrecover-
able due, for example, to a deterioration in
business conditions, an impairment loss against
the carrying value of assets will be recorded.
This could adversely affect the Group’s busi-
ness results and financial position.
(iii) Retirement Benefits
Liability for retirement benefits changes in
accordance with trends in retirement benefit
obligations and pension assets. However, in
the event of changes being made to the actu-
arial prerequisites or of a deterioration in fair
value of plan assets caused by lower returns,
the Group’s business results and financial
position could be adversely affected.
12. Changes in Financing Procurement
Environment and Interest Rate
Fluctuations
In addition to loans from banks, the Group
has been raising funds by issuing its shares
and bonds. However, in the event of turmoil in
financial market tax reforms, institutional
changes being made to government-affiliated
financial organizations, or the downgrading of
the Group’s credit rating, the Group’s busi-
ness results and financial position could be
adversely affected due to such factors as the
increased funding costs and the difficulties
associated with raising money for the amount
of funds required. Moreover, factoring in the
effect of interest rate changes on the Group’s
interest-bearing debt, were the costs of financ-
ing to increase due to a rise in interest rates,
the Group’s business results and financial
position could also be adversely affected. In
the event that any deterioration in the Group’s
financial standing were to infringe the finan-
cial covenants of some of the loans and lead
to the forfeiture of the benefit of time, the
Group’s business results and financial posi-
tion could be adversely affected.
13. Compliance and Reputation
Commencing with information security efforts
to protect personal information and confiden-
tial information, the Group has taken preven-
tive measures regarding compliance, such as
compliance with the law. In addition, in the
event of a compliance-related incident being
detected, the Group has a rapid response
system in place to prevent any impact on the
Group’s social credibility and reputation.
However, the Group cannot guarantee that
there is no possibility of a legal violation occur-
ring in the future. Should there be evidence of
an illegal act or should the rapidity and content
of the response prove insufficient, the Group’s
social credibility and reputation could be
harmed, and the Group’s business results and
financial position could be adversely affected.
14 Forecasts
The Group announced its Structural Reform
Plan in February 2012 to strengthen its
Framework for Medium- and Long-Term
Initiatives in order to respond to the harsh
external environment and ensure future
growth. Since the announcement of the plan,
the Group has promoted structural reforms
by using the SKYACTIV TECHNOLOGY as
leverage. However, in the event of external
environment changes that differ greatly from
assumptions or progress not being made
accord ing to plan, the expected outcome
would not be realized and the Group’s busi-
ness results and financial position could be
adversely affected.
Mazda Annual Report 2014 42
CONTENTS
Foundations Underpinning
Sustainable Growth
Financial Section
Review of Operations
Message from Management
Introduction
Brand Value Management