Mazda 2015 Annual Report Download - page 49

If the fair market value of equity securities issued by unconsolidated subsidiaries and
affiliated companies not on the equity method and available-for-sale securities declines sig-
nificantly, such securities are stated at fair market value and the difference between fair
market value and the carrying amount is recognized as a loss in the period of the decline. If
the fair market value of equity securities issued by unconsolidated subsidiaries and affiliated
companies not on the equity method and available-for-sale securities is not readily avail-
able, such securities should be written down to net asset value with a corresponding charge
to income in the event net asset value declines significantly. In these cases, such fair
market value or the net asset value will be the carrying amount of the securities at the
beginning of the next year.
Inventories
Inventories are stated at the lower of cost (determined principally by the average method),
or net realizable value.
Property, plant and equipment (except for leased property)
Property, plant and equipment are stated principally at cost. Depreciation is computed
mainly using the straight-line method over the estimated economic useful lives of the
assets with a residual value at the end of useful lives to be a memorandum value.
Intangible assets (except for leased property)
Intangible assets are amortized by the straight-line method over the estimated useful lives
of the assets.
For the Company and its consolidated domestic subsidiaries (together the “Domestic
Companies”), useful lives are estimated principally by a method equivalent to the provi-
sions of the Corporate Tax Code of Japan. Software for internal use is amortized on a
straight-line basis over the period of internal use, i.e., 5 years.
Leased property
Finance leases in which ownership is not transferred to the lessee
Finance leases are capitalized in the balance sheet. Depreciation or amortization expense
is recognized on a straight-line basis over the lease period.
For leases with a guaranteed minimum residual value, the contracted residual value is
considered to be the residual value for financial accounting purposes. For other leases, the
residual value is zero.
Allowance for doubtful receivables
Allowance for doubtful receivables provides for the losses from bad debt. The amount esti-
mated to be uncollectible is recognized. For receivables of ordinary risk, the amount is esti-
mated based on the past default ratio.
For receivables of high risk, the amount is estimated based on the financial standing of
the debtor.
Investment valuation allowance
Investment valuation allowance provides for losses from investments. The amount is esti-
mated in light of the financial standings of the investee companies.
Reserve for warranty expenses
Reserve for warranty expenses provides for after-sales expenses to product (vehicle).
Primarily, according to the product warranty provisions, the amount estimated based on
actual costs incurred in the past, taking future prospects into consideration, is recognized.
Reserve for loss from business of affiliates
Reserve for loss from business of affiliates provides for losses from affiliates’ businesses.
The amount of loss estimated to be incurred by the Company is recognized.
Reserve for environmental measures
Reserve for environmental measures provides for expenditure aimed at environmental
measures. The amount of future expenditure estimated as of the end of the current fiscal
year is recognized.
Employees’ severance and retirement benefits
The Group provides various types of post-employment benefit plans, including lump-sum
plans, defined benefit pension plans, and defined contribution pension plans, under which
all eligible employees are entitled to benefits based on the level of wages and salaries at
the time of retirement or termination, length of service, and certain other factors.
In calculating the retirement benefit obligations, the method of attributing expected ben-
efit to the accounting period is principally based on a benefit formula basis.
Past service costs are recognized in expenses in equal amounts mainly over 12 years,
which is within the average of the estimated remaining service periods of employees, and
actuarial gains and losses are recognized in expenses using the straight-line basis mainly
over 13 years, which is within the average of the estimated remaining service periods,
commencing with the following period.
Mazda Annual Report 2015
47
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CONTENTS
Growth Strategy
Message from Management
Introduction
Review of Operations
Foundations Underpinning
Sustainable Growth