Mazda 2016 Annual Report Download - page 49

11. Dependence on Information Technology
In the course of various business activities such as development, production, and sales of
products, the Group utilizes information technology, networks, and systems. The Group’s
products are also equipped with these technologies, including driving support system, etc.
Despite countermeasures implemented in information technology, networks, and systems to
allow safe operations, such factors as failures in infrastructure, cyberattacks, and infection by
computer viruses may result in suspension of business activities, loss of data, and deteriora-
tion in product functions. Should these events occur, the Group’s business results and fi nan-
cial position could be adversely affected due to the incurring of costs associated with
countermeasures, loss of product credibility, and damage to the brand image, etc.
12. Financial Accounting
Including the fi nancial accounting factors set out below, the Group’s operating results and
fi nancial position could be affected by fi nancial accounting assessment of its assets and
liabilities as well as changes in or new applications 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 expectations 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 unrecoverable
due to a deterioration in business conditions or in the event of tax reforms that include changes
in tax rates. This could adversely affect the Group’s business results and fi nancial position.
(ii) Impairment of Long-Lived Assets
With regard to long-lived assets, should the carrying 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 business
results and fi nancial position.
(iii) Retirement Benefi ts
Liability for retirement benefi ts changes in accordance with trends in retirement benefi t obliga-
tions and pension assets. However, in the event of changes being made to the actuarial
prerequisites or of a deterioration in fair value of plan assets caused by lower returns, the
Group’s business results and fi nancial position could be adversely affected.
13. 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 fi nancial market tax reforms, institutional changes
being made to government-affi liated fi nancial organizations, or the downgrading of the Group’s
credit rating, the Group’s business results and fi nancial position could be adversely affected
due to such factors as the increased funding costs and the diffi culties 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 fi nancing to increase due to
a rise in interest rates, the Group’s business results and fi nancial position could also be
adversely affected. In the event that any deterioration in the Group’s fi nancial standing were to
infringe the fi nancial covenants of some of the loans and lead to the forfeiture of the benefi t of
time, the Group’s business results and fi nancial position could be adversely affected.
14. Compliance and Reputation
Commencing with information security efforts to protect personal information and confi dential
information, the Group has taken preventive measures regarding compliance, such as compli-
ance 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 occurring in the future. Should there be evidence of an illegal act or should the
rapidity and content of the response prove insuffi cient, the Group’s social credibility and
reputation could be harmed, and the Group’s business results and fi nancial position could be
adversely affected.
15. Forecasts
In order to realize further growth in the future, the Group has formulated the medium-term
business plan Structural Reform Stage 2, which will commence in the March 2017 fi scal year.
The plan will work to realize qualitative business growth and accelerate the improvement
of brand value. In implementing the plans, however, in the event of external environment
changes that differ greatly from assumptions or progress not being made according to plan,
the expected outcome would not be realized and the Group’s business results and fi nancial
position could be adversely affected.
Business Risks
MAZDA ANNUAL REPORT 2016
47 Financial Section
Message from
Management
Review of Operations
Drivers of Value Creation
Foundations Underpinning
Sustainable Growth
Contents