Mazda 2016 Annual Report Download - page 56

Income taxes
Income taxes are comprised of corporation, enterprise and inhabitants taxes. Deferred tax assets
and liabilities are recognized to reflect the estimated tax effects attributable to temporary differences
and net operating loss 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 by a valuation allowance, if necessary, by the
amount of any tax benefits that are not expected to be realized.
The Company and its wholly owned domestic subsidiaries elect to file a consolidated corporate
tax return as a consolidation group.
Research and development costs
Research and development costs are charged to income when incurred. For the years ended
March 31, 2016 and 2015, research and development costs were ¥116,610 million ($1,031,947
thousand) and ¥108,378 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 and meet criteria for hedge accounting.
If derivative financial instruments are used as hedges and meet certain hedging criteria, recog-
nition of gains or losses resulting from changes in the fair value of derivative financial instruments
is deferred 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.
Amortization of Goodwill
The difference between acquisition cost and net assets acquired is shown as consolidation
goodwill and amortized on a straight-line basis over a period (primarily 5 years) during which each
investment is expected to generate benefits.
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 stock to be issued upon the exercise of stock acquisition
rights and stock options.
For the years ended March 31, 2016 and 2015, only information on net income per share of
common stock is provided without information on diluted net income per share of common stock to
reflect the diluting effect, because there were no dilutive potential common stocks for the years
ended March 31, 2016 and 2015.
The Company implemented a share consolidation on its common stock with a ratio of five
shares to one share on August 1, 2014. Net income per share of common stock are calculated
based on the assumption that consolidation of shares had been carried out at the beginning of the
year ended March 31, 2015.
Cash dividends per share represent amounts applicable for the respective years on an
accrual basis.
3
ADOPTION OF NEW ACCOUNTING STANDARDS AND ACCOUNTING
CHANGES
(Changes in accounting policies)
Effective from the year ended March 31, 2016, the Company has applied the “Revised Accounting
Standard for Business Combinations” (Accounting Standards Board of Japan (“ASBJ”) Statement
No. 21, September 13, 2013, hereinafter the “Business Combinations Accounting Standard”),
“Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22,
September 13, 2013, hereinafter the “Consolidation Accounting Standard”), “Revised Accounting
Standard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013, hereinafter the
“Business Divestitures Accounting Standard”) and other standards. As a result, the differences
arising from the changes in equity of parent company to its subsidiaries in case where control is
retained have been adjusted in capital surplus, and acquisition-related costs have been reported as
expenses for the fiscal year in which such costs are incurred. For business combinations imple-
mented on or after the beginning of the year ended March 31, 2016, the accounting method was
changed so as to reflect the adjustments to the allocated amount of acquisition costs under the
finalization of provisional accounting treatment in the consolidated financial statements of the fiscal
year in which the combination took place. In addition, the presentation method of net income was
amended and the reference to “minority interests” was changed to “non-controlling interests”.
To reflect this change in financial statement presentation, prior year’s consolidated financial
statements have been reclassified to conform to this year’s presentation.
The Company has applied the Business Combinations Accounting Standard and other
standards from the beginning of the year ended March 31, 2016 prospectively, in accordance with
the transitional treatment set forth in article 58-2 (4) of the Business Combinations Accounting
Standard, article 44-5 (4) of the Consolidation Accounting Standard and article 57-4 (4) of the
Business Divestitures Accounting Standard.
Notes to Consolidated Financial Statements
MAZDA ANNUAL REPORT 2016
54 Financial Section
Message from
Management
Review of Operations
Drivers of Value Creation
Foundations Underpinning
Sustainable Growth
Contents