Mitsubishi 2000 Annual Report Download - page 50

Notes to consolidated financial statements
48
(f) Depreciation
Depreciation of property, plant and equipment at MMC and its domestic subsidiaries is principally calculated by the de-
clining-balance method over the estimated useful lives of the respective assets. For buildings, however, the straight-line
method is also followed.
Depreciation of property, plant and equipment at the foreign subsidiaries is principally calculated by the straight-line
method over the estimated useful lives of the respective assets.
(g) Accrued severance indemnities and pension plans
Employees who terminate their services with MMC and its domestic consolidated subsidiaries are generally entitled to
lump-sum severance benefits determined by reference to their basic rate of pay and length of service at the date of termi-
nation. The indemnity for cases of voluntary termination is lower than that for involuntary termination or retirement.
MMC and its domestic consolidated subsidiaries have provided for such liability at 40% for other employees of the
amount that would be required to be paid if all eligible employees voluntarily terminated their services at the balance
sheet date.
In addition to the lump-sum severance indemnity plans, MMC and certain of its domestic consolidated subsidiaries
have pension plans which, under certain conditions, cover a portion of the existing lump-sum severance benefits to em-
ployees who retire at the mandatory retirement age.
Pension cost is funded as accrued.
Directors and corporate auditors of MMC and its domestic consolidated subsidiaries are customarily entitled to lump-
sum payments under their respective unfunded severance benefit plan subject to the shareholders' approval. Provision for
the indemnity for severance benefits for those officers has been made at an estimated amount.
(h) Installment sales
Certain domestic and foreign subsidiaries recognize revenues by the installment sales method whereby gross profit on
such sales is deferred and credited to income in proportion to the amount of installment receivables which become due.
(i) Income taxes
In accordance with a new accounting standard for income taxes, deferred tax assets and liabilities were recognized in the
consolidated financial statements for the year ended March 31, 2000 with respect to the differences between financial re-
porting and the tax bases of the assets and liabilities, and were measured using the enacted tax rates and laws which will
be in effect when the differences are expected to reverse.
Until the year ended March 31, 1999, deferred income taxes had been recognized by MMC only for timing differences
between financial and tax reporting with respect to the elimination of unrealized intercompany profits and other adjust-
ments for consolidation purposes, although tax-effect accounting had been adopted by the foreign consolidated sub-
sidiaries. The effect of this change in method of accounting was to increase the deferred tax assets in current assets by
¥14,552 million ($136,806 thousand) and in other assets by ¥1,182 million ($11,135 thousand), investment in unconsoli-
dated subsidiaries and affiliates by ¥233 million ($2,195 thousand), deferred tax liabilities by ¥ 24,519 million ($230,984
thousand), and to decrease net loss by ¥ 2,637 million ($24,842 thousand) and retained earnings by ¥7,509 million
($70,740 thousand) for the year ended March 31, 2000.
(j) Translation of foreign currency accounts
The accounts of the consolidated foreign subsidiaries are translated into yen as follows:
(1) Asset and liability items are translated at the rate of exchange in effect on the closing date of each subsidiary;
(2) Components of stockholders' equity are translated at the historical rates at acquisition or occurrence; and
(3) Revenue, expense and cashflow items are translated at the average rate for the fiscal year of each subsidiary.
Translation differences are presented as translation adjustments in the accompanying consolidated balance sheets.
(k) Amounts per share
The computation of basic net income (loss) per share is based on the weighted average number of shares outstanding dur-
ing each year. Fully diluted net income per share is computed based on the weighted average number of shares of com-