Mitsubishi 2011 Annual Report Download - page 45

Intangible fixed assets (excluding leased assets):
ntangible fixed assets (excluding leased assets) are amortized using
the straight line method for MMC and its domestic consolidated
subsidiaries and using the straight line method primarily over the
period for which each asset is available for use for its overseas
subsidiaries. Software intended for use by MMC and its domestic
consolidated subsidiaries is amortized using the straight line
method over a period of 5 years.
Leased assets:
Assets recognized under finance leases that do not involve transfer
of ownership to the lessee are depreciated using the straight line
method based on the contract term of the lease agreement. If a
guaranteed residual value is determined in the lease agreement,
the said guaranteed residual value is deemed as the residual value
of such leased assets. If the residual value is not determined, it is
deemed to be zero.
(g) Allowance for doubtful accounts
The allowance for doubtful accounts has been provided based on
MMC and its consolidated subsidiaries’ historical experience with
respect to write-offs and an estimate of the amount of specific
uncollectible accounts.
(h) Allowance for product warranties
The allowance for product warranty claims has been calculated
based on MMC and its consolidated subsidiaries’ historical experi-
ence and estimations with respect to future costs relating to claims.
(i) Retirement benefits
Accrued retirement benefits for employees at March 31, 2011 and
2010 are calculated based on the retirement benefits obligation and
the fair value of the pension plan assets estimated at year end.
Prior service cost is being amortized using the straight line
method over periods of 1 to 17 years. These periods are within the
estimated average remaining service years of the employees.
Actuarial gains and losses are being amortized using the straight
line method over the periods of 5 to 15 years. These periods
are within the estimated average remaining service years of the
employees.
(j) Accrual for retirement benefits for directors and corporate
auditors
Before the termination of the retirement benefits plan for directors
and corporate auditors in the fiscal year ended March 2007, certain
directors and corporate auditors of MMC and its domestic con-
solidated subsidiaries had been customarily entitled to lump-sum
payments under their respective unfunded severance benefit plans,
subject to the shareholders’ approval. Due to the termination of
the plan and partial deduction of the provision, further provision is
no longer needed and the outstanding balance of the provision at
March 31, 2011 and 2010 represents benefits reserved before the
plan’s termination.
(k) Translation of foreign currency accounts
Receivables and payables denominated in foreign currencies are
translated into Yen at the rates of exchange in effect at the balance
sheet date, and differences arising from the translation are included
in the statements of operations.
The accounts of the consolidated foreign subsidiaries are trans-
lated into Yen as follows:
a. Asset and liability items are translated at the rate of exchange in
effect on March 31;
b. Components of shareholders’ equity are translated at their
historical rates at acquisition or upon occurrence; and
c. Revenues, expenses and cash flow items are translated at the
average rate for the financial period. Translation adjustments are
included in “Net assets”.
(l) Amounts per share of common stock
The computation of basic net income per share of common stock
is based on the weighted average number of shares of common
stock outstanding during each year. Diluted net income per share
of common stock is computed based on the weighted average
number of shares of common stock outstanding each year after
giving effect to the dilutive potential of common stock to be issued
upon the conversion of preferred stock and stock options.
(m) Derivative financial instruments
MMC and its consolidated subsidiaries are exposed to risks arising
from fluctuations in foreign currency exchange rates and interest
MITSUBISHI MOTORS CORPORATION
Annual Report 2011 43