Mitsubishi 2011 Annual Report Download - page 52

each group company monitors the financial condition of its major
customers, as well as managing the maturity profiles and outstand-
ing balances of the receivables on a customer by customer basis.
Trade receivables denominated in foreign currency are exposed
to foreign currency risk. In principle, forward foreign exchange
contracts are used to hedge the net position after offsetting foreign
currency denominated payables.
Investment securities are exposed to the risk of market price fluc-
tuation. However, such securities are composed of mainly the stocks
of companies with which the Group has business relationships.
Trade payables, which include notes payable and accounts pay-
able, are mostly expected to be settled within one year. While trade
payables include certain payables denominated in foreign curren-
cies, in principle these are managed by netting against foreign
currency denominated receivables.
Floating rate bank borrowings are exposed to interest rate risk.
For some of our long-term bank borrowings, derivative transac-
tions (interest rate swaps) are used as hedging instruments on an
individual loan contract basis to hedge the interest payable fluctua-
tion risk. Such transactions meet the criteria of special accounting
provisions for interest rate swaps, and therefore hedge effectiveness
assessment is not required.
Certain intercompany loans are exposed to foreign currency risk,
however derivative transactions are used as hedging instruments for
some of these loans.
In order to mitigate counterparty risks, the Group enters into
derivative transactions only with highly rated financial institutions.
Trade payables and bank borrowings are exposed to liquidity
risk. Each Group company manages these risks, by preparing cash
flow projections and other similar tools.
(c) Supplementary information about the fair value of financial
instruments
The notional amount with respect to the derivative transactions
presented in “Fair value of financial instruments” does not
represent the amount of market risk associated with the relevant
derivative transactions.
Fair value of financial instruments
The carrying amount, fair value, and the difference between the
carrying amount and the fair value of the financial instruments
at March 31, 2011 and 2010 were as follows. These financial
instruments do not include any financial instrument for which it
is extremely difficult to reasonably measure its fair value. (Refer to
Note 16.2)
(In millions of yen)
March 31, 2011
Carrying
amount Fair value Difference
Cash and bank deposits ¥317,097 ¥317,097 ¥ —
Notes and accounts
receivable–trade 114,432 114,432 —
Finance receivables 78,980
Allowance for doubtful
accounts (*1) (5,928)
73,051 70,893 (2,158)
Investment securities (*2) 28,722 28,722 —
Total assets ¥533,304 ¥531,146 ¥(2,158)
Notes and accounts
payable–trade ¥278,595 ¥278,595 ¥ —
Short-term loans payable 125,499 125,499 —
Long-term loans payable 272,450 272,942 492
Accrued expenses and accounts
payable (*3) 97,159 97,159 —
Total liabilities ¥773,704 ¥774,196 ¥ 492
Derivative transactions (*4) 6,767 6,767 —
(In thousands of U.S. dollars)
March 31, 2011
Carrying
amount Fair value Difference
Cash and bank deposits
$3,813,562 $3,813,562 $ —
Notes and accounts
receivable–trade 1,376,223 1,376,223 —
Finance receivables
949,854
Allowance for doubtful
accounts (*1) (71,299)
878,555 852,593 (25,962)
Investment securities (*2)
345,429 345,429 —
Total assets
$6,413,769 $6,387,807 $(25,962)
Notes and accounts
payable–trade $3,350,512 $3,350,512 $ —
Short-term loans payable
1,509,312 1,509,312 —
Long-term loans payable
3,276,615 3,282,533 5,917
Accrued expenses and accounts
payable (*3) 1,168,485 1,168,485 —
Total liabilities
$9,304,926 $9,310,843 $ 5,917
Derivative transactions (*4)
81,394 81,394 —
(*1) The allowance for doubtful accounts recognized for the individual
financial receivable is deducted from the carrying amount.
(*2) Investments presented on the balance sheets consist of Investment
securities of ¥73,031 million ($878,313 thousand), which include
Securities with market value of ¥28,722 million ($345,429 thousand)
and Non-listed stocks and stocks of unconsolidated subsidiaries and
affiliates of ¥44,309 million ($532,884 thousand) (refer to Note 16.2),
and Other investments in unconsolidated subsidiaries and affiliates of
¥14,547 million ($174,957 thousand) at March 31, 2011.
(*3) Accounts payable–other and accrued expenses presented on the balance
sheets consist of Accrued expenses and accounts payable of ¥97,159
million ($1,168,485 thousand) and Allowance for product warranties of
¥28,211 million ($339,289 thousand) at March 31, 2011.
(*4) The amount of the receivable/payable derived from derivative transac-
tions is presented on a net basis.
MITSUBISHI MOTORS CORPORATION
Annual Report 2011
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