Mitsubishi 1999 Annual Report Download - page 45

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(f) Depreciation
Depreciation of property, plant and equipment of MMC and its domestic subsidiaries is principally calculated by the
declining-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
termination.
The indemnity for cases of voluntary termination is lower than that for involuntary termination or retirement. MMC and
its domestic consolidated subsidiaries have, in general, provided for such liability at 40% of the amount which 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 employees
who retire at the mandatory retirement age.
Pension cost is funded as accrued. Past service cost was amortized over a period of 26 and 25 years for the years ended
March 31, 1999 and 1998, respectively.
(h) Installment sales
Certain domestic consolidated subsidiaries recognize revenues by the installment sales method whereby gross profit on
installment sales is deferred and credited to income in proportion to the amount of installment receivables which become
due.
(i) Income taxes
Income taxes are principally accounted for on an accrual basis. Deferred income taxes pertaining to timing differences
are recognized only insofar as they relate to the elimination of unrealized intercompany profits and other adjustments for
consolidation purposes.
(j) Translation of foreign currency accounts
Foreign currency receivables and payables of MMC and its domestic consolidated subsidiaries are translated into yen as
follows:
(1) Current receivables and payables are translated at the applicable year-end rates; and
(2) Non-current receivables and payables are translated at historical rates, which approximate the prevailing rates on the
dates of the transactions.
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 and expense 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.
Notes to consolidated financial statements
43