Mitsubishi 2004 Annual Report Download - page 41

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and hedged items for the hedged period. Interest rate swaps which meet the criteria for special hedge accounting are evaluated
by reviewing whether the conditions are met for applying the special hedge accounting instead of evaluating effectiveness, as
permitted by the accounting standard.
3. CHANGES IN ACCOUNTING POLICIES
(a) Synchronization of fiscal year-end of overseas consolidated subsidiaries
In the year ended March 31, 2003, to improve transparency and quality of disclosure, the fiscal year-end of overseas consoli-
dated subsidiaries, which historically had been December 31, was changed to synchronize with the fiscal year-end of MMC,
March 31. In the year ended March 2003, as part of this change, Mitsubishi Motors Australia Ltd. and 11 other overseas
subsidiaries formally changed their local fiscal year-end to March 31. Mitsubishi Motors North America Inc. and 49 other over-
seas subsidiaries prepared their financial statements for consolidation purposes for a period ended on March 31, 2003.
In the year ended March 31, 2004, Mitsubishi Motors North America, Inc. and 23 other overseas subsidiaries, which had
previously prepared their financial statements for consolidation purposes to March 31, 2003, formally changed their local fiscal
year end to March 31. Mitsubishi Motors Europe B.V. and 30 other overseas subsidiaries continued to prepare their financial
statements for consolidation purposes to March 31.
Accordingly, operating results for the year ended March 31, 2004 included 12 months of operations for these 55
subsidiaries, whereas the operating results for the year ended March 31, 2003 consisted of 15 months for the 62 above-
mentioned subsidiaries.
In the year ended March 31, 2003, the effect of this change was to increase net sales by ¥433,364 million, and to decrease
operating profit, profit before income taxes and minority interests and net income by ¥10,030 million, ¥24,920 million and
¥6,486 million over the previous year, respectively. Further, net cash provided by operating activities increased by ¥39,495 mil-
lion, net cash provided by investing activities and net cash used in financing activities decreased by ¥19,171 million and
¥23,151 million over the previous year, respectively. The effect of this change on segment information is given in Note 21.
(b) Lease subvention income and expenses related to the North American subsidiaries
Effective January 1, 2003, a change in the recording of lease subvention income and expenses related to the North America sub-
sidiaries was made to recognize the income and expenses from certain lease transactions on a more normalized basis.
One of the North American subsidiaries enters into lease agreements through its captive finance subsidiary (a consolidated
subsidiary of this North American subsidiary), which may be on terms below market. Accordingly, the North American
subsidiary pays subvention to its finance subsidiary to the extent that these terms are below market. The finance company
records this subvention income as deferred revenue which is amortized over the lease term. Prior to December 31, 2002, this
subvention was eliminated on the consolidation of the North American group as an intergroup transaction. As a result of this
elimination, there was no recognition of the subvention expense and income in each period of the lease term, over the entire
lease term the expense and income are matched.
Effective January 1, 2003, the North American subsidiary changed to recognize all the subvention expense when it enters
into lease agreements, since the subvention expenses are considered as a kind of marketing expense for sales promotion. As a
result, the Company no longer eliminates unamortized deferred revenue against marketing expenses, allowing for this expense
to be recognized immediately and to be subsequently reversed as the deferred revenue is recognized over the lease term.
This change was made to recognize the income and expenses from these lease transactions on a more normalized basis.
In the year ended March 31, 2003, as a result of this change, operating profit for the year decreased by ¥237 million, and
profit before income taxes and minority interests decreased by ¥11,389 million over the previous year. In addition, total assets
and total liabilities increased by ¥4,195 million and ¥11,041 million, respectively. The effect of this change on segment
information is given in Note 21.
4. NEW ACCOUNTING STANDARDS
(a) Accounting for Treasury Stock and Legal Reserve
MMC adopted Accounting Standard No. 1, “Accounting Standards for Treasury Stock and the Withdrawal of Legal Reserve,”
which was issued by the Accounting Standards Board of Japan, from the beginning of the year ended March 31, 2003.