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Annual Report 2005
58
MITSUBISHI MOTORS CORPORATION
Forward foreign exchange contracts related to forecasted export of finished goods are accounted for using deferral
hedge accounting. Deferral hedge accounting requires unrealized gains or losses to be deferred as liabilities or assets.
MMC and its consolidated subsidiaries have also developed a hedging policy to control various aspects of the
derivative transactions including authorization levels and transaction volumes. Based on this policy, MMC and its
consolidated subsidiaries hedge, within certain limits, the risks arising from the changes in foreign currency
exchange rates and interest rates. Forward foreign exchange contracts are designated to hedge the exposure to
variability in expected future cash flows.
Hedge effectiveness on interest rate swaps are evaluated by reviewing the gross changes in cash flows of hedging
instruments 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. U.S. DOLLAR AMOUNTS
The U.S. dollar amounts in the accompanying consolidated financial statements are included, solely for conve-
nience, at ¥107.39 = U.S.$1.00, the exchange rate prevailing on March 31, 2005. The translation should not be
construed as a representation that the Yen amounts represent or have been, or could be, converted into U.S. dollars
at that or any other rate.
4. TRADE NOTES, ACCOUNTS RECEIVABLE AND FINANCE RECEIVABLES SOLD
The outstanding balances of trade notes and accounts receivable sold to others which have been deducted from the
respective accounts amounted to ¥7,913 million ($73,687 thousand) and ¥30,091 million as of March 31, 2005
and 2004, respectively. Such amounts deducted from finance receivables were ¥240,317 million ($2,237,800
thousand) and ¥464,253 million as of March 31, 2005 and 2004, respectively.
Following weakness in the North American economy, a higher probability was assigned to the higher end of the
range of future credit losses relating to securitized finance receivables estimated in the finance company, Mitsub-
ishi Motors Credit of America, Inc. An allowance for doubtful accounts of ¥39,956 million, including an one time
unusual amount to bring the valuation to a more conservative estimate of value as compared to prior estimates, was
recorded in cost of sales during the period ended March 31, 2004.
5. INVENTORIES
Inventories at March 31, 2005 and 2004 consisted of the following:
In thousands of
In millions of yen U.S. dollars
2005 2004 2005
Finished products ¥163,187 ¥171,528 $1,519,582
Raw materials 25,468 19,980 237,162
Work in process 44,696 83,952 416,206
¥233,353 ¥275,460 $2,172,951