Mitsubishi 2006 Annual Report Download - page 63

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61
MITSUBISHI MOTORS CORPORATION ANNUAL REPORT 2006
(ii) Borrowing
In January 2005, as part of the “Mitsubishi Motors Revitalization Plan,” the MMC group announced its plan to raise
¥240 billion ($2,043 million) through new loans. Financing had been successful as the MMC group already raised
¥70 billion ($595 million) by the end of FY2005. As actual cash flow exceeded forecast, the MMC group will review
its financing needs each year and will raise the appropriate amount of funds to successfully carry out the “Mitsubishi
Motors Revitalization Plan.”
(iii) Capital expenditure for revitalization
The capital enhancement and funding measures will give the MMC group access to ¥490 billion ($4,171 million)
(excluding a ¥64.2 billion ($546 million) debt-for-equity swap). MMC will allocate this funding with maximum effi-
ciency to R&D and capital investment, which will provide the platform vital to the successful achievement of targets
and goals set out in the “Mitsubishi Motors Revitalization Plan.”
The MMC group set up a new “Business Revitalization Monitoring Committee,” an external body that monitors
the progress made in the implementation of the “Mitsubishi Motors Revitalization Plan” in April 2005. The mem-
bers of the committee are made up of specialists and leaders in their fields from outside the MMC group as well as
representatives from key stockholders of Mitsubishi companies, and they have been overseeing the progress of the
“Mitsubishi Motors Revitalization Plan” and have given valuable advice and guidance.
For this fiscal year, due to effective business strategy, financing, and management, consolidated operating income
returned to the black a year ahead of original plan. Consolidated net loss however fell below plan as a result of the
impairment charge in Japan, additional impairment charges in North America and Australia, and provision for losses
on restructuring for this period. It is expected that as a result, the strength of individual operations will restore and
improve, and the transformation of the organization will continue steadily from FY2006 going forward.
The MMC group, in order to restore operations as well as financial health across the board, is devoting itself to
materializing the new “Mitsubishi Motors Revitalization Plan” that was announced in January 2005 with full sup-
port of three Mitsubishi companies (MHI, Mitsubishi Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd.).
Accordingly, these financial statements have been prepared on the basis of going concern and the effect of any
significant doubt as to going concern is not reflected.
2. Significant Accounting Policies
(a) Basis of preparation
MMC and its domestic consolidated subsidiaries maintain their books of account in conformity with the financial
accounting standards of Japan. Foreign subsidiaries maintain their books of account in conformity with standards in
their countries of domicile.
The accompanying consolidated financial statements have been prepared in accordance with generally accepted
accounting principles in Japan which are different in certain respects as to the application and disclosure require-
ments of International Financial Reporting Standards. These financial statements have been compiled from the
consolidated financial statements filed to the Financial Services Agency as required by the Securities and Exchange
Law of Japan.
In addition, the notes to the consolidated financial statements include information, which is not required under
generally accepted accounting principles in Japan but is presented herein as additional information.
Certain reclassifications have been made to the prior year’s financial statements to conform to the current
year’s presentation.
As permitted, amounts of less than ¥1 million have been omitted. Consequently, the totals shown in the accompany-
ing financial statements (both in yen and U.S. dollars) do not necessarily agree with the sum of the individual amounts.
Notes to Consolidated Financial Statements