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74 MITSUBISHI MOTORS CORPORATION ANNUAL REPORT 2006
(d) Notional finance lease depreciation method
Notional depreciation of such finance leases is principally calculated and depreciated with no residual value by the
declining-balance method over the lease term.
(e) Calculation of notional interest expense of finance leases
The notional interest expense of such finance leases is principally regarded as the difference between total minimum
lease payments and acquisition cost, and is allocated to each period using the interest method.
Future minimum lease payments required under operating lease transactions entered into by MMC and its con-
solidated subsidiaries at March 31, 2006 and 2005 were as follows:
In thousands of
In millions of yen U.S. dollars
2006 2005 2006
Due within 1 year ¥15,596 ¥15,456 $132,771
Due after 1 year 30,294 46,697 257,891
Total ¥45,891 ¥62,153 $390,662
As lessor
Future minimum lease revenues from operating lease transactions entered into by MMC and its consolidated subsid-
iaries as lessor at March 31, 2006 and 2005 were as follows:
In thousands of
In millions of yen U.S. dollars
2006 2005 2006
Due within 1 year ¥14,508 ¥20,741 $123,504
Due after 1 year 15,279 22,215 130,072
Total ¥29,787 ¥42,956 $253,576
18. Derivative Financial Instruments
(a) Nature of and policy for derivative transactions
MMC and its consolidated subsidiaries utilize derivative financial instruments, including forward foreign exchange
contracts, currency options, currency swaps, interest rate swaps and cross currency swaps to manage their exposure
to fluctuations in foreign currencies and interest rates. MMC and its consolidated subsidiaries do not utilize deriva-
tives for speculation or trading purposes.
(b) Risk
MMC and its consolidated subsidiaries are exposed to the risk of credit loss in the event of nonperformance by the
counterparties to the derivatives, but any such loss would not be expected to be material because MMC enters into
derivative transactions only with financial institutions with high credit ratings. The notional amounts of the deriva-
tive financial instruments do not necessarily represent the amounts exchanged by the parties and, therefore, are not
a direct measure of MMC’s risk exposure in connection with derivatives.
All the transactions related to derivative financial instruments are for the purpose of hedging, however, certain
interest rate swaps (pay-floating/receive-fixed) are exposed to risk of future interest rate fluctuations. MMC and
consolidated subsidiaries do not enter into derivative contracts for which significant volatility would have any signifi-
cant influence on its operations.