Mitsubishi 2007 Annual Report Download - page 60

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MITSUBISHI MOTORS CORPORATION Annual Report 2007
(f) Depreciation and Amortization
Depreciation of property, plant and equipment is principally calculated by the declining balance method or the straight
line method over the estimated useful life of the respective assets. The estimated useful life of the assets at MMC and
its domestic consolidated subsidiaries are as provided for in the Corporate Tax Law.
Intangible fixed assets are amortized by the straight line method primarily over their respective estimated useful
lives. Software intended for use by MMC and its domestic consolidated subsidiaries is amortized by the straight line
method over a period of 5 years. Goodwill and negative goodwill are amortized immediately or on a straight line basis
over periods of 3 to 7 years depending on the period of effectiveness estimated by each investment.
[Additional information]
Until this fiscal year, in order to determine the useful lives of the fixed assets for accounting purposes, MMC used the
same useful lives that are provided for in the Corporate Tax Law. However, due to effective manufacturing integration
based on the “Mitsubishi Motors Revitalization Plan” and by reducing the number of platforms and sharing existing
platforms, the estimated actual useful lives of dies, which are classified under tooling and furniture, and their useful
lives under the Corporate Tax Law are now substantially different.
Hence, from this fiscal year, instead of the useful lives dictated by the Corporate Tax Law, estimated actual useful
lives are used to determine the useful lives of MMC’s fixed assets. As a result, operating income, ordinary income and
net income for the year ended March 31, 2007 have increased by ¥7,585 million ($64,259 thousand). (The effects on
the segment information are described in Note 19).
(g) Allowance for doubtful accounts
The allowance for doubtful accounts has been provided based on MMC and its consolidated subsidiaries’ historical
experience with respect to write-offs and an estimate of the amount of specific uncollectible accounts.
(h) Allowance for product warranties
The allowance for product warranty claims has been calculated based on MMC and its consolidated subsidiaries’
historical experience and estimations with respect to future costs relating to claims.
(i) Retirement benefits
Accrued retirement benefits for employees at March 31, 2007 and 2006 are calculated based on the retirement
benefits obligation and the fair value of the pension plan assets estimated at year end.
Prior service cost is being amortized using the straight line method over periods of 5 to 21 years. These periods are
within the estimated average remaining service years of the employees.
Actuarial gains and losses are being amortized using the straight line method over the periods of 5 to 21 years.
These periods are within the estimated average remaining service years of the employees.
(j) Accrual for retirement benefits for directors and corporate auditors
Before the termination of the retirement benefits plan for directors and corporate auditors during this fiscal year,
certain directors and corporate auditors of MMC and its domestic consolidated subsidiaries were customarily entitled
to lump-sum payments under their respective unfunded severance benefit plans subject to the stockholders’ approval.
Provision for severance benefits for those directors and corporate auditors were made at the estimated amount which
would be paid if all directors and corporate auditors resigned as of the balance sheet dates. Due to the termination of
the plan, further provision is no longer needed and the outstanding balance of the provision represents only a portion
of benefit payments reserved before the plan’s termination.