Mitsubishi 2008 Annual Report Download - page 54

52 mitsubishi motors corporation annual report 2008
(g) 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 useful lives of the assets at MMC are based on estimated life of assets and its
domestic consolidated subsidiaries are as provided for in the Corporate Tax Law.
[Additional information]
Until March 31, 2006, to determine the useful lives of 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 April 1, 2006, 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. (The effects on the segment information are described in Note 17).
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.
(h) 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.
(i) 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.
(j) Retirement benefits
Accrued retirement benefits for employees at March 31, 2008 and 2007 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 1 to 21 years. These periods are within the esti-
mated 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.
(k) Accrual for retirement benefits for directors and corporate auditors
Before the termination of the retirement benefits plan for directors and corporate auditors during the previous fiscal year, certain directors
and corporate auditors of MMC and its domestic consolidated subsidiaries had been customarily entitled to lump-sum payments under
their respective unfunded severance benefit plans subject to the stockholders’ approval. Due to the termination of the plan and partial
deduction of the provision, further provision has been no longer needed and the outstanding balance of the provision represents only a
portion of benefit payments reserved before the plan’s termination.