Mitsubishi 2010 Annual Report Download - page 41

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Notes to Consolidated Financial Statements
Mitsubishi Motors Corporation and Consolidated Subsidiaries
1. 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. The financial statements of foreign subsidiaries are prepared for consolidation purposes in conformity with generally
accepted accounting principles in the United States or International Financial Reporting Standards, subject to the adjustments required
by generally accepted accounting principles in Japan.
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting prin-
ciples in Japan which are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards. These financial statements have been compiled from the consolidated financial statements filed with the Finan-
cial Services Agency as required by the Financial Instruments & Exchange Act 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 accompanying financial
statements (both in Yen and U.S. dollars) do not necessarily agree with the sum of the individual amounts.
(b) Principles of consolidation
All significant companies over which MMC has effective control are consolidated. Significant companies over which MMC has the
ability to exercise significant influence have been accounted for by the equity method.
All significant inter-company transactions have been eliminated in consolidation.
Any differences at the date of acquisition between acquisition cost and the fair value of the net assets acquired are expensed when
incurred or are amortized over periods between 3 to 7 years depending on the period over which it is estimated to be beneficial for
each investment.
(c) Cash and cash equivalents
All highly liquid and low risk investments with maturities of three months or less when purchased are considered to be cash equivalents.
(d) Inventories
Inventories of MMC and its domestic consolidated subsidiaries are principally stated at cost determined by the first in first out method
or specific identification method (under either method, the balance sheet carrying value is reduced to recognize any deterioration of
recoverability). Inventories of the overseas consolidated subsidiaries are principally stated at the lower of cost or market value. Cost is
determined by the specific identification method.
(e) Investments
Investments in securities are classified either as held-to-maturity, investments in unconsolidated subsidiaries and affiliates, or other
securities. Held-to-maturity securities are stated at their amortized cost. No investments classified as held-to-maturity were held during
the years ended March 31, 2010 and 2009. Other securities with a readily determinable market value are stated at fair value and the
cost of such securities sold is computed based on the moving average method. The difference between the acquisition cost and the
carrying value of other securities, including unrealized gains and losses, is recognized in “Valuation difference on available-for-sale
securities” in the accompanying consolidated balance sheets. Other securities without a readily determinable market value are stated
at cost determined by the moving average method.
(f) Depreciation and amortization
Property, plant and equipment (excluding leased assets):
Depreciation of property, plant and equipment (excluding leased assets) is principally calculated using the declining balance method
or the straight line method over the estimated useful life of the respective assets for MMC and domestic consolidated subsidiaries.
Depreciation is principally calculated using the straight line method for the overseas consolidated subsidiaries.
The useful lives of the assets are based on the estimated lives of assets for MMC and are determined in accordance with the Cor-
poration Tax Act for its domestic consolidated subsidiaries. The useful lives of the assets are determined based on the expected useful
lives for the overseas consolidated subsidiaries.
Intangible fixed assets (excluding leased assets):
Intangible fixed assets (excluding leased assets) are amortized using the straight line method for MMC and its domestic consolidated
subsidiaries and using the straight line method primarily over the period for which each asset is available for use for its overseas sub-
sidiaries. Software intended for use by MMC and its domestic consolidated subsidiaries is amortized using the straight line method
over a period of 5 years.
39
MITSUBISHI MOTORS CORPORATION Annual Report 2010MITSUBISHI MOTORS CORPORATION Annual Report 2010