Mitsubishi 2010 Annual Report Download - page 43

Forward foreign exchange contracts related to forecast exports of finished goods are accounted for using deferral hedge account-
ing. Deferral hedge accounting requires unrealized gains or losses to be deferred as liabilities or assets.
MMC and its consolidated subsidiaries have also developed a hedging policy to control various aspects of the derivative transac-
tions including authorization levels and transaction volumes. Based on this policy, within certain limits, MMC and its consolidated sub-
sidiaries hedge the risks arising from the changes in foreign currency exchange rates and interest rates. Forward foreign exchange
contracts are designated to hedge the exposure to variability in expected future cash flows.
For interest rate swaps accounted for as special hedges, instead of measuring hedge effectiveness, confirmation of the conditions
for special hedge accounting is carried out.
2. Changes in Accounting Policies
(Accounting standard for measurement of inventories）
“Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9, issued on July 5, 2006) has been applied from the
previous fiscal year. Accordingly, operating income decreased by ¥245 million and loss before income taxes and minority interests
increased by the same amount. The impact on segment information has been described in the relevant section.
(Accounting standard for lease transactions)
In prior years, MMC and its domestic consolidated subsidiaries accounted for finance lease transactions, which do not involve the
transfer of ownership, using the method of accounting for operating leases. However, following the application of the ”Accounting
Standard for Lease Transactions” (ASBJ Statement No. 13, issued on June 17, 1993 and revised on March 30, 2007 by the Business
Accounting Deliberation Council), and “Guidance on Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16, issued on
January 18, 1994 and revised on March 30, 2007 by JIPCA) in the previous fiscal year, the method of accounting for finance leases is
now applied to such finance lease transactions.
If the commencement of the finance lease contract, which does not involve transfer of ownership, is earlier than the beginning of
the first year of adoption of the above accounting standard, the balance of future minimum lease payments (after deduction of the
interest element) as of the end of the fiscal year prior to adoption is deemed as the acquisition cost of the asset, and such leased
assets are recognized as if they had been acquired at the beginning of the year of adoption of the standard.
As a result of this change, property, plant and equipment increased by ¥24,172 million. However, the impact of this change on
operating income and loss before income taxes and minority interests was immaterial.
Along with the application of the Accounting Standard for Lease Transactions, the balance of the purchased molds not yet depreci-
ated that was formerly included in “Inventories” in accordance with the accounting treatment for finance lease is now included in
“Property, plant and equipment, net”. As a result of this change, inventories decreased by ¥35,102 million, and property, plant and
equipment increased by the same amount.
(Practical solution on unification of accounting policies applied to foreign subsidiaries for consolidated financial statements)
From the beginning of the previous fiscal year, the “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsid-
iaries for Consolidated Financial Statements” (PITF Practical Solution No. 18) has been adopted. Accordingly, the opening balance of
retained earnings decreased by ¥13,455 million. Operating income increased by ¥1,943 million and loss before income taxes and
minority interests also decreased by the same amount respectively as compared to the amount that would have been recorded under
the previous method.
The impact on segment information has been described in the relevant section.
3. U.S. Dollar Amounts
The U.S. dollar amounts in the accompanying consolidated financial statements are included, solely for convenience, at ¥93.04 = U.S.
$1.00, the exchange rate prevailing on March 31, 2010. This translation should not be construed as a representation that the Yen
amounts represent or have been, or could be, converted into U.S. dollars at that or any other rate.
4. Notes and Accounts Receivable-trade, and Finance Receivables
The outstanding balances of trade notes and accounts receivable sold to others which have been deducted from the respective
accounts amounted to ¥18,000 million ($193,465 thousand) and ¥7,600 million as of March 31, 2010 and 2009, respectively.
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MITSUBISHI MOTORS CORPORATION Annual Report 2010MITSUBISHI MOTORS CORPORATION Annual Report 2010