Mitsubishi 2012 Annual Report Download - page 40

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 generally accepted ac-
counting principles in 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 adjust-
ments required by generally accepted accounting principles in Japan.
The accompanying consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles 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
Financial 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 which 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 omit-
ted. Consequently, the totals shown in the accompanying financial
statements (both in Yen and U.S. dollars) may not necessarily agree
with the sum of the individual amounts presented.
(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 5 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, as
investments in unconsolidated subsidiaries and affiliates, or as 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, 2012 and 2011. 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
Corporation 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.
MITSUBISHI MOTORS CORPORATION
Annual Report 2012
38