Mitsubishi 2012 Annual Report Download - page 48

(b) Depreciation method of leased assets
Leased assets under finance leases that do not involve trans-
fer of ownership to the lessee, are depreciated using the
straight line method based on the contract term of the lease
agreement. If the guaranteed residual value is determined
in the lease agreement, the said guaranteed residual value
is deemed as the residual value of such leased assets. If the
residual value is not determined, it is deemed to be zero.
(2) Operating lease transactions
Future minimum lease payments required under non-cancellable
operating lease transactions entered into by MMC and its
consolidated subsidiaries at March 31, 2012 and 2011 were as
follows:
(In millions of yen)
(In thousands
of U.S. dollars)
March 31,
2012 2011 2012
Due within 1 year ¥1,231 ¥1,349 $ 14,986
Due after 1 year 7,427 7,740 90,375
Total ¥8,659 ¥9,090 $105,361
As lessor
FFuture minimum lease revenues from non-cancellable operating
lease transactions entered into by MMC and its consolidated sub-
sidiaries as lessor at March 31, 2012 and 2011 were as follows:
(In millions of yen)
(In thousands
of U.S. dollars)
March 31,
2012 2011 2012
Due within 1 year ¥4,210 ¥ 4,618 $ 51,228
Due after 1 year 5,668 6,034 68,965
Total ¥9,878 ¥10,653 $120,194
15. Financial Instruments
For the years ended March 31, 2012 and 2011
Overview of financial instruments
(a) Our policy to manage financial instruments
The Group’s capital management policy is to limit its investments to
low-risk financial products and to obtain its required funds mainly
through bank borrowings. We use derivative instruments to hedge
interest rate, foreign currency and similar risks, and we do not enter
into any speculative transactions.
(b) Nature and risks of financial instruments and our risk
management structure
TTrade receivables, which include notes receivable and accounts
receivable, are exposed to the credit risk of our customers. To man-
age this risk, in accordance with the Group’s credit control rules,
each group company monitors the financial condition of its major
customers, as well as managing the maturity profiles and outstand-
ing balances of the receivables on a customer by customer basis.
Trade receivables denominated in foreign currency are exposed
to foreign currency risk. In principle, forward foreign exchange
contracts are used to hedge the net position after offsetting foreign
currency denominated payables.
Some of investment securities are exposed to the risk of market
price fluctuation. However, such securities are composed of mainly the
stocks of companies with which the Group has business relationships.
Trade payables, which include notes payable and accounts pay-
able, are mostly expected to be settled within one year. While trade
payables include certain payables denominated in foreign curren-
cies, in principle these are managed by netting against foreign
currency denominated receivables.
Floating rate bank borrowings are exposed to interest rate risk.
For some of our long-term bank borrowings, derivative transac-
tions (interest rate swaps) are used as hedging instruments on an
individual loan contract basis to hedge the interest payable fluctua-
tion risk. Such transactions meet the criteria of special accounting
provisions for interest rate swaps, and therefore hedge effectiveness
assessment is not required.
Certain intercompany loans are exposed to foreign currency risk,
however derivative transactions are used as hedging instruments for
some of these loans.
In order to mitigate counterparty risks, the Group enters into
derivative transactions only with highly rated financial institutions.
Trade payables and bank borrowings are exposed to liquidity
risk. Each Group company manages these risks, by preparing cash
flow projections and other similar tools.
MITSUBISHI MOTORS CORPORATION
Annual Report 2012
46