RNS Number:7593M
Mitsubishi Corporation
25 June 2003
Additional Notes to Consolidated Financial Statements
for the Year Ended March 31, 2003 (Based on US GAAP)
June 25, 2003
Mitsubishi Corporation
TOKYO, June 25, 2003.. Mitsubishi Corporation announced today additional notes
to its consolidated financial statements, using accounting principles generally
accepted in the United States, for the year ended March 31, 2003. The
consolidated financial statements were originally announced on May 14, 2003.
INCOME TAXES
Income taxes in Japan applicable to the companies, imposed by the national,
prefectural and municipal governments, in the aggregate, result in a normal
effective statutory rate of approximately 42% for the years ended March 31, 2002
and 2003. Effective March 31, 2003, separate new local tax legislation was
enacted in Japan changing the parent company's and its domestic subsidiaries'
statutory income tax rate from 42% to 41% for fiscal years beginning on or after
April 1, 2004. Deferred income tax balances have been adjusted to reflect the
revised rates, which increased the provision for income taxes for the year ended
March 31, 2003. Foreign subsidiaries are subject to income taxes of the
countries in which they operate.
A reconciliation of the combined statutory tax rates for the years ended March
31, 2002 and 2003 to the effective rates of income taxes reflected in the
accompanying consolidated statements of income is as follows:
2002 2003
Combined statutory income tax rate 42.0% 42.0%
Expenses not deductible for income tax purposes 5.2 6.0
Operating losses of certain subsidiaries 6.3 12.8
Tax benefits on losses of subsidiaries (1.1) (0.2)
Lower income tax rates applicable to income in certain foreign countries (7.0) (9.7)
Effect of taxation on dividends 1.4 9.6
Effect of reduction in tax rate 3.1
Tax benefits realized on foreign tax credits carryforwards
Other-net (0.7) (0.6)
Effective income tax rate 46.1% 63.0%
Amounts provided for income taxes for the years ended March 31, 2002 and 2003 are allocated as follows:
Millions of Yen Millions of U.S.
Dollars
2002 2003 2003
Income taxes Y 45,875 Y 38,302 $325
Equity in earnings of affiliated companies,including impairment (17,544) 4,802 40
loss
Other comprehensive income (36,154) (62,767) (531)
Total income tax expense (benefit) Y (7,823) Y (19,663) $(166)
Significant components of deferred tax assets and liabilities at March 31, 2002 and 2003 are as follows:
Millions of Yen Millions ofU.S. Dollars
2002 2003 2003
Assets:
Allowance for doubtful receivables Y 52,299 Y 60,122 $509
Accrued pension and severance liabilities 56,892 105,624 895
Impairment loss on property and equipment 15,929 11,958 101
Net operating loss carryforwards 36,629 30,282 257
Accruals and other 59,537 55,649 472
Gross deferred tax assets 221,286 263,635 2,234
Less valuation allowance (37,008) (36,955) (313)
Deferred tax assets-less valuation allowance 184,278 226,680 1,921
Liabilities:
Depreciation 22,474 23,541 200
Valuation of debt and equity securities 63,401 36,985 313
Property and intangible assets 29,528 52,995 449
Other 25,090 25,674 218
Gross deferred tax liabilities 140,493 139,195 1,180
Net deferred tax assets Y43,785 Y 87,485 $741
A valuation allowance is established to reduce certain deferred tax assets with respect to deductible temporary
differences and net operating loss carryforwards where it is more likely than not that they will not be realized. The
total valuation allowance increased by Y 2,338 million and decreased by Y 53 million ($0.4million) for the years
ended March 31, 2002 and 2003, respectively.
Net deferred tax assets are included in the consolidated balance sheets at March 31, 2002 and 2003 as follows:
Millions of Yen Millions of U.S. Dollars
2002 2003 2003
Current assets-Deferred income taxes Y 48,170 Y 55,651 $472
Other assets 32,051 96,467 817
Current liabilities-Other current liabilities (2,701) (2,297) (19)
Long-term liabilities-Deferred income taxes (33,735) (62,336) (529)
Net deferred tax assets Y 43,785 Y87,485 $741
At March 31, 2003, the amount of undistributed earnings of subsidiaries on which a deferred tax liability has not
been recognized in the accompanying consolidated financial statements aggregated Y 331,989 million ($2,813 million).
Most of the undistributed earnings of domestic subsidiaries are not considered to be a taxable temporary difference.
Determination of the deferred tax liability related to the undistributed earnings of foreign subsidiaries is not
practicable.
At March 31, 2003, the companies had aggregate operating loss carryforwards of approximately Y 84,615 million ($717
million) which may be used as a deduction in the determination of taxable income in future periods. If not utilized,
such loss carryforwards expire as follows:
Millions of Yen Millions of
U.S. Dollars
Year ending March 31:
2004 Y 5,774 $49
2005 7,100 60
2006 12,948 110
2007 19,122 162
2008 9,757 83
2009 through 2013 7,565 64
2014 through 2018 602 5
2019 and thereafter 21,747 184
Total Y 84,615 $717
Income (loss) from consolidated operations before income taxes for the years ended March 31, 2002 and 2003 comprised
the following:
Millions of Yen
The Parent Foreign Total
Company and Subsidiaries
Its Domestic
Subsidiaries
Year ended March 31, 2002 Y 34,417 Y 65,102 Y 99,519
Year ended March 31, 2003 Y (16,760 ) Y 77,594 Y 60,834
Millions of U.S. Dollars
The Parent Foreign Total
Company and Its Domestic Subsidiaries
Subsidiaries
Year ended March 31, 2003 $(142) $658 $516
Income taxes for the years ended March 31, 2002 and 2003 comprised the following:
Millions of Yen
The Parent Foreign Subsidiaries Total
Company and
Its Domestic Subsidiaries
Year ended March 31, 2002:
Current Y 22,503 Y 23,039 Y 45,542
Deferred 5,139 (4,806) 333
Total Y27,642 Y 18,233 Y 45,875
Year ended March 31, 2003:
Current Y30,751 Y 25,517 Y 56,268
Deferred (16,752) (1,214) (17,966)
Total Y 13,999 Y 24,303 Y 38,302
Millions of U.S. Dollars
The Parent Company and Foreign Subsidiaries Total
Its Domestic Subsidiaries
Year ended March 31, 2003:
Current $261 $216 $477
Deferred (142) (10) (152)
Total $119 $206 $325
ACCRUED PENSION AND SEVERANCE LIABILITIES
The parent company and certain of its subsidiaries have non-contributory defined benefit pension plans covering
substantially all employees other than directors. The plans provide benefits based upon years of service,
compensation at the time of severance and other factors. The parent company and certain of its subsidiaries also have
contributory defined benefit pension plans which cover substantially all of their employees and provides for lifetime
annuity payments commencing at age 60. In addition, certain subsidiaries and affiliated companies participate in a
contributory defined benefit pension plan (Dia Union Pension Fund) which covers substantially all of their employees
and provides for lifetime annuity payments commencing at age 60.
Each of the contributory pension funds is administered by a board of trustees comprised of management and employee
representatives as required by government regulations. Employee benefits under the plans consist of a portion
specified by government regulations and an additional portion from the parent company's or its subsidiaries'
sponsored plans. The plan assets for both portions are managed and invested as one asset pool. Both the companies and
their employees are required to contribute to the pension funds; however, the companies have obligations to fund the
plans in a manner sufficient to satisfy the plans benefit obligations.
The companies' funding policy is mainly to contribute an amount deductible for income tax purposes. Contributions are
intended to provide not only for benefits attributable to service to date but also for those expected to be earned in
the future. In March 2002 and March 2003, the parent company contributed certain marketable equity securities to
employee retirement benefit trusts plan assets for the parent's contributory and non-contributory pension plans.
In addition to the pension plans, most of the domestic subsidiaries have unfunded severance indemnity plans under
which their employees, other than directors, are entitled, under most circumstances, upon mandatory retirement at
normal retirement age or earlier termination of employment, to lump-sum severance indemnities based on compensation
at the time of severance, years of service and other factors.
Net periodic pension costs of the parent company's and its subsidiaries' pension and indemnities plans for the years
ended March 31, 2002 and 2003 include the following components:
Millions of Yen Millions of
U.S. Dollars
2002 2003 2003
Contributory pension plans:
Service cost-benefits earned during Y 7,461 Y 6,743 $57
the period
Interest cost on projected benefit 10,067 10,309 88
obligation
Expected return on plan assets (8,534 ) (6,003 ) (51 )
Recognized net actuarial loss 7,641 9,007 76
Amortization of unrecognized prior 117 (166 ) (1 )
service cost
Amortization of unrecognized obligation 163 163 1
at transition
Net periodic pension cost Y 16,915 Y 20,053 $170
Non-contributory pension plans:
Service cost-benefits earned during Y 6,213 Y 6,209 $53
the period
Interest cost on projected benefit 2,443 2,294 19
obligation
Expected return on plan assets (1,757 ) (1,424 ) (12 )
Recognized net actuarial loss 3,982 3,826 32
Amortization of unrecognized prior 242 78 1
service cost
Amortization of unrecognized net asset (20 ) (18 )
at transition
Settlement loss 3,657 31
Net periodic pension cost Y 11,103 Y 14,622 $124
The following table sets forth the reconciliation of benefit obligation, plan assets and funded status of the plans:
Millions of Yen
2002 2003
Contributory Non-contributory Contributory Non-contributory
Pension Plans Pension Plans Pension Plans Pension Plans
Change in benefit obligation:
Benefit obligation at beginning of year Y 336,340 Y 89,981 Y346,376 Y 96,874
Service cost 7,461 6,213 6,743 6,209
Interest cost 10,067 2,443 10,309 2,294
Employee contributions 2,205 2,317
Plan amendments 205 (1,106 )
Actuarial (gain) loss (536 ) 2,036 67,908 6,606
Benefits paid (9,161 ) (4,191 ) (10,213 ) (3,401 )
Lump-sum payments/settlements (6,135 ) (7,916 )
Acquisitions/divestitures and other-net 5,402 2,051 3,556
Change in foreign currency exchange rates 1,125 (974 )
Benefit obligation at end of year 346,376 96,874 425,696 102,142
Change in plan assets:
Fair value of plan assets at beginning of 260,780 57,977 282,674 57,810
year
Actual return on plan assets (17,624 ) (4,620 ) (53,477 ) (10,258 )
Employer contributions 46,474 8,415 22,241 26,362
Employee contributions 2,205 2,317
Benefits paid (9,161 ) (2,139 ) (10,213 ) (1,923 )
Lump-sum payments/settlements (6,135 ) (6,637 )
Acquisitions/divestitures and other-net 3,228 1,165 206
Change in foreign currency exchange rates 1,084 (748 )
Fair value of plan assets at end of year 282,674 57,810 244,707 64,812
Reconciliation of funded status and net
amount recognized in
the consolidated balance sheets:
Funded status (63,702 ) (39,064 ) (180,989 ) (37,330 )
Unrecognized net actuarial loss 145,578 26,941 264,151 38,599
Unrecognized prior service cost 1,245 389 (19 )
Unrecognized net obligation (asset) at 319 (23 ) 156 (3 )
transition
Net amount recognized Y82,195 Y (10,901 ) Y83,707 Y1,247
Amounts recognized in the consolidated
balance sheets consist of:
Prepaid pension cost included in other Y 3,306 Y5,223
current assets
Accrued pension liability Y(49,064 ) (33,378 ) Y (156,615 ) (35,949 )
Intangible asset included in other assets 319 1,161 2,306
Accumulated other comprehensive loss, 130,940 18,010 238,016 31,973
before tax
Net amount recognized Y 82,195 Y (10,901 ) Y 83,707 1,247
Millions of U.S. Dollars
2003
Contributory Non-contributory
Pension Plans Pension Plans
Change in benefit obligation:
Benefit obligation at beginning of year $2,935 $821
Service cost 57 53
Interest cost 88 19
Employee contributions 20
Plan amendments 2 (9)
Actuarial (gain) loss 575 56
Benefits paid (87) (29)
Lump-sum payments/settlements (67)
Acquisitions/divestitures and other-net 18 30
Change in foreign currency exchange rates (8)
Benefit obligation at end of year 3,608 866
Change in plan assets:
Fair value of plan assets at beginning of year 2,396 490
Actual return on plan assets (453) (87)
Employer contributions 188 223
Employee contributions 20
Benefits paid (87) (16)
Lump-sum payments/settlements (57)
Acquisitions/divestitures and other-net 10 2
Change in foreign currency exchange rates (6)
Fair value of plan assets at end of year 2,074 549
Reconciliation of funded status and net amount recognized
in
the consolidated balance sheets:
Funded status (1,534) (317)
Unrecognized net actuarial loss 2,239 328
Unrecognized prior service cost 3
Unrecognized net obligation (asset) at transition 1
Net amount recognized $709 $11
Amounts recognized in the consolidated balance sheets
consist of:
Prepaid pension cost included in other current assets $45
Accrued pension liability $(1,327) (305)
Intangible asset included in other assets 19
Accumulated other comprehensive loss, before tax 2,017 271
Net amount recognized $709 $11
The aggregate projected benefit obligation, aggregate accumulated benefit obligation and aggregate fair value of plan
assets for the contributory pension plans where accumulated benefit obligations exceeded plan assets were Y 346,376
million, Y 333,038 million and Y 282,674 million, respectively, as of March 31, 2002 and Y 425,696 million ($3,608
million), Y 401,322 million ($3,401 million) and Y 244,707 million ($2,074 million), respectively, as of March 31,
2003.
The aggregate projected benefit obligation, aggregate accumulated benefit obligation and aggregate fair value of plan
assets for the non-contributory pension plans where accumulated benefit obligations exceeded plan assets were Y
91,014 million, Y 81,200 million and Y 51,145 million, respectively, as of March 31, 2002 and Y 95,981 million ($813
million), Y 90,750 million ($769 million) and Y 59,559 million ($505 million), respectively, as of March 31, 2003.
Assumptions used for 2002 and 2003 are as follows:
2002 2003
Contributory pension plans:
Weighted-average discount rate 3.0% 2.0%
Average rate of increase in future compensation levels 2.3% 2.1%
Expected long-term rate of return on plan assets 4.0% 2.9%
Non-contributory pension plans:
Weighted-average discount rate* 3.3% 2.1%
Average rate of increase in future compensation levels* 4.1% 4.1%
Expected long-term rate of return on plan assets* 4.8% 4.3%
* Includes those of foreign subsidiaries.
The parent company has offered an early retirement program to its employees. The program provides additional benefit
payments for employees who are age 50 or older with more than 15 years of service and elect early retirement benefit
before the mandatory retirement age of 60. As a result of an announcement in November 1998 that the program would be
amended so that a portion of additional benefits would not be provided for employees who apply for the program after
April 1, 2000 (April 1, 2003 for expatriates who were residing abroad upon the announcement and administrative
personnel), a large number of employees applied for the program during the year ended March 31 2003. At March 31,
2002 and 2003, the liability for applicants to the program, discounted to reflect the present value of the expected
cash flows, was Y 29,631 million and Y 32,083 million ($272 million), respectively. Such liability is allocated
between "Other accrued expenses" and "Accrued pension and severance liabilities" in the accompanying consolidated
balance sheets, depending on when the additional benefit payment is expected to be made. Related expenses recognized
by the parent company for the years ended March 31, 2002 and 2003, included in selling, general and administrative
expenses in the accompanying consolidated statements of income, were Y 4,387 million and Y 13,968 million ($118
million), respectively.
# # #
For further information contact: Mitsubishi Corporation
Investor Relations Office
Phone: 81-3-3210-8580
Fax: 81-3-3210-8583
e-mail: ml.ir@mitsubishicorp.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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