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Mitsubishi Elect. - 1st Quarter Results

Mon, 30th Jul 2018 12:40

RNS Number : 1800W
Mitsubishi Electric Corporation
30 July 2018
 

 

 

 

FOR IMMEDIATE RELEASE

No. 3206

 

 

Investor Relations Inquiries

Media Inquiries

 

 

Investor Relations Group, Corporate Finance Division

Public Relations Division

Mitsubishi Electric Corporation

Mitsubishi Electric Corporation

Cad.Irg@rk.MitsubishiElectric.co.jp

prd.gnews@nk.MitsubishiElectric.co.jp

 

www.MitsubishiElectric.com/news/

 

 

 

 

 

 

Mitsubishi Electric Announces Consolidated Financial Results for the First Quarter of Fiscal 2019

 

 

TOKYO, July 30, 2018 - Mitsubishi Electric Corporation (TOKYO: 6503) announced today its consolidated financial results for the first quarter, ended June 30, 2018, of the current fiscal year ending March 31, 2019 (fiscal 2019).

 

 

Consolidated Financial Results

Net sales:

1,050.9

billion yen

(2% increase from the same quarter last year)

Operating income:

61.5

billion yen

(18% decrease from the same quarter last year)

Income before income taxes:

68.7

billion yen

(15% decrease from the same quarter last year)

Net income attributable to Mitsubishi Electric Corp. stockholders:

47.5

billion yen

(17% decrease from the same quarter last year)

 

The global economy in the first quarter, from April through June 2018, of fiscal 2019 saw a slight slowdown in China, a buoyant expansion in the U.S. and gradual trends of recovery in Japan and Europe. In addition, the yen appreciated against the U.S. dollar and weakened against the euro compared to the same period of the previous fiscal year.

Under these circumstances, consolidated net sales in the first quarter increased by 2% compared to the same period of the previous fiscal year to 1,050.9 billion yen with increased sales in the Industrial Automation Systems, Electronic Devices and Home Appliances segments. Consolidated operating income decreased by 18% compared to the same period of the previous fiscal year to 61.5 billion yen, due to decreased profits in all segments.

              Income before income taxes decreased by 15% compared to the same period of the previous fiscal year to 68.7 billion yen.

              Net income attributable to Mitsubishi Electric Corporation stockholders decreased by 17% compared to the same period of the previous fiscal year to 47.5 billion yen.

 

 

 

Consolidated Financial Results by Business Segment

Energy and Electric Systems

Total sales:

267.3

billion yen

(substantially unchanged from the same quarter last year which recorded 268.5 billion yen)

Operating income:

5.9

billion yen

(0.7 billion yen decrease from the same quarter last year which recorded 6.7 billion yen)

 

The social infrastructure systems business saw decreases in both orders and sales from the same period of the previous fiscal year due primarily to decreases in the transportation systems business in Japan and the power systems business outside Japan.

The building systems business saw increases in both orders and sales compared to the same period of the previous fiscal year due primarily to buoyancies in the renewal business in Japan and the new installation of elevators and escalators outside Japan.

As a result, total sales for this segment remained substantially unchanged from the same period of the previous fiscal year. Operating income decreased by 0.7 billion yen from the same period of the previous fiscal year mainly due to a shift in project portfolios.

 

 

Industrial Automation Systems

Total sales:

360.9

billion yen

(3% increase from the same quarter last year which recorded 350.8 billion yen)

Operating income:

44.8

billion yen

(5.8 billion yen decrease from the same quarter last year which recorded 50.7 billion yen)

 

The factory automation systems business saw decreases in both orders and sales from the same period of the previous fiscal year due primarily to a temporary slowdown in capital expenditures in the fields of organic light emitting diodes (OLED) and smartphones outside Japan, despite buoyant demand for exports mainly by machinery and semiconductor-related equipment manufacturers in Japan.

The automotive equipment business saw increases in both orders and sales from the same period of the previous fiscal year due primarily to increases in Japan and other markets in Asia, as well as increased sales in electric-vehicle related equipment in response to market growth worldwide.

              As a result, total sales for this segment increased by 3% from the same period of the previous fiscal year. Operating income decreased by 5.8 billion yen from the same period of the previous fiscal year due primarily to increases in material prices and upfront investment for growth drivers.

 

 

Information and Communication Systems

Total sales:

79.7

billion yen

(11% decrease from the same quarter last year which recorded 90.0 billion yen)

Operating income (loss):

(1.8

billion yen)

(substantially unchanged from the same quarter last year which recorded a loss of 1.7 billion yen)

 

The telecommunications systems business saw decreases in both orders and sales compared to the same period of the previous fiscal year due primarily to decreased demand in communications infrastructure equipment.

The information systems and service business saw decreases in both orders and sales compared to the same period of the previous fiscal year, mainly due to a shift in projects for the system integrations business.

The electronic systems business saw an increase in orders compared to the same period of the previous fiscal year mainly due to an increase in large-scale projects in the defense systems business, while sales experienced a decrease compared to the same period of the previous fiscal year due primarily to a shift in project portfolios in the defense systems business.

As a result, total sales for this segment decreased by 11% compared to the same period of the previous fiscal year. Operating income remained substantially unchanged from the same period of the previous fiscal year due primarily to a shift in project portfolios.

 

 

 

Electronic Devices

Total sales:

51.4

billion yen

(7% increase from the same quarter last year which recorded 48.1 billion yen)

Operating income:

1.4

billion yen

(1.5 billion yen decrease from the same quarter last year which recorded 3.0 billion yen)

 

The electronic devices business saw orders substantially unchanged, while sales rose by 7% from the same period of the previous fiscal year due to an increase in demand mainly for power modules used in industrial, consumer and automotive applications, despite decreased demand for optical communication devices.

Operating income decreased by 1.5 billion yen compared to the same period of the previous fiscal year due primarily to a shift in product mix.

 

 

Home Appliances

Total sales:

280.3

billion yen

(4% increase from the same quarter last year which recorded 269.8 billion yen)

Operating income:

20.0

billion yen

(4.1 billion yen decrease from the same quarter last year which recorded 24.1 billion yen)

 

The home appliances business saw an increase in sales of 4% from the same period of the previous fiscal year due to an increase in sales of air conditioners for Europe, Japan, China and the U.S.A.

Operating income decreased by 4.1 billion yen compared to the same period of the previous fiscal year due primarily to increases in material prices.

 

 

Others

Total sales:

155.6

billion yen

(7% increase from the same quarter last year which recorded 144.9 billion yen)

Operating income:

1.1

billion yen

(0.8 billion yen decrease from the same quarter last year which recorded 2.0 billion yen)

 

Sales increased by 7% compared to the same period of the previous fiscal year due primarily to an increase in sales at affiliated companies involved in materials procurement.

Operating income decreased by 0.8 billion yen compared to the same period of the previous fiscal year due primarily to a shift in project portfolios.

 

 

 

Financial Standing

An analysis on the status of assets, liabilities and equity on a consolidated basis

Total assets as of the end of this fiscal quarter decreased from the end of the previous fiscal year by 99.4 billion yen to 4,206.1 billion yen. The change in balance of total assets is mainly attributable to increases in inventories by 63.6 billion yen as a result of work-in-process as recorded in commensurate with progress in job orders under pertinent contracts, while cash and cash equivalents decreased by 6.7 billion yen, and trade receivables and contract assets decreased by 162.0 billion yen primarily as a result of credit collection.

Total liabilities decreased from the end of the previous fiscal year by 94.3 billion yen to 1,814.0 billion yen. The outstanding balances of debts and corporate bonds decreased by 12.2 billion yen from the end of the previous fiscal year to 299.7 billion yen, resulting in a decline in the ratio of interest bearing debt to total assets to 7.1%, representing a 0.1 point decrease compared to the end of the previous fiscal year. Meanwhile, trade payables decreased by 38.5 billion yen, and other current liabilities decreased by 47.3 billion yen.

Mitsubishi Electric Corporation stockholders' equity decreased by 8.9 billion yen compared to the end of the previous fiscal year to 2,285.2 billion yen. The stockholders' equity ratio was recorded at 54.3%, representing a 1.0 point increase compared to the end of the previous fiscal year. These changes referred to above primarily result from a decrease in dividend payment of 55.8 billion yen, despite recording a net income attributable to Mitsubishi Electric Corporation stockholders of 47.5 billion yen.

 

 

An analysis on the status of cash flow on a consolidated basis

Cash flows from operating activities for this quarter decreased by 27.5 billion yen compared to the same period of the previous fiscal year to 97.2 billion yen (cash in), mainly due to an increase in inventories. Cash flows from investing activities increased by 16.4 billion yen compared to the same period of the previous fiscal year to 38.7 billion yen (cash out), due primarily to a decrease in proceeds from sale of short-term investments and investment securities. As a result, free cash flow was 58.5 billion yen (cash in). Cash flows from financing activities were 64.0 billion yen (cash out) mainly due to dividend payments.

 

 

Forecast for Fiscal 2019

The current consolidated earnings forecast for fiscal 2019, ending March 31, 2019, is unchanged from the announcement on April 27, 2018 as stated below.

 

Current consolidated forecast for fiscal 2019

Net sales

4,500.0

billion yen

(1% increase from fiscal 2018)

Operating income

315.0

billion yen

(4% decrease from fiscal 2018)

Income before income taxes

345.0

billion yen

(2% decrease from fiscal 2018)

Net income attributable to Mitsubishi Electric Corp. stockholders

245.0

billion yen

(4% decrease from fiscal 2018)

 

 

Note: The results forecast above is based on assumptions deemed reasonable by the Company at the present time, and actual results may differ significantly from forecasts. Please refer to the cautionary statement at the end.

 

 

 

Consolidated Financial Results Summary

 

 (In billions of yen except where noted)

 

FY '18 Q1 (A)

(Apr. 1, 2017 -

Jun. 30, 2017)

FY '19 Q1 (B)

(Apr. 1, 2018 -

Jun. 30, 2018)

 

B - A

B/A (%)

Net sales

1,033.9

1,050.9

17.0

102

Operating income

75.4

61.5

(13.9)

82

Income before income taxes

80.4

68.7

(11.7)

85

Net income attributable to Mitsubishi Electric Corp. stockholders

56.9

47.5

(9.4)

83

Basic net income per share attributable to Mitsubishi Electric Corp. stockholders

26. yen

22. yen

(4. yen)

84

Notes:

1) Consolidated financial charts are made in accordance with International Financial Reporting Standards (IFRS).

2) The Company has 208 consolidated subsidiaries.

 

 

Condensed Quarterly Consolidated Financial Statements

Condensed Quarterly Consolidated Statements of Profit or Loss and Condensed Quarterly Consolidated Statements of Comprehensive Income

 

(Condensed Quarterly Consolidated Statements of Profit or Loss)

(In millions of yen)

 

FY '18 Q1

(Apr. 1, 2017 -

Jun. 30, 2017)

FY '19 Q1

(Apr. 1, 2018 -

Jun. 30, 2018)

 

(A)

% of total

(B)

% of total

B - A

B/A

(%)

Net sales

1,033,936

100.0

1,050,982

100.0

17,046

102

Cost of sales

716,965

69.3

741,047

70.5

24,082

103

Selling, general and

administrative expenses

241,610

23.4

250,206

23.8

8,596

104

Other profit (loss)

132

0.0

1,860

0.2

1,728

14-fold

Operating income

75,493

7.3

61,589

5.9

(13,904)

82

Financial income

3,587

0.4

4,758

0.4

1,171

133

Financial expenses

932

0.1

610

0.1

(322)

65

Share of profit of investments accounted for using the equity method

2,298

0.2

2,993

0.3

695

130

Income before income taxes

80,446

7.8

68,730

6.5

(11,716)

85

Income tax expenses

21,236

2.1

18,723

1.7

(2,513)

88

Net income

59,210

5.7

50,007

4.8

(9,203)

84

Net income attributable to:

 

 

 

 

 

 

Mitsubishi Electric Corp. stockholders

56,985

5.5

47,578

4.5

(9,407)

83

Non-controlling interests

2,225

0.2

2,429

0.3

204

109

 

 

 

(Condensed Quarterly Consolidated Statements of Comprehensive Income)

(In millions of yen)

 

FY '18 Q1 (A)

(Apr. 1, 2017 -

Jun. 30, 2017)

FY '19 Q1 (B)

(Apr. 1, 2018 -

Jun. 30, 2018)

B - A

Net income

59,210

50,007

(9,203)

(Other comprehensive income (loss), net of tax)

 

 

 

Items that will not be reclassified to net income

 

 

 

Financial assets measured at fair value through other comprehensive income

(9,134)

7,388

16,522

Share of other comprehensive income of investments accounted for using the equity method

287

131

(156)

Subtotal

(8,847)

7,519

16,366

Items that may be reclassified to net income

 

 

 

Exchange differences on translating foreign operations

12,540

(9,152)

(21,692)

Net changes in the fair value of cash flow hedges

3

(18)

(21)

Share of other comprehensive income of investments accounted for using the equity method

(857)

(1,844)

(987)

Subtotal

11,686

(11,014)

(22,700)

Total other comprehensive income (loss)

2,839

(3,495)

(6,334)

Comprehensive income (loss)

62,049

46,512

(15,537)

Comprehensive income (loss) attributable to:

 

 

 

Mitsubishi Electric Corp. stockholders

59,527

44,730

(14,797)

Non-controlling interests

2,522

1,782

(740)

 

Condensed Quarterly Consolidated Statements of Financial Position

                                                                    (In millions of yen)

 

FY '18 (A)

(ended Mar. 31, 2018)

FY '19 Q1 (B)

(ended Jun. 30, 2018)

B - A

(Assets)

 

 

 

Current assets

2,582,735

2,495,610

(87,125)

Cash and cash equivalents

599,199

592,488

(6,711)

Trade receivables and Contract Assets

1,191,529

1,029,435

(162,094)

Inventories

646,262

709,929

63,667

Other current assets

145,745

163,758

18,013

Non-current assets

1,722,845

1,710,508

(12,337)

Investments accounted for using the equity method

194,308

182,429

(11,879)

Other financial assets

363,171

371,726

8,555

Net property, plant and equipment

724,257

726,490

2,233

Other non-current assets

441,109

429,863

(11,246)

Total assets

4,305,580

4,206,118

(99,462)

(Liabilities)

 

 

 

Current liabilities

1,488,249

1,420,377

(67,872)

Bonds and borrowings

122,895

140,904

18,009

Trade payables

579,566

541,046

(38,520)

Other current liabilities

785,788

738,427

(47,361)

Non-current liabilities

420,112

393,672

(26,440)

Bonds and borrowings

189,055

158,805

(30,250)

Net defined benefit liabilities

171,520

175,751

4,231

Other non-current liabilities

59,537

59,116

(421)

Total liabilities

1,908,361

1,814,049

(94,312)

(Equity)

 

 

 

Mitsubishi Electric Corp. stockholders' equity

2,294,174

2,285,231

(8,943)

Common stock

175,820

175,820

-

Capital surplus

199,442

202,639

3,197

Retained earnings

1,811,348

1,802,907

(8,441)

Accumulated other comprehensive income (loss)

109,492

106,847

(2,645)

Treasury stock at cost

(1,928)

(2,982)

(1,054)

Non-controlling interests

103,045

106,838

3,793

Total equity

2,397,219

2,392,069

(5,150)

Total liabilities and equity

4,305,580

4,206,118

(99,462)

Balance of Debt

311,950

299,709

(12,241)

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

Exchange differences on translating foreign operations

17,549

7,316

(10,233)

Remeasurements of defined benefit pension plans

-

-

-

Financial assets measured at fair value through other comprehensive income

91,952

99,561

7,609

Net changes in the fair value of cash flow hedges

(9)

(30)

(21)

 

Condensed Quarterly Consolidated Statements of Changes in Equity

(In millions of yen)

 

Mitsubishi Electric Corp. stockholders' equity

Non-controlling interests

Total equity

 

Common stock

Capital surplus

Retained earnings

Accumulated other comprehensive income (loss)

Treasury stock at cost

Total

Balance at April 1, 2017

175,820

198,745

1,593,660

101,166

(1,228)

2,068,163

98,800

2,166,963

Comprehensive income

 

 

 

 

 

 

 

 

Net income

 

 

56,985

 

 

56,985

2,225

59,210

Other comprehensive income (loss)

 

 

 

2,542

 

2,542

297

2,839

Comprehensive income

-

-

56,985

2,542

-

59,527

2,522

62,049

Transfer to retained earnings

 

 

6,948

(6,948)

 

-

 

-

Dividends paid

 

 

(38,642)

 

 

(38,642)

(1,499)

(40,141)

Purchase of treasury stock

 

 

 

 

(697)

(697)

 

(697)

Reissuance of treasury stock

 

 

 

 

 

-

 

-

Transactions with non-controlling interests, etc.

 

 

 

 

 

-

79

79

Balance at June 30, 2017

175,820

198,745

1,618,951

96,760

(1,925)

2,088,351

99,902

2,188,253

 

 

 

 

 

 

 

 

 

 

Mitsubishi Electric Corp. stockholders' equity

Non-controlling interests

Total equity

 

Common stock

Capital surplus

Retained earnings

Accumulated other comprehensive income (loss)

Treasury stock at cost

Total

Balance at April 1, 2018

175,820

199,442

1,811,348

109,492

(1,928)

2,294,174

103,045

2,397,219

Comprehensive income

 

 

 

 

 

 

 

 

Net income

 

 

47,578

 

 

47,578

2,429

50,007

Other comprehensive income (loss)

 

 

 

(2,848)

 

(2,848)

(647)

(3,495)

Comprehensive income

-

-

47,578

(2,848)

-

44,730

1,782

46,512

Transfer to retained earnings

 

 

(203)

203

 

-

 

-

Dividends paid

 

 

(55,816)

 

 

(55,816)

(2,585)

(58,401)

Purchase of treasury stock

 

 

 

 

(1,054)

(1,054)

 

(1,054)

Reissuance of treasury stock

 

 

 

 

 

-

 

-

Transactions with non-controlling interests, etc.

 

3,197

 

 

 

3,197

4,596

7,793

Balance at June 30, 2018

175,820

202,639

1,802,907

106,847

(2,982)

2,285,231

106,838

2,392,069

 

 

Condensed Quarterly Consolidated Statements of Cash Flows

(In millions of yen)

 

 

FY '18 Q1

(Apr. 1, 2017 - Jun. 30, 2017) (A)

FY '19 Q1

(Apr. 1, 2018 - Jun. 30, 2018) (B)

B - A

I

Cash flows from operating activities

 

 

 

1

Net income

59,210

50,007

(9,203)

2

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

(1) Depreciation and amortization

37,295

38,093

798

 

(2) Decrease in trade receivables and contract assets

157,910

164,962

7,052

 

(3) Decrease (increase) in inventories

(49,263)

(62,155)

(12,892)

 

(4) Increase (decrease) in trade payables

(30,910)

(39,220)

(8,310)

 

(5) Other, net

(49,485)

(54,451)

(4,966)

 

Cash flows from operating activities

124,757

97,236

(27,521)

 

 

 

 

 

II

Cash flows from investing activities

 

 

 

1

Purchase of property, plant and equipment

(42,711)

(36,350)

6,361

2

Proceeds from sale of property, plant and equipment

393

1,102

709

3

Purchase of short-term investments and investment securities

(3,201)

(4,129)

(928)

4

Proceeds from sale of short-term investments and investment securities

25,716

1,944

(23,772)

5

Other, net

(2,469)

(1,288)

1,181

 

Cash flows from investing activities

(22,272)

(38,721)

(16,449)

 

 

 

 

 

I + II

Free cash flow

102,485

58,515

(43,970)

 

 

 

 

 

III

Cash flows from financing activities

 

 

 

1

Proceeds from long-term debt and repayment of long-term debt

(2,254)

(12,336)

(10,082)

2

Increase (decrease) in bank loans, net

(11,380)

(1,814)

9,566

3

Dividends paid

(38,642)

(55,816)

(17,174)

4

Purchase of treasury stock

(697)

(1,054)

(357)

5

Other, net

(2,085)

7,001

9,086

 

Cash flows from financing activities

(55,058)

(64,019)

(8,961)

 

 

 

 

 

IV

Effect of exchange rate changes on cash and cash equivalents

3,004

(1,207)

(4,211)

V

Net increase (decrease) in cash and cash equivalents

50,431

(6,711)

(57,142)

VI

Cash and cash equivalents at beginning of period

662,469

599,199

(63,270)

VII

Cash and cash equivalents at end of period

712,900

592,488

(120,412)

 

Consolidated Segment Information

 

1. Sales and Operating Income by Business Segment

(In millions of yen)

Business Segment

FY '18 Q1

(Apr. 1, 2017 -

Jun. 30, 2017)

FY '19 Q1

(Apr. 1, 2018 -

Jun. 30, 2018)

C - A

D - B

C/A

(%)

Sales (A)

Operating income (loss) (B)

Sales (C)

Operating income (loss) (D)

Energy and Electric Systems

268,544

6,712

267,397

5,978

(1,147)

(734)

100

Industrial Automation Systems

350,817

50,746

360,999

44,873

10,182

(5,873)

103

Information and

Communication Systems

90,046

(1,783)

79,782

(1,840)

(10,264)

(57)

89

Electronic Devices

48,122

3,056

51,462

1,486

3,340

(1,570)

107

Home Appliances

269,892

24,188

280,334

20,056

10,442

(4,132)

104

Others

144,904

2,013

155,657

1,160

10,753

(853)

107

Subtotal

1,172,325

84,932

1,195,631

71,713

23,306

(13,219)

102

Eliminations and other

(138,389)

(9,439)

(144,649)

(10,124)

(6,260)

(685)

-

Consolidated Total

1,033,936

75,493

1,050,982

61,589

17,046

(13,904)

102

*Notes: Inter-segment sales are included in the above chart.

 

2. Sales by Location of Customers

(In millions of yen)

Location of Customers

FY '18 Q1

(Apr. 1, 2017 -

Jun. 30, 2017)

FY '19 Q1

(Apr. 1, 2018 -

Jun. 30, 2018)

B - A

B/A (%)

Sales (A)

% of total net sales

Sales (B)

% of total net sales

 

Japan

527,472

51.0

541,434

51.5

13,962

103

 

 

North America

106,481

10.3

103,098

9.8

(3,383)

97

 

 

Asia (excluding Japan)

274,426

26.6

270,275

25.7

(4,151)

98

 

 

 

China

140,390

13.6

140,183

13.3

(207)

100

 

 

Europe

112,064

10.8

121,637

11.6

9,573

109

 

 

Others

13,493

1.3

14,538

1.4

1,045

108

 

Total overseas sales

506,464

49.0

509,548

48.5

3,084

101

Consolidated total

1,033,936

100.0

1,050,982

100.0

17,046

102

                   

 

 

 

Notes to the Condensed Consolidated Financial Statements

(Notes regarding the going concern assumption)

Not applicable

 

(Notes if there is any significant change in Mitsubishi Electric Corp. stockholders' equity)

Not applicable

 

(Summary of key accounting policies)

(a) Disclosure of compliance with IFRS and matters regarding first-time adoption

The Mitsubishi Electric Group has applied IFRS from the first quarter in the current fiscal year. The date of transition to IFRS is April 1, 2017. "Disclosures of transition to IFRS" section describes how the transition to IFRS affected the Mitsubishi Electric Group's reported financial position, financial performance and cash flows at the date of transition to IFRS and in comparative fiscal years.

 

(b) Financial instruments

The Mitsubishi Electric Group classifies non-derivative financial assets as financial assets measured at amortized cost or financial assets measured at fair value through profit or loss for the year or other comprehensive income. This classification is determined on initial recognition.

Financial assets measured at amortized cost are measured at amortized cost using the effective interest method and considering loss allowance for expected credit losses after initial recognition.

Financial assets that are not measured at amortized cost are measured at fair value. Changes after initial recognition in fair value of financial assets measured at fair value through other comprehensive income are recognized in other comprehensive income. When these financial assets are derecognized, cumulative gains or losses previously recognized in other comprehensive income are reclassified to retained earnings.

Changes in fair value after initial recognition of financial assets measured at fair value through profit or loss for the year are recognized in profit or loss.

 

(c) Inventories

Inventories are measured at the lower of cost or net realizable value. In determining the cost, work-in-progress for build-to-ordered products are recorded under the specific identification method, make-to-stock products are recorded at the average production costs and raw material and finished product inventories are generally recorded using the average-cost method.

 

(d) Property, plant and equipment

Property, plant and equipment is measured at cost on initial recognition and depreciated primarily using the declining-balance method over the estimated useful life of each asset. Some assets are depreciated using the straight-line method.

It is determined for property, plant and equipment whether there is an indication of impairment of the asset or cash-generating unit. If there is an indication of impairment, the asset or cash-generating unit is tested for impairment by estimating its recoverable amounts and comparing its carrying amount with the recoverable amount.

 

(e) Goodwill and intangible assets

Goodwill is stated at cost less accumulated impairment losses. Goodwill is not amortized but is tested for impairment at least annually.

Intangible assets acquired in a business combination are measured at fair value on initial recognition. Other intangible assets are measured at cost on initial recognition. Intangible assets with finite useful lives are depreciated on a straight-line basis over the estimated useful life of each asset.

It is determined for intangible assets with finite useful lives whether there is an indication of impairment of the asset or cash-generating unit. If there is an indication of impairment, the asset or cash-generating unit is tested for impairment by estimating its recoverable amounts and comparing its carrying amount with the recoverable amount.

 

(f)  Income taxes

Deferred tax assets and liabilities are recognized for temporary differences between the accounting carrying amounts of assets and liabilities and their tax bases, the carry forward of unused tax losses and unused tax credits at the end of a reporting period. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized.

Deferred tax assets and liabilities are measured at the tax rates and in accordance with tax laws that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

 

(g) Post-employment benefits and pension

Net defined benefit liability or asset is determined at the present value of the defined benefit obligation less the fair value of the plan assets. The amount of change in fair value arising from remeasurement of the present value of defined benefit obligations and the fair value of plan assets is fully recognized in other comprehensive income in the periods in which it arises and immediately transferred to retained earnings. Past service costs arising from plan amendments are recognized in profit or loss for the period in which they arise. Contributions to a defined benefit plan are recognized as expenses for the period in which the employees render the related service.

 

 

 

Disclosures of Transition to IFRS

The Mitsubishi Electric Group has applied IFRS beginning with the consolidated financial statements for the first quarter of the current fiscal year. The most recent consolidated financial statements prepared in accordance with US GAAP are for the one-year period ended on March 31, 2018. The date of transition to IFRS was April 1, 2017.

 

(1) Exemptions and exceptions in IFRS 1

IFRS 1 requires entities adopting IFRS for the first time to retrospectively apply IFRS in principle; however, with regard to certain items, it allows exemption from, or prohibits, retrospective application of IFRS.

The Company and its consolidated subsidiaries use the following exemptions on retrospective application permitted by IFRS 1:

 

- Business combinations

The Company and its consolidated subsidiaries elected not to apply IFRS 3 Business Combinations retrospectively to past business combinations that occurred on or before December 22, 2015. Consequently, the amount of goodwill that arose from business combinations occurred on or before December 22, 2015 is recorded at the carrying value in accordance with US GAAP. This goodwill was tested for impairment at the transition date irrespective of whether there was any indication of impairment.

 

- Exchange differences on translating foreign operations

The Company and its consolidated subsidiaries elected to deem the cumulative translation differences for foreign operations at the transition date to be zero. Consequently, the cumulative translation differences for foreign operations at the transition date were transferred from accumulated other comprehensive income (loss) to retained earnings.

 

- Designation of financial instruments recognized before the date of transition to IFRS

The Company and its consolidated subsidiaries elected to determine the classification of financial instruments on the basis of the facts and circumstances that exist at the date of transition to IFRS.

 

(2) Reconciliations

Reconciliations for which disclosures are required on first time adoption of IFRS are as follows:

Items that do not affect retained earnings and comprehensive income are presented in "Reclassification," and items that affect retained earnings and comprehensive income are presented in "Recognition and measurement differences."

 

 

Reconciliation of Equity as at the Date of Transition to IFRS (April 1, 2017)

(Consolidated Statements of Financial Position)                                                          (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

(Assets)

 

 

 

 

(Assets)

Current assets

2,500,685

3,062

4,810

2,508,557

Current assets

Cash and cash equivalents

662,469

-

-

662,469

Cash and cash equivalents

Trade receivables

1,037,201

15,261

103,004

1,155,466

Trade receivables and contract assets

Inventories

643,040

-

(83,138)

559,902

Inventories

Prepaid expenses and other current assets

157,975

(12,199)

(15,056)

130,720

Other current assets

 

-

(3,062)

60,950

1,729,473

Non-current assets

Long-term trade receivables

2,815

(2,815)

-

-

 

Investments

618,935

(618,935)

-

-

 

 

-

181,724

5,634

187,358

Investments accounted for using the equity method

 

-

362,869

27,710

390,579

Other financial assets

Net property, plant and equipment

732,611

-

(33,133)

699,478

Net property, plant and equipment

Other assets

317,224

74,095

60,739

452,058

Other non-current assets

Total assets

4,172,270

-

65,760

4,238,030

Total assets

 

 

(In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

(Liabilities)

 

 

 

 

(Liabilities)

Current liabilities

1,525,761

7,456

33,082

1,566,299

Current liabilities

Bank loans and current portion of long-term debt

124,368

-

21,987

146,355

Bonds and borrowings

Trade payables

780,202

(145,119)

-

635,083

Trade payables

Other current liabilities

621,191

152,575

11,095

784,861

Other current liabilities

 

-

(7,456)

6,423

504,768

Non-current liabilities

Long-term debt

227,756

-

-

227,756

Bonds and borrowings

Retirement and severance benefits

194,990

-

8,044

203,034

Net defined benefit liabilities

Other fixed liabilities

83,055

(7,456)

(1,621)

73,978

Other non-current liabilities

Total liabilities

2,031,562

-

39,505

2,071,067

Total liabilities

(Equity)

 

 

 

 

(Equity)

Mitsubishi Electric Corp. shareholders' equity

2,039,627

-

28,536

2,068,163

Mitsubishi Electric Corp. stockholders' equity

Common stock

175,820

-

-

175,820

Common stock

Capital surplus

212,530

-

(13,785)

198,745

Capital surplus

Retained earnings

1,654,557

-

(60,897)

1,593,660

Retained earnings

Accumulated other comprehensive income (loss)

(2,052)

-

103,218

101,166

Accumulated other comprehensive income (loss)

Treasury stock at cost

(1,228)

-

-

(1,228)

Treasury stock at cost

Noncontrolling interests

101,081

-

(2,281)

98,800

Non-controlling interests

Total equity

2,140,708

-

26,255

2,166,963

Total equity

Total liabilities and equity

4,172,270

-

65,760

4,238,030

Total liabilities and equity

Balance of Debt

352,124

-

21,987

374,111

Balance of Debt

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

Accumulated other comprehensive income (loss):

Foreign currency translation adjustments

18,535

-

(18,535)

-

Exchange differences on translating foreign operations

Pension liability adjustments

(156,993)

-

156,993

-

Remeasurements of defined benefit pension plans

Unrealized gains on securities

136,352

-

(35,223)

101,129

Financial assets measured at fair value through other comprehensive income

Unrealized gains (losses) on derivative instruments

54

-

(17)

37

Net changes in the fair value of cash flow hedges

 

 

 

Reconciliation of Equity as at the End of the First Quarter of the Previous Fiscal Year (June 30, 2017)

(Condensed Quarterly Consolidated Statements of Financial Position)                       (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

(Assets)

 

 

 

 

(Assets)

Current assets

2,494,270

3,167

(2,102)

2,495,335

Current assets

Cash and cash equivalents

712,900

-

-

712,900

Cash and cash equivalents

Trade receivables

869,117

15,682

118,436

1,003,235

Trade receivables and contract assets

Inventories

723,340

-

(108,524)

614,816

Inventories

Prepaid expenses and other current assets

188,913

(12,515)

(12,014)

164,384

Other current assets

 

-

(3,167)

67,398

1,687,334

Non-current assets

Long-term trade receivables

2,644

(2,644)

-

-

 

Investments

578,353

(578,353)

-

-

 

 

-

167,341

5,332

172,673

Investments accounted for using the equity method

 

-

326,496

27,872

354,368

Other financial assets

Net property, plant and equipment

745,257

-

(32,777)

712,480

Net property, plant and equipment

Other assets

296,849

83,993

66,971

447,813

Other non-current assets

Total assets

4,117,373

-

65,296

4,182,669

Total assets

 

 

(In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

(Liabilities)

 

 

 

 

(Liabilities)

Current liabilities

1,472,476

7,632

23,356

1,503,464

Current liabilities

Bank loans and current portion of long-term debt

134,310

-

10,819

145,129

Bonds and borrowings

Trade payables

723,525

(118,564)

-

604,961

Trade payables

Other current liabilities

614,641

126,196

12,537

753,374

Other current liabilities

 

-

(7,632)

19,137

490,952

Non-current liabilities

Long-term debt

217,516

-

-

217,516

Bonds and borrowings

Retirement and severance benefits

187,719

-

19,989

207,708

Net defined benefit liabilities

Other fixed liabilities

74,212

(7,632)

(852)

65,728

Other non-current liabilities

Total liabilities

1,951,923

-

42,493

1,994,416

Total liabilities

(Equity)

 

 

 

 

(Equity)

Mitsubishi Electric Corp. shareholders' equity

2,063,279

-

25,072

2,088,351

Mitsubishi Electric Corp. stockholders' equity

Common stock

175,820

-

-

175,820

Common stock

Capital surplus

212,530

-

(13,785)

198,745

Capital surplus

Retained earnings

1,683,659

-

(64,708)

1,618,951

Retained earnings

Accumulated other comprehensive income (loss)

(6,805)

-

103,565

96,760

Accumulated other comprehensive income (loss)

Treasury stock at cost

(1,925)

-

-

(1,925)

Treasury stock at cost

Noncontrolling interests

102,171

-

(2,269)

99,902

Non-controlling interests

Total equity

2,165,450

-

22,803

2,188,253

Total equity

Total liabilities and equity

4,117,373

-

65,296

4,182,669

Total liabilities and equity

Balance of Debt

351,826

-

10,819

362,645

Balance of Debt

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

Accumulated other comprehensive income (loss):

Foreign currency translation adjustments

23,023

-

(11,618)

11,405

Exchange differences on translating foreign operations

Pension liability adjustments

(144,517)

-

144,517

-

Remeasurements of defined benefit pension plans

Unrealized gains on securities

114,685

-

(29,380)

85,305

Financial assets measured at fair value through other comprehensive income

Unrealized gains (losses) on derivative instruments

4

-

46

50

Net changes in the fair value of cash flow hedges

 

 

 

Reconciliation of Equity as at the End of the Previous Fiscal Year (March 31, 2018)

(Consolidated Statements of Financial Position)                                                            (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

(Assets)

 

 

 

 

(Assets)

Current assets

2,606,493

(1,434)

(22,324)

2,582,735

Current assets

Cash and cash equivalents

599,199

-

-

599,199

Cash and cash equivalents

Trade receivables

1,087,593

14,225

89,711

1,191,529

Trade receivables and contract assets

Inventories

741,782

-

(95,520)

646,262

Inventories

Prepaid expenses and other current assets

177,919

(15,659)

(16,515)

145,745

Other current assets

 

-

1,434

63,345

1,722,845

Non-current assets

Long-term trade receivables

1,965

(1,965)

-

-

 

Investments

614,295

(614,295)

-

-

 

 

-

187,828

6,480

194,308

Investments accounted for using the equity method

 

-

335,474

27,697

363,171

Other financial assets

Net property, plant and equipment

740,448

-

(16,191)

724,257

Net property, plant and equipment

Other assets

301,358

94,392

45,359

441,109

Other non-current assets

Total assets

4,264,559

-

41,021

4,305,580

Total assets

 

 

 

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

(Liabilities)

 

 

 

 

(Liabilities)

Current liabilities

1,471,367

8,586

8,296

1,488,249

Current liabilities

Bank loans and current portion of long-term debt

122,430

-

465

122,895

Bonds and borrowings

Trade payables

719,404

(139,838)

-

579,566

Trade payables

Other current liabilities

629,533

148,424

7,831

785,788

Other current liabilities

 

-

(8,586)

(349)

420,112

Non-current liabilities

Long-term debt

189,055

-

-

189,055

Bonds and borrowings

Retirement and severance benefits

171,017

-

503

171,520

Net defined benefit liabilities

Other fixed liabilities

68,975

(8,586)

(852)

59,537

Other non-current liabilities

Total liabilities

1,900,414

-

7,947

1,908,361

Total liabilities

(Equity)

 

 

 

 

(Equity)

Mitsubishi Electric Corp. shareholders' equity

2,259,355

-

34,819

2,294,174

Mitsubishi Electric Corp. stockholders' equity

Common stock

175,820

-

-

175,820

Common stock

Capital surplus

213,250

-

(13,808)

199,442

Capital surplus

Retained earnings

1,857,741

-

(46,393)

1,811,348

Retained earnings

Accumulated other comprehensive income (loss)

14,472

-

95,020

109,492

Accumulated other comprehensive income (loss)

Treasury stock at cost

(1,928)

-

-

(1,928)

Treasury stock at cost

Noncontrolling interests

104,790

-

(1,745)

103,045

Non-controlling interests

Total equity

2,364,145

-

33,074

2,397,219

Total equity

Total liabilities and equity

4,264,559

-

41,021

4,305,580

Total liabilities and equity

Balance of Debt

311,485

-

465

311,950

Balance of Debt

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

Accumulated other comprehensive income (loss):

Foreign currency translation adjustments

34,149

-

(16,600)

17,549

Exchange differences on translating foreign operations

Pension liability adjustments

(141,075)

-

141,075

-

Remeasurements of defined benefit pension plans

Unrealized gains on securities

121,413

-

(29,461)

91,952

Financial assets measured at fair value through other comprehensive income

Unrealized gains (losses) on derivative instruments

(15)

-

6

(9)

Net changes in the fair value of cash flow hedges

 

 

 

Notes to reconciliation of equity

 

The principal effects of transition to IFRS in the reconciliation of equity above are as follows:

 

(1) Reclassification

The main elements of reclassification are as follows:

(a) In accordance with the presentation provisions under IFRS, other financial assets are presented separately.

(b) Part of trade receivables, prepaid expenses and other current assets and other assets, etc. are reclassified based on the definition and recognition criteria of IFRS.

(c) Part of trade payables, other current liabilities and other fixed liabilities are reclassified based on the definition and recognition criteria of IFRS.

 

(2) Recognition and measurement differences

The main elements of recognition and measurement differences are as follows:

(a) Employee benefits

Under US GAAP, actuarial gains and losses and past service costs are deferred in accumulated other comprehensive income, subsequently amortized for a specified future period and recognized in profit or loss. Current service costs, interest costs and expected return on plan assets are recognized in profit or loss for the fiscal year.

Under IFRS, on the other hand, changes resulting from remeasurement of defined-benefit corporate pension plans, defined benefit obligation on lump-sum payment plans and plan assets required by IFRS are recognized in other comprehensive income, and reclassified from accumulated other comprehensive income directly to retained earnings, not through profit or loss. Past service costs arising from plan amendments are fully recognized immediately in profit or loss. Current service costs are recognized in profit or loss. Interest costs are recognized in profit or loss at the amount determined by multiplying the net amount of the defined benefit obligation and plan assets by the discount rate used to determine the present value of the obligation.

 

(b) Equity instruments

Under US GAAP, non-marketable equity instruments are recognized at their cost. If fair value of equity instruments has decreased and the decrease is considered not to be temporary, impairment loss is recognized for the amount of the cost of the equity instruments in excess of fair value. Gains or losses on the sale of these equity instruments are recognized in profit or loss.

Under IFRS, on the other hand, all equity instruments are recognized at fair value irrespective of whether there is an active market. Since it is permitted to recognize changes in fair value in other comprehensive income, the Company and its consolidated subsidiaries have elected to recognize changes in fair value of equity instruments in other comprehensive income. Accordingly, loss on impairment and gains or losses on the sale of equity instruments recognized in profit or loss under US GAAP are recognized in other comprehensive income as well.

 

(c) Income taxes

Under US GAAP, tax expenses incurred by sellers are deferred using the deferral method for differences arising from unrealized profits and losses from intercompany transactions.

Under IFRS, on the other hand, a difference between the carrying amount and the sale price of an asset sold is recognized as a future deductible temporary difference based on the asset-and-liability approach. A deferred tax asset is recognized for the future deductible temporary difference using purchaser's effective tax rate while taking its recoverability into consideration.

Under US GAAP, deferred tax liabilities for temporary differences associated with investments in equity investees are recognized using tax rates applicable on the premise that the temporary difference will be reversed at the time of sale of the equity investees even if a company intends to continue to hold the investments. In principle, deferred tax liabilities are recognized for the undistributed earnings of subsidiaries, etc.

Under IFRS, deferred tax liabilities are in principle recognized for all the taxable temporary differences using tax rates applied when the taxable temporary differences reverse, such as when receiving dividends or selling the investments. Deferred tax liabilities are recognized for the taxable temporary differences associated with investments in subsidiaries etc. which are probable to reverse in the foreseeable future.

 

(d) Exchange differences on translating foreign operations

Cumulative exchange differences on translating foreign operations are all deemed to be zero at the date of transition to IFRS. Consequently, exchange differences on translating foreign operations included in accumulated other comprehensive income as at the transition date were fully reclassified to retained earnings.

 

(e) Exclusion of equity investees

Under US GAAP, when an investee no longer qualifies as an equity investee, the difference between the sale price and the carrying amount of the interest sold is recognized in profit or loss. If an investor retains a residual interest, gains or losses recognized in prior periods remain included in the carrying amount of the residual interest.

Under IFRS, on the other hand, when an investee no longer qualifies as an equity investee, the residual interest is measured at fair value if an investor retains a residual interest. The sale price and the difference between the fair value and the carrying amount of the residual interest at the point when an investee no longer qualifies as an equity investee is recognized in profit or loss.

 

(f)  Government grants

Under US GAAP, government grants related to acquisition of assets are not reflected in the carrying amounts of assets because there are no accounting standards for such government grants.

Under IFRS, on the other hand, government grants related to assets are recognized as reducing the carrying amount of the asset by the government grants received.

 

(g) Impairment of non-financial assets

Under US GAAP, if there is an indication that a fixed asset may be impaired, the carrying amount and the undiscounted estimated future cash flows of the asset is compared. If the carrying amount exceeds the estimated future cash flows, any excess of the carrying amount over the fair value is recognized as an impairment loss.

Under IFRS, on the other hand, if there is an indication that a fixed asset may be impaired, any excess of the carrying amount over the recoverable amount of the fixed asset (the higher of value in use or fair value less costs of disposal) is recognized as an impairment loss of the fixed asset.

 

(h) Business combinations

Under US GAAP, in business combinations, the acquirer measures the acquiree as a whole (including non-controlling interests) at fair value and goodwill is recognized including the portion of goodwill attributable to the non-controlling interests.

Under IFRS, on the other hand, in business combinations it is permitted to elect to apply either method: the acquirer measures the acquiree as a whole (including non-controlling interests) at fair value and goodwill is recognized including the portion of goodwill attributable to the non-controlling interests; or non-controlling interest is measured as a proportional interest in the fair value of the acquiree's net identifiable assets and goodwill is recognized only for the acquirer's share. The Company elected the method of measuring non-controlling interest as a proportional interest in the fair value of the acquiree's net identifiable assets and recognizing goodwill only for the acquirer's share. Capital surplus is recognized when non-controlling interests are additionally acquired after the date when control was obtained.

 

 

Reconciliation of Profit or Loss and Comprehensive Income for the First Quarter of the Previous Fiscal Year (from April 1, 2017 to June 30, 2017)

(Condensed Quarterly Consolidated Statements of Profit or Loss)                              (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

Net sales

1,005,599

-

28,337

1,033,936

Net sales

Cost of sales

681,232

(39)

35,772

716,965

Cost of sales

Selling, general and administrative expenses

250,121

461

(8,972)

241,610

Selling, general and administrative expenses

 

-

143

(11)

132

Other profit (loss)

Operating income

74,246

(279)

1,526

75,493

Operating income

Other income

28,493

-

-

-

 

Interest and Dividends

3,587

19,926

(19,926)

3,587

Financial income

Equity in earnings of affiliated companies

2,405

(2,405)

-

-

 

Other

22,501

(22,501)

-

-

 

Other expenses

3,491

-

-

-

 

Interest

677

192

63

932

Financial expenses

Other

2,814

(2,814)

-

-

 

 

-

2,405

(107)

2,298

Share of profit of investments accounted for using the equity method

Income before income taxes

99,248

(232)

(18,570)

80,446

Income before income taxes

Income taxes

29,241

(232)

(7,773)

21,236

Income tax expenses

Net income

70,007

-

(10,797)

59,210

Net income

 

 

 

 

 

Net income attributable to:

Net income attributable to the noncontrolling interests

2,263

-

(38)

2,225

Non-controlling interests

Net income attributable to Mitsubishi Electric Corp.

67,744

-

(10,759)

56,985

Mitsubishi Electric Corp. stockholders

 

 

 

(Condensed Quarterly Consolidated Statements of Comprehensive Income)           (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

Net income

70,007

-

(10,797)

59,210

Net income

Other comprehensive income (loss), net of tax

 

 

 

 

(Other comprehensive income (loss), net of tax)

 

 

 

 

 

Items that will not be reclassified to net income

Unrealized gains (losses) on securities

(21,638)

(287)

12,791

(9,134)

Financial assets measured at fair value through other comprehensive income

Pension liability adjustments

12,477

(179)

(12,298)

-

Remeasurements of defined benefit pension plans

 

-

466

(179)

287

Share of other comprehensive income of investments accounted for using the equity method

 

-

-

314

(8,847)

Subtotal

 

 

 

 

 

Items that may be reclassified to net income

Foreign currency translation adjustments

4,720

855

6,965

12,540

Exchange differences on translating foreign operations

Unrealized gains (losses) on derivative instruments

(63)

3

63

3

Net changes in the fair value of cash flow hedges

 

-

(858)

1

(857)

Share of other comprehensive income of investments accounted for using the equity method

 

-

-

7,029

11,686

Subtotal

Total

(4,504)

-

7,343

2,839

Total other comprehensive income (loss)

Comprehensive income (loss)

65,503

-

(3,454)

62,049

Comprehensive income (loss)

 

 

 

 

 

Comprehensive income (loss) attributable to:

Comprehensive income (loss) attributable to the noncontrolling interests

2,512

-

10

2,522

Non-controlling interests

Comprehensive income (loss) attributable to Mitsubishi Electric Corp.

62,991

-

(3,464)

59,527

Mitsubishi Electric Corp. stockholders

 

 

 

Reconciliation of Profit or Loss and Comprehensive Income for the Previous Fiscal Year (from April 1, 2017 to March 31, 2018)

(Consolidated Statements of Profit or Loss)                                                                  (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

Net sales

4,431,198

-

13,226

4,444,424

Net sales

Cost of sales

3,030,902

-

53,024

3,083,926

Cost of sales

Selling, general and administrative expenses

1,061,778

729

(34,623)

1,027,884

Selling, general and administrative expenses

Loss on impairment of long-lived assets

19,881

(19,881)

-

-

 

 

-

(20,990)

15,820

(5,170)

Other profit (loss)

Operating income

318,637

(1,838)

10,645

327,444

Operating income

Other income

60,414

-

-

-

 

Interest and Dividends

8,611

23,637

(23,637)

8,611

Financial income

Equity in earnings of affiliated companies

22,261

(22,261)

-

-

 

Other

29,542

(29,542)

-

-

 

Other expenses

14,473

-

-

-

 

Interest

2,727

4,726

(657)

6,796

Financial expenses

Other

11,746

(11,746)

-

-

 

 

-

22,261

1,686

23,947

Share of profit of investments accounted for using the equity method

Income before income taxes

364,578

(723)

(10,649)

353,206

Income before income taxes

Income taxes

82,239

(723)

5,291

86,807

Income tax expenses

Net income

282,339

-

(15,940)

266,399

Net income

 

 

 

 

 

Net income attributable to:

Net income attributable to the noncontrolling interests

10,459

-

185

10,644

Non-controlling interests

Net income attributable to Mitsubishi Electric Corp.

271,880

-

(16,125)

255,755

Mitsubishi Electric Corp. stockholders

 

 

 

(Consolidated Statements of Comprehensive Income)                                                  (In millions of yen)

Presentation under US GAAP

US GAAP

Re-classification

Recognition and measurement differences

IFRS

Presentation under IFRS

Net income

282,339

-

(15,940)

266,399

Net income

Other comprehensive income (loss), net of tax

 

 

 

 

(Other comprehensive income (loss), net of tax)

 

 

 

 

 

Items that will not be reclassified to net income

Unrealized gains (losses) on securities

(14,875)

392

14,431

(52)

Financial assets measured at fair value through other comprehensive income

Pension liability adjustments

15,857

(596)

6,062

21,323

Remeasurements of defined benefit pension plans

 

-

204

(34)

170

Share of other comprehensive income of investments accounted for using the equity method

 

-

-

20,459

21,441

Subtotal

 

 

 

 

 

Items that may be reclassified to net income

Foreign currency translation adjustments

17,023

(1,908)

1,877

16,992

Exchange differences on translating foreign operations

Unrealized gains (losses) on derivative instruments

(88)

(6)

23

(71)

Net changes in the fair value of cash flow hedges

 

-

1,914

(45)

1,869

Share of other comprehensive income of investments accounted for using the equity method

 

-

-

1,855

18,790

Subtotal

Total

17,917

-

22,314

40,231

Total Other comprehensive income (loss)

Comprehensive income (loss)

300,256

-

6,374

306,630

Comprehensive income (loss)

 

 

 

 

 

Comprehensive income (loss) attributable to:

Comprehensive income (loss) attributable to the noncontrolling interests

11,852

-

68

11,920

Non-controlling interests

Comprehensive income (loss) attributable to Mitsubishi Electric Corp.

288,404

-

6,306

294,710

Mitsubishi Electric Corp. stockholders

 

 

Notes to Reconciliation of Profit or Loss and Comprehensive Income

The principal effects of transition to IFRS in the reconciliation of profit or loss and comprehensive income above are as follows:

 

(1) Reclassification

The main elements of reclassification are as follows:

(a) In accordance with the presentation provisions under IFRS, financial income and financial expenses are presented separately.

(b) In accordance with the presentation provisions under IFRS, part of other income and other expenses, etc. is included and presented in operating profit.

(c) Unrealized gains (losses) on securities, pension liability adjustments, foreign currency translation adjustments and unrealized gains (losses) on derivative instruments in other comprehensive income that are attributable to equity investees are reclassified in accordance with the presentation provisions under IFRS.

 

(2) Recognition and measurement differences

The main elements of recognition and measurement differences are as follows:

(a) Reconciliation of sales and cost of sales

Under US GAAP, if amounts of construction contracts cannot be reliably estimated, all construction costs and construction revenue are recognized when the construction is complete.

Under IFRS, on the other hand, revenue from a performance obligation satisfied over time is recognized using the cost recovery method if the outcome cannot be reliably estimated. Revenues using the cost recovery method are only recognized for costs incurred to the extent that it is probable that the cost will be recovered and costs are recognized as expenses in the period in which they are incurred.

(b) Equity instruments

Non-marketable equity instruments are recognized at their cost under US GAAP. If fair value of equity instruments has decreased and the decrease is considered not to be temporary, impairment loss is recognized for the amount of the cost of the equity instruments in excess of fair value. Gains or losses on the sale of these equity instruments are recognized in profit or loss.

Under IFRS, on the other hand, equity instruments are recognized at fair value irrespective of whether there is an active market. Because it is permitted to recognize changes in fair value in other comprehensive income, the Company and its consolidated subsidiaries have elected to recognize changes in fair value of equity instruments in other comprehensive income. Accordingly, loss on impairment and gains or losses on the sale of equity instruments recognized in profit or loss under US GAAP are recognized in other comprehensive income as well.

 

 

Notes to Reconciliation of Cash Flows

There are no significant differences in the statement of cash flows resulting from transition from US GAAP to IFRS.

 

 

Cautionary Statement

The Mitsubishi Electric Group (hereafter "the Group") is involved in development, manufacture and sales in a wide range of fields including Energy and Electric Systems, Industrial Automation Systems, Information and Communication Systems, Electronic Devices and Home Appliances, and these operations extend globally, not only inside Japan, but also in North America, Europe, Asia and other regions. While the statements herein are based on certain assumptions and premises that the Group trusts and considers to be reasonable under the circumstances on the date of announcement, actual financial standings and operating results are subject to change due to any of the factors as contemplated hereunder and/or any additional factor unforeseeable as of the date of this announcement. Such factors materially affecting the expectations expressed herein shall include but are not limited to the following:

 

(1)  Important trends

The Group's operations may be affected by trends in the global economy, social conditions, laws, tax codes and regulations.

(2)  Foreign currency exchange rates

Fluctuations in foreign currency markets may affect the Group's sales of exported products and purchases of imported materials that are denominated in U.S. dollars or euros, as well as its Asian production bases' sales of exported products and purchases of imported materials that are denominated in foreign currencies.

(3)  Stock markets

A fall in stock market prices may cause a decline in value of the Group's marketable securities and pension assets.

(4)  Supply/demand balance for products and procurement conditions for materials and components

A decline in prices and shipments due to changes in the supply/demand balance, as well as an increase in material prices due to a worsening of material and component procurement conditions, may adversely affect the Group's performance.

(5)  Fund raising

An increase in interest rates, the yen interest rate in particular, would increase the Group's interest expenses.

(6)  Significant patent matters

Important patent filings, licensing, copyrights and patent-related disputes may adversely affect related businesses.

(7)  Environmental legislation or relevant issues

The Group may incur losses or expenses owing to changes in environmental legislation or the occurrence of environmental issues. Such changes in legislation or the occurrence of environmental issues may also impact manufacturing and all corporate activities of the Group.

(8)  Flaws or defects in products or services

The Group may incur losses or expenses resulting out of flaws or defects in products or services, and the lowered reputation of the quality of all its products and services may affect the entire Group.

(9)  Litigation and other legal proceedings

The Group's operations may be affected by lawsuits or other legal proceedings against Mitsubishi Electric, its subsidiaries and/or equity-method affiliated companies.

(10) Disruptive changes

Disruptive changes in technology, development of products using new technology, timing of production and market introduction may adversely affect the Group's performance.

(11) Business restructuring

The Group may record losses due to restructuring measures.

(12) Information security

The performance of the Group may be affected by computer virus infections, unauthorized access and other unpredictable incidents that lead to the loss or leakage of personal information held by the Group or confidential information regarding the Group's business such as its technology, sales and other operations.

(13) Natural disasters

The Group's operations, particularly manufacturing activities, may be affected by the occurrence of earthquakes, typhoons, tsunami, fires and other large-scale disasters.

(14) Other significant factors

The Group's operations may be affected by the outbreak of social or political upheaval due to terrorism, war, pandemic by new strains of influenza and other diseases, or other factors.

 

###

About Mitsubishi Electric Corporation

With nearly 100 years of experience in providing reliable, high-quality products, Mitsubishi Electric Corporation (TOKYO: 6503) is a recognized world leader in the manufacture, marketing and sales of electrical and electronic equipment used in information processing and communications, space development and satellite communications, consumer electronics, industrial technology, energy, transportation and building equipment. Embracing the spirit of its corporate statement, Changes for the Better, and its environmental statement, Eco Changes, Mitsubishi Electric endeavors to be a global, leading green company, enriching society with technology. The company recorded consolidated group sales of 4,444.4 billion yen (in accordance with IFRS; US$ 41.9 billion*) in the fiscal year ended March 31, 2018. For more information visit:

www.MitsubishiElectric.com

*At an exchange rate of 106 yen to the US dollar, the rate given by the Tokyo Foreign Exchange Market on March 31, 2018

 

Click on, or paste the following link into your web browser, to view the associated PDF document.

 

http://www.rns-pdf.londonstockexchange.com/rns/1800W_1-2018-7-30.pdf

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
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