(k) Research and development costs
Research and development costs are charged to income when
incurred.
(l) Revenue recognition
Revenue is generally recognized on sales of products at the time of
shipment.
(m) Derivative financial instruments
The Company and certain consolidated subsidiaries have entered into
various derivative transactions in order to manage certain risks arising
from adverse fluctuations in foreign currency exchange rates, interest
rates, and stock and commodity prices. Derivative financial
instruments are carried at fair value with changes in unrealized gain
or loss charged or credited to operations, except for those which
meet the criteria for deferral hedge accounting under which
unrealized gain or loss is deferred as an asset or a liability.
Receivables and payables hedged by qualified forward foreign
exchange contracts are translated at the corresponding foreign
exchange contract rates.
(n) Appropriation of retained earnings
Under the Commercial Code of Japan, the appropriation of retained
earnings with respect to a given financial year is made by resolution
of the shareholders at a general meeting held subsequent to the
close of such financial year. The accounts for that year do not,
therefore, reflect such appropriations. See Note 22.
(o) New Accounting Standards
A new Japanese accounting standard “Impairment of Fixed Assets”
was issued in August 2002 that is effective for fiscal years beginning
on or after April 1, 2005. The new standard requires that tangible and
intangible fixed assets be carried at cost less depreciation, and be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Companies would be required to recognize an
impairment loss in their income statement if certain indicators of
asset impairment exist and the book value of an asset exceeds the
undiscounted sum of future cash flows of the asset. The Company is
currently assessing the impact of this new accounting standard on its
financial position and operating results. 
FINANCIAL SECTION
Nissan Annual Report 200478
2. ACCOUNTING CHANGES
(a) Until the year ended March 31, 2003, finished goods, work in
process and purchased parts included in raw materials were stated at
the lower of average cost or market, and raw materials except for
purchased parts and supplies were stated at the lower of cost or
market, cost being determined by the last-in, first-out method.
Effective April 1, 2003, the Company and certain consolidated
subsidiaries began to value all inventories at the lower of cost or
market, cost being determined by the first-in, first-out method. This
change was made in order to establish a sound financial position by
reflecting the changes in the purchase prices in the valuation of
inventories considering the fact that there has been progress in
achieving a reduction in purchasing costs and that this trend is
anticipated to continue. This change is also intended to achieve a
better matching of revenue and expenses and more appropriate cost
management by applying an inventory valuation method which
reflects the actual inventory movements. The effect of this change
was immaterial for the year ended March 31, 2004.
(b) Effective April 1, 2003, Nissan Motor Manufacturing (UK) Ltd., a
consolidated subsidiary, implemented early adoption a new
accounting standard for retirement benefits in the United Kingdom.
The effect of this change was to increase retirement benefit
expenses by ¥2,178 million and to decrease operating income and
income before income taxes and minority interests by ¥1,686 million
and ¥2,178 million respectively, for the year ended March 31, 2004
as compared with the corresponding amounts which would have
been recorded if the previous method had been followed. Retained
earnings also decreased by ¥18,132 million since the net retirement
benefit obligation at transition and actuarial loss was charged directly