Consolidated Financial Statements for FY2021
Ended March 31, 2022

Consolidated Financial Statements

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2022 and 2021
Thousands of
U.S. dollars (Note 1)

Millions of yen

2022

2021

2022

AssetsCurrent assets:
Cash and deposits (Notes 5, 7 and 8)
Accounts receivable—trade (Note 19)
Allowance for doubtful accounts
Inventories (Notes 3, 6 and 22)
Other current assets
Total current assets¥ 151,393
23,286(44)712,451
54,447
941,533¥ 188,340
18,714(38)
636,803
68,377912,196$ 1,236,770
190,230(359)
5,820,203
444,791
7,691,635

Property and equipment (Notes 3, 6, 20 and 22):
Land (Note 7)
Buildings and structures (Note 7)
Construction in progress (Note 7)
Other property and equipment (Note 7)
Subtotal of property and equipment
Accumulated depreciation and accumulated impairment losses
Total property and equipment

2,847,702
1,759,702
139,860
48,7184,795,982(681,665)
4,114,317

2,778,475
1,705,467
107,850
46,854
4,638,646(626,477)
4,012,169

23,263,639
14,375,476
1,142,554
397,990
39,179,659(5,568,704)
33,610,955

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 8 and 10)
Long-term debt due within one year (Notes 7, 8 and 10)
Long-term non-recourse debt due within one year (Notes 7, 8 and 10)
Notes and accounts payable—trade
Accrued income taxes
Provison for bonuses
Deposits received
Other current liabilities (Notes 13 and 19)
Total current liabilities
Long-term liabilities:
Long-term debt due after one year (Notes 7, 8 and 10)
Long-term non-recourse debt due after one year (Notes 7, 8 and 10)
Guarantee and lease deposits received (Note 8)Long-term deposits received
Net defined benefit liability (Note 11)
Other long-term liabilities (Notes 8, 13, 14 and 18)
Total long-term liabilities

2022

2021

68,610237,386
4,786
42,30840,145
5,804
55,156
185,836
640,031¥ 146,620
211,446
16,344
24,69740,742
4,023
65,964
152,124
661,960

2,957,325
291,887
249,2768,764
5,796
18,9123,531,960

2,890,210
296,673258,219
27,932
5,258
30,393
3,508,685

24,159,178
2,384,503
2,036,402
71,59647,349154,497
28,853,525

122,805
104,154
1,256,742(4,475)
1,479,226

122,805
104,154
1,126,670(4,475)
1,349,154

1,003,227
850,862
10,266,661(36,557)
12,084,193

155,863705(1,450)(295)
154,823
1,634,049¥5,806,040

160,441(2,989)(4,266)681
153,867
1,503,021¥5,673,666

1,273,286
5,759(11,845)(2,410)1,264,790
13,348,983$47,431,092

¥

2022

$

560,4931,939,270
39,098345,625
327,955
47,414450,584
1,518,145
5,228,584

Contingent liabilities (Note 23)
Intangibles (Note 20):
Leasehold rights (Notes 3 and 22)
Other intangibles
Total intangibles

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates (Note 8)
Investment securities (Notes 8 and 9)
Guarantee and lease deposits (Notes 8 and 9)
Net defined benefit asset (Note 11)
Deferred income taxes (Note 14)
Other investments and other assets (Notes 8 and 18)
Allowance for doubtful accounts
Total investments and other assets
Total assets
See accompanying notes.

1

61,803
2,191
63,99470,274503,230
66,994258
11,45734,642(659)
686,196¥5,806,040

60,162
2,249
62,411

68,689505,448
68,743—
11,07135,023(2,084)
686,890¥5,673,666

504,885
17,899522,784

574,087
4,111,020
547,292
2,108
93,595
283,000(5,384)
5,605,718$47,431,092

Net assets (Note 16):
Shareholders’ equity
Common stock:
Authorized —1,900,000 thousand shares
Issued—476,086 thousand shares
Capital surplus
Retained earnings (Note 24)
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities (Note 9)
Net deferred gains (losses) on hedges (Note 18)
Foreign currency translation adjustments
Remeasurements of defined benefit plans (Note 11)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets2

Consolidated Financial Statements

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2022, 2021 and 2020

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2022, 2021 and 2020

Millions of yen

Revenue from operations (Notes 17, 19, 20 and 22)
Costs and expenses (Note 17):
Cost of revenue from operations (Note 22)
Selling, general and administrative expenses (Note 11)
Operating income (Note 20)
Other income (expenses) (Note 22):
Interest income
Interest expense (Notes 10 and 18)
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Notes 12, 20 and 22)
Loss on disposal of property and equipment (Note 22)
Gain on sale of investment securities (Note 9)
Loss on sale of investment securities (Note 9)
Loss on devaluation of investment securities (Note 9)
Loss related to COVID-19
Reversal of allowance for doubtful accounts
Other, net
Income before income taxes
Income taxes (Note 12):Current
Deferred
Total
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Thousands

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

476,086¥122,805¥104,154¥ 876,803

Profit attributable to owners of parent

—

—

—

Foreign currency translation adjustments

—

—

—

Net unrealized holding gains (losses) on securities——

Acquisition of treasury stock—

Disposal of treasury stock—

Change in scope of consolidation

2022

2021

2020

2022

¥939,431¥917,473¥1,013,513$7,674,463

636,988
68,560705,548
233,883

629,565
68,664
698,229219,244691,832
87,349779,181234,332

5,203,725
560,085
5,763,810
1,910,653

131(18,034)
12,66298(0)(3,453)(4,015)2,427(2)(1,160)——(3,883)(15,229)
218,654275(18,318)
11,561536—(3,876)(7,890)13,116
(312)
(489)
(629)
—
(2,859)(8,885)
210,359656(19,186)
11,024278(2,131)(9,660)(1,567)
1,417—(7,838)—4,824(6,339)(28,522)
205,8101,070(147,325)
103,439801(0)(28,208)(32,800)
19,827(16)(9,476)——(31,722)(124,410)
1,786,243

77,311(9,109)68,202
150,452—¥150,452

64,9304,040
68,970141,389—¥141,389

68,180(3,367)64,813140,997—¥ 140,997

631,574(74,414)557,160
1,229,083—$1,229,083

Yen

2022

Amounts per share of common stock:
Profit attributable to owners of parent:—Basic—Diluted
Cash dividend applicable to the year (Note 24)

Thousands of
U.S. dollars (Note 1)¥317.45—
45.00

U.S. dollars (Note 1)

2021¥298.33
—
40.00

2020

¥297.50
—
35.00

2022

$2.59
—
0.37

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income (loss)
RemeasureForeign
ments ofNet deferredcurrency
definedgains (losses)
translation
benefiton hedges
adjustments
plans

Total
accumulated
othercomprehensive
income (loss)

Total net
assets¥102,812¥1,202,104——

140,997

—

(366)

(366)

—

(32,875)(32,875)

—

—

—

(3)

—

—

—

0

—

—

—

—

—

—

—

—

—

—

(7,583)

—

—

—

—

—

(7,583)

—

—

412

—

—

412

412

—

—

—

—

—

(103)

(103)

(103)

Treasury
stock

Total
shareholders’equityNet unrealized
holding gains(losses) on
securities¥(4,470)¥1,099,292¥109,210

140,997—

140,997

—

—

—

—

—

—

—

—

(366)

—

—

—

—

(32,875)

—

—

—

—

—

(3)

(3)

—

—

—

0

—

0

0

—

—

—

—

—

—

—

—

—

Final for prior year (¥16 per share)

—

—

—

(7,583)—(7,583)

Interim for current year (¥16 per share)

—

—

—

(7,583)—(7,583)Net deferred gains (losses) on hedges

—

—

—

—

—

Remeasurements of defined benefit plans

—

—

—

—

Balance at April 1, 2019¥(3,972)¥(2,352)¥ (74)Cash dividends paid:

Balance at April 1, 2020

476,086¥122,805¥104,154¥1,002,634¥(4,473)¥1,225,120¥ 76,335¥(3,560)¥(2,718)¥(177)¥ 69,880¥1,295,000

Profit attributable to owners of parent

—

—

—

141,389—

141,389

—

—

—

—

—

141,389

Foreign currency translation adjustments

—

—

—

—

—

—

—

—

(1,548)—(1,548)(1,548)Net unrealized holding gains (losses) on securities

—

—

—

—

—

—

84,106———

84,106

84,106

Acquisition of treasury stock

—

—

—

—

(2)

(2)

—

—

—

—

—

(2)

Disposal of treasury stock

—

—

—

—

—

—

—

—

—

—

—

—

Change in scope of consolidation

—

—

—

657

—

657

—

—

—

—

—

657

Final for prior year (¥19 per share)

—

—

—

(9,005)—(9,005)

—

—

—

—

—

(9,005)Interim for current year (¥19 per share)

—

—

—

(9,005)—(9,005)

—

—

—

—

—

(9,005)Net deferred gains (losses) on hedges

—

—

—

—

—

—

—

571

—

—

571

571

Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

—

858

858

858

Cash dividends paid:

Balance at April 1, 2021

476,086¥122,805¥104,154¥1,126,670¥(4,475)¥1,349,154¥160,441¥(2,989)¥(4,266)¥681¥153,867¥1,503,021

Profit attributable to owners of parent

—

—

—

150,452—

150,452

—

—

—

—

—

150,452

Foreign currency translation adjustments

—

—

—

—

—

—

—

—

2,816

—

2,816

2,816

Net unrealized holding gains (losses) on securities

—

—

—

—

—

—

(4,578)———(4,578)(4,578)Acquisition of treasury stock

—

—

—

—

(0)

—

—

—

—

—

—

(0)

Disposal of treasury stock

—

—

—

—

—

—

—

—

—

—

—

—

Change in scope of consolidation

—

—

—

(0)

—

—

—

—

—

—

—

(0)

Final for prior year (¥21 per share)

—

—

—

(9,953)—(9,953)

—

—

—

—

—

(9,953)

Interim for current year (¥22 per share)

—

—

—

(10,427)—(10,427)

—

—

—

—

—

(10,427)

Net deferred gains (losses) on hedges

—

—

—

—

—

—

—

3,694

—

—

3,694

3,694

Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

—

(976)

(976)

(976)

476,086¥122,805¥104,154¥1,256,742¥(4,475)¥1,479,226¥155,863

705¥(1,450)¥(295)¥154,823¥1,634,049

Treasurystock

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income (loss)
RemeasureNet unrealized
Foreignments ofTotal
holding gains
Net deferredcurrency
definedshareholders’(losses) on
gains (losses)
translation
benefitequitysecurities
on hedges
adjustments
plans

Total
accumulated
othercomprehensive
income (loss)

Total net
assetsCash dividends paid:

Balance at March 31, 2022

Shareholders’ equity

See accompanying notes.

¥

Commonstock

CapitalsurplusRetainedearnings$1,003,227$850,862$ 9,204,068

Profit attributable to owners of parent——

1,229,083—

1,229,083

—

—

—

—

—

Consolidated Statements of Comprehensive Income

Foreign currency translation adjustments

—

—

—

—

—

—

—

23,005—23,00523,005Net unrealized holding gains (losses) on securities

—

—

—

—

—

(37,399)———(37,399)(37,399)

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2022, 2021 and 2020

Acquisition of treasury stock

—

—

—

(0)

(0)

—

—

—

—

—

(0)

Disposal of treasury stock

—

—

—

—

—

—

—

—

—

—

—

Change in scope of consolidation

—

—

(0)

—

(0)

—

—

—

—

—

(0)

Final for prior year ($0.17 per share)——(81,309)—(81,309)

—

—

—

—

—

(81,309)

Interim for current year ($0.17 per share)——(85,181)—(85,181)

—

—

—

—

—

(85,181)

Net deferred gains (losses) on hedges

—

—

—

—

—

—

30,177——30,17730,177

Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

(7,974)(7,974)(7,974)$1,003,227$850,862$10,266,661$(36,557) $12,084,193$1,273,286$ 5,759$(11,845)

Balance at April 1, 2021$(36,557) $11,021,600$1,310,685$(24,418)$(34,850)$ 5,564$1,256,981 $12,278,581
1,229,083

Cash dividends paid:

Thousands of
U.S. dollars (Note 1)

Millions of yen

ProfitOther comprehensive income (loss) (Note 21)
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

2022

2021

2020

2022

¥150,452¥141,389¥140,997$1,229,083(4,578)
3,694
2,816
(976)
956
¥151,408

84,106571(1,548)858
83,987¥225,376(32,875)
412
(366)
(103)
(32,932)¥108,065(37,399)
30,17723,005(7,974)
7,809$1,236,892¥151,408—¥225,376—¥108,065—$1,236,892—

Balance at March 31, 2022$(2,410) $1,264,790 $13,348,983

See accompanying notes.

See accompanying notes.

34Consolidated Financial Statements

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2022, 2021 and 2020

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2022 and 2021, and for the years ended March 31, 2022, 2021 and 2020

Thousands of
U.S. dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization (Notes 20 and 22)
Loss on impairment of fixed assets
Provision for (Reversal of) allowance for doubtful accounts
Increase (Decrease) in net defined benefit liability
Loss (Gain) on sale of property and equipment, net
Loss on disposal of property and equipment
Loss (Gain) on sale of investment securities, net
Loss (Gain) on devaluation of investment securities
Interest and dividend income
Interest expense
Decrease (Increase) in accounts receivable—trade
Decrease (Increase) in inventories
Increase (Decrease) in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
Total
Proceeds from interest and dividend income
Payments for interest
Payments for income tax and other taxes
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of investment securities
Proceeds from sale and redemption of investment securities
Payments for guarantee and lease deposits
Proceeds from guarantee and lease deposits
Repayments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from non-recourse bonds
Redemption of non-recourse bonds
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from long-term non-recourse loans
Repayments of long-term non-recourse loans
Decrease (Increase) in treasury stocks, net
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of newly consolidated
subsidiaries
Cash and cash equivalents at end of year (Note 3)
See accompanying notes.

5

2022

2021

2020

2022

¥ 218,654
60,645
3,453
135
(196)
(98)
4,015
(2,425)
1,160(12,793)
18,034(4,572)(48,327)
17,611
2,082
18,965276,343
12,793(18,150)(78,019)
192,967¥ 210,359
57,813
3,876
(21)
226
(536)
7,890
(12,803)489(11,836)
18,318(1,185)
7,304(12,041)(4,922)
26,434289,365
11,836(18,224)(57,030)
225,947¥ 205,810
48,9749,660(4,848)
60
1,853
1,567
(1,417)
7,838(11,680)
19,186
4,637
46,767(18,543)(416)(6,117)303,331
11,680(19,334)(65,218)
230,459$ 1,786,243
495,425
28,2081,103(1,601)(801)
32,800(19,810)9,476(104,509)
147,325(37,350)(394,796)
143,869
17,008
154,930
2,257,520
104,509(148,272)(637,358)
1,576,399(179,553)
525(9,024)
4,241(1,278)2,731(35,829)
27,858(19,656)(209,985)(355,432)
1,659(20,500)
49,141(748)
1,954(16,549)
24,264(20,471)(336,682)(270,347)
11,307(46,695)
2,676(1,121)804(10,950)
29,525(5,318)(290,119)(1,466,816)
4,289(73,719)
34,646(10,440)
22,310(292,697)
227,579(160,575)(1,715,423)(78,010)40,000(20,000)—(1,500)264,500(191,446)—(14,844)(0)(20,375)(242)(21,917)
1,964(36,971)
187,281

(106)
—
—
6,000
(8,000)259,500(131,471)
57,140(62,678)(2)(18,005)(292)
102,086(1,088)(9,737)
193,448

121,083—(40,000)
2,000(2,000)
153,300(129,619)
93,720(100,363)(3)(15,163)(310)
82,645(244)
22,741
170,707(637,285)
326,771(163,385)—(12,254)
2,160,771(1,563,974)—(121,265)(0)(166,449)(1,976)(179,046)
16,044(302,026)
1,529,949

0¥ 150,310

3,570¥ 187,281—¥ 193,4480$ 1,227,923

1

Basis of presenting consolidated
financial statements

The accompanying consolidated financial statements of Sumitomo
Realty & Development Co., Ltd. (the “Company”) and its consolidated
subsidiaries (collectively referred to as the “Group”) have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act and its related accounting regulations,and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial
Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are based on
their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of
domicile. The accompanying consolidated financial statements havebeen restructured and translated into English from the consolidated
financial statements of the Company prepared in accordance withJapanese GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Financial Instruments andExchange Act. In addition, the notes to the consolidated financial
statements include information which may not be required underJapanese GAAP but is presented herein as additional information.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2022, which was ¥122.41 to
U.S. $1. The translation should not be construed as representations
that the Japanese yen amounts have been, could have been or could in
the future be converted into U.S. dollars at this or any other rate ofexchange.
2

Accounting policies(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which theCompany has power of control through majority voting rights orexistence of certain conditions evidencing control by the Company.
Non-consolidated subsidiaries are excluded from the scope of
consolidation because they are small and their combined total assets,revenues from operations, profit (amount corresponding to theCompany’s equity interest), retained earnings (amount corresponding
to the Company’s equity interest), and any other figures do not have amaterial impact on the consolidated financial statements.
In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable to noncontrolling interests, are recorded based on the fair value at the time
the Company acquired control of the respective subsidiaries.
All significant intercompany balances, transactions and profits havebeen eliminated in consolidation.
In the year ended March 31, 2022, SRD Finance Co., Ltd. isincluded in the scope of consolidation due to increasing its materiality
on the consolidated financial statement, and Sumitomo Fudosan
Finance Co., Ltd. was dissolved and excluded from the scope of
consolidation because of the absorption-type merger with theCompany as the surviving company.
(2) Cash and cash equivalents in the consolidated statements ofcash flows
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term, highly liquid investments withmaturities not exceeding three months at the time of purchase areconsidered to be cash and cash equivalents. Reconciliation between
cash and deposits in the consolidated balance sheets and cash andcash equivalents in the consolidated statements of cash flows at March

31, 2022 and 2021 is presented in Note 5 “Cash and cash
equivalents.”(3) Recognition of significant revenue
In relation to recognition of revenue from contracts with customers,
the nature of principal performance obligations for major businesses of
the Group and typical timing of the satisfaction of these performanceobligations (typical timing of revenue recognition) are as follows:(Leasing Business)
Leasing business mainly consists of leasing of office buildings andhigh-grade rental apartments. The Group recognizes revenue inaccordance with “Accounting Standard for Lease Transactions” (ASBJ
Statement No. 13) based on lease contracts with customers.
(Sales Business)
Sales business mainly consists of sales of condominium units anddetached houses. The Group recognizes revenue at the time the buyer(the customer) acquires control of the real estate by fulfilling thedelivery obligations stipulated in the sales contract.
(Construction Business)
Construction business mainly consists of construction and renovationof custom homes and “Shinchiku Sokkurisan” remodeling. The Group
recognizes revenue at the time the owner (the customer) acquires
control of the real estate by fulfilling delivery obligations stipulated in
the construction contract.
(Brokerage Business)
Brokerage business mainly consists of brokerage of real estate sales.
The Group recognizes revenue at the time the delivery of the realestate from the seller to the buyer is completed by fulfilling thebrokerage obligations for the sale and purchase of real estate
stipulated in the brokerage contract.
(4) Inventories
Inventories are stated at cost, determined by the specific identification
method principally. The carrying amount of inventories is written downwhen the profitability declines.
(5) Securities
Investments in unconsolidated subsidiaries and affiliates are stated atmoving-average cost. Available-for-sale securities except for equity
securities without market prices are stated at fair value, and equity
securities without market prices are mainly stated at moving-averagecost.
(6) Property and equipment (except for leased assets)
The Company and its consolidated domestic subsidiaries depreciatebuildings using the straight-line method, and other property andequipment (excluding facilities attached to buildings and structuresacquired on or after April 1, 2016) using the declining-balance method
over their estimated useful lives. The consolidated overseas subsidiaries
depreciate property and equipment using primarily the straight-line
method in accordance with the accounting principles in the respective
countries.
In addition, the Company and its consolidated domestic subsidiaries
depreciate facilities attached to buildings and structures acquired on orafter April 1, 2016 using the straight-line method.
(7) Intangibles (except for leased assets)
Software costs recognized as other intangibles are amortized using thestraight-line method over the estimated useful lives (five years).
(8) Allowance for doubtful accounts
The Group provides for doubtful accounts at an estimateduncollectable amount based on the evaluation of certain identified
doubtful and bankrupt receivables plus an amount calculated using the6Notes to Consolidated Financial Statements

percentage of actual collection losses in certain reference periods withrespect to remaining receivables.

Actuarial gains and losses are wholly recognized in the next fiscal
year.

(9) Leased assets
Leased assets are recognized as other property and equipment or otherintangibles. Leased assets related to finance lease transactions without
title transfer are depreciated using the straight-line method over thelease periods as their useful lives with no residual value.

(12) Derivatives
The Group states derivatives at fair value. If derivatives are used ashedges and meet certain hedging criteria, the Group defers recognitionof gains or losses resulting from changes in fair value of the derivative
financial instruments until the related gains or losses on the hedged
items are recognized.
The assessment of hedge effectiveness is performed by comparing
the accumulated cash flows of the hedged item to those of thehedging instrument over the term of the relationship. Interest rate
swap contracts adopting exceptional accounting is excluded from theeffectiveness assessment.

(10) Income taxes
Income taxes are provided for on the basis of income for financial
statement purposes. The tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial statements
and income tax purposes are recognized as deferred income taxes.
(11) Net defined benefit asset and liability
For the calculation of defined benefit obligations, the estimatedamount of defined benefits is allocated to the respective fiscal years by
the straight-line method.
Some of the Company’s consolidated subsidiaries calculate net
defined benefit liability and retirement benefit expenses by using asimplified method in which defined benefit obligations are equal to theamount that would be paid if all employees resigned voluntarily at theend of the fiscal year.
3(13) Amounts per share of common stock
The computation of earnings per share is based on the weightedaverage number of shares of common stock outstanding during eachyear. Diluted earnings per share is not presented as there are no
potential shares.
Cash dividends per share represent actual amounts applicable to therespective year.

Thousands of
U.S. dollars

2022

2021

2022

¥308,156
394,922¥260,825
366,597$2,517,409
3,226,223

The net realizable value is estimated based on business plans withthe consideration of expected selling price, construction cost trend, andother data. The business plans are mainly based on unit sales price andconstruction cost, and these assumptions are determined bycomparable data in the same sales area or actual data in the Group.
In case a loss on devaluation of inventories is to be recognized dueto the change of the above-mentioned assumption, the impact on the
consolidated financial statements may be significant.

(Loss on impairment of fixed assets)(1) Carrying amounts in the consolidated financial statements for the years ended March 31, 2022 and 2021:
Thousands of
U.S. dollars

Millions of yen(2) Information on the nature of significant accounting estimates for
identified items
The amounts of property and equipment are determined by deducting
accumulated depreciation and accumulated impairment losses from theacquisition costs, and used as the carrying amount. When a property’s
profitability has declined and an impairment indicator exists, the Groupis required to determine whether an impairment loss should berecognized. Impairment indicators include recurring operating losses, asignificant adverse change that could affect the recoverable amount, asignificant deterioration of business environment and a significant
decrease in the market prices. Such market prices are calculated by theCompany using income approach, and future cash flow and discount7(Application of Accounting Standard for Fair Value
Measurement)
Effective from the beginning of the year ended March 31, 2022, theGroup adopted “Accounting Standard for Fair Value Measurement”(ASBJ Statement No. 30, July 4, 2019) and other related standards, andhenceforth adopts prospectively the new accounting policies inaccordance with the transitional provision set out in Article 19 of the“Accounting Standard for Fair Value Measurement” and Article 44-2 of“Accounting Standard for Financial Instruments” (ASBJ Statement No.
10, July 4, 2019). There is no impact on the consolidated financial
statements.
In addition, breakdown by level of fair value of financial instruments
for the year ended March 31, 2022 is disclosed in Note 8 “Financial
instruments.” Such information for the year ended March 31, 2021 is
not provided in accordance with the transitional provision set out in
Article 7-4 of “Guidance on Disclosures about Fair Value of Financial
Instruments” (ASBJ Guidance No. 19, March 31, 2020).

Cash and cash equivalents
Thousands of
U.S. dollars

Millions of yen

Millions of yen

Property and equipment
Leasehold rights

Changes in accounting policies(Application of the Accounting Standard for Revenue
Recognition)
Effective from the beginning of the year ended March 31, 2022, theGroup adopted “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 31, 2020) and the related standard, and theGroup recognizes the amount expected to be received for promised
goods or services as revenue when they are transferred to customers.
The new accounting policy was applied from the balance ofretained earnings as of the beginning of the year ended March 31,
2022 in which the cumulative effect of applying the new accounting
policy retrospectively was recognized, in accordance with transitional
provision set out in the proviso of Article 84 of the Standard.
As a result, there is no impact on retained earnings for the
beginning of the year ended March 31, 2022 and the impact on the
consolidated financial statements for the year is immaterial.
Note 19 “Revenue recognition” for the year ended March 31, 2021
is not provided in accordance with the transitional provision set out in
Article 89-3 of the Standard.
5

Significant accounting estimates(2) Information on the nature of significant accounting estimates for
identified items
Real estate for sale including that in process is recognized as
inventories in the consolidated balance sheets and stated at cost. In
case the net realizable value is lower than the book value, theprofitability is regarded to have declined, and the net realizable value isused as the carrying amount. The difference between the book value
and the net realizable value (loss on devaluation of inventories) is
recognized as cost of revenue from operations for the current fiscal
year.

4

the impact on the consolidated financial statements may be significant.

Cash and cash equivalents at March 31, 2022 and 2021 consisted of the following:(Evaluation of real estate for sale including that in process)(1) Carrying amounts in the consolidated financial statements for the years ended March 31, 2022 and 2021:

Inventories:
Real estate for sale
Real estate for sale in process

In case the impairment indicator exists, and an impairment loss is tobe recognized due to the change of the above-mentioned assumption,

2022

2021

2022

¥4,114,317
61,803¥4,012,169
60,162$33,610,955
504,885rate is estimated based on current rent per unit, rent level in themarket, occupancy rate, discount rate and other assumptions.
For fixed assets of which the impairment indicator exists, theimpairment loss is recognized if the total amount of their future cash
flow before discount is lower than the book value.
The carrying amount of fixed assets of which the impairment loss is
to be recognized, have been reduced to the recoverable amounts, andthe amount of the reduction is recognized as impairment loss for thecurrent fiscal year. The recoverable amounts are determined based on
the appraisal value by a real estate appraiser, the amounts equivalent
to the publicly notified land price and the amounts calculated bydiscounting the future cash flow.

Cash and deposits
Restricted deposits in trust
Time deposits with maturities exceeding three months
Cash and cash equivalents
6

2022

2021

2022

¥151,393
(783)
(300)
¥150,310¥188,340
(773)
(286)
¥187,281$1,236,770(6,397)(2,450)$1,227,923

Inventories

Inventories at March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Real estate for sale
Real estate for sale in process
Costs on uncompleted construction contracts
Other
Total

2022

2021

2022

¥308,156
394,9228,210
1,163¥712,451¥260,825
366,597
8,638
743¥636,803$2,517,409
3,226,223
67,0709,501$5,820,203(Change in purpose of holding inventories and property and equipment)
As a result of review of holding purposes, the Company transferred amounts between inventories and property and equipment. Such transfers at
March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred to property and equipment
Transferred from property and equipment

2022

2021

2022

¥
—
37,860¥(5,759)
6,164$—
309,2888

Notes to Consolidated Financial Statements

7

Pledged assets

Assets pledged as collateral at March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen¥

Cash and deposits

2022

2021

1,988

¥ 2,0872022$

16,241

Buildings and structures

129,469

98,2001,057,667

Land

396,008

404,372

3,235,095

772

—

6,307

Construction in progress

823

107

6,723

¥529,060¥504,766$4,322,033

Other property and equipment
Total
Secured liabilities at March 31, 2022 and 2021 are as follows:

Thousands of
U.S. dollars

Millions of yen

2022

¥

190
4,786
134,430
291,887¥431,293

Long-term debt due within one year
Long-term non-recourse debt due within one year
Long-term debt due after one year
Long-term non-recourse debt due after one year
Total

190
16,344
104,620
296,673¥417,827$

1,552
39,0981,098,195
2,384,503$3,523,348

Specified assets for non-recourse debts at March 31, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and deposits
Buildings and structures
Land
Other property and equipment
Total

2021

¥ 2,995
77,088258,72585¥338,893

In cases where multiple inputs are used that have a significant
impact on fair value, the fair value level is classified into the lowest
priority level among the levels to which those inputs respectively
belong.

(1) Financial instruments whose fair values are regarded as their carrying amounts on the consolidated balance sheets
For 2022
Millions of yen
Fair value

2022

$

16,682574,577
2,045,266
670$2,637,195

Investment securities*
Available-for-sale securities
Equity securities
Debt securities
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total assets
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total derivative transactions

Level 1

Level 2

Level 3

Total

¥499,521
—

¥

—
536

¥—
—

¥499,521
536

—

—

—

—

—
¥499,521

3,363¥3,899—¥—3,363¥503,420

¥

—

¥

—

¥—

¥

—

¥

—
—

2,348
¥2,348

—
¥—

¥

2,348
2,348

(Note) “Specified assets for non-recourse debts” is included in “Assets pledged as collateral” for the years ended March 31, 2022 and 2021 except for cash and deposits.

* Of investment securities, ¥536 million ($4,379 thousand) accounts as guarantee and lease deposits in the consolidated balance sheets.

8

For 2021

Financial instruments

1. Overview(1) Policy for financial instruments
The Group has the policy to limit its fund management to short-term
deposits, and also raise funds through loans from banks, the issuanceof corporate bonds and commercial paper.
The Group utilizes interest rate swap contracts within the amountof fundraising, and does not utilize derivatives for any speculative
purposes.
(2) Details of financial instruments, these risks, and risk
management systems
Investment securities are equities of business-related companies andare exposed to market price fluctuation risk. The Group regularly
checks the market value of the securities and the financial condition of
the equity issuers, and continuously reviews whether it continues tohold securities with consideration for its relationships with the equity
issuers.
Floating rate debt are exposed to interest rate fluctuation risk, so
the Group utilizes derivatives (interest swap contracts) to hedge theserisks for certain loans and corporate bonds interest. Interest rate swap
contracts are exposed to risks of interest rate fluctuation. The derivative

9

2022

2,042
70,334
250,36182¥322,819¥

Level 1: Fair value measured based on unadjusted quoted prices in an
active market for identical assets or liabilities
Level 2: Fair value measured based on direct or indirect observable
inputs for the assets or liabilities other than level 1 inputs
Level 3: Fair value measured based on significant unobservable inputs
for the assets or liabilities

2022

2021

¥

2. Matters concerning fair values and breakdown by level of fairvalue of financial instruments
The carrying amounts of financial instruments on the consolidatedbalance sheets, their fair values and the differences between them asof March 31, 2022 and 2021 are as follows. (Financial instruments
whose fair values are extremely difficult to estimate and equity
securities with no market price are not included; please see (Note 3)and (Note 4).)
The fair value of financial instruments is classified into the following
three levels based on observability and significance of the inputs used
to measure the fair value.

transactions are executed with creditworthy financial institutions, so
the Group management believes there are few risks of default by
counterparties. Derivative transactions are executed by the Company’s
Finance Department in accordance with the decisions of a committee
whose chairman is the director of the Finance Department. The Finance
Department prepares reports on derivatives that are provided to thedirector of the Finance Department periodically.
Guarantee and lease deposits received is mainly for avoiding
customers’ credit risk.
(3) Supplemental information on fair values of financial
instruments
The fair values of financial instruments are based on their market
prices, and if the market price is not available, other rational valuation
techniques are used instead. The rational valuation techniques
incorporate variable factors, and as a result the values may change due
to using different assumptions.
Contract amounts of derivatives shown in Note 18 “Derivativetransactions” itself are not representing the market risks related toderivatives.

Millions of yen

Investment securities*1
Available-for-sale securities
Equity securities
Debt securities
Total assets
Derivative transactions*2(1) Non-hedge accounting(2) Hedge accounting
Total derivative transactions

Carrying amount

Fair value

Difference¥503,108
535¥503,643¥503,108
535¥503,643

¥—
—
¥—

¥

¥

¥—
—
¥—

—
(4,310)¥ (4,310)—(4,310)¥ (4,310)*1 Of investment securities, ¥535 million accounts as guarantee and lease deposits in the consolidated balance sheets.
*2 Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

10Notes to Consolidated Financial Statements

For 2022
Thousands of U.S. dollars
Fair value
Level 1

Investment securities
Available-for-sale securities
Equity securities
Debt securities
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total assets
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total derivative transactions

Level 2

Level 3

Total

—
4,379

$—
—

$4,080,721
4,379

—

—

—

—

—
$4,080,721

27,473$31,852—$—

27,473$4,112,573

$

—

$

—

$—

$

—

$

—
—

19,181$19,181—$—$

19,181
19,181$4,080,721—$(2) Financial instruments whose fair values are not regarded as their carrying amounts on the consolidated balance sheets
Cash and deposits and short-term debt are not presented below tables because their fair values approximate their carrying amounts due to theirshort-term maturities.
For 2022
Millions of yen(1) Long-term debt (including due within one year)(2) Long-term non-recourse debt (including due within one year)(3) Guarantee and lease deposits received
Total liabilities

Fair value

Carrying
amountLevel 1

Level 2

Level 3Total

¥3,194,711
296,673249,276¥3,740,660

¥—
—
—
¥—

¥3,205,136
299,447
248,475¥3,753,058

¥—
—
—
¥—

¥3,205,136
299,447
248,475¥3,753,058

Difference(3) Guarantee and lease deposits received
The fair values of the guarantee and lease deposits received are
calculated based on the deposit period expected to be returned anddiscounting its future cash flows using the credit risk-adjusted
discount rate over the remaining deposit period, and they areclassified as level 2.

(Note 2) Financial instruments whose fair values are regarded as
their carrying amounts on the consolidated balance
sheets and are classified as level 3
Not applicable(Note 3) Carrying amounts of financial instruments whose fair values are extremely difficult to estimate
For 2021
Millions of yen

Investments in unconsolidated subsidiaries and affiliates*1
Unlisted equity securities*1
Guarantee and lease deposits received*2¥ 68,689
2,340
258,219*1 The fair values of these items are not estimated since their market price is unavailable and the assessment of their fair values is deemed extremely difficult.
*2 The fair values of guarantee and lease deposits received are not estimated because their remaining terms cannot be determined and the assessment of their fair value is deemed extremely difficult.

(Note 4) Equity Securities with no market price are not included in investment securities. The carrying amounts of such financial
instruments are as follows:
For 2022
Investments in unconsolidated subsidiaries and affiliates
Unlisted equity securities
Total

Millions of yen

Thousands of
U.S. dollars¥70,274
3,709¥73,983$574,087
30,300$604,387(Note 5) Redemption schedule of pecuniary claims and securities with maturities
For 2022
Millions of yen¥10,4252,774(801)¥12,398

1 year or less

Cash and deposits
Investment securities*
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥151,393

¥ —

¥ —

¥—

112
¥151,505

302
¥302

122
¥122

—
¥—

* Investment securities include guarantee and lease deposits of ¥536 million ($4,379 thousand).

For 2021
Millions of yen(1) Long-term debt (including due within one year)(2) Long-term non-recourse debt (including due within one year)
Total liabilities

Carrying amount

Fair value¥3,101,656
313,017¥3,414,673¥3,137,030
317,321¥3,454,351

Difference¥35,374
4,304¥39,678

For 2022
Thousands of U.S. dollars(1) Long-term debt (including due within one year)(2) Long-term non-recourse debt (including due within one year)(3) Guarantee and lease deposits received
Total liabilities

Level 1

Level 2

Level 3

Total

$26,098,448
2,423,601
2,036,402$30,558,451

$—
—
—
$—

$26,183,613
2,446,263
2,029,858$30,659,734

$—
—
—
$—

$26,183,613
2,446,263
2,029,858$30,659,734(Note 1) Explanation of valuation techniques and inputs used in
the measurement of fair value(1) Investment securities and Derivative transactions
The fair values of listed equity securities are measured using quoted
market price and are classified as level 1.
The fair values of debt securities are measured mainly based onreference bond trading statistics published by the Japan Securities
Dealers Association and the fair values of derivative transactions aremeasured based on quoted price provided by financial institutions
which are counterparties. Their fair values are classified as level 2.
(2) Long-term debt (including due within one year) and Longterm non-recourse debt (including due within one year)
The fair value of floating rate debt (excluding hedged item subject tothe exceptional accounting for interest rate swaps*) are measured
based on their carrying amounts because the market interest rate is

11

Fair value

Carrying
amountDifference$ 85,165
22,662(6,544)$101,283

reflected in such debt within a short time period, and the credit
standing of the Company and status of specified assets for nonrecourse debts have not changed significantly from the time whenthese transactions occurred.
The fair value of floating rate debt which is hedged item subject tothe exceptional accounting for interest rate swaps, and the fixedcoupon debt are calculated by discounting the combined total ofprincipal and interest including interest rate swap receipts andpayments using interest rates expected to be currently available. They
are classified as level 2.
* If interest rate swap contracts are used as hedge and meet certain
hedging criteria, the net amount to be paid or received under theinterest rate swap contract is added to or deducted from the intereston hedged item.

For 2021
Millions of yen
1 year or less

Cash and deposits
Investment securities*
Held-to-maturity securities (National government bonds)
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥188,340

¥ —

¥—

¥—

—
118
¥188,458

—
417
¥417

—
—
¥—

—
—
¥—

* Investment securities include guarantee and lease deposits of ¥535 million.

For 2022
Thousands of U.S. dollars

Cash and deposits
Investment securities
Available-for-sale securities with maturities (National government bonds)
Total

1 year or less

1 to 5 years$1,236,770$—

5 to 10 years$ —Over 10 years$—

915$1,237,685

2,467$2,467

997
$997

—
$—

12

Notes to Consolidated Financial Statements(Note 6) Repayment schedule of short-term debt, long-term debt and long-term non-recourse debt
For 2022
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total

2023

2024

2025

2026

¥ 68,610
237,386
4,786¥310,782¥—
289,472
4,640¥294,112¥—
379,4154,374¥383,789¥—
293,855
52,007¥345,862

2022

2023

2024

2027 2028 and thereafter¥—
313,063
107,502¥420,565¥—
1,681,520
123,364¥1,804,884

For 2021
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total¥146,620
211,446
16,344¥374,410¥—
237,386
4,786¥242,172¥—
289,472
4,640¥294,112

2025

¥

—
379,4154,374¥383,789

2026 2027 and thereafter¥—
293,855
52,007¥345,862¥—
1,690,082
230,866¥1,920,948

For 2022
Thousands of U.S. dollars
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total
9

2023

2024

2025

2026

$ 560,493
1,939,270
39,098$2,538,861$—
2,364,774
37,905$2,402,679$—
3,099,543
35,732$3,135,275$—
2,400,580
424,859$2,825,439

2027 2028 and thereafter$—
2,557,495
878,213$3,435,708$—
13,736,786
1,007,794$14,744,580

For 2021
1. The following tables summarize the book value, carrying amounts and fair values of securities with available fair values as of March 31, 2021:(1) Available-for-sale securities:
Millions of yen

Carrying amount

Securities whose carrying amount exceeds book value:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed book value:
Equity securities
Debt securities*
Other
Subtotal
Total

Book value

Difference¥460,551
535
423
461,509¥217,650
526
409
218,585¥242,9019
14242,924

41,474—660
42,134¥503,643

53,019—677
53,696¥272,281(11,545)—(17)(11,562)¥231,362* Debt securities are included in “Guarantee and lease deposits” on the consolidated balance sheets.
(Note) The Group recognized impairment loss on investment securities of ¥489 million related to equity securities in available-for-sale securities.

2. Total sales of available-for-sale securities sold in the year ended March 31, 2021 amounted to ¥3,743 million and the related gains and losses
amounted to ¥1,243 million and ¥312 million, respectively. Although gain on sale of investment securities in the consolidated statements of income is¥13,116 million, this difference from above ¥1,243 million is because ¥13,116 million includes the gain on sale of the equity interests with no market
price. It is mainly the gain on sale of equity interests of Dalian Qingyun Sky Realty and Development Co., Ltd. whose amount is ¥11,873 million.

Securities

For 2022
1. The following tables summarize the book value, carrying amounts and fair values of securities with available fair values as of March 31, 2022:(1) Available-for-sale securities:
Millions of yen

Carrying amount

Securities whose carrying amount exceeds book value:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed book value:
Equity securities
Debt securities*
Other
Subtotal
Total

Thousands of U.S. dollars

Book value

Difference

Carrying amountBook value

Difference¥442,654
414—
443,068¥203,995
409—
204,404¥238,6595—
238,664$3,616,159
3,382—
3,619,541$1,666,490
3,341—
1,669,831$1,949,669
41—
1,949,710

56,866122—
56,988¥500,056

70,887
123—
71,010¥275,414(14,021)(1)—(14,022)¥224,642

464,554997—
465,551$4,085,092

579,095
1,005—
580,100$2,249,931(114,541)(8)—(114,549)$1,835,161* Debt securities are included in “Guarantee and lease deposits” on the consolidated balance sheets.
(Note) The Group recognized impairment loss on investment securities of ¥1,160 million ($9,476 thousand) related to equity securities in available-for-sale securities.

2. Total sales of available-for-sale securities sold in the year ended March 31, 2022 amounted to ¥4,226 million ($34,523 thousand) and the related
gains and losses amounted to ¥2,427 million ($19,827 thousand) and ¥2 million ($16 thousand), respectively.

13

14

Notes to Consolidated Financial Statements

10 Short-term debt and long-term debt

Non-recourse debt at March 31, 2022 and 2021 consisted of the following:

Short-term debt at March 31, 2022 and 2021 consisted of the following:
Millions of yen

2022

Loans, principally from banks
Commercial paper
Total¥28,61040,000¥68,610

Average interest
rate (%)

2021

0.27
(0.08)

Average interest
rate (%)¥ 26,620
120,000¥146,620

2022$233,723
326,770$560,493

0.28(0.04)All of short-term debts are raised in yen, and the interest rates represent weighted-average rates in effect balance at March 31, 2022 and 2021.
Long-term debt at March 31, 2022 and 2021 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2022

1.098% domestic straight bonds, due 2023
0.950% domestic straight bonds, due 2023
0.968% domestic straight bonds, due 2023
0.987% domestic straight bonds, due 2024
0.914% domestic straight bonds, due 2024
0.904% domestic straight bonds, due 2024
0.884% domestic straight bonds, due 2024
0.836% domestic straight bonds, due 2024
0.809% domestic straight bonds, due 2024
0.429% domestic straight bonds, due 2021
0.392% domestic straight bonds, due 2022
0.670% domestic straight bonds, due 2025
0.826% domestic straight bonds, due 2025
0.992% domestic straight bonds, due 2025
0.400% domestic straight bonds, due 2026
0.230% domestic straight bonds, due 2026
0.400% domestic straight bonds, due 2027
0.310% domestic straight bonds, due 2031
0.260% domestic straight bonds, due 2031
Loans from banks and insurance companies, with interest at weighted-average rates of 0.32% in 2022 and 0.30%
in 2021:
SecuredUnsecured
Subtotal
Amount due within one year
Total

¥

10,00010,00010,00020,00020,00020,00020,00020,00020,000——10,00020,00020,00010,00010,00030,00030,00010,000134,6202,770,091
3,194,711(237,386)¥2,957,325

2022

2021

¥

10,00010,00010,00020,00020,00020,00020,00020,00020,00010,00010,00010,00020,00020,00010,00010,00030,000——104,8102,726,846
3,101,656(211,446)¥2,890,210$

81,693
81,693
81,693
163,385
163,385
163,385
163,385
163,385
163,385——
81,693
163,385
163,385
81,693
81,693245,078
245,078
81,693

1,099,747
22,629,614
26,098,448(1,939,270)$24,159,178

All of long-term debts are raised in yen, and the interest rates represent weighted-average rates in effect balance at March 31, 2022 and 2021.

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Non-recourse bonds, with interest at weighted-average rates of 0.09% in 2022 and 2021, respectively:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted-average rates of 0.12% in 2022 and 2021, respectively:
Due within one year
Due after one year
Subtotal
Total
SecuredUnsecured
Total

2022

2021

—
35,60035,600¥ 1,500
35,60037,100$4,786
256,287
261,073¥296,673

14,844
261,073
275,917¥313,017

39,0982,093,677
2,132,775$2,423,601¥296,673—¥296,673¥313,017—¥313,017$2,423,601—$2,423,601¥—
290,826
290,826

All of non-recourse debts are raised in yen, and the interest rates represent weighted-average rates in effect balance at March 31, 2022 and 2021.
The aggregate annual maturities of long-term debt and long-term non-recourse debt are seen Note 8 “Financial instruments.”
11 Employees’ severance and retirement benefits
The Company and its certain consolidated subsidiaries provide two types of post-employment benefit plans, lump-sum payment plans and defined
benefit corporate pension plans, under which all eligible employees are entitled to benefits based on their current rate of pay, length of service andthe conditions under which termination occurs.
As explained in Note 2 (11), “Net defined benefit asset and liability” the liabilities and expenses for severance and retirement benefits are
determined based on the amounts obtained by actuarial calculations except for the cases using the simplified method.
For 2022 and 2021
1. Defined benefit plan
(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year

2022

2021

2022

¥12,153
732
49
565
(676)
¥12,823¥12,069
754
49
(194)
(525)
¥12,153$ 99,281
5,980
400
4,616
(5,523)$104,754(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Retirement benefits paid
Plan assets at end of year

15

2022

2022

2021

2022

¥6,895
138
138
361
(247)
¥7,285¥5,799
116
786
366
(172)
¥6,895$56,327
1,127
1,128
2,949
(2,018)$59,51316

Notes to Consolidated Financial Statements(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidatedbalance sheets
Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheets¥ 7,108(7,285)(177)
5,715¥ 5,538¥ 6,328(6,895)(567)
5,825¥ 5,258$ 58,067(59,513)(1,446)
46,687$ 45,241

Net defined benefit liability
Net defined benefit asset
Net amount of liabilities on the consolidated balance sheets¥ 5,796(258)¥ 5,538¥ 5,258—¥ 5,258$ 47,349(2,108)$ 45,241

Obligations under retirement benefit plans (funded)
Fair value of plan assets(4) Components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

Service costs
Interest costs
Expected return on plan assets
Actuarial differences
Retirement benefit expenses

2022

2021

2022

¥ 732
49
(138)
(980)
¥(337)

¥ 754
49
(116)
257
¥ 944

$ 5,980400(1,127)(8,006)$(2,753)(5) Remeasurements of defined benefit plans (before deducting tax effect)

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total

2022

2021

2022

¥1,407¥1,407¥(1,237)¥(1,237)$11,494$11,494(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial differences
Total(7) Major breakdown of plan assets
Debt securities
Equity securities
General life insurance accounts
Other
Total
(8) Actuarial assumptions
Discount rate
Rate of expected return on plan assets

2022

2021

2022

¥427
¥427

¥(980)¥(980)$3,488$3,488

2022

2021

28.0%
36.5
34.1
1.4
100.0%

27.9%
35.9
34.8
1.4
100.0%

2022

2021

0.4%
2.0

0.4%
2.0

12 Loss on impairment of fixed assets
The Group recognized impairment losses on the following assets for the years ended March 31, 2022, 2021 and 2020, respectively.
For 2022
Use

Location

Number of properties

Asset leased to others
Idle asset

Tokyo
Nagano1
1

Use

Location

Number of properties

Assets leased to others

Tokyo and other cities in JapanFor 2021
4

For 2020
Use

Location

Number of properties

Assets leased to others

Tokyo

2

The Group recognized losses on the impairment of certain properties,
which are generally assessed individually for impairment. The Company
houses and other welfare facilities are treated as common assets.
For 2022
For the asset leased to others, loss on sales of property and equipmentof ¥3,053 million ($24,941 thousand) was recognized by aconsolidated subsidiary as a result of reorganization of assets within
the Group. The selling price of the asset was determined as its
recoverable amount, and the loss on sales of property and equipment
was recognized as loss on impairment of fixed assets for the year
ended March 31, 2022.
For the idle asset, the carrying value has been reduced to its
recoverable amount by ¥400 million ($3,268 thousand) due to achange in use from common assets.
The selling price of the asset leased to others above was based on
the appraisal value by a real estate appraiser, and the recoverable
amount of the idle asset above was measured by net realizable value
calculated based on assessed value of fixed assets for tax purposes.

For 2021
The carrying value of assets have been reduced to their recoverable
amounts by ¥3,578 million since the total amount of the future cash
flow is estimated to be lower than the carrying value for the year
ended March 31, 2021. The recoverable amounts were calculated bydiscounting the future cash flow at 3.6%.
Loss on sales of property and equipment of ¥299 million wasrecognized by a consolidated subsidiary due to restructuring of assets
within the Group. The selling price of the assets were based on theamounts equivalent to the publicly notified land price. These amounts
were determined as their recoverable amounts, and the loss on sales ofproperty and equipment of the assets was recognized as loss on
impairment of fixed assets for the year ended March 31, 2021.
For 2020
Loss on sales of property and equipment of ¥9,660 million wasrecognized by a consolidated subsidiary due to restructuring of assets
within the Group. The selling price of the assets were based on theappraisal value by a real estate appraiser. These amounts were
determined as their recoverable amounts, and the loss on sales ofproperty and equipment of the assets was recognized as loss on
impairment of fixed assets for the year ended March 31, 2020.

13 Asset retirement obligations
Even though removing asbestos is required for some buildings theGroup operates at the time of demolishing, it is difficult to estimate
the fair value of obligations associated with such assets reasonably
since the timing and/or method of settlement for the retirement
obligations are not clear enough. Therefore, for the years ended
March 31, 2022 and 2021, asset retirement obligations related tosuch a case are not recorded (except for the asset retirement
obligations recorded on the financial statements).

In addition, under the partial lease contracts, the Group has
obligations for restoring office spaces when they move out. For theasset retirement obligations associated with such a case, the durationof use of the assets is not clear enough and these assets do not have
any relocation plans. Therefore, the Group is unable to estimate theasset retirement obligations since it is difficult to estimate the timingof fulfillment of the obligations. Consequently, for the years ended
March 31, 2022 and 2021, asset retirement obligations related tosuch a case are not recorded (except for the asset retirement
obligations recorded on the financial statements).

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥360 million($2,941 thousand) and ¥388 million for the years ended March 31, 2022 and 2021, respectively.

1718

Notes to Consolidated Financial Statements

14 Income taxes

15 Business combination

The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes wasapproximately 30.62% for the years ended March 31, 2022, 2021 and 2020 respectively.

(Transactions conducted by commonly controlled entities)(An absorption-type merger of consolidated subsidiaries)
The Company resolved at its board of directors meeting held on
January 14, 2022 to merger by absorption with its consolidated
subsidiary, Sumitomo Fudosan Finance Co., Ltd. The merger agreement
was executed on the same date, and the subsidiary was absorbed andmerged as of March 1, 2022.

Details of deferred tax assets and liabilities at March 31, 2022 and 2021 are as follows:

Thousands of
U.S. dollars

Millions of yen

2022

2021

2022

Deferred tax assets:
Loss on devaluation of real estate for sale including that in process
Loss on impairment of fixed assets
Loss on transfer involving wholly owned subsidiaries
Net operating loss carryforwards
Adjustments of book value in consolidation
Accrued enterprise tax and other taxes
Loss on devaluation of investments and other loss, in subsidiaries and affiliates
Loss on devaluation of investment securities
Provision for bonuses
Net defined benefit liability
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets¥ 22,646
15,124
12,164
7,368
6,501
2,592
2,187
2,047
1,855
1,782
20,06994,335(20,488)¥ 73,847¥ 18,807
15,001
11,632
7,977
6,583
2,728
1,853
2,101
1,304
1,917
15,312
85,215(19,785)¥ 65,430$ 185,001
123,552
99,37160,191
53,10821,175
17,866
16,72215,154
14,558
163,950
770,648(167,372)$ 603,276

Deferred tax liabilities:
Net unrealized holding gains on securities
Retained earnings appropriated for tax allowable reserves
Deferred gains on hedges
Other
Total deferred tax liabilities
Net deferred tax liabilities¥(68,826)(3,731)(1,030)(2,006)¥(75,593)¥ (1,746)¥(70,728)(3,731)—(2,648)¥(77,107)¥(11,677)$(562,258)(30,480)(8,414)(16,388)$(617,540)$ (14,264)(Note) Net deferred tax liabilities are included in the following items on the consolidated balance sheets for the years ended March 31, 2022 and 2021.
Thousands of
U.S. dollars

Millions of yen

Investments and other assets—Deferred income taxes
Long-term liabilities—Other long-term liabilities

2022

2021

2022

¥11,457
13,203¥11,071
22,748$ 93,595
107,859

The difference between the statutory tax rate and the effective tax rate for the year ended March 31, 2022 is insignificant and not presented.
The difference between the statutory tax rate and the effective tax rate for the year ended March 31, 2021 is as follows:

2021

Statutory tax rate
Adjustment:
Valuation allowance
Inhabitant tax on per capita basis
Dividends and other income not taxable permanently
Other
Effective tax rate

1930.62%
2.45
0.14(0.35)(0.08)
32.78%

1. Overview of business combination(1) Name and business of the target company
Name: Sumitomo Fudosan Finance Co., Ltd.
Business: Property leasing(2) Date of business combination
March 1, 2022
(3) Legal form of business combination
An absorption-type merger in which the Company is thesurviving company and Sumitomo Fudosan Finance Co., Ltd. isabsorbed.

(4) Name of company after combination
No change(5) Purpose of business combination
The purpose is to streamline the Group’s property leasing
business, as Sumitomo Fudosan Finance Co., Ltd. had been
engaged in financing operations within the Group (the financing
business had been transferred to another subsidiary in theGroup), as well as holding multiple rental properties and leasing
them to the Company under a master lease agreement.
2. Overview of accounting treatments
The transaction is treated as a common control transaction pursuant
to “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, January 16, 2019), as well as “Guidance on
Accounting Standard for Business Combinations and AccountingStandard for Business Divestitures” (ASBJ Guidance No. 10, January
16, 2019).

16 Net assets
Under the Japanese Corporate Law (“the Law”) and its regulations, theentire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of the Boardof Directors, designate an amount not exceeding one-half of the priceof the new shares as additional paid-in capital, which is included incapital surplus.
Under the Law, in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of additional
paid-in capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. Legal earnings
reserve is included in retained earnings on the accompanying
consolidated balance sheets.

Under the Law, legal earnings reserve and additional paid-in capital
could be used to eliminate or reduce a deficit and capitalized by aresolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be
distributed as dividends. Under the Law, all additional paid-in capitaland all legal earnings reserve may be transferred to other capitalsurplus and retained earnings, respectively, which are potentiallyavailable for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with the Law and its
regulations.

17 Information for certain lease transactions
Future lease payments and receipts under such non-cancelable operating leases at March 31, 2022, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2022

2021

2020

Operating leases:
Future lease payments:
Due within one year
Due after one year
Total

2022

¥

1,538
41,134¥ 42,672¥ 1,574
41,880¥ 43,454¥ 1,526
39,395¥ 40,921

12,564
336,035$ 348,599

Future lease receipts:
Due within one year
Due after one year
Total

¥ 87,055
124,271¥211,326¥ 91,310
140,152¥231,462¥ 89,154
122,544¥211,698$ 711,176
1,015,203$1,726,379$

20

Notes to Consolidated Financial Statements

18 Derivative transactions

2. Information for understanding the amount of revenue in the current and subsequent fiscal years(1) Receivables arising from contracts with customers and contract liabilities

Hedge accounting was applied to all derivative transactions for the years ended March 31, 2022 and 2021.
The summary of these transactions is as follows:

For 2022

End offiscal year

Beginning offiscal year

1. Foreign currency-related derivatives
Not applicable¥18,71457,879Receivables arising from contracts with customers*
Contract liabilities

2. Interest-related derivatives
For 2022

Thousands of
U.S. dollars

Millions of yen

End offiscal year

Beginning offiscal year

¥23,286
61,180$152,880
472,829$190,230
499,796* Receivables arising from contracts with customers include receivables from revenue from leases based on lease contracts.
Millions of yen

Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Contract amounts

Contract amounts
due after one year

¥ 447,400¥ 447,400¥1,016

1,329,433

1,142,274— (*)

Bank loans
Bank loans and bonds

Fair value

Contract liabilities are (1) advances received from customers such as
deposits and other advances based on real estate sales contracts inSales business, (2) advances received on construction contracts inprogress from customers such as deposits and intermediate payments
based on construction contracts in Construction business, (3) advances
received from customers such as advances received at the time of theconclusion of real estate sales contracts based on real estate brokeragecontracts in Brokerage business and other advances from customers.
Contract liabilities are transferred to revenue upon satisfaction ofrelated performance obligations.
Out of the amount of revenue from operations for the year ended
March 31, 2022, ¥41,062 million ($335,446 thousand) is transferredfrom contract liabilities of the beginning of the year.

Thousands of U.S. dollars
Hedging accounting

Types of derivative transactions

Hedged items

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Bank loans

Contract amounts

Contract amounts
due after one year

$ 3,654,930$3,654,930

Bank loans and bonds

Fair value$8,30010,860,493

9,331,542

Contract amounts

Contract amounts
due after one year

¥ 348,900¥ 347,400¥(4,310)1,440,247

1,271,549— (*)

For 2021— (*)

Millions of yen

Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

19 Revenue recognition

Thousands of
U.S. dollars

Millions of yen¥230,902
134,859
21,051¥386,812

Sales business
Construction business
Brokerage business
Total$1,886,300
1,101,699
171,972$3,159,971

20 Segment information
The Group operates their business in five segments: (1) Leasing
business consists of leasing and management of office buildings, rental
apartments, etc., and operation and management of hotels,
multipurpose halls, retail facilities, etc.; (2) Sales business consists ofsales of condominium units, detached houses, etc.; (3) Construction

business consists of construction and remodeling of detached houses,
condominiums, etc.; (4) Brokerage business consists of brokerage ofreal estate sales and sales agent of residential properties; and (5) Other
businesses including fitness business and restaurant business.

Information by business segment for the years ended March 31, 2022, 2021 and 2020 is summarized as follows:

1. Information for breakdown of revenues from contracts with customers

Millions of yen
Millions of yen

For 2022

For 2022

Reportable segments

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥365,402————
57,271¥422,673¥—
218,177———
15,499¥233,676¥¥——
105,747
88,432—9,129¥203,308————
70,106
2,205¥72,311

Other businesses

Total

¥

¥365,402
218,177
105,747
88,432
70,106
91,567¥939,431

—
—
—
—
—
7,463
¥7,463Thousands of U.S. dollars
Reportable segments

Office buildings and other properties leasing*
Condominiums and detached houses
Shinchiku Sokkurisan remodeling
Custom homes
Real estate brokerage
OthersTotal

For 2022

Fair value(*) Interest rate swap contracts adopting exceptional accounting for interest rate swaps which meet specific matching criteria are not remeasured at market value, but the differential paid or received
under the swap agreements is recognized and included in interest expenses of the long-term debt or the long-term non-recourse debt as hedged items. Thus, the fair value of such interest rate
swap contracts is included in the fair value of the long-term debt or the long-term non-recourse debt.

Office buildings and other properties leasing*
Condominiums and detached houses
Shinchiku Sokkurisan remodeling
Custom homes
Real estate brokerage
OthersTotal(2) Transaction price allocated to remaining performance obligations
The aggregate amounts of transaction prices allocated to the remaining performance obligations by each segment are as follows. The amount inSales business includes the amount expected to be recognized as revenue after over one year.

Leasingbusiness

Salesbusiness$2,985,067————
467,862$3,452,929$—
1,782,346———
126,616$1,908,962

Construction
business

Brokeragebusiness$$——
863,876
722,425—
74,576$1,660,877————
572,715
18,013$590,728

Other businesses

$

—
—
—
—
—
60,967$60,967

Total

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥ 422,673
2,409
425,082¥ 162,650¥4,297,595¥233,676
112
233,788¥ 50,486¥761,443¥203,308
1,054
204,362¥ 18,523¥ 23,626¥ 72,311
1,173
73,484¥ 18,026¥193,444

¥

7,463
1,621
9,084
¥
617
¥125,049¥ 939,431
6,369
945,800¥ 250,302¥5,401,157¥—(6,369)(6,369)¥ (16,419)¥404,883¥ 939,431—
939,431¥ 233,883¥5,806,040

¥

¥

¥

¥

¥

¥

¥

¥

57,394

167

1,032

676

Other businesses

293

Total

59,562Adjustments

1,083

Consolidated financial
statements amounts

60,645

3,453

—

—

—

—

3,453

—

3,453

164,430

21,741

281

802

286

187,540286

187,826$2,985,067
1,782,346
863,876
722,425
572,715
748,034$7,674,463* Revenue from office buildings and other properties leasing is mainly leasing revenue based on lease contracts and includes revenue from contracts with customers associated with such contracts.

2122Notes to Consolidated Financial Statements

21 Comprehensive income

Millions of yen

For 2021

Reportable segments

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥ 395,288
2,950
398,238¥ 155,246¥4,226,734¥263,30392
263,395¥ 53,932¥658,010¥187,564
1,144
188,708¥ 15,566¥ 23,460¥ 64,026
1,767
65,793¥ 11,480¥179,632¥ 7,292
979
8,271¥ (49)¥71,731¥ 917,473
6,932
924,405¥ 236,175¥5,159,567¥—(6,932)(6,932)¥ (16,931)¥514,099¥ 917,473—
917,473¥ 219,244¥5,673,666

¥

¥

97

¥ 1,209¥¥¥

56,641¥ 1,172

¥

3,876

—

—

—

—

3,876

—

3,876

363,798

2,262

341

550

663

367,614107

367,72154,332Other businesses

673

330

Total

Adjustments

Consolidated financial
statements amounts

57,813

Millions of yen

For 2020

Reportable segments

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥ 392,110
3,482
395,592¥ 169,416¥3,922,764¥324,661
267
324,928¥ 46,490¥673,420¥216,622
2,309
218,931¥ 20,583¥ 25,053¥ 69,158
2,041
71,199¥ 14,593¥170,884¥10,962
1,135
12,097¥ 775¥72,476¥1,013,513
9,234
1,022,747¥ 251,857¥4,864,597¥—(9,234)(9,234)¥ (17,525)¥453,026¥1,013,513—
1,013,513¥ 234,332¥5,317,623

¥

¥

113

¥ 1,283¥¥¥

47,789¥ 1,185

¥

9,660

—

—

—

—

9,660

—

9,660

273,245

2,904

1,553

816

608

279,126248

279,374

45,421Other businesses

658

314

Total

Adjustments

Consolidated financial
statements amounts

48,974

Thousands of U.S. dollars

For 2022
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness$ 3,452,929
19,6793,472,608$ 1,328,731$35,108,202$1,908,962
915
1,909,877$ 412,434$6,220,431$1,660,877
8,611
1,669,488$ 151,319$ 193,007$ 590,728
9,582
600,310$ 147,259$1,580,296$

60,967 $ 7,674,463
13,24352,03074,2107,726,493$
5,041 $ 2,044,784$1,021,559 $44,123,495—(52,030)(52,030)$ (134,131)$3,307,597$ 7,674,463—
7,674,463$ 1,910,653$47,431,092

$

$

$

$

$

$

$

468,867

1,364

8,431

Total

2,394 $

486,578

Adjustments

$

8,847

Consolidated financial
statements amounts

—

—

—

—

28,208—28,2081,343,273

177,608

2,296

6,552

2,336

1,532,065

2,336

1,534,401

Adjustments of segment assets consist mainly of intersegment
transaction eliminations and undistributed corporate assets to eachsegment, and the Group classified cash and deposits, investments inunconsolidated subsidiaries and affiliates, investment securities, andassets of the general administrative division in the Company and its
certain consolidated subsidiaries into corporate assets.

Thousands of
U.S. dollars

Millions of yen

Unrealized holding gains (losses) on securities:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Deferred gains (losses) on hedges:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Foreign currency translation adjustments:
Increase (Decrease) during the fiscal year
Remeasurements of defined benefit plans:
Increase (Decrease) during the fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Total other comprehensive income (loss)

2022

2021

2020

2022

¥(5,332)(1,266)(6,598)2,020¥(4,578)¥133,468(12,272)
121,196(37,090)¥ 84,106¥(53,788)
6,434(47,354)
14,479¥(32,875)$(43,559)(10,342)(53,901)
16,502$(37,399)¥ 4,343981
5,324(1,630)¥ 3,694

¥

¥

¥

(112)
935
823
(252)
571

¥

(349)
942
593
(181)
412

$ 35,479
8,014
43,493(13,316)$ 30,177¥ 2,816¥ (1,548)

¥

(366)

$ 23,005¥ (427)(980)(1,407)431¥ (976)
¥ 956

¥

¥

(257)
66
(191)
88
¥ (103)¥(32,932)$ (3,488)(8,006)(11,494)
3,520$ (7,974)$ 7,809

980
257
1,237
(379)
¥
858
¥ 83,987

22 Investment and rental properties
The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and rental apartments in Tokyo and otherareas. The carrying amount on the consolidated balance sheets for the year ended March 31, 2022 is ¥3,945,068 million ($32,228,315 thousand).
Certain domestic office buildings are not recognized as rental properties since the Company or its certain consolidated subsidiaries use some of thefloor space of these properties.
The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March
31, 2022 and 2021are as follows:
Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

495,425

28,208Adjustments of segment profit consist mainly of intersegment
transaction eliminations and undistributed corporate expenses to eachsegment, and the Group classified these expenses of the generaladministrative division in the Company and its certain consolidated
subsidiaries into corporate expenses.

23

5,522

Other businesses

Amounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods and tax
effects for each component of other comprehensive income (loss) for the years ended March 31, 2022, 2021 and 2020 are as follows:

A portion used as investment andrental properties

Balance at beginning of fiscal year
Carrying amount
Changes during the fiscal year, net
Balance at end of fiscal year
Fair value at end of fiscal year
Balance at beginning of fiscal year
Carrying amount
Changes during the fiscal year, net
Balance at end of fiscal year
Fair value at end of fiscal year

2022

2021

2022

¥3,705,532(61,796)
3,643,736
6,807,876¥ 133,004
168,327
301,331
632,166¥3,415,982
289,550
3,705,532
6,873,990¥ 139,090(6,086)
133,004
397,179$30,271,481(504,828)
29,766,653
55,615,358$ 1,086,545
1,375,108
2,461,653
5,164,333(Notes)*Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs.
*Fair values as of March 31, 2022 and 2021 are calculated by the Group primarily based on their fair values according to Japanese Real Estate Appraisal Standards.

24Notes to Consolidated Financial Statements

Independent Auditor’s Report

Significant changes during the years ended March 31, 2022 and 2021 are as follows:

Thousands of
U.S. dollars

Millions of yen

Increase:
Acquired real estateTransferred from inventories
Decrease:
Depreciation and amortization
Transferred to inventories
Loss on impairment of fixed assets

2022

2021

2022

¥196,018—¥337,931
5,759$1,601,323—¥ (48,862)(37,860)—¥ (46,944)(6,164)(3,741)$ (399,167)(309,288)—

Income and expenses for investment and rental properties for the years ended March 31, 2022 and 2021 are as follows:

Thousands of
U.S. dollars

Millions of yen

Investment and rental properties

A portion used as investment and rental properties

Revenue from operations
Cost of revenue from operations
Operating income
Other income (expenses), net
Revenue from operations
Cost of revenue from operations
Operating income
Other income (expenses), net

2022

2021

2022

¥299,165
148,260
150,905(3,480)¥ 29,965
17,853
12,112(309)¥298,596
146,879
151,717(10,084)¥ 18,960
11,3217,639(0)$2,443,959
1,211,176
1,232,783(28,429)$ 244,792
145,846
98,946(2,524)(Notes)*As a portion used as investment and rental properties includes a portion used by the Company or its certain consolidated subsidiaries for providing services as well as management and administration,
revenue from operation for these are not recorded above. On the other hand, cost of revenue from operations for these (mainly rent, depreciation, taxes and dues) is included above.
*Other income (expenses), net for investment and rental properties and a portion used as investment and rental properties are mostly loss on disposal of property and equipment.

23 Contingent liabilities
The Group is contingently liable mainly for defects in condominiums, detached houses and other real estate, to our brokerage business customers
who bought or sold these, in an amount aggregating to ¥13,913 million ($113,659 thousand) and ¥11,305 million at March 31, 2022 and 2021,
respectively.

To the Board of Directors of Sumitomo Realty & Development Co., Ltd.:

OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group”), which comprise the consolidated balance sheets as at March 31, 2022 and 2021,
the consolidated statements of income, comprehensive income, changes in net assets and cash flows for each of the years in the three year period
ended , and notes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of theGroup as at March 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for each of the years in the threeyear period ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of theGroup in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we havefulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, andin forming our opinion thereon, and we do not provide a separate opinion on these matters.

24 Subsequent events(Dividends)
On June 29, 2022, the shareholders of the Company approved payments of a year-end cash dividend of ¥23 ($0.19) per share or a total of ¥10,901
million ($89,053 thousand) to shareholders of record at March 31, 2022. Such appropriations are recognized in the period in which they areapproved by the shareholders.

2526

Independent Auditor’s Report

Appropriateness of management’s judgments concerning the identification of an impairment indicator for the Investment and rental
properties
The key audit matter

How the matter was addressed in our audit

Office buildings, rental apartments and other properties (including
construction in progress and those held for development, hereinafterreferred to as the “Investment and rental properties”) owned by theGroup were recognized as property and equipment in the consolidatedbalance sheet of the Group as of March 31, 2022. As described in
Note 22, “Investment and rental properties” to the consolidated
financial statements, the Investment and rental properties amounted to¥3,945,068 million and accounted for approximately 68% of the total
assets in the consolidated financial statements.

The primary procedures we performed to evaluate whether
management’s judgment concerning the identification of an
impairment indicator for the Investment and rental properties wasappropriate included the following:

As described in Note 3, “Significant accounting estimates” to theconsolidated financial statements, when a property’s profitability has
declined and an impairment indicator exists, the Group is required todetermine whether an impairment loss should be recognized.
Impairment indicators include recurring operating losses, changes thatsignificantly reduce the recoverable amount, a significant deteriorationof business environment and a significant decrease in the market
prices.
The probability of achieving the business plans including thedevelopment plans which were basis for estimating the recoverable
amount and the assumptions used for calculating the market prices of
the Investment and rental properties such as expected rents, occupancy
rates and discount rates were determined by management withsubjective judgments. Also, these judgments are largely influenced byeconomic trends, corporate performance, trends in land prices,financial market situations, taxation system and other social aspects.
Accordingly, these estimates involved a high degree of uncertainty.
In addition, in case the impairment indicator exists, and an impairment
loss is to be recognized, the impact on the consolidated financial
statements may be significant.
We, therefore, determined that the appropriateness of management’s
judgment concerning the identification of an impairment indicator for
the Investment and rental properties was one of the most significant in
our audit of the consolidated financial statements for the current fiscal
year, and accordingly, a key audit matter.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to management’s judgment
concerning the identification of an impairment indicator for theInvestment and rental properties.
(2) Evaluation of the appropriateness of management’s judgment
concerning the identification of an impairment indicator for theInvestment and rental properties.
1. The probability of achieving the business plans• We inquired of management and the personnel in the responsible
divisions their judgments about the current progress against thebusiness plans and the probability of achieving the business plansconsidering the effect of COVID-19 and the military conflict between
Russia and Ukraine, and also inspected the supporting documents
including approved documents, contracts and other relevant materials
regarding the current progress of the business plans.
• We observed certain properties which have been completed orwhose occupancy rates had fluctuated in the current fiscal year, andcertain projects in progress, in order to assess if these properties havebeen actually rented or if the current progress against the business plan
was consist with their judgments.
2. Reasonableness of the calculated market prices• We assessed the appropriateness of the expected rents and occupancy
rates by comparing them with actual results or current contract rents
in the same project, or observable actual rent data of comparable
properties.
We assessed the appropriateness of the discount rates by comparing
them with information published by external organizations.
•• With the assistance of our own real-estate valuation specialists, weevaluated the reasonableness of the calculated market prices andassessed the appropriateness of the discount rates determined bymanagement.

The reasonableness of the valuation of the Real Estate for Sale
The key audit matter

How the matter was addressed in our audit

Condominium units, detached houses and land lots for sale (including
those in process and those held for development, hereinafter referred
to as the “Real Estate for Sale”) owned by the Group were recognized
as inventories in the consolidated balance sheet of the Group as ofMarch 31, 2022. As described in Note 6 “Inventories” to theconsolidated financial statements, real estate for sale and real estate
for sale in process amounted to ¥308,156 million and ¥394,922
million, respectively, accordingly the Real Estate for Sale accounted forapproximately 12% of the total assets in the consolidated financial
statements.

The primary procedures we performed to evaluate whether thevaluation of the Real Estate for Sale was reasonable included thefollowing:

As described in Note 3, “Significant accounting estimates” to theconsolidated financial statements, in case the net realizable value islower than the book value, the profitability is regarded to have declined,
and the net realizable value is used as the carrying amount. The
difference between the book value and the net realizable value isrecognized as cost of revenue from operations for the current fiscal year.
The probability of achieving the business plans including thedevelopment plans which were basis for estimating the net realizablevalue and the assumptions underlying the business plan including
expected selling prices were determined by management withsubjective judgments. Also, these judgments are largely influenced byeconomic trends, trends in personal income, trends in land prices,financial market situations, taxation system and other social aspects.
Accordingly, these estimates involved a high degree of uncertainty.
In addition, in case a loss on devaluation of inventories is to berecognized, the impact on the consolidated financial statements may
be significant.
We, therefore, determined that the reasonableness of the valuation of
the Real Estate for Sale was one of the most significant in our audit of
the consolidated financial statements for the current fiscal year, andaccordingly, a key audit matter.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to the valuation of the Real Estate forSale.
(2) Evaluation of the reasonableness of the valuation of the Real Estatefor Sale
1. The probability of achieving the business plans• We inquired of management and the personnel in the responsible
divisions their judgments about the current progress against thebusiness plans and the probability of achieving the business plansconsidering the effect of COVID-19 and the military conflict between
Russia and Ukraine, and also inspected the supporting documents
including approved documents, contracts and other relevant materials
regarding the current progress of the business plans.
• We observed certain properties in order to assess if the current
progress against the business plan was consistent with their judgments.
2. Appropriateness of the expected selling prices• With regard to the Real Estate for Sale whose certain units have beensold or contracted, we assessed the appropriateness of the expected
selling prices by comparing them with the actual sales results in thesame project.
• With regard to the Real Estates for Sale which have no sales
transaction record, we assessed the appropriateness of the expected
selling prices by comparing them with the actual price data or
observable selling prices of comparable properties in the same sales
area.

• With the assistance of our own real-estate valuation specialists, weevaluated the reasonableness of the net realizable value based on the
expected selling price.

Other Information
The other information comprises the information included in the Consolidated Financial Statements issued by the Company, but does not include theconsolidated financial statements and our auditor’s report thereon.
We do not perform any work on the other information as we determine such information does not exist.
Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors or the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties with regard to thedesign, implementation and maintenance of the Group’s financial reporting process.

27

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Independent Auditor’s Report

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:

Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2022 are presented solely
for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been madeon the basis described in Note 1 to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

/S/ Atsuji Maeno
Atsuji Maeno
Designated Engagement Partner
Certified Public Accountant

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.

/S/ Hidekazu Takahashi
Hidekazu Takahashi
Designated Engagement Partner
Certified Public Accountant

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease tocontinue as a going concern.
Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting standards
generally accepted in Japan, the overall presentation, structure and content of the consolidated financial statements, including the disclosures,and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.

/S/ Yoshimori Takahashi
Yoshimori Takahashi
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
July 29, 2022

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned scope and timing of theaudit, significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe thesematters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.

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