Consolidated Financial Statements
MODEC, INC. and Consolidated Subsidiaries
For the years ended December 31,
2017 and 2016

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS
December 31, 2017 and 2016

ASSETS

Millions of Japanese yen
2016
2017
CURRENT ASSETS:
Cash and time deposits (Notes 1(t), 3 and 18)
Accounts receivable-trade (Notes 17, 18 and 21)
Inventories (Note 2)
Short-term loans receivable (Notes 18 and 21)
Deferred tax assets (Note 14)
Other current assets
Less allowance for bad debts (Note 18)
Total current assets¥31,380
98,1881,096
46,282
2,403
19,983(1,297)
198,035¥42,807
95,5442,360
55,012
3,263
21,026(1,971)
218,042PROPERTY AND EQUIPMENT (Note 20):
Buildings and structures
Machinery and equipment
Other property and equipment
Construction in progress
Less accumulated depreciation
Net property and equipment

130
32,2593,912
110(29,549)6,863

130
43,542
4,078
186(33,776)
14,161INTANGIBLE ASSETS (Notes 5 and 13)

7,446

7,420

63,22534,762
1,767
9,063
108,819¥321,165

55,162
28,165
2,666
7,630
93,624¥333,249

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4 and 18)
Long-term loans receivable from affiliates (Notes 18 and 21)
Deferred tax assets (Note 14)
Other investments (Note 1(u), 3)
Total investments and other assets
Total assets

The accompanying notes are an integral part of these consolidated financial statements.

1

LIABILITIESMillions of Japanese yen
2017

2016

CURRENT LIABILITIES:
Accounts payable-trade (Notes 18 and 21)
Short-term loans payable (Notes 6, 8 and 18)
Current portion of long-term loans payable (Notes 6 and 18)
Lease obligations
Accrued expenses
Income taxes payable (Note 14)
Advances received
Accrued employees’ bonuses
Accrued directors’ bonuses
Provision for product warranty
Provision for repairs
Other provisions
Deferred tax liabilities (Note 14)
Other current liabilities
Total current liabilities¥80,335
3,390
11,077
6
13,971
6,717
6,425
43
13
5,495
49
5
－
1,049
128,581¥96,738－
7,812
20
14,377
9,713
5,252
7
13
6,860
43
5
1
1,688
142,536

LONG-TERM LIABILITIES:Long-term loans payable (Notes 6 and 18)
Lease obligations
Net defined benefit liabilities (Note 11)
Liabilities from application of equity method
Other long-term liabilities
Total long-term liabilities

31,586
2
310
6,875
5,422
44,19742,478
9
265
7,350
5,998
56,102¥172,778¥198,639

CONTINGENT LIABILITIES AND COMMITMENTS (Note 15)
Total liabilities

2

NET ASSETS

Millions of Japanese yen
2017
NET ASSETS:SHAREHOLDERS’ EQUITY (Note 9):
Common stock
Authorized – 102,868,000 shares in 2017 and in 2016
Issued – 56,408,000 shares in 2017 and in 2016
Capital surplus
Retained earnings
Treasury stock, at cost
775 shares in 2017 and 663 shares in 2016
Total shareholders’ equity
ACCUMULATED OTHER COMPREHENSIVE INCOME:
Unrealized holding gains (losses) on securities, net of tax
Unrealized gains (losses) on hedging derivatives, net of tax
Foreign currency translation adjustments
Retirement liability adjustments for foreign consolidated
subsidiaries
Total accumulated other comprehensive income
NON-CONTROLLING INTERESTS
Total net assets
Total liabilities and net assets

3

2016

¥30,12230,85274,495¥30,12230,85257,227(2)
135,468(1)
118,200(17)(9,109)10,472(11)(10,453)
15,490

(312)
1,032

(176)
4,849

11,885
148,387¥321,165

11,560134,609¥333,249

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2017 and 2016
Millions of Japanese yen
2017
2016
¥191,182¥229,987
166,377
198,443
24,80431,544

SALES (Notes 20 and 21)
COST OF SALES (Note 21)
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Note 12)
Operating profit

13,356
11,44813,52618,0185,143(1,321)

4,055(1,807)

9,686－(1,389)
491
249

9,618
397
(1,421)
－
－

－
－
755
13,616(107)(1,524)
548
9,758

PROFIT BEFORE INCOME TAXES

25,064

27,776

INCOME TAXES (Note 14):
Current
Deferred

2,938
1,976

6,290
1,873

PROFIT

20,14919,612695(1,400)PROFIT ATTRIBUTABLE TO OWNERS OF PARENT¥19,454¥21,012

Earnings per share (Note 10)
Dividends per share (Note 10)

Japanese yen¥334.89¥50¥372.52¥37.50OTHER INCOME (EXPENSES):Interest and dividend income
Foreign exchange losses, net
Equity in earnings of unconsolidated subsidiaries andaffiliates, net
Gain on revaluation of derivatives
Interest expense
Gain on sales of affiliate’s stock
Gain on liquidations of subsidiaries, net
Loss on disposal of property and equipment and intangible
assetsImpairment loss (Note 13)
Others, net
Total other income (expenses)

PROFIT (LOSS) ATTRIBUTABLE TONON-CONTROLLING INTERESTS

The accompanying notes are an integral part of these consolidated financial statements.

4

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2017 and 2016

PROFIT
OTHER COMPREHENSIVE INCOME:
Unrealized holding gains (losses) on securities, net of tax
Unrealized gains (losses) on hedging derivatives, net of tax
Foreign currency translation adjustments
Retirement liability adjustments for foreign consolidated
subsidiaries
Share of other comprehensive income (loss) of unconsolidated
subsidiaries and affiliates accounted for using equity method
Total other comprehensive income
COMPREHENSIVE INCOME

Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

Millions of Japanese yen
2017
2016
(Note 16)
(Note 16)
¥20,149¥19,612(6)(1,001)(2,663)

(19)
1,740
(945)

(166)

13

(300)
(4,138)¥16,011

1,269
2,058
¥21,671

Millions of Japanese yen
2016
2017
¥15,637¥23,538¥373¥(1,867)

The accompanying notes are an integral part of these consolidated financial statements.

5

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the years ended December 31, 2017 and 2016
Millions of Japanese yen

Commonstock

Balance at January 1,
2016¥30,122

Capitalsurplus¥30,852

Retainedearnings¥38,259

Treasurystock, at cost

Unrealized
holding gains(losses) on
securities, netof taxUnrealized
gains(losses)on
hedging
derivatives,
net of tax

¥(1)

¥7

¥(15,667)

Foreigncurrencytranslation
adjustments

Retirement
liability
adjustments
for foreign
consolidated
subsidiaries

Noncontrollinginterests¥18,170¥(187)¥13,428(2,044)

Cash dividends paid－

Profit attributable toowners of parent

21,01221,012

Net changes of items
other than those inshareholders’ equity
during the year

¥30,122¥30,852¥57,227

¥(1)

(19)

5,214

(2,679)10(1,867)

658

¥(11)

¥(10,453)¥15,490¥(176)¥11,560¥134,609(2,185)

Cash dividends paid

Purchase of treasurystock(2,185)(0)Profit attributable toowners of parent(0)

19,454

19,454

Net changes of items
other than those inshareholders’ equity
during the year

Balance at December
31, 2017¥114,983(2,044)Purchase of treasury
stock

Balance at January 1,
2017

Total net
assets¥30,122¥30,852¥74,495

¥(2)

(6)

1,343

(5,018)

(135)

325

(3,491)¥(17)¥(9,109)

10,472¥(312)¥11,885¥148,387

The accompanying notes are an integral part of these consolidated financial statements.

6

MODEC, INC. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2017 and 2016
Millions of Japanese yen
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES:Profit before income taxes
Adjustments to reconcile profit before income taxes to net cash provided byoperating activities:
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) of allowance for bad debts
Increase (decrease) of net defined benefit liabilities
Increase (decrease) of accrued directors’ bonuses
Increase (decrease) of provision for product warranty
Increase (decrease) of provision for repairs
Interest and dividend income
Interest expense
Foreign exchange (gains) losses, net
Equity in earnings of unconsolidated subsidiaries and affiliates, net
Loss on disposal of property and equipment and intangible assets
Loss (gain) on sales of affiliate’s stock
Loss (gain) on liquidations of subsidiaries and affiliates, net
Changes in assets and liabilities:
Decrease (increase) in– Accounts receivable-trade– Inventories– Bankrupt and substantially bankrupt claims
Increase (decrease) in– Accounts payable-trade– Consumption tax payable
Others, net
Total adjustments
Interest and dividend received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities¥25,064¥27,776

4,673
－
164
(343)
45
－
(1,159)6(5,143)
1,389
448(9,686)
－
(491)
(249)

5,364
1,524
369
(1,495)
45
(0)
385
42
(4,055)1,421(2,019)(9,618)107－－(4,662)
1,187－

48,618
1,595
1,823(13,829)(148)(7,849)(10,583)
13,224(1,403)(4,553)¥(3,315)(40,107)393(7,328)24,8449,804(1,447)(2,851)¥30,350

The accompanying notes are an integral part of these consolidated financial statements.

7

Millions of Japanese yen
2017
2016
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and intangible assets
Purchases of investments in subsidiaries and affiliates
Proceeds from sales of investments in affiliates
Decrease (increase) in short-term loans receivable
Disbursements of long-term loans receivable
Net cash used in investing activities¥(4,490)(8,219)301
17,034(8,214)(3,588)¥(2,862)(4,474)－(26,605)(4,430)(38,373)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Repayments of finance lease obligations
Net cash used in financing activities

3,380
1,634
(8,458)(0)(2,186)(47)(20)(5,698)105
1,182(6,067)－(2,044)－(30)(6,853)(1,260)(13,862)
42,194(885)(15,762)
57,956¥28,331¥42,194

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
CASH AND CASH EQUIVALENTS AT END OF YEAR
(Note 1 (t))

8MODEC, Inc. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting and Reporting Policies(a) Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of MODEC, Inc. (“the Company”) havebeen prepared in accordance with the provisions set forth in the Japanese Financial Instruments
and Exchange Act and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to application and disclosure requirements of International Financial ReportingStandards.
The accounts of the Company’s foreign subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting principles prevailing in therespective countries of domicile and any significant differences between Japanese GAAP and
Local GAAP are adjusted in consolidation. The accompanying consolidated financial
statements have been restructured and translated into English with some expanded descriptions
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 Financeas required by the Financial Instruments and Exchange Act. Some supplementary information
reported in the statutory Japanese language consolidated financial statements but not required
for fair presentation is not presented in the accompanying consolidated financial statements.
All of the Japanese yen and U.S. dollar amounts presented in the accompanying consolidated
financial statements and notes of the Company are rounded down to millions.
(b) Principles of Consolidation and Equity Method
The accompanying consolidated financial statements include the accounts of the Company and
19 of its subsidiaries for the year ended December 31, 2017 and 20 of its subsidiaries for theyear ended December 31, 2016. Material inter-company balances, transactions and profits havebeen eliminated in consolidation.
Investments in significant unconsolidated subsidiaries and affiliates, which were 17 companies
for the year ended December 31, 2017 and 18 companies for the year ended December 31, 2016
were accounted for using the equity method.
Another 6 subsidiaries for the year ended December 31, 2017 and 5 subsidiaries for the year
ended December 31, 2016 were neither consolidated nor accounted for using the equity method
as they would not have had a material effect on the accompanying consolidated financial
statements.
The consolidated financial statements are required to include the accounts of the Company andsignificant companies that are controlled by the Company through substantial ownership ofmore than 50% of the voting rights or through ownership of a high percentage of the voting
rights even if it is equal to or less than 50% and existence of certain conditions evidencing
control by the Company of decision-making bodies of such companies.
Investments in significant unconsolidated subsidiaries and affiliates, of which the Company has
ownership of 20% or more but less than or equal to 50%, and of 15% or more and less than 20%
and can exercise significant influences over operating financial policies of investees, have beenaccounted for using the equity method.
All consolidated subsidiaries have the same balance sheet date, December 31, corresponding
with that of the Company.
9(c) Valuation of Assets and Liabilities of Subsidiaries
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries,
including the portion attributable to non-controlling shareholders, were evaluated by using thefair value at the time the Company acquired the control of the respective subsidiaries.
(d) Goodwill
The excess of cost over the underlying investments in consolidated subsidiaries is recognized as
goodwill and is amortized using the straight-line method over their estimated useful lives.
The excess of cost over the underlying investments in affiliates accounted for using the equity
method is treated in the same manner.
(e) Securities
In accordance with the Japanese accounting standard for financial instruments, all companies
are required to examine the intent of holding each security and classify those securities as (a)securities held for trading purposes (“trading securities”), (b) debt securities intended to be held
to maturity (“held-to-maturity debt securities”), (c) equity securities issued by unconsolidated
subsidiaries and affiliates, and (d) all other securities that are not classified in any of the above
categories (“available-for-sale securities”).
Based on the examination of the intent of holding, the Company classifies its securities as
equity securities issued by unconsolidated subsidiaries and affiliates and available-for-salesecurities. Available-for-sale securities maturing within one year from the balance sheet date
are recorded in current assets. Other securities are recorded in investment securities. The
Company does not have trading securities or held-to-maturity debt securities.
Equity securities issued by unconsolidated subsidiaries and affiliates that are not accounted forusing the equity method are stated at moving-average cost. Available-for-sale securities withavailable fair market values are stated at fair market value as of the balance sheet dates.
Unrealized gains and losses on these securities are reported net of applicable income taxes, as aseparate component of net assets. Realized gains and losses on sale of such securities arecomputed using moving-average cost. Available-for-sale securities without available fairmarket values are stated at moving-average cost.
(f) Inventories
Both raw materials and costs of uncompleted contracts are stated at cost, determined on an
individual project basis (Balance sheet value reflects downturn in profitability).
(g) Property and Equipment
Property and equipment are stated at cost. Depreciation of Floating Production Storage &Offloading Systems (“FPSOs”) and Floating Storage & Offloading Systems (“FSOs”) ownedby the foreign consolidated subsidiaries are calculated using the straight-line method based on
their lease terms or their economic useful lives.
Depreciation of property and equipment other than FPSOs and FSOs are calculated as follows.
The Company depreciates property and equipment using the declining-balance method basedon their useful lives and residual values prescribed by the Japanese corporation tax laws andregulations except for buildings, facilities attached to buildings and structures acquired on orafter April 1, 2016, which are depreciated using the straight-line method.
Foreign consolidated subsidiaries depreciate property and equipment using the straight-line
method based on their estimated useful lives.

10(h) Intangible Assets
The Company amortizes software costs used internally using the straight-line method over theestimated useful lives mainly of 5 years and amortizes other intangible assets using thestraight-line method based on the useful lives prescribed by the Japanese corporation tax laws
and regulations.
(i) Finance Lease Transaction without Transfer of Ownership
Lessee:The method of amortization of the lease assets related to finance lease transactions withouttransfer of ownership is by the straight-line method corresponding to lease period with zero
residual value.
(j) Allowance for Bad Debts
The Company provides for an allowance for bad debts to cover probable losses on estimateduncollectable portion of specifically identified receivable.
(k) Accrued Employees’ Bonuses
The Company accrues employees’ bonuses based on the estimated amounts to be paid in thesubsequent period.
(l) Accrued Directors’ Bonuses
The Company accrues directors’ bonuses based on the estimated amounts to be paid in thesubsequent period.
(m) Provision for Product Warranty
Provision for product warranty is provided based on the estimated amounts for covering theprobable product warranties.
(n) Provision for Repairs
Provision for repairs is provided based on the estimated amounts for foreseeable periodic repair
expenses deemed to correspond to normal wear and tear of equipment as of the end of theconsolidated fiscal year to be paid in the subsequent period.
(o) Severance and Retirement Benefits for Employees
The Company and certain foreign consolidated subsidiaries have unfunded lump-sum
severance and retirement payment plans for employees. Under these plans, employees whose
employment is terminated or who retire are entitled to benefits which are, in general,
determined on the basis of length of service and basic salary at the time of termination orretirement. If the termination is involuntary, the employees are generally entitled to larger
benefits than in the case of voluntary termination or retirement.
In accordance with the Japanese accounting standard for employees’ severance and pension
benefits, a “simpler method” can be adopted to calculate severance and retirement benefits for
employees if the number of employees is less than 300. Therefore, the Company adopts the“simpler method” and records severance and retirement benefits for employees at the amounts
payable if all employees voluntarily terminated their employment at the balance sheet date.
The Company and certain foreign consolidated subsidiaries also adopt defined contribution
pension plans.

11(p) Translation of Foreign Currency Accounts
Foreign currency transactions are translated into Japanese yen using the exchange rate in effectat the time of each transaction or at the applicable exchange rates under forward exchange
contracts.
Assets and liabilities denominated in foreign currencies are translated into Japanese yen at
appropriate year-end current exchange rates, and the resulting gains or losses are recorded inother income (expenses) in the consolidated statements of income.
Financial statements of foreign consolidated subsidiaries are translated into Japanese yen using
the exchange rates prevailing at the end of each consolidated fiscal year, except the exchange
rates in effect at the date of transactions are used for shareholders’ equity. The Company
records foreign currency translation adjustments as a component of net assets in the
consolidated balance sheets.
(q) Derivative Transactions and Hedge Accounting
Derivative financial instruments of the Company are stated at fair value and gains or losses arerecognized for changes in the fair value unless derivative financial instruments are used forhedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, theCompany defers recognition of gains or losses resulting from changes in fair value of derivative
financial instruments until the related losses or gains on the hedged items are recognized.
However, in cases where forward foreign exchange contracts and currency swap contracts areused as hedges and meet certain hedging criteria, forward foreign exchange contracts andcurrency swap contracts and hedged items are accounted for in the following manner.
1) If a forward foreign exchange contract or a currency swap contract is executed to hedge
existing foreign currency receivables or payables,a) the difference, if any, between the Japanese yen amount of the hedged foreign currency
receivable or payable translated using the spot rate at the inception date of the contract
and the book value of the receivable or payable is recognized in the income statement in
the period which includes the inception date, andb) the discount or premium on the contract (that is, the difference between the Japanese
yen amount of the contract translated using the contracted forward rate and thattranslated using the spot rate at the inception date of the contract) is recognized over theterm of the contract.
2) If a forward foreign exchange contract or a currency swap contract is executed to hedge afuture transaction denominated in a foreign currency, the future transaction will be recorded
using the contracted forward rate, and no gains or losses on the forward foreign exchange
contracts and currency swap contracts are recognized.
Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net
amount to be paid or received under the interest rate swap contract is added to or deducted fromthe interest on the assets or liabilities for which the swap contract was executed.
Certain foreign consolidated subsidiaries adopt hedge accounting in accordance with
U.S.GAAP.

12

(r) Revenue Recognition
1) The Company applies the percentage of completion method to the construction contracts inthe event where the outcome of construction contracts can be reliably estimated. The
percentage of completion is calculated by units of work performed method which is basedon a physical progress measurement or percentage of cost method. The other construction
contracts are recognized by the completed contract method.
2) Revenues and cost of sales relating to finance lease transactions are recognized when lease
payments are received.
(s) Income Taxes
The Company provides income taxes at the amounts currently payable based on taxable income
for tax purposes that may be different from income for accounting purposes. The Company
recognizes tax effects of temporary differences between the carrying amounts of assets andliabilities for tax and financial reporting purposes. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
(t) Cash Flow Statements
In preparing the consolidated statements of cash flows, cash on hand, readily available deposits
and short-term highly liquid investments with maturities not exceeding three months at the timeof purchase are considered to be cash and cash equivalents.
Reconciliations of cash and time deposits shown in the consolidated balance sheets and cash
and cash equivalents in the consolidated statements of cash flows as of December 31, 2017 and2016 are as follows:
Millions of Japanese yen
2017
2016
¥31,380¥42,807

Cash and time deposits
Deposit pledged as collateral(3,048)(613)

Cash and cash equivalents¥28,331¥42,194

Changes in Presentation:(u) Reclassifications
The Company made certain reclassifications to the previously reported the consolidated fiscal
year 2016 amounts to conform to the consolidated fiscal year 2017 presentation. These
reclassifications had no effect on previously reported profit attributable to owners of parent or
net assets.
Additional Information:(v) Revised Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ
Guidance on No.26, March 28, 2016)
The company adopted “Revised Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance on No.26, March 28, 2016) from this consolidated fiscal year.

13

2. Inventories
Inventories as of December 31, 2017 and 2016 consisted of the following:
Millions of Japanese yen
2017

2016

¥47
1,048
¥1,096

Raw materials
Costs of uncompleted contracts

¥72
2,287
¥2,3603. Pledged Assets
Asset pledged as collateral as of December 31, 2017 and 2016 were as follows:
Millions of Japanese yen
2017¥3,048
1,475¥4,524

Cash and time deposits
Long-term time deposits
Cash and cash equivalents

2016
¥613
3,781
¥4,395(Note) Above assets were pledged to issue letters of credit. No debt corresponds to these deposits asof the end of this consolidated fiscal year.

4. Marketable Securities and Investment Securities
The following tables summarize acquisition costs, book values (fair values) of securities withavailable fair values as of December 31, 2017 and 20162017:
Available-for-sale securities:
Securities with book values exceedingacquisition costs:
Equity securities
Securities with book values notexceeding acquisition costs:
Equity securities
Total

Book value

2016:
Available-for-sale securities:
Securities with book values exceedingacquisition costs:
Equity securities
Securities with book values notexceeding acquisition costs:
Equity securities
Total

Book value

Millions of Japanese yen
Acquisition cost

Difference

¥74

¥64

¥10

72
¥147

100
¥164

(27)
¥(17)

Millions of Japanese yen
Acquisition cost

Difference

¥79

¥64

¥14

74
¥153

100
¥164

(25)
¥(11)

5. Goodwill
Goodwill included in intangible assets as of December 31, 2017 and 2016 were ¥1,207 million and¥1,414 million, respectively.
6. Loans Payable
Short-term loans payable represent notes payable to banks due generally in twelve months or lessand bearing an average interest rate of 2.20% and 1.71% as of December 31, 2017 and 2016,
respectively.
14

Long-term loans payable as of December 31, 2017 and 2016 are summarized below:
Millions of Japanese yen
2017
Loans from banks and others due through 2025
Less: Current portion included in current liabilities, at average rate of
1.80%
Loans from banks and others, at average rate of 1.24% due through 2025
(Excluding current portion)

2016¥42,664¥50,291

11,077

7,812¥31,586¥42,478

The aggregate annual maturities of long-term loans payable are summarized below:
Year ending December 31,
2018
2019
2020
2021
2022
2023 and thereafter

Millions of Japanese yen¥11,077
6,607
14,003
5,937
3,676
1,362
¥42,664

7. Asset Retirement Obligation
The Company and its subsidiaries recognize an asset retirement obligation following the officerental contract. The note is not required to disclose as the total amount of this liability is immaterial.
The Company and its subsidiaries estimated an unrecoverable security deposit amount as an asset
retirement obligation. This loss is recognized as expense instead of a liability.
8. Unused Balance of Overdraft Facilities and Lending Commitment
The Company has a commitment line agreement with a syndicate of seven financial institutions asof 2017 and 2016 and an overdraft facility agreement with two financial institutions as of 2017 and2016 for the purpose of providing operating funds. The commitment line amount is $160 million asof December 31, 2017 and 2016 without any drawdown. The overdraft facility line amount is¥3,000 million and $30 million without any drawdown as of December 31, 2017 and 2016.
9. Shareholders’ Equity
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one-half of the prices of the new shares as additional paid-in
capital, which is recorded in capital surplus.
Under the Japanese Corporate Law (“the Law”), in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% ofcommon stock over the total of additional paid-in-capital and legal earnings reserve must be set
aside as additional paid-in-capital or legal earnings reserve. Legal earnings reserve is included inretained earnings in the accompanying consolidated balance sheets.
Under the Law, all additional paid-in-capital and all legal earnings reserve may be transferred toother capital surplus and retained earnings, respectively, which are potentially available fordividends.
The maximum amount that the Company can distribute as dividends is calculated based on theunconsolidated financial statements of the Company in accordance with the Law.
At the annual shareholders’ meeting held on March 24, 2017, the shareholders approved cash
dividends amounting to ¥1,057 million for the year ended December 31, 2016. At the annual
shareholders’ meeting held on March 23, 2018, the shareholders approved cash dividends
amounting to ¥1,692 million for the year ended December 31, 2017. Such appropriations have not15been accrued in the consolidated financial statements. Such appropriations are recognized in the
period in which they are approved by the shareholders.
10. Per Share Data
Earnings per share is calculated based on the weighted average number of shares of common stock
outstanding during the consolidated fiscal year.
Diluted earnings per share reflect the effect of potential dilution that could occur if securities orother contracts to issue common stock were exercised or converted into common stock. There is no
outstanding potential common stock for the years ended December 31, 2017 and 2016.
Dividends per share shown for each consolidated fiscal year in the accompanying consolidated
statements of income represent dividends declared as applicable to the respective years.
11. Severance and Retirement Benefits for Employees(a) Defined benefit pension plans
The net defined benefit liabilities recorded in the liability section of the consolidated balance
sheets as of December 31, 2017 and 2016 consisted of the following:i)Movements of net defined benefit liabilities recorded in the consolidated balance sheets(simpler method)
Millions of Japanese yen
2017
2016
Balance at beginning of year
Severance and retirement benefit expenses

ii)

¥265

¥220

78

61

Benefits paid

(33)

(16)

Balance at end of year

¥310

¥265

Reconciliation of projected retirement benefit obligation and net defined benefit liabilities
recorded in the consolidated balance sheets
Millions of Japanese yen
2017

2016

Projected retirement benefit obligation(Unfunded termination and retirement allowance plan)

¥310

¥265

Net defined benefit liabilities recorded in the consolidated balance sheets

¥310

¥265

iii) Severance and retirement benefit expenses
Millions of Japanese yen
2016

2017
Severance and retirement benefit expenses (simpler method)

¥78

¥61

(b) Defined contribution pension plans
Contribution to pension plans amounted to ¥60 million and ¥57 million for the years ended
December 31, 2017 and 2016, respectively.
12. Research and Development Expenses
Research and development expenses included in selling, general and administrative expenses are¥160 million and ¥315 million for the years ended December 31, 2017 and 2016, respectively.

1613. Impairment Loss
Impairment loss for the year ended December 31, 2016 consisted of the following:(a) Overview of the impairment loss
Company

Location

Use

Type of Assets

MODEC International, Inc.

U.S.A.

－

Goodwill(b) Grouping unit
The business assets have been grouped by each company.
(c) The recognition and the amount of the impairment loss
MODEC International, Inc., which is a consolidated subsidiary, recognized an impairment lossof ¥1,524 million on the remaining unamortized portion for goodwill due to the unlikelihood ofan estimated profitability.
(d) The measurement of the impairment loss
The recoverable amount of the above goodwill was estimated at zero.
14. Income Taxes
The statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise andinhabitants’ taxes is 31.0% and 33.0% for the years ended December 31, 2017 and 2016,
respectively.
1) The following table summarizes the significant differences between the statutory tax rate and theCompany and its consolidated subsidiaries’ effective tax rate for financial statement purposes forthe years ended December 31, 2017 and 2016.
2017

2016

31.0%

Statutory income tax rates

33.0%

Difference of statutory tax rate between the Company and foreign subsidiaries(6.7)(19.6)

Equity in earnings of unconsolidated subsidiaries and affiliates, net(12.0)(11.4)

Valuation allowance

13.1

27.5

1.6

0.1
－

Income of foreign subsidiaries taxed at lower than Japanese statutory rate
Income taxes refunds
Income taxes for prior periods

(8.4)
－

Others1.0(0.2)

Effective tax rates

19.6%

29.4%

17

0.0

2) Significant components of deferred tax assets and liabilities as of December 31, 2017 and 2016
are as follows:
Millions of Japanese yen
2017
2016
Deferred tax assets:
Current assets:
Accrued enterprise taxes
Accrued employees’ bonuses
Provision for product warranty
Allowance for bad debts
Tax loss carry forward
Estimated costs for construction contracts, etc.
Difference on percentage-of-completion method
Others
Sub total
Valuation allowance
Offset to deferred tax liabilities (short-term)
Total
Fixed assets:
Unrealized inter-company profit on fixed assets
Tax loss carry forward
Net defined benefit liabilities
Depreciation
Long-term foreign tax credit
Temporary difference for investment in subsidiaries
Others
Sub total
Valuation allowance
Offset to deferred tax liabilities (long-term)
Total
Total deferred tax assets

¥142
3
938
735
617
3,326
3,481
1,159
10,405(5,124)(2,877)
2,403

¥－
3
1,203
978
567
2,248
3,321
2,336
10,658(3,439)(3,955)
3,263

2,121
9,657
96
18
1,496
－
2,341
15,731(13,353)
(610)
1,767
¥4,171

3,671
8,610
82
37
1,629
824
3,128
17,984(13,946)(1,370)2,666¥5,930Millions of Japanese yen
2017
Deferred tax liabilities:
Current liabilities:
Tax effect of derivative hedge on foreign subsidiaries
Difference on percentage-of-completion method
Undistributed earnings of foreign subsidiaries and affiliates
Others
Sub total
Offset to deferred tax assets (short-term)
TotalLong-term liabilities:
Depreciation
Difference on percentage-of-completion method
Undistributed earnings of foreign subsidiaries and affiliates
Others
Sub total
Offset to deferred tax assets (long-term)
Total
Total deferred tax liabilities
Net deferred tax assets

18

2016

¥－
(2,559)(53)(263)(2,877)2,877－¥(331)(2,504)－(1,120)(3,957)
3,955
(1)

－
(182)
(213)
(214)
(610)
610
－
－
¥4,171

(62)
(509)
(334)
(463)
(1,370)1,370－(1)¥5,9293) The revision of the corporate income tax rate after December 31, 2017
In the United States, the new tax reform legislation that are resolved to reduce the U.S. corporate
tax rate after January 1, 2018 from 35.0% to 21.0% were passed on December 22, 2017.
In the consolidated fiscal year, owing to passing of new tax reform legislation, the deferred tax
assets and liabilities of the consolidated subsidiaries in the United States were calculated by the
corporate tax rate that was based on revised tax rate.
As a consequence, the net amount of deferred tax assets decreased ¥176 million and deferredincome taxes increased ¥159 million.
15. Contingent Liabilities and Commitments
As of December 31, 2017 and 2016, the Company was contingently liable for the following:

Guarantees of bank loans and other indebtedness for affiliates

Millions of Japanese yen
2017
2016
¥58,035¥78,391

For the years ended December 31, 2017 and 2016, the share of the fair market values of swap
contracts of affiliates accounted for using the equity method are included in the consolidated
financial statements due to the adoption of “Practical Solution on Unification of Accounting
Policies Applied to Associates Accounted for Using the Equity Method” (PITF No.24 issued by the
Accounting Standards Board of Japan on March 10, 2008).

19

16. Comprehensive Income
The following represents each component of other comprehensive income for the years ended
December 31, 2017 and 2016:
Millions of Japanese yen
2017

2016

Unrealized holding gains (losses) on securities, net of tax
Amount of generation

¥(6)

¥(22)

Amount of rearrangement adjustment－－

Before adjusting the tax effect

(6)

(22)

Tax effect－3

Unrealized holding gains (losses) on securities, net of tax

(6)

(19)

(1,235)

2,962

Amount of rearrangement adjustment

(63)

(242)

Before adjusting the tax effect(1,298)

2,719

296

(979)

(1,001)

1,740(2,414)(945)

Amount of rearrangement adjustment

(249)

－

Before adjusting the tax effect(2,663)

(945)

－

－

(2,663)(945)

Amount of generation

(105)

22

Amount of rearrangement adjustment

(88)

(0)

Before adjusting the tax effect

(193)

22

27

(9)

(166)

13

Amount of generation(2,464)(1,146)

Amount of rearrangement adjustment

2,164

2,415

(300)

1,269

¥(4,138)¥2,058

Unrealized gains (losses) on hedging derivatives, net of tax
Amount of generation

Tax effectUnrealized gains (losses) on hedging derivatives, net of tax
Foreign currency translation adjustments
Amount of generation

Tax effectForeign currency translation adjustments
Retirement liability adjustments for foreign consolidated subsidiaries

Tax effect
Retirement liability adjustments for foreign consolidated subsidiaries
Share of other comprehensive income (loss) of unconsolidated
subsidiaries and affiliates accounted for using equity method

Share of other comprehensive income (loss) of unconsolidated
subsidiaries and affiliates accounted for using equity method
Total

20

17. Leases
Lessor:Future lease receivables related to the non-cancellable operating leases are as follows:
Millions of Japanese yen
2017

2016

Due within one year－

Due after one year

－

－

－

¥1,232

Total¥1,232

18. Financial Instruments(a) Concerning status of financial instrumentsi) Policies for financial instruments
The Company and its consolidated subsidiaries adopt only short-term financial instruments for
operating funds.
The Company and its consolidated subsidiaries have the policy of procuring bank-loans to raise
funds.
The Company and some of its consolidated subsidiaries transfer funds to each other through aninter-company cash management systems (CMS).
As to derivative financial instruments, the Company and its consolidated subsidiaries utilize
them for hedging purpose only and not for speculation.
ii) Substances and risks of financial instruments and managing of financial instruments
Accounts receivable-trade is exposed to credit risks of customers. The Company and its
subsidiaries research the credit standings and select credit worthy customers, and manage thebalance of accounts receivable-trade at regular intervals to reduce credit risks.
Short-term and long-term loans receivable that are granted to support the affiliates are mainly
established to accomplish charter projects which are exposed to credit risks of their customers.
The Company reduces the share of risks by arranging project financing or through thecooperation with general trading companies and other business partners.
Majority of accounts receivable-trade and loans receivable are denominated in foreign
currencies and the net of these balances with accounts payable-trade and loans payable areexposed to currency fluctuation risks. These risks are basically hedged by using forward foreignexchange contracts.
Investment securities are exposed to market fluctuation risks. The Company and its subsidiaries
have the business relationships with the issuers of the majority of investment securities andperiodically research the fair market value and financial position of the issuers.
Majority of accounts payable-trade are due within one year. Accounts payable-tradedenominated in foreign currencies arising from overseas procurement of materials are exposed
to currency fluctuation risks, but these accounts payable-trade are managed to not exceed
accounts receivable-trade in the same foreign currencies.
Short-term and long-term loans payable are primarily for raising funds for the affiliates.
Majority of loans payable are exposed to currency fluctuation risks, but these loans payable aremanaged to not exceed loans receivable in the same foreign currencies. In addition, theCompany arranges the interest rate swap transaction for some of long-term loans payable byeach contract to fix the interest expense and to reduce the interest rate fluctuation risks.
Derivative transactions consist of mainly forward foreign exchange contracts and currency
swap contracts arranged for the purpose of hedging currency fluctuation risks arising from21

foreign currency accounts receivable-trade and accounts payable-trade, and interest rate swap
transaction for the purpose of interest rate fluctuation risks arising from loans payable.
Accounts payable-trade and loans payable are exposed to the liquidity risks. To manage theliquidity risks, our finance department appropriately prepares and updates the cash
management plan.
iii) Supplementary explanation about fair value of financial instruments
The fair value is based on their fair market value quoted market price, if available, or reasonably
estimated value if market price is not available. Since various assumptions and factors arereflected in estimating the fair value, different assumptions and factors could result in different
fair value.
The contract amounts of derivative transactions mentioned in Note 19. Derivative Transactions
do not indicate the actual market risks involved in the derivative transactions.
(b) Concerning fair value of financial instruments
Consolidated balance sheets amounts, fair value of financial instruments and the difference
between them for the years ended December 31, 2017 and 2016 are as follows. Financial
instruments for which the fair value is considered to be extremely difficult to obtain are notincluded in the list below.
2017:Book Value¥31,380
98,18842,867
147
38,176¥210,760(1) Cash and time deposits(2) Accounts receivable-trade(3) Short-term loans receivable(4) Investment securities(5) Long-term loans receivable from affiliates (*1)
Assets total

Millions of Japanese yen
Fair Value¥31,380
98,18842,867
147
38,906¥211,489

Difference
－
－
－
－
¥729
¥729

－
(6) Accounts payable-trade¥80,335¥80,335(7) Short-term loans payable
－
3,390
3,390
(8) Long-term loans payable(*1)－
42,664
42,664
Liabilities total－¥126,389¥126,389(9) Derivative transactions (*2)i) Derivative transactions for which hedge accounting－
has not been applied¥2,438¥2,438ii) Derivative transactions for which hedge accounting
has been applied
(978)
(962)
¥16
Derivative transactions total¥1,460¥1,476¥16*1: Long-term loans receivable from affiliates and Long-term loans payable both include current portion.
*2: Derivative transactions are presented net of receivables and payables. Figures with parenthesis indicate payables.

22

2016:
Book Value¥42,807
95,54455,012(84)
54,928
153
28,165¥221,559(1) Cash and time deposits(2) Accounts receivable-trade(3) Short-term loans receivable
Allowance for bad debts (*1)(4) Investment securities(5) Long-term loans receivable from affiliates
Assets total

Millions of Japanese yen
Fair Value¥42,807
95,544

Difference

54,928153
28,437¥221,871

－
－

－
－
¥272
¥272

－
(6) Accounts payable-trade¥96,738¥96,738(7) Current portion of long-term loans payable
－
7,812
7,812
(8) Long-term loans payable－
42,47842,478
Liabilities total－¥147,030¥147,030(9) Derivative transactions (*2)i) Derivative transactions for which hedge accounting－
has not been applied¥2,530¥2,530ii) Derivative transactions for which hedge accounting
has been applied
345
284
¥(60)
Derivative transactions total¥2,875¥2,815¥(60)*1: Individual allowance for bad debts is deducted from short-term loans receivable.
*2: Derivative transactions are presented net of receivables and payables. Figures with parenthesis indicate payables.

(note 1) Articles concerning calculation method of fair value, marketable securities andderivative transaction
Assets(1) Cash and time deposits, (2) Accounts receivable-trade and (3) Short-term loans receivable
Fair values of these accounts are stated at the balance sheet amounts because they are
considered to be close to the balance sheet amounts and these accounts are settled in
short-term.
(4) Investment securities
Fair value of this account is based on available market price. Securities held by intent aredescribed in the corresponding pages. (Please see Note 4. Marketable Securities andInvestment Securities.)(5) Long-term loans receivable from affiliates
Fair value of this account is stated at the present value calculated from the future cash
flows discounted by the premium-added rate on the proper index like yield on thegovernment bonds.
Liabilities(6) Accounts payable – trade, (7) short-term loans payable and Current portion of long-termloans payable
Fair values of these accounts are stated at the balance sheet amounts because they are
considered to be close to the balance sheet amounts and these accounts are settled in
short-term.
(8) Long-term loans payable
Fair value of long-term loans payable with fixed interest rate is calculated using the total
amount of the principal and interest discounted by the interest rate on condition that theborrowing is newly executed at the date of fair value evaluation.
Fair value of long-term loans payable with floating interest rate is stated at the balance
sheet amounts. Considering that floating interest rate reflects latest market conditions and23credit of the Company considered being almost same as before, fair value of long-termloans payable is close to the balance sheet amounts.
Derivative Transactions
Please see Note 19. Derivative Transactions.
(note 2) Consolidated balance sheets amounts of financial instruments for which the fair value
is considered to be extremely difficult to obtain are as follows:
Millions of Japanese yen
2017
2016
Privately owned equity
securities¥63,078¥55,008

As to these financial instruments, there is no available fair market value and it is considered tocost a great deal to estimate future cash flows. Therefore, these financial instruments are notincluded in (4) Investment securities because it is considered to be extremely difficult toobtain fair value.
(note 3) The expected redemption amount of monetary asset and securities with maturity after
December 31, 2017 and 2016 are as follows:
2017:

Millions of Japanese yen

Cash and time deposits
Accounts receivable-trade
Short-term loans receivable
Long-term loans receivablefrom affiliates

Within one year
¥31,380
98,18842,867
3,414Over one year but
within five years

Over five years but
within ten years－－－¥5,556－－－¥14,633

2016:

Over ten years－－－¥14,572

Millions of Japanese yen

Cash and time deposits
Accounts receivable-trade
Short-term loans receivable
Long-term loans receivablefrom affiliates

Within one year
¥42,807
95,54455,012

Over one year but
within five years

Over five years but
within ten years－－－¥2,516－－－¥14,935－

Over ten years－－－¥10,714(note 4) The aggregate annual maturities of long-term loans payable are as follows:Year ending December 31,
2019
2020
2021
2022
2023 and thereafter
Total

Millions of Japanese yen¥6,607
14,003
5,937
3,676
1,362
¥31,586

19. Derivative Transactions
The Company and its consolidated subsidiaries utilize forward foreign exchange contracts andcurrency swap contracts in order to hedge currency fluctuation risks arising from export of products
in addition to hedging through increases in overseas production and overseas procurement ofmaterials.
The Company and its consolidated subsidiaries also utilize interest rate swaps as derivativetransactions in order to hedge interest rate risks of loans payable.
As the derivative transactions are made solely with leading financial institutions, the Company andits consolidated subsidiaries do not expect any credit risks.
24

The Company follows its internal regulations for derivatives, which stipulates the policy, objective,
scope, organization, procedures, and financial institutions to deal with, and has a reporting systemfor derivative transactions reflecting proper internal control functions.
The following summarizes hedging derivative financial instruments used and items hedged:
Hedging instruments:
Forward foreign exchange contracts
Currency swap contracts
Interest rate swap contracts

Hedged items:
Foreign currency receivables, payables andfuture transactions
Foreign currency receivables and payables
Loans payable

The Company evaluates hedge effectiveness on a quarterly basis by comparing the cumulativechanges in cash flows from or the changes in fair value of hedged items with the corresponding
changes in the hedging derivative instruments.
The following tables summarize market value information as of December 31, 2017 and 2016 ofderivative transactions:(a) Derivative transactions for which hedge accounting has not been applied
2017:
Currency related derivatives
Type
Currency swap
To receive Japanese yen, to pay U.S.
dollars
Total
2016:
Currency related derivatives
Type
Forward contract
To sell U.S. dollars
Currency swap
To receive Japanese yen, to pay U.S.
dollars
Total

Millions of Japanese yen
Contract AmountDue after one
Contract Amount
Total
year
less Market Value¥21,024¥21,024¥17,912¥17,912

Unrealized
gain (loss)¥2,438¥2,438¥2,438¥2,438Millions of Japanese yen
Contract AmountDue after one
Contract Amount
Total
year
less Market Value

Unrealized
gain (loss)¥2,315

－

¥(1)

¥(1)

24,050¥26,366¥21,024¥21,024

2,532¥2,5302,532¥2,530(b) Derivative transactions for which hedge accounting has been applied
2017:
Currency related derivatives
Type
Forward contract (principle method)
To buy EuroTo buy STG pounds
To buy Singapore dollars
Total

Millions of Japanese yen
Contract AmountDue after
Contract AmountTotal
one yearless Market Value

Hedged Items

¥271
6
568
¥846

Accounts payabletrade and others

25

－
－
－
－

¥13
0
21
¥34

2016:
Currency related derivatives
Type
Forward contract (principle method)
To buy EuroTo buy Japanese yen
To buy Singapore dollars
To buy Brazilian Real
Total

Millions of Japanese yen
Contract AmountDue after
Contract AmountTotal
one yearless Market Value

Hedged Items¥1,131309
961
10,263¥12,665

Accounts payabletrade and others

2017:Interest related derivatives
TypeInterest rate swap (principle method)
To receive float, pay fix
Interest rate swap
(exceptional method)
To receive float, pay fix

¥(55)
(9)
(36)
2,043
¥1,941Millions of Japanese yen
Contract AmountDue after
Contract AmountTotal
one yearless Market Value

Hedged Items
Long-term loans
payableLong-term loans
payable

Total

2016:
Interest related derivatives
TypeInterest rate swap (principle method)
To receive float, pay fix
Interest rate swap
(exceptional method)
To receive float, pay fix

¥235
－
43
－
¥278

¥20,250¥17,310¥(1,013)

7,282

6,254

16

¥27,532¥23,564¥(997)

Millions of Japanese yen
Contract AmountDue after
Contract AmountTotal
one yearless Market Value

Hedged Items
Long-term loans
payable¥25,302

Long-term loans
payableTotal¥20,250¥(1,596)

8,299

7,507

(60)

¥33,602¥27,757¥(1,657)

20. Segment Information(1) Overview of reportable segment
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as single business therefore overview of reportable segment is not presented.
(2) Information by products and services
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as single business therefore information by products and services is not presented.
(3) Information by geographical area(a) Sales
2017:
Brazil¥90,966
2016:

Ghana
¥34,105

Europe¥23,541

Millions of Japanese yen
Oceania
Asia¥15,160¥5,883

Other¥21,524

Total¥191,182

BrazilGhana
EuropeOceaniaAsia
Other¥140,042¥34,165¥17,587¥14,443¥9,059¥14,689(Note) Sales amount is classified by country or geographical area based on the location of customers.

Total¥229,987

Millions of Japanese yen

26

(b) Property and equipment
2017:
Australia¥1,7352016:
Australia¥4,238－Millions of Japanese yen
Netherlands
U.S.A.
¥3,271¥1,190

Other
¥665

Total
¥6,863

Vietnam¥4,459Millions of Japanese yen
Netherlands
U.S.A.
¥3,375¥1,439

Other
¥646

Total
¥14,161

Vietnam(4) Information by major customer
2017:
Customers
Tartaruga MV29 B.V.
MAERSK OIL NORTH SEA UK
LIMITED

Millions of Japanese yen
Sales¥38,509

Related Segment(note 1)

¥23,418(note 1)

2016:
Customers
Tartaruga MV29 B.V.
Carioca MV27 B.V.

Millions of Japanese yen
Sales¥71,648¥28,768

Related Segment(note 1)
(note 1)

(note 1) The Company and its subsidiaries construct FPSOs and FSOs and provide related services as single businesstherefore related segment is not presented.

(5) Information about losses on impairment for each reportable segment
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as singles business therefore information about losses on impairment for each reportablesegment is not presented.
(6) Information about goodwill amortization amount and year-end balance for eachreportable segment
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as singles business therefore information about goodwill amortization amount and year-end
balance for each reportable segment is not presented.
(7) Information about gains on negative goodwill for each reportable segment
The Company and its subsidiaries construct FPSOs and FSOs and operate their related services
as singles business therefore information about gains on negative goodwill for each reportablesegment is not presented.

2721. Related Party Transactions
Significant related party transactions and corresponding balances between the Company andunconsolidated subsidiaries or affiliates for the year ended December 31, 2017 are as follows:2017:
Related parties
Sepia MV30 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Tartaruga MV29 B.V.
Tartaruga MV29 B.V.
MODEC and TOYO Offshore
Production Systems Pte. Ltd.

Transactions
Disbursements of loans for capital expenditure
Construction of FPSO (Sales)
Disbursements of loans for capital expenditure
Collections of loans for capital expenditure
Guarantees of contract fulfillment
Disbursements of loans for capital expenditure
Collections of loans for capital expenditure
Guarantees of derivative transactions
Construction of FPSO (Sales)
Guarantees of bank loans
Construction of FPSO (Cost of sales)

Millions ofJapanese yen¥5,2455,328
7,512
33,534
3,574
37,07931,0883,168
37,364
49,8462,740

Consolidated balance sheets accounts
Short-term loans receivable
Short-term loans receivable
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Accounts receivable-trade
Short-term loans receivable
Accounts receivable-trade
Accounts payable-trade

Millions ofJapanese yen¥5,255
2,440
3,812
5,514
3,241
37,612
29,155
3,470

2017:
Related parties
Sepia MV30 B.V.
Opportunity MV18 B.V.
Gas Opportunity MV20 B.V.
Tupi Pilot MV22 B.V.
T.E.N. Ghana MV25 B.V.
Carioca MV27 B.V.
Tartaruga MV29 B.V.
MODEC and TOYO Offshore
Production Systems Pte. Ltd.

Significant related party transactions and corresponding balances between the consolidated
subsidiaries and unconsolidated subsidiaries or affiliates for the year ended December 31, 2017 are
as follows:2017:
Related parties
T.E.N. Ghana MV25 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.

Transactions
Disbursements of loans for working capital
Construction of FPSO (Sales)
Disbursements of loans for working capitalMillions ofJapanese yen¥4,035
1,950
4,179

Consolidated balance sheets accounts
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Accounts receivable -tradeLong-term loans receivable from affiliates

Millions ofJapanese yen¥6,185
6,096
4,035
4,297
5,027
4,179

2017:
Related parties
Guara MV23 B.V.
Cernambi Sul MV24 B.V.
T.E.N. Ghana MV25 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.

28

Significant related party transactions and corresponding balances between the Company andunconsolidated subsidiaries or affiliates for the year ended December 31, 2016 are as follows:
2016:
Related parties
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
Cernambi Norte MV26 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Carioca MV27 B.V.
Tartaruga MV29 B.V.
Tartaruga MV29 B.V.

Transactions
Construction of FPSO (Sales)
Disbursements of loans for capital expenditure
Collections of loans for capital expenditure
Guarantees of contract fulfillment
Guarantees of bank loans
Disbursements of loans for capital expenditure
Collections of loans for capital expenditure
Disbursements of loans for capital expenditure
Collections of loans for capital expenditure
Guarantees of bank loans
Guarantees of derivative transactions
Construction of FPSO (Sales)
Guarantees of bank loans

Millions ofJapanese yen¥9,76633,70812,182
5,824
7,129
15,61824,033
27,417
12,827
24,211
3,462
75,05935,457

Consolidated balance sheets accounts
Short-term loans receivable
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Accounts receivable-trade
Short-term loans receivable
Short-term loans receivable
Accounts receivable-trade

Millions ofJapanese yen¥3,634
3,929
5,684
5,311
27,992
31,70343,241

2016:
Related parties
Song Doc MV19 B.V.
Gas Opportunity MV20 B.V.
Tupi Pilot MV22 B.V.
T.E.N. Ghana MV25 B.V.
T.E.N. Ghana MV25 B.V.
Carioca MV27 B.V.
Tartaruga MV29 B.V.

Significant related party transactions and corresponding balances between the consolidated
subsidiaries and unconsolidated subsidiaries or affiliates for the year ended December 31, 2016 are
as follows:
2016:
Related parties
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
MODEC and TOYO Offshore
Production Systems Pte. Ltd.

Transactions
Disbursements of loans for working capital
Construction of FPSO (Sales)
Construction of FPSO (Cost of sales)

Millions ofJapanese yen¥4,43014,107
26,944

Consolidated balance sheets accounts
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Long-term loans receivable from affiliates
Accounts receivable-trade
Accounts payable-trade

Millions ofJapanese yen¥6,376
6,284
4,430
11,2491,338

2016:
Related parties
Guara MV23 B.V.
Cernambi Sul MV24 B.V.
Cernambi Norte MV26 B.V.
Carioca MV27 B.V.
MODEC and TOYO Offshore
Production Systems Pte. Ltd.

22. Significant Subsequent Event
Stock Remuneration Plan for Directors and Executive Officers
At the extraordinary meeting of the Board of Directors held on February 6, 2018, the Company
was resolved to adopt a stock remuneration plan for directors and executive officers (excluding
outside directors and directors who are members of the Supervisory Committee) as the new
incentive plan that uses a trust (“this plan”). The adoption of this plan was approved at theannual shareholders’ meeting held on March 23, 2018.

29