ANNUAL REPORT
2012

CONTENTS
PROFILE1

CONSOLIDATED BALANCE SHEETS

4

THE MESSAGE FROM THE PRESIDENTCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2
6
7
8

11

12

INDEPENDENT AUDITOR'S REPORT48

NON-CONSOLIDATED STATEMENTS OF INCOME

52

NON-CONSOLIDATED BALANCE SHEETSNON-CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSNOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

50
53
56

INDEPENDENT AUDITOR'S REPORT71

CORPORATE DATA73

CORPORATE OUTLINE

72

PROFILE

1

THE MESSAGE FROM THE PRESIDENT

2

Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
and Consolidated Subsidiaries
Years ended March 31, 2012 and 2011
with Independent Auditor’s Report3Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2012
As of March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)

AssetsCurrent assets:
Cash and deposits (Notes 6-(c) and 10)
Trade notes and accounts receivable (Notes 6-(c) and 6-(g))
Inventories (Notes 6-(a) and 6-(f))
Deferred tax assets (Note 16)
Other current assets
Less allowance for doubtful receivables
Total current assets¥ 34,897
115,418
22,471
1,504
10,364(531)
184,124¥ 20,730
93,034
21,2482,764
10,819(608)
147,989$ 424,589
1,404,282
273,403
18,299126,098(6,460)2,240,223

Non-current assets:
Property and equipment, at cost:
Land (Notes 6-(c) and 6-(d))
Buildings and structures (Note 6-(c))
Machinery, equipment and vehicles (Note 6-(c))
Construction in progress
Accumulated depreciation
Property and equipment, net

15,82014,694
16,435
58(24,202)22,807

16,54014,551
17,74089(25,302)
23,617

192,480
178,780
199,963705(294,464)
277,491

2,294

2,262

27,910Investments and other assets:
Investments in securities (Notes 6-(c) and 13)
Long-term loans receivable
Claims provable in bankruptcy and other
Investments in unconsolidated subsidiaries and affiliates
Investments in real estate (Notes 6-(b) and 6-(c))
Long-term non-operating accounts receivable (Note 19)
Deferred tax assets (Note 16)
OtherLess allowance for doubtful receivables
Total investments and other assets
Total non-current assets

4,707
7,487
4,912
1,547
4,067
37,4252,926
7,364(46,058)
24,38149,483

4,649
7,544
7,848
1,481
3,569
38,114
2,016
7,534(49,610)
23,15049,03191,09359,763
18,82249,482455,347
35,60089,597(560,384)
296,641
602,056

Total assets¥233,608¥197,021$2,842,292

Intangible fixed assets

2

4

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2012

Liabilities and net assets
Current liabilities:
Short-term bank loans and current portion of long-term debt
(Notes 6-(c) and 22)
Trade notes and accounts payable (Note 6-(g))
Accrued expenses
Advances received on contracts in progress
Reserve for defects on completed construction projects
Allowance for losses on construction contracts (Note 6-(f))
Allowance for loss on litigation
Allowance for loss on disaster
Other current liabilities (Note 6-(c))
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 6-(c) and 22)
Accrued retirement benefits (Note 15)
Deferred tax liability on land revaluation (Note 6-(d))
Other long-term liabilities (Note 6-(c))
Total long-term liabilities
Contingent liabilities (Notes 6-(e) and 19)
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
2,669,464,970 shares in 2012 and 2011
Issued and outstanding:
288,989,667 shares in 2012 and
283,363,598 shares in 2011
Preferred stock:
Authorized:
26,894,644 shares in 2012 and 2011
Issued and outstanding:
13,149,900 shares in 2012 and13,843,700 shares in 2011
Additional paid-in capital
Retained earnings
Less treasury stock, at cost:
447,922 shares in 2012 and 436,646 shares in 2011
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding loss on securities
Deferred gain on hedging instruments, net of taxes (Note 14)
Land revaluation (Note 6-(d))
Translation adjustments
Total accumulated other comprehensive income (loss)
Minority interests
Total net assets
Total liabilities and net assets

As of March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)

¥ 20,579
118,786
2,292
29,433
939
1,624
862
–
12,772
187,291¥ 7,517
101,548
1,961
21,164
1,161
372
1,280
470
16,568152,045$ 250,383
1,445,260
27,886358,109
11,42419,75910,487–
155,396
2,278,756

2,413
16,662335
4,901
24,313

2,582
16,135445
5,163
24,32729,358
202,725
4,075
59,630295,814

12,003

12,003146,039

481
7,771

682
6,360

5,852
94,549(241)
20,014(242)
18,804(2,932)
243,508

(137)
30
39
(856)
(923)
2,913
22,004¥233,608

(195)
–
57
(694)
(833)
2,677
20,648¥197,021(1,666)365
474(10,414)(11,230)
35,442
267,721$2,842,292

The accompanying notes are an integral part of these statements.

53

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Income
March 31, 2012
Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Net sales (Note 7-(a))
Cost of sales (Note 7-(b))
Gross profit¥313,558
294,521
19,036¥298,647
278,285
20,362$3,815,038
3,583,416
231,609

14,345
4,691

15,3994,962

174,534
57,075433
156(1,048)
687
(683)
–
(77)
24
21

248
195
(963)
–
(386)
(605)
(547)
67
15

5,268
1,898
(12,750)
8,358(8,310)
–
(936)
292
255

(86)
–
(69)
(1,003)(1,647)
3,043

(44)
245
–
(549)
(2,325)2,636(1,046)–(839)(12,203)(20,038)
37,023

1,109
265
1,375

603
191
795

13,493
3,224
16,729

1,668
294
1,374

1,841
300
1,541

20,294
3,577
16,717

Selling, general and administrative expenses(Notes 7-(c) and 15)
Operating income
Other income (expenses):
Interest and dividend income
Payments received from insurance claims
Interest expense
Reversal of provision for doubtful receivables
Exchange loss, net
Provision for doubtful receivables
Loss on disaster (Note 7-(g))
Equity in earnings of affiliates
Gain on sales of property and equipment (Note 7-(e))
Loss on sales and disposal of property and equipment(Note 7-(f))
Gain on prior-period adjustment
Loss on litigation
Other, net
Income before income taxes and minority interests
Income taxes (Note 16):
Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income

¥

¥
(Yen)

Net income per share – basic (Note 20)
Net income per share – diluted (Note 20)

¥

4.82
1.81

$

(U.S. dollars)(Note 3)
¥

5.47
2.34

$

0.058
0.022

The accompanying notes are an integral part of these statements.

64

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Comprehensive Income
March 31, 2012
Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Income before minority interests
Other comprehensive income:Unrealized holding gain (loss) on securities
Deferred gain on hedging instruments, net of taxes
Land revaluation
Translation adjustments
Share of other comprehensive income of affiliates
accounted for by the equity method
Total other comprehensive income (Note 8)
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests¥1,668¥1,841$20,294

58
30
47
(197)

(234)
–
–
(104)

705
365
571
(2,396)(7)(67)¥1,601(8)(347)¥1,494(85)(815)$19,479¥1,320¥ 280¥1,217¥ 276$16,060$ 3,406

The accompanying notes are an integral part of these statements.

75

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2012

Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Shareholders’ equity
Capital stock:
Balance at the beginning of the period
Changes in items during the period
Total changes in items during the period
Balance at the end of the period
Additional paid-in capital:
Balance at the beginning of the period
Changes in items during the period
Disposition of treasury stock
Cancellation of treasury stock
Total changes in items during the period
Balance at the end of the period
Retained earnings :Balance at the beginning of the period
Changes in items during the period
Cash dividends paid
Net income
Reversal of revaluation reserve for land, net of taxes
Total changes in items during the period
Balance at the end of the period
Treasury stock, at cost:
Balance at the beginning of the period
Changes in items during the period
Purchases of treasury stock
Disposition of treasury stock
Cancellation of treasury stock
Total changes in items during the period
Balance at the end of the period
Total shareholders’ equity:
Balance at the beginning of the period
Changes in items during the period
Dividends from surplus
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancellation of treasury stockReversal of revaluation reserve for land, net of taxes
Total changes in items during the period
Balance at the end of the period

8¥12,003¥12,003$146,039–
12,003–
12,003–146,039

682

682

8,297

(1)
(200)
(201)
481

(0)
–
(0)
682

(12)
(2,433)(2,445)
5,852

6,360

5,651

77,381

–
1,374
36
1,411
7,771

(833)
1,541
0
708
6,360

–
16,717438
17,167
94,549

(242)

(241)

(2,944)

(200)
1
200
0
(241)

(0)
0
–
(0)
(242)

(2,433)122,433
0(2,932)18,80418,096

228,786

–
1,374
(200)
0
–
36
1,210
20,014

(833)
1,541
(0)
0
–
0
708
18,804–
16,717(2,433)0–438
14,721
243,5086

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2012

Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Accumulated other comprehensive income
Unrealized holding (loss) gain on securities:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Deferred gain on hedging instruments, net of taxes
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Land revaluation:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Translation adjustments:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Total accumulated other comprehensive income (loss):
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Minority interests
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

9

(195)

37

(2,372)

58
58
(137)

(233)
(233)
(195)

705
705
(1,666)

–

–

–

30
30
30

–
–
–

365
365
365

57

57

693

(17)
(17)
39

(0)
(0)
57

(206)
(206)
474

(694)

(604)

(8,443)

(161)
(161)
(856)

(90)
(90)
(694)

(1,958)(1,958)(10,414)

(833)

(508)

(10,135)

(90)
(90)
(923)

(324)
(324)
(833)

(1,095)(1,095)(11,230)

2,677

2,723

32,570

236
236
2,913

(45)
(45)
2,677

2,871
2,871
35,442

7

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2012

Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Total net assets
Balance at the beginning of the period
Changes in items during the period
Dividends from surplus
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancellation of treasury stockReversal of revaluation reserve for land, net of taxes
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

20,64820,310251,222

–
1,374
(200)
0
–
36
145
1,356
¥22,004

(833)
1,541
(0)
0
–
0
(370)
337
¥20,648–
16,717(2,433)
0
–
438
1,764
16,498$267,721

The accompanying notes are an integral part of these statements.

10Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Cash Flows
March 31, 2012

Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)Operating activities
Income before income taxes and minority interests
Depreciation and amortization(Decrease) increase in allowance for doubtful receivables
Increase in accrued retirement benefits(Decrease) in reserve for defects on completed construction projects
Increase in allowance for losses on construction contracts(Decrease) in allowance for loss on litigation(Decrease) increase in provision for loss on disaster
Loss on sales and disposal of property and equipment
Interest and dividend income
Interest expense
Exchange loss, net
Equity in earnings of affiliates(Increase) decrease in trade notes and accounts receivable(Increase) decrease in inventories
Decrease in other assets
Decrease (increase) in trade notes and accounts payable
Increase (decrease) in advances received on contracts in progress(Decrease) in other liabilities
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Special retirement benefits
Relocation expenses
Net cash provided by (used in) operating activities¥ 3,043
1,786
(491)
531
(220)
1,251
(417)
(470)
65
(433)
1,048
81
(24)
(22,457)(1,231)
1,611
17,466
8,471(4,188)
31
5,454
496
(1,087)
(875)
–
–
3,987

¥ 2,636
1,502
916
1,142
(92)
45
(45)
470
13
(248)
963
308
(67)
7,903
2,852
4,036
(20,663)(2,221)(6,023)(237)(6,807)
271
(959)
(984)
(32)
(293)
(8,805)$ 37,023
21,730(5,973)6,460(2,676)
15,220(5,073)(5,718)790(5,268)12,750985(292)(273,232)(14,977)
19,600212,507
103,066(50,955)377
66,3586,034(13,225)(10,646)––
48,509Investing activities
Increase in fixed deposits
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible fixed assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Increase in investments in unconsolidated subsidiaries and affiliates
Disbursements for loans
Proceeds from collection of loans
Other
Net cash used in investing activities(1,544)(1,175)
255
(344)
(1)
1
(10)
(1,047)604
24(3,238)(1,297)(1,508)
48
(114)
(234)
102
(15)
(220)
185
539
(2,514)(18,785)(14,296)
3,102(4,185)
(12)
12
(121)
(12,738)
7,348
292(39,396)

Financing activities
Increase in short-term bank loans
Increase in long-term debt
Decrease in long-term debt
Increase in long-term loans of employees(Increase) in treasury stock
Cash dividends paid
Cash dividends paid for minority shareholders
Other
Net cash provided by financing activities

12,892
700
(700)
97
(200)
–
(62)
(127)
12,5981,101
3,200(2,040)
51
(0)
(833)
(25)
(89)
1,363

156,856
8,516(8,516)
1,180(2,433)–(754)(1,545)
153,278(243)
13,104
16,742¥ 29,847(267)(10,224)
26,967¥ 16,742(2,956)
159,435
203,698$ 363,146

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 the year
Cash and cash equivalents at end of the year

The accompanying notes are an integral part of these statements.

11

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

1.

Basis of Preparation

The accompanying consolidated financial statements of Sumitomo Mitsui Construction Co.,
Ltd. (the “Company”) and consolidated subsidiaries (collectively the “Group”) are preparedon the basis of accounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements of International Financial
Reporting Standards, and have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments and Exchange Law ofJapan.
Certain reclassifications have been made to present the accompanying consolidated
financial statements in a format which is familiar to readers outside Japan. In addition,certain amounts in the prior year’s financial statements have been reclassified to conform tothe current year’s presentation.
As permitted, amounts of less than one million yen have been omitted. As a result, thetotals shown in the accompanying consolidated financial statements do not necessarily
agree with the sums of the individual amounts.
2.

Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated
Subsidiaries and Affiliates
The accompanying consolidated financial statements include the accounts of theCompany and the significant companies which it controls directly or indirectly.
Companies over which the Company exercises significant influence in terms of theiroperating and financial policies have been included in the consolidated financial
statements on an equity basis. In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries, including the portion attributable to minority
shareholders, are recorded based on the fair value at the time the Company acquired
control of the respective subsidiaries. All significant intercompany balances andtransactions have been eliminated in consolidation.
The excess of the cost over the underlying net assets at fair value at the respective
dates of acquisition of the consolidated subsidiaries (goodwill) or the excess of fairvalue of the net assets acquired over cost (negative goodwill) is charged or credited toincome in the year of acquisition.
Investments in affiliates not accounted for by the equity method are principally statedat cost.
The Company had 13 consolidated subsidiaries, 2 unconsolidated subsidiaries and 2
affiliates accounted for by the equity method as of March 31, 2012.

12

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Fiscal Year of Consolidated Subsidiaries
All foreign consolidated subsidiaries (4 companies) have a fiscal year that ends on
December 31. The accompanying consolidated financial statements were preparedbased on the financial statements as of the same date. Necessary adjustments forconsolidation were made on significant transactions that took place during the period
between the fiscal year-end of the subsidiaries and the fiscal year-end of the Company.
(c) Securities
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Trading securities
are carried at fair value and held-to-maturity securities are carried at amortized cost.
Marketable securities classified as other securities for which market prices are
determinable are carried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net assets.
Non-marketable securities classified as other securities are carried at cost. Cost of
securities sold is determined by the moving average method.
(d) Inventories
Inventories other than materials and supplies are stated at cost determined by the
specific identification method. Materials and supplies are valued at cost determined by
the average method. Book values are written down based on any decline inprofitability.
(e) Depreciation and Amortization(1) Property and equipment (except leased assets) and investments in real estate
Depreciation of property and equipment (except leased assets) and investments inreal estate is determined primarily by the declining-balance method based on theestimated useful lives of the respective assets as prescribed in the Corporation
Tax Law of Japan except that the straight-line method is applied to officebuildings acquired on or after April 1, 1998.
Depreciation at all overseas subsidiaries is determined by the straight-line method
or by the declining-balance method based on the estimated useful lives of therespective assets.
(2) Intangible fixed assets (except leased assets)
Amortization of intangible fixed assets (except leased assets) is calculated by thestraight-line method based on the estimated useful lives of the respective assets asprescribed in the Corporation Tax Law of Japan. Amortization of computer
software for internal use is calculated by the straight-line method over theestimated useful lives of 5 years.

1311

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(e) Depreciation and Amortization (continued)(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer
the ownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
Finance leases other than those that transfer the ownership of the leased assets tothe lessees, whose commencement dates are on or before March 31, 2008,
continue to be accounted for in a similar manner as operating leases.
(f)Allowance for Doubtful Receivables
The allowance for doubtful receivables is provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtfulreceivables estimated based on an individual assessment of each receivable andprobability of collection.

(g) Advances Received on Contracts in Progress
As is customary in Japan, the Company and its domestic consolidated subsidiaries
receive payments from customers on an installment basis in accordance with the termsof the respective construction contracts.
(h) Reserve for Defects on Completed Construction Projects
A reserve has been provided at an estimated amount for the fiscal year’s sales
proceeds in order to cover the liability for future costs of defects of the completed
construction projects.
(i)

Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses
on construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.

(j)

Allowance for Loss on Litigation
An allowance has been provided for future losses on pending litigation at an estimatedamount calculated based on specific circumstances.

14

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(k) Employees’ Retirement Benefits
Accrued retirement benefits for employees are provided principally at an amountcalculated based on the retirement benefit obligation and the fair value of the pension
plan assets, as adjusted for the unrecognized net retirement benefit obligation attransition, unrecognized actuarial gain or loss and unrecognized prior service cost.
The net retirement benefit obligation at transition is being amortized principally over a
period of 15 years. Prior service cost is being amortized as incurred by the straight-line
method over periods (mainly 11 years) which are shorter than the average remaining
years of service of the employees. Actuarial gain or loss is amortized in the year
following the year in which the gain or loss is recognized by the straight-line method
over periods (mainly 11 years) which are shorter than the average remaining years ofservice of the employees.
(Additional Information)
Effective July 1, 2011, the Company has transferred a portion of its lump-sum
retirement benefit plan covering substantially all employees to a defined contribution
pension plan and has adopted “Practical Solution on Accounting for Transfers between
Retirement Benefit Plans” (Accounting Standards Board of Japan (ASBJ) GuidanceNo. 1)As a result, prior service cost was recognized in the amount of ¥(3,482) million, and isbeing amortized from the second quarter of the year ended March 31, 2012 by thestraight-line method over a period of 11 years, which is shorter than the averageremaining years of service of the employees.
(l)Recognition of Revenues and Costs on Construction Contracts
Revenues and costs of construction contracts that commenced on or after April 1, 2009,of which the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method. The percentage of completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract
method is applied for contracts for which the percentage of completion cannot be
reliably estimated.
Revenues and costs of construction contracts of the Company and certain subsidiaries
that commenced on or before March 31, 2009, which cover a construction period
longer than 12 months are, in principle, also recognized by the percentage-ofcompletion method, except for total revenue on long-term contracts of less than ¥500
million.

(m) Recognition of Income from Finance Leases
Income from finance leases is recorded as sales and cost of sales at the time a lease
payment is received.

15

13

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(n) Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Foreign exchange forward contracts qualifying for allocation accounting aretranslated at the contract rate.
Interest rate swaps qualifying for hedge accounting and meeting specificmatching criteria are not remeasured at market value, but the differential paid or
received under the swap agreements is charged or credited to income (short-cut
method).
(2) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

Forward foreign exchange contracts
Interest rate swaps
Future foreign currency transactions
Interest on debt.

(3) Hedging policy
The Company utilizes foreign exchange forward contracts and interest rate swaps
only for the purpose of hedging future risks of fluctuation of foreign currency
exchange rates or interest rates.
(4) Assessment of hedge effectivenessThe evaluation of hedge effectiveness for a foreign exchange forward contract isperformed on a quarterly basis to confirm that amount of the foreign exchange
contract is within amount of the underlying hedged item to assess whether theforward contract qualifies for hedge accounting.
An evaluation of hedge effectiveness for interest rate swaps is not performed as
all meet specified criteria under the short-cut method.
(o) Cash Equivalents
All highly liquid investments with a maturity of three months or less when purchased,
which can easily be converted to cash and are subject to little risk of change in value,
are considered cash equivalents.
(p) Consumption Taxes
Consumption taxes are accounted for by the tax exclusion method.

16

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(q) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company has adopted the consolidated taxation system.
3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan and has been made, as a matter of arithmetic
computation only, at ¥82.19 = U.S.$1.00, the approximate rate of exchange in effect on
March 31, 2012. This translation should not be construed as a representation that yen havebeen, could have been, or could in the future be, converted into U.S. dollars at that or any
other rate.
4.

Changes in Accounting Methods

Effective the year ended March 31, 2012, the Company has adopted “Accounting Standard
for Net Income Per Share” (ASBJ Statement No. 2, issued on June 30, 2010), “Guidance on
Accounting Standard for Net Income Per Share” (ASBJ Guidance No. 4, issued on June 30,2010), and “Practical Solution on Accounting for Net Income Per Share” (ASBJ PITF
No. 9, issued on June 30, 2010).
In addition, see “Per Share Information” for details on the impact of this change.
5.

Additional Information

Adoption of the “Accounting Standard for Accounting Changes and Error Corrections”
Effective April 1, 2011 the year, the Company has adopted “Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Statement No. 24, issued on December
4, 2009), and “Guidance on Accounting Standard for Accounting Changes and Error
Corrections” (ASBJ Guidance No. 24 issued on December 4, 2009) for accounting changes
and corrections of prior period errors.

17

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

6.

Notes to Consolidated Balance Sheets(a) Inventories
The components of inventories as of March 31, 2012 and 2011 were as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Merchandise and finished goods
Materials and supplies
Costs on uncompleted construction
contracts
Real estate for sale

¥

440
1,977

19,963
89¥22,471

¥

484
1,937

18,717108¥21,248$

5,353
24,054

242,888
1,082$273,403(b) Investments in Real Estate“Investments in real estate” includes accumulated depreciation in the amount of ¥651
million ($7,920 thousand) and ¥619 million at March 31, 2012 and 2011, respectively.
(c) Pledged Assets
The following assets were pledged at March 31, 2012 principally as collateral for
short-term bank loans, long-term debt, and guarantees (such as guarantees for thecompletion of construction contracts):
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Trade notes and accounts receivable
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation
Investments in securities
Investments in real estate18¥ 1,894
17,39012,210¥ 2,788338
12,959$ 23,044
211,582
148,558

1,297

1,371

15,780

54
1,990
3,832
¥38,669

90
1,926
3,333
¥22,809657
24,212
46,623$470,483

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(c) Pledged Assets (continued)
Of the above property and equipment, assets that were held in mortgages for factory
foundations at March 31, 2012 and 2011 are summarized as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation¥1,236¥1,236$15,038

245

267

2,980

54
¥1,53690¥1,594657$18,688

The secured liabilities as of March 31, 2012 and 2011 are summarized as follows:
As of March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of
long-term debt]
Long-term debt
Other current liabilities
Other long-term liabilities¥14,073¥2,213$171,225

[636]
2,196
100
325

[873]
2,332
100
425

[7,738]26,7181,216
3,954(d) Land Revaluation
Land for operations was revalued by a consolidated subsidiary under the Law for Land
Revaluation during the year ended March 31, 2001. The revaluation amount is shown
as a separate component of net assets.
The market value of the land was ¥689 million ($8,383 thousand) and ¥678 million
more than the revalued book amount at March 31, 2012 and 2011, respectively.

19

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(e) Contingent Liabilities
At March 31, 2012 and 2011, the Company and consolidated subsidiaries were
contingently liable for the following:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
As guarantors of bank loans tocustomers, unconsolidated subsidiaries,
an affiliate and employees
As endorsers of notes receivablediscounted with banks
As endorsers of notes receivableendorsed to vendors(f)¥3,096¥3,291$37,668

331

433

4,027

–

7

–

Estimated Loss on Uncompleted Construction Contracts
An estimated loss on uncompleted construction contracts was recognized and included
as part of inventories but was not offset against the amount on the balance sheet. It has
been recorded as an allowance for losses on construction contracts in the amount of¥507 million ($6,168 thousand) and ¥57 million as of March 31, 2012 and 2011.

(g) Trade Notes Maturing on the Balance Sheet Date
Trade notes are settled on the dates they mature.
Since the last day of fiscal year fell on a bank holiday, the below-listed notes maturingon that day are excluded from the corresponding balances in the consolidated balance
sheet as of March 31, 2012.
As of March 31, 2012
(Millions of(Thousands ofyen)
U.S. dollars)
Trade notes receivable
Trade notes payable

¥214
175

20

$2,6032,129

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20127.

Notes to Consolidated Statements of Income(a) Net Sales Based on Percentage-of-completion Method
Net sales on construction contracts accounted for under the percentage-of-completion
method amounted to ¥215,008 million ($2,615,987 thousand) and ¥208,742 million
for the years ended March 31, 2012 and 2011, respectively.
(b) Allowance for Losses on Construction Contracts Included in Cost of Sales
The allowance for losses on construction contracts was included in cost of sales in theamounts of ¥1,542 million ($18,761 thousand) and ¥298 million for the years ended
March 31, 2012 and 2011, respectively.
(c) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses at March
31, 2012 and 2011 were as follows:
Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Retirement benefit expenses
Provision for doubtful receivables
Other
Total

¥ 6,099
1,001
23
7,221
¥14,345¥ 6,348
1,171
132
7,747
¥15,399$ 74,206
12,179279
87,857$174,534(d) Research and Development Expenses
Research and development costs included in selling, general and administrative
expenses and manufacturing costs amounted to ¥909 million ($11,059 thousand) and¥916 million for the years ended March 31, 2012 and 2011, respectively.
(e) Gain on Sale of Property and Equipment
The significant components of gain on sale of property and equipment for the years
ended March 31, 2012 and 2011 were as follows:
Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Buildings and structures
Land
Others
Total

¥ 3
5
12
¥21
21

¥ 6
–
8
¥15

$ 36
60
146
$255

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(f)

Loss on Sales and Disposal of Property and Equipment
The significant components of loss on sales and disposal of property and equipment for theyears ended March 31, 2012 and 2011 were as follows:
Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Loss on disposal
Loss on sales
Others
Total

¥19
44
22
¥86

¥34
1
9
¥44

$ 231
535
267
$1,046(g) Loss on Disaster
Loss on disaster was due to the Great East Japan Earthquake on March 11, 2011.

2220

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20128.

Notes to Consolidated Statements of Comprehensive Income

Amount of recycling and amount of income tax effect associated with other comprehensive
income for the year ended March 31, 2012 was as follows:
As of March 31, 2012
(Millions of(Thousands ofyen)
U.S. dollars)
Unrealized holding gain on securities:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Unrealized holding gain on securities

¥ 59
–
59
(0)
58

$

717
–
717
(0)
705

Deferred gain on hedging instruments, net of taxes:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Deferred gain on hedging instruments, net of taxes

48
–
48
(18)
30

584
–
584
(219)
365

Land revaluation:
Income tax effect adjustment
Land revaluation

47
47

571
571

(197)
–
(197)
–
(197)

(2,396)–(2,396)–(2,396)

(7)
–

(85)
–

(7)
¥ (67)(85)$ (815)

Translation adjustments:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Translation adjustments
Share of other comprehensive income of affiliates
accounted for by the equity method:
Changes in items during the period
Amount of recycling
Share of other comprehensive income of affiliates
accounted for by the equity method
Total other comprehensive income (loss)

23

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20129.

Notes to Consolidated Statements of Changes in Net Assets(a) Type and number of shares issued and treasury stock(1) For the year ended March 31, 2012
Balance atApril 1,
2011
Shares issued:
Common stock
2nd Series Class A preferred stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

283,363,598
2,020,600
5,861,200
5,961,900
297,207,298

Increase
Decrease(Number of shares)
5,626,069–––
5,626,069–
520,600
80,00093,200693,800

Balance at
March 31,2012
288,989,667
1,500,000
5,781,200
5,868,700
302,139,567

Note 1:

Increase of common stock is due to the acquisition of common stock by exercising call
options on the 2nd Series Class A preferred stock and 3rd Series Class D preferred stock.

Note 2:

Decrease of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due
to redemption by exercising a call option.

Note 3:

Decrease of 3rd Series Class C preferred stock is due to redemption to based on a resolution at
the annual general meeting of the shareholders on June 29, 2011.
Balance atApril 1,
2011

Treasury shares:
Common stock
2nd Series Class A preferred stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

436,646–––436,646

Increase
Decrease(Number of shares)
13,431
520,600
80,00093,200707,2312,155
520,600
80,00093,200695,955

Balance at
March 31,2012
447,922–––447,922

Note 1:

Increase of common stock is due to the purchase of fractional shares.

Note 2:

Decrease of common stock is due to the sale of fractional shares in response to shareholder
requests.

Note 3:

Increase of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due tothe acquisition of common stock by exercising a call option.

Note 4:

Decrease of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due
to redemption by exercising a call option.

Note 5:

Increase of 3rd Series Class C preferred stock is due to the acquisition of common stock by
exercising a call option based on a resolution at the annual general meeting of theshareholders on June 29, 2011.

Note 6:

Decrease of 3rd Series Class C preferred stock is due to redemption based on a resolution at
the annual general meeting of the shareholders on June 29, 2011.

24

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(a) Type and number of shares issued and treasury stocks (continued)(2) For the year ended March 31, 2011
Balance atApril 1,
2010
Shares issued:
Common stock
2nd Series Class A preferred stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

275,313,598
4,500,000
5,861,200
5,961,900
291,636,698

Increase
Decrease(Number of shares)
8,050,000–––
8,050,000–
2,479,400––
2,479,400

Balance at
March 31,2011
283,363,598
2,020,600
5,861,200
5,961,900
297,207,298

Note 1:

Increase of common stock is due to acquisition of common stock by exercising a call option
on the 2nd Series Class A preferred stock.

Note 2:

Decrease of preferred stock is due to redemption of the 2nd Series Class A preferred stock toacquire common stock by exercising a call option.
Balance atApril 1,
2010

Treasury shares:
Common stock
2nd Series Class C preferred stockTotal

425,236–425,236

Increase
Decrease(Number of shares)
11,8772,479,400
2,491,277

467
2,479,400
2,479,867

Balance at
March 31,2011

436,646–436,646

Note 1:

Increase of common stock is due to the purchase of fractional shares.

Note 2:

Decrease of common stock is due to the sale of fractional shares in response to shareholder
requests.

Note 3:

Increase of preferred stock is due to the acquisition of common stock by exercising a call
option of the 2nd Series Class A preferred stock.

Note 4:

Decrease of preferred stock is due to redemption of 2nd Series Class A preferred treasury
stock to acquire common stock by exercising a call option.

(b) Dividends:
For the years ended March 31, 2012 and 2011, there were no dividends paid toshareholders.
Dividends with the cut-off date in the year ended March 31, 2010 and the effective
date in the year ended March 31, 2011 were as follows:

Resolution

Total dividends Dividends(Millions ofper share
yen)
(Yen)

Type of shares

Annual general 2nd Series Class A preferred stock
meeting of the 3rd Series Class C preferred stock
shareholders on 3rd Series Class D preferred stock
June 29, 2010

25

¥ 38
394
400
¥833

¥ 8.4567.25
67.25

Cut-off
date

Effective
date

March 31, June 30,
2010
2010

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

10. Notes to Consolidated Statements of Cash Flows
Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2012 and 2011 were as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Time deposits with maturities of overthree months
Cash and cash equivalents¥34,897¥20,730$424,589(5,050)¥29,847(3,987)¥16,742(61,442)$363,146

11. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation /amortization and net book value of the leased property as of March 31, 2012 and 2011,
which would have been reflected in the consolidated balance sheets if finance leaseaccounting had been applied to the finance leases currently accounted for as operatingleases:(a) As lessee:(1) Finance leases (of which commencement dates were prior to application ofchange in accounting method)
As of March 31,
2011

2012
Machinery,equipment Intangible
and
fixed
vehiclesassetsAcquisition costs
Accumulated depreciation /amortization
Net book value

Machinery,equipment Intangible
fixed
and
Total
assetsvehicles(Millions of yen)

Total

¥514

¥83

¥597

¥721

¥146

¥867

326
¥187

75
¥ 7

402
¥195

431
¥290

115
¥ 30

547
¥320

As of March 31, 2012
Machinery,equipment Intangible
and
fixed
Total
vehiclesassets(Thousands of U.S. dollars)
Acquisition costs
Accumulated depreciation /amortization
Net book value$6,253$1,009$7,263

3,966$2,275

$

912
85

4,891
$2,37226

24

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(a) As lessee: (continued)
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Future minimum payments:
Within one year
Over one year
Lease payments
Depreciation / amortizationequivalents
Interest expense equivalents

¥ 85
124
¥209

¥135
205
¥340

$1,034
1,508$2,542¥130¥173$1,581

112
12

152
18

1,362
146

Depreciation / amortization equivalents are computed by the straight-line method
over the respective lease terms with a residual value of zero.
The difference between total lease expenses and acquisition costs of the leased
assets comprise interest equivalents. Interest equivalents are computed by theinterest method over the respective lease terms.
(2) Operating leases
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Future minimum payments:
Within one year
Over one year

¥2
1
¥3

¥ 6
3
¥10

$24
12
$36

12. Financial Instruments(a) Overview(1) Policy for financial instruments
The Group limits investments of surplus funds to short-term bank deposits, andraises necessary funds through bank loans.
In addition, the Group only uses derivatives for hedging risk of fluctuation offoreign currency exchange rates or interest rates, not for speculative transactions.

27

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(a) Overview (continued)(2) Types of financial instruments and related risk and risk management system
Trade notes and accounts receivable are exposed to credit risk in relation tocustomers and trading partners. Also, the Group’s main investments in securities
are shares of companies, and they are exposed to market price fluctuation risk.
Management of credit risks (Risks of default by customers and trading partners)
The Company manages due dates and balances of trade notes and accounts
receivable for individual customers and trading partners through its internal
systems and monitors their credit status. These systems enable the Group to
identify any concerns for doubtful receivables at an early stage and reduce risks
of uncollectible amounts. Consolidated subsidiaries also manage credit risks inthe same manner as the Company. The Company minimizes credit risks bymainly holding held-to-maturity securities with high credit ratings.
Management of market risks (Risks of fluctuations in currency exchange andinterest rates)
The Company and certain consolidated subsidiaries hold trade receivables inforeign currencies. However, the risk of fluctuations in the currency exchange
rate is not significant because a similar amount of trade payables are also held,
and the Company utilizes foreign exchange forward contracts to hedge the risk ofchanges in the foreign currency exchange rate.
Loan payables are mainly for short-term operating funds. The Group manages
loan payables to flexibly execute or revise its fund management plans. In order to
fix the interest expense for long-term debt bearing interest at variable rates, theGroup utilizes interest rate swap transactions for certain long-term debt.
Derivatives are foreign currency exchange forward contacts held for the purposeof hedging future risk of fluctuation of foreign currency exchange rate of themonetary liabilities denominated in foreign currencies, and interest rate swaps
held for the purpose of hedging future risk of fluctuation of interest rates onloans.
Derivative transactions are carried out in accordance with the Companies’
internal rules on transactions, and with highly rated financial institutions used ascounter parties to reduce the risk of default.
Information regarding the method of hedge accounting, hedging instruments andhedged items, hedging policy, and assessment of hedge effectiveness is found in
Note 2-(n).

28Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(a) Overview (continued)(3) Supplementary explanation of the fair value of financial instruments
The fair values of financial instruments are based on market prices, or, if nomarket prices are available, they include estimated amounts. Because estimationsof the fair value incorporate various factors, applying different assumptions can,in some cases, result in different fair values.
In addition, the amounts of derivatives in Note 14 “Derivative and Hedge
Accounting” are not necessarily indicative of the actual market risk involved in
the derivative transactions.
(b) Fair value of financial instruments
Amounts recognized in the consolidated balance sheets, market value, and thedifference at March 31, 2012 and 2011, are as shown below. Moreover, items forwhich it is extremely difficult to determine fair values are not included in thefollowing table (see Note 2).
Carrying
value
Cash and deposits
Trade notes and accounts
receivable
Investments in securities
Held-to-maturity
securities
Other securities
Long-term loans receivable
Allowance for doubtfulreceivables (*1)
Claims provable inbankruptcy and other
Allowance for doubtfulreceivables (*1)
Long-term non-operating
accounts receivable
Allowance for doubtfulreceivables (*1)
Total assets
Trade notes and accounts
payableShort-term bank loans
and current portion of
long-term debt
Long-term debt
Total liabilities
Derivative transactions (*2)

As of March 31, 2012
Fair
Carrying
Fair
value
value
value
Difference
Difference(Millions of yen)(Thousands of U.S. dollars)¥ 34,897¥ 34,897

115,418
2,031
9
2,021
7,547
(5,845)
1,701

¥

–

$ 424,589$ 424,589

115,377
2,031

(40)
0

1,404,282
24,711

1,403,783
24,711

(486)
0

9
2,021

0
–

109
24,58991,823

109
24,589

0
–

1,566

(135)

19,053(1,642)669(0)(71,115)
20,695

4,912

59,763(4,856)56(59,082)
681

55

(0)

37,425$–455,347(34,605)
2,819
156,925

2,794
156,724

(25)
(201)

(421,036)
34,298
1,909,295

33,994
1,906,849(304)(2,445)

118,786

118,786–

1,445,260

1,445,260–

20,5792,413¥141,779

20,5972,269¥141,653

18(144)¥(125)

250,383
29,358$1,725,015

250,60227,606$1,723,482

219(1,752)$(1,520)

48

48

–

584

584

–

(*1):

Allowance for doubtful receivables recognized individually is offset.

(*2):

Assets and liabilities arising from derivative transactions are shown at net value.

29

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Fair value of financial instruments (continued)
As of March 31, 2011
Fair
Carrying
value
value
Difference(Millions of yen)
Cash and deposits
Trade notes and accounts
receivable
Investments in securities
Held-to-maturity
securities
Other securities
Long-term loans receivable
Allowance for doubtfulreceivables (*)¥ 20,730¥ 20,730

93,034
1,970

93,023
1,970

(10)
0

9
1,960
7,544

9
1,960

0
–

1,597

(155)

195

(0)

(35,245)
2,868
120,551

2,824
120,341

(43)
(210)

101,548

101,548

–

7,517
2,582
¥111,648

7,528
2,519
¥111,59711(63)¥ (51)–––

Claims provable inbankruptcy and other
Allowance for doubtfulreceivables (*)
Long-term non-operating
accounts receivable
Allowance for doubtfulreceivables (*)
Total assets
Trade notes and accounts
payableShort-term bank loans
and current portion of
long-term debt
Long-term debt
Total liabilities
Derivative transactions(*):(5,792)
1,752

¥

–

7,848
(7,653)
195
38,114

Allowance for doubtful receivables recognized individually is offset.

Note 1:

Calculation of the fair value of financial instruments and other matters related to investment securities
and derivative transactions.

Assets(1) Cash and deposits
Because settlement periods of deposits are short and their market values arealmost the same as their book values, the book values are used.
(2) Trade notes and accounts receivable
The fair values are determined using the present value of discounted collectible
principal and interest amounts estimated reflecting their collectability based on an
appropriate rate in which a credit spread is added to a risk-free benchmark rate
(such as a government bond yield) corresponding to the remaining term.

30

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Fair value of financial instruments (continued)(3) Investments in securities
Concerning the market value of investment securities, the market value for stockis the price quoted on the stock exchange, and the market value for bonds is theprice provided by financial institutions.
In addition, for matters concerning to securities, see “Notes on securities.”(4) Long-term loans receivable, (5) Claims provable in bankruptcy and other, and(6) Long-term non-operating accounts receivable
These fair values are determined using the present value of discounted collectible
principal and interest amounts estimated reflecting their collectability, based on
an appropriate rate in which a credit spread is added to a risk-free benchmark rate
(such as a government bond yield) corresponding to the remaining term. Further,
the fair value of doubtful debts are determined by discounting the value of
expected cash flows using the same discount rate, or estimated collectible amountsecured by collateral or guaranteed.
Liabilities(1) Trade notes and accounts payable
Because settlement periods are short and their market values are almost the sameas their book values, the book values are used.
(2) Short-term bank loans
The carrying amount of the current portion of long-term debt approximates fairvalue since the carrying amount is equivalent to the present value of future cash
flows discounted using the current borrowing rate for similar debt with acompatible maturity. For borrowings other than the current portion of long-term
debt, the carrying amount approximates fair value due to the short maturities ofthese instruments.
(3) Long-term debt
Fair value of long-term debt is based on the price provided by financial
institutions or the present value of future cash flows discounted using the current
borrowing rate for similar debt with a comparable maturity. The fair value ofloans subject to special hedge accounting treatment of interest rate swaps is basedon the present value of the total principal and interest of the borrowings hedged
by interest rate swaps, discounted by the interest rate to be applied if similar newloans were entered into.
The information of the fair value for derivatives is included in Note 14.

31

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Fair value of financial instruments (continued)
Note 2:Financial instruments for which it is extremely difficult to measure the fair value.

As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Unlisted stocks (*)(*):¥4,163¥4,160$50,650

Unlisted stocks are not included in “(3) Investments in securities” because these have no market value and it
is extremely difficult to measure the fair value.

Note 3:

The redemption schedule for monetary claims and held-to-maturity debt securities with maturity dates
subsequent to the consolidated balance sheet date.
As of March 31, 2012
Within 1
year

Deposits¥ 34,869
Trade notes andaccounts
receivable
111,553
Investments insecurities
Held-to-maturity
securities (Bonds)–
Long-term loans
receivable
3
Claims provable inbankruptcy andother (*)
22
Long-term
non-operating
accounts
receivable (*)
1,039¥147,488

Over 1
Over 5year and years andwithin 5 within 10
years
years
(Millions of yen)Over 10years

Over 1
Over 5year and years andWithin 1
within 5 within 10 Over 10
year
years
years
years
(Thousands of U.S. dollars)

¥

¥

–

$ 424,248

–

¥

–

$

–

$

–

$

–

3,864

–

–

1,357,257

47,013

–

–

9

–

–

–

109

–

–

6

789

902

36

73

9,599

10,974

1

–

–

267

12

–

–

588
¥4,469

0
¥789

–
¥902

12,641$1,794,476

7,154$54,374

0$9,599–$10,974(*) The fair values of these items are extremely difficult to determine. This table does not include the amount of¥32 million ($389 thousand) out of claims provable in bankruptcy and other and the amount of ¥1,191 million($14,490 thousand) out of long-term non-operating accounts receivable.
Note 4:

The redemption schedule for corporate bonds, long-term debt, and other interest bearing debt withmaturity dates subsequent to the consolidated balance sheet date. See Note 22.

32

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Fair value of financial instruments (continued)
As of March 31, 2011
Over 1
Over 5year and years andWithin 1 within 5 within 10 Over 10
years
year
years
years
(Millions of yen)
Deposits¥ 20,663
Trade notes andaccounts
receivable
92,179Investments insecurities
Held-to-maturity
securities (Bonds)–
Long-term loans
receivable
12
Claims provable inbankruptcy andother (*)
20
Long-term
non-operating
accounts
receivable (*)
211¥113,088

¥

–

¥

–

¥

–

854

–

–

9

–

–

5

783

951

3

–

–

1,407
¥2,281

0
¥783

–
¥951

(*) The fair values of these items are extremely difficult to determine. This table does not include the amount of¥171 million out of claims provable in bankruptcy and other and the amount of ¥1,248 million out of
long-term non-operating accounts receivable.

13. Securities
Securities at March 31, 2012 and 2011 are summarized as follows:(a) Held-to-maturity securities
Carrying
value
Securities whose fairvalue exceeds theircarrying value:
Bonds

Securities whose fairvalue exceeds theircarrying value:
Bonds

¥9

As of March 31, 2012
Fair
Unrealized Carrying
Fair
Unrealized
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)¥9¥0

As of March 31, 2011
Fair
Unrealized
Carrying
value
gain
value
(Millions of yen)

¥9

¥9

¥0

33

$109

$109

$0

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Other securities
As of March 31, 2012
Cost
Unrealized gain:
Stock
Unrealized loss:
Stock
Total

Unrealized gain:
Stock
Unrealized loss:
Stock
Total

Balance
Unrealized
sheet
gain (loss)
amount(Millions of yen)

Balance
Unrealized
sheet
Cost
gain (loss)
amount(Thousands of U.S. dollars)

¥ 972

¥ 817

¥ 154

$11,826$ 9,940$ 1,873

1,049¥2,021

1,330¥2,148(281)¥(126)

12,763$24,589

16,182$26,134(3,418)$(1,533)

As of March 31, 2011
Balance
Unrealized
sheet
Cost
gain (loss)
amount(Millions of yen)
¥ 629

¥ 521

¥ 107

1,331
¥1,9601,625¥2,146(293)¥(186)(c) Sales of securities classified as other securities
Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Sales amount-stock
Aggregate gain-stock

¥–
–

34

¥32
3

$–
–

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

14. Derivatives and Hedge Accounting
Derivative transactions for the years ended March 31, 2012 and March 31, 2011 aresummarized as follows:(a) There are no derivative transactions to which the hedge accounting is not applied.
(b) Derivative transactions to which the hedge accounting is applied
Currency-related transactions
Method ofhedge
accounting
Allocationaccounting
method forforeignexchange
forwardcontracts

As of March 31, 2012
Transaction
type

Hedgeditem

Foreignexchange
forwardcontracts
Long
U.S. dollar

Accounts
payableLong
U.S. dollar

Future foreign
currencytransactions

Total

Contract
Over 1amountyear(Millions of yen)

Fair
value

Contract
Over 1
Fair
amountyear
value(Thousands of U.S. dollars)¥–Note 2

$

886
¥886

¥48
¥48

21,425$21,4502

1,761¥1,763¥24–

Note 2

10,779$10,779

$584
$584

$

Note 1:

Estimated fair value was provided by the counterparty financial institution.

Note 2:Since foreign exchange forward contracts accounted for are included in that of the account payable as thehedged item, the fair values of the contracts are included in the fair values of the account payable.

For the year ended March 31, 2011, there were no currency-related transactions.
Interest-related transactions
Method ofhedge
accounting
Short-cut
methodNote 1:

Note 1:

Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating

Long-term
debt

Contract
Over 1
Fair
amountyear
value(Millions of yen)

¥2,500¥1,900Note 1

Contract
Over 1
Fair
amountyear
value(Thousands of U.S. dollars)$30,417$23,117

Note 1Since these interest rate swaps accounted for by short-cut method are included in that of thelong-term debt as the hedged item, the fair values of the contracts are included in the fairvalues of the long-term debt.

Method ofhedge
accounting
Short-cut
methodAs of March 31, 2012

As of March 31, 2011
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating

Long-term
debt

Contract
Over 1
Fair
amountyear
value(Millions of yen)

¥2,500¥2,000Note 1Since these interest rate swaps accounted for by short-cut method are included in that of thelong-term debt as the hedged item, the fair values of the contracts are included in the fairvalue of the long-term debt.

35

33

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201215.

Retirement Benefit Plans

For the year ended March 31, 2012, the Company and its consolidated subsidiaries havelump-sum retirement benefit plans covering substantially all employees. The benefit
amounts are determined by reference to basic rates of pay, length of service and theconditions under which termination occurs. Certain consolidated domestic subsidiaries
transferred annuity payments to a defined benefits pension plan or the Smaller Enterprise
Retirement Allowance Mutual Aid Scheme. Certain foreign consolidated subsidiaries set up
an employee pension trust.
The following table sets forth the funded and accrued status of the plans, and the amounts
recognized in the consolidated balance sheets at March 31, 2012 and 2011 for theCompany’s and the consolidated subsidiaries’ defined benefit plans:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized net retirement benefit
obligation at transition
Unrecognized actuarial loss
Unrecognized prior service costAccrued retirement benefits¥(22,012)
187(21,825)¥(27,222)
179(27,042)$(267,818)
2,275(265,543)

5,948
2,424
(3,210)¥(16,662)

7,934
2,876
95
¥(16,135)

72,36829,492(39,055)$(202,725)

The components of retirement benefit expenses for the years ended March 31, 2012 and2011 are outlined as follows:
Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)Service cost
Interest cost
Expected return on plan assets
Amortization of net retirement benefit
obligation at transition
Amortization of actuarial loss
Amortization of prior service cost
Total retirement benefit expenses
Expenses for transfer to defined
contribution pension plan
Total retirement benefit expenses

36¥1,007408(4)¥1,146645(1)$12,252
4,964
(48)

1,983
554
(174)
¥3,775

1,983
430
62
¥4,26624,127
6,740(2,117)$45,9302¥3,777–¥4,26624$45,954

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

The principal assumptions used for the above plans were as follows:
2011

2012
Discount rate
Expected rate of return on plan assets
Amortization period for prior service
cost
Amortization period for actuarial
differences
Period for recognition of net retirement
benefit obligation at transition16.

Principally 1.7%
1.0%

Principally 1.7%
1.0%

Principally 11 years

Principally 11 years

Principally 11 years

Principally 11 years

Principally 15 years

Principally 15 years

Income Taxes

The significant components of deferred tax assets and liabilities at March 31, 2012 and2011 were as follows:
As of March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Tax loss carryforwards
Accrued retirement benefits
Allowance for bad debts
Accounts payable and accrued
expenses
Allowance for losses on construction
contracts
Reserve for defects on completed
construction projects
Allowance for loss on litigation
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gain on hedging instruments,
net of taxes
Asset retirement obligations
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets

37¥ 38,358
6,008
2,431

¥ 61,760
6,574
3,357

$ 466,699
73,09829,577

1,404

1,294

17,082

616

152

7,494

353
307
1,228
50,707(46,227)
4,480

466
521
1,965
76,091(71,277)
4,814

4,294
3,735
14,940616,948(562,440)
54,507

(18)
(11)
(2)
(17)
(49)
¥ 4,430

–
(11)
(1)
(19)
(32)
¥ 4,781

(219)
(133)
(24)
(206)
(596)
$ 53,899

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

The following table summarizes the significant differences between the statutory tax rate
and the effective tax rates for the years ended March 31, 2012 and 2011:
Years ended March 31,
2012
2011
Statutory tax rate
Non-deductible expenses
Non-taxable income
Per capita inhabitants’ taxes
Valuation allowance
Adjustments related to consolidation
Change in corporate tax rate
Other
Effective tax rates

40.7%
12.0
(7.1)
3.3
(9.2)
(0.3)
10.3
(4.5)
45.2%

40.7%
8.0
(4.7)
6.4
(16.6)
(1.0)
–
(2.6)
30.2%

Adjustment of deferred tax assets and deferred tax liabilities due to change of effective
statutory tax rate
Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the
Income Tax Act, etc. for the Purpose of Creating a Taxation System Responding toChanges in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on
Special Measures for Securing Financial Resources Necessary to Implement for Measuresfor Reconstruction following the Great East Japan Earthquake” (Act No. 117 of 2011), theeffective statutory tax rate used to measure deferred tax assets and liabilities was changed.
As a result, deferred tax assets, after offsetting deferred tax liabilities, decreased ¥310
million ($3,771 thousand), income taxes-deferred increased ¥312 million（$3,796 thousand),
unrealized holding gain on securities increased ¥0 million and deferred gain on hedging
instruments, net of taxes increased ¥1 million ($12 thousand). Additional deferred tax
liabilities for land revaluation decreased ¥47 million ($571 thousand) and land revaluation
increased by the same amount.
17. Investment and Rental Property
Investment and rental property as of March 31, 2012 and 2011 were as follows;(a) Types of investment and rental property
A consolidated subsidiary maintains warehouses available for rent including land in
Saitama prefecture. Gains on investment and rental property for the years ended March
31, 2012 and 2011 were ¥134 million ($1,630 thousand) and ¥133 million,
respectively.

38

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(b) Fair value of investment and rental property
The book value, net increase (decrease) and fair value of investment and rental
property for the years ended March 31, 2012 and 2011 were as follows:Year ended March 31, 2012
Book value
Balance
Fair value
Balance
Balance
Fair value
Net
Net
as of
as of
as of
as of
as of
increaseincrease
March 31, March 31, March 31,
March 31, March 31,(decrease)(decrease)
2012
2012
2011
2012
2012
(Millions of yen)(Thousands of U.S. dollars)Book value
Balance
as ofMarch 31,
2011
¥3,333¥(31)¥3,302¥2,869$40,552$(377)$40,175$34,906

Note 1:

The amount at the end of the year represents acquisition cost less accumulated depreciation
and accumulated impairment loss.

Note 2:

Net decrease is due to depreciation.

Note 3:

Fair values are calculated based on the appraisal value for major properties.

Year ended March 31, 2011
Book value
Balance
Fair value
Balance
Net
as of
as of
as of
increase
March 31, March 31,
March 31,(decrease)
2011
2011
2010
(Millions of yen)
¥3,365¥(31)¥3,333¥2,821

Note 1:

The amount at the end of the year represents acquisition cost less accumulated depreciation
and accumulated impairment loss.

Note 2:

Net decrease is due to depreciation.

Note 3:

Fair values are calculated based on the appraisal value for major properties.

18. Segment Information, etc
Segment Information(a) Outline of Segments
The Company’s reportable operating segments are components for which separate
financial information is available and that are evaluated regularly by the board of
directors in determining the allocation of management resources and in assessing
performance.
The Company currently divides its operations into Civil Construction and Building
Construction, managed by the Civil Engineering Division and the Building
Administration Division, respectively. Business strategies are formulated by eachsegment.

39

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

Segment Information (continued)
Accordingly, the Company divides its operations into two reportable operating
segments on the same basis as it uses internally; Civil Construction and Building
Construction.
Civil Construction consists mainly of governmental public works like bridge
construction. Building Construction is awarded by private sector companies for things
like high rise apartment buildings.
(b) Accounting methods used to calculate segment income (loss), segment assets andother items for reportable segments
Accounts for reportable segments are for the most part calculated in line with thegenerally accepted standards used for the preparation of the consolidated financial
statements.
Segment income (loss) for reportable segments is based on gross profit.
Amounts for intersegment transactions or transfers are based on the market prices
determined by third party transactions.
The Company does not allocate any assets to reportable operating segments.
(c) Segment income, segment assets and other items for reportable segments

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales
Segment income

Year ended March 31, 2012
Reportable operating segments
Civil
Building
Total
Others
Total(Millions of yen)

Adjustments

Consolidated¥119,492¥193,330¥312,823¥735¥313,558¥–¥313,558

1,153¥120,645

20¥193,350

1,173¥313,996

51
¥786

1,224
¥314,783(1,224)¥(1,224)–¥313,558

10,496

8,323

18,819306

19,126(89)

19,036Note 1:“Others,” which includes the Company’s business of elder care facilities and insurance agent,
does not qualify as a reportable operating segment.

Note 2:Adjustment for segment income is the reduction of income recognized between reportable
operating segments.

Note 3:

Segment income corresponds to gross profit in the consolidated statement of income.

40

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

Segment Information (continued)
Year ended March 31, 2012
Reportable operating segments
Civil
Building
Total
Others
Total(Thousands of U.S. dollars)

Adjustments

Consolidated

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales$1,453,850$2,352,232$3,806,095$8,942$3,815,038$–$3,815,038

14,028$1,467,879

243$2,352,475

14,271$3,820,367

620$9,563

14,892$3,829,942(14,892)$(14,892)–$3,815,038

Segment income

127,704

101,265

228,969

3,723

232,704(1,082)

231,609

Adjustments

Consolidated

Year ended March 31, 2011
Reportable operating segments
Building
Total
Civil
Others
Total(Millions of yen)

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales¥117,118¥180,741¥297,859¥787¥298,647¥–¥298,647

1,211¥118,3301¥180,742

1,213¥299,073

68
¥855

1,281
¥299,928(1,281)¥(1,281)–¥298,647

10,10010,01020,110352

20,463(100)

20,362

Segment income

Note 1:
Note 2:
Note 3:“Others,” which includes the Company’s business of elder care facilities and insurance agent,
does not qualify as a reportable operating segment.
Adjustment for segment income is the reduction of income recognized between reportable
operating segments.
Segment income corresponds to gross profit in the consolidated statement of income.

Related Information
For the year ended March 31, 2012(a) Product and service information
See “Segment income, segment assets and other items for reportable segments”(b) Geographical segment information(1) Sales
Japan

Asia
Others(Millions of yen)

¥270,576
Notes:¥42,354¥627

Year ended March 31, 2012
Total
Japan
Asia
Others
Total(Thousands of U.S. dollars)¥313,558$3,292,079 $515,318$7,628$3,815,038

Geographical segments are determined based on the country/region of domicile ofcustomers.

41

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

Related Information (continued)(2) Tangible fixed assets
Geographical segment information on tangible fixed assets has been omitted as
the amount of tangible fixed assets in Japan constituted over 90% of total as ofMarch 31, 2012.
(c) Major customer information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2012.
For the year ended March 31, 2011(a) Product and service information
See “Segment income, segment assets and other items for reportable segments”(b) Geographical segment information(1) SalesYear ended March 31, 2011
Japan
Asia
Others
Total(Millions of yen)
¥264,260
Notes:¥32,396¥1,990¥298,647

Geographical segments are determined based on the country/region of domicile ofcustomers.

(2) Tangible fixed assets
Geographical segment information on tangible fixed assets as the amount oftangible fixed assets in Japan constituted over 90% of total as of March 31, 2011.
(c) Major customer information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2011.
Loss on impairment by reportable segment
For the years ended March 31, 2012 and 2011, there was no loss on impairment for any
reportable segment.

42

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

Amortization of goodwill and unamortized balance by reportable segment
For the years ended March 31, 2012 and 2011, there was no amortization and unamortizedbalance of goodwill by reportable segment.
Gain on negative goodwill by reportable segment
For the year ended March 31, 2012, there was no gain on negative goodwill by reportablesegment.
For the year ended March 31, 2011, negative goodwill has been recognized due to theadditional acquisition of shares of SMCC PHILIPPINE INC., which mainly operates in the
Civil Construction Segment.
Gain on negative goodwill was ¥270 million for the year ended March 31, 2011.
19. Related Party Transactions(a) Related party transaction
Transactions with affiliates for the year ended March 31, 2012 are summarized asfollows:
Year ended March 31, 2012

Affiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Capitalcontributionof the related
party

Number of
voting shares
held as apercentage ofvoting sharesissued¥1030.0%Capitalcontributionof the related
party

Number of
voting shares
held as apercentage ofvoting sharesissued

$121

30.0%

Nature ofTotal amounttransactionof transaction(Millions of yen)
Guarantee ofbank loan¥2,797

Balance sheet
account

Long-term
non-operationaccounts
receivable

Balance at
March 31,
2012

¥579

Year ended March 31, 2012

Affiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Nature ofTotal amounttransactionof transaction(Thousands of U.S. dollars)

Balance sheet
account

Guarantee ofbank loan

Long-term
non-operationaccounts
receivable

43$34,030

Balance at
March 31,2012

$7,044

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012(a) Related party transaction (continued)
Transactions with affiliates for the year ended March 31, 2011 are summarized asfollows:
Year ended March 31, 2011

Affiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Capitalcontributionof the related
party

Number of
voting shares
held as apercentage ofvoting sharesissued¥1030.0%Nature ofTotal amounttransactionof transaction(Millions of yen)
Guarantee ofbank loan¥2,797

Balance sheet
account

Balance at
March 31,2011

Long-term
non-operationaccounts
receivable¥609(b) Significant affiliates(1) The parent information
There is no parent company at March 31, 2012 and March 31, 2011.
(2) Financial information on significant affiliates
For the year ended March 31, 2012, a significant affiliate was Aseismic Devices
Co., Ltd. Financial information on the company was as follows:
2012(Millions of
yen)

2012
(Thousands of
U.S. dollars)

Total current assets
Total non-current assets¥2,458
224$29,906
2,725

Total current liabilities
Total long-term liabilities

1,959
3

23,83536

Total net assets¥ 720$ 8,760

Net sales
Income before income taxes
Net income¥3,027442¥ 237$36,829
5,377$ 2,88344

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201220.

Per Share Information

Net assets and basic net income per share as of and for the years ended March 31, 2012 and2011 were as follows:2012
Net assets per share
Net income per share – basic
Net income per share – diluted(Yen)¥(37.37)
4.82
1.81

2011

2012
(U.S. dollars)¥(44.52)
5.47
2.34$(0.454)
0.058
0.022

The basis of calculation for net assets per share at March 31, 2012 and 2011 was as follows:
As of March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)
Total net assets
Amounts deducted from total net assets[Including paid-in amounts for sharesof preferred stock][Including minority interests]
Total net assets attributable tocommon stock¥ 22,004
32,788¥ 20,648
33,245$ 267,721
398,929[29,874][2,913][30,568][2,677][363,474][35,442]¥(10,783)¥(12,596)$(131,196)(Thousands of shares)

Number of shares of common stock
used to determine net assets per share

288,541

282,926

The basis for calculating basic net income per share for the years ended March 31, 2012
and 2011 was as follows:
Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – basic:
Net income
Amount not available to commonshareholders
Net income per share – basic¥1,374¥1,541$16,717–¥1,374–¥1,541–$16,717(Thousands of shares)

Average number of shares of common
stock outstanding

285,18645

281,799

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2012

Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – diluted:
Adjustment for net income

–

–

–

(Thousands of shares)

Increase in number of share ofcommon stock[Including preferred stock]476,133[476,133]

375,905[375,905]

As described in “Changes in Accounting Methods”, previous period financial statements
have been adjusted retroactively to apply the change in accounting methods.
As a result, net income per share diluted for the previous period decreased ¥0.31 comparedwith the amount before the retroactive adjustment.
21. Subsequent Event
Acquisition of treasury stock pursuant to clause 156 of the Companies Act.
The following acquisition of treasury stock (3rd Series Class C preferred stock) was
determined at the board of directors’ meeting held on May 10, 2012. The proposal was
submitted to the shareholders’ meeting for approval, and subsequently approved at theshareholders’ meeting held on June 28, 2012.
(a) Reason for acquisition
To maintain the value of common stock in the event that preferred stock holders
exercise their acquisition rights to common stock, and to reduce the total amount ofdividends, the Company plans to acquire treasury stock.
(b) Details of acquisition of treasury stocks which was approved by shareholder’s meeting(1) Type of stock
3rd Series Class C preferred stock(2) Amount of stock
400,000 shares [Maximum](3) Total of acquisition cost
¥1,000 million ($12,166 thousand) [Maximum](4) Term for acquisition
1 year from the day following the date of the shareholders’ meeting.
46

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201222.

Short-Term Bank Loans and Long-Term Debt

Short-term bank loans generally represent notes, principally at average annual interest ratesof 2.4% and 1.9% at March 31, 2012 and 2011, respectively.
Long-term debt at March 31, 2012 and 2011 is summarized as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Debt with collateral (at average interest
rates of 2.6% at 2012 and 2011)
Debt without collateral (at average interest
rates of 2.3% at 2012 and 2.4% at 2011)
Lease obligations
Current portion (excluding leaseobligations)
Current portion of lease obligations
Deposits from employees¥2,832¥2,866$ 34,456

450
404

416
393

5,475
4,915

(869)
(128)
1,758
¥4,447

(700)
(111)
1,660
¥4,525(10,573)(1,557)
21,389$ 54,106

The aggregate annual maturities of long-term debt subsequent to March 31, 2012 aresummarized as follows:Year ending March 31,
2013
2014
2015
2016 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)

¥ 869
786
703
923
¥3,282$10,573
9,563
8,553
11,230$39,931

The aggregate annual maturities of lease obligations subsequent to March 31, 2012 aresummarized as follows:Year ending March 31,
2013
2014
2015
2016 and thereafter

47(Millions ofyen)(Thousands of
U.S. dollars)

¥128
120
103
52
¥404

$1,557
1,460
1,253
632
$4,915

48

Non-Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
Years ended March 31, 2012 and 2011
with Independent Auditor’s Report49Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2012

AssetsCurrent assets:
Cash and deposits (Note 5-(c))
Notes receivable (Note 5-(f))
Accounts receivable on completed contracts (Note 5-(c))
Short-term loans receivable (Note 5-(b))
Inventories (Notes 5-(a) and 5-(e))
Deferred tax assets (Note 10)
Accounts receivable, other
Advance payments
Other current assets (Note 5-(f))
Less allowance for doubtful receivables
Total current assets

As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
¥ 20,743
744
97,664
8,530
17,421
1,290
2,370
5,750
3,242
(1,040)156,716¥ 11,407
190
78,984
8,136
17,537
2,600
2,025
6,591
2,925
(1,218)129,180$ 252,378
9,052
1,188,271
103,783
211,960
15,69528,83569,95939,445(12,653)
1,906,752

5,500
4,768
702
2,713
300
3,568
56
(9,306)
8,303

5,500
4,759
697
3,951
143
3,635
87
(10,398)
8,377

66,91858,011
8,541
33,0083,650
43,411
681(113,225)
101,022

1,650

1,717

20,075Investments and other assets:
Investments in securities (Note 5-(c))
Investments in subsidiaries and affiliates (Notes 5-(c) and 9)
Long-term loans receivable
Long-term loans to employees
Claims provable in bankruptcy and other
Long-term prepaid expenses
Deferred tax assets (Note 10)Long-term non-operating accounts receivable
Other
Less allowance for doubtful receivables
Total investments and other assets
Total non-current assets

4,475
6,382
6,561
895
4,819
50
2,784
37,412
6,801(48,111)22,071
32,025

4,422
6,342
6,571
941
7,740
54
1,892
37,928
7,092(51,515)
21,47031,56554,447
77,64979,827
10,88958,632608
33,872455,189
82,747(585,363)
268,536
389,645

Total assets¥188,742¥160,745$2,296,410

Non-current assets:
Property and equipment, at cost:
Land (Note 5-(c))
Buildings (Note 5-(c))
Structures (Note 5-(c))
Machinery and equipment
VehiclesTools, furniture and fixtures
Construction in progress
Accumulated depreciation
Property and equipment, net
Intangible fixed assets

250

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2012

Liabilities and net assets
Current liabilities:
Short-term bank loans and current portion of long-term debt
(Notes 5-(c) and 13)
Trade notes payable (Note 5-(b))
Accounts payable on completed contracts (Note 5-(b))
Accounts payable, otherAccrued expenses
Income taxes payable
Consumption taxes payable
Advances received on contracts in progress
Deposits received
Reserve for defects on completed construction projects
Allowance for losses on construction contracts (Note 5-(e))
Allowance for loss on litigation
Allowance for loss on disaster
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 5-(c) and 13)
Accrued retirement benefits
Other long-term liabilities
Total long-term liabilities

As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

¥ 20,389
37,59361,545
1,748
1,674
212
2,309
22,526
4,813
888
1,521
862
–
1,816
157,903¥

8,682
35,76049,339
1,986
1,402
231
4,340
17,348
6,902
1,134
231
1,280
470
1,701
130,811$ 248,071
457,391
748,813
21,267
20,367
2,579
28,093274,072
58,55910,80418,505
10,487–22,095
1,921,194

2,116
14,635279
17,032

2,250
14,226
256
16,73325,745
178,0633,394
207,227

12,003

12,003146,039

400
400

601
601

4,866
4,866

83
1,654
1,737

83
934
1,018

1,009
20,124
21,133(241)
13,900(242)
13,381(2,932)
169,120

(124)
30
(94)
13,805¥188,742

(180)
–
(180)
13,200¥160,745(1,508)365(1,143)
167,964$2,296,410

Contingent liabilities (Note 5-(d))
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
2,669,464,970 shares in 2012 and 2011
Issued and outstanding:
288,989,667 shares in 2012 and
283,363,598 shares in 2011
Preferred stock:
Authorized:
26,894,644 shares in 2012 and 2011
Issued and outstanding:
13,149,900 shares in 2012 and13,843,700 shares in 2011
Capital surplus:
Other capital surplus
Total capital surpluses
Retained earnings:
Legal retained earnings
Earned surplus carried forward
Total retained earnings
Less treasury stock, at cost:
447,922 shares in 2012 and 436,646 shares in 2011
Total shareholders’ equity
Valuation, translation adjustments and other:
Unrealized holding loss on securities
Deferred gain on hedging instruments, net of taxes
Total valuation, translation adjustments and otherTotal net assets
Total liabilities and net assets

See accompanying notes to non-consolidated financial statements.

51

3

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Income
March 31, 2012

Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Net sales:
Completed construction (Note 6-(a))¥247,037¥240,996$3,005,681

Cost of sales:
Completed construction (Note 6-(b))
Gross profit

234,239
12,798226,166
14,8302,849,969
155,712Selling, general and administrative expenses (Note 6-(d))
Operating income

10,5002,297

11,447
3,382

127,752
27,947822
147
776(1,073)
(693)
–

543
188
–
(1,018)
(422)
(582)

10,001
1,788
9,441(13,055)(8,431)
–

–
(27)
(77)
–
0
(69)
(22)
(913)
(1,128)

640
(17)
(534)
179
6
–
–
(637)
(2,935)

–
(328)
(936)
–
0
(839)
(267)
(11,108)(13,724)

1,169

446

14,223

50
398
449
719

111
7
118
327

608
4,842
5,462
8,748

Other income (expenses):
Interest and dividend income
Payments received from insurance claims
Reversal of provision for doubtful receivables
Interest expense
Exchange loss, net
Provision for doubtful receivables
Loss on devaluation of investments in subsidiaries andaffiliates
Loss on sales and disposal of property and equipment
Loss on disaster (Note 6-(f))
Gain on prior-period adjustment
Gain on sales of investment in securities
Loss on litigation
Loss on devaluation of golf club memberships
Other, net
Income before income taxes
Income taxes (Note 10):
Current
Deferred
Net income

¥

¥
(Yen)

Net income per share – basic (Note 11)
Net income per share – diluted (Note 11)

¥

2.52
0.95

$

(U.S. dollars)(Note 2)
¥

1.16
0.50

$

0.030
0.011

See accompanying notes to non-consolidated financial statements.

52

4

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2012

Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Shareholders’ equity
Capital stock:
Balance at the beginning of the period
Changes in items during the period
Total changes in items during the period
Balance at the end of the period
Additional paid-in capital:
Other capital surplus:
Balance at the beginning of the period
Changes in items during the period
Disposition of treasury stock
Cancellation of treasury stock
Total changes of items during the period
Balance at the end of the period
Retained earnings:
Earned reserve:
Balance at the beginning of the period
Changes in items during the period
Provision of legal retained earnings
Total changes in items during the period
Balance at the end of the period
Earned surplus carried forward:
Balance at the beginning of the period
Changes in items during the period
Cash dividends paid
Provision of legal retained earnings
Net income
Total changes in items during the period
Balance at the end of the period
Total retained earnings :Balance at the beginning of the period
Changes in items during the period
Cash dividends paid
Net income
Total changes in items during the period
Balance at the end of the period

53¥12,003¥12,003$146,039–
12,003–
12,003–146,039

601

601

7,312

(1)
(200)
(201)
400

(0)
–
(0)
601

(12)
(2,433)(2,445)
4,866

83

–

1,009

–
–
83

83
83
83

–
–
1,009

934

1,523

11,363

–
–
719
719
1,654

(833)
(83)
327
(588)
934

–
–
8,748
8,748
20,124

1,018

1,523

12,385

–
719
719
1,737

(833)
327
(505)
1,018

–
8,748
8,748
21,1335

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2012

Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Treasury stock, at cost:
Balance at the beginning of the period
Changes in items during the period
Purchases of treasury stock
Disposition of treasury stock
Cancelation of treasury stock
Total changes in items during the period
Balance at the end of the period
Total shareholders’ equity:
Balance at the beginning of the period
Changes in items during the period
Cash dividends paid
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancelation of treasury stock
Total changes in items during the period
Balance at the end of the period
Valuation, translation adjustments and other
Unrealized holding gain (loss) on securities:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Deferred gain on hedging instruments, net of taxes
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Total valuation, translation adjustments and other:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

54

(242)

(241)

(2,944)

(200)
1
200
0
(241)

(0)
0
–
(0)
(242)

(2,433)122,433
0(2,932)

13,381

13,887

162,805

–
719
(200)
0
–
519
13,900

(833)
327
(0)
0
–
(506)
13,381–
8,748(2,433)
0–
6,314
169,120(180)

51(2,190)

55
55
(124)

(232)
(232)
(180)

669
669
(1,508)

–

–

–

30
30
30

–
–
–

365
365
365

(180)

51

(2,190)

86
86
(94)

(232)
(232)
(180)

1,046
1,046
(1,143)6

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2012

Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Total net assets
Balance at the beginning of the period
Changes in items during the period
Cash dividends paid
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancelation of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

13,20013,939160,603

–
719
(200)
0
–
86
605
¥13,805

(833)
327
(0)
0
–
(232)
(738)
¥13,200–
8,748(2,433)
0
–
1,046
7,360
$167,964

See accompanying notes to non-consolidated financial statements.

55

7

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
1.

Summary of Significant Accounting Policies(a) Basis of Presentation
The accompanying non-consolidated financial statements of Sumitomo Mitsui
Construction Co., Ltd. (the “Company”) are prepared on the basis of accounting
principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards,
and have been compiled from the non-consolidated financial statements prepared by
the Company as required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications have been made to present the accompanying financial
statements in a format which is familiar to readers outside Japan. In addition, certain
amounts in the prior year’s financial statements have been reclassified to conform tothe current year’s presentation.
As permitted, amounts of less than one million yen have been omitted. As a result, thetotals shown in the accompanying financial statements do not necessarily agree withthe sums of the individual amounts.
(b) Securities and Investments in Subsidiaries and Affiliates
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Under this standard,
trading securities are carried at fair value and held-to-maturity securities are carried atamortized cost. Marketable securities classified as other securities for which market
prices are determinable are carried at fair value with any changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly in net assets.
Non-marketable securities classified as other securities are carried at cost. Cost of
securities sold is determined by the moving average method. Investments in
subsidiaries and affiliates are stated at cost determined by the moving average method.
(c) Inventories
Inventories other than materials and supplies are stated at cost determined by the
specific identification method. Materials and supplies are valued at cost determined by
the average method. Book values are written down based on any decline inprofitability.

568

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012(d) Depreciation and Amortization(1) Property and equipment (except leased assets)
Depreciation of property and equipment (except leased assets) is determined by
the declining-balance method based on the estimated useful lives of therespective assets as prescribed in the Corporation Tax Law of Japan except thatthe straight-line method is applied to office buildings acquired on or after April 1,
1998.
(2) Intangible fixed assets (except leased assets) and long-term prepaid expenses
Amortization of intangible fixed assets (except leased assets) and long-term
prepaid expenses is calculated by the straight-line method based on the estimateduseful lives of the respective assets as prescribed in the Corporation Tax Law ofJapan. Amortization of computer software for internal use is calculated by thestraight-line method over the estimated useful lives of 5 years.
(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer
the ownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
Finance leases other than those that transfer the ownership of the leased assets tothe lessees, whose commencement dates are on or before March 31, 2008,
continue to be accounted for in a similar manner as operating leases.
(e) Allowance for Doubtful Receivables
The allowance for doubtful receivables is provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtfulreceivables estimated based on an individual assessment of each receivable andprobability of collection.
(f)Advances Received on Contracts in Progress
As is customary in Japan, the Company receives payments from customers on an
installment basis in accordance with the terms of the respective construction contracts.

(g) Reserve for Defects on Completed Construction Projects
A reserve has been provided at an estimated amount for the fiscal year’s sales
proceeds in order to cover the liability for future costs of defects of the completed
construction projects.

57

9Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012(h) Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses
on construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.
(i)

Allowance for Loss on Litigation

An allowance has been provided for future losses on pending litigation at on estimatedamount calculated based on specific circumstances.
(j)

Employees’ Retirement Benefits
Accrued retirement benefits for employees are provided principally at an amountcalculated based on the retirement benefit obligation and the fair value of the pension
plan assets, as adjusted for the unrecognized net retirement benefit obligation attransition, unrecognized actuarial gain or loss and unrecognized prior service cost.
(Additional Information)
Effective from July 1, 2011, the Company has transferred a portion of its lump-sum
retirement benefit plan covering substantially all employees to a defined contribution
pension plan and has adopted “Practical Solution on Accounting for Transfers between
Retirement Benefit Plans” (Accounting Standards Board of Japan (ASBJ) GuidanceNo. 1)As a result, prior service cost was recognized in the amount of ¥(3,482) million, and isbeing amortized from the second quarter of the year ended March 31, 2012 by thestraight-line method over a period of 11 years, which is shorter than the averageremaining years of service of the employees.

(k) Recognition of Revenues and Costs on Construction Contracts
Revenues and costs of construction contracts that commenced on or after April 1, 2009,of which the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method. The percentage-of-completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract
method is applied for contracts for which the percentage of completion cannot be
reliably estimated.
Revenues and costs of construction contracts that commenced on or before March 31,
2009, which cover a construction period longer than 12 months are, in principle, also
recognized by the percentage-of-completion method, except for total revenue on
long-term contracts of less than ¥500 million.

58

10

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012(l)

Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Foreign exchange forward contracts qualifying for allocation accounting aretranslated at the contract rate.
Interest rate swaps qualifying for hedge accounting and meeting specificmatching criteria are not remeasured at market value, but the differential paid or
received under the swap agreement is charged or credited to income (short-cut
method).
(2) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

Forward foreign exchange forward contracts
Interest rate swaps
Future foreign currency transactions
Interest on debt

(3) Hedging policy
The Company utilizes foreign exchange forward contracts and interest rate swaps
only for the purpose of hedging future risks of fluctuation of foreign currency
exchange rates or interest rates.
(4) Assessment of hedge effectivenessAn evaluation of hedge effectiveness for a foreign exchange forward contract isperformed on a quarterly basis to confirm that amount of the foreign exchange
contract is within amount of the underlying hedged item to assess whether theforward contract qualifies for hedge accounting.
An evaluation of hedge effectiveness for interest rate swaps is not performed as
all meet specified criteria under the short-cut method.
(m) Consumption Taxes
Consumption taxes are accounted for by the tax exclusion method.
(n) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company has adopted the consolidated taxation system.
59

11

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
2.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made at ¥82.19 = U.S.$1.00, the approximate rate ofexchange prevailing on March 31, 2012. This translation should not be construed as arepresentation that yen have been, could have been, or could in the future be, converted into
U.S. dollars at that or any other rate.
3.

Changes in Accounting Methods

Effective the year ended March 31, 2012, the Company has adopted “Accounting Standard
for Net Income Per Share” (ASBJ Statement No. 2, issued on June 30, 2010), “Guidance on
Accounting Standard for Net Income Per Share” (ASBJ Guidance No. 4, issued on June 30,2010), and “Practical Solution on Accounting for Net Income Per Share” (ASBJ PITF
No. 9, issued on June 30, 2010).
In addition, see “Per Share Information” for details on the impact of this change.
4.

Additional Information

Adoption of the “Accounting Standard for Accounting Changes and Error Corrections”
Effective April 1, 2011 the year, the Company has adopted “Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Statement No. 24, issued on December
4, 2009), and “Guidance on Accounting Standard for Accounting Changes and Error
Corrections” (ASBJ Guidance No. 24 issued on December 4, 2009) for accounting changes
and corrections of prior period errors.
5.

Notes to Non-Consolidated Balance Sheets(a) Inventories
The components of inventories as of March 31, 2012 and 2011 were as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Costs on uncompleted construction
contracts
Real estate for sale

¥17,333
87¥17,42160¥17,430
106¥17,537$210,889
1,058$211,960

12

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012(b) Transactions and Outstanding Balances with Subsidiaries and Affiliates
Significant outstanding balances for subsidiaries and affiliates other than individuallypresented on the accompanying non-consolidated balance sheets at March 31, 2012
and 2011 were as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Short-term loans receivable
Trade notes payable
Accounts payable on completed
contracts¥ 8,403
1,122¥ 8,008
711$102,238
13,651

13,748

12,220167,270(c) Pledged Assets
The following assets were pledged at March 31, 2012 and 2011 principally as
collateral for short-term bank loans, long-term debt and guarantees (such as guarantees
for the completion of construction contracts):
As of March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Accounts receivable on completed
contracts
Land
Buildings, net of accumulated
depreciation
Structures, net of accumulated
depreciation
Investments in securities
Investments in subsidiaries and affiliates¥ 1,848¥ 2,776$ 22,484

17,169
5,209

–
5,209

208,894
63,377

375

402

4,562

33
1,965
364
¥26,966

34
1,909
358
¥10,691

401
23,9084,428$328,093

The secured liabilities as of March 31, 2012 and 2011 are summarized as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of long-termdebt]Long-term debt

61

¥14,037¥2,123$170,787

[600]
1,900

[500]
2,000

[7,300]23,11713

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012(d) Contingent Liabilities
At March 31, 2012 and 2011, the Company was contingently liable for the followings:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
As guarantor of bank loans to customers,
subsidiaries, an affiliate and employees
As endorsers of notes receivablediscounted with banks
As endorsers of other current assets(Non-operating notes receivable)
discounted with banks¥4,124¥4,358$50,176

78

433

949

252

–

3,066

(e) Estimated Loss on Uncompleted Construction Contracts
An estimated loss on uncompleted construction contracts was recognized and included
as part of inventories but was not offset against the amount on the balance sheet. It has
been recorded as an allowance for losses on construction contracts in the amount of¥485 million ($5,900 thousand) and ¥51 million as of March 31, 2012 and 2011,
respectively.
(f)

Trade Notes Maturing on the Balance Sheet Date
Trade notes maturing at the end of the fiscal year are settled on the dates they mature.
Since the last day of fiscal year fell on a bank holiday, notes receivable maturing onthat date were excluded from the corresponding balances in the non-consolidatedbalance sheet as of March 31, 2012.
As of March 31, 2012
(Millions of(Thousands ofyen)
U.S. dollars)
Trade notes receivable
Other current assets (Non-operating notes
receivable)

6.

¥ 8

$ 97

16

194

Notes to Non-Consolidated Statements of Income(a) Net Sales Based on Percentage-of-completion Method
Net sales on construction contracts accounted for under the percentage-of-completion
method amounted to ¥186,588 million ($2,270,203 thousand) and ¥185,894 million
for the years ended March 31, 2012 and 2011, respectively.

62

14

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012(b) Allowance for Losses on Construction Contracts Included in Cost of Sales
The allowance for losses on construction contracts was included in cost of sales in theamounts of ¥1,472 million ($17,909 thousand) and ¥156 million for the years ended
March 31, 2012 and 2011, respectively.
(c) Transactions and Outstanding Balances with Subsidiaries and Affiliates
Significant transactions with subsidiaries and affiliates other than individuallypresented on the accompanying non-consolidated statements of Income for the years
ended 2012 and 2011 were as follows:
Years ended March 31,
2011
2012
2012
(Millions of yen)(Thousands of
U.S. dollars)Interest and dividend income

¥721

¥461

$8,772(d) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses for theyears ended March 31, 2012 and 2011 were as follows:
Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Retirement benefit expenses
Legal welfare expenses
Communication and traveling expenses
Rent
Depreciation expenses
Provision for doubtful receivables
Other
Total

¥ 4,360
879
658
841
1,022
499
7
2,231
¥10,500¥ 4,590
1,016
683
844
1,363
502
125
2,321
¥11,447$ 53,047
10,694
8,005
10,232
12,434
6,071
85
27,144$127,752(e) Research and Development Expenses
Research and development costs included in selling, general and administrative
expenses and manufacturing costs amounted to ¥835 million ($10,159 thousand) and¥842 million for the years ended March 31, 2012 and 2011, respectively.
(f)

Loss on Disaster
Loss on disaster was due to the Great East Japan Earthquake on March 11, 2011.

6315

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 20127.

Notes to Non-Consolidated Statements of Changes in Net Assets

Type and number of treasury stocks at March 31, 2012 are as follows:
Balance atApril 1,
2011
Treasury shares:
Common stock
2nd Series Class A preferred stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

436,646–––436,646

Increase
Decrease(Number of shares)
13,431
520,600
80,00093,200707,2312,155
520,600
80,00093,200695,955

Balance at
March 31,2012
447,922–––447,922

Note 1:

Increase of common stock is due to the purchase of fractional shares.

Note 2:

Decrease of common stock is due to the sale of fractional shares in response to shareholder
requests.

Note 3:

Increase of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due to theacquisition of common stock by exercising a call option.

Note 4:

Decrease of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due toredemption acquire common stock by exercising a call option.

Note 5:

Increase of 3rd Series Class C preferred stock is due to the acquisition of common stock by
exercising a call option based on a resolution at the annual general meeting of the shareholders on
June 29, 2011.

Note 6:

Decrease of 3rd Series Class C preferred stock is due to redemption based on a resolution at theannual general meeting of the shareholders on June 29, 2011.

Type and number of treasury stocks at March 31, 2011 were as follows:
Balance atApril 1,
2010
Treasury shares:
Common stock
2nd Series Class A preferred stockTotal

425,236–425,236

Increase
Decrease(Number of shares)
11,8772,479,400
2,491,277

467
2,479,400
2,479,867

Balance at
March 31,2011

436,646–436,646

Note 1:

Increase of common stock is due to the purchase of fractional shares.

Note 2:

Decrease of common stock is due to the sale of fractional shares in response to shareholder
requests.

Note 3:

Increase of preferred stock is due to the acquisition of common stock by exercising a call option of
the 2nd Series Class A preferred stock.

Note 4:

Decrease of preferred stock is due to redemption of 2nd Series Class A preferred treasury by
exercising a call option.

64

16

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
8.

Leases

The following pro forma amounts represent the acquisition costs, accumulated depreciation /amortization and net book value of the leased property as of March 31, 2012 and 2011,
which would have been reflected in the non-consolidated balance sheets if finance leaseaccounting had been applied to the finance leases currently accounted for as operatingleases:(a) As lessee:(1) Finance leases (of which commencement dates were prior to the initial year of
application of change in accounting method)
As of March 31,

2012

Acquisition costs
Accumulated
depreciation /amortization
Net book value

VehiclesTools,
furnitureandfixtures

Intangible
fixed
assets

–

¥48

¥83

¥132

–
–

43
¥ 5

75
¥ 7

119
¥ 13

2011
Tools,
furniture Intangible
and
fixed
fixturesassets

Total

¥10

¥116

¥133

¥260

9
¥ 1

88
¥ 28

104
¥ 29

201
¥ 59

Total
Vehicles(Millions of yen)

As of March 31, 2012
Tools,
furniture Intangible
and
fixed
fixturesassets
VehiclesTotal(Thousands of U.S. dollars)
Acquisition costs
Accumulated
depreciation /amortization
Net book value

–

$584

$1,009$1,606

–
–

523
$ 60

$

912
85

1,447
$ 158

As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Future minimum payments:
Within one year
Over one year
Lease payments
Depreciation / amortization equivalents
Interest expense equivalents

¥13
1
¥14

¥46
17
¥63

$158
12
$170

¥43
39
1

¥59
53
3

$523
474
12

Depreciation / amortization equivalents are computed by the straight-line method over
the respective lease terms with a residual value of zero.
The difference between total lease expenses and acquisition costs of the leased assets
comprise interest equivalents. Interest equivalents are computed by the interest method
over the respective lease terms.
65

17

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
9.

Securities

Stocks of subsidiaries and affiliates at March 31, 2012 and 2011 were as follows:
As of March 31, 2012
Carrying
Fair
Unrealized Carrying
Fair
Unrealized
value
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)
Stocks ofa subsidiary¥717¥1,863¥1,145$8,723$22,666$13,931

As of March 31, 2011
Carrying
Fair
Unrealized
value
value
gain
(Millions of yen)
Stocks ofa subsidiary
Note:

¥717

¥1,394¥677

Stocks of subsidiaries and affiliates for which it is extremely difficult todetermine market values were excluded from the above as follows:
As of March 31,
2012
2011
Carrying value
Carrying value(Millions of(Thousands of(Millions ofyen)
U.S. dollars)yen)

Stocks ofa subsidiaries
Stocks ofa affiliates¥2,628$31,974¥2,618

400

4,866

400

66

18

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 201210.

Income Taxes

The significant components of the Company’s deferred tax assets and liabilities at March
31, 2012 and 2011 were as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Tax loss carryforwards
Accrued retirement benefits
Allowance for bad debts
Account payable and accrued
expenses
Loss on devaluation of investments in
subsidiaries and affiliates
Allowance for losses on construction
contracts
Reserve for defects on completed
construction projects
Allowance for loss on litigation
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gain on hedging instruments,
net of taxes
Asset retirement obligations
Unrealized holding gain on securities
Total deferred tax liabilities
Net deferred tax assets¥ 36,058
5,273
3,508

¥ 59,469
5,790
4,432

$ 438,715
64,156
42,681

1,180

1,103

14,356

1,108

1,277

13,480

577

94

7,020

337
307
406
48,758(44,658)
4,100

461
521
952
74,101(69,601)
4,500

4,100
3,735
4,939
593,235(543,350)
49,884

(18)
(6)
(0)
(25)
¥ 4,074

–
(7)
(0)
(7)
¥ 4,492

(219)
(73)
(0)
(304)
$ 49,568

The following table summarizes the significant differences between the statutory tax rate
and the effective tax rates for the years ended March 31, 2012 and 2011:
Years ended March 31,
2011
2012
Statutory tax rate
Non-deductible expenses
Non-taxable income
Per capita inhabitants’ taxes
Valuation allowance
Change in corporate tax rate
Effective tax rates

40.7 %
28.8(18.6)
4.3(41.5)
24.8
38.5%

67

40.7 %
40.2(27.7)
26.6(53.2)–
26.6%

19

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
Adjustment of deferred tax assets and deferred tax liabilities due to change of effective
statutory tax rate
Following the promulgation on December 2, 2011 of the “Act for Partial Revision of the
Income Tax Act, etc. for the Purpose of Creating a Taxation System Responding toChanges in Economic and Social Structures ”(Act No. 114 of 2011) and the “Act on
Special Measures for Securing Financial Resources Necessary to Implement for Measuresfor Reconstruction following the Great East Japan Earthquake” (Act No. 117 of 2011), theeffective statutory tax rate used to measure deferred tax assets and liabilities was changed.
As a result, deferred tax assets, after offsetting deferred tax liabilities, decreased ¥288
million ($3,504 thousand), and income taxes-deferred increased ¥289 million ($3,516
thousand), unrealized holding gain on securities increased ¥0 million and deferred gain on
hedging instruments, net of taxes increased ¥1 million ($12 thousand).
11.

Per Share Information

Net assets and basic net income per share as of and for the years ended March 31, 2012 and2011 were as follows:2012
Net assets per share
Net income per share – basic
Net income per share – diluted(Yen)¥(55.69)
2.52
0.95

2011

2012
(U.S. dollars)¥(61.38)
1.16
0.50$(0.677)
0.030
0.011

The basis of calculation for net assets per share at March 31, 2012 was as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Total net assets
Amounts deducted from total net
assets[Including paid-in amounts forshares of preferred stock]Total net assets attribute to common
stock¥ 13,805¥ 13,200$ 167,964

29,87430,568363,474[29,874][30,568][363,474]¥(16,068)¥(17,367)$(195,498)(Thousands of shares)

Number of shares of common stock
used to determine net assets per share

288,54168

282,926

20

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
The basis for calculating basic net income per share – basic and net income per share –diluted for the years ended March 31, 2012 and 2011 was as follows:
Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – basic:
Net income
Amount not available to commonshareholders
Net income per share – basic

¥719

¥327

$8,748

–

–

¥719

¥327

–

$8,748(Thousands of shares)

Average number of share ofcommon stock outstanding

285,186

281,799

Years ended March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – diluted:
Adjustment for net income

–

–

–

(Thousands of shares)

Increase in number of share ofcommon stock[Including preferred stock]476,133[476,133]

375,905[375,905]

As described in “Changes in Accounting Methods”, previous period financial statements
have been adjusted retroactively to apply the change in accounting methods.
As a result, net income per share diluted for the previous period decreased ¥0.06 comparedwith the amount before the retroactive adjustment.

69

21

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2012
12. Subsequent Event
Acquisition of treasury stock pursuant to clause 156 of the Companies Act.
The following acquisition of treasury stock (3rd Series Class C preferred stock) was
determined at the board of directors’ meeting held on May 10, 2012. The proposal was
submitted to the shareholders’ meeting for approval, and subsequently approved at theshareholders’ meeting held on June 28, 2012.
(a) Reason for acquisition
To maintain the value of common stock in the event that preferred stock holders
exercise their acquisition rights to common stock, and to reduce the total amount ofdividends, the Company plans to acquire treasury stock.
(b) Details of acquisition of treasury stocks which was approved by shareholder’s meeting(1) Type of stock
3rd Series Class C preferred stock(2) Amount of stock
400,000 shares [Maximum](3) Total of acquisition cost
¥1,000 million ($12,166 thousand) [Maximum](4) Term for acquisition
1 year from the day following the date of the shareholders’ meeting.
13. Short-Term Bank Loans and Long-Term Debt
Short-term bank loans generally represent notes, principally at average interest rates of
2.4% and 2.1% at March 31, 2012 and 2011, respectively.
Long-term debt at March 31, 2012 and 2011 is summarized as follows:
As of March 31,
2012
2011
2012
(Millions of yen)(Thousands of
U.S. dollars)
Debt with collateral (at average interest
rates of 2.6% at 2012 and 2011)
Less current portion¥2,500(600)¥1,90070¥2,500(500)¥2,000$30,417
7,300$23,11722

71

CORPORATE OUTLINE
Corporate Name:

Sumitomo Mitsui Construction Co.,Ltd.

Established:

October 14,1941

Permission:(Special-23)No.200, Specified Constructor,
granted by the Minister of Land,
Infrastructure and Transport

License:(14)No.1, Housing, Land and Building Dealer,
granted by the Minister of Land, Infrastructure
and Transport

Main Scope of Business:

1) To contract, plan, design and/or supervise
civil engineering, architectural, prestressed
concrete, electrical, piping and other works
2) To plan, design and supervise marine
development, regional development,
urban development, natural resource
development and environment
maintenance3) To manufacture, sell and lease materials
for civil and building works, prestressed
concrete products, seismic isolating
device, seismic damping device, andother machinery and instruments

Corporate History

72

Main Banks

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Ltd

Main Shareholders

Japan Securities Finance Co., Ltd.
Daiwa Securities SMBC Principal Investments Co., Ltd.
Mitsui Fudosan Co., Ltd.
Matsui Securities Co., Ltd.
Mito Securities Co., Ltd.

CORPORATE DATAHEAD OFFICE

2-1-6 Tsukuda, Chuo-ku,
Tokyo, 104-0051, Japan

INTERNATIONAL DIVISION
2-1-6 Tsukuda, Chuo-ku,
Tokyo, 104-0051, Japan
TEL:81-3-4582-3171
FAX:81-3-4582-3247

OVERSEAS OFFICE

Jakarta:(Indonesia)

SMCC Shanghai

Bangkok:(Thailand)

SMCC Guam, Inc.

Summitmas 2, 20th Floor JL.Jend. Sudirman Kav.
61-62, Jakarta Selatan 12190, Indonesia
TEL 62-21-520-1757
FAX 62-21-525-0905

26/49, 14th Floor, Orakarn Building, Soi Chidlom,
Ploenchit Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
TEL:66-2-250-0560
FAX:66-2-254-7405

Shanghai:(China)

Room No.202, No.2 Building, 641 Tian Shan Road,
Chang Ning Zone, Shanghai 200336, China
TEL:86-21-6228-6780
FAX:86-21-6228-6781

Taipei:(Taiwan)

8F., No.96, Guangfu N. Rd., Songshan Dist., Taipei
City 105, Taiwan R.O.C.

Nairobi:(Kenya)

P.O.Box 60487-00200 Arwings Kodhek Road,
Chemusian Apartments, Apartment No.2 Next to
Olive Garden Hotel, Hurlingham, Nairobi, Kenya
TEL:254-20-2722560
FAX:254-20-2722619

SUBSIDIARY COMPANIES INOVERSEAS

Manila:(Philippines)

2nd Floor, Pioneer House Building, 108 Paseo deRoxas, Makati City, Metro Manila, Philippines
TEL:63-2-840-4913
FAX:63-2-840-4912

Guam:(USA)Suite 105-107, IBC Building, J.L. Baker Street,
Harmon Industrial Park, Harmon, Guam 96913(P.O.Box 9670, Tamuning, Guam 96931)
TEL:1-671-649-7521
FAX:1-671-649-7550

SMCC(Thailand)Co.,Ltd.

26/49, 14th Floor, Orakarn Building, Soi Chidlom,
Ploenchit Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
TEL:66-2-250-0560
FAX:66-2-254-7405

Pt.SMCC Utama Indonesia

Summitmas 2, 20th Floor JL.Jend. Sudirman Kav.
61-62, Jakarta Selatan 12190, Indonesia
TEL:62-21-520-1757
FAX:62-21-525-0905

Hanoi:(Vietnam)

17-21 Floor Building, Building Group No 4,
Hacinco Student's Village, Nguy Nhu Kon Tumroad, Nhan Chinh Wrd, Thanh Xuan District, Hanoi,
Vietnam
TEL:84-4-3942-8888
FAX:84-4-3942-8808

Singapore:

491B River Valley Road, #10-02/04, Singapore
TEL:65-6933-8000
FAX:65-6933-8001

SMCC Construction India Ltd.

23,Local Shopping Centre, Madangir,Near Pushp
Bhawan, New Delhi 110062,India
TEL:91-11-41392800
FAX:91-11-41652592,41652593

SMCC Philippines, Inc.

2nd Floor, Pioneer House Building, 108 Paseo deRoxas, Makati City, Metro Manila, Philippines
TEL:63-2-840-4913
FAX:63-2-840-4912

73

Room No.202, No.2 Building, 641 Tian Shan Road,
Chang Ning Zone, Shanghai 200336, China
TEL:86-21-6228-6780
FAX:86-21-6228-6781

Suite 105-107, IBC Building, J.L. Baker Street,
Harmon Industrial Park, Harmon, Guam 96913(P.O.Box 9670, Tamuning, Guam 96931)
TEL:1-671-649-7521
FAX:1-671-649-7550

ANNUAL REPORT
2012