PAGETOKYO ELECTRON ANNUAL REPORT 201625

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2016 and 2015

1. Basis of Presentation of Consolidated Financial
Statements
The accompanying consolidated ﬁnancial statements ofTokyo Electron Limited (hereinafter “the Company”) and its
subsidiaries (hereinafter collectively referred to as “Tokyo
Electron”) have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act
of Japan and its related accounting regulations, and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to applicationand disclosure requirements of International Financial
Reporting Standards.
The Company uses ﬁnancial statements prepared by foreign subsidiaries in accordance with International Financial
Reporting Standards or U.S. generally accepted accounting
principles for the preparation of the consolidated ﬁnancial
statements, together with adjustment for certain items which
are required to be adjusted in the consolidation process.
The accompanying consolidated ﬁnancial statements havebeen restructured and translated into English from the statutory Japanese language consolidated ﬁnancial statements. Some
supplementary information included in the statutory Japanese
language consolidated ﬁnancial statements is not presented in
the accompanying consolidated ﬁnancial statements.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥112.68
to $1.00, the approximate rate as of March 31, 2016. The
translation should not be construed as a representation that
the Japanese yen amounts shown could be converted into
U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated ﬁnancial statements include theaccounts of the Company and its 37 and 46 subsidiaries as ofMarch 31, 2016 and 2015, respectively.
All signiﬁcant inter-company accounts, transactions andunrealized proﬁts or losses have been eliminated throughconsolidation procedures.
The Company transferred a portion of its shares of Tokyo
Electron Device Limited on April 1, April 15 and May 9, 2014.
As a result, effective on April 1, 2014, the classiﬁcation ofTokyo Electron Device Limited changed from a consolidated
subsidiary to an equity method affiliate. In accordance withthis change, 8 affiliates apply equity method as of March 31,
2016. The ﬁscal year-end of all entities is March 31, except for

5 consolidated foreign subsidiaries. Financial statements provisionally closed for the period ending March 31 are used for
those subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies
are translated into Japanese yen at the year-end rates, except
for those hedged by forward exchange contracts, which aretranslated at the contracted rates. Resulting exchange gains
and losses are included in earnings for the year.
Revenue and expense items are translated at the rates thatapproximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries aretranslated into Japanese yen at the rates of exchange in
effect at the balance sheet date, except for shareholders’equity accounts, which are translated at the historical rates.
Revenue and expense accounts of foreign subsidiaries aretranslated at average rates of exchange in effect during theyear. Resulting translation adjustments are presented in net
assets as a component of accumulated other comprehensive
income in the consolidated balance sheets.
(c) Cash equivalents
Tokyo Electron considers all highly-liquid instruments purchased with original maturities of three months or less to be
cash equivalents.
(d) Short-term investments
Short-term investments consist of short term deposits
and low-risk ﬁnancial instruments with original maturities ofmore than three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security
and classiﬁes those securities as trading securities, held-tomaturity debt securities or other securities. Tokyo Electron has
no trading securities. Held-to-maturity debt securities arestated mainly at amortized cost. Other securities with market
prices are valued at fair value at the balance sheet date. The
differences between the book value and fair value of othersecurities, net of applicable income taxes, are presented in
net assets as a component of accumulated other comprehensive income. Other securities without market prices arevalued at cost using the weighted-average method.
The cost of sold securities is calculated using the weighted
average method.
(f) Inventories
Inventories other than raw materials are stated at thelower of cost, determined by principally the speciﬁc identiﬁcation method, or net realizable value, which is deﬁned as
selling price less estimated additional manufacturing costs
and estimated direct selling expenses. Raw materials arestated at the lower of cost, determined principally by themoving-average method, or replacement cost.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation of buildings, machinery and equipment of theCompany and its domestic subsidiaries is computed using
the declining balance method, except for buildings acquired
subsequent to March 31, 1998 which are depreciated using
the straight-line method, based on the estimated useful livesof assets. Foreign subsidiaries mainly apply the straight-line
method over the estimated useful lives of assets.
Estimated useful lives of property, plant and equipment are as
follows:
Buildings
2 to 60 years
Machinery and equipment
2 to 17 years(h) Intangible assets (excluding goodwill)
Intangible assets are amortized by the straight-line method over their estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortizedby the straight-line method over a period not exceeding 20
years.
(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of ﬁxed assets
held for use in the business.
If the carrying value of a ﬁxed asset is impaired, a loss isrecognized based on the amount by which the carrying value
exceeds its recoverable amount, being the higher of the net
selling price or the value in use of the assets. Net selling priceis determined using the fair value less disposal costs andvalue in use is based on the total amount of discounted cash
ﬂows estimated to be generated from the continuing use of
the individual assets or the asset group and the disposal of
the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an
amount determined based on the historical experience ofbad debts with respect to ordinary receivables, and an estimate of uncollectible amounts determined by reference tospeciﬁc doubtful receivables from customers which are experiencing ﬁnancial difficulties.
(l) Employee benefits
The Company and its domestic subsidiaries provide
deﬁned beneﬁt plans for their employees. Expected beneﬁts
are attributed to accounting periods by the beneﬁt formulabasis. Prior service costs are charged to earnings on astraight-line basis, beginning from the ﬁscal year in which
they are incurred, over a ﬁxed number of years (4 years)
within the average remaining years of service of employees

when the changes occur. Actuarial differences are charged toearnings on a straight-line basis, beginning from the following ﬁscal year after they are incurred, over a ﬁxed number ofyears (4 years) within the average remaining years of serviceof employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of theCompany and its domestic subsidiaries is calculated in accordance with internal regulations.
The Company and certain domestic subsidiaries decided to
discontinue the payment of severance pay for directors andaudit & supervisory board members after April 1, 2005, and at
the general shareholders’ meeting in June 2005, it was
resolved that the severance pay for directors and audit &supervisory board members until March 31, 2005 would be
paid at the termination of their service and the decision
regarding the payment amount for each director and audit &supervisory board member was delegated to the board of
directors and audit & supervisory board members. The accruals for severance costs for directors and audit & supervisoryboard members are included in Net liability for deﬁned beneﬁts in the consolidated balance sheets.
(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, and Tokyo Electron accrues estimated warranty costs
when product revenue is recognized. Estimated after-salerepair expenses over warranty periods are accrued based on
the historical ratio of actual repair expenses to corresponding
sales.
(n) Derivatives and hedge accounting
The Company and certain subsidiaries make use of derivatives in order to manage certain risks arising from adverse
ﬂuctuations in foreign currency exchange rates. The amountof derivatives is limited to the extent of foreign currency
assets, liabilities and actual orders, and Tokyo Electron does
not trade in derivatives for speculative purposes.
Derivatives are carried at fair value in the consolidated balance sheet with changes in unrealized gain or loss charged or
credited to earnings, except for those which meet the criteria
for hedge accounting. Unrealized gains or losses on hedging
instruments, net of taxes, are reported in net assets as acomponent of accumulated other comprehensive income.
Receivables and payables hedged by qualiﬁed forward foreign exchange contracts are translated at the corresponding
foreign exchange contract rates.
(o) Income taxes
Tokyo Electron records deferred tax assets and liabilities on
temporary differences between the carrying amounts ofassets and liabilities for ﬁnancial reporting purposes and thePAGETOKYO ELECTRON ANNUAL REPORT 201626

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Financial Section

Corporate Data

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

amounts used for income tax purposes and net operating
loss carryforwards. Deferred tax assets and liabilities aremeasured using the enacted tax rates and laws which are
expected to be in effect when net operating loss carryforwards and temporary differences are expected to realized.
(p) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)production equipment is principally recognized at the time of
the customer conﬁrmation of set-up and testing of products.
Revenue from such equipment not requiring substantial
installation is recognized at the time of shipment. Service
revenue maintenance is recognized ratably over the term of
the maintenance contract.
(q) Per share information
Net income per share and net assets per share are computed based on the weighted-average number of shares ofcommon stock outstanding during each year. Net income diluted per share is computed based on the weighted-average
number of shares of common stock outstanding during eachyear after incorporating the dilutive potential effect of sharesof common stock to be issued upon the exercise ofstock options.
Dividends per share has been presented on an accruals
basis and include, in each ﬁscal year ended March 31, dividends
approved or to be approved after March 31 but applicable tothe year then ended.
The basis for the calculation of net income per share forthe ﬁscal years ended March 31, 2016 and 2015 is as follows:
Thousands of
U.S. dollars

Millions of yen

2016

Net income attributable toowners of parent
Less components not pertaining
to holders of common stock
Net income pertaining toholders of common stock
Weighted-average number ofshares of common stock
outstanding (thousands)¥77,892—¥77,892

168,924

2015¥71,888—¥71,8882016$691,267—$691,267

179,238(r) Research and development expenses
Research and development expenses are charged to earnings as incurred and amounted to ¥76,287 million ($677,023
thousand) and ¥71,350 million for the years ended March 31,
2016 and 2015, respectively.

(s) Reclassifications
Certain reclassiﬁcations have been made to the prior year’s
consolidated ﬁnancial statements to conform with the presentation used for the year ended March 31, 2016.

3. Change in Accounting Policies and Adoption of
New Accounting Standards
Year ended March 31, 2016
The Company and its domestic subsidiaries adopted“Revised Accounting Standard for Business Combinations”(ASBJ Statement No.21, September 13, 2013 (hereinafter,“Statement No.21”)), “Revised Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No.22,
September 13, 2013 (hereinafter, “Statement No.22”)) and“Revised Accounting Standard for Business Divestitures”(ASBJ Statement No.7, September 13, 2013 (hereinafter,“Statement No.7”)) (together, the “Business Combination
Accounting Standards”), from the current ﬁscal year. As aresult, the Company changed its accounting policies to recognize in capital surplus the differences arising from thechanges in the Company’s ownership interest of subsidiaries
over which the Company continues to maintain control andto record acquisition related costs as expenses in the ﬁscal
year in which the costs are incurred. In addition, theCompany changed its accounting policy for the reallocationof acquisition costs due to the completion following provisional accounting to reﬂect such reallocation in the consolidated ﬁnancial statements for the ﬁscal year in which thebusiness combination took place. The Company also changed
the presentation of net income and the term “non-controllinginterests” is used instead of “minority interests”. Certain
amounts in the prior year comparative information werereclassiﬁed to conform to such changes in the current year
presentation.
In the consolidated statement of cash ﬂows, cash ﬂows
from acquisition or disposal of shares of subsidiaries with nochanges in the scope of consolidation are included in “Cashﬂows from ﬁnancing activities” and cash ﬂows from acquisition related costs for shares of subsidiaries with changes inthe scope of consolidation or costs related to acquisition or
disposal of shares of subsidiaries with no changes in thescope of consolidation are included in “Cash ﬂows from operating activities”.

With regard to the application of the Business
Combination Accounting Standards, the Company followed
the provisional treatments in article 58-2 (4) of Statement
No.21, article 44-5 (4) of Statement No.22 and article 57-4 (4)of Statement No.7 with application from the beginning of
the current ﬁscal year prospectively.
There is no effect on the consolidated ﬁnancial statementsof the current ﬁscal year.
Year ended March 31, 2015
Effective from the year ended March 31, 2015, theCompany and its consolidated domestic subsidiaries adopted
article 35 of the “Accounting Standard for Retirement
Beneﬁts” (ASBJ Statement No.26, May 17, 2012 (hereinafter,“Statement No.26”)) and article 67 of the “Guidance on
Accounting Standard for Retirement Beneﬁts” (ASBJ
Guidance No.25, May 17, 2012 (hereinafter, “Guidance
No.25”)), and have changed the determination of retirement
beneﬁt obligations and current service costs. In addition, theCompany and its consolidated domestic subsidiaries havechanged the method of attributing expected beneﬁt to periods from straight-line attribution to a beneﬁt formula basis
and determining the discount rates.
In accordance with article 37 of Statement No.26, theeffect of changing the determination of retirement beneﬁt
obligations and current service costs were recognized inretained earnings at the beginning of the year ended March
31, 2015.
The effect of the adoption of the accounting standards on
the Company’s consolidated ﬁnancial statements for the year
ended March 31, 2015 was immaterial.

4. Accounting Standards issued but not yet adopted“Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016
(hereinafter, “Guidance No.26”))

1. Treatment for an entity that does not meet any of thecriteria in types 1 to 5;
2. Criteria for types 2 and 3;
3. Treatment for deductible temporary differences which
an entity classiﬁed as type 2 is unable to schedule;
4. Treatment for the period which an entity classiﬁed as
type 3 is able to reasonably estimate with respect tofuture taxable income before consideration of taxable
or deductible temporary differences that exist at theend of the current ﬁscal year; and5. Treatment when an entity classiﬁed as type 4 also
meets the criteria for types 2 or 3.
(2) Effective date
Effective from the beginning of the ﬁscal year ending
March 31, 2017(3) Effects of application of the Guidance
The Company and its domestic subsidiaries are currently inthe process of determining the effects of these revised standards on the consolidated ﬁnancial statements.

5. Supplemental Information on the Consolidated
Statements of Cash Flows
Information of assets and liabilities of a deconsolidated
subsidiary and the relationship between the sales price ofshares and the net proceeds from the sales transaction forthe year ended March 31, 2015 are as follows:
Millions of yen

2015

Current assets
Non-current assets

6,333

Current liabilities(25,311)

Non-current liabilities(9,222)

Non-controlling interests(10,420)

Equity investment interest after sale of shares(7,983)

Accumulated other comprehensive income(1) Overview
Following the framework in Auditing Committee Report
No. 66 “Audit Treatment regarding the Judgment ofRecoverability of Deferred Tax Assets”, which prescribes estimation of deferred tax assets according to the classiﬁcationof the entity by one of ﬁve types, the following treatments
were changed as necessary:¥51,578

Loss on sale of affiliates’ shares(113)(1,609)Loss on change in equity(242)

Sales price of shares

3,011

Cash and cash equivalents
Net proceeds from sales of affiliates’ shares(1,285)¥ 1,726

PAGE

TOKYO ELECTRON ANNUAL REPORT 201627

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

6. Securities
Other securities as of March 31, 2016 and 2015 are as follows:

For the year ended March 31, 2016, the Company soldavailable-for-sale securities and recognized the following
gain and loss on sale:
Millions of yen

Millions of yen

2016:

Cost

Securities with market prices
Equity securities

Amount of sale

Gain on sale

Loss on sale

Equity securities¥1,275

¥446

¥247

Total

¥1,275¥446¥247

Carrying value

Non-current¥7,204¥18,580

Thousands of US dollars

Securities without market prices
Unlisted stock
Total

1,318

1,334

¥8,522¥19,914

Millions of yen

2015:

Cost

Carrying value

Non-current

Amount of sale

Gain on sale

Loss on sale

Equity securities$11,315$3,958$2,192

Total$11,315$3,958$2,192For the year ended March 31, 2015, the amount of gain andloss on sale of available-for-sale securities was immaterial.

Equity securities¥8,282¥22,230

Year ended March 31, 2015
(1) Non-current assets of Tokyo Electron (Kunshan) Limited

7. Inventories

Securities without market prices
Unlisted stock

Inventories as of March 31, 2016 and 2015 are as follows:

1,621

1,645

60

60

Total

¥9,963¥23,935

Thousands of U.S. dollars

Finished products

2016:

Cost

Work in process, raw materials
and supplies

Other

Carrying value

Non-current
Equity securities$63,933$164,891

11,697

11,839$75,630$176,730

Securities without market prices
Unlisted stock
Total

Held-to-maturity securities classiﬁed as current assets are¥160,999 million ($1,428,816 thousand) and ¥238,300 million
as of March 31, 2016 and 2015, respectively.
Reconciliation of held-to-maturity securities as of March
31, 2016 and 2015 to the amounts of short-term investmentsin the consolidated balance sheets are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

¥160,999 ¥238,300

Thousands of
U.S. dollars

Millions of yen

2016

2015

¥130,479 ¥112,301

Total

Securities with market prices

64,601$1,157,961

63,287573,313¥195,080 ¥175,588$1,731,274

The amounts of change in inventory provision included incost of sales in the consolidated statements of income forthe years ended March 31, 2016 and 2015 were an increase of¥758 million ($6,723 thousand) and a decrease of ¥582 million, respectively

8. Other Income (Expenses)
Loss on impairment of property, plant and equipment,
goodwill and other assets
For the years ended March 31, 2016 and 2015, the following
loss on impairment has been recognized:
Year ended March 31, 2016
(1) Goodwill and non-current assets of TEL FSI, Inc.

(45,000) (238,068)(399,361)

Deposits with original maturities
of more than three months

25,03651

222,187¥141,035 ¥283$1,251,642

Net loss on devaluation of investment securities was ¥331
million ($2,938 thousand) and ¥0 million for the years ended
March 31, 2016 and 2015, respectively.

Loss on impairment
Location

Chaska,Minnesota,
U.S.A.

Use

Type of Asset

Goodwill
Buildings
Business
Other intangible
assetsassets
Total

Loss onimpairment
Location

Use

Type of Asset

Millions of yen

Plant

Buildings,
machinery andequipment, andother assets¥2,1192016$1,428,816

Deposits and low-risk ﬁnancial
instruments with original
maturities of three months
or less

Short-term investments(2) Others
Loss on impairment of ¥266 million ($2,360 thousand) was
recognized for other asset groups of Tokyo Electron.

9. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral as of March 31, 2016 and 2015.

10. Short-term Borrowings
There are no short-term borrowings classiﬁed as current
liabilities as of March 31, 2016 and 2015.
As of March 31, 2016 and 2015, Tokyo Electron has unusedlines of credit amounting to ¥114,960 million ($1,020,234
thousand) and ¥114,990 million, respectively.

11. Employee Benefits

Securities with market prices

Held-to-maturity (current)Tokyo Electron performed an impairment test and recognized loss on impairment of assets of TEL FSI, Inc., a subsidiary
manufacturing semiconductor production equipment, due to
TEL FSI, Inc.’s reconsideration of its business plan. Tokyo Electron
recognized the difference between the book value and therecoverable amount of goodwill, buildings, and other intangible assets as loss on impairment. The recoverable amount
was measured as value in use, and was calculated by discounting future cash ﬂows at a discount rate of 14.0-14.5%.

Millions of yen

Thousands of
U.S. dollars¥3,8252,756$33,946
24,4592,880¥9,461

25,559$83,964

Kunshan, Jiangsu, China

Due to a signiﬁcant downturn in proﬁtability caused by themarked deterioration in operating conditions, Tokyo Electron(Kunshan) Limited, a subsidiary manufacturing FPD production equipment, recognized the difference between bookvalue and recoverable amount of property, plant and equipment as loss on impairment. The recoverable amount wasmeasured as the net selling price calculated based on reasonable estimates, such as real estate appraisals performed bythird party valuation experts.
(2) Others
Loss on impairment of ¥387 million was recognized forother asset groups of Tokyo Electron.
Loss on business restructuring
Loss on business restructuring of ¥2,235 million ($19,835
thousand) for the year ended March 31, 2016 represents losses relating to the business restructuring in U.S. subsidiaries,
which mainly consists of inventory disposal costs.

The Company and its domestic subsidiaries provide for
their employees a cash balance plan and a non-contributory
retirement and severance beneﬁt plan as deﬁned beneﬁtplans for their employees. Further, certain consolidated overseas subsidiaries provide deﬁned beneﬁt plans for theiremployees.
Deﬁned beneﬁt plans(1) Movement of deﬁned beneﬁt obligations
Thousands of
U.S. dollars

Millions of yen

2016

Balance at April 1, 2015
and 2014
Cumulative effect of changes
in accounting policies

2015¥112,272 ¥113,221

2016$ 996,379

—

2,034

—

112,272

115,255

996,379

Service cost

5,677

5,697

50,382

Interest cost

1,273

1,608

11,297

Actuarial loss

9,690

4,793

85,996

Beneﬁts paid

(7,748)(5,138)(68,761)

Effect of change in scope of
consolidation(4,548)(11,095)(40,362)

Foreign currency exchange
rate changes

(475)

969

(4,215)

87

183

771

¥116,228 ¥112,272$1,031,487

Restated balance

Other
Balance at March 31, 2016
and 2015

PAGE

TOKYO ELECTRON ANNUAL REPORT 201628

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(4) Deﬁned beneﬁt costs(2) Movement of plan assets
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

¥70,905¥69,540$629,260

Expected return on plan assets

1,271

1,332

Actuarial gain (loss)(2,304)

Employer contributions

2,997

Balance at April 1, 2015
and 2014

11,297

11,280

Expected return on plan assets(1,271)(1,332)(11,280)

3,997(20,447)

Net actuarial gain amortization(2,268)(2,570)(20,126)

3,406

26,597

Other

243

528

2,155

¥3,654¥3,931$32,428(5,542)(39,590)

(380)

952

27

273
¥70,905

Total deﬁned beneﬁt costs
for the ﬁscal years ended
March 31, 2016 and 2015

(3,372)239(5) Remeasurements of deﬁned beneﬁt plants$555,103

Millions of yen

Actuarial losses(3) Reconciliation from deﬁned beneﬁt obligations and plan
assets to liability (asset) for deﬁned beneﬁts
Thousands of
U.S. dollars

Millions of yen

2015$550,257

Plan assets(62,549)(70,905)(555,103)

Funded status(546)(8,692)(4,846)54,22550,059481,230

—

921

—

2016

$(120,643)(6) Accumulated remeasurements of deﬁned beneﬁt plants

Net actuarial gain (loss) that is
yet to be recognized (before tax) ¥(6,582)¥53,679
55,302

Net asset for deﬁned beneﬁts(1,623)¥53,679¥42,288

Thousands of
U.S. dollars

2015

2016

¥7,180$(58,413)(7) Plan assets
1. Plan assets comprise2016

Net liability for deﬁned beneﬁts(note 2)Net liability for deﬁned beneﬁts
at March 31, 2016 and 20152015¥(3,572)

Millions of yen¥62,213

Net liability for deﬁned beneﬁts
at March 31, 2016 and 2015

2016

2016

¥62,003

Thousands of
U.S. dollars¥(13,594)

2016

Funded deﬁned beneﬁt
obligations

Asset ceiling adjustments (note 1)$50,382

1,608(4,461)

Unfunded deﬁned beneﬁt
obligations

2016¥5,697(48,864)

2016

2015

1,273

(3,053)¥62,549

2016¥5,677(5,506)

Balance at March 31, 2016
and 2015

Thousands of
U.S. dollars

Service cost

Beneﬁts paid

Other

Millions of yen

Interest cost

Effect of change in scope of
consolidation
Foreign currency exchange
rate changes

12. Income Taxes

2015$476,384

Bonds

51,105490,788

Life insurance company generalaccount

26

20(8,817)(14,404)

Equity securities

17

22

Cash and cash equivalents

2

2

Other

9

10

Total

100%

100%

¥42,288$476,384

Notes: 1. The asset ceiling adjustment represents plan assets exceeding theasset ceiling for overseas subsidiaries that apply International
Accounting Standard 19 Employee Beneﬁts.
2. The provision for accrued pension and severance costs for directors
and audit & supervisory board members of ¥375 million ($3,328
thousand) as of March 31, 2016 and 2015 is not included.

46%

46%

Signiﬁcant components of the deferred tax assets and liabilities of Tokyo Electron as of March 31, 2016 and 2015 are as
follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Net liability for deﬁned beneﬁts¥17,717¥17,913$157,233

Net operating loss carryforwards

17,061

19,842

151,411

Elimination of unrealized
proﬁt in inventories

14,100

11,582

125,133

Devaluation of inventories

4,913

4,149

43,601

Deferred tax assets

Loss on impairment of property,
plant and equipment andother assets

3,037

3,026

26,952

Accrued employees’ bonuses

2,831

3,210

25,124

Accrued warranty expenses

2,395

2,734

21,255

Other

12,366

10,003

109,745

Total gross deferred tax assets

74,42072,459660,454

Less valuation allowance(11,995)(13,506)(106,452)

Total deferred tax assets

62,42558,953554,002

Undistributed earningsof subsidiaries(5,383)(5,620)(47,772)

Intangible assets identiﬁed
through business combination(3,741)(5,255)(33,200)

Net unrealized gains on
investment securities(3,487)(4,510)(30,946)

Other(3,146)(5,863)(27,920)

Deferred tax liabilities

Total deferred tax liabilities(15,757)(21,248)(139,838)

Net deferred tax assets¥46,668¥37,705$414,164

Net deferred tax assets are included in the consolidatedbalance sheets as of March 31, 2016 and 2015 as follows:
Thousands of
U.S. dollars

Millions of yen

2. Long-term expected rate of return
Current and target asset allocations, and historical andexpected returns on the various categories of plan assets
have been considered in determining the long-term
expected rate of return.
(8) Actuarial assumptions
The principal actuarial assumptions at and for the years
ended March 31, 2016 and 2015 are as follows:
2016

2015

Discount rate

0.59%

1.15%

Long-term expected rate of return

2.00%

2.00%

2016

2015

2016

Current assets¥31,204¥27,672$276,926

Investments and other assets

20,782

18,348

184,434

Other current liabilities
Other non-current liabilities

—

(1)

—

(5,318)(8,314)(47,196)

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during
the period in which temporary differences become deductible. For assessment of the realizability of deferred tax assets,management considers the scheduled reversal of deferred
tax liabilities, future estimated taxable income, tax planning
strategies and level of net operating loss carryforwards, ifany, in accordance with accounting principles generally
accepted in Japan.

Based on the level of historical taxable income and future
estimated taxable income over the periods which the temporary differences are deductible, management believes Tokyo
Electron will realize the beneﬁts of deferred tax assets, net ofvaluation allowance, as of March 31, 2016 and 2015.
The Company and its wholly-owned domestic subsidiaries
apply a consolidated tax ﬁling system for corporate tax purposes.
On March 31, 2016, amendments to the Japanese tax regulations were enacted into law. Based on the amendments,
the statutory income tax rates utilized for the measurementof deferred tax assets and liabilities expected to be settled orrealized from April 1, 2016 to March 31, 2018 and on or after
April 1, 2018 were changed from 32.34% to 30.86% and30.62%, respectively, as of March 31, 2016.
Due to these changes in statutory income tax rates, netdeferred tax assets (after deducting the deferred tax liabilities) decreased by ¥1,781 million ($15,806 thousand), anddeferred income tax expense increased by ¥1,893 million($16,800 thousand) for the ﬁscal year ended March 31, 2016.
Signiﬁcant components of the difference between thestatutory and effective tax rates for the years ended March
31, 2016 and 2015 are as follows:
2016

2015

33.06%

35.64%Tax credits(7.49)(4.35)

Effect of enacted changes in Japanese
tax rates on net deferred tax assets

1.78

3.39

Statutory tax rate in Japan
Adjustments:

Amortization and impairment of
goodwill

1.49

0.45

Effect of elimination of unrealized proﬁt(1.30)

0.70

Change in valuation allowance(0.83)(17.51)Others, net

0.09(1.16)

Effective tax rate

26.80%

17.16%

13. Net Assets
Net assets comprises four subsections, which are shareholders’ equity, accumulated other comprehensive income,share subscription rights and non-controlling interests.
Under Japanese laws and regulations, the entire amount
paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the boardof directors, designate an amount not exceeding one half ofthe price of the new shares as additional paid-in capitalwhich is included in capital surplus.

PAGE

TOKYO ELECTRON ANNUAL REPORT 201629

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of
additional paid-in capital and legal reserve must be set aside
as additional paid-in capital or legal reserve. Legal reserve is
included in retained earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in
capital used to eliminate or reduce a deﬁcit generally requirea resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve
may be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.

The Company is subject to restriction of dividends basedon the Japanese Corporate Act, which restricts the amount ofdividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings to shareholders on dates other than the mid-term andyear-end, by a resolution of the board of directors in accordance with Japanese laws and regulations.
At the board of directors’ meeting held on May 12, 2016, thedistribution of cash dividends amounting to ¥18,372 million($163,046 thousand) was resolved. Such appropriations havenot been accrued in the consolidated ﬁnancial statements asof March 31, 2016 since they are recognized in the period inwhich they are resolved at the board of directors’ meeting.

Other comprehensive income for the years ended March 31, 2016 and 2015 is as follows:
Thousands of
U.S. dollars

2016

2015

2016

¥ (2,379)¥5,281$ (21,113)

Net unrealized gains on investment securities
Reclassiﬁcation adjustments

(201)

0

(1,784)(2,580)5,281(22,897)

Tax expense

1,024(1,413)

9,088

Sub-total, net of tax(1,556)

3,868(13,809)

Net deferred gains (losses) arising during the year
Reclassiﬁcation adjustments
Sub-total, before tax
Tax expense
Sub-total, net of tax

2016

(168)

95

(1,491)

—

3

—

(168)

98

(1,491)

56

(29)

497

(112)

69

(994)

(5,705)

6,664(50,630)

Reclassiﬁcation adjustments

(1)

(21)

(9)

(5,706)

6,643(50,639)———

Sub-total, before tax
Tax expense
Sub-total, net of tax(5,706)

6,643(50,639)

Remeasurements of deﬁned beneﬁt plans

Yen

U.S. dollars

¥1

$0.01

479,300¥1

Granted135,700

1

0.01

—

—

Exercised

207,400

1

0.01

88,900

1

1,000

1

0.01

12,2001

Outstanding at the end of year

305,500

1

0.01

378,200

1

169,800

1

0.01

252,100

1

Amounts expensed related to stock options
The amounts expensed related to stock options for the years
ended March 31, 2016 and 2015, are as follows:
Millions of yen

Thousands of
U.S. dollars

2016

2015

2016

¥967

¥153

$8,582

Valuation method of fair value per unit of stock options
Fair value as of the grant date for stock options granted forthe year ended March 31, 2016 was ¥6,909 ($61.32) per unit,
which was evaluated as follows:(1) Valuation method used : Black-Scholes model(2) Major underlying assumptions and estimates:
11th Stock Acquisition Rights

Volatility (Note 1)
Expected residual periods (Note 2)

11.5 years

Expected dividends (Note 3)¥96.5 ($0.86) per share
0.52%

(907)

(100,515)

Risk-free interest rate (Note 4)(2,268)(2,665)(20,128)

Sub-total, before tax(13,594)(3,572)(120,643)

Notes: 1. Calculated based on the stock price performance for 11.5 years (fromDecember 2003 to June 2015).
2. Calculated on the assumption that the share subscription rights
would be exercised at the middle point of the exercise period.
3. Based on the dividends paid for the year ended March 31, 2015
and 2014.
4. Based on Japanese government bond yield corresponding to the
expected residual periods.

4,361

1,302

38,703(2,270)(81,940)

(345)

56

(3,062)¥(16,952)¥8,366$(150,444)

Share of other comprehensive income of associates accounted for using equity method
Adjustments during the year
Total other comprehensive income(3) Method of estimating the number of vested stock options
As it is difficult to reasonably estimate the number of stock
options to be forfeited in the future, the Company adopts
a method that reﬂects the actual number of forfeitures.

16. Leases
Future minimum lease payments on non-cancelable operating leases are as follows:
Millions of yen

Due within one year

Thousands of
U.S. dollars

2016

2015

2016

¥2,397¥3,249$21,273

Due over one year

4,756

3,660

42,208

Total¥7,153¥6,909$63,481

17. Fair Value of Financial Instruments

39.21%(11,326)(9,233)Yen

Exercisable at the end of year

Adjustments during the year

Tax expense

Weighted-average
exercise price378,200

Reclassiﬁcation adjustments

Sub-total, net of tax

Weighted-average exercise price

Outstanding at the beginning of year

Foreign currency translation adjustments
Adjustments during the year

2015
Number ofsharesSelling, general andadministrative expenses

Net deferred gains (losses) on hedging instruments

exercise period of seventeen years from the date on which theoptions become exercisable.
Options to purchase 135,700 shares of the Company wereauthorized and granted at an exercise price of ¥1 ($0.01) for theyear ended March 31, 2016.

A summary of stock options outstanding and exercisable as of March 31, 2016 and 2015 is as follows:

Expired (forfeited)

Millions of yen

Sub-total, before tax

Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since theyear ended March 31, 1999. The options under the plans vest
immediately or over three-year period with restriction on
exercise up to three years after the date of grant, and have an

Number ofshares

14. Other Comprehensive Income

Net unrealized gains (losses) arising during the year

15. Share Subscription Rights

Policy for financial instruments
Tokyo Electron limits its fund management to short-termbank deposits and low-risk ﬁnancial instruments.
Trade receivables, which consist of notes and accounts
receivable, are exposed to credit risk in the event of non-performance by the counterparties. Execution and managementof credit risk, maturity and receivable balance are conductedpursuant to the internal management rules for credit control.
Credit risk of major customers is assessed on a regular basis.

PAGETOKYO ELECTRON ANNUAL REPORT 201630

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Short-term investments consist of time deposits and low
risk ﬁnancial instruments and Tokyo Electron trade withhighly-rated ﬁnancial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests inlisted companies exposed to equity market risks. Conditions,
including market prices, for these investment securities aremonitored on a regular basis.
Trade payables, which consist of notes and accounts payable, mainly mature within one year. Trade payables are
exposed to liquidity risks which are managed through activities such as implementing cash management plans.
See note 18 for detailed discussion on derivative ﬁnancial
instruments.
Fair value of financial instruments
Carrying amount and estimated fair value of ﬁnancial
instruments as of March 31, 2016 and 2015 are set out below.
Fair value of ﬁnancial instruments which is practically difficult
to estimate are excluded (see note 6).
Millions of yen
Carrying
amountEstimated
fair value1

Cash and cash equivalents¥ 95,638¥ 95,638

Short-term investments

141,035

140,785

2016:

AssetsTrade notes and accounts
receivable, net of allowance for
doubtful accounts (¥48 million)
Investment securities

116,455

2016:

Cash and cash equivalents$ 848,757$ 848,757

Short-term investments

1,251,642

1,249,423

Trade notes and accounts
receivable, net of allowance for
doubtful accounts ($426 thousand)
Investment securities

Hedge accounting applied

164,891

164,891
488,552

Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

10,49010,490293

293

Notes: 1. Fair value calculation of ﬁnancial instruments
Cash and cash equivalents, short-term investments, trade notes andaccounts receivable and trade notes and accounts payable
The carrying amounts approximate fair value because of the shortmaturity of these instruments.
Investment securities
The fair values of marketable securities are based on quoted market prices.
See note 6 for further information by classiﬁcation of investment
securities.
Derivatives
See note 18 for detailed discussion on derivative ﬁnancial
instruments.
2. The following unlisted equity securities are not included in the above
as they do not have quoted market prices and therefore it is considered extremely difficult to measure their fair value.
Millions of yen

18,5802016

55,05055,050

1,182

1,182

33

33

Unlisted stocks¥1,334¥1,645

Tokyo Electron is subject to risk from adverse ﬂuctuations
in foreign currency exchange rates in its operating andﬁnancing activities. The Company and certain subsidiaries
enter into forward foreign exchange contracts in order tohedge such risks, but do not enter into such transactions for
speculative purposes. The Company implements a ratio analysis of the total cumulative cash ﬂow ﬂuctuations to assess
effectiveness of hedging for all derivative transactions,
except for transactions where the critical terms of the hedging instrument and hedged item match and the Company
could conclude that changes in fair value or cash ﬂows are
expected to completely offset. Execution and managementof all derivative transactions are conducted pursuant to theinternal management rule.
The estimated fair values of the derivative ﬁnancial instruments as of March 31, 2016 and 2015 are as follows:
1. Derivative ﬁnancial instruments not designated as hedging
instruments
Millions of yen

2016:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars¥51,173¥1,773¥1,773

Sell Korean won

1,068

(612)

(612)
(0)

Sell Singapore dollars

58

(0)

Buy Korean won

879

2

2

2016

Buy U.S. dollars

834

(1)

(1)

Buy Taiwan dollars

431

10

10

Buy EURO

359

9

9

2015

$11,839

Other

—

292

—

Total

¥1,334¥1,937$11,839

Buy Swiss francs

95

1

1

Buy Singapore dollars

33

(0)

(0)

Total

¥54,930¥1,182¥1,182

2015:

Contract
amountFair value

Gains(losses)

Sell U.S. dollars¥55,664¥(1,448)¥(1,448)

Sell Swiss francs

6,346

34

34

Sell Korean won

1,068

(757)

(757)

3. Maturities of ﬁnancial assets and securities are as follows:
Millions of yen

2015:

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents
Short-term investments¥317,632
283¥317,632
283

Within 1 year

Cash and cash equivalents¥ 95,638¥—

Short-term investments

141,035—

2016:

Trade notes and accounts receivable

110,466

110,466

Investment securities

22,23022,230Liabilities

2015:

Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable

56,479Hedge accounting applied—

Within 1 year

After 1 through5 years(2,125)

202

202

61

(0)

(0)

Sell Chinese yuan

13

(3)

(3)

Buy U.S. dollars

843

1

1

394

(1)

(1)

¥317,632

¥—

283

—

Buy Chinese yuan

338

50

50

110,845—

Buy EURO

135

(1)

(1)

Buy Singapore dollars

33

0

0

¥64,895¥(2,125)¥(2,125)

Thousands of U.S. dollars(2,125)Sell Singapore dollars

Buy Taiwan dollars

56,479Derivatives (see note 18)
Hedge accounting not applied

116,503
Millions of yen

Trade notes and accounts
receivable, net of allowance for
doubtful accounts (¥379 million)

Trade notes and accounts payable

Millions of yen

Millions of yen
After 1 through5 years

2016:

Within 1 year

After 1 through5 years

Cash and cash equivalents$ 848,757$—

Short-term investments

1,251,642—

Trade notes and accounts receivable

1,033,928—

Contract
amountFair value

Gains(losses)

Sell U.S. dollars$454,145$15,734$15,734

Sell Korean won

9,478(5,431)(5,431)

515

(0)

(0)

Buy Korean won

7,801

18

18

Buy U.S. dollars

7,401

(9)

(9)

Buy Taiwan dollars

3,825

89

89

Buy EURO

80

2016:

Thousands of
U.S. dollars

Reported amount In balance sheet

Derivatives (see note 18)
Hedge accounting not applied

1,033,502

488,552

Liabilities
Trade notes and accounts payable

1,033,502

Liabilities
Trade notes and accounts payable

Thousands of U.S. dollars

Estimated
fair value1

Assets

116,455

18,58018. Derivative Financial Instruments

Thousands of U.S. dollars
Carrying
amount

Total

Sell Singapore dollars

3,186

80

Buy Swiss francs

843

9

9

Buy Singapore dollars

293

(0)

(0)

$487,487$10,490$10,490

Total

Note: The fair values are based on the quoted forward foreign exchange rates.

2. Derivative ﬁnancial instruments designated as hedging
instruments
Alternative method
The contract amounts of forward foreign exchange contracts, entered into to hedge future transactions and receivables and payables denominated in foreign currencies thathave been translated by the corresponding contracted rates,
are as follows:
Millions of yen

Thousands of U.S. dollars

Contract
amountFair value

Contract
amountFair value

Sell U.S. dollars¥1,371¥63$12,167$559

Sell Korean won

33

(18)

293

(160)

Buy EURO

361

(8)

3,204

(71)

Buy GBP

19

(3)

169

(26)

Buy U.S. dollars

13

(0)

115

(0)

Sell U.S. dollars

162

—

1,438

—

Buy U.S. dollars

200

—

1,775

—

Buy Singapore dollars

21

—

186

—

2016:

Future transactions
denominated ina foreign currency

Monetary assets andliabilities in foreign
currency (Note)

Buy EURO
Total

12

—

106

—

¥2,192¥34$19,453

$302

PAGE

TOKYO ELECTRON ANNUAL REPORT 201631

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Millions of yen

2015:

Contract
amountFair value

Future transactions denominated ina foreign currency
Sell U.S. dollars¥ 638¥ (37)

Sell Korean won

74

(51)

Buy Chinese yuan

1,808

326

Buy EURO

406

(45)

Buy U.S. dollars

50

9

Buy U.S. dollars
Total(3) Share transfer date
April 1, 2014, April 15, 2014 and May 9, 2014(4) Share transfer information
Legal form

Monetary assets and liabilities in foreign
currency (Note)
Sell U.S. dollars

components and computer network related products
while becoming even more independent and building its
own growth strategies for the future.

Share transfer

Number of shares transferred

2,342,600 shares—

Sales amount of the shares¥3,011 million

268—

Ownership ratio after the share transfer¥4,335

¥202

1,091

Note: The fair value of these derivative ﬁnancial instruments, which is based on
the quoted foreign exchange rates, is included in the carrying value ofhedged assets and liabilities.

35.45%

2. Summary of accounting treatment(1) Carrying value of assets and liabilities and primary information related to the transferred business

19. Business Combinations

Millions of yen

2015

Years ended March 31, 2015
Business Divestitures
Share transfer of a subsidiary
1. Outline of the share transfer(1) Name of the company and business description
Name of the company: Tokyo Electron Device Limited
Business description: Sale of electronic components andcomputer networks(2) Reason of the share transfer
In the midst of a rapidly changing business environment, Tokyo Electron has spent a considerable effort
investigating future growth strategies for both Tokyo
Electron and Tokyo Electron Device Limited as both companies look to develop the businesses going forward. As aresult, the Company sold a portion of its shares in Tokyo
Electron Device Limited in order to improve the value ofboth enterprises. This will enable Tokyo Electron andTokyo Electron Device Limited to plan for a greater concentration of management resources in our core equipment business, and for Tokyo Electron Device Limited toactively drive its development business and overseas
expansion in addition to existing sales of electronic

Current assets
Non-current assets¥51,578
6,333

Total assets¥57,911

Current liabilities¥25,311

Non-current liabilities
Total liabilities

9,222¥34,533(2) Accounting treatment
Responding to treasury stock repurchase announced by
Tokyo Electron Device Limited, Tokyo Electron recognized
loss on change in equity in the amount of ¥242 million forthe difference between the decrease in equity interest ofTokyo Electron Devise Limited and cash receipt, while
Tokyo Electron recognized loss on sale of affiliates’ sharesin the amount of ¥1,609 million for the share transfer.

20. Segment Information
General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
ﬁnancial information is available and the operating result is regularly reviewed by management to make decisions about resources to be allocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo Electron
identiﬁes as a reportable segment, “semiconductor production equipment (SPE)” and “ﬂat panel display (FPD) production equipment”.
Products of the SPE segment consist of coater/developers, plasma etch systems, thermal processing systems, single wafer
deposition systems, cleaning systems used in wafer processing, wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segment principally develops, manufactures, sells and distributes such products.
Products of the FPD production equipment segment consist of coater/developers and etch/ash systems used in the manufacture of ﬂat panel displays. The FPD production equipment segment principally develops, manufactures, sells and distributes suchproducts.
Changes in reportable segment
The photovoltaic panel (PV) production equipment segment is included in “Other” for the year ended March 31, 2016 due tothe decrease in its ﬁnancial signiﬁcance, whereas it was presented as a separate reportable segment for the year ended March 31,
2015. The segment information for the year ended March 31, 2015 has been reclassiﬁed to conform to the presentation for thecurrent year, and is presented in the “Information about reportable segment net sales, segment proﬁt (loss), segment assets andother items” section below.
Basis of measurement of reportable segment net sales, segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are generally consistent with those applied for the preparation of
the consolidated ﬁnancial statements. Intersegment sales or transfers are determined based on current market prices. Assets incommon use have not been allocated to each reportable segment, while costs associated with those assets have been allocatedto reportable segments on a systematic basis.
Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2016 and 2015 is as follows:
Millions of yen
Reportable Segment
Semiconductor
production
equipment

FPD
production
equipment

Other

Total

¥613,033¥44,687¥ 6,229¥663,949——

11,592

11,592(11,592)—

Total

613,033

44,687

17,821

675,541(11,592)

663,949

Segment proﬁt

123,163

4,747

2,036

129,946(23,479)

106,467

Segment assets

321,100

25,1862,134

348,420444,948

793,368

8,792

424

45

9,261

9,996

19,257

970

—

—

970

—

970

Loss on impairment

9,711

—

—

9,711

16

9,727

Capital expenditures, including intangible assets

8,500

285

13

8,798

5,952

14,7502016:

3. Business segment of the company transferredElectronic components and computer networks

Consolidated¥¥663,949

Net sales
Sales to external customers
Intersegment sales or transfers

4. Approximate income recorded in the consolidated statement of operations for the ﬁscal year ended March 31, 2015
Income before income taxes and non-controlling interests¥250 million

Eliminations
andCorporate

Depreciation and amortization
Amortization of goodwill

—

PAGE

TOKYO ELECTRON ANNUAL REPORT 201632

CONTENTS

To Our Stakeholders

Medium-term Management Plan
Interview with the CEO

Business Overview

Financial Review

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Sustainability

Consolidated Statements of Income

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Other information(1) Domestic and overseas net sales by destination for the years ended March 31, 2016 and 2015 are as follows:

Millions of yen
Reportable Segment

2015:

Semiconductor
production
equipment

FPD
production
equipment

Other

Total

Eliminations
andCorporate

Consolidated

Net sales
Sales to external customers¥576,242¥32,710¥ 4,173¥613,125¥—¥613,125——

11,443

11,443(11,443)—

Total

576,242

32,71015,616

624,568(11,443)

613,125

Segment proﬁt (loss)

135,992(1,312)(7,620)127,060(40,232)

86,828Intersegment sales or transfers

Millions of yen

2016:

Net sales

Korea

U.S.A

China

Europe

Other

Total

¥170,095¥121,808¥107,273¥103,574¥87,325¥56,659¥17,215¥663,949

Millions of yen

2015:

305,583

23,751

3,622

332,956

543,198

876,154

Depreciation and amortization

10,018427

48

10,493

10,38520,878

Amortization of goodwill

1,150

—

—

1,150

—

1,150

388

509

—

897

1,609

2,506

2016:

8,530

197

23

8,750

5,530

14,280Net sales

Capital expenditures, including intangible assets

Japan

Note: Sales are classiﬁed in countries or regions based on location of customers.

Segment assets

Loss on impairment

TaiwanNet sales

TaiwanU.S.A.

Korea

Japan

Europe

China

Other

Total

¥141,620¥135,425¥101,962¥95,046¥62,466¥58,380¥18,226¥613,125

Note: Sales are classiﬁed in countries or regions based on location of customers.
Thousands of U.S. dollars
TaiwanJapan$1,509,540 $1,081,008

Korea

U.S.A

China

Europe

Other

Total

$952,015$919,187$774,982$502,831$152,778$5,892,341

Thousands of U.S. dollars
Reportable Segment

2016:

Semiconductor
production
equipment

FPD
production
equipment

Other

Total

Eliminations
andCorporate(2) Net property, plant and equipment by location as of March 31, 2016 and 2015 are as follows:
Consolidated
Millions of yen

Net sales
Sales to external customers
Intersegment sales or transfers$5,440,477$396,583$ 55,281 $5,892,341 $— $5,892,341——

102,875

102,875

Total

5,440,477

396,583

158,156

5,995,216(102,875)(102,875) 5,892,341—

Segment proﬁt

1,093,033

42,12818,0691,153,230(208,368)

944,862

Segment assets

2,849,663

223,518

18,9393,092,120

3,948,775

7,040,895

Depreciation and amortization

78,026

3,763

399

82,18888,712

170,900

Amortization of goodwill

8,608

—

—

8,608

—

8,608

Loss on impairment

86,182——

86,182

142

86,324

Capital expenditures, including intangible assets

75,4352,529

116

78,08052,822130,902

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including PV Production Equipment business, group-wide
logistic services, facility maintenance and insurance.
2. (1) For the year-ended March 31, 2015, as described in “”Change in reportable segment””, sales to external customers of ¥3,618 million, segment loss of¥8,789 million, segment assets of ¥1,731 million and depreciation and amortization of ¥6 million reported as “”PV production equipment”” were included
in “”Other””.
(2) “Eliminations and Corporate” segment loss totaling ¥23,479 million ($208,368 thousand) and ¥40,232 million for the years ended March 31, 2016 and2015, respectively, includes corporate expenses not allocated to any reportable segments. The corporate expenses consist of research and development
costs of ¥13,583 million ($120,545 thousand) and ¥17,109 for the years ended March 31, 2016 and 2015, respectively, pertaining to fundamental researchand element research, not allocated to any of the reportable segments. In addition, for the year ended March 31, 2015, expenses related to businesscombination of ¥8,530 million is included.
(3) “Eliminations and Corporate” segment assets totaling ¥444,948 million ($3,948,775 thousand) and ¥543,198 million as of March 31, 2016 and 2015,
respectively, consist mainly of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
(4) “Eliminations and Corporate” loss on impairment of ¥16 million ($142 thousand) and ¥1,609 million for the years ended March 31, 2016 and 2015, respectively, are attributable to corporate assets not allocated to any of the reportable segments.
(5) “Eliminations and Corporate” capital expenditures totaling ¥5,952 ($52,822 thousand) and ¥5,530 million for the years ended March 31, 2016 and 2015,
respectively, consist mainly of capital expenditures for buildings, machinery and equipment not allocated to any of the reportable segments.

2016:

Property, plant and equipment

Japan

U.S.A.

Other

Total

¥75,580¥9,724¥11,013¥96,317Japan

U.S.A.

Other

Total

¥78,492¥15,496¥12,908¥106,896

Millions of yen

2015:

Property, plant and equipment

Thousands of U.S. dollars

2016:

Property, plant and equipment

Japan

U.S.A.

Other

Total

$670,749$86,298$97,737$854,784(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:

Millions of yen

Related reportable segment

Name of customer

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

Intel Corporation

Semiconductor production equipment

Taiwan Semiconductor
Manufacturing Company Ltd.

Semiconductor production equipment

2016

2016

¥100,672$893,433

83,795

743,655

71,938638,427

Millions of yen

Related reportable segment

Name of customer

Intel Corporation

Semiconductor production equipment

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

Note: The amounts include sales to the customer and its subsidiaries.

Thousands of
U.S. dollars

2015¥123,154
97,943

PAGE

TOKYO ELECTRON ANNUAL REPORT 201633

CONTENTS

To Our Stakeholders

Business Overview

Financial Review

Medium-term Management Plan
Interview with the CEO

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥ 970

¥—

¥ 970

Goodwill

4,095

—

4,095

Millions of yen
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill¥1,150¥—¥1,150Goodwill

9,067

—

9,067

2015:

Thousands of U.S. dollars
Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill$ 8,608$—$ 8,608

Goodwill

36,342—

36,342

2016:

Consolidated Statements of Income

21. Subsequent events
Regarding the Kumamoto earthquakes in April 2016, Tokyo Electron Kyushu Limited, one of our main plants, suffered damage toits buildings and production facilities. Tokyo Electron is taking necessary steps to return the plant operation to its normal state.
In the ﬁscal year ending March 31, 2017, Tokyo Electron expects to record restoration cost, inventory disposal cost andother losses related to the Kumamoto earthquakes, and currently estimates the total amount of loss to be approximately¥10,000 million ($88,747 thousand).

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2016 and 2015, and unamortized balances as of March 31, 2016 and 2015 are as follows:

2016:

Sustainability

Independent Auditor’s Report

Corporate Data