Consolidated Balance Sheet
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
31 March 2016

Millions of Yen
2015
2016

ASSETS
CURRENT ASSETS:
Cash and deposits (Notes 9, 20 and 21)
Notes and accounts receivable (Note 21)
Short-term investments (Notes 5 and 21)
Land and buildings for sale
Inventories
Deferred tax assets (Note 16)
Other
Allowance for doubtful accounts
Total current assets¥

PROPERTY, PLANT AND EQUIPMENT:
Buildings and structures, net (Notes 6, 7, 9, 15 and 18)
Machinery, equipment and vehicles, net (Notes 6, 7, 9 and 18)
Land (Notes 7, 8, 9 and 15)
Construction in progress
Other, net (Notes 6 and 9)
Total property, plant and equipment, net
INTANGIBLE ASSETSINVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5, 9 and 21)
Long-term loans receivable
Deferred tax assets (Note 16)
Assets for retirement benefits (Note 12)
Other
Allowance for doubtful accounts
Total investments and other assets
TOTAL ASSETS (Note 25)¥

See accompanying notes to consolidated financial statements.

2

25,072
23,702
2,188
100,742
1,976
2,533
12,565(270)
168,510¥

26,60030,892352
101,243
1,894
2,614
8,110
(260)
171,449

Thousands of
U.S. Dollars(Note 1)
2016$

222,507210,348
19,418894,059
17,54322,481
111,519(2,399)1,495,478

198,994
13,466
213,8106,076
8,898
441,247

187,950
12,979206,6162,119
8,476
418,141

1,766,016
119,515
1,897,504
53,92978,9693,915,935

8,245

8,820

73,17539,959
388
2,208
21
9,811
(59)
52,329670,333

47,358
388
1,656
1,464
15,033(75)
65,825664,236

354,628
3,447
19,601
188
87,075(532)
464,408
5,948,999¥$

Consolidated Balance Sheet (continued)
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
31 March 2016

Millions of Yen
2015
2016

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Notes and accounts payable (Notes 9 and 21)
Short-term loans (Notes 9, 10 and 21)
Short-term bonds (Notes 10 and 21)
Current portion of bonds (Notes 10 and 21)
Income taxes payable (Note 16)
Deferred tax liabilities (Note 16)
Advances received
Allowance for employees' bonuses
Provision for unutilised gift tickets
Other (Notes 9 and 24)
Total current liabilities¥

NONCURRENT LIABILITIES:
Bonds (Notes 10 and 21)
Long-term loans (Notes 9, 10, 21 and 22)
Long-term payables - other
Deferred tax liabilities (Note 16)
Deferred tax liabilities for land revaluation (Notes 8 and 16)
Accrued retirement benefits for directors and audit and supervisory board
members
Liability for retirement benefits (Note 12)
Other (Note 24)
Total noncurrent liabilities
Total liabilities

10,77568,7805,000
10,245
5,619
1
8,011
2,667
407
40,829152,337¥

11,404
106,105－
10,251
4,191
2
10,2072,637
384
46,956
192,141

Thousands of
U.S. Dollars(Note 1)
2016$

95,630610,401
44,37390,92949,86814
71,097
23,6753,614
362,345
1,351,949

80,257
161,430
654
7,944
31,08760,403
134,234253
9,349
32,715712,258
1,432,648
5,809
70,504
275,892

447

620

3,974

18,93325,448326,204
478,542

19,66524,339281,581473,722

168,028
225,848
2,894,963
4,246,913

51,466

51,466456,748

28,794
79,10328,81960,525

255,545702,022(17,199)(1,497)(152,643)

142,165

139,314

1,261,673

12,221
37,557(2,815)46,962
2,662
191,790
670,333

15,18735,496(1,881)
48,801
2,398
190,513664,236

108,460
333,309(24,990)416,779
23,631
1,702,085
5,948,999

COMMITMENTS AND CONTINGENT LIABILITIES (Note 23)
NET ASSETS (Note 13) :Common stock:
Authorised, 1,595,886,000 shares as at 31 March 2016 and 2015;
Issued, 565,913,515 shares as at 31 March 2016 and 2015
Capital surplus
Retained earnings
Treasury stock, at cost, 24,193,867 shares as at 31 March 2016,
and 3,822,672 shares as at 31 March 2015
Total shareholders' equity
Accumulated other comprehensive income:Net unrealised holding gain on securities (Notes 5 and 16)
Revaluation reserve for land (Notes 8 and 16)
Retirement benefit liability adjustment (Notes 12 and 16)
Total accumulated other comprehensive income, net
Non-controlling interests
Total net assets
TOTAL LIABILITIES AND NET ASSETS
See accompanying notes to consolidated financial statements.

3

¥

¥

$

Consolidated Statement of Income
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2016

OPERATING REVENUES (Notes 7 and 25)
OPERATING EXPENSES:
Transportation, other service expenses and cost of sales (Note 14)
Selling, general and administrative expenses (Note 7)
Total operating expenses
Operating income (Note 25)¥

Millions of Yen
2015
2016
¥ 294,906
300,188

Thousands of
U.S. Dollars(Note 1)
2016$
2,664,080

240,069
28,594
268,663
31,524

238,680
26,788265,468
29,4372,130,545
253,7632,384,309
279,771790(3,581)
(61)
21
842
1,680
348

646
(3,931)(1,712)
1,177
18,617
1,144
11

7,011
(31,782)
(543)
191
7,479
14,918
3,094

(511)

(735)

(4,539)OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Loss on impairment of property, plant and equipment (Notes 7, 15 and 25)
Shares of profit of affiliates, net
Gain on contribution received for construction
Subsidies
Gain on sales of investment securities, net
Loss on sales or disposal of property, plant and equipment, net(Note 7)
Loss on deduction of contributions received for construction fromacquisition costs of property, plant and equipment
Gain on bargain purchase
Loss on step acquisitions
Other, net
Other income (expenses), net(1,475)(18,401)(13,097)

4,709(2,119)
(99)
544

340
－
43
(2,802)

41,795(18,807)
(884)
4,835

PROFIT BEFORE INCOME TAXES

32,06926,640284,606

9,094
274
9,369
22,699

8,038
527
8,565
18,07480,715
2,438
83,153
201,453

INCOME TAXES (Note 16):
Current
Deferred
Total income taxes
PROFITPROFIT ATTRIBUTABLE TO:
Non-controlling interests
Owners of parent (Note 19)¥

See accompanying notes to consolidated financial statements.

4313
22,385¥

209
17,864$

2,786
198,666

Consolidated Statement of Comprehensive Income
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2016

PROFIT
OTHER COMPREHENSIVE INCOME (Note 17):
Net unrealised holding (loss) gain on securities
Revaluation reserve for land
Retirement benefit liability adjustment
Total other comprehensive (loss) income
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of parent
Non-controlling interests¥

Millions of Yen
2015
2016
18,074
22,699¥Thousands of
U.S. Dollars(Note 1)2016
$ 201,453¥(2,981)
1,625(934)(2,289)20,409

4,230
3,456
619
8,306
26,380(26,458)
14,425(8,289)(20,322)
181,130¥

See accompanying notes to consolidated financial statements.

5

20,111
298¥¥

26,162
218$$

178,4822,648

Consolidated Statement of Changes in Net Assets
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2016
Millions of Yen

BALANCE at 1 APRIL 2014
Cumulative effects of changes inaccounting principles
BALANCE at 1 APRIL 2014 as adjusted
Cash dividends
Profit attributable to owners of parent
for the period
Purchase of treasury stock
Disposal of treasury stockReversal of revaluation reserve for land
Change in scope of consolidation
Net changes in items other thanshareholders' equity
BALANCE at 1 APRIL 2015
Cash dividends
Profit attributable to owners of parent
for the period
Purchase of treasury stock
Disposal of treasury stock
Change in treasury shares of parent
arising from transactions with
non-controlling interests
Reversal of revaluation reserve for land
Net changes in items other thanshareholders' equity
BALANCE at 31 MARCH 2016

CommonStock¥51,466¥

CapitalSurplus¥28,819Retained
Earnings¥
47,700Treasury
Stock¥(1,451)

Total Shareholders'Equity¥126,535

Net Unrealised
Holding Gain on
Securities¥
10,966

Revaluation
Reserve forLand¥
32,008Retirement
BenefitLiability
Adjustment¥(2,501)

Total
Accumulated
Other
Comprehensive
Income, Net¥
40,473

Noncontrolling
Interests
¥
2,855

Total
Net Assets¥
169,864－－(1,418)－(1,418)

－

－

－

－

－

(1,418)51,466－

28,819－46,282(3,654)(1,451)－

125,117(3,654)

10,966－32,008－(2,501)－40,473－

2,855－

168,446(3,654)－－

17,864－

17,864

－

－

－

－

－

17,864

－
－
－
－

－
0
－
－

－
－
(31)
63

(47)
0
－
－

(47)
0
(31)
63

－
－
－
－

－
－
－
－

－
－
－
－

－
－
－
－

－
－
－
－

(47)
0
(31)
63

－

－

－

－

－

4,220

3,487

619

8,328

(457)

7,870

51,466－

28,819－60,525(3,372)(1,497)－

139,314(3,372)

15,187－35,496－(1,881)－

48,801－

2,398－

190,513(3,372)－－

22,385－22,385

－

－

－

－

－

22,385

－
－

－
0

－
－

(15,703)
0(15,703)
1

－
－

－
－

－
－

－
－

－
－

(15,703)
1

－

(25)

－

－

(25)

－

－

－

－

－

(25)

－

－

(435)

－

(435)

－

－

－

－

－

(435)

－

－

－

－

－

(2,965)

2,060

(934)

(1,839)264(1,574)51,466¥

28,794¥

79,103¥(17,199)¥

142,165¥

12,221¥

37,557¥(2,815)¥46,962

¥

2,662

¥

191,790

Thousands of U.S. Dollars (Note 1)

BALANCE at 1 APRIL 2015
Cash dividends
Profit attributable to owners of parent
for the period
Purchase of treasury stock
Disposal of treasury stock
Change in treasury shares of parent
arising from transactions with
non-controlling interests
Reversal of revaluation reserve for land
Net changes in items other thanshareholders' equity
BALANCE at 31 MARCH 2016

Net Unrealised
Holding Gain on
Securities$ 134,781－

Revaluation
Reserve forLand$ 315,020－－

198,666

－

－

－

－

－

198,666(139,360)7(139,360)
14

－
－

－
－

－
－

－
－

－
－

(139,360)
14

－

(223)

－

－

－

－

－

(223)

(3,863)－(3,863)

－

－

－

－

－

(3,863)－－－(26,320)

18,288(8,289)(16,321)2,350(13,971)702,022$ (152,643)$ 1,261,673

CapitalSurplus$ 255,762－

Retained
Earnings$ 537,148(29,929)－－

198,666

－
－

－
7

－
－

－

(223)

－

－

－

－

－

456,748$

255,545$

Noncontrolling
Interests$
21,281－

Total Shareholders'Equity$ 1,236,368(29,929)

CommonStock$ 456,748
－

$

Total
Accumulated
Other
Comprehensive
Income, Net$
433,101－

Retirement
BenefitLiability
Adjustment$ (16,701)－

TreasuryStock$ (13,290)－

See accompanying notes to consolidated financial statements.

6$

108,460$

333,309$(24,990)$416,779$

23,631Total
Net Assets$
1,690,751(29,929)$

1,702,085

Consolidated Statement of Cash Flows
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2016

Millions of Yen
2015
2016
OPERATING ACTIVITIES:Profit before income taxes
Adjustments for:
Depreciation and amortisation
Loss on impairment of property, plant and equipment
Gain on bargain purchase
Loss on step acquisitions
Loss on sales or disposal of property, plant and equipment, net
Loss on deduction of contributions received for construction fromacquisition costs of property, plant and equipment
Gain on contribution received for construction
Gain on sales of investment securities, net
Share of profit of affiliates, net
Interest and dividend income
Interest expense(Decrease) increase in allowance for doubtful accounts
Increase (decrease) in allowance for employees' bonuses
Decrease in liability for retirement benefits
Increase in assets for retirement benefits
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Decrease in trade payables
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥

INVESTING ACTIVITIES:(Increase) decrease in time deposits, net
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Proceeds from contribution received for construction
Purchase of investment securities
Proceeds from sales of investment securities
Payment for additional investment in subsidiaries
Purchase of investment in subsidiaries resulting in change in scope of
consolidation(Increase) decrease in loans receivable
Other, net
Net cash used in investing activities
FINANCING ACTIVITIES:(Decrease) increase in short-term loans, net
Increase in short-term bonds, net
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Redemption of bonds
Repayments of long-term payables - otherCash dividends paid
Dividends paid to non-controlling interests
Purchase of treasury stock
Other, net
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from mergers withunconsolidated subsidiaries
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 20)
See accompanying notes to consolidated financial statements.

7¥

32,069¥26,640Thousands of
U.S. Dollars(Note 1)
2016$

284,606

17,94961(4,709)2,119643

17,349
1,712
(340)
－
1,123

159,292543(41,795)
18,807
5,711

1,475

18,401

13,097

(842)
(348)
(21)
(790)
3,581
(3)
23
(369)
(296)
6,817
342
(753)
(9,969)46,977837(3,604)(7,874)36,334(18,617)(11)(1,177)
(646)
3,931
32
(190)
(479)
(663)
(4,559)(18,235)
(123)
9,477
33,622670(3,970)(8,863)
21,459(7,479)(3,094)(191)(7,011)
31,782(34)
207(3,281)(2,630)60,4993,039(6,685)(88,476)
416,906
7,429(31,990)(69,884)
322,461(0)(28,696)930
1,315(2,111)349－

0(19,912)
16,3491,176(2,335)
20
(298)

(0)
(254,673)
8,254
11,674(18,741)
3,101
－

－

(52)

－

(17)
481
(27,750)9569(4,473)

(158)
4,268
(246,273)(10,701)
5,000
75,672(75,099)
29,938(10,251)(15)(3,372)(25)(15,703)(1,208)(5,768)2,816
26,552

2,726－
26,223(28,156)－(10,331)(1,401)(3,651)(30)(47)(1,607)(16,275)710
25,831(94,974)
44,373
671,569(666,484)
265,690(90,982)(139)(29,930)(229)(139,360)(10,727)(51,197)
24,991
235,645

4

10

38

29,372¥

26,552$

260,675

Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended 31 March 2016

1.

BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Keihan Holdings Co., Ltd. (former name: Keihan
Electric Railway Co., Ltd.) (the “Company”) and its consolidated subsidiaries (collectively, the “Group”)
have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments andExchange Act and its related accounting regulations and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
Japanese yen figures less than one million yen are rounded down to the nearest million yen and U.S. dollar
figures less than one thousand dollars are rounded down to the nearest thousand dollars, except for per
share data. As a result, the totals shown in the accompanying consolidated financial statements in Japanese
yen and U.S. dollars do not necessarily agree with the sums of the individual amounts.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In addition, the notes to the accompanying consolidated financial
statements include information which is not required under Japanese GAAP but is presented herein as
additional information.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current
year’s presentation. Such reclassification had no effect on consolidated profit or net assets.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts
are included solely for the convenience of readers outside Japan and have been made at the rate of ¥112.68
to $1, the approximate rate of exchange at 31 March 2016. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation - The accompanying consolidated financial statements include the accounts of theCompany and the significant companies which it controls directly or indirectly. Companies overwhich the Company exercises significant influence in terms of their operating and financial policies
have been included in the accompanying consolidated financial statements on an equity basis.
For the purpose of consolidation, all significant intercompany balances and transactions have been
eliminated in consolidation.
Certain subsidiaries are excluded from the scope of consolidation because the effect of their total
assets, net sales, net profit or loss, and retained earnings (each amount of net profit or loss andretained earnings in proportion to the interest held by the Group) on the accompanying consolidated
financial statements is not significant individually or in the aggregate.
Investments in one affiliate are accounted for by the equity method for the year ended 31 March
2016.

8

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)a.

Consolidation (continued)
Investments in unconsolidated subsidiaries are not accounted for by the equity method but stated atcost, because the effect of their net profit or loss and retained earnings (each amount in proportion to
the interest held by the Group) on the accompanying consolidated financial statements is not
significant individually or in the aggregate.
The fiscal year end of the consolidated subsidiaries is 31 March, which is same as that of theCompany.

b.

Securities - Securities are classified into three categories: trading securities, held-to-maturity debt
securities or other securities. Trading securities, consisting of debt and marketable equity securities
are stated at fair value. Gain and loss, both realised and unrealised, are charged to income. Held-tomaturity securities are stated at amortised cost, and amortisation for each period through to thematurity date is determined on a straight-line basis. Marketable securities as other securities arestated at fair value determined primarily by the average market price for one month prior to the yearend. Unrealised gains and losses on these securities are reported, net of applicable income taxes, as“Net unrealised holding gain (loss) on securities” in a separate component of net assets through theconsolidated statement of comprehensive income. The cost of securities sold is determinedprimarily by the moving-average method. Non-marketable securities as other securities are stated atcost determined primarily by the moving-average method.

c.

Inventories - Inventories are stated at lower of cost or net selling value, determined by the following
methods.
Merchandise: Primarily by retail cost method
Land and buildings for sale: Specific identification method
Supplies: Primarily by moving-average methodd.

Property, Plant and Equipment (excluding Leased Assets) - Property, plant and equipment
excluding leased assets are stated at cost. Depreciation is determined primarily by the decliningbalance method. However, certain assets are depreciated using the straight-line method over theestimated useful lives of the respective assets.
The useful lives range from 5 to 60 years for buildings and structures, and 5 to 20 years formachinery, equipment and vehicles.

e.

Intangible Assets (excluding Leased Assets) - Intangible assets excluding leased assets areamortised using the straight-line method. Software for internal use is amortised over its estimateduseful life of 5 years.

f.

Leased Assets - Leased assets under finance lease transactions which do not transfer ownership tothe lessee are capitalised and depreciated over the respective lease terms to a nil residual value by
the straight-line method. Finance lease transactions commencing on or before 31 March 2008 otherthan those in which the ownership of the leased assets is transferred to the lessee are accounted for in
the same manner as operating leases.

g.

Goodwill - Goodwill is amortised using the straight-line method over its estimated useful life.
Insignificant amounts of goodwill are charged to expense as incurred.

h.

Allowance for Doubtful Accounts - Allowance for doubtful accounts is provided at an amountcalculated based on the Company’s historical experience of bad debts on ordinary receivables andloan receivables plus an additional estimate of probable specific bad debts from customers
experiencing financial difficulties.
9

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)i.

Allowance for Employees’ Bonuses - Allowance for employees’ bonuses is provided at an estimatedamount of bonuses to be paid to employees.

j.

Provision for Unutilised Gift Tickets
Unutilised gift tickets are credited to income after a certain period has passed from their respective
dates of issuance. Provision for unutilised gift tickets is provided at a reasonably estimated amountof future utilisation.

k.

Employees’ Retirement Benefits(1) Attribution method of retirement benefits over the service period
The assets and liability for retirement benefits are provided based on the amount of the projected
benefit obligation after deducting plan assets at fair value at the end of the year.
The retirement benefit obligation is attributed to each period by the straight-line method.
(2) Accounting for actuarial gains and losses and prior service costs
Prior service costs are amortised as incurred by the straight-line method over a period of 15 years,
which is within the estimated average remaining years of service of the eligible employees.
Actuarial gains and losses are amortised from the year following the year in which the gain or loss isrecognised, by the straight-line method over a period of 10 to 15 years, which is within the estimatedaverage remaining years of service of the eligible employees.

l.

Retirement Benefits for Directors and Audit and Supervisory Board Members - Certain
consolidated subsidiaries provide liability for retirement benefits for directors and audit andsupervisory board members based on the amount required at the balance sheet date in accordancewith the internal policies of such consolidated subsidiaries.

m. Income Taxes - Income taxes are calculated based on taxable income and charged to income on an
accrual basis. Certain temporary differences exist between taxable income and profit reported forfinancial reporting purposes which enter into the determination of taxable income in a different
period.
n.

Hedge Accounting - The Company and four consolidated subsidiaries adopt hedge accounting.
Under Japanese GAAP, interest rate swaps which meet certain conditions are accounted for as if theinterest rates of the swaps had originally been applied of the underlying debt (the “special
accounting treatment”).
(1) Method of accounting
For interest rate swap contracts that meet certain conditions, the special accounting treatment isapplied.
(2) Hedging instruments
Interest rate swaps(3) Hedged items
Interest on loans(4) Hedging policy
Interest rate swaps are used to mitigate the fluctuation risk of interest rates on loans, and the hedged
items are identified by individual contracts.

10

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)n.

Hedge Accounting (continued)(5) Assessment of hedge effectivenessHedge effectiveness is not assessed as the notional principal, contractual terms (interest rates anddates of receipt and payment of interest), and maturities of the interest rate swap transactions arealmost same as those of the respective hedged items, and thus, these transactions meet the criteria for
application of the special accounting treatment.

o.

Contributions for Construction - For the Company and two consolidated subsidiaries, contributions
for construction granted by municipal governments and others are deducted directly from theacquisition costs of the related assets at the time of completion of construction for seismic
strengthening, the widening of railroad crossings and so forth for the railway business.
Gain on contributions received for construction is included in other income (expenses) and theamount directly deducted from the acquisition costs of the assets is recorded as loss on deduction ofcontributions received for construction from the acquisition costs of property, plant and equipment inother income (expenses) in the consolidated statement of income.

p.

Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows, cash andcash equivalents are composed of cash on hand, bank deposits available for withdrawal on demand,
deposits and short-term investments which are readily convertible to cash and subject to little risk ofany change in their value, and which were purchased with an original maturity of three months or
less.

q.

Consumption Taxes - Consumption taxes, in general, are not included in income and expenses but
recorded at the net amount on the consolidated balance sheet. Non-deductible consumption taxes
related to the Company’s assets are included in the cost of each asset.

3.

ACCOUNTING CHANGE

Accounting Standards for Business Combinations
The Company and its domestic subsidiaries adopted “Revised Accounting Standard for Business
Combinations” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 21 of 13 September 2013),“Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No.22 of 13
September 2013), “Revised Accounting Standard for Business Divestitures” (ASBJ Statement No.7 of 13
September 2013) and other standards. These revised accounting standards are applied from the fiscal year
ended 31 March 2016. Accordingly, differences resulting from changes in ownership interest in a
subsidiary when control over the subsidiary is retained are recognised under capital surplus, andacquisition-related costs are recorded as expenses for the period in which they arise. For businesscombinations conducted on or after the beginning of the year ended 31 March 2016, the accounting method
has been changed to reflect adjustments of the allocation of acquisition costs on the finalisation ofprovisional accounting treatments in the consolidated financial statements for the year in which thebusiness combination occurs. In addition, the presentation method of profit attributable to owners ofparent was amended, and the reference to “minority interests” was changed to “non-controlling interests.”
Certain reclassifications were made to the previous year’s consolidated financial statements to reflect thesechanges in presentation.
In the consolidated statement of cash flows for the year ended 31 March 2016, cash flows related to theacquisition of shares of subsidiaries not resulting in a change in the scope of consolidation are classified
into “cash flows from financing activities,” while cash flows related to expenses arising from acquisition ofshares of subsidiaries resulting in a change in the scope of consolidation are classified into “cash flows
from operating activities.”
11

3.

ACCOUNTING CHANGE (continued)

Accounting Standards for Business Combinations (continued)
From 1 April 2015, these revised standards are applied prospectively in accordance with the transitional
treatment provided in Article 58 – 2 (4) of ASBJ Statement No.21, Article 44 – 5 (4) of ASBJ Statement
No.22 and Article 57 – 4 (4) of ASBJ Statement No.7.
The effect on the consolidated financial statements for the year ended and as of 31 March 2016 wasimmaterial.

4.

ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

Implementation Guidance on Recoverability of Deferred Tax Assets
On 28 March 2016, the ASBJ issued “Revised Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No.26).
(1)

Overview

The ASBJ basically continues to apply the framework used in “Audit Treatment of Judgments with
Regard to Recoverability of Deferred Tax Assets” (Japanese Institute of Certified Public Accountants
Audit Committee Report No. 66), where each entity is classified into one of five categories
depending on past taxable income and the status of net operating tax loss carryforwards, and therecoverability of the deferred tax assets is assessed based on the entity’s assigned category. However,the ASBJ reflected necessary changes in the guidance regarding the following accounting
treatments:*1 Accounting treatment for entities that are not included in any of the five categories*2 Criteria for classifying entities that have generated stable income for the past three years and thecurrent year classified as “Category 2” or which have experienced significant fluctuations oftaxable income, however, with no significant net operating tax loss carryforwards for the past
three years or the current year classified as “Category 3” entities*3 Recoverability of deferred tax assets for unscheduled deductible temporary differences of“Category 2” entities*4 Reasonable estimable period of future taxable income before adjustments of temporary
differences for “Category 3” entities*5 Accounting treatment for recoverability of deferred tax assets at “Category 4” entities withsignificant net operating tax loss carryforwards or that have had significant net operating tax
loss carryforwards expire in the past three years or the current year or are expected to expire,
which, are classified as “Category 2” or “Category 3” entities due to meeting certain conditions(2)

Scheduled date of adoption

The Company expects to adopt the revised implementation guidance from the beginning of the
fiscal year ending 31 March 2017.
(3)

Impact of adopting revised implementation guidance

The Company is currently evaluating the effect of adopting this revised implementation guidance on
its consolidated financial statements.

12

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES(1) Held-to-maturity securities
The following table summarises the carrying value and fair value of held-to-maturity securities as at
31 March 2016 and 2015.
Millions of Yen
2016
Carrying
value
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

¥

¥

172
1,401
300
1,873

Fair value

¥

¥

172
1,496
304
1,973

Difference

¥

¥

0
94
4
99

Millions of Yen
2015
Carrying
value
Securities with fair value exceeding
carrying value:
National and municipal bonds¥
Securities with fair value not exceeding
carrying value:
National and municipal bonds
Total
¥

165

48
213

Fair value

¥

165

¥

48
214

Difference

¥

0

¥

(0)
0

Thousands of U.S. Dollars
2016
Carrying
value
Fair value
Difference
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

$

$

1,526
12,441
2662
16,630

13

$

$

1,531
13,281
2,698
17,510

$

$

4
839
35
880

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(2) Marketable securities classified as other securities
The following table summarises the carrying value and acquisition cost of marketable securities
classified as other securities as at 31 March 2016 and 2015.

Carrying
value
Securities with carrying value
exceeding acquisition cost:
Equity securities
Other
Sub total
Securities with carrying value notexceeding acquisition cost:
Equity securities
Debt securities
Sub total
Total

¥

¥

24,6732,080
26,75376307
383
27,137

Carrying
value
Securities with carrying value
exceeding acquisition cost:
Equity securities
Other
Sub total
Securities with carrying value notexceeding acquisition cost:
Equity securities
Debt securities
Sub total
Total

¥

¥

29,161
2,331
31,49219
11
30
31,523

14

Millions of Yen
2016
Acquisition
cost

¥

¥

8,413
1,509
9,923

88
307
396
10,320Difference¥¥

Millions of Yen
2015
Acquisition
cost

¥

¥

8,482
1,509
9,992

19
11
30
10,023

16,259570
16,829(12))–(12))
16,816

Difference¥¥

20,678821
21,500(0)–(0)
21,499

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(2) Marketable securities classified as other securities (continued)
Thousands of U.S. Dollars
2016
Carrying
Acquisition
value
cost
Difference
Securities with carrying value
exceeding acquisition cost:
Equity securities
Other
Sub total
Securities with carrying value notexceeding acquisition cost:
Equity securities
Debt securities
Sub total
Total

$

$

218,967
18,461
237,428

675
2,728
3,404
240,832$$

74,67013,40088,070

789
2,728
3,518
91,589$$144,297
5,060
149,357

(114)
–
(114)
149,243

Unlisted equity securities with a carrying value of ¥4,546 million ($40,349 thousand) and ¥3,133
million as at 31 March 2016 and 2015, respectively, are not included in the above tables because
there is no market price and the fair value is not readily determinable.
(3) The following table summarises other securities sold for the years ended 31 March 2016 and 2015.
Gain on sales are included in gain on sales of investment securities, net in the consolidated statementof income.

Equity securities

Millions of Yen
2016
Proceeds
Gain on sale Loss on sale
0 ¥
0 ¥
–
¥

Equity securities

Millions of Yen
2015
Proceeds
Gain on sale Loss on sale
¥
20 ¥
11 ¥
0

Equity securities

Thousands of U.S. Dollars
2016
Proceeds
Gain on sale Loss on sale
$
1 $
1 $
–

15

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(4) Investments in unconsolidated subsidiaries and affiliates
Investments in unconsolidated subsidiaries and affiliates as at 31 March 2016 and 2015 consisted of
the following:
Millions of Yen
2015
2016
Investments in unconsolidated
subsidiaries and affiliates

6.

¥

8,590

¥

12,839Thousands of
U.S. Dollars
2016$

76,234

PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation included in property, plant and equipment as at 31 March 2016 and 2015
amounted to ¥426,606 million ($3,786,004 thousand) and ¥394,550 million, respectively.
Accumulated contributions deducted from the acquisition costs of property, plant and equipment as at 31
March 2016 and 2015 amounted to ¥180,593 million ($1,602,710 thousand) and ¥179,904 million,
respectively.

7.

RENTAL PROPERTIESThe Company and certain consolidated subsidiaries own rental properties including office buildings andcommercial facilities in Osaka and other areas in Japan.
For the year ended 31 March 2016, rental income, net of related expenses, relevant to these properties
amounted to ¥9,508 million ($84,383 thousand) and net gain on sales of these properties amounted to ¥41
million ($370 thousand).
For the year ended 31 March 2015, rental income, net of related expenses, relevant to these rental
properties amounted to ¥10,132 million and net loss on sales of these properties amounted to ¥483 million.
Furthermore, loss on impairment of these real estate properties was recognised in the amount of ¥1,553
million.
Rental income is included in operating revenues and rental expenses are mainly included in operating
expenses in the consolidated statements of income. Net loss on sales and impairment of these rental
properties are included in other expenses in the consolidated statement of income.
Increases/(decreases) in the carrying value during the years ended 31 March 2016 and 2015, and the fairvalue of the rental properties as at 31 March 2016 and 2015 are as follows:

16

7.

RENTAL PROPERTIES (continued)

1 April 2015
142,930

Millions of Yen
2016
Carrying value
Increase/(Decrease)
31 March 2016¥
12,315¥
155,245

Fair value
31 March 2016¥
206,366

1 April 2014¥
162,595

Millions of Yen
2015
Carrying value
Increase/(Decrease)
31 March 2015¥
(19,665)¥
142,930

Fair value
31 March 2015¥
179,905

1 April 2015$
1,268,463

Thousands of U.S. Dollars
2016
Carrying value
Increase/(Decrease)
31 March 2016$
109,293$
1,377,756

Fair value
31 March 2016$
1,831,440¥

Notes: 1. Carrying value recognised in the consolidated balance sheet represents the acquisition cost lessaccumulated depreciation and accumulated losses on impairment.
2. The main components of net changes in the carrying value during the years ended 31 March 2016
and 2015 are the increase due to consolidation of a new subsidiary of ¥6,960 million ($61,768
thousand) and construction of logistics facilities of ¥4,428 million ($39,304 thousand) and thedecrease due to sale of ¥16,862 million and loss on impairment of ¥1,553 million.
3. Fair values of the major rental properties as at each year end are estimated in accordance with theappraisal standards for valuing real estate properties. Fair values of the other rental properties are
estimated internally by the Group based on certain assessments and property indices that areconsidered to reflect applicable market value.

8.

REVALUATION OF LAND

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on 31 March 1998) and the“Act for Partial Revision of the Act on Revaluation of Land” (Act No. 19 promulgated on 31 March 2001),
the Company revaluates its land held for business. The resulting revaluation difference, net of applicabletax effect on revaluation gains has been stated as “revaluation reserve for land” in net assets. The
applicable tax effect has been stated as “deferred tax liabilities for land revaluation” in liabilities.
Details of the revaluation are as follows:
Method of revaluation
Fair values are determined based on the appraisal value publicly announced for tax assessment
purposes with certain reasonable adjustments in accordance with Article 2-3 and 2-5 of the“Ordinance for Enforcement of the Act on Revaluation of Land” (Cabinet Ordinance No. 119
promulgated on 31 March 1998)
Date of revaluation
31 March 2002

17

9.

PLEDGED ASSETS

Assets pledged as collateral and the corresponding liabilities as at 31 March 2016 are summarised asfollows:
Thousands of
U.S. Dollars
2016
The Group’s
Railwayfoundation
Total
mortgage

Millions of Yen
2016
The Group’s
Railwayfoundation
Total
mortgage
Assets pledged as collateral:
Cash and deposits
Buildings and structures
Machinery, equipment andvehiclesLand
Other property, plant andequipment
Investment securities
Total

¥

1
66,322¥(–)(62,870)$$(–)(557,955)

10,44871,845(10,448)(70,853)

92,725
637,608(92,725)(628,801)

631
800¥ 150,049

(631)
(–)
¥ (144,803)

5,607
7,099
$ 1,331,644(5,607)(–)$ (1,285,090)

Thousands of
U.S. Dollars
2016
The Group’s
Railwayfoundation
Total
mortgage

Millions of Yen
2016
The Group’s
Railwayfoundation
Total
mortgage
Corresponding liabilities:
Accounts payables
Other accounts payable
included in other ofcurrent liabilities
Long-term loans(including current portionof long-term loans)
Total

8
588,594

¥

¥

23

¥

(–)

$

212

$

(–)

–

(–)

–

(–)

50,47850,502(48,584)(48,584)

447,983$ 448,196(431,172)$ (431,172)¥

Figures in parentheses in the above table represent the amounts of assets pledged as the Group’s railway
foundation mortgage and the corresponding liabilities.

18

10. SHORT-TERM LOANS, SHORT-TERM BONDS, BONDS AND LONG-TERM LOANS
The average interest rates applicable to the short-term bank loans, which are calculated as the weightedaverage rates to the year end balances, were 0.626% and 0.660% for the years ended 31 March 2016 and2015, respectively. The Company has issued short-term bonds of ¥5,000 million ($44,373 thousand) as at
31 March 2016.
Long-term debt as at 31 March 2016 and 2015 is summarised as follows:
Bonds

Thousands of
U.S. Dollars
2016

Millions of Yen
2015
2016
Euro-yen zero coupon unsecured
convertible bonds with stockacquisition rights in yen, due 30
March 2021
Unsecured Keihan Electric Railway
bonds, payable in yen at rates
ranging from 0.725% to 2.27%, duefrom 2016 through 2025
Unsecured Keifuku Electric Railroad
bonds, payable in yen at rates
ranging from 0.199% to 0.470%,
due from 2016 through 2020
Less current portion
Bonds, less current portion¥¥

20,099¥–$178,380

70,00070,000621,228403(10,245)
80,257655(10,251)
60,403 $3,579(90,929)712,258¥

The aggregate annual maturities of bonds subsequent to 31 March 2016 are summarised as follows:Year ending 31 March,
2017
2018
2019
2020
2021
2022 and thereafter
Total

Thousands ofMillions of Yen U.S. Dollars
10,245¥$90,92945407
10,045
89,154
10,045
89,154
20,119178,554
40,000354,987
90,503¥$803,188

Euro-yen zero coupon unsecured convertible bonds with stock acquisition rights issued on 30 March 2016
are convertible at ¥1,063 ($9.43) per share in the period from 13 April 2016 to 16 March 2021 subject toadjustment in certain circumstances.

1910. SHORT-TERM LOANS, SHORT-TERM BONDS, BONDS AND LONG-TERM LOANS(continued)
Loans

Millions of Yen
2015
2016
Loans from banks and other financial
institutions, due serially to 2036 at
weighted-average rates ranging from
0.931% to 1.504%¥
Less current portionLong-term loans, less current portion ¥179,740(18,309)
161,430¥¥

Thousands of
U.S. Dollars
2016

179,167 $ 1,595,143(44,933)(162,495)
134,234 $ 1,432,648

The aggregate annual maturities of long-term loans subsequent to 31 March 2016 are summarised asfollows:
Year ending 31 March,
2017
2018
2019
2020
2021
2022 and thereafter
Total

Thousands ofMillions of Yen U.S. Dollars
18,309¥$162,495
22,627200,808
25,357225,040
58,940523,079
7,136
63,33447,369420,386¥ 179,740$ 1,595,143

11. OVERDRAFT AND LOAN COMMITMENTS
The Company and consolidated subsidiaries entered into overdraft and loan commitment agreements with23 banks for efficient funding of working capital as at 31 March 2016.
The unused portions of the credit line under these agreements as at 31 March 2016 are as follows:

Total overdraft limits and loan
commitments
Loan executions
Unused credit line

Millions of Yen
2016

Thousands of
U.S. Dollars
2016

¥

$

¥

83,844(46,810)37,03420$

744,093(415,428)
328,665

12. RETIREMENT BENEFITSThe Company and its consolidated subsidiaries provide several defined benefit plans, such as defined
benefit corporate pension plans, retirement lump-sum benefit plans and smaller enterprise retirement
allowance mutual aid plans, and defined contribution pension plans. The Company also maintains aretirement benefit trust.
(1) The changes in the defined benefit obligation for the years ended 31 March 2016 and 2015 (except
for the retirement benefit obligation calculated by the simplified method presented in (3) below)
were as follows:

Balance at the beginning of year,
as originally reported
Cumulative effects of changes inaccounting principle
Balance at the beginning of year,
as adjusted
Service costs
Interest cost
Actuarial loss
Retirement benefits paid
Other
Balance at the end of year¥¥

Millions of Yen
2015
2016

Thousands of
U.S. Dollars
2016

32,64331,840$ 289,697

–

1,893

–

32,643
1,292
273
640
(2,504)233
32,57833,733
1,334
292
446
(3,164)–32,643289,697
11,471
2,427
5,683(22,230 )2,074$ 289,124¥¥(2) The changes in plan assets for the years ended 31 March 2016 and 2015 (except for plan assets
calculated by the simplified method presented in (3) below) were as follows:

Balance at the beginning of year
Expected return on plan assets
Actuarial (loss) gainContributions by the Group
Retirement benefits paid
Other
Balance at the end of year¥¥

Millions of Yen
2015
2016
16,932 ¥15,817388
364(1,374)
728
1,273
1,597
(1,295)(1,575)249–
16,173 ¥16,932

21

Thousands of
U.S. Dollars
2016$ 150,270
3,451(12,199 )11,302(11,500 )2,213$ 143,537

12. RETIREMENT BENEFITS (continued)(3) The changes in the assets and liabilities for retirement benefits calculated by the simplified method
for the years ended 31 March 2016 and 2015 were as follows:

Balance at the beginning of year
Retirement benefit expenses
Retirement benefits paid
Contributions to pension plans
Increase due to consolidation of a new
subsidiary
Other
Balance at the end of year¥¥

Thousands ofMillions of Yen
U.S. Dollars
2015
2016
2016
2,489 ¥
2,545 $
22,094
218
1,940
285
(202)
(1,793 )(255)(72)(644 )
(85)
76
(2)
2,507

¥

–
–
2,489

$

674
(18 )
22,253

Under the simplified method, the retirement benefit obligation is calculated at the amount payable atthe year-end if all eligible employees terminated their services voluntarily.
(4) Reconciliation of the ending balances of the retirement benefit obligation and plan assets and asset
and liability for retirement benefits recorded in the consolidated balance sheet as at 31 March 2016
and 2015

Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net of asset and liability for retirement
benefits in the consolidated balance sheet
Liability for retirement benefit
Asset for retirement benefits
Net liability for retirement benefits in the
consolidated balance sheet¥

Thousands ofMillions of Yen
U.S. Dollars
2015
2016
2016
15,852 ¥16,168 $ 140,689(16,554)(146,915 )(17,507)(701)(6,226 )(1,338)
19,613
19,539174,066
18,912
18,933(21)
18,912

18,20019,665(1,464)¥

18,200167,840
168,028(188 )$

167,840

Note: The above table includes the retirement benefit obligation calculated by the simplified
method.

22

12. RETIREMENT BENEFITS (continued)(5) The components of retirement benefit expenses for the years ended 31 March 2016 and 2015 are as
follows:

Service costs
Interest cost
Expected return on plan assets
Amortisation of actuarial loss
Amortisation of prior service costs
Retirement benefit expenses
calculated by the simplified method
Other
Retirement benefit expenses fordefined benefit plans¥

Millions of Yen
2015
2016
1,292 ¥
1,334
273
292
(388)
(364)
962
1,084
(249)
(249)
218
38

¥

2,147

Thousands of
U.S. Dollars
2016
11,471$
2,427(3,451 )8,539(2,212 )
1,940
343

285
–
¥

2,382

$

19,059(6) The components of retirement benefit liability adjustment (before tax effects) in othercomprehensive income for the years ended 31 March 2016 and 2015 are as follows:

Prior service costs
Actuarial loss (gain)
Total

¥
¥

Millions of Yen
2015
2016
249 ¥
249
1,052
(1,366)
1,302 ¥
(1,117)

Thousands of
U.S. Dollars
2016
2,212
$
9,342
11,555$(7) The components of retirement benefit liability adjustment (before tax effects) in accumulated othercomprehensive income as at 31 March 2016 and 2015 are as follows:

Unrecognised prior service costs
Unrecognised actuarial gain
Total

¥
¥

Millions of Yen
2015
2016
(2,582) ¥(2,831)
6,662
5,610
4,080 ¥
2,778

23

Thousands of
U.S. Dollars
2016$ (22,918 )
59,13036,211$

12. RETIREMENT BENEFITS (continued)(8) Plan assets
a. The components of plan assets by major category as at 31 March 2016 and 2015 are as follows:
2016
43%
32
14
5
6
100%

Debt securities
Equity securities
General accounts
Cash and deposits
Other
Total

2015
43%
35
12
5
5
100%

Note: 20% and 26% of the total plan assets are in the retirement benefit trust as at 31 March
2016 and 2015, respectively.
b. Method of determining long-term expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined as a result of consideration ofboth the portfolio allocation at present and in the future, and long-term expected rate of returnfrom multiple plan assets at present and in the future.
(9) Assumptions used in accounting for the defined benefit plans for the years ended 31 March 2016 and2015 are set forth as follows:

Discount rates
Long-term expected rates of return onplan assets

2016
0.1-0.9%

2015
0.7-0.9%

1.0-4.0%

2.5-4.0%(10) Defined contribution plans for the years ended 31 March 2016 and 2015
The total contributions to be paid by the Company and its consolidated subsidiaries to defined
contribution plans were ¥554 million ($4,921 thousand) and ¥534 million for the years ended 31
March 2016 and 2015, respectively.

2413. SHAREHOLDERS’ EQUITYThe Companies Act of Japan (the “Act”) provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (otherthan the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sumof the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions canbe made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions aremet.
Under the Act, upon the issuance and sale of new shares of common stock, the entire amount of theproceeds is required to be accounted for as common stock, although a company may, by resolution of theBoard of Directors, account for an amount not exceeding one-half of the proceeds of the sale of new sharesas additional paid-in capital included in capital surplus.
(1) Movements in issued shares of common stock and treasury stock during the years ended 31 March
2016 and 2015 are as follows:

1 April 2015
Issued shares:
Common stock
Treasury stock (Notes 1 and 2)

565,913,515
3,822,672

Number of shares
2016
Increase
Decrease–
20,373,309

–
2,114

31 March 2016
565,913,515
24,193,867

Notes: 1. The increase in the number of shares of treasury stock of 20,373,309 shares was due topurchase of treasury stock under resolution of the Board of Directors and of 70,309
shares was due to repurchases of fractional shares of less than one voting unit.
2. The decrease in the number of shares of treasury stock of 2,114 shares was due to sales offractional shares of less than one voting unit.

1 April 2014
Issued shares:
Common stock
Treasury stock (Notes 1 and 2)

565,913,515
3,740,367

Number of shares
2015
Increase
Decrease–
83,953–1,648

31 March 2015
565,913,515
3,822,672

Notes: 1. The increase in the number of shares of treasury stock of 83,953 shares was due torepurchases of fractional shares of less than one voting unit.
2. The decrease in the number of shares of treasury stock of 1,648 shares was due to sales offractional shares of less than one voting unit.

25

13. SHAREHOLDERS’ EQUITY (continued)(2) Information regarding dividend payments during the years ended 31 March 2016 and 2015 is asfollows:
For the year ended 31 March 2016a. Dividend payment:
2016
Resolutions
General shareholders’meeting held on
17 June 2015
Board meeting heldon 29 October 2015

Type ofsharesDividends paid

Dividend
per share

Record dates

Effective
dates

Commonstock¥1,686 million($14,965 thousand)¥3.0($0.02)31 March
2015

18 June2015

Commonstock¥1,686 million($14,964 thousand)¥3.0($0.02)30 September
2015

1 December
2015

b. Dividend payment with an effective date in the following fiscal year:
2016
Resolution
General shareholders’meeting held on
17 June 2016

Type ofsharesDividends paid

Commonstock¥1,625 million($14,422 thousand)Source of Dividend
dividend per share

Recorddate

Effective
date

Retainedearnings

31 March
2016

20 June2016¥3.0($0.02)For the year ended 31 March 2015a. Dividend payment:

Resolutions
General shareholders’meeting held on
19 June 2014
Board meeting held on
31 October 2014

Type ofshares2015
Dividends paid Dividend per(Millions of Yen) share (Yen)Record dates

Effective
dates

Common
stock

¥

1,967

¥

3.5

31 March
2014

20 June2014

Common
stock

¥

1,686

¥

3.0

30 September
2014

1 December
2014

b. Dividend payment with an effective date in the following fiscal year:
2015

Resolution
General shareholders’meeting held on
17 June 2015

Type ofsharesCommonstock

Dividends paid
(Millions of Yen)
¥

1,686

26

Source ofdividend
Retainedearnings

Dividend
per share
(Yen)
¥

3.0

Recorddate

Effectivedate

31 March
2015

18 June2015

14. COST OF SALES
Cost of sales included loss on devaluation of inventories of ¥746 million ($6,628 thousand) and ¥665
million for the years ended 31 March 2016 and 2015, respectively.

15. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are assessed for impairment either on an individual asset basis such as
property or store, or on a group basis such as business segment, which is determined based on the
managerial accounting segment.
The Group recognised loss on impairment of property, plant and equipment in the amounts of ¥61 million($543 thousand) and ¥1,712 million for the years ended 31 March 2016 and 2015, respectively. The details
are summarised as follows:
For the year ended 31 March 2016
2016
Usage
Idle assets
Hotel facilities
Commercial
storesClassification
Land
Buildings andstructures andother
Buildings andstructures andother

LocationTsuzukigun, Kyoto

Millions of Yen¥
30

Thousands of
U.S. Dollars$
271

Sakyo-ku, Kyoto

23

212

Nishi-ku, Nagoya

6

60

¥

Total

61

$

543

For the year ended 31 March 2015
2015
Usage
Idle assets
Rentalproperties
Hotel facilities
Commercial
storesClassificationLand
Land, buildings
and structuresand other
Buildings andstructures andother
Buildings andstructures andother

Location
Chuo-ku, Tokyo

Millions of Yen¥
900

Moriguchi, Osakaand other652

Sakyo-ku, Kyoto

118

Nishi-ku, Nagoya
and other

40
¥

Total

1,712

For assets, such as idle assets, rental properties, hotel facilities and commercial stores when a decline inmarket value is observed, a decline in profitability is expected to continue, or a decision to sell or
dismantlement is made, respectively, the Group writes down the carrying value of the asset to therecoverable amount and loss on impairment of property, plant and equipment is recorded as other expense.

27

15. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT (continued)
The recoverable amounts of idle assets were determined using net realizable value basically based on theappraisal value assessed by an external appraiser for the years ended 31 March 2016 and 2015.
The recoverable amounts of rental properties were determined using net realizable value basically based on
the appraisal value assessed by an external appraiser or value in use calculated by the discounted cash flow
method with a discount rate of 5% for the year ended 31 March 2015. Such properties to be dismantled
were written down to the nominal value as future cash flow was not expected.
The recoverable amounts for hotel facilities were determined using net realisable value basically based on
the appraisal value assessed by an external appraiser for the years ended 31 March 2016 and 2015.
The recoverable amounts of commercial stores were determined using value in use. Commercial stores
were written down to the nominal value as future cash flow was not expected due to a decision to withdraw
from the business during the year ended 31 March 2016.
The recoverable amounts of commercial stores were determined using value in use calculated by thediscounted cash flow method with a discount rate of 5% for the year ended 31 March 2015. Certain
commercial stores were written down to the nominal value as future cash flow was not expected.

28

16. INCOME TAXES
Income taxes applicable to the Company and its domestic subsidiaries comprise corporation tax,
inhabitants’ taxes and enterprise taxes which, in the aggregate, resulted in normal statutory tax rates ofapproximately 33.0% for the year ended 31 March 2016 and approximately 35.6% for the year ended 31
March 2015.
The tax effects of significant temporary differences and tax loss carry forwards which resulted in net
deferred tax assets and liabilities at 31 March 2016 and 2015 are as follows:
Millions of Yen
2015
2016
Deferred tax assets:
Liability for retirement benefits
Loss on devaluation of land,buildings and structures for sale
Loss on impairment of property,
plant and equipment
Tax loss carry forwards
Unrealised gain
Loss on devaluation of securities
Allowance for employees’ bonuses
Accrued enterprise tax
OthersSub-total
Valuation allowance
Total deferred tax assets
Offset by deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities:
Difference on valuation of assets ofconsolidated subsidiaries
Net unrealised holding gain on
securities
Gain on securities contributed to
employee retirement benefit trust
Reserve for deduction in costs ofproperty, plant and equipment
Assets for retirement benefits
OthersTotal deferred tax liabilities
Offset by deferred tax assets
Net deferred tax liabilities

¥

8,984

¥

9,691

Thousands of
U.S. Dollars
2016$

79,733

1,445

1,613

12,825

¥

1,338
1,297
1,125
972
866
443
2,681
19,154(6,852)
12,302(7,560)
4,741

¥

1,488
1,504
1,054
1,082
888
418
2,907
20,649(7,684)
12,965(8,694)4,271 $

11,88011,510
9,992
8,628
7,688
3,934
23,794
169,989(60,809)109,179(67,097)
42,082¥(8,085)¥(8,327 )(71,759 )¥$(4,515)(6,217)(40,076)(2,461)(2,589)(21,841)

(187)
–
(256)
(15,506)
7,560(7,946)

(164)
(521)
(225)
(18,046)
8,694(9,351)(1,663)–(2,274)(137,616)
67,097(70,518)29¥$

16. INCOME TAXES (continued)
A reconciliation between the statutory tax rates and the effective tax rates reflected in the accompanying
consolidated statement of income for the years ended 31 March 2016 and 2015 is as follows:

Statutory tax rates
Effect of:Permanent non-deductible expenses
Permanent non-taxable income
Per capita portion of inhabitants’ tax
Effect of change in corporate tax rates
Valuation allowance
Amortisation of goodwill
Equity in loss of affiliates, net
Gain on bargain purchase
Loss on step acquisitions
Others
Effective tax rates

2016
33.0%

2015
35.6%

0.6
(0.2)
0.4
(0.1)
(2.3)
0.3
(0.0)
(4.9)
2.2
0.2
29.2

0.7
(0.4)
0.4
0.0
(2.6)
0.4
(1.6)
(0.5)
–
0.2
32.2

The “Act to Partially Revise the Income Tax Act and Others” (Act No.15 of 2016) and the “Act to Partially
Revise the Local Tax Act and Others” (Act No.13 of 2016) were enacted during the Japanese Diet session
on 29 March 2016. In line with these revisions, the Company changed the statutory tax rate used to
calculate deferred tax assets and liabilities from 32.2% to 30.8% and to 30.6% for the temporary
differences expected to be realised or settled in the years beginning 1 April 2016 and 2017, and for the
temporary differences expected to be realised or settled from 1 April 2018, respectively. The effect of theannounced reduction of the effective statutory tax rate was to decrease deferred tax liabilities after
offsetting deferred tax assets, by ¥218 million ($1,937 thousand) and to increase net unrealised holding
gain on securities by ¥235 million ($2,086 thousand) and to decrease income taxes-deferred by ¥45 million($402 thousand) and retirement benefit liability adjustment by ¥62 million ($550 thousand) as of and forthe year ended 31 March 2016.
Additionally, deferred tax liability relating to revaluation reserve for land decreased by ¥1,625 million($14,425 thousand) and revaluation reserve for land increased by the same amount as of 31 March 2016.

30

17. OTHER COMPREHENSIVE INCOME
Reclassification adjustments and related income tax effects on components of other comprehensive income(loss) for the years ended 31 March 2016 and 2015 are as follows:

Net unrealised holding (loss) gain on
securities:
Amount arising during the year
Reclassification adjustments for gain
included in profit
Before tax effectTax effect
Total
Revaluation reserve for land:
Amount arising during the year
Reclassification adjustments for gain
included in profit
Before tax effectTax effect
Total
Retirement benefit liability adjustment:
Amount arising during the year
Reclassification adjustments for loss
included in profit
Before tax effectTax effect
Total
Other comprehensive (loss) income, net¥¥

Millions of Yen
2015
2016

Thousands of
U.S. Dollars
2016(4,683)

$

¥

5,465

(41,562)(0)(4,683)
1,702(2,981)(11)
5,453(1,223)4,230(1)(41,564)
15,105(26,458)

–

–

–

–
–
1,625
1,625

–
–
3,456
3,456

–
–
14,425
14,425(2,015)281(17,882)712(1,302)368(934)(2,289)

835
1,117
(497)
619
8,306 $

6,327
(11,555)
3,266(8,289)(20,322)31¥

18. LEASES(1) Finance Leases (as Lessee)
Leased assets under finance lease transactions which do not transfer ownership to the lessee mainly
consist of machinery, equipment and vehicles, such as buses used for the transportation business.
As described in Note 2 “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (f) Leased
Assets,” leased assets under finance lease transactions which do not transfer ownership to the lessee
are capitalised and depreciated over the respective lease terms to a nil residual value by the straightline method.
Finance lease transactions commencing on or before 31 March 2008 other than those in which theownership of the leased assets is transferred to the lessee are accounted for in the same manner as
operating leases.
The following pro forma amounts represent the acquisition costs, accumulated depreciation,
accumulated loss on impairment and net book value of leased assets as at 31 March 2016 and 2015,
which would have been reflected in the accompanying consolidated balance sheet if finance leaseaccounting had been applied to the finance lease transactions entered into by the Company and its
consolidated subsidiaries as lessees, which are currently accounted for as operating leases:
As at 31 March 2016
The information is omitted because acquisition costs, accumulated depreciation and net book value
are immaterial as at 31 March 2016.
As at 31 March 2015

Buildings and structures
Machinery, equipment and vehicles
Total

Acquisition
costs
¥
12
1,266
¥
1,278

Millions of Yen
2015
Accumulated
Net book
depreciation
value
¥
2 ¥
9
1,074
191
¥
1,077 ¥
201

Acquisition costs in the table above are calculated based on the original future minimum lease
payments and accordingly they include interest expense. Under Japanese GAAP, this treatment ispermitted when the ratio of the balance of the remaining lease payments at year end to the balance ofproperty, plant and equipment is insignificant.

32

18. LEASES (continued)(1) Finance Leases (as Lessee) (continued)
The following pro forma amounts represent future minimum lease payments (including the interest
portion thereon) for finance leases accounted for as operating leases as at 31 March 2016 and 2015:
As at 31 March 2016
The information is omitted because the amount of future minimum lease payments is immaterial as
at 31 March 2016.
As at 31 March 2015
Millions of Yen
2015
Future minimum lease payments
Due within one year
Due after one year
Total

¥

119
81
201

¥

Future minimum lease payments include interest expense, which is permitted under Japanese GAAP
when the ratio of the balance of the future minimum lease payments at year end to the balance ofproperty, plant and equipment is insignificant.
The following pro forma amounts represent lease payments, and depreciation for finance leases
accounted for in the same manner as operating leases for the years ended 31 March 2016 and 2015:
For the year ended 31 March 2016
The information is omitted because the amounts of lease payments and depreciation are immaterial
for the year ended 31 March 2016.
For the year ended 31 March 2015
Millions of Yen
2015
¥
123
¥
123

Lease payments
Depreciation(2) Operating Leases

Future minimum lease payments under non-cancelable operating leases as at 31 March 2016 and2015 are as follows:
Millions of Yen
2015
2016
Future minimum lease payments:
Due within one year
Due after one year
Total

¥
¥

1,480
5,742
7,222

33

¥
¥

1,480
7,222
8,703

Thousands of
U.S. Dollars
2016
$
$

13,13750,96364,101

19. AMOUNTS PER SHARE
Yen
Net assets
Profit attributable to owners of parent:
Basic

¥

2016
349.13¥

2015
334.67

¥

39.95

¥

31.78

U.S. Dollars
2016
$
3.09
$

0.35

Profit attributable to owners of parent per share is computed based on profit attributable to owners ofparent and the weighted-average number of shares of common stock outstanding during the period.
Diluted profit attributable to owners of parent per share for the years ended 31 March 2016 and 2015 is notpresented since there were no potentially dilutive securities for the year ended 31 March 2016 and nopotential securities for the year ended 31 March 2015, respectively.
The financial data used in the computation of basic earnings per share for the years ended 31 March 2016
and 2015 in the table above is summarised as follows:

Profit attributable to owners of parent¥

Millions of Yen
2015
2016
¥ 17,864
22,385

Thousands of
U.S. Dollars
2016$ 198,666

Thousands of shares
Weighted-average number of sharesof common stock outstanding

2016

2015

560,357

562,135

Potential securities which do not have dilutive effect for the year ended 31 March 2016 are euro-yen zero
coupon convertible bonds with stock acquisition rights (2,000 units) in yen, due 30 March 2021 in theaggregate amount of ¥20,000 million ($177,493 thousand).

34

20. CASH AND CASH EQUIVALENTS
The balances of cash and deposits reflected in the accompanying consolidated balance sheet as at 31 March
2016 and 2015 are reconciled with cash and cash equivalents presented in the accompanying consolidated
statement of cash flows for the years then ended as follows:

Cash and deposits¥
Time deposits with a maturity of morethan three months
Deposits included in other of current
assetsCash and cash equivalents¥

Millions of Yen
2015
2016
25,072 ¥26,600(48)
4,349
29,372Thousands of
U.S. Dollars
2016$ 222,507

(48)

¥

–
26,552(429)$

38,597
260,675

The Company acquired all shares in Osaka Merchandise Mart Corporation (currently, Keihan Tatemono
Co., Ltd.) on 30 June 2015 which became a newly consolidated subsidiary. Major components of assets
and liabilities of the newly consolidated subsidiary due to acquisition of shares during the year ended 31
March 2016:

Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities

Millions of yen¥
2,676
75,422021
9,054
11,731
528
1,921
¥
2,450

Thousands of
U.S. Dollars$
23,75480,359104,113
4,690
17,053$
21,743

21. FINANCIAL INSTRUMENTS(1) Overview
a. Group policy for financial instruments
The Group restricts its investment activities of surplus cash to short-term deposits and others. In
terms of financing activities, the Group mainly raises funds by loans from banks and otherfinancial institutions and the issuance of bonds. Derivative transactions are utilised, not for
speculative purposes, but to avoid the risks described below.
b. Nature of financial instruments, their related risk and risk management for financial instruments
Trade receivables, such as notes and accounts receivable, are exposed to the credit risk ofcustomers. The Group mitigates the credit risk mainly by managing due dates and outstandingbalances by individual customers.
Short-term investments and investment securities mainly consist of held-to-maturity debt
securities and equity securities issued by companies with which the Group has business
relationships. Since these securities are exposed to the risk of market price fluctuations, theGroup regularly monitors the fair value of the securities and financial conditions of the issuers.

35

21. FINANCIAL INSTRUMENTS (continued)(1) Overview (continued)
b. Nature of financial instruments, their related risk and risk management for financial instruments(continued)
Trade payables, such as notes and accounts payable, are mostly due in one year or less.
Proceeds from short-term loans and short-term bonds are mainly used for working capital, andproceeds from bonds and long-term loans are mainly used for capital investments. Among them,those to which variable interest rates apply are exposed to the risk of interest rate fluctuations.
However, for certain long-term loans, the derivative transactions (such as interest rate swaps) byindividual contracts are used as hedging instruments to hedge the risk of fluctuations of interest
rates and stabilise interest payments.
Hedge effectiveness is not assessed as the interest rate swaps meet the criteria for application of
the special accounting treatment.
Derivative transactions are executed and managed by the treasury department of the Company
and four consolidated subsidiaries which utilise derivative instruments upon the approval of theproper decision-making authority. In addition, the counterparties of the derivative transactions
are limited to highly-rated financial institutions in order to mitigate credit risk.
In addition, trade payables and loans are exposed to liquidity risk. However, the Group manages
liquidity risk mainly by preparing monthly cash flow management plans.
c. Supplementary explanation on fair value of financial instruments and related matters
The fair value of financial instruments is based on quoted market prices, if available. If a quoted
market price is not available, fair value is reasonably estimated. Since various assumptions andfactors are reflected in estimating the fair value, different assumptions and factors could result indifferent fair value. In addition, the notional amounts of derivatives in Note 22 “DERIVATIVEFINANCIAL INSTRUMENTS” are not necessarily indicative of the actual market risk involvedin the derivative transactions.

36

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters
Carrying value, fair value and the difference between them are as follows:
Millions of Yen
2016(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets

Carrying
value¥
25,072
23,702

Fair value¥
25,072
23,702Difference
¥
–
–

1,873
27,137
77,785

1,973
27,13777,884

99
–
99

¥

¥

¥

(4) Notes and accounts payable(5) Short-term loans(6) Short-term bonds(7) Bonds (including current portion)(8) Long-term loans (including current
portion)Total liabilities¥

179,740
336,489¥

184,420
345,323

¥

4,679
8,833

(9) Derivative transactions

¥

–

¥

–

¥

–

¥

Difference––

10,77550,4705,000
90,503

10,77550,4705,000
94,657

–
–
–
4,154

Millions of Yen
2015(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets

Carrying
value¥
26,60030,892¥

213
31,52389,230¥¥11,404
61,171–
70,655

Fair value
26,60030,892

214
31,52389,231¥(4) Notes and accounts payable(5) Short-term loans(6) Short-term bonds(7) Bonds (including current portion)(8) Long-term loans (including current
portion)Total liabilities¥

179,167
322,399¥

184,035
330,546

¥

4,867
8,146

(9) Derivative transactions

¥

–

¥

–

¥

–

37

11,404
61,171–73,934

0
–
0
–
–
–
3,279

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets

Thousands of U.S. Dollars
2016
Carrying
value
Fair value
Difference–$ 222,507 $ 222,507 $
210,348
210,348–$

16,630240,832
690,319$

17,510240,832
691,199

$

880
–
880

(4) Notes and accounts payable(5) Short-term loans(6) Short-term bonds(7) Bonds (including current portion)(8) Long-term loans (including current
portion)Total liabilities

95,630447,906
44,373803,188

95,630447,906
44,373840,054–––
36,866

1,595,143$ 2,986,241

1,636,673$ 3,064,638$

41,53078,397(9) Derivative transactions

$

$

$

–

–

–

Notes:
1. Method to determine the estimated fair value of financial instruments and other matters related
to securities and derivative transactions(1) Cash and deposits and (2) Notes and accounts receivable
As these items are settled in a short period of time, their carrying value approximates fairvalue.
(3) Short-term investments and investment securities
The fair value of equity securities is estimated based on the market price on stock exchanges,
and the fair value of debt securities is estimated based on the market price on stock
exchanges or the quoted price from the counterparty financial institutions.
(4) Notes and accounts payable, (5) Short-term loans and (6) Short-term bonds
As these items are settled in a short period of time, their carrying value approximates the fairvalue.
(7) Bonds
The fair value of bonds issued by the Group is estimated mainly based on the quoted market
price.

38

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)
Notes: (continued)(8) Long-term loans
As long-term loans with variable interest rates reflect market interest rates in a short period oftime, the carrying value approximates the fair value. The fair value of long-term loans with
fixed interest rates is estimated based on the present value of the total amounts of principal
and interest payments discounted at an interest rate to be applied if similar new loans are
made. In terms of long-term loans hedged by interest rate swaps accounted for by the special
accounting treatment (see Note 22 “DERIVATIVE FINANCIAL INSTRUMENTS”), the fairvalue is estimated based on the present value of the total amounts of principal and interest
payments which are accounted for by the special accounting treatment discounted by theinterest rates to be applied assuming that new loans under similar conditions to the existingloans are made.
(9) Derivative transactions
See Note 22 “DERIVATIVE FINANCIAL INSTRUMENTS.”
2. Financial instruments for which it is extremely difficult to determine the fair value as at 31 March
2016 and 2015 are summarised as follows:

Category
Unlisted stocks¥

Millions of Yen
2015
2016
¥
3,133
4,546

Thousands of
U.S. Dollars
2016$
40,349Because a quoted market price is not available and the future cash flows cannot be reasonably
estimated for these instruments, it is extremely difficult to determine their fair value. Therefore,
the above financial instruments are not included in the tables above.
3. Investments in unconsolidated subsidiaries and affiliates are not included in the table above.

39

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)
Notes: (continued)
4. The redemption schedules for cash and deposits, notes and accounts receivable and short-term
investments and investment securities with maturities as at 31 March 2016 are as follows:

Due in1 yearor less¥
23,55023,702

Cash and deposits
Notes and accounts receivable
Short-term investments and investment
securities:
Held-to-maturity debt securities
National and municipal bonds
Other securities with maturities
Corporate bonds
Total

Millions of Yen
2016
Due after
Due after
1 year
5 years
throughthrough
5 years
10 years
¥
– ¥
–
–
–

114

¥

3
47,370Due in1 yearor less$ 209,003
210,348

Cash and deposits
Notes and accounts receivable
Short-term investments and investment
securities:
Held-to-maturity debt securities
National and municipal bonds
Other securities with maturities
Corporate bonds
Total

$

1,157

¥

3
1,161

Due after
10 years
¥
–
–

300

¥

–
300

300

¥

300
600

Thousands of U.S. Dollars
2016
Due after
Due after
1 year
5 years
Due after
throughthrough
5 years
10 years
10 years
$
– $
– $
–
–
–
–

1,013

10,273

2,662

2,662

33
420,39833
10,306

–
2,662

2,662
5,324

$

$

$

5. The redemption schedules for short-term loans, short-term bonds, bonds and long-term loans as
at 31 March 2016
Refer to Note 10. SHORT-TERM LOANS, SHORT-TERM BONDS, BONDS AND LONGTERM LOANS.

40

22. DERIVATIVE FINANCIAL INSTRUMENTS
The notional amounts and the estimated fair value of the derivative positions outstanding qualifying forhedge accounting as at 31 March 2016 and 2015 were as follows:
Millions of Yen
2016
Contractual valueHedge
accounting
methodSpecialaccounting
treatment ofinterest rate
swaps

Transaction typeInterest rate swap
Receive-floating/pay-fixed

Major hedged
items

Notional
amountDue after
1 yearFair value

Long-termloans¥ 3,472¥ 3,052(Note)

Millions of Yen
2015
Contractual valueHedge
accounting
methodSpecialaccounting
treatment ofinterest rate
swaps

Transaction typeInterest rate swap
Receive-floating/pay-fixed

Major hedged
items

Notional
amountDue after
1 yearFair value

Long-termloans¥ 3,240¥ 2,550(Note)

Thousands of U.S. Dollars
2016
Contractual valueHedge
accounting
methodSpecialaccounting
treatment ofinterest rate
swaps

Transaction typeInterest rate swap
Receive-floating/pay-fixed

Major hedged
items

Notional
amountDue after
1 yearFair value

Long-termloans$ 30,812$ 27,085(Note)

Note: Because interest rate swaps are accounted for as if the interest rates applied to the swaps had beenoriginally applied to the long-term loans, their fair value was included in long-term loans.

4123. CONTINGENT LIABILITIESThe Company provides guarantees for the borrowings of the following companies, which are other thanconsolidated subsidiaries, as at 31 March 2016 as follows:

Nakanoshima Rapid
Railway Co., Ltd.
Bunkazai Service Co., Ltd.
Keifuku Community
Service Co., Ltd.
Hachikenya Co., Ltd.
Total

Millions of Yen
2016

Thousands of
U.S. Dollars
2016

¥

$

¥

25,210130
16
1325,370223,735
1,153
141
123
225,154$

24. ASSET RETIREMENT OBLIGATIONS(1) General information about asset retirement obligations
Asset retirement obligations included in the “Other” of current and noncurrent liabilities are mainly
legal obligations for the removal of asbestos under the Ordinance on Prevention of Asbestos Hazards
and the restoration under certain real estate lease agreements.
(2) Basis of measurement for asset retirement obligations
Asset retirement obligations are calculated individually based on individual estimates of the usage
period depending on the situation of each asset retirement obligation, and the discount rates ofJapanese government bonds at the time of application of the relevant accounting standards or at thetime of acquisition of the assets.
(3) Changes in the balance of asset retirement obligations for the years ended 31 March 2016 and 2015
were as follows:

Balance at the beginning of year
Increase due to consolidation of a new
subsidiary
Increase due to acquisition of property,
plant and equipment
Adjustment with passing of time
Increase due to changes in estimate (Note)
Decrease due to settlement
Other
Balance at the end of year

Millions of yen
2015
2016
¥
359
¥
384

¥

Thousands of
U.S. Dollars
2016$ 3,411

34

–

308

–
4
3
(8)
(61)
357

31
4
37
(47)
(1)
384

–
40
33
(72)
(547)
3,174

¥

$

Note: The carrying amounts of asset retirement obligations increased by ¥3 million ($33 thousand)and ¥37 million for the years ended 31 March 2016 and 2015, respectively, due to a change inthe estimated costs to be incurred at the time of retirement.

4225. SEGMENT INFORMATION(1) Outline of reportable segments
The Group’s reportable segments are divisions of the Group for which separate financial information
is available, and whose operating results are regularly reviewed by the Board of Directors of theCompany in order to allocate management resources and assess performance of operations.
The Group is engaged in transportation and various other businesses. The Group classifies thosebusinesses into certain segments and manages the performance of each business by segment.
Accordingly, the Group has five business segments: “Transportation,” “Real Estate,” “Retail
Distribution,” “Leisure and Service” and “Others.”“Transportation” involves mainly railway and bus services. “Real Estate” mainly involves sales orleasing of real estate, wholesale of construction materials, and surveying and designing of real estate.
“Retail Distribution” involves mainly operations of department stores, other stores, and malls.
“Leisure and Service” involves mainly hotel and sightseeing cruise businesses. “Others” involves
credit card business.
Effective 1 April 2015, the Group has transferred the business of Biomarket Co., Ltd., which wasmanaged under the segment “Others,” to the segment “Retail Distribution” due to changes inmanagement categories. Along with this change in reportable segments, the Company has
reclassified the segment information for the previous year.
(2) Calculation method used for operating revenues, income or loss, assets, and other items of eachreportable segment
The accounting policies of the reportable segments are substantially the same as those described in
Note 2 “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.”
The segment income or loss is based on the operating income of each reportable segment.
Inter-segment operating revenues or transfers are determined based on market prices.

4325. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2016 and 2015
Millions of Yen
2016
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service

Others¥

92,195¥ 1,077

12,383

384

Total

¥

93,562¥

89,033

Segment income (loss)
Segment assets
Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets¥

10,193
266,694¥

13,882
303,245

Operating revenues:
External customers
Inter-segment
operating revenues
or transfers

¥

1,367

76,649¥ 98,490

Total

Adjustments Consolidated(Note 1)
(Note 2)¥300,188¥

14,852(14,852)¥

315,040(12) ¥
7,006

31,490640,481¥

31,77537678¥ 98,875¥

31,813¥ 1,755

¥

¥

4,599
34,871¥

2,826
28,664–¥300,188¥ (14,852)¥

300,188¥¥

31,524670,333

34
29,851–

10,788

4,333

1,284

1,145

17

17,571–

17,571

12,74913,392

1,609

3,924

120

31,796(398)

31,398Notes: 1. Details of adjustments are as follows:(1) “Adjustments” to “Segment profit (loss)” represented elimination of inter-segment
transactions.
(2) “Adjustments” to “Segment assets” represented elimination of inter-segment
transactions and corporate assets. Corporate assets amounted to ¥43,502 million($386,071 thousand) and principally consist of the Company’s surplus funds (cash anddeposits), long-term investment assets (investment securities) and deferred tax assets.
(3) “Adjustments” to “Increase in property, plant and equipment, and intangible assets”
represented elimination of inter-segment transactions.
2. Segment profit (loss) was adjusted to operating income in the consolidated statement ofincome.

4425. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2016 and 2015 (continued)
Millions of Yen
2015
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service

Others

¥88,959¥ 1,039

Total¥

Segment income (loss)
Segment assets
Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets¥

Operating revenues:
External customers
Inter-segment
operating revenues
or transfers¥

77,332

12,122355

90,341¥89,454

8,086
267,028¥

14,752289,667

1,381¥ 97,845

Total

Adjustments Consolidated(Note 1)
(Note 2)¥294,906¥

14,559(14,559)¥

309,465(4) ¥11,15029,295628,148¥

29,72931668¥ 98,200¥

29,761¥ 1,707

¥

¥

3,299
32,382¥

3,161
27,918–¥294,906¥ (14,559)¥

294,906¥¥

29,437664,236142
36,088–

10,468

4,242

1,348

1,042

5

17,107–

17,107

11,601

2,351

683

1,223

18

15,878–15,878Notes: 1. Details of adjustments are as follows:(1) “Adjustments” to “Segment profit (loss)” represented elimination of inter-segment
transactions.
(2) “Adjustments” to “Segment assets” represented elimination of inter-segment
transactions and corporate assets. Corporate assets amounted to ¥48,976 million andprincipally consist of the Company’s surplus funds (cash and deposits), long-term
investment assets (investment securities) and deferred tax assets.
2. Segment profit (loss) was adjusted to operating income in the consolidated statement ofincome.

45

25. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2016 and 2015 (continued)
Thousands of U.S. Dollars
2016
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service

OthersTotal$

818,205$ 9,562$ 2,664,080

12,135

109,904

3,415

334

6,017

131,807(131,807)

–

Total

$

830,340$ 790,146$ 877,487$ 282,333$ 15,580$ 2,795,887$ (131,807)$ 2,664,080

Segment income (loss)
Segment assets
Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets$

90,462
2,366,827$ 123,206
2,691,206$ 25,086
254,387

$

$

$

$

95,74838,462

11,401

10,169158

155,939–

155,939

113,147

118,854

14,286

34,8301,067

282,186(3,535)

278,650

Operating revenues:
External customers
Inter-segment
operating revenues
or transfers$ 680,242$ 874,071$ 281,999

40,822309,470(109) $ 279,468
62,183
5,684,075

Adjustments Consolidated(Note 1)
(Note 2)$–302
264,923$ 2,664,080

279,771
5,948,999(4) Related informationa. Information by product and service
Information by product and service was omitted because it was the same as that of reportablesegment information.
b. Geographical information
Operating revenues
As revenue located in Japan accounted for more than 90% of revenue recognised in the
consolidated statement of income for the years ended 31 March 2016 and 2015, information onrevenue by geographical segment was omitted.
Property, plant and equipment
As the balance of property, plant and equipment located in Japan accounted for more than 90%of the balance of property, plant and equipment recognised in the consolidated balance sheet as
at 31 March 2016 and 2015, information on property, plant and equipment by geographicalsegment was omitted.
c. Information by major customer
As operating revenues to any single external customer do not exceed 10% of operating revenues
in the consolidated statement of income, information by major customer was omitted.

46

25. SEGMENT INFORMATION (continued)(5) Information about loss on impairment of property, plant and equipment by reportable segment
Millions of Yen
2016
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service
Impairment losses

¥

37

¥

–

¥

–

¥

23

Others
¥

–

Total
¥

61

Adjustments Consolidated
¥

–

¥

61

Millions of Yen
2015
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service
Impairment losses

¥

62

¥

1,511

¥

18

¥

118

Others
¥

–

Total
¥

1,712

Adjustments Consolidated
¥

–

¥

1,712

Thousands of U.S. Dollars
2016
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service
Impairment losses

$

331

$

–

$

–

$

212

Others
$

–

Total
$

543

Adjustments Consolidated
$

–

$

543

(6) Information on amortisation of goodwill and remaining unamortised balance by reportable segment
Information on amortisation of goodwill and remaining unamortised balance by reportable segment
as at 31 March 2016 and 2015 and for the years then ended was omitted because the amounts wereimmaterial.
(7) Information on negative goodwill by reportable segment
Relating to the segment “Real Estate,” the Company acquired additional shares of Osaka
Merchandise Mart Corporation, making it a consolidated subsidiary. As a result, the Company
recognised gain on bargain purchase of ¥4,709 million ($41,795 thousand) and loss on step
acquisitions of ¥2,119 million ($18,807 thousand) for the year ended 31 March 2016.
Information on the ending balance and amortisation of negative goodwill by reportable segment as at
31 March 2015 and for the year then ended, respectively, was omitted because the amounts wereimmaterial.

47

26. RELATED PARTY TRANSACTIONSTransactions of the Company with related parties as at and for the years ended 31 March 2016 and 2015
are as follows:
Company’s unconsolidated subsidiaries and affiliates
2016
Category
Affiliates

Company
nameNakanoshima Rapid
RailwayCo., Ltd.

Location
Chuo-ku,
Osaka

Capital¥26,135
million($231,946
thousand)Business
Railway
operations

Percentage
of votingrights(Direct
votingrights)RelationshipReservationofguarantees
on loans

Transaction
Guarantees(Note 1)

Transaction
amount¥25,210
million($223,735
thousand)Account–

Year-endbalance–

Account–

Year-endbalance–33.50%
Holding
concurrent
post ofdirectors

2015
Category
Affiliates

Company
nameNakanoshima Rapid
RailwayCo., Ltd.

Location
Chuo-ku,
Osaka

Capital¥26,135
millionBusiness
Railway
operations

Percentage
of votingrights(Direct
votingrights)RelationshipReservationofguarantees
on loans

Transaction
Guarantees(Note 1)

Transaction
amount¥26,532
million33.50%
Holding
concurrent
post ofdirectors

Note: 1. Guarantees are provided for the loans of the affiliate obtained from the Development Bank ofJapan and other banks in the amounts of ¥25,210 million ($223,735 thousand) and ¥26,532
million for the years ended 31 March 2016 and 2015, respectively.

27. BUSINESS COMBINATIONBusiness combination through acquisition
1)

An outline of this business combination is as follows:(a) Name of acquired company and business
Name of acquired company: Osaka Merchandise Mart Corporation
Business: Lease and administrative operations of Osaka Merchandise Mart Building(b) Main reasons for business combination
The purposes of the business combination are as follows:
Temmabashi, where the Company was founded and Osaka Merchandise Mart Corporation is
located, is considered an important area for revitalisation along the Keihan Railway lines as oneof the main strategies determined in the Medium-term Management Plan “Bravely PursuingCreation” (FY2016-FY2018). The Company also expects that the operations of the acquiredcompany will be lucrative going forward as rental property to strengthen the profitability of thereal estate leasing business.
(c) Date of business combination
30 June 2015(d) Legal form of business combination
Business combination, in which the company was acquired through a cash consideration
48

27. BUSINESS COMBINATION (continued)
Business combination through acquisition (continued)
1)

An outline of this business combination is as follows: (continued)(e) Name of company after business combination
The company’s name is unchanged.
(f) Percentage of voting rights acquired by the Company
Percentage of voting rights before the business combination
Additionally acquired percentage of voting rights on the date ofbusiness combination
Percentage of voting rights after the business combination

45%
55
100%

(g) Main reason for determination of the acquiring company
The Company acquired all voting rights of the acquired company through a cash consideration.
2)

Period during which the financial results of the acquired company are included in the consolidated
statement of income
The Company included the financial results of the acquired company for the period from 1 July 2015
to 31 March 2016. As the deemed acquisition date is 30 June 2015, the financial results of theacquired company from 1 April 2015 to 30 June 2015 are accounted for by the equity method.

3)

Details on acquisition cost of acquired company

Fair value of the shares of the acquired company at thebusiness combination date, which the Company
retained before the business combination
Fair value of the additionally acquired shares of theacquired company at the business combination date
Total acquisition costs
4)

2,057

$

18,258

¥

2,514
4,572

$

22,316
40,575¥1 million ($15 thousand)Difference between acquisition costs of the acquired company and the total amount of costs oftransactions for share acquisition
Loss on step acquisitions

6)¥

Major acquisition-related costs and amounts
Valuation fees

5)

Millions of yen

Thousands of
U.S. dollars¥2,119 million ($18,807 thousand)Amount of gain on bargain purchase and reason for recognition(a) Amount of gain on bargain purchase¥4,709 million ($41,795 thousand)(b) Reason for recognition
The fair value of net assets of the acquired company at the date of the business combination
exceeded the acquisition cost.

49

27. BUSINESS COMBINATION (continued)
Business combination through acquisition (continued)
7)

Information on assets acquired and liabilities assumed on the date of the business combination

Current assets
Fixed assets
Total assets
Current liabilities
Fixed liabilities
Total liabilities
8)

Millions of yen
¥
2,676
9,054
11,731
528
1,921
¥
2,450

Thousands of
U.S. dollars$
23,75480,359104,113
4,690
17,053$
21,743

Effects on the consolidated statement of income for the fiscal year assuming that the businesscombination was completed at beginning of the fiscal year and its calculation method
Information is omitted because the effect is immaterial.

28. SUBSEQUENT EVENTS
Company split
The Company shifted to a holding company structure by splitting railway business and other business towholly owned subsidiaries, Keihan Electric Railway Split Preparation Co., Ltd. and Keihan Electric
Railway Real Estate Co., Ltd. as at 1 April 2016. As a result of this company split, the names of theCompany and Keihan Electric Railway Split Preparation Co., Ltd. were changed to Keihan Holdings Co.,
Ltd. and Keihan Electric Railway Co., Ltd. as at 1 April 2016. Assets and liabilities transferred to Keihan
Electric Railway Split Preparation Co., Ltd. and Keihan Electric Railway Real Estate Co., Ltd. are as
follows:i)

Assets and liabilities transferred to Keihan Electric Railway Split Preparation Co., Ltd.

AssetsLiabilities
Valuation or translation differencesii)

Millions of yen¥
183,165
124,107
24,053Thousands of
U.S. dollars$ 1,625,533
1,101,419
213,468

Assets and liabilities transferred to Keihan Electric Railway Real Estate Co., Ltd.

AssetsLiabilities
Valuation or translation differences

Millions of yen¥
62,08643,851
539

Thousands of
U.S. dollars$
551,001
389,165
4,786This company split is accounted for as a transaction under common control based on “Revised AccountingStandard for Business Combinations” (ASBJ Statement No.21 of 13 September 2013), the “Revised
Accounting Standard for Business Divestitures” (ASBJ Statement No. 7 of 13 September 2013) and the“Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard forBusiness Divestitures” (ASBJ Guidance No. 10 of 13 September 2013).
50

28. SUBSEQUENT EVENTS (continued)
Granting of share-based compensation stock options
Share-based compensation stock options are to be issued to directors (excluding outside directors) of theCompany by the resolutions at the general meeting of shareholders on 17 June 2016 and information of thestock option plan is as follows:
The stock option plan
Individuals covered by the plan

5 directors

Class and number of shares to be granted
Amount to be paid in upon exercise

Annually up to 50,000 shares of common stock¥1 ($0.00) per share
In the event a grantee resigns from any position of director,
audit and supervisory board member and executive officer,
all the stock acquisition rights are exercisable together forten days after their resignation dates

Exercisable conditions

Transfer of stock acquisition rights
Exercisable period

Transfer of stock acquisition rights requires approval of theBoard of Directors
Within 30 years at maximum from the grant date, to be
determined by the Board of Directors

Issuance of unsecured bonds
The Company resolved at the Board of Directors’ meeting held on 28 April 2016 to issue the 29th
unsecured bonds in the aggregate amount of ¥10,000 million ($88,746 thousand) in order to financeredemption of bonds and issued these bonds on 16 June 2016.
The unit price for the bond issuance was set at ¥100 ($0.88) per ¥100 ($0.88) nominal value, and theannual interest rate is 0.340%. These bonds will be redeemed at once on the maturity date of 16 June
2026.

51