Consolidated Balance Sheet
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
31 March 2018

Millions of Yen
2017
2018

ASSETS
CURRENT ASSETS:
Cash and deposits (Notes 8, 19 and 20)
Notes and accounts receivable (Note 20)
Short-term investments (Notes 4 and 20)
Land and buildings for sale
Inventories
Deferred tax assets (Note 15)
Other
Allowance for doubtful accounts
Total current assets¥

PROPERTY, PLANT AND EQUIPMENT (Note 5):
Buildings and structures, net (Notes 6, 8, 14 and 17)
Machinery, equipment and vehicles, net (Notes 6, 8 and 17)
Land (Notes 6, 7, 8 and 14)
Construction in progress
Other, net (Note 8)
Total property, plant and equipment, net
INTANGIBLE ASSETSINVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4, 8 and 20)
Long-term loans receivable
Deferred tax assets (Note 15)
Assets for retirement benefits (Note 11)
Other
Allowance for doubtful accounts
Total investments and other assets
TOTAL ASSETS (Note 24)¥220,31731,19951
105,070
1,772
3,223
10,099(243)
171,490¥

18,372
25,76070
99,541
1,878
2,670
9,970
(609)
157,655

Thousands of
U.S. Dollars(Note 1)
2018$

191,239
293,671480
988,989
16,68430,342
95,066(2,294)
1,614,179

193,388
16,672
217,866
19,065
8,632
455,624

198,409
16,575
222,847
10,6238,464
456,920

1,820,294
156,935
2,050,700
179,454
81,253
4,288,638

9,267

8,044

87,22743,676
689
6,697
704
11,340(283)
62,824699,20738,229
682
7,209
266
10,843(219)
57,011
679,631

411,108
6,487
63,041
6,635
106,742(2,666)591,348
6,581,394¥$

Consolidated Balance Sheet (continued)
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
31 March 2018

Millions of Yen
2017
2018

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Notes and accounts payable (Notes 8 and 20)
Short-term loans and current portion of long-term loans(Notes 8, 9, 10 and 20)
Current portion of bonds (Notes 9 and 20)
Income taxes payable (Note 15)
Advances received
Allowance for employees' bonuses
Provision for unutilised gift tickets
Other (Notes 8 and 23)
Total current liabilities¥

NONCURRENT LIABILITIES:
Bonds (Notes 9 and 20)
Long-term loans (Notes 8, 9, 20 and 21)
Long-term payables - other
Deferred tax liabilities (Note 15)
Deferred tax liabilities for land revaluation (Notes 7 and 15)
Accrued retirement benefits for directors and audit and supervisory board
members
Liability for retirement benefits (Note 11)
Other (Note 23)
Total noncurrent liabilities
Total liabilities

11,588¥

11,248

Thousands of
U.S. Dollars(Note 1)
2018$

109,078

80,20265,363754,915

10,045
4,524
7,521
2,555
565
44,596
161,600

45
5,990
6,979
2,630
508
43,450136,217

94,55842,58870,79324,055
5,327
419,767
1,521,084

80,125
146,026
536
11,33633,137

90,191
158,938
685
11,23633,168754,193
1,374,494
5,048
106,708
311,912

345

437

3,252

18,79023,749314,047475,647

20,011
25,289339,959
476,176

176,867
223,545
2,956,023
4,477,107

51,466

51,466484,435

28,787
117,384

28,782
98,392

270,963
1,104,895(21,603)(21,580)(203,350)

176,033

157,060

1,656,943

10,78736,0886(2,540)44,341
44
3,139
223,559699,207

11,26635,584(2)(3,338)43,50927
2,857
203,455
679,631

101,538
339,68858(23,916)
417,369421
29,5512,104,286
6,581,394

COMMITMENTS AND CONTINGENT LIABILITIES (Note 22)
NET ASSETS (Note 12) :Common stock:
Authorised, 319,177,200 shares as at 31 March 2018,
and 1,595,886,000 shares as at 31 March 2017;
Issued, 113,182,703 shares as at 31 March 2018,
and 565,913,515 shares as at 31 March 2017
Capital surplus
Retained earnings
Treasury stock, at cost, 5,989,571 shares as at 31 March 2018,and 29,912,535 shares as at 31 March 2017
Total shareholders' equity
Accumulated other comprehensive income:Net unrealised holding gain on securities (Note 4)
Revaluation reserve for land (Note 7)
Foreign currency translation adjustments
Retirement benefit liability adjustment (Note 11)
Total accumulated other comprehensive income, net
Stock acquisition rights
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 2018

OPERATING REVENUES (Notes 6 and 24)
OPERATING EXPENSES:
Transportation, other service expenses and cost of sales (Note 13)
Selling, general and administrative expenses (Notes 6 and 12)
Total operating expenses
Operating income (Note 24)¥

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Loss on impairment of property, plant and equipment (Notes 6, 14 and 24)
Shares of loss of affiliates, net
Gain on contribution received for construction
Subsidies
Compensation income
Gain on sales of investment securities, net (Note 4)
Loss on sales or disposal of property, plant and equipment, net(Note 6)
Loss on deduction of contributions received for construction fromacquisition costs of property, plant and equipment
Special retirement expenses (Note 11)
Gain on sale of shares of subsidiaries (Note 26)
Loss on valuation of shares of subsidiaries
Compensation for damage
Other, net
Other income (expenses), net
PROFIT BEFORE INCOME TAXESINCOME TAXES (Note 15):
Current
Deferred
Total income taxes
PROFITPROFIT ATTRIBUTABLE TO:
Non-controlling interests
Owners of parent (Note 18)¥

See accompanying notes to consolidated financial statements.

4

Millions of Yen
2017
2018
¥ 302,917
322,276

Thousands of
U.S. Dollars(Note 1)
2018$
3,033,475

248,780
42,037
290,817
31,458232,252
38,320270,573
32,343

2,341,679
395,684
2,737,364
296,111854(2,561)
(61)
(59)
516
1,473
－
916

850
(2,802)(1,359)
(16)
292
1,417
602
2,776

8,040
(24,109)
(582)
(559)
4,859
13,867
－
8,623

(711)

(996)

(6,696)(1,042)(911)(9,816)

－
3,179
(310)
(152)
185
2,225

(85)
－
－
－
(407)
(641)

－
29,926(2,918)(1,437)
1,748
20,94733,68431,702

317,058

10,701(27)
10,67423,00910,255(1,401)
8,853
22,848100,733(258)
100,475
216,583297
22,712¥

212
22,636$

2,800
213,782

Consolidated Statement of Comprehensive Income
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2018

PROFIT
OTHER COMPREHENSIVE INCOME (LOSS) (Note 16):
Net unrealised holding loss on securities
Revaluation reserve for land
Retirement benefit liability adjustment
Share of other comprehensive income (loss) of affiliates
accounted for using the equity method
Total other comprehensive income (loss)
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

5

¥

¥
¥

Millions of Yen
2017
2018
22,84823,009¥Thousands of
U.S. Dollars(Note 1)
2018
$ 216,583

(456)
－
797

(941)
(2,087)(522)(4,300)
－
7,510

8

(2)

81

349
23,35923,039319¥¥(3,554)
19,29419,068
225

$
$

3,291
219,874
216,8633,011

Consolidated Statement of Changes in Net Assets
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2018
Millions of Yen

BALANCE at 1 APRIL 2016
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 1 APRIL 2017
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 2018

Total
Accumulated
Other
Comprehensive
Income, Net¥
46,962－Stock
Acquisition
Rights¥－－

Noncontrolling
Interests
¥
2,662
－

TreasuryStock¥ (17,199)－

Total Shareholders'Equity¥142,165(3,233)

Net Unrealised
Holding Gain on
Securities¥
12,221－

Revaluation
Reserve forLand¥
37,557－

22,636－

22,636

－

－

－

－

－

－

－

22,636－－(4,381)
0(4,381)
0

－
－

－
－

－
－

－
－

－
－

－
－

－
－

(4,381)
0

(12)

－

－

(12)

－

－

－

－

－

－

－

(12)

－

－

(114)

－

(114)

－

－

－

－

－

－

－

(114)

－

－

－

－

－

(954)

(1,973)

(2)

(522)

(3,453)27

194(3,230)51,466－28,782－

98,392(3,215)(21,580)－

157,060(3,215)

11,266－35,584－(2)－(3,338)－43,509
－

27
－

2,857
－

203,455(3,215)－－22,712－

22,712

－

－

－

－

－

－

－

22,712

－
－

－
(0)

－
－

(36)
13

(36)
12

－
－

－
－

－
－

－
－

－
－

－
－

－
－

(36)
12

CommonStock¥51,466－

CapitalSurplus¥28,794－Retained
Earnings¥
79,103(3,233)

－

－

－
－

－
0

－

¥

Total
Net Assets
191,790(3,233)

－

5

－

－

5

－

－

－

－

－

－

－

5

－

－

(504)

－

(504)

－

－

－

－

－

－

－

(504)

－
¥

Retirement
BenefitLiability
Adjustment¥(2,815)－

Foreigncurrencytranslation
adjustments¥－－

51,466－¥28,787－¥

117,384－¥(21,603)

－
¥

(479)

176,033¥

10,787504¥

36,088

8
¥

6

797
¥

(2,540)831¥

44,341

16
¥

44

282
¥

3,139

1,130
¥

223,559

Thousands of U.S. Dollars (Note 1)

BALANCE at 1 APRIL 2017
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 2018

Foreigncurrencytranslation
adjustments
$
(23)
－

Retirement
BenefitLiability
Adjustment$ (31,426)－

Total
Accumulated
Other
Comprehensive
Income, Net$
409,541－

Stock
Acquisition
Rights$262－

Noncontrolling
Interests$
26,893－Total
Net Assets$
1,915,055(30,270)

TreasuryStock$ (203,129)－

Total Shareholders'Equity$ 1,478,357(30,270)

213,782－

213,782

－

－

－

－

－

－

－

213,782

－
－

(346)
125

(346)
120

－
－

－
－

－
－

－
－

－
－

－
－

－
－

(346)
120

48

－

－

48

－

－

－

－

－

－

－

48

－

－

(4,747)－(4,747)

－

－

－

－

－

－

－

(4,747)

－

－

－

－

－

(4,510)

4,747

81

7,510

7,827

159

2,657

10,644

270,963$ 1,104,895$ (203,350)$ 1,656,943

CommonStock$ 484,435－

CapitalSurplus$ 270,919－

Retained
Earnings$
926,131(30,270)

－

－

－
－

－
(5)

－

$

Revaluation
Reserve forLand$ 334,941－

Net Unrealised
Holding Gain on
Securities$ 106,049－

484,435$$

See accompanying notes to consolidated financial statements.

6

101,538$

339,688$58$(23,916)$

417,369$421$

29,551$2,104,286

Consolidated Statement of Cash Flows
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2018
Thousands of
U.S. Dollars(Note 1)
2018

Millions of Yen
2017
2018
OPERATING ACTIVITIES:Profit before income taxes
Adjustments for:
Depreciation and amortisation
Loss on impairment of property, plant and equipment
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
Loss on valuation of shares of subsidiaries
Gain on sales of shares of subsidiaries
Gain on sales of investment securities
Share of loss of affiliates, net
Interest and dividend income
Interest expense
Special retirement expenses(Decrease) increase in allowance for doubtful accounts
Decrease in allowance for employees' bonuses(Decrease) increase in liability for retirement benefits
Increase in assets for retirement benefits
Increase in trade receivables
Decrease in inventories
Increase in trade payables
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Special retirement payments
Net cash provided by operating activities¥

33,684¥31,702$

317,058

19,512
61
677

18,4601,359
750

183,663
582
6,380

1,042

911

9,816

(516)
310
(3,179)
(916)
59
(854)
2,561
－
(269)
(94)
(404)
(109)
(5,600)
8,159
1,039
3,223
58,388854(2,628)(12,175)－
44,438(292)－－(2,776)
16
(850)
2,802
85
499
(36)
95
(254)
(2,409)
1,260
194
(714)
50,805852(2,855)(10,147)(85)
38,569(4,859)2,918(29,926)(8,623)559(8,040)24,109－(2,532)(889)(3,808)(1,032)(52,713)76,802
9,788
30,342549,594
8,039(24,745)(114,600)－
418,287140(41,018)
8,637
140(5,251)
1,022(0)(34,079)466
496(1,630)
5,357

1,327
(386,094)
81,301
1,320(49,426)
9,621

490

－

4,616

INVESTING ACTIVITIES:
Decrease (increase) 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
Proceeds from purchase of shares of subsidiaries
resulting in change in scope of consolidation (Note 19)
Proceeds from sales of shares of subsidiaries
resulting in change in scope of consolidation (Note 19)
Decrease (increase) in loans receivable
Other, net
Net cash used in investing activities

2,826

－

26,606

1,911(1,503)(32,603)(1,023)814(29,597)

17,994(14,156)(306,888)

FINANCING ACTIVITIES:
Decrease in short-term loans, net
Decrease in short-term bonds, net
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Redemption of bonds
Cash dividends paid
Dividends paid to non-controlling interests
Purchase of treasury stock
Other, net
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 19)(1,655)－30,781(34,595)－(45)(3,218)(15)(36)(1,071)(9,858)
1,976
18,32420,300(7,995)(5,000)31,867(29,781)
9,936(10,245)(3,235)(26)(4,381)(1,159)(20,020)(11,048)
29,372
18,324(15,586)－
289,730(325,637)－(432)(30,293)
(145)
(346)
(10,083)(92,794)
18,604
172,479
191,084

See accompanying notes to consolidated financial statements.

7

¥

¥

$

Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended 31 March 2018

1.

BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Keihan Holdings 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 and Exchange Act and its related accounting regulations andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are
different in certain respects as to the application and disclosure 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 sharedata. 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.
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 ¥106.24
to $1, the approximate rate of exchange at 31 March 2018. 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 and retained
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 two affiliates are accounted for by the equity method for the year ended 31 March
2018.

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 the Company.

b.

Securities - Securities are classified into two categories: held-to-maturity debt securities or othersecurities. Held-to-maturity securities are stated at amortised cost, and amortisation for each period
through to the maturity date is determined on a straight-line basis. Marketable securities classified asother securities are stated at fair value determined primarily by the average market price for one monthprior to the year-end. Unrealised gains and losses on these securities are reported, net of applicable
income taxes, as “Net unrealised holding gain on securities” in a separate component of net assets
through the consolidated statement of comprehensive income. The cost of securities sold isdetermined primarily by the moving-average method. Non-marketable securities classified as othersecurities are stated at cost 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 declining-balance method.
However, certain assets are depreciated using the straight-line method over the estimated useful livesof the respective assets.

e.

Intangible Assets (excluding Leased Assets) - Intangible assets excluding leased assets are amortisedusing the straight-line method. Software for internal use is amortised over its estimated useful life of
5 years.

f.

Leased Assets - Leased assets under finance lease transactions which do not transfer ownership to thelessee are capitalised and depreciated over the respective lease terms to a nil residual value by thestraight-line method. Finance lease transactions commencing on or before 31 March 2008 other thanthose in which the ownership of the leased assets is transferred to the lessee are accounted for in thesame 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 and loan
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 primarily 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 primarily 15 years, which is within theestimated average 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 and supervisory board
members based on the amount required at the balance sheet date in accordance with 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.

Significant Hedge Accounting - The Company and three consolidated subsidiaries adopt hedge
accounting. Under Japanese GAAP, interest rate swaps which meet certain conditions are accounted
for as if the interest 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

10

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)n.

Hedge Accounting (continued)(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.
(5) Assessment of hedge effectivenessHedge effectiveness is not assessed as the notional principal, contractual terms (interest rates and datesof receipt and payment of interest), and maturities of the interest rate swap transactions are almost
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 - Three consolidated subsidiaries receive contributions forconstruction as part of construction cost from local authorities and others at railway track business.
Contributions received are deducted directly from the acquisition costs of the related assets at the timeof completion of construction of the railway business.
Gain on contributions received for construction is included in other income (expenses) and the amountdirectly 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.

3.

ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE

・ Implementation Guidance on Tax Effect Accounting
・ Implementation Guidance on Recoverability of Deferred Tax Assets(1) Summary
On 16 February 2018, the Accounting Standards Board of Japan (hereinafter referred to as the“ASBJ”) issued “Revised Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance
No.28) and “Revised Implementation Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No.26). The ASBJ made the following necessary revisions while adhering
fundamentally to the framework outlined in “Practical Guidelines on Accounting Standards for
Tax Effect Accounting.”
The authority for providing related accounting guidance has been transferred from the JapaneseInstitute of Certified Public Accountants to the ASBJ.

11

3.

ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)(1) Summary (continued)(Major revised accounting treatments)
・ Accounting treatment of taxable temporary differences related to investments in subsidiaries,
etc. when an entity prepares separate financial statements
・ Accounting treatment related to the recoverability of deferred tax assets in entities that
qualify as Category 1 when the company has recorded sufficient taxable income to exceed
the amount of the deductible temporary differences in the current and prior three years.
(2) Scheduled date of adoption
The Company expects to adopt the revised implementation guidance from the beginning of the
fiscal year ending 31 March 2019.
(3) Effect of the adoption of implementation guidance
The Company is currently assessing the effect of the adoption of the revised implementation
guidance on its consolidated financial statements.

・ Accounting Standard and Implementation Guidance for Revenue Recognition(1) Summary
On 30 March 2018, the ASBJ issued “Accounting Standard for Revenue Recognition” (ASBJ
Statement No.29) and “Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No.30). The International Accounting Standards Board(hereinafter referred to as the “IASB”) and the Financial Accounting Standards Board (hereinafterreferred to as the “FASB”) in the United States co-developed comprehensive accounting
standards for revenue recognition and issued “Revenue from Contracts with Customers” (issued
as IFRS 15 by the IASB and Topic 606 by the FASB) in May 2014. The ASBJ developed
comprehensive accounting standards on revenue recognition and issued them in conjunction with
the implementation guidance based on the fact that IFRS 15 will be applied from fiscal years
starting on or after 1 January 2018 and Topic 606 will be applied from fiscal years starting after
15 December 2017.
As the basic policy in developing accounting standards for revenue recognition, the ASBJ defined
the accounting standard starting with incorporating the basic principle of IFRS 15 from astandpoint of comparability between financial statements, which is one benefit of ensuringconsistency with IFRS 15. Furthermore, the ASBJ added alternative accounting treatment
without impairing comparability when there are matters to be considered related to accounting
practices, etc. common in Japan.
(2) Scheduled date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the
beginning of the fiscal year ending 31 March 2022.
(3) Effect of the adoption of accounting standard and implementation guidance
The Company is currently assessing the effect of the adoption of the accounting standard and theimplementation guidance on its consolidation financial statements.

12

4.

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 2018 and 2017.
Millions of Yen
2018
Carrying
value
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

¥

¥

227
1,400
200
1,828

Fair value

¥

¥

234
1,459
200
1,894

Difference

¥

¥

7
58
0
65

Millions of Yen
2017
Carrying
value
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

¥

¥

57
1,401
200
1,659

Fair value

¥

¥

57
1,477
202
1,738

Difference

¥

¥

0
76
2
79

Thousands of U.S. Dollars
2018
Carrying
value
Fair value
Difference
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

$

$

2,142
13,187
1,882
17,212

13

$

$

2,210
13,735
1,887
17,833

$

$

67
548
5
621

4.

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 2018 and 2017.

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

¥

¥

20,961
1,603
22,56474300
374
22,938Carrying
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

¥

¥

21,8001,534
23,33418303
322
23,656

14

Millions of Yen
2018
Acquisition
cost

¥

¥

6,053
1,209
7,263

79
300
379
7,642

Difference¥¥

Millions of Yen
2017
Acquisition
cost

¥

¥

6,219
1,209
7,429

18
303
322
7,751

14,907393
15,300(4)–(4)
15,295Difference¥¥

15,581324
15,905(0)–(0)
15,905

4.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(2) Marketable securities classified as other securities (continued)
Thousands of U.S. Dollars
2018
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

$

$

197,299
15,090212,390

699
2,823
3,523
215,914$$56,981
11,38868,369

746
2,823
3,570
71,939$$140,318
3,702
144,020

(46)
–
(46)
143,974

Unlisted equity securities with a carrying value of ¥8,907 million ($83,844 thousand) and ¥3,965
million as at 31 March 2018 and 2017, 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 2018 and 2017.
Gain on sales are included in gain on sales of investment securities, net in the consolidated statementof income.

Equity securities

Millions of Yen
2018
Proceeds
Gain on sale Loss on sale¥
1,022 ¥
916 ¥–Equity securities
Other

Millions of Yen
2017
Proceeds
Gain on sale Loss on sale¥
4,981 ¥
2,700 ¥
–
¥
375 ¥
75 ¥
–

Equity securities

Thousands of U.S. Dollars
2018
Proceeds
Gain on sale Loss on sale$
9,621 $
8,623 $–

15

4.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(4) Investments in unconsolidated subsidiaries and affiliates
Investments in unconsolidated subsidiaries and affiliates as at 31 March 2018 and 2017 consisted of
the following:

Investments in unconsolidated
subsidiaries and affiliates

5.

¥

Millions of Yen
2017
2018

Thousands of
U.S. Dollars
2018

10,052

$

¥

9,019

94,618PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation included in property, plant and equipment as at 31 March 2018 and 2017
amounted to ¥444,658 million ($4,185,417 thousand) and ¥435,109 million, respectively.
Accumulated contributions deducted from the acquisition costs of property, plant and equipment as at 31
March 2018 and 2017 amounted to ¥181,199 million ($1,705,568 thousand) and ¥180,769 million,
respectively.

6.

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 2018, rental income, net of related expenses, relevant to these properties
amounted to ¥9,967 million ($93,818 thousand) and net gain on sales of these properties amounted to ¥232
million ($2,185 thousand).
For the year ended 31 March 2017, rental income, net of related expenses, relevant to these properties
amounted to ¥9,727 million and net gain on sales of these properties amounted to ¥17 million. Furthermore,
loss on impairment of these real estate properties was recognised in the amount of ¥3 million.
Income is included in operating revenues and expenses are mainly included in operating expenses in the
consolidated statements of income. Net gain on sales and net loss on impairment of these properties areincluded in other income (expense) in the consolidated statement of income.

16

6.

RENTAL PROPERTIES (continued)

Increases/(decreases) in the carrying value during the years ended 31 March 2018 and 2017, and the fairvalue of the rental properties as at 31 March 2018 and 2017 are as follows:

1 April 2017¥
162,652

Millions of Yen
2018
Carrying value
Increase/(Decrease)
31 March 2018¥
(3,889)¥158,763

Fair value
31 March 2018¥
218,788

1 April 2016
155,245

Millions of Yen
2017
Carrying value
Increase/(Decrease)
31 March 2017
¥
7,406
¥
162,652

Fair value
31 March 2017¥221,758

1 April 2017$
1,530,991

Thousands of U.S. Dollars
2018
Carrying value
Increase/(Decrease)
31 March 2018$(36,607)$(1,494,384)

Fair value
31 March 2018$
2,059,380¥

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 2018and 2017 are the decrease due to the sales of real estate of ¥5,346 million ($50,328 thousand) andthe increase due to the acquisition of office buildings of ¥8,361 million, respectively.
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.

7.

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 and two consolidated subsidiaries revaluate its land held for business. The resulting revaluationdifference, net of applicable tax 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” inliabilities.
Details of the revaluation are as follows:
Method of revaluation
Fair values are determined based on the appraisal value publicly announced for tax assessment purposeswith 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

8.

PLEDGED ASSETS

Assets pledged as collateral and the corresponding liabilities as at 31 March 2018 are summarised as follows:
Thousands of
U.S. Dollars
2018
The Group’s
Railwayfoundation
Total
mortgage

Millions of Yen
2018
The Group’s
Railwayfoundation
Total
mortgage
Assets pledged as collateral:
Buildings and structures
Machinery, equipment andvehiclesLand
Other property, plant andequipment
Investment securities
Total

¥

¥

67,318¥(63,354 )13,422
54,118

(
(

760
800
136,419((¥($

633,646$(596,332 )

13,422 )53,630 )126,337
509,394((

126,337 )504,803 )

760 )
– )
131,167 )

7,158
7,530
1,284,066$

Thousands of
U.S. Dollars
2018
The Group’s
Railwayfoundation
Total
mortgage

Millions of Yen
2018
The Group’s
Railwayfoundation
Total
mortgage
Corresponding liabilities:
Accounts payables
Long-term loans(including current portionof long-term loans)
Total

¥

41

¥(

– )

¥

52,671
52,712(¥(50,660 )50,660 )(7,158 )(–)
$ ( 1,234,631 )

$

392

$(

– )

$

495,776
496,168($(

476,847 )476,847 )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

9.

SHORT-TERM LOANS, 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 0.526% and 0.536% for the years ended 31 March 2018 and2017, respectively.
Long-term debt as at 31 March 2018 and 2017 is summarised as follows:
Bonds

Euro-yen zero coupon unsecured
convertible bonds with stockacquisition rights in yen, due 30
March 2021¥
Unsecured Keihan Holdings bonds,
payable in yen at rates ranging from
0.34% to 1.89%, due from 2019
through 2026
Unsecured Keifuku Electric Railroad
bonds, payable in yen at rates of
0.226%, due from 2018 through
2020
Total
Less current portion
Bonds, less current portion¥

Millions of Yen
2017
2018

Thousands of
U.S. Dollars
2018

20,059$¥20,079188,81670,00070,000658,885111
90,171(10,045)
80,125

157
90,237(45)
90,191

1,049
848,752(94,558)
754,193¥$

The aggregate annual maturities of bonds subsequent to 31 March 2018 are summarised as follows:Year ending 31 March,
2019
2020
2021
2022
2023
2024 and thereafter
Total

Thousands ofMillions of Yen U.S. Dollars
10,045¥$94,55810,04594,55820,019188,438
10,00094,126
10,00094,12630,059282,943
90,171¥$
848,752

Euro-yen zero coupon unsecured convertible bonds in the nominal amount of ¥20,000 million with stockacquisition rights issued on 30 March 2016 are convertible at ¥5,315 ($50.02) per share in the period from
13 April 2016 to 16 March 2021 subject to adjustment in certain circumstances.
From 1 April 2018, these bonds are convertible at ¥5,307.1 ($49.95). The price was adjusted pursuant to theclauses on price adjustment of the bonds because the proposal on dividend per share of ¥20 ($0.18) wasapproved at the 96th Ordinary General Meeting of Shareholders held on 19 June 2018.

19

9.

SHORT-TERM LOANS, BONDS AND LONG-TERM LOANS (continued)

Loans

Loans from banks and other financial
institutions, due serially from 2019
to 2038 at weighted-average rates
ranging from 0.767% to 0.824%
Less current portionLong-term loans, less current portion¥¥

Millions of Yen
2017
2018

Thousands of
U.S. Dollars
2018180,135(34,109)
146,026$ 1,695,553(321,059)$ 1,374,494¥¥

181,827(22,888)
158,938

The aggregate annual maturities of long-term loans subsequent to 31 March 2018 are summarised as follows:Year ending 31 March,
2019
2020
2021
2022
2023
2024 and thereafter
Total

Thousands ofMillions of Yen U.S. Dollars
34,109¥$321,059
52,484
494,020
9,058
85,262
5,046
47,49820,490
192,867
58,946554,845¥ 180,135$ 1,695,553

10. OVERDRAFT AND LOAN COMMITMENTS
The Company and 17 consolidated subsidiaries entered into overdraft and loan commitment agreements with
21 banks for efficient funding of working capital as at 31 March 2018.
The unused portions of the credit line under these agreements as at 31 March 2018 are as follows:

Total overdraft limits and loan
commitments
Loan executions
Unused credit line

Millions of Yen
2018

Thousands of
U.S. Dollars
2018

¥

$

¥

87,742(42,035)
45,70620$

825,889(395,669)
430,220

11. 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 allowancemutual aid plans, and defined contribution pension plans. Certain consolidated subsidiaries maintain aretirement benefit trust.
(1) The changes in the defined benefit obligation for the years ended 31 March 2018 and 2017 (except for
the retirement benefit obligation calculated by the simplified method presented in (3) below) are as
follows:

Balance at the beginning of year
Service costs
Interest cost
Actuarial loss
Retirement benefits paid
Other
Balance at the end of year¥¥

Millions of Yen
2017
2018
32,57834,444 ¥
1,377
1,332
86
91
2,069
21
(1,425)(2,341)(241)–
34,44433,548 ¥Thousands of
U.S. Dollars
2018$ 324,218
12,547856
199(22,043)–$ 315,776(2) The changes in plan assets for the years ended 31 March 2018 and 2017 (except for plan assets
calculated by the simplified method presented in (3) below) are as follows:

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

Millions of Yen
2017
2018
16,173
16,841 ¥
342
282
600
344
881
1,374
(897)
(1,152)(259)–
16,841
17,690 ¥21

Thousands of
U.S. Dollars
2018$ 158,521
2,654
3,247
12,938(10,844)–$ 166,517

11. 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 2018 and 2017 are 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¥¥

Millions of Yen
2017
2018
2,507
2,141 ¥
204
275
(267)
(173)
(48)
(61)

Thousands of
U.S. Dollars
2018$20,1592,590(1,630)
(576)

–
(255)
2,141

429
–
20,972

45
–
2,228

¥

$

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 2018and 2017 are as follows:

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¥
Note:Millions of Yen
2017
2018
16,12915,850 ¥(17,221)(18,255)(1,092)(2,404)
20,837
20,490Thousands of
U.S. Dollars
2018$ 149,199(171,836)(22,637)
192,869

19,74520,011(266)

170,231
176,867(6,635)18,085
18,790(704)
18,085¥19,745$170,231

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

2211. RETIREMENT BENEFITS (continued)(5) The components of retirement benefit expenses for the years ended 31 March 2018 and 2017 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
Retirement benefit expenses fordefined benefit plans¥

Millions of Yen
2017
2018
1,377
1,332 ¥
86
91
(342)
(282)
749
1,123
(273)
(256)

Thousands of
U.S. Dollars
2018$12,544856(2,654)
10,576(2,410)

204

2,590

275
¥

2,284

¥

1,802

$

21,503

In addition to the above table, special retirement benefit of ¥85 million was recorded as other expenses
in the consolidated statement of income for the year ended 31 March 2017.
(6) The components of retirement benefit liability adjustment (before tax effects) in other comprehensive
income for the years ended 31 March 2018 and 2017 are as follows:

Prior service costs
Actuarial (gain) loss
Total

¥
¥

Millions of Yen
2017
2018
273
256 ¥
719
(1,447 )992(1,191 ) ¥Thousands of
U.S. Dollars
2018
$
2,410
(13,624)$ (11,213)(7) The components of retirement benefit liability adjustment (before tax effects) in accumulated othercomprehensive income as at 31 March 2018 and 2017 are as follows:

Unrecognised prior service costs
Unrecognised actuarial gain
Total

¥
¥

Millions of Yen
2017
2018
(2,309)(2,053) ¥
7,382
5,934
5,072
3,881 ¥

23

Thousands of
U.S. Dollars
2018$ (19,326)
55,862$36,535

11. RETIREMENT BENEFITS (continued)(8) Plan assets
a. The components of plan assets by major category as at 31 March 2018 and 2017 are as follows:
2018
43%
36
13
2
6
100%

Debt securities
Equity securities
Insurance company general accounts
Cash and deposits
Other
Total
Note:

2017
43%
36
13
2
6
100%

20% and 20% of the total plan assets were in the retirement benefit trust as at 31 March2018 and 2017, 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 2018 and2017 are set forth as follows:

Discount rates
Long-term expected rates of return onplan assets

2018
0.0-0.7%

2017
0.0-0.7%

1.5-3.0%

2.5-3.0%(10) Defined contribution plans for the years ended 31 March 2018 and 2017
The total contributions to be paid by the Company and its consolidated subsidiaries to defined
contribution plans were ¥566 million ($5,328 thousand) and ¥562 million for the years ended 31
March 2018 and 2017, respectively.

2412. 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 (other than the legal
reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any
time by resolution of the shareholders, or by the Board of Directors if certain conditions are met.
Under the Act, upon the issuance of new shares of common stock, the entire amount of the proceeds isrequired to be accounted for as common stock, although a company may, by resolution of the Board of
Directors, account for an amount not exceeding one-half of the proceeds of new shares as additional paid-in
capital included in capital surplus.
Under the Act, the distribution of retained earnings with respect to a given financial period is made byresolution of the shareholders at a general meeting held subsequent to the close of the financial period. The
distribution of retained earnings with respect to the interim financial period is made by resolution of theBoard of Directors. The accounts for the period do not reflect such distributions.
Stock options
The Company has stock option plans. Stock option expenses, included in selling, general and administrative
expenses, charged to profit or loss for the year ended 31 March 2018 and 2017 amounted to ¥27 million($257 thousand) and ¥27 million, respectively.
The stock option plan of the Company as of 31 March 2018 is summarised as follows:
The 2016 Plan
Individuals covered by
the plan
Class and number of
options granted
Grant date
Vesting conditions
Vesting period forservices received
Exercisable period

The 2017 Plan
6 Directors (excluding Audit andSupervisory Committee Members
and outside directors)
7 Executive officers

5 Directors (excluding outside
directors)
8 Executive officers
Common stock 8,000 shares

Common stock 8,000 shares

4 July 2016
None
No vesting period for services
received has been stipulated.
From 5 July 2016 to 4 July 2046

6 July 2017
None
No vesting period for services
received has been stipulated.
From 7 July 2017 to 6 July 2047

Size and movement of stock options are summarised as follows:
The 2016 plan
Number of stock options not yet vested:
Outstanding at 31 March 2017
GrantedForfeited
VestedOutstanding at 31 March 2018
Number of stock options already vested:
Outstanding at 31 March 2017
VestedExercised
Forfeited
Outstanding at 31 March 201825

The 2017 plan

–
–
–
–
–

–
8,000
–
8,000
–

8,000
–
3,000
–
5,000

–
8,000
–
–
8,000

12. SHAREHOLDERS’ EQUITY (continued)
The fair value of stock options for the stock option plan of the Company during the year ended 31 March2018 is summarised as follows:

Exercise price
Average stock price at the exercise date
Fair value as of the grant date

Yen
U.S. dollars
Yen
U.S. dollars
The 2016 plan The 2016 plan The 2017 plan The 2017 plan
¥
1
$
0
¥
1
$
0
–
3,605
33
–
3,485
32
3,425
32

The number of existing stock options as of 31 March 2018 represents the corresponding number of shares.
In addition, the number of shares has been converted due to the consolidation of the Company’s common
stock at a ratio of 1 share for 5 shares on 1 October 2017.
The valuation method for estimating fair value was the Black-Scholes model. The major assumptions used
are as follows:
Major assumptions
Expected volatility
Expected holding period
Expected dividend

Note
(a)
(b)
(c)

Risk-free rate(d)

The 2017 plan
21.926%
3.7 years¥30 per share($0 per share)(0.075%)(a) Expected volatility was computed by the weekly historical volatility of the Company’s stock during theperiod from 24 October 2013 to 6 July 2017.
(b) Expected holding period was computed by estimating the expected tenure of new stock option holders
and weighted average unit of stock options granted to each new stock option holder.
(c) Expected dividend was calculated based on the actual amounts paid for the year ended 31 March 2017,
which was converted on the basis of the number of shares after the consolidation of the Company’scommon stock at a ratio of 1 share for 5 shares on 1 October 2017.
(d) Risk-free rate was computed by the average of the compound interest of long-term interest-bearing
government bonds with redemption dates within the before and after three months based on the date
which the expected holding period elapse from the grant date the stock acquisition rights.
The number of vested stock options is the same as the number of granted stock options as they vested on the
grant date.

26

12. SHAREHOLDERS’ EQUITY (continued)
Common stock and treasury stock(1) Movements in issued shares of common stock and treasury stock during the years ended 31 March2018 and 2017 are as follows:

1 April 2017
Issued shares:
Common stock (Notes 1 and 2)
Treasury stock(Notes 1, 3 and 4)

Number of shares
2018
Increase
Decrease

31 March 2018565,913,515–

452,730,812

113,182,703

29,912,535

28,191

23,951,155

5,989,571

Notes: 1. The Company executed a share consolidation at a ratio of 1 share for 5 shares on 1 October2017.
2. The decrease in the number of shares of common stock of 452,730,812 was due to the shareconsolidation.
3. The increase in the number of shares of treasury stock of 26,367 shares (21,783 shares
before the date of the consolidation of shares, and 4,584 shares after the date) was due torepurchase of fractional shares of less than one voting unit, and of 1,824 shares was due torepurchase of fractional shares of less than one voting unit as a result of the consolidationof shares.
4. The decrease in the number of shares of treasury stock of 15,000 shares (before the date of
the consolidation of shares) was due to disposal of treasury stock as a result of exercise ofstock options, of 23,934,691 shares was due to the consolidation of shares, and of 1,464
shares (954 shares before the date of the consolidation of shares, and 510 shares after thedate) was due to sales of fractional shares of less than one voting unit.

1 April 2016
Issued shares:
Common stock
Treasury stock (Notes 1 and 2)

565,913,515
24,193,867

Number of shares
2017
Increase
Decrease–
5,719,503–
835

31 March 2017565,913,515
29,912,535

Notes: 1. The increase in the number of shares of treasury stock of 5,678,000 shares was due topurchase of treasury stock under resolution of the Board of Directors and of 41,503 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 835 shares was due to sales offractional shares of less than one voting unit.

27

12. SHAREHOLDERS’ EQUITY (continued)(2) Information regarding dividend payments during the years ended 31 March 2018 and 2017 is asfollows:
For the year ended 31 March 2018a. Dividend payment:
2018
Resolutions
General shareholders’meeting held on
20 June 2017
Board meeting heldon 30 October 2017
Notes:

Type ofsharesDividends paid

Dividend
per share

Record dates

Effective
dates

Commonstock¥1,608 million($15,135 thousand)¥3.0($0.02)31 March
2017

21 June2017

Commonstock¥1,607 million($15,135 thousand)¥3.0($0.02)30 September
2017

1 December
2017

The Company executed a share consolidation at a ratio of 1 share for 5 shares on 1 October
2017. Dividend per share by the resolution of Board meeting held on 30 October 2017
represents the amount on the basis of the number of shares before the share consolidation.

b. Dividend payment with an effective date in the following fiscal year:
2018
Resolution
General shareholders’meeting held on
19 June 2018

Type ofsharesDividends paid

Source of Dividend
dividend per share

Recorddate

Effective
date

Commonstock¥2,143 million($20,179 thousand)

Retainedearnings¥20($0.18)31 March
2018

20 June2018

Dividends paid

Dividend
per share

Record dates

Effective
dates

Commonstock¥1,625 million¥3.0

31 March
2016

20 June2016

Commonstock¥1,608 million¥3.0

30 September
2016

1 December
2016

For the year ended 31 March 2017a. Dividend payment:
2017
Resolutions
General shareholders’meeting held on
17 June 2016
Board meeting heldon 31 October 2016

Type ofsharesb. Dividend payment with an effective date in the following fiscal year:
2017
Resolution
General shareholders’meeting held on
20 June 2017

Type ofsharesCommonstock

Dividends paid
¥1,608 million

Source of Dividend
dividend per share

Recorddate

Effective
date

Retainedearnings

31 March
2017

21 June2017¥3.0

13. COST OF SALES
Cost of sales included loss on devaluation of inventories of ¥331 million ($3,119 thousand) and ¥222 million
for the years ended 31 March 2018 and 2017, respectively.

28

14. 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($582 thousand) and ¥1,359 million for the years ended 31 March 2018 and 2017, respectively. The details
are summarised as follows:
For the year ended 31 March 2018
2018
Usage
Commercial
storesHotel facilities

Location
Hirakata, Osakaand other

Sakyo-ku, Kyoto

Classification
Buildings and structures
Other
Sub-total
Buildings and structures
Sub-total
Total

Millions of Yen
¥

¥

54
1
56
5
5
61

For the year ended 31 March 2017
2017
Usage

Location

Marine businessassetsOtsu, Shiga andotherIdle assets

Hirakata, Osaka

Rentalproperties

Sakyo-ku, Kyoto

Hotel facilities

Sakyo-ku, Kyoto

Commercial
storesRitto, Shiga andotherClassification
Buildings and structures
Machinery, equipment andvehiclesLand
Lease assets
Other
Sub-total
Buildings and structures
Land
Sub-total
Buildings and structures
Land
Other
Sub-total
Buildings and structures
Machinery, equipment andvehiclesOther
Sub-total
Buildings and structures
Machinery, equipment andvehiclesOther
Sub-total
Total
29

Millions of Yen
¥
305
66
83
362
98
916
8
239
247
3
127
1
132
29
1
2
33
14
0
15
29
¥ 1,359

Thousands of
U.S. Dollars
$

$

513
18
531
50
50
582

14. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT (continued)
For commercial stores as a decision to withdraw from the business was made or a decline in profitability was
expected, and for hotel facilities as a decline in profitability was expected to continue, the Group wrote
down the carrying value of the asset to the recoverable amount and loss on impairment of property, plant andequipment was recorded as other expense for the year ended 31 March 2018.
For assets, such as marine business assets, rental properties, hotel facilities, and commercial stores as adecline in profitability was expected to continue, or for idle assets when a decline in market value wasobserved, the Group wrote down the carrying value of the asset to the recoverable amount and loss on
impairment of property, plant and equipment was recorded as other expense for the year ended 31 March2017.
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 fromthe business for the year ended 31 March 2018, and as future cash flow was negative for the year ended 31
March 2017.
The recoverable amounts of hotel facilities were determined using net realisable value basically based on theappraisal value assessed by an external appraiser for the years ended 31 March 2018 and 2017.
The recoverable amounts of marine business assets were determined using net realisable value basically
based on the valuation used for property tax purposes for the year ended 31 March 2017.
The recoverable amounts of rental properties were determined using net realisable value basically based on
the appraisal value assessed by an external appraiser for the year ended 31 March 2017.
The recoverable amounts of idle assets were determined using net realisable value basically based on thevaluation used for property tax purposes for the year ended 31 March 2017.

30

15. 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 a normal statutory tax rate of approximately
30.8% for the years ended 31 March 2018 and 2017.
The tax effects of significant temporary differences and tax loss carry forwards which resulted in net deferred
tax assets and liabilities at 31 March 2018 and 2017 are as follows:
Millions of Yen
2017
2018
Deferred tax assets:
Liability for retirement benefits
Difference arising from company
split
Loss on impairment of property,
plant and equipment
Loss on devaluation of land,buildings and structures for saleTax loss carry forwards
Unrealised gain
Allowance for employees’ bonuses
Loss on devaluation of securities
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
OthersTotal deferred tax liabilities
Offset by deferred tax assets
Net deferred tax liabilities

¥

¥

9,831

10,267

Thousands of
U.S. Dollars
2018$

92,538

4,248

4,238

39,991

1,383

1,746

13,023

¥

1,712
1,097
1,129
861
795
3,255
24,314(9,624)
14,689(4,768)
9,921

¥

1,420
1,246
1,074
887
683
3,130
24,694(9,900)14,794(4,913)9,880$

16,114
10,327
10,627
8,112
7,483
30,644
228,863(90,595)
138,268(44,884)
93,383¥(8,250)¥(8,172)$(77,662)¥(4,353)(4,531)(40,974)(2,774)(2,774)(26,118)

(158)
(567)
(16,105)
4,768(11,336)

(167)
(503)
(16,150)
4,913(11,236)(1,493)(5,343)(151,593)
44,884
106,70831¥$

15. INCOME TAXES (continued)
A reconciliation between the statutory tax rate and the effective tax rate reflected in the accompanying
consolidated statement of income for the year ended 31 March 2017 is as follows:
2017
30.8%

Statutory tax rates
Effect of:Permanent non-deductible expenses
Permanent non-taxable income
Per capita portion of inhabitants’ tax
Valuation allowance
Amortisation of goodwill
Others
Effective tax rates

0.3
(0.2)
0.4
(3.6)
0.3
(0.1)
27.9

A reconciliation between the statutory tax rate and the effective tax rate for the year ended 31 March 2018 isomitted as the effective tax rate in the accompanying consolidated statement of income for the year ended
31 March 2018 differs from the statutory tax rate by less than 5%.

16. OTHER COMPREHENSIVE INCOME (LOSS)
Reclassification adjustments and related income tax effects on components of other comprehensive income(loss) for the years ended 31 March 2018 and 2017 are as follows:
Thousands of
U.S. Dollars
2018

Millions of Yen
2017
2018
Net unrealised holding loss 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
Share of comprehensive income (loss) ofaffiliates accounted for using equity method
Amount arising during the year
Other comprehensive income (loss), net

¥

275

¥
32

¥

1,684

$

2,591

(910)
(635)
178
(456)

(2,609)
(925)
(16)
(941)

(8,573)(5,982)
1,682(4,300)

–

–

–

–
–
–
–

–
–
(2,087)(2,087)

–
–
–
–

323

(1,468)

3,047

867
1,191
(393)
797

476
(992)
469
(522)

8,165
11,213(3,703)
7,510

8
349

(2)
(3,554)

81
3,291

¥

$

17. 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 details of these finance lease transactions are omitted because the amounts are
immaterial.
(2) Operating Leases
Future minimum lease payments under non-cancelable operating leases as at 31 March 2018 and 2017
are as follows:
Millions of Yen
2017
2018
Future minimum lease payments:
Due within one year
Due after one year
Total

¥
¥

1,439
41,668
43,108

33

¥
¥

1,480
4,262
5,742

Thousands of
U.S. Dollars
2018
$
$

13,550392,214405,764

18. AMOUNTS PER SHARE2018¥ 2,055.87

2017¥ 1,870.99

U.S. Dollars
2018
$
19.35

¥
¥

¥
¥

$
$

Yen
Net assets
Profit attributable to owners of parent:
Basic
Diluted

211.87211.85211.01211.001.99
1.99

The Company executed a share consolidation at a ratio of 1 share for 5 shares on 1 October 2017. Per share
information noted above was calculated as if the share consolidation had been implemented at the beginningof the year ended 31 March 2017.
The financial data used in the computation of basic and diluted profit attributable to owners of parent for theyears ended 31 March 2018 and 2017 in the table above is summarised as follows:

Profit attributable to owners of parent¥

Millions of Yen
2017
2018
¥ 22,636
22,712Thousands of
U.S. Dollars
2018$ 213,782

Thousands of shares
Weighted-average number of shares ofcommon stock outstanding
Increase in shares of common stock
for the calculation of dilutive effect

2018

2017

107,197

107,27311

5

Potential shares which do not have dilutive effect for the years ended 31 March 2018 and 2017 are euro-yen
zero coupon convertible bonds with stock acquisition rights (400 units) in yen, due 30 March 2021 in theaggregate amount of ¥20,000 million ($188,253 thousand).

34

19. CASH AND CASH EQUIVALENTS
The balances of cash and deposits reflected in the accompanying consolidated balance sheet as at 31 March2018 and 2017 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 more than
three months
Cash and cash equivalents¥

Millions of Yen
2017
2018
18,372
20,317 ¥Thousands of
U.S. Dollars
2018$ 191,239¥(16)
20,300(48)
18,324(155)
191,084¥$

The Company acquired all shares in Zero Corporation Co., Ltd., which became a newly consolidated
subsidiary. Major components of assets and liabilities of the newly consolidated subsidiary due to acquisitionof shares, acquisition cost of its shares, and proceeds from the acquisition during the year ended 31 March2018 are as follows:

Millions of Yen
2018
¥
9,760
618
317
(6,942)(2,700)1,054(1,544)Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Acquisition cost of shares
Cash and cash equivalents
Proceeds from purchase of shares of a subsidiary
resulting in change in scope of consolidation¥

490

Thousands of
U.S. Dollars
2018$
91,871
5,818
2,990(65,342)(25,416)
9,920(14,537)$

4,616

The Company sold all shares in Keihan Life Support Co., Ltd., which was excluded from the scope of
consolidation. Major components of assets and liabilities excluded from consolidation due to sales of shares,
selling price of its shares, and proceeds from the sales of shares during the year ended 31 March 2018 are as
follows:

Millions of Yen
2018
¥
684
3,885
(1,613)(3,242)
3,164
50
2,929
(50)
(52)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Gain on sale of shares of a subsidiary
Incidental costs related to sales of shares
Selling price of shares
Incidental costs related to sales of shares
Cash and cash equivalents
Proceeds from sales of shares of a subsidiary
resulting in change in scope of consolidation

¥

35

2,826

Thousands of
U.S. Dollars
2018
$
6,443
36,575(15,191)(30,515)
29,785479
27,576
(479)
(491)
$

26,606

20. 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, the Groupregularly monitors the fair value of the securities and financial conditions of the issuers.
Trade payables, such as notes and accounts payable, are mostly due in one year or less.
Proceeds from short-term loans are mainly used for working capital, and proceeds from bonds andlong-term loans are mainly used for capital investments. Among them, those to which variableinterest rates apply are exposed to the risk of interest rate fluctuations. However, for certain longterm loans, the derivative transactions (such as interest rate swaps) by individual contracts areused 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 andthree consolidated subsidiaries which utilise derivative instruments upon the approval of thedecision-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 21 “DERIVATIVEFINANCIAL INSTRUMENTS” are not necessarily indicative of the actual market risk involvedin the derivative transactions.

36

20. 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
2018(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets(4) Notes and accounts payable(5) Short-term loans(6) Bonds (including current portion)(7) Long-term loans (including current
portion)Total liabilities(8) Derivative transactions

Carrying
value¥
20,31731,199Fair value¥
20,31731,199Difference
¥
–
–

1,828
22,93876,284

1,894
22,93876,350

65
–
65

¥

¥

¥

11,58846,092
90,171

11,58846,092
92,196

–
–
2,025

¥

180,135
327,988¥

183,883
333,761

¥

3,747
5,772

¥

–

¥

–

¥

–

¥

Difference––

Millions of Yen
2017(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¥
18,372
25,760¥1,659
23,65669,449¥¥11,24842,474
90,237

Fair value
18,372
25,7601,738
23,656
69,528¥(4) Notes and accounts payable(5) Short-term loans(6) Bonds (including current portion)(7) Long-term loans (including current
portion)Total liabilities¥

181,827
325,788¥

186,602333,284

¥

4,775
7,496

(8) Derivative transactions

¥

–

¥

–

¥

–

37

11,24842,474
92,958

79
–
79
–
–
2,721

20. 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
2018
Carrying
value
Fair value
Difference$ 191,239 $ 191,239 $–
293,671
293,671–$

17,212215,914718,037$

17,833215,914718,658

$

621
–
621

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

109,078
433,856
848,752

109,078
433,856
867,813––
19,061

1,695,553$ 3,087,240

1,730,827$ 3,141,576$

35,27454,335(8) Derivative transactions

$

$

$

–

–

–

Notes:
1. Method to determine the estimated fair value of financial instruments and other matters related tosecurities 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 fair value.
(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 and (5) Short-term loans
As these items are settled in a short period of time, their carrying value approximates the fairvalue.
(6) Bonds
The fair value of bonds issued by the Group is estimated mainly based on the quoted market
price.

38

20. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)
Notes: (continued)(7) 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 andinterest 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 21 “DERIVATIVE FINANCIAL INSTRUMENTS”), the fair value isestimated 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 the interest rates tobe applied assuming that new loans under similar conditions to the existing loans are made.
(8) Derivative transactions
See Note 21 “DERIVATIVE FINANCIAL INSTRUMENTS.”
2. Financial instruments for which it is extremely difficult to determine the fair value as at 31 March2018 and 2017 are summarised as follows:

Category
Unlisted stocks¥

Millions of Yen
2017
2018
3,965
8,907 ¥

Thousands of
U.S. Dollars
2018$
83,844

Because 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

20. 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 2018 are as follows:

Due in1 yearor less¥
18,65831,199Cash 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
2018
Due after
Due after
1 year
5 years
throughthrough
5 years
10 years
¥
– ¥
–
–
–

51

¥

–
49,909Due in1 yearor less$ 175,626
293,671

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

$

1,406

¥

–
1,406

Due after
10 years
¥
–
–

170

¥

–
170

200

¥

Thousands of U.S. Dollars
2018
Due after
Due after
1 year
5 years
Due after
throughthrough
5 years
10 years
10 years
$
– $
– $
–
–
–
–

480

13,239

1,604

1,882

–
469,778–
13,239

–
1,604

2,823
4,706

$

$

$

5. The redemption schedules for short-term loans, bonds and long-term loans as at 31 March 2018
Refer to Note 9. SHORT-TERM LOANS, BONDS AND LONG-TERM LOANS.

40

300
500

21. DERIVATIVE FINANCIAL INSTRUMENTS
The notional amounts and the estimated fair value of the derivative positions outstanding qualifying forhedge accounting as at 31 March 2018 and 2017 are as follows:
Millions of Yen
2018
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¥ 2,482¥ 2,212(Note)

Millions of Yen
2017
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¥ 3,052¥ 2,482(Note)

Thousands of U.S. Dollars
2018
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$ 23,362$ 20,820(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22. CONTINGENT LIABILITIESThe Company provides guarantees for the borrowings of the following company, which is other thanconsolidated subsidiaries, as at 31 March 2018 as follows:

Nakanoshima Rapid Railway Co., Ltd.
Total

Millions of Yen
2018¥
22,644¥
22,644

Thousands of
U.S. Dollars
2018$
213,143$
213,143

23. 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 2018 and 2017
are as follows:

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

Millions of yen
2017
2018
¥
357
¥
497

Thousands of
U.S. Dollars
2018$ 4,680

142
4
(7)
–
–
497

388
40
(19)
(223)
(125)
4,740

¥

41
4
(2)
(23)
(13)
503

¥

$

Note: As a result of obtaining new information, the amount of asset retirement obligations decreasedby ¥23 million ($223 thousand) for the year ended 31 March 2018, due to a change in theestimated restoration costs to be incurred under real estate lease agreements at the time ofvacating stores.

4224. 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 and 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.
(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24. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2018 and 2017
Millions of Yen
2018
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution

Adjustments Consolidated

Service

Others¥30,882¥ 1,140

416

684

31,298
4,877

Total

(Note 1)

(Note 2)

Operating revenues:
External customers¥

90,040¥99,993¥ 100,216

2,222

13,139

492

Total

¥

92,262¥ 113,132¥ 100,709¥

Segment income

¥

9,180

¥

¥

¥

¥

322,273¥3¥

322,276

16,954(16,954)¥ 1,824¥

339,228¥ (16,951)¥

322,276¥¥

32,254¥¥

Inter-segment
operating revenues
or transfers

Segment assets

15,316

2,845

34

(795)

–

31,458

243,838

366,22031,04935,533

7,680

684,322

14,884699,207

11,289

5,017

1,326

1,163

37

18,833279

19,113

14,952

21,345

1,187

1,958

7

39,452

293

39,745

Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets

Notes: 1. Details of adjustments are as follows:(1) “Adjustments” to “Segment income” represented elimination of inter-segment
transactions and profit or loss of the Company not allocated to each reportable segment.
(2) “Adjustments” to “Segment assets” represented elimination of inter-segment
transactions and the Company assets not allocated to each reportable segment. The
Company assets amounted to ¥31,884 million ($300,113 thousand) and principallyconsist of the Company’s surplus funds (cash and deposits), long-term investment
assets (investment securities).
(3) “Adjustments” to “Increase in property, plant and equipment, and intangible assets”
represented the Company assets not allocated to each reportable segment.
2. Segment profit was adjusted to operating income in the consolidated statement of income.

44

24. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2018 and 2017 (continued)
Millions of Yen
2017
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution

Adjustments Consolidated

Service

Others¥30,741¥ 1,12560

666

30,801
4,755

Total

(Note 1)

(Note 2)

Operating revenues:
External customers¥

92,202¥80,800

Total¥

Segment income¥¥ 98,046

13,214446

94,404¥

94,014¥ 98,493

¥

9,976

¥

14,491¥¥¥

302,915¥1¥

302,917

16,590(16,590)¥ 1,792¥

319,505¥ (16,588)¥

302,917¥¥31,935¥¥Inter-segment
operating revenues
2,202

or transfers

Segment assets

2,636

74

408

–

32,343

246,368

344,032

30,64833,826

7,255

662,133

17,498679,631

10,722

4,732

1,276

1,101

30

17,864

209

18,074

17,69016,553

2,341

1,877

34

38,498675

39,173

Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets

Notes: 1. Details of adjustments are as follows:(1) “Adjustments” to “Segment income” represented elimination of inter-segment
transactions and profit or loss of the Company not allocated to each reportable segment.
(2) “Adjustments” to “Segment assets” represented elimination of inter-segment
transactions and the Company assets not allocated to each reportable segment. The
Company assets amounted to ¥34,957 million and principally consist of the Company’s
surplus funds (cash and deposits), long-term investment assets (investment securities).
(3) “Adjustments” to “Increase in property, plant and equipment, and intangible assets”
represented the Company assets not allocated to each reportable segment.
2. Segment profit was adjusted to operating income in the consolidated statement of income.

45

24. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2018 and 2017 (continued)
Thousands of U.S. Dollars
2018
Reportable Segments
RetailLeisure andAdjustments Consolidated

Transportation Real Estate Distribution

Service

OthersTotal$

847,518$ 290,685$ 10,733$ 3,033,446

20,915

123,675

4,635

3,919

6,442

159,588

Total$

868,434$ 1,064,880$ 947,939$ 294,605$ 17,176$ 3,193,035$ (159,559) $ 3,033,475

Segment income

$

$

$

$

$

(Note 1)

(Note 2)

Operating revenues:
External customers$ 941,204$ 943,304$

29$ 3,033,475(159,588)–

Inter-segment
operating revenues
or transfers

Segment assets

86,415$ 144,171$ 26,779

2,295,168

3,447,106

292,258

334,466

45,911

72,290320

6,441,290

303,598

140,104(7,487) $6,581,394

296,111106,260

47,22812,484

10,948350

177,272

2,632

179,905

140,742

200,915

11,177

18,43874

371,348

2,762

374,110

Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets(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 2018 and 2017, 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 2018 and 2017, information on property, plant and equipment by geographical segment
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

24. SEGMENT INFORMATION (continued)(5) Information about loss on impairment of property, plant and equipment by reportable segment
Millions of Yen
2018
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Impairment losses

¥

12

¥

–

¥

44

Service¥

Others
5

¥

–

Total
¥

61

Adjustments Consolidated
¥

–

¥

61

Millions of Yen
2017
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Impairment losses

¥

132

¥

–

¥

–

Service¥

Others

1,266

¥

–

Total
¥

1,398

Adjustments Consolidated
¥

(38)

¥

1,359

Thousands of U.S. Dollars
2018
Reportable Segments
RetailTransportation Real Estate Distribution
Impairment losses

$

113

$

–

$

417

Leisure andService$50

Others
$

–

Total
$

582

Adjustments Consolidated
$

–

$

582

(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 2018 and 2017 and for the years then ended was omitted because the amounts wereimmaterial.
(7) Information on negative goodwill by reportable segment
There was no gain on negative goodwill recognised for the years ended 31 March 2018 and 2017.

47

25. RELATED PARTY TRANSACTIONSTransactions of the Company with related parties as at and for the years ended 31 March 2018 and 2017
are as follows:
Company’s unconsolidated subsidiaries and affiliates
2018
Category
Affiliates

Company
nameNakanoshima Rapid
RailwayCo., Ltd.

Location
Chuo-ku,
Osaka

Capital¥26,135
million($246,006
thousand)Business
Railway
operations

Percentage
of votingrights(Direct
votingrights)RelationshipReservationofguarantees
on loans

Transaction
Guarantees(Note 1)

Transaction
amount¥22,644
million($213,143
thousand)Account–

Year-endbalance–

Account–

Year-endbalance–33.50%
Holding
concurrent
position of
directors

2017
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¥23,957
million33.50%
Holding
concurrent
position of
directors

Note: 1. Guarantees are provided for the loans of the affiliate obtained from the Development Bank of Japanand other banks in the amounts of ¥22,644 million ($213,143 thousand) and ¥23,957 million forthe years ended 31 March 2018 and 2017, respectively.

26. BUSINESS COMBINATION(i) Business Divestiture1.

Summary1)

Names of the parties to whom the Company transferred the divested business
The Kansai Electric Power Co., Inc.
KANDEN Security of Society, Inc.

2)

Business being divested(a) Name of the former operator of businesses
Keihan Life Support Co., Ltd., which was a consolidated subsidiary of the Company(b) Business description
Home-visit nursing care business, day care nursing business, and senior citizen facility
business48

26. BUSINESS COMBINATION (continued)(i) Business Divestiture (continued)
1.

Summary (continued)
3)

Reason for business divestiture
The Group shifted to a holding company structure on 1 April 2016 and set up the creation ofsightseeing spots, revitalisation of areas along the Keihan railway lines and contents creation as
its main strategies, and it has been promoting “implementation of cross-sectional strategies ofgroup businesses”, ”creation of new business models” and “effective allocation of management
resources.”
Under such circumstances, in order to respond to changes in society promptly and to improve theGroup’s business quality, comprehensively considering the effective allocation of management
resources and synergies among the Group, the Company concluded that transferring the nursing
care business to the Kansai Electric Power Group, which is attempting further advancement of
the business, is the best way for improving value of areas along railway lines in the future.

4)

Date of business divestiture
26 April 2017

5)

Other items on summary of transaction including legal form of business divestitureTransfer of shares for a cash consideration

2.

Outline of accounting treatment
1)

Amount of gain on business transfer
Gain on sale of shares of a subsidiary

2)

Assets and liabilities transferred as at the date of business divestiture are as follows:

Current assets
Non-current assets
Total assets
Current liabilities
Non- current liabilities
Total liabilities
3)¥3,164 million ($29,785 thousand)Millions of Yen
2018
¥
684
3,885
4,570
1,613
3,242
¥
4,855

Thousands of
U.S. Dollars
2018
$
6,443
36,57543,01815,191
30,515$ 45,707

Accounting treatment
The difference amount between the book value of shares of the subsidiary in the consolidated
financial statements and the sales price was accounted for as gain on sale of shares of a subsidiary.

3.

Reportable segment to which the divested business belonged
Transportation
49

26. BUSINESS COMBINATION (continued)(i) Business Divestiture (continued)
4.

The estimate amount of profit or loss attributable to the operations of the divested business, which isaccounted for in the consolidated statement of income for the year ended 31 March 2018.
The Company deems that the business divestiture was executed at the beginning date of the year ended
31 March 2018. Accordingly, the profit or loss attributable to the operations of the divested businessis not included in the consolidated statement of income for the year ended 31 March 2018.

(ii) Acquisition of a subsidiary1.

Summary
1)

Name of acquired company and business description(a) Name of acquired company(b) Business description

2)

Zero Corporation Co., Ltd.
Ready-built housing business,business and others

order-madebuilding

Reason for share acquisition
The Company expects to propose various other forms of town creation in addition to the largescale development in the Keihan Group by expanding to areas along the Keihan Railway lines
utilizing the know-how of Zero Corporation related to existing developed areas.

3)

Date of business combination
3 July 20174)

Legal form of business combination
Share acquisition for a cash consideration

5)

Name of acquired company after acquisition
No change

6)

Shareholding ratio after acquisition
100%

7)

Determination of the acquirer
The Company has acquired 100% of shares of Zero Corporation Co., Ltd. through a shareacquisition for a cash consideration.

2.

Period for which profit or loss of the acquired company is included in the Company’s consolidated
statement of income for the fiscal year ended 31 March 2018.
From 1 July 2017 to 31 March 201850

26. BUSINESS COMBINATION (continued)(ii) Acquisition of a subsidiary (continued)
3.

Acquisition cost

Cash consideration
Acquisition cost4.

Millions of Yen
2018
¥
1,054
¥
1,054

Thousands of
U.S. Dollars
2018
$
9,920
$
9,920

Details and amount of major acquisition-related costs
Advisory fee etc. ¥43 million ($406 thousand)5.

Amount of goodwill recognised arising from the acquisition, reason for recognition, and amortisation
method and period(a) Amount of goodwill arising from this acquisition¥317 million ($2,990 thousand)(b) Reason for recognition
Goodwill resulted from the acquiree’s excess earning power that the Company expects to realisein business operations in the future.
(c) Amortisation method and period
Straight-line method for 3 years

6.

The amounts and major breakdown of assets acquired and liabilities assumed on the acquisition dateCurrent assets
Non-current assets
Total assets
Current liabilities
Non- current liabilities
Total liabilities
7.

Millions of Yen
2018
¥
9,760
618
10,378
6,942
2,700
¥
9,642

Thousands of
U.S. Dollars
2018$
91,871
5,818
97,68965,342
25,416$90,759Approximate amount of impact on the consolidated statement of income for the year ended 31 March2018 assuming that the business combination was completed at the beginning of the fiscal year ended
31 March 2018, and the calculation method.
The disclosure has been omitted because the estimated impact is immaterial.

27. SUBSEQUENT EVENT
There was no significant subsequent event.
51