ANNUAL REPORT
2013

CONTENTS
PROFILE1

CONSOLIDATED BALANCE SHEETS

4

THE MESSAGE FROM THE PRESIDENT

2

CONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6
7
8

11

12

INDEPENDENT AUDITOR'S REPORT53

NON-CONSOLIDATED STATEMENTS OF INCOME

58

NON-CONSOLIDATED BALANCE SHEETS

56

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

59
62

INDEPENDENT AUDITOR'S REPORT75

CORPORATE DATA77

CORPORATE OUTLINE

76a

PROFILE

1

THE MESSAGE FROM THE PRESIDENT

2

Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
and Consolidated Subsidiaries
Year ended March 31, 2013
with Independent Auditor’s Report3Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2013

As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)

AssetsCurrent assets:
Cash and deposits (Notes 6-(c) and 10)
Trade notes and accounts receivable (Notes 6-(c) and 6-(g))
Inventories (Notes 6-(a) and 6-(f))
Deferred tax assets (Note 16)
Other current assets (Note 6-(c))
Less allowance for doubtful receivables
Total current assets¥039,899
101,279
19,184
1,673
10,424(379)
172,083¥034,897
115,418
22,471
1,504
10,364(531)
184,124$0,424,231
1,076,863
203,976
17,788110,834(4,029)1,829,696

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

16,75015,883
18,161
16(27,109)23,701

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

178,096
168,878
193,099
170(288,240)
252,004

2,060

2,294

21,903

Intangible fixed assets
Investments and other assets:
Investments in securities (Notes 6-(c) and 13)
Long-term loans receivable
Claims provable in bankruptcy and other
Investments in unconsolidated subsidiaries and affiliates
Investments in real estate (Notes 6-(b) and 6-(c))
Long-term non-operating accounts receivable (Notes 6-(e)and 20)
Deferred tax assets (Note 16)
OtherLess allowance for doubtful receivables
Total investments and other assets
Total non-current assets

5,238
6,491
867
1,850
4,243

4,707
7,487
4,912
1,547
4,067

55,69369,016
9,218
19,67045,11424,4972,867
6,557(29,042)
23,57049,33237,4252,926
7,364(46,058)
24,38149,483

260,467
30,48369,718(308,793)
250,611524,529

Total assets¥221,416¥233,608$2,354,237

2

4

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2013

Liabilities and net assets
Current liabilities:
Short-term bank loans and current portion of long-term debt
(Notes 6-(c) and 23)
Trade notes and accounts payable (Note 6-(g))
Accrued expenses
Advances received on contracts in progress
Reserve for defects on completed construction projects
Allowance for losses on construction contracts (Note 6-(f))
Allowance for loss on litigation
Other current liabilities (Note 6-(c))
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 6-(c) and 23)
Accrued retirement benefits (Note 15)
Deferred tax liability on land revaluation (Note 6-(d))
Other long-term liabilities (Notes 6-(c) and 6-(e))
Total long-term liabilities
Contingent liabilities (Notes 6-(e) and 20)
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
2,669,464,970 shares in 2013 and 2012
Issued and outstanding:
675,480,576 shares in 2013 and
288,989,667 shares in 2012
Preferred stock:
Authorized:
26,894,644 shares in 2013 and 2012
Issued and outstanding:
4,428,700 shares in 2013 and13,149,900 shares in 2012
Additional paid-in capital
Retained earnings
Less treasury stock, at cost:
454,364 shares in 2013 and 447,922 shares in 2012
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain (loss) on securities
Deferred gain on hedging instruments, net of taxes (Note 14)
Land revaluation (Note 6-(d))
Translation adjustments
Total accumulated other comprehensive income (loss)
Minority interests
Total net assets
Total liabilities and net assets

As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)¥008,391
115,338
2,642
27,768728
717
890
13,804
170,280¥020,579
118,786
2,292
29,433
939
1,624
862
12,772
187,291$0,089,218
1,226,347
28,091
295,247
7,740
7,623
9,463
146,772
1,810,526

2,194
18,057335
5,186
25,773

2,413
16,662335
4,901
24,31323,328
191,993
3,561
55,140274,035

12,003

12,003

127,623

480
9,814

481
7,771

5,103
104,348(241)
22,056(241)
20,014(2,562)
234,513

197
139
39
(682)
(306)
3,611
25,361¥221,416

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

2,094
1,477
414
(7,251)(3,253)38,394
269,654$2,354,237

The accompanying notes are an integral part of these statements.

5

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Income
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Net sales (Note 7-(a))
Cost of sales (Note 7-(b))
Gross profit
Selling, general and administrative expenses(Notes 7-(c) and 15)
Operating income
Other income (expenses):
Interest and dividend income
Payments received from insurance claims
Interest expense
Exchange loss, net
Corporate tax on overseas sales
Loss on disaster (Note 7-(g))
Equity in earnings of affiliates
Gain on sales of property and equipment (Note 7-(e))
Loss on sales and disposal of property and equipment(Note 7-(f))
Gain on liquidation of investments in securities
Loss on litigation
Loss on step acquisitions
Other, net
Income before income taxes and minority interests
Income taxes (Note 16):
Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income¥342,727
322,612
20,115¥313,558
294,521
19,036$3,644,093
3,430,217
213,875

14,33014,345

152,365

5,784

4,691

61,499

644
153
(926)
–
(230)
–
–
14

433
156
(1,048)
(683)
(172)
(77)
24
21

6,847
1,626
(9,845)–(2,445)
–
–
148

(21)
14
(194)
(44)
(876)
(1,466)
4,317

(86)
–
(69)
–
(143)
(1,647)
3,043

(223)
148
(2,062)(467)(9,314)(15,587)
45,901

1,741
(165)
1,576

1,109
265
1,375

18,511(1,754)
16,7572,740
698¥002,042

1,668
294¥001,374

29,133
7,421$0,021,711(Yen)
Net income per share – basic (Note 21)
Net income per share – diluted (Note 21)¥0004.56
2.56

The accompanying notes are an integral part of these statements.

6(U.S. dollars)(Note 3)¥0004.82
1.81$00000.048
0.027

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Comprehensive Income
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Income before minority interests
Other comprehensive income:Unrealized holding gain on securities
Deferred gain on hedging instruments, net of taxes
Land revaluation
Translation adjustments
Share of other comprehensive income of affiliates
accounted for by the equity method
Total other comprehensive income (loss) (Note 8)
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests¥2,740¥1,668$29,133

336
108
–
205

58
30
47
(197)

3,572
1,148
–
2,179

4
655
¥3,396(7)(67)¥1,601

42
6,964$36,108¥2,659736¥1,320280$28,272
7,825

The accompanying notes are an integral part of these statements.

7

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Shareholders’ equity
Capital stock:
Balance at the beginning of the period
Changes in items during the period
Total changes in items during the period
Balance at the end of the period
Additional paid-in capital:
Balance at the beginning of the period
Changes in items during the period
Disposition of treasury stock
Cancellation of treasury stock
Total changes in items during the period
Balance at the end of the period
Retained earnings:
Balance at the beginning of the period
Changes in items during the period
Net income
Reversal of revaluation reserve for land, net of taxes
Total changes in items during the period
Balance at the end of the period
Treasury stock, at cost:
Balance at the beginning of the period
Changes in items during the period
Purchases of treasury stock
Disposition of treasury stock
Cancellation of treasury stock
Total changes in items during the period
Balance at the end of the period
Total shareholders’ equity:
Balance at the beginning of the period
Changes in items during the period
Dividends from surplus
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancellation of treasury stockReversal of revaluation reserve for land, net of taxes
Total changes in items during the period
Balance at the end of the period

8¥12,003¥12,003$127,623–
12,003–
12,003–
127,623

481

682

5,114

(0)
–
(0)
480

(1)
(200)
(201)
481

(0)
–
(0)
5,103

7,771

6,360

82,626

2,042
–
2,042
9,814

1,374
36
1,411
7,771

21,711–
21,711
104,348

(241)

(242)

(2,562)

(0)
0
–
0
(241)

(200)
1
200
0
(241)

(0)
0
–
0
(2,562)20,01418,804

212,801

–
2,042
(0)
0
–
–
2,042
22,056

–
1,374
(200)
0
–
36
1,210
20,014–
21,711(0)0––21,711
234,513

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Accumulated other comprehensive income
Unrealized holding (loss) gain on securities:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Deferred gain on hedging instruments, net of taxes
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Land revaluation:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Translation adjustments:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Total accumulated other comprehensive income (loss):
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Minority interests
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

9

(137)

(195)

(1,456)

335
335
197

58
58
(137)

3,561
3,561
2,094

30

–

318

108
108
139

30
30
30

1,148
1,148
1,477

39

57

414

–
–
39

(17)
(17)
39

–
–
414

(856)

(694)

(9,101)

173
173
(682)

(161)
(161)
(856)

1,839
1,839
(7,251)

(923)

(833)

(9,813)

617
617
(306)

(90)
(90)
(923)

6,560
6,560
(3,253)

2,913

2,677

30,972

698
698
3,611

236
236
2,913

7,421
7,421
38,394

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Total net assets
Balance at the beginning of the period
Changes in items during the period
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancellation of treasury stockReversal of revaluation reserve for land, net of taxes
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

22,004

20,648233,960

2,042
(0)
0
–
–
1,315
3,357
¥25,361

1,374
(200)
0
–
36
145
1,356
¥22,004

21,711(0)
0––
13,98135,693$269,654

The accompanying notes are an integral part of these statements.

10Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Cash Flows
March 31, 2013

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill(Decrease) in allowance for doubtful receivables
Increase in accrued retirement benefits(Decrease) in reserve for defects on completed construction projects(Decrease) increase in allowance for losses on construction contracts
Increase (decrease) in allowance for loss on litigation(Decrease) in provision for loss on disaster
Loss on sales and disposal of property and equipment(Gain) on liquidation of investments in securities
Interest and dividend income
Interest expense
Exchange (gain) loss, net
Equity in loss (earnings) of affiliates
Loss on step acquisitions
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Decrease in other assets(Increase) decrease in trade notes and accounts payable(Decrease) increase in advances received on contracts in progress
Increase (decrease) in other liabilities
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
¥ 04,317
1,637
22
(31)
1,229
(227)
(961)
28
–
6
(12)
(644)
926
(583)
135
44
14,386
3,721
599(4,564)(2,377)685
1318,352588(894)(1,493)
16,553¥ 03,043
1,786
–
(491)
531
(220)
1,251
(417)
(470)
65
–
(433)
1,048
81
(24)
–
(22,457)(1,231)
1,611
17,466
8,471(4,188)
31
5,454
496
(1,087)
(875)
3,987

$ 45,901(3,155)
(817)
21
(88)
(208)
1
(18)

(1,544)(1,175)
255
(344)
(1)
1
(10)

(33,545)(8,686)223(935)(2,211)
10
(191)

267
(63)
421
69
(3,571)–(1,047)604
24(3,238)

2,838
(669)
4,476
733
(37,969)

Financing activities(Decrease) increase in short-term bank loans
Increase in long-term debt
Decrease in long-term debt
Increase in long-term loans of employees(Increase) in treasury stock
Cash dividends paid for minority shareholders
Other
Net cash (used in) provided by financing activities(12,288)
750
(869)
53
(0)
(47)
(161)
(12,563)

12,892
700
(700)
97
(200)
(62)
(127)
12,598(130,653)
7,974(9,239)
563
(0)
(499)
(1,711)(133,577)

Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

1,135
1,553
29,847¥ 31,400(243)
13,104
16,742¥ 29,847

12,06816,512
317,352

Investing activities
Increase in fixed deposits
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible fixed assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Increase in investments in unconsolidated subsidiaries and affiliates
Proceeds from purchases of stocks of subsidiaries resulting in change inscope of consolidation
Disbursements for loans
Proceeds from collection of loans
Other
Net cash (used in) investing activities

The accompanying notes are an integral part of these statements.
11

17,405233(329)
13,067(2,413)(10,217)
297
–
63
(127)
(6,847)
9,845(6,198)1,435
467
152,961
39,564
6,368(48,527)(25,273)
7,283
138
195,130
6,251(9,505)(15,874)
176,002$ 333,864

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

1.

Basis of Preparation

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

Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated
Subsidiaries and Affiliates
The accompanying consolidated financial statements include the accounts of theCompany and the significant companies which it controls directly or indirectly.
Companies over which the Company exercises significant influence in terms of theiroperating and financial policies have been included in the consolidated financial
statements on an equity basis. In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries, including the portion attributable to minority
shareholders, are recorded based on the fair value at the time the Company acquired
control of the respective subsidiaries. All significant intercompany balances andtransactions have been eliminated in consolidation.
The excess of the cost over the underlying net assets at fair value at the respective
dates of acquisition of the consolidated subsidiaries (goodwill) or the excess of fairvalue of the net assets acquired over cost (negative goodwill) is charged or credited toincome in the year of acquisition.
Investments in affiliates not accounted for by the equity method are principally statedat cost.
The Company had 15 consolidated subsidiaries, 2 unconsolidated subsidiaries and 1
affiliate accounted for by the equity method as of March 31, 2013.

12

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Fiscal Year of Consolidated Subsidiaries
All foreign consolidated subsidiaries (4 companies) have a fiscal year that ends on
December 31. The accompanying consolidated financial statements were preparedbased on the financial statements as of the same date. Necessary adjustments forconsolidation were made on significant transactions that took place during the period
between the fiscal year-end of the subsidiaries and the fiscal year-end of the Company.
(c) Securities
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Trading securities
are carried at fair value and held-to-maturity securities are carried at amortized cost.
Marketable securities classified as other securities for which market prices are
determinable are carried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net assets.
Non-marketable securities classified as other securities are carried at cost. Cost of
securities sold is determined by the moving average method.
(d) Inventories
Inventories other than materials and supplies are stated at cost determined by the
specific identification method. Materials and supplies are valued at cost determined by
the average method. Book values are written down based on any decline inprofitability.
(e) Depreciation and Amortization(1) Property and equipment (except leased assets) and investments in real estate
Depreciation of property and equipment (except leased assets) and investments inreal estate is determined primarily by the declining-balance method based on theestimated useful lives of the respective assets as prescribed in the Corporation
Tax Law of Japan except that the straight-line method is applied to officebuildings acquired on or after April 1, 1998.
Depreciation at all overseas subsidiaries is determined by the straight-line method
or by the declining-balance method based on the estimated useful lives of therespective assets.
(2) Intangible fixed assets (except leased assets)
Amortization of intangible fixed assets (except leased assets) is calculated by thestraight-line method based on the estimated useful lives of the respective assets asprescribed in the Corporation Tax Law of Japan. Amortization of computer
software for internal use is calculated by the straight-line method over theestimated useful lives of 5 years.

13Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(e) Depreciation and Amortization (continued)(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer
the ownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
Finance leases other than those that transfer the ownership of the leased assets tothe lessees, whose commencement dates are on or before March 31, 2008,
continue to be accounted for in a similar manner as operating leases.
(f)Allowance for Doubtful Receivables
The allowance for doubtful receivables is provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtfulreceivables estimated based on an individual assessment of each receivable andprobability of collection.

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

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

(j)

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

14

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(k) Employees’ Retirement Benefits
Accrued retirement benefits for employees are provided principally at an amountcalculated based on the retirement benefit obligation and the fair value of the pension
plan assets, as adjusted for the unrecognized net retirement benefit obligation attransition, unrecognized actuarial gain or loss and unrecognized prior service cost.
The net retirement benefit obligation at transition is being amortized principally over a
period of 15 years. Prior service cost is being amortized as incurred by the straight-line
method over periods (mainly 11 years) which are shorter than the average remaining
years of service of the employees. Actuarial gain or loss is amortized in the year
following the year in which the gain or loss is recognized by the straight-line method
over periods (mainly 11 years) which are shorter than the average remaining years ofservice of the employees.
(l)Recognition of Revenues and Costs on Construction Contracts
Revenues and costs of construction contracts that commenced on or after April 1, 2009,of which the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method. The percentage of completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract
method is applied for contracts for which the percentage of completion cannot be
reliably estimated.
Revenues and costs of construction contracts of the Company and certain subsidiaries
that commenced on or before March 31, 2009, which cover a construction period
longer than 12 months are, in principle, also recognized by the percentage-ofcompletion method, except for total revenue on long-term contracts of less than ¥500
million.

(m) Recognition of Income from Finance Leases
Income from finance leases is recorded as sales and cost of sales at the time a lease
payment is received.
(n) Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Foreign exchange forward contracts qualifying for allocation accounting aretranslated at the contract rate.
Interest rate swaps qualifying for hedge accounting and meeting specificmatching criteria are not remeasured at market value, but the differential paid or
received under the swap agreements is charged or credited to income (short-cut
method).

15

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(n) Derivatives and Hedge Accounting (continued)(2) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

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

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

Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company has adopted the consolidated taxation system.

16

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan and has been made, as a matter of arithmetic
computation only, at ¥94.05 = U.S.$1.00, the approximate rate of exchange in effect on
March 31, 2013. This translation should not be construed as a representation that yen havebeen, could have been, or could in the future be, converted into U.S. dollars at that or any
other rate.
4.

Changes in Accounting Methods

Changes in Accounting Policies Which Are Difficult to Distinguish from Changes in
Accounting Estimates
In accordance with an amendment to the Corporation Tax Law of Japan effective April 1,
2012, the Company and its domestic consolidated subsidiaries have changed theirdepreciation method for property, plant and equipment acquired after April 1, 2012.
As a result, operating income and income before income taxes and minority interests
increased by ¥20 million ($212 thousand) for the year ended March 31, 2013 comparedwith the corresponding amounts which would have been recorded under the previous
method.
5.

Unapplied Accounting Standards“Accounting Standard for Retirement Benefits” (ASBJ Statement No.26 issued on May 17,2012) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance
No. 25, issued on May 17, 2012)(a) Outline
From the perspective of improving financial reporting and based on international
trends, these accounting standards have been revised primarily to enhance disclosuresand focusing on accounting for unrecognized actuarial differences, methods fortreating unrecognized prior service costs and calculation retirement benefit obligationand service costs.
(b) Scheduled date of adoption
The scheduled adoption date is the end of the fiscal year ending March 31, 2014.
However, the scheduled adoption date for the revision of calculation methods ofretirement benefit obligations and service costs will be the beginning of the year
ending March 31, 2015.
(c)

Impact of the Adoption of These Accounting Standards
The Company is currently assessing the effects of the adoption of the accounting
standard and guidance on its consolidated financial statements.

17

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

6.

Notes to Consolidated Balance Sheets(a) Inventories
The components of inventories as of March 31, 2013 and 2012 were as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Merchandise and finished goods
Materials and supplies
Costs on uncompleted construction
contracts
Real estate for sale

¥00,579
1,341¥ 00,440
1,977$006,156
14,25817,261
2¥19,184

19,96389¥ 22,471

183,53021$203,976(b) Investments in Real Estate“Investments in real estate” includes accumulated depreciation in the amounts of ¥912
million ($9,696 thousand) and ¥651 million at March 31, 2013 and 2012, respectively.
(c) Pledged Assets
The following assets were pledged at March 31, 2013 and 2012 principally as
collateral for short-term bank loans, long-term debt, and guarantees (such as
guarantees for the completion of construction contracts):
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Trade notes and accounts receivable
Other current assets
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation
Investments in securities
Investments in real estate

18¥00,829－912,241¥ 1,894
17,390－12,210$008,814－95
130,154

1,237

1,297

13,152

36
2,312
3,800
¥20,467

54
1,990
3,832
¥38,669382
24,58240,404$217,618

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(c) Pledged Assets (continued)
Of the above property and equipment, mortgaged assets for factory foundations at
March 31, 2013 and 2012 are summarized as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation¥1,258¥1,236$13,375

226

245

2,402

36
¥1,52154¥1,536382$16,172

The secured liabilities as of March 31, 2013 and 2012 are summarized as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of
long-term debt]
Long-term debt
Other current liabilities
Other long-term liabilities¥2,574¥14,073$27,368

[736]
1,960
100
225

[636]
2,196
100
325

[7,825]
20,8391,063
2,392(d) Land Revaluation
Land for operations was revalued by a consolidated subsidiary under the Law for Land
Revaluation during the year ended March 31, 2001. The revaluation amount is shown
as a separate component of net assets.
The market value of the land was ¥698 million ($7,421 thousand) and ¥689 million
more than the revalued book amount at March 31, 2013 and 2012, respectively.

19

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(e) Contingent Liabilities
At March 31, 2013 and 2012, the Company and consolidated subsidiaries were
contingently liable for the following:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
As guarantors of bank loans tocustomers, unconsolidated subsidiaries,
an affiliate and employees
As endorsers of notes receivablediscounted with banks
Note 1:(f)¥071¥3,096$0,754

382

331

4,061

Though the amount of an estimated loss corresponding to the Company’s affiliate
Yoshiikikaku Co., Ltd. had been recognized, the amount of contingent liabilities wasdisclosed since the guaranteed amount was not determined as of March 31, 2012.
As of March 31, 2013, the amount of claims and guarantees was calculated based on theunderstanding that this company would be liquidated.
As a result, the Company recognized ¥2,579 million ($27,421 thousand) of long-term
non-operating accounts receivable and other long-term liabilities, respectively as of March 31,
2013.

Estimated Loss on Uncompleted Construction Contracts
An estimated loss on uncompleted construction contracts was recognized and included
as part of inventories but was not offset against the amount on the balance sheet. It has
been recorded as an allowance for losses on construction contracts in the amounts of¥49 million ($520 thousand) and ¥507 million as of March 31, 2013 and 2012,
respectively.

(g) Trade Notes Maturing on the Balance Sheet Date
Trade notes are settled on the dates they mature.
Since the last day of the fiscal year in 2013 and 2012 fell on a bank holiday, thebelow-listed notes maturing on that day are excluded from the corresponding balancesin the consolidated balance sheets as of March 31, 2013 and 2012, respectively.
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Trade notes receivable
Trade notes payable

¥179
168

20

¥214
175

$1,903
1,786

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20137.

Notes to Consolidated Statements of Income(a) Net Sales Based on Percentage-of-completion Method
Net sales on construction contracts accounted for under the percentage-of-completion
method amounted to ¥238,596 million ($2,536,905 thousand) and ¥215,008 million
for the years ended March 31, 2013 and 2012, respectively.
(b) Allowance for Losses on Construction Contracts Included in Cost of Sales
The allowance for losses on construction contracts was included in cost of sales in theamounts of ¥610 million ($6,485 thousand) and ¥1,542 million for the years ended
March 31, 2013 and 2012, respectively.
(c) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses at March
31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Retirement benefit expenses
Provision for doubtful receivables
Other
Total

¥05,943
1,102
22
7,261
¥14,330¥06,099
1,001
23
7,221
¥14,345$063,189
11,717
233
77,203$152,365(d) Research and Development Expenses
Research and development costs included in selling, general and administrative
expenses and manufacturing costs amounted to ¥885 million ($9,409 thousand) and¥909 million for the years ended March 31, 2013 and 2012, respectively.
(e) Gain on Sale of Property and Equipment
The significant components of gain on sale of property and equipment for the years
ended March 31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
¥－
02
11
¥14

Land
Buildings and structures
Others
Total
21

¥05
03
12
¥21

$ －
021
116
$148

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(f) Loss on Sales and Disposal of Property and Equipment
The significant components of loss on sales and disposal of property and equipment
for the years ended March 31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Loss on disposal
Loss on sales
Others
Total

¥12
0
8
¥21

¥19
44
22
¥86

$127
0
85
$ 223

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

22

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20138.

Notes to Consolidated Statements of Comprehensive Income

Amount of recycling and amount of income tax effects associated with othercomprehensive income for the years ended March 31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Unrealized holding gain on securities:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Unrealized holding gain on securities
Deferred gain on hedging instruments, net oftaxes:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Deferred gain on hedging instruments,
net of taxes
Land revaluation:
Income tax effect adjustment
Land revaluation
Translation adjustments:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Translation adjustments
Share of other comprehensive income ofaffiliates accounted for by the equity
method:Changes in items during the period
Amount of recycling
Share of other comprehensive income ofaffiliates accounted for by the equity
methodTotal other comprehensive income(loss)

23

¥337
0
338
(1)
336

¥059
59
(0)
58

$3,583
0
3,593
(10)
3,572

175

48

1,860

–

–

–

–

175
(66)
108

48
(18)
30

1,860
(701)
1,148

–
–

47
47

－
－

205

(197)

–

–

205

(197)

–

–

205

(197)

2,179
－
2,179
－
2,179

4
(0)
4

(7)
(7)

42
(0)
42

¥655

¥(67)

$6,964–

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20139.

Notes to Consolidated Statements of Changes in Net Assets(a) Type and number of shares issued and treasury stock(1) For the year ended March 31, 2013
Balance atApril 1,
2012
Shares issued:
Common stock
2nd Series Class A preferred stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

288,989,667
1,500,000
5,781,200
5,868,700
302,139,567

Increase
Decrease(Number of shares)
386,490,909–––
386,490,909––
2,860,000
5,861,200
8,721,200

Balance at
March 31,2013
675,480,576
1,500,000
2,921,200
7,500
679,909,276

Note 1:

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

Note 2:

Decrease of 3rd Series Class C preferred stock and 3rd Series Class D preferred stock is due
to redemption by exercising a call option.
Balance atApril 1,
2012

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

447,922––447,922

Increase
Decrease(Number of shares)
7,773
2,860,000
5,861,200
8,728,973

1,331
2,860,000
5,861,200
8,722,531

Balance at
March 31,2013
454,364––454,364

Note 1:

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

Note 2:

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

Note 3:

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

Note 4:

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

24

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(a) Type and number of shares issued and treasury stocks (continued)(2) For the year ended March 31, 2012
Balance atApril 1,
2011
Shares issued:
Common stock
2nd Series Class A preferred stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

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

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

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

Note 1:

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

Note 2:

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

Note 3:

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

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

436,646–––436,646

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

Balance at
March 31,2012

447,922–––447,922

Note 1:

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

Note 2:

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

Note 3:

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

Note 4:

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

Note 5: Increase of 3rd Series Class C preferred stock is due to the acquisition of common stock by
exercising a call option based on a resolution at the annual general meeting of theshareholders on June 29, 2011.
Note 6:

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

25

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Dividends:
Dividends with the cut-off date in the year ended March 31, 2013 and the effective
date in the year ending March 31, 2014 were as follows:

Resolution

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

Type of shares

Annual general 2nd Series Class A preferred stock
meeting of the 3rd Series Class C preferred stock
shareholders on 3rd Series Class D preferred stock
June 27, 2013

¥ 10
177
0
¥188

¥ 7.1760.85
60.85

Cut-off
date

Effective
date

March 31, June 28,
2013
2013

For the years ended March 31, 2012 and 2011, there were no dividends paid toshareholders of common stock.
10.

Notes to Consolidated Statements of Cash Flows(a) Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2013 and 2012 were as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Time deposits with maturities of overthree months
Cash and cash equivalents

26¥39,899¥34,897$424,231(8,498)¥31,400(5,050)¥29,847(90,356)$333,864

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) The following is the summary of assets acquired and liabilities assumed through theacquisition of shares of MitsuiPrecon, Inc. during the year ended March 31, 2013,
related acquisition costs and net disbursement:
As of March 31,(Millions of (Thousands ofyen)
U.S. dollars)
Current assets¥1,220$12,971

Non-current assets

1,484

15,77817

180

Current liabilities(1,605)(17,065)

Long-term liabilities(1,080)(11,483)

Minority interests

(10)

(106)

Loss on step acquisitions
Acquisition cost for controlling interest in subsidiary

44

467

(52)

(552)

18

191

(276)

(2,934)¥0,258$02,743

Goodwill

Total amount of the shares of the above consolidated
subsidiary acquired by the Company
Cash and cash equivalents of the above consolidated
subsidiary
Net Proceeds from purchases of stocks of subsidiaries
resulting in change in scope of consolidation27

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

11. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation /amortization and net book value of the leased property as of March 31, 2013 and 2012,
which would have been reflected in the consolidated balance sheets if finance leaseaccounting had been applied to the finance leases currently accounted for as operatingleases:(a) As lessee:(1) Finance leases (of which commencement dates were prior to application ofchange in accounting method)
As of March 31,
2013
Machinery,equipment Intangible
and
fixed
vehiclesassetsAcquisition costs
Accumulated depreciation /amortization
Net book value

2012
Machinery,equipment Intangible
and
fixed
Total
vehiclesassets(Millions of yen)

¥383

¥－

¥383

¥514

¥83

¥597

263
¥119

－
¥－

263
¥119

326
¥187

75
¥ 7

402
¥195

As of March 31, 2013
Machinery,equipment Intangible
fixed
and
vehiclesTotal
assets(Thousands of U.S. dollars)
Acquisition costs
Accumulated depreciation /amortization
Net book value

Total$4,072$－$4,072

2,796$1,265－$－2,796$1,26528

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(a) As lessee: (continued)
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Future minimum payments:
Within one year
Over one year
Lease payments
Depreciation / amortizationequivalents
Interest expense equivalents

¥058
71
¥129

¥085
124
¥209

$0,616754$1,371¥083¥130$0,882

71
7

112
12

754
74

Depreciation / amortization equivalents are computed by the straight-line method
over the respective lease terms with a residual value of zero.
The difference between total lease expenses and acquisition costs of the leased
assets comprise interest equivalents. Interest equivalents are computed by theinterest method over the respective lease terms.
(2) Operating leases
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Future minimum payments:
Within one year
Over one year

¥0
0
¥1

¥2
1
¥3

$00
0
$10

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

29

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(a) Overview (continued)(2) Types of financial instruments and related risk and risk management system
Trade notes and accounts receivable are exposed to credit risk in relation tocustomers and trading partners. Also, the Group’s main investments in securities
are shares of companies, and they are exposed to market price fluctuation risk.
Management of credit risks (Risks of default by customers and trading partners)
The Company manages due dates and balances of trade notes and accounts
receivable for individual customers and trading partners through its internal
systems and monitors their credit status. These systems enable the Group to
identify any concerns for doubtful receivables at an early stage and reduce risks
of uncollectible amounts. Consolidated subsidiaries also manage credit risks inthe same manner as the Company. The Company minimizes credit risks bymainly holding held-to-maturity securities with high credit ratings.
Management of market risks (Risks of fluctuations in currency exchange andinterest rates)
The Company and certain consolidated subsidiaries hold trade receivables inforeign currencies. However, the risk of fluctuations in the currency exchange
rate is not significant because a similar amount of trade payables are also held,
and the Company utilizes foreign exchange forward contracts to hedge the risk ofchanges in the foreign currency exchange rate.
Loan payables are mainly for short-term operating funds. The Group manages
loan payables to flexibly execute or revise its fund management plans. In order to
fix the interest expense for long-term debt bearing interest at variable rates, theGroup utilizes interest rate swap transactions for certain long-term debt.
Derivatives are foreign currency exchange forward contracts held for the purposeof hedging future risk of fluctuation of foreign currency exchange rate of themonetary liabilities denominated in foreign currencies, and interest rate swaps
held for the purpose of hedging future risk of fluctuation of interest rates onloans.
Derivative transactions are carried out in accordance with the Companies’
internal rules on transactions, and with highly rated financial institutions used ascounter parties to reduce the risk of default.
Information regarding the method of hedge accounting, hedging instruments andhedged items, hedging policy, and assessment of hedge effectiveness is found in
Note 2-(n).

30Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(a) Overview (continued)(3) Supplementary explanation of the fair value of financial instruments
The fair values of financial instruments are based on market prices, or, if nomarket prices are available, they include estimated amounts. Because estimationsof the fair value incorporate various factors, applying different assumptions can,in some cases, result in different fair values.
In addition, the amounts of derivatives in Note 14 “Derivative and Hedge
Accounting” are not necessarily indicative of the actual market risk involved in
the derivative transactions.
(b) Fair value of financial instruments
Amounts recognized in the consolidated balance sheets, market value, and thedifference at March 31, 2013 and 2012, are as shown below. Moreover, items forwhich it is extremely difficult to determine fair values are not included in thefollowing table (see Note 2).
Carrying
value
Cash and deposits
Trade notes and accounts
receivable
Securities and investments
in securities
Held-to-maturity
securities
Other securities
Long-term loans receivable
Allowance for doubtfulreceivables (*1)
Claims provable inbankruptcy and other
Allowance for doubtfulreceivables (*1)
Long-term non-operating
accounts receivable
Allowance for doubtfulreceivables (*1)
Total assets
Trade notes and accounts
payableShort-term bank loans
and current portion of
long-term debt
Long-term debt
Total liabilities
Derivative transactions (*2)

As of March 31, 2013
Fair
Carrying
Fair
value
value
value
Difference
Difference(Millions of yen)(Thousands of U.S. dollars)¥ 39,899¥ 39,899

101,279–$ 424,231$ 424,231$

101,265(13)

1,076,863

1,076,714

(138)

2,582

2,584

2

27,45327,474

21

217
2,365
6,551

219
2,365

2
–

2,307
25,14669,654

2,328
25,146

21
–

1,533

(83)

16,299

(882)

223

(0)

(4,933)
1,617¥(52,450)
17,192

867
(845)
21

–

9,218
21

(8,984)223(0)24,875

264,486(22,571)
2,304
147,705

2,284
147,590

(19)
(115)

(239,989)
24,497
1,570,494

24,284
1,569,271(202)(1,222)

115,338

115,338–

1,226,347

1,226,347

–

8,391
2,194
¥125,923

8,407
2,142
¥125,88816(51)¥ (34)

89,21823,328$1,338,894

89,38822,775$1,338,522

170
(542)
$(361)

224

224

–

2,381

2,381

–

(*1):

Allowance for doubtful receivables recognized individually is offset.

(*2):

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

31

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Fair value of financial instruments (continued)
As of March 31, 2012
Carrying
Fair
value
value
Difference(Millions of yen)
Cash and deposits
Trade notes and accounts
receivable
Investments in securities
Held-to-maturity
securities
Other securities
Long-term loans receivable
Allowance for doubtfulreceivables (*)¥ 34,897¥ 34,897

115,418
2,031

115,377
2,031

(40)
0

9
2,021
7,547

9
2,021

0
–

1,566

(135)

55

(0)

(34,605)
2,819
156,925

2,794
156,724

(25)
(201)

118,786

118,786–

20,5792,413¥141,779

20,5972,269¥141,653

18(144)¥(125)

48

48–(5,845)
1,701

Claims provable inbankruptcy and other
Allowance for doubtfulreceivables (*)

–

4,912
(4,856)56

Long-term non-operating
accounts receivable
Allowance for doubtfulreceivables (*)

37,425

Total assets
Trade notes and accounts
payableShort-term bank loans
and current portion of
long-term debt
Long-term debt
Total liabilities¥

Derivative transactions(*1):

Allowance for doubtful receivables recognized individually is offset.

(*2):

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

Note 1: Calculation of the fair value of financial instruments and other matters related to investment securities andderivative transactions

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

32

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Fair value of financial instruments (continued)(3) Securities and investments in securities
Concerning the market value of investment securities, the market value for stocks
is the price quoted on the stock exchange, and the market value for bonds is theprice provided by financial institutions.
In addition, for matters concerning to securities, see “Notes on securities.”(4) Long-term loans receivable, (5) Claims provable in bankruptcy and other, and(6) Long-term non-operating accounts receivable
These fair values are determined using the present value of discounted collectible
principal and interest amounts estimated reflecting their collectability, based on
an appropriate rate in which a credit spread is added to a risk-free benchmark rate
(such as a government bond yield) corresponding to the remaining term. Further,
the fair value of doubtful debts are determined by discounting the value of
expected cash flows using the same discount rate, or estimated collectible amountsecured by collateral or guaranteed.
Liabilities(1) Trade notes and accounts payable
Because settlement periods are short and their market values are almost the sameas their book values, the book values are used.
(2) Short-term bank loans
The carrying amount of the current portion of long-term debt approximates fairvalue since the carrying amount is equivalent to the present value of future cash
flows discounted using the current borrowing rate for similar debt with acompatible maturity. For borrowings other than the current portion of long-term
debt, the carrying amount approximates fair value due to the short maturities ofthese instruments.
(3) Long-term debt
Fair value of long-term debt is based on the price provided by financial
institutions or the present value of future cash flows discounted using the current
borrowing rate for similar debt with a comparable maturity. The fair value ofloans subject to special hedge accounting treatment of interest rate swaps is basedon the present value of the total principal and interest of the borrowings hedged
by interest rate swaps, discounted by the interest rate to be applied if similar newloans were entered into.
The information of the fair value for derivatives is included in Note 14.

33

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Fair value of financial instruments (continued)
Note 2:Financial instruments for which it is extremely difficult to measure the fair value.

As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Unlisted stocks (*)(*):¥4,077¥4,163$43,349

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

Note 3:

The redemption schedule for monetary claims and held-to-maturity debt securities with maturity dates
subsequent to March 31, 2013 and 2012.
As of March 31, 2013
Within 1
year

Deposits¥ 39,869
Trade notes andaccounts
receivable
99,435
Securities andinvestments insecurities
Held-to-maturity
securities (Bonds)
9
Long-term loans
receivable
3
Claims provable inbankruptcy andother (*)
21
Long-term
non-operating
accounts
receivable (*)
93¥139,433

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

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

¥

¥

–

$ 423,912

$

–

¥

–

–

$

–

$

–

1,844

–

–

1,057,256

19,606

–

–

–

207

–

95

–

2,200

–

77

690

846

31

818

7,336

8,955

–

–

–

223

–

–

–

999
¥2,921

1
¥898

–
¥846

988

10,662

10$9,548–$8,995$1,482,541 $31,057(*) The fair values of these items are extremely difficult to determine. This table does not include the amount of¥1,209 million ($12,854 thousand) out of long-term non-operating accounts receivable related to Yoshiikikaku
Co., Ltd.

34

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Fair value of financial instruments (continued)
As of March 31, 2012
Over 1
Over 5year and years andWithin 1 within 5 within 10 Over 10
years
years
year
years
(Millions of yen)
Deposits¥ 34,869
Trade notes andaccounts
receivable
111,553
Investments insecurities
Held-to-maturity
securities (Bonds)–
Long-term loans
receivable
3
Claims provable inbankruptcy andother (*)
22
Long-term
non-operating
accounts
receivable (*)
1,039

¥

¥147,488

–

¥

–

¥

–

3,864

–

–

9

–

–

6

789

902

1

–

–

588

0

–

¥4,469¥789¥902(*) The fair values of these items are extremely difficult to determine. This table does not include the amount of¥32 million out of claims provable in bankruptcy and other and the amount of ¥1,191 million out of long-term
non-operating accounts receivable.

Note 4:

The redemption schedule for corporate bonds, long-term debt, and other interest bearing debt withmaturity dates subsequent to the consolidated balance sheet date. See Note 23.

13. Securities
Securities at March 31, 2013 and 2012 are summarized as follows:(a) Held-to-maturity securities
Carrying
value
Securities whose fairvalue exceeds theircarrying value:
Bonds

Securities whose fairvalue exceeds theircarrying value:
Bonds

¥217

As of March 31, 2013
Fair
Unrealized Carrying
Fair
Unrealized
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)

¥219

¥2

As of March 31, 2012
Carrying
Fair
Unrealized
value
value
gain
(Millions of yen)

¥

9

¥

9

¥0

35

$2,307$2,328$21

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Other securities
Balancesheet
amountUnrealized gain:
Stock
Unrealized loss:
Stock
Total

Unrealized gain:
Stock
Unrealized loss:
Stock
Total

As of March 31, 2013
Balance
Unrealized
Unrealized
sheet
Cost
Cost
gain (loss)
gain (loss)
amount(Millions of yen)(Thousands of U.S. dollars)¥1,865¥1,488¥376$19,829$15,821$3,997499¥2,365663¥2,152

(163)
¥213

5,305
$25,146

7,049$22,881(1,733)$2,264As of March 31, 2012
Balance
Unrealized
sheet
Cost
gain (loss)
amount(Millions of yen)
¥ 972

¥ 817

¥ 154

1,049
¥2,021

1,330¥2,148(281)¥(126)

36

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

14. Derivatives and Hedge Accounting
Derivative transactions for the years ended March 31, 2013 and 2012 are summarized asfollows:(a) There are no derivative transactions to which hedge accounting is not applied.
(b) Derivative transactions to which the hedge accounting is applied(1) Currency-related transactions
As of March 31, 2013

Method ofhedge
accounting

Transaction
type

Hedgeditem

Allocationaccounting
method forforeignexchange
forwardcontracts

Foreignexchange
forwardcontracts
Long
U.S. dollar
Thai baht

Accounts
payableLong

Future foreign
currencytransactions

U.S. dollar
Thai baht

Contract
Over 1
Fair
amountyear
value(Millions of yen)

34
33

¥ –
–

Note 2
Note 2$852
208¥1,129

71
20
¥92

¥158
65
¥224

9,059
2,211
$12,004¥

Total

Contract
Over 1
Fair
amountyear
value(Thousands of U.S. dollars)

361
350

$

–
–

Note 2
Note 2

754
212
$978

$1,679691$2,381

Note 1:

Estimated fair value was provided by the counterparty financial institution.

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

Method ofhedge
accounting
Allocationaccounting
method forforeignexchange
forwardcontracts

Total

As of March 31, 2012
Transaction
type

Hedgeditem

Foreignexchange
forwardcontracts
Long
U.S. dollar

Accounts
payableLong
U.S. dollar

Future foreign
currencytransactions

Contract
Over 1amountyear(Millions of yen)

Fair
value

¥

–

Note 2

886
¥886

¥48
¥48

2

1,761
¥1,763¥Note 1:

Estimated fair value was provided by the counterparty financial institution.

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

37

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Derivative transactions to which the hedge accounting is applied (continued)(2)

Interest-related transactions

Method ofhedge
accounting
Short-cut
methodNote 1:

Note 1:

15.

Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating

Long-term
debt

Contract
Over 1
Fair
amountyear
value(Millions of yen)

¥1,900¥1,300Note 1

Contract
Over 1
Fair
amountyear
value(Thousands of U.S. dollars)$20,202$13,822

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

Method ofhedge
accounting
Short-cut
methodAs of March 31, 2013

As of March 31, 2012
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating

Long-term
debt

Contract
Over 1
Fair
amountyear
value(Millions of yen)

¥2,500¥1,900Note 1Since these interest rate swaps accounted for by short-cut method are included in that of thelong-term debt as the hedged item, the fair values of the contracts are included in the fairvalue of the long-term debt.

Retirement Benefit Plans

For the year ended March 31, 2013, the Company and its consolidated subsidiaries havelump-sum retirement benefit plans and defined contribution pension system. The benefit
amounts are determined by reference to basic rates of pay, length of service and theconditions under which termination occurs. Certain consolidated domestic subsidiaries
transferred annuity payments to a defined benefits pension plan or the Smaller Enterprise
Retirement Allowance Mutual Aid Scheme. Certain foreign consolidated subsidiaries set up
an employee pension trust.

38

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

The following table sets forth the funded and accrued status of the plans, and the amounts
recognized in the consolidated balance sheets at March 31, 2013 and 2012 for theCompany’s and the consolidated subsidiaries’ defined benefit plans:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized net retirement benefit
obligation at transition
Unrecognized actuarial loss
Unrecognized prior service costAccrued retirement benefits¥(21,558)
196(21,362)¥(22,012)
187(21,825)$(229,218)
2,083(227,134)

3,969
2,292
(2,956)¥(18,057)

5,948
2,424
(3,210)¥(16,662)

42,20024,370(31,430)$(191,993)

Note 1: Certain subsidiaries adopted the simplified method to calculate their retirement benefit obligation andrecognized the remaining amount after deducting their payments to the Smaller Enterprise Retirement
Allowance Mutual Aid Scheme as the retirement benefit obligation.

The components of retirement benefit expenses for the years ended March 31, 2013 and2012 are outlined as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)Service cost (Note 1)
Interest cost
Expected return on plan assets
Amortization of net retirement benefit
obligation at transition
Amortization of actuarial loss
Amortization of prior service cost
Total retirement benefit expenses
Expenses for transfer to defined
contribution pension plan
Other (Note 2)
Total retirement benefit expenses

¥ 937
365
(5)

¥1,007408(4)$ 9,962
3,880
(53)

1,984
531
(253)
¥3,559

1,983
554
(174)
¥3,77521,095
5,645(2,690)$37,841–637¥4,1972–¥3,777–
6,772$44,625

Note 1: Certain subsidiaries adopted the simplified method to calculate the retirement benefit obligation andrecognized the remaining amount after deducting payments to the Smaller Enterprise Retirement
Allowance Mutual Aid Scheme as the retirement benefit obligation.
Note 2: “Other” is amount of payment to the defined contribution pension plan.

39

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

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

Discount rate
Expected rate of return on plan assets
Amortization period for prior service cost
Amortization period for actuarial
differences
Period for recognition of net retirement
benefit obligation at transition
16.

2013

2012

Principally 1.7%
1.0%
Principally 11 years

Principally 1.7%
1.0%
Principally 11 years

Principally 11 years

Principally 11 years

Principally 15 years

Principally 15 years

Income Taxes

The significant components of deferred tax assets and liabilities at March 31, 2013 and2012 were as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued retirement benefits
Tax loss carryforwards
Allowance for bad debts
Accounts payable and accrued expenses
Allowance for loss on litigation
Allowance for losses on construction
contracts
Reserve for defects on completed
construction projects
Foreign tax credit carryforwards
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gain on hedging instruments,
net of taxes
Asset retirement obligations
Construction assistance fundreceivables
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets

40¥ 6,501
4,112
3,118
1,400
317

¥ 6,008
38,358
2,431
1,404
307

$ 69,122
43,721
33,152
14,885
3,370

272

616

2,892

271
269
1,312
17,577(12,921)
4,655

353
–
1,228
50,707(46,227)
4,480

2,881
2,860
13,950186,889(137,384)
49,494

(85)
(10)

(18)
(11)

(903)
(106)

(6)
(4)
(8)
(115)
¥ 4,540

–
(2)
(17)
(49)
¥ 4,430

(63)
(42)
(85)
(1,222)$(48,272)

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

The following table summarizes the significant differences between the statutory tax rate
and the effective tax rates for the years ended March 31, 2013 and 2012:
Years ended March 31,
2013
2012
Statutory tax rate
Non-deductible expenses
Non-taxable income
Per capita inhabitants’ taxes
Valuation allowance
Adjustments related to consolidation
Change in corporate tax rate
Other
Effective tax rates
Note 1:

17.

–%
–
–
–
–
–
–
–
–%

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

The reconciliation for the year ended March 31, 2013 was omitted because the difference between the statutory
tax rate and the effective tax rate is less than 5% of the statutory tax rate.

Business Combinations

Business combinations for the year ended March 31, 2013 are summarized as follows:Business combination through acquisition(a) Outline of the business combination(1) Name of the acquired companies and description of business(i)Name of the acquired company: Mitsui Precon, Inc.

(ii) Description of business: Building construction, civil engineering, design forelectrical construction, etc.
(2) Main reasons for the business combination
The Company determined to additionally acquire shares of Mitsui Precon, Inc.,
which was an affiliate accounted for by the equity method for the year ended
March 31, 2012, to increase efficiencies and achieve cost reductions resulting from
Mitsui Precon, Inc.’s expertise in precast concrete, which is expected to increase
the corporate value of the Company .
(3) Date of business combination
March 25, 2013(4) Legal form of business combination
Acquisition of shares by cash
41

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(a) Outline of the business combination (continued)(5) Company name after business combination
The company name remains unchanged.
(6) Percentage share of voting rights the Company has acquired
Percentage share of voting rights held immediately before
the business combination
Percentage share of voting rights additionally acquired on
the business combination date
Percentage share of voting rights after the acquisition

38.6%
5.0%
43.6%

(7) Main reason in determining the acquiring company
The Company acquired a majority of the voting rights through the acquisition ofshares by cash.
(b) Period of the acquired company’s financial results included in the consolidated
financial statements.
Since the business combination was deemed to take place on March 31, 2013, gain
and loss related to the acquired company for the period from April 1, 2012 to March
31, 2013 is presented as loss on equity method investment in the consolidated
statements of income.
(c) Acquisition cost and breakdown of the cost

Fair value of common stock of Mitsui Precon, Inc.
prior to business combination
Cash used to additionally acquire the common
stocks of Mitsui Precon, Inc.
Total acquisition cost

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

¥07

$074

¥18
¥25

$191
$265

(d) Difference between acquisition cost of the acquired company and total acquisition costof individual transactions leading to acquisition

Loss on step acquisitions

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

¥44

$467

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(e) Amounts of goodwill incurred, reason for recognizing goodwill, amortization method
and amortization period(1) Amounts of goodwill incurred(Millions ofyen)(Thousands of
U.S. dollars)

¥17

$180

(2) Reason for recognizing goodwill

Goodwill was incurred due to the difference between the equivalent amounts of
the Company’s equity interest in the acquired company and acquisition cost.
(3) Amortization method and period

Goodwill is expensed as incurred because the amount was immaterial.
(f)

Details of assets and liabilities acquired on the day of the business combination andmain breakdown(Millions ofyen)(Thousands of
U.S. dollars)

Current assets¥1,220$12,971

Non-current assets¥1,484$15,778

Total assets¥2,704$28,750

Current liabilities¥1,605$17,065

Long-term liabilities¥1,808$19,223

Total liabilities¥2,685$28,548(g) Approximate amounts and their calculation method of impact on the consolidated
statements of income for the year ended March 31, 2013, assuming that the businesscombination had been completed at the beginning of the year ended March 31, 2013.
The information is omitted due to its immateriality. The amounts in the above table
have not been audited by Ernst & Young ShinNihon LLC.
18. Investment and Rental Property
Investment and rental property as of March 31, 2013 and 2012 were as follows:(a) Types of investment and rental property
A consolidated subsidiary maintains warehouses available for rent including land in
Saitama prefecture. Gains on investment and rental property for the years ended March
31, 2013 and 2012 were ¥137 million ($1,456 thousand) and ¥134 million,
respectively.
43

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(b) Fair value of investment and rental property
The book value, net increase (decrease) and fair value of investment and rental
property for the years ended March 31, 2013 and 2012 were as follows:Year ended March 31, 2013
Book value
Book value
Balance
Balance
Fair value
Balance
Balance
Fair value
as of
Net
as of
as of
as of
Net
as of
as of
March 31,
increase
March 31, March 31, March 31,
increase
March 31, March 31,
2012(decrease)
2013
2013
2012
(decrease)
2013
2013
(Millions of yen)(Thousands of U.S. dollars)¥3,302¥(31)¥3,270¥3,001$35,108$(329)$34,768$31,908Note 1:

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

Note 2:

Net decrease is due to depreciation.

Note 3:

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

Year ended March 31, 2012
Book value
Balance
Fair value
Balance
Net
as of
as of
as of
increase
March 31, March 31,
March 31,(decrease)
2012
2012
2011
(Millions of yen)
¥3,333¥(31)¥3,302¥2,869Note 1:

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

Note 2:

Net decrease is due to depreciation.

Note 3:

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

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

44

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

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

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales
Segment income

Year ended March 31, 2013
Reportable operating segments
Building
Total
Others
Total
Civil(Millions of yen)

Adjustments

Consolidated¥136,370¥205,546¥341,917¥810¥342,727¥–¥342,727

1,352¥137,722

0¥205,546

1,352¥343,269

58
¥868

1,410
¥344,138(1,410)¥(1,410)¥342,727

11,326

8,608

19,935301

20,237(122)

20,115–Note 1:“Others,” which includes the Company’s business of elder care facilities and insurance agent,
does not qualify as a reportable operating segment.

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

Note 3:

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

45

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

Segment Information (continued)
Year ended March 31, 2013
Reportable operating segments
Civil
Building
Total
Others
Total(Thousands of U.S. dollars)

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales$2,185,497$3,635,481$8,612$3,644,093$–$3,644,093

14,375$1,464,348

0$2,185,497

14,375$3,649,856

616$9,22914,992$3,659,096(14,992)$(14,992)–$3,644,093

120,425

91,525211,961

3,200

215,172(1,297)

213,875

Adjustments

Consolidated

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

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales¥119,492¥193,330¥312,823¥735¥313,558¥–¥313,558

1,153¥120,645

20¥193,350

1,173¥313,996

51
¥786

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

10,496

8,323

18,819306

19,126(89)

19,036

Segment income

Note 2:
Note 3:

Consolidated$1,449,973

Segment income

Note 1:

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

Related Information
For the year ended March 31, 2013(a) Product and service information
See “Segment income, segment assets and other items for reportable segments”.
(b) Geographical segment information(1) SalesYear ended March 31, 2013
Asia
Others
Total
Japan
Asia
Others
Total(Millions of yen)(Thousands of U.S. dollars)Japan¥270,668
Notes:¥70,200¥1,859¥342,727$2,877,916 $746,411$19,766$3,644,093

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

46

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

Related Information (continued)(2) Tangible fixed assets
Geographical segment information on tangible fixed assets has been omitted as
the amount of tangible fixed assets in Japan constituted over 90% of total as ofMarch 31, 2013.
(c) Major customer information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2013.
For the year ended March 31, 2012(a) Product and service information
See “Segment income, segment assets and other items for reportable segments”.
(b) Geographical segment information(1) SalesJapan

Year ended March 31, 2012
Asia
Others
Total(Millions of yen)

¥270,576
Notes:¥42,354¥627¥313,558

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

(2) Tangible fixed assets
Geographical segment information on tangible fixed assets as the amount oftangible fixed assets in Japan constituted over 90% of total as of March 31, 2012.
(c) Major customer information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2012.
Loss on impairment by reportable segment
For the years ended March 31, 2013 and 2012, there was no loss on impairment for any
reportable segment.

47

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

Amortization of goodwill and unamortized balance by reportable segment
For the year ended March 31, 2013, the information is omitted due to the immateriality ofamounts.
For the year ended March 31, 2012, there was no amortization and unamortized balance of
goodwill by reportable segment.
Gain on negative goodwill by reportable segment
For the years ended March 31, 2013 and 2012, there were no gain on negative goodwill byreportable segment.
20. Related Party Transactions(a) Related party transaction
Transactions with affiliates for the year ended March 31, 2013 were summarized asfollows:
Year ended March 31, 2013

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

Capitalinvestment

Number of
voting shares
held as apercentage ofvoting sharesissued¥1030.0%Nature ofTotal amounttransactionof transaction(Millions of yen)
Long-term
non operating
accounts
receivable
Long-term
accounts
payable¥2,579¥2,579Balance sheet
account

Long-term
non operating
accounts
receivable
Long-term
accounts
payableBalance at
March 31,2013

¥3,158¥2,579Year ended March 31, 2013

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

Capitalinvestment

Number of
voting shares
held as apercentage ofvoting sharesissued

$106

30.0%

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

Balance sheet
account

Long-term
non operating
accounts
receivable
Long-term
accounts
payableLong-term
non operating
accounts
receivable
Long-term
accounts
payable48$27,421$27,421

Balance at
March 31,2013

$33,577$27,421

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013(a) Related party transaction (continued)
Transactions with affiliates for the year ended March 31, 2012 were summarized asfollows:
Year ended March 31, 2012

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

Capitalinvestment

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

Balance sheet
account

Long-term
non-operationaccounts
receivable

Balance at
March 31,
2012

¥579

(b) Significant affiliates(1) The parent information
There is no parent company at March 31, 2013 and 2012.
(2) Financial information about significant affiliates
For the year ended March 31, 2013, a significant affiliate was Aseismic Devices
Co., Ltd. Financial information about the company as of and for the years ended
March 31, 2013 and 2012 was as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Total current assets
Total non-current assets¥2,558205¥2,458224$027,198
2,179

Total current liabilities
Total long-term liabilities

1,828
6

1,959
3

19,43663

Total net assets¥0,929¥0,720$09,877

Net sales
Income before income taxes
Net income¥3,716586¥0,328¥3,027442¥0,237$39,5106,230$03,48749

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201321.

Per Share Information

Net assets and basic net income per share as of and for the years ended March 31, 2013 and2012 were as follows:2013
Net assets per share
Net income per share – basic
Net income per share – diluted(Yen)¥19.98
4.56
2.56

2012

2013
(U.S. dollars)¥(37.37)
4.82
1.81$0.2120.048
0.027

The basis of calculation for net assets per share at March 31, 2013 and 2012 was as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Total net assets
Amounts deducted from total net assets[Including paid-in amounts for sharesof preferred stock][Including cash dividends on preferredstock][Including minority interests]
Total net assets attributable tocommon stock¥ 25,361
11,872¥ 22,004
32,788$269,654
126,230[8,071][29,874][85,816][188][3,611][–][2,913][1,998][38,394]¥13,489¥(10,783)$143,423(Thousands of shares)

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

675,026

288,541

The basis for calculating basic net income per share – based and net income per share –diluted for the years ended March 31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – basic:
Net income
Amount not available to commonshareholders[Including cash dividends on
preferred stock]
Net income per share – basic¥2,042¥1,374$21,711

188

–

1,998

[188]
¥1,853[–]¥1,374[1,998]$19,702(Thousands of shares)

Average number of shares of common
stock outstanding

406,06650

285,186

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – diluted:
Adjustment for net income[Including cash dividends on
preferred stock]

–

1,998

[188]

–

1,998

(Thousands of shares)

Increase in number of share ofcommon stock[Including preferred stock]
22.

¥188

393,097[393,097]

476,133[476,133]

Subsequent Event

There is no information to be disclosed as of March 31, 2013.
23.

Short-Term Bank Loans and Long-Term Debt

Short-term bank loans generally represent notes, principally at average annual interest ratesof 2.0% and 2.4% at March 31, 2013 and 2012, respectively.
Long-term debt at March 31, 2013 and 2012 was summarized as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Debt with collateral (at average interest
rates of 2.4% at 2013 and 2.6% at 2012)
Debt without collateral (at average interest
rates of 2.1% at 2013 and 2.3% at 2012)
Lease obligations
Current portion (excluding leaseobligations)
Current portion of lease obligations
Deposits from employees

51¥2,696¥2,832$28,665

466
548

450
404

4,954
5,826

(969)
(188)
1,812
¥4,365

(869)
(128)
1,758
¥4,447(10,303)(1,998)19,266$46,411

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2013

The aggregate annual maturities of long-term debt subsequent to March 31, 2013 aresummarized as follows:Year ending March 31,
2014
2015
2016
2017 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)

¥ 969
886
820
487
¥3,163$10,303
9,420
8,718
5,178
$33,631

The aggregate annual maturities of lease obligations subsequent to March 31, 2013 aresummarized as follows:Year ending March 31,
2014
2015
2016
2017 and thereafter

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

¥188
173
99
86
¥548

$1,998
1,839
1,052
914
$5,826

53

54

Non-Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
Year ended March 31, 2013
with Independent Auditor’s Report55

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2013

AssetsCurrent assets:
Cash and deposits (Note 4-(c))
Notes receivable (Note 4-(g))
Accounts receivable on completed contracts (Note 4-(c))
Inventories (Notes 4-(a) and 4-(f))
Deferred tax assets (Note 8)
Accounts receivable, other
Advance payments
Other current assets (Note 4-(g))
Less allowance for doubtful receivables
Total current assets

As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
¥ 19,915
756
82,08915,003
1,321
2,079
6,110
3,002
(809)
129,469¥ 20,743
744
97,664
17,421
1,290
2,370
5,750
11,772(1,040)156,716$0,211,749
8,038
872,822
159,521
14,045
22,10564,96531,919(8,601)
1,376,597

5,500
4,776
711
2,675
316
3,546
11
(9,670)
7,867

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

58,47950,781
7,559
28,442
3,359
37,703
116(102,817)
83,646

1,443

1,650

15,342

Investments and other assets:
Investments in securities (Note 4-(c))
Investments in subsidiaries and affiliates (Notes 4-(c) and 7)
Long-term loans receivable
Long-term loans to employees
Claims provable in bankruptcy and other
Long-term prepaid expenses
Deferred tax assets (Note 8)Long-term non-operating accounts receivable (Note 4-(b))
OtherLess allowance for doubtful receivables
Total investments and other assets
Total non-current assets

5,004
16,457
5,618
840
821
41
2,686
24,485
6,116(31,323)
30,74840,060

4,475
6,382
6,561
895
4,819
50
2,784
37,412
6,801(48,111)22,071
32,02553,205
174,981
59,734
8,931
8,729
435
28,559260,340
65,029(333,046)
326,932
425,943

Total assets¥169,529¥188,742$1,802,541

Non-current assets:
Property and equipment, at cost:
Land (Note 4-(c))
Buildings (Note 4-(c))
Structures (Note 4-(c))
Machinery and equipment
VehiclesTools, furniture and fixtures
Construction in progress
Accumulated depreciation
Property and equipment, net
Intangible fixed assets

56

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2013

Liabilities and net assets
Current liabilities:
Short-term bank loans and current portion of long-term debt
(Notes 4-(c) and 11)
Trade notes payable (Note 4-(b))
Accounts payable on completed contracts (Note 4-(b))
Accounts payable, otherAccrued expenses
Income taxes payable
Consumption taxes payable
Advances received on contracts in progress
Deposits received
Deposits received from employees
Reserve for defects on completed construction projects
Allowance for losses on construction contracts (Note 4-(f)Allowance for loss on litigation
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 4-(c) and 11)
Accrued retirement benefits
Long-term accounts payable (Notes 4-(b) and 4-(e))
Other long-term liabilities
Total long-term liabilities

As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)¥008,264
31,202
61,208
1,668
1,787
213
1,463
18,921
5,690
1,812
635
590
890
73
134,419¥020,389
37,59361,545
1,748
1,674
212
2,309
22,526
4,813
1,758
888
1,521
862
58
157,903$0,087,868
331,759
650,802
17,73519,0002,264
15,555201,180
60,49919,266
6,751
6,273
9,463
776
1,429,229

1,933
15,654
2,579
188
20,356

2,116
14,635–279
17,032

20,552
166,443
27,421
1,998
216,438

12,003

12,003

127,623

400
400

400
400

4,253
4,253

83
2,164
2,247

83
1,654
1,737

882
23,00923,891(241)
14,409(241)
13,900(2,562)
153,205

204
139
343
14,753¥169,529

(124)
30
(94)
13,805¥188,742

2,169
1,477
3,646
156,863$1,802,541

Contingent liabilities (Note 4-(d))
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
2,669,464,970 shares in 2013 and 2012
Issued and outstanding:
675,480,576 shares in 2013 and
288,989,667 shares in 2012
Preferred stock:
Authorized:
26,894,644 shares in 2013 and 2012
Issued and outstanding:
4,428,700 shares in 2013 and13,149,900 shares in 2012
Capital surplus:
Other capital surplus
Total capital surpluses
Retained earnings:
Legal retained earnings
Earned surplus carried forward
Total retained earnings
Less treasury stock, at cost:
454,364 shares in 2013 and 447,922 shares in 2012
Total shareholders’ equity
Valuation, translation adjustments and other:
Unrealized holding gain (loss) on securities
Deferred gain on hedging instruments, net of taxes
Total valuation, translation adjustments and otherTotal net assets
Total liabilities and net assets

See accompanying notes to non-consolidated financial statements.
57

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Income
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Net sales:
Completed construction (Note 5-(a))¥256,027¥247,037$2,722,243

Cost of sales:
Completed construction (Note 5-(b))

244,106

234,2392,595,491

Gross profit

11,921

12,798

126,751

Selling, general and administrative expenses (Note 5-(d))
Operating income

10,107
1,813

10,5002,297

107,464
19,276

757
146
149
(961)
–
(216)
(9)

822
147
776
(1,073)
(693)
(216)
(27)

8,048
1,552
1,584
(10,217)–(2,296)
(95)

(354)
–
(230)
11
(194)
(310)
(1,212)

–
(77)
(172)
–
(69)
(545)
(1,128)(3,763)–(2,445)116(2,062)(3,296)(12,886)

601

1,169

6,390

Net income

92
(0)
91
¥ 000509

50
398
449
¥000,719

978
(0)
967
$0,005,412

Net income per share – basic (Note 9)
Net income per share – diluted (Note 9)¥0000.79
0.63

Other income (expenses):
Interest and dividend income (Note 5-(c))
Payments received from insurance claims
Reversal of provision for doubtful receivables
Interest expense
Exchange loss, net
Provision for doubtful receivables
Loss on sales and disposal of property and equipment
Loss on valuation of investments in subsidiaries
and affiliates
Loss on disaster (Note 5-(f))
Corporate tax on overseas sales
Gain on liquidation of investments in securities
Loss on litigation
Other, net
Income before income taxes
Income taxes (Note 8):
Current
Deferred(Yen)

See accompanying notes to non-consolidated financial statements.

58

¥

2.52
0.95

(U.S. dollars)(Note 2)
$ 0,00.008
0.006

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Shareholders’ equity
Capital stock:
Balance at the beginning of the period
Changes in items during the period
Total changes in items during the period
Balance at the end of the period
Additional paid-in capital:
Other capital surplus:
Balance at the beginning of the period
Changes in items during the period
Disposition of treasury stock
Cancellation of treasury stock
Total changes of items during the period
Balance at the end of the period
Retained earnings:
Earned reserve:
Balance at the beginning of the period
Changes in items during the period
Total changes in items during the period
Balance at the end of the period
Earned surplus carried forward:
Balance at the beginning of the period
Changes in items during the period
Net income
Total changes in items during the period
Balance at the end of the period
Total retained earnings:
Balance at the beginning of the period
Changes in items during the period
Net income
Total changes in items during the period
Balance at the end of the period

59¥12,003¥12,003$ 127,623–
12,003–
12,003–
127,623

400

601

4,253

(0)
–
(0)
400

(1)
(200)
(201)
400

(0)
–
(0)
4,253

83

83

882

–
83

–
83

–
882

1,654

934

17,586

509
509
2,164

719
719
1,654

5,412
5,412
23,009

1,737

1,018

18,468

509
509
2,247

719
719
1,737

5,412
5,412
23,891

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Treasury stock, at cost:
Balance at the beginning of the period
Changes in items during the period
Purchases of treasury stock
Disposition of treasury stock
Cancelation of treasury stock
Total changes in items during the period
Balance at the end of the period
Total shareholders’ equity:
Balance at the beginning of the period
Changes in items during the period
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancelation of treasury stock
Total changes in items during the period
Balance at the end of the period
Valuation, translation adjustments and other
Unrealized holding gain (loss) on securities:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Deferred gain on hedging instruments, net of taxes
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period
Total valuation, translation adjustments and other:
Balance at the beginning of the period
Changes in items during the period
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

60

(241)

(242)

(2,562)

(0)
0
–
0
(241)

(200)
1
200
0
(241)

(0)
0
–
0
(2,562)

13,90013,381

147,793

509
(0)
0
–
509
14,409

719
(200)
0
–
519
13,900

5,412
(0)
0
–
5,412
153,205

(124)

(180)

(1,318)

329
329
204

55
55
(124)

3,498
3,498
2,169

30

–

318

108
108
139

30
30
30

1,148
1,148
1,477

(94)

(180)

(999)

438
438
343

86
86
(94)

4,657
4,657
3,646

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
Total net assets
Balance at the beginning of the period
Changes in items during the period
Net income
Purchases of treasury stock
Disposition of treasury stock
Cancelation of treasury stock
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balance at the end of the period

13,805

13,200146,783

509
(0)
0
–
438
947
¥ 14,753

719
(200)
0
–
86
605
¥ 13,805

5,412
(0)
0
–
4,657
10,069$ 156,863

See accompanying notes to non-consolidated financial statements.

61

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013
1.

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

62

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013(d) Depreciation and Amortization(1) Property and equipment (except leased assets)
Depreciation of property and equipment (except leased assets) is determined by
the declining-balance method based on the estimated useful lives of the respective
assets as prescribed in the Corporation Tax Law of Japan except that thestraight-line method is applied to office buildings acquired on or after April 1,
1998.
(2) Intangible fixed assets (except leased assets) and long-term prepaid expenses
Amortization of intangible fixed assets (except leased assets) and long-term
prepaid expenses is calculated by the straight-line method based on the estimateduseful lives of the respective assets as prescribed in the Corporation Tax Law ofJapan. Amortization of computer software for internal use is calculated by thestraight-line method over the estimated useful lives of 5 years.
(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer
the ownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
Finance leases other than those that transfer the ownership of the leased assets tothe lessees, whose commencement dates are on or before March 31, 2008,
continue to be accounted for in a similar manner as operating leases.
(e) Allowance for Doubtful Receivables
The allowance for doubtful receivables is provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtfulreceivables estimated based on an individual assessment of each receivable andprobability of collection.
(f)Advances Received on Contracts in Progress
As is customary in Japan, the Company receives payments from customers on an
installment basis in accordance with the terms of the respective construction contracts.

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

63

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013(h) Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses
on construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.
(i)

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

(j)

Employees’ Retirement Benefits
Accrued retirement benefits for employees are provided principally at an amountcalculated based on the retirement benefit obligation and the fair value of the pension
plan assets, as adjusted for the unrecognized net retirement benefit obligation attransition, unrecognized actuarial gain or loss and unrecognized prior service cost.

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

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

64

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013(l)

Derivatives and Hedge Accounting (continued)(2) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

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

(3) Hedging policy
The Company utilizes foreign exchange forward contracts and interest rate swaps
only for the purpose of hedging future risks of fluctuation of foreign currency
exchange rates or interest rates.
(4) Assessment of hedge effectivenessAn evaluation of hedge effectiveness for a foreign exchange forward contract isperformed on a quarterly basis to confirm that amount of the foreign exchange
contract is within amount of the underlying hedged item to assess whether theforward contract qualifies for hedge accounting.
An evaluation of hedge effectiveness for interest rate swaps is not performed as
all meet specified criteria under the short-cut method.
(m) Consumption Taxes
Consumption taxes are accounted for by the tax exclusion method.
(n) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company has adopted the consolidated taxation system.
2.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made at ¥94.05 = U.S.$1.00, the approximate rate ofexchange prevailing on March 31, 2013. This translation should not be construed as arepresentation that yen have been, could have been, or could in the future be, converted into U.S.
dollars at that or any other rate.

65Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013
3.

Changes in Accounting Methods

Changes in Accounting Policies Which Are Difficult to Distinguish from Changes in
Accounting Estimates
In accordance with an amendment to the Corporation Tax Law of Japan effective April 1,
2012, the Company has changed its depreciation method for property, plant and equipment
acquired on or after April 1, 2012.
As a result of this change, operating income, and income before income taxes increased by¥11 million ($116 thousand) for the year ended March 31, 2013.
4.

Notes to Non-Consolidated Balance Sheets(a) Inventories
The components of inventories as of March 31, 2013 and 2012 were as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Costs on uncompleted construction
contracts
Real estate for sale

¥15,003－¥15,003¥17,333
87¥17,421$159,521－$159,521(b) Transactions and Outstanding Balances with Subsidiaries and Affiliates
Significant outstanding balances for subsidiaries and affiliates other than individuallypresented on the accompanying non-consolidated balance sheets at March 31, 2013
and 2012 were as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)Long-term non-operating accounts
receivable
Trade notes payable
Accounts payable on completed
contracts
Long-term accounts payable66¥ 03,158
654¥00,5791,122$033,577
6,953

15,731
2,579

13,748－167,262
27,421

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013(c) Pledged Assets
The following assets were pledged at March 31, 2013 and 2012 principally as
collateral for short-term bank loans, long-term debt and guarantees (such as guarantees
for the completion of construction contracts):
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Accounts receivable on completed
contracts
Land
Buildings, net of accumulated
depreciation
Structures, net of accumulated
depreciation
Investments in securities
Investments in subsidiaries and affiliates¥0,807¥01,848$08,580－
5,209

17,1695,209－
55,385

351

375

3,732

28
2,293
364
¥9,055

33
1,965
364
¥26,966297
24,3803,870$96,278

The secured liabilities as of March 31, 2013 and 2012 are summarized as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of long-termdebt]Long-term debt

¥2,538¥14,037$26,985

[700]
1,700

[600]
1,900

[7,442]
18,075(d) Contingent Liabilities
At March 31, 2013 and 2012, the Company was contingently liable for the following:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
As guarantor of bank loans to customers,
subsidiaries, an affiliate and employees
As endorsers of notes receivablediscounted with banks
As endorsers of other current assets(Non-operating notes receivable)
discounted with banks
67¥1,284¥4,124$13,652

234

78

2,488

148

252

1,573

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013(e) Long-term accounts payable
Though the amount of an estimated loss corresponding to the Company’s affiliate
Yoshiikikaku Co., Ltd. had been recognized, the amount of contingent liabilities wasdisclosed since the guaranteed amount was not determined until March 31, 2012.
As of March 31, 2013, the amount of claims and guarantees was calculated based on
the understanding that this company would be liquidated.
As a result, the Company recognized ¥2,579 million ($27,421 thousand) of long-term
non-operating accounts receivable and long-term accounts payable, respectively as ofMarch 31, 2013.
(f)

Estimated Loss on Uncompleted Construction Contracts
An estimated loss on uncompleted construction contracts was recognized and included
as part of inventories but was not offset against the amount on the balance sheet. It has
been recorded as an allowance for losses on construction contracts in the amounts ofnil and ¥485 million as of March 31, 2013 and 2012, respectively.

(g) Trade Notes Maturing on the Balance Sheet Date
Trade notes maturing at the end of the fiscal year are settled on the dates they mature.
Since the last day of the fiscal year in 2013 and 2012 fell on a bank holiday, notes
receivable maturing on that date were excluded from the corresponding balances in the
non-consolidated balance sheet as of March 31, 2013 and 2012.

Trade notes receivable
Other current assets (Non-operating notes
receivable)
5.

As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
¥04
¥08
$042
26

16

276

Notes to Non-Consolidated Statements of Income(a) Net Sales Based on Percentage-of-completion Method
Net sales on construction contracts accounted for under the percentage-of-completion
method amounted to ¥194,563 million ($2,068,718 thousand) and ¥186,588 million
for the years ended March 31, 2013 and 2012, respectively.
(b) Allowance for Losses on Construction Contracts Included in Cost of Sales
The allowance for losses on construction contracts was included in cost of sales in theamounts of ¥484 million ($5,146 thousand) and ¥1,472 million for the years ended
March 31, 2013 and 2012, respectively.

68

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013(c) Transactions and Outstanding Balances with Subsidiaries and Affiliates
Significant transactions with subsidiaries and affiliates other than individuallypresented on the accompanying non-consolidated statements of income for the years
ended 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)Interest and dividend income

¥656

¥721

$6,975(d) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses for theyears ended March 31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Rent
Retirement benefit expenses
Communication and traveling expenses
Legal welfare expenses
Depreciation expenses
Provision for doubtful receivables
Other
Total

¥04,171
1,019
974
845
609
431
－
2,055
¥10,107¥ 4,360
1,022
879
841
658
499
7
2,231
¥10,500$044,348
10,834
10,356
8,984
6,475
4,582
－
21,850$107,464(e) Research and Development Expenses
Research and development costs included in selling, general and administrative
expenses and manufacturing costs amounted to ¥800 million ($8,506 thousand) and¥835 million for the years ended March 31, 2013 and 2012, respectively.
(f)

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

69

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013
6.

Notes to Non-Consolidated Statements of Changes in Net Assets

Type and number of treasury stocks at March 31, 2013 are as follows:
Balance atApril 1,
2012
Treasury shares:
Common stock
3rd Series Class C preferred stock
3rd Series Class D preferred stockTotal

447,922––447,922

Increase
Decrease(Number of shares)
7,773
2,860,000
5,861,200
8,728,973

1,331
2,860,000
5,861,200
8,722,531

Balance at
March 31,2013
454,364––454,364

Note 1:

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

Note 2:

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

Note 3:

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

Note 4:

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

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

436,646–––436,646

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

Balance at
March 31,2012

447,922–––447,922

Note 1:

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

Note 2:

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

Note 3:

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

Note 4:

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

Note 5:

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

Note 6:

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

70

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013
7.

Securities

Stocks of subsidiaries and affiliates at March 31, 2013 and 2012 were as follows:
As of March 31, 2013
Carrying
Fair
Unrealized Carrying
Fair
Unrealized
value
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)
Stocks ofa subsidiary¥717¥1,932¥1,215$7,623$20,542$12,918

As of March 31, 2012
Carrying
Fair
Unrealized
value
value
gain
(Millions of yen)
Stocks ofa subsidiary

Note:

¥717

¥1,863¥1,145

Stocks of subsidiaries and affiliates for which it is extremely difficult todetermine market values were excluded from the above as follows:
As of March 31,
2012
2013
Carrying value
Carrying value(Millions of(Thousands of(Millions ofyen)
U.S. dollars)yen)

Stocks ofa subsidiaries
Stocks ofa affiliates¥2,706$28,771¥2,628

6

63

400

71

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013
8.

Income Taxes

The significant components of the Company’s deferred tax assets and liabilities at March 31,
2013 and 2012 were as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued retirement benefits
Allowance for bad debts
Tax loss carryforwards
Loss on devaluation of investments in
subsidiaries and affiliates
Account payable and accrued
expenses
Allowance for loss on litigation
Foreign tax credit carryforwards
Reserve for defects on completed
construction projects
Allowance for losses on construction
contracts
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Deferred gain on hedging instruments,
net of taxes
Asset retirement obligations
Unrealized holding gain on securities
Total deferred tax liabilities
Net deferred tax assets¥05,631
4,163
1,365

¥05,273
3,508
36,058$059,872
44,263
14,513

1,234

1,108

13,120

994
317
269

1,180
307
－

10,568
3,370
2,860

241

337

2,562

224
233
14,675(10,575)
4,100

577
406
48,758(44,658)
4,100

2,381
2,477
156,034(112,440)
43,593

(85)
(5)
(0)
(92)
¥04,007

(18)
(6)
(0)
(25)
¥ 4,074

(903)
(53)
(0)
(978)
$042,604

The following table summarizes the significant differences between the statutory tax rates
and the effective tax rates for the years ended March 31, 2013 and 2012:
Years ended March 31,
2013
2012
38.0 %
40.7 %
43.3
28.8(30.0)(18.6)(2.4)
4.3(49.2)－
16.1(41.5)
24.8
－
(0.5)
－
15.3%
38.5%

Statutory tax rates
Non-deductible expenses
Non-taxable income
Per capita inhabitants’ taxes
Tax credit
Valuation allowance
Change in corporate tax rate
Other
Effective tax rates
72Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 20139.

Per Share Information

Net assets and basic net income per share as of and for the years ended March 31, 2013 and2012 were as follows:2013
Net assets per share
Net income per share – basic
Net income per share – diluted

(Yen)

¥9.62
0.79
0.63

2012

2013
(U.S. dollars)¥(55.69)
2.52
0.95$0.1020.008
0.006

The basis of calculation for net assets per share at March 31, 2013 and 2012 were as
follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Total net assets
Amounts deducted from total net
assets[Including paid-in amounts forshares of preferred stock][Including cash dividends on
preferred stock]Total net assets attribute to common
stock¥14,753¥(13,805$156,863

8,260

29,87487,825[8,071][29,874][85,816]

[188]

[－]

[1,998]¥06,492¥(16,068)$069,027(Thousands of shares)

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

675,026

288,541

The basis for calculating basic net income per share – basic and net income per share –diluted for the years ended March 31, 2013 and 2012 were as follows:
Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – basic:
Net income
Amount not available to commonshareholders[Including cash dividends on
preferred stock]
Net income per share – basic

¥509

¥719

$5,412

188

－

1,998

[188]
¥320

[ –]
¥719

[1,998]$3,402(Thousands of shares)

Average number of share ofcommon stock outstanding

406,06673

285,186

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2013

Years ended March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Net income per share – diluted:
Adjustment for net income[Including cash dividends on
preferred stock]

¥178

¥–

$1,892

[178]

[ –]

[1,892](Thousands of shares)

Increase in number of share ofcommon stock[Including preferred stock]388,227[388,227]

476,133[476,133]

10. Subsequent Event
There is no information to be disclosed as of March 31, 2013.
11. Short-Term Bank Loans and Long-Term Debt
Short-term bank loans generally represent notes, principally at average interest rates of
2.0% and 2.4% at March 31, 2013 and 2012, respectively.
Long-term debt at March 31, 2013 and 2012 is summarized as follows:
As of March 31,
2013
2012
2013
(Millions of yen)(Thousands of
U.S. dollars)
Debt with collateral (at average interest
rates of 2.4% and 2.6% at 2013 and2012)
Less current portion¥2,400(700)¥1,70074¥2,500(600)¥1,900$25,518(7,442)$18,075

75

CORPORATE OUTLINE
Corporate Name:

Sumitomo Mitsui Construction Co.,Ltd.

Established:

October 14,1941

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

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

Main Scope of Business:

Main Banks

2) To plan, design and supervise marine
development, regional development,
urban development, natural resource
development and environment
maintenance

Daiwa Securities SMBC Principal Investments Co., Ltd.
Japan Securities Finance Co., Ltd.
Matsui Securities Co., Ltd.
Nomura Securities Co., Ltd.
Daiwa Securities Co., Ltd.

1) To contract, plan, design and/or supervise
civil engineering, architectural, prestressed
concrete, electrical, piping and other works

3) To manufacture, sell and lease materials
for civil and building works, prestressed
concrete products, seismic isolating
device, seismic damping device, andother machinery and instruments

Corporate History

76

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Ltd

Main Shareholders

CORPORATE DATAHEAD OFFICE

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

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

OVERSEAS OFFICE

Jakarta:(Indonesia)

SMCC Shanghai

Bangkok:(Thailand)

SMCC Guam, Inc.

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

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

Shanghai:(China)

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

Taipei:(Taiwan)

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

Nairobi:(Kenya)

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

SUBSIDIARY COMPANIES INOVERSEAS

Manila:(Philippines)

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

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

SMCC(Thailand)Co.,Ltd.

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

Pt.SMCC Utama Indonesia

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

Hanoi:(Vietnam)

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

Singapore:

491B River Valley Road, #10-01, Singapore 248373
TEL:65-6933-8000
FAX:65-6933-8001

SMCC Construction India Ltd.

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

SMCC Philippines, Inc.

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

77

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

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

ANNUAL REPORT
2013