Notes to Consolidated Financial Statements
J. FRONT RETAILING Co., Ltd. and Consolidated Subsidiaries
February 28, 2015

1

Basis of Preparation

The accompanying consolidated financial statements

not required under accounting principles generally acceptedof J. FRONT RETAILING Co., Ltd. (the Company ) andin Japan but are presented as additional information.

consolidated subsidiaries (collectively, the Group ) areprepared on the basis of accounting principles generally

The translation of yen amounts into U.S. dollar amounts is

accepted in Japan, which are diﬀerent in certain respects as

included solely for the convenience of readers outside Japanto the application and disclosure requirements of Internationaland has been made at ¥119.27 = U.S. $1.00, the exchange

Financial Reporting Standards, and are compiled from therate prevailing on February 28, 2015.

consolidated ﬁnancial statements prepared by the Company

should not be construed as a representation that yen can beas required by the Financial Instruments and Exchange Act

converted into U.S. dollars at the above or any other rate.

This translationof Japan.
As permitted by the Financial Instruments and Exchange Act
In preparing the accompanying consolidated financialof Japan, amounts of less than one million yen have beenstatements, certain reclassiﬁcations have been made to theomitted. As a result, the totals shown in the accompanying

consolidated ﬁnancial statements issued domestically in orderconsolidated financial statements (both in yen and in

to present them in a format which is more familiar to readers

U.S. dollars) do not necessarily agree with the sum of theoutside Japan. In addition, certain notes included herein are

individual amounts.

2

Summary of Significant Accounting Policies(a)Principles of consolidation
The accompanying consolidated financial statements

decline in the value of such investments, the Company has
written down the investments.

include the accounts of the Company and the signiﬁcantcompanies which it controls directly or indirectly.

(b)Foreign currency translation

Companies over which the Company exercises signiﬁcantMonetary assets and liabilities denominated in foreigninﬂuence in terms of their operating and ﬁnancial policies

currencies are translated into yen at the rates of exchange

have been included in the accompanying consolidated

in eﬀect at the balance sheet date. Foreign exchange gainﬁnancial statements on an equity basis.

or loss on translation is recognized in the consolidated
statement of income.

Certain subsidiaries are excluded from the scope of
consolidation because the effect of its total assets,

Assets and liabilities of overseas consolidated subsidiaries

sales, net income or loss and retained earnings on theare translated into yen at the exchange rates in effectaccompanying consolidated financial statements is

at the respective balance sheet dates, except for theimmaterial. In addition, certain unconsolidated subsidiaries

components of net assets excluding minority interests

are accounted for by the equity method.

which are translated at the respective historical rates.
Revenue and expenses are translated at the average rates

The fiscal year end of certain consolidated subsidiaries

of exchange for the year. Differences arising from theis December 31. Their ﬁnancial statements as of and fortranslation are reflected in Foreign currency translation

the year ended December 31 are used in the preparation

adjustments and Minority interests in the accompanyingof the consolidated financial statements and necessary

consolidated balance sheet and statement of changes inadjustments are made to their financial statements to

net assets.

reflect any significant transactions from January 1 toFebruary 28. All significant intercompany balances andtransactions have been eliminated in consolidation.

(c)Cash and cash equivalents
Cash and cash equivalents consist of cash on hand,deposits with banks withdrawable on demand, and short-

Investments in subsidiaries and affiliates which are notterm investments with a maturity of three months or lessconsolidated nor accounted for by the equity method arewhen purchased which can easily be converted to cash

carried at cost or less. Where there has been a permanent

and are subject to little risk of change in value.
11

(d)Allowance for doubtful accounts

Finance lease transactions entered into on or before

Allowance for doubtful accounts is computed based on

February 28, 2009 that do not transfer ownership to thethe actual historical experience for normal receivables andlessee continue to be accounted for as operating lease

an estimate of uncollectible amounts determined after antransactions.

analysis of speciﬁc individual receivables from companies
in ﬁnancial diﬃculty.

(i)Goodwill
Goodwill is amortized by the straight-line method over ﬁve(e)Securities and investment securities
The accounting standard for ﬁnancial instruments requires

years, with the exception of immaterial amounts, which arecharged to income when incurred.

that securities be classiﬁed into three categories: trading,held-to-maturity or other securities. Trading securities are(j)Intangible assets (except for goodwill and leased assets)

carried at fair value and held-to-maturity debt securities

Amortization is calculated by the straight-line method overare carried at amortized cost.

the estimated useful lives of the respective assets.

Marketable securities

classiﬁed as other securities are carried at fair value withany changes in unrealized holding gain or loss, net of the

Expenditures relating to computer software developed for

applicable income taxes, included directly in net assets.

internal use are charged to income when incurred, except

Cost of securities sold is determined by the moving

if the software is expected to contribute to the generation

average method. Non-marketable securities classiﬁed asof income or to future cost savings. Such expenditures areother securities are carried at cost based on the moving

capitalized as intangible assets and are amortized by theaverage method.

straight-line method over their respective estimated useful
lives, generally a period of ﬁve years.

Investments in limited partnerships are stated at the net
value of equities attributable to the Company based on(k)Deferred income taxes

the most recent financial statements available prepared

Deferred income taxes are provided for temporary

according to the ﬁnancial reporting dates speciﬁed in thediﬀerences between the balances of assets and liabilities

respective partnership agreements.

reported for financial reporting purposes and thecorresponding balances for tax reporting purposes.

(f)Inventories
Inventories are principally stated at lower of cost,(l)Derivative ﬁnancial instruments and hedging activities

determined by the retail inventory method, or net selling

All derivatives are stated at fair value with any changes

value.

in fair value included in proﬁt or loss in the corresponding
period, except for derivatives meeting the criteria for(g)Property and equipment (except for leased assets)deferral hedge accounting under which unrealized gain

Property and equipment are stated at cost. Depreciation

or loss, net of the applicable income taxes, is deferred as

is computed based on the estimated useful lives of the

a component of net assets. Receivables and payables

respective assets by the declining-balance method,

hedged by forward foreign exchange contracts meeting

except for buildings and structures, which are principally

certain conditions are translated at the corresponding

depreciated by the straight-line method.

forward foreign exchange contract rates (the allocation
method ). Interest-rate swap transactions meeting certain

The principal estimated useful lives are as follows:

conditions for special treatment are accounted for as if
the interest rates applied to the interest-rate swap had

Buildings and structures

3 to 50 years

originally applied to the underlying debt (the special

Other

2 to 20 years

treatment ).

(h)Leases

12

Hedging instruments are forward foreign exchange

Leased assets under finance lease transactions that docontracts and interest rate swaps and hedged items are

not transfer ownership to the lessee are depreciated to a

trade accounts receivable and payable denominated inresidual value of zero by the straight-line method using theforeign currencies, forecast transactions denominated incontract term as the useful life.

foreign currencies, loans payable and interest expenses on

loans payable.

publication at the amount of estimated loss excepted to
be incurred subsequent to the balance sheet date due

The Company and its consolidated subsidiaries hedge

to unsalable based on the maximum deductible amountforeign currency exchange rate risk and interest rate risk

under the Corporation Tax Law of Japan.

based on its risk management policy of the Group.
v)Provision for sales promotion expense
The relationship between the hedging instruments andProvision for sales promotion expense is provided at

the underlying hedged items is assessed at each balance

the estimated amount calculated based on historical

sheet date to confirm the effectiveness of hedging

experience to prepare for the future use of point card

activities. However, hedge eﬀectiveness is not assessedcertificates granted under a point card program that is

if the substantial terms and conditions of the hedging

designed for sales promotion.

instruments and the hedged items are the same.
vi)Provision for loss on utilization of gift certiﬁcates(m)Distribution of retained earnings

Gift certificates outstanding are credited to income by

Under the Corporation Law of Japan and the Company s

the derecognition after a certain period has passed from

Articles of Incorporation, the distribution of retained

their respective dates of issuance. Provision for loss on

earnings with respect to a given fiscal year is made byutilization of gift certiﬁcates is provided at the estimatedresolution of the shareholders at a general meeting heldamount based on the historical utilization ratio.

subsequent to the close of the ﬁscal year. The distributionof retained earnings with respect to the interim periodvii)Provision for loss on business liquidation

is made by resolution of the Board of Directors. The

Provision for loss on business liquidation is provided at

accounts for the corresponding periods do not reﬂect suchthe estimated amount for losses arising from business

distributions. Please refer to the Note 28 Subsequentliquidation and stores closures of certain consolidated

Eventssubsidiaries at the estimated amount of futureof these Notes of Consolidated Financial

Statements.
(n)Provisions

anticipated losses.
viii)Provision for loss on store reconstructioni)Provision for bonuses to employees

Provision for loss on store reconstruction is provided

Provision for bonuses to employees is provided basedat the estimated amount for losses arising from theon the estimated amount to be paid to employees

reconstruction of a store of a consolidated subsidiary at

subsequent to the balance sheet date.

the estimated amount of future anticipated losses.

ii)Provision for bonuses to directors and audit and(o)Retirement beneﬁts

supervisory board members

Asset for retirement benefits and liability for retirement

Provision for bonuses to directors and audit andbenefits have been provided principally at an amountsupervisory board members is provided based on thecalculated based on the retirement beneﬁt obligation andestimated amount to be paid to directors and audit andthe fair value of the pension plan assets. The estimatedsupervisory board members subsequent to the balance

benefit is attributed to each period by the straight-line

sheet date.

method over the estimated average remaining years ofservice of the eligible employees.

iii)Provision for sales returns
Provision for sales returns is provided at the amountPast service cost is amortized as incurred primarily by theof estimated loss expected to be incurred subsequentstraight-line method over periods of principally 10 to 12

to the balance sheet date based on the maximum

years, which are within the estimated average remaining

deductible amount under the Corporation Tax Law ofyears of service of the eligible employees.

Japan.
Net unrecognized actuarial gain or loss is amortizediv)Provision for loss on books unsalable
Provision for books unsalable after a certain period fromcommencing in the year following the year in which thegain or loss was recognized primarily by the straight-

13

line method over periods of principally 10 to 12 years,

customarily entitled to lump-sum payments under unfunded

which are within the estimated average remaining years of

retirement benefit plans. Accrued retirement benefits forservice of the eligible employees.

these directors and audit and supervisory board members
are provided at an estimated amount based on each

In addition, directors and audit and supervisory board

consolidated subsidiary s internal rules.

members of certain domestic consolidated subsidiaries are3

Accounting Change

Accounting standards for retirement beneﬁts

The adoption of these standards follows transitionalEﬀective February 28, 2015, the Company and its domestic

provisions described in Section 37 of the standard. The

consolidated subsidiaries adopted Accounting Standard

effect of this change is included in accumulated otherfor Retirement Benefits (Accounting Standards Board ofcomprehensive income as Retirement beneﬁts adjustments.

Japan ( ASBJ ) Statement No.26 issued on May 17, 2012)
and Guidance on Accounting Standard for Retirement

As a result of this change, Asset for retirement benefits

Beneﬁts (ASBJ Guidance No.25 issued on May 17, 2012),

and Liability for retirement benefits were recorded in

except for certain provisions described in the main clause of

the amounts of ¥11,864 million ($99,472 thousand)

Section 35 of the standard and in the main clause of Sectionand ¥31,514 million ($264,224 thousand), respectively,

67 of the guidance.

accumulated other comprehensive income decreased by¥7,832 million ($65,666 thousand) and net assets per share

In accordance with the adoption, the retirement benefit

decreased by ¥29.68 ($0.25) as of February 28, 2015 fromobligation after deducting the fair value of the pension

the corresponding amounts that would have been recordedplan assets, and unrecognized actuarial gain or loss andunder the previous method.

unrecognized past service costs are recorded as Liability for
retirement beneﬁts and Asset for retirement beneﬁts.

4Standards Issued but Not Yet Effective(a)Accounting standards for retirement beneﬁts

obligations and service cost from the beginning of the

Accounting Standard for Retirement Benefits (ASBJ

fiscal year ending February 28, 2016. The Company

Statement No.26) and Guidance on Accounting Standard

and its domestic consolidated subsidiaries are currently

for Retirement Benefits (ASBJ Guidance No.25) were

evaluating the impact on the consolidated financial

issued on May 17, 2012. However, the main clause ofstatements from the adoption of the revised standards.

Section 35 of the standard and the main clause of Section
67 of the guidance have not yet been adopted as ofFebruary 28, 2015.

(b)Accounting standards for business combinations
On September 13, 2013, the ASBJ issued Revised
Accounting Standard for Business Combinations (ASBJ

Under these accounting standards, the accounting

Statement No.21), Revised Accounting Standard fortreatment of unrecognized actuarial gain or loss and pastBusiness Divestitures (ASBJ Statement No.7), Revised

service cost, calculation methods of retirement benefit

Accounting Standard for Earnings Per Share (ASBJ

obligation and service cost and disclosures were mainlyStatement No.2), Revised Accounting Standard forrevised.

These revisions were made considering theConsolidated Financial Statements (ASBJ Statement

viewpoint of enhancing ﬁnancial reporting and international

No.22), Revised Guidance on Accounting Standard

convergence of accounting standards.

for Business Combinations and Accounting Standard
for Business Divestitures (ASBJ Guidance No.10) and

The Company and its domestic consolidated subsidiaries

Revised Guidance on Accounting Standard for Earnings

expect to adopt the above sections, which require

Per Share (ASBJ Guidance No.4).

changing the calculation methods of retirement benefit

14

Under these revised accounting standards, the major

acquisition period are comparatively disclosed, theaccounting changes are as follows:

acquirer shall retrospectively adjust the provisionalamounts recognized at the acquisition date to the(1)Any differences arising from changes in a parent s

completed amounts and shall reflect new information

ownership interest in a subsidiary shall be accounted

on facts and circumstances that existed as of thefor as changes in capital surplus when the parent

acquisition date. Such adjustments shall be recognizedcompany retains control over its subsidiary. In addition,

as if the accounting for the business combination had

Minority interests in the current year s consolidated

been completed at the acquisition date.

balance sheet will be changed to non-controllinginterests.

(4) Income before minority interests in the current year s
consolidated statement of income will be changed to(2)Acquisition-related costs shall be accounted for as

net income and net income in the current year s

expenses when incurred.

consolidated statement of income will be changed to
net income attributable to shareholders of the parent(3)If the initial accounting for a business combinationcompany.

is incomplete by the end of the reporting period inwhich the business combination occurs, an acquirer

The Company and its domestic consolidated subsidiaries

shall report provisional amounts for the items whose

expect to adopt these revised accounting standards fromaccounting is incomplete in its financial statements

the beginning of the ﬁscal year ending February 28, 2017.

( provisional accounting ).

5Under these revised

accounting standards, if accounting for a business

The Company and its domestic consolidated subsidiaries

combination is completed during the next fiscal year

are currently evaluating the impact on the consolidated(the completion period ) and consolidated financial

financial statements from the adoption of the revised

statements for the completion period and those for the

standards.

Inventories

Inventories at February 28, 2015 and 2014 consisted of the following:
Millions of yen
Merchandise and finished goods
Work in process
Raw materials and supplies

6

2015¥30,108
833
262¥31,204

2014¥28,951463
275¥29,690

Thousands of
U.S. dollars
2015$252,436
6,984
2,197
$261,625

Accumulated Depreciation

Accumulated depreciation (including accumulated impairmentand ¥293,608 million, respectively, which has been offset

losses) of property and equipment at February 28, 2015 andagainst the acquisition costs of the property and equipment2014 amounted to ¥298,382 million ($2,501,736 thousand)in the accompanying consolidated balance sheet.

15

7

Rental Properties

Certain subsidiaries of the Company own buildings (including

disposal of ﬁxed assets of ¥187 million ($1,568 thousand)land) as rental properties in Tokyo and other regions.

and ¥1,090 million and loss on impairment of fixed assetsof ¥229 million ($1,920 thousand) and ¥527 million related

Gross profit of ¥4,241 million ($35,558 thousand) andto rental properties were recognized for the years ended¥4,159 million (rental revenue is recorded as rent income of

February 28, 2015 and 2014, respectively. In addition, loss

real estate in net sales and rental expenses as cost of realon store reconstruction related to rental properties amounted

estate rent in costs of sales), gain on sales of ﬁxed assets

to ¥263 million for the year ended February 28, 2014.

of ¥84 million ($704 thousand) and ¥1,621 million, loss on
The carrying value in the accompanying consolidated balance sheet at February 28, 2015 and 2014 and corresponding fairvalue of rental properties are as follows:

Rental properties

Millions of yen
Carrying value
Fair value
February 28,
February 28,
March 1, 2014
Net change
2015
2015
¥104,162¥5,368¥109,530¥104,985

Rental properties

Millions of yen
Carrying value
Fair value
February 28,
February 28,
March 1, 2013
Net change
2014
2014
¥135,257¥(31,095)¥104,162¥95,932

Rental properties

Thousands of U.S. dollars
Carrying value
Fair value
February 28,
February 28,
March 1, 2014
Net change
2015
2015
$873,329$45,007$918,337$880,230

Notes:1.The carrying value represents the acquisition cost less accumulated depreciation and loss on impairment.
2.The main components of net change in carrying value include the increases of ¥4,784 million ($40,111
thousand) due to acquisitions of real estate and ¥2,834 million ($23,761 thousand) due to changes in the
purpose of ownership and a decrease of ¥1,901 million (¥15,939 thousand) due to depreciation for the year
ended February 28, 2015. The main components of net change in carrying value include the increase of¥13,564 million due to acquisitions of real estate and the decrease of ¥42,224 million due to changes in the
purpose of ownership and ¥1,686 million due to depreciation for the year ended February 28, 2014.
3.For major properties, fair value is determined based on the real estate appraisal standards of independent realestate appraisers, etc. For other properties, fair value is estimated by considering the land price index withnecessary adjustments applied by the Company and its consolidated subsidiaries.
4.The urban redevelopment project in the Ginza 6-chome district, whose consolidated balance sheet amounts
are ¥124,365 million ($1,042,718 thousand) and ¥108,529 million as of February 28, 2015 and 2014,
respectively, involves the development of large-scale commercial facilities and is still in the development
stage at present. Since it is extremely diﬃcult to determine the fair value due to these reasons, the carrying
value and the fair value of the project are not included in the above table.

168

Pledged Assets and Secured Liabilities

The carrying value of assets pledged as collateral and the corresponding liabilities secured by collateral at February 28, 2015
and 2014 was as follows:
Millions of yen

Thousands of
U.S. dollars
2015

2015

2014

Assets pledged as collateral:
Buildings and structures, net
Land
Investment securities
Other property and equipment
Total¥22,942
18,093241
60¥41,338¥24,208
18,093259
59¥42,622$192,353
151,698
2,021
503$346,592

Liabilities secured by collateral:
Notes and accounts payable ‒ trade
Short-term loans payable
Long-term loans payable
Total

¥432
1,620
10,125¥12,177¥275
878
12,045¥13,198$3,622
13,58384,891$102,096

9

Assets in TrustThe carrying value of assets in trust at February 28, 2015 and 2014 was as follows:
Millions of yen
Assets in trust:Land
Buildings and structures, net
Other property and equipment
Total

2015

2014

¥40,921
17,582245¥58,748¥40,844
14,32760¥55,231

Thousands of
U.S. dollars
2015$343,095
147,4132,054$492,563

17

10 Securities
Information regarding marketable securities classiﬁed as other securities at February 28, 2015 and 2014 is summarized asfollows:

Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities
Subtotal
Securities whose carrying value
does not exceed theiracquisition cost:
Equity securities
Debt securities
Subtotal
Total

Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities
Subtotal
Securities whose carrying value
does not exceed theiracquisition cost:
Equity securities
Debt securities
Subtotal
Total

Carrying
value

2015
Acquisition
cost

Millions of yen
Unrealized
gain (loss)

Carrying
value

2014
Acquisition
cost

Unrealized
gain (loss)¥12,833
4,386
17,220¥8,972
4,355
13,327¥3,861
31
3,892¥11,506
4,293
15,799¥7,2704,257
11,527¥4,236
35
4,271

1,343
430
1,773
¥18,994

1,490
431
1,922
¥15,250

(147)
(1)
(148)
¥3,744

5,448
428
5,877
¥21,677

5,966
431
6,398
¥17,926

(517)
(3)
(520)
¥3,750Thousands of U.S. dollars
2015
Carrying
Acquisition
Unrealized
value
cost
gain (loss)$107,596
36,774
144,378$75,224
36,514
111,738$32,372
260
32,632

11,2603,605
14,865$159,252

12,493
3,614
16,115$127,861(1,232)(8)(1,241)$31,391

Sales of securities classiﬁed as other securities and the aggregate gain and loss for the years ended February 28, 2015 and2014 are summarized as follows:
Millions of yen
Equity securities:
Sales proceeds
Aggregate gain
Aggregate loss

18

2015

2014

¥5,6202,811‒¥2,171
199
148

Thousands of
U.S. dollars
2015$47,119
23,568‒For marketable securities, the Company and its consolidated

The Company and consolidated subsidiaries have recognizedsubsidiaries recognize loss on devaluation of investment

loss on devaluation of investment securities classified as

securities for securities whose fair value has declined byequity securities included in other securities included in ¥36

30% or more compared with their acquisition cost, if themillion ($302 thousand) and ¥25 million for the years ended

decline is deemed to be irrecoverable.

February 28, 2015 and 2014, respectively.

11 Short-Term Loans Payable, Commercial Papers, Long-Term Debt and Lease Obligations
The annual weighted-average interest rates applicable to

The annual weighted-average interest rates applicable toshort-term loans payable were 0.52% and 0.53% at Februarycommercial papers were 0.11% and 0.10% at February 28,

28, 2015 and 2014, respectively.

2015 and 2014, respectively.

Long-term debt and lease obligations at February 28, 2015 and 2014 consisted of the following:
Millions of yen
Bonds payable without collateral due throughNovember 2015, with an annual interest rateof 0.33%
Bonds payable without collateral due throughNovember 2017, with an annual interest rateof 0.49%
Loans payable, due through November 2021,
with an annual weighted-average interest
rate of 0.96%
Lease obligations due through December 2022
Less current portion

Thousands of
U.S. dollars
2015

2015

2014

¥12,000¥12,000$100,612

12,00012,000100,612106,498
2,725
133,223(25,867)¥107,355

117,527
3,008
144,535(17,927)¥126,608

892,915
22,847
1,116,986(216,878)$900,101

The aggregate annual maturities of bonds payable, long-term loans payable and lease obligations subsequent to February 28,
2015 are summarized as follows:

Years ending February 28 or 29,
2016
2017
2018
2019
2020
2021 and thereafterYears ending February 28 or 29,
2016
2017
2018
2019
2020
2021 and thereafter

Millions of yen
Long-term loans
Bonds payable
Lease obligations
payable¥12,000¥12,952¥915‒
30,380647
12,00034,980394‒
14,380
201
‒
9,220
107
‒
4,586
460
¥24,000¥106,498¥2,725
Thousands of U.S. dollars
Long-term loans
Bonds payable
Lease obligations
payable$100,612$108,594$7,672‒
254,716
5,425
100,612293,284
3,303‒
120,567
1,685‒
77,304897‒
38,451
3,857$201,224$892,915$22,847

19

12 Retirement Benefits(1)Outline of retirement beneﬁts for employees

may also be paid when an employee retires.

Certain

The Company and its main consolidated subsidiaries haveconsolidated subsidiaries also have established adeﬁned beneﬁt pension plans (i.e., corporate pension fundemployees beneﬁt trust.

plans, tax-qualiﬁed pension plans and lump-sum payment
plans). Certain consolidated subsidiaries have defined

Certain domestic subsidiaries have calculated theircontribution pension plans.

retirement benefit obligation and retirement benefit
expenses based on the amount which would be payable

Additional retirement allowances not included in theat the year end if all eligible employees terminated theiractuarial calculation as per retirement beneﬁt accounting

services voluntarily (the simpliﬁed method ).

(2)Deﬁned beneﬁt pension plans for the year ended February 28, 2015
1.The changes in the retirement beneﬁt obligation for the year ended February 28, 2015 are outlined as follows:
Thousands of
U.S. dollars
2015¥62,259$522,001
2,245
18,823
662
5,550
4,515
37,855(5,658)(47,439)
3,714
31,139¥67,737$567,930

Millions of yen
Balance at the beginning of the year
Service cost
Interest cost
Actuarial loss
Benefits paid
Past service cost
Balance at the end of the year

*The retirement beneﬁt obligation based on the simpliﬁed method is included in the table above due to its immateriality.

2.The changes in plan assets for the year ended February 28, 2015 are outlined as follows:
Thousands of
U.S. dollars
2015¥44,076$369,548
740
6,204
4,996
41,888Millions of yen
Balance at the beginning of the year
Expected return on plan assets
Actuarial gainContributions to the pension plans by theCompany and consolidated subsidiaries
Benefits paid
Balance at the end of the year

1,925

16,140(3,650)¥48,087(30,603)$403,178

3.The balance of retirement beneﬁt obligation and plan assets at fair value and the amounts recognized in the consolidatedbalance sheet at February 28, 2015 are outlined as follows:
Thousands of
U.S. dollars
2015¥38,901$326,159(48,087)(403,178)(9,186)(77,019)
28,836
241,771

Millions of yen
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net liability for retirement benefits
recognized in the consolidated balance sheet
Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits
recognized in the consolidated balance sheet

20

19,649164,744

31,514(11,864)

264,224(99,472)¥19,649$164,744

4.The components of retirement beneﬁt expenses for the year ended February 28, 2015 are outlined as follows:
Thousands of
U.S. dollars
2015¥2,245$18,823
662
5,550
(740)
(6,204)
1,648
13,817
133
1,115
227
1,903
¥4,176$35,013Millions of yen
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of past service cost
Other
Retirement benefit expenses

5.The components of retirement beneﬁts adjustments included in accumulated other comprehensive income (before tax eﬀect)
at February 28, 2015 are outlined as follows:
Thousands of
U.S. dollars
2015¥(2,000)$(16,769)(10,632)(89,142)¥(12,632)$(105,911)

Millions of yen
Unrecognized past service cost
Unrecognized actuarial loss
Total

6.The fair value of plan assets, by major category, as a percentage of total plan assets at February 28, 2015 is as follows:
Debt securities
Equity securities
General accounts at life insurance companies
Cash and deposits
Other
Total

2015
27%
49
11
2
11
100%

The total pension plan assets includes 30% of the retirement

The expected long-term rate of return on plan assets isbenefits trust for the corporate pension fund plans (29% in

determined as a result of consideration of both the present

equity securities and 1% in cash and deposits).

and anticipated portfolio allocation and the expected longterm rates of return from multiple plan assets.

7.The assumptions used in accounting for the deﬁned beneﬁt pension plans are as follows:

Discount rates
Expected long-term rates of return on plan assets

2015
0.9% to 1.1%
1.0% to 2.0%

(3)Deﬁned contribution pension plans for the year ended February 28, 2015
Thousands of
U.S. dollars
2015
¥365
$3,060Millions of yen
Contributions to defined contribution pension plans

21

(4)Accrued retirement beneﬁts for the year ended February 28, 2014
1.The following table sets forth the funded and accrued status of the pension plans and the amounts recognized in theaccompanying consolidated balance sheet at February 28, 2014 for deﬁned beneﬁt pension plans of the Company and its
consolidated subsidiaries:

Retirement benefit obligation
Plan assets at fair value
Retirement benefit trust
Unfunded retirement benefit obligation
Unrecognized actuarial loss
Unrecognized past service cost
Net retirement benefit obligation
Prepaid pension cost (*)
Accrued retirement benefits

Millions of yen
2014¥(62,259)
32,348
11,728(18,182)
12,766(1,580)(6,996)
10,053¥(17,049)*Prepaid pension cost is included in Other in investments and other assets in the consolidated balance sheet at February 28, 2014.

Certain domestic consolidated subsidiaries calculate the accrued retirement beneﬁts based on the simpliﬁed method.
2.The components of retirement beneﬁt expenses for the year ended February 28, 2014 are outlined as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of past service cost
Retirement benefit expenses
Other (*)
Retirement benefit expenses

Millions of yen
2014¥2,380
802
(706)
2,084
(642)
3,918
5,129
¥9,048(*) Other in the above table consists of the payments for contributions for deﬁned contribution pension plans and additional retirement allowances.

Retirement beneﬁt expenses for certain domestic consolidated subsidiaries which applied the simpliﬁed method are included inservice cost.
3.The assumptions used in accounting for the deﬁned beneﬁt pension plans are as follows:
Discount rates
Expected rates of return on plan assets

22

2014
0.9% to 1.1%
1.0% to 2.0%

13 Leases(1)Lessee s accounting
please refer to the Note 2 Summary of Significant

1.Finance lease transactions that do not transfer ownershipto the lessee

Accounting Policies of these Notes to Consolidated

For finance lease transactions that do not transfer

Financial Statements.

ownership to the Company or its consolidated
subsidiaries, the corresponding leased assets mainly

Finance lease transactions commencing on or before

consist of system facilities (tools, furniture and ﬁxtures)

February 28, 2009, other than those in which thein the information services business, which included inownership of the leased assets is transferred to certain

Other, net of property and equipment.

consolidated subsidiaries, are accounted for in the samemanner as operating leases.

Regarding the depreciation method of the leased assets,
The following amounts represent the acquisition cost, accumulated depreciation, accumulated loss on impairment, and net bookvalue of the leased assets at February 28, 2015 and 2014, which would have been reﬂected in the accompanying consolidatedbalance sheet if ﬁnance lease accounting had been applied to the ﬁnance lease transactions entered into by the consolidated
subsidiaries as lessees on or before February 28, 2009, which are accounted for as operating leases:
Millions of yen
2015
Accumulated Accumulated loss
depreciation
on impairment

Acquisition
cost
Leased assets:
Machinery, equipment, tools, furniture and fixtures¥1,480¥3,753$12,409

The amounts the above table include the interest portion.

¥3,523¥13

Thousands of U.S. dollars
2015
Accumulated Accumulated loss
depreciation
on impairment

Acquisition
cost
Leased assets:
Machinery, equipment, tools, furniture and fixtures¥9

Millions of yen
2014
Accumulated Accumulated loss
depreciation
on impairment

Acquisition
cost
Leased assets:
Machinery, equipment, tools, furniture and fixtures¥1,389$11,646

Net book
value

$75

¥80

Net book
value
¥217

Net book
value

$671

lease terms with a nil residual value amounted to ¥136
million ($1,140 thousand) and ¥447 million for the years

Lease payments relating to ﬁnance leases accounted for as

ended February 28, 2015 and 2014, respectively. Reversal

operating leases for the years ended February 28, 2015 andof accumulated loss on impairment of the leased assets for2014 totaled ¥138 million ($1,157 thousand) and ¥449

the years ended February 28, 2015 and 2014 totaled ¥1

million, respectively.

million ($8 thousand) and ¥2 million, respectively.

Depreciation of the leased assets

computed by the straight-line method over the respective

23

Future minimum lease payments (including the interest portion thereon) subsequent to February 28, 2015 for ﬁnance leases
accounted for as operating leases are summarized as follows:
Years ending February 28 or 29,

Thousands of
U.S. dollars

Millions of yen

¥44
36
¥81
1
¥80

2016
2017 and thereafter
Total
Allocated accumulated loss on impairment of leased assets
Total

$369
302
$679
8
$671

2.Operating leases
Future minimum lease payments subsequent to February 28, 2015 for noncancelable operating leases were as follows:
Years ending February 28 or 29,

Millions of yen

Thousands of
U.S. dollars¥3,116
17,508¥20,62520162017 and thereafter
Total$26,126
146,793$172,927(2)Lessor s accounting
1.Finance lease transactions that do not transfer ownershipownership of the leased assets is transferred from theto the lessee

Company or its consolidated subsidiaries to the lessees

Finance lease transactions commencing on or before

are accounted for in the same manner as operating

February 28, 2009 other than those in which theleases.

The following amounts represent the acquisition cost, accumulated depreciation and net book value of the leased assets at
February 28, 2015 and 2014, which would have been transferred to the lessees if ﬁnance lease accounting had been applied
to the ﬁnance lease transactions entered into by the consolidated subsidiaries as lessors on or February 28, 2009, which areaccounted for as operating leases:

Leased assets:
Machinery, equipment, tools, furnitureand fixtures included in Other, net
in property and equipment

Leased assets:
Machinery, equipment, tools, furnitureand fixtures included in Other, net inproperty and equipment

Acquisition
cost

2015
Accumulated
depreciation

¥296

¥261

Millions of yen
Net book
value

¥34

Acquisition
cost

¥343

2014
Accumulated
depreciation¥274

Net book
value

¥69

Thousands of U.S. dollars
2015
Acquisition Accumulated
Net book
cost
depreciation
value$2,482$2,188$285

Lease income relating to finance leases accounted for as¥40 million for the years ended February 28, 2015 andoperating leases for the years ended February 28, 2015 and2014, respectively.

2014 were ¥34 million ($285 thousand) and ¥40 million,
respectively. Depreciation expense of the leased assets

No loss on impairment was allocated to any leased assets forcomputed by the straight-line method over the respective

the years ended February 28, 2015 and 2014.

lease terms amounted to ¥34 million ($285 thousand) and24

Future minimum lease receivable (including the interest portion thereon) subsequent to February 28, 2015 for ﬁnance leases
accounted for as operating leases are summarized as follows:
Years ending February 28 or 29,

Thousands of
U.S. dollars

Millions of yen

¥25
9
¥34

2016
2017 and thereafter
Total

$210
75
$285

2.Operating leases
Future minimum lease receivable subsequent to February 28, 2015 for noncancelable operating leases were as follows:
Years ending February 28 or 29,

Thousands of
U.S. dollars$25,463
120,952$146,424

Millions of yen¥3,037
14,426¥17,46420162017 and thereafterTotal

14 Shareholders Equity
resolution of the shareholders or by the Board of Directors(1)The Corporation Law of Japan (the Law ) provides thatan amount equal to 10% of the amount to be disbursed

if certain conditions are met.

as distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal

The capital reserve included in capital surplus amounted

reserve) be transferred to the capital reserve and the legal

to ¥7,500 million ($62,883 thousand) at February 28,

reserve, respectively, until the sum of the capital reserve2015 and 2014. In addition, the legal reserve included inand the legal reserve equals 25% of the capital stock

retained earnings amounted to nil at February 28, 2015

account. Such distributions can be made at any time by

and 2014.

(2)Movements in shares issued and treasury stock during the years ended February 28, 2015 and 2014 are summarized asfollows:

Shares issued:
Common stock
Treasury stock:
Common stock

March 1, 2014

Number of shares
2015
Increase
Decrease

February 28, 2015

536,238,328‒

268,119,164

268,119,164

8,372,594

44,0314,211,367

4,205,258

Two shares of common stock were consolidated into one

an aﬃliate accounted for by the equity method for the year

share on September 1, 2014. As a result, the number ofended February 28, 2015. The decrease in treasury stock

shares issued decreased by 268,119,164.

consists of 4,087 shares resulting from the sale of sharesless than one voting unit by the Company, 7,000 shares

The increase in treasury stock consists of 41,564 shares

resulting from the exercise of stock options and 4,200,280

resulting from the purchase of shares less than one voting

shares resulting from consolidation of shares for the year

unit by the Company, and 2,467 shares of treasury stock

ended February 28, 2015.

attributable to the Company resulting from the purchase by25

Shares issued:
Common stock
Treasury stock:
Common stock

March 1, 2013

Number of shares
2014
Increase
Decrease

February 28, 2014

536,238,328‒‒

536,238,328

8,030,692

441,129

99,227

8,372,594

The increase in treasury stock consists of 150,400 sharesthe equity method for the year ended February 28, 2014.

resulting from the purchase of shares less than one voting

The decrease in treasury stock consists of 8,227 shares

unit by the Company, 287,827 shares resulting from theresulting from the sale of shares less than one voting unit bypurchase of shares held by untraceable shareholders andthe Company and 91,000 shares resulting from the exercise

2,902 shares of treasury stock attributable to the Companyof stock options for the year ended February 28, 2014.

resulting from the purchase by an aﬃliate accounted for by(3)Stock option plans
Descriptions of each stock option plan as of February 28, 2015 are as follows:
Stock option plans

No.3 plan (*1)

No.4 plan (*1)

No.5 plan (*2)

Individuals covered by the plan

Directors: 7
Audit and supervisory board
members: 4
Executive officers: 14
Administration officer: 1

Directors: 7
Audit and supervisory board
members: 4
Executive officers: 12
Administration officer: 1

Directors: 8
Audit and supervisory board
members: 5

Type and number ofshares to be issued
upon the exercise of thestock subscription rights (*5)

154,000 shares ofcommon stock

168,000 shares ofcommon stock

31,500 shares ofcommon stock

May 27, 2004 (*3)
None
None
From September 3, 2007
to May 27, 2014

May 26, 2005 (*3)
None
None
From September 3, 2007
to May 26, 2015

May 25, 2006 (*4)
None
None
From September 3, 2007
to July 14, 2026

Grant date
Vesting conditions
Vesting period
Exercise period*1 The Company granted these stock options which were originally granted by the Daimaru, Inc. through the stock transfer contract entered into on September 3, 2007.
*2 The Company granted these stock options which were originally granted by Matsuzakaya Co., Ltd. through the stock transfer contract entered into on September 3,
2007.
*3 Grant date was the date of resolution of shareholder s meeting of the Daimaru, Inc., currently Daimaru Matsuzakaya Department Store Co., Ltd. and individuals
covered by the plan and their title were those as of the grant date.
*4 Grant date was the date of resolution of shareholder s meeting of Matsuzakaya Co., Ltd., currently Daimaru Matsuzakaya Department Store Co., Ltd. and individuals
covered by the plan and their title were those as of the grant date.
*5 The number of shares in the above table are adjusted to reﬂect the consolidation of shares executed on September 1, 2014.

26

Information regarding the Company s stock option plans is summarized as follows:

No.3 plan

No.4 plan

No.5 plan

‒
‒
‒
‒
‒

‒
‒
‒
‒
‒

‒
‒
‒
‒
‒

126,000‒‒
126,000‒

150,500‒(7,000)‒143,500

9,500
‒
‒
‒
9,500

Exercise price (Yen)
Average stock price at exercise (Yen)Fair value at grant date (Yen)¥1,398 (*1)¥‒¥‒ (*2)¥1,382 (*1)
¥1,391 (*1)¥‒ (*2)¥1¥‒¥1,666 (*1)

Exercise price (U.S. dollars)
Average stock price at exercise (U.S. dollars)
Fair value at grant date (U.S. dollars)$11,721$‒$‒$11,587$11,663$‒$8$‒$13,968

Number of stock options: (*1)
Non-vested
Outstanding at March 1, 2014
GrantedForfeited
VestedOutstanding at February 28, 2015
VestedOutstanding at March 1, 2014
VestedExercised
Forfeited
Outstanding at February 28, 2015

*1 The amounts are adjusted to reﬂect the consolidation of shares executed on September 1, 2014.
*2 The fair value of stock options is omitted since they had been issued before the date of enactment of the Law.

During the year ended February 28, 2015, no stock options

options actually forfeited is reﬂected.

were granted.
Stock subscription rights as stock options of ¥15 million
Because it is difficult to reasonably estimate the number($125 thousand) were recorded as of February 28, 2015 andof options that will be forfeited in the future, the number of2014.

15 Financial Instruments
Overview

mainly associated with leases of stores and are exposed(a)Policy for ﬁnancial instruments

to credit risk of lessors. For these credit risks, the GroupThe Company and its consolidated subsidiaries manages

individually manages the due dates and balances for eachfunds only through low-risk ﬁnancial assets such as bankcounterparty and tries to identify any incidents that may

deposits and debt securities, in addition, funds are raisedcause potential collectability issues and to mitigate suchthrough bank borrowings, issuance of commercial papers

risks.

and corporate bonds, and securitization of receivables.
Derivatives are only utilized to hedge foreign currency

Equity securities, such as investment securities, arefluctuation risk arising from receivables and payables

exposed to market price fluctuation risk, but mainly

denominated in foreign currencies and interest rateconsist of securities of companies with which a businessfluctuation risk arising from loans payable and bonds

relationship has been established, and the fair value ispayable, and are not used for speculative purposes.

monitored periodically and the portfolio is reviewed on an
ongoing basis.

(b)Types of financial instruments, related risks and risk
management

Trade payables, such as notes and accounts payable ‒Notes and accounts receivable-trade are exposed to

trade and income taxes payable are mostly due within one

credit risk of customers. Deposits and guarantees are

year. Trade payables denominated in foreign currencies

27are exposed to foreign currency ﬂuctuation risk and foreign

are based on the internal rules which determine theexchange forward contracts are utilized for a portion of

authorization for such transactions. In addition, derivativethese trade payables to hedge foreign currency ﬂuctuationtransactions are entered into only with ﬁnancial institutions

risk.

with high credit ratings to mitigate credit risk.

Short-term loans payable, commercial papers andTrade payables and loans payable are exposed to liquidity

securitized receivables are mainly used for financing of

risk. The Group individually manages the risk by preparing

operating activities, and bonds payable and long-term loansa cash management schedule on a monthly basis andpayable are mainly used for capital investments. Loans

maintains necessary liquidity by entering into commitment

payable with variable interest rates are exposed to interest

lines and overdraft contracts with its main financial

rate fluctuation risk, but derivative transactions (interest-

institutions.

rate swaps) are utilized as hedging instruments for certainof long-term loans payable on an individual loan basis toFair Value of Financial Instruments

mitigate the interest rate fluctuation risk and fix interest

The carrying value of financial instruments on thepayments. Hedge effectiveness of each transaction is

consolidated balance sheet, fair value and the diﬀerence

assessed periodically. For interest-rate swap transactions

as of February 28, 2015 and 2014, are shown in thethat meet the criteria for the special treatment, anfollowing table.

assessment of hedge eﬀectiveness is omitted.

instruments for which it is extremely diﬃcult to determine

The table does not include financial

the fair value. (Please refer to Note 2 below).
The execution and management of derivative transactions(1)Cash and deposits(2)Notes and accounts
receivable ‒ trade(3)Securities and investment
securities:
Other securities
Investments in affiliates(4)Deposits and guarantees
Total assets(5)Notes and accounts
payable ‒ trade(6)Short-term loans payable(7)Commercial papers(8)Income taxes payable(9)Bonds payable(10)Long-term loans payable
Total liabilities
Derivative transactions (*)

28

Millions of yen

Carrying value¥36,8062015
Fair value¥36,806

Difference¥‒

Carrying value¥35,128

2014
Fair value¥35,128

Difference¥‒

75,55675,556‒

66,26566,265‒18,994
1,448
40,650¥173,456

18,994730
39,435¥171,523‒(718)(1,214)¥(1,933)

21,677
1,455
42,646¥167,173

21,677699
40,325¥164,097‒(755)(2,320)¥(3,076)

95,0209,268
28,691
12,702
24,000106,498¥276,180¥(27)

95,0209,268
28,691
12,70224,094
107,400¥277,177
¥(27)

‒
‒
‒
‒
94
901
¥996
¥‒

86,501
14,23032,192
4,999
24,000117,527¥274,451¥(20)

86,501
14,23032,192
4,999
24,070118,759¥275,754
¥(20)

‒
‒
‒
‒
70
1,231
¥1,302¥‒

(1)Cash and deposits(2)Notes and accounts
receivable ‒ trade(3)Securities and investment
securities:
Other securities
Investments in affiliates(4)Deposits and guarantees
Total assets(5)Notes and accounts
payable ‒ trade(6)Short-term loans payable(7)Commercial papers(8)Income taxes payable(9)Bonds payable(10)Long-term loans payable
Total liabilities
Derivative transactions (*)

Thousands of U.S. dollars
2015
Carrying value
Fair value
Difference$308,594$308,594$‒

633,487

633,487‒

159,252
12,141
340,823$1,454,314

159,252
6,121
330,636$1,438,107‒(6,020)(10,187)$(16,207)

796,680
77,706
240,555
106,498
201,224
892,915$2,315,586$(226)

796,680
77,706
240,555
106,498
202,012900,478$2,323,945$(226)

‒
‒
‒
‒
788
7,563
$8,351$‒*Assets and liabilities arising from derivative transactions are shown at net value with the amount in parentheses representing net liability position.
Note 1:Methods to determine the fair value of ﬁnancial instruments and other matters related to securities and derivative transactions(1) Cash and deposits and (2) Notes and accounts receivable ‒ trade
Since these items are settled in a short time period, their fair value approximates carrying value. Time deposits with their maturity dates over one year are includedin (1) Cash and deposits in the above table.
(3) Securities and investment securities
The fair value of equity securities is based on quoted market prices. The fair value of debt securities is based on quoted market prices or prices provided by thecounter party ﬁnancial institutions.
(4) Deposits and guarantees
The fair value of deposits and guarantees is based on the present value of future cash ﬂows discounted by the interest rates reﬂecting credit risk. Deposits andguarantees due within one year are included in (4) Deposits and guarantees in the above table.
(5) Notes and accounts payable ‒ trade, (6) Short-term loans payable, (7) Commercial papers and (8) Income taxes payable
Since these items are settled in a short time period, their fair value approximates carrying value.
(9) Bonds payable
The fair value of bonds payable is stated at the market value. The current portion of bonds payable is included in (9) Bonds payable in the above table.
(10) Long-term loans payable
The fair value of long-term loans payable with variable interest rates approximates the carrying the value because the interest rate reﬂects the market rate in a shortperiod of time. Certain long-term loans payable with variable interest rates are hedged by the special treatment of interest-rate swap agreements and accounted
for as loans with ﬁxed interest rates. The fair value of those long-term loans payable is based on the present value of the total of principal, interest payments andnet cash ﬂows of the swap agreements discounted by the interest rates to be applied reasonably assuming new loans under similar conditions are made. The fairvalue of long-term loans payable with ﬁxed interest rates is based on the present value of the total of principal and interest payments discounted by the interest
rates to be applied assuming new loans under similar conditions are made. The current portion of long-term loans payable is included in (10) Long-term loans
payable in the above table.
Derivative Transactions
Please refer to Note 16 Derivative Financial Instruments and Hedging Activities of these Notes to Consolidated Financial Statements.
Note 2:Financial instruments for which it is extremely diﬃcult to determine the fair value are as follows:

Millions of yen

Unlisted stocks
Deposits and guarantees
Long-term guarantee deposits received

2015

2014

¥18,427¥26,304¥32,700¥17,060¥27,482¥34,100

Thousands of
U.S. dollars
2015$154,498$220,542$274,16829

Long-term guarantee deposits received are included in Other

unlisted stocks are not included in the preceding table.

in non-current liabilities in the consolidated balance sheet asof February 28, 2015 and 2014.

Because no quoted market price is available and it isextremely diﬃcult to estimate the future cash ﬂows, the above

Because no quoted market price is available and it isdeposits and guarantees and long-term guarantee deposits

extremely difficult to determine the fair value, the above

received are not included in the preceding table.

Note 3:Redemption schedules for cash and deposits, receivables and marketable securities with maturities at February 28, 2015 and 2014 are as follows:

Cash and deposits
Notes and accounts receivable ‒ trade
Securities and investment securities:
Other securities with maturities:(1)Government and municipal bonds(2)Corporate bonds(3)Other
Deposits and guarantees
Total

Cash and deposits
Notes and accounts receivable ‒ trade
Securities and investment securities:
Other securities with maturities:(1)Government and municipal bonds(2)Corporate bonds(3)Other
Deposits and guarantees
Total

Cash and deposits
Notes and accounts receivable ‒ trade
Securities and investment securities:
Other securities with maturities:(1)Government and municipal bonds(2)Corporate bonds(3)Other
Deposits and guarantees
Total

Millions of yen
2015
More thanMore than
five years
one year andWithinand within
within five
one yearten years
years¥30,060¥2,700¥‒75,556
‒
‒

250
900
200
4,401
¥111,369

30
2,800
600
3,474
¥9,604‒‒‒
6,038¥6,038Millions of yen
2014
More thanMore than
five years
one year andWithinand within
within five
one yearten years
years¥29,690¥400¥‒
66,265
‒
‒

‒
400
‒
4,596
¥100,953

280
3,200
800
4,097
¥8,777‒‒‒
5,841¥5,841Thousands of U.S. dollars
2015
More thanMore than
five years
one year andWithinand within
within five
one yearten years
years$252,033$22,638$‒
633,487
‒
‒

2,096
7,546
1,677
36,899$933,755

252
23,476
5,031
29,127$80,523‒‒‒
50,625$50,625

More thanten years

¥‒
‒
‒
‒
‒
9,627
¥9,627More thanten years
¥‒
‒

‒
‒
‒
11,095¥11,095

More thanten years

$‒
‒
‒
‒
‒
80,716$80,716

Note 4:The redemption schedule for long-term loans payable is disclosed in Note 11 Short-Term Loans Payable, Commercial Papers, Long-Term Debt and Lease
Obligations of these Notes to Consolidated Financial Statements.

30

16 Derivative Financial Instruments and Hedging Activities
Derivative transactions which quality for hedge accounting
The estimated fair value of the derivatives positions outstanding as of February 28, 2015 and 2014, to which quality for hedge
accounting are summarized as follows:
Currency-related transactions

Method of hedge
accounting
Allocation method

Deferral hedge
accounting

Method of hedge
accounting
Allocation method

Deferral hedge
accounting

Transaction
Forward foreign currency
exchange contracts:
Sell:
U.S. dollars
Chinese yuan
Total
Currency swap contracts:
Receive / U.S. dollars
and pay / Japanese yen
Total
Forward foreign currency
exchange contracts:
Buy:
U.S. dollars
Euro
Chinese yuan
Thai baht
British pounds
TotalTransaction
Forward foreign currency
exchange contracts:
Sell:
U.S. dollars
Total
Buy:
U.S. dollars
Currency swap
contracts:
Receive / U.S. dollars
and pay / Japanese yen
Total
Forward foreign currency
exchange contracts:
Buy:
U.S. dollars
Euro
Chinese yuan
Thai baht
British pounds
Total

Major hedged item

Millions of yen
2015
Contract value
Maturing
Notional
Fair value
afteramountone yearAccounts receivable, trade

¥213
1
¥215

¥‒
‒
¥‒

(*)
(*)
(*)

Long-term loans payable

¥300
¥300

¥300
¥300

(*)
(*)

¥1,847
706
176
162
0
¥2,893

¥‒
‒
‒
‒
‒
¥‒

¥28
(56)
0
0
0
¥(27)

Forecasted transactions
denominated in foreign
currencies (Accounts
payable, trade)

Major hedged item

Millions of yen
2014
Contract value
Maturing
Notional
Fair value
afteramountone yearAccounts receivable, trade

¥130
¥130

¥‒
¥‒

(*)
(*)

Accounts payable, trade

¥9

¥‒

(*)

Long-term loans payable

¥300
¥309

¥300
¥300

(*)
(*)

¥1,663415
150
00¥2,228

¥‒
‒
‒
‒
‒
¥‒

¥(14)
(2)
(3)
0
0
¥(20)

Forecasted transactions
denominated in foreign
currencies (Accounts
payable, trade)31

Method of hedge
accounting
Allocation method

Deferral hedge
accounting

Transaction
Forward foreign currency
exchange contracts:
Sell:
U.S. dollars
Chinese yuan
Total
Currency swap contracts:
Receive / U.S. dollars
and pay / Japanese yen
Total
Forward foreign currency
exchange contracts:
Buy:
U.S. dollars
Euro
Chinese yuan
Thai baht
British pounds
Total

Major hedged item

Thousands of U.S. dollars
2015
Contract value
Maturing
Notional
Fair value
afteramountone yearAccounts receivable, trade$1,7868$1,803

$‒
‒
$‒

(*)
(*)
(*)

Long-term loans payable$2,515$2,515$2,515$2,515(*)(*)$15,486
5,919
1,476
1,358
0
$24,256

$‒
‒
‒
‒
‒
$‒

$235
(470)
0
0
0
¥(226)

Forecasted transactions
denominated in foreign
currencies (Accounts
payable, trade)

The fair value of forward foreign currency exchange contracts under deferral hedge accounting is computed using prices
provided by the counter party ﬁnancial institutions.
(*)Because transactions under the allocation method are accounted for in combination with accounts receivable, trade, accounts payable, trade and long-term loans
payable, the fair value of these transactions is included in that of notes and accounts receivable ‒ trade, notes and accounts payable ‒ trade and long-term loans
payable disclosed in Note 15 Financial Instruments of these Notes to Consolidated Financial Statements.

Interest-related transactions

Method of hedge
accounting
Specialtreatment ofinterest-rate
swap

Method of hedge
accounting
Specialtreatment ofinterest-rate
swap

32

Transaction
Interest-rate swaps:

Major hedged item
Long-term loans payable

Receive / variable and pay /fixedTransaction
Interest-rate swaps:
Receive / variable and pay /fixedMillions of yen
2015
Contract value
Maturing
Notional
Fair value
afteramountone year¥38,040

Major hedged item

¥29,280( *)Millions of yen
2014
Contract value
Maturing
Notional
Fair value
afteramountone yearLong-term loans payable¥48,820¥36,140(*)

Method of hedge
accounting
Specialtreatment ofinterest-rate
swap

Transaction
Interest-rate swaps:

Thousands of U.S. dollars
2015
Contract value
Maturing
Notional
Fair value
afteramountone year

Major hedged item
Long-term loans payable

Receive / variable and pay /fixed$318,940 $245,493( *)(*)Because interest-rate swap agreements are accounted for by applying the swap rates to the underlying long-term loans payable, their fair value is included in that of thelong-term loans payable disclosed in Note 15 Financial Instruments of these Notes to Consolidated Financial Statements.

17 Contingent Liabilities
At February 28, 2015, the Company and its consolidated subsidiaries had the following contingent liabilities:
Thousands of
U.S. dollars

Millions of yen

¥18
49
¥67

Guarantees of financing for employee housing
Guarantees of lease agreement of White Express Co., Ltd.

$151
411
$562

18 Selling, General and Administrative Expenses
The components of selling, general and administrative expenses for the years ended February 28, 2015 and 2014 were as
follows:

2015¥30,319280

2014¥31,744
28

Thousands of
U.S. dollars
2015$254,205
2,348

50,413
5,402

51,394
5,205

422,680
45,292

194
4,355

201
4,133

1,627
36,514

6
10,687
16,02328,366
16,567632
38,323¥201,572

17
11,161
15,99427,713
17,317349
37,051¥202,31350
89,603
134,342
237,830
138,903
5,299
321,313$1,690,048

Millions of yen
Advertising expenses
Provision of allowance for doubtful accounts
Compensation and bonuses for directors and audit
and supervisory board members and salaries andbonuses for employees
Provision for bonuses to employees
Provision for bonuses to directors and audit andsupervisory board members
Retirement benefit expenses
Provision of accrued retirement benefits for directors
and audit and supervisory board members
Welfare expenses
Depreciation and amortization
Rent expenses
Operational costs
Amortization of goodwill
Other
Total

33

19 Impairment of Fixed Assets
The Company and its consolidated subsidiaries mainly group stores into minimum units which generate identiﬁable cash ﬂows.
The recoverable value of buildings and others and lease assets is measured mainly based on value in use and written down tonil if no future cash inﬂows are expected.
The recoverable value of land is measured at the estimated net selling value, which is based on the appraisal value by realestate appraisers.
The Company and its consolidated subsidiaries wrote down the following assets to their respective net recoverable value.
Consequently, the Company and its consolidated subsidiaries recorded related loss on impairment of fixed assets of ¥965
million ($8,091 thousand) and ¥1,463 million in the accompanying consolidated statement of income for the years ended
February 28, 2015 and 2014, respectively:
Thousands of
U.S. dollars
2015

Millions of yen
Location
Daimaru Matsuzakaya
Department Stores Co., Ltd.
(Urawa-ku, Saitama-shi, etc.)
Parco CO., LTD.
(Chuo-ku, Chiba-shi)
NEUVE・A CO., LTD.
(Aoi-ku, Shizuoka-shi, etc.)
Daimaru Kogyo, Ltd.
(Kita-ku, Osaka-shi)
J. Front Foods Co., Ltd.
(Kawasaki-ku, Kawasaki-shi)
Daimaru Matsuzakaya
Department Stores Co. Ltd.
(Chuo-ku, Osaka, etc.)
NEUVE・A CO., LTD.
(Toyonaka-shi, Osaka, etc.)
J. FRONT FOODS Co., Ltd.
(Chiyoda-ku, Tokyo)
JFR Information Center Co., Ltd.
(Tennouji-ku, Osaka-shi)

Usage

2015

Classification

Stores, etc.

Buildings and others

Stores, etc.

2014

¥11

¥

$92

Buildings and others

607

‒

5,089

Stores, etc.

Buildings and others

Stores, etc.

Buildings and others
Land

74
47
165

‒
‒
‒

620
394
1,383

Stores, etc.

Buildings and others

58

‒

486

Stores, etc.

Buildings and others

‒

1,292

‒

Stores, etc.

Buildings and others

‒

70

‒

Stores, etc.

Buildings and others

‒

33

‒

Offices, etc.

Lease assets

‒
¥965

66
¥1,463‒$8,09120 Loss on Store Reconstruction
Loss on store reconstruction recognized by a consolidated subsidiary for the year ended February 28, 2014 consisted of thefollowing:

Reconstruction of South Wing of Matsuzakaya Ueno store in
Daimaru Matsuzakaya Department Stores Co., Ltd.:
Loss on impairment of fixed assets
Provision for loss on store reconstruction
Others
Total

34

Millions of yen
2014¥1,802
1,320
112¥3,235

21 Loss on Business Liquidation
Loss on business liquidation recognized by certain consolidated subsidiaries for the years ended February 28, 2015 and 2014
consisted of the following:Thousands of
U.S. dollars
2015

Millions of yen
Liquidation of fishing business in
Daimaru Kogyo, Ltd.:
Loss on business liquidation
Loss on impairment of fixed assets
Total

¥634
19
¥654

$5,316
159$5,483

Millions of yen
2014
Store closure:
Parco (SINGAPORE) PTE LTD.
JFR Online Co., Ltd.
Daimaru Com Development Co., Ltd.
Total

¥94
13
2
¥110

22 Loss on Devaluation of Inventories
Loss on devaluation of inventories included in cost of goods sold of ¥250 million ($2,096 thousand) and ¥346 million wasrecognized for the years ended February 28, 2015 and 2014, respectively.

35

23 Other Comprehensive Income
The following table presents reclassiﬁcation adjustments and tax eﬀects allocated to each component of other comprehensive
income (loss) for the years ended February 28, 2015 and 2014.
Thousands of
U.S. dollars
2015

Millions of yen
Net unrealized holding gain on securities:
Amount arising during the year
Reclassification adjustments for gain
included in net income
Before tax effectTax effectTotal
Net unrealized deferred loss on hedging
instruments:
Amount arising during the year
Before tax effectTax effectTotal
Foreign currency translation adjustments:
Amount arising during the year
Reclassification adjustments for gain
included in net income
Total
Share of other comprehensive (loss) incomeof affiliates accounted for by the equity
method:Amount arising during the year
Reclassification adjustments for gain
included in net income
Total
Total other comprehensive income

2015

2014

¥2,692¥3,547$22,571(2,698)
(6)
8
2

(48)
3,499
(1,210)2,289(22,621)
(50)
67
17

(7)
(7)
2
(5)

(83)
(83)
31
(51)

(59)
(59)
17
(42)

242

310

2,029

‒
242

(26)
283

‒
2,029

(46)

118

(386)

(6)
(52)
¥186

‒
118
¥2,639(50)(436)$1,55924 Supplemental Information on the Consolidated Statement of Cash Flows
Reconciliations of cash and deposits in the accompanying consolidated balance sheet at February 28, 2015 and 2014 andcash and cash equivalents in the accompanying consolidated statement of cash ﬂows for the years then ended are as follows:
Millions of yen

Cash and deposits
Time deposits over three months
Cash and cash equivalents

36

2015
¥34,106(1,973)¥32,132

At February 28,
2014¥34,728(3,452)¥31,276

Thousands of
U.S. dollars

2015$285,956(16,542)$269,406

25 Income Taxes
Income taxes in Japan applicable to the Company and its domestic subsidiaries comprise corporate tax, inhabitants taxes andenterprise tax, which, in the aggregate, resulted in a statutory tax rate of 38.0% for the years ended February 28, 2015 and2014. Overseas subsidiaries are subject to the income tax regulations of the respective countries in which they operate.
The eﬀective tax rates reﬂected in the consolidated statement of income for the years ended February 28, 2015 and 2014 diﬀer
from the statutory tax rate for the following reasons:Statutory tax rate
Effect of:Permanent non-deductible expenses
Permanent non-taxable income
Per capita portion of inhabitants taxes
Change in valuation allowance
Remeasurement of deferred tax assets and deferred
tax liabilities due to the change in statutory tax rate
Equity in earnings of unconsolidated subsidiaries
and affiliates
Unrealized inter-company profit
Other, net
Effective tax rates

2015
38.0%

2014
38.0%

0.8
(0.2)
0.5
0.3

0.6
(0.1)
0.4
1.2

1.5

(0.3)

(0.7)
‒
0.7
40.9%

(0.3)
(4.4)
(2.5)
32.6%

37

The signiﬁcant components of deferred tax assets and liabilities at February 28, 2015 and 2014 are as follows:
Millions of yen
Deferred tax assets:
Liability for retirement benefits
Accrued retirement benefits
Accrued loss on utilization of gift certificates
Securities for retirement benefit trust
Loss on devaluation of assets resulting from mergerof consolidated subsidiaries
Accrued point card certificates
Provision for bonuses to employees
Unrealized profit on fixed assets
Loss on impairment of fixed assets
Asset retirement obligations
Accrued enterprise taxes, etc.
Allowance for doubtful accounts
Tax loss carryforwards
Provision for loss on store reconstruction
Provision for sales promotion expenses
Provision for loss on business liquidation
Loss on devaluation of inventories
Other
Deferred tax assets (subtotal)
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Revaluation of assets and liabilities
Reserve for depreciation for tax purposes
Securities returned from retirement benefit trust
Assets related to asset retirement obligations
OthersTotal deferred tax liabilities
Net deferred tax liabilities

2015

2014

¥6,947
‒
4,687
4,123

¥‒
2,476
4,501
4,078

$58,246‒
39,29734,569

4,077
2,391
1,983
1,511
1,231
1,121
968
711
346
270
257
176
129
4,130
35,066(6,932)
28,133

4,077
2,614
2,142
1,500
754
1,057
567
743
175
486
279
14
120
4,817
30,408(6,877)23,531

34,18320,047
16,626
12,66910,321
9,399
8,116
5,961
2,901
2,264
2,155
1,476
1,082
34,627
293,955(58,078)
235,877(100,970)(7,989)(582)(361)(3,374)(113,278)¥(85,144)(101,009)(8,141)(946)(359)(3,226)(113,684)¥(90,153)(846,567)(66,982)(4,880)(3,027)(28,289)(949,761)$(713,876)

On March 31, 2015, the Act for Partial Revision of the

As a result of this change, deferred tax assets in current

Income Tax Act etc. (Act. No. 9 of 2015) and the Act for

assets, deferred tax assets in investments and other assets,

Partial Revision of the Local Tax Act etc. (Act. No.2 ofdeferred tax liabilities in non-current liabilities and deferred2015) were oﬃcially issued and the Company and domestic

tax liabilities for land revaluation would have decreased

consolidated subsidiary are subject to the amended statutoryby ¥316 million ($2,649 thousand), ¥206 million ($1,727

tax rate eﬀective for ﬁscal years beginning on or after April

thousand), ¥9,907 million ($83,064 thousand) and ¥118

1, 2015.

Accordingly, the statutory tax rates used formillion ($989 thousand), respectively, and net unrealized

calculating deferred tax assets and liabilities will be reduced

holding gain on securities and income taxes-deferred (credit)from 35.6% to 33.1% for temporary differences that are

would have increased by ¥120 million ($1,006 thousand)expected to be realized or settled during the fiscal yearand ¥9,383 million ($78,670 thousand), respectively, iffrom March 1, 2016 to February 28, 2017 and to 32.3%

these revised statutory tax rates were applied at February 28,

for temporary diﬀerences that are expected to be realized or2015.

settled on or after March 1, 2017.

38

Thousands of
U.S. dollars
2015

26 Amounts per Share
Amounts per share at February 28, 2015 and 2014 and for the years then ended are as follows:

Net assets
Basic net income
Diluted net income
Cash dividends

Yen
2015
¥1,425.05
75.47
75.47
19.00

2014
¥1,402.53
119.55
119.53
11.00

U.S. dollars
2015$11.95
0.63
0.63
0.16

Net assets per share are computed based on the net assets

net income available for distribution to shareholders andavailable for distribution to the shareholders and the number

the weighted-average number of shares of common stockof shares of common stock outstanding at the year end.

outstanding during each year after giving eﬀect to the dilutive
potential of shares of common stock to be issued upon the

Basic net income per share is computed based on the net

exercise of stock subscription rights.

income attributable to shareholders of common stock andthe weighted-average number of shares of common stock

Cash dividends per share of the Company represent the cash

outstanding during the year.

dividends declared as applicable to the respective years
together with the interim cash dividends paid.

Diluted net income per share is computed based on the
The ﬁnancial data used in the computation of basic and diluted net income per share for the years ended February 28, 2015
and 2014 is summarized as follows:
Millions of yen
Net income attributable to common
stockholders

Weighted-average number of sharesof common stock outstanding
Increase in shares of common stock
resulting from the exercise of stock
subscription rights

2015

2014

¥19,918¥31,568

Thousands of shares
2015

Thousands of
U.S. dollars
2015$166,999
2014

263,920

264,06212

36

The ﬁnancial data used in the computation of net assets per share as of February 28, 2015 and 2014 is summarized as follows:

2015¥430,465

2014¥422,215

Thousands of
U.S. dollars
2015$3,609,164(15)(54,357)(54,373)(15)(52,025)(52,041)(126)(455,747)(455,882)¥376,091¥370,173$3,153,274

Millions of yen
Total net assets
Deduction from total net assets:
Stock subscription rights
Minority interests
Total net assets attributable
to common stockholders

Thousands of shares
2015
Number of shares of common stock
used in the calculation of net assets
per share

263,9132014
263,932

Note:Two shares of common stock were consolidated into one share on September 1, 2014. Basic net income per share, diluted net income per share and net assets per
share have been calculated as if the consolidation of shares was executed on March 1, 2013.

39

27 Segment Information(1)Outline of reportable segments
The Group s reporting segments are divisions of the Group for which separate ﬁnancial information is available, and whose
operating results are reviewed regularly by the Board of Directors of the Company in order to allocate management resources
and assess performance of operations.
The Group operates its main businesses such as the department store business, under a holding company structure, andthe reportable segments of the Group consist of the Department Store Business, the Parco Business, the Wholesale
Business, the Credit Business and Other Businesses.
The Department Store Business consists of sales of clothing, general goods, household goods, food products, etc. the ParcoBusiness mainly consists of development, management, supervision and operation of shopping centers. The Wholesale
Business consists of wholesaling of food products, chemical products and materials, etc. the Credit Business mainly
consists of issuance and administration of credit cards.

Other Businesses mainly consist of mail-order marketing, rentals of

real estate, parking, leasing, design and construction contracting, manufacturing and sales of furniture, and retailing of general
goods.
(2)Calculation of net sales, income, assets, and other items by reportable segments
The accounting policies of the reportable segments are substantially the same as those described in Note 2 Summary of
Signiﬁcant Accounting Policies of these Notes to Consolidated Financial Statements. Inter-segment sales and transfers arerecorded at the same prices used in transactions with third parties.
(3)Net sales, income, assets, and other items by reportable segments
Reportable segment information for the years ended February 28, 2015 and 2014 is summarized as follows:

Net sales:
Sales to third parties
Inter-segment sales ortransfers
Total
Segment income
Segment assets
Other items:
Depreciation andamortization
Investments inunconsolidated
subsidiaries andaffiliates accounted
for by the equity
methodIncrease in property
and equipment andintangible assets

40

Millions of yen
2015
Reportable segments

Department
Store
Business

Parco
Business¥758,964¥273,914¥50,954¥5,362¥60,333 ¥1,149,529¥‒ ¥1,149,529

901¥759,866¥23,115¥629,972

297¥274,212¥12,255¥256,531

8,416¥59,371¥1,067¥24,296

5,018¥10,381¥3,424¥38,593

36,96451,600¥97,298 ¥1,201,129¥2,418¥42,281¥111,970 ¥1,061,363(51,600)‒¥(51,600) ¥1,149,529¥(190)¥42,091¥(42,662) ¥1,018,700¥10,747¥5,938¥172¥9¥1,248¥18,116¥(152)¥17,963¥3,861

¥105

¥‒

¥‒

¥163

¥4,130¥11,308¥15,438¥10,359¥11,624¥145¥5¥1,217¥23,353¥(133)¥23,219

Wholesale
Business

CreditBusiness

Other
Businesses

Total

Adjustments Consolidated

Net sales:
Sales to third parties
Inter-segment sales ortransfers
Total
Segment income
Segment assets
Other items:
Depreciation andamortization
Investments inunconsolidated
subsidiaries andaffiliates accounted
for by the equity
methodIncrease in property
and equipment andintangible assets

Net sales:
Sales to third
partiesInter-segment
sales ortransfers
Total
Segment income
Segment assets
Other items:
Depreciation
andamortization
Investments inunconsolidated
subsidiaries
and affiliates
accounted forby the equity
methodIncrease inproperty andequipment andintangible
assetsMillions of yen
2014
Reportable segments

Department
Store
Business

Parco
Business¥767,907¥268,031¥55,043¥4,768¥50,546 ¥1,146,297

1,021

260

8,229

4,676

38,030¥768,928¥22,980¥631,768¥268,292¥12,017¥249,985¥63,273¥1,127¥21,749¥9,444¥3,186¥33,205¥10,627¥5,896¥154¥10¥1,170¥17,859¥(160)¥17,698¥3,714

¥99

¥‒

¥‒

¥162

¥3,976¥10,550¥14,526¥14,205¥36,406¥239¥12¥1,490¥52,354¥(205)¥52,148

Wholesale
Business

CreditBusiness

Other
Businesses

Total

52,218¥88,576 ¥1,198,515¥2,961¥42,272¥114,772 ¥1,051,481

Adjustments Consolidated¥22 ¥1,146,319(52,218)‒¥(52,196) ¥1,146,319¥(455)¥41,816¥(52,750) ¥998,730

Thousands of U.S. dollars
2015
Reportable segments

Department
Store
Business

Parco
Business

Wholesale
Business$6,363,411$2,296,588$427,216

7,554$6,370,973$193,804$5,281,898

2,490$2,299,086$102,750$2,150,843$90,106

CreditBusiness

Other
Businesses

Total$44,957$505,852$9,638,040

70,563$497,787$8,946$203,706

42,073$87,038$28,708$323,577

309,919432,632$815,779 $10,070,672$20,273$354,498$938,794 $8,898,826$49,786$1,442$75$10,464$151,891$(1,274)$150,608$32,372

$880

$‒

$‒

$1,367$34,627$94,810$129,437$86,853$97,460$1,216$42$10,204$195,799$(1,115)$194,676

Adjustments Consolidated$‒$9,638,040(432,632)‒$(432,632) $9,638,040$(1,593)$352,905$(357,693) $8,541,125

41

The total amount of segment income is adjusted to operating income on the consolidated statement of income.
The adjustments for segment income in the amounts of ¥190 million ($1,593 thousand) and ¥455 million include eliminationsof inter-segment transactions of ¥2,565 million ($21,506 thousand) and ¥2,247 million and corporate expenses mainly
recorded by the Company not attributable to any reportable segments of ¥2,755 million ($23,099 thousand) and ¥2,703 million
for the years ended February 28, 2015 and 2014, respectively.
The adjustments for segment assets in the amounts of ¥42,662 million ($357,693 thousand) and ¥52,750 million include
eliminations of inter-segment receivables of ¥73,068 million ($612,627 thousand) and ¥78,004 million, unrealized proﬁt on
ﬁxed assets of ¥1,527 million ($12,803 thousand) and ¥1,511 million, and assets of the Company, which are not attributable
to any reportable segments, of ¥30,307 million ($254,104 thousand) and ¥25,954 million as of February 28, 2015 and 2014,
respectively.
The adjustments for depreciation and amortization in the amounts of ¥152 million ($1,274 thousand) and ¥160 million for theyears ended February 28, 2015 and 2014, respectively, consist of inter-segment transfers.
The adjustments for investments in unconsolidated subsidiaries and aﬃliates accounted for by the equity method in the amountsof ¥11,308 million ($94,810 thousand) and ¥10,550 million as of February 28, 2015 and 2014, respectively, consist ofinvestments made by the Company, which are not attributable to any reportable segments.
The adjustments for increase in property and equipment and intangible assets in the amounts of ¥133 million ($1,115
thousand) and ¥205 million for the years ended February 28, 2015 and 2014, respectively, consist of inter-segment unrealized
proﬁt on ﬁxed assets.
(4)Related information
As more than 90% of consolidated net sales for the years ended February 28, 2015 and 2014 were made in Japan, thedisclosure of geographical segment information of net sales has been omitted.
As more than 90% of the property and equipment in the consolidated balance sheet as of February 28, 2015 and 2014 werelocated in Japan, the disclosure of geographical segment information of property and equipment has been omitted.
The information about major customers has been omitted, as there is no major external customer that accounts for 10% ormore of consolidated net sales for the years ended February 28, 2015 and 2014.
(5)Loss on impairment of ﬁxed assets
Loss on impairment of ﬁxed assets by reportable segments for the years ended February 28, 2015 and 2014 is summarized
as follows:

Department
Store Business¥11

Department
Store Business¥3,09542

ParcoBusiness¥682

Millions of yen
2015
Reportable segments
Wholesale
CreditOther
Business
Business
Businesses
¥232
¥‒
¥58

Parco
Business¥70

Millions of yen
2014
Reportable segments
Wholesale
CreditOther
Business
Business
Businesses
¥‒
¥‒
¥99

Total

Corporate andConsolidated
elimination
¥985
¥‒
¥985

Corporate andConsolidated
elimination¥3,265¥‒¥3,265Total

Department
Store Business
$92

Parco
Business$5,718

Thousands of U.S. dollars
2015
Reportable segments
Wholesale
Other
Credit BusinessBusiness
Businesses$1,945$‒$486

Corporate andConsolidated
elimination$8,259$‒$8,259Total

The amounts in the above table for the years ended February 28, 2015 and 2014 included loss on impairment of ﬁxed
assets recognized in the accounts of Loss on store reconstruction and Loss on liquidation of business in the consolidated
statement of income. Accordingly, the total amounts in the above table are not equal to loss on impairment of theconsolidated statement of income. Please refer to Note 20 Loss on Store Reconstruction and Note 21 Loss on Liquidationof Business of these Notes to Consolidated Financial Statements.
(6)Amortization of goodwill and remaining balance
Information on amortization of goodwill and the remaining balance by reportable segments as of and for the years ended
February 28, 2015 and 2014 is as follows:

Amortizationof goodwill
Remainingbalance

Amortizationof goodwill
Remainingbalance

Amortizationof goodwill
Remainingbalance

Department
Store
Business

Millions of yen
2015
Reportable segments
Parco
Business

Wholesale
Business

CreditBusiness

Other
Businesses

Total

Corporate andConsolidated
elimination

¥‒

¥349

¥‒

¥‒

¥283

¥632

¥‒

¥632

¥‒

¥873

¥‒

¥‒

¥1,132¥2,005¥‒¥2,005

Department
Store
Business

Millions of yen
2014
Reportable segments
Parco
Business

Wholesale
Business

CreditBusiness

Other
Businesses

Total

Corporate andConsolidated
elimination

¥‒

¥349

¥‒

¥‒

¥‒

¥349

¥‒

¥349

¥‒

¥1,222¥‒¥‒¥1,415¥2,638¥‒¥2,638Department
Store
Business

Thousands of U.S. dollars
2015
Reportable segments
Parco
Business

Wholesale
Business

CreditBusiness

Other
Businesses

Total

Corporate andConsolidated
elimination$‒$2,926$‒$‒$2,373$5,299$‒$5,299$‒$7,320$‒$‒$9,491$16,811$‒$16,811

Goodwill is recognized as a result of business combinations (acquisition of shares of Parco Co., Ltd. and Forest Co., Ltd.).

43

28 Subsequent Events(1)Capital and business alliance with Senshukai Co., Ltd.
The Company resolved at the meeting of the Board of Directors held on April 17, 2015 to enter into a capital and businessalliance with Senshukai Co., Ltd. (Securities code: 8165, First Section of the Tokyo Stock Exchange; Senshukai ) and to
make Senshukai an equity-method aﬃliate. Details of the capital and business alliance are as follows:
1.Reasons for the capital and business alliance
The Group has store assets which mainly consist of department stores and other store assets managed by Parco andStylingLife Holdings, as a part of a balanced approach in central urban areas throughout Japan as well as a prime customer
base. Under the basic policies of its medium-term business plan, which covers the three years from 2014 to 2016, theGroup is working to dramatically strengthen its competitiveness and proﬁtability as a multi retailer, to construct a businessmodel for growth along with regions with its stores as the core (strategy of urban dominance), and to promote omni-channel
retailing that leverages the strengths of physical stores.
Senshukai describes itself as the Women s Smiles Company and deals in a wide-ranging lineup of merchandise including
clothing, daily sundries, and interior goods, with a primary focus on original goods for women aged from their 30s to their50s, centered on its mainstay mail-order business Belle Maison.

Under its medium- to long-term business plan, which

covers ﬁve years from 2014 to 2018, the core strategies are to develop optimal private brand products for each of the main
target customer segments in the mail-order business, to expand purchase opportunities by promoting a shift to an omnichannel format, and to increase eﬃciency by investing in logistics and IT systems.
Recently, amid a significantly changing environment surrounding the retail industry with tougher competition within
the industry, intensifying competition across industries, and so forth, the Company and Senshukai have had numerous
discussions since October 2014, considering that both companies would be able to eﬃciently expand their market shareand develop their businesses through a business alliance because of the highly complementary nature of their businessﬁelds and customer bases. As a result of these discussions, in order to ramp up their collaboration under their businessalliance and realize its effects, both companies recognized the need to enhance their framework for promoting joint
operations, such as establishing joint projects together, and therefore agreed to enter into the following capital and businessalliance.
2.Details of the capital and business alliance(a)Details of the business alliancei)Expand sales channels and reduce the cost of merchandise through joint development of both companies existing
private brand merchandiseii)Conduct cross selling of certain merchandise groups for which each company individually does not fully meetcustomers needs by utilizing both company s resources and expertiseiii)Develop and jointly deploy new private brand merchandise by utilizing the Group s expertise in the development andoperation of stores, and sales service know-how, and Senshukai s product development capabilitiesiv)Expand sales and earnings in the e-commerce business by utilizing the Group s customer base and brand power andSenshukai s expertise in e-commerce operationsv)Enhance the operating eﬃciencies and rebuild the platform of the Group s mail-order business, utilizing Senshukai sexpertise and order fulﬁllment system in mail-order marketing

44vi)In addition to the above, generate proﬁts by utilizing each other s group assets and expertise to the maximum extentvii)Establish a Business Alliance Promotion Committee to drive the above initiatives forward(b)Details of the capital alliance
The Company acquired a number of the outstanding shares of Senshukai from its shareholders. In addition, Senshukai
disposed of treasury shares and issued new shares through a third-party allotment, and the Company subscribed for allof these shares. As a result, the Company s equity share ratio in Senshukai became 22.62% (share of voting rights:
22.65%), and Senshukai became an equity-method aﬃliate.
(c)Consideration transferred for newly acquired shares of Senshukai
Through the following methods, i), ii), and iii), the Company acquired a total of 11,815,000 shares of Senshukai, which
is 22.62% of the total number of issued shares of Senshukai after the issuance of new shares described below (shareof voting rights: 22.65%), at the acquisition price per share of ¥846 ($7.09) (simple average of the closing price of
Senshukai s common shares on the Tokyo Stock Exchange from January 19, 2015 to April 16, 2015). As a result, therelated consideration transferred was ¥9,995 million ($83,801 thousand).
i)Acquisition of shares from shareholders of Senshukai
The Company acquired a total of 2,915,000 shares of Senshukai held by the share acquisition counterparties listed in
4. below, which is 5.58% of the total number of issued shares of Senshukai after the issuance of new shares described
below (share of voting rights: 5.59%) at the acquisition price per share of ¥846 ($7.09). As a result, the related
consideration transferred was ¥2,466 million ($20,676 thousand).
ii)Subscription of disposed treasury shares
The Company subscribed for 4,300,000 shares of disposed treasury shares through a third-party allotment, which is
8.23% of the total number of issued shares of Senshukai after the issuance of new shares described below (shareof voting rights: 8.24%) at the acquisition price per share of ¥846 ($7.09). As a result, the related considerationtransferred was ¥3,637 million ($30,494 thousand).
iii)Subscription of newly issued shares
The Company subscribed for 4,600,000 shares of newly issued shares through a third-party allotment, which is 8.81%of the total number of issued shares of Senshukai after this issuance of new shares (share of voting rights: 8.82%) at
the acquisition price per share of ¥846 ($7.09). As a result, the related consideration transferred was ¥3,891 million($32,623 thousand).
(d)Number of shares of the Company newly acquired by Senshukai and proportion of issued shares of the Company held bySenshukai not applicable45

3.Overview of the capital and business alliance partneri)Corporate nameSenshukai Co., Ltd.

ii)Address

1-8-9 Doshin, Kita-ku, Osakaiii)Name and title of representative

Michio Tanabe, Representative Directoriv)Businesses

Catalogue business, buyer s club business, bridal
business, corporate business and other businessesv)Capital¥22,304 million ($187,004 thousand)

4.Overview of share acquisition counterparties(a)Corporate informationi)Corporate name

Sawzan, Ltd.

ii)Address

1-5-12 Hobai, Takarazuka-shi, Hyogoiii)Name and title of representative

Kaoru Takai, Representative Directoriv)BusinessCasualty insurance agency businessv)Capital¥11,790 thousand ($99 thousand)(b)Names and locations of individuals
Kaoru Takai(Takarazuka, Hyogo)

Kazuyo Takai(Takarazuka, Hyogo)

Eiko Yukimachi(Suginami-ku, Tokyo)

Yukari Yukimachi(Suginami-ku, Tokyo)

5.Number of shares acquired, consideration transferred, and numbers of shares held before and after the acquisitioni)Number of shares held before
the acquisition

Nilii)Number of shares acquired

11,815,000 shares(Number of voting rights: 118,150)

iii)Consideration transferred¥10,246 million($85,906 thousand),including advisory fees, etc.

iv)Number of shares held after
the acquisition

11,815,000 shares(Number of voting rights: 118,150)(share of voting rights: 22.65%)

6.Schedule of the capital and business alliance

46i)Date of resolution by the Board of Directors

April 17, 2015ii)Date of concluding the share transfer agreement andcapital and business alliance agreement

April 17, 2015iii)Date of execution of the share transfer

April 22, 2015iv)Date of subscription of disposed treasury sharesand newly issued shares

May 7, 2015

(2)Acquisition of treasury stock
For the purposes of enhancing shareholder returns, implementing ﬂexible capital policy and improving of capital eﬃciency,
according to Section 459.1 of the Law and Section 39 of the Articles of Incorporation, the Company resolved at the meetingof the Board of Directors held on April 17, 2015 to acquire up to 3,400,000 shares of treasury stock for a maximum total
amount of ¥5,000 million ($41,922 thousand) through the market based on the related trust agreement during the period from
April 20, 2015 through July 31, 2015.
(3)Distribution of retained earnings
The following distribution of retained earnings of the Company, which has not been reflected in the accompanying
consolidated financial statements for the year ended February 28, 2015, was approved at the meeting of the Board of
Directors held on April 9, 2015:

Cash dividends(¥13.00 = $0.11 per share)(Millions of yen)(Thousands of
U.S. dollars)¥3,432$28,77547