Consolidated Financial Statements
KYUDENKO CORPORATION
Years ended March 31, 2015 and 2014

KYUDENKO CORPORATION
Consolidated Balance Sheet
March 31,
2014
2015
(Millions of yen)

AssetsCurrent assets:
Cash on hand and in banks (Notes 6, 18 and 20)
Trade notes and accounts receivable (Note 18)
Short-term investments (Note 19)
Costs on uncompleted construction contracts
Merchandise
Raw materials and supplies
Deferred tax assets (Note 14)
Other current assets (Note 6)
Allowance for doubtful accounts
Total current assets¥

Non-current assets:
Property, plant and equipment:
Buildings and structures (Note 13)
Machinery, vehicles, tools, furniture and fixtures(Note 6)
Leased assets
Land
Construction in progress
Accumulated depreciation
Total property, plant and equipment
Intangible assets:
Goodwill (Note 22)
Other intangible assets
Total intangible assets
Investments and other assets:
Investment securities (Notes 6, 18 and 19)
Long-term loans receivable (Note 6)
Asset for retirement benefits (Note 7)
Deferred tax assets (Note 14)
Other (Note 6)
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets¥

21,67974,104
167
9,471
693
578
2,954
4,327
(3)
113,973¥

37,95779,857
197
8,282
1,533
541
3,041
4,376
(4)
135,784

2015(Thousands of
U.S. dollars)(Note 4)$

315,865
664,538
1,645
68,926
12,7594,504
25,311
36,421(38)
1,129,933

61,341

62,131

517,028

26,862
5,630
27,354667(43,890)
77,96630,8796,073
27,863
1,225(46,601)
81,571

256,965
50,544
231,866
10,194(387,794)
678,805

2,389
1,359
3,749

1,408
1,189
2,598

11,7239,900
21,62423,655
295
103
3,725
3,150
(894)
30,037111,754
225,727¥

29,768
247,715
297
2,473
235
1,961
2,380
19,806
3,080
25,631(773)(6,436)34,987291,152
119,158
991,582
254,942 $ 2,121,515

3

March 31,
2014
2015
(Millions of yen)

Liabilities and net assets
Current liabilities:
Trade notes and accounts payable (Note 18)
Short-term borrowings (Notes 5 and 18)
Income taxes payable (Note 14)
Advances received on uncompleted construction
contracts
Provision for loss on construction contracts
Other current liabilities (Notes 5 and 14)
Total current liabilities¥

Non-current liabilities:
Convertible bond-type bonds with sharesubscription rights (Notes 5 and 18)
Long-term debt (Notes 5 and 18)
Lease obligations (Note 5)
Provision for directors and corporate auditors’
retirement benefits
Liability for retirement benefits (Note 7)
Other non-current liabilities (Notes 8 and 14)
Total non-current liabilities
Total liabilities

66,988
3,425
835

¥

68,445
3,282
5,140

2015
(Thousands of
U.S. dollars)(Note 4)$

569,571
27,31342,773

13,6961,394
6,012
92,353

16,166449
6,848
100,332

134,532
3,741
56,991
834,923

18,961
1,977

10,00018,047
1,758

83,215150,181
14,635154
16,182
1,660
38,935
131,289228
18,045
1,871
49,951150,284

1,897
150,165
15,577
415,672
1,250,596

7,901
7,889
76,691(19)
92,462

7,901
7,889
85,537(48)
101,279

65,75565,653
711,800(407)
842,801

1,578

4,012

33,389Commitments and contingencies (Note 16)
Net assets (Note 9):
Shareholders’ equity:
Common stock:
Authorized – 250,000,000 shares
Issued – 66,039,535 shares in 2014 and 2015
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments(Note 21)Translation adjustments
Retirement benefit liability adjustments (Note 7)
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets

¥

－
153
(1,435)296
1,679
94,438
225,727

¥

(82)
(690)
528
4,399
(3,119)(25,961)
1,338
11,136
2,040
16,980104,658
870,918
254,942 $ 2,121,515

See notes to consolidated financial statements.

4

KYUDENKO CORPORATION
Consolidated Statement of Income
Year ended March 31,
2014
2015
2015
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
Net sales:
Construction contracts (Notes 10 and 22)¥
Other
Total net sales
Cost of sales:
Construction contracts
Other
Total cost of sales
Gross profit:
Construction contracts
Other
Total gross profit
Selling, general and administrative expenses (Notes 11 and
12)Operating income (Note 22)
Non-operating income (expenses):
Interest income
Dividend income
Interest expenses
Equity in earnings of affiliates
Rent income
Insurance and dividend income
Extra retirement payments
Other, net
Ordinary income
Special gains (losses):Gain on sales of non-current assets
Loss on disposal and sales of non-current assets
Gain on sales of investment securities
Gain on bargain purchase
Loss on valuation of investment securities
Loss on write down of uncompleted real estatedevelopment projects
Impairment loss (Notes 13 and 22)
Other, net
Income before income taxes and minority interests
Income taxes (Note 14):
Current
DeferredIncome before minority interests
Minority interests¥
Net income

267,757
11,552
279,310¥

301,916
14,033315,949$ 2,512,408
116,779
2,629,187

243,746
10,084
253,831

266,738
12,100278,838

2,219,672
100,694
2,320,366

24,0101,467
25,47835,178
1,932
37,111

292,736
16,084
308,821

18,342
7,136

20,353
16,757

169,371
139,449

67
710
(398)
192
335
418
(84)
530
8,908

76
283
(386)
234
349
364
(62)
545
18,163638
2,363(3,217)
1,952
2,909
3,030
(517)
4,538
151,147

35
(92)
363
37
(47)

186
(90)
328
232
(9)

1,551
(753)
2,732
1,936
(77)

(1,072)
(225)
13
7,919

－
－
－
18,811－－－
156,537

1,215
2,939
3,764
83
3,681

5,453
1,710
11,646
128
11,51745,382
14,237
96,917
1,071
95,845¥$

See notes to consolidated financial statements.
5

KYUDENKO CORPORATION
Consolidated Statement of Comprehensive Income

Income before minority interests
Other comprehensive income (Note 15):
Unrealized holding gain (loss) on securities
Translation adjustments
Retirement benefit liability adjustments
Share of other comprehensive income of affiliates
accounted for by the equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:Shareholders of Kyudenko Corporation
Minority interests¥

Year ended March 31,
2014
2015
2015
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
3,764¥
11,646 $96,917
209
204
－

2,439
424
(1,684)20,303
3,529(14,014)

¥

(2)
411
4,175

¥

(84)
1,095
12,741 $

(704)
9,113
106,031

¥
¥

4,055
120

¥
¥

12,559182

104,515
1,516$$

See notes to consolidated financial statements.

6

KYUDENKO CORPORATION
Consolidated Statement of Changes in Net Assets
For the year ended March 31, 2014 and 2015:
Shareholders’ equity

Accumulated other comprehensive income
Total
Unrealized

Unrealized

accumulated

Total

holding gain

gain (loss)

Retirement

other

CommonCapitalRetained

Treasuryshareholders’(loss) on

from hedging

Translation

benefit liability

comprehensive

Minority

Total

stock

surplusearnings

stock

equitysecurities

instruments

adjustments

adjustments

incomeinterests

net assets¥¥ 95,950(Millions of yen)
Balance at April 1, 2013

¥

7,901

¥

7,889

¥ 82,260¥(4,420) ¥ 93,631

¥

1,376

–

¥

¥

(51)

–

¥

¥

1,325

994

Cash dividends paid

(730)

(730)

(730)

Net income

3,681

3,681

3,681

(4,119)(4,119)(4,119)

8,519

–

–

–

–

Purchase of treasury stock
Retirement of treasury(8,519)stock
Transfer to capital surplus

8,519(8,519)

202

–

204

(1,435)(1,028)

685

(343)

–

–

(5,568)4,400(1,168)

202

–

204

(1,435)(1,028)685(1,511)

7,901

7,889

76,691(19)

92,462

1,578

–

153

(1,435)

296

1,679

94,438

7,901

7,889

75,207(19)

90,978

1,578

–

153

(1,435)

296

1,679

92,954from retained earnings
Net changes in items otherthan those inshareholders’ equity
Total changes during the year
Balance at March 31, 2014
Balance at April 1, 2014
Cumulative effects of(1,483)

accounting changes (Note 3)
Restated balance(1,483)(1,483)

Cash dividends paid

(1,188)(1,188)(1,188)Net income

11,517

11,517

11,517

(28)

(28)

(28)

Purchase of treasury stock
Net changes in items otherthan those in

2,433

shareholders’ equity–

Total changes during the year
Balance at March 31, 2015

¥

7,901

¥

–

10,3297,889¥ 85,537(28)¥

10,300(48) ¥ 101,279

(82)

2,433
¥

4,012

375

(82)
¥

(82)

(1,684)

375
¥

528

1,041

(1,684)¥(3,119)

361

1,041
¥

1,338

¥

1,402

361

11,7032,040¥ 104,658

For the year ended March 31, 2015:
Shareholders’ equity

Accumulated other comprehensive income
Total
Unrealized

Unrealized

accumulated

Total

holding gain

gain (loss)

Retirement

other

CommonCapitalRetained

Treasuryshareholders’(loss) on

from hedging

Translation

benefit liability

comprehensive

Minority

Total

stock

surplusearnings

stock

equitysecurities

instruments

adjustments

adjustments

incomeinterests

net assets$ 65,755$ 65,653$ 638,189$ 13,974$ 785,874(Thousands of U.S. dollars) (Note 4)
Balance at April 1, 2014$(166) $ 769,432$ 13,138

$

–

$

1,276

$ (11,947)

$

2,467

Cumulative effects of(12,347)

accounting changes (Note 3)

65,755

Restated balance

65,653(12,347)

625,842(166)

757,085(12,347)–

13,138

1,276(11,947)2,467

13,974

773,527

Cash dividends paid

(9,888)(9,888)(9,888)Net income

95,845

95,845

95,845

(241)

(241)

(241)

20,250

(690)

3,123

(14,014)

8,669

3,005

11,675(241)

85,716

20,250

(690)

3,123

(14,014)

8,669

3,005

97,391(407) $ 842,801$ 33,389

4,399$ ( 25,961)$ 11,136$ 16,980$ 870,918

Purchase of treasury stock
Net changes in items otherthan those inshareholders’ equity–

Total changes during the year
Balance at March 31, 2015$

65,755 $–85,95765,653$ 711,800

$

$

(690)

$

See notes to consolidated financial statements.
7

KYUDENKO CORPORATION
Consolidated Statement of Cash Flows
Year ended March 31,
2014
2015
2015
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
Cash flows from operating activities
Income before income taxes and minority interests¥
Depreciation and amortization
Impairment loss
Loss on write down of uncompleted real estate development
projects
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in liability for retirement benefits andprovision for directors and corporate auditors’ retirement
benefits
Increase (decrease) in provision for loss on construction
contracts
Interest and dividend income
Interest expenses
Foreign exchange loss (gain)
Equity in earnings of affiliates
Loss (gain) on sales of property, plant and equipment
Loss on retirement of property, plant and equipment
Loss on valuation of investment securities
Loss (gain) on sales of investment securities
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in costs on uncompleted construction
contracts
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in advances received on uncompleted
construction contracts
Increase (decrease) in long-term accounts payable
Increase (decrease) in consumption taxes payable(receivable)
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid¥
Net cash provided by operating activities

7,919
4,305
225

¥

18,811
5,262－$

156,537
43,788
－

1,072
(35)

－
(125)

－
(1,043)(6,780)(2,996)(24,933)

854
(778)
398
(28)
(192)
1
56
47
(363)
2,120

(966)
(360)
386
(105)
(234)
(190)
55
9
(328)
(5,512)(8,041)(3,001)
3,217(874)(1,952)(1,583)459
77(2,732)(45,873)(1,915)
(485)
3,830

1,735
(801)
1,147

14,440(6,669)
9,545

5,326
(168)

1,676
16

13,954141(1,060)(510)
13,840
749
(398)

456
3,799
2,406
20,023
20,342
169,280
365
3,037
(386)
(3,217)(1,203)(10,017)
19,117 $ 159,083(1,424)
12,767¥

8

Year ended March 31,
2014
2015
2015
(Millions of yen)(Thousands of
U.S. dollars)(Note 4)
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of subsidiaries’ shares resulting in changes inscope of consolidation (Note 20)
Payments of long-term loans receivableCollection of long-term loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of convertible bond-type bonds
with share subscription rights
Purchase of treasury stock
Proceeds from stock issuance to minority shareholders
Repayments to minority shareholders
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 20)

¥

(10)
457
(12,815)292(1,356)
1,547

¥

$

(16,826)
83(56,735)
2,922(33,251)
18,142(2,147)－59(483)(14,456)

(526)
(30)
101
(1,067)(11,816)(4,384)(249)
848(8,881)(98,331)(6,731)
17,110
(790)

(274)
1,760
(2,556)(2,287)
14,645(21,272)－(4,119)
219
－
(733)
(2)
(939)
4,012

10,000(28)
9(23)(1,190)(2)(1,011)
6,680

83,215
(241)
74
(192)
(9,910)(23)(8,413)55,595

174
2,498

282
14,263
21,66835,931

2,348
118,695
180,311$ 299,006

19,169¥(2,022)
10(6,817)351(3,995)
2,180

21,668¥

See notes to consolidated financial statements.

9

KYUDENKO CORPORATION
Notes to Consolidated Financial Statements
1.

Basis of Presentation

KYUDENKO CORPORATION (the “Company”) and its domestic subsidiaries maintaintheir accounting records and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, and its foreign subsidiaries maintaintheir books of account in conformity with those of their countries of domicile.
The accompanying consolidated financial statements of the Company and consolidated
subsidiaries are prepared on the basis of accounting principles generally accepted in Japan,
which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments andExchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conformto the current year’s presentation.
As permitted by the Financial Instruments and Exchange Act, amounts of less than one
million yen have been omitted. As a result, the totals shown in the accompanying
consolidated financial statements (both in yen and U.S. dollars) do not necessarily agreewith the sum of the individual amounts.
2.

Summary of Significant Accounting Policies(a) Principles of consolidation and accounting for investments in unconsolidated
subsidiaries and affiliates
The accompanying consolidated financial statements include the accounts of theCompany and any significant companies controlled directly or indirectly by theCompany.
Investments in companies over which the Company exercises significant influence interms of their operating and financial policies have been accounted for by the equity
method.
As of March 31, 2015, the numbers of consolidated subsidiaries and affiliates
accounted for by the equity method were 40 and 4 (36 and 3 in 2014). During theyear ended March 31, 2015, the Company acquired Kodera Dengyo Co. andKakusokukeisou Co. and established Kagoshima Solar Firm Co. and Kyudenko South
East Asia Pte. Ltd., which were newly included in the scope of consolidation. The
Company also invested in Oita Hiyoshibaru Mega Solar Co., which was newly
accounted for by the equity method.
The financial statements of Kakusokukeisou Co. are consolidated by using thefinancial statements as of December 31 which is prepared solely for consolidation
purposes. Kyulien Environment Improving Co., Ltd, Asia Projects Engineering Pte.
Ltd. and Kyudenko South East Asia Pte. Ltd. are consolidated using their financial
statements as of their respective fiscal year end, which falls on December 31 andnecessary adjustments are made to their financial statements to reflect any significant
transactions from January 1 to March 31. Kodera Dengyo Co. is consolidated using
the financial statements as of the fiscal year end, which falls on January 31 andnecessary adjustments are made to the financial statements to reflect any significant
transactions from February 1 to March 31.
10All significant intercompany balances and transactions have been eliminated inconsolidation.
Investments in subsidiaries and affiliates which are not consolidated or accounted forby the equity method are carried at cost or less. Where there has been a permanent
decline in the value of such investments, the Company has written down theinvestments.
Differences between the cost and the underlying net equity at fair value of investments
in consolidated subsidiaries and in companies which are accounted for by the equity
method (goodwill) have been amortized by the straight-line method over periods notexceeding 20 years. However, immaterial amounts of goodwill and negative
goodwill are charged or credited to income in the year of acquisition.
(b) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at
the rates of exchange in effect at the balance sheet date, and differences arising fromthe translation are included in the consolidated statement of income.
The balance sheet accounts and income statement accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange in effect at the balance
sheet date, except for the components of net assets excluding minority interests which
are translated at their historical exchange rates. Differences arising from thetranslation are presented as translation adjustments and minority interests in the
consolidated financial statements.
(c) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks which can bewithdrawn at any time and short-term investments with a maturity of three months orless when purchased which can easily be converted to cash and are subject to little riskof change in value.
(d) Inventories
Costs on uncompleted construction contracts are stated at cost by the specificidentification method.
Merchandise and raw materials and supplies are stated principally at the lower of costor market, cost being determined principally by the periodic average method.
(e) Short-term investments and investment securities
Securities other than equity securities issued by subsidiaries and affiliates areclassified into three categories: trading, held-to-maturity or other securities. Trading
securities are carried at fair value and held-to-maturity securities are carried atamortized cost. Marketable securities classified as other securities are carried at fairvalue with changes in unrealized holding gain or loss, net of the applicable income
taxes, included directly in net assets. In cases where an embedded derivative in acompound financial instrument cannot be separately measured, the entire compound
financial instrument is measured at fair value with changes in value charged or
credited to income. Non-marketable securities classified as other securities arecarried at cost except for investments in limited partnerships that are accounted for by
the equity method. Cost of securities sold is determined by the moving average11method.
(f)

Property, plant and equipment and depreciation (excluding leased assets)
Depreciation of property, plant and equipment (excluding leased assets) of theCompany and its consolidated subsidiaries is calculated principally by the
declining-balance method based on the estimated useful lives and the residual value inaccordance with the Corporation Tax Law of Japan, except for certain buildings of theCompany and domestic consolidated subsidiaries, which are depreciated by thestraight-line method.
Significant renewals and additions are capitalized at cost. Maintenance and repairs
are charged to income.

(g) Intangible assets (excluding leased assets)
Intangible assets (excluding leased assets) are amortized by the straight-line method.
Computer software for internal use is amortized by the straight-line method over theestimated useful life of five years.
(h) Leases
Non-cancellable lease transactions that transfer substantially all risks and rewards
associated with the ownership of assets are accounted for as finance leases. All otherlease transactions are accounted for as operating leases and related payments arecharged to income as incurred.
(i)

Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience for normal
receivables and on an estimate of collectability of receivables from companies infinancial difficulty.

(j)Allowance for investment loss
Allowance for investment loss is provided at an amount considered to be appropriate
based on an evaluation of the financial condition of the individual investees. The
allowance is directly deducted from each investment account.

(k) Provision for loss on construction contracts
Provision for loss on construction contracts is provided with respect to construction
projects for which anticipated future losses can be reasonably estimated.
(l)Retirement benefits
Accrued retirement benefits and prepaid pension cost for employees have beenrecorded mainly at the amount calculated based on the retirement benefit obligationand the fair value of the pension plan assets as of the balance sheet date. The
retirement benefit obligation for employees is attributed to each period by the benefit
formula method.
12

Actuarial gain or loss is amortized in the year following the year in which the gain orloss is recognized primarily by the straight-line method over periods within the
average remaining years of service of the employees. Prior service cost is being
amortized as incurred by the straight-line method over periods within the averageremaining years of service of the employees.
All the consolidated subsidiaries use a simplified method for calculating retirement
benefit expenses and liabilities based on the assumption that the benefits payable,
which are calculated as if all eligible employees voluntarily terminated theiremployment at fiscal year-end, approximate the retirement benefit obligation at
year-end.
In addition, accrued retirement benefits for directors and corporate auditors of certain
consolidated subsidiaries are provided at the amount payable at year-end in accordancewith each company’s internal regulations. Retirement benefit expenses for directors
and corporate auditors are charged to income when the general shareholders’ meeting
approves the resolutions for the payments of those benefits.
(m) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial
statements with respect to the differences between the financial reporting and tax
bases of the assets and liabilities, and were measured using the enacted tax rates andlaws which will be in effect when the differences are expected to reverse.
(n) Research and development costs
Research and development costs are charged to income as incurred.
(o) Recognizing revenues and costs of construction contracts
Revenues and costs of construction contracts for which contract revenues, contract
costs and 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 continues to be applied for construction contracts for which thepercentage-of-completion cannot be reliably estimated.
(p) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive ofconsumption taxes.
(q) Derivative financial instruments
The Company and certain affiliates enter into various derivative transactions in orderto manage certain risks arising from adverse fluctuations in foreign currency exchange
rates and interest rates. Derivatives financial institutions are carried at fair value withchanges in unrealized gain or loss charged or credited to income, except for thosewhich meet criteria for deferral hedge accounting under which unrealized gain or loss
is deferred as a component of net assets.
Deferral hedge accounting is adopted for derivatives which qualify as hedges, underwhich unrealized gain or loss is deferred. Hedging instruments are derivative13

transactions and hedged items are primarily interest payments on long-term debt(including foreign currency interest payments) and long-term debt denominated inforeign currencies. Hedge effectiveness is not assessed if the substantial terms andconditions of the hedging instruments and the hedged items are the same. With
regard to interest rate swaps and currency swaps which meet certain conditions, theCompany applies the special treatment (short-cut method) assuming no ineffectivenessin the hedging relationship between hedged items and hedging instruments.
The Company also has compound financial instruments with embedded derivatives aspart of its surplus fund management.
(r) Impairment of fixed assets
The Company and its consolidated subsidiaries base their asset grouping for assessing
impairment losses on fixed assets on their management accounting categories (eachbranch of the Company and each consolidated subsidiary). Leased assets and idle
assets are separately evaluated for impairment.
(t) Standards issued but not yet effective
Accounting standards for business combinations
On September 13, 2013, the Accounting Standards Board of Japan (ASBJ) issued“Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21),
“Revised Accounting Standard for Consolidated Financial Statements” (ASBJ
Statement No. 22), “Revised Accounting Standard for Business Divestitures (ASBJ
Statement No. 7), “Revised Accounting Standard for Earnings Per Share” (ASBJ
Statement No. 2), “Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ GuidanceNo. 10), and “Revised Guidance on Accounting Standard for Earnings Per Share”(ASBJ Guidance No. 4).
1) Overview
Under these revised accounting standards, the accounting treatment for any changes ina parent’s ownership interest in a subsidiary when the parent retains control over thesubsidiary and the corresponding accounting for acquisition-related costs were revised.
In addition, the presentation method of net income was amended, the reference to“minority interests” was changed to “non-controlling interests,” and accounting
treatment for adjustments to provisional amounts during a measurement period was
also changed.
2) Scheduled date of adoption
The Company expects to adopt these revised accounting standards and guidance fromthe beginning of the fiscal year ending March 31, 2016.
3) Impact of adopting revised accounting standards and guidance
The Company is currently evaluating the effect of adopting these revised standards on
its consolidated financial statements.

14

3.

Accounting Changes

Application of accounting standards for retirement benefits
The Company and its domestic subsidiaries adopted Section 35 of “Accounting Standard
for Retirement Benefits” (ASBJ Statement No. 26, May 17, 2012; hereinafter the“Accounting Standard”) and the main clause of Section 67 of “Guidance on AccountingStandard for Retirement Benefits” (ASBJ Guidance No. 25, March 26, 2015; hereinafter
the “Guidance”) effective from April 1, 2014. As a result, the methods for calculating theretirement benefit obligation and service cost have been revised in the following respects:
the method for attributing projected benefits to each period has been changed from thestraight-line method to the benefit formula method, and the method for determining thediscount rate has been changed from using a bond maturity approximate to the estimatedaverage remaining years of service of the eligible employees as a basis of determining thediscount rate to using a single weighted-average discount rate which reflects the expected
timing and amount of benefit payments.
In accordance with the transitional treatment provided in Section 37 of the AccountingStandard, the cumulative effect of changing the methods for calculating the retirement
benefit obligation and service cost was recognized by adjusting retained earnings at the
beginning of the fiscal year ended March 31, 2015.
As a result, liability for retirement benefits increased by ¥2,296 million ($19,107 thousand)and retained earnings decreased by ¥1,483 million ($12,347 thousand) at the beginning of
the fiscal year ended March 31, 2015. The effect of this change on operating income,ordinary income and income before income taxes and minority interests for the fiscal year
ended March 31, 2015 was immaterial.
The effect of this change on per share amounts is described in “17. Amounts Per Share” ofthe notes to consolidated financial statements.”
4.

U.S. Dollar Amounts

The accompanying consolidated financial statements are expressed in yen, and solely forthe convenience of the readers, have been translated into U.S. dollars at the rate of¥120.17= U.S. $1.00, the approximate rate of exchange prevailing at March 31, 2015.
This translation should not be construed as a representation that all amounts shown could
be converted into U.S. dollars at such rate.
5. Short-Term Borrowings, Long-Term Debt, Convertible Bond-type Bonds with
Share Subscription Rights and Lease Obligations
The annual weighted-average interest rates applicable to short-term borrowings (excluding
the current portion of long-term debt) were 0.841% and 1.242% at March 31, 2014 and2015, respectively.

15

Long-term debt, convertible bond-type bonds with share subscription rights and leaseobligations at March 31, 2014 and 2015 consisted of the following:

Loans from banks due through 2029
with interest rates ranging from 0.25%
to 1.49%¥
Convertible bond-type bonds with sharesubscription rights (non-interest
bearing)
Lease obligations due through 2024
Less current portion
¥

2014
2015
(Millions of yen)

2015
(Thousands of
U.S. dollars)

21,400－2,932
24,332(3,394)20,938¥20,603$ 171,454¥

10,0002,609
33,213(3,407)29,806

83,21521,715276,385(28,353)$ 248,032

The aggregate annual maturities of long-term debt, convertible bond-type bonds with sharesubscription rights and lease obligations are summarized as follows:Year ending March 31,
2016
2017
2018
2019
2020
2021 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)

¥

$

3,407
3,165
7,020
16,097707
2,814
33,213¥
6.

28,353
26,34558,422
133,956
5,885
23,423276,385$

Pledged Assets

The assets pledged as collateral for long-term debt of the Company’s investees involved in
the renewable energy generation business and/or PFI business at March 31, 2014 and 2015
were as follows:
2014
2015
(Millions of yen)
Cash on hand and in banks
Other current assets – short-tem loans
receivable
Machinery, vehicles, tools, furniture andfixtures
Investment securities
Long-term loans receivable
Investments and other assets – other
Total

¥

¥

42

¥

2015
(Thousands of
U.S. dollars)

197

$

1,646

33

9

79

1,584
336
121
15
2,133

1,399
403
111
15
2,136

11,646
3,356
929
124
17,782

¥

$

16

7.

Retirement Benefit Plans

The Company has defined contribution plans, and the Company and its consolidated
subsidiaries also have defined benefit plans (corporate pension plans and lump-sum
payment plans) covering substantially all employees who are entitled to lump-sum or
annuity payments, the amounts of which are determined by reference to their basic rates ofpay, length of service, and the conditions under which termination occurs.
The Company and its consolidated subsidiaries may pay additional retirement benefits
under certain circumstances.
For all the defined benefit plans of consolidated subsidiaries, liabilities and expenses for
retirement benefits are calculated using the simplified method.
(a) Defined benefit plans
1) The changes in the retirement benefit obligation for the years ended March 31, 2014
and 2015 were as follows:

Balance at the beginning of the year¥
Cumulative effect of accounting changes
Restated balance at the beginning of theyear
Service cost
Interest cost
Actuarial gain and loss
Retirement benefit paid
Prior service cost¥
Balance at the end of the year

2014
2015
(Millions of yen)

2015
(Thousands of
U.S. dollars)

40,328－$314,769
19,107

40,121
1,362
530
893
(4,552)
3,855
42,211 $

333,876
11,3384,411
7,432(37,881)32,086351,263¥

40,328
1,191
806
(78)
(4,422)－37,825 ¥37,8252,2962) The changes in the plan assets for the years ended March 31, 2014 and 2015 were as
follows:
2014
2015(Millions of yen)
Balance at the beginning of the year
Expected return on plan assets
Actuarial gain and loss
Contributions by the Company
Retirement benefit paid
Other
Balance at the end of the year¥¥

17,662 ¥
618
694
8,547
(4,401)
50
23,171 ¥2015(Thousands of
U.S. dollars)

23,171 $
463
1,758
4,474
(4,314)49
25,602 $192,823
3,856
14,62937,237(35,903)408
213,053173) The following table sets forth the funded status of the plans and the amounts recognizedin the consolidated balance sheet at March 31, 2014 and 2015 for the Company’s andits consolidated subsidiaries’ defined benefit plans:
2014
2015
(Millions of yen)
Funded retirement benefit obligation
Plan assets at fair value¥

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

2015(Thousands of
U.S. dollars)

37,825 ¥(23,171)
14,654－42,211 $ 351,263(25,602)(213,053)
16,608138,209－－

14,654

16,608138,209

14,654－

16,608－138,209－

14,654¥

16,608$138,2094) The components of retirement benefit expenses for the years ended March 31, 2014 and2015 were as follows:
2014
2015
(Millions of yen)
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain and loss
Amortization of prior service cost
Other
Retirement benefit expenses¥¥

1,141 ¥
806
(618)
1,631
(1,029)84
2,016 ¥

2015
(Thousands of
U.S. dollars)

1,313 $
530
(463)
1,590
(978)
377
2,370 $

10,9294,411(3,856)
13,238(8,141)
3,143
19,724

5) The components of retirement benefit liability adjustments included in othercomprehensive income (before tax effect) for the years ended March 31, 2014 and 2015
were as follows:
2014
2015
(Millions of yen)
Prior service cost
Actuarial gain and loss
Total

¥
¥

－
－
－

¥
¥

2015
(Thousands of
U.S. dollars)(4,834) $ (40,227)
2,455
20,435(2,378) $ (19,792)

6) The components of retirement benefit liability adjustments included in accumulated
other comprehensive income (before tax effect) as of March 31, 2014 and 2015 were as
follows:
2014
2015(Millions of yen)
Unrecognized prior service cost
Unrecognized actuarial gain and loss
Total

¥
¥

(4,662) ¥6,884
2,221 ¥

171
4,428
4,600

2015
(Thousands of
U.S. dollars)$
1,425
36,854$38,28018

7) The fair value of plan assets, by major category, as a percentage of total plan assets at
March 31, 2014 and 2015 were as follows:
2014
43%
32%
25%
100%

Bonds
Stocks
Other
Total

2015
46%
30%
24%
100%

The expected return on assets has been estimated based on the anticipated allocation toeach asset class and the expected long-term returns on assets held in each category.
8) Weighted average assumptions used in accounting for the above plans were as follows:
2014
2.0%
3.5%

Discount rates
Expected rates of return on plan assets

2015
1.1%
2.0%

(b) Defined benefit plans accounted for using the simplified method
1) The changes in liability for retirement benefits calculated using the simplified method
for the years ended March 31, 2014 and 2015 were as follows:
2014
2015
(Millions of yen)
Balance at the beginning of the year
Retirement benefit expenses
Retirement benefit paid
Contributions
Other
Balance at the end of the year¥¥

1,454 ¥
161
(68)
(329)
205
1,424 ¥

2015
(Thousands of
U.S. dollars)

1,424 $
135
(111)
(336)
88
1,200 $

11,8501,128(928)(2,796)739
9,9932) The following table sets forth the funded status of the plans accounted for using thesimplified method and the amounts recognized in the consolidated balance sheet atMarch 31, 2014 and 2015 for the defined benefit plans:
2014
2015
(Millions of yen)
Funded retirement benefit obligation
Plan assets at fair value¥

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

3,745(2,523)
1,222
201

¥

2015
(Thousands of
U.S. dollars)

4,024 $
(3,135)889
311

33,490(26,092)
7,398
2,595

1,424

1,200

9,993

1,527
(103)

1,436
(235)

11,955(1,961)

1,424

¥

1,200

$

9,993

3）Retirement benefit expenses calculated using the simplified method amounted to ¥161
million and ¥135 million ($1,128 thousand) at March 31, 2014 and 2015, respectively
19(c) Defined contribution plans
Contributions made to defined contribution plans by the Company and its consolidated
subsidiaries for the years ended March 31, 2014 and 2015 were ¥353 million and ¥342
million ($2,851 thousand), respectively.
8.

Asset Retirement Obligations

Asset retirement obligations mainly represent future obligations to restore leased property
to its original condition associated with the removal of the consolidated subsidiaries’
renewable energy generation facilities.
The asset retirement obligations are measured at the present value of the future liabilities
applying discount rates of 1.416% to 1.994% corresponding with 17 years for the estimateduseful life of those facilities from the acquisition date.
The following table indicates the changes in asset retirement obligations for the years ended
March 31, 2014 and 2015:
2014
2015
(Millions of yen)
Balance at the beginning of the year¥
Increase due to acquisition of fixed assets
Adjustment due to passage of time¥
Balance at the end of the year
9.

476
212
10
699

¥
¥

699
121
14
835

2015
(Thousands of
U.S. dollars)
$
$

5,819
1,012
116
6,949

Net Assets

Under the Corporate Law of Japan (the “Corporate Law”), the entire amount paid for new
shares is required to be designated as common stock, in principle. However, a company
may designate an amount not exceeding 50% of the proceeds of the issuance of new sharesas additional paid-in-capital, which is included in capital surplus.
The Corporate Law provides that an amount equal to 10% of the amount to be distributed
as distributions of capital surplus (other than capital reserve) and retained earnings (otherthan legal reserve) be transferred to capital reserve and legal reserve, respectively, until thesum of capital reserve and legal reserve equals 25% of the stated common stock. Such
distributions can be made at any time by resolution of the shareholders or by the Board of
Directors, if certain conditions are met, but neither capital reserve nor legal reserve isavailable for distributions.

20

(a) Shares issued and outstanding / Treasury shares
For the year ended March 31, 2014:
Number ofshares at April
Types of shares
1, 2013
Shares issued:
Common stock
Treasury stock:
Common stock

Increase
Decrease(Number of Shares)

Number ofshares at
March 31, 2014

83,005,819－

16,966,284

66,039,535

9,975,440

7,027,202

16,966,284

36,358

Details of the increase and decrease are as follows:
Increase due to purchase of shares
7,000,000
Increase due to purchase of shares of less than one standard unit
27,202
Decrease due to retirement of treasury stock
16,966,284
For the year ended March 31, 2015:
Number ofshares at April
Types of shares
1, 2014
Shares issued:
Common stock
Treasury stock:
Common stock

Increase
Decrease(Number of Shares)

Number ofshares at
March 31, 2015

66,039,535－－

66,039,535

36,35825,072－

61,430Details of the increase are as follows:
Increase due to purchase of shares of less than one standard unit(a)(b) Share subscription rights

25,072For the year ended March 31, 2015

Company
Parent company

Description
2nd unsecured

Type ofsharesCommon stock

Number of sharessubject to share subscription rights
At April 1,
At March
2014
Increase
Decrease
31, 2015(Number of Shares)－ 5,452,562－ 5,452,562

convertiblebond-type bonds
with sharesubscription rights

1. Number of shares subject to share subscription rights represents the number of shares to beissued upon exercise of the share subscription rights.
2. The increase during the year was due to the issuance of the 2nd unsecured convertiblebond-type bonds with share subscription rights. The share subscription rights are included in
the convertible bond-type bonds with share subscription rights in the consolidated balance sheet.
3. The exercise period for the 2nd unsecured convertible bond-type bonds with share subscription
rights has not commenced as of March 31, 2015.

21

(c) Dividends
1) Dividends paid
For the year ended March 31, 2014:
Total
dividends(Millions ofyen)
Resolution: Meeting of the Boardof Directors on April 26, 2013
Cash dividends (¥5 per share)¥
Resolution: Meeting of the Boardof Directors on October 30, 2013
Cash dividends (¥5 per share)¥

Cut-off
date

Effective
date

365

March 31,2013

June 6,2013

365

September
30, 2013

December2, 2013

For the year ended March 31, 2015:
Total dividends(Thousands(Millions ofof U.S.
yen)
dollars)
Resolution: Meeting of the Boardof Directors on April 28, 2014
Cash dividends (¥8 ($0.07) per
share)¥
Resolution: Meeting of the Boardof Directors on October 30, 2014
Cash dividends (¥10 ($0.08) per
share)¥

Cut-off
date

Effective
date

528 $

4,395

March 31,2014

June 6,
2014

660 $

September
5,492
30, 2014

December
1, 20142) Dividends with the cut-off date in the year ended March 31, 2014 and the effective
date in the year ended March 31, 2015:

Total
dividends(Millions ofyen)
Resolution: Meeting of the Boardof Directors on April 28, 2014
Cash dividends (¥8 per share)
Source of dividends: Retained
earnings¥

Cut-off
dateMarch 31,528
2014

Effective
date

June 6,2014

22

Dividends with the cut-off date in the year ended March 31, 2015 and the effective
date in the year ending March 31, 2016:

Total dividends(Thousands(Millions ofof U.S.
yen)
dollars)
Resolution: Meeting of the Boardof Directors on April 28, 2015
Cash dividends (¥15 ($0.12) per
share)
Source of dividends: Retained
earnings

¥

989 $

8,237

Cut-off
date

Effective
date

March 31,2015

June 5,2015

10. Net Sales from Construction Contracts Recognized by Percentage-of-Completion
MethodNet sales from construction contracts recognized by the percentage-of-completion method
for the years ended March 31, 2014 and 2015 amounted to ¥100,264 million and ¥140,766
million ($1,171,392 thousand), respectively.
11. Selling, General and Administrative Expenses
Major items included in selling, general and administrative expenses for the years ended
March 31, 2014 and 2015 were as follows:
2014
2015
(Millions of yen)
Salaries and wages
Retirement benefit expenses
Provision for directors andcorporate auditors’ retirement
benefits
Provision for bonuses to directors
and corporate auditors
Depreciation and amortization

¥

7,866
429

¥

2015
(Thousands of
U.S. dollars)

8,283
510

$

68,929
4,244

52

55

461

10
955

12
875

107
7,284

12. Research and Development Costs
Research and development costs included in cost of sales and selling, general andadministrative expenses for the years ended March 31, 2014 and 2015 amounted to ¥313
million and ¥288 million ($2,402 thousand), respectively.

2313. Impairment Loss
Information regarding impairment loss for the years ended March 31, 2014 and 2015 is asfollows:
For the year ended March 31, 2014:
Classification
Idle assets

Type of asset
Buildings andstructures

Location
Chikushino city,
FukuokaAmount(Millions of
yen)
¥
225

The net book value of the idle assets was reduced to the recoverable amount because theCompany decided to dispose of part of the buildings after considering the future use of theidle land and buildings. The recoverable amount was determined based on the net sales
value.
For the year ended March 31, 2015:
Not applicable.
14. Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated
subsidiaries consist of corporation tax, inhabitants’ taxes and enterprise tax, which, in theaggregate, resulted in statutory rates of approximately 37.75% and 35.38% for the years
ended March 31, 2014 and 2015, respectively. Income taxes of the foreign consolidated
subsidiaries are based generally on the tax rates applicable in their countries ofincorporation.
The reconciliation between the effective tax rates reflected in the consolidated statement ofincome and the effective statutory tax rates for the years ended March 31, 2014 and 2015
was as follows:2014
Effective statutory tax rate
Effect of:
Non-deductible expenses
Non-taxable dividend income and others
Capita levy on inhabitant tax
Valuation allowance
Effect of changes in the statutory tax rate
Other, net
Effective tax rate

2015

37.75%

35.38%

5.76(1.94)
2.09
5.83
1.98
0.99
52.46%

1.97(0.37)
0.89(1.49)
2.17(0.46)
38.09%

24

The significant components of deferred tax assets and liabilities as of March 31, 2014 and2015 were as follows:

Deferred tax assets:
Liability for retirement benefits
Accrued bonuses
Tax loss carryforwards
Unrealized profits on fixed assets
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets¥

Deferred tax liabilities:
Unrealized holding gain on othersecurities
Reserve for advanced depreciation of
fixed assets
Reserve for special depreciation
Other
Total deferred tax liabilities¥
Net deferred tax assets

2014
2015
(Millions of yen)

2015
(Thousands of
U.S. dollars)

5,714
1,992
1,083
365
3,420
12,575(2,388)
10,187

$

¥

5,895
1,986
931
378
3,119
12,310(1,977)
10,33349,056
16,528
7,748
3,153
25,956
102,442(16,452)
85,990(832)(1,840)(15,317)(1,483)(978)(460)(3,754)
6,433(1,343)(1,244)(815)(5,244)
5,088(11,182)(10,356)(6,785)(43,642)
42,347¥$

Note: Net deferred tax assets as of March 31, 2014 and 2015 were reflected in thefollowing accounts in the consolidated balance sheet:
2014
2015
(Millions of yen)
Current assets - deferred tax assets
Investments and other assets - deferred
tax assets
Current liabilities - other current
liabilities
Non-current liabilities - othernon-current liabilities

¥

2,954

¥

2015
(Thousands of
U.S. dollars)
3,041 $
25,311

3,725

2,380

19,806

(1)

(0)

(0)

(246)

(332)

(2,769)Disclosure for the year ended March 31, 2015
With the promulgation of the “Act for Partial Amendment of the Income Tax Act, etc.” andthe “Act for Partial Amendment of the Local Tax Act, etc.” on March 31, 2015, theeffective statutory tax rate used for the calculation of deferred tax assets and deferred tax
liabilities has been changed from 35.38% to 32.83% for the temporary differences expected
to be realized or settled in the fiscal year beginning April 1, 2015 and to 32.06% for the
temporary differences expected to be realized or settled on or after April 1, 2016.
As a result, deferred tax assets, after offsetting deferred tax liabilities, decreased by ¥72
million ($603 thousand), deferred income tax expense increased by ¥407 million ($3,393
thousand), unrealized holding gain on securities increased by ¥188 million ($1,564
thousand), and retirement benefit liability adjustments increased by ¥147 million ($1,224
thousand) as of and for the fiscal year ended March 31, 2015.
25

15.

Other Comprehensive Income

The following table presents reclassification adjustments and tax effects allocated to eachcomponent of other comprehensive income for the years ended March 31, 2014 and 2015:
2014
2015
(Millions of yen)

Unrealized holding gain (loss) on
securities:
Amount arising during the year
Reclassification adjustments for gains
and losses included in net income
Amount before tax effectTax effectUnrealized holding gain (loss) on
securities¥

Translation adjustments:
Amount arising during the year
Retirement benefit liability
adjustments:
Amount arising during the year
Reclassification adjustments for gains
and losses included in net income
Amount before tax effectTax effect
Retirement benefits liability
adjustments
Share of other comprehensive incomeof affiliates accounted for by theequity method:Amount arising during the year
Total other comprehensive income

¥

290

¥

2015
(Thousandsof U.S.
dollars)

3,640$ 30,291

9
299
(90)

(198)
3,441
(1,001)(1,652)
28,638(8,335)

209

2,439

20,303

204

424

3,529

－

(2,940)(24,466)

－
－
－

561
(2,378)694

4,674(19,792)
5,777－(1,684)(14,014)

(2)
411

(84)
1,095

(704)
9,113

¥

$

26

16. Commitments and Contingencies
The Company and its consolidated subsidiaries had the following contingent liabilities at
March 31, 2014 and 2015 as follows:
Debt guarantees for non-consolidated companies
2014
2015
(Millions of yen)Mizuho Bank, Ltd.
(Atsumi Greenpower Co.)
Development Bank of Japan Inc.
(Nagashima Windhill Co.)
Total

¥

725

¥

360
1,085

2015
(Thousands of
U.S. dollars)

¥

639

¥

322
961

$

5,317

$

2,679
7,997

Endorsement for transfer of notes receivable
2014
2015
(Millions of yen)
¥

7

¥

0

2015
(Thousands of
U.S. dollars)$
3

The Company has entered into subordinated loan commitment contracts as a subordinatedcreditor in joint financing for companies involved in the PFI business. At March 31, 2014
and 2015, the Company had loan commitment agreements with 10 and 9 companies,
respectively. The unused balances under the loan commitment contracts at March 31,
2014 and 2015 were as follows:
2014
2015
(Millions of yen)
Total loan commitments
Aggregated borrowings
Unused balances

¥

194
－
194

¥

¥

146
－
146

¥

2015
(Thousands of
U.S. dollars)
$
1,217
－
$
1,217

17. Amounts Per Share
Per share information as of March 31, 2014 and 2015 and for the years then ended is asfollows:
2014

2015

2015
(U.S. dollars)

174.54173.44

$

1.45
1.44

¥ 1,555.33

$

12.94

(Yen)
Net income:
Basic
Diluted¥Net assets¥ 1,405.38

51.95
－

¥

Basic net income per share is computed based on the net income available for distribution
to shareholders of common stock and the weighted average number of shares of common
stock outstanding during the year, and diluted net income per share is computed based on
the net income available for distribution to the shareholders and weighted average number27

of shares of common stock outstanding during each year after giving effect to the dilutive
potential of shares of common stock to be issued upon the exercise of share subscription
rights.
Net assets per share are computed based on the net assets excluding minority interests andthe number of shares of common stock outstanding at the year end.
The bases for calculation are as follows:(a) Basic and diluted net income per share
2014
2015
(Thousands of shares)
Weighted average number of sharesfor basic net income
Increase in shares of common stock:
Exercise of share subscription rights
Number of shares used for diluted net
income per share

70,86665,990-419-

66,409The entire amount of net income for the years ended March 31, 2014 and 2015 was
attributed to common shareholders.
(b) Net assets per share
2014
2015
(Thousands of shares)
Number of shares of common stock
used for the calculation of net assets
per share

66,00365,978

2014
2015(Millions of yen)
Total net assets
Amounts deducted from total net
assets:Share subscription rights
Minority interests
Net assets attributable to shares ofcommon stock¥¥

94,438

2015(Thousands of
U.S. dollars)¥ 104,658$ 870,918(1,679)(2,040)(16,980)

92,759¥ 102,617$ 853,938

As described in “Accounting Changes,” the Company and its domestic subsidiaries adopted“Accounting Standard for Retirement Benefits” and applied the transitional treatment
provided in Section 37 of the accounting standard. As a result, net assets per share atMarch 31, 2015 decreased by ¥22.49 ($0.19). The effect of this change on basic anddiluted net income per share for the year ended March 31, 2015 was immaterial.
18. Financial Instruments(a) Policy for financial instruments
The Company and its consolidated subsidiaries utilize short-term deposits for surplus funds.
In addition, they raise funds through borrowings from financial institutions. Derivativetransactions are only used to reduce risks, except for certain highly secure embedded
derivatives in compound financial instruments used for surplus funds. The Company andits consolidated subsidiaries do not enter into derivatives for speculative or trading28

purposes.
(b) Details of financial instruments, related risk and risk management system
Trade receivables, such as trade notes and accounts receivable, are exposed to credit risk inrelation to customers. The Company and its consolidated subsidiaries monitor the due
dates and manage credit risk under the credit management rules to mitigate the risk.
Investment securities mainly consist of equity securities and are exposed to market risk.
The Company and its consolidated subsidiaries review the fair values of listed equity
securities quarterly and the financial condition of the issuing entities.
Trade payables, such as trade notes and accounts payable, have payment due dates mainly
within one year.
Short-term borrowings are taken out mainly to obtain funds for operating activities.
Long-term debt and convertible bond-type bonds with share subscription rights are usedmainly for the purposes of making investments and repurchasing treasury stock.
The Company and its consolidated subsidiaries execute and manage derivative transactions
within the limits of established internal rules and regulations, and reduce credit risk bylimiting counterparties to highly creditworthy financial institutions.
Trade payables, short-term borrowings and long-term debt are exposed to liquidity risk.
The Company and its consolidated subsidiaries manage the risk by preparing and updating
its cash flow plans monthly. In order to avoid interest rate fluctuation risk and foreignexchange fluctuation risk, the Company uses interest rate swaps for certain loans borrowed
from financial institutions and interest rate and currency swaps are used for all loans
denominated in foreign currencies.
The Company executes and manages hedgetransactions within the limits of established internal rules and regulations.
(c) Supplemental explanation on estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, the fair value is reasonably estimated. As
the estimation of the fair value relies on various assumptions and factors, different
assumptions and factors could result in different fair value.

29

Carrying value of financial instruments on the consolidated balance sheet as of March 31,
2014 and 2015 and estimated fair value were as follows:

Carrying
value

Cash on hand andin banks
Trade notes andaccounts
receivable (*1)
Investment
securities
Total assets
Trade notes andaccounts payable
Long-term debt (*2)
Total liabilities
Derivatives¥

March 31, 2014
Estimated
fair value
Difference(Millions of yen)

¥ 21,679

74,101

74,101－

12,935
108,715

12,935
108,715－－

66,98821,40088,388¥–66,98820,74287,730
¥
–

－
(657)
(657)
–

Carrying
value

Cash on hand andin banks¥ 37,957
Trade notes andaccounts
receivable (*1)
79,852
Investment
16,993securities
Total assets
134,804
Trade notes andaccounts payable
68,445
Convertible bond-typebonds with sharesubscription rights
10,000Long-term debt (*2)
20,603
Total liabilities
99,049Derivatives
¥
–

¥

－

21,679¥March 31, 2015
Estimated
Carrying
Estimated
fair value
Difference
value
fair value
Difference(Millions of yen)(Thousands of U.S. dollars)

¥

¥

－

$ 315,865$ 315,865

79,852－

664,499

664,499－

16,993
134,804－－

141,415
1,121,780

141,415
1,121,780－－

68,445－569,571569,571－

10,18020,671
99,297
–

180
68
248
–

83,215
171,454824,240$–

84,713172,021826,306
$
–

1,497
567
2,065
–

37,957

¥

¥

$

$

－

(*1) The allowance for doubtful accounts was deducted from the trade notes and accounts receivable.
(*2) The balances include the current portion of long-term debt.

Note 1:
Short-term investments (current assets) and short-term borrowings, excluding the current portion of
long-term debt (current liabilities), were not included in the above table because the amounts wereimmaterial.

30

Note 2:
Valuation methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactions are as follows:
AssetsCash on hand and in banks
Since all these items are settled in a short period of time, the carrying value approximates fairvalue.
Trade notes and accounts receivable
Since these items are settled in a short period of time, the carrying value approximates fairvalue.
Investment securities
The fair value of equity securities is based on quoted market prices. The fair value of debt
securities is based on either quoted market prices or prices provided by the financial institutions
making markets in these securities. The fair value of investment trusts is based on publicly
available information.
In cases where the fair value of an embedded derivative in a compound financial instrument
cannot be separately measured, the entire compound financial instrument is measured at fairvalue.
For information on securities classified by holding purpose, please refer to Note 19,“Securities.”
Liabilities
Trade notes and accounts payable
Since all these items are settled in a short period of time, the carrying value approximates fairvalue.
Convertible bond-type bonds with share subscription rights
The fair value of convertible bond-type bonds with share subscription rights is based on quoted
market prices.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal andinterest discounted by the interest rate to be applied if similar new borrowings were enteredinto.
Derivative transactions
Please refer to Note 21, “Derivative Transactions.”
Note 3:
Unlisted equity securities of ¥10,720 million and ¥12,774 million ($106,300 thousand) as of March
31, 2014 and 2015, respectively, were not included in the above table because it was extremely
difficult to determine the fair value.

31(d) Redemption schedule for receivables and marketable securities with maturities at
March 31, 2014 and March 31, 2015 were as follows:

Due inone yearor less
Cash in banks
Trade notes and accounts
receivable
Short-term investments
and investment
securities
Other securities withmaturities (debt
securities)
Other securities withmaturities (Other)Total¥ 21,612

¥

－

¥

－

Due after
ten years¥－

74,104

－

－

－

100

604

－

1,192

19
¥ 95,836

Due inone yearor less
Cash in banks
Trade notes and accounts
receivable
Short-term investments
and investment
securities
Other securities withmaturities (debt
securities)
Other securities withmaturities (Other)
Total

March 31, 2014
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Millions of yen)

¥ 37,870

¥

203
808

¥

47
47

March 31, 2015
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Millions of yen)
¥

－

¥

－

¥

1,266
2,459

Due after
ten years¥－

79,857

－

－

－

30

269

－

592

146
¥ 117,904

141
411

－
－

3,781
4,373

¥

¥

¥

32

Due inone yearor less
Cash in banks
Trade notes and accounts
receivable
Short-term investments
and investment
securities
Other securities withmaturities (debt
securities)
Other securities withmaturities (Other)
Total
(e)

$ 315,140

March 31, 2015
Due after
Due after
one yearfive years
throughthroughDue after
five years
ten yearsten years(Thousands of U.S. dollars)
$

－

$

－

$

－

664,538

－

－

－

249

2,244

－

4,926

1,221
$ 981,149

1,179
3,423

－
－

31,469$ 36,396$$

The redemption schedule for long-term debt is disclosed in Note 5.

19. Securities(a) Information regarding marketable securities classified as other securities as of March
31, 2014 and 2015 is as follows:
March 31, 2014
Carrying
value

Securities whosecarrying value
exceeds theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Securities whosecarrying value does
not exceed theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Total

¥

9,127
781
318
10,227

1,805
971
47
2,824
¥ 13,052

Gross
Acquisition unrealized
costgain (loss)(Millions of yen)

¥

6,539
638
269
7,446

2,111
1,029
50
3,190
¥ 10,637

¥

¥

2,588
143
48
2,780

(305)
(57)
(2)
(365)
2,415

33

Carrying
value
Securities whosecarrying value
exceeds theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Securities whosecarrying value does
not exceed theiracquisition cost
Equity securities
Debt securities
OthersSubtotal
Total

¥

¥

14,845633
588
16,068

841
211
48
1,101
17,169March 31, 2015
Gross
Gross
Acquisition unrealized
Carrying
Acquisition
unrealized
costgain (loss)
value
cost
gain (loss)(Millions of yen)(Thousands of U.S. dollars)

¥

¥

9,073
531
453
10,058

¥

956
241
50
1,247
11,305$ 123,540
5,273
4,898
133,712

(114)
(29)
(1)
(146)
5,863

7,002
1,761
399
9,164
$ 142,877

¥

5,772
102
135
6,009

$

75,504
4,423
3,773
83,700

$

7,956
2,008
416
10,38094,081$$

48,036850
1,125
50,012

(953)
(246)
(16)
(1,216)
48,795(b) Information regarding sales of securities classified as other securities for the years
ended March 31, 2014 and 2015 is as follows:
2014
2015
(Millions of yen)

Proceeds from sales
Gains on sales
Losses on sales

¥

1,074
363
－

¥

2,127
328
－

2015
(Thousandsof U.S.
dollars)$

17,706
2,732－(c) Impairment loss on securities classified as other securities of ¥47 million and ¥9
million ($77 thousand) was recognized for the years ended March 31, 2014 and 2015,
respectively.
20. Supplemental Information on Consolidated Statement of Cash Flows
Cash and cash equivalents in the consolidated statement of cash flows for the years ended
March 31, 2014 and 2015 are reconciled to cash on hand and in banks in the consolidatedbalance sheet as follows:

Cash on hand and in banks
Time deposits with maturities ofmore than three months
Cash and cash equivalents

2014
2015
(Millions of yen)

2015
(Thousands of
U.S. dollars)¥

21,679$315,865¥(11)
21,668$(16,859)
299,006¥

37,957¥(2,026)35,931

34

The following is a summary of assets acquired and liabilities assumed through theacquisition of shares of Asia Projects Engineering Pte. Ltd. during the year ended March 31,
2014, related acquisition cost and net disbursement:(Millions ofyen)
Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Minority interests
Acquisition cost
Cash and cash equivalents
Net disbursement

¥

¥

3,258
372
2,629
(1,247)
(217)
(387)
4,408
(2,260)2,147

The following is a summary of assets acquired and liabilities assumed through theacquisition of shares of Kodera Dengyo Co. and Kakusokukeisou Co. during the year ended
March 31, 2015, related acquisition cost and net disbursement:(Millions ofyen)
Current assets
Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Minority interests
Acquisition cost
Cash and cash equivalents
Net disbursement

¥

¥

2,365
1,462
(171)
(955)
(380)
(214)
2,105
(1,578)526(Thousands of
U.S. dollars)$$

19,683
12,174(1,428)(7,952)(3,167)(1,788)17,519(13,135)
4,384

Leased assets and lease obligations related to new finance lease transactions recorded forthe years ended March 31, 2014 and 2015 amounted to ¥710 million and ¥632 million($5,263 thousand), respectively. Asset retirement obligations recorded for the years ended
March 31, 2014 and 2015 amounted to ¥212 million and ¥121 million ($1,012 thousand),
respectively.
21. Derivative Transactions
Summarized below are the notional amounts and the estimated fair value of the derivative
instruments outstanding at March 31, 2014 and 2015, for which hedged accounting has
been applied.

35

a. Interest-related transactions
March 31, 2014
Method ofhedge
accounting
Short-cut
methodShort-cut
methodHedging instruments
Interest rate
swap
Interest rateand currency
swap

Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: US dollars
Pay: JP yen

Hedgeditems
Long-termdebtLong-term
debt

Notional
amounts¥

5,000

Due after
one year(Millions of yen)
¥

2,510

5,000

Fair
value
¥

-

2,259

-

March 31, 2015
Method ofhedge
accounting
Short-cut
methodPrinciple
methodShort-cut
methodHedging instruments
Interest rate
swap
Interest rate
swap
Interest rateand currency
swap

Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: USD
Pay: JPY

Hedgeditems
Long-termdebtLong-termdebtLong-term
debt

Notional
amounts¥

5,000

Due after
one year(Millions of yen)
¥

5,000

Fair
value
¥

-

284

284

(82)

2,510

2,008

-

March 31, 2015
Method ofhedge
accounting
Short-cut
methodPrinciple
methodShort-cut
methodHedging instruments
Interest rate
swap
Interest rate
swap
Interest rateand currency
swap

Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: floating
Pay: fixed
Receive: USD
Pay: JPY

Hedgeditems
Long-termdebtLong-termdebtLong-term
debt

Notional
Due after
Fair
amounts
one yearvalue(Thousands of U.S. dollars)$

41,607$ 41,607

¥

2,366

2,366

(690)

20,887

16,709-The fair value of the interest rate and currency swaps was included in that of the hedged
long-term debt as they are accounted for together with underlying hedged long-term debt
under the short-cut method.
The principle method was applied to the interest rate swaps used to hedge long-term debt ofaffiliates accounted for by the equity method, and the notional amount and the fair value
were based on the Company’s proportionate share. The fair value was calculated based on
prices provided by the counterparty financial institutions
22. Segment Information(a) Outline of reportable segments
The reportable segments of the Company and its consolidated subsidiaries (the “Group”)
are components for which discrete financial information is available and whose operating
results are regularly reviewed by the Board of Directors to make decisions on resource
36allocation and to assess performance.
The Group is primarily engaged in the integrated utilities engineering service business,based on mid- to long-term business plans developed in the head office of the Company.
The Company’s regional offices mainly offer services in cooperation with each company of
the Group.
Also, some consolidated subsidiaries are involved in other industries such as the sales
business of construction-related materials and equipment, the real-estate sales business andthe renewable energy generation business, each company operating as an independent
management unit.
Thus, the Group consists of the segments based on business activities, with several
businesses that have essentially identical financial characteristics and contents of services
combined into “Utilities engineering service” as a reportable segment for the purpose of
disclosing appropriate information.
The “Utilities engineering service” segment primarily offers services for the design andconstruction of electrical works, such as power distribution line, indoor wiring, andcommunication, and of heating ventilation and air conditioning mechanical installation
works, such as ventilation, heating and cooling, plumbing, water treatment and sanitationequipment installation.
(b) Method used to calculate net sales, profit or loss, assets, liabilities and other items byreportable segment
The accounting policies of the reportable segments are substantially the same as thosedescribed in “Summary of Significant Accounting Policies.” Segment performance isevaluated based on operating income or loss. Intersegment sales and transfers arerecorded at the same prices used in transactions with third parties.
(c) Net sales, profit or loss and other items by reportable segment for the years ended
March 31, 2014 and 2015 are summarized as follows:Year ended March 31, 2014
Adjustments
andOthersTotaleliminations Consolidated(Millions of yen)

Utilities
engineering
service
Net sales
Sales to third
partiesIntersegment sales
and transfers
Total
Segment profit orloss
Other items
Depreciation andamortization
Amortization of
goodwill¥ 267,757¥ 11,552¥ 279,310¥–¥ 279,310

9,642¥ 277,400

19,538¥ 31,091

29,181¥ 308,491(29,181)¥ (29,181)–¥ 279,310

¥

7,908

¥

209

¥

8,117

¥

(981)

¥

7,136

¥

3,004

¥

1,371

¥

4,376

¥

(70)

¥

4,305

¥

246

¥

7

¥

254

¥

－

¥

254

37

Year ended March 31, 2015
Adjustments
andOthersTotaleliminations(Millions of yen)

Utilities
engineering
service
Net sales
Sales to third
parties¥ 301,916
Intersegment sales
2,529
and transfers¥ 304,446
Total
Segment profit or loss ¥ 16,032
Other items
Depreciation andamortization¥
3,038
Amortization of
goodwill¥
1,207¥ 14,033¥ 315,949¥–¥ 315,949

23,236¥ 37,270¥
665

25,766¥ 341,716¥ 16,698(25,766)¥ (25,766)¥
58–¥ 315,949¥ 16,757

¥

2,390

¥

5,429

¥

(167)

¥

5,262

¥

2

¥

1,210

¥

－

¥

1,210

Year ended March 31, 2015
Adjustments
andOthersTotaleliminations(Thousands of U.S. dollars)

Utilities
engineering
service
Net sales
Sales to third
parties$ 2,512,408
Intersegment sales
21,052and transfers$
2,533,461
Total
Segment profit or loss $ 133,418
Other items
Depreciation andamortization$ 25,285
Amortization of
goodwill$ 10,051

Consolidated

Consolidated$ 116,779$2,629,187$–$2,629,187

193,366$ 310,145$
5,541

214,418$ 2,843,606$ 138,959(214,418)$ (214,418)$
490–$2,629,187$ 139,449$ 19,896$

45,182$(1,393)$ 43,788$$

10,074$－$ 10,074

22

The disclosure of geographical segment information has been omitted as net sales and total
assets of the foreign operations constituted less than 10% of the consolidated totals for theyears ended March 31, 2014 and 2015.
Impairment loss on fixed assets by reportable segment for the year ended March 31, 2014 issummarized as follows:
Utilities
engineering
service
Impairment loss¥

225

Year ended March 31, 2014
Adjustments
andOtherseliminations(Millions of yen)¥－¥－

Consolidated¥

225

There was no impairment loss on fixed assets recognized for the year ended March 31,
2015.

38

The following table presents the amortization and balance of goodwill and negative
goodwill as of and for the years ended March 31, 2014 and 2015 by reportable segment:

Goodwill:
Amortization
Balance as of March 31
Negative goodwill:
Amortization
Balance as of March 31

Utilities
engineering
serviceYear ended March 31, 2014
Adjustments
andOtherseliminations Consolidated(Millions of yen)

¥
¥

246
2,381

¥
¥

7
8

¥
¥

－
－

¥
¥

254
2,389

¥
¥

1
0

¥
¥

2
0

¥
¥

－
－

¥
¥

4
0

Year ended March 31, 2015
Utilities
Adjustments
engineeringandservice
Otherseliminations Consolidated(Millions of yen)
Goodwill:
Amortization
Balance as of March 31
Negative goodwill:
Amortization
Balance as of March 31

Good will
Amortization
Balance as of March 31
Negative good will
Amortization
Balance as of March 31

¥
¥

1,207
1,403

¥
¥

2
5

¥
¥

－ ¥
－ ¥

1,210
1,408

¥
¥

0
－

¥
¥

0
－

¥
¥

－ ¥
－ ¥

0
－

Utilities
engineering
serviceYear ended March 31, 2015
Adjustments
andOtherseliminations Consolidated(Thousands of U.S. dollars)$$

10,051
11,678

$
$

22
45

$
$

－ $
－ $

10,074
11,723

$
$

0
－

$
$

0
－

$
$

－ $
－ $

0
－

The following table presents major customer information for the years ended March 31,
2014 and 2015:
2014
2015
(Millions of yen)

2015
(Thousands of
U.S. dollars)Name of customers:
Kyushu Electric Power Co., Inc.

Reportable segment:
Utilities engineering service and Others
Net sales¥ 45,452¥ 48,639$ 404,757

39

23. Related Party Transactions
Consolidated net sales from construction contracts included those involving Kyushu
Electric Power Co., Inc., which has an approximately 25% ownership interest in the
Company, in the amounts of ¥43,846 million and ¥45,809 million ($381,205 thousand) for
the years ended March 31, 2014 and 2015, respectively. The related receivables at March
31, 2014 and 2015 amounted to ¥6,720 million and ¥7,409 million ($61,658 thousand),
respectively. The related advances received at March 31, 2014 and 2015 amounted to ¥1
million and ¥19 million ($160 thousand), respectively.
The terms of the transactions referred to above were negotiated and determined on anarm’s-length basis similar to third party transactions.
The Company purchased 6,314,000 treasury shares of its common stock from Kyushu
Electric Power Co., Inc. for ¥3,700 million on November 28, 2013 through the off-hours
own share repurchasing trading system of the Tokyo Stock Exchange (ToSTNeT-3).

40