ANNUAL REPORT

2 011
The year ended March 31, 2011

Corporate Philosophy

Earn the support of the public
AIFUL was founded by President and CEO Yoshitaka
Fukuda in 1967 as a sole proprietorship consumer
finance business and established as a corporation in1978 to bolster its creditworthiness. In 1982 thecorporate name was changed to the current AIFULCORPORATION. AIFUL has grown into a comprehensive
financial group handling such diverse businesses ascredit cards, small business lending, credit guarantees,
loan servicing and venture capital in addition to
consumer finance.
Based on the corporate philosophy “Earn the supportof the public with sincerity and hard work,” AIFUL aims
to be a company that is truly trusted by society.

Contents
2

Message from President and CEO Yoshitaka Fukuda

4

Eleven-Year Summary

6

Business Data

8

Management’s Discussion and Analysis of Finances

10

Consolidated Financial Statements

45

Independent Auditors’ Report

46

Group Network

47

Investor Information

with sincerity and hard work

To raise the efficiency of the Group as a whole, onBusiness Classificationl Unsecured loans

July 1, 2011 the AIFUL Group consolidated its consumer
finance businesses under the “AIFUL” brand and its installment sales finance and credit card businesses under thel Secured loans
l Small business loansl Credit guarantees“LIFE” brand, based on the business restructuring policyof the Group’s Business Revitalization Plan approved
under the alternative dispute resolution (ADR) process.
In addition, the AIFUL Group is involved in businesses
including small business lending and credit guarantees inaffiliation with banks and other financial institutions.

Business Classificationl Secured loans

Businext
Corporationl Small business loans

Business Classification

Life Card Co., Ltd.
Business Classificationl Credit card shoppingl Debt collection (Servicer)

AsTry Loan
Services
Corporationl Installment sales financel Credit guarantees

Business Classificationl Venture capital business

New FrontierPartners Co., Ltd.
(As of July 1, 2011)

Forward-Looking Statements
The figures contained in this Annual Report with respect to AIFUL’s plans and strategies and other statements that are not historical facts are forward-looking
statements about the future performance of AIFUL, which are based on management’s assumptions and beliefs in light of the information currently available to it and involve risks and uncertainties and actual results that may differ from those in the forward-looking statements as a result of various f­ actors.
Potential risks and uncertainties include, without limitation, general economic conditions in AIFUL’s market and changes in the overall market for consumer
loans, the rate of default by customers, and the level of interest rates charged by AIFUL.

AIFUL CORPORATION

Annual Report 20111

Message from President and CEO Yoshitaka Fukuda

I thank you for your continuing interest in and support for the AIFUL Group. I would like topresent the financial results of AIFUL CORPORATION and its consolidated subsidiaries for the
fiscal year ended March 2011. In addition, I will explain the steps we have taken to restructure
our business.

Financial Results for the Fiscal Year Ended March 2011
Consolidated total income decreased 34% year on year to ¥144.9 billion. Full enforcementof the Money Lending Business Act resulted in reduced lending, and debt waivers associatedwith interest refund claims remained at a high level. As a result, total loans outstanding
decreased ¥262.2 billion, or 31%, from a year earlier. In addition, interest on loans continued todecrease due to the effect of reductions in interest rates.
Based on the Business Revitalization Plan approved under the ADR process, the AIFULGroup reduced fixed costs including personnel and rental expenses through voluntary retirement
and other business restructuring initiatives. The Group also scaled back loans and other assets to
reduce variable costs. As a result, general and administrative expenses decreased ¥23.8 billion,or 28%, year on year to ¥61.8 billion.
On the other hand, AIFUL CORPORATION expects that interest refund claims will rise toa certain degree because a major consumer finance company is undergoing corporate
reorganization proceedings, and therefore recognized charge-offs and provision for doubtful
accounts related to interest refunds of ¥49.7 billion and provision for losses on interest
refunds of ¥27.2 billion, which together totaled ¥76.9 billion. As a result, operating loss was¥24.1 billion, and ordinary loss was ¥24.9 billion.
Further, AIFUL recognized losses from a natural disaster of ¥6.6 billion to cover theestimated impact of the Great East Japan Earthquake. Consequently, net loss was ¥31.9 billion.

Yoshitaka Fukuda
President and CEO

2

Business Restructuring
The AIFUL Group is undertaking steps to restructure its business to address a challenging
operating environment resulting from such factors as an increase in interest refund claims
following a ruling of Japan’s Supreme Court in January 2006, financial turmoil triggered by the
subprime loan crisis, and restrictions on total lending following full enforcement of the Money
Lending Business Act in June 2010. These steps include full-fledged reform of the Group’s cost
structure with measures including reductions in personnel through organizational integrationand the elimination and consolidation of sales branches, complemented by the sale ofconsumer finance subsidiaries and the receipt of financial support through business
revitalization procedures approved under the ADR process.
In addition to implementing full-fledged cost structure reform, on July 1, 2011, theAIFUL Group consolidated its consumer finance businesses under the “AIFUL” brand and its
installment sales finance and credit card businesses under the “LIFE” brand based on thebusiness restructuring policy of the Group’s Business Revitalization Plan approved under the
ADR process. The new organization will take full advantage of each brand’s recognition todevelop business. In addition, head office operations were consolidated, and debt collection
divisions were integrated to further improve business efficiencies across the entire Group.
The AIFUL Group forecasts that its operating environment will remain challenging becauseof the slower-than-expected decrease in interest refund claims and the significant decline inloans outstanding due to the enforcement of the Money Lending Business Act. However, theAIFUL Group is strengthening its operating base by building a quality portfolio of loans,reducing costs by meticulously reforming its cost structure, and reorganizing the Group throughbusiness restructuring. We intend to devote all of our capabilities to steadily implementing ourBusiness Revitalization Plan so that we can earn the support and meet the expectations ofstakeholders.

September 2011

Yoshitaka Fukuda
President and CEO

AIFUL CORPORATION

Annual Report 20113

Eleven-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002 and 2001



			
		

2011

For the Year:
Total income
Total expenses
		 Charge-offs and provision for		 doubtful accounts
Income (loss) before income taxes and		 minority interests
Net income (loss)
At Year-End:
Loans
Nonperforming loans
		 Loans in legal bankruptcy
		 Nonaccrual loans
		 Accruing loans contractually past			 due three months or more as to			 principal or interest payments
Restructured loans
Total assets
Allowance for doubtful accounts
Total liabilities
Interest-bearing debt
Total equity
Minority interests
Per Share Data (Yen/U.S. dollars (Note 2)):
Net income (loss), basic
Diluted net income
Total equity
Cash dividends

2010

2009

2008

2007

¥145,215
178,239¥ 218,375
507,805¥ 316,542
308,826¥ 402,389
371,491¥ 501,009
873,272

65,069166,259

99,273

155,930

447,375(33,024)(31,936)(289,430)(295,141)

7,716
4,247

30,89827,434(372,263)(411,251)¥594,527
182,60744,13688,221¥ 835,928
256,71348,849137,021¥1,290,354
322,058
41,282
181,825¥1,598,706
343,768
46,895
189,721¥1,912,689
328,046
43,008
180,819

9,489
40,761
858,017
192,434
794,412492,610
63,605
2,757

15,56655,277
1,152,945
236,303
1,055,639
648,823
97,306
3,849

25,97972,972
1,644,744
237,820
1,251,410
917,792
393,334
5,761

29,35177,801
2,041,128
330,415
1,716,608
1,354,089
324,5215,604

36,66567,5542,214,559
407,573
1,957,415
1,530,262
257,1455,420¥(134.05)—
255.32—¥(1,238.90)—
392.30
—

¥

24.77
—
1,626.89
15.00¥ 190.77
186.86
1,909.46
40.00¥(2,903.85)—
1,777.44
60.00

7.1(41.4)(3.2)—

8.1(122.7)(21.1)
—

23.6
1.2
0.2
60.6

15.6
9.6
1.3
21.0

11.4
(88.1)(16.4)—

238,685,568
2,073

238,685,568
2,514

238,685,568
4,895

167,475,000
5,138

142,035,000
6,477

Ratios (%):
Equity ratio
ROE
ROA
Payout ratio
Other Data:
Number of shares outstanding
		 at year-end
Number of employees at year-end

Notes: 1. Figures in the financial section are based on audited English-language statements.
2. The U.S. dollar amounts have been translated, for convenience only, at ¥83=$1, the approximate rate of exchange at March 31, 2011.
3. In accordance with the provisions of Article 218 of the Commercial Code of Japan, AIFUL CORPORATION conducted a split of its common shares of 1.5 to 1 on
May 23, 2005.

4

AIFUL CORPORATION

Annual Report 2011

			
Million of yen

Thousands of
U.S. dollars (Note 2)

2006

2005

2004

2003

2002

2001

2011

¥ 548,818
436,045¥ 520,737
391,295¥ 479,473
375,659¥ 451,168
343,715¥ 400,014
338,166¥ 281,719
189,145$ 1,749,578
2,147,458

166,047

155,466

157,349

138,479

92,57659,194

783,964

112,773
65,827

129,442
75,723103,81462,548

107,453
59,911

61,84835,064

92,574
48,253(397,880)(384,772)¥2,124,017
203,800
33,44680,721¥1,995,622
175,136
31,02060,283¥1,786,940
149,826
28,63752,452¥1,670,782
120,399
20,83039,897¥1,482,796
94,854
16,45728,723¥1,261,042
79,913
13,07125,644$ 7,162,976
2,200,084
531,759
1,062,904

27,56462,0692,790,969
171,715
2,102,310
1,792,746
681,694
6,965

21,04962,784
2,574,286
159,483
1,951,548
1,673,458
617,353
5,385

17,82050,9172,332,761
145,757
1,780,575
1,513,812
547,504
4,682

16,503
43,1692,282,113
132,130
1,792,093
1,504,969
485,991
4,029

11,94537,7292,029,634
109,337
1,604,780
1,344,273
421,343
3,511

7,196
34,002
1,865,537
98,395
1,557,838
1,239,265
306,550
1,149

114,325
491,096
10,337,554
2,318,482
9,571,229
5,935,060
766,325
33,217¥ 464.84
464.694,813.45
60.00¥ 800.36
800.306,538.03
60.00¥ 660.98—
5,794.58
60.00¥ 637.59—
5,143.45
60.00¥ 390.00—
4,523.01
50.00¥ 569.32—
3,611.74
50.00$(1.62)
—
3.08
—

24.4
10.1
2.5
12.9

24.0
13.0
3.1
7.5

23.5
12.1
2.7
9.1

21.3
13.2
2.8
9.4

20.7
9.6
1.8
12.8

16.4
15.7
2.6
8.8

142,035,000
6,675

94,690,000
6,510

94,690,000
5,969

94,690,000
6,123

93,376,000
5,810

84,876,000
5,750

AIFUL CORPORATION

Annual Report 20115

Business Data

AIFUL GROUPTOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis)(Millions of Yen)

AVERAGE RATE OF BORROWINGS


(%)

2007

2008

2009

2010

2011

1.80
2.03
1.51

1.78
2.15
1.44

2.03
2.25
1.84

2.01
2.15
1.84

2.18
2.15
2.26

2.20

2.10

2.25

1.60

1.60

2010

2011

Total Receivables Outstanding 2,369,586 1,999,414 1,636,320 1,105,056
Loans
1,985,263 1,665,682 1,334,196 856,763
		 Unsecured
1,537,905 1,278,001 1,015,647 634,249
		 Secured
291,716 246,520 206,941 138,650
		 Small Business
155,642 141,161 111,608
83,864Credit Card Business*
127,222 127,678 136,763 121,995
Installment Sales
		 Finance Business
112,518
62,80833,791
13,856
Credit Guarantees
141,930 129,713 118,207 100,153
Other
12,652
13,534
13,364
12,288768,342594,527
425,400
99,65069,47774,677

Average Rate of Borrowings
Indirect
DirectLong-term Prime Rate
(Reference)

6,313
82,134
10,690NUMBER OF CUSTOMER ACCOUNTS

2007

2008

2009

TOTAL INCOME/NET INCOME (LOSS)

Total Income
Interest on Loans
		 Unsecured
		 Secured
		 Small Business
Credit Card Business*
Installment Sales
		 Finance Business
Credit Guarantees
Other
Net Income (Loss)(Millions of Yen)

2007

2008

2009

2010

2011

501,009448,662
374,839
43,57530,247
12,754402,389
356,435
300,887
31,95923,59014,948316,542
263,797
219,969
25,32718,501
16,881

218,375
170,662
137,394
20,027
13,24017,824145,215
103,784
79,543
13,976
10,265
12,32812,9989,187
17,408(411,251)

6,912
8,548
15,54627,434

3,631
1,726
8,021
7,035
24,212
21,1284,247 (295,141)

692
5,759
22,652(31,936)



Number of Customer Accounts
Unsecured
SecuredSmall Business
Credit Card Holders
Accounts of Installment
Sales Finance Business(Thousands)

2007

2008

2009

2010

2011

3,548
3,367
87
93
14,066

3,067
2,911
73
83
14,819

2,629
2,499
62
68
15,252

1,966
1,867
46
54
12,719

1,515
1,432
36
47
6,746

459

292

178

87

39

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2007
Total Assets
ROA (%)
Total Equity
ROE (%)

2008(Millions of Yen)

2009

2010

2,214,559 2,041,128 1,644,744 1,152,945(16.4)
1.3
0.2(21.1)
257,145 324,521 393,334
97,306(88.1)
9.6
1.2(122.7)

2011
858,017(3.2)
63,605(41.4)* “Credit Card Business” (hokatsu shinyo konyu assen in Japanese) consists of credit card
shopping loans.

AIFUL CORPORATION
LOANS OUTSTANDING
(Millions of Yen)

2008

2009

2010

2011

1,298,612 1,058,880
995,077 817,825
274,787 221,577
28,747
19,478

842,786
648,123
181,394
13,269553,476
423,733
120,821
8,922

381,368
289,361
83,422
8,585

2007
Loans Outstanding
Unsecured
SecuredSmall Business

TOTAL INCOME/NET INCOME (LOSS)

Total Income
Interest on Loans
		 Unsecured
		 Secured
		 Small Business
Other
Net Income (Loss)

6(Millions of Yen)

2007

2008

2009

309,698
292,669
243,614
41,424
7,631
17,029(359,399)

239,629
224,707
190,230
29,8094,668
14,922
27,069189,682 130,278
167,415 113,069
142,01092,85422,546
18,353
2,859
1,862
22,267
17,2099,658 (261,496)

AIFUL CORPORATION

Annual Report 20112010

NUMBER OF CUSTOMER ACCOUNTS


Number of Customer Accounts
Unsecured
SecuredSmall Business

2008

2009

2010

2011

1,894
1,789
84
22

1,593
1,509
70
15

1,351
1,281
59
11

1,061
1,009
44
7

815
772
34
9

AVERAGE LENDING INTEREST RATE


2011
90,75074,02060,194
12,511
1,315
16,730(70,169)(Thousands)

2007

Average Lending
Interest Rate
Unsecured
SecuredSmall Business

(%)

2007

2008

2009

2010

2011

20.8
22.9
13.5
22.7

19.1
21.0
12.0
19.4

17.6
19.4
11.2
17.5

16.2
17.3
12.1
16.8

15.8
16.9
12.3
15.0

DOUBTFUL ACCOUNTS CHARGE-OFFS/RATIO OF DOUBTFUL ACCOUNTS CHARGE-OFFS(Millions of Yen)

2007

2008

2009

2010

2011

Doubtful Accounts Charge-offs 138,602
Unsecured
121,558
Ratio of Doubtful Accounts
Charge-offs (%)
10.67
Unsecured
12.22

160,168
138,799

119,068
103,473

111,651
89,452

81,666
63,779

15.13
16.97

14.13
15.97

20.17
21.11

21.41
22.04

2009

2010

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2007
Total Assets
ROA (%)
Total Equity
ROE (%)

2008

NEW ACCOUNTS(Accounts)

2007

2008

2009

2010

2011

156,350
149,549

115,629
112,693

87,392
85,91651,75751,75760,43455,986

48.3

34.7

28.6

21.9

27.3

2011

2007

2008

2009

2010

2011

270,201
80,990137,023
45,165
7,023

Credit Card796,600
		 Credit Card Shopping Loans 561,299
		 Credit Card Cashing Loans 235,301

877,126
664,791
212,335

963,926
775,779
188,147

863,975
796,376
67,599491,804
446,540
45,263

2007

2008

2009

2010

2011

14,065
1,961
12,103

14,8192,071
12,74815,252
2,239
13,013

12,7192,219
10,499

6,746
2,762
3,984

New Accounts
Unsecured*
Acceptance Ratio ofUnsecured* (%)*Affinity cards are not included.

(Millions of Yen)

1,660,827 1,535,958 1,241,766(18.6)
1.7
0.7
255,005 322,016 396,233(81.0)
9.4
2.7

2011

858,532 578,153(24.9)(9.8)
135,536
64,835(98.3)(70.0)

Life Card Co., Ltd. (Managed Asset Basis)
TOTAL RECEIVABLES OUTSTANDING
2007
Total Receivables Outstanding
Installment Receivables
Loans (Cash Advance)
Credit Guarantees
Other717,884
229,735
396,260
83,0138,876

2008
653,045
190,485
380,191
73,486
8,882(Millions of Yen)

2009
570,668
170,553
327,493
64,0388,582

2010
410,315
135,852
211,632
54,904
7,926

PURCHASE RESULTS(Millions of Yen)

NUMBER OF CARDHOLDERSOPERATING REVENUE/NET INCOME (LOSS)

Operating Revenue
Installment Receivables
Loans (Cash Advance)
Credit Guarantees
Other
Net Income (Loss)(Millions of Yen)

2007

2008

2009

2010

2011

129,479
26,61891,342
4,134
7,383(43,313)

120,667
22,51686,436
3,809
7,904
3,427

100,356
21,612
67,154
3,384
8,205
217

73,371
19,95541,265
2,899
9,252(27,750)

44,675
13,267
19,5592,410
9,439(31,148)

AVERAGE YIELD

Average Yield
Installment Receivables
Loans (Cash Advance)
Credit Guarantees

(%)

2007

2008

2009

2010

2011

17.1
9.9
23.0
4.7

17.4
10.5
21.7
4.9

16.1
11.2
18.4
4.9

14.6
11.5
15.4
4.8

13.4
11.6
11.4
4.7

Number of Cardholders
LIFE Proper Card
Affinity Cards(Thousands)

DOUBTFUL ACCOUNTS CHARGE-OFFS/RATIO OF DOUBTFUL ACCOUNTS CHARGE-OFFS(Millions of Yen)

2007

2008

2009

2010

2011

Doubtful Accounts Charge-offs 44,498
Credit Card Shopping Loans
2,451
Credit Card Cashing Loans 15,220
Installment Sales
		 Finance Business
7,029
LIFE Cash Plaza
		 (Unsecured Loans)
15,302
Ratio of Doubtful Accounts
Charge-offs (%)
6.20
Credit Card Shopping Loans
2.09
Credit Card Cashing Loans
6.62
Installment Sales
		 Finance Business
6.25
LIFE Cash Plaza(Unsecured Loans)
9.28

48,275
2,986
19,49443,064
3,132
18,16538,716
3,401
15,63230,3083,784
12,259

4,026

2,370

2,609

1,059

18,814

16,574

14,768

11,285

7.39
2.34
8.79

7.55
2.29
9.00

9.44
2.79
12.00

11.22
5.07
14.58

6.41

7.02

18.83

16.79

12.01

13.36

18.44

23.48

AIFUL CORPORATION

Annual Report 20117

Management’s Discussion and Analysis of Finances

Consolidated Results of Operations

decreased 23% compared with a year earlier to 1,432
thousand and the balance of unsecured loans outstanding

During the year ended March 31, 2011, total income fordecreased 33% to ¥425,400 million due to a persistently

the AIFUL Group decreased 34% year on year to ¥145,215

high level of debt waivers associated with claims for the

million. Interest on loans decreased 39% year on year torefund of interest, in addition to the effect of restrictions on¥103,784 million. Revenue from the credit card businesstotal lending.

decreased 31% year on year to ¥12,328 million. Revenue
from credit guarantees decreased 18% year on year to¥5,759 million. Collection of purchased receivables

Secured Loans and Small Business Loans
In response to the introduction of restrictions on total

increased 17% year on year to ¥3,752 million. Recovery oflending, AIFUL CORPORATION temporarily suspended sales

loans previously charged off increased 12% year on year toof secured loans, but in September 2010 resumed sales of¥12,632 million.

home equity loans to sole proprietors and corporate

Total expenses decreased 65% year on year to ¥178,239
million. Provision for losses on interest refunds decreased

customers. The balance of secured loans as of March 31,
2011 decreased 28% from a year earlier to ¥99,650 million.

87% year on year to ¥27,211 million, and charge-offs andBusinext Corporation, an AIFUL Group company in theprovision for doubtful accounts decreased 61% year on year

field of small-business finance, remained cautious in lendingto ¥65,069 million. The AIFUL Group also reduced generalbecause of deteriorating economic conditions for small andand administrative expenses, including salaries and othermedium-sized companies. As a result, the balance of small

employees’ benefits, 28% year on year to ¥61,880 million

business loans as of March 31, 2011 decreased 17% from aby implementing management rationalization measures toyear earlier to ¥69,477 million.

reform its cost structure.
In addition, the AIFUL Group incurred extraordinary
losses totaling ¥10,607 million that included a ¥6,602

Credit Card BusinessIn the credit card business (credit card shopping),

million loss from the estimated damage attributable to the

conducted by subsidiary Life Card Co., Ltd., the AIFUL Group

Great East Japan Earthquake and a ¥1,278 million loss onenhanced web-based sales channels and bolstered efforts toadjustment for application of accounting standard for asset

acquire new customers with an emphasis on proper cards

retirement obligations.

(issued by LIFE only) and Aoyama cards. However, theAs a result of the above, for the year ended March 31,

number of cardholders as of March 31, 2011 decreased by

2011, loss before income taxes and minority interests for5.97 million from a year earlier to 6.74 million, and credit

the AIFUL Group was ¥33,024 million and net loss wascard transaction volume decreased 44% year on year to¥31,936 million.

¥457,545 million due to termination of tie-ups with certain
tie-up partners in accordance with the basic policies of the

Unsecured Loans

Business Revitalization Plan, the effects of weak

New loan applications declined 13% year on year due tofull enforcement of the Money Lending Business Act. On the

consumption and other factors.
As a result, credit card receivables decreased 39% fromother hand, the AIFUL Group stabilized fund raising bya year earlier to ¥74,677 million. This figure includes

gaining agreement for business revitalization using the¥3,655 million in off-balance sheet securitized installment

alternative dispute resolution process in the previous fiscal

accounts receivable.

year. As a result, the new account acceptance ratio
increased 5 percentage points to 27% and the number of
new accounts approved during the year ended March 31,
2011 increased 8% year on year to 55 thousand.
However, the number of accounts as of March 31, 20118

AIFUL CORPORATION

Annual Report 2011

Credit Guarantees
In the credit guarantee business conducted by AIFULCORPORATION and Life Card Co., Ltd., in addition toinitiatives to add new tie-up partners, the AIFUL Groupfocused on proposing new products and supporting sales

year on year to ¥5,495 million. The primary sources of cash

promotions for existing tie-up partners. As a result, as ofwere proceeds from sales of investment securities andMarch 31, 2011, the AIFUL Group provided guarantees ofproceeds from sales of property and equipment.

unsecured loans to individuals for 179 companies and thebalance of guarantees of unsecured loans to individuals

Net Cash Used in Financing Activities

totaled ¥67,653 million, down 17% from a year earlier due to

Net cash used in financing activities decreased 43% year

factors such as intensifying competition. Moreover, the AIFUL

on year to ¥154,347 million, primarily because of repayments

Group provided guarantees of unsecured business loans toof long-term debt and redemption of bonds.

100 companies, and the balance of guarantees of unsecured
business loans decreased 23% from a year earlier to ¥14,480
million.

Important Matters

Financial Position

long-term funds through various methods, including borrowing

As of March 31, 2011, total assets decreased ¥294,928
million, or 26%, from a year earlier to ¥858,017 million. This

The AIFUL Group has traditionally raised short-term andfrom financial institutions, issuing bonds, and securitizing loan
receivables. However, the AIFUL Group’s fund-raising capacity
has been confronted by difficult conditions in the current

was primarily due to a ¥241,401 million decrease in loans

market environment due to a variety of reasons including

due to tighter lending.

increased expenses as the result of rising demands for interest

Total liabilities decreased ¥261,227 million, or 25%, fromrefunds in accordance with a ruling by Japan’s Supreme Courta year earlier to ¥794,412 million. Key factors included ain 2006 as well as the rapid and sharp deterioration in thedecrease of ¥156,147 million due to repayment of loans andfund-raising environment. Accordingly, there have beenredemption of bonds and a decrease of ¥59,139 million in theconcerns that the AIFUL Group may have difficulty in raisingallowance for losses on interest refunds.
Total equity decreased ¥33,701 million, or 35%, from ayear earlier to ¥63,605 million. This was primarily due to the
net loss for the year ended March 31, 2011.

Cash Flows
As of March 31, 2011, cash and cash equivalents
increased ¥11,223 million, or 9%, from a year earlier to¥139,971 million.

sufficient new funds to sustain its business.
As a result, since the fiscal year ended March 31, 2010,
conditions have arisen to cast a substantial doubt about the
AIFUL Group’s ability to continue as a going concern.
In order to resolve this situation, the AIFUL Group applied
on September 24, 2009 for Business Revitalization Procedures
using the Alternative Dispute Resolution (the “ADR”) process
in order to improve its earning capacity and financial strengthwith the goal of revitalizing and reinforcing its business. At themeeting of participating creditors held on December 24, 2009,
the AIFUL Group obtained an approval for its Business
Revitalization Plan, which includes the provision of financial

Net Cash Provided by Operating Activities
Net cash provided by operating activities decreased 38%

support. As a result, Business Revitalization Procedures using
the ADR process were adopted.

year on year to ¥160,100 million. Cash was mainly provided

In the fiscal year ended March 31, 2011, the AIFUL Groupby decreases in loans and other receivables. Decreases in theundertook its first repayment of ¥10,000 million to creditors

allowance for doubtful accounts and the allowance for losses
on interest refunds were non-cash accruals to income before
income taxes and therefore did not provide cash.

Net Cash Provided by Investing Activities
Net cash provided by investing activities decreased 50%

on September 30, 2010 in accordance with its Business
Revitalization Plan.
By implementing concrete measures stipulated under theBusiness Revitalization Plan, the AIFUL Group considers that
there is no substantial uncertainty about its ability to continue
as a going concern.

AIFUL CORPORATION

Annual Report 20119

Consolidated Financial Statements

Consolidated Balance Sheets
AIFUL CORPORATION and Consolidated Subsidiaries
March 31, 2011 and 2010

						Millions of Yen		

Thousands of
U.S. Dollars (Note 3)

2011

2010

2011

¥ 139,971¥ 128,748$ 1,686,398

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 18)

5

7

60

Operational investment securities (Notes 7 and 18)

725

788

8,735

Allowance for investment losses

(65)

(75)

(783)

Time deposits (Note 18)

Loans, credit guarantees and receivables:
		

Loans (Notes 4, 10 and 18)

594,527

835,928

7,162,976

		

Installment accounts receivable (Notes 5, 10 and 18)

77,335125,990931,747

		Credit guarantees (Note 6)

82,134

100,153

989,566

		

Other receivables

14,902

17,868

179,542		Allowance for doubtful accounts (Notes 2.m and 18)(160,191)(203,478)(1,930,012)

Prepaid expenses

2,086

1,786

25,133

Other current assets (Note 10)

31,31649,930377,301

782,745

1,057,645

9,430,663

Land (Notes 8 and 10)

9,541

13,311

114,952

Buildings and structures (Notes 8 and 10)

26,41432,606318,240

330

338

3,976

			

Total current assets

PROPERTY AND EQUIPMENT (Note 10):

Machinery, equipment and vehicles (Notes 8 and 10)

17,522

17,230211,109

Lease assets

341

341

4,108

Construction in progress

256

25

3,084

Furniture and fixtures (Note 8)

54,40463,851

655,469(31,838)(33,744)(383,590)

22,56630,107

271,879

Investment securities (Notes 7, 10 and 18)

5,417

7,088

65,265

Allowance for investment losses

(639)

(628)

(7,699)unconsolidated subsidiaries (Note 18)

2,377

2,725

28,639Claims in bankruptcy (Notes 4 and 18)

46,83850,401

564,313

Software, net (Note 8)

11,58916,138

139,627

Lease and guarantee deposits

17,85020,219215,060

			

Total

Accumulated depreciation			Net property and equipment

INVESTMENTS AND OTHER ASSETS:

Investments in and advances toLong-term prepayments

562

853

6,771

Other assets (Note 8)

955

1,222

11,506(32,243)(32,825)(388,470)

52,706

65,193635,012¥ 858,017¥1,152,945$10,337,554

Allowance for doubtful accounts (Note 18)
			Total investments and other assets

TOTAL
See notes to consolidated financial statements.

10

AIFUL CORPORATION

Annual Report 2011

				
		
Millions of Yen		

2011
LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term borrowings (Notes 10 and 18)
Current portion of long-term debt (Notes 10 and 18)
Trade notes payable
Trade accounts payable
Obligation under credit guarantees (Note 6)
Income taxes payable
Accrued expenses
Allowance for credit card point redemption
Allowance for losses from business restructuring (Note 14)
Allowance for losses from a natural disaster
Other current liabilities (Notes 5 and 6)
			 Total current liabilities¥ 42,580
132,703462
21,00382,134
412
2,904
2,006
196
51
9,521
293,972

LONG-TERM LIABILITIES:Long-term debt (less current portion) (Notes 10 and 18)
Allowance for losses on interest refunds (Note 2.m)
Negative goodwill, net
Deferred tax liabilities (Note 16)
Other long-term liabilities
			 Total long-term liabilities

EQUITY (Note 12):
Common stock,		 authorized, 568,140,000 shares;		 issued, 238,685,568 shares
Capital surplus:
		 Additional paid-in capital
Stock acquisition rights
Retained earnings
Treasury stock, at cost 457,178 shares in 2011
and 457,058 shares in 2010
Accumulated other comprehensive income (loss)
Unrealized loss on available-for-sale securities
			 Total
Minority interests
			 Total equity
TOTAL

Thousands of
U.S. Dollars (Note 3)

2011

2010

24,261
377,185

513,012
1,598,831
5,566
253,048
989,566
4,964
34,98824,1692,361
614
114,7123,541,831

317,327
178,770
653
129
3,561
500,440

436,712
237,909
871
276
2,686
678,454

3,823,217
2,153,855
7,867
1,554
42,905
6,029,398

143,325

143,325

1,726,807

164,134
24(242,212)

164,134(210,276)

1,977,518
289(2,918,217)(3,110)(3,110)(37,470)(1,313)60,8482,757
63,605¥ 858,017(616)
93,457
3,849
97,306¥1,152,945(15,819)
733,108
33,217766,325$10,337,554

AIFUL CORPORATION

Annual Report 2011¥

61,205150,906
704
33,111
100,153
644
3,421
1,456
1,324

$

11

Consolidated Financial Statements

Consolidated Statements of Operations
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

						Millions of Yen		INCOME:Interest on loans
Revenue from credit card business
Revenue from installment sales finance business
Revenue from credit guarantee
Interest on deposits, securities and other
Recovery of loans previously charged off
Amortization of negative goodwill (Note 24)
Gain on retirement of bonds (Note 24)
Gain on sale of investment securities (Note 24)
Reversal of provision for bonuses
Other income
			 Total income
EXPENSES:Interest on borrowings
Charge-offs and provision for doubtful accounts (Note 24)
Provision for losses on interest refunds (Note 24)
Salaries and other employees’ benefits
Net periodic benefit costs (Note 11)
Advertising expenses
Provision for credit card point redemption (Note 24)
Rental expenses (Note 17)
Commissions and fees
Depreciation and amortization (Notes 2.a and 24)
Provision for investment losses (Note 24)
Foreign exchange loss
Loss on impairment of long-lived assets (Notes 8 and 24)
Loss from and provision for businessrestructuring (Note 14)
Losses from a natural disaster (Notes 15 and 24)
Loss on adjustment for application of accounting
standard for asset retirement obligations (Note 24)
Loss on transfer of business (Note 22)
Loss on disposal of property and equipment
Other expenses
			 Total expenses
LOSS BEFORE INCOME TAXES AND
MINORITY INTERESTS

2011

2010

2011

¥103,784
12,328
692
5,759
283
12,632
218
1,537
549

¥ 170,662
17,824
1,726
7,035
319
11,253148$1,250,410
148,530
8,337
69,3863,410
152,193
2,627
18,5186,614

7,433
145,215

1,161
580
7,667
218,375

11,54965,06927,211
18,106
628
1,719
2,006
4,230
12,514
7,808
271
1,548
1,243

17,551
166,259
206,887
27,229
1,096
2,211
1,456
6,804
16,441
9,210
703

389
6,602

13,150

4,860

1,278

89,553
1,749,578
139,145783,964
327,843
218,145
7,566
20,711
24,16950,964
150,771
94,072
3,265
18,651
14,976
4,687
79,542
15,398604
15,464
178,239

6,142
639
27,167
507,805

7,277
186,3122,147,458(33,024)(289,430)(397,880)

78

159
104
7,369
7,632

940

INCOME TAXES (Notes 16 and 24):
Current
Prior periods
Deferred			 Total income taxes

(79)
(1)

(952)
(12)

NET LOSS BEFORE MINORITY INTERESTS(33,023)

MINORITY INTERESTS IN NET LOSS

(1,087)(1,921)(13,096)¥ (31,936)¥(295,141)$ (384,772)

NET LOSS		AMOUNTS PER COMMON SHARE (Notes 2.w and 21):
Basic net loss
Cash dividends applicable to the year
See notes to consolidated financial statements.

12

Thousands of
U.S. Dollars (Note 3)

AIFUL CORPORATION

Annual Report 2011¥(134.05)
nil(397,868)

Yen		¥(1,238.90)
nil

U.S. Dollars (Note 3)$(1.62)nil

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income (Loss)
AIFUL CORPORATION and Consolidated Subsidiaries
Year Ended March 31, 2011

				
			
Millions of Yen

Thousands of
U.S. Dollars (Note 3)¥(33,023)$(397,868)

(701)
(701)

(8,445)(8,445)COMPREHENSIVE INCOME (LOSS) (Note 20):¥(33,724)$(406,313)

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO (Note 20):
Owners of the parent
Minority interests¥(32,633)(1,091)$(393,169)(13,144)

NET LOSS BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (LOSS) (Note 20):
Unrealized loss on available-for-sale securities
Total other comprehensive income (loss)

See notes to consolidated financial statements.

AIFUL CORPORATION

Annual Report 201113

Consolidated Financial Statements

Consolidated Statements of Changes in Equity
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

Thousands
Millions of Yen						
		Accumulated Other						
		Comprehensive Income (Loss)			
Capital				
Unrealized
DeferredSurplusNumber of				
Gain (Loss) Gain (Loss) on
Shares of		
Additional
Stock		on Available- Derivatives
CommonCommonPaid-inAcquisition
Retained
Treasury
for-sale under Hedge		
Stock Issued
Stock
CapitalRights
Earnings
Stock
Securities Accounting
Total

Minority
Interests

Total
EquityBALANCE AT APRIL 1, 2009

238,686 ¥143,325¥164,134

Net loss			Cash dividends paid,¥5 per share				¥00 ¥ 86,056 ¥(3,110)¥ (733)¥(2,099)(295,141)			
(1,191)				

¥ 387,573¥ 5,761¥ 393,334(295,141)		

(295,141)(1,191)		

(1,191)

Net increase in treasury stock(334 shares)
Net change in the year						BALANCE AT MARCH 31, 2010

238,686

143,325

164,134

Nil

					

Net loss

		

117

2,099

2,216

(1,912)

304

(616)

Nil

93,457

3,849

97,306(31,936)				

(31,936)(210,276)(3,110)(31,936)

Net increase in treasury stock(120 shares)
Net change in the year		
BALANCE AT MARCH 31, 2011

			238,686 ¥143,325¥164,13424			
¥24 ¥(242,212) ¥(3,110)(697)		
¥(1,313)

¥

Nil

(673)

(1,092)(1,765)¥ 60,848¥ 2,757¥ 63,605

Minority
Interests

Total
EquityThousands of U.S. Dollars (Note 3)						
		Accumulated Other						
		Comprehensive Income (Loss)			
Capital				
Unrealized
DeferredSurplus					
Gain (Loss) Gain (Loss) on			Additional
Stock		on Available- Derivatives
		CommonPaid-inAcquisition
Retained
Treasury
for-sale under Hedge				
Stock
CapitalRights
Earnings
Stock
Securities Accounting
Total

BALANCE AT MARCH 31, 2010

		 $1,726,807 $1,977,518$000 $(2,533,445) $(37,470) $ (7,421)

				Net loss$0 0(384,772)		

$1,125,988 $ 46,373 $1,172,361(384,772)		

(384,772)

Net increase in treasury stock(120 shares)
Net change in the year		
BALANCE AT MARCH 31, 2011			
$1,726,807 $1,977,518

See notes to consolidated financial statements.

14

AIFUL CORPORATION

Annual Report 2011289			

(8,397)		

$289 $(2,918,217) $(37,470) $(15,819)$Nil(8,108)(13,156)(21,264)$ 733,108 $ 33,217 $ 766,325

Consolidated Financial Statements

Consolidated Statements of Cash FlowsAIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010						 Millions of Yen		

2011		OPERATING ACTIVITIES:
Loss before income taxes and minority interests
Adjustments for:		 Income taxes — paid
		 Income taxes — refund		 Loss on adjustment for application of accounting standard for asset retirement obligations
		 Depreciation and amortization
		 Amortization of negative goodwill
		 Loss on impairment of long-lived assets
		 Increase in allowance for investment losses
		 (Decrease) increase in allowance for doubtful accounts
		 Increase in provision for point card certificates		 (Decrease) increase in allowance for losses on interest refunds
		 (Decrease) increase in allowance for losses from business restructuring
		 Gain on sale of investments in securities, net
		 Loss on disposal of property and equipment
		 Gain on retirement of bonds
		 Loss on transfer of business		 Changes in assets and liabilities:
			 Decrease in loans
			 Decrease in installment accounts receivable
			 Decrease in operational investment securities
			 Decrease in purchased receivables
			 Decrease in other operating receivables
			 Decrease (increase) in claims in bankruptcy
			 Decrease (increase) in operating guarantee deposits
			 Decrease (increase) in other current assets
			 Decrease in other current liabilities
		 Other, net				 Total adjustments				 Net cash provided by operating activities
INVESTING ACTIVITIES:Capital expenditures
Proceeds from sale of property, plant and equipment
Proceeds from sales of investment securities
Proceeds from transfer of investments in and advances to subsidiaries
Payment for sales of investments in subsidiaries resulting in change in scope of consolidation
Other, net				 Net cash provided by investing activities
FINANCING ACTIVITIES:Net decrease in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Cash dividends paid
Other, net				 Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR

Thousands of
U.S. Dollars (Note 3)

2010

2011

¥ (33,024)¥(289,430)$ (397,880)

(367)
155
1,278
7,808
(218)
1,243
1
(43,869)550(59,139)(1,127)(485)
604(1,537)(605)
568(4,422)
1,867
15,39894,072(2,627)
14,976
12(528,542)
6,627(712,518)(13,578)(5,843)
7,277(18,518)

9,210
(148)
4,860
703
9,990
353
121,178980(1,161)
639
6,142

241,401
48,655
71
1,368
1,598
3,563
1,090
18,098(27,762)
145
193,124
160,100

423,149
16,027
136
5,357
1,075
(9,937)(17,071)(8,723)(17,696)
1,079
546,105
256,675

2,908,446
586,205855
16,482
19,25342,92813,133218,048(334,482)
1,746
2,326,795
1,928,915(3,231)
6,138
1,328

(3,813)(38,928)
73,952
16,0001,260
5,495(18,625)
23,100(158,743)(79)(154,347)(25)
11,223
128,748¥ 139,971

1,391
9,628
(432)
4,139
10,913(50,045)
24,200(243,378)(1,191)(63)(270,477)
39(2,850)131,598¥ 128,748

15,181
66,205(224,398)
278,313(1,912,566)(951)(1,859,602)(301)
135,217
1,551,181$ 1,686,398(Supplemental Disclosure of Cash Flow Information)
For the year ended March 31, 2010, Wide Corporation, TRYTO CORPORATION, TCM. Co. Ltd. and Passkey Co., Ltd. were excluded fromconsolidation due to sale of shares. Assets and liabilities of these companies at the time of consolidation exclusion were as follows:							 Millions of Yen

		 Assets sold		 Liabilities relinquished		 Gain on sale		 Sale value
		 Cash relinquished		 Cash paid in sales of subsidiaries¥ 24,088(55,927)
31,8390(432)¥ (432)

See notes to consolidated financial statements.

AIFUL CORPORATION

Annual Report 201115

Consolidated Financial Statements

Notes to Consolidated Financial Statements
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010		
1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act and its
related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as toapplication and disclosure requirements of International
Financial Reporting Standards and accounting principles
generally accepted in the United States of America. The
consolidated financial statements are not intended to present
the financial position, results of operations and cash flows inaccordance with accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.
Under Japanese GAAP, a consolidated statement ofcomprehensive income (loss) is required from the fiscal year
ended March 31, 2011 and has been presented herein.

Accordingly, accumulated other comprehensive income (loss) ispresented in the consolidated balance sheet and theconsolidated statement of changes in equity. Information withrespect to other comprehensive income (loss) for the year
ended March 31, 2010 is disclosed in Note 20. In addition,“net loss before minority interests” is disclosed in the
consolidated statement of operations from the year ended
March 31, 2011.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in orderto present them in a form which is more familiar to readers
outside Japan.
In addition, certain reclassifications have been made in the2010 financial statements to conform to the classification usedin 2011.

		
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation — The consolidated financial statements
include the accounts of AIFUL CORPORATION (the“Company”) and its eight (seven in 2010) significant
subsidiaries (together, the “Group”). Consolidation of theremaining fourteen (sixteen in 2010) unconsolidated
subsidiaries would not have a material effect on theaccompanying consolidated financial statements.
		 On July 29, 2010, Life Card Co., Ltd. was established. The
accounts of Life Card Co., Ltd. are newly consolidated forthe year ended March 31, 2011.
		 The Company sold all its shares of Wide Corporation,
TRYTO CORPORATION, TCM. Co. Ltd. and Passkey Co., Ltd.
on September 30, 2009. Accordingly, these four companies
were eliminated from the scope of consolidation as of March
31, 2010. The results of these four companies’ operations
up to the sale date of September 30, 2009 were included in
the consolidated statements of operations for the year
ended March 31, 2010.
		 In March, 2007, the Accounting Standards Board of Japan(the “ASBJ”) issued ASBJ Implementation Guidance No. 15,“Implementation Guidance on Disclosures about Certain
Special Purpose Entities” (“Guidance No. 15”). This standard
permits companies to avoid consolidation of certain special
purpose entities which were established and are being
operated for the purpose of securitization of receivables.
		 A consolidated subsidiary securitizes its trust beneficiary
backed by installment accounts receivable and loans todiversify its funding sources and ensure stable funding. In
the securitization structures, the consolidated subsidiary uses
special purpose entities, which include special purpose
entities and other entities under the Asset Securitization Law(SPC Law). The consolidated subsidiary transfers thepreferred portion of the trust beneficiary to the special
purpose entities in the securitization structures. The special

16

AIFUL CORPORATION

Annual Report 2011

purpose entities raise funds by issuing corporate bonds
backed by the transferred preferred assets and these funds
flow back to the consolidated subsidiary as sales proceeds ofthe transferred assets. The consolidated subsidiary also
provides collection services to the special purpose entities.
The consolidated subsidiary retains the subordinated portionof the trust beneficiary, and an allowance is provided for theestimated uncollectable amount.
		 As a result of such securitizations, a consolidated
subsidiary had two (five in 2010) special purpose entities
which are not consolidated under Guidance No. 15 as ofMarch 31, 2011 and 2010. Related disclosures for the fiscal
year ended March 31, 2011 were omitted due toimmateriality. The total assets and liabilities of such special
purpose entities as of March 31, 2010 were ¥63,850 millionand ¥63,828 million, respectively. There were no transactions
between the consolidated subsidiary and the special purpose
entities in the year ended March 31, 2010. The consolidated
subsidiary retained no shares with shareholder voting rightsof these special purpose entities nor provided directors or
employees for the fiscal year ended March 31, 2010.
		 Under the control or influence concept, those companies
in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated, andthose companies over which the Group has the ability to
exercise significant influence are accounted for by theequity method.
		 Investments in six unconsolidated subsidiaries are statedat cost. Investments in the remaining eight unconsolidated
subsidiaries (ten in 2010), which are limited liability
investment partnerships and similar partnerships, are initially
recorded at cost, and the carrying amount is adjusted torecognize the Company’s interests in earnings or losses insuch partnerships based on the most recent available

financial statements of the partnerships. If the equity
method of accounting had been applied to the investmentsin these companies, the effect on the accompanying
consolidated financial statements would not be material.
		 The difference between the cost of an acquisition and thefair value of the net assets of the acquired subsidiary at thedate of acquisition is reported as goodwill or negative
goodwill in the accompanying consolidated balance sheets.
		 Goodwill on acquisition of subsidiaries is amortized using
the straight-line method over the estimated period (not toexceed 20 years) in which economic benefits are expected tobe realized. However, when the excess of cost over net
assets of subsidiaries acquired is not material, it is charged toincome when incurred. Negative goodwill on acquisition ofsubsidiaries prior to March 31, 2010 is amortized using thestraight-line method over ten years.
		 All significant intercompany balances and transactions
have been eliminated in consolidation. All material
unrealized profit included in assets resulting fromtransactions within the Group is eliminated.
b.	Business Combinations — In October 2003, the BusinessAccounting Council (the “BAC”) issued a Statement of
Opinion, “Accounting for Business Combinations”, and in
December 2005, the ASBJ issued ASBJ Statement No. 7,“Accounting Standard for Business Divestitures” and ASBJ
Guidance No. 10, “Guidance for Accounting Standard forBusiness Combinations and Business Divestitures”. The
accounting standard for business combinations allows
companies to apply the pooling of interests method of
accounting only when certain specific criteria are met suchthat the business combination is essentially regarded as auniting-of-interests. For business combinations that do notmeet the uniting-of-interests criteria, the businesscombination is considered to be an acquisition and thepurchase method of accounting is required. This standard
also prescribes the accounting for combinations of entities
under common control and for joint ventures.
		 In December 2008, the ASBJ issued a revised accounting
standard for business combinations, ASBJ Statement No. 21,“Accounting Standard for Business Combinations”. Major
accounting changes under the revised accounting standard
are as follows: (1) The revised standard requires accounting
for business combinations only by the purchase method. As
a result, the pooling of interests method of accounting is nolonger allowed. (2) The current accounting standard
accounts for research and development costs to be charged
to income as incurred. Under the revised standard, in-process
research and development (IPR&D) acquired in the businesscombination is capitalized as an intangible asset. (3) The
previous accounting standard provided for a bargain
purchase gain (negative goodwill) to be systematicallyamortized over a period not exceeding 20 years. Under therevised standard, the acquirer recognizes the bargain
purchase gain in profit or loss immediately on the acquisition
date after reassessing and confirming that all of the assets
acquired and all of the liabilities assumed have been
identified after a review of the procedures used in thepurchase allocation. This standard was applicable to businesscombinations undertaken on or after April 1, 2010 withearly adoption permitted for fiscal years beginning on orafter April 1, 2009.
c.	Cash Equivalents — Cash equivalents are short-term
investments that are readily convertible into cash and thatare exposed to insignificant risk of changes in value. Cashequivalents include time deposits which mature or becomedue within three months of the date of acquisition.
d.	Operational Investment Securities Held by Venture
Capital Subsidiary and Investment Securities —Operational investment securities held by a venture capitalcompany and investment securities, all of which are classified
as available-for-sale securities, are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported
in a separate component of equity. The cost of securities
sold is determined based on the moving-average cost
method. Non-marketable available-for-sale securities arestated at cost determined by the moving-average method.
For other than temporary declines in fair value, operational
investment securities and investment securities are reduced
to net realizable value by a charge to income.
		 Investments in limited liability investment partnerships
and similar partnerships are initially recorded at cost, and thecarrying amount is adjusted to recognize the Company’s
interests in earnings or losses in such partnerships based on
the most recent available financial statements of thepartnerships.
e.	Property and Equipment — Property and equipment arestated at cost. Depreciation of property and equipment of
the Company and its consolidated subsidiaries is computedby the declining-balance method except that the straightline method is applied to the buildings of the Company’s
consolidated subsidiaries acquired on and after April 1,
1998. The range of useful lives is principally from 2 to 62
years for buildings and structures, from 3 to 17 years formachinery, equipment and vehicles, and from 2 to 20 years
for furniture and fixtures.
f.	Long-lived Assets — The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss would be recognized
if the carrying amount of an asset or asset group exceeds thesum of the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset
or asset group. The impairment loss would be measured as
the amount by which the carrying amount of the asset
exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
g.	Software — Expenditures for the purchase of software,
which meet certain future-tests, are capitalized as softwareand amortized by the straight-line method over theestimated useful lives of five years.
h.	Allowance for Doubtful Accounts — The allowance for
doubtful accounts is stated in amounts considered to beappropriate based on the Group’s past credit loss experience
AIFUL CORPORATION

Annual Report 201117

and an evaluation of potential losses in the accounts
outstanding.
i.	Allowance for Investment Losses — The allowance forinvestment losses is stated in amounts considered to beappropriate based on the financial position of the investment
destination and an evaluation of potential losses on nonmarketable investment securities.
j.	Allowance for Credit Card Point Redemption — The
allowance for credit card point redemption is provided at an
estimated amount of future costs related to credit card point
redemption. These points are granted to card members
according to the point system that is intended to promote
the usage of cards.
k.	Allowance for Losses from Business Restructuring — The
allowance for losses from business restructuring is provided
at an estimated amount of future costs related to closure ofoutlets and other restructuring activities.
l.	Allowance for Losses from a Natural Disaster — The
allowance for losses from a natural disaster is provided at an
estimated amount of future costs for removal, restorationand other related to the damage of assets caused by theGreat East Japan Earthquake in March 2011.
m.	Allowance for Losses on Interest Refunds — The limit ofinterest rates is regulated by two laws — “Contributions
Law” and “Interest Rate Restriction Law”. Under the former
law, interest rates on loans should not exceed 29.2%(20.0% for customers who get loans after June 18, 2010)
and the violation of law is considered to be a criminal
penalty. The latter law stipulates that interest payments forinterest rates that exceed the legal limit (20.0% for principal
amounts under ¥100 thousand, 18.0% for principal
amounts not less than ¥100 thousand and under ¥1 millionand 15.0% for principal amounts not less than ¥1 million)
are void. However, under the “Moneylending BusinessControl and Regulation Law”, such interest payments arenonetheless considered to be valid if moneylenders issue
notices as prescribed by the law to debtors and debtors pay
voluntarily (For customers who get loans after June 18,
2010, such system is abolished.). Strict interpretation by the
courts of these requirements has led to decisions againstmoneylenders and resulted in more debtors claiming for the
return of excess interest payments.
		 The Company and certain consolidated subsidiaries haveloaned money at rates between the limits set by the twolaws. Allowance for losses on interest refunds is stated inamounts considered to be appropriate based on the
Company’s and certain consolidated subsidiaries’ past refund
loss experience, the recent situation regarding interest
refunds and other factors.
		 At March 31, 2011 and 2010, the Group recorded anallowance of ¥178,770 million ($2,153,855 thousand) and¥237,909 million, respectively, as “Allowance for losses oninterest refunds”. In addition, the estimated amount ofinterest refunds of ¥77,013 million ($927,867 thousand) and¥76,991 million which were expected to be preferentially set
off against loans was recorded as “Allowance for doubtful

18

AIFUL CORPORATION

Annual Report 2011accounts” for the Company and certain consolidated
subsidiaries at March 31, 2011 and 2010, respectively.
n.	Asset Retirement Obligations — In March 2008, the ASBJ
published the accounting standard for asset retirement
obligations, ASBJ Statement No. 18 “Accounting Standard
for Asset Retirement Obligations” and ASBJ Guidance No.
21 “Guidance on Accounting Standard for Asset Retirement
Obligations”. Under this accounting standard, an asset
retirement obligation is defined as a legal obligation imposed
either by law or contract that results from the acquisition,
construction, development and the normal operation of atangible fixed asset and is associated with the retirement ofsuch tangible fixed asset. The asset retirement obligation isrecognized as the sum of the discounted cash flows required
for the future asset retirement and is recorded in the period
in which the obligation is incurred if a reasonable estimate
can be made. If a reasonable estimate of the asset
retirement obligation cannot be made in the period the asset
retirement obligation is incurred, the liability should berecognized when a reasonable estimate of asset retirement
obligation can be made. Upon initial recognition of a liability
for an asset retirement obligation, an asset retirement cost is
capitalized by increasing the carrying amount of the related
fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense throughdepreciation over the remaining useful life of the asset. Overtime, the liability is accreted to its present value each period.
Any subsequent revisions to the timing or the amount of theoriginal estimate of undiscounted cash flows are reflected as
an increase or a decrease in the carrying amount of theliability and the capitalized amount of the related asset
retirement cost. This standard was effective for fiscal years
beginning on or after April 1, 2010.
		 The Company applied this accounting standard effective
April 1, 2010. The effect of this change was to increase loss
before income taxes and minority interests by ¥1,266 million($15,253 thousand).
o.	Stock Options — In December 2005, the ASBJ issued ASBJ
Statement No. 8, “Accounting Standard for Stock Options”
and related guidance. The new standard and guidance areapplicable to stock options newly granted on and after May
1, 2006. This standard requires companies to recognize
compensation expense for employee stock options based on
the fair value at the date of grant and over the vesting
period as consideration for receiving goods or services. The
standard also requires companies to account for stock
options granted to non-employees based on the fair value ofeither the stock option or the goods or services received. In
the balance sheet, the stock option is presented as a stockacquisition right as a separate component of equity until
exercised. The standard covers equity-settled, share-based
payment transactions, but does not cover cash-settled,share-based payment transactions. In addition, the standard
allows unlisted companies to measure options at theirintrinsic value if they cannot reliably estimate fair value. The
Company has applied this accounting standard for stock
options to those granted on and after May 1, 2006.

Notes to Consolidated Financial Statementsp.	Leases — In March 2007, the ASBJ issued ASBJ Statement
No. 13, “Accounting Standard for Lease Transactions”,
which revised the previous accounting standard for leasetransactions issued in June 1993. The revised accounting
standard for lease transactions was effective for fiscal years
beginning on or after April 1, 2008.
		 Under the previous accounting standard, finance leases
that were deemed to transfer ownership of the leased
property to the lessee were capitalized. However, otherfinance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized”
information was disclosed in the note to the lessee’s financial
statements. The revised accounting standard requires that all
finance lease transactions be capitalized to recognize leaseassets and lease obligations in the balance sheet. In addition,
the accounting standard permits leases which existed at thetransition date and do not transfer ownership of the leased
property to the lessee to continue to be accounted for as
operating lease transactions.
		 The Group applied the revised accounting standard
effective April 1, 2008. In addition, the Group continues toaccount for leases which existed at the transition date anddo not transfer ownership of the leased property to thelessee as operating lease transactions.
		 Lease assets related to finance lease transactions without
title transfer are depreciated on a straight-line basis, over theleased periods as their useful lives and with no residual value.
		 All other leases are accounted for as operating leases.
q.	Income Taxes — The provision for income taxes iscomputed based on the pretax income included in the
consolidated statements of operations. The asset and liability
approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of
temporary differences between the carrying amounts andthe tax bases of assets and liabilities. Deferred taxes aremeasured by applying currently enacted tax laws to thetemporary differences.
r.	Foreign Currency Transactions — All short-term and longterm monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at theexchange rates at the balance sheet date. The foreignexchange gains and losses from translation are recognized in
the consolidated statements of operations to the extent thatthey are not hedged by forward exchange contracts.
s. Revenue Recognition:
	Interest on Loans — Interest on loans is recorded on an
accrual basis. In accordance with the practice prevailing in
the industry, the Company records accrued interest at either
the interest rate stipulated in the Interest Rate Restriction
Law or the contracted interest rate, whichever is lower.
	Revenue from Credit Card Business, Revenue from
Installment Sales Finance Business — Fees from customers
and member stores applying the add-on method are
generally recorded collectively as unearned income whencredit contracts become effective and are recognized inequal installments over the lives of contracts. Fees from

customers applying the remaining principal method or
revolving method are generally recognized in equal
installments over the lives of contracts.
	Revenue from Credit Guarantees — Revenue from credit
guarantees is recorded by the remaining principal method.
t.	Interest on Borrowings — Interest on financial liabilities isaccounted for as operating expenses while other interest is
included in other expenses.
u.	Bond Issue Costs — Amortization is calculated by thestraight-line method over the term of the related bond issue.
Bond issue costs are included in other assets.
v.	Derivatives and Hedging Activities — The Group uses
derivative financial instruments to manage its exposures tofluctuations in interest rates and foreign exchange. Interest
rate swaps, interest rate caps and currency swaps contracts
are utilized by the Group to reduce interest rate and foreign
currency exchange risks. The Group does not enter into
derivatives for trading or speculative purposes.
		 Derivative financial instruments and foreign currencytransactions are classified and accounted for as follows: a)
all derivatives are recognized as either assets or liabilities
and measured at fair value, and gains or losses on derivativetransactions are recognized in the consolidated statementsof operations, and b) for derivatives used for hedging
purposes, if derivatives qualify for hedge accounting
because of high correlation and effectiveness between thehedging instruments and the hedged items, gains or losses
on derivatives are deferred until maturity of the hedgedtransactions.
		 Currency swaps contracts are utilized to hedge foreign
currency exposure in principal and interest payments of U.S.
dollar straight bonds. U.S. dollar straight bonds aretranslated at the contracted rates.
		 The interest rate swaps and caps which qualify for hedge
accounting and meet specific matching criteria are notremeasured at market value but the differential paid or
received under the swap or cap contracts is recognized andincluded in interest expenses or income.
w.	Per Share Information — Basic net income per share iscomputed by dividing net income available to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits.
		 Diluted net income per share of common stock reflects
the potential dilution that could occur if securities wereconverted into common stock and assumes full conversionof the outstanding convertible bonds at the time of issuanceand full exercise of outstanding stock options.
		 Cash dividends per share presented in the accompanying
consolidated statements of operations are dividends
applicable to the respective years including dividends to be
paid after the end of the year and have not been
retroactively adjusted for stock splits.
x.	New Accounting Pronouncements:
Accounting Changes and Error Corrections — In
December 2009, ASBJ issued ASBJ Statement No. 24

AIFUL CORPORATION

Annual Report 201119

“Accounting Standard for Accounting Changes and Error
Corrections” and ASBJ Guidance No. 24 “Guidance on
Accounting Standard for Accounting Changes and Error
Corrections”. Accounting treatments under this standard
and guidance are as follows: (1) Changes in Accounting
Policies — When a new accounting policy is applied withrevision of accounting standards, the new policy is applied
retrospectively unless the revised accounting standards
include specific transitional provisions. When the revised
accounting standards include specific transitional provisions,an entity shall comply with the specific transitional
provisions. (2) Changes in Presentations — When thepresentation of financial statements is changed, prior period

financial statements are reclassified in accordance with thenew presentation. (3) Changes in Accounting Estimates — Achange in an accounting estimate is accounted for in the
period of the change if the change affects that period only,
and is accounted for prospectively if the change affects boththe period of the change and future periods. (4) Correctionsof Prior Period Errors — When an error in prior period
financial statements is discovered, those statements arerestated. This accounting standard and the guidance areapplicable to accounting changes and corrections of priorperiod errors which are made from the beginning of the
fiscal year that begins on or after April 1, 2011.

3 TRANSLATION INTO UNITED STATES DOLLARS		The consolidated financial statements are stated in Japaneseyen, the currency of the country in which the Company isincorporated and operates. The translation of Japanese yenamounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan and have been made at

the rate of ¥83 to $1, the approximate rate of exchange at
March 31, 2011. Such translations should not be construed as
representations that the Japanese yen amounts could be
converted into U.S. dollars at that or any other rate.

4 LOANS		
Loans at March 31, 2011 and 2010 consisted of the following (before allowance for doubtful accounts):
					
				
Millions of Yen

2011

				

Unsecured¥425,400
Secured
99,650
Small business loans
69,477
Total		
¥594,527
Off-balance sheet securitized loans		
Net		
¥594,527

Thousands of
U.S. Dollars

2010

2011

¥634,249
138,650
83,864¥856,763(20,835)¥835,928$5,125,301
1,200,602
837,073$7,162,976$7,162,976

Registered moneylenders are required to disclose the following information under the Non-Bank Bond Issuing Law.
					
				
Millions of Yen				Loans in legal bankruptcy
Nonaccrual loans
Accruing loans contractually past due three months or more as toprincipal or interest payments
Restructured loans
Total		Loans in legal bankruptcy are loans in which accrual ofinterest is discontinued (excluding the portion recognized as
bad debts), based on management’s judgment as to thecollectability of principal or interest resulting from the past
due payment of interest or principal and other factors.
Allowances for claims in bankruptcy are stated at suchamount less net realizable value of collateral.

20

AIFUL CORPORATION

Annual Report 2011

Thousands of
U.S. Dollars

2011

2010

2011

¥ 44,136
88,221¥ 48,849
137,021$ 531,759
1,062,904

9,489
40,761¥182,607

15,56655,277¥256,713

114,325
491,096$2,200,084

Nonaccrual loans are loans in which accrual of interest is
discontinued, other than loans in legal bankruptcy as well as
loans receiving regular payments in the case of granting
deferral of interest payment to the debtors in financial
difficulties to assist them in their recovery.
Accruing loans contractually past due three months ormore as to principal or interest payments are loans for which

Notes to Consolidated Financial Statements

payments of principal or interest have not been received for aperiod of three months or more beginning with the next
business day following the last due date for such payments.
Loans classified as loans in legal bankruptcy and nonaccrualloans are excluded from accruing loans contractually past due
three months or more.
Restructured loans are loans on which creditors grantconcessions (e.g., reduction of the stated interest rate, deferralof interest payment, extension of maturity date, waiver of theface amount, or other concessive measures) to the debtors infinancial difficulties to assist them in their recovery andeventually enable them to pay creditors. Loans classified asloans in legal bankruptcy, nonaccrual loans and accruing loans
contractually past due three months or more are excluded.

The securitized loans, which are not recognized on thebalance sheets amounted to nil and ¥20,835 million at March
31, 2011 and 2010, respectively.
At March 31, 2011 and 2010, the Group had balances
related to revolving loan contracts aggregating ¥538,711
million ($6,490,494 thousand) and ¥790,012 million,
respectively, whereby the Group is obligated to advance funds
up to a predetermined amount upon request. At March 31,
2011 and 2010, the balances of unadvanced commitments
were ¥759,699 million ($9,153,000 thousand) and ¥836,316
million, respectively. The loan contract contains provisions thatallow the Group to reduce the contract amount of thecommitment or refuse to advance funds to loan customers
under certain conditions.

5 INSTALLMENT ACCOUNTS RECEIVABLE
		
Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2011 and 2010 consistedof the following:
					
				
Millions of Yen

Thousands of
U.S. Dollars

2011

				
				
			
Receivables

2011

2010
Unearned		
IncomeReceivables

Credit card business
Installment sales finance business
Total¥74,677
6,313¥80,990

¥441
220
¥661

Off-balance sheet securitizedinstallment accounts receivableNet(3,655)		
¥77,335¥661

Unearned		
IncomeReceivables

Unearned
Income¥ 789
503¥1,292$899,723
76,060$975,783$5,313
2,651$7,964(9,862)		
¥125,990¥1,292(44,036)$931,747$7,964¥121,995
13,857¥135,852

In addition, the Group had unearned income of immaterial amounts at March 31, 2011 and 2010 which was included in othercurrent liabilities, related to loans other than those shown in the above table.

6 CREDIT GUARANTEES AND OBLIGATIONS UNDER CREDIT GUARANTEES		The Group, as guarantor, recorded credit guarantees as acontra account of obligations under credit guarantees.
Unearned income relating to credit guarantees was ¥63 million($759 thousand) and ¥80 million at March 31, 2011 and 2010,
respectively, which was included in other current liabilities.

7 OPERATIONAL INVESTMENT SECURITIES HELD BY VENTURE CAPITAL SUBSIDIARY AND INVESTMENT SECURITIES		Operational investment and investment securities at March 31, 2011 and 2010 consisted of the following:
					
				
Millions of Yen				Current:
Equity securities
Non-current:
Equity securities
Other
Total		

Thousands of
U.S. Dollars

2011

2010

2011

¥ 725

¥ 788

$ 8,735¥5,223
194¥5,417¥6,799289¥7,088$62,9282,337$65,265

AIFUL CORPORATION

Annual Report 201121

The costs and aggregate fair values of operational investment and investment securities at March 31, 2011 and 2010 were as
follows:			Millions of Yen

			

2011

				
			
Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Securities classified as:						Available-for-sale — Equity securities¥5,302¥127¥1,307¥4,122			Millions of Yen

			

2010

				
			
Cost

Securities classified as:
Available-for-sale — Equity securities¥6,085

			

Unrealized
Gains

Unrealized
Losses

Fair
Value

¥698

¥1,151¥5,632Thousands of U.S. Dollars

			

2011

				
			
Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Securities classified as:
Available-for-sale — Equity securities$1,530$15,747$49,663$63,880

Proceeds from sales of available-for-sale securities for theyears ended March 31, 2011 and 2010 were ¥1,367 million($16,470 thousand) and ¥1,221 million, respectively. Grossrealized gains on these sales, computed on the moving-average
cost basis, were ¥565 million ($6,807 thousand) and ¥1,206
million for the years ended March 31, 2011 and 2010,

respectively, and gross realized losses were ¥77 million ($928
thousand) and immaterial amounts for the years ended March
31, 2011 and 2010, respectively.
The impairment losses on available-for-sale equity securities
for the years ended March 31, 2011 and 2010 were ¥48 million($578 thousand) and ¥159 million, respectively.

8 LONG-LIVED ASSETS		The following table summarizes the Group’s asset grouping:				Business Classification

Asset Grouping

Financial services and venture capital	Each business entity is the minimum unit. For assets related to businessr estructuring, each outlet which each company has decided to closeor each headquarters or branch which each company has decided totransfer is the minimum unit.
Real estate business	Each real estate for rent (rental property) is the minimum unit.
Works of art

Each work of art is the minimum unit.

System related equipment	Each system related equipment which each company has decided to sellis the minimum unit.
Year ended March 31, 2011
The Group reviewed its long-lived assets for impairment for the year ended March 31, 2011. As a result, the Group recognized an
impairment loss for rental properties, system related equipment and other which were intended to be sold, outlets and other which
the Group decided to close and headquarters of consolidated subsidiaries and other which the Group decided to transfer. The
carrying amount of the relevant assets was written down to the estimated recoverable amount. The estimated recoverable amountof each asset grouping was measured as follows:
Rental properties — The amount of sales contract and other
System related equipment and other — The expected amount of sale
	Outlets and Headquarters of consolidated subsidiaries which the Group decided to close or transfer and other — The asset group
was measured at its value in use, which is the aggregated depreciation expense up to the point of disposal or transfer.

22

AIFUL CORPORATION

Annual Report 2011

Notes to Consolidated Financial Statements

				Impairment Loss					
Thousands of		
Description
Classification
Location
Millions of Yen
U.S. Dollars

Rental properties
Buildings and structures,
Kyoto prefecture and other				
land, and other		Outlets and other
Buildings and structures,Tokyo metropolitan area				and furniture and fixturesand other
System related
Furniture and fixtures, andKyoto prefecture
equipment and othersoftware		
Headquarters of
Buildings and structures,Tokyo metropolitan area,
consolidated subsidiaries furniture and fixtures,
Kyoto prefecture
and otherand softwareand other¥1,020$12,289

122

1,470

93

1,120

8

96

The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended March
31, 2011:
					
				
Millions of Yen

Thousands of
U.S. Dollars

¥ 516
145
569
13
¥1,243

Buildings and structures
Furniture and fixtures
Land			Other			Total			

$ 6,217
1,747
6,855
157
$14,976

Year ended March 31, 2010
The Group reviewed its long-lived assets for impairment for the three months ended September 30, 2009. As a result, the Group
recognized an impairment loss for rental properties, works of art which were intended to be sold and outlets which the Groupdecided to close. The carrying amount of the relevant assets was written down to the estimated recoverable amount. The estimatedrecoverable amount of each asset grouping was measured as follows:
Rental properties — Quotation from a real-estate appraiser
Works of art — Quotation from a third party appraiser
	Outlets which the Group decided to close — The asset group was measured at its value in use, which is the aggregateddepreciation expense up to the point of disposal.
						Description
Classification

Rental properties
Outlets which the Groupdecided to close
Works of art

Impairment Loss
Millions of Yen

Buildings and structures, land, and other
Buildings and structures, furniture andfixtures, and otherFurniture and fixtures

¥ 448
817
3,397

The Group reviewed its long-lived assets for impairment for the three months ended March 31, 2010. As a result, the Group
recognized an impairment loss for branch offices and other which were planned to be transferred. The carrying amount of therelevant assets was written down to the estimated recoverable amount. The estimated recoverable amount was measured as follows:
Branch offices and other — The estimated recoverable amount of the assets was measured at its value in use, which reflects theaggregated depreciation expense up to the point of disposal.
						Description
Classification

Branch offices and other

Buildings and structures, and other

Impairment Loss
Millions of Yen¥198

AIFUL CORPORATION

Annual Report 201123

The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended March
31, 2010:
				Millions of Yen

Buildings and structures
Machinery, equipment and vehicles
Furniture and fixtures
Land			Other			Total			

¥ 990
4
3,614
214
38
¥4,8609 INVESTMENT PROPERTY		In November 2008, the ASBJ issued ASBJ Statement No. 20“Accounting Standard for Investment Property and Related
Disclosures” and issued ASBJ Guidance No. 23 “Guidance on
Accounting Standard for Investment Property and Related
Disclosures”. This accounting standard and the guidance wereapplicable to investment property and related disclosures at theend of the fiscal years ending on or after March 31, 2010. The

Group applied the accounting standard and guidance effective
March 31, 2010.
The Group held some investment property for the fiscal years
ended March 31, 2011 and 2010, but related disclosures wereomitted due to immateriality.

10 SHORT-TERM BORROWINGS AND LONG-TERM DEBT		
Short-term borrowings at March 31, 2011 and 2010 consisted of the following:
					
				
Millions of Yen

2011

				

Thousands of
U.S. Dollars

2010

Other (principally from a credit card company and 			securitized loan), 1.80% to 2.00% (1.80% to4.66% at March 31, 2010)¥42,580¥61,205

24

AIFUL CORPORATION

Annual Report 2011

2011

$513,012

Notes to Consolidated Financial Statements

Long-term debt at March 31, 2011 and 2010 consisted of the following:
					
				
Millions of Yen

				

2011

Loans from banks, 1.90% to 3.58% *¥ 221,447
Loans from other financial institutions, 1.90% to 2.92% *49,761
Unsecured 0.80% to 2.93% yen straight bonds, due 2010		
Unsecured 1.50% to 1.58% yen straight bonds, due 2011
17,900Unsecured 1.20% to 1.99% yen straight bonds, due 2012
35,900Unsecured 1.74% yen straight bonds, due 2013
10,000Unsecured 1.99% yen straight bonds, due 2015
10,000Unsecured 5.00% U.S. dollar straight bonds, due 2010
Unsecured 6.00% U.S. dollar straight bonds, due 2011
57,600Unsecured 3.50% medium-term notes, due 2015
15,000
Other (principally from securities companies and securitized loan),
1.90% to 2.30% (0.76% to 2.30% at March 31, 2010) *32,232
Obligations under finance leases
190
Total
¥ 450,030
Less current portion(132,703)
Long-term debt, less current portion¥ 317,327

Thousands of
U.S. Dollars

2010

2011

¥ 250,002
55,32350,00020,00040,00010,00010,00055,61057,60015,000$ 2,668,036
599,530

23,828255¥ 587,618(150,906)¥ 436,712

388,337
2,289$ 5,422,048(1,598,831)$ 3,823,217

215,663432,530
120,482
120,482
693,976
180,723* The Company and certain consolidated subsidiaries receive financial assistance based on consensual business revitalization alternative dispute resolution
procedures prescribed in the Act on Special Measures for Industrial Revitalization (the “Business Revitalization Procedures”). Financial assistance is obtained
through modification to repayment schedules for loan obligations, the content of which will be to make partial payments until June 10, 2014, and withregard to the obligations remaining after June 10, 2014, to receive refinancing by no later than July 10, 2014 or to make a proposal to the participating
creditors regarding the payment method in the period after July 10, 2014 and to reach an agreement thereon.
Therefore, the final due dates for long-term debts subject to financial assistance mentioned above cannot be identified.
At March 31, 2011 and 2010, long-term debts subject to the financial assistance of ¥177,657 million ($2,140,446 thousand) and ¥200,892 million were
included in “Loans from banks”, ¥49,761 million ($599,530 thousand) and ¥55,323 million were included in “Loans from other financial institutions”, and¥32,232 million ($388,337 thousand) and ¥15,917 million were included in “Other” in the table above.
The final due date for “Loans from banks” other than those subject to financial assistance is 2014 (due 2013 at March 31, 2010). The final due date for“Other” other than those subject to financial assistance at March 31, 2010 was 2010 (no such amount outstanding at March 31, 2011).

Annual maturities of long-term debt, excluding finance leases (see Note 17) at March 31, 2011 were as follows:					Year Ending March 31
Millions of Yen

Thousands of
U.S. Dollars¥132,638
50,92032,70016,50025,000¥257,758$1,598,048
613,494
393,976
198,795
301,205$3,105,518

2012
2013
2014
2015
2016
Total

Long-term debt whose repayment schedule is determined is included in the table above.
Long-term debt of ¥192,082 million ($2,314,241 thousand) whose repayment schedule is undetermined, such as obligations
remaining after June 10, 2014, is not included in the table above.

AIFUL CORPORATION

Annual Report 201125

At March 31, 2011, the following assets were pledged as collateral for short-term borrowings and long-term debt (including
current portion of long-term debt):
					
				
Millions of Yen

Thousands of
U.S. Dollars

Loans
Installment accounts receivable
Other current assets
Land
Buildings and structures
Machinery, equipment and vehicles
Investment securities
Total¥325,632
49,074
36
8,924
7,204
62
3,928
¥394,860$3,923,277
591,253434
107,518
86,795
747
47,325$4,757,349

Related liabilities:
Short-term borrowings
Long-term debt (including current portion of long-term debt)
Total¥ 42,580
259,651¥302,231$ 513,012
3,128,325$3,641,337

If requested by lending financial institutions, the Group has committed to pledge loans of ¥53,033 million ($638,952 thousand)as collateral in addition to those shown in the above table. At March 31, 2011, lending financial institutions can request the Groupto pledge additional collateral for long-term debt (including current portion of long-term debt) of ¥43,815 million ($527,892
thousand). In this amount, ¥25 million ($301 thousand) of related liabilities shown in the above table is included.
At March 31, 2011, other current assets amounting to ¥17,660 million ($212,771 thousand) were pledged as collateral for thecurrency swap contracts in addition to those shown in the above table

11 RETIREMENT AND PENSION PLANS		The Company and certain consolidated subsidiaries have a defined contribution pension plan and a prepaid retirement benefits
plan. Contributions to the defined contribution plan and payments to the prepaid retirement benefits plan are charged to income
when made.
The components of net periodic benefit costs for the years ended March 31, 2011 and 2010 were as follows:
					
				
Millions of Yen

26

Thousands of
U.S. Dollars

				

2011

2010

2011

Payments for prepaid retirement benefits plan
Premiums for defined contribution pension plan
Other		Net periodic benefit costs

¥260
368

¥ 485
595
16
¥1,096$3,132
4,434

AIFUL CORPORATION

Annual Report 2011

¥628

$7,566

Notes to Consolidated Financial Statements

		
12 EQUITY
Japanese companies are subject to the Companies Act ofJapan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at
any time during the fiscal year in addition to the year-end
dividend upon resolution at the shareholders meeting. For
companies that meet certain criteria such as; (1) having theBoard of Directors, (2) having independent auditors, (3) having
the Board of Corporate Auditors, and (4) the term of service ofthe directors is prescribed as one year rather than two years ofnormal term by its articles of incorporation, the Board of
Directors of such company may declare dividends (except for
dividends in kind) at any time during the fiscal year if thecompany has prescribed so in its articles of incorporation. The
Company meets all the above criteria.
The Companies Act permits companies to distributedividends-in-kind (non-cash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year
upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Companies Act
provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.

(b) Increases/decreases and transfer of common stock,reserve and surplus
The Companies Act requires that an amount equal to 10%
of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital(a component of capital surplus) depending on the equity
account charged upon the payment of such dividends until the
total of the aggregate amount of legal reserve and additional
paid-in capital equals 25% of the common stock. Under theCompanies Act, the total amount of additional paid-in capitaland legal reserve may be reversed without limitation. The
Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain
conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution
to the shareholders which is determined by specific formula.
Under the Companies Act, stock acquisition rights arepresented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury
stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.

AIFUL CORPORATION

Annual Report 201127

13 STOCK OPTION		
The stock options outstanding as of March 31, 2011 and 2010 are as follows:
Stock		OptionPersons Granted

Number of
Options Granted

Date of Grant

2005
Stock Option

31 Company’s and subsidiaries’		
directors
374,400		
June 24, 2005
454 Company’s and subsidiaries’
shareskey employees

2010
Stock Option

2,206 Company’s and subsidiaries’
key employees

2,192,650
July 1, 2010
shares		

Exercise Price

Exercise Period¥8,420($101.45)

From July 1, 2007
to June 30, 2010

¥128($1.54)

From August 1, 2014
to July 31, 2016

The stock option activity is as follows:2005
Stock Option

2010
Stock Option(shares)(shares)

For the year ended March 31, 2010
Non-vested
March 31, 2009 - Outstanding					 Granted 					 Canceled 					 Vested 			March 31, 2010 - Outstanding			
Vested			March 31, 2009 - Outstanding
270,000
		 Vested 					 Exercised 					 Canceled
6,600
March 31, 2010 - Outstanding
263,400
Exercise price¥8,420For the year ended March 31, 2011Non-vested
March 31, 2010 - Outstanding						 Granted 		
2,192,650
		 Canceled 		
97,050		 Vested 			March 31, 2011 - Outstanding		
2,095,600
Vested			March 31, 2010 - Outstanding
263,400
		 Vested 				 Exercised		 Canceled
263,400
March 31, 2011 - Outstanding				Exercise price¥8,420¥128
				($101.45)($1.54)
Fair value price at grant date		
¥61
					
($0.73)
The assumptions used to measure fair value of 2010 Stock Option
Estimate method:
Volatility of stock price:
Estimated remaining outstanding period:
Estimated dividend:
Risk free interest rate:

28

AIFUL CORPORATION

Annual Report 2011Black-Scholes option pricing model
77.936%5.08 years¥0 per share
0.3577%

Notes to Consolidated Financial Statements

14 LOSS FROM AND PROVISION FOR BUSINESS RESTRUCTURING		
The following table summarizes the components of the Group’s loss from business restructuring for the year ended March
31, 2010.
Millions of Yen			

Loss from business restructuring:Special severance payments
Cost related to closure of outlets
Other
Total

¥ 8,887
1,585
1,354¥11,826

The following table summarizes the components of the Group’s provision for business restructuring for the year ended
March 31, 2010.
Millions of Yen			Provision for business restructuring:
Cost related to headquarter restructuring
Cost related to closure of outlets
Voluntary retirement cost
Termination fee
Other
Total

¥ 303
19
217
771
14
¥1,324Disclosure of the components of the Group’s loss from and provision for business restructuring for the year ended March 31,
2011 was not presented herein, since the amount recognized was immaterial.

15 LOSSES FROM A NATURAL DISASTER		
The following table summarizes the components of the Group’s losses from a natural disaster for the year ended March 31, 2011.
The disaster was caused by the Great East Japan Earthquake which occurred on March 11, 2011.
					
			
Millions of Yen

Losses from a natural disaster:
Provision for doubtful accounts
Provision for losses from a natural disaster
Other
Total

¥6,54451
7¥6,602AIFUL CORPORATION

Thousands of
U.S. Dollars$78,843614
85$79,542Annual Report 201129

16 INCOME TAXES		The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately 41% for the years ended March 31, 2011 and 2010.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities
at March 31, 2011 and 2010 were as follows:
					
				
Millions of Yen

2011

2010

¥ 47,338
72,53916,863
4,537
156,622
4,563
9,979
312,441(312,441)¥
Nil¥ 57,269
97,226
19,503
4,044
109,990
3,338
10,326
301,696(301,696)
¥
Nil

				

Deferred tax assets:
Allowance for doubtful accounts
Allowance for losses on interest refunds
Charge-offs for doubtful accounts
Accrued interest on loans
Tax loss carryforwards
Interest refunds payable
Other
Total
Less valuation allowance
Total deferred tax assets

Thousands of
U.S. Dollars

Deferred tax liabilities:			
Exchange differences related to lease deposits 		
¥(200)
Unrealized gain on available-for-sale securities
¥
(8)
(76)
Costs of removal related to asset retirement obligations(121)		Total deferred tax liabilities
¥
(129)
¥
(276)
¥

Net deferred tax assets

(129)

¥

(276)

2011

$

570,337
873,964
203,169
54,663
1,887,012
54,976120,228
3,764,349(3,764,349)
$
Nil

$
$

(96)
(1,458)(1,554)$(1,554)A valuation allowance is established to reduce certain deferred tax assets with respect to deductible temporary differences
and net operating loss carryforwards where it is more likely than not that they will not be realized.
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying
consolidated statement of operations for the years ended March 31, 2011 and 2010 has not been disclosed because of the Group’s
net loss position.
At March 31, 2011, the Company and certain consolidated subsidiaries had tax loss carryforwards aggregating approximately¥385,878 million ($4,649,133 thousand) which were available for offset against taxable income of the Company and such
subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:

30

					
Year Ending March 31
Millions of Yen

Thousands of
U.S. Dollars

2012
¥
67
2013
238
2014		
2015
39,866
2016
60,5562017 and thereafter
285,151
Total¥385,878$

AIFUL CORPORATION

Annual Report 2011

807
2,868

480,313729,591
3,435,554$4,649,133

Notes to Consolidated Financial Statements

17 LEASES		The Group leases furniture and fixtures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2011 and 2010 were ¥4,230
million ($50,964 thousand) and ¥6,804 million, respectively.
Obligations under finance leases at March 31, 2011 were as follows:
					
			
Millions of Yen

Thousands of
U.S. Dollars

¥ 65
125
¥190

$ 783
1,506
$2,289Due within one year
Due after one year
Total

Pro forma information of leased property whose lease
inception was before March 31, 2008
ASBJ Statement No. 13, “Accounting Standard for Lease
Transactions” requires that all finance lease transactions should
be capitalized to recognize lease assets and lease obligations in
the balance sheet. However, the ASBJ Statement No. 13 permits
leases without ownership transfer of the leased property to thelessee whose lease inception was before March 31, 2008 to

continue to be accounted for as operating lease transactions if
certain “as if capitalized” information is disclosed in the notes
to the financial statements. The Company applied the ASBJ
Statement No. 13 effective April 1, 2008 and accounted forsuch leases as operating lease transactions. Pro forma
information of leased property whose lease inception was
before March 31, 2008 was as follows:			

Furniture and Fixtures

					
				
Millions of Yen

				
				

Acquisition cost
Accumulated depreciation
Net leased property

Thousands of
U.S. Dollars

As ofMarch 31, 2011

As ofMarch 31, 2010

As ofMarch 31, 2011

¥402
329
¥ 73

¥734
522
¥212

$4,8433,963$ 880

Obligations under finance leases as of March 31:
					
				
Millions of Yen

Thousands of
U.S. Dollars

				

2011

2010

2011

Due within one year
Due after one year
Total		

¥87

¥143
87
¥230

$1,048¥87$1,048Depreciation expense, interest expense and other information under finance leases:
					
				
Millions of Yen

Thousands of
U.S. Dollars

				

2011

2010

2011

Depreciation expense
Interest expense
Total		Lease payments

¥139
7
¥146
¥149

¥221
8
¥229
¥232

$1,67584$1,759$1,795

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements of operations,are computed by the straight-line method and the interest method, respectively.

AIFUL CORPORATION

Annual Report 201131

		
18 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESIn March 2008, the ASBJ revised ASBJ Statement No. 10“Accounting Standard for Financial Instruments” and issued
ASBJ Guidance No. 19 “Guidance on Accounting Standard for
Financial Instruments and Related Disclosures”. This accounting
standard and the guidance were applicable to financial
instruments and related disclosures at the end of the fiscal years
ending on or after March 31, 2010. The Group applied therevised accounting standard and the guidance effective March
31, 2010.
(1) Group policy for financial instruments
The main business of the Group is finance. The Group is
engaged in the provision of unsecured loans for individual
consumers, secured loans, small business loans, shopping loans,credit guarantee, debt collection and so on. To run thesebusinesses, the Group raises funds domestically andinternationally. Indirect financing by loans from banks and direct
financing by bond issue and loan securitization are used. The
Group enters into derivative transactions as means of managing
its interest rate exposures and foreign currency exposures oncertain liabilities. Such derivative transactions are entered into
to hedge interest exposures and foreign currency exposuresinherent within its business. The Group does not hold or issue
derivatives for trading or speculative purposes.
(2) Nature and extent of risks arising from financial
instruments
Loans and installment accounts receivable for domestic
consumers and small businesses are the main financial assets of
the Group and are exposed to credit risk through default ofcontract by customers. Other financial assets such as
operational investment securities and investment securities aremainly stock and investments in limited liability investment
partnerships. The Group holds these securities to develop thesebusinesses. The securities are exposed to the issuer’s credit risk
and the risk of market price fluctuations.
Borrowings and debt including bonds are the main financial
liabilities of the Group. The Group also raises funds by loan
securitization. These liabilities are exposed to liquidity risks, orrisk that liabilities cannot be met when they fall due if theGroup is unable to participate in fund-raising markets in certain
circumstances. In addition, the Group raises funds at variableinterest rates or by bonds in foreign currency, and these areexposed to the market risks of fluctuation in interest rates andforeign currency exchange rates.
Derivatives include interest rate swaps and currency swaps
which are applicable to hedge accounting, and interest rate
swaps and caps which are not applicable to hedge accounting.
These derivatives are exposed to the market risks of fluctuation
in interest rates and foreign currency exchange rates, andcounterparty risks. See Note 19 for more details about
derivatives and hedging activities.

32

AIFUL CORPORATION

Annual Report 2011

(3) Risk management for financial instruments
Credit risk management
Credit risk is the risk of economic loss arising from acounterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risks according
to internal guidelines. In relation to loans, installments accounts
receivable and credit guarantees which are the Group’s major
financial assets, the Group conducts credit checks for eachcontract based on data of the consumer data industry and its
own credit standards, maintaining its system to modify credit
ceilings, set guarantees or collateral. The Group manages its
credit risks of issuers of securities by checking credit informationand market prices periodically.
Because the counterparties to derivatives are limited tomajor financial institutions, the Group does not anticipate any
losses arising from credit risk. The Group manages such credit
risks by relevant sections evaluating, analyzing and deliberating
countermeasures and reporting to the board of directors
accordingly.
See Note 19 for details regarding derivatives.
	Market risk management (foreign exchange risk and interest
rate risk)
The Group manages foreign exchange risk and interest raterisk based on a “risk management manual” which wasendorsed by the Group’s risk management committee. The risk
management committee is directly controlled by the board of
directors. The finance department reports the conditions offoreign exchange risk and interest rate risk to the internal
control department. The internal control department examines
the reasonability and adequacy of the finance department’s risk
evaluation and countermeasures, and reports to the board of
directors. Also, the Group utilizes interest rate swaps in order tohedge exposure to risks from changes in interest rates andcurrency swaps to manage exposure to risks from changes inforeign currency.
Market risk management (stock price volatility risk)
Most of the operational investment securities andinvestment securities the Group holds are intended to develop
business including business alliances and capital alliances.
Relevant sections monitor the market environment and thefinancial situation of the issuers, deliberate countermeasuresand report to the board of directors accordingly. The Group
does not hold trading securities, which are held for the purposeof earning capital gains in the near term.
Market risk management (derivatives)
The Group manages market risk of derivatives according tointernal guidelines. Relevant sections conduct internal checks tomake sure that transactions, valuations of effectiveness ofhedging and management of affairs are performed inaccordance with internal guidelines.
Quantitative information of market risk
The Group does not perform quantitative analysis of themarket risk.

Notes to Consolidated Financial Statements(Interest rate risk)
The main financial instruments in the Group which areaffected by interest rate risk, the typical risk parameter, are“Loans”, “Installment accounts receivable”, “Short-termborrowings” and “Long-term debt”. Fair values under
movements of the risk parameter of long-term debts, including
those subject to the financial assistance based on consensual
business revitalization alternative dispute resolution procedures
which accounts for a large portion of long-term debt, cannot
be reasonably estimated. Therefore, changes in fair value as ofMarch 31, 2011 affected by movements of the risk parameterassumed within a normal range and related information is notdisclosed herein.

Liquidity risk management regarding fund-raising
The Group manages liquidity risk by adequate financial
planning of the Group on a timely basis, diversifying means offund-raising and adjusting the ratio of long-term and shortterm debt in the light of market environment.
(4) Fair value of financial instruments
Fair values of financial instruments are based on quoted prices
in active markets. If a quoted price is not available, otherrational valuation techniques are used. There are possibilities
that fair value calculation results may differ when different
assumptions are used. Also please see Note 19 for details of fairvalue for derivatives.

(a) Fair value of financial instruments
Note that the following table does not include non-listed equity securities and certain other securities for which fair value isdifficult to determine (see Note 4 (b) below).
							March 31, 2011		

Cash and cash equivalents		
Time deposits		
Loans				Allowance for doubtful accounts and losses on interest refunds *1
					Installment accounts receivable		
Unearned income *2		Allowance for doubtful accounts *3							
Operational investment securities, investment securities andinvestments in unconsolidated subsidiaries 		
Claims in bankruptcy 		Allowance for doubtful accounts *3							
Total				Short-term borrowings 		
Long-term debt*4 *5		Total				Millions of Yen
Carrying		
AmountFair Value

Unrealized
Gain (Loss)¥ 139,971
5
594,527(158,249)
436,278
77,335(589)(6,666)70,080¥139,971
5

4,122
46,838(32,177)
14,661¥ 665,117¥ 42,580
190,190¥ 232,770

4,122

513,978¥ 77,700

71,1651,085

		
14,661¥743,902¥ 42,580
145,778¥188,358

AIFUL CORPORATION¥ 78,785¥(44,412)¥(44,412)

Annual Report 2011

33

			

Thousands of U.S. Dollars

				March 31, 2011		

Cash and cash equivalents		
Time deposits
Loans				Allowance for doubtful accounts and losses on interest refunds *1							Installment accounts receivable		
Unearned income *2		Allowance for doubtful accounts *3							
Operational investment securities, investment securities andinvestments in unconsolidated subsidiaries 		
Claims in bankruptcy 		Allowance for doubtful accounts *3							
Total				Short-term borrowings 		
Long-term debt*4 *5		Total				Carrying		
AmountFair Value$ 1,686,398
60
7,162,976(1,906,615)
5,256,361
931,747(7,097)(80,313)844,337$1,686,398
60

49,663564,313(387,674)
176,639$ 8,013,458$ 513,012
2,291,446$ 2,804,458

49,663

Unrealized
Gain (Loss)

6,192,506$ 936,145

857,409

13,072

		
176,639$8,962,675$ 949,217$ 513,012
1,756,361$(535,085)$2,269,373$(535,085)*1. Allowance for doubtful accounts which correspond to loans and allowance for losses on interest refunds which is expected to be preferentially set off
against loans is deducted.
*2. Unearned income of installment accounts receivable, included in other current liabilities, is deducted.
*3. Allowance for doubtful accounts which correspond to installment accounts receivable or claims in bankruptcy is deducted.
*4. Long-term debt which is subject to the financial assistance based on the Business Revitalization Procedures is excluded. Obligations under finance leases are
excluded.
*5. The fair value of derivatives transactions which qualify for hedge accounting is included in the fair value of the hedged item (i.e. long-term debt).

34

AIFUL CORPORATION

Annual Report 2011

Notes to Consolidated Financial Statements

			Millions of Yen				March 31, 2010		

Carrying		
AmountFair Value

Cash and cash equivalents		
Time deposits
Loans				Allowance for doubtful accounts and losses on interest refunds *1
					Installment accounts receivable		
Unearned income *2		Allowance for doubtful accounts *3							
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries		
Claims in bankruptcy 		Allowance for doubtful accounts *3							
Total				Short-term borrowings 		
Long-term debt *4 *5		Total				Derivative transactions: *5
to which hedge accounting is applied
to which hedge accounting is not applied		
Total				Unrealized
Gain (Loss)¥128,748¥ 128,748
7
7
835,928(200,336)
635,592
758,107¥122,515
125,990(1,099)(7,333)			
117,558
120,186
2,628
5,632
50,401(32,797)
17,604¥905,141¥61,205
315,231¥376,436

17,604¥1,030,284¥ 61,205
249,339¥ 310,544

¥
¥

¥
¥

(9)
(9)

5,632				¥125,143¥ 65,892¥ 65,892(9)(9)*1. Allowance for doubtful accounts which correspond to loans and allowance for losses on interest refunds which is expected to be preferentially set off
against loans is deducted.
*2. Unearned income of installment accounts receivable, included in other current liabilities, is deducted.
*3. Allowance for doubtful accounts which correspond to installment accounts receivable or claims in bankruptcy is deducted.
*4. Long-term debt which is subject to the financial assistance based on the Business Revitalization Procedures is excluded. Obligations under finance leases are
excluded.
*5. Assets and liabilities generated from derivatives transactions are indicated on a net basis, and those items which turn out to be liabilities on a net basis arebracketed. Also, the fair value of derivatives transactions which qualify for hedge accounting is included in the fair value of the hedged item (i.e. long-termdebt).

Cash and cash equivalents
The carrying values of cash and cash equivalents
approximate fair value because of their short maturities.
Time deposits
The carrying values of time deposits approximate fair value
because of their short maturities.
Loans
The fair value of loans is determined based on the present
value of expected future cash flow, which consists of expectedinflows of principal and interest which is adjusted to reflectcollectability and outflows of costs of collection. The expected
future cash flow is discounted at a risk free interest rate basedon maturity length.
Installment accounts receivable
The carrying values of installment accounts receivables
related to the credit card business approximate fair value
because most transactions are single payments in the following
month. The fair value of installment accounts receivable related
to installment sales finance business is determined based on thepresent value of expected future cash flow, which consists of
expected inflows of principal and fees which is adjusted toreflect collectability and outflows of costs of collection. The
expected future cash flow is discounted at a low-risk interest
rate based on maturity length.
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
The fair value of operational investment securities,
investment securities and investments in unconsolidated
subsidiaries are measured at the quoted market price of thestock exchange.
Claims in bankruptcy
The carrying values of claims in bankruptcy less allowances
for claims in bankruptcy approximate fair value because
allowances for claims in bankruptcy are stated taking net
realizable value of collateral into account.
Short-term borrowings
The carrying values of short-term borrowings approximate
fair value because of their short maturities.

AIFUL CORPORATION

Annual Report 201135

Long-term debt
The fair values of marketable bonds issued by the Company
are measured at the quoted market price and those ofnonmarketable bonds issued by the Company are determinedby discounting cash flows of principal and interest, discounted
at the rate which reflects credit risk and the maturities of thebond. The fair values of certain bonds are determined as fixedinterest rate, yen-denominated bonds, because forward
exchange contracts and interest rate swaps qualify for hedge
accounting and are assigned to the associated bond. Carrying
values of the current portion of long-term debt approximate fairvalue because of their short maturities. The carrying values oflong-term debt other than the current portion of long-term
debt approximate fair value because the variable rate reflects
the market interest rate in a short period of time and also all of
the debts are those of a consolidated subsidiary whose credit
condition has not significantly changed since the initial date ofborrowing.
Derivatives
The fair values of derivatives are measured at prices indicatedby the correspondent financial institution because all derivatives
transactions are nonmarketable. The information regarding thefair value for derivatives is included in Note 19.

(b) Financial instruments whose fair value cannot be reliably determined					Carrying Amount					
March 31, 2011
Millions of Yen

Thousands of
U.S. Dollars

Operational investment securities, investment securities and investments inunconsolidated subsidiaries: *1
Unlisted stocks
Investments in limited liability investment partnerships
Long-term debt *2

$

¥

2,675
1,298
259,651

				

Carrying AmountMarch 31, 2010

Millions of Yen

Operational investment securities, investment securities and investments inunconsolidated subsidiaries: *1
Unlisted stocks
Investments in limited liability investment partnerships
Long-term debt *2¥

32,22915,6393,128,325

2,804
2,057
272,132

Since the fair values of the items in the table above cannot be reliably determined, they are not included in operational
investment securities, investment securities and investments in unconsolidated subsidiaries and long-term debt in (4) (a).
*1. Unlisted stocks and investments in limited liability investment partnerships do not have a quoted market price in an active market and their fair values
cannot be reliably determined, so they are not subject to fair value disclosure.
*2. The Company and certain consolidated subsidiaries receive financial assistance based on the Business Revitalization Procedures. Financial assistance isobtained through modification to repayment schedules for loan obligations, the content of which will be to make partial payments until June 10, 2014,
and with regard to the obligations remaining after June 10, 2014, to receive refinancing by no later than July 10, 2014 or to make a proposal to theparticipating creditors regarding the payment method in the period after July 10, 2014 and to reach an agreement thereon. Under such circumstances,long-term borrowings which are subject to the financial assistance have significant uncertainties in estimates of future repayment plans. Also, increased
credit risks and long repayment periods have substantial impact on discounted cash flows. Since it is difficult to make reasonable fair value calculations forsuch long-term borrowings, they are not subject to fair value disclosure.

(5) Maturity analysis for financial assets with contractual maturities			

36

Millions of Yen				March 31, 2011		

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after
Five Years

Cash and cash equivalents		
Time deposits		
Loans *1			
Installment accounts receivable		Total				¥139,971
5
238,718
72,815¥451,509¥332,071
4,520¥336,591¥23,738
1¥23,739

AIFUL CORPORATION

Annual Report 2011

Notes to Consolidated Financial Statements			

Thousands of U.S. Dollars

				March 31, 2011		

Cash and cash equivalents		
Time deposits		
Loans *1			
Installment accounts receivable		Total				Due in One
Year or Less

Due after One Yearthrough Five Years

Due after
Five Years$1,686,398
60
2,876,120
877,289$5,439,867$4,000,855
54,458$4,055,313$286,00012$286,012*1. Loans of ¥46,838 million ($564,313 thousand) whose amount of redemption cannot be determined, such as claims in bankruptcy, are not included in thetable above.

Please see Note 10 for annual maturities of short-term borrowings and long-term debt and Note 17 for obligations under financeleases, respectively		
19 DERIVATIVESThe Group enters into interest rate swap and cap, andcurrency swap contracts as a means of managing its principal
and interest rate exposures and foreign currency exposures oncertain liabilities.
Such derivative transactions are entered into to hedge
interest exposures and foreign currency exposures inherent
within its business. Accordingly, market and foreign exchangerisks in these derivatives are theoretically offset by opposite

movements in the value of hedged liabilities. The Group does
not hold or issue derivatives for trading or speculative purposes.
Because the counterparties to these derivatives are limited tomajor financial institutions, the Group does not anticipate any
losses arising from credit risk.
Derivative transactions entered into by the Group have been
made in accordance with internal policies, which regulate theauthorization process and credit limit amount.

Derivative transactions to which hedge accounting is not applied			

Millions of Yen				
At March 31, 2011
Contract AmountInterest rate caps agreements:(Buying)¥52,500

			

¥¥2,500		¥(150)

Contract Amount 		
due after One Year
Fair Value

3,615		

144,000¥147,615

			¥94,000¥94,000

Unrealized
Gain (Loss)¥(13)¥ (13)

4
¥ (9)

(538)
¥(551)

Thousands of U.S. Dollars

				
At March 31, 2011
Contract AmountInterest rate caps agreements:(Buying)

Unrealized
Gain (Loss)

Millions of Yen				
At March 31, 2010
Contract AmountInterest rate swaps:(fixed rate payment, floating rate receipt)
Interest rate caps agreements:(Buying)
Total			Contract Amount 		
due after One Year
Fair Value$632,530

Contract Amount 		
due after One Year
Fair Value

Unrealized
Gain (Loss)$30,120		

$(1,807)

The fair value of derivative transactions is measured at the quoted price obtained from the correspondent financial institution.
Derivative transactions to which hedge accounting is applied			

Millions of Yen				
At March 31, 2011
Hedged Item

Interest rate swaps:(fixed rate payment, floating rate receipt)

Contract AmountContract Amountdue after One Year

Fair Value

Long-term debt

¥11,520		

*

Currency swap contracts
Long-term debt
Total				57,600		
¥69,120		

**

AIFUL CORPORATION

Annual Report 2011

37

			

Millions of Yen				
At March 31, 2010
Hedged Item

Contract AmountContract Amountdue after One Year

Fair Value

Long-term debt

¥ 11,520¥11,520*

Currency swap contracts
Long-term debt
Total				113,210¥124,730

57,600¥69,120**

Interest rate swaps:(fixed rate payment, floating rate receipt)			

Thousands of U.S. Dollars

				
At March 31, 2011
Hedged Item

Interest rate swaps:(fixed rate payment, floating rate receipt)

Contract AmountContract Amountdue after One Year

Fair Value

Long-term debt

$138,795		

*

Currency swap contracts
Long-term debt
Total				693,976		
$832,771		

**

Note* The above interest rate swaps and currency swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market
value but the differential paid or received under the swap agreements is recognized and included in interest expense or income. In addition, the fairvalue information of such interest rate swaps and currency swaps in Note 18 is included in that of the hedged items (i.e. long-term debt).

20 COMPREHENSIVE INCOME (LOSS)		
For the year ended March 31, 2010
Total comprehensive income (loss) for the year ended March 31, 2010 was the following:			Millions of Yen

Total comprehensive income (loss) attributable to:
Owners of the parent
Minority interests
Total comprehensive income (loss)¥(292,925)(1,913)¥(294,838)

Other comprehensive income for the year ended March 31, 2010 consisted of the following:			Millions of Yen

Other comprehensive income:Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Total other comprehensive income

¥ 125
2,099
¥2,22421 NET LOSS PER SHARE		Basic net loss per share (“EPS”) for the years ended March 31, 2011 and 2010 is as follows:		Millions of Yen

Thousands ofShares		Net Income (Loss)

Weighted
Average Shares

For the year ended March 31, 2011:
Basic EPS		 Net loss attributable to common shareholders
For the year ended March 31, 2010:
Basic EPS		 Net loss attributable to common shareholders

Yen

Dollars
EPS¥ (31,936)

238,228¥ (134.05)¥(295,141)

238,229¥(1,238.90)$(1.62)

Diluted net loss per share for the years ended March 31, 2011 and 2010 was not disclosed because of the Company’s net loss
position and also because no dilutive securities were outstanding.

38

AIFUL CORPORATION

Annual Report 2011

Notes to Consolidated Financial Statements

22 BUSINESS DIVESTITURES		On September 30, 2009, the Company divested Wide
Corporation, TRYTO CORPORATION, TCM. Co. Ltd. and Passkey
Co., Ltd. to NEOLINE CAPITAL Co., Ltd. These divestitures wereconducted by selling all the shares the Company owned in thefour divested companies and by selling investments in andadvances to the four divested companies. Due to thesedivestitures, the Company realized ¥31,839 million as gain on
sales of shares of subsidiaries, which is the difference between
the book value of the four divested companies and the salevalue according to the transfer contract entered into withNEOLINE CAPITAL Co., Ltd. and ¥37,981 million as loss ontransfer of business, which is the difference between the bookvalue of investments in and advances to the four divested
companies and the sale value according to the transfer contract
entered into with NEOLINE CAPITAL Co., Ltd. As a result, theGroup recognized ¥6,142 million as “Loss on transfer ofbusiness” in the consolidated statements of operations for theyear ended March 31, 2010, which was the difference from
offsetting gain and loss mentioned above.

23 SUBSEQUENT EVENTS		AIFUL Corporation (“AIFUL” or “the Company”)
announced its decision to set the effective date for subsidiaryspin-off and merger as July 1, 2011 in accordance with therelevant resolution of the Company’s Board of Directors at a
meeting held on April 28, 2011. The basic policy called for Life
Co., Ltd. (“LIFE”), a consolidated subsidiary of the Company,
to be spun off and merged. In this context, Life Card Co., Ltd.
(“Life Card”) would acquire by way of corporate spin-off andmerger LIFE’s Consumer Credit business (Credit card andInstallment sales finance) as well as the credit guarantee andinsurance businesses previously transferred to LIFE.
Furthermore, the basic policy stipulates the businessintegration (“Merger”) of four consolidated subsidiaries
comprising LIFE, following its corporate spin-off, City’s
Corporation (“City’s”), City Green Corporation (“City Green”)
and Marutoh KK (“Marutoh”) by way of merger with theCompany as the surviving company.
I. Objectives of the Group Reorganization
Confronted by a very challenging operating environment
due largely to such factors as an increase in interest refund
claims following a ruling of the Japanese Supreme Court inJanuary 2006, financial turmoil triggered by the sub-prime
loan crisis, and controls on the total amount an individual canborrow following comprehensive implementation ofamendments to Japan’s Money Lending Business Act in June
2010, the Group is undertaking steps to restructure its
business. These steps include a full-fledged reform of theGroup’s cost structure encompassing cutbacks in personnel
and other measures in line with organizational integration andthe elimination and consolidation of bases, and arecomplemented by the sale of consumer finance subsidiaries
and the application of financial support entailing theconsensual business revitalization alternative dispute
resolution procedures (“the ADR process”). In addition to
implementing this full-fledged cost structure reform, theGroup is also maximizing efforts to consolidate its

organization and business by implementing this subsidiaryspin-off and merger. These efforts take into considerationeach of the selection and concentration perspectives and are
based on a business reorganization policy consistent with theGroup’s Business Revitalization Plan approved under the ADR
process. By implementing Group reorganization, the Groupwill consolidate its consumer finance businesses to the“AIFUL” brand and Installment sales finance and Credit cardbusinesses to the “Life” brand to take full advantage of eachbrand’s recognition across their business activities andoperations. In addition, steps will be taken to consolidate
head office operations, back office divisions and credit
management as well as debt collection divisions, and tofurther improve business efficiencies across the entire Group.
II. Overview of the Spin-off(1) Spin-off Schedule
Date of spin-off approval at meetings of the boards of
directors (LIFE and Life Card): April 28, 2011
Date of spin-off agreement execution (LIFE and Life Card):
April 28, 2011
Date of extraordinary shareholders meetings (LIFE and Life
Card): May 30, 2011
Scheduled effective date of the spin-off: July 1, 2011
The extraordinary shareholders meetings of LIFE and Life
Card were held in the case where resolution of a generalshareholders meeting was deemed to exist pursuant to theprovisions of Article 319, Paragraph 1 of the Companies Act ofJapan.
(2) The Method of Spin-off
LIFE will transfer by way of corporate spin-off (absorptiontype corporate spin-off method) its Consumer Credit business(Credit card and Installment sales finance) as well as the credit
guarantee and insurance businesses previously transferred to
LIFE to Life Card, a wholly owned LIFE subsidiary established inJuly 2010, on the scheduled effective date of July 1, 2011.

AIFUL CORPORATION

Annual Report 201139

(3) Details of the Allocation Relating to the Corporate Spin-off
At the time of the corporate spin-off, Life Card will allocate and deliver one share of its common stock to LIFE.
Profiles of the Companies Involved in the Corporate Spin-off				Trade Name
Principal business				

Splitting Company

Successor Company

LIFE Co., Ltd.
Consumer credit business andConsumer finance businessLife Card Co., Ltd.
Consumer credit business andCredit guarantee business(4) Summary of Accounting ProceduresThis corporate spin-off is classified as a transaction under common control in accordance with accounting standards for businesscombinations.
III. Overview of the Merger(1) Merger Schedule
Date of Merger approval by the boards of directors (AIFUL, LIFE, City’s, City Green and Marutoh): April 28, 2011
Date of Merger agreement execution (AIFUL, LIFE, City’s, City Green and Marutoh): April 28, 2011
Scheduled effective date of the Merger: July 1, 2011
Plans are for the Merger to be conducted without AIFUL obtaining approval at a general meeting of its shareholders inaccordance with the simplified merger procedures set forth in Article 796, Paragraph 3 of the Companies Act of Japan and without
LIFE, City’s, City Green and Marutoh obtaining approvals at general meetings of their shareholders in accordance with the short form
merger procedures set forth in Article 784, Paragraph 1 of the Companies Act of Japan.
(2) The Method of the Merger
The absorption-type merger shall be undertaken with AIFUL as the surviving company and the four companies comprising LIFE,
following its corporate spin-off, identified in II. above, City’s, City Green and Marutoh, as the absorbed companies.
(3) Details of the Allocation Relating to the Merger
With respect to the Merger, at the time each merger of City’s, City Green and Marutoh takes effect, AIFUL shall not make any
payment upon the merger of City’s, City Green and Marutoh reflecting that nature of each absorbed company as AIFUL’s wholly
owned subsidiaries.
With respect to the Merger, details of the allocation relating to the merger with LIFE are presented as follows.
				Company NameAIFUL Corporation		
(The Absorption-Type Merger Surviving Company)		

LIFE Co., Ltd.
(The Absorption-Type Merger Absorbed Company)

Details of the allocation relating
to the Merger
1		
39
Number of shares to be delivered
as a result of the Merger 		Common Stock: 2,248,350 shares (scheduled)
Note: A t the time of the Merger with LIFE, plans are in place for AIFUL to issue and allocate 39 shares of its common stock for each share of LIFE common
stock. However, no shares will be allocated for the 1,342,418 shares of LIFE common stock currently held by AIFUL in the course of the Merger.

(4) Profiles of the Merging Companies				

Trade Name
Principal business				

The Absorption-Type Merger Absorbed Company

LIFE Co., Ltd.
City’s Corporation
Consumer finance business andSmall business loan
Consumer credit business		

City Green Corporation
Holding company forCity’s Corporation

Marutoh KK
Real estate business(5) Summary of Accounting Procedures
The Merger is classified as a transaction under common control in accordance with accounting standards for businesscombinations.

24 SEGMENT INFORMATION		
For the years ended March 31, 2011 and 2010
In March 2008, the ASBJ revised ASBJ Statement No. 17 “Accounting Standard for Segment Information Disclosures” and issued
ASBJ Guidance No. 20 “Guidance on Accounting Standard for Segment Information Disclosures”. Under the standard and guidance,
an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating

40

AIFUL CORPORATION

Annual Report 2011

Notes to Consolidated Financial Statements

segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity
about which separate financial information is available and such information is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources tooperating segments. This accounting standard and the guidance are applicable to segment information disclosures for the fiscal
years beginning on or after April 1, 2010.
The segment information for the year ended March 31, 2010 under the revised accounting standard is also disclosed
hereunder as required.
1. Description of reportable segments
The Group’s reportable segments are those for which separately financial information is available and regular evaluation by theCompany’s management is being performed in order to decide how resources are allocated among the Group. Therefore, the Groupconsists of the Group’s major operating company, “AIFUL Corporation” and “LIFE Co., Ltd.”. AIFUL Corporation engages mainly inthe loan business and the credit guarantee business. LIFE Co., Ltd. engages mainly in the loan business, the credit card business andthe credit guarantee business.
2. Methods of measurement for the amounts of sales, profit (loss), assets, liabilities and other items for each reportablesegment
The accounting policies of each reportable segment are consistent to those disclosed in Note 2, “Summary of Significant
Accounting Policies”.
3. Information about sales, profit (loss), assets, liabilities and other items is as follows						

Millions of Yen						

2011

				
			

Operating revenue:
Operating revenue from external customers
Intersegment operating revenue or transfers

Reportable Segment		

AIFUL

LIFE

Total

¥ 86,20320
86,223(70,169)
578,153
513,318¥ 44,03376
44,109(31,148)
281,340
248,736¥ 130,236
96
130,332(101,317)
859,493762,054

Other (Note 1)¥14,726
127
14,853(3,528)73,961
68,273Total

Reconciliations Consolidated¥ 144,962		
223¥ (223)
145,185(223)(104,845)
72,909933,454(75,437)
830,327(35,915)

			 Total
Segment loss (Note 2)
Segment assets (Note 3)
Segment liabilities (Note 4)
Other:
Provision for credit card point redemption		
2,006
2,006		2,006		Provision for investment losses
244		
244
27
271		
Charge-offs and provision for doubtful accounts
48,53913,106
61,645
7,245
68,890(3,821)
Provision for losses on interest refunds		
27,211
27,211		
27,211		
Provision for accrued bonuses
735
373
1,108
86
1,194		Depreciation and amortization
4,219
3,468
7,687
121
7,808		Interest on advances to subsidiaries and other
1,678
4
1,682
8
1,690
(1,680)
Dividends income
159
35
194
5
199		
Amortization of negative goodwill						
218Interest on advances from parent company and other				
268
268
(268)
Gain on sale of investment securities
372
174
546		
546
3
Gain on retirement of bonds
1,537		1,537		1,537		Loss on impairment of long-lived assets
211		
211
1,032
1,243		Losses from a natural disaster
3,613
2,484
6,097
505
6,602		Loss on adjustment for application of accounting
standard for asset retirement obligations
1,277		1,277
11,278		Income taxes:
Current		
43
16
59
19
78		
Deferred		
119
(200)
(81)
2
(79)		
Increase in property, plant and equipment andintangible assets
2,437
1,960
4,397
28
4,425		

¥144,962
144,962(31,936)
858,017794,4122,006
271
65,06927,211
1,194
7,808
10
199
218
549
1,537
1,243
6,602
1,278
78
(79)
4,425

(Notes)1. “Other” items are business segments excluded from reportable segments and include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
2. “Reconciliations” include elimination of intersegment transactions of ¥72,691 million (Loss on write-down of investments in subsidiaries of ¥67,782 million)
and amortization of goodwill of ¥218 million.
3. “Reconciliations” are elimination of intersegment assets.
4. “Reconciliations” are elimination of intersegment liabilities.

AIFUL CORPORATION

Annual Report 201141						

Millions of Yen						

2010

				
			

AIFUL

Reportable Segment		
LIFE

Total

Other (Note 1)

Total

Reconciliations Consolidated

Operating revenue:
Operating revenue from external customers¥ 124,745¥ 72,537 ¥ 197,282¥ 20,821 ¥ 218,103		 ¥ 218,103
Intersegment operating revenue or transfers
49
140
189
169
358 ¥
(358)
			 Total
124,794
72,677
197,471
20,990218,461(358)
218,103
Segment loss (Note 2)(261,496)(27,750)(289,246)(18,313)(307,559)
12,418(295,141)
Segment assets (Note 3)
858,532
414,232 1,272,764
101,066 1,373,830(220,885) 1,152,945
Segment liabilities (Note 4)722,996
350,374 1,073,370
91,915 1,165,285(109,646) 1,055,639
Other:
Provision for credit card point redemption		
1,456
1,456		1,456		1,456Provision for investment losses
1,674		
1,674
639
2,313
(1,610)703
Charge-offs and provision for doubtful accounts
128,383
25,816
154,199
15,364
169,563(3,304)
166,259
Provision for losses on interest refunds
176,867
25,927
202,794
4,093
206,887		
206,887
Provision for accrued bonuses
743
407
1,150
173
1,323		1,323Depreciation and amortization
5,312
3,722
9,034
176
9,210		9,210Interest on advances to subsidiaries and other
3,739
11
3,750
8
3,758
(3,738)20
Dividends income
116
29
145
9
154		
154
Amortization of negative goodwill						
148
148Interest on advances from parent company and other				
373
373
(373)
Gain on sale of investment securities
13
1,140
1,153
8
1,161		1,161Reversal of provision for bonuses
408
112
520
60
580		
580
Loss on impairment of long-lived assets
4,206
204
4,410
450
4,860		4,860Loss from business restructuring
8,142
3,767
11,909		
11,909(83)
11,826
Loss on transfer of business
4,081		4,081		
4,081
2,061
6,142
Income taxes:
Current		
74
31
105
54
159		
159
Prior periods		
164
164
(60)
104		
104
Deferred
3,310
1,470
4,780
2,589
7,369		7,369Increase in property, plant and equipment andintangible assets
1,046
2,330
3,376
48
3,424		3,424
(Notes)1. “Other” items are business segments excluded from reportable segments and include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
2. “Reconciliations” include elimination of intersegment transactions of ¥12,270 million (Loss on write-down of investments in subsidiaries of ¥7,554 million)
and amortization of goodwill of ¥148 million.
3. “Reconciliations” are elimination of intersegment assets.
4. “Reconciliations” are elimination of intersegment liabilities.

42

AIFUL CORPORATION

Annual Report 2011

Notes to Consolidated Financial Statements						 Thousands of U.S. Dollars						
				
			

2011

Reportable Segment		

AIFUL

LIFE

Total

Other (Note 1)

Total

Reconciliations Consolidated

Operating revenue:
Operating revenue from external customers$1,038,590 $ 530,518 $ 1,569,108$177,422 $ 1,746,530		$ 1,746,530
Intersegment operating revenue or transfers
241
916
1,157
1,530
2,687 $ (2,687)
			 Total
1,038,831
531,434 1,570,265
178,952 1,749,217(2,687) 1,746,530
Segment loss (Note 2)(845,410) (375,277) (1,220,687)(42,506) (1,263,193)
878,421(384,772)
Segment assets (Note 3)
6,965,699 3,389,638 10,355,337
891,097 11,246,434(908,880) 10,337,554
Segment liabilities (Note 4)
6,184,554 2,996,819 9,181,373
822,567 10,003,940(432,711) 9,571,229
Other:
Provision for credit card point redemption		
24,16924,169		
24,169		
24,169Provision for investment losses
2,940		2,9403253,265		3,265Charge-offs and provision for doubtful accounts
584,807
157,904
742,71187,289830,000(46,036)
783,964
Provision for losses on interest refunds		
327,843
327,843		
327,843		
327,843
Provision for accrued bonuses
8,855
4,494
13,3491,037
14,386		
14,386
Depreciation and amortization
50,831
41,78392,614
1,458
94,072		
94,072
Interest on advances to subsidiaries and other
20,21748
20,26596
20,361(20,241)
120
Dividends income
1,916
421
2,337
61
2,398		2,398Amortization of negative goodwill						
2,627
2,627
Interest on advances from parent company and other				
3,229
3,229
(3,229)Gain on sale of investment securities
4,482
2,096
6,578		
6,578
36
6,614
Gain on retirement of bonds
18,518		
18,518		
18,518		
18,518Loss on impairment of long-lived assets
2,542		2,54212,434
14,976		
14,976
Losses from a natural disaster
43,53029,92873,458
6,084
79,542		
79,542
Loss on adjustment for application of accounting
standard for asset retirement obligations
15,386		
15,38612
15,398		
15,398
Income taxes:
Current		
518
193
711
229
940		
940
Deferred
1,434(2,410)(976)24(952)		
(952)Increase in property, plant and equipment andintangible assets
29,362
23,61552,977337
53,314		
53,314(Notes)1. “Other” items are business segments excluded from reportable segments and include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
2. “Reconciliations” include elimination of intersegment transactions of $875,795 thousand (Loss on write-down of investments in subsidiaries of $816,651
thousand) and amortization of goodwill of $2,626 thousand.
3. “Reconciliations” are elimination of intersegment assets.
4. “Reconciliations” are elimination of intersegment liabilities.

Related Information
1. Information about products and services
			Millions of Yen

			

		

		

Operating revenue from external customers		

2011
Loan Business¥103,784

					Operating revenue from external customers		

¥170,662

Operating revenue from external customers		

¥144,962

Other

Total

¥47,441¥218,103

Thousands of U.S. Dollars					¥41,1782010
Loan Business

			

		

Total

Millions of Yen

			

		

Other

2011
Loan Business

Other

Total

$1,250,410$496,120$1,746,530

AIFUL CORPORATION

Annual Report 201143

Notes to Consolidated Financial Statements

2. Information about geographical areas(1) Operating revenue
Information about geographic area is omitted, as the Group does not operate outside Japan for the years ended March 31, 2011
and 2010.
(2) Property, plant and equipment
Information about geographic area is omitted, as there are no property, plant and equipment located outside Japan for the years
ended March 31, 2011 and 2010.
3. Information about major customers
Information about major customers is omitted, as no single external customer accounted for more than 10% of operating
revenue for the years ended March 31, 2011 and 2010.
(Information regarding amortization of goodwill and unamortized amount of each reportable segment)					Millions of Yen

					

2011

				
			
Aiful	

		
Life
Other

Amortization of goodwill¥¥
Goodwill at March 31, 2011 (Note)			

¥218
¥
653		

					

Millions of Yen

					

2010

				
			
Aiful	

		
Life
Other

Amortization of goodwill¥¥
Goodwill at March 31, 2010 (Note)			

Thousands of U.S. Dollars

					

2011

		
Life
Other

Amortization of goodwill$$
Goodwill at March 31, 2011 (Note)			

Elimination/
Corporate

¥148
¥
871		

					
				
			
Aiful	

Elimination/
Corporate

Elimination/
Corporate$2,627$
7,867		

Total

¥218
653

Total

¥148
871

Total

$2,627
7,867(Note) “Other” is negative goodwill of New Frontier Partners Co., Ltd.

For the year ended March 31, 2010
Most of the Group’s business is related to a single segment, lending. The Group does not operate outside Japan. Accordingly,
information about industry and geographic segments is not presented.

44

AIFUL CORPORATION

Annual Report 2011

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORTTo the Board of Directors and Shareholders of
AIFUL CORPORATION:
We have audited the accompanying consolidated balance sheets of AIFUL CORPORATION (the“Company”) and consolidated subsidiaries as of March 31, 2011 and 2010, and the related
consolidated statements of operations for the years then ended, the consolidated statement ofcomprehensive income for the year ended March 31, 2011, and the related consolidated statementsof changes in equity, and cash flows for the years then ended, all expressed in Japanese yen. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of AIFUL CORPORATION and consolidated subsidiaries as ofMarch 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for theyears then ended in conformity with accounting principles generally accepted in Japan.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and,in our opinion, such translation has been made in conformity with the basis stated in Note 3. Such U.S.
dollar amounts are presented solely for the convenience of readers outside Japan.

June 22, 2011
The accompanying financial statements are not intended to present the financial position, results ofoperations and cash flows in accordance with accounting principles generally accepted in countries andjurisdictions other than Japan.
The standards to audit such financial statements are those which are generally accepted in Japan.

AIFUL CORPORATION

Annual Report 201145

Group Network(As of July 1, 2011)

http:///aiful.jp
www.lifecard.co.jp
http:/(Japanese only) (Japanese only)

AIFUL CORPORATIONBusiness Classification
Credit card loans
shoppingl Unsecuredl Installment
sales finance
Secured loansl Creditguarantee
Small business
loans
l Credit guarantees
Voting Rights Held
95.9%
Investor Relations Website
http://www.ir-aiful.com/english

http:// www.lifecard.co.jp (Japanese only)

Life Card Co., Ltd.

Business Classificationl Credit card shoppingl Installment sales financel Credit guarantees
Voting Rights Held100%

http:// www.businext.co.jp (Japanese only)

Businext Corporation

Business Classificationl Secured loans
l Small business loans
Voting Rights Held
60.0%

Companies

Business Classification

AsTry Loan Services Corporation
New Frontier Partners Co., Ltd.

46

AIFUL CORPORATION

Debt collection (Servicer)
Venture capital

Annual Report 2011

Voting Rights Held (%)

100.0
100.0

Investor Information(As of March 31, 2011)

Corporate Profile

Principal Shareholders
		
		
		

Number of
Shares(Thousands)

Percentage ofTotal Shares
Outstanding

AMG Co., Ltd.

47,407

19.86

Mitsuhide Fukuda

31,067

13.02

Marutaka Co., Ltd.

12,271

5.14

J.P. MORGAN CLEARING CORP-CLEARING 11,680

4.89

Corporate NameAIFUL CORPORATION

Address of Head Office381-1, Takasago-cho,
Gojo-Agaru, Karasuma-Dori,
Shimogyo-ku,
Kyoto 600-8420, Japan
April 1967

Japan Securities Finance Co., Ltd.

6,932

2.90

Common Stock¥143,324 million

BNY GCM CLIENT ACCOUNTJPRD AC ISG (FE-AC)

4,070

1.71

Number of Employees

Non-consolidated: 1,164
Consolidated: 2,073

Date of Establishment

Corporate Officers (As of June 28, 2011)
President andRepresentative Director

Yoshitaka Fukuda

Representative Director

Taichi Kawakita

Directors

Masayuki Sato
Tsuneo Sakai
Nobuyuki Wakuta

Standing Corporate
Auditors
Corporate Auditor

Masanobu Hidaka (outside)
Kenichi Kayama

Composition of Shareholders
Domestic Financial
Institutions
7.06%
Financial
Instruments
Firms
2.27%
Other
Companies
25.61%

Individuals
and Other
48.81%

ForeignInvestors
16.25%

Masanori Nagasawa(outside)

Stock Listing
Tokyo Stock Exchange

The First Section

Securities Code8515

Shareholder Information
Number of Shares of Common Stock
Authorized

568,140,000 shares

Issued and Outstanding

238,685,568 shares

Number of Shareholders

30,657

Independent Auditors

Deloitte Touche
Tohmatsu LLC

Transfer Agentand Registrar

The Sumitomo Trust &Banking Co., Ltd.

Contact Address
Investor Relations Section
Tokyo Office
2-31-19 Shiba, Minato-ku, Tokyo 105-0014, Japan
E-mail: spokesperson@aiful.co.jp

AIFUL CORPORATION

Annual Report 201147