ANNUAL REPORT 2013
The year ended March 31, 2013

Corporate Philosophy
Earn the trust of society through corporate
activity based in integrity

AIFUL was founded by President and CEO Yoshitaka
Fukuda in 1967 as a sole proprietorship consumer financebusiness and established as a corporation in 1978 tobolster its creditworthiness. In 1982 the corporate namewas changed to the current AIFUL CORPORATION. AIFUL
has grown into a comprehensive financial group handlingsuch diverse businesses as credit cards, small business
lending, credit guarantees, loan servicing and venture

Content s
1 Five-Year Summary
2 Message from President
and CEO, Yoshitaka Fukuda

capital in addition to consumer finance.
Based on the corporate philosophy “Earn the trustof society through corporate activity based in integrity”
AIFUL aims to be a company that is truly trusted bysociety.

4 Current Business
Environment
8 Business Data
10 Consolidated Financial
Statements
41 Independent Auditor’sReport42 Group Network
43 Investor Information

Forward-Looking Statements
The figures contained in this Annual Report with respect to AIFUL’s plans and strategies and otherstatements that are not historical facts are forward-looking statements about the future performanceof 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 fromthose in the forward-looking statements as a result of various factors.
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, andthe level of interest rates charged by AIFUL.

Five-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2013, 2012, 2011, 2010 and 2009

Thousands of
U.S. Dollars

Millions of Yen

2013

2012

2011

2010

2009

2013

Total income¥108,683¥120,034¥145,215¥218,375¥316,542$1,156,203

Total expenses

85,082

101,940

178,239

507,805

308,826

905,128

Provision for doubtful accounts

8,177

32,93765,069166,259

99,27386,989

Income (loss) before income taxes
and minority interests

23,601

18,094(33,024)(289,430)

7,716

251,075

Net income (loss)

22,706

17,392(31,936)(295,141)

4,247

241,553¥390,635¥455,012¥594,527¥835,928¥1,290,354$4,155,691

98,628131,807

182,607

256,713

322,058

1,049,234

Loans in legal bankruptcy

37,59843,033

44,136

48,84941,282399,979

Nonaccrual loans

36,90655,42788,221137,021

181,825

392,617

Accruing loans contractually past
due three months or moreas to principal or interest
payments

2,610

4,475

9,489

15,56625,97927,766

Restructured loans

21,51428,872

40,761

55,277

72,972

228,872

Total assets

607,181665,185

858,017

1,152,945

1,644,744

6,459,372

Allowance for doubtful accounts

119,428

156,346

192,434

236,303237,820

1,270,510

Total liabilities

502,173583,541

794,412

1,055,639

1,251,410

5,342,266

Interest-bearing debt

308,747

360,569

492,610

648,823

917,792

3,284,542

Total equity

105,008

81,64463,60597,306393,334

1,117,106

2,305

1,854

2,757

3,849

5,761

24,521

Net income (loss), basic¥94.42¥72.49¥(134.05)¥(1,238.90)¥24.77$1.00

Diluted net income

94.04

—

—

—

—

1.00

Total equity

426.82331.59255.32392.301,626.89

4.54

—

—

—

—

15.00

—

Equity ratio

16.9

12.0

7.1

8.1

23.6

—

ROE

24.9

24.7

(41.4)(122.7)

1.2

—

ROA

3.6

2.3

(3.2)

(21.1)

0.2—

Payout ratio

—

—

—

—

60.6

—

240,933,918

240,933,918

238,685,568

238,685,568 238,685,568

—

1,437

1,898

2,073

For the Year:At Year-End:
Loans
Nonperforming loans

Minority interests

Per Share Data (Yen/U.S. dollars(Note 2)):

Cash dividends

Ratios (%):

Other Data:
Number of shares outstandingat year-end
Number of employees at year-end

2,514

4,895

—

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 ¥94=$1, the approximate rate of exchange at March 31, 2013.

AIFUL CORPORATION Annual Report 20131

Message from President and CEO
Yoshitaka Fukuda
I would like to take this opportunity to express my gratitude to
our stakeholders for their support. It is my pleasure to report our
financialMessage
results forfrom
the fiscal
year ended
MarchYoshitaka
31, 2013. Fukuda
President
and CEO
Financial Results for the Fiscal Year Ended March 31, 2013
The AIFUL Group’s consolidated operating revenue for the fiscal year ended March 31, 2013 fell 13%
I thank you for your continuing interest in and support for the AIFUL Group. I would like tofrom the previous year, to 99.6
billion yen. The total amount of loans outstanding declined 14% year onpresent the financial results of AIFUL CORPORATION and its consolidated subsidiaries for theyear, to 390.6 billion yen, mainly due to the effects of restrictions on total lending limits and the highfiscal year ended March 2011. In addition, I will explain the steps we have taken to restructurelevel of waiver of principal
to interest repayments, among other factors. Interest income from loans
our duebusiness.
outstanding also continued to decrease, partly influenced by the reduction in lending interest rates,

Financial
Results for the Fiscal Year Ended March 2011
amounting to 61.6 billion
for a 19% decrease.
In other results, credit cardbusinesstotal
earnings
10%
toon
12.5
yen,
creditConsolidated
incomeincreased
decreased 34%
year
yearbillion
to ¥144.9
billion.
Fullguarantee
enforcement
the4.6
Money
Lending
Act resulted
in reducedreceivables
lending, and dropped
debt waivers
associatedearnings were down 4%of tobillionyen,Businesscollectionof purchased
13%
to 3.9 billion
with interest refund claims remained at a high level. As a result, total loans outstanding

yen, while recovery of loans previously charged off slipped 5% to 10.8 billion yen.

decreased ¥262.2 billion, or 31%, from a year earlier. In addition, interest on loans continued toWith respect to operating expenses, the Company allocated 17.2 billion yen to an allowance for losses
decrease due to the effect of reductions in interest rates.

on interest repayments amidst
ongoing
uncertainty
regardingthe directionof ADR
interest
repayment
Basedon the Business
Revitalization
Plan approved
under theprocess,the AIFUL claims,
our greatest management
issue.
On fixed
the otherhand, dueto anand
improvement
the content
loans,
Group
reducedcosts including
personnel
rental expensesinthroughvoluntaryofretirement
and other businessrestructuringinitiatives.
The Groupofalso
scaledback
andother assets
toexpenses for doubtful accounts
shrank 8.1
billion yen,a reduction
75%
year
onloansyear,
reflecting
strictercosts.
As aadministrative
result, general andadministrative
expensesdecreased¥23.8
billion,controls over extending reduce
credit.variable
Generalandcosts
also dropped
to 49.3
billionyen
for a
or 28%, year on year to ¥61.8 billion.

decrease of 5% as a result of greater business efficiency brought on by Group restructuring. Because of
On the other hand, AIFUL CORPORATION expects that interest refund claims will rise tothis, consolidated operating
expenses were reduced by 13% year on year to 84.9 billion yen, and operatinga certain degree because a major consumer finance company is undergoing corporate
income came to 14.7 billion
yen, a decreaseof 11%
over thepreviouscharge-offs
fiscal year.
reorganization
proceedings,
and therefore
recognizedand provision for doubtful
to interest
refunds¥49.7
and provision
for lossesofontheinterest
In addition, ordinaryaccounts
incomerelated
increased
5% yearonofyeartobillion
17.6 billion
yen because
postingrefunds
of billion¥27.2 billion,
which
together
As aasresult,operatingloss wasof non-operating incomeof 3.0yen, anincrease
oftotaled
253%¥76.9
yearbillion.
on year,a resultof foreign¥24.1 billion, and ordinary loss was ¥24.9 billion.

exchange gains and other factors, and net income increased 31% year on year to 22.7 billion yen owing toFurther, AIFUL recognized losses from a natural disaster of ¥6.6 billion to cover the

extraordinary income of 6.0 billion yen, an increase of 17% over the previous fiscal year, which includes aestimated impact of the Great East Japan Earthquake. Consequently, net loss was ¥31.9 billion.

gain on loan extinguishment under the Business Revitalization Plan.

Yoshitaka Fukuda
Yoshitaka Fukuda
President
and CEO
President and CEO

2

AIFUL CORPORATION Annual Report 20132

Current Business Outlook
The AIFUL Group is finally beginning to see signs of improvement thanks to more positive businesssentiment and aggressive advertising by major players in the consumer finance industry, bringing new loan
contracts as well as a higher-quality loan portfolio, resulting in a bottoming out of the shrinking operating
loan balance and other factors. At the same time, the situation continues to remain uncertain with respect
to interest repayment claims, which constitute the industry’s greatest risk factor, since the number of claims
is decreasing only slightly.
In this business environment, the AIFUL Group is systematically implementing its Business Revitalization
Plan according to the alternative dispute resolution (ADR) process, downsizing personnel by 341 throughvoluntary retirement appeals and making organizational changes such as consolidating loan management
departments. Moreover, we made strides in further accumulating quality loans and improving our loan
portfolio, such as by outsourcing our system development and operation business to LIFECARD CO., LTD. tofurther reduce costs and improve operational efficiency, and reinforcing efforts to attract new customers
by recalibrating our advertising to match our current business scale.
While continuing to respond to our greatest management challenge regarding interest repayment
claims, the AIFUL Group is fully committed to thorough implementation of the Business Revitalization Plan,and strives to further increase Groupwide business efficiency to justify and respond to the ongoing supportand expectations of all our stakeholders.
It is with this in mind that I thank all of our stakeholders for your ongoing support and encouragement.

Yoshitaka Fukuda
President and CEO
Representative Director

Important Matters
The AIFUL Group has traditionally raised short-term and long-term funds through various methods, including borrowings fromfinancial institutions, issuing bonds, and securitizing loan receivables. However, the AIFUL Group’s fund-raising capacity has been
confronted by difficult conditions in the current market environment due to a variety of reasons including increased expenses as theresult of rising demands for interest repayment in accordance with a ruling by Japan’s Supreme Court in 2006 as well as the rapid
and sharp deterioration in the fund-raising environment. Accordingly, there have been concerns that the AIFUL Group may havedifficulty in raising 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 AIFULGroup’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 strength with the goalof revitalizing and reinforcing its business. At the meeting of participating creditors held on December 24, 2009, the AIFUL Groupobtained an approval for its Business Revitalization Plan, which includes the provision of financial support. As a result, Business
Revitalization Procedures using the ADR process were adopted.
In the fiscal year ended March 31, 2013, the AIFUL Group undertook its repayment of ¥34,245 million to creditors on June 11,2012 in accordance with its Business Revitalization Plan.
By implementing concrete measures stipulated under the Business 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 20133

Current Business Environment
AIFUL CORPORATION ANNUAL REPORT

Trends in the Industry
With the interest repayment issue and full implementation of
the Money Lending Business Act and Capital Subscription Law
in June 2010, restructuring and attrition in the industry havecontinued, with a rapid shrinking of the consumer financemarket. Loans outstanding have decreased by over 70% to 3
trillion yen since 2005, while the number of registered lenders
has plummeted by over 80% to roughly 2,000.

Lending volume and number of registerd learders(Trillion yen)With respect to new contracts for unsecured loans for the top
three firms in the industry, extension of credit tightened in
anticipation of the full implementation of the Money Lending
Business Act, customers refrained from borrowing, andadvertising expenditures for all firms were regulated, resulting
in ongoing decreases in new applications and contracts.
However, through improving industry sentiment and proactive
advertising campaigns by all three firms, new applications andcontracts for loans have both begun to increase from fiscal
year 2011.
Loans outstanding for the top three firms continue todecrease through the impact caused by waiver of principal
due to ongoing interest repayments and restrictions on total
lending limits, but finally there are signs of improvement, as
this decline gradually slows and the balances bottom out.

12,5008

10,000

6

7,500

4

5,000

2

2,500
FY2005

FY2006

FY2007

FY2008FY2009(Billion yen)

Waiver of principal
Interest repayments

1,200
1,000
800
600
400
200
0

FY2006

FY2007

FY2008FY2009FY2010FY2011

Source: The Japanese Financial Services Association

Number of applications and new accounts for
top three firms
Applications
New accounts
Contract rate

(Thousands)

2,100
1,800

(%)

70
60

1,500

50

1,200

40

900

30

600

20

300

10

0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 0
Source: Compiled by Aiful from financial data of each company

Loans outstanding for top three firms(Billion yen)

Loans outstanding
Number of accounts(Thousands)

7,000

3,000

6,000

2,500

5,000

2,000

4,000

1,500

3,000

1,000

2,000

500

1,000

0 2009/3 2009/9 2010/3 2010/9 2011/3 2011/9 2012/3 2012/9 2013/3 0
Source: Compiled by Aiful from financial data of each company

Loan write-offs and NPL ratio for top three firms(Billion yen)

Loan write-offs
NPL ratio

(%)

18

250

15

200

12

150

9

100

6

50

3

0

FY2006

FY2007

FY2008FY2009FY2010Source: Compiled by Aiful from financial data of each company

AIFUL CORPORATION Annual Report 2013

0

FY2011

Interest repayments and waiver of principal (for industry)

300

4

FY2010(Source: Financial Services Agency)

3,500

Conversely, as a benefit of restrictions on total lending limits,
improvement in the quality of our loan portfolio continues,
and loan write-offs and non-performing loans (NPL) aresteadily decreasing.
In fiscal year 2012, loan write-offs decreased 43%
compared with the previous period, far above the 9% rate of
decline for loans outstanding.
Moreover, the NPL ratio has now decreased to levels
before the Money Lending Business Act came into full effect,
and it currently continues to decrease still further.

15,00010

0With respect to interest repayment claims, the largest businessrisk, these amounted to roughly 2.9 trillion yen over the last
six years, and waiver of principal came to approximately 2.0
trillion yen. Interest repayments have steadily decreased sincehitting a peak, but even in fiscal year 2011 interest repayments
were 560.9 billion yen, while waiver of principal amounted
to 213.1 billion yen, causing major financial strain on lending
companies and still posing the greatest risk in the industry.

Lending volume
Number of firms

12

FY2011FY20120Current Business Environment

Business Overview of the AIFUL GROUP
The AIFUL Group’s consolidated operating revenue for the
fiscal year 2012 fell 13% compared with the previous fiscal year
to 99,619 million yen. The principal components of operating
revenue were interest on loans, which contracted 19% year on
year to 61,607 million yen, revenue from the credit card business,
which increased 10% to 12,514 million yen and revenue fromthe credit guarantee business, which decreased 4% to 4,610
million yen. In contrast, the collection of purchased receivables
contracted 13% to 3,908 million yen while the recovery of loans
previously charged off edged down 5% to 10,840 million yen.
Operating expenses fell 13% compared with the previous
fiscal year to 84,901 million yen. This is mainly due to a provision
for losses on interest repayments, which had not been posted in
New lending of unsecured loans(non-consolidated)
Applications
New accounts
Contract rate

（Thousands）

700
600

(%)

70
60

500

50

400

40

300

30

200

20

100

10

0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 0

Lending volume and loans outstanding(non-consolidated)(Billion yen)

1,800

Loans outstanding (non-consolidated)
Lending volume
Ratio of lending volume to loans outstanding

(%)

60

1,500

50

1,200

40

900

30

600

20

300

10

0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 0

the previous fiscal year, of 17,297 million yen, and a provision for
doubtful accounts of 8,136 million yen, down 75% year on year.
In addition, the recording of 5,948 million yen in gain on loan
extinguishment following upon the Business Revitalization Plan,
resulted in the posting of 6,037 million yen (up 17% year onyear) of extraordinary income.
As a result of the above factors, the AIFUL Group’s operating
income for the consolidated fiscal year under review was 14,719
million yen (down 11% year on year), ordinary income was
17,647 million yen (up 5% year on year) and net income was
22,706 million yen (up 31% year on year).

With the effects of restrictions on total lending limits set by the Money
Lending Business Act and the Capital Subscription Law, the number of
new accounts by the Company has continued to decline since its peakin fiscal 2005. However, with the passage of time since the enactmentof these laws, improving industry sentiment, and proactive advertising
campaigns by top firms, fiscal 2010 showed a positive outlook comparedwith the previous fiscal year. In fiscal 2012, the number of new accounts
for unsecured loans was 87,000 for an increase of 42% year on year,
while the contract rate to applications increased by eight points over theprevious period to 38%.
Moreover, although the balance of loans outstanding has been
declining since its peak in fiscal 2005 because of waiver of principal due
to interest repayments, the extent of the decrease has steadily narrowed
to the point that the balance of loans outstanding for the period ended
March 31, 2013 was only 17% less than the previous fiscal year, at
286,316 million yen. On the other hand, the lending volume bottomed
out in the fiscal year ended March 31, 2010, and in the fiscal year ended
March 31, 2013 the ratio of lending volume to loans outstanding for theperiod had recovered to fiscal 2007 levels, at 31%.

In the credit guarantee business, the number of guarantee tie-ups increased by 11 new
partners, while the Group further pursued marketing to expand credit guarantee tie-ups,
as well as new product proposals and sales promotion support.
As a result of these efforts, the Group forged affiliations with 191 unsecured
personal loan companies, and held guarantees for outstanding loans amounting to
64,971 million yen, up 4% year on year. The Group also forged affiliations with 108
unsecured business loan companies, and held guarantees for outstanding loans totaling
9,469 million yen, down 17% year on year, which amounts to a total of guarantees heldof 74,441 million yen, up 0.4%, which is the first increase in the last seven years.

Credit guarantee outstanding(consolidated)

In the credit card business operated by LIFECARD, a wholly owned subsidiary of AIFUL,
efforts are being focused on greater convenience for cardholders and on increasing thenumber of transactions mainly through online marketing, by enhancing the homepage
function and implementing campaigns aimed at existing members.
As a result, transactions at the end of the consolidated fiscal year under review were468,273 million yen, up 46% year on year, and the balance of installment receivables
stood at 79,216 million yen, up 9% year on year.
The total amount of loans outstanding for LIFECARD’s cash advance business stoodat 35,053 million yen, down 18% year on year.

Installment receivables (LIFECARD)(Billion yen)

120
100
80
60
40
20
0

FY2009FY2010FY2011FY2012(Billion yen)

140
120
100
80
60
40
20
0

FY2009FY2010FY2011FY2012*Commenced business on July 1, 2011.

AIFUL CORPORATION Annual Report 20135

Current Business Environment
AIFUL CORPORATION ANNUAL REPORTAs a benefit of restrictions on total lending limits, the quality of
our loan portfolio continues to improve, and write-offs and nonperforming loans (NPL) are decreasing steadily.
The amount of total receivables write-offs for the fiscal year
ended March 31, 2013 was down 44% year on year, far greaterthan the 14% reduction in loans outstanding.
In addition, write-offs ratio in the fiscal year ended March
31, 2013 was only about half that of the previous year at 7%
compared with 13% in the previous period, and excluding the
portion of waiver of principal due to interest repayments, theso-called general write-offs were at 5%, dropping to levels notseen since 2006.
The balance of non-performing loans (NPL) was 25%
less than in the previous period, a far greater drop than thepercentage decrease in the balance of loans outstanding, andthe ratio of unsecured loans NPL was also down four points, to13%, making for steady improvements both in write-offs and in
non-performing loans (NPL).

Total receivables write-offs (consolidated)
Write-offs (general)
Write-offs due to interest repayments
Ratio of write-offs(Billion yen)

250

(%)

20

200

16

150

12

100

8

50

4

0

FY2006

FY2007

FY2008FY2009FY2010FY2011FY20120

Non-performing loans (NPL) (consolidated)
Non-performing loans (NPL)
Unsecured loans NPL
Ratio of unsecured loans NPL(Billion yen)

350

(%)

30

280

24

210

18

140

12

70

6

0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 0

On the other hand, with regard to interest repayments, where
the number of claims and attorney involvements are major
indicators, the situation remains uncertain, with the number ofclaims decreasing by about half since the fourth quarter of fiscal
2010 influenced by the bankruptcy of Takefuji Corporation andstill decreasing, but current trends remain virtually flat.
Moreover, interest repayments (cash-out basis) and amountof debt waived due to interest repayments have decreased
by roughly half since their peak, but continue to exert major
financial pressure, amounting to a monthly average of over
3,000 million yen.
The magnitude of financial pressure from interest repayment
claims has caused Aiful to implement voluntary retirement fourtimes over the seven years since fiscal year 2005, and the numberof employees has been reduced from 6,675 in fiscal 2005 to
1,437 in fiscal 2012.
As well, the number of lending outlet locations has been
reduced from 2,722 in fiscal year 2005 to 651 locations in fiscal
year 2012, as the Company tried to radically reduce costs andstreamline operations by consolidating and eliminating bases anddepartments and restructuring the Group.
Going forward, we will pour all our efforts into improving
our financial position and profitability by continuing to pursue
business efficiency and cost structure reforms throughout theGroup.
Number of full-time employees(consolidated)

50
40

3,000

7,000

2,500

6,000
4,000

1,500

3,000

1,000

2,000

60
48
36

20

24

10

12

0

1Q

2Q

3Q

FY2010

4Q

1Q

2Q

3Q

FY2011

4Q

1Q

2Q

3Q

FY20124Q

0*Attorney involvement is based on comparison with the May 2007 peak value of 100%.
*Since July 1, 2011 portions of former LIFE and the other three firms were absorbed and amalgamatedLosses related to interest repayment claims(consolidated)

Debt waived
Interest repayment(Billion yen)

150
100
50
0

FY2007

FY2008FY2009FY2010FY2011FY2012

General and administrative expenses(consolidated)(Billion yen)200
Staffed
Unstaffed

150

2,000

5,000

(%)

30

(num)

(num)

Advertising expenses
Personnel expenses
Others

100
50

500

1,000

6

Interest repayment claims(non-consolidated)
Attorney involvement(non-consolidated)(Thousans)Number of branches(consolidated)

8,000

0

Interest repayment claims and attorney involvement(non-consolidated)

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

AIFUL CORPORATION Annual Report 2013

0

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

0

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012

Current Business Environment

With respect to interest-bearing debt, payment has been madewithin the framework of ADR, both to ADR creditors andcreditors not covered by ADR, such as by corporate bonds, inaccordance with our Business Revitalization Plan.
As a result, interest-bearing debt amounting to 698,556
million yen in fiscal year 2009 was reduced over a three-year
period by 56% or 390,205 million yen, with the remaining
interest-bearing debt outstanding at 308,351 million yen as ofMarch 31, 2013.
The portion of outstanding liabilities covered by ADR out
of outstanding interest-bearing debt as of March 31, 2013 was
198,100 million yen, and the balance of corporate bonds was
33,700 million yen.

Interest-bearing debt (consolidated)
Commercial paper (CP)Liquidation of receivables
Corporate bonds
Borrowings(Billion yen)

2,000

1,500

1,000

500

0

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012

Cash and cash equivalents (“funds”) declined 25,497 million yen,or 29%, compared to the end of the previous fiscal year to61,198 million yen.
Net Cash Provided by Operating Activities
Net cash provided by operating activities amounted to 21,813 million yen, a decrease of 70% compared with thecorresponding period of the previous fiscal year. During the period under review, the increase in funds caused by the
decline in operating receivables including loans to customers exceeded the decline in funds due to the drop in theallowance for doubtful accounts and the decrease in allowance for losses on interest repayments.
Net Cash Used in Investing Activities
Net cash used in investing activities totaled 1,176 million yen (2,654 million yen provided by investing activities in theprevious fiscal year). This was mainly attributable to the purchase of tangible fixed assets and the payment of longterm loans.
Net Cash Used in Financing Activities
Net cash used in financing activities amounted to 46,181 million yen, down 64% year on year, due to the repaymentof borrowings and the redemption of bonds.

Cash Flows and Funding (Consolidated)
Cash flow fromoperating activities

Cash flow frominvesting activities＋「＋21.8bn｣「▲1.1bn｣

Cash flow fromfinancing activities＋「▲46.1bn｣＝

Breakdown

Financial expenses

99.6bnSG&A, etc.

53.1bnLosses on
Interest
repayments
Loancollection

200.4bn

Repayment of
ADR-related
obligations

6.8bn

Interest
income, etc.

28.2bnExpenses due topurchase of assets, etc.

174.1bn

Bond redemption

1.9bn

44.2bnLoans tocustomers▲25.4bn

Income due tosales of assets, etc.

0.7bn

Long-term
debt 10.3bn
Short-termborrowings

Loan
repayment
and bond
redemption,etc.

186.9bn

17.5bnRepayment ofother debt, etc.

141.1bn

130.4bn【Cash inflow】 【Cash outflow】
Cash and cash
equivalents

86.6bnAt the beginningof FY2012【Cash inflow】【Cash outflow】【Cash inflow】【Cash outflow】
Cash and cash
equivalents

61.1bnAt the end of
FY2012AIFUL CORPORATION Annual Report 20137

Business Data
AIFUL CORPORATION ANNUAL REPORTAIFUL GROUPTOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of Yen)
2011

2012

2013

1,636,320 1,105,057

768,342618,220

556,032

1,334,196

856,763594,527455,012

390,635

Unsecured

1,015,647

634,249

425,400

318,785

272,980

Secured206,941

138,650

99,65077,11564,345

Small Business

111,608

83,86469,47859,11253,310Installment Receivables

170,554

135,852

80,99080,614

83,885Credit Guarantees

118,207

100,153

82,134

74,14874,441

Other

13,364

12,28910,690

8,446

7,071

2009
Total Receivables Outstanding
Loans

2010

AVERAGE RATE OF BORROWINGS
2009

2010

2011

2012

2013

2.03

2.01

2.18

2.09

2.05

Indirect

2.25

2.15

2.15

2.07

1.99

Direct

1.84

1.84

2.26

2.19

2.60

2.25

1.60

1.60

1.35

1.15

Average Rate of Borrowings

Long-term Prime Rate
(Reference)

NUMBER OF CUSTOMER ACCOUNTS(Thousands)

2009

2010

2011

2012

2013

2,629

1,966

1,515

1,130

888

Unsecured

2,499

1,867

1,432

1,062

830

Secured

62

46

36

28

23

(Millions of Yen)

Small Business

68

54

47

40

36

Credit Card Holders

15,252

12,719

6,746

6,357

5,811

Number of Customer Accounts

TOTAL INCOME/NET INCOME (LOSS)

(%)

2009

2010

2011

2012

2013

Total Income
316,542Interest on Loans
263,797
Unsecured
219,969
Secured25,327
Small Business
18,501
Installment Receivables 20,512
Credit Guarantees
8,021
Other
24,212Net Income (Loss)
4,247

218,375
170,662
137,395
20,027
13,241
19,5507,035
21,128(295,141)

145,215
103,784
79,543
13,976
10,26513,021
5,759
22,652(31,936)

120,034
75,99356,886
10,581
8,526
11,7194,798
27,524
17,392

108,683
61,60745,028
8,690
7,889
12,746
4,610
29,72022,706TOTAL ASSETS/ROA/TOTAL EQUITY/ROE
2009
Total Assets

2011

2012

2013

858,017665,185

607,1810.2(21.1)

(3.2)

2.3

3.6

393,334

97,306

63,60581,644

105,008

1.2(122.7)(41.4)

24.7

24.9

ROA (%)
Total Equity

2010

1,644,744 1,152,945(Millions of Yen)ROE (%)AIFUL CORPORATION
LOANS OUTSTANDING
Total Receivables Outstanding
Loans(Millions of Yen)

2009

2010

2011

2012

2013

901,734

603,088422,004

408,167

348,353

842,786

553,476

381,368

344,455

286,316

NUMBER OF CUSTOMER ACCOUNTS
Number of Customer Accounts
Unsecured

2013

2010

2011

2012

1,351

1,061

815

805

631

1,281

1,009

772

767

601

Unsecured

648,123

423,733

289,361

265,617

224,669

Secured

59

44

34

27

22

Secured181,394

120,82183,422

66,60752,708Small Business

11

7

9

12

9

Small Business

13,269

8,922

8,585

12,231

8,939

–

–

–

7,202

4,433

Credit Guarantees

54,16745,24936,96948,39751,078

Other

4,781

4,363

3,667

8,113

6,526

Installment Receivables

AVERAGE LENDING INTEREST RATE
Average Lending
Interest RateTOTAL INCOME/NET INCOME (LOSS)
2010

2011

2012

2013

193,282

130,278

90,75179,75769,655Interest on Loans

167,415

113,069

74,02057,65747,402

Unsecured

142,01092,85460,194

46,374

38,126

Secured22,546

18,353

12,511

9,554

7,655

Small Business

2,859

1,862

1,315

1,729

1,621

Credit Guarantees

4,636

4,136

3,349

3,051

3,215

Installment Receivables
Other
Net Income (Loss)

–

–

–

316

306

21,231

13,073

13,382

18,732

18,7339,657(261,496)(70,169)

13,407

10,649

2010

2011

2012

2013

17.6

16.2

15.8

15.9

15.0

AMOUNT OF WRITE-OFFS/RATIO OF WRITE-OFFS(Millions of Yen)

2013

2009

2010

2011

2012

Total Receivables Write-offs 119,068

111,651

81,666

68,352

31,591

Unsecured Loans
Write-offs

103,473

89,452

63,77946,33325,194

Ratio of Total Receivables
Write-offs (%)

14.13

20.17

21.41

19.84

11.03

Ratio of Unsecured
Loans Write-offs(%)

15.97

21.11

22.04

17.44

11.21

*On July 1, 2011, Group companies, formerly known as Life Co., Ltd. and Cities Co., Ltd., were absorbed by merger into AIFUL

AIFUL CORPORATION Annual Report 2013

(%)

2009

(Millions of Yen)

2009
Total Income

8(Thousands)

2009

Business Data

NEW ACCOUNTS
New Accounts
Unsecured Loans
Contract Rate of
Unsecured Loans (%)(Accounts)

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2009

2010

2011

2012

2013

87,39251,75760,43463,296

87,575

Total Assets

85,91651,75755,986

61,73487,515

ROA (%)

28.6

21.9

27.3

29.9

38.0

Total Equity(Millions of Yen)

2009

2010

2011

2012

2013

1,241,766

858,532

578,153

533,713466,5420.7(24.9)

(9.8)

2.4

2.1

396,232

135,536

64,83579,761

90,411

2.7(98.3)(70.0)

18.6

12.5

ROE (%)

LIFECARD CO., LTD. (Managed Asset Basis)
TOTAL RECEIVABLES OUTSTANDING(Millions of Yen)

2009

2010

2011

2012

2013

Total Receivables Outstanding

570,668

410,315

270,201

152,663

151,736

Installment Receivables

170,554

135,852

80,99073,41279,452Loans (Cash Advance)

327,493

211,632

137,023

53,16848,375Credit Guarantees

64,03854,90445,16525,75023,363

8,583

7,926

7,023

333

545

Other

2009

2010

2011

2012

2013

100,356

73,371

44,675

19,711

26,402

Installment Receivables

21,612

19,955

13,267

8,657

12,50967,154

41,265

19,559

6,084

6,904

Credit Guarantees

3,384

2,899

2,410

1,240

1,395

Other

8,205

9,252

9,439

3,730

5,593

218

(27,750)(31,148)

2,207

3,320

2013

2010

2011

2012

963,926

863,975

491,804

341,491

496,088

Credit Card Shopping Loans

775,779

796,376

446,540

310,754455,181

Credit Card Cashing Loans

188,147

67,59945,26330,73740,906

2009

2010

2011

2012

15,252

12,719

6,746

6,357

5,811

LIFE Proper Card

2,239

2,219

2,762

2,489

2,021

Affinity Cards

13,013

10,499

3,984

3,869

3,790

Credit Card

(Millions of Yen)

Loans (Cash Advance)

Net Income (Loss)(Millions of Yen)

2009

NUMBER OF CARDHOLDERSOPERATING REVENUE/NET INCOME (LOSS)
Operating Revenue

PURCHASE RESULTS

Number of Cardholders(Thousands)

2013

AMOUNT OF WRITE-OFFS/RATIO OF WRITE-OFFS(Millions of Yen)

AVERAGE YIELD
Average Yield

(%)

2009

2010

2011

2012

2013

16.1

14.6

13.4

17.1

17.5

2009

2010

2011

2012

2013

Total Receivables Write-offs

43,06438,71630,308

1,665

2,961

Ratio of Total Receivables
Write-offs (%)

7.55

9.44

11.22

1.09

1.95

*LIFECARD CO., LTD. commenced business on July 1, 2011. As a result, performance figures for the fiscal year ended March 31,
2012 are for a nine-month period.
*Figures prior to the fiscal year ended March 31, 2011 are for Life Co., Ltd.

AIFUL CORPORATION Annual Report 20139

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2013
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

ASSETS

2013

2012

2013

¥ 61,198¥ 86,696

CURRENT ASSETS:
Cash and cash equivalents (Note 15)$651,0434

5

43Operational investment securities (Notes 6 and 15)

926

662

9,851

Allowance for investment losses

(19)

(50)

(202)

390,635

455,012

4,155,691

Time deposits (Note 15)

Loans, credit guarantees and receivables:
Loans (Notes 3, 8 and 15)
Installment accounts receivable (Notes 4, 8 and 15)

83,88578,950892,394

Credit guarantees (Note 5)

74,441

74,148

791,926

Other receivables

10,215

13,031

108,669

Allowance for doubtful accounts (Notes 2.l and 15)(84,715)(117,604)(901,223)

1,612

3,169

17,149Prepaid expenses
Other current assets (Note 8)

15,697

14,050166,988

Total current assets

553,879

608,069

5,892,329

Land (Notes 7 and 8)

8,895

8,960

94,628

Buildings and structures (Notes 7 and 8)

23,49624,255249,957

Machinery and equipment (Notes 7 and 8)

356

385

3,787

10,68017,166113,617

PROPERTY AND EQUIPMENT:

Furniture and fixtures (Note 7)
Lease assets

607

338

6,457

Construction in progress

673

140

7,160

Total

44,70751,244475,606

Accumulated depreciation(25,906)(31,886)(275,595)

Net property and equipment

18,801

19,358200,011

1,136

1,490

12,085

(16)

(42)

(170)

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 15)
Allowance for investment losses
Investments in and advances to unconsolidated subsidiaries (Note 15)

2,402

2,480

25,553Claims in bankruptcy (Notes 3 and 15)

39,832

45,232423,745

Software, net

4,659

8,510

49,564

Lease and guarantee deposits

20,182

17,642214,702

535

513

5,691

Long-term prepayments

484

675

5,149

Allowance for doubtful accounts (Note 15)(34,713)(38,742)(369,287)

Total investments and other assets

34,50137,758367,032¥ 607,181¥ 665,185$ 6,459,372

Other assets (Note 7)

TOTAL
See notes to consolidated financial statements.

10

AIFUL CORPORATION Annual Report 2013

Consolidated Balance Sheet

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITY

2013

2012

2013

¥ 40,900¥ 35,000

52,772

61,812561,404

124

144

1,319

CURRENT LIABILITIES:
Short-term borrowings (Notes 8 and 15)
Current portion of long-term debt (Notes 8, 14 and 15)
Trade notes payable$

435,106

Trade accounts payable

14,307

22,209152,202

Obligation under credit guarantees (Note 5)

74,441

74,148

791,926987

426

10,500

Income taxes payable
Accrued expenses

1,756

1,654

18,681

Allowance for credit card point redemption

2,830

2,310

30,106

Allowance for losses from business restructuring (Note 12)

2,127
3,814

7,296

40,575

191,931207,126

2,041,819

Long-term debt (less current portion) (Notes 8, 14 and 15)

215,075

263,757

2,288,032

Allowance for losses on interest refunds (Note 2.l)

91,422

108,668

972,574

218

435

2,319

Other current liabilities (Notes 4, 5 and 19)
Total current liabilities
LONG-TERM LIABILITIES:

Negative goodwill, net (Note 20)

149

124

1,585

Other long-term liabilities

3,378

3,431

35,937

Total long-term liabilities

310,242

376,4153,300,447

issued, 240,933,918 shares

143,325

143,325

1,524,734

Capital surplus

164,392

164,392

1,748,851

Deferred tax liabilities (Note 13)

EQUITY (Note 10):
Common stock, authorized, 568,140,000 shares;

Stock acquisition rights (Note 11)
Retained earnings
Treasury stock, at cost 457,966 shares in 2013 and 457,895 shares in 2012

62

51

660

(202,114)(224,820)(2,150,149)(3,110)(3,110)(33,085)

148

(48)

1,574

102,70379,7901,092,585

2,305

1,854

24,521

105,008

81,644

1,117,106¥ 607,181¥ 665,185$ 6,459,372

Accumulated other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale securities
Total
Minority interests
Total equity
TOTAL

AIFUL CORPORATION Annual Report 201311

Consolidated Financial Statements

Consolidated Statement of Income
Year Ended March 31, 2013
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2013

2012

2013

¥ 61,607¥ 75,993$ 655,394

12,514

11,344133,128

INCOME:
Operating revenue:
Interest on loans
Revenue from credit card business
Revenue from credit guarantee

4,610

4,798

49,043

Recovery of loans previously charged off

10,84011,431

115,319

Other operating revenue

10,04810,436

106,893

99,619114,002

1,059,777

218

218

2,319

Total operating revenue
Amortization of negative goodwill (Note 21)
Reversal of allowance for investment losses
Gain on purchase of borrowings

40

154

426

5,948

2,902

63,277

Gain on negative goodwill (Note 21)
Other income
Total income

1,115
2,858

1,643

30,404

108,683

120,034

1,156,203

6,878

9,353

73,17032,937EXPENSES:Interest on borrowings and bonds
Provision for doubtful accounts (Note 21)

8,177

Provision for losses on interest refunds (Note 21)

17,297

Salaries and other employees' benefits

13,12915,380139,670

518

617

5,511

Net periodic benefit costs (Note 9)86,989184,011Advertising expenses

3,814

2,416

40,574

Provision for credit card point redemption (Note 21)

2,347

1,392

24,968

Rental expenses (Note 14)

2,448

3,122

26,043

Commissions and fees

9,753

10,000103,755

Depreciation and amortization (Note 21)

6,021

6,902

64,053Foreign exchange loss

347

Loss on sales of investment securities (Note 6)
Loss on impairment of long-lived assets

1,453
52

322

Loss from and provision for business restructuring (Note 12)
Other expenses
Total expenses
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

553

2,156
14,64815,543

155,83185,082

101,940

905,128

23,601

18,094251,075

414

241

4,404

INCOME TAXES (Notes 13 and 21):
Current
Deferred
Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME
NET INCOME

30

(9)

320

444

232

4,724

23,157

17,862

246,351

451

470

4,798

¥ 22,706¥ 17,392$ 241,553
U.S. Dollars(Note 1)Yen
AMOUNTS PER COMMON SHARE (Notes 2.u and 18):
Basic net income¥ 94.42¥ 72.49$1.00

Diluted net income

94.04

nil

1.00

nil

nil

nil

Cash dividends applicable to the year
See notes to consolidated financial statements.

12

AIFUL CORPORATION Annual Report 2013

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2013
AIFUL CORPORATION and Consolidated Subsidiaries

Millions of Yen

Thousands of U.S.
Dollars (Note 1)

2013

2012

2013

¥ 23,157¥ 17,862$ 246,351

Unrealized gain (loss) on available-for-sale securities

196

1,265

2,085

Total other comprehensive income

196

1,265

2,085

¥ 23,353¥ 19,127$ 248,436¥ 22,902¥ 18,657$ 243,638

451

470

4,798

NET INCOME BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (Note 17):COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests
See notes to consolidated financial statements.

AIFUL CORPORATION Annual Report 201313

Consolidated Financial Statements

Consolidated Statement of Changes in Equity
Year Ended March 31, 2013
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands

BALANCE AT APRIL 1, 2011

Millions of Yen

Number of
Shares ofCommonStock Issued

CommonStockCapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

TreasuryStock238,686¥ 143,325¥ 164,134¥ 24¥ (242,212)¥ (3,110)

Net income

2,248

Minority
Total Equity
Interests¥ 60,848¥ 2,757¥ 63,605

17,392(903)

17,39227

240,934

(0)

(0)

258

258

1,265

1,292

389

(48)

79,7901,854

81,64422,706451

22,706258

143,325

164,392

51

Net income(224,820)(3,110)22,706

Net increase in treasury
stock (71 shares)(0)

Net change in the year

BALANCE AT MARCH 31, 2013

¥ (1,313)

Total

(0)

Net change in the year

BALANCE AT MARCH 31, 2012

Unrealized
Gain (Loss) on
Available-forsale Securities

17,392

Net increase in treasury
stock (717 shares)
Issuance of new shares

Accumulated
Other
Comprehensive
Income (Loss)

11

240,934¥ 143,325¥ 164,392¥ 62¥ (202,114)¥ (3,110)

(0)

(0)

196

207

658

¥ 148

¥ 102,703¥ 2,305¥ 105,008

Thousands of U.S. Dollars (Note 1)

BALANCE AT MARCH 31, 2012

CommonStockCapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

Treasury
Stock$1,524,734$1,748,851$543$ (2,391,702)$ (33,085)

Net income

117$1,524,734

See notes to consolidated financial statements.

AIFUL CORPORATION Annual Report 2013

$ (511)(0)

Net change in the year

14

Unrealized
Gain (Loss) on
Available-forsale Securities

241,553

Net increase in treasury
stock (71 shares)

BALANCE AT MARCH 31, 2013

Accumulated
Other
Comprehensive
Income (Loss)$1,748,851$660$ (2,150,149)$ (33,085)

Total

Minority
Total Equity
Interests$848,830$19,723$868,553

241,553

4,798

241,553

(0)

(0)

2,085

2,202

7,000

$ 1,574$1,092,585$24,521$1,117,106

Consolidated Financial Statements

Consolidated Statement of Cash Flows
Year Ended March 31, 2013
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2013

2012

2013

¥ 23,601¥ 18,094$ 251,075

Income taxes - paid

(288)

(132)

(3,064)

Income taxes - refund

423

48

4,500

Depreciation and amortization

6,021

6,902

64,053

Amortization of negative goodwill

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:

(218)

(218)

(2,319)Loss on impairment of long-lived assets

52

322

553

Decrease in allowance for investment losses

(55)

(358)

(585)

Decrease in allowance for doubtful accounts(36,919)(36,088)(392,755)

Increase (decrease) in allowance for bonuses

52

(343)

553

Increase in allowance for point card certificates

520

304

5,532

Decrease in allowance for losses on interest refunds(17,246)(70,102)(183,468)(Decrease) increase in allowance for losses from business restructuring(2,127)

1,931(22,628)

(32)

1,398

(340)

(5,948)(2,902)(63,277)(Gain) loss on sale of investments in securities, net
Gain on purchase of borrowings
Gain on negative goodwill(1,115)

Changes in assets and liabilities:
Decrease in loans

64,377

139,515

684,862

Increase in installment accounts receivable(4,935)(1,615)(52,500)

Decrease (increase) in purchased receivables

1,442

(374)

15,340Decrease in other operating receivables

1,375

2,245

14,628Decrease in claims in bankruptcy

5,400

1,606

57,447(Increase) decrease in operating guarantee deposits(2,640)86(28,085)

Decrease in other current assets

223

16,161

2,372

Decrease in other current liabilities(11,367)(2,083)(120,926)

102

(542)

1,086

Total adjustments(1,788)54,646(19,021)

Net cash provided by operating activities

21,81372,740232,054(1,606)(2,343)(17,085)

Proceeds from sale of property, plant and equipment

221

1,742

2,351

Proceeds from sales of investment securities

532

3,776

5,660

Other, net

(323)

(521)

(3,437)(1,176)

2,654(12,511)¥ 20,637¥ 75,394$ 219,543

Other, net

INVESTING ACTIVITIES:Capital expenditures

Net cash (used in) provided by investing activities
FORWARD(Continued)

AIFUL CORPORATION Annual Report 201315

Consolidated Statement of Cash Flows

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2013

2012

2013

¥ 20,637

75,394$ 219,543

Net increase (decrease) in short-term borrowings

5,900(7,580)62,766

Proceeds from long-term debt

10,351

21,556110,117

Repayments of long-term debt

(62,369)(142,587)(663,500)

(63)

(65)

(670)

(46,181)(128,676)(491,287)

46

7

488

NET DECREASE IN CASH AND CASH EQUIVALENTS(25,498)(53,275)(271,256)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

86,696

139,971922,299¥ 61,198¥ 86,696$ 651,043

FORWARD
FINANCING ACTIVITIES:Other, net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

16

AIFUL CORPORATION Annual Report 2013

Consolidated Financial Statements

Notes to Consolidated Financial Statements
Year Ended March 31, 2013
AIFUL CORPORATION and Consolidated Subsidiaries

1 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been

Japan. In addition, certain reclassifications have been made inprepared in accordance with the provisions set forth in thethe 2012 financial statements to conform to the classification

Japanese Financial Instruments and Exchange Act and its related

used in 2013.

accounting regulations, and in accordance with accounting

The consolidated financial statements are stated in Japaneseprinciples generally accepted in Japan (“Japanese GAAP”), whichyen, the currency of the country in which the Company isare different in certain respects as to application and disclosure

incorporated and operates. The translations of Japanese yen

requirements of International Financial Reporting Standards. The

amounts into U.S. dollar amounts are included solely for the

consolidated financial statements are not intended to present

convenience of readers outside Japan and have been madethe financial position, results of operations and cash flows inat the rate of ¥94 to $1, the approximate rate of exchange at

accordance with accounting principles generally accepted in

March 31, 2013. Such translations should not be construed

countries and jurisdictions other than Japan.

as representations that the Japanese yen amounts could be

In preparing these consolidated financial statements, certain

converted into U.S. dollars at that or any other rate.

reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as ofpartnerships and similar partnerships, are initially recorded at

March 31, 2013, include the accounts of AIFUL CORPORATION

cost, and the carrying amount is adjusted to recognize the(the “Company”) and its four (four in 2012) significant subsid-

Company’s interests in earnings or losses in such partnerships

iaries (together, the “Group”). Consolidation of the remaining

based on the most recent available financial statements of thetwelve (thirteen in 2012) unconsolidated subsidiaries would

partnerships.

not have a material effect on the accompanying consolidated
financial statements.
In March, 2007, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Implementation Guidance No.

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 sheet.

15, “Implementation Guidance on Disclosures about Certain

Goodwill on acquisition of subsidiaries is amortized us-

Special Purpose Entities” (“Guidance No. 15”). This standard

ing the straight-line method over the estimated period (not topermits companies to avoid consolidation of certain special pur-exceed 20 years) in which economic benefits are expected topose entities which were established and are being operated

be realized. However, when the excess of cost over net assets

for the purpose of securitization of receivables.

of subsidiaries acquired is not material, it is charged to income

A consolidated subsidiary securitizes its trust beneficiarywhen incurred. Negative goodwill on acquisition of subsidiar-backed by installment accounts receivable and loans to diversify

ies prior to March 31, 2010 is amortized using the straight-line

its funding sources and ensure stable funding. In the securitiza-

method over ten years. See Note 2.b for the new accounting

tion structures, the consolidated subsidiary uses special purpose

standard of business combinations undertaken on or after April

entities. As a result of such securitizations, a consolidated

1, 2010.

subsidiary had one special purpose entity which is not consoli-

All significant intercompany balances and transactions have

dated under Guidance No. 15 as of March 31, 2013. Related

been eliminated in consolidation. All material unrealized profit

disclosures for the fiscal years ended March 31, 2013 and 2012,

included in assets resulting from transactions within the Group

were omitted due to immateriality.
Under the control or influence concept, those companies

is eliminated.
b. Business Combinations — In October 2003, the Business

in which the Company, directly or indirectly, is able to exercise

Accounting Council (the “BAC”) issued a Statement of Opinion,

control over operations are fully consolidated, and those com-

“Accounting for Business Combinations”, and in December

panies over which the Group has the ability to exercise signifi-

2005, the ASBJ issued ASBJ Statement No. 7, “Accounting

cant influence are accounted for by the equity method.

Standard for Business Divestitures” and ASBJ Guidance No.

Investments in six unconsolidated subsidiaries are stated at

10, “Guidance for Accounting Standard for Business Combina-

cost. Investments in the remaining six unconsolidated sub-tions and Business Divestitures”. The accounting standard for

sidiaries (seven in 2012), which are limited liability investment

business combinations allowed companies to apply the pooling

AIFUL CORPORATION Annual Report 201317

Notes to Consolidated Financial Statements

of interests method of accounting only when certain specificdeclining-balance method except that the straight-line method

criteria are met such that the business combination is essentiallyis applied to the buildings of the Company’s consolidated

regarded as a uniting-of-interests. For business combinations

subsidiaries acquired on and after April 1, 1998. The range ofthat do not meet the uniting-of-interests criteria, the busi-

useful lives is principally from 2 to 62 years for buildings andness combination is considered to be an acquisition and thestructures, from 4 to 17 years for machinery and equipment,purchase method of accounting is required. This standard alsoprescribes the accounting for combinations of entities undercommon control and for joint ventures.

for impairment whenever events or changes in circumstanceIn December 2008, the ASBJ issued a revised accounting

indicate the carrying amount of an asset or asset group may

standard for business combinations, ASBJ Statement No. 21,

not be recoverable. An impairment loss is recognized if the“Accounting Standard for Business Combinations”. Major

carrying amount of an asset or asset group exceeds the sum

accounting changes under the revised accounting standardof the undiscounted future cash flows expected to result fromare as follows: (1) The revised standard requires accounting

the continued use and eventual disposition of the asset or asset

for business combinations only by the purchase method. Asgroup. The impairment loss would be measured as the amounta result, the pooling of interests method of accounting is noby which the carrying amount of the asset exceeds its recover-longer allowed. (2) The previous accounting standard accounts

able amount, which is the higher of the discounted cash flows

for research and development costs to be charged to income asfrom the continued use and eventual disposition of the asset or

incurred. Under the revised standard, in-process research andthe net selling price at disposition.

development costs (IPR&D) acquired in the business combina-

g. Software — Expenditures for the purchase of software, whichtion are capitalized as an intangible asset. (3) The previous ac-

meet certain future-tests, are capitalized as software and amor-

counting standard provided for a bargain purchase gain (nega-

tized by the straight-line method over the estimated useful lives

tive goodwill) to be systematically amortized over a period notexceeding 20 years. Under the revised standard, the acquirerof five years.
h. Allowance for Doubtful Accounts — The allowance forrecognizes the bargain purchase gain in profit or loss immedi-

doubtful accounts is stated in amounts considered to be appro-

ately on the acquisition date after reassessing and confirming

priate based on the Group’s past credit loss experience and anthat all of the assets acquired and all of the liabilities assumed

evaluation of potential losses in the accounts outstanding.

have been identified after a review of the procedures used ini. Allowance for Investment Losses — The allowance forthe purchase price allocation. This standard was applicable toinvestment losses is stated in amounts considered to be appro-

business combinations undertaken on or after April 1, 2010.

priate based on the financial position of the investment destina-c. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalentstion and an evaluation of potential losses on nonmarketable
investment securities.
j. Allowance for Credit Card Point Redemption — The al-include time deposits which mature or become due withinlowance for credit card point redemption is provided at an

three months of the date of acquisition.

estimated amount of future costs related to credit card point

d. Operational Investment Securities Held by Venture Capi-redemption. These points are granted to card members ac-

tal Subsidiary and Investment Securities — Operationalcording to the point system that is intended to promote theinvestment securities held by a venture capital company andusage of cards.

investment securities, all of which are classified as available-k. Allowance for Losses from Business Restructuring — The

for-sale securities, are reported at fair value, with unrealized

allowance for losses from business restructuring is provided

gains and losses, net of applicable taxes, reported in a separate

at an estimated amount of future costs related to closure ofcomponent of equity. The cost of securities sold is determined

outlets and other restructuring activities.

based on the moving-average cost method. Nonmarketablel. Allowance for Losses on Interest Refunds — The limit ofavailable-for-sale securities are stated at cost determined by theinterest rates in Japan is regulated by two laws - “Capital Sub-moving-average method. For other than temporary declines

scription Law” and “Interest Rate Restriction Act”. Under thein fair value, operational investment securities and investment

former law, interest rates on loans should not exceed 29.2%

securities are reduced to net realizable value by a charge to(20.0% for customers who originate loans after June 18, 2010)

income.

and the violation of law is considered to be a criminal penalty.

Investments in limited liability investment partnerships and

The latter law stipulates that interest payments for interest rates

similar partnerships are initially recorded at cost, and the car-that exceed the legal limit (20.0% for principal amounts underrying amount is adjusted to recognize the Company’s interests¥100 thousand, 18.0% for principal amounts not less thanin earnings or losses in such partnerships based on the most¥100 thousand and under ¥1 million and 15.0% for principal

recent available financial statements of the partnerships.

amounts not less than ¥1 million) are void. However, under thee. Property and Equipment — Property and equipment are18

and from 2 to 20 years for furniture and fixtures.
f. Long-lived Assets — The Group reviews its long-lived assets“Moneylending Business Control and Regulation Law”, suchstated at cost. Depreciation of property and equipment of theinterest payments are nonetheless considered to be valid if

Company and its consolidated subsidiaries is computed by themoneylenders issue notices as prescribed by the law to debtors

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

and debtors pay voluntarily (For customers who originate loans

also requires companies to account for stock options granted

after June 18, 2010, such system is abolished.). Strict judge-

to non-employees based on the fair value of either the stock

ment by the Supreme Court of these requirements has led tooption or the goods or services received. In the balance sheet,decisions against moneylenders and resulted in more debtors

the stock option is presented as a stock acquisition right as aclaiming for the return of excess interest payments.

separate component of equity until exercised. The standard

The Company and its certain consolidated subsidiaries havecovers equity-settled, share-based payment transactions, butloaned money at rates between the limits set by the two laws.

does not cover cash-settled, share-based payment transactions.

Allowance for losses on interest refunds is stated in amounts

In addition, the standard allows unlisted companies to measureconsidered to be appropriate based on the Company’s and its

options at their intrinsic value if they cannot reliably estimate

certain consolidated subsidiaries’ past refund loss experience,
the recent situation regarding interest refunds and other factors.

fair value.
o. Leases — In March 2007, the ASBJ issued ASBJ Statement
No. 13, “Accounting Standard for Lease Transactions”, which

At March 31, 2013 and 2012, the Group recorded an al-revised the previous accounting standard for lease transactions.

lowance of ¥91,422 million ($972,574 thousand) and ¥108,668

The revised accounting standard for lease transactions was ef-

million, respectively, as “Allowance for losses on interest

fective for fiscal years beginning on or after April 1, 2008.

refunds”. In addition, the estimated amount of interest refunds

Under the previous accounting standard, finance leasesof ¥42,826 million ($455,596 thousand) and ¥58,112 million

that were deemed to transfer ownership of the leased property

which were expected to be preferentially set off against loans

to the lessee were capitalized. However, other finance leases

was recorded as “Allowance for doubtful accounts” for thewere permitted to be accounted for as operating lease transac-

Company and its certain consolidated subsidiaries at March 31,

tions if certain “as if capitalized” information was disclosed

2013 and 2012, respectively.

in the note to the lessee’s financial statements. The revised

m. Asset Retirement Obligations — In March 2008, theaccounting standard requires that all finance lease transactions

ASBJ published ASBJ Statement No. 18 “Accounting Standard

be capitalized by recognizing lease assets and lease obligations

for Asset Retirement Obligations” and ASBJ Guidance No.

in the balance sheet.

21 “Guidance on Accounting Standard for Asset Retirement

In addition, the revised accounting standard permits leases

Obligations”. Under this accounting standard, an asset retire-

which existed at the transition date and do not transfer own-

ment obligation is defined as a legal obligation imposed either

ership of the leased property to the lessee to continue to be

by law or contract that results from the acquisition, construc-accounted for as operating lease transactions.

tion, development and the normal operation of a tangible fixed

The Group applied the revised accounting standard effec-

asset and is associated with the retirement of such tangible

tive April 1, 2008. In addition, the Group continues to accountfixed asset. The asset retirement obligation is recognized as thefor leases which existed at the transition date and does not

sum of the discounted cash flows required for the future asset

transfer ownership of the leased property to the lessee as oper-

retirement and is recorded in the period in which the obligation

ating lease transactions.

is incurred if a reasonable estimate can be made. If a reason-

Lease assets related to finance lease transactions withable estimate of the asset retirement obligation cannot beownership transfer are depreciated on the methods which are

made in the period the asset retirement obligation is incurred,applied to the assets owned by the Group. Lease assets related

the liability should be recognized when a reasonable estimate

to finance lease transactions without ownership transfer areof the asset retirement obligation can be made. Upon initialdepreciated on a straight-line basis, over the leased periods

recognition of a liability for an asset retirement obligation, anwith no residual value.

asset retirement cost is capitalized by increasing the carrying

All other leases are accounted for as operating leases.

amount of the related fixed asset by the amount of the liability.

p. Income Taxes — The provision for income taxes is computed

The asset retirement cost is subsequently allocated to expense

based on the pretax income included in the consolidated state-through depreciation over the remaining useful life of the asset.

ment of income. The asset and liability approach is used toOver time, the liability is accreted to its present value each pe-

recognize deferred tax assets and liabilities for the expected

riod. Any subsequent revisions to the timing or the amount of

future tax consequences of temporary differences between

the original estimate of undiscounted cash flows are reflected

the carrying amounts and the tax bases of assets and liabilities.

as an adjustment to the carrying amount of the liability and theDeferred taxes are measured by applying currently enacted tax

capitalized amount of the related asset retirement cost.

laws to the temporary differences.

n. Stock Options — ASBJ Statement No. 8, “Accounting Stan-

The Group files a tax return under the consolidated corpo-

dard for Stock Options” and related guidance are applicablerate-tax system, which allows companies to base tax payments

to stock options granted on and after May 1, 2006. Thison the combined profits or losses of the parent company andstandard requires companies to measure the cost of employee
stock options based on the fair value at the date of grant andits wholly owned domestic subsidiaries.
q. Foreign Currency Transactions — All short-term andrecognize compensation expense over the vesting period as

long-term monetary receivables and payables denominatedconsideration for receiving goods or services. The standard

in foreign currencies are translated into Japanese yen at

AIFUL CORPORATION Annual Report 201319

Notes to Consolidated Financial Statements

the exchange rates at the balance sheet date. The foreign

u. Per Share Information — Basic net income per share is com-exchange gains and losses from translation are recognizedputed by dividing net income available to common shareholders

in the consolidated statement of income to the extent thatby the weighted-average number of common shares outstand-they are not hedged by forward exchange contracts.

ing for the period, retroactively adjusted for stock splits.

r. Revenue Recognition:

potential dilution that could occur if securities were converted

crual basis. In accordance with the practice prevailing in theinto common stock and assumes full exercise of outstanding

industry, the Company records accrued interest at either thestock options.

interest rate stipulated in the Interest Rate Restriction Act or the

Cash dividends per share presented in the accompanying

contracted interest rate, whichever is lower.

consolidated statement of income are dividends applicable to

Revenue from Credit Card Business, Revenue from In-

the respective years including dividends to be paid after the end

stallment Sales Finance Business — Fees from customersof the year and have not been retroactively adjusted for stockand member stores applying the add-on method are generally
recorded collectively as unearned income when credit contracts

splits.
v. Accounting Changes and Error Corrections — In Decem-

become effective and are recognized in equal installments

ber 2009, ASBJ issued ASBJ Statement No. 24 “Accounting

over the lives of contracts. Fees from customers applying theStandard for Accounting Changes and Error Corrections” andremaining principal method or revolving method are generally

ASBJ Guidance No. 24 “Guidance on Accounting Standard

recognized in equal installments over the lives of contracts.

for Accounting Changes and Error Corrections”. Accounting

Revenue from Credit Guarantees — Revenue from credit

treatments under this standard and guidance are as follows: (1)guarantees is recorded by the remaining principal method.

Changes in Accounting Policies - When a new accounting policys. Interest on Borrowings — Interest on financial liabilities is

is applied following revision of an accounting standard, theaccounted for as operating expenses while other interest is

new policy is applied retrospectively unless the revised account-

included in other expenses.

ing standard includes specific transitional provisions, which caset. Derivatives and Hedging Activities — The Group uses

the entity shall comply with the specific transitional provisions.

derivative financial instruments to manage its exposures to(2) Changes in Presentation - When the presentation of finan-fluctuations in interest rates and foreign exchange. Interest ratecial statements is changed, prior-period financial statements

swaps, interest rate caps and currency swaps contracts are uti-

are reclassified in accordance with the new presentation. (3)lized by the Group to reduce interest rate and foreign currency

Changes in Accounting Estimates - A change in an accounting

exchange risks. The Group does not enter into derivatives for

estimate is accounted for in the period of the change if the

trading or speculative purposes.

change affects that period only, and is accounted for prospec-

Derivative financial instruments are classified and accounted

tively if the change affects both the period of the change andfor as follows: a) all derivatives are recognized as either assets

future periods. (4) Corrections of Prior-Period Errors - When an

or liabilities and measured at fair value, and gains or losses

error in prior-period financial statements is discovered, thoseon derivative transactions are recognized in the consolidated

statements are restated.

statement of income, and b) for derivatives used for hedging
purposes, if derivatives qualify for hedge accounting because ofhigh correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives aredeferred until maturity of the hedged transactions.
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 are translated at thecontracted rates.
The interest rate swaps and caps 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 or cap contracts is recognized and included in interest
expenses or income.

20

Diluted net income per share of common stock reflects theInterest on Loans — Interest on loans is recorded on an ac-

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

3 LOANS
Loans at March 31, 2013 and 2012, consisted of the following (before allowance for doubtful accounts):
Thousands of
U.S. Dollars

Millions of Yen

2013

2012

2013

Unsecured¥ 272,980¥ 318,785$ 2,904,042

Secured64,345

77,115684,521

Small business loans
Total

53,31059,112567,128¥ 390,635¥ 455,012$ 4,155,691

Registered moneylenders are required to disclose the following information under the Non-Bank Bond Issuing Law.
Thousands of
U.S. Dollars

Millions of Yen

2013

2012

2013

¥ 37,598¥ 43,033$ 399,979

Nonaccrual loans

36,90655,427

392,617

Accruing loans contractually past due three months or moreas to principal or interest payments

2,610

4,475

27,766

Restructured loans

21,51428,872

228,872¥ 98,628¥ 131,807$1,049,234

Loans in legal bankruptcy

Total
Loans in legal bankruptcy are loans in which accrual of

Restructured loans are loans on which creditors grantinterest is discontinued (excluding the portion recognized as badconcessions (e.g., reduction of the stated interest rate, deferral

debts), based on management’s judgment as to the collectabilityof interest payment, extension of maturity date, waiver of theof principal or interest resulting from the past due payment offace amount, or other concessive measures) to the debtors ininterest or principal and other factors. Allowances for claims infinancial difficulties to assist them in their recovery and eventuallybankruptcy are stated at such amount less net realizable value of

enable them to pay creditors. Loans classified as loans in legal

collateral.

bankruptcy, nonaccrual loans and accruing loans contractually

Nonaccrual loans are loans in which accrual of interest is
discontinued, other than loans in legal bankruptcy as well as

past due three months or more are excluded.
At March 31, 2013 and 2012, the Group had balancesloans receiving regular payments in the case of granting deferral

related to revolving loan contracts aggregating ¥301,487 millionof interest payment to the debtors in financial difficulties to assist($3,207,309 thousand) and ¥382,972 million, respectively,

them in their recovery.

whereby the Group is obligated to advance funds up to a

Accruing loans contractually past due three months or morepredetermined amount upon request. At March 31, 2013 andas to principal or interest payments are loans for which payments

2012, the balances of unadvanced commitments were ¥678,908

of principal or interest have not been received for a period of

million ($7,222,426 thousand) and ¥688,926 million, respectively.

three months or more beginning with the next business day

The loan contract contains provisions that allow the Group tofollowing the last due date for such payments. Loans classified as

reduce the contract amount of the commitment or refuse toloans in legal bankruptcy and nonaccrual loans are excluded fromadvance funds to loan customers under certain conditions.

accruing loans contractually past due three months or more.

AIFUL CORPORATION Annual Report 201321

Notes to Consolidated Financial Statements

4 INSTALLMENT ACCOUNTS RECEIVABLE
Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2013 and 2012, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen

2013

Credit card business

Unearned
IncomeReceivables

Unearned
IncomeReceivables

Unearned
Income¥ 82,439¥ 399¥ 77,755¥ 365$ 877,011$ 4,245

1,446

8

2,859

54

15,38385¥ 83,885¥ 407¥ 80,614¥ 419$ 892,394$ 4,330¥ 419$ 892,394$ 4,330

Off-balance sheet securitizedinstallment accounts receivable
Net

2013

Receivables

Installment sales finance business
Total

2012

(1,664)¥ 83,885¥ 407¥ 78,950

In addition, the Group had unearned income of immaterial amounts at March 31, 2013 and 2012, which was included in other current
liabilities, related to loans other than those shown in the above table.

5 CREDIT GUARANTEES AND OBLIGATIONS UNDER CREDIT GUARANTEESThe Group, as guarantor, recorded credit guarantees as a contra account of obligations under credit guarantees. Unearned income relatingto credit guarantees was ¥40 million ($426 thousand) and ¥49 million at March 31, 2013 and 2012, respectively, which was included inother current liabilities.

6 OPERATIONAL INVESTMENT SECURITIES HELD BY VENTURE CAPITAL SUBSIDIARY AND INVESTMENT SECURITIESOperational investment and investment securities at March 31, 2013 and 2012, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Current — Equity securities

2013

2012

2013

¥ 926

¥ 662

$ 9,851¥ 840¥ 1,344$ 8,936

Non-current:
Equity securities
Government and corporate bonds

152

Other

144

146

1,532

¥ 1,136¥ 1,490$ 12,085

Total

1,617

The costs and aggregate fair values of available-for-sale securities included in investment securities with reliable determined fair value atMarch 31, 2013 and 2012, were as follows:
Millions of Yen

2013

Securities classified as:
Available-for-sale securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value

¥ 427

¥ 234

¥ 12

¥ 649

Unrealized
Gains

Unrealized
LossesFair Value

¥ 43

¥ 17

¥ 247

Millions of Yen

2012
Cost

Securities classified as:
Available-for-sale securities¥ 221

Thousands of U.S. Dollars

2013

Securities classified as:
Available-for-sale securities
22

AIFUL CORPORATION Annual Report 2013

Cost

Unrealized
Gains

Unrealized
LossesFair Value$ 4,543$ 2,489$ 128$ 6,904

Notes to Consolidated Financial Statements

Proceeds from sales of available-for-sale securities for the years ended March 31, 2013 and 2012, were ¥84 million ($894 thousand)and ¥3,755 million, respectively. Gross realized gains on these sales, computed on the moving-average cost basis, were ¥38 million ($404
thousand) and ¥56 million for the years ended March 31, 2013 and 2012, respectively, and gross realized losses were ¥1,457 million forthe year ended March 31, 2012. There was no gross realized loss for the year ended March 31, 2013.
The impairment losses on available-for-sale securities for the years ended March 31, 2013 and 2012, were ¥31 million ($330 thousand)and ¥339 million, respectively.

7 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 businessrestructuring, each outlet and department which each company has decided toclose is the minimum unit.

Right of telephone

Each right of telephone which each company has decided to sell is the minimum
unit.

Year ended March 31, 2013
The Group reviewed its long-lived assets for impairment for the year ended March 31, 2013. As a result, the Group recognized an
impairment loss for right of telephone which the Group decided to sell. The carrying amount of the relevant assets was written down tothe estimated recoverable amount. The estimated recoverable amount of each asset grouping was measured at the expected amount of
sale.
Impairment Loss

Description
The assets of
expected saleClassification
Other assets(Right of telephone)

Location

Millions of Yen

Thousands of
U.S. Dollars

¥ 52

$ 553

Kyoto Prefecture

The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended March 31,
2013:
Millions of Yen

Thousands of
U.S. Dollars

¥ 52

$ 553

Other assets
Year ended March 31, 2012

The Group reviewed its long-lived assets for impairment for the year ended March 31, 2012. As a result, the Group recognized an
impairment loss for outlets and the department (called, “Contact Center”) and other which the Group decided to close. The carrying
amount of the relevant assets was written down to the estimated recoverable amount. The estimated recoverable amount of each asset
grouping was measured at its value in use, which is the equivalent to the depreciation expense up to the point of disposal.

Impairment Loss

Description
Outlets and other
The department and other

Classification

Location

Millions of Yen

Buildings and structures, and furniture andfixtures

Miyagi prefecture and
other

¥5

Buildings and structures and machinery andequipment, and furniture and fixtures

Tokyo metropolitan area
and other317

The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended March 31,
2012:

AIFUL CORPORATION Annual Report 201323

Notes to Consolidated Financial Statements

Millions of Yen

Buildings and structures¥ 312

Machinery and equipment

1

Furniture and fixtures

9

Total

¥ 322

8 SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2013 and 2012, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Borrowings principally from certain credit card company,
1.35% to 2.95% (1.55% at March 31, 2012)

2013

2012

2013

¥ 40,900¥ 35,000$ 435,106

Long-term debt at March 31, 2013 and 2012, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Loans from banks, 1.90% to 3.275%*
Loans from other financial institutions, 1.90% to 2.92%*

2013

2012

2013

¥ 155,926¥ 183,108$1,658,787

24,92839,739265,192

Unsecured 1.22% to 1.63% yen straight bonds, due 2012

17,000Unsecured 1.74% yen straight bonds, due 2013

8,700

9,300

92,553

Unsecured 1.99% yen straight bonds, due 2015

10,00010,000106,383

Unsecured 3.50% medium-term notes, due 2015

15,00015,000159,574

Other debt (principally from securities companies),
1.90% to 2.675%*

52,896

51,298562,724

397

124

4,223

¥ 267,847¥ 325,569$2,849,436

Obligations under finance leases
Total
Less current portionLong-term debt, less current portion(52,772)(61,812)(561,404)¥ 215,075¥ 263,757$2,288,032* The Company and its 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, 2013 and 2012, long-term debts subject to the financial assistance of ¥120,280 million ($1,279,574 thousand) and ¥141,312 million were
included in “Loans from banks”, ¥24,928 million ($265,192 thousand) and ¥39,739 million were included in “Loans from other financial institutions”, and¥52,896 million ($562,724 thousand) and ¥51,298 million were included in “Other debt” in the table above.
The final due date for “Loans from banks” other than those subject to financial assistance is 2015 (2015 at March 31, 2012).

24

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

Annual maturities of long-term debt, excluding finance leases (see Note 14) at March 31, 2013, were as follows:
Millions of Yen

Thousands of
U.S. Dollars

2014¥ 52,412$ 557,574

2015

26,406

280,9152016

26,891

286,075

Total¥ 105,709$ 1,124,564

Year Ending March 31

Long-term debt whose repayment schedule is determined is included in the table above.
Long-term debt of ¥161,741 million ($1,720,649 thousand) whose repayment schedule is undetermined, such as obligations remaining
after June 10, 2014, is not included in the table above.
At March 31, 2013, 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¥ 229,911$2,445,862

79,694

847,809

139

1,479

Land

8,523

90,670

Buildings and structures

5,103

54,287

Machinery and equipment

49

521

¥ 323,419$3,440,628

Short-term borrowings¥ 35,000$372,340

Long-term debt (including current portion of long-term debt)

198,104

2,107,490¥ 233,104$2,479,830

Loans
Installment accounts receivable
Other current assets

Total
Related liabilities:

Total

If requested by lending financial institutions, the Group has committed to pledge loans of ¥52,345 million ($556,862 thousand) as
collateral for ¥40,547 million ($431,351 thousand) debt of short-term borrowings and long-term debt as of March 31, 2013, in addition to
those shown in the above table.

AIFUL CORPORATION Annual Report 201325

Notes to Consolidated Financial Statements

9 RETIREMENT AND PENSION PLANS
The Company and its 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, 2013 and 2012, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2013

2012

2013

Payments for prepaid retirement benefits plan

¥ 223

¥ 259

$ 2,372

Premiums for defined contribution pension plan

292

357

3,106

3

1

33

¥ 518

¥ 617

$ 5,511

Other
Net periodic benefit costs

10 EQUITY
Japanese companies are subject to the Companies Act of(b) Increases/Decreases and Transfer of Common Stock,

Japan (the “Companies Act”). The significant provisions in the

Reserve and Surplus

Companies Act that affect financial and accounting matters are

The Companies Act requires that an amount equal to 10% ofsummarized below:

dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (a(a) Dividends

component of capital surplus) depending on the equity accountUnder the Companies Act, companies can pay dividends at any

charged upon the payment of such dividends until the aggregate

time during the fiscal year in addition to the year-end dividend

amount of legal reserve and additional paid-in capital equals

upon resolution at the shareholders meeting. For companies that

25% of the common stock. Under the Companies Act, the total

meet certain criteria such as; (1) having the Board of Directors, (2)amount of additional paid-in capital and legal reserve may behaving independent auditors, (3) having an Audit & Supervisory

reversed without limitation. The Companies Act also provides

Board, and (4) the term of service of the directors is prescribedthat common stock, legal reserve, additional paid-in capital, otheras one year rather than two years of normal term by its articles

capital surplus and retained earnings can be transferred amongof incorporation, the Board of Directors may declare dividends

the accounts under certain conditions upon resolution of the(except for dividends in kind) at any time during the fiscal year

shareholders.

if the company has prescribed so in its articles of incorporation.
The Company meets all the above criteria.
The Companies Act permits companies to distribute26(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase

dividends-in-kind (noncash assets) to shareholders subject to atreasury stock and dispose of such treasury stock by resolution ofcertain limitation and additional requirements.

the Board of Directors. The amount of treasury stock purchased

Semiannual interim dividends may also be paid once acannot exceed the amount available for distribution to theyear upon resolution by the Board of Directors if the articles

shareholders which is determined by specific formula. Underof incorporation of the company so stipulate. The Companies

the Companies Act, stock acquisition rights are presented as a

Act provides certain limitations on the amounts available forseparate component of equity. The Companies Act also provides

dividends or the purchase of treasury stock. The limitationthat companies can purchase both treasury stock acquisition rights

is defined as the amount available for distribution to theand treasury stock. Such treasury stock acquisition rights areshareholders, but the amount of net assets after dividends must

presented as a separate component of equity or deducted directly

be maintained at no less than ¥3 million.

from stock acquisition rights.

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

11 STOCK OPTION
The stock options outstanding as of March 31, 2013 and 2012, are as follows:

Stock Option
2010
Stock Option

Persons Granted
2,206 Company's andSubsidiaries' key employees

Number of
Options Granted

Date of Grant

Exercise Price

Exercise Period

2,192,650 shares

July 1, 2010

¥128($1.36)

From August 1, 2014
to July 31, 2016

The stock option activity is as follows:2010 Stock Option(shares)

For the year ended March 31, 2012

Non-vested
April 1, 2011 - Outstanding
GrantedCanceled
VestedMarch 31, 2012 - Outstanding
VestedApril 1, 2011 - Outstanding
VestedExercised
Canceled
March 31, 2012 - Outstanding

2,192,650

2,192,650

2010 Stock Option(shares)

For the year ended March 31, 2013

Non-vested
March 31, 2012 - Outstanding
GrantedCanceled
VestedMarch 31, 2013 - Outstanding
VestedMarch 31, 2012 - Outstanding
VestedExercised
Canceled
March 31, 2013 - Outstanding
Exercise price
Fair value price at grant date

2,192,650

2,192,650¥ 128($ 1.36)¥ 61($ 0.65)

The assumptions used to measure fair value of 2010 Stock Option
Estimate method:Black-Scholes option pricing model

Volatility of stock price:

77.936%

Estimated remaining outstanding period:

5.08 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.3577%

AIFUL CORPORATION Annual Report 201327

Notes to Consolidated Financial Statements

12 PROVISION FOR BUSINESS RESTRUCTURING
The following table summarizes the components of the Group’s provision for business restructuring for the year ended March 31, 2012:
Millions of Yen

Provision for business restructuring:
Voluntary retirement cost and other¥ 2,065

13 INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted innormal effective statutory tax rates of approximately 36% and 41% for the years ended March 31, 2013 and 2012, respectively.
The tax effects of significant temporary differences and tax loss carry forward which resulted in deferred tax assets and liabilities at
March 31, 2013 and 2012, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2013

2012

2013

¥ 24,410¥ 39,580¥ 259,681

Allowance for losses on interest refunds

32,54742,664346,245

Charge-offs for doubtful accounts

8,798

11,56593,596

Accrued interest on loans

2,459

3,257

26,159Tax loss carry forwards

182,348

166,422

1,939,872

Interest refunds payable

326

3,650

3,468

Other

7,360

11,72278,298

Total

258,248

228,860

2,747,319

Less valuation allowance(258,248)(278,860)(2,747,319)

Total deferred tax assets

¥ Nil

¥ Nil

¥ Nil

Unrealized gain on available-for-sale securities¥ (9)¥ (12)$ (96)

Costs of removal related to asset retirement obligations

(140)

(112)

(1,489)¥ (149)¥ (124)$ (1,585)¥ (149)¥ (124)$ (1,585)

Deferred tax assets:
Allowance for doubtful accounts

Deferred tax liabilities:

Total deferred tax liabilities
Net deferred tax liabilities

A valuation allowance is established to reduce certain deferred tax assets with respect to deductible temporary differences and net
operating loss carry forwards where it is more likely than not that they will not be realized.

28

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statement of income for the years ended March 31, 2013 and 2012, is as follows:

2013

2012

36%

Normal effective statutory tax rate

41%

Expenses not deductible for income tax purposes

13

Income not taxable for income tax purposes(2)Less valuation allowance

(33)

(258)

Effect of tax rate reduction

Nil

210

Others, net

(1)

(3)

Actual effective tax rate2%

1%

On December 2, 2011, new tax reform laws were enacted in Japan, which changed the Group’s normal effective statutory tax rate of
the fiscal 2013 as noted in the table above.
At March 31, 2013, the Company and its wholly-owned domestic subsidiaries had tax loss carry forwards aggregating approximately¥509,157 million ($5,416,564 thousand) which were available for offset against taxable income of the Company and such subsidiaries infuture years. These tax loss carry forwards, if not utilized, will expire as follows.
Millions of Yen

Thousands of
U.S. Dollars

2014¥ 39,866$424,1062015

59,408632,000

2016

155,254

1,651,638

2017

113,429

1,206,691

2018

95,7981,019,128

2019 and thereafter

45,402

483,001¥ 509,157$5,416,564

Year Ending March 31

Total

14 LEASES
The Group leases furniture and fixtures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2013 and 2012, were ¥2,448 million($26,043 thousand) and ¥3,122 million, respectively.
Obligations under finance leases at March 31, 2013 were as follows:
Millions of Yen

Thousands of
U.S. Dollars

Due within one year

¥ 360

$ 3,830

Due after one year

37

393

¥ 397

$ 4,223

Total

AIFUL CORPORATION Annual Report 201329

Notes to Consolidated Financial Statements

15 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instrumentsof issuers of securities by checking credit information and market

The main business of the Group is finance. The Group is engaged

prices periodically.

in the provision of unsecured loans for individual consumers,

Because the counterparties to derivatives are limited tosecured loans, small business loans, shopping loans, credit

major financial institutions, the Group does not anticipate any

guarantee, debt collection and so on. To run these businesses,

losses arising from credit risk. The Group manages such credit

the Group raises funds domestically and internationally. Indirectrisks by relevant sections evaluating, analyzing and deliberating

financing by loans from banks and direct financing by bond issue

countermeasures and reporting to the board of directors

are used. The Group enters into derivative transactions as means

accordingly.

of managing its interest rate exposures and foreign currency

See Note 16 for details regarding derivatives.

exposures on certain liabilities. Such derivative transactions areentered into to hedge interest exposures and foreign currency

Market risk management (foreign exchange risk and interest

exposures inherent within its business. The Group does not holdrate risk)

or issue derivatives for trading or speculative purposes.

The Group manages foreign exchange risk and interest rate risk
based on a “risk management manual” which was endorsed by(2) Nature and extent of risks arising from financial
instruments

the Group’s risk management committee. The risk management
committee is directly controlled by the board of directors. The

Loans and installment accounts receivable for domestic consumers

finance department reports the conditions of foreign exchange

and small businesses are the main financial assets of the Grouprisk and interest rate risk to the internal control department.

and are exposed to credit risk through default of contract by

The internal control department examines the reasonability

customers. Other financial assets such as operational investment

and adequacy of the finance department’s risk evaluation andsecurities and investment securities are mainly stock andcountermeasures, and reports to the board of directors. Also, theinvestments in limited liability investment partnerships. The Group

Group utilizes interest rate swaps in order to hedge exposure toholds these securities to develop these businesses. The securities

risks from changes in interest rates and currency swaps to manage

are exposed to the issuer’s credit risk and the risk of market priceexposure to risks from changes in foreign currency.

fluctuations.

Market risk management (stock price volatility risk)

Borrowings and debt including bonds are the main financial

Most of the operational investment securities and investment

liabilities of the Group. These liabilities are exposed to liquidity

securities the Group holds are intended to develop businessrisks, or risk that liabilities cannot be met when they fall due if the

including business alliances and capital alliances. Relevant sections

Group is unable to participate in fund-raising markets in certain

monitor the market environment and the financial situation of thecircumstances. In addition, the Group raises funds at variable

issuers, deliberate countermeasures and report to the board ofinterest rates or by bonds in foreign currency, and these are

directors accordingly. The Group does not hold trading securities,

exposed to the market risks of fluctuation in interest rates andwhich are held for the purpose of earning capital gains in the nearforeign currency exchange rates.

term.

Derivatives include interest rate swaps and currency swaps

Market risk management (derivatives)

which are applicable to hedge accounting, and interest rate swaps

The Group manages market risk of derivatives according to internaland caps which are not applicable to hedge accounting. These

guidelines. Relevant sections conduct internal checks to makederivatives are exposed to the market risks of fluctuation in interest

sure that transactions, valuations of effectiveness of hedging andrates and foreign currency exchange rates, and counterparty

management of affairs are performed in accordance with internalrisks. See Note 16 for more details about derivatives and hedging

guidelines.

activities.

Liquidity risk management regarding fund-raising
The Group manages liquidity risk by adequate financial planning of(3) Risk management for financial instruments

the Group on a timely basis, diversifying means of fund-raising andCredit risk management

adjusting the ratio of long-term and short-term debt in the light ofCredit risk is the risk of economic loss arising from amarket environment.

counterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risks according(4) Fair value of financial instruments

to internal guidelines. In relation to loans, installments accounts

Fair values of financial instruments are based on quoted prices inreceivable and credit guarantees which are the Group’s major

active markets. If a quoted price is not available, other rational

financial assets, the Group conducts credit checks for eachvaluation techniques are used. There are possibilities that fair value

contract based on data of the consumer data industry and its own

calculation results may differ when different assumptions are used.

credit standards, maintaining its system to modify credit ceilings,

Also please see Note 16 for details of fair value for derivatives.

set guarantees or collateral. The Group manages its credit risks

30

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements(a) Fair value of financial instruments
Millions of Yen

March 31, 2013
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value¥ 61,198¥ 61,1984

4

390,635(73,522)
317,113

Installment accounts receivable
Unearned income
Allowance for doubtful accounts
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
Claims in bankruptcy
Allowance for doubtful accounts

Unrealized Gain

378,171¥ 61,058

78,357

79,469

1,112

649

649

83,885(361)(5,167)

39,832(34,573)
5,259

5,259

Total

¥ 462,580¥ 524,750

Short-term borrowings¥ 40,900¥ 40,900

69,34759,355¥ 9,992¥ 110,247¥ 100,255¥ 9,992

Long-term debt

Total

¥ 62,170

Millions of Yen

March 31, 2012
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value¥ 86,696¥ 86,69655455,012(106,374)
348,638

Installment accounts receivable
Unearned income
Allowance for doubtful accounts
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
Claims in bankruptcy
Allowance for doubtful accounts

Unrealized Gain

413,320¥ 64,862

72,37374,158

1,785

247

247

78,950(374)(6,203)45,232(38,643)
6,589

6,589

Total

¥ 514,548¥ 581,015

Short-term borrowings¥ 35,000¥ 35,000

93,096

77,954¥ 15,142¥ 128,096¥ 112,954¥ 15,142

Long-term debt

Total

¥ 66,467

AIFUL CORPORATION Annual Report 201331

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars

March 31, 2013
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value$ 651,043$ 651,043

43

43

4,155,691(782,148)
3,373,543

Installment accounts receivable

4,023,096$ 649,553

833,585

845,415

11,830

6,904

6,904

892,394

Unearned income(3,840)Allowance for doubtful accounts(54,969)

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
Claims in bankruptcy
Allowance for doubtful accounts
Total
Short-term borrowings
Long-term debt

Total
Cash and cash equivalents

Unrealized Gain

423,745(367,799)
55,94655,946$ 4,921,064$ 5,582,447$ 435,106$ 435,106

737,734

631,436$ 106,298$ 1,172,840$ 1,066,543$ 106,298$661,383

measured at the quoted market price of the stock exchange.

The carrying values of cash and cash equivalents approximate fairvalue because of their short maturities.

Claims in bankruptcy
The carrying values of claims in bankruptcy less allowances forTime deposits

claims in bankruptcy approximate fair value because allowances

The carrying values of time deposits approximate fair value

for claims in bankruptcy are stated taking net realizable value of

because of their short maturities.

collateral into account.

Loans

Short-term borrowings

The fair value of loans is determined based on the present value of

The carrying values of short-term borrowings approximate fair

expected future cash flow, which consists of expected inflows ofvalue because of their short maturities.

principal and interest which is adjusted to reflect collectability andoutflows of costs of collection. The expected future cash flow is

Long-term debt

discounted at a low-risk interest rate based on maturity length.

The fair values of marketable bonds issued by the Company aremeasured at the quoted market price and those of nonmarketable

Installment accounts receivablebonds issued by the Company are determined by discounting

The carrying values of installment accounts receivables related

cash flows of principal and interest, discounted at the rate whichto the credit card business approximate fair value because mostreflects credit risk and the maturities of the bond. The carrying

transactions are single payments in the following month. The

values of long-term borrowings approximate fair value because

fair value of installment accounts receivable related to installment

the variable rate reflects the market interest rate in a short period

sales finance business is determined based on the present valueof time and also all of the borrowings are those of a consolidatedof expected future cash flow, which consists of expected inflows

subsidiary whose credit condition has not significantly changedof principal and fees which is adjusted to reflect collectability andsince the initial date of borrowing.

outflows of costs of collection. The expected future cash flow is
discounted at a low-risk interest rate based on maturity length.

Derivatives
The fair values of derivatives are measured at prices indicatedOperational investment securities, investment securities andby the correspondent financial institution because all derivatives

investments in unconsolidated subsidiaries

transactions are nonmarketable. The information regarding the

The fair value of operational investment securities, investment

fair value for derivatives is included in Note 16.

securities and investments in unconsolidated subsidiaries are

32

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements(b) Financial instruments whose fair value cannot be reliably determined
Carrying AmountMarch 31, 2013

Millions of Yen

Thousands of
U.S. Dollars¥ 1,843$ 19,606

475

5,053

198,104

2,107,490

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

Carrying AmountMarch 31, 2012

Millions of Yen

Operational investment securities, investment securities and investments inunconsolidated subsidiaries: *1¥ 2,333

Unlisted stocks

828

Investments in limited liability investment partnerships

232,349

Long-term debt *2

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 its 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
Millions of Yen

March 31, 2013
Cash and cash equivalents
Time deposits

Due in One Yearor Less

Due after One Yearthrough Five Years

Due after FiveYears

¥ 25,162¥ 61,198
4

Loans

156,616¥ 208,857

Installment accounts receivable

79,7344,151

Government bonds in operational investment securities,
investment securities and available-for-sale securities
Total

152
¥ 297,704¥ 213,008¥ 25,162

Thousands of U.S. Dollars

March 31, 2013
Cash and cash equivalents
Time deposits

Due in One Yearor Less

Due after One Yearthrough Five Years$ 651,043
43

Loans

1,666,127$ 2,221,883

Installment accounts receivable

848,234

44,160Government bonds in operational investment securities,
investment securities and available-for-sale securities
Total

Due after FiveYears

$ 267,681

1,616$ 3,167,064$ 2,266,043$ 267,681

Claims in bankruptcy of ¥39,832 million ($423,745 thousand) whose amount of redemption cannot be determined are not included in thetable above.
Please see Note 8 for annual maturities of long-term debt and Note 14 for obligations under finance leases, respectively.
AIFUL CORPORATION Annual Report 201333

Notes to Consolidated Financial Statements

16 DERIVATIVESThe Group enters into interest rate swap and cap, and currency swap contracts as a means of managing its principal and interest rate
exposures and foreign currency exposures on certain liabilities.
Such derivative transactions are entered into to hedge interest exposures and foreign currency exposures inherent within its business.
Accordingly, market and foreign exchange risks 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 to major financial institutions, the Group does not anticipate any losses arisingfrom credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies, which regulate the authorization
process and credit limit amount.
Derivative transactions to which hedge accounting is not applied
Millions of Yen
Contract AmountContract AmountDue after One Year¥ 2,500¥ Nil

Fair Value

Unrealized Loss

At March 31, 2012
Interest rate caps agreements¥ (3)The fair value of derivative transactions is measured at the quoted price obtained from the correspondent financial institution.
There were no derivative transactions to which hedge accounting is not applied at March 31, 2013.

17 COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2013 and 2012, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2013

2012

2013

Unrealized gain (loss) on available-for-sale securities:¥ 136¥ (140)$1,447

Reclassification adjustments to profit or loss

57

1,410

606

Amount before income tax effect

193

1,270

2,053

3

(5)

32

Total

¥ 196

¥ 1,265$ 2,085

Total other comprehensive income¥ 196¥ 1,265$ 2,085

Gains arising during the year

Income tax effect

18 NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2013 and 2012, is
as follows:Year ended March 31, 2013
Basic EPS – Net income available tocommon shareholders

Millions of Yen

Thousandsof Shares

Net Income

Weighted Average
Shares¥ 22,706

240,476

Effect of dilutive securities:
Stock acquisition rights
Diluted EPS – Net income for computation

Yen

Dollars
EPS¥ 94.42$ 1.00$ 1.00963¥ 22,706

241,439¥ 94.04¥ 17,392

239,917¥ 72.49

Year ended March 31, 2012
Basic EPS – Net income available tocommon shareholders

Diluted net income per share for the year ended March 31, 2012, was not disclosed because there was no dilutive securities.

34

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

19 RELATED PARTY DISCLOSURES
Transactions of the Company with a related party for the year ended March 31, 2013, were as follows:
Millions of Yen

Thousands of
U.S. Dollars

¥ 60

$ 638

Millions of Yen

Thousands of
U.S. Dollars

¥ 60

$ 638

Fine art sales
The balances due to a related party at March 31, 2013, were as follows:

Other current liabilities

A related party is “AMG Co., Ltd.” which is wholly owned by directors of the Company and their family members.

20 SUBSEQUENT EVENT
Effective March 29, 2013, the Company entered into the agreement with Sumitomo Mitsui Trust Bank to dissolve their joint venture businessof BUSINEXT CORPORATION (“BN”) by transferring all shares and borrowings of BN to its consolidated subsidiary of New Frontier Partners,
which was completed on April 3, 2013. The gain on negative goodwill of ¥2,305 million ($24,521 thousand) and the gain on purchase ofborrowings of ¥3,840 million ($40,851 thousand) will be recognized in fiscal year 2014.

21 SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20, “Guidance on
Accounting Standard for Segment Information Disclosures”, an entity is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating 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 evaluatedregularly 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 to operating segments.
1. Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s
management is being performed in order to decide how resources are allocated among the Group. Therefore, the Group consists of theGroup’s major operating companies, “AIFUL Corporation” and “LIFECARD Co., Ltd.”. AIFUL Corporation engages mainly in the loan businessand the credit guarantee business. LIFECARD Co., Ltd. engages mainly in the credit card business and the credit guarantee business.
Effective July 1, 2011, the Group changed its reportable segments from “AIFUL Corporation”, “LIFE Co., Ltd.” and “LIFECARD Co.,
Ltd.” to “AIFUL Corporation” and “LIFECARD Co., Ltd.” which was caused by the business combination among the Group. The segment
information prior to July 1, 2011 has not been restated using the new operating segments due to practical difficulties in reclassifying figures
in “LIFE Co., Ltd.” into the segments of “AIFUL Corporation” and “LIFECARD Co., Ltd.” The difficulties result from a lack of data required torestate prior periods.
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.

AIFUL CORPORATION Annual Report 201335

Notes to Consolidated Financial Statements

Millions of Yen
2013
Reportable Segment

Other *1

AIFUL

LIFECARD

Total¥ 47,402¥ 6,904¥ 54,306

Revenue from credit card business

116

12,398

Revenue from credit guarantee

3,215

1,395

Recovery of loans previously charged off

10,78922

10,811

776

5,221

5,997

62,29825,94088,238

Total

Reconciliations

Consolidated

Operating revenue:
Interest on loans

Other operating revenue
Operating revenue from external customers
Intersegment operating revenue or transfers
Total¥61,607¥ 61,607

12,514

12,514

12,514

4,610

4,610

4,610

29

10,84010,840

4,051

10,04810,048

11,381

99,61999,619387¥ (387)

11,381

100,006

(387)

12

375

387

62,31026,31588,625¥ 7,301

99,61910,6493,319

13,9681,156

15,124

7,582

22,706

Segment assets *3

466,542

185,639

652,181

63,006715,247(108,066)

607,181

Segment liabilities *4

376,131

95,434

471,565

48,956

520,521(18,348)

502,173

2,347

2,347

Segment profit (loss)*2

Other:
Provision for credit card point redemption
Reversal of allowance (provision) forinvestment losses
Provision for doubtful accounts
Provision for losses on interest refunds

(760)

2,347

(760)

38
3,343

513

2,616

3,129

15,877

1,420

17,297

(722)

762

6,472

1,705

17,297

Provision for accrued bonuses

584

4

588

28

616

Depreciation and amortization

3,621

2,387

6,008

13

6,021

Interest on advances to subsidiaries and other456

Dividends income

16

19

456

456

35

35

Amortization of negative goodwill
Interest on advances from parent company andotherGain on purchase of borrowings

71
5,948

Loss on write-down of investments in
subsidiaries

71

40
8,177
17,297

260

876
6,021

(452)

4

218

218

35

(71)

5,948

5,948

5,948

28

28

28

52

52

52

52

8,760

8,760

8,760

Loss on impairment of investment securities
Loss on impairment of long-lived assets

2,347(8,760)

Income taxes:
Current(1,393)

Deferred30

Increase in property, plant and equipment andintangible assets
*1
*2
*3
*4

36

1,648

1,611

218

196

30
449

2,097

6

414

414

30

30

2,103

2,103

“Other” items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
“Reconciliations” are elimination of intersegment transactions.
“Reconciliations” are elimination of intersegment assets.
“Reconciliations” are elimination of intersegment liabilities.

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

Millions of Yen
2012
Reportable Segment

Other *1

AIFUL

LIFE

LIFECARD

Total

Total

Reconciliations

Consolidated¥ 57,657¥ 4,436¥ 6,084¥ 68,177

Revenue from credit card business

105

2,802

8,437

Revenue from credit guarantee

3,051

507

1,240

Recovery of loans previously charged off

10,522873

511,40031

11,431

11,431

846

1,461

3,511

5,818

4,618

10,436

10,43672,181

10,07919,277

101,537

12,465

114,002

114,002

11

9

293

313

20

333

¥ (333)72,192

10,08819,570101,850

12,485

114,335(333)

114,00213,407766

2,207

16,3801,836

18,216(824)

17,392

Operating revenue:
Interest on loans

Other operating revenue
Operating revenue from externalcustomers
Intersegment operating revenue ortransfers
Total
Segment profit (loss) *2
Segment assets*3

Segment liabilities *4¥ 7,816¥ 75,993¥ 75,993

11,344

11,344

11,344

4,798

4,798

4,798

533,713

181,829715,542

63,248

778,790(113,605)

665,185453,952

94,956548,908

50,487599,395(15,854)583,541

1,393

1,393

1,393

(1)

1,392

Other:
Provision for credit card point redemption
Reversal of allowance (provision) forinvestment losses

(520)

(520)

131

(389)

543

154
32,937

Provision for doubtful accounts

23,935

2,643

2,529

29,1073,453

32,560377

Provision for accrued bonuses

592

183

5

780

51

831

1

Depreciation and amortization

3,688

805

2,409

6,882

20

6,902

612

3

615

118

11

129

Interest on advances to subsidiaries and
other

612

Dividends income

98

9

11

Interest on advances from parent
company and other
Gain on retirement of bonds

(610)

102
815

815

102
815

5
129

218

Amortization of negative goodwill

832
6,902

218

(102)
815

Gain on purchase of borrowings

2,902

2,902

2,902

2,902

Gain on negative goodwill

1,115

1,115

1,115

1,115

Loss on impairment of long-lived assets

322

322

322

322

Loss on sales of investment securities

1,453

1,453

1,453

Loss from and provision for business restructuring

2,008

91

36

2,135

21

2,156

2,156

Current

41

3

186

230

11

241

241

Deferred

(9)

(9)

(9)

2,408

2,408

1,453

Income taxes:

Increase in property, plant and equipment
and intangible assets
*1
*2
*3
*4

1,352

(9)
37

999

2,388

20

“Other” items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
“Reconciliations” are elimination of intersegment transactions.
“Reconciliations” are elimination of intersegment assets.
“Reconciliations” are elimination of intersegment liabilities

AIFUL CORPORATION Annual Report 201337

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
2013
Reportable Segment
AIFUL

LIFECARD

Total$ 504,276$ 73,446$ 577,722

Other *1

Total

Reconciliations

Consolidated

Operating revenue:
Interest on loans$ 77,672$ 655,394$ 655,394

Revenue from credit card business

1,234

131,894

133,128

133,128

133,128

Revenue from credit guarantee

34,202

14,84149,04349,04349,043

Recovery of loans previously charged off

114,777234

115,011308

115,319

115,319

8,256

55,542

63,79843,095

106,893

106,893662,745

275,957

938,702

121,075

1,059,777

1,059,777

4,117$ (4,117)

121,075

1,063,894(4,117)

Other operating revenue
Operating revenue from external customers
Intersegment operating revenue or transfers
Total

127

3,990

4,117

662,872

279,947

942,819

1,059,777

113,287

35,309148,596

12,298160,894

80,659241,553

Segment assets *3

4,963,213

1,974,883

6,938,096

670,915

7,609,011(1,149,639)

6,459,372

Segment liabilities *44,001,394

1,015,255

5,016,649

520,808

5,537,457(195,191)

5,342,266

24,96824,968Segment profit (loss)*2

Other:
Provision for credit card point redemption
Reversal of allowance (provision) forinvestment losses
Provision for doubtful accounts
Provision for losses on interest refunds(8,085)24,968(8,085)405
35,564

5,457

27,83033,287

168,904

15,107

184,011(7,680)8,10668,851

18,138184,011

Provision for accrued bonuses

6,213

42

6,255

298

6,553

Depreciation and amortization

38,521

25,394

63,915138

64,053

Interest on advances to subsidiaries and other

4,851

Dividends income

170

202

4,851

4,851

372

372

Amortization of negative goodwill
Interest on advances from parent company andother

24,968

755

755

426
86,989184,011

2,766

9,319
64,053(4,809)

42

2,319

2,319

372

(755)

Gain on retirement of bonds
Gain on purchase of borrowings

63,277

63,277

63,277

63,277

298

298

298
553

Gain on negative goodwill

298

Loss on impairment of investment securities
Loss on impairment of long-lived assets

553

553

553

Loss on write-down of investments in
subsidiaries

93,191

93,191

93,191(93,191)

Income taxes:
Current(14,819)

Deferred320

Increase in property, plant and equipment andintangible assets
*1
*2
*3
*4

38

17,532

17,138

2,319

2,085

320
4,777

22,309

64

4,404

4,404

320

320

22,373

22,373“Other” items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
“Reconciliations” are elimination of intersegment transactions.
“Reconciliations” are elimination of intersegment assets.
“Reconciliations” are elimination of intersegment liabilities.

AIFUL CORPORATION Annual Report 2013

Notes to Consolidated Financial Statements

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

2013

Operating revenue from external customers

Loan Business

Credit Card
Business

Other

Total

¥ 71,290¥ 12,929¥ 15,400¥ 99,619

Millions of Yen

2012

Operating revenue from external customers

Loan Business

Credit Card
Business

Other

Total

¥ 86,133¥ 11,737¥ 16,132¥ 144,002

Thousands of U.S. Dollars

2013

Operating revenue from external customers

Loan Business

Credit Card
Business

Other

Total

$ 758,404$ 137,543$ 163,830$ 1,059,777

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, 2013
and 2012.
(2) Property, plant and equipment
Information about geographic area is omitted, as no property, plant and equipment are located outside Japan for the years ended March
31, 2013 and 2012.
3. Information about major customers
Information about major customers is omitted, as no single external customer accounted for more than 10% of operating revenue forthe years ended March 31, 2013 and 2012.
4. Information regarding amortization of negative goodwill and unamortized amount of each reportable segment.
Millions of Yen

2013
AIFUL

LIFECARD

Elimination/
Corporate

Other *1

Total

Amortization of negative goodwill

¥ 218

¥ 218

Negative goodwill at March 31, 2013

218

218

Millions of Yen

2012
AIFUL *2
Amortization of negative goodwill
Negative goodwill at March 31, 2012

¥ 1,115LIFE

LIFECARD

Other *1

Elimination/
Corporate

Total

¥ 218

¥ 1,333

435

435

AIFUL CORPORATION Annual Report 201339

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars

2013
AIFUL

LIFECARD

Elimination/
Corporate

Total

Amortization of negative goodwill$ 2,319¥ 2,319

Negative goodwill at March 31, 2013

2,319

2,319

*1 Negative goodwill in other segment relates to New Frontier Partners.
*2 Amortization of negative goodwill in AIFUL segment relates to the merger of LIFE on July 1, 2011.

40

Other *1

AIFUL CORPORATION Annual Report 2013

AIFUL CORPORATION Annual Report 201341

Group Network(As of March 31, 2013)

AIFUL CORPORATION ANNUAL REPORTAIFUL CORPORATION
http://aiful.jp (Japanese only)
Business Classification
Unsecured loans
Secured loans
Small business loans
Credit guarantees
Investor Relations Website

http://www.ir-aiful.com/english

LIFECARD CO., LTD.
http://www.lifecard.co.jp (Japanese only)
Business Classification
Credit card shopping
Credit guarantees

Astry Loan Services Corporation
http://www.astry-s.co.jp (Japanese only)
Business Classification
Debt collection (Servicer)

42

AIFUL CORPORATION Annual Report 2013

BUSINEXT CORPORATION
http://www.businext.co.jp (Japanese only)
Business Classification
Secured loans
Small business loans

New Frontier Partners Co., Ltd.
http://www.nf-partners.co.jp (Japanese only)
Business Classification
Venture capitalInvestor Information(As of March 31, 2013)

Principal Shareholders
Corporate NameAIFUL CORPORATION

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

Date of Establishment

April 1967

Common Stock¥143,324 million

Number of Employees

Non-consolidated: 972
Consolidated: 1,437

Corporate Officers (As of June 25, 2013)
President andRepresentative Director

Yoshitaka Fukuda

Representative Director

Taichi Kawakita

Directors

Masayuki Sato
Nobuyuki Wakuta
Kazumitsu Oishi
Tsuguo Nakagawa
Toshikazu Moriwaki
Mitsuhide Fukuda

Full-time Corporate
Auditors

Masanobu Hidaka
Minoru Kobayashi

Corporate Auditor

Masanori Nagasawa (outside)

Principal Shareholders
Number of Percentage ofSharesTotal Shares(Thousands) Outstanding

AMG Co., Ltd.

47,407

19.68

Mitsuhide Fukuda

31,075

12.90

Marutaka Co., Ltd.

12,271

5.09

CHASE MANHATTAN BANK GTS CLIENTSACCOUNT ESCROW

7,344

3.05

Japan Securities Finance Co., Ltd.

4,199

1.74

Composition of Shareholders
Domestic Financial
Institutions
6.4%

Individuals
and Other
50.2%

Other
Domestic
Institutions
32.2%

Foreign Investors
11.2%

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

240,933,918 shares

Number of Shareholders

37,309

Independent Auditors

Deloitte Touche Tohmatsu LLC

Transfer Agent andRegistrar

Sumitomo Mitsui Trust Bank,
LimitedContact Address
P.R. and I.R. Section
Tokyo Office
2-31-19 Shiba, Minato-ku, Tokyo 105-0014, Japan
E-mail: spokesperson@aiful.co.jp

AIFUL CORPORATION Annual Report 201343