TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

27

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2013 and 2012

1. Basis of Presentation of Consolidated
Financial Statements
The accompanying consolidated financial statements of Tokyo
Electron Limited (hereinafter “the Company”) and its subsidiaries(hereinafter collectively referred to as “Tokyo Electron”) have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Law of Japan and its related accounting
regulations, and in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial
Reporting Standards.
The Company uses financial statements prepared by foreignsubsidiaries in accordance with International Financial ReportingStandards or U.S. generally accepted accounting principles for the
preparation of the consolidated financial statements, together withadjustment for certain items which are required to be adjusted in
the consolidation process.
The accompanying consolidated financial statements have been
restructured and translated into English from the statutory
Japanese language consolidated financial statements. Some supplementary information included in the statutory Japanese language consolidated financial statements is not presented in theaccompanying consolidated financial statements.
U.S. dollar amounts included herein are solely for the convenience of readers and are presented at the rate of ¥94.05 to$1.00, the approximate rate as of March 31, 2013. The translation
should not be construed as a representation that the Japanese
yen amounts shown could be converted into U.S. dollars at that or
any other rate.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its 58 and 30 subsidiaries for the years ended
March 31, 2013 and 2012, respectively.
All significant inter-company accounts, transactions and unrealized profits or losses have been eliminated through consolidation
procedures.
The fiscal year-end of all entities is March 31, except for 19 consolidated foreign subsidiaries. Financial statements for the fiscal
year ending December 31 are used for 14 subsidiaries. Significant
differences in inter-company transactions and accounts arisingfrom consolidating financial statements of different fiscal year-ends
have been adjusted through consolidation procedures. Financial
statements for the provisionally closed financial period ending
March 31 are used for five subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies aretranslated into Japanese yen at the year-end rates, except for

those hedged by forward exchange contracts, which are translated at the contracted rates. Resulting exchange gains and losses
are included in earnings for the year.
Revenue and expense items are translated at the rates thatapproximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries are translated into Japanese yen at the rates of exchange in effect at the balance sheet date, except for shareholders’ equity accounts, which
are translated at the historical rates. Revenue and expense
accounts of foreign subsidiaries are translated at average rates of
exchange in effect during the year. Resulting translation adjustments are presented in net assets as a component of accumulated other comprehensive income and minority interests in the
consolidated balance sheets.
(c) Cash equivalents
Tokyo Electron considers all highly-liquid instruments purchasedwith original maturities of three months or less to be cash­equivalents.
(d) Short-term investments
Short-term investments consist of short term deposits and lowrisk financial instruments with original maturities of more than threemonths.
(e) Investment securities
Tokyo Electron examines the intent of holding each security andclassifies those securities as trading securities, held-to-maturity
debt securities or other securities. Tokyo Electron has no trading
securities. Held-to-maturity debt securities are stated mainly atamortized cost. Other securities with market prices are valued atfair market value prevailing at the balance sheet date. The differences between the book and market prices of other securities, netof applicable income taxes, are presented in net assets as a component of accumulated other comprehensive income. Other securities without market value are valued at cost using theweighted-average method.
The cost of sold securities is calculated using the weightedaverage method.
(f) Inventories
Inventories other than raw materials are stated at the lower ofcost, determined by the specific identification method, or net realizable value, which is defined as selling price less estimated additional manufacturing costs and estimated direct selling expenses.
Raw materials are stated at the lower of cost, determined principally by the moving-average method, or net realizable value.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation ofbuildings, machinery and equipment of the Company and its domestic
subsidiaries is computed using the declining balance method, except
for buildings acquired subsequent to March 31, 1998 which are depreciated using the straight-line method, based on the estimated useful
lives of assets. Foreign subsidiaries mainly apply the straight-line method over the estimated useful lives of assets.

Estimated useful lives of property, plant and equipment are
as follows:   Buildings
2 to 60 years   Machinery and equipment
2 to 17 years
Changes in accounting policies with amendment of respective
law or regulation which are difficult to distinguish from changes inaccounting estimates
Effective from the year ended March 31, 2013, the Company
and its domestic subsidiaries have changed their depreciation
method for property, plant and equipment acquired on or after
April 1, 2012, in accordance with the revision of the Corporation
Tax Act. The changes had no significant impact on the consolidated financial statements.
(h) Intangible assets
Intangible assets are amortized by the straight-line method overtheir estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortized by
the straight-line method over a period not exceeding 20 years.
(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets held
for use in the business.
If the carrying value of a fixed asset is impaired, a loss is recognized based on the amount by which the carrying value exceeds
its recoverable amount, being the higher of the net selling price or
the value in use of the assets. Net selling price is determined using
the fair value less disposal costs and value in use is based on the
total amount of discounted cash flows estimated to be generated
from the continuing use of the individual assets or the asset groupand the disposal of the assets.
(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debts withrespect to ordinary receivables, and an estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers which are experiencing financial difficulties.
(l) Accrued pension and severance costs
The Company and its domestic subsidiaries provide an accrualfor defined benefit employees’ pension and severance costs
based on the projected benefit obligation and the fair value of pension assets. Prior service costs are charged to earnings on astraight-line basis, beginning from the fiscal year in which they are
incurred, over a fixed number of years (four years) within the average remaining years of service of employees when the changes
occur. Actuarial differences are charged to earnings on a straightline basis, beginning from the following fiscal year after they are
incurred, over a fixed number of years (four years) within the averageremaining years of service of employees when the differences occur.
The provision for accrued pension and severance costs for
directors and audit & supervisory board members of the Company
and its domestic subsidiaries is calculated in accordance withinternal regulations.

The Company and certain domestic subsidiaries decided to discontinue the payment of severance pay for directors and audit &supervisory board members after April 1, 2005, and at the generalshareholders’ meeting in June 2005, it was resolved that the­severance pay for directors and audit & supervisory board members until March 31, 2005 would be paid at the termination of their­service and the decision regarding the payment amount for eachdirector and audit & supervisory board member was delegated tothe board of directors and audit & supervisory board members. As
discussed in note 11, the accruals for severance costs for directors and audit & supervisory board members are included in accrued
pension and severance costs in the consolidated balance sheets.
(m) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty, andTokyo Electron accrues such estimated costs when product revenue is recognized. To prepare for future repairs during warranty
periods, estimated after-sale repair expenses over warranty periods are accrued based on the historical ratio of actual repair
expenses to corresponding sales.
(n) Leases
Until the year ended March 31, 2008, non-cancelable leases of
the Company and its domestic subsidiaries had been primarily
accounted for as operating leases (whether such leases were classified as operating or finance leases), except for leases that transfer ownership to the lessee at the end of the lease, which had
been accounted for as finance leases.
Effective from the year ended March 31, 2009, the Company
and its domestic subsidiaries adopted “Accounting Standard forLease Transactions” and “Guidance on Accounting Standard forLease Transactions.” As a result, the Company and its domestic
subsidiaries capitalized leased assets under finance leases commencing after March 31, 2008 and such leased assets are depreciated using the straight-line method over the period of the lease
contract with zero residual value.
(o) Derivatives and hedge accounting
The Company and a domestic subsidiary make use of derivatives in order to manage certain risks arising from adverse fluctuations in foreign currency exchange rates. The amount of derivatives
is limited to the extent of foreign currency assets, liabilities andactual orders, and the Company and the domestic subsidiary do
not trade in derivatives for speculative purposes.
Derivatives are carried at fair value in the consolidated balance
sheet with changes in unrealized gain or loss charged or credited
to earnings, except for those which meet the criteria for hedge
accounting. Unrealized gains or losses on hedging derivatives, netof taxes, are reported in net assets as a component of accumulated other comprehensive income. Receivables and payables
hedged by qualified forward foreign exchange contracts are translated at the corresponding foreign exchange contract rates.
(p) Income taxes
Tokyo Electron records deferred tax assets and liabilities on temporary differences between the carrying amounts of assets and­liabilities for financial reporting purposes and the amounts used for

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

28

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

income tax purposes, which are measured using the enacted tax
rates and laws which are expected to be in effect when the differences are expected to reverse.
(q) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)/PV(Photovoltaic panel) production equipment is principally recognizedat the time of the customer confirmation of set-up and testing ofproducts. Revenue from such equipment not requiring substantial
installation is recognized at the time of shipment. Revenue fromother products, such as electronic components, is recognized at
the time of shipment. Service revenue from maintenance is recognized ratably over the term of the maintenance contract.
(r) Per share information
Net income per share and net assets per share are computed
based on the weighted-average number of shares of common
stock outstanding during each year.

Standards Board of Japan) for accounting changes and corrections of prior period errors which are made from the fiscal year
beginning on April 1, 2011. The adoption of this standard had no
significant impact on the consolidated financial statements.

Dividends per share has been presented on an accruals basis
and include, in each fiscal year ended March 31, dividends
approved or to be approved after March 31 but applicable to theyear then ended.
(s) Research and development expenses
Research and development expenses are charged to earnings
as incurred and amounted to ¥73,249 million ($778,830 thousand)and ¥81,506 million for the years ended March 31, 2013 and2012, respectively.
(t) Reclassifications

unrecognized past service, to change the calculation formula for
projected benefit obligations and current service cost, and toenhance disclosures.
These standards are effective from the year ending March 31,
2014, except for amendments relating to determination of retirement benefit obligations and current service costs, which are
effective from the year ending March 31, 2015.

Certain reclassifications have been made to the prior year’s consolidated financial statements to conform with the presentation
used for the year ended March 31, 2013.

3. Change in Accounting Policies and Adoptionof New Accounting Standards(a) Accounting standards for earnings per share
Effective from April 1, 2011, the Company adopted “AccountingStandard for Earnings Per Share” (Statement No. 2 issued as of June30, 2010 by the Accounting Standards Board of Japan) and“Guidance on Accounting Standards for Earnings Per Share”(Guidance No. 4 issued as of June 30, 2010 by the AccountingStandards Board of Japan). Based on these new standards, theCompany has changed its method of calculating diluted net income
per share. Under the new method, for share option rights which vest
after a specified period of service, the fair value amount of the shareoptions for service expected to be provided in the future is included in
the proceeds assumed to be received when options are exercised.
(b) Accounting standard for accounting changes anderror corrections
Effective from April 1, 2011, the Company and its domestic subsidiaries adopted “Accounting Standard for Accounting Changes
and Error Corrections” (Statement No. 24 issued by the
Accounting Standards Board of Japan) and “Guidance on
Accounting Standard for Accounting Changes and Error
Corrections” (Guidance No. 24, issued by the Accounting

6. Securities

7. Inventories

Other securities as of March 31, 2013 and 2012 are as follows:
2013:

4. Accounting Standards issued
but not yet adopted

Cost

Finished products

Securities with market prices  Equity securities

The Company and its domestic subsidiaries are currently in theprocess of determining the effects of these revised standards onthe consolidated financial statements.

5. Supplemental Information on
the Consolidated Statements of Cash Flows
Information of assets and liabilities of newly consolidated subsidiaries by acquisition of shares as of the beginning of consolidation,and the relationship between acquisition cost of shares and net
payment for the acquisitions for the year ended March 31, 2013 is
as follows:
Millions of yen

Current assets

Thousands of
U.S. dollars

2013

2013

¥21,811$231,909  Unlisted stock

793

897
1,141

Total

¥12,152¥18,669

2012:

Cost

Millions of yen

Securities with market prices  Equity securities

Carrying value$108,644$176,831

8,432

9,538

Securities without market prices  Unlisted stock  OtherTotal

12,132

12,132$129,208$198,501

Held-to-maturity securities classified as current assets are¥190,498 million ($2,025,497 thousand) and ¥211,790 million asof March 31, 2013 and 2012, respectively.
Reconciliation of held-to-maturity securities as of March 31, 2013
and 2012 to the amounts of short-term investments in the consolidated balance sheets are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥190,498¥211,790$2,025,497

Deposits and low-risk financial instruments with original
maturities of three months
or less

(45,498)(132,790)(483,764)

Deposits with original maturities
of more than three months

9,816

9,849

104,370¥154,816¥ 88,849$1,646,103

Noncurrent liabilities(30,544)(324,764)

Acquisition cost of shares

41,102437,023(348)(3,700)$585,635

Cost

Securities with market prices  Equity securities

(179,266)¥55,079910¥16,082

Noncurrent(16,860)

Net payment for acquisition of investments
in newly consolidated subsidiaries

910¥10,607

Thousands of U.S. dollars

2013:

Current liabilities

253,875

473

Total

Held-to-maturity (current)

(101,563)

485  Other

335,832(9,552)¥14,699  Unlisted stock

373,31223,877¥ 9,212Securities without market prices

31,585Loans as of the date of business combination

Carrying value

Noncurrent

35,110Cash and cash equivalents ofacquired companies¥16,631

1,141  OtherNoncurrent assets

Payment in prior year

¥10,218

Securities without market prices

Goodwill

Short-term investments

Millions of yen

Carrying value

Noncurrent“Accounting Standard for Retirement Benefits (Statement No.
26 issued as of May 17, 2012 by the Accounting Standards Boardof Japan)”“Guidance on Accounting Standard for Retirement Benefits(Guidance No. 25 issued as of May 17, 2012 by the AccountingStandards Board of Japan)”
These accounting standards have been revised to mainly
change the treatment of unrecognized actuarial differences andInventories as of March 31, 2013 and 2012 are as follows:

Millions of yen

Net loss on devaluation of investment securities was ¥44 million($468 thousand) and ¥817 million for the years ended March 31,
2013 and 2012, respectively.
Net gain on sale of investment securities was nil and ¥38 million
for the years ended March 31, 2013 and 2012, respectively.

Work in process, raw materials
and supplies
Total

Thousands of
U.S. dollars

2013

2012

2013

¥ 87,398¥101,790$  929,272

48,30047,680513,556¥135,698¥149,470$1,442,828

The amounts of change in inventory provision included in cost of
sales in the consolidated statements of income for the years
ended March 31, 2013 and 2012 were an increase of ¥1,162 million ($12,355 thousand) and ¥1,115 million, respectively.

8. Impairment of Property, Plant and Equipment
and Intangible Assets
For assessing fixed asset impairment, the Company generallygroups fixed assets used for normal operations at a business unit
level for which profits are reasonably controllable. Also, theCompany assesses the recoverability of individual assets not usedin normal operations or that are idle.
No significant impairment losses of property, plant and equipment
and intangible assets were recognized for the years ended March
31, 2013 and 2012.

9. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral asof March 31, 2013 and 2012.

10. Short-term Borrowings
Short-term borrowings classified as current liabilities are ¥3,756
million ($39,936 thousand) and ¥4,403 million as of March 31,
2013 and 2012, respectively. These borrowings are from banks
and bore interest at an average annual rate of 0.50% and 0.40% as
of March 31, 2013 and 2012, respectively.
As of March 31, 2013, Tokyo Electron has unused lines of credit
amounting to ¥151,885 million ($1,614,939 thousand).

11. Accrued Pension and Severance Costs
The Company and its domestic subsidiaries have defined benefit
plans (cash balance plan and noncontributory retirement and severance benefit plans) covering substantially all their employees whomeet eligibility requirements. The benefits under the plans are
based on length of service and certain other factors.
The cash balance plan provides for pension or lump-sum payment benefits to employees who retire or terminate their employment for reasons other than dismissal for cause. Under the cash

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

29

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Consolidated Statements of Cash Flows

Corporate Citizenship

Consolidated Statements of Income

Intellectual Property

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

balance plan, each participant has an account which is credited
yearly based on the current rate of pay and market-related interest
rate. The noncontributory plans provide for lump-sum payment
benefits to employees who retire or terminate their employment forreasons other than dismissal for cause. Certain foreign subsidiaries
have noncontributory retirement and severance benefit plans thatprovide for pension or lump-sum payment benefits to employees
who retire or terminate their employment for reasons other thandismissal for cause.
The funded status of the defined benefit plans, a substantial
portion of which consists of domestic benefit plans, as of March
31, 2013 and 2012 is as follows:
Thousands of
U.S. dollars

Millions of yen

2013

Benefit obligation

¥(106,972)

2012

2013

¥(94,369) $(1,137,395)

Fair value of plan assets

52,15245,139554,514

Funded status

(54,820)(49,230)(582,881)

1,150(1,809)12,227(53,670)(51,039)(570,654)

Unrecognized actuarial difference
Net amount recognized
Amounts recognized in the consolidated balance
sheets consist of: Prepaid pension andseverance costs (Note 1)
 Accrued pension andseverance costs (Note 2)
Net amount recognized

2,974(56,644)¥ (53,670)

3,607

31,621(54,646)(602,275)¥(51,039) $  (570,654)

Notes: 1. The prepaid pension and severance costs as of March 31, 2013 and 2012 isincluded in other assets in the consolidated balance sheets.
2. The provision for accrued pension and severance costs for directors and audit& supervisory board members (¥581 million ($6,178 thousand) as of March 31,
2013 and ¥620 million as of March 31, 2012) is not included.

Net periodic pension cost of the plans is as follows:

2013

2012

2013

Service cost¥5,513¥5,597$58,618

Interest cost

1,864

1,768

19,819

Expected return on plan assets

(887)

(814)

(9,431)

Amortization of actuarial
difference

(501)

401

(5,327)

Amortization of prior service cost

—

25

—

¥5,989¥6,977$63,679

Significant assumptions of domestic pension plans used todetermine the above amounts are as follows:
2013

Allocation method of benefit obligation
Discount rate

Significant components of the deferred tax assets and liabilitiesof Tokyo Electron as of March 31, 2013 and 2012 are as follows:

2012

Straight-line Straight-line
methodmethod
1.40%

2.00%

Expected rate of return on plan assets

2.00%

2.00%

Amortization period of actuarial difference

4 years

4 years

Amortization period of prior service cost

4 years

4 years

Thousands of
U.S. dollars

Millions of yen

Deferred tax assets
Accrued pension andseverance costs
Net operating loss
carryforwards
Tax credit for research anddevelopment
Devaluation of inventories
Elimination of unrealized profit
in inventories
Accrued employees’ bonuses
Accrued warranty expenses
Other
Total gross deferred tax assets
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities
Intangible assets identified
through business combination
Undistributed earnings offoreign subsidiaries
Net unrealized gains on
investment securities
Reserves under Special
Taxation Measures Law
Prepaid pension andseverance costs
Other
Total deferred tax liabilities
Net deferred tax assets

2013

2012

2013

¥20,326¥19,538$216,119

15,864

1,609

168,676

6,811
4,666

12,564
4,749

72,41949,612

2,967
2,202
1,875
8,593
63,304(13,352)
49,952

9,161
2,954
2,971
8,029
61,575(15,134)
46,441

31,547
23,413
19,93691,367673,089(141,967)
531,122(6,110)—(64,966)(4,789)(3,760)(50,920)(2,341)(1,981)(24,891)(1,058)(1,084)(11,249)(1,051)(547)(15,896)¥34,056(1,200)(748)(8,773)¥37,668(11,175)(5,816)(169,017)$(362,105)

Net deferred tax assets are included in the consolidated balance
sheets as of March 31, 2013 and 2012 as follows:

Thousands of
U.S. dollars

Millions of yen

Net pension cost

12. Income Taxes

Millions of yen

Current assetsInvestments and other assets
Other current liabilities
Other liabilities

Thousands of
U.S. dollars

2013

2012

2013

¥15,669
23,206(2)(4,817)¥23,546
17,585(1)(3,462)$166,603
246,741(21)(51,218)

The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the period inwhich temporary differences become deductible. For assessmentof the realizability of deferred tax assets, management considers
the scheduled reversal of deferred tax liabilities, future estimatedtaxable income, tax planning strategies and level of net operating
loss carryforwards, if any, in accordance with accounting principles
generally accepted in Japan.
Based on the level of historical taxable income and future estimated taxable income over the periods which the temporary differences are deductible, management believes Tokyo Electron willrealize the benefits of these deferred tax assets, net of valuation
allowance, as of March 31, 2013 and 2012.
The Company and its wholly-owned domestic subsidiaries apply
a consolidated tax filing system for corporate tax purposes.

The Company is subject to corporate tax, inhabitants’ tax and adeductible enterprise tax, which in the aggregate resulted in a statutory income tax rate of approximately 38.01% and 40.69% for
the years ended March 31, 2013 and 2012, respectively. On
December 2, 2011, amendments to the Japanese tax regulations
were enacted into law. As a result of these amendments, the statutory income tax rate for the Company has been reduced to
38.01% for years beginning on or after April 1, 2012 and 35.64%
for years beginning on or after April 1, 2015. Based on the amendments, the statutory income tax rates utilized for the measurementof deferred tax assets and liabilities expected to be settled or realized from April 1, 2013 to March 31, 2015 and on or after April 1,2015 are 38.01% and 35.64%, respectively, as of March 31, 2013.

The Company believes that it will be able to eliminate the double
taxation by agreement achieved through consultations, and accordingly, has reported the total tax expense of ¥2,195 million ($23,339
thousand) for the fiscal year ended March 31, 2013, as the difference in amounts resulting from the different corporate tax rates
between Japan, the United States of America and South Korea
and the additional amount in conjunction with the imposition of
additional taxes.

Significant components of the difference between the statutory
and effective tax rates for the years ended March 31, 2013 and2012 are as follows:

Under Japanese laws and regulations, the entire amount paid for
new shares is required to be designated as common stock. However,a company may, by a resolution of the board of directors, designate an
amount not exceeding one half of the price of the new shares as additional paid-in capital which is included in capital surplus.

Statutory tax rate in JapanAdjustments:
Effect of elimination of unrealized profit
in inventories
Prior years income taxes from transfer
pricing adjustment
Difference in statutory tax rates
of subsidiaries
Change in deferred tax liabilities for undistributed earnings of foreign subsidiaries
Tax credit for research anddevelopment
Change in valuation allowance
Amortization of goodwill
Expenses not deductible for tax purposes
Effect of enacted changes in Japanese
tax rates on net deferred tax assets
Others, net
Effective tax rate

2013

2012

38.01%

40.69%

16.70(0.16)

12.35—(7.12)(4.04)

5.63

0.87(3.65)(2.44)
2.14
1.14(5.20)
0.38
­—
0.82

—
1.45
64.21%

5.92(0.63)
38.65%The Company received a notice of correction pursuant to transfer pricing taxation from the Tokyo Regional Taxation Bureau on
July 4, 2012 based on the determination that income arising fromtransactions with the Company’s consolidated subsidiaries in the
United States of America and South Korea during the six years
beginning from the year ended March 31, 2006 to the year ended
March 31, 2011 was insufficiently allocated to the Company.
The Company filed its objections with the tax authorities, and toeliminate double taxation, filed a request for inter-governmental
consultations (Mutual Agreement Procedures) to be performed
pursuant to the tax treaties ratified by Japan, the United States ofAmerica and South Korea on March 29, 2013. The Company also
filed for Advance Pricing Agreement (APA) with the tax authorities
for future fiscal periods.

13. Net Assets
Net assets comprises four subsections, which are shareholders’equity, accumulated other comprehensive income, share subscription rights and minority interests.

In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or the excess, ifany, of 25% of common stock over the total of additional paid-in
capital and legal reserve must be set aside as additional paid-in
capital or legal reserve. Legal reserve is included in retained earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in capital used to eliminate or reduce a deficit generally require a resolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be distributed as dividends. All additional paid-in capital and legal reserve may
be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The Company adopted the restriction of dividends, which
restricts the amount of dividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings toshareholders on dates other than the mid-term and year-end, by aresolution of the board of directors in accordance with Japaneselaws and regulations.
At the board of directors’ meeting held on May 15, 2013, thedistribution of cash dividends amounting to ¥4,659 million($49,537 thousand) was resolved. Such appropriations have notbeen accrued in the consolidated financial statements as of March
31, 2013 since they are recognized in the period in which they are
resolved at the board of directors’ meeting.

Corporate DataTOKYO ELECTRON ANNUAL REPORT 2013

PAGE

30

CONTENTSCONTENTS

Financial Highlights

Business Overview

Financial Review

Top Message

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

14. Other Comprehensive Income (loss)

Thousands of
U.S. dollars

2013

2012

2013

Net unrealized gains on investment securities

Weighted-average exercise price

Number ofsharesOther comprehensive income (loss) for the years ended March 31, 2013 and 2012 is as follows:
Millions of yen

2012

2013

Tokyo Electron Device Limited

Outstanding at the beginning of year

650

Yen

U.S. dollars

Number ofshares¥308,698$3,282.28

650Weighted-average
exercise priceYen¥308,698

Granted

—

—

—

—

—

Exercised

—

—

—

—

—

¥1,011¥ 302$ 10,750

Expired (forfeited)

—

—

—

—

—

—

531

—

Outstanding at the end of year

650

308,698

3,282.28

650

308,698

Sub-total, before tax

1,011

833

10,750Exercisable at the end of year

650

308,698

3,282.28

650

308,698

Tax expense

(359)

(64)

(3,817)

Sub-total, net of tax

652

769

6,933

(339)

(9)

(3,604)

Reclassification adjustments

431

(101)

4,582

Sub-total, before tax

92

(110)

978

Tax benefit

(36)

41

(383)

Sub-total, net of tax

56

(69)

595

Adjustments during the year

8,760

(925)

93,142

Reclassification adjustments

—

—

—

8,760

(925)

93,142 Unrealized gains arising during the year
Reclassification adjustments

Net deferred losses on hedging instruments Deferred losses arising during the year

Foreign currency translation adjustments

Sub-total, before taxTax (expense) or benefit
Sub-total, net of taxTotal other comprehensive income (loss)

—

—

—

8,760

(925)

93,142¥9,468¥(225)$100,670

15. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since the year
ended March 31, 1999. The options under the plans vest immediately with restriction on exercise up to two or three years after thedate of grant, and have an exercise period of eight to twenty years
from the date of grant.
Options to purchase 130,700 and 234,200 shares of theCompany were authorized and granted at an exercise price of ¥1

for the year ended March 31, 2013 and 2012, respectively. The
options under the plans with restriction on exercise up to three
years after the date of grant, and have an exercise period of twenty years from the date of grant.
Shareholders of Tokyo Electron Device Limited, a domestic listed
subsidiary, have approved annual stock option plans for directors
and selected employees since the year ended March 31, 2005.

A summary of stock options outstanding and exercisable as of March 31, 2013 and 2012 is as follows:
2012

2013

Tokyo Electron Limited
Number ofshares

Weighted-average exercise priceYen

U.S. dollars

Number ofshares

Weighted-average
exercise price
Yen

Outstanding at the beginning of year

833,300¥3,139$33.381,296,800¥5,086

Granted

130,700

1

0.01

234,200

1

Exercised

25,8001

0.01

111,100

1

Expired (forfeited)

381,300

5,894

62.67

586,600

6,786

Outstanding at the end of year

556,900

661

7.03

833,300

3,139

Exercisable at the end of year

192,000

1,914

20.35

599,100

4,365

16. Leases

17. Fair Value of Financial Instruments

As mentioned in note 2 (n), effective from the year ended March
31, 2009, the Company and its domestic subsidiaries adopted“Accounting Standard for Lease Transactions” and “Guidance on
Accounting Standard for Lease Transactions.” As permitted under
the standards, finance leases which commenced on or before
March 31, 2008 continue to be accounted for as operating leases.
Pro forma information of leased property acquired on or before
March 31, 2008 including acquisition cost, accumulated depreciation, obligation under finance leases, and depreciation expense offinance leases that do not transfer ownership of leased property to
the lessee on an “as if capitalized” basis for the years ended March
31, 2013 and 2012, is as follows:
Leased assets not recorded in the consolidated balance sheets:

Policy for Financial Instruments
Tokyo Electron limits its fund management to short-term bankdeposits and low-risk financial instruments, and obtains funds byutilizing bank-loans or liquidating trade-receivables.
Trade receivables, which consist of notes and accounts receivable, are exposed to credit risk in the event of non-performance by
the counterparties. Execution and management of credit risk,
maturity and receivable balance are conducted pursuant to theinternal management rules for credit control. Credit risk of major
customers is assessed on a regular basis.
Short-term investments consist of time deposits and low risk
financial instruments and Tokyo Electron trade with highly-rated
financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests in listedcompanies exposed to equity market risks. Conditions, including
market prices, for these investment securities are monitored on aregular basis.
Trade payables, which consist of notes and accounts payable,
mainly mature within one year. Trade payables are exposed toliquidity risks which are managed through activities such as implementing cash management plans.
See note 18 for detailed discussion on derivative financial­instruments.

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

Acquisition cost

¥286

¥286

$3,041

Accumulated depreciation

264

216

2,807

Net leased property

¥ 22

¥ 70

$  234

Future minimum lease payments:
Millions of yen

Due within one yearThousands of
U.S. dollars

2013

2012

2013

¥22

¥48

$234

Due over one year

—

22

—

Total

¥22

¥70

$234

Lease payments relating to finance leases accounted for as
operating leases amounted to ¥48 million ($510 thousand) and¥97 million, which approximated the corresponding depreciationon the respective leased property computed by the straight-line
method over the lease terms, for the years ended March 31, 2013
and 2012, respectively.
Future minimum lease payments on non-cancelable operatingleases:Millions of yen

Due within one yearThousands of
U.S. dollars

2013

2012

2013

¥1,628¥2,013$17,310Due over one year

2,834

2,905

30,133

Total

¥4,462¥4,918$47,443

Fair Value of Financial Instruments
Carrying amount and estimated fair value of financial instruments as of March 31, 2013 and 2012, are set out below. Fairvalue of financial instruments which is practically difficult to estimate are excluded (see note 6).
Millions of yen

2013:

AssetsCash and cash equivalents
Short-term investments Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥1,180 million)
Investment securities
Liabilities
Trade notes and accounts payable
Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

Carrying
value

Estimated
fair value1¥ 85,314
154,816¥ 85,314
154,811

99,321

99,321

16,631

16,631

36,261

36,261(3,325)(62)(3,325)(62)

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

31

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Millions of yen
Carrying
value

2012:

AssetsCash and cash equivalents
Short-term investments Trade notes and accounts receivable, net of allowance for
doubtful accounts (¥1,376 million)
Investment securities¥158,776¥158,776

88,84988,638148,930

148,930

14,69914,699Liabilities
Trade notes and accounts payable

46,987

46,987

Derivatives (see note 18)
Hedge accounting not applied

(400)

(400)

Hedge accounting applied

(153)

(153)

Thousands of U.S. dollars
Carrying
value

2013:

Estimated
fair value1

AssetsCash and cash equivalents$  907,113$  907,113

Short-term investments

1,646,103

1,646,050

1,056,045

1,056,045

176,831

176,831385,550

385,550(35,354)(35,354)

(659)

(659)

 Trade notes and accounts receivable, net of allowance for doubtful
accounts ($12,546 thousand)
Investment securities
Liabilities
Trade notes and accounts payable
Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

Receivables and payables derived from derivative transactions are stated on a net
basis. The figures in parentheses represent net payables.
Notes: 1. Fair value calculation of financial instruments
Cash and cash equivalents, short-term investments, trade notes and accounts
receivable and trade notes and accounts payable The carrying amounts approximate fair value because of the short maturity ofthese instruments.
Investment securities
The fair values of marketable securities are based on quoted market prices.
     See note 6 for further information by classification of investment securities.
    Derivatives      See note 18 for detailed discussion on derivative financial instruments.
2. Maturities of financial assets and securities are as follows:
Millions of yen
2013:

Within 1 year

2. Derivative financial instruments designated as hedging instruments

Thousands of U.S. dollars

Estimated
fair value1

After 1 through5 years

2013:

Within 1 year

Cash and cash equivalents$  907,113

2013: Hedge accounting

Contract
amountFair value

Contract
amountFair value

Sell U.S. dollars¥ 5,872¥(90)$ 62,435$(957)

Short-term investments

1,646,103—

Trade notes and accounts receivable

1,068,591—

18. Derivative Financial Instruments
Tokyo Electron is subject to risk from adverse fluctuations in foreign currency exchange rates in its operating and financing activities. The Company and its listed domestic subsidiary enter into
forward foreign exchange contracts in order to hedge such risks,
but do not enter into such transactions for speculative purposes.
The Company and its domestic subsidiary implement a ratio analysis of the total cumulative cash flow fluctuations to assess effectiveness of hedging for all derivative transactions, except fortransactions where the critical terms of the hedging instrument andhedged item match and the Company could conclude that changes
in fair value or cash flows are expected to completely offset.
Execution and management of all derivative transactions in chargeof finance department are conducted pursuant to the internalm­ anagement rule.
The estimated fair values of the derivative financial instruments
as of March 31, 2013 and 2012 are as follows:

Millions of yen

(32)

1,669

(447)

Sell Swiss francs

60

1

638

11

Sell EURO

22

(2)

234

(21)

6,180

33

65,710

351

769

41

8,177

436

¥13,350¥(62)$141,946$(659)

Buy U.S. dollars
Total

Millions of yen

2012: Hedge accounting

Contract
amountFair value

Sell U.S. dollars

¥6,879¥(181)

Sell Korean won

85

(7)

Sell Chinese yuan

192

1

Buy U.S. dollars

4,325

17

Buy EURO
Total

195

17¥11,676¥(153)

The contract amounts of forward foreign exchange contracts,
entered into to hedge receivables and payables denominated inforeign currencies that have been translated by the corresponding
contracted rates, are as follows:

2013:

Sell U.S. dollars

Contract
amountFair value¥50,652¥(3,021)

Unrealized gains(losses)¥(3,021)

Sell Swiss francs

25,787(50)(50)

Sell Korean won

1,068

(295)

(295)

50

(3)

(3)

Sell Singapore dollars
Buy U.S. dollars

Thousands of U.S.
dollars

2013

2012

2013

¥ 9,760¥9,854$103,775

Sell U.S. dollars

404

58

4,295

Buy U.S. dollars

74

65

787

¥10,238¥9,977$108,857

Sell Chinese yuan

4,368

44

44

Total

¥81,925¥(3,325)¥(3,325)

2012:

Contract
amountFair value

Unrealized gains(losses)

Total

Note: The fair value of these derivative financial instruments, which is based on the quoted foreign exchange rates, is included in the carrying value of hedged assets
and liabilities.

19. Other Income (Expenses)

Millions of yen

Sell U.S. dollars

¥ 9,874¥(464)¥(464)

Sell Korean won

701

23

23

5,804

41

41

¥(400)¥(400)¥—

154,816—

Total

¥16,379

Trade notes and accounts receivable

100,501—2013:

Contract
amountFair value

Unrealized gains(losses)Thousands of U.S. dollars

Sell U.S. dollars$538,564$(32,121)$(32,121)¥158,776¥—

Sell Swiss francs

274,184

(532)

(532)

Short-term investments

88,849—Sell Korean won

11,356(3,137)(3,137)

Trade notes and accounts receivable

150,306—

Sell Singapore dollars

532

(32)

(32)

46,443468

468$871,079$(35,354)$(35,354)

Within 1 year

3,083

(42)

Millions of yen¥ 85,314

Cash and cash equivalents

(3)

157

1. Derivative financial instruments not designated as hedging
instruments

Cash and cash equivalents

2012:

290

Contract amount

Short-term investments

After 1 through5 years

Sell Chinese yuan
Sell Korean won

Buy EURO

Buy U.S. dollars
Total

Note: The fair values are based on the quoted forward foreign exchange rates.

20. Business Combinations

Thousands of U.S. dollars$—

Buy U.S. dollarsMillions of yen

Millions of yen

After 1 through5 years

Loss from natural disasters of ¥936 million for the year ended
March 31, 2012, represents losses relating to the Great East
Japan Earthquake which occurred on March 11, 2011, whichmainly ­consists of repair costs for damaged facilities.
Loss on business restructuring of ¥849 million for the year ended
March 31, 2012 consists of devaluation of inventories, loss on impairment of property, plant and equipment and loss on disposal of inventories and property, plant and equipment.

Business combinations by acquisition(A) Acquisition of shares of NEXX Systems, Inc.
(1) Overview of business combination
		 (a) Name of the acquired company and business description
			 Name of the acquired company: NEXX Systems, Inc.
			 Business description: Advanced deposition equipment
for wafer level packaging, electrochemical deposition(ECD) and physical vapor deposition (PVD) systems
		 (b) Primary reasons for business combination			  Tokyo Electron aims to broaden its business portfolio
by securing the advanced packaging application of NEXX
Systems, Inc. and to strengthen the semiconductor production equipment business.
(c) Date of business combination
			 May 1, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL NEXX, Inc.
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by Tokyo
Electron U.S. Holdings, Inc., the Company’s consolidated
subsidiary(2) Period of acquired company’s financial results included in
the consolidated financial statements
		  From May 1, 2012 to March 31, 2013
(3) Acquisition cost of the acquired company
Millions of yen

Thousands of
U.S. dollars

Compensation paid for acquisition¥15,961$169,708

Acquisition cost

¥15,961$169,708(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized			 ¥8,379 million ($89,091 thousand)		 (b) Basis for recognition of goodwill
  Goodwill was recognized based on future increase in profitability expected from the future business development.
(c) Amortization method and period
		 Straight-line method over 10 years(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination
Millions of yen

Thousands of
U.S. dollars

Current assets¥ 2,183$ 23,211

Noncurrent assets

10,702

11,791

Total assets¥12,885$137,002

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

32

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Millions of yen

Thousands of
U.S. dollars(3) Acquisition cost of the acquired company

Current liabilities¥1,659$17,640

Millions of yen

Thousands of
U.S. dollars

Noncurrent liabilities

3,644

38,745Compensation paid for acquisition¥19,772$210,229

Total liabilities¥5,303$56,385

Acquisition cost

¥19,772$210,229(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year
Millions of yen

Thousands of
U.S. dollars

Net sales¥415$4,413Operating income (loss)(259)(2,754)

Income (loss) before income taxes andminority interests(303)(3,222)

Method of estimate calculation
The estimated impact is calculated as the difference between
the net sales and income of the acquired company assuming thatthe business combination had been completed at the beginning of
the fiscal year and the actual net sales and income recorded in the
Company’s consolidated statement of income. This estimate
includes the equivalent of goodwill and other intangible assets
amortization from the beginning of the fiscal year until the date ofbusiness combination.
The estimated impact has not been audited.
(B) Acquisition of shares of FSI International, Inc.
(1) Overview of business combination
		 (a) Name of the acquired company and business description
			 Name of the acquired company: FSI International, Inc.
Business description: Development and manufacture ofsemiconductor production equipment (surface preparation equipment)		 (b) Primary reasons for business combination			  Tokyo Electron aims to expand its business portfolioand strengthen the business for the surface preparationequipment by including product lineup of FSI, Inc.
(c) Date of business combination
			 October 11, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL FSI, Inc.
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by Tokyo
Electron U.S. Holdings, Inc., the Company’s consolidated
subsidiary(2) Period of acquired company’s financial results included in
the consolidated financial statements
		  From October 11, 2012 to March 31, 2013(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized			 ¥3,856 million ($40,999 thousand)			  Amount of goodwill is calculated on a provisional basis as
the allocation of acquisition cost is yet to be completed.
		 (b) Basis for recognition of goodwill
  Goodwill was recognized for the difference between
the acquisition cost and the assets acquired and liabilities
assumed.
(c) Amortization method and period  Goodwill is amortized by the straight-line method overthe estimated period expected to yield benefits.
(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination
Millions of yen

Thousands of
U.S. dollars

Current assets¥ 8,446$ 89,803

Noncurrent assets

12,461

132,494

Total assets¥20,907$222,297

Millions of yen

Thousands of
U.S. dollars$26,125

Current liabilities¥2,457

Noncurrent liabilities

2,534

26,943

Total liabilities¥4,991$53,068(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year(C) Acquisition of shares of Magnetic Solutions Ltd.
(1) Overview of business combination
		 (a) Name of the acquired company and business description
			 Name of the acquired company: Magnetic Solutions Ltd.
Business description: Development and manufacture ofmagnetic field annealing systems
		 (b) Primary reasons for business combination
  Tokyo Electron acquired the magnetic field annealing
technologies of Magnetic Solutions Ltd. to accelerate thedevelopment of the thermal processing systems for processes used in the manufacturing of magneto-resistive
random-access memory (MRAM), which is increasingly
attracting attention as a key device for the future.
Additionally, Tokyo Electron aims to strengthen its thermal
processing system business by combining the acquired
technologies with its technologies.
(c) Date of business combination
December 3, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL Magnetic Solutions Ltd.
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by Tokyo
Electron Europe Ltd., the Company’s consolidateds­ ubsidiary(2) Period of acquired company’s financial results included in
the consolidated financial statements
From December 3, 2012 to March 31, 2013
(3) Acquisition cost of the acquired company
Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Compensation paid for acquisition¥2,065$21,956¥6,697$71,207

Acquisition cost

¥2,065$21,956

Operating income

70

744

Income before income taxes andminority interests

21

223

Net sales

Method of estimate calculation
The estimated impact is calculated as the difference between
the net sales and income of the acquired company assuming thatthe business combination had been completed at the beginning of
the fiscal year and the actual net sales and income recorded in the
Company’s consolidated statement of income. This estimate
includes the equivalent of goodwill and other intangible assets
amortization from the beginning of the fiscal year until the date ofbusiness combination.
The estimated impact has not been audited.

(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized		  ¥1,089 million ($11,579 thousand)		 (b) Basis for recognition of goodwill
  Goodwill was recognized based on future increase in profitability expected from the future business development.
(c) Amortization method and period
			 Straight-line method over 10 years(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination

Current assets
Noncurrent assets
Total assets

Millions of yen

Thousands of
U.S. dollars¥  560$ 5,954

971

10,325¥1,531$16,279

Current liabilities
Noncurrent liabilities
Total liabilities

Millions of yen

Thousands of
U.S. dollars¥555$5,901——¥555$5,901(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year

Net sales

Millions of yen

Thousands of
U.S. dollars¥1,068$11,356

Operating income

93

989

Income before income taxes andminority interests

89

946

Method of estimate calculation
The estimated impact is calculated as the difference between
the net sales and income of the acquired company assuming thatthe business combination had been completed at the beginning of
the fiscal year and the actual net sales and income recorded in the
Company’s consolidated statement of income. This estimate
includes the equivalent of goodwill and other intangible assets
amortization from the beginning of the fiscal year until the date ofbusiness combination.
The estimated impact has not been audited.
(D) Acquisition of shares of Oerlikon Solar Holding AG(1) Overview of business combination
		 (a) Name of the acquired company and business description			Name of the acquired company: Oerlikon Solar
Holding AG
Business description: Development and manufacture ofthin-film silicon photovoltaic panel production equipment
		 (b) Primary reasons for business combination
  The Company acquired Oerlikon Solar Holding AG
which has a track record in thin-film silicon solar photovoltaic panel production equipment to achieve growth in
the photovoltaic panel production equipment business.
Additionally Tokyo Electron aims to strengthen the business by integrating the thin film deposition technologies
of Oerlikon Solar Holding AG with the production equipment technologies developed by Tokyo Electron.
(c) Date of business combination
			 November 26, 2012		 (d) Legal form of business combination
			 Acquisition of shares in exchange for cash		 (e) Name of acquired company after business combination
			 TEL Solar Holding AG
		 (f) Percentage of voting equity interests acquired			100%		 (g) Main basis for determination of the acquiring company
			  Acquisition of shares in exchange for cash by
the Company

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

33

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Review of Operations
and Business Outlook

Corporate GovernanceConsolidated Balance Sheets

Corporate CitizenshipIntellectual Property

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income
Independent Auditor’s Report

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(2) Period of acquired company’s financial results included in
the consolidated financial statements		  Financial results of the acquired company are not includedin the consolidated statements of income according to generally accepted accounting principles in Japan, as the financial year end of the acquired company and the deemed
acquisition date are December 31, 2012, which does notexceed three months prior to the consolidated balance
sheet date.
(3) Acquisition cost of the acquired company
Millions of yen

Compensation paid for acquisition
Expenses directly related to the acquisition
Acquisition cost

¥2,837

Thousands of
U.S. dollars$30,165

468

4,976

¥3,305$35,141(4) Amount of goodwill recognized, basis for recognizing goodwill, amortization method and period(a) Amount of goodwill recognized			 ¥21,787 million ($231,653 thousand)			  Amount of goodwill is calculated by the provisional basis
as the allocation of acquisition cost is yet to be completed.
		 (b) Basis for recognition of goodwill
  Goodwill was recognized for the difference between
the acquisition cost and the assets acquired and liabilities
assumed.
(c) Amortization method and period  Goodwill is amortized by the straight-line method overthe estimated period expected to yield benefits.
(5) Amounts of assets acquired and liabilities assumed as of thedate of the business combination

Current assets
Noncurrent assets
Total assets

Millions of yen

Thousands of
U.S. dollars¥10,622$112,940

7,451

79,224¥18,073$192,164

Millions of yen

Thousands of
U.S. dollars

Current liabilities¥12,189$129,601

Noncurrent liabilities

24,366

259,075

Total liabilities¥36,555$388,676(6) Estimated impact on the consolidated statement of income
for the fiscal year assuming that the business combination
had been completed at the beginning of the fiscal year
Millions of yen

Thousands of
U.S. dollars

Net sales¥ 6,358$ 67,602

Operating income (loss)(12,280)(130,569)

Income (loss) before income taxes andminority interests(13,208)(140,436)

Method of estimate calculation
The estimated impact is calculated based on sales and incomeof the acquired company from January 1, 2012 to December 31,
2012, including the amortization of goodwill.
The estimated impact has not been audited.

Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2013 and 2012 are as follows:

21. Segment Information

2013:

General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
financial information is available and the operating result is regularly
reviewed by management to make decisions about resources tobe allocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo
Electron identifies as a reportable segment, “Semiconductor
Production Equipment (SPE),” “Flat Panel Display and Photovoltaic
panel (FPD/PV) Production Equipment,” and “Electronic
Components and Computer Networks.”
Products of the SPE segment consist of coaters/developers,
plasma etch systems, thermal processing systems, single wafer
deposition systems, cleaning systems used in wafer processing,wafer probers used in the wafer testing process and other semiconductor production equipment. The SPE segment principallydevelops, manufactures, sells and distributes such products.
Products of the FPD/PV Production Equipment segment consistof coaters/developers, plasma etch/ash system used in the manufacture of flat panel displays, and photovoltaic panel production
equipment used in the manufacture of thin film silicon photovoltaic
panels. The FPD/PV segment principally develops, manufactures,
sells and distributes such products.
The Electronic Components and Computer Networks segmentprincipally designs, develops, procures, and distributes semiconductor products centering on integrated circuits (IC), other electronic components, computer networks and software.
Basis of measurement of reportable segment net sales, segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are
generally consistent with those applied for the preparation of theconsolidated financial statements. Intersegment sales or transfers
are determined based on current market prices. Assets in common use have not been allocated to each reportable segment,
while costs associated with those assets have been allocated toreportable segments on a systematic basis.

Millions of yen
Reportable Segment
Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other¥392,027¥20,160¥84,665

43

—

813

392,070

20,16085,478

Total

Eliminations
andCorporate

Consolidated¥   448¥497,300¥    —¥497,300

10,613

11,469(11,469)—

11,061

508,769(11,469)

497,300

Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)

48,600(6,355)

1,283

1,321

44,849(27,082)

17,767

Segment assets

223,956

49,48947,5571,550

322,552

452,976775,528

Depreciation and amortization

12,330

462

448

78

13,31813,313

26,631

Amortization of goodwill

1,038

—

103

—

1,141

—

1,141

Capital expenditures, including intangible andother assets

13,464

1,661

482

54

15,661

9,834

25,495

Consolidated¥633,091

Millions of yen
Reportable Segment

2012:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other

Total

Eliminations
andCorporate¥477,873¥69,889¥84,868¥   461¥633,091¥    —

—

—

1,432

14,565

15,997(15,997)—

477,873

69,88986,30015,026

649,088(15,997)

633,091

Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit

89,020

2,271

2,312

1,827

95,430(34,828)

60,602

Segment assets

262,789

21,29546,391

1,927

332,402451,209783,611

Depreciation and amortization

11,282

687

570

170

12,70911,48924,198

Capital expenditures, including intangible andother assets

13,518

672

407

36

14,63328,572

43,205

Eliminations
andCorporate

Consolidated

Thousands of U.S. dollars
Reportable Segment

2013:

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer
networks

Other$4,168,283$214,354$900,213$  4,763

457

—

8,644

112,845

121,946(121,946)—

4,168,740

214,354908,857

117,608

5,409,559(121,946)

5,287,613

Total

Net sales
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)

$5,287,613 $       — $5,287,613

516,746(67,571)

13,642

14,046476,863(287,953)

188,910

2,381,244

526,199505,656

16,481

3,429,580

4,816,332

8,254,912

Depreciation and amortization

131,101

4,912

4,764

829

141,606

141,552

283,158

Amortization of goodwill

11,037

—

1,095

—

12,132—

12,132

Capital expenditures, including intangible andother assets

143,158

17,661

5,125

574

166,518

104,561

271,079

Segment assets

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, facility maintenance and insurance.
2. (1) “Eliminations and Corporate” segment profit (loss) totaling ¥27,082 million ($287,953 thousand) and ¥34,828 million for the years ended March 31, 2013 and 2012, respectively, includes corporate expenses not allocated to any reportable segments. The corporate expenses mainly consist of research and development costs of ¥20.359 million($216,470 thousand) and ¥26,071 million for the years ended March 31, 2013 and 2012, respectively, pertaining to fundamental research and element research, not allocated toany of the reportable segments.
(2) “Eliminations and Corporate” segment assets totaling ¥452,976 million ($4,816,332 thousand) and ¥451,209 million as of March 31, 2013 and 2012, respectively, consist
mainly of cash and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
3. “Eliminations and Corporate” capital expenditures totaling ¥9,834 million ($104,561 thousand) for the year ended March 31, 2013 consist mainly of capital expenditures for buildings,
machinery and equipment, and ¥28,572 million for the year ended March 31, 2012 consist mainly of capital expenditures for buildings not allocated to any of the reportable segments.
4. Reported segment profit (loss) is reconciled to Income before income taxes and minority interests in the consolidated statements of income.

TOKYO ELECTRON ANNUAL REPORT 2013

PAGE

34

CONTENTSCONTENTS

Financial Highlights

Business Overview

Top Message

Financial Review

Review of Operations
and Business Outlook

Special Feature

Consolidated Eleven-Year Summary

Consolidated Statements of Changes in Net Assets

Corporate GovernanceConsolidated Balance Sheets

Corporate Citizenship

Consolidated Statements of Income

Consolidated Statements of Cash FlowsIntellectual Property

Corporate Data

Financial Section

Consolidated Statements of Comprehensive Income

Notes to Consolidated Financial Statements

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Other Information(1) Domestic and overseas net sales by destination for the years ended March 31, 2013 and 2012 are as follows:
Thousands of
U.S. dollars

Millions of yen
Net sales

2013

2012

2013

Japan

¥118,504¥171,364$1,260,011

U.S.A.

117,194

114,951

1,246,082

Taiwan107,734

86,882

1,145,497

Korea

59,376114,218

631,324

Other

94,492

145,676

1,004,699

Total

¥497,300¥633,091$5,287,613(2) Net property, plant and equipment by location as of March 31, 2013 and 2012 are as follows:
Millions of yen

Property, plant and equipment

Japan

U.S.A.

Other

Total

¥99,888¥14,549¥21,261¥135,698

Millions of yen

2012:

Japan

Other

Total

Property, plant and equipment

¥107,874¥19,011¥126,885

2013:

Japan

U.S.A.

Other

Total

$1,062,073$154,694$226,061$1,442,828

Thousands of U.S. dollars

Property, plant and equipment(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2013

Intel Corporation

Semiconductor production equipment¥73,955$786,337

Taiwan Semiconductor
Manufacturing Company Ltd.

Semiconductor production equipment

68,769731,196

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD/PV production equipment

60,374

641,935

Related reportable segment

Name of customer

Millions of yen

Related reportable segment

Name of customer

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD/PV production equipment

Intel Corporation

Semiconductor production equipment

Note: The amounts include sales to the customer and its subsidiaries.

Millions of yen

2013:

2012

¥116,919
90,399

Semiconductor
production
equipment

FPD/PV
production
equipment

Electronic
components &computer networks

Total

Amortization of goodwill¥ 1,038

¥

—

¥103

¥ 1,141

Goodwill

14,56523,397411

38,373

Semiconductor
production
equipment

FPD/PV
production
equipment

Thousands of U.S. dollars

2013:

Note: Sales are classified in countries or regions based on location of customers.

2013:

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the year ended March 31, 2013 and unamortized balances as of March
31, 2013 is as follows:

Amortization of goodwill$ 11,037

Goodwill

154,864$

Electronic
components &computer networks

Total

—

$1,095$ 12,132

248,772

4,370

408,006