YMFG Notes to Consolidated Financial Statements
Years ended March 31, 2015 and 201425

1. BASIS OF PRESENTATION

2. SIGNIFICANT ACCOUNTING POLICIESYamaguchi Financial Group, Inc. (“YMFG”) was establishedon October 2, 2006 as a holding company for The
Yamaguchi Bank, Ltd. (“Yamaguchi Bank”) and Momiji
Holdings, Inc. (“Momiji Holdings”) through a statutory
share transfer (kabushiki iten). Upon formation of YMFG
and completion of the statutory share transfer, Yamaguchi
Bank and Momiji Holdings became wholly owned
subsidiaries of YMFG.
Furthermore, in September 2011 Kitakyushu Financial
Project Co., Ltd., received a transfer of approval to handle
business split off from Yamaguchi Bank in the Kyushu
region and commenced operations on October 3, 2011.
YMFG and its consolidated subsidiaries (“the Group”)
maintain their accounts and records in accordance withthe provisions set forth in the Financial Instruments andExchange Law and its related accounting regulation andin conformity with accounting principles and practices
generally accepted in Japan (“Japanese GAAP”). Japanese
GAAP are different in certain respects as to application anddisclosure requirements of International Financial ReportingStandards.
The accompanying consolidated financial statements
are a translation of the audited consolidated financial
statements of YMFG which were prepared in accordancewith Japanese GAAP and were filed with the appropriate
Local Finance Bureau of the Ministry of Finance as requiredby the Financial Instruments and Exchange Law.
In preparing the accompanying consolidated financial
statements, certain restructuring and reclassifications havebeen made in the consolidated financial statements issued
domestically in order to present them in a form which ismore familiar to readers outside Japan.
The consolidated financial statements are stated inJapanese yen. The translations of the Japanese yenamounts into U.S. dollars are included solely for theconvenience of readers, using the prevailing exchange rate
at March 31, 2015, which was ¥120.17 to U.S.$1.00. Suchtranslations should not be construed as representations
that the Japanese yen amounts have been, could havebeen, or could in the future be, converted into U.S. dollars
at this or any other rate of exchange.

Consolidation and equity method(1) Scope of consolidation

YMFG Annual Report 2015

Japanese accounting standards on consolidated
financial statements require a company to consolidate
any subsidiaries of which the company substantiallycontrols the operations, even if it is not a majority
owned subsidiary. Control is defined as the power togovern the decision making body of an enterprise.
(i) 13 consolidated subsidiaries at March 31, 2015
and 12 at March 31, 2014.
The names of the consolidated subsidiaries arelisted on page 1.
YM Lease Co., Ltd., formerly accounted forby the equity method, was excluded from thescope of application of equity-method affiliates
and included in the scope of consolidation fromthe fiscal year ended March 31, 2015, as YMFG
acquired additional shares in YM Lease, increasing
its percentage of voting rights.
(ii) Five unconsolidated subsidiaries at March 31,
2015, and six at March 31, 2014.
Name of major subsidiary:
Yamaguchi Capital 2nd Investment Business
Limited Liability Association
The unconsolidated subsidiaries are excluded
from the scope of consolidation because their total
assets, ordinary income, net income (in proportion
to ownership), retained earnings (in proportion toownership) and accumulated other comprehensive
income are so immaterial that they do not hinder arational judgment of YMFG’s consolidated financial
position and results of operations.

(2) Application of the equity method
Japanese accounting standards also require any
unconsolidated subsidiaries and affiliates with financial
and operating policies over which YMFG is able toexercise material influence to be accounted for by theequity method.
(i) No unconsolidated subsidiaries were accounted
for by the equity method at March 31, 2015 and2014.
(ii) As at March 31, 2015, three affiliates accounted
for by the equity method and four at March
31, 2014. Affiliates accounted for by the equity
method at March 31, 2015 were as follows:YM Saison Co., Ltd.
Yamaguchi Capital Co., Ltd.
Momiji Card Co., Ltd.
YM Lease Co., Ltd., formerly accounted for by
the equity method, was included in the scopeof consolidation and excluded from the scopeof application of equity-method affiliates fromthe fiscal year ended March 31, 2015, as YMFG
acquired additional shares in YM Lease, increasing
its percentage of voting rights.
(iii) As at March 31, 2015, five unconsolidated
subsidiaries were not accounted for by the equity
method, and six at March 31, 2014.
Name of major subsidiary:
Yamaguchi Capital 2nd Investment Business
Limited Liability Association
The unconsolidated subsidiaries that are notaccounted for by the equity method are also
excluded from the scope of application of equity
method because their net income (in proportion
to ownership), retained earnings (in proportion toownership) and accumulated other comprehensive
income (in proportion to ownership) are so
immaterial that they do not hinder a rational
judgment of YMFG’s consolidated financial
position and results of operations.
(iv) There were no affiliates that were not accounted
for by the equity method as at March 31, 2015 and2014.

(3) The balance sheet dates of consolidated
subsidiaries
The balance sheet date of consolidated subsidiaries is
as follows:
March 31, 2015
13 companies
March 31, 2014
12 companies(4) Accounting Policies
Trading assets, trading liabilities andtransactions for trading purposes
The valuation method of “Trading assets” and “Trading
liabilities” is as follows:
Balances incurred by transactions of which the purpose
is to earn a profit by taking advantage of short-term
fluctuations in a market or discrepancies in different
markets of interest rates, currency exchange rates, shareprices or other indices (hereinafter referred to as “trading
purposes”) are included in “Trading assets” or “Trading
liabilities” in the consolidated balance sheets as of thedate on which the transactions have been contracted.

The income or losses on these transactions are recorded
as “Trading income” and “Trading expenses” on the
consolidated statements of income.
Trading assets and trading liabilities are valued, in thecase of securities and commercial paper, at the market
value as of the date of the balance sheet and, in the caseof derivatives, including swaps, futures and options, at theamount due if the transactions were to be settled as of thedate of the balance sheet. “Trading income” and “Trading
expenses” include interest income and interest expense,
respectively, and gains and losses, respectively, resulting
from the valuation of securities, commercial paper,
derivatives, etc., which are included in “Trading assets” or“Trading liabilities.”

Securities
With regard to the valuation of securities, held-to-maturity
debt securities are stated at amortized cost (straight-line
method) using the moving-average method. Investments
in unconsolidated subsidiaries that are not accounted forby the equity method are stated at cost determined by themoving-average method. Available-for-sale securities are in
general stated at fair value (cost of sale calculated primarily
according to the moving-average method) indicatedaccording to market price at the consolidated balance
sheet date (for equity securities, the average market priceduring the one-month period ending on the consolidatedbalance sheet date). Available-for-sale securities having noreadily available market value are valued at cost using themoving-average method.
Unrealized gains (losses) on available-for-sale securities
are reported as a component of net assets.
Securities constituting trust assets within money held in
trust are valued using the same methods as those for theabove-mentioned trading assets, liabilities and securities.

Derivatives
Derivatives other than those for specific trading purpose or
those for which certain exceptional accounting treatment isapplied are stated at fair value.

Method of hedge accounting
The subsidiaries that conduct banking business (“theBanks”) apply deferred hedge accounting in accordancewith “Treatments of Accounting and Audit on Applicationof Accounting Standard for Financial Instruments in
Banking Industry”(The Japanese Institute of Certified Public
Accountants (“JICPA”) Industry Audit Committee Report
YMFG Annual Report 201526

No.24). As for the hedge to offset market fluctuation, theBanks assess the effectiveness of the hedge by grouping thehedged items such as deposits and loans and the hedging
instruments such as interest rate swaps by their maturity.
Also, the Banks apply deferred hedge accounting tohedge foreign exchange risks associated with various
foreign currency denominated monetary assets andliabilities as stipulated in “Treatment of Accounting and
Auditing Concerning Accounting for Foreign Currency
Transactions in Banking Industry” (JICPA Industry Audit
Committee Report No. 25). The effectiveness of thecurrency swap transactions, exchange swap transactions
and similar transactions hedging the foreign exchange risks
of monetary assets and liabilities denominated in foreign
currencies is assessed based on comparison of the foreign
currency position of the hedged monetary assets andliabilities and the hedging instruments.
The Banks apply exceptional treatments permitted forinterest rate swaps to certain assets.

Allowance for loan losses

Tangible fixed assets (excluding lease assets)
Tangible fixed assets are stated at cost less accumulated
depreciation, except for certain revalued land.
Depreciation of tangible fixed assets of the Banks iscomputed by using the declining-balance method except
for buildings (excluding fixtures) acquired after March
31, 1998, which are depreciated using the straight-line
method.
The estimated useful lives of the assets are primarily as
follows:
Buildings: 7 to 50 years
Others: 3 to 15 years
Other consolidated subsidiaries depreciate their tangible
fixed assets using mainly the declining-balance method
over the useful lives of the respective assets provided by
the tax act in Japan.

Intangible fixed assets (excluding lease assets)
Amortization of intangible fixed assets is computed byusing the straight-line method. Software costs for internal
uses are amortized over the estimated useful life (5 years).

The Banks provide allowance for loan losses according to
the following write-off and provisioning standards.
For loans to borrowers who are legally bankrupt (dueto bankruptcy, composition, suspension of transactions
with banks by the rules of clearinghouses, etc.) or
substantially bankrupt, an allowance is provided in theamount of loans, net of amounts expected to be collected
through disposition of collateral or through execution ofguarantees.
For loans to borrowers in danger of bankruptcy,
an allowance is provided in the amount considered
uncollectible based on the amount of loans, net of amounts
expected to be collected through disposition of collateral or
through execution of guarantees, and other sources.
Loans to normal borrowers and borrowers requiringcaution are classified into certain groups, and an allowance
is provided for each group using the rate of loan losses
experienced for the Group during certain reference periodsin the past.
Each branch as well as the credit supervision department
evaluates all loans in accordance with the self-assessment rule.
Other consolidated subsidiaries provide an allowance foran amount calculated using the rate of collection losses in thepast for loans of normal borrowers in addition to amounts
estimated based on collectibility analysis for borrowers indanger of bankruptcy and certain other borrowers.

27

YMFG Annual Report 2015

Lease assets
Lease assets included within tangible and intangible fixed
assets related to finance lease transactions that do nottransfer ownership are depreciated over the lease termusing the straight-line method. For lease assets with aguaranteed residual value stated in their lease agreements,
the residual value is set at the guaranteed amount.
Otherwise, the residual value is assumed to be zero.

Accounting for certain lease transactions
Consolidated subsidiaries’ finance lease transactions that
do not transfer ownership belonging to accounting periods
that commenced prior to April 1, 2008, are treated as
operating lease transactions.

Income taxes
Income taxes comprise corporate, enterprise and inhabitanttaxes. The Group recognizes tax effects of temporary
differences between the financial statement basis andthe tax basis of assets and liabilities. The asset and liability
approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of
temporary differences.

Foreign currency translation

Provision for loss on interest repayment

YMFG and foreign currency assets and liabilities and theaccounts of overseas branches of consolidated subsidiaries
are translated into yen at the rates prevailing at theconsolidated balance sheet date.

Provision for loss on interest repayment is provided forpossible losses on reimbursements of excess interest
payments and loan losses related to consumer financeloans extended at interest rates in excess of the maximum
interest rate prescribed in the Interest Rate Restriction Law.
In accordance with “Audit Guidelines on Consumer
Finance Companies’ Provisions for Possible Losses on
Reimbursements of Excess Interest Payments,” issued by
JICPA in 2006, the amount of such provision is rationallyestimated and booked based on actual historical repayment
claims by debtors.

Provision for bonuses
Provision for bonuses is provided for payment of bonuses
to employees, in the amount of estimated bonuses that are
attributable to the fiscal year.

Method of accounting for retirement benefits
When calculating retirement benefit obligations, thebenefit formula method is used for attributing expected
retirement benefits to periods through the year-end. The
methods for recognizing past service cost and actuarial
gains or losses are as follows:
Past service cost:
Recognition of past service cost
is apportioned by the straightline method over a fixed numberof years (2 years) within theemployees’ average remaining
service period from the time of
their occurrence
Actuarial gains or losses: Recognition of actuarial gains
or losses are apportioned by thestraight-line method over a fixed
number of years (Mainly 10 to
11 years) within the employees’
average remaining service period
at the time of their occurrencein each fiscal year, starting fromthe following fiscal year
Some consolidated subsidiaries employ the simplified
method for calculating retirement benefit obligations
and periodic benefit costs, stating retirement benefit
obligations at the amounts required as if all employees
voluntarily terminate their employment as of the year-end.

Provision for directors’ retirement benefits
The provision for directors’ retirement benefits forconsolidated subsidiaries outside the banking businessis provided for the estimated amount corresponding to
accrued retirement benefit payments to directors as of theend of the fiscal year.

Provision for reimbursement of deposits
Provision for reimbursement of deposits is provided for inorder to meet depositor requests for reimbursement on
deposits already derecognized as liabilities, in an amountdeemed necessary by estimating the losses corresponding
to the expected requests for reimbursements in the future.

Provision for customer point services
Provision for customer point services is provided inconjunction with a point system to promote credit carduse. The reserve is recorded for the expected cost to be
incurred when credit card members use points they havereceived as of the balance sheet date.

Reserves under special laws
Reserves under special laws consist of the financial
instruments transaction responsibility reserve posted by YM
Securities Co., Ltd., which were calculated according to thespecifications of Article 46-5 of the Financial Instruments
and Exchange Act and Article 175 of the Cabinet Office
Order Related to the Financial Instruments Business, toprepare for losses originating from incidents relating to thepurchase and sale of securities or other transactions.

Amounts per share of common stock
Computations of net income per share of common stock
are based on the weighted-average number of shares
outstanding during each year.
YMFG has issued potential shares, but “current term
net income per share after stock adjustment” is not shown
because these shares have no dilutive effect.
Cash dividends per share represent the cash dividends
declared as applicable to each year.

YMFG Annual Report 201528

Amortization of goodwill
Goodwill is mainly amortized over a 10-year period using
the straight-line method.

Consumption tax
YMFG and its consolidated subsidiaries in Japan employ
the tax exclusion method for consumption tax and local
consumption taxes, meaning that transaction amounts
and consumption tax amounts are treated separately foraccounting purposes.
However, non-deductible consumption taxes forpurchase of property, plant and equipment are recognized
as expenses for the year of the purchase.

Adoption of Consolidated Tax Payment System
YMFG and certain of its consolidated subsidiaries adopted
the consolidated tax payment system as provided under
the Corporation Tax Act.

Changes in Accounting Principles(Changes in accounting principles due to revisions inaccounting standards)(Adoption of the “Accounting Standard for Consolidated
Financial Statements”)
YMFG adopted the “Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22, September
13, 2013) from the fiscal year ended March 31, 2014.
This adoption had no impact on the consolidated
financial statements.
(Adoption of the “Accounting Standard for Retirement
Benefits”)
For the year ended March 31, 2014
From the year ended March 31, 2014, YMFG adopted
the “Accounting Standard for Retirement Benefits”(ASBJ Statement No. 26, May 17, 2012) and the“Implementation Guidance for the Accounting Standard
for Retirement Benefits” (ASBJ Guidance No. 25, May
17, 2012) (excluding the provisions found in the body ofParagraph 35 of the Accounting Standard for Retirement
Benefits and Paragraph 67 of the Implementation
Guidance for the Accounting Standard for Retirement
Benefits). Accordingly, from March 31, 2014, YMFG
has recorded the difference between retirement benefit
obligations and plan assets as net defined benefit asset or
net defined benefit liability.

29

YMFG Annual Report 2015

With regard to the application of the AccountingStandard for Retirement Benefits, in accordance with thetransitional treatment stipulated in Paragraph 37 of the
Accounting Standard for Retirement Benefits, the impactof these changes is included in remeasurements of defined
benefit plans within accumulated other comprehensive
income as of March 31, 2014.
As a result, as of March 31, 2014, YMFG recorded net
defined benefit asset of ¥22,882 million and net defined
benefit liability of ¥4,479 million. Furthermore, deferred tax
assets increased by ¥1,897 million and accumulated othercomprehensive income decreased by ¥3,465 million.
For the year ended March 31, 2015
YMFG adopted the “Accounting Standard for Retirement
Benefits” (ASBJ Statement No. 26, May 17, 2012) and the“Implementation Guidance for the Accounting Standard
for Retirement Benefits” (ASBJ Guidance No. 25, March
26, 2015), applying the provisions found in the body ofParagraph 35 of the Accounting Standard for Retirement
Benefits and Paragraph 67 of the Implementation
Guidance for the Accounting Standard for Retirement
Benefits from the fiscal year ended March 31, 2015.
Accordingly, the Company reviewed the method for
calculating retirement benefit obligations and current
service costs, and changed a method of attributing
expected benefit to periods from the straight-line method
to the benefit formula method. In addition, YMFG haschanged its method of determining discount rates froma method of using a single discount rate based on the
average remaining service period and average benefit
period to a method of using multiple discount rates foreach expected retirement benefit period.
With regard to the application of the AccountingStandard for Retirement Benefits, in accordance withthe transitional treatment stipulated in Paragraph 37of the Accounting Standard for Retirement Benefits,
from the beginning of the fiscal year ended March 31,
2015, changes in amounts resulting from the method of
calculating retirement benefit obligations and past services
costs were recorded in retained earnings.
As a result, at the beginning of the fiscal year ended
March 31, 2015, retirement benefit liabilities increased¥3,086 million ($26 million), and retained earnings
decreased ¥1,994 million ($17 million). Also, the income
before income taxes for the fiscal year ended March 31,
2015 increased by ¥368 million ($3 million).

(Adoption of the “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc.
through Trusts”)
YMFG adopted the “Practical Solution on Transactions ofDelivering the Company’s Own Stock to Employees etc.
through Trusts” (Practical Issues Task Force No. 30, issued
March 26, 2015) from the fiscal year ended March 31,
2015. Accordingly, the Company recognized at the time ofdisposal the difference arising from the disposal of treasury
shares by the Company to the trust, and posts as liabilities
the differences arising from the net amount of gain or loss
from sales of shares sold by the trust to the employee stock
ownership plan (ESOP), dividends paid by the Company forthe shares held by the trust and miscellaneous expenses
related to the trust.
These accounting policies have been applied
retroactively, and the consolidated financial statements
for the fiscal year ended March 31, 2014, reflect thisretroactive application.
Compared with the figures before retroactive
application, as of March 31, 2014, other liabilities
increased ¥92 million, and treasury stock, capital surplus
and retained earnings decreased by ¥301 million, ¥351
million and ¥42 million, respectively.
Due to the reflection of the cumulative effect on net
assets as of April 1, 2013, after retroactive adjustment to theconsolidated statements of changes in net assets, treasury
stock, capital surplus and retained earnings decreased by¥398 million, ¥367 million and ¥27 million, respectively.

Accounting Standards Not Applied“Accounting Standard for Retirement Benefits” (ASBJ
Statement, May 17, 2012)(i) Overview
With the view of financial reporting improvements andtrends in international convergence, this accounting
standard mainly focuses on, how unrealized actuarial gains
and losses and past service costs should be accounted
for and how retirement benefit obligations and current
service costs should be determined for the enhancement of
disclosures.
(ii) Effective Dates
The revised method of calculation of retirement benefit
obligations and current service costs will be effective on the
Banks’ consolidated financial statements at the beginningof the fiscal year commencing April 1, 2014.

(iii) Effects of Adoption of the Accounting Standard
The expected effect of adopting this accounting standard isto reduce retained earnings by ¥1,994 million ($19 million)in the fiscal year beginning on April 1, 2014.
“Accounting Standard for Business Combinations” (ASBJ
Statement, Sep. 13, 2013)(i) Overview
This accounting standard revises primarily the following
areas of the current standard: (1) the treatment of changes
in the parent company’s ownership interest in a subsidiaryin case where additional shares of the subsidiary are
acquired and the controlling ownership remains in theparent company, (2) the treatment of acquisition-related
expenses, (3) the treatment of the transitional accounting
and (4) the presentation of net income and changes fromminority interest to noncontrolling shareholder interest.
(ii) Effective Dates
The accounting standard will be applied to the Group’s
consolidated financial statements from the beginning of
the fiscal year commencing April 1, 2015.
(iii) Effects of Adoption of the Accounting Standard
The Group is currently evaluating the effects.
“Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts”(Dec. 25, 2013)(i) Overview
This standard clarifies the practical treatment oftransactions of delivering the company stock to employees
or employee stock ownership plans through trusts.
(ii) Effective Dates
The accounting standard will be applied to the Group’s
consolidated financial statements from the beginning of
the fiscal year commencing April 1, 2014.
(iii) Effects of Adoption of the Accounting Standard
The Group is currently evaluating the effects.

Additional Information(ESOP Trust)
To enhance its welfare benefits, YMFG has introduced the
ESOP Trust for Group employees (hereinafter, “Employees”)(1) Overview of Transactions
Of those Employees enrolled in the Yamaguchi Financial
Group Employee Stock Ownership Plan (hereinafter, the“Company’s ESOP”), the Company has established thetrust for those beneficiaries satisfying certain conditions.

YMFG Annual Report 201530

This trust acquired as a lump sum a number of shares in
the Company corresponding to the number expected to beacquired by the Company’s ESOP over the five-year period
beginning in September 2011. Thereafter, the trust has
sold the Company’s shares to the Company’s ESOP eachmonth on a specific date.
(2) Company Shares Residing in the Trust
Company shares residing in the trust are recorded intreasury stock in the net assets section according to thebook value of the trust (excluding ancillary expenses). The
book value and the number of shares of this treasury stock
amounted to ¥1,050 million and 1,400 thousand shares on
March 31, 2014, and ¥785 million ($7 million) and 1,047
thousand shares on March 31, 2015.
(3) Book Value of Borrowings Recorded by Applying theGross Price Method
The book value of borrowings recorded by applying thegross price method was ¥1,050 million on March 31, 2014,and ¥630 million ($5 million) on March 31, 2015.

3. CONSOLIDATED STATEMENTS OF CASHFLOWS AND CASH EQUIVALENTS
In preparing the consolidated statements of cash flows, theGroup considers cash and due from THE BANK OF JAPAN
as cash and cash equivalents.
The reconciliation of cash and due from banks in the
consolidated balance sheets and cash and cash equivalentsin the consolidated statements of cash flows at March 31,
2015 and 2014 were as follows:

Cash and due from banks
Time deposits in other banks
Other
Cash and cash equivalents

Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
¥965,275 ¥915,056 $8,032,579(13,393)(7,497)(111,450)(8,900)(33,354)(74,062)¥942,982 ¥874,205 $7,847,067

4. FINANCIAL INSTRUMENTS
Items pertaining to the status of financial
instruments(1) Policies on financial instruments
YMFG provides community-based integrated financial
services centered on the banking business and including
the securities and credit card businesses. Accordingly,

31

YMFG Annual Report 2015

the Group is subject to a variety of risks, including credit
risk, market risk and liquidity risk. Due to changes in
economic, social and financial conditions, these risks havegrown more diverse and complex. Under these conditions,
the Group considers strengthening its risk management
structure as a priority issue. To maintain and enhance thesoundness of its operations, YMFG has created groupwide
risk management regulations, which clarify the Group’s
fundamental stance on risk management.

(2) Content and risks of financial instruments
Of financial assets held by the Group, principally loans andbills discounted extended to business partners are subject
to the credit risk of breach of contract. The Group holds
securities, principally debt securities, equity securities andinvestment trusts, for trading purposes, for holding tomaturity, for purely investment purposes and to promote
positive business relations. These securities are subject toissuer credit risk, interest rate fluctuation risk and market
price fluctuation risk.
The Group’s financial liabilities center on deposits andnegotiable certificates of deposit, and call money that itraises in the market. However, the Group is subject tothe liquidity risk of becoming unable to secure necessary
funding. The Group is also subject to interest rate risk arisingfrom fluctuations in financial and economic conditions.
The Group employs derivative transactions to hedge
underlying market risks on its assets and liabilities. The
Group also provides derivatives as financial products tomeet customers’ needs. Interest-related and securitiesrelated derivative transactions are employed to limit the
impact on income of future interest rate fluctuations andprice fluctuations for loans and bills discounted, deposits,
securities and other instruments bearing long-term interest
at fixed rates. Currency-related derivative transactions areused primarily to avoid fluctuations in income stemmingfrom future exchange rate fluctuations, stabilize funding
denominated in foreign currencies, as well as offered as
products to clients. With regard to transactions to secure
income through changes in market rates, which areconducted on a limited basis, the Group has establishedstringent standards that include risk limits and loss limits.
As market risk factors, interest rate related andsecurities-related derivative transactions are subject tothe risk of fluctuations in interest rates and prices, andcurrency-related derivative transactions are subject toexchange rate fluctuations. For transactions that are
not conducted on exchanges, the Group is subject tocredit risk, the risk of loss in the event a counterparty
becomes unable to fulfill its contractual obligations due todeteriorating financial conditions.
With regard to use of hedge accounting, the Group applies
deferred hedge accounting after it ensured in advance thatthe established conditions are satisfied. As for hedging
methods, the Group employs the portfolio hedge wherecertain group of assets with similar risk is identified andsuch risk is hedged comprehensively. In addition, for certain
interest swap contracts, exceptional treatments are applied.

(3) Risk management structure related tofinancial instruments(i) Management of credit risk
Through the appropriate operation of a credit rating
system, the Group endeavors to determine the financial
conditions of business partners and accurately evaluate
their credit risk. The Group has enhanced the precisionof its credit evaluations, reviewing business partner credit
ratings swiftly and appropriately for each financial period
and each time their credit conditions change.
The Group conducts self assessments according tostringent standards that are consistent throughout theGroup. YMFG performs write-off and provisions basedon the results of its self assessments. The Group’s
authentication departments verify the content of suchinspections. Independence is maintained through internal
audits conducted by audit departments. In addition,
the Group undergoes external audits conducted by its
independent external auditors.
With regard to the screening of individual transactions,
the Group employs a screening system suited to eachsubsidiary bank’s size of the business and characteristics
to conduct detailed screenings that take individual sector
and regional characteristics into consideration. In terms of
portfolio management, the Group strives to enhance its
risk management by first measuring credit risk, and thenmanaging risk by category, sector and geographic area.
Risk management departments periodically obtain
credit information and fair value as a part of managing
credit risks on securities issuers and counterparty risks onderivative transactions.
(ii) Management of market risk
Qualitative information on the management of market risk
The Group has formulated a market risk management
process that identifies and quantitatively measures inherent
market risks. An asset-liability management (ALM) system is
employed to control market risk within allowable limits, and

the Group ALM Committee is periodically held to respondto such risks.
YMFG periodically evaluates market risk conditions andverifies the appropriateness of risk controls.
Quantitative information on the management of market risk
The market risk (estimated loss amount) of the loans,securities, deposits and derivatives transactions of Yamaguchi
Bank, Momiji Bank and Kitakyushu Bank of the Group arecalculated according to value at risk (VaR). Furthermore, thecovariance method is used to calculate VaR.
As of March 31, 2015, the market risk (estimated loss
amount) of Yamaguchi Bank was ¥73,513 million ($612
million), the market risk (estimated loss amount) of Momiji
Bank was ¥21,416 million ($178 million) and the maket
risk (estimated loss amount) of Kitakyushu Bank was¥12,536 million ($104 million). Also, as of March 31, 2014,
the market risk (estimated loss amount) of Yamaguchi
Bank was ¥63,526 million, the market risk (estimated loss
amount) of Momiji Bank was ¥18,079 million and themarket risk (estimated loss amount) of Kitakyushu Bank was¥11,439 million.
Assumptions used in calculating VaR include a holding
period of three months (however, one year for a holding
period for shares held for the purpose of strategic
investment), a confidence interval of 99.9% and an
observation period of five years.
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank
conduct back-testing to compare the VaR calculated by themodel with the actual losses. Based on the results for the year
ended March 31, 2015 and 2014, the measurement model
is considered to have captured market risk to an acceptable
degree of accuracy. However, as measurements of market risk
employ certain probabilities of occurrence which is statisticallycalculated on the basis of historical market fluctuations, it
is possible that this method may not adequately capture
market risk in the event of sudden changes in the market
environment outside the normally expected scope.
(iii) Management of liquidity risk related to fundraising
The majority of funds is raised through deposits, whichconstitute a stable base for procuring funds. The Groupmanages funds on the basis of elaborate forecasts,
confirming cash flows primarily through cash controls infinancial markets.
For cash flow management, the Group strives tomaintain the liquidity risk by reducing liquidity risk,
ensuring stability, preparing for unexpected events, andmaintaining highly liquid assets.

YMFG Annual Report 201532

(4) Supplementary explanation of items
pertaining to the fair value of financial
instruments
The fair values of some financial instruments are basedon market prices. The fair values of other instruments, forwhich market prices are not readily available, are basedon rational calculation. However, as assumptions areused in these calculations, different assumptions can yield
different values.

Items pertaining to the fair value of financial
instruments
The table below indicates the consolidated balance sheet
amounts of financial instruments, as well as their fair values
and the differences between the two. Line items with little
significance to balance sheet amounts have been omitted.
Unlisted equity securities and other instruments for which
fair value is not easily determinable are not included in thetable below. (Refer to (Note 2).)Millions of yen
2015
Consolidatedbalance sheet Fair value Difference
amount(1) Cash and due from banks ¥ 965,275 ¥ 965,275¥—(2) Call loans and bills purchased
283,251
283,251—(3) Money held in trust
48,09648,096—(4) Securities
Held-to-maturity debt securities
4,447
4,519
72
Available-for-sale securities
2,310,718 2,310,718—(5) Loans and bills discounted
6,228,014
Allowance for loan losses (* 1)(71,801)
6,156,213 6,210,677
54,464
Total assets¥9,768,000 ¥9,822,536¥54,536(1) Deposits¥8,441,552 ¥8,443,962¥ 2,410(2) Negotiable certificates of
767,528
767,528—
deposit
Total liabilities¥9,209,080 ¥9,211,490¥ 2,410
Derivative transactions (* 2)Hedge accounting not applied ¥(8,761) ¥(8,761) ¥—Hedge accounting applied(1,326)(1,326)—
Total derivative transactions¥ (10,087) ¥ (10,087) ¥—Millions of yen
2014
Consolidatedbalance sheet Fair value Difference
amount(1) Cash and due from banks ¥ 915,056 ¥ 915,056¥—(2) Call loans and bills purchased
315,198
315,198—(3) Money held in trust
49,99649,996—(4) Securities
Held-to-maturity debt securities
3,171
3,187
16
Available-for-sale securities
2,061,118 2,061,118—(5) Loans and bills discounted
5,964,133
Allowance for loan losses (* 1)(85,152)
5,878,981 5,910,384
31,403
Total assets¥9,223,520 ¥9,254,939¥31,419(1) Deposits¥8,147,033 ¥8,149,311¥ 2,278(2) Negotiable certificates of
617,933
617,933—
deposit(3) Bonds payable
45,00045,251251
Total liabilities¥8,809,966 ¥8,812,495¥ 2,529
Derivative transactions (* 2)Hedge accounting not applied ¥(2,145) ¥(2,145) ¥—Hedge accounting applied
(974)
(974)
—
Total derivative transactions¥(3,119) ¥(3,119) ¥—Thousands of U.S. dollars
2015
Consolidatedbalance sheet Fair value Difference
amount$—(1) Cash and due from banks $ 8,032,579 $ 8,032,579(2) Call loans and bills purchased 2,357,086
2,357,086—(3) Money held in trust
400,233
400,233—(4) Securities
Held-to-maturity debt securities
37,006
37,605599
Available-for-sale securities
19,228,743 19,228,743—(5) Loans and bills discounted
51,826,696
Allowance for loan losses (* 1)(597,497)
51,229,199 51,682,425
453,226
Total assets$81,284,846 $81,738,671$453,825(1) Deposits$70,246,751 $70,266,806$ 20,055(2) Negotiable certificates of
6,387,018
6,387,018
deposit
Total liabilities$76,633,769 $76,653,824$ 20,055
Derivative transactions (* 2)Hedge accounting not applied $(72,905) $(72,905) $—Hedge accounting applied(11,034)(11,034)—
Total derivative transactions$(83,939) $(83,939) $—(* 1) The general allowance for loan losses and specific allowance for loan losses are deducted.
(* 2) The amount collectively represents derivative transactions that are recorded as trading
assets and liabilities, and other trading assets and liabilities.
This indicates the net amount of rights and obligations under derivative transactions.
Parentheses, ( ), indicate that the net amount is negative.

(Note 1) Methods of calculating the fair value of financial
instruments(1) Assets(i) Cash and due from banks
As the settlement term of these instruments is short(within one year) and their fair values and book values are

33

YMFG Annual Report 2015

approximately the same, their book values are taken as
their fair values.
(ii) Call loans and bills purchased
As the settlement term of these instruments is short(within one year) and their fair values and book values areapproximately the same, their book values are taken as
their fair values.
(iii) Money held in trust
As for the securities held as trusted assets in money heldin trust established independently for the purpose ofinvesting mainly in the securities of the Group, the value
on stock exchanges is taken as fair value for the equity
securities, and either the value on exchanges or a priceindicated by other financial institutions dealing with thespecific instruments is taken as fair value.
Notes pertaining to money held in trust exchanges forthe purpose of holding are indicated within “Money heldin trust.”(iv) Securities
For equity securities, fair value is determined by stock
exchange prices; the fair value of debt securities isdetermined by exchange prices or prices received frominformation vendors. Fair values of investment trusts are
determined by exchange prices or standard prices disclosed
by investment trust management companies.
The fair value of private placement bonds guaranteedby Yamaguchi Bank and Momiji Bank is determined foreach internal rating category and period by discounting topresent value the total amount of interest and principal,
using as the discount rate the risk-free rate plus thecredit cost determined for each internal rating category.
However, fair value of bonds of legally bankrupt debtors,
substantially bankrupt debtors and debtors in dangerof bankruptcy is determined by deducting the expectedamount of loss on the bond by using the same method
applied to loans from the bond’s face value.
(v) Loans and bills discounted
For loans and bills discounted with floating interest rates,
as in the short term their values reflect market interest
rates, unless the credit status of the obligor has changed
significantly since the loans were extended, their fair value
is similar to their book value, so their book value is taken as
their fair value.
For loans and bills discounted bearing fixed interest
rates, fair value is determined for each internal rating
category and period by discounting to present value
the total amount of interest and principal, using as thediscount rate the risk-free rate for operating loans andbills discounted plus the credit cost for each internalrating category. For consumer loans and bills discounted,
fair value is determined by discounting the total amountof interest and principal to their present value using theassumed interest rate on new loans of the same type. For
instruments having a short settlement period (within oneyear), as their fair values and book values are approximately
the same, their book value is taken as their fair value.
With regard to loans to legally bankrupt obligors,
substantially bankrupt obligors or obligors who are indanger of bankruptcy, the estimated collectible amountis based on either the present value of estimated future
cash flows or the expected amounts recoverable fromthe disposal of collateral and/or under guarantees. As
the fair value is essentially equivalent to the amount after
deducting the allowance for possible loan losses from thebook value as of the consolidated balance sheet date, thisamount is taken as fair value.
For loans that have no specific repayment period, as thefair value is assumed to be equivalent with the book value
according to the expected payment dates and interest
rates, book value is taken as the fair value.
(2) Liabilities(i) Deposits and (ii) Negotiable certificates of deposit
The fair value of demand deposits is determined as
the payment amount if payment were required on the
consolidated balance sheet date (book value). The fairvalue of time deposits is determined by discounting future
cash flows to their present value by certain time periods.
The discount rate employed is the interest rate required for
newly accepted deposits. For deposits having a short period(within one year), as their fair values and book values areapproximately the same, their book value is taken as theirfair value.
(iii) Bonds payable
The fair value of bonds issued by the Group is determinedby using prices publicly quoted by third-party institutions.
(3)Derivative transactions
The fair value of derivative transactions, comprisinginterest-rate-related transactions (such as interest rate
futures, interest rate options and interest rate swaps)
currency-related transactions (such as currency futures,
currency options and currency swaps), bond-relatedtransactions (such as bond futures and bond options) istaken as their value on exchanges, discounted present

YMFG Annual Report 201534

value or price as calculated using option pricing models.
Interest rates swaps that employ exceptional accounting
treatment are accounted for as part of the loans and bills
discounted that are hedged. Therefore, their fair value isincluded in the fair value of loans and bills discounted.
(Note 2) The consolidated balance sheet amounts offinancial instruments for which market prices are notreadily available
Financial instruments for which market prices are notreadily available are not included in “Assets (4) Availablefor-sale securities.”

Category(1) Unlisted equity securities(*1, *2)(2) Investments in partnerships,
etc. (*3)
Total

Thousands of
U.S. dollars
Millions of yen
2015
2014
2015
Consolidated balance sheet amount¥6,057¥6,090$50,404
2,762

1,611

22,984¥8,819¥7,701$73,388(*1) As unlisted equity securities have no market prices and their fair value is not readily
available, they are not included in the scope of fair value disclosures.
(*2) During the fiscal year ended March 31, 2014 and 2015, impairment losses of ¥22 millionand ¥15 million ($125 thousand) were recorded on unlisted equity securities.
(*3) Of investments in partnerships, those partnership assets comprising unlisted equity
securities, which have no readily available fair value, are not included in the scope of fairvalue disclosure.

35

YMFG Annual Report 2015

(Note 3) Expected maturity amount of monetary claims andsecurities with maturities after the consolidated balance
sheet dateMillions of yen
2015
More than More than More thanWithinone year three years five years More than
one year and within and within and within seven years
three years five years seven years¥869,860 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
283,251——and bills
purchased(3) Securities
242,598
564,180
531,630
Held-to546
885
723
maturity debt
securities
Local
—
—
—
government
bond
Corporate
110
570
723
bond
Others436
315—
Available-for242,052
563,295
530,907
sale securities
with maturities
Japanese
80,170151,197
237,361
government
bond
Local
16,4184,163
4,273
government
bond
Corporate131,735
353,197
253,978bond
Others13,72954,73835,295(4) Loans and 2,146,945 1,126,783
808,102bills discounted
(*)
Total
¥3,542,654 ¥1,690,963 ¥1,339,732——

338,24730

376,982
2,263

—

900

30

1,363

—
338,217—374,719

170,809

96,770

9,676

4,961

135,888

226,843

21,844
46,145555,296 1,590,889¥893,543 ¥1,967,871

Millions of yen
2014
More than More than More thanWithinone year three years five years More than
one year and within and within and within seven years
three years five years seven years¥819,863 ¥
— ¥
— ¥
— ¥
—

(1) Due frombanks(2) Call loans
315,198——
and bills
purchased(3) Securities
102,685522,639644,212
Held-to260
1,139
692
maturity debt
securities
Local
—
—
—
government
bond
Corporate
260
470
692
bond
Others—669—
Available-for102,425
521,500
643,520
sale securities
with maturities
Japanese
26,716
139,128
216,876
government
bond
Local
7,976
19,262
3,345
government
bond
Corporate
58,230335,503
328,065
bond
Others9,503
27,607
95,234(4) Loans and 2,040,816 1,148,253
819,357
bills discounted
(*)
Total
¥3,278,562 ¥1,670,892 ¥1,463,569——

189,964—

411,702
1,080

—

500

—

580

—
189,964—
410,62264,575126,004

3,631

10,157

100,976

260,711

20,782
13,750502,276 1,453,431¥692,240 ¥1,865,133

Thousands of U.S. dollars
2015
More than More than More thanWithinone year three years five years More than
one year and within and within and within seven years
three years five years seven years$ 7,238,579 $
— $
— $
— $
—

(1) Due frombanks(2) Call loans
2,357,086————
and bills
purchased(3) Securities
2,018,789 4,694,850 4,423,982 2,814,738 3,137,072
Held-to4,543
7,364
6,016
250
18,831maturity debt
securities
Local
—
—
—
—
7,489
government
bond
Corporate
915
4,743
6,016
250
11,342bond
Others
3,628
2,621
—
—
—
Available-for2,014,246 4,687,486 4,417,966 2,814,488 3,118,241
sale securities
with maturities
Japanese
667,138 1,258,193 1,975,210 1,421,395
805,276
government
bond
Local
136,623
34,64335,55880,51941,283government
bond
Corporate
1,096,239 2,939,145 2,113,489 1,130,798 1,887,684
bond
Others114,246455,505
293,709
181,776
383,998(4) Loans and 17,865,898 9,376,575 6,724,657 4,620,920 13,238,654
bills discounted
(*)
Total
$29,480,352 $14,071,425 $11,148,639 $7,435,658 $16,375,726(*) Loans and bills discounted for which no period is specified are included in “within one year.”(Note 4) Estimated repayment amounts of deposits, negotiablecertificates of deposit and other interest-bearing liabilities to be
repaid after the consolidated balance sheet dateMillions of yen
2015
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥7,359,032 ¥563,053 ¥484,617¥34,850
Deposits (*)
Negotiable certificates766,740788——
of deposit
Total¥8,125,772 ¥563,841 ¥484,617¥34,850

Millions of yen
2014
More than More thanThree
Withinone year two years
or
one year and within and within years
more
two years three years¥7,476,391 ¥464,376 ¥165,186¥41,080
Deposits (*)
Negotiable certificates
617,582350——of deposit
Bonds payable
20,000——25,000Total¥8,113,973 ¥464,726 ¥165,186¥66,080

YMFG Annual Report 201536

Thousands of U.S. dollars
2015
More than More thanThree
Withinone year two years
years orone year and within and within
more
two years three years$61,238,512 $4,685,471 $4,032,762$290,006
Deposits (*)
Negotiable certificates
6,380,461
6,557——
of deposit
Total$67,618,973 $4,692,028 $4,032,762$290,006(*) Within deposits, demand deposits are included in “within one year.”

5. SECURITIESSecurities held at March 31, 2015 include shares of
unconsolidated subsidiaries and affiliates amounting to¥86 million ($1 million) and investments of ¥853 million($7 million). Corresponding figures at March 31, 2014,
were ¥355 million and ¥700 million.
The amount of guarantee obligations for private
placement bonds (Financial Instruments and Exchange
Law, Article 2, Item 3), out of bonds included in securities,
amounted to ¥4,785 million ($40 million) and ¥3,301 million
as of March 31, 2015 and March 31, 2014 respectively.
Bonds included in securities also include securities
lent through unsecured loan agreements (bond lendingtransactions) of ¥18,561 million ($154 million) and¥15,015 million, at March 31, 2015 and March 31,
2014 respectively.

(b) Held-to-maturity debt securities:
Type
Securities with fairLocalvalue exceeding book government
value
bonds
Corporate
bonds
OthersSubtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
OthersSubtotal
Total

Type
Securities with fairLocalvalue exceeding book government
value
bonds
Corporate
bonds
OthersSubtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
OthersSubtotal
Total

Millions of yen
2015Book value Fair value Difference
¥ 900

¥ 915

¥15

2,686

2,727

41

751
4,337

767
4,409

16
72

—

—

—

110

110

(0)

—
110
¥4,447—110¥4,519—(0)¥72

Millions of yen
2014Book value Fair value Difference
¥ 500

¥ 502

¥ 2

1,713

1,717

4

670
2,883

680
2,899

10
16

—

—

—

288

288

—

—
288
¥3,171—288¥3,187——¥16

6. FAIR VALUE INFORMATION
Securities
The following tables summarize book values, fair value andacquisition cost of securities with available fair values as ofMarch 31, 2015 and 2014:(a) Trading securities
Amount of unrealized gain (loss) on trading securities
included in the consolidated statement of income— ¥14 million ($117 thousand) and ¥(73) million as at
March 31, 2015 and 2014, respectively.

37

YMFG Annual Report 2015

Type
Securities with fairLocalvalue exceeding book government
value
bonds
Corporate
bonds
OthersSubtotal
Securities with fairLocalvalue not exceeding government
book value
bonds
Corporate
bonds
OthersSubtotal
Total

Thousands of U.S. dollars
2015Book value Fair value Difference$ 7,489$ 7,614$125

22,352

22,693341

6,250
36,091

6,383
36,690

133
599

—

—

—

915

915

(0)

—
915
$37,006—
915$37,605

—
(0)
$599

(c) Available-for-sale securities

Type

Millions of yen
2015
Acquisition
Book value
Differencecost¥ 133,436 ¥ 56,513 ¥ 76,923

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
678,753674,788bonds
Local
government
35,75235,088bonds
Corporate
1,054,576 1,041,975
bonds
Others223,373
210,685
Subtotal
2,125,890 2,019,049
Securities with book Shares
5,695
6,355
value not exceeding Japaneseacquisition costgovernment
57,55657,858bonds
Local
government
3,739
3,759
bonds
Corporate
47,05647,346bonds
Others70,782
72,682
Subtotal
184,828
188,000
Total¥2,310,718 ¥2,207,049

Type

3,965
664
12,601
12,688106,841
(660)
(302)
(20)
(290)
(1,900)(3,172)¥103,669

Millions of yen
2014
Acquisition
Book value
Difference
cost¥ 106,333 ¥ 54,479¥51,854

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment
438,638
436,586bonds
Local
government
40,68739,909bonds
Corporate
931,557
922,097
bonds
Others
68,976
68,197
Subtotal
1,586,191 1,521,268
Securities with book Shares
8,996
10,506value not exceeding Japaneseacquisition costgovernment
134,662
135,042bonds
Local
government
3,685
3,693
bonds
Corporate
151,919
152,730
bonds
Others
175,664
182,847
Subtotal
474,926
484,818
Total¥2,061,117 ¥2,006,086

Type

Securities with book Sharesvalue exceeding
Japaneseacquisition costgovernment 5,648,273 5,615,278
bonds
Local
government
297,512291,986bonds
Corporate
8,775,701 8,670,841
bonds
Others1,858,809 1,753,226
Subtotal
17,690,689 16,801,606
Securities with book Shares
47,391
52,883value not exceeding Japaneseacquisition costgovernment
478,955
481,468bonds
Local
government
31,11431,281bonds
Corporate
391,579
393,992
bonds
Others589,015604,826
Subtotal
1,538,054 1,564,450
Total$19,228,743 $18,366,056

5,526
104,860
105,583
889,083(5,492)(2,513)(167)(2,413)(15,811)(26,396)$862,687

fiscal year ended March 31, 2015 and 2014.
(e) Available-for-sale securities sold during the fiscal year

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2015
Sale
Total gain Total loss
amounton saleon sale
¥
4,677
¥ 760
¥ 92
1,759,555
6,757
913
4,477
23
—
358,5381,641
42
330,695
6,482
846¥2,457,942¥15,663¥1,893

SharesJapanese government bonds
Local government bonds
Corporate bonds
Others
Total

Millions of yen
2014
Sale
Total gain Total loss
amounton saleon sale¥5,273¥ 1,998¥ 31
1,725,598
5,972
1,941
10,179242—
533,3282,449
159
288,129
7,731
1,376¥2,562,507¥18,392¥3,507778

779
64,923(1,510)32,995(d) Held-to-maturity debt securities sold during the fiscal year
There were no held-to-maturity securities sold during the

2,052

9,460

Thousands of U.S. dollars
2015
Acquisition
Book value
Differencecost$ 1,110,394 $ 470,275$640,119

(380)
(8)
(811)
(7,183)(9,892)¥55,031

YMFG Annual Report 201538

Shares
Japanese government bonds
Local government bonds
Corporate bonds
Others
Total

Thousands of U.S. dollars
2015
Sale
Total gain Total loss
amounton saleon sale$ 38,920$ 6,324$ 766
14,642,215
56,2297,598
37,256191—
2,983,590
13,656350
2,751,893
53,940
7,039$20,453,874$130,340$15,753(b) Money held in trust classified as held-to-maturity
There are no corresponding transactions as at March
31, 2015 and 2014.
(c) Available-for-sale money held in trust

Available-for-sale money heldin trust(f) Securities for which purpose of holding changed
There were no securities for which the purpose of holding
changed at March 31, 2015 and 2014.

Impairment losses on securities
Regarding securities (excluding those for which market
prices are not readily available) other than trading securities,
if their market values have fallen substantially below theiracquisition price and are not expected to recover to theacquisition price, such market values are recorded in the
consolidated balance sheets. The valuation difference
is recorded as a loss for the fiscal year in which suchdifference is realized (hereinafter, “impairment losses”).
During the fiscal year ended March 31, 2015,
impairment losses were ¥16 million ($133 thousand) on
equity securities and during the fiscal year ended March
31, 2014, impairment losses totaled ¥113 million on equity
securities. The basis for determining whether the market
value has fallen significantly is as follows.
If the market value of the securities in general has
fallen by 30% or more compared with the acquisition
cost, the value of the securities is determined to have“fallen significantly.” However in the case of sharesand equivalent securities, if their market value has fallen
by 30% or more but less than 50% of the acquisition
cost, the determination of whether the value has “fallen
significantly” takes into consideration other factors
such as the issuing company’s credit risk (independent
debtor classification, external ratings, etc.) and previous
percentage decreases over a specific period of time in the
past.

Money held in trust
Information on money held in trust as of March 31, 2015
and 2014 is as follows:(a) Money held in trust classified as trading purposes
There are no corresponding amounts as at March 31,
2015 and 2014.

39

YMFG Annual Report 2015

Available-for-sale money heldin trust

Available-for-sale money heldin trust

Millions of yen
2015
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥48,096¥48,273¥(177)

Millions of yen
2014
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)¥49,996¥50,013¥(17)

Thousands of U.S. dollars
2015
Consolidated
Unrealized
Acquisition
balance sheet
gains
cost
amount(losses)$400,233 $401,706$(1,473)

Unrealized gains (losses) on available-for-salesecurities
Information on unrealized gains (losses) on available-forsale securities and available-for-sale money held in trust is
as follows:

Net unrealized gains
Available-for-sale securities
Available-for-sale money heldin trust
Deferred tax liabilities
Unrealized gains on availablefor-sale securities before
following adjustment
Equivalent to minority interests
YMFG’s interest in net
unrealized gains on valuationof available-for-sale securities
held by affiliates accounted forby the equity method
Unrealized gains on availablefor-sale securities

Millions of yen
2015
2014
¥103,611 ¥55,338
103,788
55,355(177)(17)

Thousands of
U.S. dollars
2015$862,204
863,677(1,473)32,455
71,156(18,646)
36,692270,076
592,128

10
0

—
14

83
0

¥ 71,146¥36,706$592,045

Valuation differences on investments in partnerships,
etc., of ¥120 million ($999 thousand) at March 31, 2015and ¥324 million at March 31, 2014, for which market
values are extremely difficult to determine, are recorded inavailable-for-sale securities of net unrealized gains in thelist above.

Derivatives(b) Currency-related:(1) Derivative transactions at March 31, 2015 and 2014, towhich hedge accounting is not applied(a) Interest-rate-related:
Millions of yen
2015
Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixedInterest rate cap
Sold
Total

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥50,546¥37,556

¥ 582

¥ 582

50,63737,648

(466)

(466)

96
—

(0)
¥ 116

4
¥ 120

¥

96
—

¥

Millions of yen
2015

Type
Over-the-counter:
Currency swaps
Foreign exchange
forward contracts:
Sold
BoughtCurrency options
Sold
BoughtTotal

TypeOver-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixedInterest rate cap
Sold
Total

Over oneyear

Fair value

Realized
gains(losses)¥59,080¥55,080

¥ 763

¥ 762

59,20455,204

(622)

(622)

128
—

128
—

(0)
¥ 141

4
¥ 144

¥

¥

¥261,656 ¥141,121

158,367
25,690Type
Over-the-counter:
Interest rate swaps:
Receivable fixed,
payable floating
Receivable floating,payable fixedInterest rate cap
Sold
Total

Over oneyear

Fair value

Realized
gains(losses)$420,621 $312,524$ 4,843$ 4,843

421,378(3,878)(3,878)$313,290

799
— $

799
—

$

(0)
965

7,268
3,059

174,828 130,634
174,828 130,634
¥
— ¥
—

Type
Over-the-counter:
Currency swaps
Foreign exchange
forward contracts:
Sold
BoughtCurrency options
Sold
BoughtTotal

Contract
amounts

Over oneyear¥145,534¥83,213

119,873
14,229615—

203,186 146,722
203,186 146,722¥— ¥—Thousands of U.S. dollars
2015
Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥(10,093) ¥ (1,732)

(929)
774

(929)
774

(4,767)
6,847
6,413(3,169)¥(8,602) ¥ 1,791

Millions of yen
2014

Millions of yen
2014
Contract
amounts

Contract
amounts33$ 998

Fair value

Realized
gains(losses)¥(3,022) ¥ (1,295)

(694)
83

(694)
83

(5,833)
10,551
7,120(6,706)¥(2,346) ¥ 1,939

Thousands of U.S. dollars
2015

Type
Over-the-counter:
Currency swaps
Foreign exchange
forward contracts:
Sold
BoughtCurrency options
Sold
Bought
Total

Over oneyear

Fair value

Realized
gains(losses)$2,177,382 $1,174,345$(83,989)$(14,413)

60,48125,456(7,731)
6,441(7,731)6,441

1,454,839 1,087,077
1,454,839 1,087,077$— $—(39,669)
53,366$(71,582)

56,978(26,371)$ 14,904

Contract
amounts

1,317,858
213,780

YMFG Annual Report 201540

(c) Stock-related:
There were no stock-related transactions as at March 31,
2015 and 2014.
(d) Bond-related:
Millions of yen
2015

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear¥111,318
¥
—

¥—
¥—

Fair value¥(275)¥(275)

Realized
gains(losses)

Contract
amounts

Over oneyear

Fair value

Realized
gains(losses)¥62,247
¥
—

¥—
¥—

¥60
¥60

¥60
¥60

Thousands of U.S. dollars
2015

Type
Listed:Bond futures
Sold
Total

Contract
amounts

Over oneyear

Fair value$926,338
$
—

$—
$—

$(2,288)$(2,288)

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixedInterest rate swaps employing
exceptional accounting:Interest rate swaps
Receive floating, payable fixed
Total¥(275)¥(275)

Millions of yen
2014

Type
Listed:Bond futures
Sold
Total

(a) Interest-rate-related:

Realized
gains(losses)$(2,288)$(2,288)(e) Commodity-related:
There were no commodity-related transactions as at March
31, 2015 and 2014.
(f) Credit-derivatives:
There were no credit related transactions as at March 31,
2015 and 2014.

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixedInterest rate swaps employing
exceptional accounting:Interest rate swaps
Receive floating, payable fixed
Total

Type
Principal accounting procedure:Interest rate swaps
Receive floating, payable fixedInterest rate swaps employing
exceptional accounting:Interest rate swaps
Receive floating, payable fixed
Total

¥

¥13,710¥(499)

242—*¥(499)

275—¥

Millions of yen
2014
Contract Over one
Fair value
amountsyear¥16,054¥¥15,346¥(615)

275—*¥(615)

308—¥

Thousands of U.S. dollars
2015
Contract Over one
Fair value
amounts
year$114,088 $114,088

$

2,288
— $

2,014
—

$(4,152)*$(4,152)(b) Currency-related:

Type
Principal accounting procedure:
Currency swaps
Total

Type
Principal accounting procedure:
Currency swaps
Total

YMFG Annual Report 2015

¥13,710(*) Of interest rate swaps employing exceptional accounting, as these instruments areaccounted for together with the hedged loans and bills discounted, their fair value isincluded in the fair value of said loans and bills discounted within “Financial instruments.”(2) Derivative transactions as at March 31, 2015 and 2014,
to which hedge accounting is applied

41

Millions of yen
2015
Contract Over one
Fair value
amountsyear

Millions of yen
2015
Contract Over one
Fair value
amountsyear¥32,730¥—¥—¥—¥(828)¥(828)

Millions of yen
2014
Contract Over one
Fair value
amounts
year¥29,267¥—¥—¥—¥(360)¥(360)

Type
Principal accounting procedure:
Currency swaps
Total

Thousands of U.S. dollars
2015
Contract Over one
Fair value
amounts
year$272,364
$
—

$—
$—

$(6,890)$(6,890)(c) Stock-related:
There were no stock-related transactions at March 31,
2015 and 2014.
(d) Bond-related:
There were no bond-related transactions at March 31,
2015 and 2014.

7. LOANS AND BILLS DISCOUNTED
Loans at March 31, 2015 and 2014 include “Risk-Managed
Loan Amounts” as follows:(1) Loans to borrowers in bankruptcy amounting to¥21,398 million ($178 million) and ¥25,936 million
denote loans subject to Article 96-1-3 and 96-1-4 of“Order for Enforcement of the Corporation Tax Act”
(Cabinet Order No. 97 of 1965) on which interest
accrual has stopped as there is doubt about thecollectability of either principal or interest because they
have been contractually past due for a considerable
period of time or for other reasons.
(2) Other delinquent loans amounting to ¥80,077 million($666 million) and ¥91,479 million denote loans
on which the Banks have stopped accruing interest
excluding loans to borrowers in bankruptcy and loans
on which interest payments are deferred in order topromote recovery of borrowers in economic difficulty.
(3) Loans past due for three months or more amounting to¥692 million ($6 million) and ¥448 million denote loans
where payment of interest or principal has been delayed
for three months or more excluding loans to borrowers
in bankruptcy and other delinquent loans.
(4) Restructured loans amounting to ¥15,260 million($127 million) and ¥22,435 million denote loans toborrowers for which the repayment terms have been
modified to more favorable terms including reductionof interest rate, deferral of interest payments, extensionof principal payments and debt forgiveness withthe objective of promoting recovery of borrowers ineconomic difficulty excluding loans to borrowers inbankruptcy, other delinquent loans, and past-due loans.
(5) The total of loans to borrowers in bankruptcy, otherdelinquent loans, past-due loans, and restructuredloans amounted to ¥117,427 million ($977 million) and¥140,298 million.
The loan amounts disclosed from (1) to (5) above areamounts before deducting an allowance for loan losses.

Commercial bills
Bills discounted are accounted for as financing transactionsin accordance with the Industry Audit Committee Report
No. 24 of the JICPA, although the Banks have the rightto sell or pledge them without restrictions. The total facevalue of commercial bills and purchased foreign exchangebills obtained as a result of discounting was ¥45,680
million ($380 million) at March 31, 2015 and ¥47,896
million at March 31, 2014.

8. COMMITMENT LINES
Loan agreements and commitment line agreements
relating to loans are agreements that oblige theconsolidated subsidiaries to lend funds up to a certain limit
agreed in advance. The consolidated subsidiaries make theloans upon the request of an obligor to draw down funds
under such loan agreements as long as there is no breachof the various terms and conditions stipulated in therelevant loan agreement. The unused commitment balance
relating to these loan agreements amounted to ¥898,025
million ($7,473 million) at March 31, 2015 and came to¥860,659 million at March 31, 2014. Of this amount,¥831,960 million ($6,923 million) at March 31, 2015, and¥802,427 million at March 31, 2014, relates to loans forwhich the term of the agreement is one year or less, or
unconditional cancellation of the agreement is allowed at
any time.
In many cases the term of the agreement runs its course
without the loan ever being drawn down. Therefore,
the unused loan commitment will not necessarily affectfuture cash flows. Conditions are included in certain loan
agreements that allow the consolidated subsidiaries either
to decline the request for a loan draw-down or to reduce
the agreed limit amount when there is due cause to do so,such as when there is a change in financial condition orwhen it is necessary to protect the consolidated subsidiaries’
credit. Consolidated subsidiaries take various measures

YMFG Annual Report 201542

to protect their credit. Such measures include having theobligor pledge collateral to the consolidated subsidiaries
in the form of real estate, securities, etc., at entering intoa loan agreement or in accordance with the consolidated
subsidiaries’ established internal procedures for confirming
the obligor’s financial condition, etc., at regular intervals.

9. PLEDGED ASSETSAt March 31, 2015 and 2014, the following assets were
pledged as collateral for certain liabilities of the Banks.

Cash and due from banks
Securities
Lease receivables andinvestment assets

Millions of yen
2015
2014
¥
18 ¥
18
231,785
222,558
1,955—

Thousands of
U.S. dollars
2015
$
150
1,928,809
16,269The collateral was pledged to secure the following:

Deposits
Payables under securities lending transactions
Borrowed money

Millions of yen
2015
2014
¥40,055¥27,600
24,02813,269
5,580

3,823

Thousands
ofU.S. dollars
2015$333,319
199,950
46,434

In addition, securities not included in the aboveschedules were pledged as collateral for operatingtransactions, such as foreign exchange contracts andforward exchange contracts. These securities amounted to¥107,910 million ($898 million), cash and due from banks¥3 million ($25 thousand) and net other assets ¥1,197
million ($10 million) including security deposits of ¥3,229
million ($27 million) at March 31, 2015. The corresponding
figures at March 31, 2014, were ¥106,203 million, ¥3million and ¥1,201 million, including security deposits of¥2,997 million.

10. ACCUMULATED DEPRECIATION
Accumulated depreciation of tangible assets was ¥74,452
million ($620 million) at March 31, 2015, and ¥72,993
million at March 31, 2014.

43

YMFG Annual Report 2015

11. IMPAIRMENT LOSSES
During the fiscal year ended March 31, 2015 and 2014,
impairment losses were recorded on the following assets.
Location
WithinHiroshima
Prefecture
WithinFukuoka
Prefecture
WithinYamaguchi
Prefecture
Total

Primary
use

Type

Asset
Land,
scheduled buildings
for saleBusiness- Land,use assets, buildings
idle assete
Asset
Land,
scheduled buildings
for sale

Impairment loss
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
¥ 20
¥—
$ 166

¥112

—

$ 932

¥ —

¥46

$

¥132

¥46

$1,098—The Bank and its consolidated subsidiaries that engage
in the banking and securities business group theirbusiness-use assets into the smallest units possible fromthe standpoint of management accounting, which is thebranch. Idle assets are, in principle, grouped as units ofindividual assets. In addition, corporate headquarters,
administrative centers, training facilities, company housing
and dormitories are considered corporate assets, as these
are related to all the consolidated subsidiaries which areengaged in the banking businesses.
Consolidated subsidiaries that do not engage in thebanking and securities business group their assets, inprinciple, on an individual company basis.
In the fiscal year ended March 31, 2015, the book valuesof the business-use and idle assets, which have problem inoperating cash flow, and assets that are scheduled for sale
are reduced to their recoverable values, and recognized the
reduction of ¥132 million ($1,098 thousand) as impairment
losses. This amount includes land of ¥67 million ($558
thousand) and buildings of ¥65 million ($541 thousand).
In the fiscal year ended March 31, 2014, the book valuesof the idle assets and assets that are scheduled for sale are
reduced to their recoverable values, and recognized the
reduction of ¥46 million as impairment losses. This amountincludes land of ¥34 million and buildings of ¥12 million.
The recoverable amount used to estimate theimpairment loss for the fiscal year ended March 31, 2015
and 2014, is the net selling price, which is calculated bydeducting the expected disposal cost from the expected
disposal value.

12. BORROWED MONEY
Payment schedule of borrowed money as of March 31,
2015 is as follows:
2015
2016
2017
2018
2019
Thereafter
Total

Thousands of
U.S. dollars$163,094
50,15438,704
26,621
14,704
38,104$331,381

Millions of yen¥19,599
6,027
4,651
3,199
1,767
4,579
¥39,822

13. BONDS PAYABLE
Bonds payable include subordinated bonds of ¥25,000
million ($208 million) as of March 31, 2015 and ¥25,000
million as of March 31, 2014.

(2) Reconciliation of plan asset balances at the
beginning and the end of the fiscal year ended
March 31, 2015 and 2014

Balance of plan assets at the
beginning of the fiscal year
Expected return on plan assets
Actuarial differences
Contribution from employer
Retirement benefit payments
OthersBalance of plan assets at theend of the fiscal year

Millions of yen
2015
2014
¥76,382¥67,200
2,805
11,714
1,629(2,368)228¥90,390

Thousands of
U.S. dollars
2015$635,616

1,919
7,480
1,941
(2,396)
238¥76,382

23,342
97,47913,556(19,705)
1,896$752,184(3) Reconciliation of the balances of retirement
benefit obligations and plan assets at the end of
the fiscal year ended March 31, 2015 and 2014,
and the carrying amounts of net defined benefit
liability and net defined benefit asset
Millions of yen
2015
2014
¥ 60,328 ¥ 57,935

Thousands of
U.S. dollars
2015$502,022

14. PROVISION FOR EMPLOYEERETIREMENT BENEFITS

Retirement benefit obligationsof funded plans
Plan assets

Overview of severance payments and pension plans
Some consolidated subsidiaries employ funded andunfunded defined benefit and defined contribution plans as
employee retirement benefits.
Defined benefit plans include defined benefit corporate
pension plans and lump-sum retirement plans. Also, someare established as retirement benefit trusts.
Some consolidated subsidiaries employ the simplified
method for calculating retirement benefit obligations.

Retirement benefit obligationsof unfunded plans
Net carrying amount of
obligations and assets

Defined benefit plans(1) Reconciliation of retirement benefit obligation
balances at the beginning and the end of the
fiscal year ended March 31, 2015 and 2014

(4) Retirement benefit costs and their breakdowns

Retirement benefit obligations at
the beginning of the fiscal year
Cumulative effects of changes
in accounting policies
Restated balance
Service cost
Interest cost
Actuarial differences
Retirement benefit payments
OthersRetirement benefit obligations
at the end of the fiscal year

Millions of yen
2015
2014
¥57,979¥58,375

Thousands of
U.S. dollars
2015$482,475

3,086—

25,68061,065
1,555
634
627
(3,742)
242¥60,381

58,347
1,556
1,042
645
(3,878)239¥57,979

508,155
12,9405,276
5,218(31,139)
2,013$502,463

Net retirement benefit liability
Net retirement benefit asset
Net carrying amount of
obligations and assets

Service cost*
Interest cost
Expected return on plan assets
Recognized actuarial loss
Amortization of past service
cost
OthersRetirement benefit costs on
defined benefit plans(90,390)(30,062)53(76,382)(18,447)44(752,184)(250,162)
441¥(30,009)¥(18,403)$(249,721)

Millions of yen
2015
2014
¥ 3,467 ¥ 4,479(33,476)(22,882)¥(30,009) ¥(18,403)

Thousands of
U.S. dollars
2015$ 28,851(278,572)$(249,721)

Millions of yen
2015
2014
¥ 1,555¥ 1,556634
1,042(2,805)(1,919)
1,637
1,840
0
1
57
¥ 1,078

Thousands of
U.S. dollars
2015$ 12,940
5,276(23,342)
13,622064¥ 2,584475$ 8,971* Excludes employee contribution portion of defined benefit corporate pensions

YMFG Annual Report 201544

(5) Remeasurements of defined benefit plans

Defined contribution plans

Items posted as remeasurements of defined benefit plans(before tax-effect exclusions) break down as follows.

The required contribution to the consolidated subsidiaries’
defined contribution plans at the end of the fiscal year
ended March 31, 2015 and 2014 were ¥153 million($1,273 million) and ¥157 million, respectively.

Past service cost
Actuarial gain (loss)
Total

Millions of yen
2015
2014
¥
0
¥—
12,723—¥12,723¥—

Thousands of
U.S. dollars
2015$
0
105,875$105,875(6) Cumulative remeasurements of defined benefit
plans
Items posted as cumulative remeasurements of defined
benefit plans (before tax-effect exclusions) break down
as follows.

Unrecognized past service cost
Unrecognized actuarial gain
(loss)
Total

Millions of yen
2015
2014
¥
—
¥
0
(7,361)
5,362¥(7,361)¥5,362Thousands of
U.S. dollars
2015$—(61,255)$(61,255)(7) Plan assets(i) Percentages of major asset categories to total plan assets
are as follows.
2015
20%
64%
16%
100%

Bonds
SharesOthers
Total

2014
25%
59%
16%
100%

(Note) Plan assets include 30% of corporate pension plans established as retirement benefit
trusts at the end of the fiscal year ended March 31, 2015, and 28% at March 31, 2014.

(ii) Method of establishing expected long-term return onplan assets(Corporate pensions)
Based on the expected rate of return for individual
investment fiduciary institutions, deducting investment costfrom the weighted average rate for the policy asset mix(medium- to long-term portfolio)(Retirement benefit trusts)
Past dividend performance is converted to yield.

(8) Basis of actuarial calculation
The basis of actuarial calculations as of March 31, 2015 and2014
Discount rate

45

2015
2014
0.03%—1.64% 1.50%—2.00%

Expected long-term rate of returnon plan assets

1.50%—6.20% 1.60%—3.80%

Expected rate of salary increase

0.80%—4.65% 0.94%—4.65%

YMFG Annual Report 2015

15. REVALUATION RESERVE FOR LAND
Pursuant to the Law concerning Revaluation of Land (Law
No. 34, promulgated March 31, 1998, the “Law”), YMFG
revalued certain land used for banking operations by
consolidated subsidiaries. The tax-equivalent portion ofthis revaluation amount was recorded in liabilities under“deferred tax liabilities for revaluation reserve for land,”and the reminder under net assets as “revaluation reserve
for land.”
Revaluation date: March 31, 1998
Item 3, Article 3, of the Law establishes the evaluation
method as that prescribed by Article 2-4 of the Order for
Enforcement of Law on Revaluation of Land (Enforcement
Order No. 119, promulgated March 31, 1998), and theamount of land tax is calculated on the basis of the land
tax amount specified under Article 16 of the Land-holding
Tax Act, adjusted rationally in accordance with the basis of
calculation announced officially by the Director General of
the National Tax Administration Agency.
Total difference between market value of land forbusiness use revalued in accordance with Article 10 of the
Law and the total post-revaluation book value of land at
March 31, 2015 and 2014 were ¥23,409 million ($195
million) and ¥23,419 million, respectively.

16. CONTINGENT LIABILITIES —ACCEPTANCES AND GUARANTEESAll contingent liabilities, including letters of credit,
acceptances and guarantees are reflected in acceptancesand guarantees. As a contra account, customers’ liabilities
for acceptances and guarantees are shown on the asset side,which represent the Banks’ right of indemnity from customers.

17. OTHER INCOME
Other income for the fiscal year ended March 31, 2015 and2014 included the gains on sale of stock of ¥5,150 million($43 million) and ¥8,597 million, respectively.

18. GENERAL AND ADMINISTRATIVE
EXPENSES

are not capitalized and are accounted for in the samemanner as operating leases. Certain information forsuch non-capitalized finance leases for the year ended
March 31, 2015 and 2014 were as follows:
Equivalent amount:
Acquisition cost
Accumulated depreciation
Net book value

Millions of yen
2015
2014
¥11
¥69
11
67
¥—
¥ 2

Thousands of
U.S. dollars
2015
$92
92
$—

Lease payments
Equivalent depreciation expense
Equivalent interest expense

Millions of yen
2015
2014
¥2
¥21
2
19
¥0
¥ 0

Thousands of
U.S. dollars
2015
$17
17
$ 0

Items included operating expenses for the year ended
March 31, 2015 and 2014 were as follows:

Salary and allowance
Retirement benefit costs
Depreciation

Millions of yen
2015
2014
¥30,988¥31,436
897
2,596
10,518
10,786

Millions of
U.S. dollars
2015
$258
7
88

19. OTHER EXPENSES
Other expenses included ¥616 million ($5,126 thousand)in loss on sale of stock, ¥31 million ($258 thousand) indevaluation of stock and ¥1,199 million ($9,978 thousand)in loss on investment of money held in trust for the year
ended March 31, 2015. For the year ended March 31,
2014, other expenses included ¥928 million in loss on saleof stock, and ¥135 million in devaluation of stock andthere are no loss on investment of money held in trust.

20. LEASE TRANSACTIONS
1. Finance lease transactions(1) Finance lease transactions that do not transfer
ownership(i) Content of lease assets
Tangible fixed assets
Mainly office equipment
Intangible fixed assets
Software(ii) Depreciation method for lease assets
As described in “Lease assets under” (5) Accounting
Policies, in “2. SIGNIFICANT ACCOUNTING POLICIES.”(2) The Banks and other consolidated subsidiaries leasecertain equipment under noncancelable finance leases.
Finance leases that do not transfer ownership to lessees

Equivalent depreciation expense is computed using thestraight-line method over the lease terms assuming noresidual value. Equivalent interest expense is computed
using the interest rate method over the lease terms forthe difference between acquisition cost and total lease
payments.
Future minimum lease payments under non-cancelable
finance leases having remaining terms in excess of one year
at March 31, 2015 and 2014 were as follows:
At March 31, 20152016
2017 and thereafter
Total minimum lease payments

Millions of yen¥——¥—

Thousands of
U.S. dollars$——$—

At March 31, 2014
Millions of yen
¥ 2
—
¥ 2

2015
2016 and thereafter
Total minimum lease payments

2. Operating leases
Future minimum lease payments at March 31, 2015 and2014 were as follows:
At March 31, 20152016
2017 and thereafter
Total minimum lease payments

Millions of yen
¥ 84
1,097
¥1,181Thousands of
U.S. dollars
$ 699
9,129
$9,828YMFG Annual Report 201546

At March 31, 2014%
Millions of yen
¥ 52
747
¥799

2015
2016 and thereafter
Total minimum lease payments

21. INCOME TAXES
1. Significant components of the deferred tax assets andliabilities as of March 31, 2015 and 2014 were as follows:

Deferred tax assets:
Allowance for loan losses
Provision for bonuses
Net defined benefit liability
Depreciation
Losses on devaluation of
securities
Net operating losses
carryforwards
Other
Deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gains onavailable-for-sale securities
Securities contributed toretirement benefit trusts
Other
Total deferred tax liabilities
Net deferred tax assets(liabilities)

Millions of yen
2015
2014

Thousands of
U.S. dollars
2015¥ 19,703
1,035
4,357
941
2,775

¥ 24,891
1,148
7,252
951
3,542

$ 163,959
8,613
36,257
7,831
23,092

406

2,555

3,379

4,374
33,591(3,873)29,7184,605
44,944(5,995)38,94936,398279,529(32,229)
247,300(32,447)(18,646)(270,009)(4,676)(5,160)(38,912)(2,706)(39,829)¥(10,111)(1,421)(25,227)¥ 13,722(22,518)(331,439)$ (84,139)

2. Significant differences between the statutory effective
tax rate and the actual income tax rate after applicationof deferred income tax accounting for the year ended
March 31, 2015 and 2014 were as follows:

47

YMFG Annual Report 2015

Effective statutory tax rate
(Adjustments)
Revision of valuation allowances
Items permanently exempted from income suchas dividend income
Non-deductable goodwill amortization
Inhabitant tax on per capita basis
Items permanently excluded from expense suchas entertainment expenses
Stated difference of tax rates on special
reconstruction surtax
Expiration of losses carried forward
Consolidation adjustment
OthersActual tax rate after application of deferredincome tax accounting

2015
—

2014
37.75

—
—

(10.39)(1.60)

—
—
—

3.73
0.27
0.31

—

1.46

—
—
—
—

5.69
(1.40)(0.39)
35.43(Note) Information for the year ended March 31, 2015 is omitted, as the difference between
the effective statutory tax rate and the actual tax rate after application of deferredincome tax accounting is 5% or less.

3. Revisions in amounts of deferred taxes assets andliabilities due to changes in the corporate tax rate
For the year ended March 31, 2014
The “Act on Partial revision of Income Tax Act” (Law
No. 10 of 2014) was promulgated on March 31, 2014,
repealing the special reconstruction surtax from the fiscal
years beginning on or after April 1, 2014. Accordingly, thestatutory effective tax rate used for calculating deferred tax
assets and liabilities was reduced from 37.75% to 35.38%,
applied for temporary differences that are expected to be
deductible in the fiscal year beginning April 1, 2014. Thischange in the tax rate had the effect of reducing deferred
tax assets by ¥547 million and increasing income tax
adjustments by ¥547 million.
For the year ended March 31, 2015
The “Act on Partial revision of Income Tax Act” (Law No.
9 of 2015) and the “Act on Partial Revision of the Local
Tax Act” (Law No. 2 of 2015) were promulgated on March
31, 2015, lowering the corporate tax rate from the fiscal
years beginning on or after April 1, 2015. Accordingly, thestatutory effective tax rate used for calculating deferred tax
assets and liabilities was reduced from 35.38% to 32.38%
applied for temporary differences that are expected to be
deductible in the fiscal year beginning April 1, 2015, andfurther to 32.06% applied for temporary differences thatare expected to be deductible in the fiscal year beginning
April 1, 2016.
This change in the tax rate had the effect of reducing
deferred tax liabilities by ¥1,358 million ($11 million),increasing unrealized gains on available-for-sale securitiesby ¥3,364 million ($28 million), reducing deferred gains
or losses on hedges by ¥16 million ($133 thousand),increasing remeasurements of defined benefit plans by¥273 million ($2 million) and raising deferred income
taxes by ¥2,263 million ($19 million). Deferred tax
liabilities for land revaluation decreased ¥1,187 million($10 million), and revaluation reserve for land increased by
the same amount.

to ¥1,712 million ($14 million). Such appropriations havenot been accrued in the Consolidated Financial Statements
as of March 31, 2015 and to be recognized in the period inwhich they are approved by the shareholders.
At the annual shareholders’ meeting, held on June
26, 2014, the shareholders approved cash dividends
amounting to ¥1,772 million. Such appropriations have notbeen accrued in the Consolidated Financial Statements asof March 31, 2014 and to be recognized in the period inwhich they are approved by the shareholders.

22. NET ASSETS
23. CHANGES IN NET ASSETSThe Companies Act of Japan (the “Act”) became effective
on May 1, 2006, replacing the Japanese Commercial Code(the “Code”). The Act is generally applicable to eventsand transactions occurring after April 30, 2006 and for the
fiscal years ending after that date.
Under the Act, the entire amount paid for new sharesis in principle 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 ofthe price of the new shares as additional paid-in capital,
which is included in capital surplus.
Under the Act, in cases where dividend distribution of
surplus is made, the smaller of an amount equal to 10%of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal
earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve
is included in retained earnings in the accompanying
Consolidated Balance Sheets.
Under the Act, legal earnings reserve and additional
paid-in capital may be used to eliminate or reduce a
deficit, or may be capitalized, by a resolution of theshareholders’ meeting.
Under the Act, additional paid-in capital and legal
earnings reserve may not be distributed as dividends,
however all of these may be transferred to other capitalsurplus and retained earnings, respectively, which arepotentially available for dividends.
The maximum amount that YMFG can distribute as
dividends is calculated based on the Non-Consolidated
Financial Statements of the Company in accordance with
the Act.
At the annual shareholders’ meeting, held on June 26,
2015, the shareholders approved cash dividends amounting

1. Type and number of shares issued and treasury shareswere as follows:
Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2014
2015
Shares issued
Common stock
Total
Treasury stock
Common stock*1, *2
Total

264,353
264,353——

264,353
264,353

11,29911,29910,062
10,062504
504

20,857
20,857*1 Of the increase in the number of shares, 10,000 thousand shares were acquired in themarket, 35 thousand shares were due to the acquisition of fractional shares and 27
thousand shares were due to the transition of a company from an equity-method affiliate
to a consolidated subsidiary. Of the decrease in the number of shares, 353 thousand
shares were due to the sale of shares to the Group’s employee stock ownership program
ESOP Trust for Employee Shareholders, 150 thousand shares were due to the exercise ofstock options, and 1 thousand shares were in response to demand for the purchase of
fractional shares.
*2 Treasury stock as of beginning and ending of fiscal year ended March 31, 2015 include
1,400 thousand shares and 1,047 thousand shares held by the ESOP Trust for Employee
Shareholders.

Number of shares (in thousand)March 31,
March 31,
Increase Decrease
2013
2014
Shares issued
Common stock
Preferred stock (Type 3)*1
Preferred stock (Type 4)*1
Total
Treasury stock
Common stock*2, *3
Preferred stock (Type 3)*1
Preferred stock (Type 4)*1
Total

264,35311
9264,373

—
—
—
—

—
11
9
20

264,353——
264,353

2,749
—
—
2,749

9,042
11
9
9,062

492
11
9
512

11,299——11,299*1 Increases and decreases in the number of shares are due to acquisitions andextinguishments of Type 3 and Type 4 preferred stock.
*2 Of the increase in the number of shares, 9,000 thousand shares were acquired in themarket, and 42 thousand shares were due to the acquisition of fractional shares. Of thedecrease in the number of shares, 449 thousand shares were due to the sale of sharesto the Group’s employee stock ownership program, 41 thousand shares were due to theexercise of stock options, and 1 thousand shares were in response to demand for thepurchase of fractional shares.
*3 Treasury stock as of beginning and ending of fiscal year ended March 31, 2014
include 1,849 thousand shares and 1,400 thousand shares held by the ESOP Trust for
Employee Shareholders.

YMFG Annual Report 201548

2. Information on dividends is as follows:(a) Dividends paid in the fiscal year ended March 31, 2015
and 2014.

Type of shares
Resolved at the boardof directors meetingon May 9, 2014
Common stock
Resolved at the boardof directors meetingon November 7, 2014
Common stock

Aggregate
amount ofdividends(Millionsof yen)Cashdividends
per share(Yen)¥1,781*1 ¥¥1,782*2 ¥Recorddate(b) Dividends to be paid in the fiscal year ending March 31,
2016 and 2015 are as follows:

Effectivedate

7.00 Mar. 31, Jun. 27,
2014
2014

7.00 Sep. 30, Dec. 10,
2014
2014

Type of shares
Resolved at theboard of directors
meeting on May
8, 2015
Common stock

Type of shares
Resolved at the boardof directors meetingon May 10, 2013
Common stock
Preferred stock(Type 3)Preferred stock(Type 4)
Resolved at the boardof directors meetingon November 8, 2013
Common stockCashdividends
per share(Yen)

Recorddate¥1,581*1 ¥6.00 Mar. 31,
2013¥11,500 Mar. 31,
2013¥11,500 Mar. 31,
2013

¥ 127
¥

98

¥1,581*2 ¥6.00 Sep. 30,
2013

Effective
dateJun. 27,2013
Jun. 27,2013
Jun. 27,2013

Dec. 10,2013*1 The total amount of dividend on common stock include ¥11 million in dividends to ESOP
Trust for employee shareholders. This is because shares held by ESOP trust are treated astreasury stock.
*2 The total amount of dividend on common stock include ¥10 million in dividends to ESOP
Trust for employee shareholders. This is because shares held by ESOP trust are treated astreasury stock.

Type of shares
Resolved at the boardof directors meetingon May 9, 2014
Common stock
Resolved at the boardof directors meetingon November 7, 2014
Common stock

AggregateCashamount ofdividends
dividends
per share(Thousands of(U.S. dollars)
U.S. dollars)

Recorddate

Effectivedate

YMFG Annual Report 2015

7.00 Mar. 31,
2015

Jun. 29,2015

Type of shares
Resolved at theboard of directors
meeting on May
9, 2014
Common stock(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Effective
dividendsof
per share
datedate(Millions of dividends
(Yen)
yen)

¥1,781 Retained ¥earnings

7.00 Mar. 31,
2014

Jun. 27,2014(Note) The total amount of dividend on common stock includes ¥10 million in dividends to
ESOP Trust for employee shareholders.

(Thousands of U.S. dollars, except per share amount)
Aggregate
amount ofCashdividends
Source dividends
RecordEffective(Thouofper sharedatedatesands of dividends (U.S. dolU.S. dollars)
lars)Type of shares
Resolved at theboard of directors
meeting on May
8, 2015$14,246 Retained
Common stockearnings$0.06 Mar. 31,
2015

Jun. 29,2015(Note) The total amount of dividend on common stock includes $58 thousand in dividends to
ESOP Trust for employee shareholders.

24. STOCK OPTIONS
1$14,821*$0.06 Mar. 31, Jun. 27,
2014
2014

$14,829*2$0.06 Sep. 30, Dec. 10,
2014
2014

*1 The total amount of dividend on common stock includes $83 thousand in dividends to
ESOP Trust for employee shareholders.
*2 The total amount of dividend on common stock includes $67 thousand in dividends to
ESOP Trust for employee shareholders.

49¥1,712 Retained ¥earnings(Note) The total amount of dividend on common stock includes ¥7 million in dividends to
ESOP Trust for employee shareholders.

*1 The total amount of dividend on common stock includes ¥10 million in dividends to ESOP
Trust for employee shareholders.
*2 The total amount of dividend on common stock includes ¥8 million in dividends to ESOP
Trust for employee shareholders.

Aggregate
amount ofdividends(Millionsof yen)(Millions of yen, except per share amount)
AggregateCashamount of Source
dividends Record
Effective
dividendsof
per share
datedate(Millions of dividends
(Yen)
yen)

At a Board of Directors meeting on September 22, 2011,a resolution was passed with regard to subscription
requirements for the allotment of stock options ascompensation to directors of YMFG’s banking subsidiaries,
Yamaguchi Bank, Momiji Bank and Kitakyushu Bank. The
details of this resolution are described below.

1. Recording of expenses related to stock options and thename of line items

General and administrative
expensesMillions of yen
2015
2014
¥194
¥208

Thousands
ofU.S. dollars
2015$1,614

2. The content of the stock options is as outlined below.
2015
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 182,900 shares of YMFG’s common
class of stock*stock
Grant dateJuly 29, 2014

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 30, 2014—July 29, 2044

2014
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 225,100 shares of YMFG’s common
class of stock*stock
Grant dateJuly 23, 2013

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

2012
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.
Number of stock options by 192,600 shares of YMFG’s common
class of stock*stock
Grant date

October 31, 2011

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights November 1, 2011—October 31, 2041
Note: Stated as the equivalent number of shares.

3. The summary of stock option activity is as indicated below.
(a) Number of stock options
2015
2014
2013
2012
Prior to vesting
As of the end of the previous— 225,100——
consolidated fiscal year
Granted
182,900———
Expired————
Vested— 225,100——
Rights not yet determined
182,900———
After vesting
As of the end of the previous—— 267,500 153,400
consolidated fiscal year
Rights determined————
Rights exercised— 54,200 62,100 33,700
Expiry————Amount unexercised— 170,900 205,400 119,700(b) Price information

Period for exercise of rights July 24, 2013—July 23, 2043

2013
Category and number of
27 directors (excluding outside directors)
persons to be granted stock of YMFG’s subsidiaries, Yamaguchi
options
Bank, Momiji Bank and Kitakyushu Bank.

Yen
2015
2014
2013
2012
Exercise price
¥
1 ¥
1 ¥
1 ¥
1
Average share price— 1,075 1,075 1,075
at time of exercise
Fair value on date
1,015
973
619
660
grantedU.S. dollars
2015
$0.01
—
8.45

Number of stock options by 294,900 shares of YMFG’s common
class of stock*stock
Grant dateJuly 30, 2012

Vesting conditions

No vesting conditions set

Target length of service
periodNo target length of service period set

Period for exercise of rights July 31, 2012—July 30, 2042

4. Method of estimating the fair value of stock options
The method employed to estimate the fair value of stock
options granted during the consolidated fiscal year ended
March 31, 2015 and 2014 are as follows:(a) Valuation method employed: Black-Scholes method(b) Main base figures and estimation method
Volatility of stock price*1
Expected number of years remaining*2
Forecast dividend*3
Risk-free interest rate*4

2015
24.89%
3.69 years¥13/share
0.101%*1 Calculated on the basis of stock price performance during a period (November 2010 toJuly 2014) corresponding to the expected number of years remaining (3.69 years).
*2 The number of remaining years in service of current directors is estimated on the basis of
the average number of years of service of directors retiring, excluding the current service
period.
*3 Based on the actual dividend for the fiscal year ended March 31, 2014.
*4 Japanese government bond yields for the expected number of years remaining.

YMFG Annual Report 201550

Volatility of stock price*1
Expected number of years remaining*2
Forecast dividend*3
Risk-free interest rate*4

2014
24.78%
3.92 years¥12/share
0.197%*1 Calculated on the basis of stock price performance during a period (August 2009 to July2013) corresponding to the expected number of years remaining (3.92 years).
*2 The number of remaining years in service of current directors is estimated on the basis of theaverage number of years of service of directors retiring, excluding the current service period.
*3 Based on the actual dividend for the fiscal year ended March 31, 2013.
*4 Japanese government bond yields for the expected number of years remaining.

5. Method for estimating the number of rights determined
for stock options
Due to the difficulty of rationally estimating the future
number of rights that will expire, in general a method is
employed that reflects only the number of rights that haveactually expired.

25. INVESTMENT AND RENTAL PROPERTYThis note is omitted, as the total amount of investment andrental property is immaterial.

51

YMFG Annual Report 2015

26. CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME
Amounts of reclassification adjustments and tax effectamounts related to other comprehensive income in the
consolidated fiscal year ended March 31, 2015 and 2014
were as follows.
Thousands of
U.S. dollars
2015

Millions of Yen
2015
2014
Unrealized gains (losses) on
available- for-sale securities
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amount
Unrealized gains (losses) on
available-for-sale securities
Deferred gains (losses) onhedges:Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amountDeferred gains (losses)on hedges
Revaluation reserve for land
Amount generated during
the year
Reclassification adjustment
Before adjustment for tax
effects
Tax effect amount
Revaluation reserve for landRemeasurements of defined
benefit plans
Amount generated during
the year
Reclassification adjustment
Before adjustment for tax
effects
Tax effect amountRemeasurements of defined
benefit plans
Share of other comprehensive
income in affiliated companies
accounted for using theequity method
Amount generated during
the year
Reclassification adjustments
Before tax effect adjustment
Tax effect amount
Share of other comprehensive
income in affiliated companies
accounted for using theequity method
Total other comprehensive
income¥61,429¥17,249$511,184(12,951)
48,478(14,024)
34,454(13,413)
3,836(1,632)
2,204(107,772)
403,412(116,703)
286,709

(170)

(89)

(1,415)

250
80
(44)
36

235
146
(52)
94

2,080
665
(365)
300

—

—

—

—
—

—
—

—
—

1,187
1,187

—
—

9,878
9,878

11,086—92,253

1,637
12,723——

13,622
105,875(4,255)
8,468——(35,408)
70,467

(13)

4

(108)

—
(13)
—
(13)

—
4
—
4

—
(108)
—
(108)

44,132

2,302

367,24627. SEGMENT INFORMATION

Net income per share is calculated based on the following:

Business segment information is not presented, as the Bankand consolidated subsidiaries operate in one segment.
Geographic segment information is not presented, as
domestic income of the Bank and consolidated subsidiaries
and their consolidated assets located substantially in Japan
represent more than 90% of the Group’s consolidated
income and assets.
Overseas sales information is not presented, as overseas
sales are less than 10% of the Group’s consolidated income.

28. RELATED PARTY TRANSACTIONSThere are no significant transactions that should indicate
dealings with related parties.

29. PER SHARE DATA
Yen
2015
2014
Net assets per share¥2,346.56 ¥2,040.02
Net income per share
120.88120.68Net income per share (diluted) ¥ 108.24 ¥ 116.57

U.S. dollars
2015$19.531.01$ 0.90Net income
Amount not attributable tocommon shareholders
Net income attributable tocommon stock
Average shares of common
stock during the year*(in thousands)

Millions of yen
except number ofshares2015
2014¥30,523¥31,242——
30,52331,242

252,514

258,870

Thousands of
U.S. dollars
2015$253,999—
253,999* Shares of the Company held by the ESOP trust are shown on the balance sheets as treasury
stock, so are not included in the above average shares of common stock during the year.
The average number of shares was 1,598 thousand in the fiscal year ended March 31,
2014, and 1,193 thousand in the fiscal year ended March 31, 2015.
(Note) As previously described in Changes in Accounting Principles, YMFG adopted the“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26, May 17,2012) and the “Implementation Guidance for the Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25, March 26, 2015), applying the provisions foundin the body of Paragraph 35 of the Accounting Standard for Retirement Benefits
and Paragraph 67 of the Implementation Guidance for the Accounting Standard for
Retirement Benefits from the fiscal year ended March 31, 2015, and in accordance withthe transitional treatment stipulated in Paragraph 37 of the Accounting Standard for
Retirement Benefits.
As a result, at the beginning of the fiscal year ended March 31, 2015, net assets per
share decreased ¥7.88 ($0.07), and net income per share and diluted net income pershare increased ¥0.94 ($0.01) and ¥0.84 ($0.01) respectively.
In the fiscal year ended March 31, 2014, as previously described in Changes in
Accounting Principles, YMFG adopted the “Accounting Standard for Retirement
Benefits” and in accordance with the transitional treatment stipulated in Paragraph 37of the Accounting Standard for Retirement Benefits.
As a result, net assets per share decreased ¥13.69 in the fiscal year ended March
31, 2014.

30. SUBSEQUENT EVENTSNet assets per share are calculated based on the following:

Net assets
Amounts excluded from net
assetsstock options
minority interests
Net assets attributable tocommon stock at the fiscal
year-end
Number of common stock at
the fiscal year-end used forthe calculation of net assets
per share (in thousands)*

Millions of yen
except number ofshares2015
2014¥578,388 ¥521,470¥ 7,008 ¥ 5,232

Thousands of
U.S. dollars
2015$4,813,081$ 58,317

512
6,496
571,380431
4,801
516,238

4,261
54,056
4,754,764

243,497

253,055* Shares of the Company held by the ESOP trust are shown on the balance sheets as treasury
stock, so are not included in the above number of common stock at the fiscal year-end used
for the calculation of net assets per share. This number of shares held by the ESOP was
1,400 thousand as of March 31, 2014, and 1,047 thousand as of March 31, 2015.

There were no significant subsequent events. Dividends
were made in June 2015 and 2014. Please refer to “21.
NET ASSETS.”

31. BUSINESS COMBINATIONSBusiness combinations due to acquisition
1. Overview of business combination(1) Name and business of acquired company
Name of acquired company YM Lease Co., Ltd.
Business
Leasing(2) Principal reasons for business combination
YM Lease Co., Ltd. has been operating as a leasing
company, and the business combination was executed tofurther enhance the financial services of the financial group
including three banks; Yamaguchi Bank, Momiji Bank andKitakyushu Bank
(3) Date of corporate combination
December 5, 2014
YMFG Annual Report 201552

(4) Legal form of the business combination
YM Lease Co., Ltd. became a subsidiary of the Groupthrough the acquisition of shares in YM Lease Co., Ltd.
(5) Company name following the combination
The company’s name remains unchanged following the
combination.
(6) Percentage of voting rights acquired
Percentage of voting rights immediately prior to acquisition
21.1% (Note)
Percentage of voting rights acquired on the date of thebusiness combination
28.9%
Total percentage of voting rights following the acquisition
50.0%(Note) This figure includes shares owned by YMFG subsidiaries The Yamaguchi Bank Co., Ltd.,and Yamagin Card Co., Ltd.

(7) Key factors leading to the corporate acquisition decision
Owning 40% or more of the shares in YM Lease Co., Ltd.,
enables YMFG to convert the company to a subsidiary on
the basis of a controlling interest.
2. Period for which acquired company’s operating
performance is included in the consolidated statements
of income for the period under review
April 1, 2014 to March 31, 2015
As the acquisition date is deemed to have been December
31, 2014, income of the acquired company for the period
from April 1, 2014, through December 31, 2014, isrecorded as equity method investment income.
3. Acquisition cost for the acquired company and its breakdown
Fair value of common stock in
YM Lease Co., Ltd., owned
immediately prior to thebusiness combination¥104 million ($866 thousand)Fair value of additional common
stock in YM Lease Co., Ltd.,acquired on the date of thebusiness combination¥94 million ($782 thousand)Acquisition cost
¥198 million ($1,648 thousand)
4. Difference between the acquisition cost of the acquiredcompany and total acquisition cost for individualtransactions leading up to the transaction Loss related tostaged acquisition¥200 million ($1,664 thousand)53

YMFG Annual Report 2015

5. Negative goodwill generated and reason for generation(1) Amount of negative goodwill generated¥2,331 million ($19,398 thousand)(2) Reason for generation
The fair value of net assets exceeded the acquisition cost at
the time of acquisition.
6. Amount and general breakdown of assets acquired
and obligations assumed on the date of the corporate
combination(1) Assets
Current assets¥21,692 million ($180,511 thousand)Noncurrent assets¥644 million ($5,359 thousand)Total assets¥22,336 million ($185,870 thousand)(2) Liabilities
Current liabilities¥5,968 million ($49,663 thousand)Long-term liabilities ¥12,591 million ($104,777 thousand)Total liabilities¥18,559 million ($154,440 thousand)
7. Impact on the consolidated statements of income forthe fiscal year under review based on the assumptionthat the corporate combination was concluded on thestarting day of the fiscal year under review
This information has been omitted, as its impact is negligible.