ANNUAL REPORT
2016

CONTENTS
PROFILE1

CONSOLIDATED BALANCE SHEETS

6

THE MESSAGE FROM THE PRESIDENT

2

CONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

8
9

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

10NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15

CONSOLIDATED STATEMENTS OF CASH FLOWS

13

INDEPENDENT AUDITOR'S REPORT52

NON-CONSOLIDATED STATEMENTS OF INCOME

56

NON-CONSOLIDATED BALANCE SHEETS

54

NON-CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSNOTES TO NON-CONSOLIDATED FINANCIAL STATEMENTS

57
60

INDEPENDENT AUDITOR'S REPORT72

CORPORATE DATA75

CORPORATE OUTLINE

74a

PROFILE

1

THE MESSAGE FROM THE PRESIDENT

2

3

4

Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
and Consolidated Subsidiaries
Year ended March 31, 2016
with Independent Auditor’s Report5Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2016

AssetsCurrent assets:
Cash and deposits (Notes 6-(b), 10 and 11)
Trade notes receivable, accounts receivable on completed
construction contracts and other (Note 11)
Inventories (Notes 6-(a) and 6-(e))
Deferred tax assets (Notes 5 and 15)
Other current assets
Allowance for doubtful receivables (Note 11)
Total current assets

Non-current assets:
Property and equipment, at cost:
Land (Notes 6-(b) and 6-(c))
Buildings and structures (Note 6-(b))
Machinery, equipment and vehicles (Note 6-(b))
Construction in progress
Accumulated depreciation
Property and equipment, net
Intangible fixed assets
Investments and other assets:
Investments in securities (Notes 6-(b), 11 and 12)Long-term loans receivable (Note 11)
Deferred tax assets (Notes 5 and 15)
Investments in unconsolidated subsidiaries and affiliates
Other (Note 6-(b))
Allowance for doubtful receivables (Note 11)
Total investments and other assets
Total non-current assets

Total assets

2

6

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
¥ 66,209¥ 53,305$ 587,584

134,596
29,5303,175
13,854(41)
247,325

128,591
30,975
2,817
11,442(98)
227,033

1,194,497
262,069
28,177
122,949(363)
2,194,932

15,463
16,28818,417
62(25,606)
24,626

16,30816,056
19,032
162(26,813)
24,746137,229
144,550
163,445550(227,245)
218,548

2,022

1,931

17,944

10,383
6,273
1,152
1,199
7,206
(6,526)
19,68846,337

11,451
6,394
1,784
1,213
13,513(8,618)25,73952,41692,14555,670
10,223
10,64063,951(57,916)
174,724
411,226¥293,663¥279,450$2,606,167

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Balance Sheets
March 31, 2016

Liabilities and net assets
Current liabilities:
Trade notes payable, accounts payable on construction contracts
and other (Note 11)
Electronically recorded payable (Note 11)
Short-term bank loans and current portion of long-term debt
(Notes 6-(b), 6-(f), 11 and 20)
Accrued expenses
Income tax payable
Advances received on construction contracts in progress
Reserve for defects on completed construction projects
Allowance for losses on construction contracts (Note 6-(e))
Allowance for contingency loss
Allowance for loss related to Antitrust Law
Other current liabilities (Note 6-(b))
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 6-(b), 6-(f), 11 and 20)
Deferred tax liability on land revaluation (Note 6-(c))
Liability for retirement benefits (Note 14)
Other long-term liabilities (Note 6-(b))
Total long-term liabilities

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)

¥115,745
22,096¥132,552–$1,027,200
196,095

4,418
5,676
4,701
31,926
800
939
2,152
287
12,825201,569

10,2104,800
2,732
34,802
866
3,027
–
–
14,172
203,167

39,20850,372
41,719283,333
7,099
8,333
19,0982,547
113,817
1,788,862

18,971
285
19,474
5,225
43,957

9,787
304
20,604
5,396
36,092

168,361
2,529
172,825
46,370390,104

12,003

12,003

106,522523
30,131

479
21,0394,641
267,403(246)
42,412(244)
33,278(2,183)376,393

373
6
56
(130)
(652)
(345)
6,069
48,136¥293,663

1,204
195
52
205
(467)
1,191
5,720
40,190¥279,450

3,310
53
496
(1,153)(5,786)(3,061)53,860427,192$2,606,167

Contingent liabilities (Notes 6-(d) and 17)
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
2,669,464,970 shares in 2016 and 2015
Issued and outstanding:
813,366,605 shares in 2016 and 2015
Additional paid-in capital
Retained earnings
Treasury stock, at cost:
501,516 shares in 2016 and 482,953 shares in 2015
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain on securities
Deferred gain on hedging instruments, net of taxes (Note 13)
Land revaluation (Note 6-(c))
Translation adjustments
Retirement benefits liability adjustment (Note 14)
Total accumulated other comprehensive income (loss)
Non-controlling interests
Total net assets
Total liabilities and net assets

The accompanying notes are an integral part of these statements.

73

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Income
March 31, 2016

Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Net sales (Note 7-(a))
Cost of sales (Notes 7-(b) and 7-(d))
Gross profit¥414,958
375,163
39,794¥377,825
349,874
27,950$3,682,623
3,329,455
353,159

16,42923,364

15,685
12,265

145,802207,348

869
138
(558)
(532)
17
3
–

833
163
652
(866)
24
2
40

7,712
1,224
(4,952)(4,721)
150
26
–

(353)
(711)
(2,152)(287)(1,625)(5,191)
18,173

(108)
(926)
–
–
(1,047)(1,231)
11,033(3,132)(6,309)(19,098)(2,547)(14,421)(46,068)
161,279

6,786
725
7,511

4,024
(781)
3,243

60,2236,434
66,657

10,661

7,790

94,613

759
9,902

835
6,955

6,735
87,877

Selling, general and administrative expenses(Notes 7-(c), 7-(d) and 14)
Operating income
Other income (expenses):
Interest and dividend income
Payments received from insurance claims
Exchange (loss) gain, net
Interest expense
Gain on sales of property and equipment (Note 7-(e))
Gain on sales of investment in securities (Note 12-(c))
Gain on negative goodwill
Loss on sales and disposal of property and equipment(Note 7-(f))
Impairment loss (Note 7-(g))
Loss on allowance for contingency loss
Loss on allowance for loss related to Antitrust Law
Other, net
Profit before income taxes
Income taxes (Note 15):
Current
DeferredProfitProfit attributable to:Non-controlling interests
Owners of parent

¥

¥
(Yen)

Profit per share – basic (Note 18)
Profit per share – diluted (Note 18)¥ 12.1800.—$(U.S. dollars)(Note 3)
¥

8.59
8.56

$

0.108
0.—

The accompanying notes are an integral part of these statements.

84

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Comprehensive Income
March 31, 2016

Years ended March 31,
2015
2016
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)
Profit¥10,661¥ 7,790$ 94,613

Other comprehensive income:Unrealized holding (loss) gain on securities
Deferred (loss) gain on hedging instruments, net of taxes
Land revaluation
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income of affiliates
accounted for by the equity method
Total other comprehensive income (Note 8)
Comprehensive income

(830)
(188)
16
(481)
(262)

911
166
31
719
349

(7,365)(1,668)141(4,268)(2,325)–(1,746)¥08,91438
2,216¥10,007–(15,495)$ 79,108

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥ 8,368546¥ 8,923
1,083$ 74,263
4,845

The accompanying notes are an integral part of these statements.

95

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2016

Capitalstock
Balance at the beginning of theperiodCumulative effect of change inaccounting principle
Restated balance at the beginningof the period
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Profit attributable to owners of
the parent
Purchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period¥12,003¥479¥21,039¥(244)

Total
shareholders’equity¥33,278–

12,003479

43

21,039(0)–¥12,003¥1,204

43
¥523

(244)

2

9,092
¥30,131

33,278

43
(812)

(812)
9,902

Unrealized
holding
gain (loss)
onsecurities
Balance at the beginning of theperiodCumulative effect of change inaccounting principle
Restated balance at the beginningof the period
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Profit attributable to owners ofparentPurchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Year ended March 31, 2016
Shareholders’ equity
Additional
Treasurypaid-in
Retainedstock,
capitalearnings
at cost(Millions of yen)

(2)
0

9,902
(2)
0
2

(2)
¥(246)

9,133¥42,412

Year ended March 31, 2016
Accumulated other comprehensive income
DeferredTotalgain (loss)
Retirement accumulatedon hedging
benefits
otherNoninstruments,
liability comprehensive controlling
Land
Translation
net of taxes revaluation adjustments adjustments
incomeinterests(Millions of yen)
¥ 195

¥52

¥ 205

¥(467)¥ 1,191¥5,720Total
net assets¥40,190
–

1,204

195

52

205

(467)

1,191

5,720

40,190

43
(812)
9,902
(2)
0
2
(830)

(188)

3

(336)

(185)

(1,536)348(1,187)

(830)
¥ 373

(188)
¥ 6

3
¥56

(336)
¥(130)(185)¥(652)(1,536)¥ (345)348¥6,0697,945¥48,13610

6

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2016

Capitalstock
Balance at the beginning of theperiodCumulative effect of change inaccounting principle
Restated balance at the beginningof the period
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Profit attributable to owners ofparentPurchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Totalshareholders’equity$106,522$4,250$186,714$(2,165)$295,331

106,5224,250

186,714(2,165)295,331

381

(0)

–
$106,522

381$4,641381(7,206)(7,206)
87,877

Unrealized
holding
gain (loss)
onsecurities
Balance at the beginning of theperiodCumulative effect of change inaccounting principle
Restated balance at the beginningof the period
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Profit attributable to owners ofparentPurchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Year ended March 31, 2016
Shareholders’ equity
Additional
Treasurypaid-in
Retainedstock,
capitalearnings
at cost(Thousands of U.S. dollars) (Note 3)

17

80,688$267,403(17)
087,877
(17)
0
17

(17)
$(2,183)

81,052$376,393

Year ended March 31, 2016
Accumulated other comprehensive income
DeferredTotalgain (loss)
Retirement accumulatedon hedging
benefits
otherNoninstruments,
liability comprehensive controlling
Land
Translation
net of taxes revaluation adjustments adjustments
incomeinterests(Thousands of U.S. dollars) (Note 3)

Total
net assets$10,685$ 1,730$461$ 1,819$(4,144)$ 10,569$50,763$356,673

10,685

1,730

461

1,819

(4,144)

10,56950,763356,673381(7,206)
87,877(17)
0
17(7,365)(1,668)26(2,981)(1,641)(13,631)

3,088(10,534)(7,365)$03,310(1,668)$ 0,05326$496(2,981)$(1,153)(1,641)$(5,786)(13,631)$ (3,061)

3,088$53,860

70,509$427,192

11

7

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Changes In Net Assets
March 31, 2016

Capitalstock
Balance at the beginning of theperiodCumulative effect of change inaccounting principle
Restated balance at the beginningof the period
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Profit attributable to owners ofparentPurchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period¥12,003¥479¥13,826¥(242)

267
12,003479

14,094

6,955
(0)

–
¥12,003¥0,294

294

(0)
¥479

(0)

6,944
¥21,039

Total
shareholders’equity¥26,068
267

(242)

(10)

Unrealized
holding
gain onsecurities
Balance at the beginning of theperiodCumulative effect of change inaccounting principle
Restated balance at the beginningof the period
Changes in items during the period:
Change in a parent’s ownershipinterest due to transaction with
non-controlling interests
Dividends from surplus
Profit attributable to owners ofparentPurchases of treasury stock
Disposition of treasury stockReversal of land revaluation
Net changes in items other thanshareholders’ equity
Total changes in items during theperiodBalance at the end of the period

Year ended March 31, 2015
Shareholders’ equity
Additional
Treasurypaid-in
Retainedstock,
capitalearnings
at cost(Millions of yen)

26,335

(10)
(2)
0

6,955
(2)
0
(0)

(1)
¥(244)

6,942¥33,278

Year ended March 31, 2015
Accumulated other comprehensive income
DeferredTotalgain onRetirement accumulated
hedgingbenefits
otherNoninstruments,
liability comprehensive controlling
Land
Translation
net of taxes revaluation adjustments adjustments
incomeinterests(Millions of yen)
¥029

29

¥40

40

¥(357)(357)¥(787)(787)¥ (781)

(781)

Total
net assets¥4,787¥30,074

47

315

4,835

30,389

–
(10)
6,955
(2)
0
(0)
910

166

12

563

319

1,972

885

2,857

910
¥1,204

166
¥195

12
¥52

563
¥ 205

319
¥(467)

1,972¥1,191885¥5,7209,800¥40,190

The accompanying notes are an integral part of these statements.

128

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Cash Flows
March 31, 2016

Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)Operating activities
Profit before income taxes
Depreciation and amortization
Impairment loss
Increase (decrease) in allowance for doubtful receivables(Decrease) increase in reserve for defects on completed construction
projects(Decrease) increase in allowance for losses on construction contracts
Increase in allowance for contingency loss
Increase in allowance for loss related to Antitrust Law(Decrease) increase in liability for retirement benefits
Loss on sales and disposal of property and equipment
Gain on negative goodwill
Interest and dividend income
Interest expense
Exchange loss (gain), net
Equity in loss of affiliates(Increase) decrease in trade notes receivable, accounts receivable oncompleted construction contracts and other
Decrease (increase) in inventories(Increase) decrease in other assets(Decrease) increase in retirement benefits liability adjustments includedin accumulated other comprehensive income.
Decrease (increase) in trade notes payable, accounts payable on
construction contracts and other(Decrease) increase in advances received on construction contracts inprogress(Decrease) increase in other liabilities
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Investing activities(Decrease) increase in fixed deposits
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible fixed assets
Proceeds from sales of investments in real estate
Purchases of investments in securities
Proceeds from sales of investments in securities
Increase in investments in unconsolidated subsidiaries and affiliates
Disbursements for loans receivable
Proceeds from collection of loans receivable
Other
Net cash provided by (used in) investing activities

13¥18,173
1,832
711
233

¥ 11,033
1,791
926
(78)

$161,279
16,258
6,309
2,067

(59)
(2,088)2,152
287(1,114)
336
–
(869)
532
389
3

27
1,272
–
–
700
64
(40)
(833)
866
(537)
6

(523)
(18,530)
19,0982,547(9,886)
2,981–(7,712)
4,721
3,452
26

(6,480)1,414(2,217)

1,817(11,636)
1,848(57,507)
12,548(19,675)

(257)

319

(2,280)6,095(5,405)54,091(2,774)(1,028)13
15,285873(540)(4,876)
10,742

12,0963,004
12
17,258769(825)(2,675)
14,527(24,618)(9,123)
115
135,649
7,747(4,792)(43,272)
95,331(200)(2,034)
172
(198)
2,920
(171)
3
–
(39)
162
190
805

277
(2,374)129(188)–(4,310)
3
(218)
(43)
87
9
(6,628)(1,774)(18,051)
1,526(1,757)25,914(1,517)
26
–
(346)
1,437
1,686
7,144

9

Sumitomo Mitsui Construction Co., Ltd.
Consolidated Statements of Cash Flows
March 31, 2016

Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 3)Financing activities(Decrease) in short-term bank loans
Increase in long-term debt
Decrease in long-term debt
Increase in long-term loans of employees(Increase) in treasury stock
Cash dividends paid
Cash dividends paid for non-controlling shareholders
Other
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents due to inclusion inconsolidation
Cash and cash equivalents at end of the year (Note 10)¥ (6,448)
12,200(2,358)
154
(2)
(806)
(143)
(425)
2,168

¥ (6,142)
11,200(1,533)
102
(1)
(10)
(161)
(398)
3,053

$ (57,223)
108,271(20,926)
1,366(17)(7,152)(1,269)(3,771)
19,240(551)
13,16544,565

1,148
12,101
32,055(4,889)116,835
395,500–¥57,730409¥ 44,565–$512,335

The accompanying notes are an integral part of these statements.

14

10

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

1.

Basis of Preparation

The accompanying consolidated financial statements of Sumitomo Mitsui Construction Co.,
Ltd. (the “Company”) and consolidated subsidiaries (collectively the “Group”) are preparedon the basis of accounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements of International Financial
Reporting Standards, and have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments and Exchange Law ofJapan.
Certain reclassifications have been made to present the accompanying consolidated financial
statements in a format which is familiar to readers outside Japan. In addition, certain amounts
in the prior year’s financial statements have been reclassified to conform to the current year’s
presentation.
As permitted, amounts of less than one million yen have been omitted. As a result, the totals
shown in the accompanying consolidated financial statements do not necessarily agree withthe sums of the individual amounts.
2.

Summary of Significant Accounting Policies(a) Basis of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries
and Affiliates
The accompanying consolidated financial statements include the accounts of the Company
and the significant companies which it controls directly or indirectly. Companies overwhich the Company exercises significant influence in terms of their operating andfinancial policies have been included in the consolidated financial statements on an
equity basis. In the elimination of investments in subsidiaries, the assets and liabilitiesof the subsidiaries, including the portion attributable to non-controlling shareholders,
are recorded based on the fair value at the time the Company acquired control of therespective subsidiaries. All significant intercompany balances and transactions havebeen eliminated in consolidation.
The excess of the cost over the underlying net assets at fair value at the respective
dates of acquisition of the consolidated subsidiaries (goodwill) or the excess of fairvalue of the net assets acquired over cost (negative goodwill) is charged or credited toincome in the year of acquisition.
Investments in affiliates not accounted for by the equity method are principally statedat cost.
The Company had 17 consolidated subsidiaries and 1 affiliate accounted for by theequity method as of March 31, 2016.

15

11

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Fiscal Year of Consolidated Subsidiaries
All foreign consolidated subsidiaries (5 companies) have a fiscal year that ends on
December 31. The accompanying consolidated financial statements were preparedbased on the financial statements as of the same date. Necessary adjustments forconsolidation were made on significant transactions that took place during the period
between the fiscal year-end of the subsidiaries and the fiscal year-end of the Company.
(c) Securities
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Trading securities
are carried at fair value and held-to-maturity securities are carried at amortized cost.
Marketable securities classified as other securities for which market prices are
determinable are carried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net assets. Non-marketablesecurities classified as other securities are carried at cost. Cost of securities sold isdetermined by the moving average method.
(d) Inventories
Inventories other than materials and supplies are stated at cost determined by the
specific identification method. Materials and supplies are valued at cost determined by
the average method. Book values are written down based on any decline in profitability.
(e) Depreciation and Amortization(1) Property and equipment (except leased assets) and investments in real estate
Depreciation of property and equipment (except leased assets) and investments inreal estate is determined primarily by the declining-balance method based on theestimated useful lives of the respective assets as prescribed in the Corporation
Tax Law of Japan except that the straight-line method is applied to office buildings
acquired on or after April 1, 1998.
Depreciation at all overseas subsidiaries is determined by the straight-line method
or by the declining-balance method based on the estimated useful lives of therespective assets.
(2) Intangible fixed assets (except leased assets)
Amortization of intangible fixed assets (except leased assets) is calculated by thestraight-line method based on the estimated useful lives of the respective assets asprescribed in the Corporation Tax Law of Japan. Amortization of computer software
for internal use is calculated by the straight-line method over the estimated useful
lives of 5 years.
(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer theownership of the leased assets to the lessees is calculated by the straight-line method
over the lease term with a residual value of zero.
16

12

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(f)Advances Received on Construction Contracts in Progress
As is customary in Japan, the Company and its domestic consolidated subsidiaries
receive payments from customers on an installment basis in accordance with the termsof the respective construction contracts.

(g) Allowance for Doubtful Receivables
The allowance for doubtful receivables is provided for future losses on general receivables
at an amount calculated by applying the percentage of actual losses on collection
experienced in the past, and an uncollectible amount for doubtful receivables estimatedbased on an individual assessment of each receivable and probability of collection.
(h) Reserve for Defects on Completed Construction Projects
A reserve has been provided at an estimated amount for the fiscal year’s sales proceeds
in order to cover the liability for future costs of defects of the completed construction
projects.
(i)

Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses
on construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.

(j)

Allowance for Contingency Loss
The allowance for contingency loss is provided for future contingency loss on rationallyestimated based on individual assessment of each risk.
(Additional information)
Regarding the defective piling work at a condominium in Yokohama disclosed on
October 14, 2015, ¥2,152 million was recognized as the amount of the rationallyestimated cost required to be paid as the contractor based on the defect liability applicableto the construction contract as a result of a ground investigation analysis up to thepresent time. In addition, the same amount was recognized in other expenses as “Losson allowance for contingency loss.”
The above amounts may change depending on circumstances in the future.

(k) Allowance for Loss Related to Antitrust Law
The allowance for loss related to Antitrust Law is provided for payment for surcharge
etc. based on Antitrust Law.
(Additional information)
SUMIKEN MITSUI ROAD CO., LTD. recognized the estimated amount of ¥287
million as a surcharge payment, etc., which will be incurred related to a violation of
the Antitrust Law on a project contracted by East Nippon Expressway Co., Ltd. In
addition, the same amount was recognized in other expenses as “Loss on allowance forloss related to Antitrust Law.”
17

13

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(l)

Accounting for Retirement Benefits(1) Method of attributing expected retirement benefits to periods
In calculating the retirement benefit obligation, the benefit formula method isapplied to attribute the expected retirement benefits to the periods up to year ended
March 31, 2016.
(2) Amortization of actuarial gain or loss and prior service cost
Actuarial gain or loss is amortized in the year following the year in which thegain or loss is recognized by the straight-line method over periods (mainly 11 years),
which are shorter than the average remaining years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method overperiods (mainly 11 years), which are shorter than the average remaining years ofservice of the employees.

(m) Recognition of Revenues and Costs on Construction Contracts
Revenues and costs of construction contracts that commenced on or after April 1, 2009,of which the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method. The percentage of completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract
method is applied for contracts for which the percentage of completion cannot be
reliably estimated.
(n) Recognition of Income from Finance Leases
Income from finance leases is recorded as sales and cost of sales at the time a lease
payment is received.
(o) Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Foreign exchange forward contracts qualifying for allocation accounting aretranslated at the contract rate.
Interest rate swaps qualifying for hedge accounting and meeting specific matching
criteria are not remeasured at market value, but the differential paid or received
under the swap agreements is charged or credited to income (short-cut method).

18

14

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(o) Derivatives and Hedge Accounting (continued)(2) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

Forward foreign exchange contracts
Interest rate swaps

Future foreign currency transactions
Interest on debt

(3) Hedging policy
The Company utilizes foreign exchange forward contracts and interest rate swaps
only for the purpose of hedging future risks of fluctuation of foreign currency
exchange rates or interest rates.
(4) Assessment of hedge effectivenessThe evaluation of hedge effectiveness for a foreign exchange forward contract isperformed on a quarterly basis to confirm that amount of the foreign exchange
contract is within amount of the underlying hedged item to assess whether theforward contract qualifies for hedge accounting.
An evaluation of hedge effectiveness for interest rate swaps is not performed as
all meet specified criteria under the short-cut method.
(p) Cash Equivalents
All highly liquid investments with a maturity of three months or less when purchased,
which can easily be converted to cash and are subject to little risk of change in value,
are considered cash equivalents.
(q) Consumption Taxes
Consumption taxes are accounted for by the tax exclusion method.
(r)

Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company has adopted the consolidated taxation system.

19

15

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

3.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made, as a matter of arithmetic computation only, at¥112.68 = U.S.$1.00, the approximate rate of exchange in effect on March 31, 2016. Thistranslation should not be construed as a representation that yen have been, could have been,or could in the future be, converted into U.S. dollars at that or any other rate.
4.

Changes in Accounting Methods

The Company and its consolidated subsidiaries have adopted “Revise Accounting Standard
for Business Combinations” (ASBJ Statement No. 21 issued on September 13, 2015),“Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement
No. 22 issued on September 13, 2015) and “Revise Accounting Standard for Business
Divestitures” (ASBJ Statement No. 7 issued on September 13, 2015) effective from April 1,
2015. As a result, under these revised accounting standards, the accounting treatment for
any changes in a parent’s ownership interest in a subsidiary when the parents retains control
over the subsidiary are recognized as capital surplus, and the corresponding accounting for
acquisition-related costs were changed to recognized for the fiscal year in which they
incurred. In addition, for business combination carry out from April 1, 2015, the reviewed
acquisition cost allocation result from the finalization of the tentative accounting method ischanged to restate in the consolidated financial for the fiscal year in which the businesscombination incurred. In addition, the presentation method of profits (loss) attributable toowners of parents was amended, the reference to “minority interests” was changed to“non-controlling interests.” The consolidated financial statement for the previous year has
been reclassified to restate these changes in presentation.
In the consolidated statements of cash flow for the year ended March 31, 2016, cash flow
related to the acquisition or sale of share of subsidiaries not result from changes in scope of
consolidation is listed in “Financial activities”. In addition, cash flow related to cost related
to the acquisition of share of subsidiaries result from changes in scope of consolidation andcash flow related to cost result from the acquisition or sale of share of subsidiaries not
result from change in scope of consolidation is listed in “Operating activities”.
The Accounting Standard for Business Combinations, etc. is applied in accordance withtransitional treatment provided in Paragraph 58-2(4) of the Accounting Standard for Business
Combinations, Paragraph 44-5(4) of the Accounting Standard for Consolidated Financial
Statements and Paragraph 57-4(4) of the Accounting Standard for Business Divestitures,and has been applied from the beginning for the year ended March 31, 2016 and will beapplied in the future.
In addition, the effect of these changes on Consolidated Financial Statements and per share
information is immaterial.

20

16

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

5.

Unapplied Accounting Standards“Revised Implementation Guidance in Recoverability of Deferred Tax Assets” (ASBJ
Guidance No. 26 issued on March 28, 2016)(a) Outline
Regards the treatment of the recoverability of deferred tax assets, a review was conductedfollowing the framework of the Japanese Institute of Certified Public Accounts Audit
Committee Report No. 66 “Audit Treatment on Determining the recoverability ofDeferred Tax Assets,” whereby companies are categorized into five categories anddeferred tax assets are calculated based on each of these categories.
(1) Treatment of companies that do not satisfy any of the category requirements from
(Category 1) to (Category 5)(2) Category requirements for (Category 2) and (Category 3)(3) Treatment related to future deductible temporary differences which cannot bescheduled in companies that qualify as (Category 2)(4) Treatment related to reasonable estimated period of future pre-adjusted taxable
income in companies that qualify as (Category 3)(5) Treatment in case that companies that satisfy the category requirements for(Category 4) but qualify as (Category 2) or (Category 3)(b) Scheduled date of adoption
The Company will adopt the revised implementation guidance from the beginning of
the year ended March 31, 2017.
(c) Impact of the Adoption of These Accounting Standards
The Company is currently assessing the effects of adoption of this revised implementation
guidance on its consolidated financial statements.
6.

Notes to Consolidated Balance Sheets(a) Inventories
The components of inventories as of March 31, 2016 and 2015 were as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Merchandise and finished goods
Materials and supplies
Costs on uncompleted construction
contracts
Real estate for sale

¥

536
3,964

25,026
2¥29,530
21

¥

609
1,296

29,0672¥30,975$

4,756
35,179222,09717$262,069
17

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Pledged Assets
The following assets were pledged at March 31, 2016 and 2015 principally as collateralfor short-term bank loans, long-term debt, and guarantees (such as guarantees for thecompletion of construction contracts):
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation
Investments in securities
Others (Investments and other assets)¥

0
10,308¥21
10,308$0
91,480

774

812

6,869

93
20
530
¥11,727

63
7,440
3,736
¥22,381

825
177
4,703
$104,073

Of the above property and equipment, mortgaged assets for factory foundations at
March 31, 2016 and 2015 were summarized as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings and structures, net ofaccumulated depreciation
Machinery, equipment and vehicles,
net of accumulated depreciation¥1,258¥1,258$11,164

180

199

1,597

93
¥1,53263¥1,520825$13,596

The secured liabilities as of March 31, 2016 and 2015 were summarized as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of
long-term debt]
Long-term debt
Other current liabilities
Other long-term liabilities

22

¥237

¥5,736$2,103

[237]
249
–
–

[736]
487
100
24

[2,103]
2,209
–
–

18

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(c) Land Revaluation
Land for operations was revalued by a consolidated subsidiary under the Law for Land
Revaluation during the year ended March 31, 2001. The revaluation amount is shown
as a separate component of net assets.
The market value of the land was ¥704 million ($6,247 thousand) and ¥701 million
more than the revalued book amount at March 31, 2016 and 2015, respectively.
(d) Contingent Liabilities
At March 31, 2016 and 2015, the Company and consolidated subsidiaries were
contingently liable for the following:As guarantors of bank loans tocustomers, unconsolidated subsidiaries,
an affiliate and employees
Advance deposits
As endorsers of notes receivablediscounted with banks

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
¥241
–

¥ 14
924

$2,138
–

–

313

–

(e) Estimated Loss on Uncompleted Construction Contracts
An estimated loss on uncompleted construction contracts was recognized and included
as part of inventories but was not offset against the amount on the balance sheet. It has
been recorded as an allowance for losses on construction contracts in the amounts of¥277 million ($2,458 thousand) and ¥2,089 million as of March 31, 2016 and 2015,
respectively.
(f)Financial covenants
For the year ended March 31, 2016
(1) The Company has entered into a syndicated loan contract dated on August 6, 2014
with its seven banks with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2015 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal
year, whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥8,500 million ($75,434 thousand) in long-term debt (including the current portion)
as of March 31, 2016.

23

19

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(f)

Financial covenants (continued)(2) The Company has entered into a syndicated loan contract dated on March 29,
2016 and loan commitment agreement dated on March 31, 2016 with its sevenbanks (same bank as we had contracted for the year ended March, 31 2015.) with
Sumitomo Mitsui Banking Corporation as arranger. The following financial covenant
is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2016 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal
year, whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($88,746 thousand) in long-term debt (including the current
portion) as of March 31, 2016.
Unused amount on loan commitment agreement as of March 31, 2016 and 2015
were as follows.

Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)¥20,000¥–$177,493–––¥20,000¥–$177,493

For the year ended March 31, 2015
The Company has entered into a syndicated loan contract dated on August 6, 2014 with
its seven banks with Sumitomo Mitsui Banking Corporation as arranger. The following
financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31, 2015
shall be equal to or exceed 75% of total consolidated net assets as of March 31, 2014
or of total consolidated net assets at the end of the most recent fiscal year, whichever isgreater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥9,500 million in long-term debt (including the current portion) as of March 31, 2015.

24

20

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20167.

Notes to Consolidated Statements of Income(a) Net Sales Based on Percentage-of-completion Method
Net sales on construction contracts accounted for under the percentage-of-completion
method amounted to ¥311,991 million ($2,768,823 thousand) and ¥284,140 million
for the years ended March 31, 2016 and 2015, respectively.
(b) Allowance for Losses on Construction Contracts Included in Cost of Sales
The allowance for losses on construction contracts was included in cost of sales in theamounts of ¥316 million ($2,804 thousand) and ¥2,115 million for the years ended
March 31, 2016 and 2015, respectively.
(c) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses at March
31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Retirement benefit expenses
Provision of allowance for doubtfulreceivables
Other
Total

¥ 7,566499¥ 6,643
1,011$ 67,145
4,428

0
8,364
¥16,429

7
8,024¥15,685

074,227$145,802(d) Research and Development Expenses
Research and development costs included in selling, general and administrative
expenses and manufacturing costs amounted to ¥1,380 million ($12,247 thousand) and¥1,118 million for the years ended March 31, 2016 and 2015, respectively.
(e) Gain on Sale of Property and Equipment
The significant components of gain on sale of property and equipment for the years
ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Buildings and structures
Machinery, equipment and vehicles
Others
Total

¥01
16
0
¥17
25

¥¥–
24
–
¥24

$008
141
0
$150

21

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(f)Loss on Sales and Disposal of Property and Equipment
The significant components of loss on sales and disposal of property and equipment
for the years ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Loss on sales
Loss on disposal
Others
Total

¥307
46
–
¥353

¥

0
78
28
¥108

$2,724408–$3,132(g) Impairment Loss
The Group recognized impairment loss on the following asset groups.
The Group principally calculates impairment loss by grouping together assets of theconstruction segments and by grouping assets of the other segment individually.
(1) For the year ended March 31, 2016
The book values of following assets were reduced to their recoverable values as aresult of profit deterioration on elder care facility and determination of closure of
product department in factory of assets for business. The corresponding write-down
was recognized in the amount of ¥711 million ($6,309 thousand) as part of otherincome expenses.
Location

Usage

Hachioji, Tokyo

Elder care facility(1 building)Esashi, Hokkaido
Rishiri, Hokkaido

Assets for business(1 building)
Assets for business(1 building)ClassificationLand
Land, machinery, equipment andvehiclesBuilding, structure, machinery,equipment and vehicles

Year ended
March 31, 2016
(Millions of (Thousands ofyen)
U.S. dollars)¥692$6,141

19

168

0

0

In addition, the recoverable value of above assets was estimated at its net realizablevalue based on amounts determined by a valuation made in accordance with realestate appraisal standards.

26

22

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(g) Impairment Loss (continued)(2) For the year ended March 31, 2015
The book values of following assets were reduced to their recoverable values as aresult of profit deterioration on elder care facility and determination of sales priceof a rental property and assets for business. The corresponding write-down wasrecognized in the amount of ¥926 million as part of other income expenses.

Location

Usage

Classification

Year ended
March 31
2015,
(Millions ofyen)Hachioji, Tokyo
Izumisano, Osaka
Hatsukaichi, Hiroshima

Elder care facility (1 building)Rental property (1 building)
Assets for business (1 building)Land and Buildings
Investment and other assets
Land

¥693
165
68

In addition, the recoverable value of the elder care facility was estimated basedon the estimated future cash flow discounted by the rate of 1.1%.
The recoverable value of a rental property and assets for business was estimatedat its net realizable value based on amounts determined by estimated sales price.

27

23

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 20168.

Notes to Consolidated Statements of Comprehensive Income

Amount of recycling and amount of income tax effects associated with other comprehensive
income for the years ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Unrealized holding gain on securities:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Unrealized holding gain on securities¥(1,241)(0)(1,241)411(830)¥1,323
–
1,323
(411)
911

$(11,013)(0)(11,013)
3,647(7,365)

(282)
–
(282)
93

246
–
246
(80)

(2,502)–(2,502)
825

(188)

166

(1,668)

16
16

31
31

141
141

Translation adjustments:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Translation adjustments

(481)
–
(481)
–
(481)

719
–
719
–
719

(4,268)–(4,268)–(4,268)Retirement benefits liability adjustments:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Retirement benefits liability adjustments

(233)
(23)
(257)
(4)
(262)

(1,583)
1,933
350
(0)
349

(2,067)(204)(2,280)(35)(2,325)

–
–

38
–

–
–

–

38

–

Deferred gain on hedging instruments,
net of taxes:
Changes in items during the period
Amount of recycling
Before income tax effect adjustment
Income tax effect adjustment
Deferred gain on hedging instruments,
net of taxes
Land revaluation:
Income tax effect adjustment
Land revaluation

Share of other comprehensive income of affiliates
accounted for by the equity method:
Changes in items during the period
Amount of recycling
Share of other comprehensive income ofaffiliates accounted for by the equity method
Total other comprehensive income

28¥(1,746)¥2,216$(15,495)

24

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

9.

Notes to Consolidated Statements of Changes in Net Assets(a) Type and number of shares issued and treasury stock
For the year ended March 31, 2016
Balance atApril 1,
2015
Shares issued:
Common stock

813,366,605
Balance atApril 1,
2015

Treasury shares:
Common stock

482,953

Increase
Decrease(Number of shares)––

Increase
Decrease(Number of shares)
19,300737

Balance at
March 31,2016
813,366,605
Balance at
March 31,2016
501,516

Note 1:

Increase of common stock is due to the purchase of fractional shares.

Note 2:

Decrease of common stock is due to the sale of fractional shares in response to shareholder
requests.

For the year ended March 31, 2015
Balance atApril 1,
2014
Shares issued:
Common stock
2nd Series Class A preferred stock
3rd Series Class D preferred stock
Total

808,262,394
1,500,000
7,500
809,769,894

Increase
Decrease(Number of shares)
5,104,211––
5,104,211–
1,500,000

7,500

1,507,500

Balance at
March 31,2015
813,366,605––
813,366,605

Note 1:

Increase of common stock is due to the acquisition of common stock by exercising call options
on 2nd Series Class A preferred stock and the 3rd Series Class D preferred stock.

Note 2:

Decrease of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due
to redemption by exercising a call option.

29

25

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(a) Type and number of shares issued and treasury stock (continued)
Balance atApril 1,
2014
Treasury shares:
Common stock
2nd Series Class A preferred stock
3rd Series Class D preferred stockTotal

468,382––
468,382

Increase
Decrease(Number of shares)
15,7061,500,000
7,500
1,523,206

1,135
1,500,000
7,500
1,508,635

Balance at
March 31,2015
482,953––
482,953

Note 1:

Increase of common stock is due to the purchase of fractional shares.

Note 2:

Decrease of common stock is due to the sale of fractional shares in response to shareholder
requests.

Note 3:

Increase of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due tothe acquisition of common stock by exercising a call option.

Note 4:

Decrease of 2nd Series Class A preferred stock and 3rd Series Class D preferred stock is due
to redemption by exercising a call option.

(b) Dividends:(1) Dividends paid
For the year ended March 31, 2016

Resolution
Annual general
meeting of theshareholders on
June 26, 2015

Type of shares
Common stock

Total
dividends(Millions ofyen)

Dividends
per share
(Yen)

¥812

¥1.00

Dividends
per share(Yen)¥ 6.6958.45

Cut-off
dateMarch 31,2015

Effective
date
June 29,2015

For the years ended March 31, 2015

Resolution

Type of shares

Total
dividends(Millions ofyen)Annual general
meeting of theshareholders on
June 27, 2014

2nd Series Class A preferred stock
3rd Series Class D preferred stock

¥10
0

30

¥10

–

Cut-off
dateMarch 31,2014

Effective
date
June 30,
2014

26

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Dividends: (continued)(2) Dividends with the cut-off date in the year ended March 31, 2016 and theeffective date in the year ending March 31, 2017 were as follows:

Resolution
Annual general
meeting of theshareholders on
June 29, 2016

Type of shares
Common stock

Total
dividends(Millions ofyen)

Dividends
per share(Yen)¥1,625¥2.00

Cut-off
date

Effective
date

March 31,2016

June 30,
2016

Dividends with the cut-off date in the year ended March 31, 2015 and theeffective date in the year ending March 31, 2016 were as follows:

Resolution
Annual general
meeting of theshareholders on
June 26, 2015

Type of shares
Common stock

Total
dividends(Millions ofyen)

Dividends
per share
(Yen)

¥812

¥1.00

Cut-off
date

Effective
date

March 31,2015

June 29,2015

10. Notes to Consolidated Statements of Cash Flows
Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2016 and 2015 were as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Cash and deposits
Time deposits with maturities of overthree months
Cash and cash equivalents

31¥66,209¥53,305$587,584(8,479)¥57,730(8,739)¥44,565(75,248)$512,335

27

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

11. Financial Instruments(a) Overview(1) Policy for financial instruments
The Group limits investments of surplus funds to short-term bank deposits, andraises necessary funds through bank loans.
In addition, the Group only uses derivatives for hedging risk of fluctuation offoreign currency exchange rates or interest rates, not for speculative transactions.
(2) Types of financial instruments and related risk and risk management system
Trade notes receivable, accounts receivable on completed construction contracts
and other are exposed to credit risk in relation to customers and trading partners.
Also, the Group’s main investments in securities are shares of companies, andthey are exposed to market price fluctuation risk.
Management of credit risks (Risks of default by customers and trading partners)
The Company manages due dates and balances of trade notes receivable, accounts
receivable on completed construction contracts and other for individual customers
and trading partners through its internal systems and monitors their credit status.
These systems enable the Group to identify any concerns for doubtful receivables at
an early stage and reduce risks of uncollectible amounts. Consolidated subsidiaries
also manage credit risks in the same manner as the Company. The Company
minimizes credit risks by mainly holding held-to-maturity securities with highcredit ratings.
Management of market risks (Risks of fluctuations in currency exchange andinterest rates)
The Company and certain consolidated subsidiaries hold trade receivables inforeign currencies. However, the risk of fluctuations in the currency exchange
rate is not significant because a similar amount of trade payables are also held,
and the Company utilizes foreign exchange forward contracts to hedge the risk ofchanges in the foreign currency exchange rate.
Loan payables are mainly for short-term operating funds. The Group manages
loan payables to flexibly execute or revise its fund management plans. In order to
fix the interest expense for long-term debt bearing interest at variable rates, theGroup utilizes interest rate swap transactions for certain long-term debt.
Derivatives are foreign currency exchange forward contracts held for the purposeof hedging future risk of fluctuation of foreign currency exchange rate of themonetary liabilities denominated in foreign currencies, and interest rate swaps
held for the purpose of hedging future risk of fluctuation of interest rates on loans.
Derivative transactions are carried out in accordance with the Companies’ internal
rules on transactions, and with highly rated financial institutions used as counterparties to reduce the risk of default.
Information regarding the method of hedge accounting, hedging instruments andhedged items, hedging policy, and assessment of hedge effectiveness is found in
Note 2-(o).
3228Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(a) Overview (continued)(3) Supplementary explanation of the fair value of financial instruments
The fair values of financial instruments are based on market prices, or, if nomarket prices are available, they include estimated amounts. Because estimationsof the fair value incorporate various factors, applying different assumptions can,in some cases, result in different fair values.
In addition, the amounts of derivatives in Note 13 “Derivative and Hedge
Accounting” are not necessarily indicative of the actual market risk involved in
the derivative transactions.
(b) Fair value of financial instruments
Amounts recognized in the consolidated balance sheets, market value, and the difference
at March 31, 2016 and 2015, were as shown below. Moreover, items for which it isextremely difficult to determine fair values are not included in the following table (seeNote 2).
Carrying
value
Cash and deposits
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
Securities and investments
in securities
Held-to-maturity
securities
Other securities
Long-term loans receivable
Allowance for doubtfulreceivables (*1)
Total assets
Trade notes payable,accounts payable on
construction contracts
and other
Electronically recorded
payableShort-term bank loans
and current portion of
long-term debt
Long-term debt
Total liabilities
Derivative transactions (*2)
Hedge accounting is notappliedHedge accounting isappliedAs of March 31, 2016
Fair
Carrying
Fair
value
Difference
value
value
Difference(Millions of yen)(Thousands of U.S. dollars)¥ 66,209¥ 66,209

134,596

134,593

7,720

7,731

280
7,440
6,333

¥

–

$ 587,584$ 587,584(3)

1,194,497

1,194,471

68,512

68,610

10

291
7,440

10
–

(5,485)848
209,375

822
209,357(25)(17)

115,745

115,745–

22,09622,096

4,418
18,971¥161,232

4,419
18,759¥161,019

(22)
9

–

(26)
88

2,582
66,027

88–(48,677)
7,525
1,858,138

7,294
1,857,978

(221)
(150)

1,027,200

1,027,200–

196,095

196,095–

0(212)¥(212)

39,208168,361$1,430,883

39,217
166,480$1,428,993

0(1,881)$(1,881)

(22)

–

(195)

(195)

–

9

–

79

79

–

–

2,484
66,02756,203$(*1): Allowance for doubtful receivables recognized individually is offset.

(*2): Assets and liabilities arising from derivative transactions are shown at net value. If total is liabilities,
amounts is shown as “( ).”33

29

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Fair value of financial instruments (continued)
As of March 31, 2015
Carrying
Fair
value
value
Difference(Millions of yen)
Cash and deposits
Trade notes receivable,accounts receivable oncompleted construction
contracts and other
Allowance for doubtfulreceivables (*1)
Securities and investments
in securities
Held-to-maturity
securities
Other securities
Long-term loans receivable
Allowance for doubtfulreceivables (*1)
Total assets
Trade notes payable,accounts payable on
construction contracts andotherElectronically recorded
payableShort-term bank loans
and current portion of
long-term debt
Long-term debt
Total liabilities
Derivative transactions (*2)
(*1):

(*2):

¥ 53,305¥ 53,305¥–

128,591(7)

128,584

128,572

(12)

8,789

8,794

5

279
8,509
6,454

285
8,509

5
–

(5,268)
1,186
191,865

1,128
191,800(58)(64)

132,552

132,552–––

10,2109,787¥152,550
292

10,205
9,643¥152,401
292

(5)
(143)
¥(148)–

Allowance for doubtful receivables recognized individually is offset.

Assets and liabilities arising from derivative transactions are shown at net value.

Note 1:

Calculation of the fair value of financial instruments and other mattersrelated to investment securities and derivative transactions

Assets(1) Cash and deposits

Because settlement periods of deposits are short and their market values arealmost the same as their book values, the book values are used.

(2) Trade notes receivable, accounts receivable on completed construction contracts
and other

The fair values are determined using the present value of discounted collectible
principal and interest amounts estimated reflecting their collectability based on an
appropriate rate in which a credit spread is added to a risk-free benchmark rate
(such as a government bond yield) corresponding to the remaining term.

34

30

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Fair value of financial instruments (continued)(3) Securities and investments in securities
Concerning the market value of investment securities, the market value for stocks
is the price quoted on the stock exchange, and the market value for bonds is theprice provided by financial institutions.
In addition, for matters concerning to securities, see “Notes on securities.”(4) Long-term loans receivable
These fair values are determined using the present value of discounted collectible
principal and interest amounts estimated reflecting their collectability, based on
an appropriate rate in which a credit spread is added to a risk-free benchmark rate
(such as a government bond yield) corresponding to the remaining term. Further,
the fair value of doubtful debts are determined by discounting the value of expectedcash flows using the same discount rate, or estimated collectible amount secured
by collateral or guaranteed.
Liabilities(1) Trade notes payable, accounts payable on construction contracts and other andElectronically recorded payable
The book values are used, because these are operation payable and settlement
periods are within a year and their market values are almost the same as theirbook values.
(2) Short-term bank loans
The carrying amount of the current portion of long-term debt approximates fairvalue since the carrying amount is equivalent to the present value of future cash
flows discounted using the current borrowing rate for similar debt with a compatible
maturity. For borrowings other than the current portion of long-term debt, thecarrying amount approximates fair value due to the short maturities of these
instruments.
(3) Long-term debt
Fair value of long-term debt is based on the price provided by financial institutionsor the present value of future cash flows discounted using the current borrowing
rate for similar debt with a comparable maturity. The fair value of loans subject tospecial hedge accounting treatment of interest rate swaps is based on the present
value of the total principal and interest of the borrowings hedged by interest rate
swaps, discounted by the interest rate to be applied if similar new loans wereentered into.
The information of the fair value for derivatives is included in Note 13.

35

31

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Fair value of financial instruments (continued)
Note 2:Financial instruments for which it is extremely difficult to measure the fairvalue
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Unlisted stocks (*)¥3,272¥3,272$29,037(*): Unlisted stocks are not included in “(3) Securities and investments in securities”
because these have no market value and it is extremely difficult to measure thefair value.
Note 3:

The redemption schedule for monetary claims and held-to-maturity debt
securities with maturity dates subsequent to March 31, 2016 and 2015

Within1 yearDeposits¥ 66,177
Trade notes receivable,accounts receivable oncompleted construction
contracts and other132,724
Securities and investments
in securities
Held-to-maturity
securities (Bonds)–
Long-term loans receivable
1¥198,904

Within1 yearDeposits¥ 53,279
Trade notes receivable,accounts receivable oncompleted construction
contracts and other125,602
Securities and Investments
in securities
Held-to-maturity
securities (Bonds)–
Long-term loans receivable
6¥178,887

Note 4:OverOver
1 year
5 years
and within and within
5 years
10 years(Millions of yen)
¥

–

¥

–

As of March 31, 2016Over
10 years
¥

Over
Over
1 year
5 years
Within and within and withinOver
5 years
10 years 10 years
1 year(Thousands of U.S. dollars)–$ 587,300

$

–

$

–

$

–

1,872

–

–

1,177,884

16,613

–

–

166
147
¥2,186

113
70
¥183

–
628
¥628

–
8
$1,765,211

1,473
1,304
$19,400

1,002
621$1,624–
5,573$5,573As of March 31, 2015
Over
Over
1 year
5 years
and within and within
5 years
10 years(Millions of yen)
¥

–

¥

–

Over
10 years
¥

–

2,981

–

–

121
143
¥3,247

157
287
¥445

–
748
¥748

The redemption schedule for corporate bonds, long-term debt, and otherinterest bearing debt with maturity dates subsequent to the consolidatedbalance sheet date. See Note 20.
36

32

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201612. Securities
Securities at March 31, 2016 and 2015 were summarized as follows:(a) Held-to-maturity securities

Securities whose fairvalue exceeds theircarrying value:
Bonds

Securities whose fairvalue exceeds theircarrying value:
Bonds

As of March 31, 2016
Carrying
Fair
Unrealized Carrying
Fair
Unrealized
value
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)

¥280

¥291

¥10

$2,484$2,582$88

As of March 31, 2015
Carrying
Fair
Unrealized
value
value
gain
(Millions of yen)

¥279

¥285

¥5

(b) Other securities
Balancesheet
amountUnrealized gain:
Stock
Unrealized loss:
Stock
Total

Unrealized gain:
Stock
Unrealized loss:
Stock
Total

As of March 31, 2016
Balance
Unrealized
sheet
Unrealized
gain (loss)
amountgain (loss)
Cost
Cost
(Millions of yen)(Thousands of U.S. dollars)¥4,033¥2,398¥ 1,635$35,791$21,281$14,510

3,406¥7,4404,485¥6,883(1,079)¥ 556

30,227$66,027

39,802$61,084(9,575)$04,934

As of March 31, 2015
Balancesheet
Unrealized
amountCost
gain (loss)(Millions of yen)
¥4,376¥2,445¥1,9304,133¥8,5094,266¥6,712(132)¥1,797(c) Sales of other securities
Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Sales proceeds
Total gain on sales of security
Total loss on sales of security

¥3
3
–
37

¥3
2
–

$26
26
–
33

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

13. Derivatives and Hedge Accounting
Derivative transactions for the years ended March 31, 2016 and 2015 were summarized asfollows:(a) Derivative transactions to which the hedge accounting is not applied.
(1) Currency-related transactions
Transaction Contract
Segmentation
type
amountOff-market
transaction

Note 1:

Foreignexchange
forwardcontracts
Long
U.S. dollar¥1,452As of March 31, 2016
Over
Fair Valuation Contract
Over
Fair
Valuation
1 year value(loss)
amount1 yearvalue(loss)(Millions of yen)(Thousands of U.S. dollar)

¥585

¥(22)

¥(22)

$12,886$5,191$(195)$(195)

Estimated fair value was provided by the counterparty financial institution.

There were no derivative transactions to which the hedge accounting is not applied forthe year ended March 31, 2015.
(b) Derivative transactions to which the hedge accounting is applied(1) Currency-related transactions
Method ofhedge
accounting

As of March 31, 2016
Transaction
type

Allocation Foreign
accounting exchange
method for forward
foreigncontracts
exchangeLongforward
U.S. dollar
contracts
Long
U.S. dollar
Total
Note 1:

Note 2:Future foreign
currencytransactions

ContractOver
Fairamount1 yearvalue(Thousands of U.S. dollars)

¥ 31

¥ –

Note 2

$ 275

$

–

Note 2

298
¥330

30
¥30

¥9
¥9

2,644
$2,928

266
$266

$79
$79

Since foreign exchange forward contracts accounted for are included in that of the account payable as thehedged item, the fair values of the contracts are included in the fair values of the account payable.
As of March 31, 2015
Transaction
type

Allocation Foreign
accounting exchange
method for forward
foreigncontracts
exchangeLongforward
U.S. dollar
contracts
Long
U.S. dollar
Total
Note 2:

Accounts
payableContractOver
Fairamount1 yearvalue(Millions of yen)

Estimated fair value was provided by the counterparty financial institution.

Method ofhedge
accounting

Note 1:Hedgeditem

Hedgeditem
Accounts
payableFuture foreign
currency

ContractOveramount1 year(Millions of yen)

Fair
value

¥

0

Note 2

330
¥330

¥292
¥292

30

2,902
¥2,932¥Estimated fair value was provided by the counterparty financial institution.

Since foreign exchange forward contracts accounted for are included in that of the account payable as thehedged item, the fair values of the contracts are included in the fair values of the account payable.

38

34

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(b) Derivative transactions to which the hedge accounting is applied (continued)(2) Interest-related transactions
Method ofhedge
accounting
Short-cut
methodNote 1:

Note 1:

Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating

Long-term
debt

ContractOver
Fairamount1 yearvalue(Millions of yen)

¥100

–

Note 1

ContractOver
Fairamount1 yearvalue(Thousands of U.S. dollars)

$887

–

Note 1Since these interest rate swaps accounted for by short-cut method are included in that of thelong-term debt as the hedged item, the fair values of the contracts are included in the long-term
debt (The current portion of long-term debt is short-term bank loans).

Method ofhedge
accounting
Short-cut
methodAs of March 31, 2016

As of March 31, 2015
Transaction
type

Hedgeditem

Interest-rate
swaps:
Pay fixed/
Receivefloating

Long-term
debt

ContractOver
Fairamount1 yearvalue(Millions of yen)

¥700

¥100

Note 1Since these interest rate swaps accounted for by short-cut method are included in that of thelong-term debt as the hedged item, the fair values of the contracts are included in the long-term
debt (The current portion of long-term debt is short-term bank loans).

14. Retirement Benefit Plans
For the year ended March 31, 2016, the Group has either funded or unfunded defined benefit
and defined contribution plans.
The Group has a defined benefits pension plan, i.e. defined benefit company pension plan
and lump-sum retirement benefit plans. Certain consolidated domestic subsidiaries participate
in the Small and Medium Enterprise Retirement Allowance Mutual Aid Scheme. Certain
foreign consolidated subsidiaries have an employee pension trust. The Company and certain
consolidated subsidiaries have a defined contribution pension plan.
In addition, for certain defined benefit company pension plan and lump-sum retirement benefit
plans and the defined contribution pension plan of the Company and certain consolidated
subsidiaries, the simplified method is applied to calculate their liability for retirement benefits
and retirement benefits expenses.

39

35

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

The changes in the retirement benefit obligation during the year ended March 31, 2016 and2015 were as follows (excluding plans for which the simplified method is applied):Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Balance at the beginning of year
Cumulative effect of change in accounting
principle
Restated balance at the beginning of
the period
Service cost
Interest cost
Actuarial loss
Retirement benefit paid
Foreign currency translation
Increase from newly consolidated subsidiary
Balance at the end of year

¥19,481¥19,005$172,887

–

(315)

–

19,481717
95
231(2,189)(19)
0¥18,318

18,690
695
317
1,582
(1,910)18
86¥19,481

172,887
6,363
843
2,050
(19,426)(168)
0$162,566

The changes in plan assets during the year ended March 31, 2016 and 2015 were as follows(excluding plans for which the simplified method is applied):Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Balance at the beginning of year
Expected return on plan assets
Actuarial gain
Retirement benefit paid
Foreign currency translation
Balance at the end of year

¥68
4
(1)
(1)
(3)
¥65

¥58
4
(0)
(2)
7
¥68

$603
35
(8)
(8)
(26)
$576

The changes in liability for retirement benefits based on the simplified method during theyear ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Balance at the beginning of year
Retirement benefit expense
Retirement benefit paid
Contribution to defined contribution plan
Balance at the end of year

¥1,191123(85)(8)¥1,22140¥1,174
128
(103)
(8)
¥1,191$10,569
1,091
(754)
(70)
$10,83536

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

A reconciliation of the funded retirement benefit obligation and plan assets and the net
liability for retirement benefits recognized in the consolidated balance sheet at March 31,
2016 and 2015 is as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net liability for retirement benefits in the
consolidated balance sheet
Liability for retirement benefits
Assets for retirement benefits
Net liability for retirement benefits in the
consolidated balance sheet

¥

327
(209)
118
19,356

¥ 321
(225)
96
20,508$2,902(1,854)
1,047
171,778

19,47420,604

172,825

19,474–20,604–

172,825–¥19,474¥20,604$172,825

Note: Including plans for which the simplified method is applied.
The components of retirement benefit expense during the year ended March 31, 2016 and2015 were as follows:Year ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Amortization of net retirement benefit
obligation at transition
Retirement benefit expense calculated by
the simplified method
Total retirement benefit expense

41

¥ 717
95
(4)
385
(409)

¥ 695
317
(4)
358
(409)

$ 6,363
843
(35)
3,416
(3,629)

–

1,984

–

123
¥ 910

128
¥3,0701,091$ 8,07537

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

The components of retirement benefit liability adjustments included in other comprehensive
income (before tax effect) during the year ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Actuarial loss
Prior service cost
Net retirement benefit obligation at transition
Total

¥ 151
(409)
–
¥(257)¥(1,224)
(409)
1,984
¥ 350

$ 1,340(3,629)–$(2,280)

The components of retirement benefit liability adjustments included in accumulated othercomprehensive income (before tax effect) as of March 31, 2016 and 2015 were follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Unrecognized actuarial loss
Unrecognized prior service costTotal

¥ 3,101(2,347)¥ 754¥ 3,253(2,756)¥ 497$ 27,520(20,828)$ 6,691

The fair value of plan assets, by major category, as a percentage of total plan assets as ofMarch 31, 2016 and 2015 were follows:2016

As of March 31,

2015

Bonds

83%

91%

Cash and Deposits
Other
Total

16%
1%
100%

8%
1%
100%

The expected return on plan assets has been estimated based on the anticipated allocation toeach asset class and the expected long-term returns on assets held in each category.
The principal assumptions used for above plans were as follows:
2016
Discount rate
Expected rate of return on plan assets
Expected rate of increase in salaries

As of March 31,

Principally 0.3%
4.7%
Principally 4.0%

42

2015

Principally 0.3%
5.6%
Principally 3.4%

38

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

The contribution to defined contribution plans in the company and consolidated subsidiaries
were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Contribution to defined contribution plans

¥680

¥653

$6,034

15. Income Taxes
The significant components of deferred tax assets and liabilities at March 31, 2016 and 2015
were as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Deferred tax assets:
Liability for retirement benefits
Accounts payable and accrued expenses
Allowance for bad debts
Allowance for losses on construction
contracts
Reserve for defects on completed
construction projects
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets

43¥ 5,984
3,167
1,999

¥ 6,674
2,688
2,142

$ 53,106
28,106
17,740

290

529

2,573

246
2,584
14,272(9,493)
4,778

282
1,690
14,008(8,513)
5,495

2,183
22,932
126,659(84,247)
42,403

(169)
(281)
(451)
¥ 4,327

(581)
(313)
(894)
¥ 4,600(1,499)(2,493)(4,002)$ 38,400

39

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

The following table summarizes the significant differences between the statutory tax rate
and the effective tax rates for the years ended March 31, 2016 and 2015:
Years ended March 31,
2016
2015
Statutory tax rate
Non-deductible expenses
Non-taxable income
Per capita inhabitants’ taxes
Tax credit
Valuation allowance
Different tax rate applied to foreign subsidiaries
Change in corporate tax rate
Other
Effective tax rates

33.1%
2.3
(1.4)
1.2
(3.0)
7.8
(0.1)
1.0
0.4
41.3%

35.6%
1.7
(3.0)
0.4
(2.2)
(8.5)
(0.7)
3.9
2.2
29.4%

The “Act for Partial Amendment of the Income Tax Act, etc.” and the “Act for Partial
Amendment of the Local Tax Act, etc.” were enacted on March 29, 2016 and the effective
statutory tax rate used to measure deferred tax assets and liabilities was changed from
32.3 % for the year ended March 31, 2015 to 30.9% for those for which taxes are expected
to be returned or paid from April 1, 2016 to March 31, 2018, and to 30.6% for those forwhich taxes are expected to be returned or paid on or after April 1, 2018.
As a result, net deferred tax assets (after deducting deferred tax liabilities, excluding for thoseon land revaluation) decreased by ¥178 million ($1,579 thousand), income taxes-deferredincreased by ¥188 million ($1,668 thousand), unrealized holding gain on securities increased¥9 million ($79 thousand) and deferred gain on hedging instruments, net of taxes increasedby ¥0 million ($0 thousand) as of and for the year ended March 31, 2016.
In addition, deferred tax liabilities on land revaluation decreased ¥16 million yen ($141
thousands) and Land revaluation increased equal amounts.
16. Segment Information, etc.
Segment Information(a) Outline of Segments
The Company’s reportable operating segments are components for which separate
financial information is available and that are evaluated regularly by the board of directors
in determining the allocation of management resources and in assessing performance.
The Company currently divides its operations into Civil Construction and Building
Construction, managed by the Civil Engineering Division and the Building Administration
Division, respectively. Business strategies are formulated by each segment.
Accordingly, the Company divides its operations into two reportable operating segmentson the same basis as it uses internally; Civil Construction and Building Construction.
Civil Construction consists mainly of governmental public works like bridge construction.
Building Construction is awarded by private sector companies for things like high riseapartment buildings.
44

40

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

Segment Information (continued)(b) Accounting methods used to calculate segment income (loss), segment assets andother items for reportable segments
Accounts for reportable segments are for the most part calculated in line with thegenerally accepted standards used for the preparation of the consolidated financial
statements.
Segment income (loss) for reportable segments is based on gross profit.
Amounts for intersegment transactions or transfers are based on the market prices
determined by third party transactions.
The Company does not allocate any assets to reportable operating segments.
(c) Segment income, segment assets and other items for reportable segments
Year ended March 31, 2016
Reportable operating segments
Civil
Building
Total
Others
Total(Millions of yen)

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales
Segment income

Adjustments Consolidated¥165,319¥248,812¥414,131¥826¥414,958¥–¥414,958

1,127¥166,446

3¥248,815

1,130¥415,261

76
¥903

1,206
¥416,164(1,206)¥(1,206)–¥414,958

21,25918,31339,573348

39,921(127)

39,794Note 1: “Others,” which includes the Company’s business of solar power, elder care facilities and insurance agent,
does not qualify as a reportable operating segment.
Note 2:Adjustment for segment income is the reduction of income recognized between reportable operating
segments.

Note 3:

Segment income corresponds to gross profit in the consolidated statement of income.

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales
Segment income

Year ended March 31, 2016
Reportable operating segments
Civil
Building
Total
Others
Total(Thousands of U.S. dollars)

Adjustments Consolidated$1,467,154$2,208,129$3,675,283$7,330$3,682,623$–$3,682,623

10,001$1,477,156

26$2,208,155

10,028$3,685,312

674$8,013

10,702$3,693,326(10,702)$(10,702)–$3,682,623

188,667

162,522351,198

3,088

354,286(1,127)353,159

45

41

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

Segment Information (continued)
Year ended March 31, 2015
Reportable operating segments
Civil
Building
Total
Others
Total(Millions of yen)

Sales
External
Customers
Intersegment
transactions
or transfers
Net sales

Adjustments Consolidated¥141,220¥235,805¥377,026¥798¥377,825¥–¥377,825

1,131¥142,352

7¥235,813

1,139¥378,165

63
¥861

1,202
¥379,027(1,202)¥(1,202)–¥377,825

17,160

10,57327,733329

28,063(113)

27,950

Segment income

Note 1:“Others,” which includes the Company’s business of solar power, elder care facilities andinsurance agent, does not qualify as a reportable operating segment.

Note 2:Adjustment for segment income is the reduction of income recognized between reportable
operating segments.

Note 3:

Segment income corresponds to gross profit in the consolidated statement of income.

Related Information
For the year ended March 31, 2016(a) Product and service information
See “Segment income, segment assets and other items for reportable segments.”(b) Geographical segment information(1) SalesJapan¥350,035

Year ended March 31, 2016
Asia
Others
Total
Japan
Asia
Others
Total(Millions of yen)(Thousands of U.S. dollars)¥63,704¥1,217¥414,958$3,106,451 $565,353$10,800$3,682,623

Notes: Geographical segments are determined based on the country/region of domicile ofcustomers.

(2) Tangible fixed assets
Geographical segment information on tangible fixed assets has been omitted as
the amount of tangible fixed assets in Japan constituted over 90% of total as ofMarch 31, 2016.
(c) Major customer information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2016.

46

42

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

Related Information (continued)
For the year ended March 31, 2015(a) Product and service information
See “Segment income, segment assets and other items for reportable segments.”(b) Geographical segment information(1) SalesJapan

Year ended March 31, 2015

¥315,992

Asia

OthersTotal¥59,397¥2,435¥377,825(Millions of yen)

Notes: Geographical segments are determined based on the country/region of domicile ofcustomers.

(2) Tangible fixed assets
Geographical segment information on tangible fixed assets has been omitted as
the amount of tangible fixed assets in Japan constituted over 90% of total as ofMarch 31, 2015.
(c) Major customer information
Information on major customers has been omitted as there were no sales to a single
customer constituting over 10% of net sales for the year ended March 31, 2015.
Loss on impairment by reportable segment
For the year ended March 31, 2016, ¥711 million ($6,309 thousand) impairment loss wasrecorded.
Note 1:

Note 2:

The above amount is assets for business.

The impairment loss was not allocated to operating segments.

For the year ended March 31, 2015, ¥926 million impairment loss was recorded.

Note 1:

Note 2:

The above amount consists of elder care facilities of ¥693 million, rental propertyof ¥165 million, and assets for business of ¥68 million.
The impairment loss was not allocated to operating segments

Amortization of goodwill and unamortized balance by reportable segment
For the year ended March 31, 2016 and 2015, there were no amortization and unamortizedbalance of goodwill by reportable segment.

47

43

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016

Gain on negative goodwill by reportable segment
For the years ended March 31, 2016, there were no gain on negative goodwill by reportablesegment.
For the years ended March 31, 2015, negative goodwill has been recognized due to theadditional acquisition of share of Pt. SMCC Utama Indonesia, etc.
Gain on negative goodwill was ¥40 million for the year ended March 31, 2015.
Gain on negative goodwill was not allocated to operating segments.
17. Related Party Transactions(a) Related party transaction
Transactions with affiliates for the year ended March 31, 2016 were summarized asfollows:

Affiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Capitalinvestment

Number of
voting shares
held as apercentage ofvoting sharesissued¥1030.0%Year ended March 31, 2016

Nature ofTotal amounttransactionof transaction(Millions of yen)
Long-term
non operating
accounts
receivable
Long-term
accounts
payableAffiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Capitalinvestment

Number of
voting shares
held as apercentage ofvoting sharesissued$8830.0%Note 2:
Note 3:¥2,579Balance at
March 31,2016

Long-term
non operating
accounts
receivable¥3,158Long-term
accounts
payable¥2,579Year ended March 31, 2016

Nature ofTotal amounttransactionof transaction(Thousands of U.S. dollars)

Balance sheet
account

Balance at
March 31,2016

Long-term
non operating
accounts
receivable

Long-term
non operating
accounts
receivable$28,026

Long-term
accounts
payableNote 1:¥2,579Balance sheet
account$22,887$22,887

Long-term
accounts
payable$22,887

Total amount of transaction represents the amount of a claim for damages from Yoshiikikaku Co., Ltd. and theamount of guarantee for financial institution.

Allowance for above long-term non operating accounts receivable was recognized in the amount of ¥2,843
million ($25,230 thousand).

Consumption tax was excluded from the total amount of the transaction, however it was included in the balance
at March 31, 2016.

48

44

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 2016(a) Related party transaction (continued)
Transactions with affiliates for the year ended March 31, 2015 were summarized asfollows:

Affiliated company:
Yoshiikikaku Co., Ltd.
(Real estate business)

Capitalinvestment

Number of
voting shares
held as apercentage ofvoting sharesissued¥1030.0%Year ended March 31, 2015

Nature ofTotal amounttransactionof transaction(Millions of yen)
Long-term
non operating
accounts
receivable
Long-term
accounts
payableNote 1:
Note 2:
Note 3:¥2,579¥2,579Balance sheet
account

Balance at
March 31,2015

Long-term
non operating
accounts
receivable¥3,158Long-term
accounts
payable¥2,579Total amount of transaction represents the amount of a claim for damages from Yoshiikikaku Co., Ltd. and theamount of guarantee for financial institution.

Allowance for above long-term non operating accounts receivable was recognized in the amount of ¥2,840
million.

Consumption tax was excluded from the total amount of the transaction, however it was included in the balance
at March 31, 2015.

(b) Significant affiliates(1) The parent information
There is no parent company at March 31, 2016 and 2015.
(2) Financial information about significant affiliates
There is no significant affiliates at March 31, 2016 and 2015

49

45

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201618. Per Share Information
Net assets and basic profit per share as of and for the years ended March 31, 2016 and 2015
were as follows:
2016
Net assets per share
Profit per share – basic
Profit per share – diluted(Yen)¥51.75
12.18
–

2015
¥42.40
8.59
8.56

2016

(U.S. dollars)$0.4590.108–

Note: Profit per share – diluted was omitted as there were no diluted share for the year
ended March 31, 2016.
The basis of calculation for net assets per share at March 31, 2016 and 2015 were as
follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Total net assets
Amounts deducted from total net assets[Including non-controlling interests]
Total net assets attributable to common stock¥48,136
6,069[6,069]¥42,066¥40,190
5,720[5,720]¥34,469$427,192
53,860[53,860]$373,322(Thousands of shares)

Number of shares of common stock used todetermine net assets per share

812,865

812,883

The basis for calculating basic profit per share – based and profit per share – diluted for theyears ended March 31, 2016 and 2015 were as follows:

Profit per share – basic:
Profit attributable to owners of parent
Amount not available to common shareholders
Profit attributable to owners of parent
per share – basic

Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)¥9,902–¥6,955–$87,877–¥9,902¥6,955$87,877(Thousands of shares)

Average number of shares of common stock
outstanding

812,874

809,466

Years ended March 31,
2016
2015
(Thousands of shares)
Increase in number of share of common stock[Including preferred stock]

50

–
[–]

3,425
[3,425]46

Sumitomo Mitsui Construction Co., Ltd.
Notes to Consolidated Financial Statements
March 31, 201619. Subsequent Event
There is no information to be disclosed as of March 31, 2016.
20. Short-Term Bank Loans and Long-Term Debt
Short-term bank loans generally represent notes, principally at average annual interest rates
of 1.7% and 1.2% at March 31, 2016 and 2015, respectively.
Long-term debt at March 31, 2016 and 2015 were summarized as follows:

Debt with collateral (at average interest ratesof 2.3% at 2016 and 2.4% at 2015)
Debt without collateral (at average interest
rates of 1.4% at 2016 and 1.6% at 2015)
Lease obligations
Current portion (excluding lease obligations)
Current portion of lease obligations
Deposits from employees

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)¥

487¥01,223$ 4,321

21,415
1,310(2,930)(614)
2,101¥21,769

10,837803(2,273)(278)
1,947¥12,259

190,051
11,625(26,002)(5,449)18,645$193,193

The aggregate annual maturities of long-term debt subsequent to March 31, 2016 weresummarized as follows:Year ending March 31,
2017
2018
2019
2020 and thereafter(Millions ofyen)(Thousands of
U.S. dollars)¥ 2,930
8,081
786
10,103¥21,902$ 26,002
71,716
6,975
89,660$194,373

The aggregate annual maturities of lease obligations subsequent to March 31, 2016 weresummarized as follows:Year ending March 31,
2017
2018
2019
2020 and thereafter

51(Millions ofyen)(Thousands of
U.S. dollars)

¥ 614
414
158
122
¥1,310$05,449
3,674
1,402
1,082
$11,62547

52

Non-Consolidated Financial Statements
Sumitomo Mitsui Construction Co., Ltd.
Year ended March 31, 2016
with Independent Auditor’s Report53Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2016

AssetsCurrent assets:
Cash and deposits
Trade notes receivable
Accounts receivable on completed construction contracts
Inventories
Deferred tax assets (Note 7)
Other current assets
Allowance for doubtful receivables
Total current assets

Non-current assets:
Property and equipment, at cost:
Land (Note 4-(b))
Buildings (Note 4-(b))
Structures (Note 4-(b))
Machinery and equipment
VehiclesTools, furniture and fixtures
Construction in progress
Accumulated depreciation
Property and equipment, net
Intangible fixed assets
Investments and other assets:
Investments in securities (Note 4-(b))
Investments in subsidiaries and affiliates (Notes 4-(b) and 6)
Long-term loans receivable
Long-term loans to employees
Long-term prepaid expenses
Deferred tax assets (Note 7)
Other
Allowance for doubtful receivables
Total investments and other assets
Total non-current assets

Total assets

254

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
¥ 37,875
792
115,359
23,5672,207
17,082(36)
196,848¥ 28,790
7,275
98,152
26,9691,983
12,384(209)
175,345$ 336,128
7,028
1,023,775
209,149
19,586
151,597(319)
1,746,964

5,328
4,789
737
2,945
416
3,276
20
(9,495)
8,018

5,434
4,767
737
2,990
477
3,225
145
(9,332)
8,445

47,28442,5006,540
26,135
3,691
29,073
177(84,265)
71,157

1,383

1,261

12,273

10,12913,613
5,618
624
25
1,190
6,261
(9,529)27,93337,335

11,19016,271
5,618
743
27
1,482
9,078
(10,977)
33,43543,14189,891
120,81149,8585,537
221
10,56055,564(84,566)
247,896
331,336¥234,183¥218,486$2,078,301

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Balance Sheets
March 31, 2016

Liabilities and net assets
Current liabilities:
Trade notes payable (Note 4-(a))
Electronically recorded payable (Note 4-(a))
Accounts payable on construction contracts (Note 4-(a))
Short-term bank loans and current portion of long-term debt
(Notes 4-(b), 4-(d) and 9)
Income taxes payable
Advances received on construction contracts in progress
Reserve for defects on completed construction projects
Allowance for losses on construction contracts
Allowance for contingency loss
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 4-(b), 4-(d) and 9)
Accrued retirement benefits
Other long-term liabilities
Total long-term liabilities

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)
¥ 21,251
20,95371,785¥040,663
20,95363,829$ 188,596
185,951
637,069

4,374
3,792
27,385
693
890
2,152
13,970167,250

10,133
1,871
30,435736
2,998–
14,851
165,520

38,81733,652
243,033
6,150
7,898
19,098
123,979
1,484,291

18,821
15,7003,040
37,562

9,600
17,171
2,989
29,761167,030
139,332
26,979333,351

12,003

12,003

106,522

398
398

399
399

3,532
3,532

184
16,646
16,830

103
9,546
9,649

1,632
147,728
149,361(246)
28,987(244)
21,808(2,183)
257,250376
6
382
29,369¥234,183

1,200
195
1,396
23,205¥218,486

3,336
53
3,390
260,640$2,078,301

Contingent liabilities (Note 4-(c))
Net assets:
Shareholders’ equity:
Capital stock:
Common stock:
Authorized:
2,669,464,970 shares in 2016 and 2015
Issued and outstanding:
813,366,605 shares in 2016 and 2015
Capital surplus:
Other capital surplus
Total capital surpluses
Retained earnings:
Legal retained earnings
Earned surplus carried forward
Total retained earnings
Treasury stock, at cost:
501,516 shares in 2016 and 482,953 shares in 2015
Total shareholders’ equity
Valuation, translation adjustments and other:
Unrealized holding gain on securities
Deferred gain on hedging instruments, net of taxes
Total valuation, translation adjustments and otherTotal net assets
Total liabilities and net assets

See accompanying notes to non-consolidated financial statements.
55

3

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Income
March 31, 2016

Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)(Note 2)

Net sales:
Completed construction (Note 5-(a))
Others¥320,781
45
320,826¥284,096
14
284,111$2,846,831
399
2,847,231

292,49324
292,518

266,6398
266,648

2,595,784
212
2,596,006

28,28720

17,4575

251,038
177

11,552
16,755

11,076
6,387

102,520
148,695

972
128
(575)
494
(592)
(919)
1
3

1,161
146
656
573
(913)
(26)
–
2

8,626
1,135
(5,102)
4,384(5,253)(8,155)
8
26

Profit before income taxes(54)(2,152)–(945)(3,640)13,114

(58)
–
(233)
(708)
598
6,985

(479)
(19,098)–(8,386)(32,303)
116,382

Profit

4,551.
569
5,120
7,994

1,731
(480)
1,250
5,735

40,3885,049
45,43870,944

Cost of sales:
Completed construction
OthersGross profit
Completed construction
Others28,308Selling, general and administrative expenses (Note 5-(d))
Operating income
Other income (expenses):
Interest and dividend income (Note 5-(b))
Payments received from insurance claims
Exchange (loss) gain, net
Royalty income (Note 5-(b))
Interest expense
Provision of allowance for doubtful receivables
Gain on sales of property and equipment
Gain on sales of investments in securities
Loss on sales and disposal of property and equipment(Note 5-(c))
Loss on allowance for contingency loss
Impairment loss
Other, net
Income taxes (Note 7):
Current
Deferred¥

17,463¥(Yen)
Profit per share – basic
Profit per share – diluted

¥

9.83
–

¥

7.09
7.06

251,224$(U.S. dollars)(Note 2)
$

0.087
–

See accompanying notes to non-consolidated financial statements.

56

4

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2016

Year ended March 31, 2016
Shareholders’ equity

Additional
paid-in capital

Balance at the beginning of
the period
Cumulative effect of changein accounting principle
Restated balance at the
beginning of the period
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
ProfitPurchases of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodBalance at the beginning of
the period
Cumulative effect of changein accounting principle
Restated balance at the
beginning of the period
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
ProfitPurchases of treasury stock
Disposition of treasurystock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodCapitalstock

Other capitalsurplus

Earnedreserve¥12,003

¥399

¥103

Retained earnings
Earned surplus
carriedTotal retained
forwardearnings(Millions of yen)
¥09,546¥09,649

Treasurystock, at cost

Total
shareholders’equity¥(244)¥21,808–

12,003

399

103

81

9,546

9,649

(812)

(812)

(812)

(81)
7,994

–
7,994

(2)
0

–
7,994
(2)
0

(0)

(244)

21,808

–

(0)

81

7,099

7,181

(2)

7,178

¥12,003

¥398

¥184

¥16,646¥16,830¥(246)¥28,987

Year ended March 31, 2016
Valuation, translation adjustments and other
Deferred
Total
Unrealized
gain (loss)
valuation,
holding
on hedging
translation
gain (loss)
instruments,
adjustmentson securities
net of taxes
and other(Millions of yen)
¥1,200¥ 195¥ 1,396

Total
net assets¥23,205
–

1,200

195

1,396

23,205
(812)
–
7,994
(2)
0

(824)

(188)

(1,013)(1,013)

(824)

(188)

(1,013)

6,164

¥

¥

¥0,3766

57

382¥29,3695

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2016

Additional
paid-in capital

Balance at the beginning of
the period
Cumulative effect of changein accounting principle
Restated balance at the
beginning of the period
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
ProfitPurchases of treasury stock
Disposition of treasurystock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodBalance at the beginning of
the period
Cumulative effect of changein accounting principle
Restated balance at the
beginning of the period
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
ProfitPurchases of treasury stock
Disposition of treasurystock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodCapitalstock

Other capitalsurplus$106,522$3,541

Year ended March 31, 2016
Shareholders’ equity
Retained earnings
Earned surplus
EarnedcarriedTotal retained
reserveforwardearnings(Thousands of U.S. dollars) (Note 2)$ 914$084,717$085,631

Treasurystock, at cost

Total
shareholders’equity$(2,165)$193,539–

106,522

3,541

914

718

84,717

85,631(2,165)

193,539(7,206)(7,206)(7,206)(718)
70,944–70,944

(17)

–
70944
(17)

0

0

(0)

–

(0)

718

63,001

63,729(17)

63,702$106,522$3,532$1,632$147,728$149,361$(2,183)$257,250

Year ended March 31, 2016
Valuation, translation adjustments and other
Deferred
Total
Unrealized
gain (loss)
valuation,
holding
on hedging
translation
gain (loss)
instruments,
adjustments
Total
on securities
net of taxes
and other
net assets(Thousands of U.S. dollars) (Note 2)$10,649$ 1,730$12,389$205,937–

10,6491,730

12,389205,937(7,206)–70,944(17)
0(7,312)(1,668)(8,990)(8,990)(7,312)(1,668)(8,990)54,703$ 3,336$$03,390$260,640

53

58

6

Sumitomo Mitsui Construction Co., Ltd.
Non-Consolidated Statements of Changes In Net Assets
March 31, 2016

Year ended March 31, 2015
Shareholders’ equity

Additional
paid-in capital

Balance at the beginning of
the period
Cumulative effect of changein accounting principle
Restated balance at the
beginning of the period
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
ProfitPurchases of treasury stock
Disposition of treasurystock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodBalance at the beginning of
the period
Cumulative effect of changein accounting principle
Restated balance at the
beginning of the period
Changes in items during
the period
Dividends from surplus
Provision of legal retained
earnings
ProfitPurchases of treasury stock
Disposition of treasurystock
Net changes in items otherthan shareholders’ equity
Total changes in items during
the period
Balance at the end of theperiodCapitalstock

Other capitalsurplus

Earnedreserve¥12,003

¥399

¥102

12,003

399

102

1

Retained earnings
Earned surplus
carriedTotal retained
forwardearnings(Millions of yen)

Treasurystock, at cost

Total
shareholders’equity¥(242)¥15,884¥3,621¥3,723

201

201

3,822

3,924

(10)

(10)

(10)

(1)
5,735

–
5,735

(2)

–
5,735
(2)

0

0

(0)

201
(242)

16,085

–

(0)

1

5,723

5,724

(1)

5,722

¥12,003

¥399

¥103

¥9,546¥9,649¥(244)¥21,808

Year ended March 31, 2015
Valuation, translation adjustments and other
Total
Deferred gain
valuation,
on hedging
translation
Unrealized
instruments,
adjustments
holding gain
net of taxes
and otheron securities(Millions of yen)
¥0,300¥ 29¥0,329Total
net assets¥16,213
201

300

29

329

16,415
(10)
–
5,735
(2)
0

900

166

1,066

1,066

900

166

1,066

6,789

¥1,200¥195¥1,396¥23,205

See accompanying notes to non-consolidated financial statements.

59

7

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016
1.

Summary of Significant Accounting Policies(a) Basis of Presentation
The accompanying non-consolidated financial statements of Sumitomo Mitsui Construction
Co., Ltd. (the “Company”) are prepared on the basis of accounting principles generally
accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards, and have been
compiled from the non-consolidated financial statements prepared by the Company as
required by the Financial Instruments and Exchange Law of Japan.
Certain reclassifications have been made to present the accompanying financial statements
in a format which is familiar to readers outside Japan. In addition, certain amounts in theprior year’s financial statements have been reclassified to conform to the current year’s
presentation.
As permitted, amounts of less than one million yen have been omitted. As a result, thetotals shown in the accompanying financial statements do not necessarily agree withthe sums of the individual amounts.
(b) Securities and Investments in Subsidiaries and Affiliates
The accounting standard for financial instruments requires that securities be classified
into three categories: trading, held-to-maturity or other securities. Under this standard,
trading securities are carried at fair value and held-to-maturity securities are carried atamortized cost. Marketable securities classified as other securities for which market prices
are determinable are carried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net assets. Non-marketablesecurities classified as other securities are carried at cost. Cost of securities sold isdetermined by the moving average method. Investments in subsidiaries and affiliates
are stated at cost determined by the moving average method.
(c) Inventories
Inventories other than materials and supplies are stated at cost determined by the specificidentification method. Materials and supplies are valued at cost determined by theaverage method. Book values are written down based on any decline in profitability.

608Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016(d) Depreciation and Amortization(1) Property and equipment (except leased assets)
Depreciation of property and equipment (except leased assets) is determined by the
declining-balance method based on the estimated useful lives of the respective assets
as prescribed in the Corporation Tax Law of Japan except that the straight-line
method is applied to office buildings acquired on or after April 1, 1998.
(2) Intangible fixed assets (except leased assets) and long-term prepaid expenses
Amortization of intangible fixed assets (except leased assets) and long-term
prepaid expenses is calculated by the straight-line method based on the estimateduseful lives of the respective assets as prescribed in the Corporation Tax Law ofJapan. Amortization of computer software for internal use is calculated by thestraight-line method over the estimated useful lives of 5 years.
(3) Leased assets
Depreciation of leased assets under finance leases other than those that transfer
the ownership of the leased assets to the lessees is calculated by the straight-line
method over the lease term with a residual value of zero.
(e) Advances Received on Construction Contracts in Progress
As is customary in Japan, the Company receives payments from customers on an
installment basis in accordance with the terms of the respective construction contracts.
(f)

Allowance for Doubtful Receivables
The allowance for doubtful receivables is provided for future losses on general
receivables at an amount calculated by applying the percentage of actual losses oncollection experienced in the past, and an uncollectible amount for doubtful receivables
estimated based on an individual assessment of each receivable and probability ofcollection.

(g) Reserve for Defects on Completed Construction Projects
A reserve has been provided at an estimated amount for the fiscal year’s sales proceeds
in order to cover the liability for future costs of defects of the completed construction
projects.
(h) Allowance for Losses on Construction Contracts
An allowance has been provided based on the estimated amount for the future losses
on construction projects in progress at the fiscal year end which are anticipated to be
substantial losses in the future.

61

9

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016(i)

Allowance for Contingency Loss
The allowance for contingency loss is provided for future contingency loss on rationallyestimated based on individual assessment of each risk.
(Additional information)
Regarding the defective piling work at a condominium in Yokohama disclosed on
October 14, 2015, ¥2,152 million was recognized as the amount of the rationallyestimated cost required to be paid as the contractor based on the defect liability
applicable to the construction contract as a result of a ground investigation analysis up
to the present time. In addition, the same amount was recognized in other expenses as“Loss on allowance for contingency loss.”
Above amounts might be increased or decreased depend on direction in which things
are moving.

(j)

Employees’ Retirement Benefits(1) Method of attributing expected retirement benefits to periods
In calculating the retirement benefit obligation, the benefit formula method isapplied to attribute the expected retirement benefits to the periods up to year
ended March 31, 2016.
(2) Amortization of actuarial gain or loss and prior service cost
Actuarial gain or loss is amortized in the year following the year in which the gainor loss is recognized by the straight-line method over periods (11 years), which
are shorter than the average remaining years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method overperiods (11 years), which are shorter than the average remaining years of serviceof the employees.

(k) Recognition of Revenues and Costs on Construction Contracts
Revenues and costs of construction contracts that commenced on or after April 1, 2009,of which the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method. The percentage-of-completion is calculated at thecost incurred as a percentage of the estimated total cost. The completed-contract method
is applied for contracts for which the percentage of completion cannot be reliably
estimated.

62

10

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016(l)

Derivatives and Hedge Accounting(1) Method of hedge accounting
Derivative financial instruments are mainly stated at fair value except thoseaccounted for under deferred hedge accounting.
Foreign exchange forward contracts qualifying for allocation accounting are translated
at the contract rate.
Interest rate swaps qualifying for hedge accounting and meeting specific matching
criteria are not remeasured at market value, but the differential paid or received
under the swap agreement is charged or credited to income (short-cut method).
(2) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

Forward foreign exchange forward contracts
Interest rate swaps
Future foreign currency transactions
Interest on debt

(3) Hedging policy
The Company utilizes foreign exchange forward contracts and interest rate swaps
only for the purpose of hedging future risks of fluctuation of foreign currency
exchange rates or interest rates.
(4) Assessment of hedge effectivenessAn evaluation of hedge effectiveness for a foreign exchange forward contract isperformed on a quarterly basis to confirm that amount of the foreign exchange
contract is within amount of the underlying hedged item to assess whether theforward contract qualifies for hedge accounting.
An evaluation of hedge effectiveness for interest rate swaps is not performed as
all meet specified criteria under the short-cut method.
(m) Accounting for Retirement Benefits
Accounting for unrecognized actuarial loss and unrecognized prior service cost on
non-consolidated financial statements is different from the accounting on consolidated
financial statements.
(n) Consumption Taxes
Consumption taxes are accounted for by the tax exclusion method.

63

11

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016(o) Income Taxes
Deferred tax assets and liabilities are determined based on the differences between theamounts calculated for financial reporting purposes and the tax bases of the assets andliabilities and are measured using the enacted tax rates and laws which will be in effectwhen the differences are expected to reverse.
The Company has adopted the consolidated taxation system.
2.

U.S. Dollar Amounts

The translation of yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made at ¥112.68 = U.S.$1.00, the approximate rate ofexchange prevailing on March 31, 2016. This translation should not be construed as arepresentation that yen have been, could have been, or could in the future be, converted into
U.S. dollars at that or any other rate.
3.

Changes in Accounting Methods

The Company and its consolidated subsidiaries have adopted “Revise Accounting Standard
for Business Combinations” (ASBJ Statement No. 21 issued on September 13, 2015) and“Revise Accounting Standard for Business Divestitures” (ASBJ Statement No. 7 issued on
September 13, 2015) effective from April 1, 2015. As a result, under these revised accounting
standards, the corresponding accounting for acquisition-related costs were revised.
In addition, for business combination carry out from April 1, 2015, the reviewed acquisition
cost allocation result from the finalization of the tentative accounting method is changed torestate in the consolidated financial for the fiscal year in which the business combination
incurred.
The Accounting Standard for Business Combinations, etc. is applied in accordance withtransitional treatment provided in Paragraph 58-2(4) of the Accounting Standard for Business
Combinations and Paragraph 57-4(4) of the Accounting Standard for Business Divestitures,and has been applied from the beginning for the year ended March 31, 2016 and will beapplied in the future.
In addition, the effect of these changes on Non-Consolidated Financial Statements and pershare information is immaterial.

6412Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016
4.

Notes to Non-Consolidated Balance Sheets(a) Outstanding Balances with Subsidiaries and Affiliates
Significant outstanding balances for subsidiaries and affiliates other than individuallypresented on the accompanying non-consolidated balance sheets at March 31, 2016
and 2015 were as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Trade notes payable
Electronically recorded payable
Accounts payable on construction
contracts

¥

220
1,261

¥

863
–

13,27813,252$

1,952
11,190117,838(b) Pledged Assets
The following assets were pledged at March 31, 2016 and 2015 principally as
collateral for short-term bank loans, long-term debt and guarantees (such as guarantees
for the completion of construction contracts):
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Land
Buildings, net of accumulated
depreciation
Structures, net of accumulated
depreciation
Investments in securities
Investments in subsidiaries and affiliates¥5,209¥05,209$46,228

290

301

2,573

32
–
369
¥5,901

27
7,424
364
¥13,326

283
–
3,274
$52,369

The secured liabilities as of March 31, 2016 and 2015 are summarized as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Short-term bank loans[Including current portion of long-termdebt]Long-term debt
65

¥200

¥5,700$1,774

[200]
100

[700]
300

[1,774]887

13

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016(c) Contingent Liabilities
At March 31, 2016 and 2015, the Company was contingently liable for the following:As guarantor of bank loans to customers,
subsidiaries, an affiliate and employees
Advance deposits
As endorsers of notes receivablediscounted with banks
As endorsers of other current assets(Non-operating notes receivable)
discounted with banks

As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)¥2,535–¥993
924$22,497
–

–

190

–

–

122

–

(d) Financial covenants
For the year ended March 31, 2016
(1) The Company has entered into a syndicated loan contract dated on August 6, 2014
with its seven banks with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2015 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014, or of total consolidated net assets at the end of the most recent fiscal
year, whichever is greater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥8,500 million ($75,434 thousand) in long-term debt (including the current portion)
as of March 31, 2016.

66

14

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016(d) Financial covenants (continued)(2) The Company has entered into a syndicated loan contract dated on March 29,
2016 and loan commitment agreement dated on March 31, 2016 with its sevenbanks (same bank as we had contracted for the year ended March, 31 2015.) with
Sumitomo Mitsui Banking Corporation as arranger. The following financial
covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31,
2016 shall be equal to or exceed 75% of total consolidated net assets as of March
31, 2014 or of total consolidated net assets at the end of the most recent fiscal
year, whichever is greater.
In calculating consolidated net assets, any allowance or costs related to thecondominium in Yokohama will be excluded from the calculation in accordancewith instructions received from the Ministry of Land, Infrastructure Transportation
and Tourism of Japan on January 13, 2016.
In addition, the balance of bank borrowings under this syndicated loan contract is¥10,000 million ($88,746 thousand) in long-term debt (including the current portion)
as of March 31, 2016.
Unused amount on loan commitment agreement as of March 31, 2016 and 2015
were as follows.
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Maximum limit under the agreement
Loan balance outstanding
Difference (unused portion)¥20,000–¥20,000¥––¥–$177,493–$177,493

For the year ended March 31, 2015
The Company has entered into a syndicated loan contract dated on August 6, 2014
with its seven banks with Sumitomo Mitsui Banking Corporation as arranger. The
following financial covenant is included in the contract:
Total consolidated net assets at the end of each fiscal year beginning March 31, 2015
shall be equal to or exceed 75% of total consolidated net assets as of March 31, 2014,
or of total consolidated net assets at the end of the most recent fiscal year, whichever isgreater.
In addition, the balance of bank borrowings under this syndicated loan contract is¥9,500 million in long-term debt (including the current portion) as of March 31, 2015.

6715

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016
5.

Notes to Non-Consolidated Statements of Income(a) Net Sales Based on Percentage-of-completion Method
Net sales on construction contracts accounted for under the percentage-of-completion
method amounted to ¥265,349 million ($2,354,889 thousand) and ¥235,443 million
for the years ended March 31, 2016 and 2015, respectively.
(b) Transactions with Subsidiaries and Affiliates
Significant transactions with subsidiaries and affiliates other than individually presented
on the accompanying non-consolidated statements of income for the years ended 2016
and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Dividend income
Royalty income

¥715
494

¥895
573

$6,3454,384(c) Loss on Sales and Disposal of Property and Equipment
The significant components of loss on sales and disposal of property and equipment
for the years ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Loss on sales
Loss on disposal
Others
Total

¥38
16
–
¥54

¥ –
30
28
¥58

$337
141
–
$479

(d) Selling, General and Administrative Expenses
The significant components of selling, general and administrative expenses for theyears ended March 31, 2016 and 2015 were as follows:
Years ended March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)
Salaries and wages
Rent
Retirement benefit expenses
Communication and traveling expenses
Legal welfare expenses
Depreciation expenses
Other
Total

68

¥ 5,463
1,044
379
920
840
404
2,498
¥11,552¥ 4,676
1,056
854
839
725
487
2,435
¥11,076$048,482
9,265
3,363
8,164
7,454
3,585
22,168$102,520
16

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016
6.

Securities

Stocks of subsidiaries and affiliates at March 31, 2016 and 2015 were as follows:

Stocks ofa subsidiary

Stocks ofa subsidiary

As of March 31, 2016
Carrying
Fair
Unrealized Carrying
Fair
Unrealized
value
value
gain
value
value
gain
(Millions of yen)(Thousands of U.S. dollars)¥717¥2,082¥1,364$6,363$18,477$12,105

As of March 31, 2015
Carrying
Fair
Unrealized
value
value
gain
(Millions of yen)¥717

¥2,540¥1,823

Note: Stocks of subsidiaries and affiliates for which it is extremely difficult to determine
market values were excluded from the above as follows:

Stocks ofa subsidiaries
Stocks ofa affiliates

As of March 31,
2016
2015
2016
Carrying value(Millions of yen)(Thousands of
U.S. dollars)¥2,448¥2,458$21,725

10

10

88

69

17

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016
7.

Income Taxes

The significant components of the Company’s deferred tax assets and liabilities at March 31,
2016 and 2015 were as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Deferred tax assets:
Accrued retirement benefits
Allowance for bad debts
Account payable and accrued expenses
Loss on devaluation of investments in
subsidiaries and affiliates
Allowance for losses on construction
contracts
Reserve for defects on completed
construction projects
Tax loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized holding gain on securities
Deferred gain on hedging instruments,
net of taxes
Asset retirement obligations
Total deferred tax liabilities
Net deferred tax assets¥ 4,814
2,929
1,484

¥ 5,571
2,940
1,069

$ 42,722
25,993
13,170

894

941

7,933

274

520

2,431

213
–
1,424
12,035(8,465)
3,570

243
210
500
11,997(7,857)
4,140

1,890
–
12,637
106,806(75,124)
31,682

(165)

(573)

(1,464)

(4)
(3)
(172)
¥ 3,397

(96)
(4)
(674)
¥ 3,465(35)(26)(1,526)$ 30,147

The following table summarizes the significant differences between the statutory tax rates
and the effective tax rates for the years ended March 31, 2016 and 2015:
Years ended March 31,
2016
2015
Statutory tax rates
Non-deductible expenses
Non-taxable income
Per capita inhabitants’ taxes
Tax credit
Valuation allowance
Change in corporate tax rate
Other
Effective tax rates

33.1 %
0.8
(1.8)
1.2
(3.9)
9.3
1.3
(1.0)
39.0 %
70

35.6 %
1.5
(4.4)
0.1
(3.0)
(17.4)
5.8(0.3)
17.9 %

18

Sumitomo Mitsui Construction Co.,Ltd.

Notes to Non-Consolidated Financial Statements
March 31, 2016
The “Act for Partial Amendment of the Income Tax Act, etc.” and the “Act for Partial
Amendment of the Local Tax Act, etc.” were enacted on March 29, 2016 and the effective
statutory tax rate used to measure deferred tax assets and liabilities was changed from
32.3% for the year ended March 31, 2015 to 30.9% for those for which taxes are expected
to be returned or paid from April 1, 2016 to March 31, 2018, and to 30.6% for those forwhich taxes are expected to be returned or paid on or after April 1, 2018.
As a result, net deferred tax assets (after deducting deferred tax liabilities, excluding for
those on land evaluation) decreased ¥160 million ($1,419 thousand), income taxes-deferredincreased ¥169 million ($1,499 thousand), Unrealized holding gain on securities increased¥9 million ($79 thousand) and deferred gain on hedging instruments, net of taxes increased¥0 million ($0 thousand) as of and for the year ended March 31, 2016.
8.

Subsequent Event

There is no information to be disclosed as of March 31, 2016.
9.

Short-Term Bank Loans and Long-Term Debt

Short-term bank loans generally represent notes, principally at average interest rates of
1.7% and 1.2% at March 31, 2016 and 2015, respectively.
Long-term debt at March 31, 2016 and 2015 were summarized as follows:
As of March 31,
2016
2015
2016
(Millions of yen)(Thousands of
U.S. dollars)

Debt with collateral (at average interest ratesof 2.2% and 2.4% at 2016 and 2015)
Less current portion

¥ 300
(200)
¥ 100

71

¥1,000(700)¥ 300$ 2,662(1,774)
$ 887

19

72

73

CORPORATE OUTLINE
Corporate Name:

Sumitomo Mitsui Construction Co.,Ltd.

Established:

October 14, 1941

Permission:(Special-23)No.200, Specified Constructor,
granted by the Minister of Land,
Infrastructure and Transport

License:(15)No.1, Housing, Land and Building Dealer,
granted by the Minister of Land, Infrastructure
and Transport

Main Scope of Business:

1) To contract, plan, design and/or supervise
civil engineering, architectural, prestressed
concrete, electrical, piping and other works
2) To plan, design and supervise marine
development, regional development,
urban development, natural resource
development and environment
maintenance3) To manufacture, sell and lease materials
for civil and building works, prestressed
concrete products, seismic isolating
device, seismic damping device, andother machinery and instruments

Corporate History

74

Main Banks

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Ltd

Main Shareholders

Japan Trustee Services Bank, Ltd.

The Master Trust Bank of Japan, Ltd.

NORTHERN TRUST GLOBAL SERVICES
LIMITED, LUXEMBOURG RE LUDU
RE: UCTIS CLIENTS 15.315 PCT NON
TREATY ACCOUNTSTATE STREET LONDON CARE OF
STATE STREET BANK AND TRUST,BOSTON SSBTC A/C UK LONDONBRANCH CLIENTS-UNITED KINGDOM
Mitsui Fudosan Co., Ltd.

CORPORATE DATAHEAD OFFICE

2-1-6 Tsukuda, Chuo-ku,
Tokyo, 104-0051, Japan

INTERNATIONAL DIVISION
2-1-6 Tsukuda, Chuo-ku,
Tokyo, 104-0051, Japan
TEL:81-3-4582-3171
FAX:81-3-4582-3247

OVERSEAS OFFICE

Bangkok:(Thailand)

26/49, 14th Floor, Orakarn Building, Soi Chidlom,
Ploenchit Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
TEL:66-2-250-0560
FAX:66-2-254-7405

SMCC Shanghai

Room No.801, No.1 Building, 641 Tian Shan Road,
Chang Ning Zone, Shanghai 200336, China
TEL:86-21-6228-6780
FAX:86-21-6228-6781

SMCC Guam, Inc.
Yangon:(Myanmar)#602, 6Floor, Tower B, Mindhama Condo,
Mindhama Road, Mayangone Township, Yangon,
Myanmar
TEL:95-1-1224236

Suite 105-107, IBC Building, J.L. Baker Street,
Harmon Industrial Park, Harmon, Guam 96913(P.O.Box 9670, Tamuning, Guam 96931)
TEL:1-671-649-7521
FAX:1-671-649-7550

Manila:(Philippines)

The Peninsula Court 6th Floor, 8735 Paseo deRoxas cor. Makati Avenue, Makati City, Metro
Manila, Philippines
TEL:63-2-840-4913
FAX:63-2-840-4912

Guam:(USA)Suite 105-107, IBC Building, J.L. Baker Street,
Harmon Industrial Park, Harmon, Guam 96913(P.O.Box 9670, Tamuning, Guam 96931)
TEL:1-671-649-7521
FAX:1-671-649-7550

Hanoi:(Vietnam)#502-504, 5th Floor, V-Tower, 649 Kim Ma str., Ba
Dinh Dist., Hanoi, Vietnam
TEL:84-4-3942-8888
FAX:84-4-3942-8808

Singapore:

2 Bukit Merah Central #06-01 Singapore 159835
TEL:65-6933-8000
FAX:65-6933-8001

Jakarta:(Indonesia)

Summitmas 2, 20th Floor JL.Jend. Sudirman Kav.
61-62, Jakarta Selatan 12190, Indonesia
TEL 62-21-520-1757
FAX 62-21-525-0905

SUBSIDIARY COMPANIES INOVERSEAS
SMCC(Thailand)Co.,Ltd.

26/49, 14th Floor, Orakarn Building, Soi Chidlom,
Ploenchit Road, Lumpini, Pathumwan, Bangkok
10330, Thailand
TEL:66-2-250-0560
FAX:66-2-254-7405

Pt.SMCC Utama Indonesia

Summitmas 2, 20th Floor JL.Jend. Sudirman Kav.
61-62, Jakarta Selatan 12190, Indonesia
TEL:62-21-520-1757
FAX:62-21-525-0905

SMCC Construction India Ltd.

201, 2nd Floor, Plot No. -D1, Ras Vilas, Saket
District Centre, Saket, New Delhi - 110017, India
TEL:91-11-41392800
FAX:91-11-41652592,41652593

SMCC Philippines, Inc.

2nd Floor, Pioneer House Building, 108 Paseo deRoxas, Makati City, Metro Manila, Philippines
TEL:63-2-840-4913
FAX:63-2-840-4912

75

SMCC Malaysia Sdn.Bhd.

Level 13, Suite13. 06, Johor Bahru City Square(Office Tower)
106-108 Jalan Wong Ah Fook, 80000 Johor Bahru,
Malaysia
TEL:60-7-207-1133
FAX:60-7-207-3311