AUDITED FINANCIAL STATEMENTSCONTENTSCONSOLIDATED FINANCIAL STATEMENTS .................................................................. 38
CONSOLIDATED BALANCE SHEETS.......................................................................... 38
CONSOLIDATED STATEMENTS OF INCOME............................................................. 40
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME................................. 40
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY.......................................... 41
CONSOLIDATED STATEMENTS OF CASH FLOWS .................................................... 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................................. 43
INDEPENDENT AUDITORS’ REPORT............................................................................... 69

SECOM Annual Report 2013

37

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2013 and 2012
		In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2012

2013

Current assets:
Cash and Cash equivalents (Notes 5 and 22)............................................................... ¥ 222,696 ¥ 213,040
Time deposits (Note 13)...............................................................................................
8,021
7,731
Cash deposits (Note 6)................................................................................................
56,09054,011
Short-term investments (Notes 7 and 22).....................................................................
12,07917,294
Notes and accounts receivable, trade...........................................................................
119,914
99,738Due from subscribers...................................................................................................
34,856
34,416Inventories (Note 8).....................................................................................................
58,021
67,094
Short-term receivables (Notes 9, 13, 20 and 21)..........................................................
21,466
14,655
Allowance for doubtful accounts (Note 9)...................................................................
(2,176)(1,335)
Deferred insurance acquisition costs (Note 14).............................................................
5,650
5,132
Deferred income taxes (Note 17).................................................................................
15,387
12,853
Other current assets (Notes 21, 22 and 23)..................................................................
13,937
10,971$ 2,369,106
85,330596,702
128,500
1,275,681
370,809617,245
228,362(23,149)
60,106
163,691
148,266ASSETS			Total current assets..............................................................................................

565,941535,600

6,020,649

Investments and long-term receivables:
Investment securities (Notes 2 (7), 7, 13 and 22)..........................................................
Investments in affiliated companies (Note 10)..............................................................
Long-term receivables (Notes 9, 13, 20 and 21)...........................................................
Lease deposits.............................................................................................................
Other investments.......................................................................................................
Allowance for doubtful accounts (Note 9)...................................................................

155,138
39,13747,321
13,6568,824(6,366)140,014
39,73941,831
13,281
8,262(7,449)1,650,404
416,351
503,415
145,277
93,872(67,723)

257,710

235,678

2,741,596

Property, plant and equipment (Notes 11, 13, 19 and 20):
Land............................................................................................................................
Buildings and improvements........................................................................................
Security equipment and control stations......................................................................
Machinery, equipment and automobiles......................................................................
Construction in progress.............................................................................................

114,528
285,609282,533
99,758
3,688

103,127
193,245
273,645
87,1905,054

1,218,383
3,038,394
3,005,670
1,061,255
39,234

Accumulated depreciation...........................................................................................

786,116(400,854)

662,261(351,413)

8,362,936(4,264,404)

385,262

310,848

4,098,532

41,99532,736
38,418
11,5386,750

43,127
14,23522,305
7,846
10,185446,755
348,255
408,702
122,745
71,809131,437

97,698

1,398,266

			Total assets.......................................................................................................... ¥1,340,350 ¥1,179,824$14,259,043

Other assets:
Deferred charges (Note 2 (12))....................................................................................
Goodwill (Note 12)......................................................................................................
Other intangible assets (Notes 12 and 13)...................................................................
Prepaid pension and severance costs (Note 15)............................................................
Deferred income taxes (Note 17).................................................................................

See accompanying notes to consolidated financial statements.

38

2013

SECOM Annual Report 2013

Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2012

2013

LIABILITIES AND EQUITY

2013

40,762
22,05333,16329,121
26,87740,271
15,46826,272
22,274

			Total current liabilities..........................................................................................

287,516

256,261

3,058,680

Long-term debt (Notes 13, 19 and 21)............................................................................
Guarantee deposits received ..........................................................................................
Accrued pension and severance costs (Note 15)..............................................................
Deferred revenue............................................................................................................
Unearned premiums and other insurance liabilities (Note 14)..........................................
Investment deposits by policyholders (Notes 14 and 21)..................................................
Deferred income taxes (Note 17).....................................................................................
Other liabilities (Notes 21, 22, and 23)............................................................................

48,762
34,22729,318
16,82490,442
29,483
14,135
10,02837,02336,337
21,421
17,32583,99830,755
9,115
9,956

518,745364,117
311,894
178,979
962,149
313,649
150,372
106,681			Total liabilities......................................................................................................

560,735

502,191

5,965,266

66,37873,80910,241
623,599

66,37874,561
10,175
572,730

706,149785,202108,947
6,634,032

11,5608(14,044)(18,710)

4,646—(13,522)(28,453)

122,979
85(149,404)(199,043)(21,186)(37,329)(225,383)$

415,234
183,840
478,819
349,415
320,106
422,096329,330
293,904
265,936

SECOM Today

Commitments and contingent liabilities (Note 24)

Financial Review

Equity:SECOM CO., LTD. shareholders’ equity (Note 18):
Common stock
		Authorized—900,000,000 shares		 issued 233,288,717 shares in 2013 and 2012........................................................
Additional paid-in capital.............................................................................................
Legal reserve...............................................................................................................
Retained earnings........................................................................................................
Accumulated other comprehensive income (loss):		 Unrealized gains on securities (Note 7).....................................................................
		 Unrealized gains on derivative instruments (Note 23)...............................................
		 Pension liability adjustments (Note 15).....................................................................
		 Foreign currency translation adjustments.................................................................

Special Feature

39,032 ¥17,28145,00932,84530,09039,67730,957
27,627
24,998Strategic Highlights

Current liabilities:
Bank loans (Notes 6 and 13)........................................................................................ ¥Current portion of long-term debt (Notes 13, 19 and 21)............................................
Notes and accounts payable, trade..............................................................................
Other payables............................................................................................................
Deposits received (Note 6)...........................................................................................
Deferred revenue........................................................................................................
Accrued income taxes.................................................................................................
Accrued payrolls..........................................................................................................
Other current liabilities (Note 17).................................................................................

The Management		In millions of yen

Common stock in treasury, at cost:(73,665)(73,660)(783,670)

679,176

612,855

7,225,277

Noncontrolling interests..................................................................................................

100,439

64,7781,068,500

			Total equity..........................................................................................................

779,615

677,633

8,293,777

			 Total liabilities and equity..................................................................................... ¥1,340,350 ¥1,179,824$14,259,043

Financial Section

15,018,951 shares in 2013 and 15,017,691 shares in 2012......................................
			 Total SECOM CO., LTD. shareholders’ equity........................................................

See accompanying notes to consolidated financial statements.

SECOM Annual Report 2013

39

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013
		In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2013

2012

2011

2013

¥861,885¥772,482¥751,868$9,168,989

583,094
162,226
—
579
1,052
2,166
749,117
112,768

536,268
146,663
—
8,133
1,218
1,374
693,656
78,826498,957
147,667
3,212
3
—
1,597
651,436
100,432

6,203,127
1,725,808—
6,160
11,191
23,043
7,969,329
1,199,660

904
150
5,095
3,841
9,990

952
29
3,491
3,055
7,527

928
139
6,014
4,789
11,8709,617
1,596
54,20240,862
106,277

1,537
48
1,576
3,161
119,597

1,597
952
2,684
5,233
81,120

1,683
84
2,691
4,458
107,844

16,351
511
16,766
33,6281,272,309

45,31133,53838,765
1,538
4,664
4,512
46,84938,202
43,27772,74842,91864,567
3,895
4,880
5,028
76,64347,79869,595(6,063)(6,561)(6,930)¥ 70,580 ¥ 41,237 ¥ 62,665

482,032
16,362
498,394
773,915
41,436815,351(64,500)$ 750,851

		In yenTranslation into
U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

Net sales and operating revenue (Notes 14 and 22)...........................................................
Costs and expenses:
Cost of sales (Note 8)..........................................................................................................
Selling, general and administrative expense (Notes 2 (17), 2 (18), 2 (19) and 4)...................
Loss on settlement of pre-existing relationship (Note 2 (2))..................................................
Impairment loss on long-lived assets (Note 11)....................................................................
Impairment loss on goodwill (Note 12)................................................................................
Loss on sales and disposal of fixed assets, net.....................................................................
				Operating income...................................................................................................
Other income:Interest and dividends.........................................................................................................
Gain on sales of securities, net (Notes 7 and 10).................................................................
Gain on private equity investments (Note 22)......................................................................
Other (Notes 16 and 23).....................................................................................................
Other expenses:
Interest ..............................................................................................................................
Loss on other-than-temporary impairment of investment securities (Note 22)......................
Other (Notes 16, 23 and 24)...............................................................................................
				 Income before income taxes and equity in net income of affliated companies.........
Income taxes (Note 17):
Current ..............................................................................................................................
Deferred.............................................................................................................................
				 Income before equity in net income of affiliated companies....................................
Equity in net income of affliated companies ....................................................................
				Net income.............................................................................................................
Less: Net income attributable to noncontrolling interests ..............................................
				 Net income attributable to SECOM CO., LTD. ........................................................

2013

2012

2011

2013

¥323.36¥ 90.00¥188.97¥ 90.00¥287.41¥ 85.00

$3.44
$0.96

SECOM
CO., LTD. and Subsidiaries
		In millions of yen
Three years ended March 31, 2013

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

Per share data (Note 2 (21)):
Net income attributable to SECOM CO., LTD. .....................................................................
Cash dividends per share ...................................................................................................

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Comprehensive income:Net income.........................................................................................................................
Other comprehensive income (loss), net of tax:
		 Unrealized gains (losses) on securities.............................................................................
		 Unrealized gains on derivative instruments......................................................................
		 Pension liability adjustments...........................................................................................
		 Foreign currency translation adjustments........................................................................
Total comprehensive income...............................................................................................
Less: Comprehensive income attributable to noncontrolling interests...........................
Comprehensive income attributable to SECOM CO., LTD........................................................
See accompanying notes to consolidated financial statements.

40

SECOM Annual Report 2013

2013

2012

2011

2013

¥76,643¥47,798¥69,595$815,351

7,384
15
(708)
10,10593,439(7,113)¥86,3262,486
8(1,953)(3,696)44,643(5,930)¥38,713(3,533)17(1,612)(6,780)57,687(5,853)¥51,834

78,553
159(7,532)
107,500
994,031(75,669)$918,362

SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013

In millions of yen

Commonstock

Additional
paid-in
capitalLegalreserve

Retained­earnings

Accumulated
other com­prehensive
income (loss)

Balance, March 31, 2010 ...................................................... 233,288,717
Cumulative effect adjustments resulting from adoption ofa new accounting standard on variable interest entities,
net of tax (Note 2 (2))—
Comprehensive income:Net income.........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding losses on securities...........................
—
		 Unrealized gains on derivative instruments.....................
—
		 Pension liability adjustments..........................................
—
		 Foreign currency translation adjustments.......................
—
Total comprehensive income...............................................
—Cash dividends paid to SECOM CO., LTD. shareholders............
Cash dividends paid to noncontrolling interests........................
—
Transfer to legal reserve...........................................................
—
Equity transactions with noncontrolling interests and other—(Note 18)...............................................................................
Losses on disposal of treasury stock.........................................
—Net changes in treasury stock...................................................
—¥66,378¥81,096¥10,053¥510,927(¥23,748)(¥74,907)———(3,821)——(3,821)—(3,821)———

62,665——62,665

6,930

69,595

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

(3,472)
12(972)(6,399)

—
—
—
—

—
—
—

—
—
—

—
—
51

(18,533)
—
(51)

—
—
—

—
—
—

(3,472)
12(972)(6,399)51,834(18,533)
—
—

(61)
5
(640)
(381)
5,853
—
(1,822)—(3,533)17(1,612)(6,780)57,687(18,533)(1,822)————(5,541)
(0)
—

—
—
—

—
—
—

(226)
—
—

—
—
(17)

(5,767)(0)(17)(7,382)——(13,149)(0)(17)

Balance, March 31, 2011 ...................................................... 233,288,717
Comprehensive income:Net income.........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities............................
—
		 Unrealized gains on derivative instruments.....................
—
		 Pension liability adjustments..........................................
—
		 Foreign currency translation adjustments.......................
—
Total comprehensive income...............................................
—Cash dividends paid to SECOM CO., LTD. shareholders............
Cash dividends paid to noncontrolling interests........................
—
Transfer to legal reserve...........................................................
—
Equity transactions with noncontrolling interests and other—(Note 18)...............................................................................
Losses on disposal of treasury stock.........................................
—Net changes in treasury stock (Note 18)...................................
—

66,37875,555

10,104551,187(34,805)(74,924)

593,495

61,314

654,809———

41,237——

41,237

6,561

47,798

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

2,515
6
(1,613)(3,432)

—
—
—
—

—
—
—

—
—
—

—
—
71

(19,623)
—
(71)

—
—
—

—
—
—

2,515
6
(1,613)(3,432)
38,713(19,623)
—
—

(29)
2
(340)
(264)
5,930
—
(1,851)—

2,486
8(1,953)(3,696)44,643(19,623)(1,851)
—

—
—
—

(642)
(352)
—

—
—
—

—
—
—

—
—
—

—
—
1,264

(642)
(352)
1,264

(615)
—
—

(1,257)
(352)
1,264

Balance, March 31, 2012 ...................................................... 233,288,717
Comprehensive income:Net income.........................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities............................
—
		 Unrealized gains on derivative instruments.....................
—
		 Pension liability adjustments..........................................
—
		 Foreign currency translation adjustments.......................
—
Total comprehensive income...............................................
—Cash dividends paid to SECOM CO., LTD. shareholders............
Cash dividends paid to noncontrolling interests........................
—
Transfer to legal reserve...........................................................
—
Equity transactions with noncontrolling interests and other—(Notes 4 and 18)....................................................................
Losses on disposal of treasury stock.........................................
—Net changes in treasury stock...................................................
—

66,37874,561

10,175

572,730(37,329)(73,660)

612,855

64,778

677,633———

70,580——70,5806,063

76,643

—
—
—
—

—
—
—
—

—
—
—
—

—
—
—
—

6,914
8
(522)
9,346

—
—
—
—

—
—
—

—
—
—

—
—
66

(19,645)
—
(66)

—
—
—

—
—
—

6,914
8
(522)
9,346
86,326(19,645)
—
—

470
7
(186)
759
7,113
—
(1,460)
—

7,384
15
(708)
10,10593,439(19,645)(1,460)
—

—
—
—

(752)
(0)
—

—
—
—

—
—
—

397
—
—

—
—
(5)

(355)
(0)
(5)

30,008——29,653(0)(5)

Balance, March 31, 2013 ...................................................... 233,288,717¥66,378¥73,809¥10,241¥623,599(¥21,186) (¥73,665)¥679,176¥100,439¥779,615

Number ofsharesissuedCommonstock intreasury,
at costTotal
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest¥569,799¥ 64,665

Total¥634,464

Retained­earnings($397,117) ($783,617)

Balance, March 31, 2013 .......................................................................... $706,149 $785,202$108,947 $6,634,032

Total$6,519,734$ 689,128$7,208,862——

750,851

64,500815,351

73,55385(5,553)99,426

—
—
—
—

—
—
—

—
—
—

73,55385(5,553)99,426918,362(208,989)
—
—

5,000
74
(1,979)8,074
75,669—(15,532)—

78,553
159(7,532)
107,500
994,031(208,989)(15,532)
—

4,223
—
—

—
—
(53)

(3,777)(0)(53)

319,235——

315,458(0)(53)($225,383) ($783,670)$7,225,277$1,068,500$8,293,777

Financial Section

Balance, March 31, 2012
$706,149 $793,202 $108,245 $6,092,872
Comprehensive income:Net income..............................................................................................
———
750,851
Other comprehensive income (loss), net of tax (Note 18):
		 Unrealized holding gains on securities.................................................
————
		 Unrealized gains on derivative instruments..........................................
————
		 Pension liability adjustments...............................................................
————
		 Foreign currency translation adjustments............................................
————
Total comprehensive income....................................................................
———(208,989)
Cash dividends paid to SECOM CO., LTD. shareholders.................................
Cash dividends paid to noncontrolling interests.............................................
————
Transfer to legal reserve................................................................................
—
—
702
(702)
Equity transactions with noncontrolling interests and other—(8,000)——(Notes 4 and 18).........................................................................................
Losses on disposal of treasury stock..............................................................
—
(0)
—
—
Net changes in treasury stock........................................................................
—
—
—
—

Total
SECOM CO., LTD.
shareholders’ Noncontrolling
equityinterest

Financial Review

Legalreserve

SECOM Today

Additional
paid-in
capitalSpecial Feature

Commonstock

Commonstock intreasury,
at costStrategic Highlights

Translation into thousands of U.S. dollars (Note 3)
Accumulated
other com­prehensive
income (loss)

The Management

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

See accompanying notes to consolidated financial statements.

SECOM Annual Report 201341

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013
		In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2013

2012

2011

Cash flows from operating activities:
Net income ........................................................................................................................... ¥ 76,643 ¥ 47,798 ¥ 69,595
Adjustments to reconcile net income to net cash provided by operating activities—
		 Depreciation and amortization, including amortization of deferred charges
		 (Notes 2 (11), 2 (12) and 12)............................................................................................
60,674
58,11756,951
		 Accrual for pension and severance costs, less payments.....................................................
(1,471)(3,268)(2,687)
		 Deferred income taxes.......................................................................................................
1,538
4,664
4,512
		 Loss on sales and disposal of fixed assets, net....................................................................
2,166
1,374
1,597
		 Impairment loss on long-lived assets (Note 11)...................................................................
579
8,133
3
		 Write-down on real estate inventories (Note 8)..................................................................
1,792
20,723
1,482
		 Gain on private equity investments (Note 22).....................................................................
(5,095)(3,491)(6,014)
		 Impairment loss on goodwill (Note 12)...............................................................................
1,052
1,218
—
		 Gain on sales of securities, net (Notes 7, 10 and 14)..........................................................
(899)(1,240)(1,658)
		 Loss on other-than-temporary impairment of investment securities (Notes 14 and 22)........
73
1,835
765
		 Equity in net income of affiliated companies......................................................................
(3,895)(4,880)(5,028)
		 Loss on settlement of pre-existing relationship (Note 2 (2)).................................................
—
—
3,212
		 Payments for legal settlement (Note 24).............................................................................
—(799)(1,770)		 Changes in assets and liabilities, net of effects from acquisitions and disposals:			 (Increase) decrease in cash deposits...............................................................................
(2,038)2,535(7,685)
			 Increase in receivables and due from subscribers, net of allowances...............................
(5,838) (12,306)(6,861)
			 (Increase) decrease in inventories...................................................................................
20,720(3,940)14,564
			 Increase in deferred charges.......................................................................................... (15,515) (15,652) (15,097)
			 Increase (decrease) in notes and accounts payable.........................................................
6,831
10,030(182)
			 Increase (decrease) in deposits received..........................................................................
2,328
2,123
(4,236)
			 Decrease in deferred revenue.........................................................................................
(1,558)(1,332)(5,419)
			 Increase (decrease) in accrued income taxes...................................................................
13,470(4,880)(1,231)
			 Increase in guarantee deposits received.........................................................................
65
161
1,367
			 Increase in unearned premiums and other insurance liabilities........................................
6,445
383
9,148
			Other, net......................................................................................................................
(621)
4,906
7,297
				 Net cash provided by operating activities................................................................... 157,446 112,212 112,625
Cash flows from investing activities:(Increase) decrease in time deposits........................................................................................
3,500
9,230
(9,665)
Proceeds from sales of property, plant and equipment...........................................................
2,603
179
780
Payments for purchases of property, plant and equipment..................................................... (64,321) (53,496) (41,726)
Payments for purchases of intangible assets...........................................................................
(5,444)(5,887)(4,829)Proceeds from sales and redemptions of investment securities (Note 7)..................................
37,44373,69337,187
Payments for purchases of investment securities.................................................................... (31,345) (66,283) (32,163)(Increase) decrease in short-term investments.........................................................................
4,152(4,357)(1,854)
Acquisitions, net of cash acquired (Note 4)............................................................................. (63,701)(1,275)(1,809)Proceeds from sales of investments in affiliated companies (Note 10).....................................
—
—
5,055
(Increase) decrease in short-term receivables, net...................................................................
(39)(1,680)164
Payments for long-term receivables........................................................................................
(1,057)(1,741)(402)
Proceeds from long-term receivables......................................................................................
1,590
4,322
1,965
Other, net..............................................................................................................................
(1,976)2,319421				 Net cash used in investing activities........................................................................... (118,595) (44,976) (46,876)
Cash flows from financing activities:
Proceeds from long-term debt...............................................................................................
17,483
3,875
11,277
Repayments of long-term debt.............................................................................................. (22,341) (11,660) (11,597)
Decrease in bank loans, net...................................................................................................
(3,630)(6,935)(312)
Decrease in investment deposits by policyholders...................................................................
(1,272) (10,888) (20,583)
Dividends paid to SECOM CO., LTD. shareholders.................................................................. (19,645) (19,623) (18,533)
Dividends paid to noncontrolling interests..............................................................................
(1,460)(1,851)(1,822)
Payments for acquisition of shares of consolidated subsidiaries from noncontrollinginterest holders.....................................................................................................................
(252)(466) (13,703)
Proceeds from sales of shares of consolidated subsidiaries to noncontrolling interest holders....
651——
Increase in treasury stock, net................................................................................................
(5)
(292)
(17)
Other, net..............................................................................................................................
86124—				 Net cash used in financing activities........................................................................... (30,385) (47,716) (55,290)
Cumulative effect adjustments resulting from adoption of a new accounting
—
—
3,905
standard on variable interest entities (Note 2 (2))...............................................................
1,190
(422)
(566)
Effect of exchange rate changes on cash and cash equivalents ........................................
9,656
19,098
13,798Net increase in cash and cash equivalents ...........................................................................
Cash and cash equivalents at beginning of year ................................................................. 213,040 193,942 180,144
Cash and cash equivalents at end of year ........................................................................... ¥222,696 ¥213,040 ¥193,942
See accompanying notes to consolidated financial statements.

42

SECOM Annual Report 20132013

$ 815,351
645,468(15,649)
16,362
23,043
6,160
19,064(54,202)
11,191(9,564)777(41,436)——(21,681)(62,106)
220,426(165,053)
72,67024,765(16,574)
143,297691
68,564(6,607)
1,674,957
37,234
27,691(684,266)(57,915)
398,330(333,457)
44,170(677,670)—(415)(11,245)
16,915(21,021)(1,261,649)
185,989(237,670)(38,617)(13,532)(208,989)(15,532)(2,681)
6,926
(53)
914
(323,245)—
12,660102,723
2,266,383$2,369,106

Financial Section

SECOM Annual Report 2013

Financial Review(2) Consolidation of Variable Interest Entities
The consolidated financial statements also include variable­interest entities (“VIEs”) of which the Company is the primary
beneficiary.
In December 2009, the Financial Accounting Standards Board(“FASB”) issued Accounting Standards Update (“ASU”) No. 200917, “Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities,” which amends the Accounting(3) Revenue Recognition
The Company generates revenue principally through sales of
security services, merchandise and software, and insurance services
under separate contractual arrangements. The Company recognizes
revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, title and risk ofloss have been transferred to the customer, the sales price is fixed
or determinable, and collectibility is probable.
Revenue from security services is recognized over the contractual
period or, in the case of specific services, when such services are
rendered. Subscribers are generally requested to prepay a portion ofservice charges which are credited to deferred revenue and recognized in income ratably over the ­covered service period. Revenue
from the installation of security equipment used to provide on-line
centralized security ­services is deferred and recognized over the

SECOM Today(1) Basis of Consolidation and Investments in Affiliated­Companies
The consolidated financial statements include the accounts of theparent company and those of its majority-owned ­subsidiaries. All
significant intercompany transactions and balances have been­eliminated in consolidation.
Investments in companies in which the ability to exercise significant influence exists (generally 20 to 50 percent owned companies),
are accounted for under the equity method. Consolidated income
includes the Company’s current equity in the net income of­affiliated companies, after elimination of intercompany profits.
The excess of cost over underlying identifiable net assets at acquisition dates of investments in subsidiaries and affiliated ­companies
is recorded as goodwill.

Special Feature

2. Significant Accounting Policies
The parent company and its Japanese subsidiaries ­maintain theirrecords and prepare their statutory financial ­statements in accordance with accounting principles generally accepted in Japan(“Japanese GAAP”). Certain adjustments and reclassifications havebeen incorporated in the accompanying financial statements to­conform with U.S. generally accepted accounting principles (“U.S.
GAAP”). These adjustments were not recorded in the statutory
books of account.
Significant accounting policies used in the preparation of theaccompanying consolidated financial statements are summarized
below:

Standards Codification (“ASC”) 810, “Consolidation.” Thisaccounting standard requires the reporting entity to consolidate avariable interest entity (“VIE”) as its primary beneficiary when it isdeemed to have a controlling financial interest in a VIE, meeting
both of the following characteristics:• The power to direct activities of a VIE that most significantly
impact the VIE’s economic performance.
• The obligation to absorb losses of the VIE that could potentiallybe significant to the VIE or the right to receive benefits fromthe VIE that could potentially be significant to the VIE.
This accounting standard is effective for fiscal years beginning
after November 15, 2009 and was adopted by the Company inthe fiscal year ended March 31, 2011. Due to the adoption of thisaccounting standard, certain organizations managing hospitals andhealth care-related institutions that were not consolidated prior to
March 31, 2010 were included in the scope of consolidation as ofApril 1, 2010. As a result, assets of ¥22,907 million and liabilities of¥26,728 million, after elimination of intercompany balances, were
included in the consolidated balance sheet at April 1, 2010. The
cumulative effect adjustments resulting from the adoption of thisaccounting standard decreased the beginning retained earnings forthe year ended March 31, 2011 by ¥3,821 million, net of tax. In
addition, the Company recognized ¥3,212 million as a loss on settlement of pre-existing relationship in the medical services segment,
related to the settlement of a lease contract between the Company
and an entity newly included in the scope of c­ onsolidation according
to the adoption of this accounting standard.
The Company provides investments, loans and guarantees to­organizations managing hospitals and health care-related institutions, to a company holding real estate, and to a PFI (Private FinanceInitiative) organization which was established to build, maintain andoperate correctional facilities. Certain of these organizations are
considered VIEs under ASC 810.
Total assets and liabilities held by VIEs of which the Company is
the primary beneficiary were ¥68,093 million ($724,394 thousand)and ¥73,490 million ($781,809 thousand), respectively, at March
31, 2013, and ¥64,469 million and ¥71,268 million, respectively, atMarch 31, 2012. Total assets and liabilities held by VIEs of which
the Company holds ­significant variable interests but is not the primary beneficiary were ¥32,983 million ($350,883 thousand) and¥33,499 million ($356,372 thousand), respectively, at March 31,
2013, and ¥33,735 million and ¥34,908 million, respectively, atMarch 31, 2012. The Company’s assets in the consolidated balance
sheets and the Company’s maximum exposure to losses related to
VIEs at March 31, 2013 and 2012 were ¥4,653 million ($49,500
thousand) and ¥4,621 million, ­respectively.

Strategic Highlights

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the areas of security services, fire protection services, medical services, insurance services, geographic
information services, real estate development and sales, and information and communication related and other services. With these
services combined, the Company is focusing on the establishmentof a “Social System Industry,” a network of integrated systems andservices, targeted at the needs of people and business.
The Company’s principal business activities are security services,
including on-line security systems for commercial and residential
premises, static guard services, armored car services for cash collection and deposit and sales of security merchandise. The Company
has also been diversifying its services covering: fire protection services, including automatic fire alarm systems and fire extinguishingsystems; medical services, including home and other medical services; insurance services, focusing on non-life insurance services;
geographic information services using geographic information system (“GIS”) and surveying and measuring technology; real estate­development and sales, focusing on the development and sale ofcondominiums equipped with security and contingency planningfeatures; information and communication related services, ­whichcenter on data center services and also include business continuity
plan support, information security services and cloud-based ­services;
lease of real estate; and other services.

The Management

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2013

43

CONSOLIDATED FINANCIAL STATEMENTS

contractual period of security services after completion of the installation. The related installation costs are also deferred and amortizedover the ­contractual period (Note 2 (12)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment, installation and security services. The Company allocates revenue to eachelement based on its relative fair value if such ­element meets criteria for treatment as a ­separate unit of accounting as prescribed in
ASC 605, “Revenue Recognition.” Otherwise, revenue is deferred
until the undelivered ­elements are fulfilled as a single unit ofaccounting.
Revenue from sales of merchandise and software is ­recognizedwhen the merchandise and software are received by the customer
and, in the case of installations, when such installations arecompleted.
Revenue from construction contracts is principally recognizedwhen construction is completed.
Revenue from long-term contracts for fire protection services andgeographic ­informa­tion services is principally recognized under thepercentage-of-­completion method.
Property and casualty insurance premiums are earned ­ratably over
the terms of the related insurance contracts. Unearned ­premiums
are earned ratably over the terms of the unexpired portion ofpremiums written.
Revenue from sales of real estate is recognized when the ­title of
the real estate is transferred to the customer.
Revenue from sales of equipment under sales-type leases isrecognized at the inception of the lease. Unearned income onsales-type leases and direct-financing leases is recognized over thelife of each respective lease using the interest method. Leases not
qualifying as sales-type leases or direct-financing leases areaccounted for as operating leases and the related ­revenue is­recognized over the lease term.
Taxes collected from customers and remitted to ­governmental
authorities on revenue-producing transactions are accounted for on
a net basis and therefore are excluded from net sales and operating
revenue in the consolidated ­statements of income.
(4) Foreign Currency Translation
All asset and liability accounts of foreign subsidiaries and affiliates
are translated into Japanese yen at the rates of exchange in effectat year-end and all income and expense accounts are translated ataverage rates of exchange during the year. The resulting translation
adjustments are accumulated and reported as part of other­comprehensive income (loss).
Foreign currency receivables and payables of the Company aretranslated into yen at the rate in effect at the balance sheet date
and the resulting translation gains and losses are credited or
charged to income for the year.
(5) Cash Equivalents
For the purpose of the consolidated statements of cash flows, theCompany considers all highly liquid investments purchased withinitial ­maturities of three months or less to be cash equivalents.
(6) Investments in Debt and Equity Securities
The Company classifies investments in debt and equity securities
as “available-for-sale” or “held-to-maturity.” The Company has no
securities classified as “trading.” “Held-to-maturity” securities arethose securities in which the Company has the ability and intent tohold the security until maturity. All securities not included in­“trading” or “held-to-maturity” are classified as “available-for-sale”

44

SECOM Annual Report 2013

securities. Market­able debt and equity securities which are classified
as “available-for-sale” are recorded at fair value. Unrealized holding
gains and losses on securities classified as “available-for-sale” arereported as part of accumulated other comprehensive income (loss),
net of tax. Debt securities classified as “held-to-maturity” arereported at ­amortized cost.
A decline in the fair value of any available-for-sale ­securities
below cost that is deemed to be other-than-­temporary results in a
reduction in carrying amount to fair value. The impairment ischarged to income and a new cost basis for the securities is established. To determine whether an impairment is other-than-­temporary, the Company considers the length of time and extent towhich the market value of the security has been less than its original cost, the financial condition, other specific factors affecting themarket value, deterioration of the credit condition of the issuers,
and whether or not the Company is able to retain the investment
for a period of time sufficient to allow for the ­anticipated recovery
in market value.
Other investments in non-public companies are recorded at cost
as fair value is not readily determinable. The Company periodicallyevaluates the values of other investments in ­non-public companies
for possible impairment by taking into consideration the financial
and operating conditions of the issuer, the general market conditions in the issuer’s industry and the period of the decline in theestimated fair value and other relevant factors. If the impairment isdetermined to be other-than-temporary, other investments in
non-public companies are written down to their impaired value
through a charge to income.
Realized gains or losses on the sale of investments are based on
the moving-average cost method and are credited or charged toincome.
(7) Private Equity Investments
The Company accounts for private equity investments in accordance with ASC 946, “Financial Services—Investment Companies,”in which investments are accounted for at fair value based on the
Company’s assessment of each underlying investment. The investments, by their nature, have little or no price transparency.
Investments are initially carried at cost as an approximation of fairvalue. Adjustments to carrying value are made if there is evidenceof a change in fair value. Downward adjustments are also made, in
the absence of third-party transactions, if it is determined that the
expected realizable value of the ­investment has declined below thecarrying value.
The carrying value of private equity investments was ¥37,493
million ($398,862 thousand) and ¥26,149 million at March 31,
2013 and 2012, respectively.
Private equity investments are included in investment securities in
the consolidated balance sheets.
(8) Inventories
Inventories, consisting of security-related products, fire
­protection-related products, real estate and information and otherrelated products, are stated at the lower of cost or market. Cost isdetermined, in the case of real estate, based on the specific identification method and, in the case of other inventories, primarily using
the ­moving-­average method.
(9) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts toensure trade, short-term and long-term receivables, and otherreceivables are not overstated due to uncollectibility. Allowance forSECOM Annual Report 2013

Financial Section(12) Deferred Charges
Deferred charges primarily consist of costs related to installation
services of security equipment used to provide on-line security
systems. The installation costs are deferred and amortized using
the straight-line method over the contractual period of security
services after completion of the installation. Amortiza­­tion expense(16) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities
and their respective tax bases, and operating loss carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in whichthose temporary differences and carryforwards are expected to berealized or settled. The effect on deferred tax assets and liabilities ofa change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are recorded toreduce deferred tax assets when it is more likely than not that a tax
benefit will not be realized.
The Company recognizes in the consolidated financial statements
the impact of a tax position, if any, based on the technical meritsof the position, when that position is more likely than not to be

Financial Review

The Company recognizes asset retirement obligations if the fairvalue of the obligations can be reasonably estimated. Asset retirement obligations include those for which an entity has a legal obligation to perform an asset retirement activity, however, the timing
and/or method of settling the obligation are conditional on a future
event that may or may not be within the ­control of the entity.
Performance of a contractual asset retirement obligation isrequired for the building leased by a certain subsidiary when thelease matures and the Company returns the leased building to its
owner. However, the Company plans not to relocate from the building and to continue to use it until it will be demolished without restoration. As such, the execution of such obligation is not expected.
The Company evaluated all the available evidence as of the fiscal
year ended March 31, 2013 and performed efforts to establish thebest estimate. However, the scope and the probability of executionof the obligation cannot be reasonably estimated. Therefore, anasset retirement obligation for that building lease is not recognized.

(15) Unearned Premiums and Other Insurance Liabilities
Unearned premiums are related to unexpired periods of insurance
contracts and are earned on a pro-rata basis over the remaining
contract period. Other insurance liabilities consist principally of liabilities for unpaid claims and adjustment expenses, which are estimates of payments to be made on reported claims and incurred but
not reported claims, which are computed based on past ­experience
for unpaid losses.

SECOM TodayThe estimated useful lives of depreciable assets are as ­follows:		 Buildings
22 to 50 years
		 Security equipment and control stations
5 to 8 years
		 Machinery, equipment and automobiles
2 to 20 years(14) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over the fair value of
assets of business acquired. Pursuant to ASC 350, “Intangibles—
Goodwill and Other,” goodwill and ­intangible assets acquired in apurchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment
at least annually. This accounting standard also requires that intangible assets with estimable ­useful lives be amortized over theirrespective estimated useful lives to their estimated residual ­values,
and reviewed for impairment in accordance with ASC 360. The
Company conducts its annual impairment test at the end of eachfiscal year.

Special Feature(11) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant ­leasehold
improvements, are carried at cost and depreciated at rates based on
the estimated useful lives of the assets. Depreciation is computed
using the straight-line method for assets other than security equipment and control stations. Security equipment and control stations
are depreciated using the declining-balance method. Assets leased
to others under operating leases are depreciated using the straightline method over the estimated useful lives. Depreciation expense
was ¥40,187 million ($427,521 thousand), ¥37,120 mil­lion and¥35,634 million for the years ended March 31, 2013, 2012 and2011, respectively. Maintenance, repairs and renewals are charged
to income as incurred.

(13) Impairment or Disposal of Long-Lived Assets
In accordance with ASC 360, “Property, Plant and Equipment,”
the Company reviews the carrying amount of its long-lived assets
held and used, other than goodwill and intangible assets withindefinite lives, and assets to be disposed of, whenever events orchanges in circumstances ­indicate that the carrying amount may
not be recoverable. Long-lived assets to be held and used arereviewed for impairment by comparing the carrying amount of theassets with their estimated future undiscounted cash flows. If it isdetermined that an impairment loss has occurred, the loss would berecognized during the period, and calculated as the difference
between the assets’ carrying amount and the fair value. Long-lived
assets that are to be disposed of other than by sale are considered
held and used until they are disposed of. Long-lived assets that are
to be disposed of by sale are reported at the lower of their ­carrying
amount or fair value less cost to sell. Reductions in the carrying
amount are ­recognized in the period in which the long-lived assets
are classified as held for sale.

Strategic Highlights(10) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring new
insurance policies are deferred and amortized principally over thepremium-paying period of the related ­insurance policies applying apercentage relationship of cost incurred to premiums from c­ ontracts
issued to applicable unearned ­premiums throughout the period of
the contract.

was ¥14,492 million ($154,170 thousand), ¥14,877 million and¥15,081 million for the years ended March 31, 2013, 2012 and2011, respectively.

The Management

doubtful accounts is maintained for all customers based on a variety
of factors, including the length of time receivables are past due,
macroeconomic conditions, significant one-time events and historical experience. An additional reserve for individual accounts isrecorded when the Company becomes aware of a customer’s
inability to meet its financial ­obligations, such as in the case ofbankruptcy filings or deterioration in the customer’s operating
results or financial position. If circumstances related to customers
change, estimates of the ­recoverability of receivables would befurther adjusted.

45

CONSOLIDATED FINANCIAL STATEMENTS

sustained upon examination. The benefit of the tax position ismeasured at the largest amount of benefit that is greater than
50 percent likely of being realized upon settlement with the­appropriate tax authority.
The Company recognizes interest and penalties accrued related
to unrecognized tax benefits in income taxes in the consolidated
statements of income.
(17) Research and Development
Research and development costs are charged to income
as incurred. Research and development expenses included in selling,
general and administrative expenses for the years ended March 31,
2013, 2012 and 2011 were ¥6,479 million ($68,926 thousand),¥6,083 million and ¥6,755 million, respectively.
(18) Advertising Costs
Advertising costs are charged to income as incurred, except forthe costs related to insurance policies. Advertising costs for acquiring new insurance policies are deferred and amortized as part of
insurance acquisition costs. Advertising expenses included in selling,
general and administrative expenses for the years ended March 31,
2013, 2012 and 2011 were ¥4,423 million ($47,053 thousand),¥3,541 million and ¥4,034 million, respectively.
(19) Shipping and Handling Costs
Shipping and handling costs included in selling, general andadministrative expenses for the years ended March 31, 2013, 2012
and 2011 were ¥1,296 million ($13,787 thousand), ¥927 millionand ¥930 million, respectively.
(20) Derivative Financial Instruments
The Company accounts for derivative financial instruments inaccordance with ASC 815, “Derivatives and Hedging.”
The Company recognizes all derivative financial instruments inthe consolidated financial statements at fair value regardless of the
purpose or intent for holding them. Changes in the fair value ofderivative financial instruments are either recognized periodically inincome or in equity as a component of accumulated other comprehensive income (loss) depending on whether the derivative financial
instruments qualify for hedge accounting, and if so, whether
they qualify as a fair value hedge or a cash flow hedge. Changes
in the fair values of derivative financial instruments accounted
for as a fair value hedge are recorded in income along with theportion of the change in the fair value of the hedged item that
relates to the hedged risk. Changes in the fair value of derivative
financial instruments accounted for as a cash flow hedge, to theextent it is effective as a hedge, are recorded in accumulated othercomprehensive income (loss), net of tax. Changes in the fair valueof derivative financial instruments not qualifying as a hedge arereported in income.
The Company meets the documentation requirements necessaryfor effective hedges which include their risk management objective and strategy for undertaking various hedge transactions. In
addition, formal assessment is made at inception of the hedge andperiodically on an on-going basis, as to whether the derivatives
used in hedging activities are highly effective in offsetting changes
in fair values or cash flows of hedged items. Hedge accounting is
discontinued for ineffective hedges, if any. Discontinued hedges arerecognized in income.

46

SECOM Annual Report 2013(21) Per Share Data
Basic Earnings per Share (“EPS”) is computed based on the average number of shares of common stock outstanding for the period.
The average number of shares of common stock outstanding forthe years ended March 31, 2013, 2012 and 2011 was 218,271
thousand shares, 218,217 thousand shares and 218,032 thousand
shares, respectively. There were no potentially dilutive shares outstanding during the years ended March 31, 2013, 2012 or 2011.
Cash dividends per share shown in the accompanying consolidated statements of income are computed based on dividends
approved and paid in each fiscal year.
(22) Use of Estimates
The preparation of the consolidated financial statements requires
management of the Company to make a number of estimates andassumptions relating to the reported amounts of assets and­liabilities, the disclosures of contingent assets and liabilities at thedate of the consolidated financial statements and the reported
amounts of revenues and expenses during the period. Actual results
could differ from those estimates. Significant items subject to such
estimates and assumptions include the carrying amounts of inventories, deferred insurance acquisition costs, investment securities,
other investments, property, plant and equipment, goodwill, otherintangible assets, unearned premiums and other insurance liabilities, valuation of receivables, valuation allowances for deferredincome taxes, valuation of derivative instruments, assets and obligations related to employee benefits, asset retirement obligations,income tax uncertainties, and other contingencies.
(23) Recent Pronouncements
In October 2010, the FASB issued ASU No. 2010-26, “Accounting
for Costs Associated with Acquiring or Renewing Insurance
Contracts, a Consensus of the FASB Emerging Issues Task Force.”
This accounting standard redefines the definition of acquisition
costs qualifying for deferral to be costs that are related directly tothe successful acquisition of new or renewal insurance contracts.
This accounting standard is effective for fiscal years beginning after
December 15, 2011, and was adopted by the Company in the fiscal
year ended March 31, 2013. The adoption of this accounting standard did not have a material impact on the Company’s consolidated
results of operations and financial position.
In April 2011, the FASB issued ASU No. 2011-02, “A Creditor’s
Determination of Whether a Restructuring Is a Troubled Debt
Restructuring.” This accounting standard provides the criteria
as to whether a loan modification constitutes a troubled debt
restructuring and requires additional disclosures about troubled
debt restructurings. This accounting standard is effective for fiscal
years beginning on or after June 15, 2011, and was adopted by theCompany in the fiscal year ended March 31, 2013. The adoptionof this accounting standard did not have a material impact on the
Company’s consolidated results of operations and financial position.
In May 2011, the FASB issued ASU No. 2011-04, “Amendments
to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs.” This accounting standard
amends current U.S. GAAP to create more commonality with IFRSs
by changing the wording used to describe requirements in U.S.
GAAP for measuring fair value and for disclosing information about
fair value measurements. This accounting standard is effective forfiscal years beginning after December 15, 2011, and was adopted
by the Company in the fiscal year ended March 31, 2013. The
adoption of this accounting standard did not have a material
impact on the Company’s consolidated results of operations andfinancial position.

Financial Section

SECOM Annual Report 2013

Financial Review

4. Acquisitions
Acquisition of Nittan Co., Ltd.
On April 1, 2012, the Company acquired 100% of commonshares outstanding of LIXIL NITTAN Co., Ltd. for ¥12,713 million($135,245 thousand) in cash and changed its name to Nittan Co.,
Ltd. The purpose of this acquisition is (i) to enhance fire protection
services, including flexible response to environmental changes, suchas increased awareness of disaster prevention due to the Great East
Japan Earthquake (domestic) and increasing disaster prevention in
emerging countries (overseas), and (ii) research and development of
next-generation systems for disaster prevention.

SECOM Today

3. U.S. Dollar Amounts
U.S. dollar amounts have been included in these financial statements solely for the convenience of the reader. The translations of
yen into U.S. dollars have been made at the rate of ¥94=US$1, therate ­prevailing on the Tokyo Foreign Exchange Market on March 31,
2013. These ­translations should not be construed as representingthat the yen amounts actually represent, or have been or could be
converted into U.S. dollars at that rate.

Special Feature(24) Reclassifications
Certain amounts in the accompanying consolidated financial
statements for the years ended March 31, 2012 and 2011 havebeen ­reclassified to conform to the presentation used for the year
ended March 31, 2013.

Strategic Highlights

standard is effective for fiscal years beginning after December 15,
2012, and will be adopted by the Company in the fiscal year
­beginning April 1, 2013. As this accounting standard is a provision
for presentation only, the adoption will not have an impact on the
Company’s consolidated results of operations or financial position.
In March 2013, the FASB issued ASU No. 2013-05, “Parent’s
Accounting for the Cumulative Translation Adjustment upon
Derecognition of Certain Subsidiaries or Groups of Asserts within
a Foreign Entity or of an Investment in a Foreign Entity.” Thisaccounting standard resolved diversity in practice and clarifies theapplicable guidance for the release of the cumulative translation
adjustment when the parent company sells a part or all of its
investment in a foreign entity, ceases to have a controlling financial
interest in a subsidiary or group of assets that is a business withina foreign entity, or obtains control in a business combinationachieved in stages involving an equity method investment that is aforeign entity. This accounting standard is effective for fiscal years
beginning after December 15, 2013 and will be adopted by theCompany in the fiscal year beginning April 1, 2014. The company iscurrently evaluating the effect of adopting this accounting standard
on its consolidated financial statements.
In June 2013, the FASB issued ASU No. 2013-08, “Amendments
for the Scope, Measurement, and Disclosure Requirements.” Thisaccounting standard changes the approach to the investmentcompany assessment in ASC 946, clarifies the characteristics ofan investment company, and provides comprehensive guidance
for assessing whether an entity is an investment company. Thisaccounting standard also amends the measurement criteria fornoncontrolling ownership interests in other investment companies
and provides additional disclosure requirements. This accounting
standard is effective for interim and annual fiscal years beginning
after December 15, 2013 and will be adopted by the Company inthe fiscal year beginning April 1, 2014. The company is currently
evaluating the effect of adopting this accounting standard on its
consolidated financial statements.

The Management

In June 2011, the FASB issued ASU No. 2011-05, “Presentationof Comprehensive Income.” In presenting other comprehensive
income and its components in financial statements, this accounting
standard eliminates the current option to present the components
of other comprehensive income as part of the statement of changes
in equity. This accounting standard also requires reclassifications
between other comprehensive income and net income to bedisclosed on the face of financial statements. Furthermore, in
December 2011, the FASB issued ASU No. 2011-12, “Deferralof the Effective Date for Amendments to the Presentation of
Reclassifications of Items Out of Accumulated Other Comprehensive
Income in Accounting Standards Update No. 2011-05.” These
accounting standards are effective for fiscal years beginning after
December 15, 2011, and were adopted by the Company in thefiscal year ended March 31, 2013. As these accounting standards
are a provision for presentation only, the adoption did not havean impact on the Company’s consolidated results of operations or
financial position.
In September 2011, the FASB issued ASU No. 2011-08, “Testing
Goodwill for Impairment.” This accounting standard permits anentity to first assess qualitative factors to determine whether it ismore likely than not that the fair value of a reporting unit is lessthan its carrying amount as a basis for determining whether it
is necessary to perform the two-step goodwill impairment test.
An entity is not required to calculate the fair value of a reporting
unit unless the entity determines that it is more likely than notthat its fair value is less than its carrying amount. This accounting
standard is effective for fiscal years beginning after December 15,
2011, and was adopted by the Company in the fiscal year ended
March 31, 2013. The adoption of this accounting standard did nothave a material impact on the Company’s consolidated results of­operations and financial position.
In July 2012, the FASB issued ASU No. 2012-02, “TestingIndefinite-Lived Intangible Assets for Impairment.” This accounting
standard allows an entity first to assess qualitative factors todetermine whether it is more likely than not that the indefinite-lived
intangible asset is impaired as a basis for determining whether it isnecessary to perform the impairment test. An entity is not required
to calculate the fair value of the indefinite-lived intangible assets
unless the entity determines that it is more likely than not thatthe indefinite-lived intangible asset is impaired. This accounting­standard is effective for annual and interim impairment tests
performed for fiscal years beginning after September 15, 2012, andwill be adopted by the Company in the fiscal year beginning April 1,
2013. It is not anticipated that the adoption will have a material
impact on the Company’s consolidated results of operations or
financial position.
In February 2013, the FASB issued ASU No. 2013-02, “Reportingof Amounts Reclassified Out of Accumulated Other Comprehensive
Income.” This accounting standard requires an entity to provide
information about the amounts reclassified out of accumulated
other comprehensive income by component. In addition, thisaccounting standard requires an entity to present, either on theface of the statement where net income is presented or in thenotes, significant amounts reclassified out of accumulated othercomprehensive income by the respective line items of net income
but only if the amount reclassified is required under U.S. GAAP tobe reclassified to net income in its entirety in the same reporting
period. For other amounts that are not required under U.S. GAAP
to be reclassified in their entirety to net income, an entity is required
to cross-reference to other disclosures required under U.S. GAAP
that provide additional detail about those amounts. This accounting

47

CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.

The following unaudited pro forma information shows theCompany’s consolidated results of operations for the years ended
March 31, 2013 and 2012 as if the newly consolidated subsidiaries
		In thousands ofacquired were consolidated on April 1, 2011.
In millions of yen
U.S. dollars
Cash and cash equivalents.........................
Other current assets...................................
Investments and long-term receivables.......
Property, plant and equipment...................
Intangible assets, including goodwill..........
Other assets...............................................
Total assets acquired..............................
Current liabilities........................................
Other liabilities...........................................
Total liabilities assumed..........................
Noncontrolling interests.........................
Net assets acquired................................

¥ 2,937
17,954
1,650
6,014
2,080
1,018
31,653
13,446
5,359
18,805
135¥12,713$ 31,245
191,000
17,553
63,97922,127
10,830336,734
143,042
57,011200,053
1,436$135,245

The goodwill of ¥1,872 million ($19,915 thousand) represents
expected excess earning power based on future business operations. It is not deductible for tax purposes and has been assigned to
the Fire protection services segment.
Acquisition of At Tokyo Corporation
On October 31, 2012, the Company acquired 50.882% ofcommon shares outstanding of At Tokyo Corporation for ¥33,328
million ($354,553 thousand) in cash. The purpose of this acquisition
is to accelerate the data center business and realize a variety ofbusiness synergies by further improving data center service quality
and new information security services.
The following table summarizes the estimated fair values of theassets acquired and liabilities assumed at the date of acquisition.

In millions of yen
Years ended March 31
2013

Unaudited

Pro forma net sales and operating revenue.......
Pro forma net income attributable to
SECOM CO., LTD. ..........................................

2012¥888,282 ¥845,466
71,764

42,830In yenYears ended March 31
2013

Unaudited

Pro forma net income attributable to
SECOM CO., LTD. per share............................

2012¥328.79 ¥196.27

The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually
have been reported if the transaction in fact had occurred on
April 1, 2011, and is not necessarily representative of the Company’s
consolidated results of operations for any future period.
5. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2013 and 2012 ­are­comprised of the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2012

2013

2013

Cash............................................. ¥152,779 ¥145,450$1,625,308
Time deposits..............................
20,772
36,948220,979		In thousands ofIn millions of yen
U.S. dollars
Call loan......................................
46,50028,000494,681
Investment securities....................
2,645
2,642
28,138Cash and cash equivalents.........................
¥ 3,922 $ 41,723
Other current assets...................................
6,145
65,372¥222,696 ¥213,040$2,369,106
Investments and long-term receivables.......
262
2,787
Property, plant and equipment...................
54,917584,224
Investment securities include negotiable certificates of deposit
Intangible assets, including goodwill..........
33,540356,809
and money management funds. These agreements mature within
Other assets...............................................
1,308
13,915three months and their carrying values approximate ­fair value. The
Total assets acquired..............................
100,094
1,064,830
Company has not experienced any losses through default of theCurrent liabilities........................................
6,770
72,021
financial institutions and does not ­anticipate default of any
Other liabilities...........................................
38,258407,000­outstanding agreements.
Total liabilities assumed..........................
45,028479,021
6. Cash Deposits
Noncontrolling interests.........................
21,738231,256
The Company operates cash collection and deposit services for
Net assets acquired................................
¥ 33,328 $ 354,553

Intangible assets of ¥15,230 million ($162,021 thousand) subject
to amortization include customer relationships of ¥12,158 million($129,340 thousand) with a 20-year useful life and trademarks of¥3,072 million ($32,681 thousand) with a 15-year useful life. The
goodwill of ¥17,468 million ($185,830 thousand) represents
expected excess earning power based on future business operations.
It is not deductible for tax purposes and has been assigned to the
Information and ­communication related and other services segment.
The Company recorded the acquisition cost of ¥212 million($2,255 thousand) related to these acquisitions in selling, generaland administrative expenses.
The fair value of noncontrolling interests is measured at theprice based on the acquisition price with an adjustment for control
premium.

48

SECOM Annual Report 2013

financial institutions relating to cash dispensers located outside offinancial institution facilities and also operates cash collection­services for entities other than financial institutions. Cash deposit
balances are segregated from cash and cash equivalents and are
restricted as to use by the Company. The Company funds most of
the cash for such operations through bank overdrafts and deposits.
Bank loans and deposits received, which relate to these operations,were ¥26,598 million ($282,957 thousand) and ¥24,863 million($264,500 thousand), respectively, at March 31, 2013, and ¥27,659
million and ¥21,921 million, respectively, at March 31, 2012. Aspart of its fee arrangement, the Company is reimbursed for theinterest cost of the related overdrafts.

		Less than 12 months

March 31, 2013
Gross unrealized
Cost

Short-term investments:
Available-for-sale:		Equity securities............ ¥ 222
		Debt securities.............. 11,434
		
¥11,656¥

LossesFair value

369
59
428

¥ —
5
¥ 5

¥

¥13,571
4,562

¥200
0

¥ 44,292
60,587318¥18,451

—
¥200

2,906
¥107,785¥

591
11,488¥ 12,079

12 months or longer

		 Gross		Gross		 unrealized		unrealized
Fair value
lossesFair value
lossesAvailable-for-sale:
Equity securities............
Debt securities..............
			¥2,405
2,278¥4,683

¥200
5
¥205

¥—
—
¥—

¥—
—
¥—

In thousands of U.S. dollars
March 31, 2013

In millions of yen
March 31, 2012

Less than 12 months

12 months or longer

		 Gross		Gross		 unrealized		unrealized
Fair value
lossesFair value
lossesAvailable-for-sale:
Equity securities............
Debt securities..............
		$25,585
24,234$49,819$2,12853$2,181

$—
—
$—

$—
—
$—

Special Feature

Investment securities:
Available-for-sale:		Equity securities............ ¥30,921
		Debt securities.............. 56,025
Held-to-maturity:
		Debt securities..............
2,588
		
¥89,534

Gains

In millions of yen

		March 31, 2013

Strategic Highlights

In millions of yen

Gross unrealized losses on, and fair value of, “available-for-sale”
and “held-to-maturity” securities, aggregated by invest­ment­category and the length of time that individual securities have been
in a continuous unrealized loss position at March 31, 2013 are as
follows:

The Management

7. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(noncurrent) include debt and equity securities. The related aggregate fair value, gross unrealized gains, gross unrealized losses andcost pertaining to “available-for-sale” and “held-to-maturity”
investments at March 31, 2013 and 2012 are as ­follows:

Gross unrealized

Investment securities:
Available-for-sale:		Equity securities............ ¥28,606
		Debt securities.............. 60,406
Held-to-maturity:
		Debt securities..............
7,461
			
¥96,473¥6,015
1,749

¥ 87
41

¥ 34,534
62,11455¥7,819

4
¥132

7,512
¥104,160

In thousands of U.S. dollars

In millions of yen¥¥

Losses52
52¥¥

Fair value

March 31, 2013

March 31, 2013
Available-for-sale

Gross unrealized
Cost

Short-term investments:
Available-for-sale:		Equity securities........... $ 2,362 $		Debt securities............. 121,638
		$124,000 $Gains

3,925 $
628
4,553 $

LossesFair value

— $
6,287
53
122,21353 $ 128,500

Fair value

Cost¥11,434¥11,488

23,01225,193——23,533
9,480¥67,459

25,12910,265¥72,075

1,510
1,078
¥2,5881,596
1,310¥2,906¥—

Fair value¥—

SECOM Annual Report 2013

Financial Section

Investment securities:
Available-for-sale:		Equity securities........... $328,946 $144,372 $2,128 $ 471,190
		Debt securities............. 596,011
48,5320644,543
Held-to-maturity:
		Debt securities.............
27,532
3,383—
30,915
		$952,489 $196,287 $2,128 $1,146,648

Due within 1 year............
Due after 1 year
through 5 years.............
Due after 5 years
through 10 years...........
Due after 10 years ..........
		..................................

Held-to-maturity

Cost

Financial Review¥ 17,294¥ 17,294

Gains

SECOM Today

3
3

Based on the Company’s ability and intent to hold the investment
for a reasonable period of time sufficient for a recovery of fairvalue, the credit condition of the issuers and other relevant factors,
the Company does not consider these investments to be otherthan-temporarily impaired at March 31, 2013.
At March 31, 2013, debt securities principally consisted of shortterm investments in monetary trusts, Japanese ­govern­ment bonds,
corporate bonds, U.S. treasury securities and U.S. Government
Agency Bonds.
The cost and fair value of “available-for-sale” and ”held-to-­maturity” debt securities by contractual maturity at March 31, 2013
are as follows:

Cost

Short-term investments:
Available-for-sale:		Debt securities.............. ¥17,245
			
¥17,245

49

CONSOLIDATED FINANCIAL STATEMENTS

In thousands of U.S. dollars
March 31, 2013
Available-for-sale
Cost

Fair value

Due within 1 year............ $121,638
Due after 1 year
through 5 years............. 244,809
Due after 5 years
through 10 years........... 250,352
Due after 10 years .......... 100,850
		.................................. $717,649$122,213

Gross realized gains............ ¥1,051
Gross realized losses...........
144¥1,950662

Held-to-maturity
Cost$

268,011
267,329
109,202$766,755

Fair value

— $

—

—

—

Costs on uncompleted construction contracts at March 31, 2013
and 2012, amounting to ¥7,983 million ($84,926 thousand) and¥5,872 million, respectively, are included in fire protection-related
products.
The amount of write-down on real estate inventories included incost of sales for the years ended March 31, 2013, 2012 and 2011were ¥1,792 million ($19,064 thousand), ¥20,723 million and¥1,482 million, respectively.

16,064 16,979
11,468 13,936$27,532 $30,915

9. Credit Quality of Financing Receivables and Allowance for
Doubtful Accounts
The Company has financing receivables and classifies them into
five categories: “lease receivable,” “loans receivable resulting from
During the years ended March 31, 2013, 2012 and 2011, the net
medical services,” “loans receivable resulting from insurance ser­unrealized gains and losses on “available-for-sale” securities
vices,” “other loans receivable” and “other.” Financing receivables
included as part of accumulated other comprehensive income (loss),classified as “lease receivable” are resulting from lease transactions of
net of tax, increased by ¥6,914 million ($73,553 thousand) andsecurity equipment and real estate for office and medical institutions.
¥2,515 ­million, decreased by ¥3,472 million, respectively.
The Company continuously monitors overdue financing receivProceeds from the sale of “available-for-sale” securities for theables which, the Company considers, have a risk of uncollectability.
years ended March 31, 2013, 2012 and 2011 were ¥20,479 million
For financing receivables with specific customer collection issues,($217,862 thousand), ¥72,223 million and ¥17,187 million, respecthe Company individually evaluates their collectability in order totively. On those sales, the gross ­realized gains and gross realized
determine the amount of allowance for doubtful accounts. For
losses, using a moving-­average cost basis, for the years ended
other financing receivables, the Company categorizes these receivMarch 31, 2013, 2012 and 2011 are as follows:
ables into groups by their nature and characteristics. The Company
		In thousands ofcollectively evaluates the collectability of each group, using its hisIn millions of yen
U.S. dollars
torical experience of write-offs and ­determines the amount ofYears ended
Year ended
allowance for doubtful accounts.
March 31
March 31
Financing receivables and allowance for doubtful accounts at
2013
2012
2011
2013
March 31, 2013 and 2012 are as follows:¥2,916752$11,181
1,532

The Company maintains long-term investment securities, issued
by a number of ­non-­public companies, included as investment securities in the consolidated balance sheets. The aggregate carrying
amount of the investments in non-public companies, at cost net ofother-than-temporary impairment, was ¥10,178 million ($108,277
thousand) and ¥9,756 million at March 31, 2013 and 2012,­respectively. The corresponding fair value at that date was not­computed as such estimation was not practicable.

In millions of yen

Year ended March 31, 2013
		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Other

Total

Allowance for
doubtful accounts:
Balance at
beginning of year........ ¥ 384 ¥ 2,512 ¥ 671 ¥3,165 ¥ 893 ¥ 7,625
Provision (Reversal)...
79
482
30
16
(5)
602
Charge off...............
(57)
(643)
(580)
(323)
(121) (1,724)
Other*.....................
—
—
—
25
53
78
8. Inventories
Balance at end
Inventories at March 31, 2013 and 2012 are comprised of theof year...................
406
2,351
121 2,883
820
6,581­following:
Individually		
In thousands ofevaluated...............
822,351
77 2,883
820
6,213
In millions of yen
U.S. dollars
Collectively
March 31
March 31evaluated............... ¥ 324 ¥— ¥ 44 ¥ — ¥ — ¥ 368
		
2013
2012
2013

Security-related products................... ¥ 7,822 ¥ 7,473
Fire protection-related products......... 16,647 11,942
Real estate......................................... 26,293 42,359
Other-related products.......................
7,259
5,320
			 .............................................. ¥58,021 ¥67,094$ 83,213
177,096279,713
77,223$617,245

Work in process for real estate inventories at March 31, 2013 and2012, amounting to ¥13,348 million ($142,000 thousand) and¥33,277 million, respectively, are included in real estate.

50

SECOM Annual Report 2013

Financing receivables:
Individually
evaluated............... ¥ 104 ¥12,795 ¥ 83 ¥3,037 ¥ 849 ¥16,868
Collectively
evaluated............... 39,658
524 3,775 2,442
156 46,555¥39,762 ¥13,319 ¥3,858 ¥5,479 ¥1,005 ¥63,423* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

		 Loans
Loans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

In millions of yen
March 31, 2013

Other

Total

* “Other” principally includes the effect of changes in foreign currency exchange rates.
In thousands of U.S. dollars

Total

Financing receivables
on nonaccrual status.... ¥— ¥ 4,359 ¥83 ¥3,037 ¥— ¥ 7,479
In millions of yen
March 31, 2012

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Other

Total

Current.......................... ¥26,251 ¥13,642 ¥3,912 ¥4,308 ¥ 679 ¥48,792
Overdue.........................
67304
887 3,214
421
4,893
Total:
Financing receivables... ¥26,318 ¥13,946 ¥4,799 ¥7,522 ¥1,100 ¥53,685
Financing receivables
on nonaccrual status.... ¥— ¥ 4,318 ¥ 887 ¥3,362 ¥— ¥ 8,567

In thousands of U.S. dollars
March 31, 2013
Other

Total

* “Other” principally includes the effect of changes in foreign currency exchange rates
and the scope of consolidation.

The Company considers the fact that receivables are past due andthe financial position of the debtor to be credit quality indicatorsand classifies financing receivables into Overdue and Current.
Financing receivables determined to have no prospects for collecting contractual interest on the basis of being past due and otherfactors are placed on nonaccrual status.

Total

Financing receivables
on nonaccrual status.... $— $ 46,372 $883 $32,309 $— $ 79,564

Impaired receivables and the related allowance for doubtful
accounts at March 31, 2013 and 2012 are as follows:
In millions of yen
March 31, 2013
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Impaired receivables.......
Related allowance for
doubtful accounts........

6,213

Financial Section

Financing receivables:
Individually
evaluated............... $ 1,106 $136,117 $ 883 $32,309 $ 9,032 $179,447
Collectively
evaluated............... 421,894
5,574 40,160 25,978 1,660 495,266$423,000 $141,691 $41,043 $58,287 $10,692 $674,713

Other

Current.......................... $421,894 $141,265 $40,160 $27,309 $ 7,128 $637,756
Overdue.........................
1,106
426
883 30,978 3,564 36,957
Total:
Financing receivables... $423,000 $141,691 $41,043 $58,287 $10,692 $674,713

Financial Review

Allowance for
doubtful accounts:
Balance at
beginning of year........ $ 4,085 $ 26,723 $ 7,138 $33,670 $ 9,500 $ 81,116
Provision (Reversal)...
840
5,128
319
170
(53) 6,404
Charge off...............
(606) (6,840) (6,170) (3,436) (1,288) (18,340)
Other*.....................
—
—
—
266
564
830
Balance at endof year........................
4,319 25,011 1,287 30,670 8,723 70,010
Individually
evaluated...............
872 25,011
819 30,670 8,723 66,095
Collectively
evaluated............... $ 3,447 $— $ 468 $— $— $ 3,915

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

SECOM Today

Year ended March 31, 2013

Other

Current.......................... ¥39,658 ¥13,279 ¥3,775 ¥2,567 ¥ 670 ¥59,949
Overdue.........................
10440
83 2,912
335
3,474
Total:
Financing receivables... ¥39,762 ¥13,319 ¥3,858 ¥5,479 ¥1,005 ¥63,423

Special Feature

Financing receivables:
Individually
evaluated............... ¥67 ¥13,439 ¥ 887 ¥3,362 ¥ 920 ¥18,675
Collectively
evaluated............... 26,251
507 3,912 4,160
180 35,010................................ ¥26,318 ¥13,946 ¥4,799 ¥7,522 ¥1,100 ¥53,685

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

Strategic Highlights

Allowance for
doubtful accounts:
Balance at
beginning of year........ ¥ 427 ¥ 2,629 ¥1,023 ¥3,027 ¥1,180 ¥ 8,286
Provision (Reversal)...
112
(117)
(41)
(71)
80
(37)
Charge off...............
(169)
—
(311)
(50)
(125)
(655)
Other*.....................
14
—
—
259
(242)
31
Balance at endof year...................
384
2,512
671 3,165
893
7,625
Individually
evaluated...............
622,512
626 3,165
893
7,258
Collectively
evaluated............... ¥ 322 ¥— ¥ 45 ¥ — ¥ — ¥ 367

		 LoansLoans		 receivable receivable		 resulting resulting		 from
from
Other
Lease
medical insurance
loans
receivable
services
services receivable

The aging analysis of the recorded financing receivables andfinancing receivables on nonaccrual status at March 31, 2013 and2012 are as follows:

The Management

In millions of yen
Year ended March 31, 2012

SECOM Annual Report 2013

51

Other
loans
receivable

Other

Total

¥104

¥12,795¥83¥3,037¥849 ¥16,868

82

2,351

77

2,883

820

CONSOLIDATED FINANCIAL STATEMENTS

In millions of yen		In thousands ofMarch 31, 2012
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Impaired receivables.......
Related allowance for
doubtful accounts........

Other
loans
receivable

Other

2013
Total

¥67

¥13,439¥887¥3,362¥920 ¥18,675

62

2,512

626

3,165

893

7,258

In thousands of U.S. dollars

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

Net sales........................ ¥162,379 ¥159,802 ¥129,551$1,727,436

Gross profit.................... ¥ 52,691 ¥ 53,394 ¥ 46,156$ 560,543

Net income
attributable toaffiliated companies..... ¥ 15,056 ¥ 16,683 ¥ 16,933$ 160,170

2012

March 31, 2013
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Impaired receivables....... $1,106 $136,117
Related allowance for
doubtful accounts........
872
25,011Otherloans
receivable

Other

Total

$883 $32,309 $9,032 $179,447
819

30,6708,723

66,095The average amounts of impaired receivables for the year ended
March 31, 2013 are as follows:

In millions of yen

		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Average amounts of
impaired receivables.....

¥86¥13,117

¥485

Other
loans
receivable

Other¥3,200¥884 ¥17,772

Total

In thousands of U.S. dollars
		 LoansLoans		 receivable receivable		 resulting resulting		 fromfromLease
medical insurance
receivable
services
services

Average amounts of
impaired receivables.....

Other
loans
receivable

Other

Dividends received from affiliated companies for the years ended
March 31, 2013, 2012 and 2011 were ¥2,403 million ($25,564
thousand), ¥2,324 million and ¥2,175 million, respectively.
Three listed affiliated companies accounted for under the equity
method with an aggregated carrying amount of ¥32,363 million($344,287 thousand) and ¥27,738 ­million at March 31, 2013 and2012, respectively, had a quoted market value of ¥79,750 million($848,404 thousand) and ¥60,164 ­million at March 31, 2013 and2012, respectively.
The amounts of goodwill were ¥3,051 million ($32,457 thousand) and ¥2,931 million at March 31, 2013 and 2012, respectively.
In June 2010, the parent company sold the outstanding share ofTokyo Biso Kogyo Corporation, a 36.6 percent owned affiliate, to
TB Holdings Corporation for ¥5,055 million. The sale resulted in aloss of ¥513 million.
A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:		In thousands of

Total$915 $139,543 $5,160 $34,043 $9,403 $189,064

10. Investments in Affiliated Companies
The Company has investments in affiliated companies that are
accounted for under the equity method. Investments principallyconsist of Taiwan Secom Co., Ltd., a 28.8 percent owned affiliate,
which is listed on the Taiwan Stock Exchange; S1 Corporation, a27.7 percent owned affiliate, which is listed on the Korea Exchange;
and Toyo Tech Co., Ltd., a 27.8 percent owned affiliate, which islisted on the Second Section of the Osaka Securities Exchange.
Combined financial information for the affiliated ­companies
accounted for under the equity method is as ­follows:

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

2011

2013

Sales.................................

¥1,924¥2,113¥1,669$20,468

Purchases.........................

¥6,573¥6,125¥5,128$69,926

		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Notes and accounts
receivable, trade.............................. ¥ 490¥ 457$ 5,213Loans receivable................................. ¥ 469¥ 375$ 4,989

Notes and accounts payable............... ¥2,820¥2,884$30,000

Guarantees for bank loans................. ¥ 139¥ 127$ 1,479		In thousands ofIn millions of yen
U.S. dollars
The Company's equity in undistributed income of affiliates at
March 31
March 31
March 31, 2013 and 2012 included in retained earnings was¥24,696 million ($262,723 thousand) and ¥30,112 million,
		
2013
2012
2013
respectively.
Current assets................................. ¥101,060 ¥101,597 $1,075,106
98,7191,158,373

Total assets................................. ¥209,947 ¥200,316$2,233,479

Current liabilities............................. ¥ 46,082 ¥ 43,818
Noncurrent liabilities.......................
34,94435,127
Equity............................................. 128,921 121,371$ 490,234
371,745
1,371,500

Total liabilities and equity............ ¥209,947 ¥200,316$2,233,479

Noncurrent assets...........................

52

SECOM Annual Report 2013

108,887

11. Long-Lived Assets
The Company has assessed the potential impairment of its longlived assets. As a result of a significant decrease in revenue forecasts, the Company principally recognized impairment losses on realestate of the other services for the year ended March 31, 2012. The
fair value was determined based on the estimated present value of
future cash flows or appraisal value.

The Management

Impairment losses on long-lived assets by ­business segment for
the years ended March 31, 2013, 2012 and 2011 are as follows:

¥ — ¥
34
—
—

—
48
—
—

¥—
—
1
—

$

—
362
—
—

297

18

2

3,160

—

—

—

—

248
—

8,067
—

—
—

2,638
—

		Total...............................

¥579 ¥8,133¥ 3$6,16012. Goodwill and Other Intangible Assets
The components of acquired intangible assets, excluding goodwill,at March 31, 2013 and 2012 are as ­follows:
March 31, 2013
Gross		Netcarrying Accumulated
carrying
amountamortization
amount(¥26,818)(2,724)(¥29,542)¥17,078
17,082¥34,160

Unamortized intangible assets............ ¥ 4,258¥¥ 4,258—

In millions of yen
March 31, 2012
Gross		Netcarrying Accumulated
carrying
amountamortization
amount(¥24,229)(2,165)(¥26,394)¥16,251
1,926¥18,177

Unamortized intangible assets............ ¥ 4,128¥¥ 4,128—

In thousands of U.S. dollars
March 31, 2013
Gross		Netcarrying Accumulated
carrying
amountamortization
amountAmortized intangible assets:
Software........................................ $466,979
Other............................................. 210,702
		$677,681($285,298) $181,681(28,979) 181,723($314,277) $363,404

Unamortized intangible assets............ $ 45,298$$71,80958,57444,98935,511
25,287The changes in the carrying amount of goodwill by businesss­ egment for the years ended March 31, 2013 and 2012 are as
follows:
In millions of yen							Information and			Fire		 Geographic Real estate communication
		
Security protection
Medical information development
related and		services
services
services
servicesand sales other services

Goodwill................ ¥2,898¥81
Accumulated
impairment
losses...................
(406)—
March 31, 2011..... 2,49281
Goodwill acquired
during the year.... 1,021—
Disposal.................
——
Impairment
losses...................
(793)—
Translation
adjustment..........
(99)—
Goodwill................ 3,820
81
Accumulated
impairment
losses................... (1,199)—
March 31, 2012..... 2,621
81
Goodwill acquired
during the year....
— 1,872
Disposal.................
——
Impairment
losses...................
(468)—
Translation
adjustment..........
198—
Goodwill................ 4,018 1,953
Accumulated
impairment
losses................... (1,667)—
March 31, 2013.... ¥2,351 ¥1,953

Total¥9,970¥4,910¥135¥2,002 ¥19,996(4,338)
5,632

(492)
4,418

(135)
—

(175)
1,827

(5,546)
14,450

—
—

102
—

—
—

—
—

1,123
—

(269)

(156)

—

—

(1,218)

—
9,970

(21)
4,991

—
135

—
2,002

(120)
20,999(4,607)
5,363

(648)
4,343

(135)
—

(175)
1,827

(6,764)
14,235

—
—

—
—

—
—

17,468—19,340
—

—

(584)

—

—

(1,052)

—
9,399

15
4,667

—
135

—
19,470213
39,642(4,036)(893)¥5,363 ¥3,774

(135)
¥ —

(175) (6,906)¥19,295 ¥32,736

Financial Section

Amortized intangible assets:
Software........................................ ¥40,480
Other.............................................
4,091
		
¥44,571¥6,750
5,506
4,229
3,338
2,377

Financial Review

Amortized intangible assets:
Software........................................ ¥43,896
Other............................................. 19,806
		¥63,7022014......................................................
2015......................................................
2016......................................................
2017......................................................
2018......................................................

In thousands of
U.S. dollars

SECOM Today

In millions of yen

		Years ending March 31
In millions of yen

Special Feature

Security services.....................
Fire protection services...........
Medical services.....................
Insurance services..................
Geographic information
services................................
Real estate development
and sales..............................
Information andcommunication related
and other services................
Corporate items.....................

Strategic Highlights

Aggregate amortization expense for the years ended March 31,
2013, 2012 and 2011 was ¥5,995 million ($63,777 thousand),¥6,120 million and ¥6,236 million, respectively. Amortized intangi		
In thousands of
ble assets are amortized using the straight-line method over their
In millions of yen
U.S. dollars
estimated useful lives. The weighted average amortization period
Years ended
Year ended
March 31
March 31for internal use software is approximately five years.
The estimated aggregate amortization expense for ­intangible
2013
2012
2011
2013
assets for the next five years is as follows:— $ 45,298

SECOM Annual Report 2013

53

CONSOLIDATED FINANCIAL STATEMENTS

In thousands of U.S. dollars							Information and			Fire		 Geographic Real estate communication
		
Security protection
Medical information development
related and		services
services
services
servicesand sales other services

Total

Goodwill................ $40,638 $ 862 $106,064 $53,096 $1,436 $ 21,298 $223,394
Accumulated
impairment
losses................... (12,755)— (49,011) (6,894) (1,436)(1,862) (71,958)
March 31, 2012..... 27,883
862 57,053 46,202—
19,436 151,436
Goodwill acquired
during the year....
— 19,915——— 185,830 205,745
Disposal.................
—
—
—
—
—
—
—
Impairment
losses................... (4,978)—— (6,213)—— (11,191)
Translation
adjustment.......... 2,105
—
—
160
—
—
2,265
Goodwill................ 42,744 20,777 99,989 49,649
1,436 207,128 421,723
Accumulated
impairment
losses................... (17,734)— (42,936) (9,500) (1,436)(1,862) (73,468)
March 31, 2013.... $25,010 $20,777 $ 57,053 $40,149 $ — $205,266 $348,255

Impairment losses on goodwill recognized in the above table aremainly due to decreases in the estimated fair value of reporting
units in each segment mainly caused by decreases in projected cash
flows. The fair value is deter­mined based on the estimated present
value of future cash flows.
13. Bank Loans and Long-Term Debt
Bank loans of ¥39,032 million ($415,234 thousand) and ¥40,762
million at March 31, 2013 and 2012, respectively, are generallycomprised of 30 to 365 day notes. The weighted average interest
rate was 1.15 percent and 1.24 percent at March 31, 2013 and2012, respectively. Substantially all of these loans are borrowed
from banks. The Company has entered into basic agreements withthese banks which state that, with respect to all present or futureloans with such banks, collateral (including sums on deposit withsuch banks) or guarantors shall be provided immediately uponrequest. Further, any collateral furnished pursuant to such agreements or otherwise will be applicable to all indebted­ness to suchbanks. The Company has not been requested to submit such­additional security.
At March 31, 2013, Nohmi Bosai Ltd., a subsidiary of the parent
company, had an unused committed line of credit from a short-termarrangement of ¥4,000 million ($42,553 thousand). The line ofcredit expires in March 2016. Under the agreement, Nohmi Bosai
Ltd. is required to pay committed fees, at an annual rate of 0.15
percent, on the unused portion of the line of credit. At March 31,
2013, the Company had overdraft agreements with 30 banks andits unused lines of credit amounted to ¥28,275 million ($300,798
thousand). The Company incurs no fee on the unused portion of
the lines of credit. The overdraft agreements expire in the period
from April 2013 to March 2014. The Company has the ability andintent to extend these overdraft agreements under similar terms
and conditions.

54

SECOM Annual Report 2013

Long-term debt at March 31, 2013 and 2012 comprisethe ­following:		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Loans, principally from banks due
2012–2033 with interest rates
ranging from 0.59% to 10.05%:
Secured............................................. ¥24,332 ¥22,619
Unsecured......................................... 17,245
9,174
1.14% unsecured bonds due 2013.......
—
3,060
1.13% unsecured bonds due 2014....... 1,471
1,557
Unsecured bonds due 2012–2019with floating interest rates basedon 6-month TIBOR plus
0.00%–0.15%.................................... 11,865 10,992
Obligations under capital leases,
due 2012–2040 (Note 19)................... 11,130 11,674
			................................................. 66,043 59,076
Less: Portion due within one year.......... (17,281) (22,053)
			 ................................................. ¥48,762 ¥37,023$258,851
183,458—
15,649126,223
118,404
702,585(183,840)$518,745

Assets pledged as collateral for bank loans and long-term debt at
March 31, 2013 and 2012 are as follows:		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Time deposits........................................ ¥ 2,210 ¥ 2,210
Short-term and long-term receivables.... 5,527 5,472
Investment securities.............................. 1,084
695
Property, plant and equipment............... 52,721 55,101
Other intangible assets........................... ¥ 818 ¥ 818$ 23,511
58,798
11,532560,862$ 8,702

The aggregate annual maturities on long-term debt at March 31,
2013 are as follows:		Years ending March 31
In millions of yen

2014.....................................................
2015.....................................................
2016.....................................................
2017.....................................................
2018.....................................................
Thereafter..............................................
............................................................

¥17,281
11,522
10,8556,472
5,872
14,041¥66,043

In thousands of
U.S. dollars$183,840
122,575
115,479
68,851
62,468149,372$702,585

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”), a­subsidiary of the parent company, maintains accounting records as
noted in Note 2 in accordance with Japanese GAAP, which vary incertain respects from U.S. GAAP. Those differences are principally,(a) that insurance acqui­sition costs are charged to expense whenincurred under Japanese GAAP whereas under U.S. GAAP, thosecosts are deferred and amortized generally over the premium-­
paying period of the insurance policies, (b) that liabilities related toincurred but not reported claims are computed based on related
regulations in Japan whereas under U.S. GAAP, those liabilities arecomputed based on past experience for unreported losses, andNet periodic pension and severance costs for the years ended
March 31, 2013, 2012 and 2011 are as follows:		In thousands of2013

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2011

2013

$87,968
16,309(23,841)(17,021)
14,968$78,383

The changes in benefit obligation, plan assets and funded ­status
are as follows:

Special Feature

Net periodic pension andseverance costs:
Service cost.......................... ¥8,269 ¥5,560 ¥6,313
Interest cost......................... 1,533 1,572 1,610
Expected return onplan assets......................... (2,241) (2,130) (2,065)
Amortization of priorservice benefit.................... (1,600) (1,649) (1,687)
Recognized actuarial loss...... 1,407 1,222
924
		 Net periodic pension
		 and severance costs....... ¥7,368 ¥4,575 ¥5,095

Strategic Highlights

		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		
2013
2012
2013

Financial Section

Amounts recognized in the consolidated balance sheet at March
31, 2013 and 2012 consist of:

Financial Review

Change in benefit obligation:
Benefit obligation
at beginning of year.................. ¥85,785 ¥82,500 $ 912,606
Service cost.................................
8,269
5,560
87,968Interest cost................................
1,533
1,572
16,309Actuarial loss..............................
4,055
1,487
43,138
Prior service liability (benefit).......
472
(25)
5,021
Benefits paid...............................
(5,834)(4,957)(62,064)
Acquisition..................................
6,871—
73,096
Settlement..................................
—
(352)
—
Benefit obligation
at end of year........................... 101,151
85,785
1,076,074
Change in plan assets:
Fair value of plan assets
at beginning of year..................
72,21067,831
768,191
Actual return on plan assets........
6,826
1,831
72,617
Employer contribution.................
6,171
6,439
65,649Benefits paid...............................
(3,801)(3,537)(40,436)
Acquisition..................................
1,965—
20,904
Settlement..................................
—
(354)
—
Fair value of plan assets
at end of year...........................
83,371
72,210886,925
Funded status
at the end of year......................... (¥17,780) (¥13,575) ($ 189,149)

SECOM Today

15. Pension and Severance Costs
Employees of the parent company and its domestic ­subsidiaries
whose services are terminated are, under most ­circumstances,­eligible for lump-sum benefits and/or ­eligible for pension benefits.
The parent company and certain domestic subsidiaries haveadopted a cash balance pension plan and a defined contribution
pension plan. Benefits under the cash balance pension plan are­calculated as a certain percentage of employees’ annual income
over their period of service, plus interest calculated as the 3-year
average yield for 10-year government bonds. The defined contribution pension plan was established in April 2003, by transferring a
portion equivalent to 20 percent of the cash balance pension plan,
including portions funded in prior periods. A specified percentageof employees’ annual income is contributed to the defined­contribution pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance pension
plan to the defined contribution pension plan. Accord­ingly, the ratioof the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution pension
plan changed to 70 percent and 30 percent, including portions
funded in prior periods.
In July 2011, Secom General Insurance Co., Ltd., a subsidiary of
the parent company, settled and transferred a portion of the taxqualified non-­contributory pension plan to the defined contribution
pension plan. In accordance with ASC 715, “Compensation—
Retirement Benefits,” the Company accounted for these transfers as
a partial settlement of benefit obligation. The amount of s­ ettlement
loss was immaterial for the year ended March 31, 2012.

The Management(c) that unearned premiums are calculated based on the documents
authorized by the Supervisory Authorities in Japan whereas under
U.S. GAAP, unearned premiums are reflected based on the lapseand ­surrender over the contract period.
In addition, under certain property and casualty insurance contracts with a refund clause and long-term insurance policies that­provide refunds at maturity, such as personal accident and fire, thepolicyholder receives a refund if premiums have been fully paid
unless a substantial settlement (as defined in the ­policy) has
occurred. The Company has provided for such refundable amounts
by classifying a portion of the net pre­mi­ums written, together withinterest thereon, as investment deposits by policyholders. Contract
and policy terms are ­principally five years.
For purposes of preparing the consolidated financial ­state­ments,
appropriate adjustments have been made to reflect such items inaccordance with U.S. GAAP.
The net equity of Secom Insurance at March 31, 2013 and 2012was ¥50,882 million ($541,298 thousand) and ¥44,541 million,
respectively.
Net sales and operating revenue of Secom Insurance include net
realized investment gains and losses, including gains and losses onsales of securities, losses on other-than-temporary impairment ofinvestment securities and impairment losses on long-lived assets.
Net realized investment gains and losses, including losses on otherthan-temporary impairments, for the years ended March 31, 2013,2012 and 2011 were gains of ¥724 million ($7,702 thousand),¥328 million and ¥838 million, respectively. Losses on other-thantemporary impairments of investment securities for the years ended
March 31, 2013, 2012 and 2011 were ¥25 ­million ($266 thousand),¥883 million and ¥681 ­million, respectively.

		In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

		
2013
2012
2013

Prepaid pension andseverance costs............................. ¥11,538 ¥ 7,846
Accrued pension andseverance costs............................. (29,318) (21,421)
			Net amount recognized....... (¥17,780) (¥13,575)$122,745(311,894)($189,149)

SECOM Annual Report 2013

55

CONSOLIDATED FINANCIAL STATEMENTS

Other changes in plan assets and benefit obligations ­recognizedin other comprehensive income (loss) for the year ended March 31,
2013 are summarized as follows:

The Company’s investment policy is designed to ensure that sufficient plan assets are available to provide future ­payments of pension benefits to the eligible plan participants. The policy does not
use target allocations for the individual asset catego­ries. Plan assets
		In thousands ofare invested primarily in equity and debt securities, and pooled
In millions of yen
U.S. dollars
funds with the objective to minimize risk and achieve the expected
Current year actuarial gain.......................
(¥ 530)($ 5,638)
rate of return. The investment results are periodically checked andAmortization of actuarial loss...................
(1,407)(14,968)
asset allocation is adjusted as necessary.
Current year prior service benefit.............
472
5,021
Amortization of prior service benefit........
1,600
17,021
The following table represents the fair value of the Company’s
pension plan assets at March 31, 2013 and 2012. The three levels of
			
¥ 135
$ 1,436
inputs used to measure fair value are more fully described in Note 22.
Amounts recognized in accumulated other comprehensive		In millions of yen
income (loss) at March 31, 2013 and 2012 consist of:March 31, 2013
		In thousands ofLevel 1
In millions of yen

Cash and cash
March 31
March 31equivalents................
Equity securities
		
2013
2012
2013
Japanese
Actuarial loss...................................... ¥30,715 ¥32,652$326,755
companies.............
Prior service benefit............................. (5,734) (7,806)(61,000)
Debt securities
			Net amount recognized........... ¥24,981 ¥24,846$265,755
Government
bonds....................
The estimated prior service benefit and actuarial loss for the
Non-government
defined benefit pension plans that will be amortized from accumubonds....................
lated other comprehensive income (loss) into net periodic benefit
Pooled funds................
Call loans.....................
cost over the next year are ¥1,598 million ($17,000 thousand) andInsurance contracts......
¥1,540 million ($16,383 thousand), respectively.
Other...........................
The accumulated benefit obligation for the pension plan was¥92,862 million ($987,894 thousand) and ¥78,805 million at March
31, 2013 and 2012, respectively.
The projected benefit obligation, accumulated benefit ­obligationand fair value of plan assets for the pension plans with ­accumulated
benefit obligation in excess of plan assets were ¥47,619 million($506,585 thousand), ¥42,896 million ($456,340 thousand) and¥18,564 million ($197,489 thousand), respectively, at March 31,
2013, and ¥35,768 million, ¥32,102 million and ¥14,555 million,
respectively, at March 31, 2012.
The Company uses March 31 as the measurement date for thedomestic pension plan.
Weighted-average assumptions used to determine the benefit
obligation at March 31, 2013 and 2012 are as follows:		 March 31

Discount rate..............................................................
Rate of compensation increase....................................

2013

2012

1.4%
2.7%

1.8%
2.6%

Weighted-average assumptions used to determine net ­pension
and severance costs for the years ended March 31, 2013, 2012 and2011 are as follows:
Years ended March 31

Discount rate..............................................
Expected return on plan assets....................
Rate of compensation increase....................

2013

2012

2011

1.8%
3.0%
2.6%

2.1%
3.0%
2.6%

2.2%
3.0%
2.6%

The Company determines the expected long-term rate of return
based on the expected long-term return of the various asset categories in which it invests. The Company considers the current
expectations for future returns and the actual ­historical returns ofeach plan asset category.

56

SECOM Annual Report 2013

Level 2

U.S. dollars

¥

899

¥

—

Level 3

¥

—

Total

¥

899

12,043——

12,043

3,708

75

—

3,783

200
911
26,83120,807
8,071
—
8,836
—
(552)
768
¥43,461 ¥22,486

1,885
47,638
8,071
8,836
216
¥83,371

774
—
—
—
—
¥17,424* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥3 million at March 31, 2013.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The non-goverment bonds invest approximately 50% inJapanese bonds and 50% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 65% in equity securities, 30% in debt securities and 5% in other investments. The unquoted beneficial certificate of security
investment trust included in the plan’s pooled funds is c­ lassified as Level 3.
		In millions of yen
March 31, 2012

Level 1

Cash and cash
equivalents................
Equity securities
Japanesecompanies.............
Debt securities
Government
bonds....................
Non-government
bonds....................
Pooled funds................
Call loans.....................
Insurance contracts......
Other...........................
Total............................

¥ 1,720

Level 2¥—¥

Level 3

Total—

¥ 1,720

9,420

—

—

9,420

5,772

66

1

5,839

—
794
23,15016,669
6,630
—
6,349
—
(341)
450
¥35,854 ¥17,914

2,324
39,819
6,630
6,349
109
¥72,210

1,530
—
—
—
—
¥18,442* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of ¥182 million at March 31, 2012.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The non-goverment bonds invest approximately 65% inJapanese bonds and 35% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 40% in equity securities, 55% in debt securities and 5% in other investments. The unquoted beneficial certificate of security
investment trust included in the plan’s pooled funds is c­ lassified as Level 3.

Level 2

In millions of yen

March 31, 2013

Year ended March 31, 2012

Level 3

Total

$

9,564
128,117
40,24520,053506,787
85,862
94,0002,297$886,925

In millions of yen

Year ended March 31, 2013
		
Debt securities					Non		 Government government
Pooled		bonds
bonds
funds

¥1

¥794

¥16,669

Other

Total

¥450

¥17,914

Total

¥ 6

¥651

¥16,113¥ —¥16,770

—

273

298

—

571

(3)

143

179

—

319

(2)
—
¥ 1

(273)
79
—
—
¥794 ¥16,669

450
—
¥450

254
—
¥17,914

In thousands of U.S. dollars
Year ended March 31, 2013
		
Debt securities					Non		 Government government
Pooled		bonds
bonds
funds

Balance at
beginning of year..........................
Actual returnon plan assets:
Relating to assets soldduring the year........................
Relating to assets heldat end of year..........................
Purchases, sales andsettlements, net............................
Transfer into (from) Level 3..............
Balance at end of year....................

$11

Other

Total

$8,447 $177,330 $4,787 $190,575——(6,617)191(6,426)—

1,245

34,319 (2,979)

32,585

—
(11)
$—

—
8,681 2,989
11,670—7,638 3,182
10,809$9,692 $221,351 $8,170 $239,213

The Company expects to contribute ¥6,204 million ($66,000
thousand) to its domestic defined benefit plans in the year ­ending
March 31, 2014.
The following benefit payments, which reflect future ­services, as
appropriate, are expected to be paid.
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

—

(622)

18

(604)

—

117

3,226

(280)

3,063

—
(1)
¥—

—
—
¥911

816
718
¥20,807

281
299
¥768

1,097
1,016
¥22,486

2014.....................................................
2015.....................................................
2016.....................................................
2017.....................................................
2018.....................................................
2019–2023............................................

¥ 5,114
4,350
5,013
4,798
5,431
28,658$ 54,404
46,27753,33051,043
57,777
304,872

The parent company and certain subsidiaries have defined contribution pension plans. The contributions to the defined contributionpen­sion plans for the years ended March 31, 2013, 2012 and 2011were ¥1,645 million ($17,500 thousand), ¥1,613 million and¥1,596 million, respectively.

Financial Section—

Financial Review

Balance at
beginning of year..........................
Actual returnon plan assets:
Relating to assets soldduring the year........................
Relating to assets heldat end of year..........................
Purchases, sales andsettlements, net............................
Transfer into (from) Level 3..............
Balance at end of year....................

Other

SECOM Today

The following table represents the changes in Level 3 investments
for the years ended March 31, 2013 and 2012.
Level 3 investments, mainly in the unquoted beneficial certificate
of security investment trust in the plan’s pooled funds, are at the­discretion of the administrator of the fund. Their fair values are estimated based on unobservable inputs provided by the administratorof the fund.

Balance at
beginning of year..........................
Actual returnon plan assets:
Relating to assets soldduring the year........................
Relating to assets heldat end of year..........................
Purchases, sales andsettlements, net............................
Transfer into (from) Level 3..............
Balance at end of year....................

Special Feature* The plan’s equity securities include common stock of the parent company and its
domestic subsidiaries in the amount of $31 thousand at March 31, 2013.
* The plan’s government bonds invest approximately 95% in Japanese bonds and
5% in foreign bonds. The non-goverment bonds invest approximately 50% inJapanese bonds and 50% in foreign bonds.
* The pension investment trust fund included in the plan’s pooled funds is classified
as Level 2, and invests approximately 65% in equity securities, 30% in debt securities and 5% in other investments. The unquoted beneficial certificate of security
investment trust included in the plan’s pooled funds is c­ lassified as Level 3.

		Debt securities					Non		 Government government
Pooled		bonds
bonds
funds

Strategic Highlights

Cash and cash
equivalents................ $ 9,564 $— $—Equity securities
Japanesecompanies............. 128,117——
Debt securities
Government
bonds....................
39,447798—
Non-government
bonds....................
8,234
2,127
9,692
Pooled funds................
—
285,436 221,351
Call loans.....................
—
85,862—
Insurance contracts......
—
94,000—
Other...........................
—(5,873)
8,170$185,362 $462,350 $239,213

The Management

Level 1In thousands of U.S. dollars

SECOM Annual Report 2013

57

CONSOLIDATED FINANCIAL STATEMENTS

16. Exchange Gains and Losses
Other income for the year ended March 31, 2013 includes net
exchange gains of ¥276 million ($2,936 thousand). Other expenses
for the years ended March 31, 2012 and 2011 include net exchange
losses of ¥145 million and ¥635 million, respectively.
17. Income Taxes
Total income taxes for the years ended March 31, 2013, 2012
and 2011 are allocated as follows:

Reconciliations of the differences between income taxes ­computed
at statutory tax rates and consolidated income taxes are as follows:		In thousands of2013

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2012

2011

2013

Income taxes computed
at statutory tax rate............. ¥45,208 ¥32,853 ¥43,677$480,936
Increase (decrease)		In thousands ofresulting from:
In millions of yen
U.S. dollars
Provision of valuation
Years ended
Year ended
allowance........................
909
7,905
97
9,670
March 31
March 31
Per capita tax.....................
850
806
831
9,043
2013
2012
2011
2013
Reversal of valuation
Consolidated income taxes.... ¥46,849 ¥38,202 ¥43,277$498,394
allowance........................
(518) (6,000)(736)(5,511)
Shareholders’ equity—
Net effect of changes inaccumulated othercorporate tax rates...........
—
2,464
—
—
comprehensive
Other, net..........................
400
174
(592)
4,256
income (loss):		Consolidated
Unrealized holding gains
		 income taxes................ ¥46,849 ¥38,202 ¥43,277$498,394(losses) on securities......... 3,379
1,236 (1,946)
35,947
Unrealized gains
The significant components of deferred tax assets and liabilities
aton derivative­
March 31, 2013 and 2012 are as follows:
instruments......................
5——
53
Pension liability		In thousands ofadjustments.....................
(255)
(763)
(654)
(2,713)In millions of yen
U.S. dollars
Foreign currency
March 31
March 31translation
		
2013
2012
2013
adjustments.....................
————
Equity transactions with
Deferred tax assets:noncontrolling interests
Loss carryforwards........................... ¥11,821 ¥11,137$125,755
and other ............................
—
—
(154)
—
Accrued pension andseverance costs.............................. 10,108
7,357
107,532
		...................................... ¥49,978 ¥38,675 ¥40,523$531,681
Deferred revenue............................. 9,438 10,015
100,404
Adjustment of book value at
The parent company and its domestic subsidiaries were ­subject tothe date of acquisition—a corporate tax of 28.05 percent for the year ended March 31,
		 Land and buildings....................... 8,510
7,033
90,532
2013 and 30 percent for the years ended March 31, 2012 and 2011,
		Other assets.................................
315
285
3,351
an inhabitants tax of approximately 20.3 percent, and a deductible
Property, plant and equipment......... 7,820
7,454
83,191enterprise tax of approximately 7.4 percent, which, in the aggreAccrued bonus................................. 6,266
5,770
66,660gate, results in a statutory tax rate in Japan of approximately 37.8
Write-down on real estate
inventories..................................... 4,536
5,371
48,255percent for the year ended March 31, 2013 and 40.5 ­percent for
Vacation accrual............................... 3,493
3,545
37,160the years ended March 31, 2012 and 2011.
Allowance for doubtful accounts...... 2,676
2,825
28,468Due to the promulgation on December 2, 2011 of the Act for
Intangible assets.............................. 1,499
1,594
15,947
Partial Amendment of the Income Tax Act, etc. for the Purpose of
Investment securities........................
464
1,941
4,936
Creating a Taxation System Responding to Changes in Economic
Other............................................... 9,979
7,241
106,160
and Social Structures and the Act on Special Measures for Securing
		 Gross deferred tax assets.............. 76,925 71,568
818,351
Financial Resources Necessary to Implement Measures for Recon		 Less: Valuation allowance............. (30,227) (29,928)(321,564)
struction Following the Great East Japan Earthquake, the statutory
		 Total deferred tax assets............... 46,698 41,640
496,787
tax rate used to calculate the deferred tax assets and liabilities forDeferredtax
liabilities:
the year ended March 31, 2012 changed mainly from 40.5 percent
Adjustment of book value at
to 37.8 percent for those items scheduled for collection or payment
the date of acquisition—­during the period from April 1, 2012 to March 31, 2015, and to		 Land and buildings....................... (5,632) (5,143)(59,915)
35.4 percent for those items scheduled for collection or payment
		Intangible assets........................... (5,448)(54)(57,957)
on or after April 1, 2015. As a result, income taxes for the year
		Other assets................................. (2,075) (1,303)(22,074)
ended March 31, 2012 increased by ¥2,464 million.
Deferred installation costs................ (7,086) (7,920)(75,383)
Unrealized holding gains on
securities........................................ (5,777) (2,236)(61,457)
Investments in affiliated companies... (5,105) (5,057)(54,309)
Prepaid pension andseverance costs.............................. (4,010) (2,710)(42,660)
Other............................................... (4,558) (4,468)(48,489)
		 Gross deferred tax liabilities.......... (39,691) (28,891)(422,244)
			 Net deferred tax assets ............ ¥ 7,007 ¥12,749$ 74,543

58

SECOM Annual Report 2013

$163,691
71,809(10,585)(150,372)$ 74,543

		 In thousands ofExpires in the years ending March 31
In millions of yen
U.S. dollars¥ 2,885
2,926
—
—
8,429
6,963
2,220
1,426
3,431
¥28,280$ 30,691
31,128——89,67074,074
23,617
15,17036,501$300,851

The operating loss carryforwards of overseas subsidiaries at
March 31, 2013 amounted to ¥4,575 million ($48,670 thousand), apart of which will begin to expire in the year ending March 31, 2014.

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

		
2013
2012
2011

Net income attributable
to SECOM CO., LTD............... ¥70,580 ¥41,237 ¥62,665
Transfers from (to)noncontrolling interests:
		 Decrease in additional
		 paid-in capital related to		 the acquisition of Secom		 Techno Service Co., Ltd.’s		 ownership interests..........
—(476) (5,692)
		Other, net...........................
(752)
(166)
151
Net transfers from (to)noncontrolling interests.......
(752)(642) (5,541)
Change from net income
attributable to SECOM CO.,LTD. and transfers from (to)noncontrolling interests......... ¥69,828 ¥40,595 ¥57,124

2013$750,851—(8,000)(8,000)$742,851(2) Retained Earnings
The Japanese Companies Act provides that an amount equal to
10 percent of surplus distributed by the parent company and its
Japanese subsidiaries be appropriated as a legal reserve until theaggregate amount of additional paid-in capital and legal reserve
equals 25 percent of the ­common stock account.
The amount available for dividends under the JapaneseCompanies Act ­is based on the amount recorded in the ­parent
company’s nonconsolidated statutory financial statements in accordance with Japanese GAAP. Such amount was ¥437,743 million($4,656,840 thousand) at March 31, 2013.

Financial Section

2014......................................................
2015......................................................
2016......................................................
2017......................................................
2018......................................................
2019......................................................
2020......................................................
2021......................................................
2022......................................................
..............................................................

		In thousands ofFinancial Review

The Company has not recognized deferred tax liabilities of ¥551
million ($5,862 thousand) for a portion of undistributed earnings offoreign subsidiaries totaling ¥16,968 million ($180,511 thousand)at March 31, 2013 as they are not expected to be remitted in theforeseeable future.
At March 31, 2013, the operating loss carryforwards of domestic
subsidiaries amounted to ¥28,280 million ($300,851 thousand) andare available for offsetting against future taxable earnings of such
subsidiaries for up to nine years, as follows:

SECOM TodayDeferred income taxes(Current assets)................................ ¥15,387 ¥12,853
Deferred income taxes(Other assets)...................................
6,750 10,185
Other current liabilities.......................
(995) (1,174)
Deferred income taxes(Liabilities)........................................ (14,135) (9,115)
		 Net deferred tax assets .............. ¥ 7,007 ¥12,749

Special Feature

18. Shareholders’ Equity(1) Additional Paid-In Capital
The change in additional paid-in capital includes the effect ofchangesin the Company’s ownership interest in its consolidated		In thousands ofsubsidiaries.
In millions of yen
U.S. dollars
The net income attributable to SECOM CO., LTD. and transfers
March 31
March 31from (to) noncontrolling interests for the years ended March 31,
		
2013
2012
2013
2013, 2012 and 2011 are as follows:

Strategic Highlights

The total amount of unrecognized tax benefits for the years
ended March 31, 2013, 2012 and 2011 were insignificant. Also,
there were no significant movements in the gross amounts of unrealized tax benefits and the amounts of interest and penalties recognized due to the unrecognized tax benefits during the years ended
March 31, 2013, 2012 and 2011.
Although the Company believes its estimates of unrecognized tax
benefits are reasonable, uncertainties regarding the final determination of income tax audit settlements and any related litigation
could affect the total amount of unrecognized tax benefits in the
future periods. Based on the information available as of March 31,
2013, the Company does not expect significant changes to theunrecognized tax ­benefits within the next twelve months.
The Company files tax returns in Japan and various foreign jurisdictions. In Japan, the Company is no longer subject to regularincome tax examinations by the tax authorities for years before
2009. In other foreign tax jurisdictions, major subsidiaries are nolonger subject to income tax examinations by tax authorities foryears before 2012, with few exceptions.

The Management

The valuation allowance principally relates to deferred tax assetsof subsidiaries with operating loss carryforwards, for tax purposes,that are not expected to be realized. The net change in the total
valuation allowance for the years ended March 31, 2013, 2012 and2011 was an increase of ¥299 million ($3,181 ­thousand), a decreaseof ¥3,771 million and an increase of ¥1,604 million, respectively.
In assessing the realizability of deferred tax assets, the Company’s
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. The Company’s management considered the sched­uled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in­making this assessment. Based upon the level of historical taxable
income and projec­tions for future taxable income over the periods
in which the deferred tax assets are deductible, the Company’s
management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the­existing valuation allowance at March 31, 2013 and 2012.
Net deferred tax assets at March 31, 2013 and 2012 are reflectedin the accompanying consolidated balance sheets under the­following captions:

SECOM Annual Report 2013

59

CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to March 31, 2013, the parent company’s Board of
Directors declared an annual cash dividend of ¥105 ($1.12) per
share, totaling ¥22,918 million ($243,809 thousand), to shareholders of record on March 31, 2013. The dividend declared wasapproved at the general shareholders’ meeting held on June 25,
2013. Dividends are recorded in the year they are declared.
The Japanese Companies Act provides that a company can makedividends of surplus anytime with resolution of the shareholders.
(3) Common Stock in Treasury
For the year ended March 31, 2012, common stock in treasury
decreased by ¥1,264 million, primarily due to allotment withrespect to the absorption-type merger of Secom Techno Service
Co., Ltd.
The Company may repurchase its common stock from the market
pursuant to the Japanese Companies Act.
(4) Other Comprehensive Income (Loss)
Components of other compre­hensive income (loss) attributable
to SECOM CO., LTD. for the years ended March 31, 2013, 2012
and 2011 are as follows:
In millions of yen
Pre-tax
amount

For the year ended March 31, 2013:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. ¥10,990
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
(697)
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
5
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
8
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
(799)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
22
Foreign currencytranslation adjustments....................
9,346
			Other comprehensive
			 income (loss)............................ ¥18,875

60

SECOM Annual Report 2013

Tax
(expense)or benefit

Net-of-tax
amount(¥3,603) ¥ 7,387

224

(473)

(2)

3

(3)

5

235

(564)

20

42

—

9,346

(¥3,129) ¥15,746

In millions of yen
Pre-tax
amount

For the year ended March 31, 2012:
Unrealized holding gains on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. ¥3,230
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
521
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
—
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
6
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
(1,867)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
(509)
Foreign currencytranslation adjustments....................
(3,432)			Other comprehensive
			 income (loss)............................ (¥2,051)
For the year ended March 31, 2011:
Unrealized holding losses on
securities—
		 Unrealized holding gains or losses
		 arising during the period.............. (¥ 4,760)
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
(658)
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
3
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
9
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period..............
(1,052)
		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
(574)
Foreign currencytranslation adjustments....................
(6,399)			Other comprehensive
			 income (loss)............................ (¥13,431)

Tax(expense)or benefit

Net-of-tax
amount(¥1,009)¥2,221

(227)

294

—

—

—

6

489

(1,378)

274

(235)

—

(3,432)(¥ 473) (¥2,524)¥1,719 (¥ 3,041)

227

(431)

—

3

—

9

424

(628)

230

(344)

—

(6,399)¥2,600 (¥10,831)

Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total minimum lease payments.................
Less: Amount representing interest...........
Present value of net minimum
lease payments (Note 13)........................
Less: Current portion................................
Long-term capital leaseobligations..........................................

¥ 2,639
2,071
1,382
1,011
800
8,232
16,135(5,005)$ 28,074
22,032
14,702
10,755
8,511
87,575
171,649(53,245)

11,130(2,238)118,404(23,808)¥ 8,892$ 94,596

2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total future minimum lease
payments............................................

¥ 7,794
7,886
7,847
7,825
7,824
39,085$ 82,915
83,894
83,47983,245
83,234
415,797¥78,261$832,564

and automobiles..............................
Other intangible assets.......................
Accumulated depreciation.................
		 ..................................................

10,198 10,349
163
127(8,598) (8,215)¥ 9,972 ¥10,496

Financial Section

20. Lessor		In thousands of
The Company’s leasing operations consist principally of leasing
In millions of yen
U.S. dollarsof security merchandise, security systems and real estate for office
March 31
March 31
and medical institutions. Most of the security merchandise, security
		
2013
2012
2013
systems and certain real estate for medical institutions on lease areclassified as sales-type leases or direct-financing leases. Other leases
Buildings and improvements.............. ¥ 8,209 ¥ 8,235$ 87,330
Machinery, equipmentare ­classified as ­operating leases.

Financial Review

		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

SECOM Today

Rental expenses under operating leases for the years ended
March 31, 2013, 2012 and 2011 were ¥18,264 million ($194,298
thousand), ¥16,419 million and ¥16,504 million, respectively. A­significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, many ofwhich are renewed upon ­expiration.
On December 8, 2000, the Company entered into a lease­agreement for a building and land in Shibuya, Tokyo. The leaseterm is 20 years beginning December 8, 2000. For financial­reporting purposes, the lease has been classified as an operatinglease. Based on the agreement, annual lease payments for the site
are approximately ¥1,299 million ($13,819 thousand) over a
20-year period.
The future minimum lease payments required under operat­ing
leases that have initial or remaining noncancelable lease terms inexcess of one year at March 31, 2013 are as follows:

Special Feature

19. Lessee
The Company leases certain office space, employee residen­tial
facilities, and computer and transportation equipment. Some leased
buildings, and computer and transportation equipment are held
under capital leases. Other leases are classified as ­operating leases.
On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The lease term
is 30 years beginning May 1, 1996. On July 15, 2010, the Company
also entered into a long-term lease agreement for the building andadjoining land. The lease term is also 30 years beginning July 15,
2010. For ­financial reporting purposes, the portion of these leasearrangements relating to the building has been classified as a­capital lease; accordingly, an asset of approximately ¥7,209 million($76,691 thousand) has been recorded in the building and improvements account. The portion of the lease relating to the land has
been classified as an operating lease. The future minimum lease
payments for the site at March 31, 2013 were ¥6,252 ­million($66,511 thousand).
A summary of leased assets under capital leases at March 31,
2013 and 2012 is as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

Strategic Highlights

For the year ended March 31, 2013:
Unrealized holding gains on
securities—
		 Unrealized holding gains
		 or losses arising during
		 the period.................................... $116,915 ($38,330) $78,585
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income.......................... (7,415)
2,383(5,032)
Unrealized gains on derivative
instruments—
		 Unrealized gains or losses
		 arising during the year.................
53
(21)
32
		Less: Reclassification
		Less: adjustment for gains
		Less: or losses included in		Less: net income..........................
85
(32)
53
Pension liability adjustments—
		 Unrealized gains or losses
		 arising during the period.............. (8,500)
2,500(6,000)		Less: Reclassification		adjustment for gains
		or losses realized		in net income.......................
234
213
447
Foreign currencytranslation adjustments.................... 99,426—
99,426
			Other comprehensive
			 income (loss)............................ $200,798 ($33,287) $167,511

Depreciation expenses for assets under capital leases for the years
ended March 31, 2013, 2012 and 2011 were ¥2,688 million($28,596 thousand), ¥2,630 million and ¥3,368 million,­respectively.
The following is a schedule by year of future minimum lease­payments under capital leases and the present value of the net­minimum lease payments at March 31, 2013:

The Management

In thousands of U.S. dollars

108,489
1,734(91,468)$106,085

SECOM Annual Report 2013

61

CONSOLIDATED FINANCIAL STATEMENTS(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits;
Notes and Accounts Receivable, Trade; Due from Subscribers;
Short-Term Receivables; Bank Loans; Notes and Accounts
		In thousands of­Payable, Trade; Other Payables; Deposits Received; Accrued
In millions of yen
U.S. dollars
Income Taxes; and Accrued ­Payrolls
March 31
March 31
The carrying amounts approximate fair value because of the
		
2013
2012
2013
short-term maturities of such instruments.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2013 and 2012 is as follows:

Total minimum lease payments
to be received..................................
Estimated executory cost....................
Estimated unguaranteed
residual value...................................
Unearned income..............................
Lease receivables, net.........................
Less: Current portion.........................
Long-term lease receivables, net.....

¥52,780 ¥34,950(4,671) (2,982)$561,489(49,691)

1,262 1,261(9,609) (6,911)
39,762 26,318(12,034) (7,882)¥27,728 ¥18,436

13,426(102,224)
423,000(128,021)$294,979

The following is a schedule by year of future minimum lease­ ayments to be received under sales-type leases and direct-­pfinancing leases at March 31, 2013:
		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total future minimum lease
payments to be received.....................

¥15,007
11,615
8,720
5,734
3,291
8,413

$159,648
123,564
92,76661,00035,01189,500¥52,780$561,489(2) Short-Term Investments; Investment Securities
The fair values of short-term investments and investment­securities are principally based on quoted market prices.
(3) Long-Term Receivables Including Current Portion
The long-term receivables, including the current portion, areclassified as Level 2 and fair value is estimated based on the present
value of future cash flows through estimated maturity, discounted
using estimated market discount rates.
(4) Long-Term Debt Including Current Portion
The long-term debt, including the current ­portion, is classified
as Level 2 and fair value is estimated based on the present valueof future cash flows of each instrument discounted using the­Company’s current incremental ­borrowing rates for similar liabilities.
(5) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are­estimated based on the present value of future cash flows,­discounted using the interest rates currently being offered for­similar contracts.

(6) Derivatives
The fair values of derivatives are estimated using current market
pricing models by obtaining quotes from ­financial institutions.
		
In thousands ofIn millions of yen
U.S. dollars
The carrying amounts and estimated fair values of finan­cial instruments, excluding debt and equity securities, which are ­disclosed in
March 31
March 31
Notes 2 (7) and 7 at March 31, 2013 and 2012 are as follows:
		
2013
2012
2013
A summary of investment in property under operating leases andproperty held for lease at March 31, 2013 and 2012 is as follows:

Land ..................................................
Buildings and improvements..............
Other intangible assets.......................
Accumulated depreciation.................
		 ..................................................

¥35,458 ¥36,950
28,541 29,426
662
662(9,687) (9,190)¥54,974 ¥57,848$377,213
303,628
7,043(103,054)$584,830

The future minimum rentals under noncancelable operatingleases at March 31, 2013 are as follows:		 In thousands ofYears ending March 31
In millions of yen
U.S. dollars

2014........................................................
2015........................................................
2016........................................................
2017........................................................
2018........................................................
Thereafter.................................................
Total future minimum rentals................

¥2,138
425
297
297
297
5,448
¥8,902$22,745
4,521
3,160
3,160
3,160
57,956$94,702

21. Fair Value of Financial Instruments
The following methods and assumptions were used to ­estimate
the fair value of financial instruments in cases for which it is­practicable.

62

SECOM Annual Report 2013

		In millions of yen

		March 31

2013
Carrying
amountNon-derivatives:
Assets—		Long-term receivables
		 including current		 portion (Less allowance		 for doubtful accounts)..... ¥55,976
Liabilities—
		Long-term debt
		 including current		 portion............................ 66,043
		Investment deposits
		 by policyholders.............. 29,483
Derivatives:
Assets—		Equity swaps
		 (Other current assets)......
59
Liabilities—
		 Interest rate swaps
		 (Other liabilities)..............
239

Estimated
fair value

2012
Carrying
amountEstimated
fair value¥57,159 ¥43,837¥45,196

66,15559,07659,20530,83130,75531,171

59

—

—

239

160

160

March 31, 2013
Carrying
amount		

In millions of yen
March 31, 2013

$595,489 $608,074
702,585 703,777
313,649 327,989
628

2,543

2,543

Limitation:
Fair value estimates are made at a specific point in time based on
relevant market information and information about the financial
instruments. These estimates are ­subjective in nature and involve
uncertainties and matters of significant ­judgment and therefore
cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.

¥ 2,601¥

97,257

17,606

39,588

154,451—¥97,301

59¥20,266—¥39,58859¥157,155

¥
¥

¥
¥

¥
¥

¥
¥

—
—

239
239

Total

—

¥

—
—

		

2,645

239
239

In millions of yen
March 31, 2012

Assets:Cash equivalents......
Short-term
investments andinvestment
securities................
Total assets..................
Liabilities:
Derivatives(Other liabilities).....
Total liabilities..............

Level 1

Level 233

¥ 2,609¥

96,716¥96,749

16,007¥18,616

27,368¥27,368

140,091¥142,733

¥
¥

¥
¥

¥
¥

¥
¥

¥

—
—

Level 3

160
160

Total

—

¥

—
—

2,642

160
160

In thousands of U.S. dollars
March 31, 2013
Level 1

Level 2

Level 3

Total

Assets:Cash equivalents...... $468 $ 27,670 $— $ 28,138
Short-term
investments andinvestment
securities................ 1,034,648 187,298 421,149
1,643,095
Derivatives (Other
current assets)........
—
628
—
628
Total assets.................. $1,035,116 $215,596 $421,149 $1,671,861

— $
— $

2,543 $
2,543 $

— $
— $

2,543
2,543

Cash Equivalents
All highly liquid investments with initial maturities of three months orless are considered to be cash equivalents, and principally valued
using quoted prices for identical assets in markets that are not active.

SECOM Annual Report 2013

Financial Section

Liabilities:
Derivatives(Other liabilities)..... $Total liabilities.............. $Financial Review

Level 1— Inputs are quoted prices in active markets for ­identicalassets or liabilities.
Level 2— Inputs are quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs
other than quoted prices that are observable, andinputs that are derived principally from or corroborated
by observable market data by correlation or othermeans.
Level 3— Inputs are derived from valuation techniques in which
one or more significant inputs or value drivers areunobservable, which reflect the reporting entity’s own
assumptions about the assumptions that market­participants would use in establishing a price.

44¥

Level 3

SECOM Today

22. Fair Value Measurements
ASC 820, “Fair Value Measurements and Disclosures,” defines fairvalue as the price that would be received to sell an asset or paid totransfer a liability (an exit price) in the principal or most advantageous
market for the asset or l­iability in an orderly transaction between
market participants at the measurement date. This accounting standard establishes a three-level fair value hierarchy that prioritizes the
inputs used to measure fair value as follows:

Liabilities:
Derivatives(Other liabilities).....
Total liabilities..............

Level 2

Special Feature

628

Assets:Cash equivalents......
Short-term
investments andinvestment
securities................
Derivatives (Other
current assets)........
Total assets..................

Level 1Strategic Highlights

Non-derivatives:
Assets—		 Long-term receivables including current		 portion (Less allowance for doubtful
		 accounts)................................................
Liabilities—
		 Long-term debt including current		 portion....................................................
		Investment deposits
		 by policyholders......................................
Derivatives:
Assets—		 Equity swaps (Other current assets)...........
Liabilities—
		 Interest rate swaps (Other liabilities)..........

Estimated
fair value

The following table represents the Company’s assets andliabilities that are measured at fair value on a recurring basis at
March 31, 2013 and 2012. Transfers between levels are recognizedat the end of their respective reporting periods.

The Management

In thousands of U.S. dollars

63

CONSOLIDATED FINANCIAL STATEMENTS

Short-Term Investments and Investment Securities
Equity securities and debt securities classified as Level 1 assets arevalued using unadjusted quoted market prices in active markets
with sufficient volume and frequency of transactions.
Level 2 assets are comprised principally of debt securities, which
are valued using quoted prices for similar assets in active markets,or quoted prices for identical or similar assets in markets that are
not active.
Non-marketable securities classified as Level 3 assets are valued
based on unobservable inputs as the market for the assets was not
active at the measurement date. The fair value is determined byusing a valuation technique, such as the discounted cash flow
model, which best reflects the nature, characteristics and risks ofeach asset. These unobservable inputs contain discount rates, exit
timing and future cash flows. An increase (decrease) in the discountrates, the later (earlier) exit and a decrease (increase) in the future
cash flows would result in a decrease (increase) in the fair value of
non-marketable securities.
For the year ended March 31, 2013, ¥3,403 million ($36,202
thousand) of debt securities were transferred from Level 1 to Level
2 because the observable markets in which these instruments weretraded became inactive.

Assets and Liabilities Measured at Fair Value on a
Nonrecurring Basis
Non-marketable equity securities with a carrying amount of¥10,179 million ($108,288 thousand) were written down to theirfair value of ¥10,178 million ($108,277 thousand), resulting in another-than-temporary impairment charge of ¥1 million ($11 thousand), which was included in earnings for the year ended March 31,
2013. For the year ended March 31, 2012, non-marketable equity­securities with a carrying amount of ¥9,801 million were written
down to their fair value of ¥9,756 million, resulting in an otherthan-­temporary impairment charge of ¥45 million, which was
included in earnings. All impaired non-marketable equity securities
were classified as Level 3 assets as the Company uses unobservable
inputs such as future cash flows to value these investments.
Long-lived assets (Note 11) and goodwill (Note 12) are also­measured at fair value on a nonrecurring basis. All impaired longlived assets and goodwill were classified as Level 3 assets as theCompany uses ­unobservable inputs to value these assets.

23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations in
Derivative Financial Investmentsinterest rates. The Company assesses interest rate risk by con­tinually
Derivative financial instruments are comprised of forward exchangemonitoring changes in the exposure and by evaluating hedging
contracts, interest rate swaps and others. These derivative instruopportunities. The Company does not hold or issue derivativements are valued using observable market data and classified as
financial instruments for trading purposes. The Company is also
Level 2 liabilities.
exposed to credit-related losses in the event of non-­perfomance bycounterparties to derivative financial instru­ments, but it is not
The following table represents the changes in Level 3 assets
expected that any counterparties will fail to meet their obligations,because most of the counterparties are internationally recognized­measured on a recurring basis for the years ended March 31, 2013
financial institutions and contracts are diversified amongst aand 2012.
		In thousands of­number of major financial institutions.
In millions of yen
U.S. dollars
Years ended
March 31

Year ended
March 31

		
2013
2012
2013

Balance at beginning of year............... ¥27,368 ¥27,431
Total gains or losses(realized or unrealized):		 Included in earnings....................
4,934 3,998
		 Included in other		 comprehensive income..............
162
19
Purchases........................................
4,283 4,055
Sales...............................................
(108) (6,662)
Redemptions...................................
(343)
(235)
Foreign currency translation
adjustments..................................
3,292 (1,238)
Balance at end of year........................ ¥39,588 ¥27,368
Changes in unrealized gains
or losses relating to instruments
still held at end of year:
		 Included in earnings.................... ¥ 4,831 ¥ 1,736$291,149
52,4891,723
45,564(1,149)(3,649)35,022$421,149$ 51,394

Total gains or losses (realized or unrealized) related to short-term
investments and investment securities are primarily included in
net sales and operating revenue or gain/loss on private equity
investments, in the consolidated statements of income.

64

SECOM Annual Report 2013

(2) Risk Management
The Company has exposure to the market risk of changes ininterest rates which relates ­primarily to its debt obligations. The
Company principally enters into interest rate swap agreements tomanage fluctuations in cash flows resulting from changes in interest
rates. Interest rate swaps are used to change floating rates on debt
obligations to fixed rates by entering into receive-floating, pay-fixedinterest rate swaps under which the Company receives floatinginterest rate ­proceeds and makes fixed interest rate payments,
thereby ­effectively creating fixed-rate debt.
(3) Cash Flow Hedge
The Company ­designates interest rate swap agreements as cash
flow hedges for variability of cash flows originating from floating
rate borrowings. The interest rate swap ­agreements mature atvarious dates through 2015. The ­effective portion of changes in fairvalues of derivative ­instruments designated as cash flow hedgesof these debt obligations are reported in other comprehensive
income (loss). These amounts are reclassified into current incomein the same period that hedged items affect current income. The
ineffective portion of changes in fair values are reported in income
immediately. The sum of the amount of hedge ineffectivenessand net gains or losses excluded from the assessment of hedge

Gains (losses) reclassified from accumulated other comprehensive
income into income (effective portion)		In thousands ofLocationInterest rate swaps Other expenses

In millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2013

2012

2011

2013

(¥9)

(¥8)

(¥12)

($96)

Derivatives not designated as hedging instruments
		In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31
2013

$628

2012

$ —
($138)¥4$53

SECOM Annual Report 2013

Financial Section¥—

Financial Review¥5

SECOM Today

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31, 2013
for the ­purchase of property, plant and equipment of ­approximately
Derivatives designated as hedging instruments¥5,661 million ($60,223 thousand).
Liabilities:
		In thousands of
The Company provides guarantees to third parties mainly withIn millions of yen
U.S. dollars
respect to bank loans extended to its affiliated companies and other
March 31
March 31
entities. Such guarantees are provided to enhance the credit standLocation
2013
2012
2013
ing of the affiliated companies and other entities. For each guarantee provided, the Company would have to per­form under theInterest rate swaps
Other liabilities
¥68
¥—
$724
guarantee if the affiliated companies and other entities default ona payment within the guaranteed period of one to five years. The
Derivatives not designated as hedging instruments
		In thousands ofmaximum amount of undiscounted pay­ments the Company would
In millions of yen
U.S. dollars
have to make in the event of default amounts to ¥2,014 million
March 31
March 31($21,426 thousand) at March 31, 2013. The carrying amounts ofLocation
2013
2012
2013
the liabilities recognized for the Company’s obligations under these­guarantees at March 31, 2013 and 2012 were deemed insignificant.
Assets:Equity swaps
Other current
Pasco Corporation, a subsidiary of the parent company, filed a		assets
¥ 59
¥ —
$ 628
lawsuit against Sumitomo Mitsui Banking Corporation asking fora confirmatory judgment to the effect that it does not owe an
Liabilities:
Interest rate swaps Other liabilities
¥171
¥160
$1,819obligation in the amount of ¥2,010 million to Sumitomo Mitsui
Banking Corporation with the Tokyo District Court on October
Effects of derivative instruments on the consolidated statements
31, 2005. Sumitomo Mitsui Banking Corporation alleged that itof income for the years ended March 31, 2013, 2012 and 2011 aremade a loan to a third party and acquired from the third party its
as follows:
claim against Pasco Corporation for an alleged sale of equipment
to Pasco Corporation, as collateral for the loan, and demanded
Derivatives designated as cash flow hedging instruments
Pasco Corporation to pay such claim to Sumitomo Mitsui Banking
Gains (losses) recognized in accumulated other comprehensive
Corporation. On December 5, 2005, Sumitomo Mitsui Banking
income (effective portion)
Corporation brought a cross action against Pasco Corporation		In thousands ofin ­relation to a demand for payment of a transferred receivable.
In millions of yen
U.S. dollars
Subsequently, both actions were consolidated according to a court
Years ended
Year ended
procedure. The oral argument was concluded on October 31, 2008,
March 31
March 31
and on March 27, 2009 Tokyo District Court rendered the following
		
2013
2012
2011
2013
judgement:

Special Feature

2011

Equity swaps
Other income¥59 ¥ — ¥ —Forward exchange Other expenses
contracts		
¥ — ¥ — (¥286)
Interest rate swaps Other expenses (¥13) (¥ 9) (¥ 31)

Location

2013

In millions of yen

Fair values of derivative instruments reflected in the ­consolidatedbalance sheet as of March 31, 2013 and 2012 are as follows:

Interest rate swaps

Strategic Highlights(4) Derivative Instruments Not Designated as Hedges
The Company enters into forward exchange contracts to reduce
exposure to fluctuations in currency rates, interest rate swap agreements to reduce exposure to fluctuations in interest rates relating
primarily to debt obligations and other agreements. Changes infair value of these derivative financial instruments, which are not­designated as hedges, are reported in current income.

The Management

effectiveness is not material for the years ended March 31, 2013,2012 and 2011 as the critical terms of most of the interest rate
swap agreements match the terms of the hedged debt obligations.
Approximately ¥4 million ($43 thousand) of net derivative income
included in accumulated other comprehensive income, net of tax at
March 31, 2013, will be reclassified into current income within 12
months from that date. At March 31, 2013 and 2012, the notional
principal amount of interest rate swap agreements designated as
cash flow hedges was ¥3,664 million ($38,979 thousand) and nil,respectively.

65

CONSOLIDATED FINANCIAL STATEMENTS

26. Segment Information
The Company discloses financial and descriptive ­information
about the Company’s reportable operating segments. The o­ perating
segments reported below are the segments of the Company forwhich separate financial information is available and for which operating profit/loss amounts are evaluated regu­larly by ­management indeciding how to allocate resources and assess performance.
The Company has seven reportable business segments: security
services, fire protection services, medical services, insurance services,
geographic information services, real estate development and sales,
Pasco Corporation appealed the case to the Tokyo High Court on
and information and communication related and other services.
April 6, 2009.
Following the decision, Pasco Corporation provided a reserve for
The security services segment provides various types of secu­rity
litigation loss of ¥2,415 million for the year ended March 31, 2009.
services by utilizing the Company’s unique security systems andmanufacturing and selling security merchandise. The fire protection
On May 10, 2010, Pasco Corporation and Sumitomo Mitsui
services segment provides various types of fire protection equipBanking Corporation reached a settlement under which Pasco
ment, such as automatic fire alarm and fire extinguishing and other
Corporation will pay to Sumitomo Mitsui Banking Corporation anfire protection systems for office buildings, plants, tunnels, ships,
amount of ¥1,750 million, after several oral proceedings and­settlement negotiations at the Tokyo High Court.
residences and cultural monuments. The medical ser­vices segment
Pursuant to the settlement, Pasco Corporation accounted forprovides intravenous solutions to patients at home, home-based¥781 million as a reversal of reserve for litigation loss in the year
­nursing care services, medical data trans­mission services by utilizing
ended March 31, 2010, and provided for ¥1,770 million, a sum of
the Company’s network and leas­ing of real estate for medical instithe above settlement amount and related litigation expenses, in thetutions. In addition, the VIE, of which the Company is the primaryconsolidated balance sheet as of March 31, 2010. These amounts
beneficiary manage hospitals and health ­care-related institutions.
were paid in the year ended March 31, 2011.
The insurance services ­segment represents the non-life insuranceIn the year ended March 31, 2012, Pasco Corporation recognized
related underwriting business in the Japanese market. The geographic information services segment represents surveying andand paid ¥799 million for legal settlement related to software.
measuring services and GIS services. The real estate development andOther than those items above, it is not anticipated that damages,
if any, resulting from other legal actions will have a material impact
sales ­segment represents development and sales of condominiums
on the Company’s consolidated financial statements.
that reinforce security. The information and communication related
and other services ­segment represents data center services, business25. Supplemental Cash Flow Information
continuity plan support, information security services, cloud s­ ervices,
Supplemental cash flow information is as follows:leasing of real estate and hotel ­management business.
Corporate expenses consist principally of general and administra		
In thousands oftive expenses of the planning, personnel and admin­istrative departIn millions of yen
U.S. dollars
ments of the parent company and administrative departments ofYears ended
Year ended
March 31
March 31
the foreign holding company.
Intersegment sales are priced on a basis intended to ­approximate
2013
2012
2011
2013
amounts charged to unaffiliated customers.
Cash paid during the
Identifiable assets are those assets used exclusively in the operayear for:tions of each segment or which are allocated when used jointly.
Interest.............................. ¥ 1,568 ¥ 1,601 ¥ 1,689 $ 16,881
Income taxes..................... 31,761 38,538 39,719
337,883
Corporate assets, which are held by the parent company and theNon-cash investing andforeign holding company for general and administra­tive facilities,
financing activities:­consist principally of cash and cash equivalents, short­-term investAdditions to obligations
ments, investment securities, land, buildings and improvements,
under capital leases.........
2,381 2,604 4,240
25,330machinery, equipment and automobiles.
Significant acquisitions
1.		Pasco Corporation must pay money to Sumitomo Mitsui Banking
Corporation in an amount of ¥2,010 million as well as interest at
the rate of 6 percent per annum on ¥600 million, from
November 1, 2005, and on ¥1,410 million, from December 1,
2005, up to the full payment of the respective amounts;
2.		Pasco Corporation incurs the cost of lawsuits including the costcaused by supplementary participation; and3.		The judgement can be provisionally executed.

(Note 4)—
		Assets acquired............... 131,747
		Liabilities assumed.......... (63,833)
		Noncontrolling		 interests........................ (21,873)
		Considerations for		 equity........................... 46,041
		Repayment of		 long-term debt............. 27,000
		 Cash and cash		 equivalents on hand.....
(6,859)		Total considerations........ ¥ 66,182 ¥66

SECOM Annual Report 2013

—
—

—
—

1,401,564(679,074)——(232,692)——

489,798——

287,234——¥——(72,968)$ 704,064

(1) Business Segment Information		In thousands of

2013

		
In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

2012

$4,812,628
26,426
4,839,054
1,214,149
45,8301,259,979
1,499,543
1,755
1,501,298
381,532
29,957
411,489

288,52137,617
326,138$9,168,989

2011

2013

2012

Operating income (loss):
Security services............. ¥102,855 ¥101,416 ¥ 99,855
Fire protection
services........................
5,981
4,443
3,158
Medical services.............
5,458
7,884
1,771
Insurance services..........
2,712
(80)
(180)
Geographic information
services........................
2,302
3,449
3,393
Real estate development
and sales......................
1,585(21,598)
525
Information andcommunication related
and other services........
5,754(4,037)
3,239
Total.............................. 126,647
91,477111,761
Corporate expenses
and eliminations..........
(13,879)(12,651)(11,329)
Operating income.......... ¥112,768 ¥ 78,826 ¥100,432
Other income.................
9,990
7,527
11,870
Other expenses..............
(3,161)(5,233)(4,458)
		 Income before income
		 taxes and equity in net
		 income of affiliated		 companies................ ¥119,597 ¥ 81,120 ¥107,844$1,094,202
63,62858,06428,851
24,48916,862
61,213
1,347,309(147,649)$1,199,660
106,277(33,628)$1,272,309

		In thousands of2013

In millions of yen

U.S. dollars

March 31

March 31

2011

2013

2012

Assets:Security services............. ¥ 441,020 ¥ 417,202 ¥ 399,361
Fire protection
services........................ 119,781
85,78680,346
Medical services............. 168,217
160,505
154,818
Insurance services.......... 179,949
167,436
177,571
Geographic
information services.....
66,04065,96858,697
Real estatedevelopment
and sales......................
31,27644,92462,284
Information andcommunication related
and other services........ 211,839
101,124
95,154
Total.............................. 1,218,122 1,042,945 1,028,231
Corporate items.............
83,091
97,140103,943
Investments inaffiliated companies.....
39,13739,73938,978
		Total assets.................. ¥1,340,350 ¥1,179,824 ¥1,171,152$ 4,691,703
1,274,266
1,789,543
1,914,351
702,553
332,723
2,253,606
12,958,745
883,947

Financial Review

428,000
77,340505,340
9,389,277(220,288)

Year ended
March 31

SECOM Today

544,617
1,362
545,979

U.S. dollars

Years ended
March 31

Special Feature

Net sales andoperating revenue:
Security services—
		Customers.................... ¥452,387 ¥434,667 ¥424,706
		Intersegment.................
2,484
1,791
2,095
			.................................. 454,871
436,458
426,801
Fire protection services—
		Customers.................... 114,130
80,67875,176
		Intersegment.................
4,308
4,093
4,887
			.................................. 118,438
84,77180,063
Medical services—
		Customers.................... 140,957
134,550
125,020
		Intersegment.................
165
148
151
			.................................. 141,122
134,698
125,171
Insurance services—
		Customers.................... 35,864
33,55833,133
		Intersegment.................
2,816
2,750
2,635
			.................................. 38,680
36,30835,768Geographic information
services—
		Customers.................... 51,194
50,17343,539
		Intersegment.................
128
216
167
			.................................. 51,322
50,38943,706
Real estate development
and sales—
		Customers.................... 27,121
11,724
24,817
		Intersegment.................
3,536
526
95
			.................................. 30,657
12,25024,912
Information andcommunication related
and other services—
		Customers.................... 40,232
27,13225,477
		Intersegment.................
7,270
6,800
6,541
			.................................. 47,502
33,93232,018
Total................................ 882,592
788,806
768,439
Eliminations..................... (20,707)(16,324)(16,571)
		 Total net sales and		 operating revenue....... ¥861,885 ¥772,482 ¥751,868

In millions of yen

Strategic Highlights

2013

In millions of yen

The Management

Information by business and geographic segments for the years
ended March 31, 2013, 2012 and 2011 is as follows:

416,351$14,259,043
Financial Section

SECOM Annual Report 2013

67

CONSOLIDATED FINANCIAL STATEMENTS

The following table is a breakdown of security services revenue to		In thousands ofIn millions of yen
U.S. dollars
external customers by service category. The security services busiYears ended
Year ended
ness is managed as a single operating segment by the ­Company’s
March 31
March 31
management.
2013

Depreciation andamortization:
Security services.............
Fire protection
services........................
Medical services.............
Insurance services..........
Geographic
information services.....
Real estate development
and sales......................
Information andcommunication related
and other services........
Total..............................
Corporate items.............
		Total depreciation
		 and amortization.......
Capital expenditures:
Security services.............
Fire protection
services........................
Medical services.............
Insurance services..........
Geographic
information services.....
Real estate development
and sales......................
Information andcommunication related
and other services........
Total..............................
Corporate items.............
		Total capital		 expenditures.............

2012

2013

2011

¥44,723¥43,806¥44,604$475,777

1,739
5,936
895

1,836
6,167
1,601

1,490
5,137
1,200

18,50063,149
9,521

2,293

1,812

1,666

24,394

30

42

48

319

4,760
60,376298

2,580
57,844273

2,587
56,732219

50,638642,298
3,170¥60,674¥58,117¥56,951$645,468¥36,034¥33,853¥27,643$383,340

1,306
13,834
36

670
5,573
26

3,602
5,563
14

13,894
147,170
383

1,328

2,162

2,166

14,128

17

17

19

181

10,614
63,169181

12,58654,887
107

3,157
42,16434

112,915672,011
1,925¥63,350¥54,994¥42,198$673,936

The capital expenditures in the above table represent the­additions to property, plant and equipment of each segment.
The Company has no single customer that accounts for morethan 10 percent of total revenues.

		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

¥311,604 ¥304,408 ¥302,529$3,314,936

2013

Electronic security
services........................
Other security services:
Static guard
services....................
Armored car
services....................
Merchandise andother ..........................
Total security
services....................

2012

47,877

46,68946,372509,330

20,532

20,60920,129218,426

72,37462,961

55,676

769,936¥452,387 ¥434,667 ¥424,706$4,812,628(2) Geographic Segment Information
Net sales and operating revenue attributed to countries based on
the geographical location of customers and long-lived assets for theyears ended March 31, 2013, 2012 and 2011 were as follows:		In thousands ofIn millions of yen

U.S. dollars

Years ended
March 31

Year ended
March 31

2011

2013

Net sales andoperating revenue:
Japan......................... ¥828,835 ¥743,727 ¥726,381
Other.........................
33,05028,75525,487
		Total....................... ¥861,885 ¥772,482 ¥751,868$8,817,393
351,596$9,168,989

2013

2012

		
In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2011

2013

Long-lived assets:
Japan........................ ¥508,104 ¥399,901 ¥395,884
Other........................
6,008
5,857
5,161
		Total...................... ¥514,112 ¥405,758 ¥401,045$5,405,362
63,915$5,469,277

2013

2012

There are no individually material countries other than Japan withrespect to net sales and operating revenue and long-lived assets.
27. Subsequent Events
The Company has evaluated subsequent events through July 30,
2013, the date at which the financial statements were available tobe issued, and determined there is no item to disclose.

68

SECOM Annual Report 2013

INDEPENDENT AUDITORS’ REPORTThe Management

We have audited the accompanying consolidated financial statements of SECOM CO., LTD. and its subsidiaries, which comprise thec­ onsolidated balance sheets as of March 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income,changes in equity, and cash flows for each of the years in the three-year period ended March 31, 2013, and the related notes to the
ラインは、ロゴに必要なクリアスペースです。
­consolidated financial statements.

Strategic Highlights

The Board of Directors and Shareholders
SECOM CO., LTD.:に、他のオブジェクトやテキストが入らないよう、ご留意ください。

Emphasis of Matter
As discussed in Note 2 to the consolidated financial statements, in the year ended March 31, 2011, SECOM CO., LTD. and its subsidiaries
adopted Accounting Standards Update No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest
Entities. Our opinion is not modified with respect to this matter.

Financial Section

Convenience translations
The accompanying consolidated financial statements as of and for the year ended March 31, 2013 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated­financial statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 3 to the­consolidated financial statements.

Financial Review

OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
SECOM CO., LTD. and its subsidiaries as of March 31, 2013 and 2012, and the results of their operations and their cash flows for eachof the years in the three-year period ended March 31, 2013, in accordance with U.S. generally accepted accounting principles.

SECOM Today

Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits inaccordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial­statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatementof the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s­internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Special FeatureManagement’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to
the p­ reparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.

Tokyo, Japan
July 30, 2013

SECOM Annual Report 2013

69

OTHER FINANCIAL DATACONTENTSSUMMARY OF SELECTED FINANCIAL DATA................................................................. 71
COMMON STOCK DATA............................................................................................. 73

70

SECOM Annual Report 2013

SUMMARY OF SELECTED FINANCIAL DATA

In millions of yen
2013

2012

2011

2010

2009

2008

¥ 30,560
19,122528,721¥ 61,756
17,998574,554

5.0
2.2
1.1
5.1
13.4
86.6
100.0
5.3
10.4

5.7
3.1
1.4
3.8
14.0
86.0
100.0
3.5
6.7

6.8
1.7
2.0
5.5
16.0
84.0
100.0
5.4
10.6

6.5
1.6
2.6
3.6
14.3
85.7
100.0
4.1
8.2

11.9
2.4
1.9
3.6
19.8
80.2
100.0
2.7
5.8

17.5
1.2
1.8
4.0
24.5
75.5
100.0
4.9
10.7

6.9
2.1

7.5
2.1

7.6
2.2

8.2
2.1

7.9
2.2

8.2
2.3

60.0
2.24
78.8

63.4
2.49
51.8

62.5
2.49
65.1

64.9
2.55
53.5

64.4
2.66
32.4

63.8
2.81
53.7

Financial Section¥ 46,989
18,533569,799

Financial Review¥ 62,665
18,533
593,495

SECOM Today

Consolidated financial ratios
Percentage of working capital accounted for by:
Debt
		Bank loans..................................................................................
		 Current portion of long-term debt...............................................
		Straight bonds.............................................................................
		 Other long-term debt..................................................................
			Total debt................................................................................
SECOM CO., LTD. shareholders’ equity...........................................
			Total capitalization...................................................................
Return on total assets (percentage) (a)...................................................
Return on equity (percentage) (b)..........................................................
Percentage of net sales and operating revenue absorbed by (c):Depreciation and amortization........................................................
Rental expense under operating leases............................................
Ratio of accumulated depreciation to depreciable
assets (percentage)...........................................................................
Net property turnover (times) (c)...........................................................
Before-tax interest coverage (times) (c)(d)................................................

¥ 41,237
19,623612,855

Special Feature

Net income attributable to SECOM CO., LTD., cash dividends
and SECOM CO., LTD. shareholders’ equity
Net income attributable to SECOM CO., LTD...................................... ¥ 70,580
Cash dividends (paid)(2)........................................................................ 19,645
SECOM CO., LTD. shareholders’ equity............................................... 679,176

Strategic Highlights

Composition of consolidated net sales andoperating revenue by segment
Net sales and operating revenue......................................................... ¥861,885 ¥772,482 ¥751,868 ¥670,644 ¥684,016 ¥701,836
434,667
424,706
424,385436,918
435,306
Security services:............................................................................. 452,387
52.5%
56.3%
56.5%
63.3%
63.9%
62.0%
				 As a percentage of net sales and operating revenue............
304,408
302,529
303,459
308,279
301,521
		 Electronic security services........................................................... 311,604
36.1
39.4
40.2
45.2
45.1
43.0
				 As a percentage of net sales and operating revenue............
		 Other security services—
46,68946,372
46,21347,99946,648
			Static guard services................................................................ 47,877
5.6
6.0
6.2
6.9
7.0
6.6
				 As a percentage of net sales and operating revenue............
20,60920,12919,823
20,31019,547
			Armored car services................................................................ 20,532
2.4
2.7
2.7
3.0
3.0
2.8
				 As a percentage of net sales and operating revenue............
67,29866,501
66,03668,30966,195					Subtotal........................................................................... 68,409
54,89060,33067,59062,961
55,676
		 Merchandise and other............................................................... 72,374
8.4
8.2
8.8
9.6
8.2
7.4
				 As a percentage of net sales and operating revenue............
80,132
84,17582,57280,67875,176
Fire protection services.................................................................... 114,130
13.2
11.9
12.3
11.8
10.4
10.0
				 As a percentage of net sales and operating revenue............
56,30952,22050,741
134,550
125,020
Medical services.............................................................................. 140,957
16.4
8.4
7.6
7.2
17.4
16.6
				 As a percentage of net sales and operating revenue............
29,142
21,53033,22933,55833,133
Insurance services........................................................................... 35,864
4.2
4.3
3.2
4.7
4.4
4.4
				 As a percentage of net sales and operating revenue............
41,91840,20739,37650,17343,539Geographic information services..................................................... 51,194
5.9
6.3
5.9
5.6
6.5
5.8
				 As a percentage of net sales and operating revenue............
13,26822,07229,928
11,724
24,817
Real estate development and sales.................................................. 27,121
3.1
2.0
3.2
4.3
1.5
3.3
				 As a percentage of net sales and operating revenue............
Information and communication related
25,49026,89430,684
27,13225,477and other services......................................................................... 40,232
4.7
3.8
3.9
4.4
3.5
3.4
				 As a percentage of net sales and operating revenue............

The Management

SECOM CO., LTD. and Subsidiaries
Years ended March 31

Note: Installation revenue is included in the corresponding electronic security services.

SECOM Annual Report 2013

71

SUMMARY OF SELECTED FINANCIAL DATA

2013

2012

2011

2010

2009

2008

Number of shares outstanding
233,288,717 233,288,717 233,288,717 233,288,717 233,288,717 233,288,717
Issued8,323,599
Owned by the Company........................................... 15,018,951 15,017,691 15,258,553 15,254,334 15,251,520
Balance..................................................................... 218,269,766 218,271,026 218,030,164 218,034,383 218,037,197 224,965,118
Per share information
Net income attributable to SECOM CO., LTD.
¥ 188.97¥ 287.41¥ 215.51¥ 323.36¥ 137.42¥ 274.51
per share (in yen) (1) .................................................
90.00
85.00
85.00
90.00
85.00
80.00
Cash dividends paid per share (in yen) (2) ...................
SECOM CO., LTD. shareholders’ equity
2,807.77
2,722.08
2,613.34
3,111.64
2,424.91
2,553.97
per share (in yen) (3) .................................................
365.28458.62383.36491.52299.72448.19Cash flow per share (in yen) (1) (e) ................................
1.44
1.42
1.57
1.56
1.50
1.90
Price/Book value ratio................................................
21.43
13.45
18.98
15.00
26.41
17.63
Price/Earnings ratio...................................................
11.09
8.43
9.87
10.67
12.11
10.80
Price/Cash flow ratio.................................................
4,050
3,865
4,850
4,090
3,630
4,840
Stock price at year-end (in yen).................................
Notes: (a) Net income attributable to SECOM CO., LTD. / Total assets(b) Net income attributable to SECOM CO., LTD. / SECOM CO., LTD.
shareholders’ equity(c) Including discontinued operations(d)		(Income before income taxes and equity in net income of affiliatedcompanies + Interest expense)/Interest expense(e) (Net income attributable to SECOM CO., LTD. + Depreciation andamortization - Dividends approved) / Average number of shares outstanding
during each period

72

SECOM Annual Report 2013

(1) Per share amounts are based on the average number of shares outstanding
during each period.
(2) Subsequent to March 31, 2013, cash dividends of ¥22,918 million (¥105
per share) were approved at the general shareholders’ meeting on June 25,2013 (see Note 18 of the accompanying notes to consolidated financial
statements).
(3) Per share amounts are based on the number of shares outstanding at theend of each period, less treasury stock.

COMMON STOCK DATASHAREHOLDER INFORMATION

2012

2011

2010

2009

2008

27,62829,11830,33831,48830,85928,512

—%
30.86
5.58
3.63
41.33
12.16
6.44
100.00%

—%
29.88
6.08
3.68
41.25
12.67
6.44
100.00%

0.08%
30.76
4.75
3.71
41.27
12.89
6.54
100.00%

0.08%
31.34
4.28
3.73
40.77
13.26
6.54
100.00%

0.00%
35.67
2.55
3.76
38.17
13.31
6.54
100.00%

—%
33.84
3.86
3.81
41.71
13.21
3.57
100.00%Strategic Highlights

Number of shareholders.............................................
Common shares held by:
Japanese government and local public entities.......
Financial institutions...............................................
Securities firms.......................................................
Other domestic corporations..................................
Foreign investors....................................................
Individuals and others.............................................
Treasury stock.........................................................
		Total...................................................................

2013

The Management

SECOM CO., LTD.
As of March 31

Special Feature

PRICE INFORMATION (TOKYO STOCK EXCHANGE)

2012

2013

April–June....................................................................................
July–September............................................................................
October–December......................................................................
January–March............................................................................
April–June....................................................................................
July–September............................................................................
October–December......................................................................
January–March............................................................................

Nikkei Stock Average (in yen)

Low

High

Low

¥4,145
3,975
3,830
4,190
4,040
4,125
4,360
5,120

¥3,660
3,435
3,390
3,390
3,325
3,580
3,860
4,295

¥10,004.20
10,137.73
9,050.47
10,255.15
10,109.87
9,232.21
10,395.18
12,635.69¥ 9,351.40
8,374.13
8,160.01
8,378.36
8,295.63
8,365.90
8,534.12
10,486.99

SECOM Today

2011

Price per share (in yen)High

Financial Review
Financial Section

SECOM Annual Report 201373

COMMON STOCK DATACOMMON STOCK ISSUES
			Shares
		
		
Date

June
Dec.
May
May
Dec.
May
June
Dec.
Nov.
Dec.
Dec.
June
Dec.
Jan.
Nov.
Nov.
Nov.
Jan.
Nov.
Nov.
Jan.
Nov.
Nov.
Jan.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Mar.
Nov.
Mar.
Mar.
Mar.
Mar.
Mar.

Additional
shares issued(In thousands)

outstanding
after issue(In thousands)

Share capital
after issue(In thousandsof yen)Allotment ratio
to shareholders

1,968
2,760
1,196
1,244
4,320
1,880
2,060
6,798
2,042
6,300
7,560
3,000
4,836
5,320
194
1,418
186
6,031
2,878
1,609
3,541
439
1,808
22,986
1,446
2,949
2,035
267
6,986
477
613
1,825
29
159
116,410
273
25
175
6
8

9,200
11,96013,156
14,40018,72020,60022,66029,45831,50037,80045,36048,36053,19658,51658,71060,12860,314
66,34569,22370,832
74,37374,812
76,62099,606
101,052
104,001
106,036
106,303113,289
113,766
114,379
116,204
116,233
116,392
232,802
233,075
233,100
233,275
233,281
233,289¥00,460,000
598,000
657,800
720,000
936,000
1,030,000
1,133,000
1,472,900
1,575,000
1,890,000
2,268,000
2,418,000
2,659,800
3,000,000
3,280,942
5,329,282
5,602,945
5,602,945
11,269,932
15,021,200
15,021,200
16,063,099
21,573,139
21,573,139
25,070,104
32,244,732
37,338,751
37,991,568
56,756,263
58,214,178
59,865,105
65,253,137
65,327,060
65,709,927
65,709,927
66,096,852
66,126,854
66,360,338
66,368,827
66,377,829—
3 for 10
1 for 10—
3 for 10—
1 for 10
3 for 10—
2 for 10
2 for 10—
1 for 10
1 for 10———
1 for 10——
0.5 for 10——
3 for 10
—
—
—
—
—
—
—
—
—
—
10 for 10*
—
—
—
—
—

15, 1974
21, 1974
21, 1975
21, 1975
1, 1975
31, 1976
1, 1976
1, 197630, 1977
1, 1977
1, 1978
1, 1981
1, 198120, 1983
30, 1983
30, 1984
30, 1985
20, 1986
30, 1986
30, 1987
20, 1988
30, 1988
30, 1989
19, 1990
31, 1990
31, 1991
31, 1992
31, 1993
31, 1994
31, 1995
31, 1996
31, 1997
31, 1998
31, 1999
19, 1999
31, 2000
31, 2001
31, 2002
31, 2003
31, 2005

Remarks

Issue at market price (¥900)
Stock split
Stock split
Issue at market price (¥1,134)
Stock split
Issue at market price (¥2,570)
Stock split
Stock split
Issue at market price (¥1,700)
Stock split
Stock split
Issue at market price (¥2,230)
Stock split
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds

Notes: 1. The above is a record of SECOM’s common stock issues since the common stock was listed on the Tokyo Stock Exchange in June 1974.
2. As of March 31, 2013, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

74

SECOM Annual Report 2013