Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

MARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
As of and for the fiscal years ended March 31, 2015 and 2016

1. BASIS OF PRESENTATION(4) Investment securities

The accompanying consolidated financial statements of MARUI GROUP CO., LTD. (“the Company”) and its consolidated subsidiaries (collectively, “the Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments andExchange Act of Japan and its related accounting regulations as well as in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial
Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form that is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in the 2015 consolidated financial statements to conform to theclassifications used in 2016.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated and operates.
As permitted by the regulations under the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements in Japanese yen
do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto were translated
from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥112 = $1, the approximate rate of exchange
at March 31, 2016, and were then rounded down to the nearest thousand. As a result, the totals shown in the accompanying
consolidated financial statements in U.S. dollars do not necessarily agree with the sums of the individual amounts. This translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan. Suchtranslation should not be construed as a representation that Japanese yen could be converted into U.S. dollars at that or any
other rate.

Investment securities held by the Group are all classified as available-for-sale securities.
Available-for-sale securities with a determinable market value are stated at fair value based on the market value at thebalance sheet date, and unrealized gains or losses, net of applicable income taxes, are reported as a separate componentof net assets. Cost of securities sold is computed based on the moving-average method. Available-for-sale securities without
a determinable market value are stated at cost determined by the moving-average method.
Investments in unconsolidated subsidiaries and affiliates are stated at cost determined by the moving-average method.

(5) Inventories
Inventories are measured at the lower of cost determined by the monthly weighted-average method or net selling value.

(6) Depreciation and amortization
Property and equipment (excluding leased assets) are depreciated by the straight-line method.
Intangible assets are amortized by the straight-line method. Capitalized computer software costs for internal use areamortized by the straight-line method over the estimated useful lives (within five years).
For finance leases which do not transfer ownership of the leased assets to the lessee, leased assets are depreciated by thestraight-line method over the lease terms with no residual value.

(7) Allowance for doubtful accounts
The allowance for doubtful accounts is stated at the amount determined based on the historical experience of bad debt withrespect to ordinary receivables (“general reserve”), plus an estimate of uncollectible amounts determined by reference to specificdoubtful receivables of customers experiencing financial difficulties (“specific reserve”).

(8) Provision for bonuses

2. SIGNIFICANT ACCOUNTING POLICIESThe provision for bonuses is accrued at the fiscal year-end to which such bonuses are attributable.

(1) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements as of and for the fiscal year ended March 31, 2016 and 2015, include the accounts of theCompany and its nine significant subsidiaries.
Under the control or influence concept, those companies in which the Company, either directly or indirectly, is able to exercise control over operations are consolidated, and those companies over which the Company has the ability to exercise significant influence are accounted for using the equity method. For the fiscal years ended March 31, 2015 and 2016, there was no
subsidiary or affiliate accounted for using the equity method. Investments in the remaining unconsolidated subsidiaries andaffiliates are stated at cost. If the equity method of accounting was applied to the investments in these companies, the effect on
the accompanying consolidated financial statements would not be material.
All significant intercompany balances and transactions have been eliminated in consolidation.
The fiscal year-end of all consolidated subsidiaries is March 31, the same as that of the Company.

(9) Provision for point card certificates
Credit points are awarded to customers when they make purchases using the Group’s member card and, upon request, theCompany will issue gift certificates or allow customers to use their accumulated credit points for their payment.
The provision for point card certificates is accrued to the estimated amount required based on the balance of credit points
awarded to card members outstanding at the fiscal year-end.

(10) Provision for loss on redemption of gift certificates
The monetary value of gift certificates and other certificates that have not been redeemed for a set period of time after issuanceis recognized as income. However, some gift certificates and other certificates can be redeemed after the recognition of income.
The provision for loss on redemption of gift certificates is provided at the estimated amount to be redeemed in the future
based on historical experience.

(2) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates
prevailing at the consolidated balance sheet dates. All revenues and expenses associated with foreign currencies are translated
into Japanese yen at the exchange rates prevailing when such transactions were made. The resulting exchange gains or losses
are credited or charged to income.

(11) Provision for loss on interest repayment
The provision for loss on interest repayment is provided to the estimated amount of repayment claims on consumer loaninterests at the fiscal year-end.

(12) Provision for loss on guarantees(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, the Group considers cash on hand, readily available deposits, and highly
liquid short-term investments with maturities of three months or less when purchased that are exposed to an insignificant risk ofchanges in value to be cash and cash equivalents.

116

The provision for loss on guarantees is provided at the estimated amount of loss arising from the Group’s guarantee obligationsof customers’ liabilities in relation to loans to individuals from financial institutions with which the Group has guarantee service
arrangements.

117

Notes to Consolidated Financial Statements(13) Basis for revenue recognition

Notes to Consolidated Financial Statements

The Group utilizes interest rate swaps to mitigate the fluctuation risk of interests on loans payable.
The Group applies the special accounting treatment for interest rate swaps as all requirements for this treatment are
fulfilled. The Group omits the evaluation of hedge effectiveness for interest rate swaps under the special accounting treatment.

The Group applied this accounting policy retroactively and restated the consolidated financial statements for the fiscal year ended
March 31, 2015. As a result, revenue and cost of sales for the fiscal year ended March 31, 2015 decreased by ¥155,100 million($1,384,821 thousand). There was no impact on gross profit, operating income, and income before income taxes. In addition, there
was no accumulated impact on the beginning balance of net assets for the fiscal year ended March 31, 2015.
In addition, due to the change in presentation, an amount of ¥1,303 million ($11,633 thousand) included in cost of sales
on the consolidated statements of income for the fiscal year ended March 31, 2015 was reclassified to selling, general andadministrative expenses.
Impacts on segment information are stated in Note 23, “SEGMENT INFORMATION.”(15) Consumption taxes(c) Accounting standard issued but not yet applied

National and local consumption taxes are accounted for by the tax-excluded method. Non-deductible consumption tax andother taxes imposed on fixed assets are recorded as expenses as incurred.

The “Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)(i) Overview
		Following the framework in Auditing Committee Report No. 66, the “Audit Treatment regarding the Judgment ofRecoverability of Deferred Tax Assets,” which prescribes estimation of deferred tax assets according to the classificationof the entity by one of five types, the following treatments were changed as necessary:		 1. Treatment for an entity that does not meet any of the criteria in types 1 to 5;
		 2. Criteria for types 2 and 3;
		 3. Treatment for deductible temporary differences which an entity classified as type 2 is unable to schedule;
		 4. Treatment for the period which an entity classified as type 3 is able to reasonably estimate with respect to futuretaxable income before consideration of taxable or deductible temporary differences that exist at the end of thecurrent fiscal year; and		 5. Treatment when an entity classified as type 4 also meets the criteria for types 2 or 3.
(ii) Effective date		 Effective from the beginning of the fiscal year ending March 31, 2017(iii) Effects of application of the Guidance		 The Company is currently evaluating the effects of application.

The charges for installment sales and interest income on consumer loans are recognized on an accrual basis based on theremaining loan balances.

(14) Hedge accounting

3. CHANGES IN ACCOUNTING POLICIES(a) Business combinations and others
Effective from the fiscal year ended March 31, 2016, the Group adopted the “Revised Accounting Standard for Business
Combinations” (ASBJ Statement No. 21, September 13, 2013), “Revised Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, September 13, 2013) and “Revised Accounting Standard for Business Divestitures” (ASBJ
Statement No. 7, September 13, 2013), and changed the presentation of net income and used the term “non-controlling interests”
instead of “minority interests.” Certain amounts in the prior year comparative information were reclassified to conform to suchchanges in the current year presentation.

(b) Revenue recognition
In the Retailing and Store Operation segment, certain sales are made under a sale or return arrangement with tenants. Under thearrangement, a good is purchased from a tenant when the good is sold to a customer and the Group does not bear substantial
risk on inventory since the title of the good remains with the tenant until the good is sold to a customer.
The Group previously recognized revenue from such arrangement by recording both operating revenues and cost of sales.
However, effective from the fiscal year ended March 31, 2016, the Group comprehensively applied JICPA Accounting PracticeCommittee Research Report No. 13, the “Research Report on Revenue Recognition in Japan (Interim Report)—considerations inlight of IAS 18 ‘Revenue’” and changed its accounting treatment to recognize a profit, net of cost of sales, as revenue.
In response to changes in the consumer market environment, the Group has been moving away from its traditional retailingbusiness and developing shopping centers of its own unique style, in accordance with the medium-term management plan.
The change of revenue recognition described above will enable the Group to not only disclose the results of operations more
appropriately and thus monitor the progress of implementation of the management plan, but to also use the amount of revenue
as a more practical KPI.
Thus, the Group changed the account name from “Total operating revenues” to “Revenue” on the consolidated statements
of income.

4. ACCOUNTS RECEIVABLE–INSTALLMENT
The following balances for lump sums receivable and revolving receivable were securitized and are therefore excluded from theconsolidated balance sheets as of March 31, 2015 and 2016:
Millions of yen
2015

Card shopping:
Lump sums receivable
Revolving receivable¥53,000
13,526

2016¥55,000
13,928

Thousands of
U.S. dollars (Note 1)
2016$491,071
124,357

Regarding expenses arising from a tenant with a fixed term lease contract, the Group previously accounted for fixed expenses
such as depreciation of retail space as cost of sales in correspondence with rent revenue. However, effective from the fiscal year
ended March 31, 2016, the Group changed the treatment to account for the expenses arising from a tenant with a sales-based
rent agreement as selling, general and administrative expenses. This is consistent with the treatment for expenses arising fromthe sales or return arrangement described above, which are accounted for as selling, general and administrative expenses. Thus,
the results of operations will be more clearly stated.

118

119

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

5. LOAN COMMITMENTS(2) Estimated fair value of financial instruments

Certain consolidated subsidiaries that operate in the Credit Card Services segment provide consumer loan services to customers.
The unused balance of loans contingent with the loan commitments was as follows:

Carrying value, fair value, and the difference between them as of March 31, 2015 and 2016, are summarized below. Financial
instruments for which the fair value is difficult to estimate are excluded from the following table (See Note 2 below).

Millions of yen

Total loan limits
Amount executed as loans
Unused balance

Thousands of
U.S. dollars (Note 1)

2015

2016

2016

¥1,081,117
128,030¥  953,086¥1,090,691
134,107¥  956,583$9,738,312
1,197,383$8,540,919

Under the provisions of the loan service contract, the Group is able to decline a loan request or decrease a loan limit whena customer’s financial condition or other circumstances change. Thus, the total unused balance will not necessarily be executed
as loans.

6. FINANCIAL INSTRUMENTS(1) Status of financial instruments(a) Policy on financial instruments
The Group raises necessary funds for business operations through bank loans and corporate bond issuance. Temporary surplus
funds are invested in highly safe short-term deposits. Derivative transactions are utilized to avoid the interest rate fluctuation risk
on loans. The Group does not use derivative transactions for speculative purposes.

(b) Financial instruments, their risks, and the risk management system
Accounts receivable–installment and operating loans are exposed to the credit risk of customers. In accordance with the internalrisk management rules, the Group mitigates such risk by monitoring and evaluating the credit status of each customer by meansof third-party personal credit information agencies and the Group’s own credit monitoring system.
Investment securities primarily consist of shares issued by business partners and are exposed to both credit risk and market
risk. The Group mitigates such risks by regularly monitoring the share price and the financial condition of the issuers.
Leasehold and other deposits consist of security deposits to rent properties for stores.
Accounts payable–trade is settled in the short term.
Long-term loans payable with a floating interest rate is exposed to interest rate fluctuation risk. The Group utilizes interest
rate swaps to avoid such risk by fixing the future interest rate.

120

Millions of yen
2015(1) Cash and deposits(2) Notes and accounts receivable–trade(3) Accounts receivable–installment
		 Allowance for doubtful accounts *1(4) Operating loans
		 Allowance for doubtful accounts *2(5) Investment securities:
		Available-for-sale securities(6) Leasehold and other deposits
Assets, total(1) Accounts payable–trade(2) S hort-term loans payable and current
portion of long-term loans payable(3) Current portion of bonds payable(4) Commercial paper(5) Income taxes payable(6) Bonds payable(7) Long-term loans payable
Liabilities, total
Derivative transactions

2016

Carrying value

Fair value

Difference

Carrying value

Fair value

Difference¥ 31,240
6,453
227,121(5,198)221,923
128,030(2,231)
125,798¥ 31,240
6,453¥    ——¥ 32,586
7,459¥    ——

249,151

27,227

312,365

37,847

142,766

16,968¥ 32,586
7,459
279,763(5,246)
274,517
134,107(2,114)
131,993

152,737

20,74424,1529,493¥419,062¥ 27,002

24,152
9,312¥463,077¥ 27,002—(180)¥44,015¥    —

19,3298,404¥474,290¥ 24,318

19,3298,324¥532,801¥ 24,318—(80)¥58,510¥    —

56,83917,00010,0003,340
85,000109,000¥308,181¥     —

56,83917,00010,0003,340
85,860109,046¥309,089¥     —

—
—
—
—
860
46
¥   907¥    —

48,32430,00010,0004,731
80,000191,000¥388,374¥        
—48,32430,00010,0004,731
80,650191,382¥389,407¥     —

—
—
—
—
650
382
¥ 1,032¥    —*1 The amount presents the total of general reserve and specific reserve for accounts receivable–installment.
*2 The amount presents the total of general reserve and specific reserve for operating loans.

121Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars (Note 1)
2016
Carrying value(1) Cash and deposits(2) Notes and accounts receivable–trade(3) Accounts receivable–installment
		 Allowance for doubtful accounts(4) Operating loans
		 Allowance for doubtful accounts(5) Investment securities
		Available-for-sale securities(6) Leasehold and other deposits
Assets, total(1) Accounts payable–trade(2) Short-term loans payable and current portion of long-term loans payable(3) Current portion of bonds payable(4) Commercial paper(5) Income taxes payable(6) Bonds payable(7) Long-term loans payable
Liabilities, total
Derivative transactions

Fair value

Difference$  290,946 $  290,946
66,59866,5982,497,883(46,839)2,451,044 2,788,973
1,197,383(18,875)
1,178,508 1,363,723$     ——

172,580
75,035$4,234,732$  217,125
431,464
267,857
89,28542,241
714,285
1,705,357$3,467,625$       —

—(714)$522,410$     —
—
—
—
—
5,803
3,410
$  9,214$     —

172,580
74,321$4,757,151$  217,125
431,464
267,857
89,28542,241
720,089
1,708,767$3,476,848$       —337,919

185,214

Liabilities:		(1) Accounts payable–trade, (2) Short-term loans payable and current portion of long-term loans payable, (3) Current
portion of bonds payable, (4) Commercial paper, and (5) Income taxes payable		  The fair value approximates their carrying value because of their short maturities.
		 (6) Bonds payable		The fair value is based on the present value calculated by discounting the sum of principal and interests using aninterest rate, for which credit risk and redemption periods are taken into account.
		 (7) Long-term loans payable		The carrying value of long-term loans payable with a floating interest rate approximates its fair value since the interest
rate reflects the market rate in the short term. Thus, carrying value is used as its fair value. The fair value of long-termloans payable hedged by interest rate swaps under special accounting treatment is calculated by discounting the sumof principal and interests accounted for together with interest rate swaps using a reasonably estimated interest rateapplied to similar borrowings. The fair value of long-term loans payable with fixed interest rates is calculated bydiscounting the sum of principal and interests using an interest rate that would be applied to similar new borrowings.
		 Derivative transactions
		 See Note 8, “DERIVATIVE TRANSACTIONS,” for details.
Note 2. Financial instruments whose fair value is extremely difficult to determine
Millions of yen

Note 1. Calculation method for fair value of financial instruments and information on securities and derivative transactions
Assets:		 (1) Cash and deposits and (2) Notes and accounts receivable–trade		 The fair value approximates their carrying value because of their short maturities.
		 (3) Accounts receivable–installment and (4) Operating loans		The fair value is determined as their present value by discounting, using the risk-free rate, their future cash flows
adjusted for their credit risk identified in the credit control process. With regard to bad receivables and loans, allowance for doubtful accounts is estimated based on the present value of their estimated future cash flows. The fair value
approximates the amount of carrying value less allowance for doubtful accounts. Thus, the amount of carrying valueless allowance for doubtful accounts is used as fair value.

2015

Unlisted stocks
Part of security deposits¥   877
27,9152016¥   921
28,103Thousands of
U.S. dollars (Note 1)
2016$  8,223
250,919

Unlisted stocks are not included in (5) Investment securities in the table above, as there were no market prices available
and it is extremely difficult to determine the fair value. Similarly, part of security deposits is not included in (6) Leasehold andother deposits.

		 (5) Investment securities
		 The fair value is based on quotes on an exchange.
		 (6) Leasehold and other deposits		The fair value is determined as their present value by discounting future cash flows at the risk-free rate adjusted for
credit risk premium. The amount includes the current portion of leasehold and other deposits.

122

123

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

7. INVESTMENT SECURITIESNote 3. Redemption schedule for monetary claims and securities with maturities
Millions of yen(1) Information on available-for-sale securities as of March 31, 2015 and 2016, is as follows:

2015

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Millions of yen

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥ 31,240
6,453
129,841
62,466
1,515¥231,516¥     ——
66,16065,005
3,654¥134,820¥    ——
19,638486
2,843¥22,968¥    ——
11,48172
1,480¥13,034
Millions of yen

2016

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥ 32,586
7,459
154,581
62,913
1,352¥258,892¥     ——
83,29470,885
2,986¥157,166¥    ——
23,502245
2,218¥25,966¥    ——
18,386
63
1,846¥20,296

Thousands of U.S. dollars (Note 1)
2016

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years$  290,946
66,5981,380,187
561,723
12,071$2,311,535$       —
—743,696
632,901
26,660$1,403,267$     ——
209,839
2,187
19,803$231,839$     ——
164,160
562
16,482$181,214

2015

Carrying value exceedingacquisition cost:
StocksSubtotalCarrying value not exceedingacquisition cost:
StocksSubtotal
Total

Carrying value

Acquisition cost

¥18,783
18,783¥16,468
16,4685,369
5,369¥24,152

6,319
6,319
¥22,7872016
Difference

Carrying value

Acquisition cost

Difference¥2,3142,314¥ 9,072
9,072¥ 8,5108,510¥   562
562

(950)
(950)
¥1,364

10,256
10,256¥19,329

12,544
12,544¥21,054(2,287)(2,287)¥(1,725)

Thousands of U.S. dollars (Note 1)
2016

Carrying value exceedingacquisition cost:
StocksSubtotalCarrying value not exceedingacquisition cost:
StocksSubtotal
Total

Carrying value

Acquisition cost

Difference$ 81,000
81,000$ 75,982
75,982$  5,017
5,017

91,571
91,571$172,580

112,000
112,000$187,982(20,419)(20,419)$(15,401)

Unlisted stocks in the amount of ¥237 million and ¥281 million ($2,508 thousand) as of March 31, 2015, and 2016,
respectively, are not included in the table above since their market price is not readily available and it is extremely difficult todetermine their fair value.

See Note 10, “SHORT–TERM LOANS PAYABLE AND LONG–TERM DEBT,” for the schedule of aggregate annual maturities oflong-term loans payable and long-term debt.

124

125

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements(2) I nformation on sale of available-for-sale securities for the fiscal years ended March 31, 2015 and 2016 is asfollows:
Millions of yen
2015

Stocks
Total

Proceeds
from sales

Gains¥22,684¥22,684¥12,094¥12,094

2016
Proceeds
from sales

Losses

¥—
¥—

Gains

¥3,340¥3,340¥972¥972

LossesStocksTotal$29,821$29,821$8,678$8,678The Group capitalizes leased assets under finance leases that do not transfer ownership. These assets mainly consist of buildings and properties in connection with the Retailing and Store Operation segment and software.
The future minimum lease payments under non-cancellable operating leases were as follows:
Millions of yen
2015

Within one year
Over one year
Total

2016
Gains

(As a Lessee)¥0¥0Thousands of U.S. dollars (Note 1)
Proceeds
from sales

9. LEASES

Losses$0$0¥ 3,960
18,469¥22,4292016¥ 4,782
25,136¥29,919

Thousands of
U.S. dollars (Note 1)
2016$ 42,696
224,428$267,133(As a Lessor)
The future minimum lease receipts under non-cancellable operating leases were as follows:(3) W hen the fair value of investment securities declines by 30% to 50%, the Group recognizes an impairment
loss after comprehensively evaluating the recoverability of the market price. For the fiscal year ended March
31, 2015, the Group recognized an impairment loss on available-for-sale securities but omitted its disclosure since the amount was immaterial. No significant impairment loss on investment securities was recognized for the fiscal year ended March 31, 2016.

8. DERIVATIVE TRANSACTIONS
For the fiscal years ended March 31, 2015 and 2016, the Group’s derivative transactions were limited to interest rate swaps
that qualified for hedge accounting and met the requirements for the special accounting treatment for interest rate swaps as
described below. There were no derivative transactions for which hedge accounting was not applied.
Hedge accounting method:
Special treatment for interest rate swaps
Type of derivative transactions:Interest rate swaps, receive floating / pay fixed
Hedged item:
Long-term loans payable
Millions of yen
2015
Contract amountTotal

Due after one year

¥17,000¥17,000

Thousands of U.S. dollars (Note 1)

2016

2016

Contract amount
Fair value

*

Total

Due after one year

¥27,000¥22,000

Contract amount
Fair value

*

Total

Due after one year

$241,071$196,428

Fair value** Interest rate swaps under the special accounting treatment are accounted for as an integral component of the long-term loans payable designated as hedged items. Thus,
their fair value is included in that of long-term loans payable.

126

Millions of yen
2015

Within one year
Over one year
Total

¥ 3,452
8,859¥12,3112016¥ 7,049
9,485¥16,534

Thousands of
U.S. dollars (Note 1)
2016$ 62,937
84,687$147,625

10. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
Short-term loans payable and current portion of long-term loans payable as of March 31, 2015 and 2016, consisted of thefollowing:
Millions of yen
2015

Short-term loans payable
Current portion of long-term loans payable
Total¥39,339
17,500¥56,8392016¥33,324
15,000¥48,324

Thousands of
U.S. dollars (Note 1)
2016$297,535
133,928$431,464

Annual weighted-average interest rates of short-term loans payable were 0.42% and 0.36% and those of current portion of
long-term loans payable were 0.88% and 0.42% for the fiscal years ended March 31, 2015 and 2016, respectively.
Annual weighted-average interest rates of commercial paper, due within a year, were 0.10% and 0.001% for the fiscal years
ended March 31, 2015 and 2016, respectively.

127

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

11. DEFERRED TAX ACCOUNTING

Long-term debt as of March 31, 2015 and 2016, consisted of the following:
Millions of yen

0.38% long-term loans from banks and others due through 2028,
excluding current portion
13th series unsecured 1.51% corporate bond, due 2017
16th series unsecured 1.01% corporate bond, due 2015
18th series unsecured 0.97% corporate bond, due 201719th series unsecured 0.58% corporate bond, due 2015
20th series unsecured 0.79% corporate bond, due 2017
21st series unsecured 0.57% corporate bond, due 2017
22nd series unsecured 0.85% corporate bond, due 2019
23rd series unsecured 0.342% corporate bond, due 2016
24th series unsecured 0.582% corporate bond, due 2018
25th series unsecured 0.344% corporate bond, due 2019
26th series unsecured 0.562% corporate bond, due 2021
27th series unsecured 0.337% corporate bond, due 2020
28th series unsecured 0.543% corporate bond, due 2022
Lease obligation
Less: Current portion
Total

Thousands of
U.S. dollars (Note 1)

2015

2016

2016

¥109,000
10,00012,00010,0005,000
10,00010,0005,000
10,00010,00010,00010,000——2,047
213,047
17,178¥195,869¥191,000
10,000—10,000—10,00010,0005,000
10,00010,00010,00010,00015,00010,0001,868
302,868
30,149¥272,719$1,705,357
89,285—89,285—89,28589,28544,64289,28589,28589,28589,285
133,928
89,285
16,6782,704,178
269,187$2,434,991

Millions of yen
Year ending March 31

Bonds payable

2017
2018
2019
2020
2021 and thereafter
Total¥ 15,000
10,00031,00032,000118,000¥206,000¥ 30,000
20,00010,00015,00035,000¥110,000Millions of yen
2015

The aggregate annual maturities of long-term debt subsequent to March 31, 2016, are as follows:
Long-term loans
payableMajor components of deferred tax assets and deferred tax liabilities as of March 31, 2015 and 2016, were as follows:

Thousands of U.S. dollars (Note 1)
Long-term loans
payableBonds payable

Lease obligation¥  149 $  133,928
149
89,285
149
276,785149
285,714
1,272 1,053,571¥1,868 $1,839,285$267,857
178,571
89,285
133,928
312,500$982,142$ 1,330
1,330
1,330
1,330
11,357$16,678

Lease obligation

Deferred tax assets:
Depreciation
Impairment loss
Provision for loss on interest repayment
Provision for point card certificates
Net operating loss carried forward
Net unrealized loss on non-current assets
Provision for bonuses
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for special account for advanced depreciation of non-current assets
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Deferred tax assets, net

2016

Thousands of
U.S. dollars (Note 1)2016¥ 6,339
5,586
4,478
1,624
1,494
1,372
1,324
6,055
28,275(7,684)¥20,590¥ 6,016
5,232
2,114
2,291
1,105
1,357
1,293
4,990
24,403(7,192)¥17,210$ 53,714
46,714
18,875
20,455
9,866
12,116
11,54444,553217,883(64,214)$153,660¥ 8,737380
197¥ 9,315¥11,275¥ 8,5234350¥ 8,877¥ 8,332$ 76,098
35
3,125$ 79,258$ 74,392(Change in presentation)
As of March 31, 2016, the amount of allowance for doubtful account, which was previously shown as one of major components
of deferred tax assets, became immaterial and was included in other. Accordingly, the allowance for doubtful accounts of ¥1,423
million as of March 31, 2015 was reclassified to other to conform to the classification used in 2016.
Income taxes consist of corporation, inhabitants’ and enterprise taxes. Reconciliations between the statutory tax rate and theeffective tax rate reflected in the consolidated statements of income were as follows:
Statutory tax rate
Adjustments:
Permanent differences such as entertainment expenses, etc.
Permanent differences such as dividends
Change in valuation allowance
Inhabitants’ tax
Adjustments due to changes in tax rate
Other
Effective tax rate

2015

2016

35.6%

33.1%

0.4
(0.3)
(4.7)
0.6
1.9
(0.4)
33.1%

0.3
(0.1)
(0.8)
0.6
0.4
0.4
33.9%

On March 29, 2016, amendments to the Japanese tax regulations were enacted in the Diet session. Based on the amendments, the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities expected to be settled orrealized from April 1, 2016 to March 31, 2018 and on or after April 1, 2018 were changed from 33.1% to 30.9% and 30.6%,
respectively, as of March 31, 2016.
As a result of this change, deferred tax assets (after deducting deferred tax liabilities) decreased by ¥110 million($982 thousand), valuation difference on available-for-sale securities decreased by ¥6 million ($53 thousand) and income
taxes–deferred increased by ¥104 million ($928 thousand) as of March 31, 2016.

128

129

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

12. ASSET RETIREMENT OBLIGATIONS

14. CONTINGENT LIABILITIES(1) Asset retirement obligations recognized in the consolidated balance sheets

The Group has commitments to guarantee customers’ liabilities in relation to personal loans to individuals from financial institutions with which the Group has guarantee service arrangements.
As of March 31, 2015 and 2016, the amounts of the Group’s guarantee obligations were ¥19,327 million and ¥23,018
million ($205,517 thousand), respectively.

The Group’s asset retirement obligations mainly include the cost of restoring the store sites to their original condition under thereal estate lease contracts of stores. The Group calculated its asset retirement obligations by assuming the lease period as the
expected period of use and applying discount rates of 0.00% to 1.38%.
Asset retirement obligations as of March 31, 2015 and 2016, consisted of the following:
Millions of yen
2015

Beginning balance
Increase due to acquisition of property and equipment
Increase due to change in estimate *1
Adjustments due to passage of time
Decrease due to fulfillment of obligation
Other increase (decrease)Ending balance

¥549
—
87
2
(13)
9
¥635

Thousands of
U.S. dollars (Note 1)

2016

2016

¥635
348
80
2
(93)
—
¥974

$5,669
3,107
714
17
(830)
—
$8,696*1 The reasonable estimate of obligation became available for stores to be closed.

(2) Asset retirement obligations other than those recognized in the consolidated balance sheets
While the Group estimates asset retirement obligations based on the real estate lease contracts of stores, it is not possible toreasonably estimate the cost of restoring the store sites to their original condition under the general lease contracts since theperiod of use is not clearly determined. Therefore, the Group does not recognize the asset retirement obligations for stores otherthan those that are planning to be closed.

Under the Companies Act of Japan (“the Act”), the entire amount paid for new shares is required to be designated as capitalstock. However, a company may, by resolution of the Board of Directors, designate an amount not exceeding one-half of theprice of the new shares as additional paid-in capital, which is included in capital surplus. The legal earnings reserve is included
in retained earnings in the accompanying consolidated balance sheets.
The Act provides that an amount equal to at least 10% of the amount to be disbursed as distributions of capital surplus(other than additional paid-in capital) and retained earnings (other than legal earnings reserve) be transferred to additional
paid-in capital and the legal earnings reserve, respectively, until the total of additional paid-in capital and the legal earnings
reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders’ meeting, or by resolution of the Board of
Directors if certain conditions are met.
Under the Act, additional paid-in capital and the legal earnings reserve may not be distributed as dividends; the Act allows
all additional paid-in capital and all legal earnings reserve to be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial
statements of the Company in accordance with Japanese laws and regulations.
The following tables summarize the dividends paid for the fiscal years ended March 31, 2015 and 2016:

13. INVESTMENT AND RENTAL PROPERTY
Certain consolidated subsidiaries hold commercial properties, including land, for rental in the Tokyo metropolitan area and otherareas. The net rental income in connection with these properties for the fiscal years ended March 31, 2015 and 2016, was¥3,824 million and ¥5,320 million ($47,500 thousand), respectively. The rental income was included in revenue and the associated rental expenses were included in cost of sales and selling, general and administrative expenses. The carrying value andthe fair value of such assets were as follows:
Millions of yen
2015

Carrying value * :Beginning balance
Changes during the year
Ending balance
Fair value *2

15. NET ASSETS

Thousands of
U.S. dollars (Note 1)

2016

2015
Resolution

Class ofshare

Total amount of dividend(Millions of yen)

Dividend per share(Yen)Annual general meeting ofshareholders held on June 26, 2014
Board of Directors’ meeting held on
November 6, 2014

Commonstock
Commonstock¥2,463

¥9

2,464

9

¥32,367
12,873¥45,240¥95,079*1 Carrying value represents the amount on the consolidated balance sheets which is carried at the acquisition costs less the accumulated depreciation.
*2 Fair value is based on the appraised value provided by third-party real estate appraisers.

$288,991
114,937$403,928$848,919

Effective date

March 31,2014
September 30,
2014

June 27,2014
December 4,
2014

Record date

Effective date

March 31,2015
September 30,
2015

June 26,
2015
December 4,
2015

2016

2016

1

¥32,28581¥32,367¥66,959

Record date

Resolution

Annual general meeting ofshareholders held on June 25, 2015
Board of Directors’ meeting held on
November 6, 2015

Class ofshare

Commonstock
Commonstock

Total amount of dividend

Dividend per share(Thousands of(Millions of
U.S. dollars)yen)(Note 1)(Yen)

(U.S. dollars)(Note 1)

¥2,630 $23,482

¥10

$0.08

2,761

11

0.09

24,651Dividends with a record date during the fiscal year ended March 31, 2016, but with an effective date subsequent to thefiscal year ended March 31, 2016, were as follows:
Total amount of dividend
Resolution

Class ofshareAnnual general meeting ofCommonshareholders held on June 29, 2016 stock130

Dividend per share(U.S.
dollars)(Note 1)

Record date

Effective date

¥2,666 $23,803 Retained ¥11 $0.09
earnings

March 31,2016

June 30,
2016(Thousands of(Millions of
U.S. dollars)yen)(Note 1)

Source(Yen)

131

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

16. COST OF SALES

20. COMPREHENSIVE INCOME

For the fiscal years ended March 31, 2015 and 2016, cost of sales included the revaluation loss on inventories in the amountsof ¥43 million and ¥94 million ($839 thousand), respectively.

Millions of yen
2015

17. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the fiscal years ended March 31, 2015 and 2016 were as follows:
Millions of yen

Advertisement
Provision for point card certificates
Provision for allowance for doubtful accounts
Salaries and allowances
Provision for bonuses
Rent
Depreciation and amortization
Other

Thousands of
U.S. dollars (Note 1)

2015

2016

2016

¥ 14,781
4,590
7,748
33,165
3,533
15,7759,165
42,647¥131,406¥ 13,941
6,586
7,289
32,7703,513
15,782
8,614
41,920¥130,419$  124,473
58,80365,080292,589
31,366140,91076,910374,285$1,164,455

Valuation difference on available-for-sale securities:
Amounts incurred for the year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Valuation difference on available-for-sale securities
Total other comprehensive income¥  5,473(12,094)(6,621)
1,827(4,794)¥ (4,794)

2016¥(2,117)(972)(3,089)491(2,598)¥(2,598)$(18,901)(8,678)(27,580)
4,383(23,196)$(23,196)

21. CASH FLOW STATEMENTS
Reconciliations of cash and cash equivalents in the consolidated statements of cash flows to accounts and amounts in theaccompanying consolidated balance sheets as of March 31, 2015 and 2016 were as follows:
Millions of yen
2015

Cash and deposits
Time deposits with maturity in excess of three months
Cash and cash equivalents

18. LOSS ON RETIREMENT OF PROPERTY AND EQUIPMENT

2016

Thousands of
U.S. dollars (Note 1)

2016¥31,240(11)¥31,229

Thousands of
U.S. dollars (Note 1)
2016¥32,586(11)¥32,575$290,946(98)$290,848

Loss on retirement of property and equipment for the fiscal years ended March 31, 2015 and 2016 consisted of the following:
Millions of yen

Buildings and structures
Furniture and fixtures

Thousands of
U.S. dollars (Note 1)

2015

2016

2016

¥  515582¥1,097¥  546
1,374¥1,920$ 4,875
12,267$17,142

For the fiscal years ended March 31, 2015 and 2016, the amounts of costs incurred for subscription rights to shares (“stock
options”) were ¥36 million and ¥50 million ($446 thousand), respectively, and were included in selling, general and administrative expenses.
The outline of stock options of the Company is as follows:
Date of resolution

19. IMPAIRMENT LOSS
For the fiscal year ended March 31, 2016, the amount of impairment loss was immaterial and the disclosure was omitted.
An impairment loss recognized for the fiscal year ended March 31, 2015 was included in other, net under non-operating
income (expenses) on the consolidated statements of income and other, net under cash flows from operating activities on the
consolidated statement of cash flows. The details are as follows:
Use

Location

Type of assets

Millions of yen

Stores, etc.

Kyoto MaruiKyoto City, Kyoto

Buildings and structures
Other
Total

¥1,78771¥1,859The Group has grouped its fixed assets by either store or rental property, which are the minimum cash-generating units.
The carrying value of each asset group is written down to its respective recoverable amount and in doing so is recognized as an
impairment loss.
The Group estimated the recoverable amount of each asset group based on value in use or fair value less costs to sell. If a
store reports continuous operating losses, the Group evaluates that the value in use of the store is zero since positive cash flows
cannot be expected in the future. If a store is planned to be closed, the Group evaluates that the fair value less costs to sell is zero.

132

22. SUBSCRIPTION RIGHTS TO SHARES

Title and number of granteeType and number of shares tobe issued upon exercise of stock
options
Granted date
Vesting conditions
Eligible service period
Exercise period

2013

2014

2015

2016

June 27, 2012
7 Directors and5 Executive Officersof the Company

June 26, 2013
7 Directors and5 Executive Officersof the Company

June 26, 2014
8 Directors and5 Executive Officersof the Company

June 25, 2015
4 Directors and
12 Executive Officersof the Company

Common stock
52,000 shares

Common stock
38,400 shares

Common stock
43,500 shares

Common stock
32,000 shares

August 3, 2012
No provision
No provision
From April 1, 2013
to March 31, 2023

July 11, 2013
No provision
No provision
From April 1, 2014
to March 31, 2024

July 11, 2014
No provision
No provision
From April 1, 2015
to March 31, 2025

July 10, 2015
No provision
No provision
From April 1, 2016
to March 31, 2026

133

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

The following table describes the scale and changes in stock options that existed during the fiscal year ended March 31,
2016. The number of stock options is translated into the number of shares.
Number of shares
2013

Before vested:
As of March 31, 2015
GrantedForfeited
VestedAs of March 31, 2016
After vested:
As of March 31, 2015
VestedExercised
Forfeited
As of March 31, 2016

Exercise price
Average exercise price
Fair value at granted date

2014

2015

2016

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
32,000—32,000
—

2,600
—
—
—
2,600

2,000
—
2,000
—
—

43,500—41,400—2,100—
32,000——32,000Yen

U.S. dollars(Note 1)Yen

U.S. dollars(Note 1)Yen

U.S. dollars(Note 1)Yen

U.S. dollars(Note 1)

¥  1
—
485

$0.008—
4.33¥    11,546
1,007$0.00813.80
8.99¥    11,434
844$0.00812.80
7.53¥    1—
1,589$0.008—
14.18

The Black-Scholes option-pricing model is applied to estimate the fair value of stock options granted for the fiscal year
ended March 31, 2016, based on the following assumptions.
Expected volatility *1
32.943%
Expected holding period *2
Expected dividend *3
Risk-free rate *4

5.7 years¥19 ($0.16) per share
0.125%*1 It is estimated based on the share price over the period corresponding to the expected holding period.
*2 It is estimated based on the assumption that stock options are exercised at the middle of the exercise period.
*3 It is based on the dividends for the fiscal year ended March 31, 2015.
*4 It is the average yield on government bonds for the period that corresponds to the remaining life of the stock option.

Since it is difficult to reasonably estimate the number of stock options that will expire in the future, the number of stock
options that were forfeited is shown as the number of vested options.

23. SEGMENT INFORMATION(2) Basis of measurement for the amounts of segment revenue, segment income or loss, segment assets, andother items
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “SIGNIFICANT ACCOUNTINGPOLICIES.”
Segment income is measured on the basis of operating income. Intersegment sales and transfers are accounted for basedon the prevailing market price.
Millions of yen
2015
Retailing and StoreOperation

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Increase in property and	  equipment and intangible assets

Reportable segment
Credit Card
Retailing-Related
Services
Services

Total

Adjustment *1

Consolidated *2¥147,593
4,918¥152,511¥  8,074¥239,592¥ 68,436
2,186¥ 70,623¥ 20,126¥385,466¥33,816
22,332¥56,149¥ 3,333¥64,944¥249,847
29,437¥279,284¥ 31,535¥690,003¥     —
(29,437)¥(29,437)¥ (3,492)¥(14,376)¥249,847—¥249,847¥ 28,042¥675,627¥  6,976¥  1,223¥ 1,869¥ 10,070¥    226¥ 10,296

6,280

1,710

2,208

10,198

(412)

9,786

*1	Adjustment to segment income consists of intersegment elimination of ¥1,602 million and corporate expenses of ¥(5,095) million that are not allocated to eachreportable segment. Adjustment to segment assets mainly consists of intersegment elimination of ¥(224,929) million and corporate assets of ¥213,560 million, whichmainly present the Company’s loans in connection with the Group’s cash management system.
*2 Segment income is reconciled to operating income on the consolidated statements of income.
Millions of yen
2016
Retailing and StoreOperation

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Increase in property and	  equipment and intangible assets

Reportable segment
Credit Card
Retailing-Related
Services
Services

Total

Adjustment *1

Consolidated *2¥134,263
4,543¥138,807¥  7,856¥246,622¥ 74,323
2,123¥ 76,446¥ 22,186¥441,748¥37,279
21,362¥58,642¥ 3,674¥66,261¥245,867
28,029¥273,896¥ 33,717¥754,633¥      —
(28,029)¥(28,029)¥ (4,101)¥(24,507)¥245,867—¥245,867¥ 29,615¥730,126¥  6,500¥  1,301¥ 1,881¥  9,683¥    (12)¥  9,670

9,700

1,374

2,048

13,124(684)

12,439(1) Overview of reportable segments
The Group defines its reportable segments as a component of the Group for which separate financial information is available
and whose operating results are regularly evaluated by the Board of Directors to make decisions about how resources are to beallocated among the Group and assess their performance.
The Group consists of the following three reportable segments identified by products and services: “Retailing and StoreOperation,” “Credit Card Services,” and “Retailing-Related Services.”
The Retailing and Store Operation segment engages in retailing operations of clothes and accessories and management ofcommercial property rental. The Credit Card Services segment engages in the credit card services, the consumer loans, and therent payment guarantee businesses. The Retailing-Related Services segment engages in businesses such as store design, advertising, apparel distribution, IT systems, maintenance and management of buildings and other facilities, and real estate rental.

134

135

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars (Note 1)
2016
Reportable segment
Credit Card
Retailing-Related
Services
Services

Retailing and StoreOperation

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Increase in property and	  equipment and intangible assets

2016
Name of thecompany

Total

Adjustment *1

Consolidated *2$2,195,241—$2,195,241$  264,419$6,518,982$1,198,776
40,562$1,239,348$   70,142$2,201,982$  663,598
18,955$  682,553$  198,089$3,944,178$332,848
190,732$523,589$ 32,803$591,616$2,195,241
250,258$2,445,500$  301,044$6,737,794$      —
(250,258)$(250,258)$ (36,616)$(218,812)$   58,035$   11,616$ 16,794$   86,455$    (107) $   86,339

86,607

12,26718,285

117,178(6,107)

111,062*1	Adjustment to segment income consists of intersegment elimination of ¥1,571 million ($14,026 thousand) and corporate expenses of ¥(5,673) million ($(50,651)
thousand) that are not allocated to each reportable segment. Adjustment to segment assets mainly consists of intersegment elimination of ¥(290,641) million($(2,595,008) thousand) and corporate assets of ¥269,384 million ($2,405,214 thousand), which mainly present the Company’s loans in connection with the Group’s
cash management system.
*2 Segment income is reconciled to operating income on the consolidated statements of income.

Location

Capital(Millions of yen)

Business

VotingrightsRelationshipTransaction

Nakano Co., Ltd.

Shinjuku,¥10 RealTokyo($89 thousand) estate(Note 1) rental

Direct Property
0.9% rental
Concurrent
position as
director

Property
rentalSeiwa Kogyo
Co., Ltd.

Shinjuku,
10 RealTokyo($89 thousand) estate(Note 1) rental

Direct Property
0.7% rental
Concurrent
position as
director

Property
rentalstores

Amount(Millions of yen)Account name

¥42 Leasehold and($375 thousand) other deposits(Note 1)Other current
liabilities¥41($366 thousand)(Note 1)
1($8 thousand)(Note 1)42 Leasehold and191($375 thousand) other deposits ($1,705 thousand)(Note 1)
(Note 1)

The monetary amounts above do not include consumption taxes. Terms and conditions for rental agreements are
determined similarly to those of third-party transactions.

25. PER SHARE INFORMATION
Net income per share, both basic and diluted, for the fiscal years ended March 31, 2015 and 2016 is as follows:
Yen

Change in reportable segments
As stated in Note 3, “CHANGES IN ACCOUNTING POLICIES,” effective from the fiscal year ended March 31, 2016, the Group
retroactively adopted to change the revenue recognition of sales under a sale or return arrangement. The account name waschanged from “Total operating revenues” to “Revenue” on the consolidated statements of income. From this change, revenue
from outside customers in Retailing and Store Operation decreased by ¥155,100 million ($1,384,821 thousand), comparedwith those recognized under the previous application. There was no impact on segment income.

Balance(Millions of yen)

Net income per share
Diluted net income per share

2015

2016

¥58.8758.86¥70.68
70.67

U.S. dollars (Note 1)
2016

$0.63
0.63

Thousands of shares

Weighted-average number of outstanding shares
Diluted shares:
Assumed exercise of stock options

Disclosures on related information with regard to the concentration of products and services, location, and major customers
have been omitted since there was no relevant information to be disclosed.
For the fiscal years ended March 31, 2015 and 2016, an impairment loss of ¥1,859 million and ¥107 million($955 thousand), respectively, was reported by the Retailing and Store Operation segment.

2015

2016

272,430

251,434

48

27

Net income per share is computed based on the net income attributable to shareholders of common stock and theweighted-average number of outstanding shares.

24. RELATED PARTY INFORMATION
Related party information where directors and their close relatives substantially own a majority of the voting rights is as follows:
2015
Name of thecompany

Nakano Co., Ltd.

Seiwa Kogyo
Co., Ltd.

Location

Capital(Millions of yen)

Shinjuku,
Tokyo

¥10

Shinjuku,
Tokyo

10

BusinessRealestaterentalRealestaterentalVotingrightsRelationshipTransaction

Amount(Millions of yen)

Direct Property
0.9% rental
Concurrent
position as
director
Direct Property
0.5% rental
Concurrent
position as
director

Property
rental¥42

Property
rentalstores

44

Account name

Balance(Millions of yen)

Leasehold andother deposits
Other current
liabilities¥ 41

Leasehold andother deposits

191

1

The monetary amounts above do not include consumption taxes. Terms and conditions for rental agreements are determined similarly to those of third-party transactions.

136

137

Notes to Consolidated Financial Statements

26. SUBSEQUENT EVENTAt the Board of Directors’ meeting held on May 12, 2016, the Company resolved to acquire treasury stock in accordance with
Article 156 of the Companies Act as applied with relevant changes in interpretation pursuant to the provisions of Article 165,
paragraph (3).
Reason for acquisition
Based on the medium-term business plan to be achieved by the fiscal year ending March 2021, the Group aims to achieve
profitable growth by innovating group business and integrating operations in light of potential changes in the business environment. As its financial strategy, the Group will effectively utilize basic operating cash flows that will be generated in the next five
years in order to optimize capital structure for the business; thus, the Group will enhance investment growth and shareholder
return. The Group will improve its corporate value by achieving the following targets: an ROE of 10%, an ROIC of 4%, and an
EPS of ¥130 as early as possible.
Based on these Group strategies, following the acquisition of treasury stock in the total amount of ¥15,000 million($133,928 thousand) in the fiscal year ended March 31, 2015 and ¥35,000 million ($312,500 thousand) in the fiscal year
ended March 31, 2016, the Company resolved to acquire treasury stock as follows:(i) Class of shares(ii) Maximum number of shares to acquire(iii) Maximum amount for acquisition(iv) Acquisition period

138

Common stock
10 million shares (4.13% of total outstanding shares)¥15,000 million ($133,928 thousand)From May 13, 2016 to September 30, 2016