Consolidated Financial Statements
In Accordance with International
Financial Reporting Standards (IFRS)Fiscal Years Ended December 31, 2012 and 2013

Rakuten, Inc. and its Consolidated Subsidiaries

This document has been translated from the Japanese original for reference purposes only. In theevent of any discrepancy between this translated document and the Japanese original, the original
shall prevail.

Table of Contents
Page
Cover
Consolidated Statement of Financial Position ........................................................................1
Consolidated Statement of Income.........................................................................................2
Consolidated Statement of Comprehensive Income ..............................................................3
Consolidated Statement of Changes in Equity .......................................................................4
Consolidated Statement of Cash Flows..................................................................................6
Notes to the Consolidated Financial Statements ..............................................................................8
1. General Information ......................................................................................................................8
2. Accounting Policies .....................................................................................................................10
3. Significant Accounting Estimates and Judgments ......................................................................24
4. Segment Information...................................................................................................................26
5. Cash and Cash Equivalents .......................................................................................................28
6. Accounts Receivable — Trade....................................................................................................29
7. Financial Assets for Securities Business ....................................................................................29
8. Loans for Credit Card Business ..................................................................................................30
9. Investment Securities for Banking Business ..............................................................................30
10. Loans for Banking Business .....................................................................................................31
11. Investment Securities for Insurance Business ..........................................................................31
12. Derivative Assets and Derivative Liabilities ..............................................................................32
13. Investment Securities ...............................................................................................................33
14. Other Financial Assets ..............................................................................................................33
15. Allowance for Doubtful Accounts ..............................................................................................34
16. Investments in Associates and Joint Ventures .........................................................................35
17. Property, Plant and Equipment .................................................................................................37
18. Intangible Assets .......................................................................................................................39
19. Deposits for Banking Business .................................................................................................43
20. Financial Liabilities for Securities Business ..............................................................................44
21. Bonds and Borrowings ..............................................................................................................44
22. Other Financial Liabilities ..........................................................................................................46
23. Provisions .................................................................................................................................46
24. Policy Reserves and Others for Insurance Business ...............................................................47
25. Income Tax Expense.................................................................................................................49
26. Common Stock, Capital Surplus, Retained Earnings and Treasury Stock ...............................54
27. Revenue ....................................................................................................................................55
28. Operating Expenses .................................................................................................................55
29. Other Income and Other Expenses ..........................................................................................56
30. Additional Line Items .................................................................................................................57
31. Financial Income and Financial Expenses ...............................................................................57
32. Earnings per Share ...................................................................................................................57
33. Transfers of Financial Assets ....................................................................................................58
34. Assets Pledged as Collateral and Assets Received as Collateral ............................................59
35. Hedge Accounting .....................................................................................................................60
36. Contingent Liabilities and Commitments ..................................................................................61
37. Share-based Payments ............................................................................................................62
38. Dividends ..................................................................................................................................69

39. Classification of Financial Instruments .....................................................................................70
40. Gains and Losses Generated from Financial Instruments .......................................................73
41. Fair Value of Financial Instruments ..........................................................................................77
42. Offsetting of Financial Assets and Financial Liabilities .............................................................83
43. Financial Risk Management .....................................................................................................88
44. Capital Management .................................................................................................................99
45. Related Parties .........................................................................................................................99
46. Business Combinations ..........................................................................................................101
47. Major Subsidiaries ..................................................................................................................105
48. Sale of Subsidiary through Business Restructuring ...............................................................106
49. Structured Entities...................................................................................................................107
50. Subsequent Events .................................................................................................................109
51. Classification of Current and Non-current .............................................................................. 110(2) Others ...................................................................................................................................... 112

Consolidated Statement of Financial Position(Millions of Yen)
Note
AssetsCash and cash equivalents
Accounts receivable — trade
Financial assets for securities
business
Loans for credit card business
Investment securities for banking
business
Loans for banking business
Investment securities for insurance
business
Derivative assets
Investment securities
Other financial assets
Investments in associates and joint
ventures
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total assets
Liabilities
Accounts payable — trade
Deposits for banking business
Financial liabilities for securities
business
Derivative liabilities
Bonds and borrowings
Other financial liabilities
Income taxes payable
Provisions
Policy reserves and others for
insurance business
Deferred tax liabilities
Other liabilities
Total liabilities
EquityEquity attributable to owners of theCompany
Common stock
Capital surplus
Retained earnings
Treasury stock
Other components of equity
Total equity attributable toowners of the Company
Non-controlling interests
Total equity
Total liabilities and equity

December 31, 2012

December 31, 2013

5
6

¥270,114
65,493¥384,008
73,4437615,703

1,218,987

8

402,418

544,3149296,326

197,89710

189,669

239,818

11

13,623

10,23312
13
14

10,674
23,411
123,132

12,58834,025
159,058

16

6,601

8,189

17
18
25

24,143
188,01440,546
17,7672,287,634

30,408235,881
31,59429,365
3,209,808

19

79,965809,531

115,357
959,96020

558,055

1,077,971

12
21
22
23

4,685
305,186
210,048
2,873
29,614

8,023
389,683
226,771
30,191
41,02024

18,496

18,85225

6,416
20,853
2,045,722

9,123
26,4032,903,354

26
26
26
26

108,255
116,599
20,873(3,626)(6,159)109,530
116,555
61,226(3,649)16,401

235,942300,063

5,970
241,9122,287,634

6,391
306,454
3,209,808―1―

Consolidated Statement of Income(Millions of Yen)
Note
Continuing operations
Revenue
Operating expenses
Other income
Other expenses
Additional line items
Operating income
Financial income
Financial expenses
Share of income of associates andjoint ventures
Income before income tax
Income tax expense
Net income

Year ended
December 31, 2012

27
28
29
29
30
31
31
16
25

Net income attributable to:
Owners of the Company
Non-controlling interests
Net income

Year ended
December 31, 2013

¥400,444
319,435
3,365
5,581(28,738)
50,055
193
2,565
1,423

¥518,568
420,374
1,831
9,781
―
90,244
197
1,962
131

49,10627,97021,136

88,61045,12943,481

20,489647
21,13642,900581
43,481(Yen)
Earnings per share attributable toowners of the Company:
Basic
Diluted32
32¥15.5915.56―2―¥32.6032.41

Consolidated Statement of Comprehensive Income(Millions of Yen)
Note

Year ended
December 31, 2012

Net income

Year ended
December 31, 2013

¥21,136¥43,481

40

(72)

9,500

25

(51)

(3,330)

16

28

54

(95)

6,224

10,362

18,294

35

(447)

(407)

25
35

176

145

35

713

227

25
35

(271)

(83)

10,533

18,176

10,43824,400Comprehensive income

31,57467,881

Comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Comprehensive income

30,907667
31,574

67,253628
67,881Other comprehensive income
Items that will not be reclassified to net
income:Gains (losses) on financial assets
measured at fair value through othercomprehensive income
Income tax effect of gains (losses)
on financial assets measured at fairvalue through other comprehensive
incomeShare of other comprehensive
income of associates and joint
venturesTotal items that will not bereclassified to net income
Items that will be reclassified to net
income:Foreign currency translation
adjustments
Gains (losses) on cash flow hedges
recognized in other comprehensive
incomeIncome tax effect of gains (losses)
on cash flow hedges recognized inother comprehensive income
Gains (losses) on cash flow hedges
reclassified from othercomprehensive income to net
incomeIncome tax effect of gains (losses)
on cash flow hedges reclassified
from other comprehensive income to
net income
Total items that will be reclassified to
net income
Other comprehensive income, net of
tax

―3―

Consolidated Statement of Changes in Equity(Millions of Yen)
Other components of equity

Note

As of January 1, 2012

Financial
Total equity
Noninstruments
Total
attributable toForeignmeasured at
Cash Total othercontrollingcurrency
equitystock
ownersofthefair value
flow components
interests
translation
Company
through other hedges of equity
adjustments
comprehensive
incomeCommon Capital Retained Treasurystock

surplus earnings¥107,959 ¥116,864¥3,641 ¥(3,626)¥(18,123)¥2,026¥(374)¥(16,471)¥208,367¥3,979 ¥212,346

Comprehensive income
Net income

20,489Other comprehensive
income, net of tax
Total comprehensive
income

－

－

296

296

20,489－20,489647

21,136

10,341(94)

171

10,418

10,41820

10,438

10,341(94)

171

10,41830,907667

31,574

Transactions withownersContributions by anddistributions to owners
Issuance ofcommon stock

26, 37

Cash dividends paid

26, 38

Reclassificationfrom othercomponents ofequity to retained
earnings

39

Others26

Total contributions
by and distributions
to owners
Changes in ownershipinterests in subsidiaries
Issuance of common
stock
Acquisitions anddisposals of non46, 47
controlling interests(3,284)106

296

OthersTotal changes inownership interestsin subsidiaries
Total transactions withowners
As of December 31,
2012

(106)

334

(79)

(0)

630

(3,257)

(0)

－

(106)

(106)

－

(106)

592

592

(3,284)(3,284)

－

－

255

255

(2,437)－(2,437)

30

30

(494)

(494)

1,380

886

(401)

(401)

(86)

(487)

－

(895)

－

－

－

－

－

－

(895)

1,324

429

296

(265)

(3,257)

(0)

－

(106)

－

(106)

(3,332)

1,324(2,008)108,255 116,599

20,873(3,626)(7,782)

1,826

(203)

(6,159)235,9425,970 241,912

Comprehensive income
Net income

42,900

Other comprehensive
income, net of tax
Total comprehensive
incomeTransactions withowners

－

－

1,275

1,275

42,900－42,900581

43,481

18,273

6,198

(118)

24,35324,35347

24,40018,273

6,198

(118)

24,353

67,253628

67,881

Contributions by anddistributions to owners
Issuance of common
stock

26, 37

Cash dividends paid

26, 38(3,944)

―4―

2,550

2,550

(3,944)(3,944)Other components of equity

Note

Reclassification fromother components ofequity to retained
earnings

39

Others26

Total contributions
by and distributions
to owners
Changes in ownershipinterests in subsidiaries
Issuance of common
stock
Acquisitions anddisposals of non47
controlling interests

stock

surplus earnings

1,793

1,275

OthersTotal changes inownership interestsin subsidiaries
Total transactions withowners
As of December 31,
2013

Financial
Total equity
Noninstruments
ForeignTotal
attributable tomeasured at
Cash Total othercontrollingcurrency
equityownersofthestockfair value
flow components
interests
translation
Company
through other hedges of equity
adjustments
comprehensive
incomeCommon Capital Retained Treasury(1,793)

812

(396)

(23)

2,087

(2,547)(23)－(1,793)(1,793)－(1,793)

－

－

393

393

(1,001)－(1,001)50

50(2,135)(2,135)(208)(2,343)

4

4

(49)

(45)

－

(2,131)

－

－

－

－

－

－

(2,131)(207)(2,338)

1,275

(44)

(2,547)(23)－(1,793)－(1,793)(3,132)(207)(3,339)109,530 116,555

61,226(3,649)10,491

6,231

(321)

16,401300,063

6,391 306,454―5―Consolidated Statement of Cash Flows
Note

Year ended
December 31, 2012

(Millions of Yen)
Year ended
December 31, 2013

Cash flows from operating activities
Income before income tax
Depreciation and amortization
Other loss
Decrease (Increase) in operatingreceivables
Decrease (Increase) in loans for
credit card business
Increase (Decrease) in deposits forbanking business
Decrease (Increase) in call loans
for banking business
Decrease (Increase) in loans forbanking business
Increase (Decrease) in operating
payablesIncrease (Decrease) in accounts
payable — other and accrued
expenses
Decrease (Increase) in financial
assets for securities business
Increase (Decrease) in financial
liabilities for securities business
OthersIncome tax paid
Net cash flows from operating
activities
Cash flows from investing activities¥49,106
21,22730,010(9,379)¥88,610
26,086
5,509(3,035)(96,287)(141,895)

66,941

150,429

42,000(32,000)(35,113)(50,149)

14,28429,464

10,852

6,768(200,103)(603,284)

193,565

519,916

24,501(6,917)
104,687

16,374(11,308)
1,485(6,349)12,431(5,162)(8,089)5,155(10,018)(18,949)(35,076)(253,991)(22,412)(30,198)(150,512)

385,115251,178(750)(6,228)

1,034

9,591

(15,637)
3,324(4,728)5,654(3,450)(10,418)

Other proceeds

4,900

1,609

Net cash flows from investing
activities

67,44030,584

Increase in time deposits
Decrease in time deposits
Purchase of property, plant andequipment
Purchase of intangible assets
Acquisition of subsidiaries
Purchase of investment securities
for banking business
Proceeds from sales andredemption of investment
securities for banking business
Purchase of investment securities
for insurance business
Proceeds from sales andredemption of investment
securities for insurance business
Purchase of investment securities
Proceeds from sales andredemption of investment
securities
Other payments

46

―6―

Note
Cash flows from financing activities
Net increase (decrease) in shortterm borrowings
Increase (Decrease) in commercial
papersProceeds from long-term debt
Repayment of long-term debt
Cash dividends paid
OthersNet cash flows (used in) fromfinancing activities
Effect of change in exchange rates oncash and cash equivalents
Net increase (decrease) in cash andcash equivalents
Cash and cash equivalents at
beginning of the year
Cash and cash equivalents at end of
the yearYear ended
December 31, 2012

(Millions of Yen)
Year ended
December 31, 2013

6,607

62,30514,00023,00030,100(90,168)(3,286)(14,073)(56,820)

63,210(66,966)(3,962)(2,335)75,252

2,006

6,573

117,313

113,8945

152,801

270,1145

270,114384,008―7―

[Notes to the Consolidated Financial Statements]
1. General Information(1) Reporting Entity
Rakuten, Inc. (hereinafter referred to as the “Company”) is a company located in Japan. The
Company and its subsidiaries (hereinafter referred to as the “Group Companies”), providers of awide-range of internet-related services, have aligned their businesses along two main axes:
internet services and internet finance. The activities in the “Internet Services” segment consist of
the operation of EC (e-commerce) sites, including the “Rakuten Ichiba” internet shopping mall,travel booking sites, portal sites and digital content sites, etc., as well as services based onthese sites, such as advertising. The activities in the “Internet Finance” segment involve internet
banking and securities services via the internet, credit card services, life insurance, e-money
services and other financial services. Activities in the “Others” segment consist of communication
services and the management of a Japanese professional baseball team. Please refer to Note 4.
Segment Information for more details.
(2) Basis of Preparation
The Group Companies’ consolidated financial statements meets the requirements set out under
Article 1-2 of the Rules on Terminology, Formats and Compilation Methods of Consolidated
Financial Statements (Cabinet Office Ordinance No. 28 of 1976; hereinafter referred to as the“Rules on Consolidated Financial Statements”) under which the Group Companies are qualified
as a “specified company” and duly prepares such consolidated financial statements under IFRS
based on the provisions of Article 93 of the Rules on Consolidated Financial Statements.
The consolidated financial statements were approved by the Representative Director on
March 27, 2014.
(3) Functional Currency and Presentation Currency
Items included in the financial statements of each consolidated subsidiary and associate aremeasured using the currency of the primary jurisdiction in which they conduct their business
operations (“functional currencies”). The consolidated financial statements are presented inJapanese yen, the functional currency of the Company and the presentation currency of theGroup Companies. The amounts in the consolidated financial statements are presented inmillions of yen rounded to the nearest million.
(4) Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for
those financial instruments that have been measured at fair value.
(5) Use of Estimates and Judgments
The preparation of the consolidated financial statements in accordance with IFRS requires the useof certain critical accounting estimates. It also requires the management of the Group Companies
to exercise judgment in the process of applying the accounting policies of the Group Companies.
The areas involving a higher degree of judgment or complexity, areas where assumptions andestimates are significant to the consolidated financial statements, or information in respect of
uncertainties of assumptions and estimates which have a significant risk of causing material
adjustment in the next year are disclosed in Note 3. Significant Accounting Estimates and Judgments.

―8―(6) Early Adoption of Standards and Interpretations
The Group Companies have early adopted the following standards prior to the mandatory
effective date since the fiscal year ended December 31, 2012.
- IFRS 9, “Financial instruments” (issued Nov. 2009, amended Oct. 2010 and Dec. 2011)(7) New Standards and Interpretations Not Yet Applied
As of December 31, 2013, the Group Companies have not applied the following standards,
interpretations and amendments to standards or interpretations issued before the approval dateof the consolidated financial statements but which are not yet effective. The Group Companies
are currently analyzing the estimated impact of adopting such standards on the results ofoperations, financial position or cash flows.

IFRS

IAS 32

IAS 36IFRS 9Financial
instruments:
presentation(Amended in
Dec. 2011:
offsetting
financial assets
and financial
liabilities)
Impairment ofassets (Revisedin May 2013:
recoverable
amountdisclosures for
non-financial
assets)Financial
instruments(Revised in
Nov. 2013:
hedge
accounting)

Mandatory
adoption(effective date)Group Companies’
adoption period(reporting
period ended)

Description

January 1, 2014 December 31, 2014

Clarification of the meaning ofa current legally enforceable
right, and clarification of therequirements for offsetting insystems with grosssettlement mechanisms
where such settlement is not
simultaneous

January 1, 2014 December 31, 2014

Clarification of the disclosure
guidelines related to therecoverable amount of CGUs
including significant goodwill
or intangible assets withindefinite useful lives

January 1, 2018
Tentative
Not determineddecision

Revision on hedge
accounting―9―

2. Accounting Policies(1) Basis of Consolidation
1) Subsidiaries
A subsidiary is an entity (including structured entities) that is controlled by the Group Companies.
The Group Companies control an entity when they are exposed, or have rights, to variable
returns from involvement with the entity and have the ability to affect those returns throughpower over that entity. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group Companies control
another entity or not. Between the date of obtaining control and the date of losing control, theconsolidated financial statements of the Group Companies include the financial statements ofeach controlled subsidiary.
The Group Companies apply the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair value of the assets
transferred, the liabilities incurred by the Group Companies to the former owners of the acquiree
and the equity interests issued by the Group Companies. The consideration transferred includes
the fair value of any asset or liability resulting from a contingent consideration arrangement.
Acquisition-related costs incurred by the Group Companies, such as agent commissions, legal
fees, due diligence costs, other professional fees and other consulting costs, are recognized as
expenses in the period in which they are incurred. Identifiable assets acquired and liabilities
assumed in a business combination are measured initially at their fair value at the acquisition
date. The acquisition date is the date when control is transferred to the acquirer. Judgments may
be required in deciding the acquisition date and whether control is transferred from one party toanother. Further, the Group Companies recognize any non-controlling interest in the acquireethat are present ownership interests and entitle their holders to a proportionate share of theacquiree’s net assets in the event of liquidation, on an acquisition-by-acquisition basis, either atfair value or at the non-controlling interest’s proportionate share of the recognized amounts ofacquiree’s identifiable net assets.
Goodwill is initially measured as the excess of the aggregate of the considerationtransferred, the fair value of non-controlling interest and the fair value of any pre-existing interestin the acquiree at the acquisition date over the net identifiable assets acquired and liabilities
assumed. Whereas if the aggregate of the consideration transferred, the fair value of noncontrolling interest in the acquiree and the fair value of pre-existing interest in the acquiree at theacquisition date is lower than the fair value of the net assets of the subsidiary acquired, thedifference is recognized in the Consolidated Statement of Income as a bargain purchasetransaction.
Changes in the ownership interest in subsidiaries are accounted for as equity transactions
if the Group Companies retain control over the subsidiaries. Any difference between theadjustment to the non-controlling interests and the fair value of the consideration transferred or
received is recognized directly in equity attributable to owners of the Company.
Intercompany balances and transactions are eliminated in consolidation. Unrealized gains
or losses included in assets resulting from transactions within the Group Companies are also
eliminated. The financial statements of each subsidiary are adjusted, if necessary, to comply withthe accounting policies of the Group Companies.
2) Associates and Joint Arrangements
Associates are entities over which the Group Companies have significant influence but do not―10―have control over the financial and operating policies of such entities. Significant influence ispresumed to exist when the Group Companies hold 20% to 50% of the voting power of anotherentity. The factors considered in determining whether or not the Group Companies havesignificant influence include representation on the board of directors. The existence of thesefactors can lead to the determination that the Group Companies have significant influence, eventhough the investment of the Group Companies is less than 20% of the voting stock.
Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the activities that have significant influence on variable returns fromarrangements require the unanimous consent of the parties sharing control. Investments in ajoint arrangement are classified as a joint operation or a joint venture depending upon the rights
and obligations of the parties to the arrangement. A joint operation is a joint arrangement
whereby parties that have joint control of the arrangement have rights to the assets, andobligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement
whereby parties that have joint control of the arrangement have rights to the net assets of thearrangement.
Investments in associates and joint ventures are accounted for using the equity method,
except where they are classified as assets held for sale in accordance with IFRS 5 “Non-current
Assets Held for Sale and Discontinued Operations” and accordingly accounted for in accordancewith IFRS 5. The Group Companies’ share of the operating results of associates and joint
ventures is adjusted to conform with the accounting policies of the Group Companies, and isreported in the Consolidated Statement of Income as “Share of income of associates and joint
ventures.” The Group Companies’ share of investees’ gains or losses resulting fromintercompany transactions is eliminated on consolidation. Under the equity method of accounting,the investment of the Group Companies in associates and joint ventures are initially recorded atcost, and subsequently increased (or decreased) to reflect both the Group Companies’ share of
the post-acquisition net income and other movements included directly in equity of theassociates and joint ventures.
Goodwill arising on the acquisition of associates or joint ventures is included in the carrying
value of the investment, and the Group Companies carry out any impairment testing on theentire interest in an associate. The Group Companies assess whether there is any objective
evidence that the investments in associates and joint ventures are impaired at each reporting
date. If there is any objective evidence of impairment, an impairment test is performed bycomparing the investment’s recoverable amount, which is the higher of its value in use or fairvalue less costs of disposal, to its carrying amount. An impairment loss recognized in priorperiods is only reversed if there has been a change in the estimates used to determine theinvestment’s recoverable amount since the last impairment loss was recognized. The impairment
loss is reversed to the extent that the carrying amount of the investment equals the recoverable
amount.
For investments in joint operations, the Group Companies recognize their share of therevenues, expenses, assets and liabilities of each joint operation.
(2) Business Combinations
The Group Companies use the acquisition method to account for business combinations. In
accordance with the recognition principles of IFRS 3 “Business Combinations,” the identifiable
assets, liabilities and contingent liabilities of the acquiree are measured at their fair values at theacquisition date except:―11―

- Deferred tax assets or liabilities and liabilities (or assets) related to employee benefit
arrangements are recognized and measured in accordance with IAS 12 “Income taxes” andIAS 19 “Employee benefits,” respectively; and liabilities related to share-based payments arerecognized and measured in accordance with IFRS 2 “Share-based Payment;” and- Non-current assets and operations classified as held for sale are measured in accordance withIFRS 5 “Non-current Assets Held for Sale and Discontinued Operations.”
If the initial accounting for business combinations is incomplete by the end of the reporting
period in which the business combinations occur, the Group Companies report provisionalamounts for the items for which the accounting is incomplete. Those provisional amounts are
retrospectively adjusted during the measurement period to reflect new information obtained
about facts and circumstances that existed at the acquisition date that, if known, would haveaffected the amounts recognized as of that date. Additional assets or liabilities are recognized if
new information, if known, would have resulted in the additional recognition of assets or liabilities.
The measurement period does not exceed one year.
Goodwill relating to acquisitions prior to the date of transition to IFRSs is reported inaccordance with the previous generally accepted accounting principles (“GAAP”).
(3) Foreign Currencies
1) Foreign Currency Transactions
Foreign currency transactions are translated into the functional currencies of individual foreignsubsidiaries using the spot exchange rate at the date of the transactions. At the end of eachreporting period, monetary assets and liabilities denominated in foreign currencies are
retranslated into the functional currencies using the spot exchange rate at the end of eachreporting period. Non-monetary assets and liabilities measured at fair value that are
denominated in foreign currencies are retranslated using the spot exchange rates at the datewhen the fair value was determined.
Exchange differences arising from settlement and translation of foreign currency
denominated monetary assets and liabilities at the period end closing rate are recognized in theConsolidated Statement of Income. However, when profits or losses related to non-monetary
items are recognized in comprehensive income, any exchange differences are also recognizedin other comprehensive income.
2) Foreign Operations
Assets and liabilities of foreign operations (including goodwill and fair value adjustments arisingon the acquisition of foreign operations) are translated into Japanese yen using the spot
exchange rate at the reporting date. Income and expenses are translated into Japanese yen at
the average exchange rates for the period.
Exchange differences arising from translation of financial statements of foreign operations
are recognized in other comprehensive income.
These differences are presented as “Foreign currency translation adjustments” in othercomponents of equity. On disposal of the entire interest of foreign operations, and on the partial
disposal of an interest which involves loss of control, significant influence or joint control, thecumulative amount of the exchange differences is reclassified to income as a part of gains orlosses on disposal.

―12―(4) Cash and Cash Equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, and othershort-term highly liquid investments with original maturities of three months or less andinsignificant risk of changes in value. However, short-term highly liquid investments in thebanking business are excluded.
(5) Financial Instruments
1) Non-derivative Financial Assets
The Group Companies recognize trade and other receivables at the time they arise. All otherfinancial assets are recognized at the contract dates when the Group Companies become aparty to the contractual provisions of the instrument.
The following is a summary of the classification and measurement model of non-derivative
financial assets.
Financial Assets Measured at Amortized Cost
Financial assets that meet the following conditions are subsequently measured at amortized
cost:- The asset is held within the Group Companies’ business model with the objective of holding
assets in order to collect contractual cash flows; and- The contractual terms of the instrument give rise on a specified date to cash flows that aresolely payments of principal and interest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value plus
directly attributable transaction costs. Subsequently, the carrying amount of the financial assets
measured at amortized cost is calculated using the effective interest method, less impairment
loss when necessary.
Impairment of Financial Assets Measured at Amortized Cost
For financial assets measured at amortized cost, on a quarterly basis, the Group Companies
assess whether there is any objective evidence that financial assets are impaired. Financial
assets are impaired and impairment losses are incurred if:- There is any objective evidence of impairment as a result of a loss event that occurred after
the initial recognition of the assets and up to the reporting date; and- The loss event had an impact on the estimated future cash flows of the financial assets and a
reliable estimate can be made.
Objective evidence that a financial asset is impaired includes:- A breach of contract, such as a default or delinquency in interest or principal payments;- Extension of the collection period of a receivable under specific conditions, which would nothave been given in the absence of such circumstances;- Indication of borrower’s bankruptcy; and- The disappearance of an active market.
The Group Companies review the evidence of impairment for financial assets measured atamortized cost individually or collectively. For significant financial assets, the Group Companies
assess the evidence of impairment individually. If it is not necessary to impair significant financial
assets individually, the Group Companies collectively assess whether or not any incurred but not
yet reported impairment exists. Financial assets are grouped based on similar credit risk
characteristics and collectively assessed for impairment.

―13―

In collectively assessing for impairment, the Group Companies adjust the impairment loss if
it is determined that the actual loss, which reflects the current economic and credit conditions,differs from historical experience, estimated timing of recovery, and expected amount of loss.
The amount of the impairment loss for financial assets is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows. The
present value of the estimated future cash flows is discounted at the financial asset’s original
effective interest rate. The carrying amount of the financial assets is reduced through the use ofan allowance account and the amount of the loss is recognized in the Consolidated Statement of
Income. The allowance for doubtful accounts is written off when there is no realistic prospect ofrecovery and all collateral has been realized or has been transferred to the Group Companies. If,
in a subsequent period, the amount of the estimated impairment loss decreases and thedecrease can be objectively linked to an event occurring after the impairment was recognized,
the impairment loss shall be reversed by adjusting the allowance account in the Consolidated
Statement of Income. The reversal shall not result in a carrying amount of the financial asset thatexceeds what the amortized cost would have been had the impairment not been recognized at
the date the impairment is reversed.
Financial Assets at Fair Value through Profit or Loss (“FVTPL”)
Financial assets other than equity instruments that do not meet the conditions for amortized cost
are measured at fair value with gains or losses on remeasurement recognized in the Consolidated
Statement of Income. Those financial assets include financial assets held for trading.
Equity investments are measured at fair value with gains or losses on re-measurement
recognized in the Consolidated Statement of Income unless the Group Companies make anirrevocable election to measure equity investments as at fair value through other comprehensive
income (“FVTOCI”) on initial recognition.
Financial assets measured at FVTPL are initially measured at fair value and transaction
costs are recognized in the Consolidated Statement of Income when they are incurred.
Financial Assets at FVTOCI
On initial recognition, the Group Companies may make an irrevocable election to measureinvestments in equity instruments as at FVTOCI. The election is made only for equity
investments other than those held for trading.
Financial assets measured at FVTOCI are initially measured at their fair value (including
directly attributable transaction costs). Subsequently, they are measured at fair value, and gains
and losses arising from changes in fair value are recognized in other comprehensive income andpresented as “Gains (losses) on financial assets measured at fair value through othercomprehensive income” in other components of equity.
However, dividends on financial assets measured at FVTOCI are recognized in theConsolidated Statement of Income as “Revenue” or “Financial income.”
Derecognition of Financial Assets
The Group Companies derecognize a financial asset when the contractual rights to the cash
flows from the asset expire, or when the Group Companies transfer the contractual right toreceive cash flows from financial assets in transactions in which substantially all the risks andrewards of ownership of the asset are transferred to another entity. Any interest in transferredfinancial asset qualifying for derecognition created or retained by the Group Companies areaccounted for separately.

―14―2) Non-derivative Financial Liabilities
Debt securities issued by Group Companies are initially recognized on the issue date. All otherfinancial liabilities are recognized when the Group Companies become a party to the contractual
provisions of the instruments.
The Group Companies derecognize financial liabilities when they are extinguished, i.e.,
when the obligation specified in the contract is discharged, cancelled or expired.
The Group Companies classify financial liabilities as accounts payable-trade, deposits forbanking business, financial liabilities for securities business, bonds and borrowings and otherfinancial liabilities as non-derivative financial liabilities, initially measure them at fair value, andsubsequently measure them at amortized cost using the effective interest method.
To reduce differences substantially caused by measurement of assets or liabilities orrecognition of income on different bases, some deposits for banking business are designated as
financial liabilities at FVTPL. Among unrealized gains and losses arising from changes in the fairvalues of such financial liabilities, any due to changes in the credit risk of the liabilities areincluded in a separate component of net assets.
3) Derivatives
Derivatives Qualifying for Hedge Accounting
The Group Companies enter into derivative transactions to manage the risk of fair value
fluctuations due to changes in interest rates, interest rate risk and foreign currency risk. The
primary derivatives used by the Group Companies are interest rate swaps and foreign exchange
forward contracts.
At the initial designation of the hedging relationship, the Group Companies document therelationship between the hedging instrument and the hedged item, along with their risk
management objective and strategy for undertaking the hedge, the hedging instrument, thehedged item, the nature of the risk being hedged, the evaluation of the effectiveness of thehedging instrument in offsetting the hedged risk, and the measurement of ineffectiveness.
At the inception of the hedge and on an ongoing basis, the Group Companies assess
whether the Group Companies can forecast if the hedging instrument is highly effective inoffsetting changes in fair value or cash flows of the hedged item attributable to the hedged risk
throughout the period for which the hedge is designated.
Derivatives are initially recognized at fair value with transaction costs recognized in theConsolidated Statement of Income as incurred. Subsequently derivatives are measured at fairvalue, and gains and losses arising from changes in the fair value are accounted for as follows:-

Fair Value Hedges
The changes in the fair value of the hedging instrument are recognized in the Consolidated
Statement of Income. The gains or losses on the hedged items attributable to the hedged risks
are recognized in the Consolidated Statement of Income, and the carrying amounts of thehedged items are adjusted.

-

Cash Flow Hedges
When derivatives are designated as hedging instruments to hedge the exposure to variability incash flows that are attributable to a particular risk associated with recognized assets or liabilities,
the portion of the gain and loss on the derivative that is determined to be an effective hedge is―15―presented as “Gains (losses) on cash flow hedges recognized in other comprehensive income”
in the other components of equity. The balances of cash flow hedges are reclassified to income
from other comprehensive income in the periods when the cash flows of hedged items affectincome, in the same line items of the consolidated statement of comprehensive income as thoseof hedged items. The gain or loss relating to the ineffective portion is recognized immediately in
the Consolidated Statement of Income.
Hedge accounting is discontinued prospectively when the hedge no longer qualifies forhedge accounting, or when the hedging instrument is expired, sold, terminated or exercised, orwhen the designation is revoked.
Derivatives Not Qualifying for Hedge Accounting
The Group Companies hold some derivatives for hedging purposes that do not qualify for hedge
accounting. Derivatives may also be held for trading as opposed to hedging purposes. Anychanges in fair value of these derivatives are recognized immediately in the Consolidated
Statement of Income.
Embedded Derivatives
Some hybrid contracts, which contain both a derivative and a non-derivative component, areincluded among the financial instruments and other contracts. In such cases, the derivative
component is termed an embedded derivative, with the non-derivative component representing
the host contract. Where the host contract is a financial liability, if the economic characteristics
and risks of embedded derivatives are not closely related to those of the host contract and aseparate instrument with the same terms as the embedded derivative would meet the definitionof a derivative, and the hybrid contract itself is not classified as FVTPL as a financial liability, theembedded derivative is separated from the host contract and accounted for as a derivative. The
financial liability component of the host contract is then accounted for in accordance with theGroup Companies’ accounting policy for non-derivative financial liabilities.
4) Presentation of Financial Instruments
Financial assets and liabilities are offset, with the net amount presented in the consolidated
statement of financial position, only if the Group Companies hold a currently enforceable legal
right to set off the recognized amounts, and there is an intention to settle on a net basis or to
realize the asset and settle the liability simultaneously.
5) Financial Guarantee Contracts
Financial guarantee contracts are contracts that require the guarantor to make specified
payments to reimburse the guarantee for losses incurred due to a debtor failing to makepayments when due in accordance with the original or modified terms of a debt instrument.
Such financial guarantee contracts are measured initially at fair value on the date of thecontract. Subsequent to initial recognition, the Group Companies measure the financial
guarantee at the higher of the best estimate of expenditure required to settle the obligation
under the financial guarantee contract, and the unamortized balance of the total amount of
future guarantee charges.

―16―(6) Property, Plant and Equipment
All property, plant and equipment are recorded at cost less any accumulated depreciation andaccumulated impairment losses.
Cost includes costs directly attributable to the acquisition of and dismantling and removal of
the asset, as well as any estimated costs of restoring the site on which they are located. Property,
plant and equipment are subsequently carried on the historical cost basis measured using thecost model.
Depreciation is calculated based on the depreciable amount. The depreciable amount is
the cost of an asset less its residual value.
Depreciation of property, plant and equipment is mainly computed under the straight-line
method based on the estimated useful life of each component. The straight-line method is usedbecause it is considered to most closely approximate the pattern in which the future economic
benefits of assets are expected to be consumed by the Group Companies. Leased assets are
depreciated over the shorter of the lease term and their useful lives if there is no reasonablecertainty that the Group Companies will obtain ownership by the end of the lease term. Land is
not depreciated.
The estimated useful lives of significant assets for the years ended December 31, 2012 and2013 are as follows:- Buildings and accompanying facilities 10–50 years- Furniture, fittings and equipment 5–10 years
The depreciation methods, useful lives and residual values are reviewed at the end of eachreporting period, and revised if necessary.
(7) Intangible Assets
1) Goodwill
Initial Recognition
Goodwill arising on the acquisition of a subsidiary is recognized as an intangible asset.
Measurement of goodwill on initial recognition is described in (1) Basis of Consolidation.
Subsequent Measurement
Goodwill is measured at cost less accumulated impairment losses.
2) Capitalized Software Costs
The Group Companies incur certain costs to purchase or develop software primarily for internaluse.
Expenditures arising from research activities to obtain new scientific or technical knowledge
are recognized as expenses when they are occurred. Expenditures arising from development
activities are capitalized as software, if, and only if, they are reliably measurable, they aretechnically feasible, it is highly probable that they will generate future economic benefits, and theGroup Companies intend and have adequate resources to complete their developments and use
or sell them.
Capitalized software is measured at cost less accumulated amortization and any
accumulated impairment losses.
3) Intangible Assets Acquired in Business Combinations
Intangible assets that are acquired in business combinations, such as trademarks and other―17―

similar items, are recognized separately from goodwill, and are initially recognized at fair value atthe acquisition date.
Subsequently such intangible assets are measured at cost less any accumulated
amortization and accumulated impairment losses.
4) Other Intangible Assets
Other intangible assets with finite useful lives are measured at cost less any accumulated
amortization and accumulated impairment losses.
5) Amortization
Amortization is calculated based on the acquisition cost of an asset less its residual value. Within
intangible assets with definite useful lives, the value of the insurance business and its customer
relationships acquired through business combinations are amortized based on the ratio of actual
insurance revenue occurring in a year over the total expected insurance revenue over the period.
Other intangible assets are amortized under the straight-line method. These methods are usedbecause they are considered to most closely approximate pattern in which the future economic
benefits of intangible assets are expected to be consumed by the Group Companies.
Estimated useful lives of significant intangible assets with definite useful lives are as
follows:- Software mainly 5 years- Value of the insurance business and its acquired customer relationships 30 years
The amortization methods, useful lives and residual values are reviewed at the end of eachreporting period, and revised if necessary.
(8) Leases (Lessee)
Leasing Transactions
The determination of whether an arrangement is, or contains, a lease is based on the substanceof the arrangement at the inception date. In the case that fulfillment of the arrangement isdependent on the use of a specific asset or assets or the arrangement conveys a right to use theasset, such transactions are classified as lease transactions.
Finance Leases
Leases that transfer all risks and benefits of ownership of the leased item to the lessee areclassified as finance leases.
Finance leases are capitalized at the commencement of the lease at the lower of the fairvalue of the leased asset and the present value of the minimum lease payments. Aftercommencement of the lease, the Group Companies’ accounting policy appropriate to each asset
is applied.
The discount rate used in calculating the present value of the minimum lease payments is
the implicit interest rate of the lease, where this can be determined practically. Where it isimpractical to determine such a rate, the lessee’s incremental borrowing rate shall be used.
The minimum lease payments are apportioned between finance charges and the reductionof the lease liability so as to achieve a constant rate of interest on the remaining balance of theliability.
A leased asset is depreciated over the shorter of the estimated useful life of the asset andthe lease term.
―18―

Operating Leases
Lease arrangements, except for finance leases that have not been capitalized in the
consolidated statement of financial position, are classified as operating leases.
Under operating lease transactions, lease payments are recognized as an expense using
the straight-line method over the lease term in the Consolidated Statement of Income.
(9) Impairment of Non-financial Assets
The Group Companies assess at each reporting date whether there is an indication that a nonfinancial asset, except for inventories and deferred tax assets, may be impaired. If any such
indication exists, the Group Companies estimate the recoverable amount of the asset. For
goodwill, intangible assets with indefinite useful lives, and intangible assets not yet available foruse, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit, or group of cash-generating
units (CGU) is the higher of its value in use and fair value less costs of disposal. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and therisks specific to the asset. A CGU is the smallest group of assets, which generates cash inflows
from continuing use that are largely independent of the cash inflows from other assets or groupof assets.
The CGU to which goodwill is allocated is determined based on the unit by which the
goodwill is monitored for internal management purposes, and in principle, each entity is
considered to be a CGU for the purposes of goodwill allocation.
Since corporate assets do not generate independent cash flows, if there is an indicationthat corporate assets may be impaired, the recoverable amount is determined for the CGU orgroup of CGUs to which the corporate assets belong.
Impairment losses are recognized in the Consolidated Statement of Income when the
carrying amount of an asset or CGU exceeds its recoverable amount. Such impairment losses
are recognized first reducing the carrying amount of any allocated goodwill and then areallocated to the other assets of the CGU on a pro-rata basis based on the carrying amount ofsuch assets.
Impairment losses recognized in respect of goodwill are not reversed. Assets other than
goodwill are reviewed at the end of each reporting period to assess whether there is any
indication that an impairment loss recognized in prior years may no longer exist or may havedecreased. An impairment loss recognized is reversed if an indication of the reversal of
impairment losses exists and there is a change in the estimates used to determine the asset’s
recoverable amount. The reversal of an impairment loss does not exceed the carrying amount,net of depreciation and amortization, which would have been determined if any impairment loss
had never been recognized for the asset in prior years.
(10) Provisions
Provisions are recognized when the Group Companies have a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources will be required tosettle the obligation, and the amount has been reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required
to settle the obligation using a pre-tax discount rate that reflects current market assessments ofthe time value of money and the risks specific to the obligation.

―19―

(11) Insurance
General Insurance Accounting
Insurance contracts issued and reinsurance contracts held by insurers are accounted for under
IFRS 4 “Insurance contracts” based on the accounting policies previously applied in accordancewith Japanese accounting standards for insurance companies.
Policy reserves and others for insurance business
The Group Companies apply the measurement of insurance liabilities which has been applied
for insurance contracts in Japan. A liability adequacy test is performed in consideration of
estimated present value of cash inflows, such as related insurance premiums and investment
income, and cash outflows such as insurance claims and benefits and operating expenses. If
the test shows that the liability is inadequate, the entire deficiency is recognized in theConsolidated Statement of Income.
(12) Equity
Common Stock
Proceeds from the issuance of equity instruments by the Company are included in “Common
stock” and “Capital surplus.” Direct issuance costs (net of tax) are deducted from “Common
stock” and “Capital surplus” proportionately based on the proceeds received.
Treasury Stock
When the Company repurchases treasury stock, the consideration paid, including directtransaction costs (net of tax), is recognized as a deduction from equity. When the Company
sells treasury stock, the consideration received is recognized as an addition to equity.
(13) Share-based Payments
The Group Companies have stock option plans as incentive plans for directors, executive
officers, and employees. The fair value of stock options at the grant date is recognized as an
employee expense over the vesting period from the grant date as a corresponding increase incapital surplus. The fair value of the stock options is measured using the Black-Scholes modelor other models, taking into account for the terms of the options granted. The Group Companies
regularly review the assumptions and revise estimates of the number of options that are
expected to vest, as necessary.
(14) Revenue
The Group Companies mainly provide EC (e-commerce) sites including an Internet shopping
mall Rakuten Ichiba, travel booking sites, portal sites and digital contents sites, along withbusiness for sales of advertising on these sites. The Group Companies also provide various
internet finance services, such as credit card, banking, securities, insurance services and so on.
Revenue is measured at the fair value of the consideration for goods sold and services provided
in the ordinary course of business, less sales related taxes. The revenue of the Group
Companies is recognized as follows:―20―

Sales of Goods
Revenue from the sale of goods is recognized when all the following conditions are satisfied:- The Group Companies have transferred to the buyer the significant risks and rewards ofownership of the goods;- The Group Companies retain neither continuing managerial involvement to the degree usuallyassociated with ownership nor effective control over the goods sold;- The amount of revenue can be measured reliably;- It is probable that the economic benefits associated with the transaction will flow to the Group
Companies; and- The cost incurred in respect of the transaction can be measured reliably.
Rendering of Services
The outcome of a transaction involving the rendering of services can be estimated reliably, andrevenue is recognized by reference to the stage of completion of the transaction at the end ofeach reporting period, when all the following conditions are satisfied:- The amount of revenue can be measured reliably;- It is probable that the economic benefits associated with the transaction will flow to the Group
Companies;- The stage of completion of the transaction at the end of each reporting period can bemeasured reliably; and- The cost incurred for the transaction and the cost to complete the transaction can bemeasured reliably.
Interest Income
Revenue arising from interest is recognized using the effective interest method when thefollowing conditions are satisfied:- The amount of revenue can be measured reliably; and- It is probable that the economic benefits associated with the transaction will flow to the Group
Companies.
(15) Financial Income and Expenses
Financial income mainly comprises interest income, dividend income and changes in the fairvalue of financial assets measured at FVTPL. Interest income is accrued using the effective
interest method. Dividend income is recognized on the date when the right of the Group
Companies to receive the dividend is established.
Financial expenses mainly comprise interest expenses and impairment losses on financial
assets measured at amortized cost. Interest expenses are accrued using the effective interest
method.
Financial income and expenses incurred from the finance business of the subsidiaries areincluded in “Revenue” and “Operating expenses.”(16) Short-term Employee Benefits
Short-term employee benefits are measured on an undiscounted basis and are expensed during
the period when the related service is rendered. Accrued bonus and holiday pay are recognized
as liabilities, when the Group Companies have present legal or constructive obligation and whenreliable estimates of the obligations can be made.

―21―

(17) Additional Line Items
The Group Companies disclose certain one-off revenues and expenses separately in theConsolidated Statement of Income when the amounts are material in order to better explain theimpact on results of operations.
(18) Current and Deferred Income Tax
The income taxes expense comprises current and deferred taxes. These are recognized in theConsolidated Statement of Income, except for income taxes which arise from businesscombinations or which are recognized either in other comprehensive income or directly in equity.
Current taxes are calculated by the expected tax payable or receivables on the taxable
income, using the tax rates enacted or substantially enacted by the end of the reporting period.
Deferred tax assets and liabilities are recognized on temporary differences between the
carrying amounts of assets and liabilities in the consolidated statement of financial position andtheir corresponding tax bases. Deferred tax assets and liabilities are not recognized if thetemporary difference arises from the initial recognition of an asset or liability in a transaction,
which is not a business combination and, at the time of the transaction, affects neither incomein the Consolidated Statement of Income nor taxable income.
Deferred tax assets and liabilities are measured at the tax rate that is expected to apply inthe period when the related deferred tax assets is realized or the deferred tax liability is settled,based on tax laws that have been enacted or substantively enacted by the end of reporting
period.
Deferred tax assets are recognized for unutilized tax losses, tax credits and deductible
temporary differences, only to the extent that it is probable that future taxable income will beavailable against which such temporary differences can be utilized.
Deferred tax assets and liabilities are recognized for taxable temporary differences
associated with investments in subsidiaries, associates, and joint ventures. However, if theGroup Companies are able to control the timing of the reversal of the temporary differences andit is probable that the temporary differences will not reverse in the foreseeable future, deferred
tax liabilities are not recognized. Deferred tax assets are recognized only to the extent that it isprobable that there will be sufficient taxable income against which the benefit of temporary
differences can be utilized and the temporary differences will reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and the deferred tax assets anddeferred tax liabilities relate to income taxes levied by the same taxation authority on either thesame taxable entity or different taxable entities which intend to settle current tax assets andliabilities on a net basis.
(19) Earnings Per ShareThe Group Companies disclose basic and diluted earnings per share (attributable to the ownersof the Company) related to common stock. Basic earnings per share is calculated by dividing net
income (attributable to equity owners of the Company) by the weighted average number ofcommon stock outstanding during the reporting period, adjusted for the number of treasury stock
held. Diluted earnings per share are calculated, for the dilutive effects of all potential common
stock by dividing net income (attributable to the owners of the Company) by the weighted―22―

average number of common stock outstanding during the reporting period, adjusted for thenumber of treasury stock.
Potential common stock of the Group Companies relates to the stock option plan.
On July 1, 2012, the Company implemented a 100-for-1 share split. Earnings per share(attributable to equity owners) for each reporting period are calculated by the number of common
stock outstanding after incorporating the share split.
(20) Operating Segments
Operating segments correspond to business activities, from which the Group Companies earnrevenues and incur expenses, including revenues and expenses relating to transactions withother operating segments. Discrete financial information for operating results of all operating
segments is available, and is regularly reviewed by the Board of Directors of the Group
Companies in order to determine the allocation of resources to the segment and assess its
performance.

―23―

3. Significant Accounting Estimates and Judgments(1) Significant Accounting Estimates and Assumptions
In the preparation of the consolidated financial statements in accordance with IFRS, the Group
Companies make estimates and assumptions concerning future events. These accounting
estimates are inherently not anticipated to equal actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the following reporting period are addressed below.
(a) Goodwill Evaluation (Note 2 “Accounting Policies” (9) and Note 18 “Intangible Assets”)
An impairment test is conducted at least once a year for goodwill recognized by the Group
Companies, regardless of whether there is an indication of impairment or not. The recoverable
amount of CGUs, to which goodwill is allocated, is mainly calculated based on estimated future
cash flows, estimated growth rate, and discount rate. This calculation is based on judgments andassumptions that are made by the management of the Group Companies, considering businessand market conditions. The Group Companies consider these assumptions to be significant
because, if the assumed conditions change, the estimated recoverable amounts might besignificantly different.
(b) Recoverability of Deferred Tax Assets (Note 2 “Accounting Policies” (18) and Note 25 “Deferred
Income Tax and Income Tax Expense”)
For temporary differences that are differences between carrying value of an asset or liability inthe consolidated statement of financial position and its tax base, the Group Companies
recognize deferred tax assets and deferred tax liabilities in respect of such deferred tax assets
and deferred tax liabilities calculated using the tax rates based on tax laws that have beenenacted or substantively enacted by the end of the reporting period and the tax rates that are
expected to apply to the period when the deferred tax asset is realized or the deferred tax liability
is settled. Deferred tax assets are recognized for all deductible temporary differences, theunutilized tax losses carried forward and the unutilized tax credit carried forward to the extent
that it is probable that taxable income will be available. The estimation of the taxable income forthe future is calculated based on the business plan approved by the management of the Group
Companies, and is based on management’s subjective judgments and assumptions. The Group
Companies consider these assumptions to be significant because changes in the assumed
conditions and amendments of tax laws in the future might significantly affect the calculation of
the amounts of deferred tax assets and deferred tax liabilities.
(c) Methods of Determining Fair Value for Financial Instruments Measured at Fair Value Including
Derivative Instruments (Note 2 “Accounting Policies” (5) and Note 41 “Fair Value of Financial
Instruments”)
Financial assets and financial liabilities including derivatives, held by Group Companies aremeasured at the following fair values:- Quoted prices in active markets for identical assets or liabilities;- Fair value calculated using observable inputs other than quoted prices for the assets or liability,
either directly or indirectly; and- Fair value calculated using valuation techniques incorporating unobservable inputs.
In particular, the fair value estimated through valuation techniques that incorporate
unobservable inputs is premised on the decisions and assumptions of the management of theGroup Companies, such as appropriate experience assumptions, suppositions, and the model―24―

utilized. The Group Companies consider the estimations to be significant as it is probable thatthe changes of estimations and assumptions might have significant influence on the calculationof fair value for financial instruments.
(d) Impairment of Financial Assets Measured at Amortized Cost (Note 2 “Accounting Policies” (5)and Note 43 “Financial Risk Management”)
For financial assets measured at amortized cost, the Group Companies assess whether there is
any objective evidence that financial assets are impaired each quarter. Where any such objective
evidence exists, the Group Companies recognize the difference between the carrying value ofthe asset and the present value of estimated future cash flows as impairment losses.
When estimating future cash flows, management makes judgments considering theprobability of default, time of recovery and historical experience, and whether after reflecting
current economic and credit conditions, actual losses are greater than or less than such trends
in the past. If these estimations and assumptions change, the amount of any impairment losses
for financial assets measured at amortized cost might vary widely, therefore, the Group
Companies consider these estimations to be significant.
(e) Provisions (Note 2 “Accounting Policies” (10) and Note 23 “Provisions”)
The Group Companies record certain provisions, such as provision for customer points.
Regarding the provision for customer points, in preparation for the future use of points bycustomers, the Group Companies use historical experience to estimate the provision for the
Rakuten Super Point Program. The provision is estimated on the premise of management’s
decisions and the assumptions of the Group Companies. The Group Companies consider theestimation to be significant as it is probable that the changes of estimation and assumptions
could have a significant influence on the calculation of the amount of the provisions.
(f) Liability Adequacy Test for Insurance Contracts (Note 2 “Accounting Policies” (11) and Note 24“Policy reserves and others for insurance business”)
The Group Companies perform a liability adequacy test for insurance contracts in considerationof estimated present value of cash inflows such as related insurance premiums and investment
income, and cash outflows such as insurance claims and benefits and operating expenses.
(2) Significant Judgment in Applying the Accounting Policies of the Group Companies
In the process of applying the accounting policies, the management of the Group Companies
has made certain decisions which have a significant influence on the amounts recognized in the
consolidated financial statements.
The Group Companies, mainly in the banking business and the credit card business,transact with structured entities, which are designed so that voting rights or similar rights are not
the dominant factor in deciding who controls the entities. The management of the Group
Companies decide whether the Group Companies are controlling the entities or not. All related
facts and circumstances on the involvement with the structured entity are considered in deciding
whether control over such an entity exists.

―25―

4. Segment Information(1) General Information
As a comprehensive internet service provider engaged in the two main activities of Internet
Services and Internet Finance, the Group Companies are organized into three reportablesegments: “Internet Services,” “Internet Finance” and “Others.”
Discrete financial information for operating results of all operating segments is available,
and is regularly reviewed by the Board of Directors of the Group Companies in order todetermine the allocation of resources and assess performance.
The “Internet Services” segment comprises businesses running various EC (e-commerce) sites
including an internet shopping mall Rakuten Ichiba, travel booking sites, portal sites and digitalcontent sites, along with business for advertising and similar on these sites.
The “Internet Finance” segment engages in businesses providing services over the internet
related to banking and securities, credit cards, life insurance and electronic money.
The “Others” segment comprises businesses involving provision of communication services
and management of a professional baseball team.
(2) Measurement of Segment Profit and Loss
For the year ended December 31, 2012, operating segment information was reported based on
generally accepted accounting principles in Japan (hereinafter referred to as “JGAAP”), andoperating segment revenue and profit or loss, except for certain consolidated subsidiaries, werereported before intercompany eliminations and other consolidation adjustments. Operating
segment profit or loss was based on operating income in accordance with JGAAP and included
allocated corporate expenses.
However, the operating segment information reported for the year ended December 31,
2013 has been prepared in accordance with IFRS as stated in Note 2. Accounting Policies, andexcept for certain consolidated subsidiaries, the operating segment revenue and profit or loss isbefore intersegment eliminations and other consolidation adjustments. Operating segment profit
or loss is based on operating income or loss in accordance with IFRS and includes allocatedcorporate expenses.
The segment information for the year ended December 31, 2012 reflects the retrospective
application of IFRS (applied from the year ended December 31, 2013), used for themeasurement of operating segment revenue and profit or loss. The Group Companies do notallocate assets and liabilities to operating segment information used by the chief operating
decision maker.
For the year ended December 31, 2012
(Millions of yen)Internet
Services
Segment revenue
Segment profit or loss

Internet
Finance

OthersTotal¥270,255¥126,562¥33,271¥430,088

25,30520,284

2,825

48,414

11,932

7,265

1,696

20,893

Other items
Depreciation and amortization―26―

For the year ended December 31, 2013
(Millions of yen)Internet
Services
Segment revenue
Segment profit or loss

Internet
Finance

OthersTotal¥315,228¥201,494¥35,746¥552,468

47,45544,174

3,762

95,391

16,032

8,223

1,665

25,920

Other items
Depreciation and amortization

The reconciliation of segment revenue to consolidated revenue is as follows:Year ended
December 31, 2012
¥430,088(Millions of yen)
Year ended
December 31, 2013
¥552,468

Intercompany transactions, etc.

(29,644)(33,900)

Consolidated revenue

400,444518,568

Segment revenue

The reconciliation of segment profit or loss to income before income tax is as follows:(Millions of yen)
Year ended
Year ended
December 31, 2012
December 31, 2013
Segment profit¥48,414¥95,391
Intercompany transactions, etc.

1,641

(5,147)

Operating income

50,05590,244

Financial income and expenses(2,372)(1,765)

Share of income of associates andjoint ventures

1,423

131

Income before income tax

49,106

88,610(3) Products and Services
Revenue from external customers by major products and services of the Group Companies is asfollows:(Millions of yen)
Revenue
RakutenRakutenRakuten
Othersfrom external
IchibaCard
Bankcustomers
Year ended¥106,998¥44,474¥32,175¥216,797¥400,444
December 31, 2012
Year ended
129,271
60,07436,621
292,602518,568
December 31, 2013―27―

(4) Geographic Information
For the year ended December 31, 2012
Japan
Revenue from externalcustomers
Property, plant andequipment andintangible assets

Americas

Europe(Millions of yen)
OthersTotal¥346,264¥29,454¥23,573¥1,153¥400,444

132,638

45,94331,753

1,823

212,157

For the year ended December 31, 2013
(Millions of yen)
Japan
Revenue from externalcustomers
Property, plant andequipment andintangible assets

Americas

EuropeOthersTotal¥458,973¥39,359¥18,421¥1,815¥518,568

144,030

75,48043,006

3,773

266,289(5) Major Customers
For the year ended December 31, 2012
Disclosure of major customers is omitted because the proportion of revenue from an individual
external customer does not exceed 10% of consolidated revenue.
For the year ended December 31, 2013
Disclosure of major customers is omitted because the proportion of revenue from an individual
external customer does not exceed 10% of consolidated revenue.
5. Cash and Cash Equivalents
Breakdown of Cash and Cash Equivalents(Millions of yen)
December 31, 2012

December 31, 2013

Cash and deposits¥266,614¥384,008

Negotiable deposits

3,500

－

270,114384,008

Cash and cash equivalents

Funds (cash and cash equivalents) stated in the Group Companies’ Consolidated Statement of
Cash Flows include cash in hand, deposits held at call with banks, and other short-term highly
liquid investments with original maturities of three months or less and insignificant risk ofchanges in value. However, short-term highly liquid investments in the banking business are
excluded.

―28―

6. Accounts Receivable — Trade
Breakdown of Accounts Receivable — Trade(Millions of yen)
December 31, 2012
Gross amount of notes andaccounts receivable — trade
Allowance for doubtful
Accounts
Net amount of notes andaccounts receivable — trade

December 31, 2013

¥67,515¥75,299(2,022)(1,856)65,49373,443

Accounts receivable — trade is mainly generated from sales related to the Internet Services
business and is measured at amortized cost.
7. Financial Assets for Securities Business
Breakdown of Financial Assets for Securities Business
December 31, 2012
Financial assets measured at amortized
cost
Cash segregated as deposits
Accounts receivable relating toinvestment securities transactions
Margin transactions assets(Millions of yen)
December 31, 2013

¥252,308¥432,404

201,589

427,678

130,165

317,956

Short-term guarantee deposits

26,66432,743

OthersGross amount of financial assets
measured at amortized cost
Allowance for doubtful accounts
Net amount of financial assets
measured at amortized cost

6,206

8,858

616,932

1,219,639(1,670)(1,406)615,262

1,218,233

441

754

615,703

1,218,987

Financial assets measured at FVTPL
Total financial assets for securities
business

Investment securities held for trading purposes are included in financial assets measured at
FVTPL.
Derivative assets held for trading purposes are included in “Derivative assets,” while
operating investment securities are included in “Investment securities.”―29―

8. Loans for Credit Card Business
Breakdown of Loans for Credit Card Business(Millions of yen)
December 31, 2012
Gross amount of loans for credit cardbusiness
Allowance for doubtful accounts
Net amount of loans for credit cardbusiness

December 31, 2013

¥422,955¥564,607(20,537)(20,293)

402,418

544,314Loans for credit card business mainly comprise accounts receivable arising from the use ofcredit cards by customers based on installment contracts and similar.
Loans for credit card business are measured at amortized cost because they are classified
as financial assets held as part of the Group Companies’ business model with the objective ofcollecting contractual cash flows, and such cash flows are limited to solely repayments ofprincipal including interest on the principal balance outstanding.
9. Investment Securities for Banking Business
Breakdown of Investment Securities for Banking Business(Millions of yen)
December 31, 2012
Financial assets measured at amortized
cost
Trust beneficiary rights

December 31, 2013

¥62,164¥23,756

100,961

53,05988,30686,183

251,431

162,998

(247)

(55)

251,184

162,943

Trust beneficiary rights

1,552

1,597

Domestic bonds

15,6788,652

Foreign bonds

27,912

24,70545,142

34,954

Financial assets measured at FVTOCI

00

Total investment securities for banking
business

296,326

197,897

Domestic bonds
Foreign bonds
Gross amount of financial assets measured
at amortized cost
Allowance for doubtful accounts
Net amount of financial assets measured atamortized cost
Financial assets measured at FVTPL

Total financial assets measured at FVTPL

Within investment securities for banking business, investment securities held as part of theGroup Companies’ business model with the objective of collecting contractual cash flows limited
to solely payments of principal and interest on the principal amount outstanding on a specified―30―

date in accordance with the contractual terms, are classified as financial assets measured atamortized cost, while all other investment securities are classified as financial assets measured
at fair value. Within financial assets measured at fair value, investments in equity instruments
are designated as financial assets measured at FVTOCI.
10. Loans for Banking Business
Breakdown of Loans for Banking Business(Millions of yen)
December 31, 2012
Gross amount of loans for banking
business
Allowance for doubtful accounts
Net amount of loans for banking
business

December 31, 2013

¥190,321¥240,618

(652)

(800)

189,669

239,818

Loans for banking business mainly comprise loan receivables from individual customers.
Loans for banking business are measured at amortized cost because they are defined as
financial assets held as part of the Group Companies’ business model with the objective ofcollecting contractual cash flows, and such cash flows are limited to repayments of principal
including interest on the principal balance outstanding.
11. Investment Securities for Insurance Business
Breakdown of Investment Securities for Insurance Business(Millions of yen)
December 31, 2012
Domestic bonds
Total investment securities for insurance
business

December 31, 2013¥13,623¥10,233

13,623

10,233

Investment securities for insurance business are measured at amortized cost because they aredefined as financial assets held as part of the Group Companies’ business model with theobjective of collecting contractual cash flows, and such cash flows are limited to solely
repayments of principal including interest on the principal balance outstanding.

―31―

12. Derivative Assets and Derivative Liabilities
The fair values and notional principal amounts of derivatives qualifying for hedge accounting andderivatives not qualifying for hedge accounting are as follows:
Derivatives Qualifying for Hedge Accounting(Millions of yen)
December 31, 2012
Notional
principal
amountDecember 31, 2013

Fair value
Assets Liabilities

Notional
principal
amountFair value
AssetsLiabilities

Fair value hedges
Interest rate swap
contracts¥12,500¥―¥566¥12,500¥―¥512

37,324

1

378

52,274―538

49,824

1

944¥64,774―

1,050

Cash flow hedges
Interest rate swap
contracts
Total

Derivatives Not Qualifying for Hedge Accounting(Millions of yen)
December 31, 2012
Notional
principal
amountAssets¥110,130

December 31, 2013

Liabilities

Notional
principal
amountAssetsLiabilities¥3,173¥55¥95,446¥1,596¥29

402,150

4,442

3,608

1,508,031

6,572

6,149

512,280

7,615

3,663

1,603,477

8,168

6,178

128,353

3,035

55

184,389

4,420

795

572

23

23

175

0

0

641,205

10,673

3,741

1,788,041

12,588

6,973

Fair value

Fair value

Foreign currency contracts
Foreign exchange
forward contracts
Foreign exchange
margin contracts
Subtotal of foreign currency
contracts
Interest rate contracts
Interest rate swaption
contracts
OthersTotal―32―

13. Investment Securities
Breakdown of Investment Securities

Financial assets measured at amortized
cost(Millions of yen)
December 31, December 31,
2012
2013
¥7,639¥8,635

Financial assets measured at FVTPL
―

―

50

697

50

697

3,687

11,506

Unlisted
Total financial assets measured at
FVTOCI12,035

13,187

15,722

24,693

Total investment securities

23,411

34,025

ListedUnlisted
Total financial assets measured at
FVTPL
Financial assets measured at FVTOCI
Listed

14. Other Financial Assets
Breakdown of Other Financial Assets(Millions of yen)
December 31,
2013

December 31,
2012
Financial assets measured at amortizedcost
Accounts receivable — other¥38,238¥38,246

Call loans for banking business

11,00043,000

Security deposits

4,441

4,668

Guarantee deposits

29,22421,80040,524

51,796

123,427

159,510

(298)

(454)

123,129

159,056

Financial assets measured at FVTPL

0

2

Financial assets measured at FVTOCI

3―

123,132

159,058

OthersGross amount of financial assets
measured at amortized cost
Allowance for doubtful accounts
Net amount of financial assets
measured at amortized cost

Total other financial assets―33―15. Allowance for Doubtful Accounts
Changes in the allowance for doubtful accounts by type of financial assets measured atamortized cost are as follows:
For the year ended December 31, 2012
(Millions of yen)

January 1, 2012
Increases during
the period(allowance for
doubtful accounts
charged to
expenses)
Increases during
the period (others)
Decreases during
the period (utilized)
Decreases during
the period(reversals)
Decrease during
the period (others)
December 31, 2012

Accounts Financial
Loans for Investment
forfor credit
securities Loans
receivable assets
cardbankingbanking— trade securities
business forbusinessbusiness business¥1,534¥1,951¥23,688¥426¥1,753Otherfinancialassets

Total

¥242

¥29,594

1,124

15

9,446

201

―

125

10,911

316

―

76

―

―

54

446

(737)

(245)

(12,673)―(1,087)

(161)

(51)

―

(380)

(14)

(69)

(675)

(54)

―

―

―

―

―

(54)

2,022

1,670

20,537

247

652

298

25,426(54) (14,796)

Included within increases during the period (allowance for doubtful accounts charged to
expenses) relating to accounts receivable — trade, is a charge for doubtful accounts of ¥213
million in respect of Play Holdings Limited (U.K.) incurred due to reorganization following thechanges to local regulations which is presented in “Loss on business restructuring” within“Additional line items.”
Aside from the above, increases during the period doubtful accounts charged to expenses
are presented in “Allowance for doubtful accounts charged to expenses” within “Operating
expenses” in the Consolidated Statement of Income.

―34―

For the year ended December 31, 2013
(Millions of yen)

January 1, 2013
Increases during
the period(allowance for
doubtful accounts
charged to
expenses)
Increases during
the period (others)
Decreases during
the period (utilized)
Decreases during
the period(reversals)
Decrease during
the period (others)
December 31, 2013

Financial Loans for Investment Loans for
Accounts assets
for credit card securities banking
receivable securities
banking— tradebusiness forbusinessbusiness business¥2,022¥1,670¥20,537
¥247
¥652

Other
financialassets

Total

¥298

¥25,426

910

76

11,776

―

134

226

13,122

145

―

655

―

14

11

825

(1,046)(340)(12,675)――(20) (14,081)

(2)

―

―

(192)

―

―

(194)

(173)

―

―

―

―

(61)

(234)

1,856

1,406

20,293

55

800

454

24,864

16. Investments in Associates and Joint Ventures(1) Investments in Associates
The Group Companies account for investments in associates using the equity method.
The carrying amounts of investments in associates, which are all individually insignificant,are as follows:

Total carrying amount

December 31, 2012

(Millions of yen)
December 31, 2013

¥6,175¥7,755

Financial information on associates, which are all individually insignificant, is as follows. The
following amounts represent the Group Companies’ percentage of ownership.
(Millions of yen)
Year ended
Year ended
December 31, 2012 December 31, 2013
Net income

¥857

¥460

Other comprehensive income

28

54

Comprehensive income

885

514

As of December 31, 2012, the recoverable amounts of investments in certain companies
recovered to their carrying amounts that would have been recognized had no impairment loss
had been recognized previously, and accordingly a reversal of previous impairment loss of ¥449
million was recorded and included in “Share of income of associates and joint ventures” in theConsolidated Statement of Income.
(2) Investments in Joint Ventures
For certain investments in companies, the Group Companies have entered into contracts which―35―require unanimous consent among the counterparties for decisions that significantly affect thereturns from the investment. As the Group Companies exercise joint control with suchcounterparties and have rights to the investee’s net assets, such companies are determined tobe joint ventures and are accounted for using the equity method.
The total carrying amounts of investments in individually insignificant joint ventures are as
follows:(Millions of yen)
December 31, 2012 December 31, 2013
Total carrying amount

¥426

¥434

Aggregate financial information on individually insignificant joint ventures is as follows. The
following amounts represent the Group Companies’ percentage of ownership.
(Millions of yen)
Year ended
Year ended
December 31, 2012 December 31, 2013
Net income¥38¥43
Other comprehensive income――

Comprehensive income

38

43

―36―

17. Property, Plant and Equipment(1) Schedule of Changes in Property, Plant and Equipment(Millions of yen)
Buildings andaccompanying
facilities

Furniture,
fittings andequipment

Others

Total

January 1, 2012
Cost
Accumulated depreciation andaccumulated impairment losses
Carrying amount¥14,997¥30,527¥9,971¥55,495(4,845)(22,134)(6,981)(33,960)

10,152

8,393

2,990

21,535

Increase
Acquisition through businesscombinations
Disposal and sales

1,827

3,703

1,862

7,392

784

266

133

1,183

(34)

(264)

(24)

(322)

(53)

(131)

(186)

(370)

(1,115)(3,269)(910)(5,294)

Exchange rate differences

70

156

18

244

Other changes

42

262

(529)

(225)

17,89026,855

11,01555,760(6,217)(17,739)(7,661)(31,617)

11,673

9,116

3,354

24,143

Increase
Acquisition through businesscombinations
Disposal and sales

1,687

5,576

4,047

11,310

275

1,098

106

1,479

(65)

(242)

(210)

(517)

Impairment loss

(574)

(108)

(24)

(706)

(1,574)(3,571)(721)(5,866)

209

488

167

864

0

(26)

(273)

(299)

20,00230,933

14,741

65,676(8,371)(18,602)(8,295)(35,268)

11,631

12,331

6,446

30,408

Impairment loss
Depreciation

December 31, 2012
Cost
Accumulated depreciation andaccumulated impairment losses
Carrying amount

Depreciation
Exchange rate differences
Other changes
December 31, 2013
Cost
Accumulated depreciation andaccumulated impairment losses
Carrying amount

Depreciation is presented within “Operating expenses” in the Consolidated Statement of Income.

―37―

(2) Impairment of Property, Plant and Equipment
The Group Companies assess, at each reporting date, whether there are any indications thatproperty, plant and equipment may be impaired. If any indication exists, the Group Companies
estimate the recoverable amount of the asset.
In principle, the Group Companies estimate the recoverable amount of individual assets.
However if estimation of the recoverable amount of individual assets is not possible, thenestimation of the recoverable amount of the CGU to which the asset belongs is made. A CGU is
the smallest identifiable group of assets, which generates cash inflows that are largely
independent of the cash inflows from other assets or group of assets. As a principle, each groupcompany is considered to be a CGU. Idle assets for which no future use is anticipated areconsidered individually as CGUs. The corresponding impairment loss is presented in “Other
expenses.”
For the year ended December 31, 2012
Impairment loss for the year ended December 31, 2012 was mainly due to the businessrestructuring of Play Holdings Limited.
For the year ended December 31, 2013
Impairment loss for the year ended December 31, 2013 was mainly due to the termination ofcontracts for certain distribution bases of Rakuten Logistics, Inc.
(3) Property, Plant and Equipment Pledged as Collateral
As of December 31, 2012
Buildings and accompanying facilities of ¥609 million are pledged as collateral for borrowings.
As of December 31, 2013
Buildings and accompanying facilities of ¥470 million are pledged as collateral for borrowings.
(4) Finance Leases (as Lessee)
Carrying amounts of leased assets under finance lease arrangements are as follows.
(Millions of yen)
December 31, 2012
December 31, 2013
Buildings¥5,898¥5,935
Furniture, fittings and
1,599
1,850
equipment
Others
960
1,133
Total
8,457
8,918
Included in the above is a baseball stadium facility, which has been donated to Miyagi Prefecture
based on a franchise contract, and which is recognized as a finance lease as the Group
Companies have the right of use the stadium facility. The related carrying amounts as ofDecember 31, 2012 and 2013 were ¥6,053 million and ¥6,038 million, respectively. There are nolease obligations associated with this lease arrangement.
Lease obligations based on finance lease contracts as of December 31, 2012 and 2013 were
¥2,431 million and ¥2,663 million, respectively.

―38―

18. Intangible Assets(1) Schedule of Changes in Intangible Assets(Millions of yen)
Goodwill

Software

Other

Total

January 1, 2012
Cost
Accumulated amortization andaccumulated impairment losses
Carrying amount¥110,639¥84,970¥21,552¥217,161(14,947)(49,944)(2,650)(67,541)

95,69235,026

18,902

149,620

Increase
Acquisition through businesscombinations
Disposal and sales―

17,852

1,533

19,38525,128

1,683

28,24855,059―(1,940)(17)(1,957)

Impairment loss

(18,984)(517)(7,925)(27,426)―(12,169)(3,764)(15,933)

Exchange rate differences

6,528

299

2,961

9,788

Other changes

(469)

(227)

174

(522)

145,093

99,441

55,538300,072(37,198)(59,434)(15,426)(112,058)

107,895

40,007

40,112

188,014

Amortization

December 31, 2012
Cost
Accumulated amortization andaccumulated impairment losses
Carrying amount
Increase
Acquisition through businesscombinations
Disposal and sales

44

20,133

3,090

23,26725,373

3,620

5,355

34,348

―

(634)

(4)

(638)

Impairment loss

(4,557)(1,514)(1,354)(7,425)―(14,300)(5,900)(20,200)

Exchange rate differences

12,343661

4,063

17,067

Other changes

1,128

440

(120)

1,448

193,008

122,851

68,161

384,020(50,782)(74,438)(22,919)(148,139)

142,226

48,41345,242

235,881

Amortization

December 31, 2013
Cost
Accumulated amortization andaccumulated impairment losses
Carrying amount

Software under intangible assets mainly comprises internally generated software.
Amortization of intangible assets is presented in “Operating expenses” in the Consolidated
Statement of Income.

―39―

Research and development expenses recognized as expenses for the years ended December
31, 2012 and 2013 were ¥614 million and ¥856 million, respectively.
The acquisition through business combinations in goodwill for the year ended December 31,
2012 is mainly attributable to the acquisitions of Kobo Inc. and AIRIO Life Insurance Co., Ltd.
(currently Rakuten Life Insurance Co., Ltd.). Please refer to Note 46. Business Combinations.
The acquisition through business combinations in goodwill for the year ended December 31,
2013 is mainly attributable to the acquisitions of VIKI, Inc. and Direct Technology Solution SAS.
Goodwill of ¥16,353 million and ¥6,195 million, respectively were acquired.
Acquisitions of Other within Intangible Assets through business combinations for the year ended
December 31, 2012 are mainly attributable to trademarks and technology obtained through theacquisition of Kobo Inc. of ¥11,056 million, and the value of business acquired and the value ofcustomer relationships acquired in the acquisition of AIRIO Life Insurance Co., Ltd. (currently
Rakuten Life Insurance Co., Ltd.) of ¥14,629 million.
(2) Impairment of Goodwill and Intangible Assets with Indefinite Useful Lives
The balance of goodwill and intangible assets with indefinite useful lives of each CGU is asfollows. Intangible assets with indefinite useful lives mainly comprise trademarks. These
trademarks, which were acquired in business combinations, will basically continue to exist as
long as the business continues and thus are considered to be intangible assets with indefinite
useful lives.
(Millions of yen)
December 31, 2012
Operatingsegment

CGU

PRICEMINISTER
S.A.S.
Kobo Inc.
Internet
Services

Internet
Finance
Others

December 31, 2013

Intangible
Intangible
assets withassets with
Goodwill
Goodwill
indefinite
indefinite
useful lives
useful lives¥12,273¥5,110¥15,519¥6,462

17,48329

19,76632――

17,510―

Others28,980732

39,591

926

Total

58,736

5,871

92,386

7,420

34,386―32,886―

11,587―

13,731―

Total

45,973―

46,617―

Others

3,186

―

3,223

―

Total

107,895

5,871

142,226

7,420

VIKI, Inc.

Rakuten Bank,
Ltd.
Others―40―

For the year ended December 31, 2012
Following a review of the business plan in December 2012, impairment losses of ¥14,004 million
relating to goodwill and ¥4,818 million relating to intangible assets with indefinite useful lives forBuy.com Inc. (CGU) were recognized. Similarly, an impairment loss of ¥4,706 million on goodwill
for PRICEMINISTER S.A.S. (CGU) was recognized. These impairment losses are presented in“Additional line items” in the Consolidated Statement of Income.
For the year ended December 31, 2013
For the year ended December 31, 2013, an impairment loss of ¥4,557 million on Others relating
to CGU of the Internet Services segment was recorded under “Other expenses” in theConsolidated Statement of Income. From the year ended December 31, 2013, of the amount of
goodwill allocated to Rakuten Bank, Ltd. (CGU in the Internet Finance segment), ¥1,500 million
was recorded as goodwill for Others (CGU) in the Internet Finance segment, following thetransfer of the unit’s investment trust business to Rakuten Securities, Inc.
When conducting an impairment test for goodwill and intangible assets with indefinite useful lives,
the Group Companies, as a general rule, consider each company to be a CGU and allocate
goodwill and intangible assets with indefinite useful lives to the CGUs expected to benefit fromsynergies associated with business combinations. A CGU is the smallest identifiable group ofassets, which generates cash inflows that are largely independent of the cash inflows from otherassets or group of assets.
The Group Companies perform impairment testing of goodwill at least annually, regardlessof whether there is any indication of impairment. Intangible assets with indefinite useful lives are
not amortized; instead they are tested for impairment annually. The Group Companies
individually determine the timing of impairment test for goodwill and intangible assets withindefinite useful lives with consideration for the timing of the formulation of the relevant businessplan. Indications of impairment are also assessed every quarter; and if any such indication exists,
impairment testing is performed.
The recoverable amount of a CGU with allocated goodwill is the higher of value in use and fairvalue less costs of disposal. On December 2013, the recoverable amount of all CGUs to which
goodwill was allocated, except for VIKI, Inc. (CGU), was determined with reference to theircalculated values in use. The recoverable amount of VIKI, Inc. was determined based on its fairvalue less costs of disposal.
Value in use is calculated based on the business plans approved by the management ofeach CGU, using pre-tax, estimated future cash flows for primarily three to five years and otherassumptions for a three to five year period. These business plans have been drawn up based
primarily on gross merchandise sales in the Internet Services segment, and the number ofaccounts and the number of registered members in the Internet Finance segment. For periods
beyond those covered by the business plans, the terminal value is assessed.
Terminal value is calculated using the estimated growth rate of each CGU. Also the pre-tax
discount rate used in the assessment of value in use is calculated for each CGU.
The growth rates used in predicting cash flows for periods beyond those covered by thebusiness plans of each CGU reflect the status of the country and the industry to which the CGU
belongs and do not exceed the average long-term growth rate of the industry in which the CGU
is active. Pre-tax discount rates used in calculating terminal value reflect the inherent risks of the―41―

relevant businesses of each CGU. Discount rates are determined based on comparable
companies of each CGU, incorporating market interest rates, the size of the subsidiarycomprising the CGU, and other factors.
Fair value less costs of disposal is based on an estimated fair value less costs of disposal
based on the discounted cash flow method for a ten-year period. This measurement of fair value
is classified as Level 3 in the fair value hierarchy due to the unobservable inputs used in thisvaluation technique.
Additionally, the business plan, which forms the basis for the measurement of therecoverable amount in the impairment tests of goodwill and intangible assets with indefinite
useful lives, is compared with past performance and consideration is made as to whether thebusiness plan is a reasonable basis for predicting future cash flows.
Significant assumptions used in the calculation of the recoverable amount as of December 31,
2012 and 2013 are as follows. The following estimates have been used in the analysis of each
CGU.

Operatingsegment

Internet
Services

December 31, 2012
CGU
Growth rate

Discount
rate

Growth rate

Discount
rate

PRICEMINISTER
S.A.S.

2.0%

12.3%

2.0%

12.6%

Kobo Inc.

2.0%

14.5%

3.0%

13.7%

VIKI, Inc.

-

8.6%~
25.3%

5.0%

32.3%
9.4%~
20.2%

OthersInternet
Finance
Others

December 31, 2013

2.0%~5.5%

Rakuten Bank,
Ltd.

2.0%

Others2.0%

Others

2.0%

11.8%
7.4%~
14.6%
9.1%~
9.6%

2.0%~5.5%
2.0%

10.8%

2.0%

10.3%~
20.5%

2.0%

12.3%

Sensitivity Analysis
The Group Companies have recorded goodwill and intangible assets with indefinite useful lives
for PRICEMINISTER S.A.S. (CGU). For the year ended December 31, 2013, since the amountby which the recoverable amount exceeds the carrying amount in PRICEMINISTER S.A.S.
remains low, if the major assumptions used in impairment test were to change within areasonably predictable range, there is a possibility that impairment would be occurred. The
recoverable amount of other CGUs to which goodwill has been allocated significantly exceeds
their carrying amounts, therefore the Group Companies judge that significant impairment isunlikely occurred for these CGUs, even if the major assumptions used in impairment test were tochange within a reasonably predictable range.
(3) Impairment of Intangible Assets (Except for Goodwill and Intangible Assets with Indefinite UsefulLives)The Group Companies assess, at each reporting date, whether there is an indication that
intangible assets (except for goodwill and intangible assets with indefinite useful lives) may be―42―

impaired. If any indication exists, the Group Companies estimate the recoverable amount of theasset.
In principle, the Group Companies estimate the recoverable amount for the individual asset,
but if estimation of the recoverable amount of individual assets is not possible, an estimation of
the recoverable amount of the CGU to which the asset belongs is made. Idle assets for which
future use is not anticipated are considered individually.
For the year ended December 31, 2012
An impairment loss of ¥960 million on intangible assets (except for goodwill and intangible
assets with indefinite useful lives) arising from Buy.com Inc. in the year ended December 31,
2012 was recorded within “Additional line items” in the Consolidated Statement of Income, while
all other impairment losses were recorded within “Other expenses” in the Consolidated
Statement of Income.
For the year ended December 31, 2013
In the year ended December 31, 2013, an impairment loss of ¥2,868 million on intangible assets(except for goodwill and intangible assets with indefinite useful lives) arising in the Internet
Services segment was recorded within “Other expenses” in the Consolidated Statement of
Income.
19. Deposits for Banking Business
Breakdown of Deposits for Banking Business

Financial liabilities measured
at amortized cost
Demand deposits
Time deposits
Total financial liabilities
measured at amortized cost
Financial liabilities measured
at FVTPLTime deposits
Total deposits for banking
business

December 31, 2012

(Millions of yen)
December 31, 2013

¥492,395¥556,765

237,055

323,977

729,450

880,742

80,081

79,218809,531959,960―43―

20. Financial Liabilities for Securities Business
Breakdown of Financial Liabilities for Securities Business(Millions of yen)
December 31, 2012

December 31, 2013

Accounts payable relating toinvestment securities
transactions¥200,962¥425,332

Margin transactions liabilities

41,77844,820

Deposits received
Borrowings secured by
securities

177,516

329,30737,465

118,774

Guarantee deposits received

99,709158,824

OthersTotal financial liabilities forsecurities business

625

914

558,055

1,077,971

Financial liabilities for securities business are measured at amortized cost.
Derivative liabilities classified as held for trading are included in “Derivative liabilities.”

21. Bonds and Borrowings
Schedule of Bonds
Name

Rakuten, Inc.

FusionCommunications
Corporation
FusionCommunications
Corporation

Type
The 1st unsecuredbondCurrency: JPY
Maturity: five years
The 2nd unsecured
callable bondCurrency: JPY
Maturity: three years
The 3rd unsecuredbondCurrency: JPY
Maturity: five years
Total bonds

Interest
rate(Millions of yen)
December 31, December 31,
2012
2013

0.91%

¥―

¥1,339

0.54%

33

―

0.64%

720

480

―

753

1,819

All bonds are measured at amortized cost.
The nominal interest rates applied for each bond in the year ended December 31, 2013stated in the “Interest rate” column differ from the effective interest rates.

―44―

Schedule of Borrowings

Short-term debt
Long-term debt
Floating-rate debt
Maturity: 1 to 10 years (JPY)(Note)
Fixed-rate debt
Maturity: 1 to 10 years (JPY)Commercial paper
Total borrowings

Interest
rate
0.225%~3.90%

0.53%~2.44%

December 31,
2012(Millions of yen)
December 31,
2013¥84,340¥147,399

184,019

161,760

2,274

21,90533,80056,800304,433

387,864

0.528%~4.38%
0.28%~0.65%―All borrowings are measured at amortized cost.
The nominal interest rates applied for each borrowing in the year ended December 31,
2013 stated in the “Interest rate” column differ from the effective interest rates.
(Note) The above borrowings include the underlying hedged items of cash flow hedges where
floating rate debt is swapped for fixed rate debt, and the interest rates stated in the“Interest rate” column incorporate the effect of the cash flow hedges.

―45―22. Other Financial Liabilities
Breakdown of Other Financial Liabilities(Millions of yen)
December 31, 2012

December 31, 2013

Other payables¥63,575¥71,973

Accrued expenses

21,234

23,835

Deposits received

73,53583,781Margin deposits received

36,86732,068Others

14,837

15,114

Total other financial liabilities

210,048

226,771

Other financial liabilities are measured at amortized cost.
23. Provisions(1) Schedule of Changes in Provisions(Millions of yen)
Provision forcustomer points
January 1, 2012
Increases during the period(provisions made)Increases during the period(others)
Decreases during the period(provisions used)
Decreases during the period(others)
December 31, 2012
Increases during the period(provisions made)Increases during the period(others)
Decreases during the period(provisions used)
Decreases during the period(others)
December 31, 2013

OthersTotal¥20,341¥2,840¥23,181

25,672

2,030

27,702

16

185

201

(20,350)(1,096)(21,446)

(3)

(21)

(24)

25,676

3,938

29,61434,641

2,526

37,167

60

1,370

1,430

(25,591)(1,182)(26,773)

(206)

(212)

(418)

34,5806,440

41,020(2) Provision for Customer Points
The Group Companies operate points programs, including the Rakuten Super Points program,and grant points to customers as part of product sales, provisioning of services, and based on
customer usage of the Group Companies’ assets, the completion of various membershipregistrations, customer referrals and limited-time promotions. Customers are able to exchange
accumulated points for products and services, obtain discounts, or transfer their points to point
programs of other companies. Points have an expiry date and once they expire a customer
forfeits the right to use them.
In anticipation of the future use of such points by customers, the Group Companies
recorded a provision for customer points at an estimated amount based on historical experienceas the majority of points granted to customers are borne by the registered retailers, which are not―46―

related to the Group Companies, in Rakuten Ichiba. These are estimates and there is an inherent
uncertainty regarding the extent of usage of such points by customers.
(3) Other Provisions
Other provisions include asset retirement obligations and provision for loss on interest
repayments.
These provisions are attributable to transactions in the ordinary course of business, and,are not individually significant.
24. Policy Reserves and Others for Insurance Business(1) Breakdown of policy reserves and others for insurance business(Millions of yen)
December 31, 2012

December 31, 2013

Reserve for outstanding claims¥1,658¥1,796

Liability reserves
Total policy reserves and others for insurance
business

16,83817,056

18,496

18,852

Regarding the funding method for liability reserves, the method stipulated in the Notification No.
48 of the Ministry of Finance, 1996 is applied for contracts subject to standard liability reserves,and the level premium method is applied for contracts not subject to standard liability reserves.
Mortality rates based on Standard Mortality Table 2007 (Standard Mortality Table 1996 forcontracts with an effective date on or before March 31, 2007) and a product crediting rate of
1.0% (1.5% for contracts with an inception date of policy on or before March 31, 2013 and 2.0%
for contracts with an effective date on or before March 31, 2001) are used for the funding ofliability reserves.
The breakdown of changes in policy reserves is as follows.
(Millions of yen)
December 31, 2012
Balance at the beginning of the year

December 31, 2013¥―

¥18,496

2,229

13,849Insurance claims and other payments(1,700)(10,859)

Changes from changes in scope of
consolidation

18,344―(377)(2,634)

18,496

18,852

Insurance premium (net)Other changes(Note 1)

(Note 2)

Balance at the end of the year

(Notes) 1 The amount is calculated by deducting costs allocated to the operation of the insurance
business from insurance revenue, etc.
2 The amount includes interest on liability reserves, mortality gain, etc.
(2) Liability Adequacy Test for Insurance Contracts

The Group Companies perform a liability adequacy test for insurance contracts taking into
consideration estimated present value of cash inflows, such as related insurance premiums and―47―

investment income, and cash outflows, such as insurance claims and benefits and operating
expenses. As a result of testing, the amount of the liability was considered to be adequate, andno additional recognition of liability and expense was recognized.
(3) Insurance Risk
For sound and appropriate insurance business operations, it is important to accurately
comprehend and adequately manage increasingly diversified and complex risks. Therefore, across-organizational risk management framework was developed, and the role and process at
departments responsible for risk management were clarified. The Group Companies ensure
appropriate business operation by having all employees and officers fully understand theimportance of risk management. Specifically, the Group Companies established a crossorganizational “Risk Management Committee,” and undertake the following overall risk
management activities: appointing departments responsible for risk management according to
the type of risk; developing a risk management framework; comprehending, analyzing andassessing risk status; and instructing operational departments.
Concerning insurance underwriting risk as a major risk in the insurance business, the Group
Companies have identified and analyzed risks through regular monitoring of the frequency of
insured events and surrender ratio. In developing new products, risk analysis is carried out inconsideration of an appropriate balance with profitability.
Under Japanese laws and regulations, life insurance companies are required to calculate risks
associated with payments of insurance claims and benefits and risks associated with asset
management in preparation for the occurrence of various risks to which life insurance companies
are exposed on a scale beyond a normally predictable level. The amounts equivalent to risks
before tax are as follows, which are recognized as representing the impact on the Consolidated
Statement of Income in the event of occurrence of such risks. The confidence level of risk
quantity is generally assumed to be 95%, with variance depending on the type of risk.
(Millions of yen)
December 31, 2012

December 31, 2013

Insurance risk impact amount¥955¥1,100Third-sector insurance risk impact amount

949

1,099

Product crediting rate risk impact amount3

3

Minimum guarantee risk impact amount――

Investment risk impact amount

378

1,051

Minimum business risk impact amount

46

65

The Group Companies only handle standard insurance products, and insured events are mainly
death (first sector product), hospitalization and surgery, etc. (third sector product). The policy
period of insurance products is mainly 10 years and lifetime, and the insurance liabilities varywith the acquisition of new contracts, occurrence of insured events and contract cancellations,etc.
In future periods covered by the liability adequacy test it is expected that insurance
revenues will exceed the associated insurance costs.

―48―

25. Income Tax Expense
The deferred tax assets and liabilities as of December 31, 2012 and 2013 include the following:(Millions of yen)
December 31,
December 31,
2012
2013
Deferred tax assets
Tax losses carried forward¥26,362¥17,380

Depreciation

1,730

1,616

Allowance for doubtful accounts

3,474

4,032

388

2,184

Provision for customer points

9,786

13,113

Taxable goodwill

4,916

3,626

Accrued bonus

1,132

1,366

Investments in subsidiaries
Provision for compensatedabsences
Asset retirement obligations

3,161

83

959

1,037

823

1,011

Others

6,147

7,431

Total

58,87852,879(7,568)(7,568)(1,233)(3,555)Intangible assets(12,199)(14,926)

Others(3,748)(4,359)

Total(24,748)(30,408)

Deferred tax assets

40,546

31,594

Deferred tax liabilities(6,416)(9,123)

Net

34,13022,471Enterprise tax payable

Deferred tax liabilities
Tax deductible losses due totransfer of shares
Gains and losses of financial
assets measured at FVTOCINet amount of deferred tax assets

Deferred tax assets related to tax losses carried forward as of December 31, 2012 were mainly
recognized by the Company and one of its subsidiaries, Rakuten Bank, Ltd. The Company’s tax
losses resulted from unusual factors, the disposal of assets in the restructuring of businesses
and past organizational restructuring. Such tax losses carried forward were partially utilized bytaxable income of the year ended December 31, 2012, and it is highly probable that taxable
income will be available in the future. Future tax losses are not expected to be generated fromunusual factors. In Rakuten Bank, Ltd., due to non-performing loans and investment securities,
which gave rise to tax losses carried forward in the past, being reduced to controllable levels,and an environment supporting steadily continuous and stable earnings made possible through―49―

various initiatives aimed toward capturing customers and ensuring stable performance as aresult of joining the Group Companies, tax losses carried forward were partially utilized by
Rakuten Bank’s taxable income for the previous year. It is considered to be highly probable that
future taxable income will be available.
Deferred tax assets related to tax losses carried forward as of December 31, 2013 are mainly
recognized by one of the Company’s subsidiaries, Rakuten Bank, Ltd. In Rakuten Bank, Ltd.,due to non-performing loans and investment securities, which gave rise to tax losses carriedforward in the past, being reduced to controllable levels, and an environment under which it cansteadily produce continuous and stable earnings made possible through various initiatives aimed
toward capturing customers and ensuring stable performance as a result of joining the Group
Companies, tax losses carried forward were partially utilized by Rakuten Bank’s taxable income
for the current year. It is considered to be highly probable that future taxable income will beavailable.
The changes in net deferred tax assets and liabilities were as follows:
For the year ended December 31, 2012
(Millions of yen)
Recognized in
Recognized
Changes inotherJanuary 1,
Decemberscope ofin profit or
Others2012
comprehensive
31, 2012
consolidation
loss
incomeTax losses carried forward¥49,569¥(28,185)¥―¥4,625¥353¥26,362

Depreciation and amortization
Allowance for doubtful
accounts
Enterprise tax payable

1,612

91

―

15

12

1,730

1

5

3,474

―

5,486

(2,018)

338

36

―

14

―

388

Provision for customer points

7,879

1,907

―

―

―

9,786

Taxable goodwill

6,566(1,650)

―

―

―

4,916

Accrued bonus

1,016

64

―

52

―

1,132

―

3,161

―

―

―

3,161

1,015

(56)

―

―

―

959

449

373

―

1

―

823

(7,568)

―

―

―

―

(7,568)(1,483)

―

250

―

―

(1,233)(6,732)

3,089―(7,721)(835)(12,199)

Others

378

1,761

(481)

773

(32)

2,399

Total

58,525(21,427)(231)(2,240)(497)

34,130Investments in subsidiaries
Provision for compensatedabsences
Asset retirement obligations
Tax deductible losses due totransfer of shares
Gains and losses of financial
assets measured at FVTOCI
Intangible assets―50―

For the year ended December 31, 2013
(Millions of yen)
Recognized in
Recognized
Changes inotherJanuary 1,
Decemberscope ofin profit or
Others2013
comprehensive
31, 2013
consolidation
loss
incomeTax losses carried forward¥26,362¥(9,204)

¥222

¥―

¥―

¥17,380

Depreciation and amortization

1,730

(128)

14

―

―

1,616

Allowance for doubtful accounts

3,474

558

―

―

―

4,032

388

1,796

―

―

―

2,184

Provision for customer points

9,786

3,327

―

―

―

13,113

Taxable goodwill

4,916(1,290)

―

―

―

3,626

Accrued bonus

1,132

198

36

―

―

1,366

Investments in subsidiaries

3,161(3,078)

―

―

―

83

959

78

―

―

―

1,037

823

188

―

―

―

1,011

(7,568)

―

―

―

―

(7,568)(1,233)―(2,322)――(3,555)(12,199)645(2,519)―(14,926)

Others

2,399

206

(853)

29

―

438

3,072

Total

34,130(6,704)(2,874)(2,519)438

22,471Enterprise tax payable

Provision for compensatedabsences
Asset retirement obligations
Tax deductible losses due totransfer of shares
Gains and losses of financial
assets measured at FVTOCI
Intangible assets

The breakdown of deductible temporary differences, tax losses carried forward and tax credits
carried forward for which no deferred tax asset is recognized in the consolidated statement offinancial position is as follows:(Millions of yen)
December 31, 2012
Deductible temporary
differences
Unused tax losses carriedforwardTax credits carried forward
Total

December 31, 2013

¥5,151¥11,031

25,134

27,178―215

30,28538,424

Deferred tax assets associated with the above are not recognized, as it is unlikely that futuretaxable income necessary for the Group Companies to utilize their benefits would be generated.

―51―

Tax losses carried forward for which no deferred tax asset is recognized in the consolidated
statement of financial position, if unutilized, will expire as follows:(Millions of yen)
December 31, 2012

December 31, 2013

1st year¥2,198¥309

2nd year

2,220

3,107

3rd year

3,948

179

4th year1247

5th year and thereafter

16,767

21,908No term of expiry date

―

1,428

25,134

27,178

Total

There are no deductible temporary differences with an expiry date or significant temporary
differences associated with investments in subsidiaries and associates accounted for using theequity method for which there are unrecognized deferred tax liabilities. There will be no
significant impact on the Group Companies’ tax payment, even if the retained earnings of thesubsidiaries or associates are remitted to the Group Companies in the future.
Breakdown of income tax expense recognized through income is as follows:(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
Income before income tax
Current tax expense
Income tax expense for net
incomeSubtotal
Deferred tax expense
Generation and reversal of
temporary difference
Changes in unused tax losses
carried forward
Subtotal
Total income tax expense―52―¥49,106¥88,610

6,543

38,425

6,543

38,425(6,758)(2,500)28,185

9,204

21,427

6,704

27,97045,129

Reconciliation between income before income tax and income tax expense is as follows:Year ended December 31, 2012 Year ended December 31, 2013
(Millions of yen)
Income before income tax

Income tax expense based on
statutory income tax rate (Note 1)(Reconciliations)
Permanent non-deductible items(%)(Millions of yen)

¥49,106(%)¥88,610

20,13341.0

33,672

38.0

970

2.0

1,643

1.9

Permanent non-taxable items
(315)
(0.6)
(485)
(0.5)
Inhabitant tax, etc. on per capita
128
0.3
79
0.1
basis
Changes in unrecognized deferred
(1.7)
5,499
6.2
(833)
tax assets (Note 2)
Difference due to statutory income
2,026
4.1
2,950
3.3
tax rate of subsidiaries (Note 3)
Impairment loss on goodwill (Note
7,784
15.9
1,332
1.5
4)
Gain on step acquisition
(976)
(2.0)
―
―
Share of income of associates and
(583)
(1.2)
(50)
(0.1)
joint ventures
Others
(364)
(0.8)
489
0.5
Income tax expense
27,97057.0
45,12950.9(Notes) 1 Income tax expense based on the statutory income tax rate refers to income tax
expense based on the effective statutory tax rate of Japan, where the Company isdomiciled. The effective statutory tax rate has changed to 38.0% from 41.0% following
revisions to the taxation system.
2 This is mainly the amount of previously unrecognized tax losses carried forward used toreduce deferred tax expense, and benefits from temporary differences in prior periods.
3 The difference is due to difference in the effective tax rate of Japan, where the Company
is located, and that of the jurisdictions where certain subsidiaries are located.
4 Please refer to Note 18. (2) Impairment of Goodwill and Intangible Assets with Indefinite
Useful Lives.

―53―

26. Common Stock, Capital Surplus, Retained Earnings and Treasury Stock
Common Stock
Schedule of shares authorized to be issued and total number of shares issued(Thousands of shares)
Total number of authorized shares
Total number of shares issued(Common stock with no par value) (Common stock with no par value)
January 1, 2012
3,941,800
1,319,458
Changes during the period:
Increases due to issuance of―
1,169
common stock
December 31, 2012
3,941,800
1,320,627
Changes during the period:
Increases due to issuance of―
3,236
common stock
December 31, 2013
3,941,800
1,323,863(Note) On July 1, 2012, the Company implemented a 100-for-1 share split. The total number ofauthorized shares and the total number of shares issued as of January 1, 2012 and as ofDecember 31, 2012 represent the total number of shares after adjustment for such share
split.
Capital Surplus
The Companies Act of Japan (hereinafter referred to as the “Companies Act”) requires that atleast 50% of the proceeds of certain issues of common shares be credited to common stock,
while the remainder of the proceeds be credited to capital reserve included in capital surplus.
The Companies Act permits, upon approval at the General Shareholders’ Meeting, the transfer ofamounts from capital reserve to common stock.
Retained Earnings
The Companies Act requires that an amount equal to 10% of dividends of retained earnings be
appropriated as capital reserve (within capital surplus) or as legal reserve (within retained
earnings) until the aggregate amount of the capital reserve and the legal reserve equals to 25%
of common stock. The legal reserve may be used to eliminate or reduce a deficit or betransferred to retained earnings upon approval at the General Shareholders’ Meeting.
Retained earnings available for dividends under the Companies Act are based on theamount recorded in the Company’s general accounting records prepared in accordance with
JGAAP.
Treasury Stock
Schedule of Changes in Treasury Stock(Thousands of shares)
Year ended December 31, 2012 Year ended December 31, 2013
January 1

6,008

6,008

Acquisition

00

Disposal

―

―

6,008

6,008

December 31―54―

(Note) On July 1, 2012, the Company implemented a 100-for-1 share split. The total number oftreasury stock as of January 1, 2012 and as of December 31, 2012 is the number of shares
after adjustment of such share split.
27. Revenue
Breakdown of revenue for the years ended December 31, 2012 and 2013 is as follows:(Millions of yen)
Year ended
Year ended
December 31, 2012
December 31, 2013
Sales of goods¥54,815¥59,072
Rendering of services (Note)

292,411

382,502

Interest income

50,80569,366

Others

2,413

7,628

Total
400,444518,568(Note) Rendering of services includes revenue arising from insurance contracts for the years ended
December 31, 2012 and 2013, amounting to ¥4,432 million and ¥26,838 million, respectively.
28. Operating Expenses
Breakdown of operating expenses for the years ended December 31, 2012 and 2013 is asfollows:(Millions of yen)
Year ended
Year ended
December 31, 2012
December 31, 2013
Advertising and promotion¥49,611¥75,408
expenditures
Employee benefits expenses
70,09893,206
Depreciation and amortization
Communication and maintenanceexpenses
Consignment and subcontract
expenses
Allowance for doubtful accounts
charged to expenses
Cost of sales of merchandiseInterest expense for financebusiness
Commission fee expense for financebusiness
Insurance claims and otherpayments, and provision of policy
reserves and others for insurance
business
OthersTotal―55―

21,22726,086

15,355

18,254

22,666

27,95910,023

12,92850,29752,346

5,512

4,864

5,002

5,300

1,857

11,21567,78792,808319,435

420,374

Employee expenses (employee benefits expenses) are as follows:
1) Schedule of Employee Expenses

Wages and salaries

Year ended
December 31, 2012
¥60,834(Millions of yen)
Year ended
December 31, 2013
¥79,135

Retirement benefits

3,412

3,864

Legal welfare expenses
3,631
Stock option expenses relating
to directors and employees
651(Note)
Other salaries
1,570
Total
70,098(Note) Please refer to Note 37. Share-based Payments.

5,497
1,679
3,031
93,206

2) Number of Employees
December 31, 2012
Number of employees

December 31, 2013

9,311

10,867(Note) Number of employees represents the number of persons employed at the Group
Companies.
29. Other Income and Other Expenses(1) Breakdown of Other Income(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
Gain on step acquisition (Note)
Others
Total(Note) Please refer to Note 46. Business Combinations.

¥2,382

¥―

983

1,831

3,365

1,831

(2) Breakdown of Other Expenses(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
Impairment loss¥―

¥5,485

1,533

908

Retired or disposed property,
plant and equipment or
intangible assets
Loss on liquidation of business(Note)
Others

808

―

3,240

3,388

Total

5,581

9,781

(Notes) This represents losses due to the liquidation of the EC service in China.

―56―30. Additional Line Items(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
Additional line items(expenses)
Loss on businessrestructuring (Note 1)
Impairment loss on goodwill
and other (Note 2)
Total¥4,250¥―24,488―28,738―(Notes) 1 For the year ended December 31, 2012, a loss of ¥4,250 million was recorded relating
to the restructuring for the future business development for Play Holdings Limited.
2 For the year ended December 31, 2012, impairment losses of ¥19,782 million forBuy.com Inc. and of ¥4,706 million for PRICEMINISTER S.A.S. were recognized. For
details, please refer to Note 18. Intangible Assets.
3 There are no applicable items for the year ended December 31, 2013.
31. Financial Income and Financial Expenses(1) Breakdown of Financial Income(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
Interest income

¥162

¥140

Dividend income

31

57

Total

193

197

(2) Breakdown of Financial Expenses(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
Interest expense¥2,220¥1,676

Commission fee

345

286

2,565

1,962

Total

32. Earnings per Share
Basic earnings per share are calculated by dividing the net income attributable to owners of theCompany by the weighted average number of common stock outstanding during the year. The
weighted average number of common stock outstanding during the year does not include
treasury stock.
Diluted earnings per share are calculated on the assumption of full conversion of potentiallydilutive common stock, adjusted for the weighted average number of common stock outstanding.
The Company has potential common stock related to stock options. The number of sharesthat may be acquired through these stock options is calculated at fair value (annual averagestock price of the Company) based on the value of the stock acquisition rights that would be
granted to unexercised stock options.
On July 1, 2012, the Company implemented a 100-for-1 stock split. The following
calculation of earnings per share includes the number of common stock outstanding after theshare split.

―57―

Per share information and the weighted average number of shares used in the calculation of
earnings per share are as follows:

Net income
attributable toowners of theCompany(Millions of yen)
Weighted
average numberof shares(Thousands ofshares)
Earnings per
share (yen)Year ended December 31, 2012

Year ended December 31, 2013

Basic

Adjustments

Diluted

Basic

¥(0)

¥20,489¥42,900¥(7)

42,893

3,036 1,317,023

1,315,997

7,378

1,323,375¥32.60¥ (0.19)¥32.41¥20,489

1,313,987¥15.59¥ (0.03)¥15.56

Adjustments

DilutedThe following potential shares were not included in the calculation of diluted earnings per sharebecause there would be no dilutive effects.
Year ended December 31, 2012

Year ended December 31, 2013

Subscription Rights to Shares of the Company
Stock options in accordance with theprovisions of Article 280-20 and Article
280-21 of the former Commercial CodeMarch 30, 2005
5,641
Resolution at Generalthousand
Shareholders’ MeetingsharesMarch 30, 2006
3,000
Resolution at Generalthousand
Shareholders’ MeetingsharesSubscription Rights to Shares of the Company
Stock options in accordance with theprovisions of Article 236, Article 238 and
Article 239 of the Companies Act
March 28, 201312
Resolution at Generalthousand
Shareholders’ MeetingsharesThere were no transactions during the period from December 31, 2013 to the date of approval of
the consolidated financial statements that materially impacted the calculation of earnings per
share.
33. Transfers of Financial Assets
The Group Companies engage in the securitization of card shopping receivables of customers
arising in the course of operating the credit card business. When securitizing receivables, theGroup Companies transfer such receivables to trusts and acquire senior and subordinatedbeneficial interests collateralized by the entrusted assets. The Group Companies then transfer
the senior beneficial interests to third parties or redeem the beneficial interests for borrowings
secured by the entrusted assets. Since the Group Companies continue to retain substantially all
the credit risks related to the underlying receivables and the rewards through the holding ofsubordinated beneficial interests, the transferred receivables do not qualify for derecognition.

―58―

The carrying amount of the financial assets that did not qualify for derecognition and thecorresponding liabilities, and the related fair values where such liabilities have limited recourse to
only the transferred assets as of December 31, 2012 and 2013 are as follows:(Millions of yen)
December 31, 2012 December 31, 2013
Carrying amount of transferredassetsCarrying amount ofcorresponding liabilities
Fair value of transferred assets
Fair value of corresponding
liabilities
Net position

¥100

¥100

100

100

100

100

100

100

―

―

Counterparties to the associated liabilities to transferred assets have recourse only to thetransferred assets.
34. Assets Pledged as Collateral and Assets Received as Collateral(1) Assets Pledged as Collateral
The Group Companies pledge assets mainly to secure debts from borrowing contracts, e-money
deposits, margin trading and security lending transactions conducted under normal terms andconditions, and as monetary deposits in derivative transactions.
The carrying amounts of assets pledged as collateral for liabilities and contingent liabilities
by the Group Companies are as follows:(Millions of yen)
December 31, 2012 December 31, 2013
Cash and cash equivalents
Loans for credit card business(Note)
Investment securities¥1,097¥1,11047,31045,400

6,836

6,831

Total

55,24353,341(Note) Loans for credit card business include securitized receivables.
In addition to the above, investment securities for banking business, which were pledged ascollateral for foreign exchange settlements, derivative trading and other transactions, and forcommitment lines as of December 31, 2012 and 2013, were ¥57,105 million and ¥50,583 million,
respectively.
Within other financial assets, guarantee deposits for futures trading held by a consolidated
subsidiary involved in the banking business as of December 31, 2012 and 2013, were ¥8,837
million and ¥8,014 million, respectively.
Within financial assets for securities business, short-term guarantee deposits as ofDecember 31, 2012 and 2013, were ¥26,664 million and ¥32,743 million, respectively.

―59―

For assets pledged as collateral, the counterparty has no right to sell or to repledge thecollateral.
(2) Assets Received as Collateral
The Group Companies receive securities pledged as collateral in lieu of guarantee deposits andcollateral for other transactions, which are conducted under normal terms and conditions. The
Group Companies hold the rights to sell or repledge the received assets, provided that the
securities are returned at the time the relevant transactions are completed. The fair values of
securities received by the Group Companies as collateral to which the Group Companies held
the right to sell or repledge the collateral as of December 31, 2012 and 2013 were ¥384,219
million and ¥719,585 million, respectively. Within such collateral, the fair value of the collateral
actually sold or pledged as of December 31, 2012 and 2013, was ¥105,968 million and ¥201,333
million, respectively.
35. Hedge Accounting(1) Fair Value Hedges
In order to offset the risk of fair value fluctuation on certain fixed rate bonds as a result offluctuations in interest rates, subsidiaries of the Group Companies have entered into fixed-forfloating interest rate swap contracts with financial institutions as fair value hedges. The fairvalues of the interest rate swaps as hedging instruments are stated in Note 12. Derivative Assets
and Derivative Liabilities.
Gains or losses from remeasuring such interest rate swaps at fair value were a loss of ¥210
million for the year ended December 31, 2012 and a gain of ¥54 million in the year ended
December 31, 2013. Additionally, gains or losses on the underlying hedged items due to thehedged risks were a gain of ¥210 million for the year ended December 31, 2012 and a loss of¥54 million for the year ended December 31, 2013.
(2) Cash Flow Hedges
In order to offset the risk of fluctuations on future cash flows from floating rate borrowings,
subsidiaries of the Group Companies have entered into fixed-for-floating interest rate swap
contracts with financial institutions as cash flow hedges. The purpose of these hedges is tohedge the risk of future fluctuations of cash flows from borrowings by effectively converting
floating rate borrowings into fixed rate borrowings. As a result of these hedges, it will become
possible to offset the fluctuations of cash flows from floating rate borrowings with the fluctuationsof cash flows from the interest rate swaps. Existing hedging relationships are expected tocontinue to the year ending December 31, 2018.
The fair values of the interest rate swaps used as the hedging instruments are stated in
Note 12. Derivative Assets and Derivative Liabilities.

―60―

Schedule of changes in the amounts recognized in other comprehensive income(Millions of yen)
Year ended December 31, 2012 Year ended December 31, 2013
January 1¥(374)¥(203)

Changes for the period
Reclassification to net
incomeDecember 31

(271)

(262)

442

144

(203)

(321)

(Note) The amounts reclassified to net income are included in “Revenue” in the Consolidated
Statement of Income.
36. Contingent Liabilities and Commitments(1) Commitment Line Lending Contracts and Guarantee Obligations
A certain consolidated subsidiary is engaged in the consumer lending business through cash
advances and credit card loans, which are incidental to the credit cards.
Since these contracts expire without the actual loan being drawn, in addition to the Group
Companies having discretion to increase or decrease the limits on the loan amounts, the unusedbalance of these loans would not necessarily have a material impact on the Group Companies’
cash flows.
Certain consolidated subsidiaries are engaged in the credit guarantee business providing
general customers with guarantees on liabilities corresponding to loans which such customers
have received from business partners of the subsidiaries.
The balances of the unused lending commitment lines and guarantee obligations given in
the credit guarantee business stated above are as follows:(Millions of yen)
December 31, 2012 December 31, 2013
Lending commitment lines
Financial guarantee contracts
Total¥1,666,455¥2,034,622

20,83917,523

1,687,294

2,052,145(2) Commitment Line Borrowing Contracts
The Company and certain consolidated subsidiaries have entered into commitment line
borrowing contracts with multiple financial institutions and the balances of the unused portions ofsuch commitment lines available are as follows:(Millions of yen)
December 31, 2012 December 31, 2013
Total commitment line
borrowings¥141,620¥111,798

Amounts borrowed

21,583

1,607

Unused commitment lines

120,037

110,191―61―

(3) Commitments (Contracts)
As of December 31, 2012 and 2013, there were no significant capital expenditures(commitments) for which contracts had been entered into and which were unrecognized in the
consolidated financial statements.
37. Share-based Payments
Employee expenses relating to stock options recognized by the Group Companies during theyears ended December 31, 2012 and 2013 were ¥651 million and ¥1,679 million, respectively.
The Group Companies have elected to apply the exemption under IFRS 1 and haveconsequently accounted for the 2008 and 2009 stock options and 2012 and 2013 stock options
1) to 5) granted by the Company, and 2012 stock option 1) to 6) and 2013 stock option granted
by Kobo Inc. in accordance with IFRS 2.
The Company has granted equity-settled stock options to its executives and employees, its
subsidiaries, and associates. Kobo Inc. has granted stock options with a cash alternative option
to executives and employees of Kobo Inc. and its subsidiaries. Conditions for vesting of thestock options require that those who received stock options continue to be employed by theCompany, its subsidiaries or associates from the grant date to the vesting date.
On July 1, 2012, the Company implemented a 100-for-1 share split. The number of stock
options issued for each year has been adjusted for the share split. The following is a summary of
the Company’s stock options.

―62―

Name
2003 stock
option 1)
2003 stock
option 2)
2004 stock
option2005 stock
option 1)
2005 stock
option 2)
2006 stock
option 1)
2006 stock
option 2)
2008 stock
option2009 stock
option2012 stock
option 1) A
2012 stock
option 1) B
2012 stock
option 1) C
2012 stock
option 2)
2012 stock
option 3)
2012 stock
option 4)2012 stock
option 5) A
2012 stock
option 5) B
2012 stock
option 5) C
2013 stock
option 1)
2013 stock
option 2)
2013 stock
option 3) A
2013 stock
option 3) B
2013 stock
option 4)2013 stock
option 5)

Grant date

Vesting dateJuly 14,
March 27,
2003
2007
August 29,
March 27,2003
2007
September 7,
March 30,
2004
2008
December 15, March 30,
2005
2009
February 13,
March 30,
2006
2009
April 20,
March 30,
2006
2010
December 14, March 30,
2006
2010
January 19,
March 27,20092012
February 12,
March 27,2010
2013
April 20,
April 19,20122014
April 20,
April 19,20122015
April 20,
April 19,
2012
2016
July 1,March 29,20122016
August 1,
March 29,20122016
August 20,
March 29,20122016
November 21, November 20,
2012
2014
November 21, November 20,
2012
2015
November 21, November 20,
2012
2016
February 1,
March 29,2013
2016
March 1,March 29,2013
2016
March 1,March 29,2013
2016
March 1,March 29,
2013
2016
July 1,March 28,20132017
December 1,
March 28,
2013
2017

Balance of
Exerciseoutstanding
price
options(Yen)(Note)
193

―

275

―

755

1,154,000

913

2,838,800

1,038

200,000

1,010

1,666,600

559

429,900

563

1,368,600

707

685,400

0.01

364,500

0.01

364,500

0.01

365,800

0.01

298,200

0.01

101,800

0.01

500

0.01

34,4000.01

34,4000.01

34,5000.01

1,351,400

0.01

276,100

0.01

495,100

0.01

150,000

0.01

1,045,500

0.01

12,000Exercise period
From March 28, 2007 to
March 26, 2013
From March 28, 2007 to
March 26, 2013
From March 31, 2008 to
March 29, 2014
From March 31, 2009 to
March 29, 2015
From March 31, 2009 to
March 29, 2015
From March 31, 2010 toMarch 29, 2016
From March 31, 2010 toMarch 29, 2016
From March 28, 2012 toMarch 26, 2018
From March 28, 2013 toMarch 26, 2019
From April 20, 2014 toApril 20, 2022
From April 20, 2015 toApril 20, 2022
From April 20, 2016 toApril 20, 2022
From March 30, 2016 to
March 28, 2022
From March 30, 2016 to
March 28, 2022
From March 30, 2016 to
March 28, 2022
From November 21, 2014 toNovember 21, 2022
From November 21, 2015 toNovember 21, 2022
From November 21, 2016 toNovember 21, 2022
From March 30, 2016 to
March 28, 2022
From March 30, 2016 to
March 28, 2022
From March 30, 2016 to
March 28, 2022
From March 30, 2016 to
March 28, 2022
From March 29, 2017 toMarch 27, 2023
From March 29, 2017 toMarch 27, 2023

(Note) The balance of outstanding options has been converted into the number of shares.

―63―

The following is a summary of Kobo Inc.’s stock options.
Exercise
Balance of
priceoutstanding
Name
Grant date
Vesting date
Exercise period(Canadianoptions
dollars)(Note)
Kobo Inc.
January 11,
January 10,
From January 11, 2014 to$1.00
5,218,842
2012 stock
2012
2014
January 11, 2018
option 1) A
Kobo Inc.
January 11,
January 10,
From January 11, 2015 to
1.00
5,218,840
2012 stock
2012
2015
January 11, 2018
option 1) B
Kobo Inc.
January 11,
January 10,
From January 11, 2016 to
1.00
5,218,842
2012 stock
2012
2016
January 11, 2018
option 1) C
Kobo Inc.
February 27, February 26,
From February 27, 2014 to
1.00
158,333
2012 stock
2012
2014
February 27, 2018
option 2) A
Kobo Inc.
February 27, February 26,
From February 27, 2015 to
1.00
158,334
2012 stock
2012
2015
February 27, 2018
option 2) B
Kobo Inc.
February 27, February 26,
From February 27, 2016 to
1.00
158,333
2012 stock
2012
2016
February 27, 2018
option 2) C
Kobo Inc.
April 9,April 8,From April 9, 2014 to
1.00
121,667
2012 stock
2012
2014
April 9, 2018
option 3) A
Kobo Inc.
April 9,April 8,From April 9, 2015 to
1.00
121,666
2012 stock
2012
2015
April 9, 2018
option 3) B
Kobo Inc.
April 9,April 8,From April 9, 2016 to
1.00
121,667
2012 stock
2012
2016
April 9, 2018
option 3) C
Kobo Inc.
April 23,
April 22,
From April 23, 2014 to
1.00―
2012 stock
2012
2014
April 23, 2018
option 4) A
Kobo Inc.
April 23,
April 22,
From April 23, 2015 to
1.00―
2012 stock
2012
2015
April 23, 2018
option 4) B
Kobo Inc.
April 23,
April 22,
From April 23, 2016 to
1.00―
2012 stock
2012
2016
April 23, 2018
option 4) C
Kobo Inc.
July 9,July 8,From July 9, 2014 to
1.00
647,350
2012 stock
2012
2014
July 9, 2018
option 5) A
Kobo Inc.
July 9,July 8,From July 9, 2015 to
1.00
647,349
2012 stock
2012
2015
July 9, 2018
option 5) B
Kobo Inc.
July 9,July 8,From July 9, 2016 to
1.00
647,350
2012 stock
2012
2016
July 9, 2018
option 5) C
Kobo Inc.
October 5, December 30,
From December 31, 2013 to2012 stock
1.00
400,000
2012
2013
October 5, 2018
option 6) A
Kobo Inc.
October 5, December 30,
From December 31, 2014 to2012 stock
1.00
400,000
2012
2014
October 5, 2018
option 6) B

―64―

Name

Grant date

Exercise
price
Vesting date
(Canadiandollars)

Kobo Inc.
2013 stock
optionJanuary 11,
2013

January 11,
2013

0.01

Balance ofoutstanding
options(Note)

Exercise period

2,188,682

From January 11, 2013 toJanuary 11, 2018

(Note) The balance of outstanding options has been converted into the number of shares.
The number of options and the weighted average exercise price related to stock options grantedby the Company are as follows:Year ended December 31, 2012
Number ofoptions(Note)

Year ended December 31, 2013

Weighted
average
exercise price(Yen)

Number ofoptions(Note)

Weighted
average
exercise price(Yen)

Balance at the beginning of
the year

13,883,300¥747

13,684,400¥687

Granted

1,670,800

0.01

3,567,300

0.01

Forfeited

700,900

774

739,200

530

Exercised

1,168,800

375

3,236,500

665

―

―

4,000

275

13,684,400

687

13,272,000

516

11,112,100

786

8,343,300

821

ExpiredOutstanding balance at theend of the year
Exercisable amount at theend of the year
Weighted average remaining
contract years

3.89 years(Note) The number of options has been converted into the number of shares.

―65―

4.53 years

The number of options and the weighted average exercise price related to stock options granted
by Kobo Inc. are as follows:Year ended December 31, 2012

Year ended December 31, 2013

Weighted
average
exercise price(Canadiandollars)

Number ofoptions(Note)

Weighted
average
exercise price(Canadiandollars)―$―

20,303,573$1.00

Granted

20,303,573

1.00

2,188,682

0.01

Forfeited――

1,065,000

1.00

Exercised

―

―

―

―

ExpiredOutstanding balance at theend of the year
Exercisable amount at end of
the year
Weighted average remaining
contract years

―

―

―

―

20,303,573

1.00

21,427,255

0.90

―

―

2,588,682

0.16

Number ofoptions(Note)
Balance at the beginning of
the year

5.18 years

4.16 years(Note) The number of options has been converted into the number of shares.
The weighted average stock prices of the Company as of the exercise date were ¥779 and¥1,231 for the years ended December 31, 2012 and 2013, respectively.
The expiration dates and the exercise prices of the outstanding options for stock options grantedby the Company are as follows:
Exercise price(Yen)

Number of options (Note)
December 31, 2012

December 31, 20132013

¥193~275

351,000

―

2014

755

1,978,000

1,154,000

2015

913~1,038

3,771,500

3,038,800

2016

559~1,010

2,641,400

2,096,500

2018

563

2,370,200

1,368,600

2019

707

933,100

685,400

2022

0.01

1,639,200

3,871,200

2023
Balance at end of theperiod0.01―

1,057,500―

13,684,400

13,272,000(Note) The number of options has been converted into the number of shares.
The expiration dates and the exercise prices of the outstanding options related to stock options
granted by Kobo Inc. are as follows:―66―

Exercise price(Canadiandollars)
2018
Balance at end of theperiodNumber of options (Note)
December 31, 2012

December 31, 2013

$0.01~1.00

20,303,573

21,427,255―

20,303,573

21,427,255(Note) The number of options has been converted into the number of shares.
The Company granted equity-settled stock options to its executives and employees, its
subsidiaries, and associates during the year ended December 31, 2013. Kobo Inc. granted
stock options with a cash alternative option to the executives of Kobo Inc. during the year ended
December 31, 2013. The fair value of the options granted has been calculated using the BlackScholes model adjusted for dividends. The fair value and assumptions used in the calculation
are as follows.
Expected volatility of the Company has been calculated as an annual rate based on thehistorical period of stock prices corresponding to the expected remaining period and weekly
data (weekly closing price versus volatility of the previous week), assuming 52 weeks in a year.
Expected volatility of Kobo Inc. is based on the stock price volatility of a comparable
company as Kobo Inc. is not listed.
December 31, 2013
The Company
The Company
2013 stock option2013 stock option 1)2), 3) A, B

The Company
2013 stock option 4)

Weighted average stock
prices (Yen)
Exercise price (Yen)

¥844

¥800

¥1,198

¥0.01

¥0.01

¥0.01

Expected volatility (%)

26.9

26.7

29.5

Remaining term (Years)

3.20

3.08

3.75

Expected dividend (Yen)

¥2.50

¥2.50

¥3.00

0.1

0.1

0.2

¥835

¥792

¥1,187

Risk-free rate (%)
Fair value per option (Yen)

December 31, 2013
The Company
2013 stock option 5)
Weighted average stock
prices (Yen)
Exercise price (Yen)¥1,585¥0.01

Expected volatility (%)

33.8

Remaining term (Years)

3.33

Expected dividend (Yen)¥3.00

Risk-free rate (%)
Fair value per option (Yen)

0.1¥1,575―67―

December 31, 2013
Kobo Inc.
2013 stock option
Weighted average stock
prices (Canadian dollars)
Exercise price (Canadiandollars)
Expected volatility (%)
Remaining term (Years)
Expected dividend(Canadian dollars)
Risk-free rate (%)
Fair value per option(Canadian dollars)

$1.08
$0.01
56.8
2.50
$―
1.2
$1.07

―68―

38. Dividends
Year ended December 31, 2012
Dividends per
share
(Yen)

Amount ofdividends(Millions ofyen)Year ended December 31, 2013
Dividends per
share
(Yen)

Amount ofdividends(Millions of yen)

Dividends paid
Dividends by resolution at
the Board of Directors in the¥250¥3,284¥3¥3,944previous year
Dividends paid during the――――current year
Total dividends paid
250
3,284
3
3,944
applicable to the year
(Note) On July 1, 2012, the Company implemented a 100-for-1 share split of common stock.
The Company continues to make stable dividend payments under the principle of returning
profits with the maximization of corporate value in mind, while maintaining a sound financial
position and enhancing retained earnings to prepare for proactive business development.
Furthermore, the Board of Directors of the Company determines the payment ofdividends. In principle, the Company distributes dividends once a year at year-end. For dividend
distributions pursuant to Article 459, Paragraph 1 of the Companies Act, the Company makes its
determination taking into consideration the business environment and other factors.
(Note) Cash dividends paid with record date during the year ended December 31, 2013 are as
follows:
Date of resolution
Total dividends (Millions of yen)
Dividends per share (Yen)
Resolution at the Board of
Directors on November 26,
2013¥5,271¥4
Resolution at the Board of
Directors on February 14,
2014

―69―

39. Classification of Financial Instruments
The Group Companies’ financial instruments are classified as follows:
As of December 31, 2012
(Financial Assets)(Millions of yen)
Financial assets measured
at fair value

Financial assets
measured atamortized cost

Total

Financial assets
measured at
FVTPL

Financial assets
measured at
FVTOCI¥―¥―¥270,114¥270,114――

65,49365,493441―

615,262

615,703――402,418

402,418

45,1420251,184

296,326――

189,669

189,669――

13,623

13,623

10,674――

10,674

Investment securities

50

15,722

7,639

23,411Other financial assets

03

123,129

123,132

56,307

15,725

1,938,531

2,010,563

Cash and cash
equivalents
Accounts receivable ―trade
Financial assets forsecurities business
Loans for credit cardbusiness
Investment securities
for banking business
Loans for banking
business
Investment securities
for insurance business
Derivative assets

Total(Financial Liabilities)(Millions of yen)Accounts payable ―trade
Deposits for banking
business
Financial liabilities forsecurities business
Derivative liabilities

Financial liabilities measured
at fair value
Financial
Financial liabilities
liabilities subject
designated as
to mandatory
being measured
measurement at
at FVTPL
fair value

Financialliabilities
measured atamortized cost

Total

¥―

¥―

¥79,965¥79,965―

80,081

729,450

809,531――558,055

558,055

4,685

―

－

4,685

Bonds and borrowings－―

305,186

305,186

Other financial liabilities－―

210,048

210,048

4,685

80,081

1,882,704

1,967,470

Total

―70―

As of December 31, 2013
(Financial Assets)(Millions of yen)
Financial assets measured
at fair value

Financial assets
measured atamortized cost

Total

Financial assets
measured at
FVTPL

Financial assets
measured at
FVTOCI¥―¥―¥384,008¥384,008――

73,44373,443754―

1,218,233

1,218,987――

544,314544,31434,9540

162,943

197,897――

239,818

239,818――

10,233

10,233

12,588――

12,588Investment securities

697

24,693

8,635

34,025

Other financial assets

2―

159,056

159,058

48,995

24,6932,800,683

2,874,371

Cash and cash
equivalents
Accounts receivable ―trade
Financial assets forsecurities business
Loans for credit cardbusiness
Investment securities
for banking business
Loans for banking
business
Investment securities
for insurance business
Derivative assets

Total(Financial Liabilities)(Millions of yen)Accounts payable ―trade
Deposits for banking
business
Financial liabilities forsecurities business
Derivative liabilities

Financial liabilities measured
at fair value
Financial
Financial liabilities
liabilities subject
designated as
to mandatory
being measured
measurement at
at FVTPL
fair value

Financialliabilities
measured atamortized cost

Total

¥―

¥―

¥115,357¥115,357―

79,218880,742959,960――

1,077,971

1,077,971

8,023

―

―

8,023

Bonds and borrowings――

389,683

389,683

Other financial liabilities――

226,771

226,771

8,023

79,2182,690,524

2,777,765

Total

―71―

(1) Investments in Equity Instruments Designated as Measured at FVTOCI
Since shares held by the Group Companies are investments held over the long term for the
purpose of strengthening business relationships or in anticipation of synergistic effects inbusiness operations rather than only for trading purposes, such shares are designated as
financial assets measured at FVTOCI.
Equity instruments designated as measured at FVTOCI as of December 31, 2012 mainlycomprise shares in Pinterest, Inc., with a fair value of ¥7,191 million. Equity instruments
designated as measured at FVTOCI as of December 31, 2013 mainly comprise shares in
Pinterest, Inc. and F@N Communications, Inc., with a fair value of ¥8,757 million and ¥7,235
million.
During the year ended December 31, 2012, shares of investments from which synergistic
effects could no longer be anticipated were sold. The fair value of such investments at the time ofsale was ¥1,147 million, and a gain on sales of ¥157 million was recognized. Similarly, during theyear ended December 31, 2013, shares of investments from which synergistic effects could nolonger be anticipated were sold. The fair value of such investments at the time of sales was¥3,388 million, and a gain on sales of ¥2,880 million was recognized.
Additionally, during the year ended December 31, 2012, dividend income recognized fromshares designated as financial assets measured at FVTOCI was ¥98 million, of this, the amountof such dividends relating to shares held as of December 31, 2012 was ¥85 million. Furthermore,during the year ended December 31, 2013, dividend income recognized from shares designatedas financial assets measured at FVTOCI was ¥112 million, and all of this was such dividends
relating to shares held as of December 31, 2013.
During the year ended December 31, 2012, the Group Companies reclassified ¥106 millionof cumulative gains in equity, related to shares designated as financial assets measured at
FVTOCI, to retained earnings on the sale of such shares, etc. During the year ended December
31, 2013, the Group Companies reclassified ¥1,793 million in cumulative gains in equity, related
to shares designated as financial assets measured at FVTOCI, to retained earnings on the saleof such shares, etc.
(2) Financial Liabilities Designated as Measured at FVTPL
The Group Companies classify certain time deposits with special clauses included in “Deposits
for banking business” as financial liabilities measured at FVTPL.
Fair values of such deposits of the Group Companies are measured at present value
calculated by discounting each portion of future cash flows, classified by period, for thecorresponding remaining maturity using the applicable interest rate considering credit risk.
(Millions of yen)
December 31, 2012
Carrying
amount(Fair value)

Contractual
obligations atmaturity

Deposits
for banking
business¥80,081¥78,630

Total

80,081

78,630December 31, 2013
Carrying
amount(Fair value)

Contractual
obligations atmaturity¥1,451¥79,218¥77,584¥1,634

1,451

79,21877,584

1,634

Difference―72―

Difference

The amount of payment demanded at maturity has been calculated assuming that the liabilities
will be repaid on the earliest maturity date on which the repayment can be demanded.
40. Gains and Losses Generated from Financial Instruments
The analysis of the gains and losses generated from financial instruments held by the Group
Companies is as follows:
For the year ended December 31, 2012
(1) Breakdown of Net Gains and Losses Generated from Financial Assets by Type of Financial
Instruments(Millions of yen)
Financial assets measured
at fair value
Financial assets
measured at
Total
Financial assets Financial assets
amortized costmeasured atmeasured at
FVTPL
FVTOCI
Revenue
Operating expenses
Financial income
Other comprehensive
income¥4,591¥67¥210¥4,868―――31¥10,243―

10,243
31

266

(72)

―

194

Net gains generated from financial assets measured at fair value include interest income,dividend income and commissions received relating to such assets.
(2) Breakdown of Net Gains and Losses Generated from Financial Liabilities by Type of Financial
Instruments(Millions of yen)
Financial liabilities measured
at fair value
Financial
Financialliabilities
Financial liabilities
Total
liabilities subject
measured at
designated as
to mandatory
amortized cost
being measured
measurement at
at fair value
fair value
Revenue¥―¥(359)¥―¥(359)
Operating expenses

―

652

―73―

―

652

(3) Total Interest Income and Interest Expenses (Calculated Using the Effective Interest Method)
Associated With Financial Assets Measured at Amortized Cost or Financial Liabilities Measured
at Amortized Cost
(Millions of yen)
Total interest income fromTotal interest expenses fromfinancial assets measured atfinancial liabilities measured atamortized costamortized cost
Revenue¥48,960¥―
Operating expenses―
4,536
Financial income
162―
Financial expenses
Total

―

2,220

49,122

6,756(4) Commission Revenue and Commission Fees Expense Generated from Financial Assets
Measured at Amortized Cost, Financial Liabilities Measured at Amortized Cost, and Trust andOther Trustee Operations(Millions of yen)
Commission
Commission Commission
fees
fees
expensesrevenue from
Commission Commission
expensesfinancial
revenuefrom fees expenses
from
from financial
assetstrust
andfrom trust andfinancialassetsliabilities
measured at measured
othertrusteeother trustee
at measured at operations
amortized
operations
amortized
cost
amortized
cost
cost
Financial expenses

¥―

¥―

¥344

¥―

(5) Impairment Loss (or Reversal of Impairment Loss) by Type of Financial Asset(Millions of yen)
Impairment
loss (orreversal of
impairment
loss)
Accounts receivable¥963― tradeFinancial assets for(36)
securities business
Loans for credit card
9,446
business
Investment securities(179)
for banking business
Loans for banking(14)business
Other financial assets
56
Total

10,236―74―¥―

(6) Analysis of Gains and Losses Arising from Derecognition of Financial Assets Measured at
Amortized Cost and Reason for Derecognition(Millions of yen)
Gains arising from derecognition Losses arising from derecognitionof financial assets measured at of financial assets measured atamortized costamortized cost
Investment securities for¥―¥220
banking business
Reason for Derecognition
Rakuten Bank, Ltd. has derecognized certain investment securities for banking business due tosales after the issuer was downgraded.
For the year ended December 31, 2013
(1) Breakdown of Net Gains and Losses on Financial Assets by Type of Financial Instruments(Millions of yen)
Financial assets measured
Financialat fair value
assets
Total
Financial assets
measured at
Financial assets
measured atamortized costmeasured at FVTPL
FVTOCI
Revenue¥17,112

¥54

¥(45)

¥17,121

Operating expenses――

12,92912,929Financial income
Other comprehensive
income

―

58

―

58

(180)

9,500

―

9,320

Net gains on financial assets measured at fair value include interest income, dividend income
and commissions received relating to such assets.
(2) Breakdown of Net Gains and Losses on Financial Liabilities by Type of Financial Instruments(Millions of yen)
Financial liabilities measured
at fair value
Financial
Financial
Financialliabilities
Total
liabilities which
liabilities
measured atmust bedesignated asamortized costmeasured at fair measured at fair
value
value
Revenue¥―¥(183)¥―¥(183)
Operating expenses

―

(620)

―75―

―

(620)

(3) Total Interest Income and Interest Expenses (Calculated Using the Effective Interest Method)
Associated With Financial Assets Measured at Amortized Cost or Financial Liabilities Measured
at Amortized Cost
(Millions of yen)
Total interest income associatedTotal interest expenses
with financial assets measured associated with financial liabilities
at amortized costmeasured at amortized cost
Revenue¥66,204¥―
Operating expenses

―

3,922

Financial income

140―

Financial expenses

―

1,676

66,344

5,598

Total

(4) Commission Revenue and Commission Expense relating to Financial Assets Measured at
Amortized Cost, Financial Liabilities Measured at Amortized Cost, and Trust and Other Trustee
Operations(Millions of yen)
Commission Commission
Commission
expenseexpenseCommission
revenue from
Commission
relating torelating to
expensefinancial
revenue from
relating to trust
financialfinancialtrust and
assetsand otherassetsliabilities
measured atother trustee
measured at measured attrusteeamortized
operations
amortized
amortized
operations
cost
cost
cost
Financial expenses
¥―
¥―
¥286
¥―
¥―
(5) Impairment Loss (or Reversal of Impairment Loss) by Type of Financial Asset(Millions of yen)
Impairment
loss (orreversal of
impairment
loss)
Accounts receivable¥908― tradeFinancial assets for76
securities business
Loans for credit card
11,776business
Investment securities(192)
for banking business
Loans for banking
134
business
Other financial assets
226
Total

12,928―76―

(6) Analysis of Gains and Losses on Derecognition of Financial Assets Measured at Amortized Costand Reason for Derecognition(Millions of yen)
Gains on derecognition ofLosses on derecognition offinancial assets measured atfinancial assets measured atamortized costamortized cost
Investment securities for¥9¥1
insurance business
Reason for Derecognition
Rakuten Life Insurance Co., Ltd. derecognized certain investment securities for the insurance
business due to the sale of such assets to adjust its investment portfolios to reflect the modified
forecast duration.
41. Fair Value of Financial Instruments(1) Fair Value and Carrying Amount of Financial Instruments
The following table provides a comparison between carrying amounts and fair values of thefinancial instruments held by the Group Companies.
(Millions of yen)
For the year ended
For the year ended
December 31, 2012
December 31, 2013
Carrying amount
Fair value
Carrying amount
Fair value(Financial assets)
Financial assets forsecurities business
Loans for credit cardbusiness
Investment securities
for banking business
Loans for banking
business
Investment securities
for insurance business
Derivative assets
Investment securities
Total(Financial liabilities)
Deposits for banking
business
Financial liabilities forsecurities business
Derivative liabilities
Bonds and borrowings
Total¥615,703¥615,703¥1,218,987¥1,218,987

402,418

412,615544,314554,390

296,326

296,829

197,897

198,238

189,669

190,663

239,818

240,896

13,623

13,778

10,233

10,38010,674

10,674

12,588

12,58823,411

23,42534,025

34,104

1,551,824

1,563,687

2,257,862

2,269,583

809,531

808,576

959,960

960,267

558,055

558,055

1,077,971

1,077,971

4,685

4,685

8,023

8,023

305,186

305,188389,683

388,781

1,677,457

1,676,504

2,435,637

2,435,042―77―

Measurement of Fair Values- Financial assets for securities businessAs financial assets for securities business are subject to short-term settlement, their fairvalues approximate their carrying amounts.
- Loans for credit card business and loans for banking business
The fair value of loans for credit card business and loans for banking business is measured
at present value calculated by discounting each portion of future cash flows classified byperiod, for the corresponding remaining maturity using the applicable interest rateconsidering credit risk.
- Investment securities, investment securities for banking business and investment securities
for insurance businessOf these investment securities, fair value of listed shares is measured at the year-end closing
market price, while fair value of unlisted shares is measured by using an appropriate
valuation technique, such as a method of comparison with similar sectors. The fair value ofbonds is measured by reasonable valuation methods based on available information,
including reference trading statistics and brokers’ quotes.
- Derivative assets and liabilities
Within derivative assets and liabilities, forward exchange contracts are measured at fair value
at the end of year based on forward exchange rates. Fair value of interest rate swaps ismeasured at the present value calculated by discounting future cash flows for the remaining
maturity using the rate of the interest rate swap at the end of year. Since counterparties ofinterest rate swap contracts are limited to financial institutions with superior credit ratings,
consideration of credit risk is not incorporated in the calculation of fair value as it is minimal.
- Deposits for banking businessFor demand deposits of the deposits for banking business, amounts payable on request at
the year-end closing date (carrying amount) are considered to represent fair value. Fair valueof time deposits is measured at the present value calculated by discounting each portion of
future cash flows classified by period, for the corresponding remaining maturity, using theapplicable interest rate considering credit risk. For time deposits with short remaining
maturities (one year or less), the carrying amount is deemed as fair value as such fair value
approximates the carrying amount.
- Financial liabilities for securities businessAs financial liabilities for securities business are subject to short-term settlement, their fairvalues approximate their carrying amounts.
- Bonds and borrowings
Among bonds and borrowings, fair value of those with longer remaining maturities ismeasured at the present value calculated by discounting each portion of future cash flowsclassified by period, for the corresponding remaining maturity, using the applicable interest
rate considering credit risk.
As other financial assets and liabilities are subject to short-term settlement, their fair values
approximate their carrying amounts.
(2)

Fair Value Hierarchy
The following table shows the fair value measurement classified into one of three levels fromLevel 1 to Level 3 based on the fair value hierarchy.

―78―

[Definition of Each Level of Hierarchy]
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Fair value calculated by using inputs that are directly or indirectly observable forassets or liabilities, other than quoted prices included within Level 1
Level 3: Fair value calculated by using the valuation technique including inputs that areunobservable
The Group Companies recognize transfers between each level in hierarchy at the year-end
closing date.
Classification by level of assets and liabilities measured at fair value in the Consolidated
Statement of Financial Position
For the year ended December 31, 2012
Level 1
Financial assets forsecurities business
Investment securities
for banking business
Investment securities
Deposits for banking
business
Derivative
assets/liabilities

Level 2

Level 3

(Millions of yen)
Total

¥―

¥441

¥―

¥441

―

6,283

38,85945,142

3,687

1,736

10,34915,772―80,081―80,081

―

6,007

(18)

5,989

There were no significant transfers between Level 1 and Level 2 during the year ended
December 31, 2012.
For the year ended December 31, 2013
Level 1
Financial assets forsecurities business
Investment securities
for banking business
Investment securities
Deposits for banking
business
Derivative
assets/liabilities

Level 2

Level 3

(Millions of yen)
Total

¥―

¥754

¥―

¥754

―

―

34,95434,954

11,506―

13,88325,389―79,218―79,218

―

4,565

―

4,565

There were no significant transfers between Level 1 and Level 2 during the year ended
December 31, 2013.
Classification by level of assets and liabilities not measured at fair value in the consolidated
statement of financial position―79―For the year ended December 31, 2013
Level 1
Financial assets forsecurities business
Loans for credit cardbusiness
Investment securities
for banking business
Loans for banking
business
Investment securities
for insurance business
Investment securities
Deposits for banking
business
Financial liabilities forsecurities business
Bonds and borrowings

Level 2

Level 3

(Millions of yen)
Total

¥―

¥1,218,155¥78¥1,218,233――

554,390554,390

41,405―

121,879

163,284――

240,896

240,896

10,380――10,380

6,899

1,800

16

8,715

―

881,049―

881,049―

1,077,971―

1,077,971―

388,781―

388,781―80―

(3) Reconciliation of Level 3 of the Hierarchy
The following reconciliation table indicates changes in the balances, from the beginning to theend of each year, of the financial instruments classified as Level 3, with one or more significant
inputs not supported by observable market data.
For the year ended December 31, 2012
(Millions of yen)

January 1, 2012

Investment
securities forbankingbusiness¥39,470

Investment
securities

Derivative
assets/liabilities

Total¥3,117¥(8)¥42,579

Gains or losses
Net income
Other comprehensive
incomeAcquisition

1,483

0

(10)

1,473

(31)

(422)

―

(453)

4,000

8,038

―

12,038

Disposal(3,244)(143)―(3,387)Issuance

―

―

―

―

Settlement

―

―

―

―

Redemption(3,461)(0)―(3,461)Others

642

(73)

―

569

Transfer to Level 3

―

―

―

―

Transfer from Level 3 (Note)

―

(168)

―

(168)

December 31, 2012
38,85910,349(18)
49,190Total net income on financial
instruments held at the end of
1,304
0
(10)
1,294
previous year
(Note) Transfers were due to significant inputs used for fair value measurement becoming
observable.

―81―

Gains or losses included in net income during the year ended December 31, 2012 are included
in “Revenue.”
For the year ended December 31, 2013
(Millions of yen)

January 1, 2013

Investment
securities forbankingbusiness¥38,859

Investment
securities

Derivative
assets/liabilities

Total¥10,349¥(18)¥49,190

Gains or losses
Net income
Other comprehensive
incomeAcquisition

2,738

17

―

2,755

0

45

―

45

―

1,122

―

1,122

Disposal

(704)

(15)

―

(719)

―
―
(5,939)
―

―
―
―
2,365

―
18
―
―

―
18
(5,939)2,365Transfer to Level 3
Transfer from Level 3 (Note)

―
―

―
―

―
―

―
―

December 31, 2013
Total net income on financial
instruments held at the end ofcurrent year

34,954

13,883―

48,837

2,773

17

―

2,790

Issuance
Settlement
Redemption
OthersGains or losses included in net income during the year ended December 31, 2013 are included
in “Revenue.”
The fair values of unlisted shares are measured in accordance with rules specified by theadministrative department independent of the sales department. In measuring fair value, theGroup Companies employ different valuation models that can most appropriately assess theproperty, characteristics and risks of each asset. The grounds for the employment of valuation
models and fair value measurement processes are reported to the Risk Management
Department, the Group Companies’ risk management function, with the aim of ensuring theutilization of appropriate fair value measurement policies and procedure.
The fair values of investment securities in the banking business are measured by the Risk
Management Department in accordance with the office standard of market value calculation.
Prices presented by transacting financial institutions and others are categorized by types ofinvestment securities. To validate the consistency of changes in these prices, movements inimportant data that may affect a change in the market value of these categories of investment
securities are carefully monitored. Validation results are reported to the Risk Management
Committee, Management Meetings and the Board of Directors on a monthly basis.

―82―

For investment securities in the banking business classified as Level 3, if each input were to bechanged to reasonable alternative assumptions, any resulting changes in fair value are notexpected to be significant. Additionally, for other financial assets classified as Level 3, significant
changes in fair value are not anticipated if each input were to be changed to reasonable
alternative assumptions.

42. Offsetting of Financial Assets and Financial Liabilities
The Group Companies’ gross amount prior to offsetting of recognized financial assets andfinancial liabilities that are presented on net basis after offsetting in the statement of financial
position, the offsetting amount and the net balance after offsetting are as follows. Additionally, interms of legally enforceable master netting arrangements or similar agreements relating torecognized financial assets or financial liabilities, the potential effects are disclosed even for
amounts that are not presented on net basis after offsetting.
As of December 31, 2012
(Financial assets that are presented on net basis after offsetting in the statement of financial
position, and legally enforceable master netting arrangements or similar agreements)(Millions of yen)
Gross amount of
Net amount ofGross amountrecognizedfinancial assetsof recognized financial liabilities
Financial
Type of transaction
presented in thefinancialassetsoffset in thestatement ofassetsstatement offinancial position
financial position
Derivative
Derivatives¥10,800¥(127)¥10,673
assets
Reverse repurchaseagreements, investment
securities borrowing
130,165―
130,165
Financialagreements and similar
assets foragreements
securities
Accounts receivable, etc.
businessrelating to investment
391,653(190,012)
201,641securities and othertransactions, etc.
Other
Accounts receivable —financial
15,643(12,135)
3,508
other, etc.
assets―83―

(Millions of yen)Type of transaction

Derivatives
Reverse repurchaseagreements, investment
securities borrowing
agreements and similar
agreements
Accounts receivable, etc.
relating to investment
securities and othertransactions, etc.
Accounts receivable —other, etc.

Net amount offinancial assets
presented in thestatement offinancial position

Related amounts that are notpresented on net basis after
offsetting in the statement offinancial position
Financial
Collateral
instruments
received

Net amount¥10,673¥(5,650)¥(802)¥4,221130,165(130,165)――

201,641(201,344)

―

297

3,508

―

―

3,508

(Financial liabilities that are presented on net basis after offsetting in the statement of financial
position, and legally enforceable master netting arrangements or similar agreements)(Millions of yen)
Gross amount of
Net amount ofGross amountrecognizedfinancial liabilities
Financialof recognizedfinancial assets
Type of transaction
presented in theliabilities
financial
offset in thestatement ofliabilities
statement offinancial position
financial position
Derivative
Derivatives¥4,362¥(127)¥4,235liabilities
Reverse repurchaseagreements, investment
79,243―79,243securities borrowing
Financialagreements and similar
liabilities foragreements
securities
Accounts payable, etc.
businessrelating to investment
561,423(190,012)
371,411securities and othertransactions, etc.
Other
Accounts payable —16,370(12,135)
4,235
financialother, etc.
liabilities―84―

(Millions of yen)Type of transaction

Derivatives
Reverse repurchaseagreements, investment
securities borrowing
agreements and similar
agreements
Accounts payable, etc.
relating to investment
securities and othertransactions, etc.
Accounts payable — other,etc.

Net amount offinancialliabilities
presented in thestatement offinancial position

Related amounts that are notpresented on net basis after
offsetting in the statement offinancial position
Financial
Collateral
instruments
pledgedNet amount¥4,235¥(4,221)

¥(14)

¥―

79,243(78,404)―¥839

371,411(286,986)―

84,425

4,235

―

―

4,235

As of December 31, 2013
(Financial assets that are presented on net basis after offsetting in the statement of financial
position, and legally enforceable master netting arrangements or similar agreements)(Millions of yen)
Gross amount of
Net amount ofGross amountrecognizedfinancial assets
Financialof recognized financial liabilities
Type of transaction
presented in theassetsfinancial
offset in thestatement ofassetsstatement offinancial position
financial position
Derivative
Derivatives¥13,904¥(1,865)¥12,039
assets
Reverse repurchaseagreements, investment
317,956―
317,956
securities borrowing
Financialagreements and similar
assets foragreements
securities
Accounts receivable, etc.
businessrelating to investment
815,560(388,268)
427,292
securities and othertransactions, etc.
Other
Accounts receivable —financial
20,206(16,441)
3,765
other, etc.
assets―85―

(Millions of yen)Type of transaction

Derivatives
Reverse repurchaseagreements, investment
securities borrowing
agreements and similar
agreements
Accounts receivable, etc.
relating to investment
securities and othertransactions, etc.
Accounts receivable —other, etc.

Net amount offinancial assets
presented in thestatement offinancial position

Related amounts that are notpresented on net basis after
offsetting in the statement offinancial position
Financial
Collateral
instruments
received

Net amount¥12,039¥(8,570)¥(228)¥3,241

317,956(317,956)――

427,292(395,542)―

31,750

3,765

―

―

3,765

(Financial liabilities that are presented on net basis after offsetting in the statement of financial
position, and legally enforceable master netting arrangements or similar agreements)(Millions of yen)
Gross amount of
Net amount ofGross amountrecognizedfinancial liabilities
Financialof recognizedfinancial assets
Type of transaction
presented in theliabilities
financial
offset in thestatement ofliabilities
statement offinancial position
financial position
Derivative
Derivatives¥9,187¥(1,865)¥7,322
liabilities
Reverse repurchaseagreements, investment
163,594―
163,594
securities borrowing
Financialagreements and similar
liabilities foragreements
securities
Accounts payable, etc.
businessrelating to investment
1,108,317(388,268)
720,049
securities and othertransactions, etc.
Other
Accounts payable —28,493(16,441)
12,052
financialother, etc.
liabilities―86―

(Millions of yen)Type of transaction

Derivatives
Reverse repurchaseagreements, investment
securities borrowing
agreements and similar
agreements
Accounts payable, etc.
relating to investment
securities and othertransactions, etc.
Accounts payable — other,etc.

Net amount offinancialliabilities
presented in thestatement offinancial position

Related amounts that are notpresented on net basis after
offsetting in the statement offinancial position
Financial
Collateral
instruments
pledgedNet amount¥7,322¥(7,080)¥(242)¥―

163,594(162,117)

―

1,477

720,049(566,534)―

153,515

12,052――

12,052

The right of offsetting recognized financial assets and liabilities subject to a legally enforceable
master netting agreement or other similar agreements becomes enforceable and affects therealization or settlement of individual financial assets and liabilities only following a default or otherspecified circumstances not expected to arise in the normal course of business.

―87―43. Financial Risk Management
The objective of Group Companies’ investment activities is to protect the principal and ensure
the efficient use of funds, fully taking into account various risks including credit risk, market risk
and liquidity risk. In addition, in view of factors such as the current economic environment, theGroup Companies’ fund-raising activities are based on the best conceivable choice of thealternative options among direct as well as indirect financing methods.
The Group Companies’ subsidiaries engage in the banking business with a primary focus on
deposit-taking, foreign exchange business, and lending to individual customers, and they accept
ordinary deposits from individual as well as corporate customers, and offer time deposits and foreign
currency deposits to individual customers. In addition, using such financial liabilities as major
resources, the subsidiaries provide unsecured card loans and residential mortgages to individual
customers, as well as acquiring investment securities and monetary claims, establishing monetarytrusts, engaging in market transactions such as call loans, along with derivative transactions andforeign exchange transactions associated with the sales of financial instruments to customers. The
subsidiaries are always aware of the significance of a bank’s social responsibility and public mission,
which strictly restrains it from entering into investment transactions beyond its management capacity
in the undue pursuit of profit, and emphasis is placed on investing deposits entrusted by customers
with full consideration of safety. Furthermore, to ensure an optimum asset and liability structure alongwith appropriate capital adequacy over the entire financial operations from funding to investment, thesubsidiaries engage in Asset and Liability Management (ALM) focused on interest rate sensitivity,
funding liquidity and market liquidity.
The Group Companies’ subsidiaries engaged in the securities business primarily focus onstock brokerage activities for individual investors, segregate the deposits and guarantee
deposits received from customers in trusts for the separate management of deposit money andsecurities, under the Financial Instruments and Exchange Act, and invest in accordance withlaws and regulations. When utilizing funds, importance is placed on the safety of investments,
such as bank deposits and financial assets with high liquidity, while fund-raising is conducted
mainly by borrowing from financial institutions.
The Group Companies’ subsidiaries engaged in the credit card business (including thecomprehensive credit purchase intermediation business, individual credit purchase intermediation
business, credit guarantee business and loan business) restrict their investment of funds to shortterm deposits, while obtaining funding through borrowings from banks and other financial institutions
and through direct financing by issuance of commercial paper and securitization of receivables.
The Group Companies’ subsidiaries engaged in the insurance business consider ensuringsafety and profitability as their priority mission in asset management, in order to honor theircommitment to the reliable payment of insurance claims and benefits over the years to come.
Their policy in asset management is to invest mainly in domestic public and corporate bonds
seeking to disperse risks, focusing primarily on government bonds and industrial bonds withsuperior credit ratings with an aim to receive consistent investment yields over the medium- tolong-term, in an effort to develop a safety-first liquidity-oriented investment portfolio. Under the
corporate policy, derivative transactions are handled responsibly, never to be treated as
speculative instruments. Derivative transactions include foreign exchange margin transactions
conducted by the securities business. In an effort to mitigate market risks associated with thesetransactions with clients, the Group Companies enter into cover deals with counterparties.
These financial assets are well diversified both in terms of the investees’ types of businessand their geographical locations, avoiding particular concentration of credit risk.

―88―

(1) Credit Risk
1) Outline of Credit Risk Associated with Financial Instruments
Financial assets held by the Group Companies are mainly accounts receivable ― installment,
operating loans, investment securities, banking business-related assets held by the subsidiaries
engaged in the banking business, securities business-related assets held by the subsidiaries
engaged in the securities business and insurance business-related assets held by thesubsidiaries engaged in the insurance business.
Accounts receivable ― installment and operating loans include credit card receivables,
loan receivables, consumer loans and secured loans held by the subsidiaries engaged in thecredit card business, all of which are presented as loans for credit card business. These areexposed to credit risk associated with respective debtors.
Investment securities include debt instruments, which are exposed to credit risk.
Banking business-related assets include investment securities for banking business andloans for banking business. Investment securities for banking business mainly include securities
in shares, domestic bonds and foreign bonds, as well as trust beneficiary rights. Such securities
are exposed to credit risk subject to the financial position of issuers, while trust beneficiary rights
are exposed to credit risk of the issuers as well as underlying assets. Loans for banking
business include unsecured card loans and residential mortgages for individual customers thatare exposed to credit risk of individual customers. Securities business-related assets include
cash segregated as deposits for securities business and margin transaction assets, which arepresented as financial assets for securities business. Cash segregated as deposits for securities
business are primarily trust segregated for customer’s money, which are invested in bankdeposits, thus exposed to the credit risk of the deposit-taking financial institutions. Margintransaction assets are exposed to customers’ credit risk.
Insurance business-related assets include investment securities for insurance business.
Investment securities for insurance business mainly include government bonds, municipal bonds
and corporate bonds, and are exposed to credit risk related to the financial position of issuers.
2) Management System of Credit Risks Associated with Financial Instruments
Specific methods and systems to manage various risks within the Group Companies are set out
under various risk management regulations established at each Group Company.
Credit risks are managed under the above regulations, through establishing individual
credit limits, understanding the credit status of individual customers, and controlling due dates
and loan balances on a regular basis, while efforts are made on early detection and mitigation of
the risk of default resulting from deterioration of borrowers’ financial conditions and other factors.
Meanwhile, derivative transactions are managed based on “the Detailed Regulations for Hedge
Trading Management.” Derivative transactions are exposed to the risk of financial loss resulting
from a counterparty’s contractual default, though credit risk is deemed to be minimal, because
counterparties are mainly financial institutions with superior credit ratings.
3) Exposure to Credit Risks
The Group Companies’ maximum exposure to credit risk is as follows:
The maximum credit risk exposure (gross) represents the maximum exposure to credit risk
without taking into account the collateral held by the Group Companies and any other credit
enhancement. The maximum credit risk exposure (net) represents the maximum credit risk
exposure, after reflecting the amount of credit risk mitigation through the collateral held by the―89―Group Companies and any other credit enhancement. The amount of credit risk mitigation
through the collateral held by the Group Companies and any other credit enhancement does notinclude part of the amount of collateral and others stated in “Note 42. Offsetting of Financial
Assets and Financial Liabilities.”
The maximum exposure to credit risk (gross) associated with financial assets stated as onbalance sheet items in the following table, are the same as their carrying amounts. The
maximum exposure to credit risk associated with the provision of financial guarantees stated as
off-balance sheet items in the following table, are the maximum amount payable in the event thatexercise of the guarantee is requested. Meanwhile, the maximum exposure to credit risk
associated with commitment line agreements is the unused portion of such commitment lines.
As of December 31, 2012
(Millions of yen)Classification by
creditworthiness
Financial Financial
assetsassets Financial
neitherpast due assets
past due
but not impaired
nor
impaired
impairedTotal¥270,114¥―¥―¥270,114¥―¥270,114¥―¥270,114

63,947

1,140

2,428

67,515(2,022)65,493―65,493

615,525

59

1,789

617,373(1,670)615,703130,165

485,538

391,853

10,206

20,896422,955

402,418―

402,418

296,573――296,573(20,537)(247)

296,326―

296,326

Loans for banking business

190,163

158―

190,321

189,669―

189,669

Investment securities for
insurance business

13,623――

13,623(652)―

13,623

Derivative assets

10,674――

10,674―

10,674―

10,674

Investment securities

7,639

―

―

7,639

―

7,639

―

7,639

Other financial assets

123,11431

285

123,430(298)

123,132―

123,132

1,983,225

11,59425,3982,020,217(25,426)

1,994,791

130,165

1,864,626

Commitment lines

―

―

―

―

―

1,666,455―

1,666,455

Financial guarantee
agreements
Total of items notrecognized in theConsolidated Statement of
Financial Position:

―

―

―

―

―

20,839―20,839

―

―

―

―

―

1,687,294―

1,687,294

1,983,225

11,59425,3982,020,217(25,426)

3,682,085

130,165

3,551,920

Allowance Maximum Total amount Maximumforcredit risk of collateral credit risk
exposure
doubtful exposureand credit(gross) enhancement(net)
accounts

Items recognized in theStatement of Financial
Position:
Cash and cash equivalents
Accounts receivable ―trade
Financial assets forsecurities business
Loans for credit cardbusiness
Investment securities forbanking businessTotal of items recognized in
the Consolidated Statementof Financial Position:

13,623

Items not recognized in theStatement of Financial
Position:

Total

―90―

As of December 31, 2013
(Millions of yen)Classification by
creditworthiness
Financial Financial
assetsassets Financial
neitherpast due assets
past due
but not impaired
nor
impaired
impairedTotal¥384,008¥―¥―¥384,008¥―¥384,008¥―¥384,008

65,675

7,255

2,369

75,299(1,856)73,443―73,443

1,218,812

111

1,470

1,220,393

1,218,987

317,956

901,031532,016

10,021

22,570564,607(1,406)544,314―544,314

197,952――

197,952(20,293)(55)

197,897―

197,897

Loans for banking business

240,202406

10

240,618(800)

239,818―

239,818

Investment securities for
insurance business

10,233――

10,233―

10,233―

10,233

Derivative assets

12,588――

12,588―

12,588―

12,588Investment securities

9,332

―

―

9,332

―

9,332

―

9,332

Other financial assets

158,595

439

478

159,512(454)

159,058―

159,058

2,829,413

18,232

26,8972,874,542(24,864)

2,849,678

317,956

2,531,722

Commitment lines

―

―

―

―

―

2,034,622―

2,034,622

Financial guarantee
agreements
Total of items notrecognized in theConsolidated Statement of
Financial Position:

―

―

―

―

―

17,523―

17,523

―

―

―

―

―

2,052,145―

2,052,145

2,829,413

18,232

26,8972,874,542(24,864)

4,901,823

317,956

4,583,867

Allowance Maximum Total amount Maximumforcredit risk of collateral credit risk
exposure
doubtful exposureand credit(gross) enhancement(net)
accounts

Items recognized in theStatement of Financial
Position:
Cash and cash equivalents
Accounts receivable ―trade
Financial assets forsecurities business
Loans for credit cardbusiness
Investment securities forbanking businessTotal of items recognized in
the Consolidated Statementof Financial Position:
Items not recognized in theStatement of Financial
Position:

Total

In respect of the credit characteristics of loans for banking business and investment securities forbanking business, borrowers are classified after a determination of their repayment capability
based on their financial conditions, cash flow and earnings capacity, and such financial assets
are then managed based on the probability of recovery of each borrower as well as extent ofassociated impairment risk.
In respect of the credit characteristics of loans for credit card business, the financial assets areclassified in consideration of the delinquency status and repayment capability of each borrower.

―91―4) Aging Analysis of Past Due But Not Impaired Financial Assets
Aging analysis of past due but not impaired financial assets is as follows.
In the following aging analysis, amounts of financial assets, for which the payment terms
have been extended or payment has not been made since the contractual due dates, areclassified according to the length of the overdue period from the due dates to the end of the year.
As of December 31, 2012
(Millions of yen)

¥1,053

Over six months to
one year
¥61

20

8

31

7,014

3,192

―

158

―

―

30

―

1

8,275

3,261

58

Six months or lessAccounts receivable ― trade
Financial assets for securities
business
Loans for credit card business(Note)
Loans for banking business
Other financial assets
Total

Over one year
¥26

(Note) Among the loans for credit card business, those past due for three months or less is ¥5,023
million, while those past due between three and six months is ¥1,991 million.
As of December 31, 2013
(Millions of yen)

¥7,201

Over six months to
one year
¥44

44

37

30

7,229

2,792

―

406

―

―

41

1

397

14,921

2,874

437

Six months or lessAccounts receivable ― trade
Financial assets for securities
business
Loans for credit card business(Note)
Loans for banking business
Other financial assets
Total

Over one year
¥10

(Note) Within loans for credit card business, those past due for three months or less is ¥5,386
million, while those past due between three months and six months is ¥1,843 million.

―92―5) Financial Assets Individually Assessed as Impaired
Analysis of the financial assets individually assessed as impaired is as follows:

As of December 31, 2012
Carrying amount

Allowance for
doubtful accounts¥2,428¥(1,112)(Millions of yen)
Carrying amountless allowance for
doubtful accounts¥1,316

1,789(1,667)122

20,896(13, 922)

6,974

Loans for banking business

―

―

―

Other financial assets

285

(279)

6

25,398(16,980)

8,418

Carrying amount

Allowance for
doubtful accounts¥2,369¥ (1,028)(Millions of yen)
Carrying amountless allowance for
doubtful accounts¥1,341

1,470(1,372)

98

22,570(13,411)

9,159(16,127)

10,770Accounts receivable ― trade
Financial assets for securities
business
Loans for credit card business

Total
As of December 31, 2013

Accounts receivable ― trade
Financial assets for securities
business
Loans for credit card business
Loans for banking business10

Other financial assets

478

Total

26,897

(10)

―

(306)

172

(2) Liquidity Risk
1)

Outline of Liquidity Risk Associated with Financial Instruments
Within financial liabilities held by the Group Companies, borrowings are mainly exposed tomarket risks, and banking business-related liabilities are exposed to liquidity risk.

2)

Management of Liquidity Risk Associated with Financial Instruments
Methods to control liquidity risk associated with funding include a cash management plan toensure adequate liquidity on hand in accordance with regulations established by each Group
Company. Liquidity risk arising from factors, such as holding investment securities, is managed
by limiting the acquisition of securities to the amount necessary from a business standpoint, andcarefully evaluating the financial conditions of issuers.

3)

Analysis of Maturity of Financial Liabilities
The balances by maturity of financial liabilities (including derivatives) are as follows:―93―As of December 31, 2012
One yearor less
Financial liabilities otherthan derivatives
Accounts payable ―trade
Deposits for banking
business
Financial liabilities forsecurities business
Bonds and borrowings
Other financial liabilities
Derivative liabilities
Derivative associated withcover deals of special time
deposits(Millions of yen)Over twoOver one
Over three Over four
years toOver five
year toyears toyears to
three
years
two years
four years five years
years¥79,965

¥―

¥―

¥―

¥―

¥―

674,270

22,517

8,498

4,765

9,158

99,000558,055

―

―

―

―

―

181,638

47,01031,147

26,672

23,696405

203,867

3,339

1,899

707

228

8

3,996

232

167

142

120

420

(90)

(301)

(956)

(421)

(548)

(3,929)1,666,455

―

―

―

―

―

20,839

―

―

―

―

―

Off-balance sheet items
Commitment lines
Financial guarantee
agreements(Note) Financial liabilities payable on demand are classified as “One year or less.” “Deposits forbanking business” include ¥492,395 million of demand deposits.
“Derivative associated with cover deals of special time deposits” are related to “Deposits
for banking business.”―94―

As of December 31, 2013
One yearor less
Financial liabilities otherthan derivatives
Accounts payable ―trade
Deposits for banking
business
Financial liabilities forsecurities business
Bonds and borrowings(Millions of yen)Over twoOver one
Over three Over four
years toOver five
year toyears toyears to
three
years
two years
four years five years
years¥115,357

¥―

¥―

¥―

¥―

¥―

807,485

11,422

6,065

8,558

14,556132,614

1,077,971

―

―

―

―

―

265,323

45,22145,41530,092

7,747

142

220,939

3,711

1,254

565

180

121

Derivative liabilities

6,634

298

220

151

124

347

Derivative associated withcover deals of special time
deposits(605)(1,210)

(701)

(815)

(295)

(5,174)

Other financial liabilities

Off-balance sheet items
Commitment lines
2,034,622―――――
Financial guarantee
17,523―――――agreements(Note) Financial liabilities payable on demand classified as “One year or less.” “Deposits for banking
business” include ¥556,765 million of demand deposits.
“Derivative associated with cover deals of special time deposits” are related to “Deposits
for banking business.”(3) Market Risk
1) Outline of Market Risk Associated with Financial Instruments
The Group Companies’ activities are exposed mainly to risks associated with changes in theeconomic environment and the financial market environment. Risks associated with changes in
the financial market environment are specifically, exchange rate risk, interest rate risk and pricefluctuation risk.
Financial assets held by the Group Companies exposed to market risks are mainly investment
securities, investment securities for banking business, and investment securities for insurance
business. Investment securities include shares that are exposed to price fluctuation risk.
Investment securities for banking business mainly include investment securities such as shares,
government bonds, municipal bonds and foreign securities as well as various trust beneficiaryrights, with exposure to interest rate risk and exchange rate risk, along with exposure to pricefluctuation risk which, however, is minimal as the Group Companies do not hold any listed
shares. Investment securities for insurance business mainly include government bonds,
municipal bonds and corporate bonds, for which exposure to price fluctuation risk is minimal.
Within the financial liabilities held by the Group Companies, those exposed to market risks―95―

are mainly borrowings and banking business-related liabilities, which are exposed primarily tointerest rate risk. Banking business-related liabilities include ordinary deposits for individual andcorporate customers, general time deposits for individual customers, new types of time deposits,
as well as ordinary foreign currency deposits and foreign currency time deposits. Although new
types of time deposits are exposed to interest rate risk, such risk is hedged by entering into
corresponding interest rate swap transactions. Although ordinary foreign currency deposits andforeign currency time deposits are exposed to exchange rate risk, such risk is hedged byentering into corresponding forward exchange contracts.
2) Management of Market Risks Associated with Financial Instruments
Within the financial instruments associated with market risks, investment securities are subject
to investment decisions based on consultation with the Board of Directors, as part of the
management to ensure that such investment securities are appropriately evaluated according tointernal regulations. With regard to foreign currency receivables arising from sales to customers,
the Group Companies’ own positions are regulated by establishing position limits and maximum
allowable losses for the prevention of any loss in excess of certain levels, in addition to themonitoring of daily sales conditions. With regard to financial assets held by subsidiaries engaged
in the banking business, such financial assets and liabilities are measured at fair value assuming
certain fluctuations in interest rates and exchange rates, and the effects on the net balance after
offsetting such financial assets and liabilities (referred to as the “present value”) are used in aquantitative analysis to manage interest rate risk and exchange rate risk. In addition, the amountof capital in use as a credit risk is calculated using the standard method to calculate the capitalrequirements for credit risk under the First Pillar of Basel II (minimum capital requirement ratio),
specified in the Notification No. 19 of the Financial Services Agency, dated March 27, 2006.
3) Interest Rate Risk (Excluding the Subsidiaries Engaged in Banking Business)
The Group Companies’ main financial liabilities are borrowings from financial institutions, ofwhich borrowings at floating interest rates are exposed to interest rate risk.
Exposures associated with the Group Companies’ financial liabilities are as follows:(Millions of yen)
December 31, 2012
Bonds and borrowings

December 31, 2013

¥305,186¥389,683

Floating interest rate

226,339

216,023

Fixed interest rate

78,847

173,660

In respect of the above exposures, given all the risk variables remaining constant, except forinterest rate risk, if all the key interest rates increased by 10 basis points (0.1%) for the year
ended December 31, 2012, income and equity would be negatively impacted by ¥189 million.
Conversely, in the event of a decrease of 0.1%, income and equity would be positively impactedby ¥189 million compared to the amounts reported for the year ended December 31, 2012.
Similarly, given all the risk variables remaining constant, except for interest rate risk, if all the key
interest rates increased by 10 basis points (0.1%) for the year ended December 31, 2013,
income and equity would be negatively impacted by ¥121 million. Conversely, in the event a
decrease of 0.1%, income and equity would be positively impacted by ¥121 million compared tothe amounts reported as of December 31, 2013.

―96―

Within bonds and borrowings with floating interest rates, the Group Companies have
implemented interest rate swap transactions to reduce interest rate fluctuation risk, and thebalances of fixed interests were ¥37,324 million and ¥52,274 million as of December 31, 2012
and 2013, respectively.
4) Price Fluctuation Risk
The Group Companies are exposed to share price fluctuation risk associated with equity
instruments. Equity instruments are not held for short-term trading purposes, but for the efficient
implementation of business strategies. The Group Companies regularly check the market pricesof their equity instruments and financial conditions of their issuers.
The Group Companies carried out a sensitivity analysis as follows, based on the price risk ofequity instruments at the end of the year.
In the event of a 5% rise in share prices, accumulated other comprehensive income (before tax
effect) would increase by ¥184 million for the year ended December 31, 2012 due to changes infair value. Conversely, in the event of a 5% fall, it would decrease by ¥184 million. Similarly, inthe event of 5% rise in share prices, accumulated other comprehensive income (before tax
effect) for the year ended December 31, 2013 would increase by ¥575 million due to changes infair value. Conversely, in the event of 5% fall, it would decrease by ¥575 million.
5) Management of Market Risks for Subsidiaries Engaged in Banking Business(Interest Rate Risk)
At the Group Companies’ subsidiaries engaged in the banking business, financial assets
exposed to interest rate risk, which is a significant risk variable, are mainly investment securities
for banking business and loans for banking business.
Financial liabilities exposed to interest rate risk include, ordinary deposits for individual andcorporate customers, general time deposits and new type of time deposits for individual
customers, as well as foreign currency ordinary deposits, foreign currency time deposits andinterest rate swap transactions as part of derivative transactions.
For subsidiaries engaged in the banking business, the effect of present value of these financial
assets and liabilities, given certain fluctuations in interest rates, is used in quantitative analysis
as part of the process to manage interest rate risk.
In calculating the effect of the present value, affected financial assets and financial liabilities areclassified into a fixed rate group and a floating rate group, and then the balance of each group isallocated to an appropriate period based on maturity with a fluctuation range of the interest rate forthe period. Specifically, given all other risk variables remaining constant, except for the interest raterisk, when all the key interest rates increase 10 basis points (0.1%) for the year ended December
31, 2012, the present value as of December 31, 2012 would decrease by ¥996 million. Conversely,in the case a decrease of 10 basis points (0.1%), it would increase by ¥996 million. Similarly, given
all the risk variables remaining constant except for interest rate, when all the key interest rates
increase 10 basis points (0.1%) for the year ended December 31, 2013, the present value as ofDecember 31, 2013 would decrease by ¥1,483 million. Conversely, in the case of a decrease of 10
basis points (0.1%), it would increase by ¥1,483 million.
These effects do not take into account correlations between interest rates and other risk variables,
further foreign currency-denominated assets and liabilities are calculated in Japanese yen astranslated by the exchange rates on December 31, 2012 and 2013. Additionally, the effects of a 10
basis point decline leading to negative interest rates in certain periods have not been excluded.
―97―

(Exchange Rate Risk)
For the Group Companies’ subsidiaries engaged in the banking business, financial assets
exposed to exchange rate risk, which is a significant risk variable, are foreign securities andforeign exchange transactions.
Financial liabilities exposed to exchange rate risk include, foreign currency ordinary deposits
and foreign currency time deposits of all deposits, and forward exchange contracts as part ofderivative transactions.
For the subsidiaries engaged in the banking business, the effect of the present value ofthese financial assets and liabilities from exchange fluctuations is used for a quantitative analysis
as part of the process to manage exchange rate risk.
In calculating the effect of the present value, the corresponding financial assets and financial
liabilities are classified by currency and the respective currency’s fluctuation range is used as thebasis for analysis. Specifically, given all the other risk variables remaining constant, except for
the exchange rate risk, in the event of a 10% appreciation in the value of the Japanese yen
against each foreign currency, the present value as of December 31, 2012 would decrease by¥21 million. Conversely, in the event of a 10% depreciation in the value of the Japanese yen
against each foreign currency, the present value would increase by ¥21 million. Similarly, given
all the other risk variables remaining constant, except for the exchange rate risk, in the event of a
10% appreciation in the value of the Japanese yen against each foreign currency, the present
value as of December 31, 2013 would decrease by ¥14 million. Conversely, in the event of a
10% depreciation in the value of the Japanese yen against each foreign currency, the present
value would increase by ¥14 million.
These effects do not take into account correlations between exchange rates and other risk
variables, while the effect of the present value by currency is calculated in Japanese yen astranslated by the exchange rates on December 31, 2012 and 2013.
6) Management of Market Risks for Subsidiaries Engaged in Securities Business(Exchange Rate Risk)
For the Group Companies’ subsidiaries engaged in the securities business, contracts andmanagement structure regarding foreign exchange margin transactions have been changed fromthe year ended December 31, 2013. Financial assets and liabilities exposed to exchange raterisk, which is a significant risk variable, are mainly derivative assets and liabilities arising fromthese foreign exchange margin transactions.
The subsidiaries conduct a quantitative analysis on the effect of the present value of thesefinancial assets and liabilities, given certain fluctuations in exchange rate.
In calculating the effect of the present value, the corresponding financial assets andfinancial liabilities are classified by currency and the respective currency’s fluctuation range isused as the basis for analysis. Specifically, given all the other risk variables remaining constant,
except for the exchange rate risk, in the event of a 10% appreciation in the value of theJapanese yen against each foreign currency, the present value as of December 31, 2013 would
decrease by ¥3 million. Conversely, in the event of a 10% depreciation in the value of theJapanese yen against each foreign currency, the present value would increase by ¥3 million.
These effects do not take into account correlations between exchange rates and other risk
variables, while the effect of the present value by currency is calculated in Japanese yen astranslated by the exchange rates on December 31, 2013.

―98―

44. Capital Management
The Group Companies’ capital structure is as follows:(Millions of yen)
December 31, 2012
Total liabilities
Less: Cash and cash
equivalents
Net liabilities

December 31, 2013

¥2,045,722¥2,903,354

270,114384,008

1,775,608

2,519,346

241,912306,454

Total equity

The Company’s subsidiaries, Rakuten Bank, Ltd., Rakuten Securities, Inc. and Rakuten Life
Insurance Co., Ltd. are subject to regulations by the Financial Services Agency over their equity
ratio, capital-to-risk ratio and solvency margin ratio, which are duly complied with.
45. Related Parties
Related party transactions and their corresponding outstanding balances of receivables andpayables between the Group Companies and other related parties are as follows. Although theGroup Companies’ subsidiaries are related parties of the Company, such transactions and thecorresponding outstanding balances with subsidiaries are not subject to disclosure as they are
eliminated for the purpose of consolidated financial statements.
(1) Related Party Transactions(Millions of yen)
December 31, 2012
Associates

Executives¥1,845¥51

Operating expenses

1,111

Accounts receivable― trade (Note 1)
Deposits for banking
business
Financial liabilities forsecurities business

December 31, 2013
Group
Total

Associates

Executives

Group Total¥1,896¥2,209¥19¥2,228

―

1,111

1,893

―

1,893

―

―

―

104

―

104

―

201

201

―

3,770

3,770

―

16

16

―

25

25

Common stock

―

39

39

―

235

235

Capital reserve

―

39

39

―

235

235

Revenue(Notes) 1. An allowance for doubtful accounts of ¥35 million has been recorded against accounts
receivable―trade at December 31, 2013.
2. There are no transactions involving collateral and guarantees.

―99―

(2) Transactions with Companies in which Majority of Voting Rights are Held by the Group
Companies’ Principal Shareholders (Individuals) and their Close Relatives(Millions of yen)
December 31, 2012
December 31, 2013
Revenue (Note 1)

¥24

¥16

Operating expenses (Note 2)

329

342

Other assets (Note 3)

21

21

Deposits for banking business
74
47
Accounts payable ― trade22(Note 4)(Notes) 1 Revenue is from commissions on ticket sales, and the ticket sales are entrusted byCrimson Football Club, Inc. Commissions on ticket sales are determined in a similarmanner as general business terms and conditions. Chairman and President andRepresentative Director of the Company, Hiroshi Mikitani indirectly owns 100% of thevoting rights in Crimson Football Club, Inc.
2 Operating expenses are sponsorship fees payable to Crimson Football Club, Inc. forplanning and organizing football matches and other events. The amount of sponsorshipfees is determined in view of the past transactions at other football clubs.
3 Other assets are prepaid expenses resulting from advertising transactions. These
receivables are unsecured in effect, charging no interest. Allowance for doubtful
accounts is not recorded for the receivables from related parties.
4 Accounts payable ― trade is accounts payable resulting from advertising transactions,due one month after the purchase date. No interest is charged to these payables.
(3) Executive Compensation
Executive compensation is as follows:Year ended December 31, 2012

(Millions of yen)
Year ended December 31, 2013

¥883

¥856

25

48

908

904

Short-term employee benefits(Note)
Share-based payments
Total(Note) Short-term employee benefits include salaries and bonuses for those employees who serve
concurrently as employees and Directors.

―100―

46. Business Combinations
For the year ended December 31, 2012
Business Combination with Kobo Inc.
(1) Outline of the business combination is as follows:
1) Name of the Acquiree and Business Description
Name of the Acquiree: Kobo Inc.
Description of the Business: Sales of e-book readers and contents, etc.
2) Reason for the Business Combination
By making Kobo Inc. its subsidiary as part of its full-scale measures for the future e-book era, theCompany has not only a proprietary brand of e-book readers named “Kobo eReader,” but also
obtains a network with rights holders, including overseas publishing companies mainly in North
America and Europe, as well as retailers who sell the e-book readers and ODMs. As a result,
Kobo Inc. will be able to seek further growth and business expansion, and to integrate with theGroup Companies’ global services, such as the EC business. By making Kobo Inc. a subsidiary,
the Group Companies aim to provide digital contents to global users, as well as new ecommerce services applicable to various mobile devices.
3) Acquisition Date: January 11, 20124) Type of the Business Combination: Acquisition of shares5) Name after the Business Combination: No change in the name of the company after thebusiness combination
6) Ratio of Acquired Voting Rights:
100.0%
7) Rationale for determining that the Company is the Acquirer
The Company acquired all the shares in Kobo Inc. in exchange for cash consideration.
(2) Information on Consideration Paid for Acquiree(Millions of yen)
Consideration paid:
Payment in cash

¥24,390

Total consideration paid

24,390(3) Costs directly associated with the acquisition were ¥188 million presented as “Operating
expenses.”(4) The amount of, and reason for goodwill recognized are as follows:
1) Amount of Goodwill:
201 million Canadian dollars
2) Reason for goodwill recognized: Goodwill has been recognized based on a reasonableestimation of the excess earnings power anticipated inassociation with future business development.

―101―

(5) Assets acquired and liabilities assumed at the acquisition date are as follows:(Millions of Canadian dollars)
Fair Value
AssetsCash and cash equivalents$34

Intangible assets

152

Others77

Total assets

263

Liabilities
Accounts payable — trade

39

Others54

Total liabilities

93(6) Revenue of the acquiree after the acquisition date, as recognized in the Consolidated Statementof Income was ¥20,659 million, while net loss was ¥8,481 million.
(7) The impact on the Group Companies’ revenue and net income on the assumption that thebusiness combination had taken place on January 1 would be insignificant, and thus thedescription is omitted.
Business Combination with AIRIO Life Insurance Co., Ltd. (currently Rakuten Life Insurance Co.,Ltd.)
(1) Outline of the business combination is as follows:
1) Name of the Acquiree and the Description of its Business
Name of the Acquiree:
AIRIO Life Insurance Co., Ltd. (currently Rakuten Life InsuranceCo., Ltd.)
Description of the Business: Life insurance business
2) Reason for the Business Combination
The insurance business of the Group Companies is expanding steadily and 133 life and non-life
insurance products are handled by 44 companies (as of September 30, 2012). AIRIO Life
Insurance Co., Ltd. (currently Rakuten Life Insurance Co., Ltd.), which was an associateaccounted for using the equity method, and the Company, have engaged in the development of
new internet-based products, and have established a close collaboration framework to mutually
utilize their various expertise and functions.
On the other hand, while marketing and transactions are becoming more diversified andtechnology is improving, the use of the internet in the life insurance business is expected to growfurther. Given this business environment, the Group Companies insurance business area will beenhanced by making AIRIO Life Insurance Co., Ltd. a subsidiary, aiming at enhancing thefinancial services to be provided by the Group Companies.
3) Acquisition Date: October 31, 20124) Type of Business Combination:
Acquisition of shares5) Name after Business Combination:
No change in the name of the company after thebusiness combination
AIRIO Life Insurance Co., Ltd. changed its name to Rakuten Life Insurance Co., Ltd. on April 1,
2013.
―102―

6) Ratio of Acquired Voting Rights:
Voting rights ratio held before the business combination
33.9%
Voting rights ratio acquired on the acquisition date
53.9%
Total voting rights ratio
87.8%
The voting rights ratio as of December 31 is 99.9% as a result of the additional acquisition.
7) Rationale for determining that the Company is the Acquirer
The Company acquired shares of AIRIO Life Insurance Co., Ltd. in exchange for cash
consideration.
(2) Information on Consideration Paid for Acquiree(Millions of yen)
Consideration paid:
Payment in cash

¥11,516

Total consideration transferred
Fair value of pre-existing equity interest in
AIRIO Life Insurance Co., Ltd. (currently
Rakuten Life Insurance Co., Ltd.) prior tobusiness combination
Total consideration paid

11,516
7,250
18,766(3) Costs directly associated with the acquisition were ¥12 million presented as “Operating
expenses.”(4) The amount of, and reason for goodwill recognized are as follows:
1) Amount of Goodwill:¥3,719 million
2) Reason for goodwill recognized: Goodwill has been recognized based on a reasonableestimation of excess earning power anticipated in association
with the future business development.
(5) Assets acquired and liabilities assumed at the acquisition date are as follows:(Millions of yen)
Fair Value
AssetsCash and cash equivalents¥3,903

Other receivable

3,929

Investment securities for insurance business

13,914

Intangible assets

15,685

Others4,600

Total assets

42,031

Liabilities
Policy reserves and others for insurance
business
Others

18,344
6,557

Total liabilities

24,901―103―

(6) The carrying amount of non-controlling interests in the acquiree recognized as of the acquisition
date was ¥2,083 million. This carrying amount is calculated by multiplying the ratio of noncontrolling interests after the acquisition with the identifiable net assets acquired on theacquisition date. Furthermore, non-controlling interests in the acquiree measured at fair value
were ¥2,598 million. This fair value is estimated based on the purchase amount paid upon
additional acquisition of shares in AIRIO Life Insurance Co., Ltd. (currently Rakuten Life
Insurance Co., Ltd.).
(7) As a result of measuring the fair value of the 33.9% pre-existing equity interest in AIRIO Life
Insurance Co., Ltd. (currently Rakuten Life Insurance Co., Ltd.) prior to the acquisition, the Group
Companies have recognized a resulting gain on the step acquisition of ¥2,382 million. This
income is included in “Other income” in the Consolidated Statement of Income.
(8) Revenue of the acquiree after the acquisition date, as recognized in the Consolidated Statementof Income was ¥4,454 million, while net income was ¥110 million.
(9) Revenue of the Group Companies on the assumption that the business combination had takenplace on January 1 would have been ¥423,032 million, while net income would have been
¥22,540 million.
(10)As a result of the additional acquisition on December 18, 2012, ¥2,595 million in cash was paid
to non-controlling shareholders, and the carrying amount of the additionally acquired equity
interest was ¥2,089 million. As a result, capital surplus decreased by ¥506 million, this is thedifference between the consideration for the additionally acquired equity interests and theircarrying amounts.
For the year ended December 31, 2013
There are no significant business combinations to be disclosed.

―104―47. Major Subsidiaries(1) Major Subsidiaries
Major subsidiaries of the Group Companies are as follows:
Name

December 31, 2012
CapitalLocation(Millions of yen) Voting
rightsOwnership
ratio

December 31, 2013
Votingrightsratio

Ownership

Rakuten Travel, Inc.

Tokyo

¥213

100%

100%

100%

100%

LinkShare
Corporation

U.S.

1 U.S. dollar

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

¥1,650

60.0%

60.0%

60.0%

60.0%

¥259

100%

100%

100%

100%

728 million
Canadiandollars

100%

100%

100%

100%

Notes

Internet Services
Segment:

Buy.com Inc.

U.S.

PRICEMINISTER
S.A.S.

FranceRakuten Auction, Inc. Tokyo

0.01 U.S.
dollar
356 thousand
euros

LinkShare Japan
K.K.

Tokyo

Kobo Inc.

CanadaKenko.com, Inc.

Tokyo

¥2,051

51.8%

51.4%

51.2%

50.8% (Note 5)

Rakuten Logistics,
Inc.

Tokyo

¥2,250

100%

100%

100%

100%

VIKI, Inc.

U.S.

1 U.S. dollar

―

―

100%

100% (Note 4)

Internet Finance
Segment:
Rakuten Card Co.,Ltd.
Rakuten Securities,
Inc.

Tokyo

¥19,324

100%

100%

100%

100%

Tokyo

¥7,496

100%

100%

100%

100%

Rakuten Bank, Ltd.

Tokyo

¥25,954

100%

100%

100%

100%

Rakuten Edy, Inc.

Tokyo

¥1,840

85.0%

85.0%

85.0%

85.0% (Note 1)

Rakuten Life
Insurance Co., Ltd.

Tokyo

¥2,500

99.9%

99.9%

100%

100% (Note 2)

Dot Commodity, Inc.

Tokyo

¥1,900

97.1%

94.8%

97.1%

94.8% (Note 6)

FusionCommunications
CorporationTokyo¥2,026

54.8%

55.0%

54.8%

55.0% (Note 3)

Rakuten Baseball,Inc.

Miyagi

¥400

100%

100%

100%

100%

Others Segment:(Notes)1

bitWallet, Inc. was renamed Rakuten Edy, Inc. on June 1, 2012.

2

AIRIO Life Insurance Co., Ltd. was renamed Rakuten Life Insurance Co., Ltd. on April 1, 2013.

3

The discrepancy between the voting rights ratio and ownership of Fusion Communications Corporationis due primarily to the fact that Fusion Communications Corporation has issued preferred shares.

4

VIKI, Inc. became a consolidated subsidiary from the year ended December 31, 2013.

5

The discrepancy between the voting rights ratio and ownership of Kenko.com, Inc. is due primarily tothe fact that Kenko.com, Inc. holds treasury stock.

6 The discrepancy between the voting rights ratio and ownership of Dot Commodity, Inc. is due primarily
to the fact that Dot Commodity, Inc. holds treasury stock.

―105―

(2) Changes in Ownership
For the year ended December 31, 2012
The Group Companies acquired control over Kobo Inc. on January 11, 2012 and AIRIO Life
Insurance Co., Ltd. (currently Rakuten Life Insurance Co., Ltd.) on October 31, 2012, making
them subsidiaries. The transactions associated with these acquisitions are described in Note 46.
Business Combinations. Other changes in ownership are as follows.
On June 29, 2012, the Group Companies additionally acquired 36.2% of voting shares in a
subsidiary, LinkShare Japan K.K. for a cash consideration of ¥4,125 million. As a result, theGroup Companies’ equity interest in LinkShare Japan K.K. increased to 100%. Put options havebeen granted to non-controlling interests in LinkShare Japan K.K., and prior to the additional
acquisition of equity interest, the Group Companies recognized them as financial liabilities inaccordance with IAS 32 “Financial instruments: presentation.” Therefore, there was no impact
on capital surplus from the additionally acquired equity interest.
For the year ended December 31, 2013
In February 2013, with the approval of the French authorities, Rakuten Europe S.à r.l., a wholly
owned subsidiary of the Company, acquired 41.2% of shares in Alpha Direct Services S.A.S., a
French logistics company, as well as the entire shares of Direct Technology Solutions S.A.S.
which held 58.8% of the shares in Alpha Direct Services S.A.S., making Alpha Direct Services
S.A.S. a wholly owned subsidiary.
In September 2013, Rakuten USA, Inc., a wholly owned subsidiary of the Company, made VIKI,
Inc. its wholly owned subsidiary through the merger of VIKI with another wholly owned
subsidiary that had been established for the purpose of this merger.
48. Sale of Subsidiary through Business Restructuring
There are no applicable items for the years ended December 31, 2012 and 2013.

―106―

49. Structured Entities
Consolidated Structured Entities
In the credit card business, the Group Companies consolidate certain structured entities astrusts for securitizing their own credit card shopping receivables. In addition, the Group
Companies engage in activities related to offering investment trust funds as part of their banking
business in the year ended December 31, 2012. The Group Companies consolidate certain
investment trusts, which are set up and managed by the Group Companies and an investment
trust, which is set up for the Group Companies.
These investment trust funds and trusts for securitization are structured entities, whichhave been designed so that voting or similar rights are not the dominant factor in deciding who
controls these entities.
The Group Companies have the right to direct the investment or servicing activities of thesestructured entities. In addition, the Group Companies, by holding subordinated beneficial
interests collateralized by entrusted assets and by holding interests in investment trust funds,
will be exposed to variability of investment returns. Accordingly, it is determined that the Group
Companies have control over these structured entities.
In accordance with the contractual arrangements with the structured entities, use of assets
and settlement of liabilities of these consolidated structured entities are restricted to the
purposes for which they are structured.
The carrying amounts of assets and liabilities of the consolidated structured entities are as
follows:
Carrying amounts of assets and liabilities of the consolidated structured entities(Millions of yen)
December 31, 2012

December 31, 2013

AssetsLoans for credit card business
Investment securities for banking
business
OthersTotal assets¥25,791¥27,200

733

―

581

551

27,10527,751

11,08011,00026―

11,106

11,000Liabilities
Bonds and borrowings
OthersTotal liabilities―107―Unconsolidated Structured Entities
The Group Companies engage in investment activities involving structured entities as part oftheir banking business. These structured entities handle securitized products that are set up by
third parties and collateralized assets including various real estates, monetary claims such as
auto loans and consumer loans, credit derivatives, and other bonds. The Group Companies
have interests in these structured entities as a result of holding bonds issued by such entities
and through trust beneficiary interests. The risks of these products are managed regularly on an
individual basis under the group management regulations for the banking business, for earlyrecognition and mitigation of the risk of default resulting from deterioration of the debtors’
financial conditions and other factors.
Additionally, the Group Companies set up investment trust funds that are provided to meetthe needs of investors as part of their investment management business. However, the Group
Companies do not hold interests in such investment trust funds.
The Group Companies do not provide any guarantee or commitment to these structured
entities. As a result, the maximum exposure to loss associated with the Group Companies’
interests in these unconsolidated structured entities is limited to the carrying amount of theinvestments in bonds and trust beneficiary interests held therein. The maximum exposure toloss represents the potential maximum loss the Group Companies could incur and does notreflect the likelihood of such a loss being incurred.
The following table shows the summary of the Group Companies’ maximum exposure toloss from its interests in these structured entities by class of asset held therein.
Carrying amount of unconsolidated structured entities and maximum exposure to loss frominterests in such entities(Millions of yen)
Consolidated
Class of asset held bystatement of financial
December 31, 2012
December 31, 2013
structured entities
position
Investment
Securitization products
securities for
set up by third parties
banking business
Public and corporate¥14,498¥9,500bonds
Real estates
2,371
1,597
Monetary claims for
72,07331,150
individual customers
Others
521
516
Total

89,463―108―

42,763

50. Subsequent Events
Acquisition of shares of Viber Media Ltd. and significant borrowings for financing thereof
At an Extraordinary Board of Directors Meeting on February 14, 2014 the Company resolved to
execute a contract to acquire all the shares of Viber Media Ltd. (head office: Cyprus) which
operates a mobile messaging service and VoIP service on a global scale for the purpose of
making Viber Media Ltd. a subsidiary. The acquisition was completed by the payment made on
March 11, 2014.
(1) Details of name of company and main business, main reasons for the acquisition, closing
date, legal structure, and company name after acquisition.
1) Name: Viber Media Ltd.
2) Main business: Mobile messaging service and VoIP service operator
3) Main reasons for the acquisition
The Company operates three main businesses on a global scale: E-commerce,
financial services, and digital contents. Viber Media Ltd. has approximately 300 million
registered users globally, and more than 100 million of whom are monthly active usersof its mobile messaging and VoIP services called “Viber.” Through making Viber Media
Ltd. a subsidiary, the Company aims to utilize the wide customer base of the Viber andto strengthen its platform for providing EC services and digital contents which operates
worldwide.
4) Closing date: March 11, 2014
5) Legal structure of acquisition: Acquisition of shares
6) Name of company after acquisition: The company name will not change after acquisition(2) Acquisition amount of the acquired firm
Value of the shares acquired: Approximately 905 million U.S. dollars* The payment for the above value of shares may be partially adjusted to include
compensation. Regarding the acquisition amount, the Company finances it throughbank borrowings, and the details are as follows.
LenderMizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation* The above two Banks plan to transfer the part of loans receivable
to Sumitomo Mitsui Trust Bank, Limited and Development Bank ofJapan.
Amount of borrowings ¥90,000 million
Interest rate
Basic interest rate + Spread
Date of borrowings March 7, 2014
Repayment date
December 31, 2021
Method of repayment
Fixed quarterly repayments of ¥3,750 million from March
31, 2016(3) The amount of, and reason for goodwill arising from the acquisition and the value of assets
and liabilities of Viber Media Ltd. to be transferred to the company as of the closing date
Not yet decided.

―109―

51. Classification of Current and Non-current
As of December 31, 2012
(Millions of yen)
Collection or settlement period

Total

12 months or lessOver 12 months

Cash and cash equivalents¥270,114¥―¥270,114

Accounts receivable ― trade
Financial assets for securities
business
Loans for credit card business
Investment securities forbanking business
Loans for banking business
Investment securities for
insurance business
Derivative assets

64,177

1,316

65,493

615,580

123

615,703

284,672

117,746

402,418

141,268

155,058

296,326

23,911

165,758

189,669

3,060

10,563

13,623

7,350

3,324

10,674800

22,611

23,411

82,69740,435

123,132

―

6,601

6,601

―

24,14324,143

Intangible assets―

188,014

188,014

Deferred tax assets―

40,54640,546

Other assets

14,5793,188

17,767

Total assets

1,508,208

779,426

2,287,634

Accounts payable ― trade79,965―79,965

Deposits for banking business
Financial liabilities forsecurities business
Derivative liabilities

673,126

136,405

809,531558,055―

558,055

3,913

772

4,685

Bonds and borrowings

179,253

125,933

305,186

Other financial liabilities

204,230

5,818

210,048

Income taxes payable

2,873

―

2,873

Provisions
Policy reserves and others for
insurance business
Deferred tax liabilities

26,167

3,447

29,614―

18,496

18,496

―

6,416

6,416

Other liabilities

20,192661

20,853

Total liabilities

1,747,774

297,948

2,045,722

AssetsInvestment securities
Other financial assets
Investments in associates andjoint ventures
Property, plant and equipment

Liabilities―110―

As of December 31, 2013
(Millions of yen)
Collection or settlement period

Total

12 months or lessOver 12 months

Cash and cash equivalents¥384,008¥―¥384,008

Accounts receivable ― trade
Financial assets for securities
business
Loans for credit card business
Investment securities forbanking business
Loans for banking business
Investment securities for
insurance business
Derivative assets

72,197

1,246

73,443

1,218,863

124

1,218,987

403,188

141,126

544,314

114,768

83,129

197,897

3,497

236,321239,818

2,512

7,721

10,233

8,679

3,909

12,588

1,852

32,17334,025

149,241

9,817

159,058

―

8,189

8,189

―

30,40830,408Intangible assets―

235,881

235,881Deferred tax assets―

31,594

31,594

Other assets

25,406

3,959

29,365

Total assets

2,384,211

825,597

3,209,808

Accounts payable ― trade115,357―

115,357

Deposits for banking business
Financial liabilities forsecurities business
Derivative liabilities

829,604

130,356

959,960

1,077,971―

1,077,971

6,546

1,477

8,023

Bonds and borrowings

263,455

126,228

389,683

Other financial liabilities

220,939

5,832

226,771

Income taxes payable

30,191―30,191

Provisions
Policy reserves and others for
insurance business
Deferred tax liabilities

36,944

4,076

41,020―18,852

18,852

―

9,123

9,123

Other liabilities

25,816587

26,403

Total liabilities

2,606,823

296,5312,903,354

AssetsInvestment securities
Other financial assets
Investments in associates andjoint ventures
Property, plant and equipment

Liabilities―111―(2) [Others]
Quarterly Information for the current fiscal year

(Cumulative period)
Revenue
Income before
income tax
Net income
Basic earnings per
share (yen)(Each quarter)
Basic earnings per
share (yen)1Q¥113,148(Millions of yen, unless otherwise stated)Year ended
2Q
3Q
December 31,
2013¥240,880¥369,725¥518,568

22,412

46,347

69,601

88,61014,27525,79336,801

43,481¥10.83¥19.48¥27.62¥32.60

1Q

2Q¥10.83

3Q
¥8.65

―112―

4Q
¥8.14

¥4.98