Notes to Consolidated Financial Statements
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1.
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Overview of Accounting Principles Utilized
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In preparing the accompanying consolidated financial statements, ORIX Corporation (the “Company”) and its subsidiaries have complied with accounting principles generally accepted in the United
States of America (“U.S. GAAP”), except for the accounting for stock splits (see Note 2 (n)).
These
statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed
consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the financial statements and
notes thereto included in our March 31, 2016 consolidated financial statements on Form
20-F.
Since the Company listed on the New York Stock Exchange in September 1998, the Company has filed the annual report
(Form 20-F)
including the consolidated
financial statements with the Securities and Exchange Commission.
Significant differences between U.S. GAAP
and generally accepted accounting principles in Japan (“Japanese GAAP”) are as follows:
(a) Initial direct costs
Under U.S. GAAP, certain initial direct costs to originate leases or loans are being deferred and
amortized as yield adjustments over the life of related direct financing leases or loans by using interest method.
Under Japanese GAAP, those initial direct costs are recognized as expenses when they are incurred.
(b) Operating leases
Under U.S. GAAP, revenues from
operating leases are recognized on a straight-line basis over the contract terms. Also operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis.
Japanese GAAP allows for operating lease assets to be depreciated using mainly either a declining-balance basis or a
straight-line basis.
(c) Accounting for life insurance operations
Under U.S. GAAP, certain costs related directly to the successful acquisition of new (or renewal of) insurance contracts,
or deferred policy acquisition costs, are being deferred and amortized over the respective policy periods in proportion to anticipated premium revenue.
Under Japanese GAAP, such costs are recorded as expenses currently in earnings in each accounting period.
In addition, under U.S. GAAP, although policy liabilities for future policy benefits are established using the net level premium method, based on actuarial estimates of the amount of future policyholder
benefits, under Japanese GAAP, these are calculated by the methodology which relevant authorities accept.
(d) Accounting
for goodwill and other intangible assets in business combination
Under U.S. GAAP, goodwill and intangible
assets that have indefinite useful lives are not amortized, but assessed for impairment at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for
impairment when such events or changes occur.
Under Japanese GAAP, goodwill is amortized over an appropriate
period up to 20 years.
(e) Accounting for contingent consideration in business combination
Under U.S. GAAP, contingent consideration issued in a business combination that is classified as a liability is recognized
at fair value at the acquisition date and subsequently remeasured to fair value, with changes in fair value recognized in earnings until the contingency is resolved.
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Under Japanese GAAP, contingent consideration is recognized as additional
acquisition cost and goodwill is additionally recognized when it becomes most probable to deliver and its fair value becomes reasonably determinable.
(f) Accounting for pension plans
Under U.S. GAAP, the net
actuarial gain (loss) is amortized using a corridor test.
Under Japanese GAAP, the net actuarial gain (loss)
is fully amortized over a certain term within the average remaining service period of employees.
(g) Sale of the
parent’s ownership interest in subsidiaries
Under U.S. GAAP, in a transaction that results in the
loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the remeasurement to fair value of the interest retained.
Under Japanese GAAP, in a transaction that results in the loss of control, only the realized gain or loss related to the
portion of ownership interest sold is recognized in income and the gain or loss on the remeasurement to fair value of the interest retained is not recognized.
(h) Classification in consolidated statements of cash flows
Classification in the statements of cash flows under U.S. GAAP differs from Japanese GAAP. As significant differences,
purchase of lease equipment and principal payments received under direct financing leases, proceeds from sales of operating lease assets, installment loans made to customers and principal collected on installment loans (excluding issues and
collections of loans held for sale) are included in “Cash Flows from Investing Activities” under U.S. GAAP while they are classified as “Cash Flows from Operating Activities” under Japanese GAAP.
(i) Securitization of financial assets
Under U.S. GAAP, an enterprise is required to perform analysis to determine whether or not to consolidate special-purpose entities (“SPEs”) for securitization under the VIE’s consolidation
rules. As a result of the analysis, if it is determined that the enterprise transferred financial assets in a securitization transaction to an SPE that needs to be consolidated, the transaction is not accounted for as a sale but accounted for as a
secured borrowing.
Under Japanese GAAP, an SPE that meets certain conditions may be considered not to be a
subsidiary of the transferor. Therefore, if an enterprise transfers financial assets to this type of SPE in a securitization transaction, the transferee SPE is not required to be consolidated, and the enterprise accounts for the transaction as a
sale and recognizes a gain or loss on the sale into earnings when control over the transferred assets is surrendered.
(j)
Fair value option
Under U.S. GAAP, an entity is permitted to carry certain eligible financial assets and
liabilities at fair value and to recognize changes in that item’s fair value in earnings through the election of the fair value option.
Under Japanese GAAP, there is no accounting standard for fair value option.
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2.
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Significant Accounting and Reporting Policies
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(a) Principles of consolidation
The consolidated financial
statements include the accounts of the Company and all of its subsidiaries. Investments in affiliates, where the Company has the ability to exercise significant influence by way of 20% – 50% ownership or other means, are accounted for by using
the equity method. Where the Company holds majority voting interests but noncontrolling shareholders have substantive participating rights to decisions that occur as part of the ordinary course of their business, the equity method is applied. In
addition, the consolidated financial statements also include variable interest entities to which the Company and its subsidiaries are primary beneficiaries.
A lag period of up to three months is used on a consistent basis for recognizing the results of certain subsidiaries and affiliates.
All significant intercompany accounts and transactions have been eliminated in consolidation.
(b) Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has identified ten areas where it believes
assumptions and estimates are particularly critical to the financial statements. The Company makes estimates and assumptions to the selection of valuation techniques and determination of assumptions used in fair value measurements (see Note 3), the
determination and periodic reassessment of the unguaranteed residual value for direct financing leases and operating leases (see (d)), the determination and reassessment of insurance policy liabilities and deferred policy acquisition costs (see
(e)), the determination of the allowance for doubtful receivables on direct financing leases and probable loan losses (see (f)), the recognition and measurement of impairment of long-lived assets (see (g)), the recognition and measurement of
impairment of investment in securities (see (h)), the determination of the valuation allowance for deferred tax assets and the evaluation of tax positions (see (i)), the assessment and measurement of effectiveness in hedging relationship using
derivative financial instruments (see (k)), the determination of benefit obligation and net periodic pension cost (see (l)) and the recognition and measurement of impairment of goodwill and intangible assets that have indefinite useful lives (see
(w)).
(c) Foreign currencies translation
The Company and its subsidiaries maintain their accounting records in their functional currency. Transactions in foreign
currencies are recorded in the entity’s functional currency based on the prevailing exchange rates on the transaction date.
The financial statements of overseas subsidiaries and affiliates are translated into Japanese yen by applying the exchange rates in effect at the end of each fiscal period to all assets and liabilities.
Income and expenses are translated at the average rates of exchange prevailing during the fiscal period. The currencies in which the operations of the overseas subsidiaries and affiliates are conducted are regarded as the functional currencies of
these companies. Foreign currency translation adjustments reflected in accumulated other comprehensive income (loss) arise from the translation of foreign currency financial statements into Japanese yen.
(d) Recognition of revenues
Revenues are recognized when persuasive evidence of an arrangement exists, the service has been rendered or the goods have been delivered to the customer, the transaction price is fixed or determinable
and collectability is reasonably assured.
In addition to the aforementioned general policy, the policies as
specifically described hereinafter are applied for each of the major revenue items.
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Finance Revenues
—Finance revenues mainly include revenues
for direct financing leases and installment loans. The policies applied to direct financing leases and installment loans are described hereinafter.
(1) Revenues from direct financing leases
Direct financing
leases consist of full-payout leases for various equipment types, including office equipment, industrial machinery and transportation equipment. In providing leasing services, the Company and its subsidiaries execute supplemental services, such as
paying insurance and handling taxes on leased assets on behalf of lessees. The excess of aggregate lease rentals plus the estimated unguaranteed residual value over the cost of the leased equipment constitutes the unearned lease income to be taken
into income over the lease term by using the interest method. The estimated residual values represent estimated proceeds from the disposition of equipment at the time the lease is terminated. Estimates of unguaranteed residual values are based on
market values of used equipment, estimates of when and how much equipment will become obsolete, and actual recovery being experienced for similar used equipment. Initial direct costs are being deferred and amortized as a yield adjustment over the
life of the related lease by using interest method. The unamortized balance of initial direct costs is reflected as a component of investment in direct financing leases.
(2) Revenues from installment loans
Interest income on
installment loans is recognized on an accrual basis. Certain direct loan origination costs, net of origination fees, are being deferred and amortized over the contractual term of the loan as an adjustment of the related loan’s yield using the
interest method.
Interest payments received on impaired loans other than purchased loans are recorded as
interest income unless the collection of the remaining investment is doubtful at which time payments received are recorded as reductions of principal. For purchased loans, although the acquired assets may remain loans in legal form, collections on
these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of
collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans regardless of whether impairment is recognized or not.
(3)
Non-accrual
policy
In common with all classes,
past-due
financing receivables are receivables for
which principal or interest is
past-due
30 days or more. Loans whose terms have been modified are not classified as
past-due
financing receivables if the principals and
interests are not
past-due
30 days or more in accordance with the modified terms. The Company and its subsidiaries suspend accruing revenues on
past-due
installment
loans and direct financing leases when principal or interest is
past-due
90 days or more, or earlier, if management determines that their collections are doubtful based on factors such as individual
debtors’ creditworthiness, historical loss experience, current delinquencies and delinquency trends. Accrued but uncollected interest is reclassified to investment in direct financing leases or installment loans in the accompanying consolidated
balance sheets and becomes subject to the allowance for doubtful receivables and probable loan loss process. Cash repayments received on
non-accrual
loans are applied first against past due interest and then
any surpluses are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries return
non-accrual
loans and lease receivables to accrual status when it becomes
probable that the Company and its subsidiaries will be able to collect all amounts due according to the contractual terms of these loans and receivables, as evidenced by continual payments from the debtors. The period of such continual payments
before returning to accrual status varies depending on factors that we consider are relevant in assessing the debtor’s creditworthiness, such as the debtor’s business characteristics and financial conditions as well as relevant economic
conditions and trends.
Gains on investment securities and dividends
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Gains on
investment securities are recorded on a trade date basis. Dividends are recorded when right to receive dividends is established.
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Operating leases
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Revenues from operating leases
are recognized on a straight-line basis over the contract terms. Investment in operating leases is recorded at cost less accumulated depreciation, which was ¥542,868 million and ¥565,335 million as of March 31, 2016 and
December 31, 2016, respectively. Operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis. Depreciation expenses are included in costs of operating leases. Gains or losses arising from
dispositions of operating lease assets are included in operating lease revenues.
Estimates of residual values
are based on market values of used equipment, estimates of when and the extent to which equipment will become obsolete and actual recovery being experienced for similar used equipment.
Sales of goods and real estate—
(1) Sales of goods
The Company and its subsidiaries sell
to their customers various types of goods, including precious metals and jewels, and aftermarket parts and accessories for vehicles. Revenues from such sales of goods are recognized when persuasive evidence of an arrangement exists, delivery has
occurred, and collectability is reasonably assured. Delivery is considered to have occurred when the customer has taken title to the goods and assumed the risks and rewards of ownership. Revenues are recognized net of estimated sales returns and
incentives.
(2) Real estate sales
Revenues from the sales of real estate are recognized when a contract is in place, a closing has taken place, the
buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property and the Company and its subsidiaries do not have a substantial continuing involvement in the property.
Services income
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Revenues are recognized when persuasive evidence of an arrangement exists, the
service has been rendered to the customer, the transaction price is fixed or determinable and collectability is reasonably assured. The policies applied to asset management, servicing and automobile maintenance services are described hereinafter.
(1) Revenues from asset management and servicing
The Company and its subsidiaries provide to our customers investment management services for investments in financial
assets, and asset management as well as maintenance and administrative services for investments in real estate properties. The Company and its subsidiaries also perform servicing on behalf of our customers. The Company and its subsidiaries receive
fees for those services from our customers.
Revenues from asset management and servicing primarily include
management fees, servicing fees, and performance fees. Management and servicing fees are recognized when transactions occur or services are rendered and the amounts are fixed or determinable and collectability of which is reasonably assured.
Management fees are calculated based on the predetermined percentages of the market value of the assets under management or net assets of the investment funds in accordance with contracts. Certain subsidiaries recognize revenues from performance
fees when earned based on the performance of the asset under management while other subsidiaries recognize revenues from performance fees on an accrual basis over the period in which services are performed. Performance fees are calculated based on
the predetermined percentages on the performance of the assets under management in accordance with the contracts.
(2)
Revenues from automobile maintenance services
The Company and its subsidiaries provide automobile
maintenance services to lessees. Where under terms of the lease or related maintenance agreements the Company and its subsidiaries bear the favorable or unfavorable variability of cost, revenues and expenses are recorded on a gross basis. For those
arrangements in which the Company and its subsidiaries do not have substantial risks and rewards of ownership, but instead serve as an agent in collecting from lessees and remitting payments to third parties, the Company and its subsidiaries record
revenues net of third-party services costs. Revenues from automobile maintenance services are recognized over the contract period in proportion to the estimated service costs to be incurred.
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(e) Insurance and reinsurance transactions
Premium income from life insurance policies, net of premiums on reinsurance ceded, is recognized as earned premiums when
due.
Life insurance benefits are recorded as expenses when they are incurred. Policy liabilities and policy
account balances for future policy benefits are measured using the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. The policies are characterized as long-duration policies and mainly consist of
whole life, term life, endowments, medical insurance and individual annuity insurance contracts. For policies other than individual annuity insurance contracts, computation of policy liabilities necessarily includes assumptions about mortality,
morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. A certain subsidiary continually evaluates the potential for changes in the estimates and assumptions applied in
determining policy liabilities, both positive and negative and uses the results of these evaluations both to adjust recorded liabilities and to adjust underwriting criteria and product offerings.
The insurance contracts sold by the subsidiary consist of variable annuity, variable life and fixed annuity insurance
contracts. The subsidiary manages investment assets on behalf of variable annuity and variable life policyholders, which consist of equity securities and are included in investments in securities in the consolidated balance sheets. These investment
assets are measured at fair value with realized and unrealized gains or losses recognized in life insurance premiums and related investment income in the consolidated statements of income. The subsidiary elected the fair value option for the entire
variable annuity and variable life insurance contracts with changes in the fair value recognized in life insurance costs.
The subsidiary provides minimum guarantees to variable annuity and variable life policyholders under which it is exposed to the risk of compensating losses incurred by the policyholders to the extent
contractually required. To mitigate the risk, a portion of the minimum guarantee risk related to variable annuity and variable life insurance contracts is ceded to reinsurance companies and the remaining risk is economically hedged by entering into
derivative contracts (See Note 18 “Derivative financial instruments and hedging”). The reinsurance contracts do not relieve the subsidiary from the obligation as the primary obligor to compensate certain losses incurred by the
policyholders, and the default of the reinsurance companies may impose additional losses on the subsidiary. Certain subsidiaries have elected the fair value option for certain reinsurance contracts relating to variable annuity and variable life
insurance contracts, which is included in other assets in the consolidated balance sheets.
Policy liabilities
and policy account balances for fixed annuity insurance contracts are measured based on the single-premiums plus interest based on expected rate and fair value adjustments relating to the acquisition of a subsidiary, less withdrawals, expenses and
other charges. The credited interest is recorded in life insurance costs in the consolidated statements of income.
Certain costs related directly to the successful acquisition of new or renewal insurance contracts, or deferred policy acquisition costs, are deferred and amortized over the respective policy periods in
proportion to anticipated premium revenue. These deferred policy acquisition costs consist primarily of first-year commissions, except for recurring policy maintenance costs and certain variable costs and expenses for underwriting policies.
(f) Allowance for doubtful receivables on direct financing leases and probable loan losses
The allowance for doubtful receivables on direct financing leases and probable loan losses is maintained at a level which,
in the judgment of management, is appropriate to provide for probable losses inherent in lease and loan portfolios. The allowance is increased by provision charged to income and is decreased by charge-offs, net of recoveries.
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Developing the allowance for doubtful receivables on direct financing leases
and probable loan losses is subject to numerous estimates and judgments. In evaluating the appropriateness of the allowance, management considers various factors, including the business characteristics and financial conditions of the obligors,
current economic conditions and trends, prior
charge-off
experience, current delinquencies and delinquency trends, future cash flows expected to be received from the direct financing leases and loans and value
of underlying collateral and guarantees. Impaired loans are individually evaluated for a valuation allowance based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral
securing the loans if the loans are collateral-dependent. For
non-impaired
loans, including loans that are not individually evaluated for impairment, and direct financing leases, the Company and its
subsidiaries evaluate prior
charge-off
experience segmented by the debtors’ industries and the purpose of the loans, and then develop the allowance for doubtful receivables on direct financing leases and
probable loan losses considering the prior
charge-off
experience and current economic conditions.
The Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal considering debtors’ creditworthiness and the liquidation
status of collateral.
(g) Impairment of long-lived assets
The Company and its subsidiaries perform a recoverability test for long-lived assets to be held and used in operations,
including tangible assets and intangible assets being amortized, consisting primarily of office buildings, condominiums, golf courses and other properties under facility operations, whenever events or changes in circumstances indicated that the
assets might be impaired. The assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying amount of assets not recoverable is
reduced to fair value if lower than the carrying amount. The Company and its subsidiaries determine the fair value using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers based on recent transactions
involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as
appropriate.
(h) Investment in securities
Trading securities are reported at fair value with unrealized gains and losses included in income.
Available-for-sale
securities are
reported at fair value, and unrealized gains or losses are recorded in accumulated other comprehensive income (loss), net of applicable income taxes, except investments which are recorded at fair value with unrealized gains and losses included in
income by electing the fair value option.
Held-to-maturity
securities are recorded
at amortized cost.
Other securities are recorded at cost or carrying value that reflects equity income and
loss based on the Company’s share, except investments which are recorded at fair value with unrealized gains and losses included in income by electing the fair value option.
For
available-for-sale
securities, the
Company and its subsidiaries generally recognize losses related to equity securities for which the fair value has been significantly below the acquisition cost (or current carrying value if an adjustment has been made in the past) for more than six
months. Also, the Company and its subsidiaries charge against income losses related to equity securities in situations where, even though the fair value has not remained significantly below the carrying value for six months, the decline in the fair
value of an equity security is based on the issuer’s specific economic conditions and not just general declines in the related market and where it is considered unlikely that the fair value of the equity security will recover within six months.
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For debt securities, where the fair value is less than the amortized cost,
the Company and its subsidiaries consider whether those securities are other-than-temporarily impaired using all available information about their collectability. The Company and its subsidiaries do not consider a debt security to be
other-than-temporarily impaired if (1) the Company and its subsidiaries do not intend to sell the debt security, (2) it is not more likely than not that the Company and its subsidiaries will be required to sell the debt security before
recovery of its amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized cost of the security. On the other hand, the Company and its subsidiaries consider a debt security to be
other-than-temporarily impaired if any of the above mentioned three conditions are not met. When the Company and its subsidiaries deem a debt security to be other-than-temporarily impaired, the Company and its subsidiaries recognize the entire
difference between the amortized cost and the fair value of the debt securities in earnings if the Company and its subsidiaries intend to sell the debt security or it is more likely than not that the Company and its subsidiaries will be required to
sell the debt security before recovery of its amortized cost basis less any current-period credit loss. However, if the Company and its subsidiaries do not intend to sell the debt security and it is not more likely than not that the Company and its
subsidiaries will be required to sell the debt security before recovery of its amortized cost basis less any current-period credit loss, the Company and its subsidiaries separate the difference between the amortized cost and the fair value of the
debt securities into the credit loss component and the
non-credit
loss component. The credit loss component is recognized in earnings, and the
non-credit
loss component
is recognized in other comprehensive income (loss), net of applicable income taxes.
For other securities,
when the Company and its subsidiaries determine the decline in value is other than temporary, the Company and its subsidiaries reduce the carrying value of the security to the fair value and charge against income losses related to these other
securities.
(i) Income taxes
The Company, in general, determines its provision for income taxes for quarterly periods by applying the current estimate of the effective tax rate for the full fiscal year to the actual
year-to-date
income before income taxes. The estimated effective tax rate is determined by dividing the estimated provision for income taxes for the full fiscal year by the
estimated income before income taxes for the full fiscal year.
At the fiscal year end, income taxes are
accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if, based on the weight of
available evidence, it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.
The effective income tax rates for the nine months ended December 31, 2015 and 2016 were 33.3% and 33.0%, respectively. These rates are 34.4% and 33.0% for the three months ended December 31,
2015 and 2016 respectively. For the nine months ended December 31, 2015, the Company and its subsidiaries in Japan were subject to a National Corporate tax of approximately 25%, an Inhabitant tax of approximately 4% and a deductible Enterprise
tax of approximately 6%, which in the aggregate result in a statutory income tax rate of approximately 33.5%. For the nine months ended December 31, 2016, as a result of the tax reforms as discussed in the following paragraph, the Company and
its subsidiaries in Japan were subject to a National Corporate tax of approximately 24%, an Inhabitant tax of approximately 4% and a deductible Enterprise tax of approximately 4%, which in the aggregate result in a statutory income tax rate of
approximately 31.7%. The effective income tax rate is different from the statutory tax rate primarily because of certain nondeductible expenses for tax purposes,
non-taxable
income for tax purposes, changes in
valuation allowance, the effect of lower income tax rates on foreign subsidiaries and a domestic life insurance subsidiary.
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On March 29, 2016, the 2016 tax reform bill was passed by the National
Diet of Japan. From fiscal years beginning on April 1, 2016, the national corporate tax rate and local business tax rate were reduced and the local corporate tax rate was increased. The net effect of those changes was a reduction in the
combined statutory income tax rate for the fiscal year beginning on April 1, 2016 from approximately 32.9% to approximately 31.7%, and a further reduction in the combined statutory income tax rate for fiscal year beginning on April 1, 2017
to approximately 31.5%. For the fiscal years beginning on or after April 1, 2018, the combined statutory income tax rate was further reduced to approximately 31.3%. In addition, tax loss carryforward rules were amended, and the deductible
amount of tax losses carried forward for the fiscal year beginning on April 1, 2016 is reduced to 60% of taxable income for the year, compared to 65% pursuant to the 2015 tax reform. From the fiscal year beginning on April 1, 2017, the
deductible limit of tax losses carried forward will be increased to 55% of taxable income for the year, while the tax loss carryforward period will be reduced from ten years to nine years. From the fiscal years beginning on or after April 1,
2018, the deductible limit of tax losses carried forward will remain at 50% of taxable income for the year and the tax loss carryforward period will remain at 10 years, consistent with the 2015 tax reform.
The Company and its subsidiaries file tax returns in Japan and certain foreign tax jurisdictions and recognize the
financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon tax examination, including resolution of any related
appeals or litigation processes, and measure tax positions that meet the recognition threshold at the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company and
its subsidiaries present an unrecognized tax benefit as either a reduction of a deferred tax asset, a reduction of an amount refundable or a liability, based on the intended method of settlement. The Company and its subsidiaries classify penalties
and interest expense related to income taxes as part of provision for income taxes in the condensed consolidated statements of income.
The Company and certain subsidiaries have elected to file a consolidated tax return for National Corporation tax purposes.
(j) Securitized assets
The Company and its subsidiaries
have securitized and sold to investors various financial assets such as lease receivables and loan receivables. In the securitization process, the assets to be securitized are sold to trusts or SPEs that issue asset-backed beneficial interests and
securities to the investors.
Trusts or SPEs used in securitization transactions are consolidated if the
Company and its subsidiaries are the primary beneficiary of the trusts or SPEs, and the transfers of the financial assets to those consolidated trusts and SPEs are not accounted for as sales. Assets held by consolidated trusts or consolidated SPEs
continue to be accounted for as lease receivables or loan receivables, as they were before the transfer, and asset-backed beneficial interests and securities issued to the investors are accounted for as debt. When the Company and its subsidiaries
have transferred financial assets to a transferee that is not subject to consolidation, the Company and its subsidiaries account for the transfer as a sale if control over the transferred assets is surrendered.
A certain subsidiary originates and sells loans into the secondary market, while retaining the obligation to service
those loans. In addition, it undertakes obligations to service loans originated by others. The subsidiary recognizes servicing assets if it expects the benefit of servicing to more than adequately compensate it for performing the servicing or
recognizes servicing liabilities if it expects the benefit of servicing to less than adequately compensate it. These servicing assets and liabilities are initially recognized at fair value and subsequently accounted for using the amortization method
whereby the assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss. On a quarterly basis, servicing assets and liabilities are evaluated for impairment or increased
obligations. The fair value of servicing assets and liabilities is estimated using an internal valuation model, or by obtaining an opinion of value from an independent third-party vendor. Both methods are based on calculating the present value of
estimated future net servicing cash flows, taking into consideration discount rates, prepayments and servicing costs. The internal valuation model is validated at least semiannually through third-party valuations.
(k) Derivative financial instruments
The Company and its subsidiaries recognize all derivatives on the consolidated balance sheets at fair value. The accounting treatment of subsequent changes in the fair value depends on their use, and
whether they qualify as effective “hedges” for accounting purposes. Derivatives for the purpose of economic hedge that are not qualified for hedge accounting are adjusted to fair value through the consolidated statements of income. If a
derivative is a hedge, then depending on its nature, changes in its fair value will be either offset against change in the fair value of hedged assets or liabilities through the consolidated statements of income, or recorded in other comprehensive
income (loss).
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If a derivative is held as a hedge of the variability of fair value related
to a recognized asset or liability or an unrecognized firm commitment (“fair value” hedge), changes in the fair value of the derivative are recorded in earnings along with the changes in the fair value of the hedged item.
If a derivative is held as a hedge of the variability of cash flows related to a forecasted transaction or a recognized
asset or liability (“cash flow” hedge), changes in the fair value of the derivative are recorded in other comprehensive income (loss) to the extent that the derivative is effective as a hedge, until earnings are affected by the variability
in cash flows of the designated hedged item.
If a derivative is held as a hedge of a foreign-currency
fair-value or cash-flow hedge (“foreign currency” hedge), changes in the fair value of the derivative are recorded in either earnings or other comprehensive income (loss), depending on whether the hedged transaction is a fair-value hedge
or a cash-flow hedge. However, if a derivative is used as a hedge of a net investment in a foreign operation, changes in its fair value, to the extent effective as a hedge, are recorded in the foreign currency translation adjustments account within
other comprehensive income (loss).
The ineffective portion of changes in fair value of derivatives that
qualify as a hedge are recorded in earnings.
For all hedging relationships that are designated and qualify as
hedging, at inception the Company and its subsidiaries formally document the details of the hedging relationship and the hedged activity. The Company and its subsidiaries also formally assess, both at the hedge’s inception and on an ongoing
basis, the effectiveness of the hedge relationship. The Company and its subsidiaries cease hedge accounting prospectively when the derivative no longer qualifies for hedge accounting.
(l) Pension plans
The Company and certain subsidiaries have contributory and
non-contributory
pension plans covering substantially all of their employees. The costs of pension plans
are accrued based on amounts determined using actuarial methods, with assumptions of discount rate, rate of increase in compensation level, expected long-term rate of return on plan assets and others.
The Company and its subsidiaries also recognize the funded status of pension plans, measured as the difference between
the fair value of plan assets and the benefit obligation, on the consolidated balance sheets. Changes in that funded status are recognized in the year in which the changes occur through other comprehensive income (loss), net of applicable income
taxes.
(m) Stock-based compensation
The Company and its subsidiaries measure, with limited exception, the cost of employee services received in exchange for
an award of equity instruments at the grant-date fair value. The costs are recognized over the requisite employee service period.
(n) Stock splits
Stock splits implemented prior to
October 1, 2001 had been accounted for by transferring an amount equivalent to the par value of the shares from additional
paid-in
capital to common stock as required by the Japanese Commercial Code (the
“Code”) before amendment. However, no such reclassification was made for stock splits when common stock already included a portion of the proceeds from shares issued at a price in excess of par value. This method of accounting was in
conformity with accounting principles generally accepted in Japan.
As a result of a revision to the Code
before amendment effective on October 1, 2001 and the Companies Act implemented on May 1, 2006, the above-mentioned method of accounting required by the Code became unnecessary.
In the United States, stock splits in comparable circumstances are considered to be stock dividends and are accounted for
by transferring from retained earnings to common stock and additional
paid-in
capital amounts equal to the fair market value of the shares issued. Common stock is increased by the par value of the shares and
additional
paid-in
capital is increased by the excess of the market value over par value of the shares issued. Had such stock splits made prior to October 1, 2001 been accounted for in this manner,
additional
paid-in
capital as of December 31, 2016 would have increased by approximately ¥24,674 million, with a corresponding decrease in retained earnings. Total ORIX Corporation
shareholders’ equity would remain unchanged. Stock splits on May 19, 2000 were excluded from the above amounts because the stock splits were not considered to be stock dividends under U.S. GAAP.
– 32 –
(o) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits placed with banks and short-term highly liquid investments with
original maturities of three months or less.
(p) Restricted cash
Restricted cash consists of trust accounts under securitization programs and real estate, deposits related to servicing
agreements, deposits collected on the underlying assets and applied to
non-recourse
loans and others.
(q) Installment loans
Certain loans, for which the Company
and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held for sale and are carried at the lower of cost or fair value determined on an individual basis, except loans held for sale for
which the fair value option under ASC 825 (“Financial Instruments”) was elected. A subsidiary elected the fair value option under ASC 825 on its loans held for sale originated on or after October 1, 2011. The subsidiary enters into
forward sale agreements to offset the change in the fair value of loans held for sale, and the election of the fair value option allows the subsidiary to recognize both the change in the fair value of the loans and the change in the fair value of
the forward sale agreements due to changes in interest rates in the same accounting period.
Loans held for
sale are included in installment loans, and the outstanding balances of these loans as of March 31, 2016 and December 31, 2016 were ¥21,867 million and ¥15,476 million, respectively. There were ¥20,673 million
and ¥14,735 million of loans held for sale as of March 31, 2016 and December 31, 2016, respectively, measured at fair value by electing the fair value option.
(r) Property under facility operations
Property under facility operations consist primarily of operating facilities (including golf courses, hotels and training facilities and senior housings) and environmental assets (including mega solar),
which are stated at cost less accumulated depreciation, and depreciation is calculated mainly on a straight-line basis over the estimated useful lives of the assets. Accumulated depreciation was ¥67,055 million and ¥79,341 million
as of March 31, 2016 and December 31, 2016, respectively.
(s) Trade notes, accounts and other receivable
Trade notes, accounts and other receivable primarily include accounts receivables in relation to sales of
assets to be leased, inventories and other assets and payment made on behalf of lessees for property tax, maintenance fees and insurance premiums in relation to direct financing lease contracts.
(t) Inventories
Inventories consist primarily of residential condominiums under development, completed residential condominiums (including those waiting to be delivered to buyers under the contract for sale), and
merchandise for sale. Residential condominiums under development are carried at cost less any impairment losses, and completed residential condominiums and merchandises for sale are stated at the lower of cost or fair value less cost to sell. The
cost of inventories that are unique and not interchangeable is determined on the specific identification method and the cost of other inventories is principally determined on the
first-in
first-out
(FIFO) method. As of March 31, 2016 and December 31, 2016, residential condominiums under development were ¥81,859 million and ¥93,535 million, respectively, and completed
residential condominiums and merchandises for sale were ¥58,091 million and ¥49,121 million, respectively.
The Company and its subsidiaries recorded ¥34 million and ¥654 million of write-downs principally on residential condominiums and merchandise for sale for the nine months ended
December 31, 2015 and 2016, respectively, primarily resulting from a decrease in expected sales price. The amounts of such write-downs for the three months ended December 31, 2015 and 2016 were ¥5 million and ¥18 million
respectively. These write-downs were principally recorded in costs of goods and real estate sold and included in the Corporate Financial Services segment and the Investment and Operation segment.
(u) Office facilities
Office facilities are stated at cost less accumulated depreciation. Depreciation is calculated on a declining-balance basis or straight-line basis over the estimated useful lives of the assets.
Accumulated depreciation was ¥45,310 million and ¥47,549 million as of March 31, 2016 and December 31, 2016, respectively.
– 33 –
(v) Other assets
Other assets consist primarily of the excess of purchase prices over the net assets acquired in acquisitions (goodwill)
and other intangible assets (see (w)), reinsurance recoverables in relation to reinsurance contracts (see (e)), deferred insurance policy acquisition costs which are amortized over the contract periods (see (e)), leasehold deposits, advance payments
made in relation to purchases of assets to be leased and construction of real estate for operating lease, prepaid benefit cost, derivative assets and deferred tax assets.
(w) Goodwill and other intangible assets
The Company and
its subsidiaries account for all business combinations using the acquisition method. The Company and its subsidiaries recognize intangible assets acquired in a business combination apart from goodwill if the intangible assets meet one of two
criteria—either the contractual-legal criterion or the separability criterion. Goodwill is measured as an excess of the aggregate of consideration transferred and the fair value of noncontrolling interests over the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed in the business combination measured at fair value. The Company and its subsidiaries would recognize a bargain purchase gain when the amount of recognized net assets exceeds the
sum of consideration transferred and the fair value of noncontrolling interests. In a business combination achieved in stages, the Company and its subsidiaries remeasure their previously held equity interest at their acquisition-date fair value and
recognize the resulting gain or loss, if any, in earnings.
The Company and its subsidiaries perform an
impairment test for goodwill and any intangible assets that have indefinite useful lives at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for
impairment when such events or changes occur.
The Company and its subsidiaries have the option to perform a
qualitative assessment to determine whether to calculate the fair value of a reporting unit under the first step of the
two-step
goodwill impairment test. The Company and its subsidiaries perform the
qualitative assessment for some goodwill but bypass the qualitative assessment and proceed directly to the first step of the
two-step
impairment test for other goodwill. For the goodwill for which the
qualitative assessment is performed, if, after assessing the totality of events or circumstances, the Company and/or subsidiaries determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount,
then the Company and/or subsidiaries do not perform the
two-step
impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company
and/or subsidiaries proceed to perform the first step of the
two-step
impairment test. The first step of goodwill impairment test, used to identify potential impairment, calculates the fair value of the
reporting unit and compares the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit falls below its carrying amount, the second step of the goodwill impairment test is performed to measure the amount of
impairment loss. The second step of the goodwill impairment test compares implied fair value of goodwill with its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal
to that excess. The Company and its subsidiaries test the goodwill either at the operating segment level or one level below the operating segments.
The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The Company and
its subsidiaries perform the qualitative assessment for some indefinite-lived intangible assets but bypass the qualitative assessment and perform the quantitative assessment for other indefinite-lived intangible assets. For those indefinite-lived
assets for which the qualitative assessment is performed, if, after assessing the totality of events and circumstances, the Company and/or subsidiaries conclude that it is not more likely than not that the indefinite-lived asset is impaired, then
the Company and/or subsidiaries do not perform the quantitative impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or subsidiaries calculate the fair
value of the indefinite-lived intangible asset and perform the quantitative impairment test. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Intangible assets with finite lives are amortized over their useful lives and tested for impairment. The
Company and its subsidiaries perform a recoverability test for the intangible assets whenever events or changes in circumstances indicate that the assets might be impaired. The intangible assets are considered not recoverable when the undiscounted
future cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount.
– 34 –
The amount of goodwill was ¥332,153 million and
¥334,922 million as of March 31, 2016 and December 31, 2016, respectively.
The amount of
other intangible assets was ¥386,334 million and ¥369,665 million as of March 31, 2016 and December 31, 2016, respectively.
(x) Trade notes, accounts and other payable
Trade notes,
accounts and other payable include primarily accounts payable in relation to purchase of assets to be leased, merchandise for sale and other assets, accounts payable in relation to construction work of residential condominiums and deposits received
mainly for withholding income tax.
(y) Other Liabilities
Other liabilities include primarily interest, bonus accrued expense and accrued benefit liability, advances received from
lessees in relation to lease contracts, deposit received from real estate transaction and derivative liabilities.
(z)
Capitalization of interest costs
The Company and its subsidiaries capitalized interest costs related to
specific long-term development projects.
(aa) Advertising
The costs of advertising are expensed as incurred.
(ab) Earnings per share
Basic earnings per share is computed by dividing net income attributable to ORIX Corporation shareholders by the weighted average number of shares of outstanding common stock in each period and diluted
earnings per share, which reflects the potential dilution that could occur if securities or other contracts issuing common stock were exercised or converted into common stock.
(ac) Additional acquisition and partial sale of the parent’s ownership interest in subsidiaries
Additional acquisition of the parent’s ownership interest in subsidiaries and partial sale of such interest where the parent continues to retain control of that subsidiary are accounted for as equity
transactions. On the other hand, in a transaction that results in the loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the
remeasurement to fair value of the interest retained.
(ad) Redeemable noncontrolling interests
Noncontrolling interests in a certain subsidiary are redeemable preferred shares which are subject to call and put rights
upon certain shareholder events. As redemption of the noncontrolling interest is not solely in the control of the subsidiary, it is recorded between liabilities and equity on the consolidated balance sheets at its estimated redemption value.
(ae) Issuance of stock by an affiliate
When an affiliate issues stocks to unrelated third parties, the Company and its subsidiaries’ ownership interest in
the affiliate decreases. In the event that the price per share is more or less than the Company and its subsidiaries’ average carrying amount per share, the Company and its subsidiaries adjust the carrying amount of its investment in the
affiliate and recognize gain or loss in the consolidated statements of income in the year in which the change in ownership interest occurs.
(af) New accounting pronouncements
In May 2014, Accounting
Standards Update
2014-09
(“Revenue from Contracts with Customers”—ASC 606 (“Revenue from Contracts with Customers”)) was issued. The core principle of this Update is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core
principle, an entity should apply a five-step model to determine when to recognize revenue, and in what amount. The five steps to apply the model are:
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•
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Identify the contract(s) with a customer
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•
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Identify the performance obligations in the contract
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•
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Determine the transaction price
|
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•
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Allocate the transaction price to the performance obligations in the contract
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•
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Recognize revenue when (or as) the entity satisfies a performance obligation
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– 35 –
This Update requires an entity to disclose more information about contracts
with customers than under the current disclosure requirements.
In April 2016, Accounting Standards Update
2016-10
(“Identifying Performance Obligations and Licensing”—ASC 606 (“Revenue from Contracts with Customers”)) was issued as an amendment of the new revenue standard. This Update adds
further guidance on identifying performance obligations and also improves the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in ASC 606.
In May 2016, Accounting Standards Update
2016-12
(“Narrow-Scope Improvements
and Practical Expedients”—ASC 606 (“Revenue from Contracts with Customers”)) was issued as an amendment of the new revenue standard. This Update (1) clarifies the objective of the collectibility criterion for applying
paragraph
606-10-25-7;
(2) permits an entity to exclude amounts collected from customers for all sales (and other similar) taxes
from the transaction price; (3) specifies that the measurement date for
non-cash
consideration is contract inception; (4) provides a practical expedient that permits an entity to reflect the
aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to
the satisfied and unsatisfied performance obligations; (5) clarifies that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of
initial application, and (6) clarifies that an entity that retrospectively applies ASC 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption.
These Updates are effective for fiscal years, and interim periods within those fiscal years beginning after
December 15, 2017. Early adoption is permitted only for the fiscal year beginning after December 15, 2016, and interim periods within the fiscal year. An entity should apply the amendments in these Updates using either a retrospective
method or a cumulative-effect method. The entity may elect some optional practical expedients when applying these Updates. The entity using the cumulative-effect method would recognize the cumulative effect of initially applying these Updates as an
adjustment to the opening balance of retained earnings or net assets at the date of initial application. The Company and its subsidiaries are currently evaluating the effect that the adoption of these Updates will have on the Company and its
subsidiaries’ results of operations or financial position.
In June 2014, Accounting Standards Update
2014-12
(“Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”—ASC 718 (“Compensation—Stock
Compensation”)) was issued. This Update requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The Company and its subsidiaries adopted this
Update on April 1, 2016. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.
In August 2014, Accounting Standards Update
2014-13
(“Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing
Entity”—ASC 810 (“Consolidation”)) was issued. This Update permits the parent of the consolidated collateralized financing entity (“CFE”) within the scope of this Update to measure the CFE’s financial assets and
liabilities based on either the fair value of the financial assets or financial liabilities, whichever has the more observable inputs. The Company and its subsidiaries adopted this Update on April 1, 2016. The adoption had no effect on the
Company and its subsidiaries’ results of operations or financial position.
– 36 –
In August 2014, Accounting Standards Update
2014-15
(“Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”—ASC
205-40
(“Presentation of Financial
Statements—Going Concern”)) was issued. This Update requires an entity to perform a going concern assessment by evaluating their ability to meet obligations for a look-forward period of one year from the financial statement issuance date
(or date the financial statements are available to be issued). Disclosures are required if it is probable an entity will be unable to meet its obligations within the look-forward period. Incremental substantial doubt disclosure is required if the
probability is not mitigated by management’s plans. This Update is effective for the first fiscal year ending after December 15, 2016 and fiscal years and interim periods thereafter. Early adoption is permitted. The Update only relates to
certain disclosure requirements and the adoption will have no effect on the Company and its subsidiaries’ results of operations or financial position.
In November 2014, Accounting Standards Update
2014-16
(“Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is
More Akin to Debt or to Equity”—ASC 815 (“Derivatives and Hedging”)) was issued. This Update requires an issuer or an investor of hybrid financial instruments issued in the form of a share to determine whether the nature of the
host contract is more akin to debt or to equity by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for separate accounting from the host
contract. The Company and its subsidiaries adopted this Update on April 1, 2016. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.
In January 2015, Accounting Standards Update
2015-01
(“Simplifying Income
Statement Presentation by Eliminating the Concept of Extraordinary Items”—ASC
225-20
(“Income Statement—Extraordinary and Unusual Items”)) was issued. This Update eliminates the
concept of extraordinary items from U.S. GAAP, but does not change the current presentation and disclosure requirements for material events or transactions that are unusual in nature or infrequent in occurrence. The Company and its subsidiaries
adopted this Update on April 1, 2016. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.
In February 2015, Accounting Standards Update
2015-02
(“Amendments to the Consolidation Analysis”—ASC 810 (“Consolidation”)) was issued.
This Update requires an entity to change the way to evaluate whether reporting entities should consolidate limited partnerships and similar legal entities, fees paid to a decision maker or service provider are variable interest in a VIE, and
variable interests in a VIE held by related parties of the reporting entity require the reporting entity to consolidate the VIE. Additionally, the amendments in this Update rescind the indefinite deferral of FASB Statement No.167 (“Amendments
to FASB Interpretation No.46(R)”), included in Accounting Standards Update
2010-10
(ASC 810 (“Consolidation”)) for certain investment companies and similar entities. The Company and its
subsidiaries adopted this Update on April 1, 2016. The adoption had no effect on the Company and its subsidiaries’ results of operations or financial position. See Note 8 “Variable Interest Entities” where the required disclosure
has been provided.
In April 2015, Accounting Standards Update
2015-03
(“Simplifying the Presentation of Debt Issuance Costs”—ASC
835-30
(“Interest—Imputation of Interest”)) was issued. This Update requires that debt issuance costs related to a
recognized debt liability are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, similar to the presentation of debt discounts or premiums. The Company and its subsidiaries adopted this Update
retrospectively to prior period financial statements on April 1, 2016. The effect of the retrospective adoption on the financial position as of March 31, 2016 was a decrease of approximately ¥3,988 million in other assets and a
decrease of approximately ¥3,988 million in long-term debt in the condensed consolidated balance sheets.
In July 2015, Accounting Standards Update
2015-11
(“Simplifying the Measurement of Inventory”—ASC 330 (“Inventory”)) was issued. This
Update applies to all inventory except for which is measured using
last-in,
first-out
(LIFO) or the retail inventory method, and requires an entity to measure inventory
at the lower of cost and net realizable value. Additionally, this Update defines net realizable value as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
This Update is effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2016. The amendments in this Update should be applied on a prospective basis. Early adoption is permitted. The Company and its
subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.
– 37 –
In September 2015, Accounting Standards Update
2015-16
(“Simplifying the Accounting for Measurement-Period Adjustments”—ASC 805 (“Business Combinations”)) was issued. This Update requires that an acquirer recognize adjustments to
provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The Company and its subsidiaries adopted this Update on April 1, 2016. The adoption had no effect on
the Company and its subsidiaries’ results of operations or financial position.
In January 2016,
Accounting Standards Update
2016-01
(“Recognition and Measurement of Financial Assets and Financial Liabilities”—ASC
825-10
(“Financial
Instruments—Overall”)) was issued. This Update revises accounting related to the classification and measurement of equity investments. This Update also revises the presentation of certain fair value changes for financial liabilities
measured at fair value. Additionally, this Update amends certain disclosure requirements associated with the fair value of financial instruments. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods
within those fiscal years. Early application to financial statements of fiscal years or interim periods that have not yet been issued is permitted as of the beginning of the fiscal year of adoption. The amendments in this Update should be applied by
means of cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company and its subsidiaries are currently evaluating the effect that adoption of this Update will have on the Company and its
subsidiaries’ results of operations or financial position.
In February 2016, Accounting Standards Update
2016-02
(ASC 842 (“Leases”)) was issued. This Update requires a lessee to recognize most leases
on-balance
sheet. Lessor accounting remains substantially
similar to current U.S. GAAP but with some important changes. This Update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted. The amendments in this
Update should be applied at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. The Company
and its subsidiaries are currently evaluating the effect that adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.
In March 2016, Accounting Standards Update
2016-07
(“Simplifying the
Transition to the Equity Method Accounting”—ASC 323 (“Investments—Equity Method and Joint Ventures”)) was issued. This Update eliminates the requirement that when an investment qualifies for use of the equity method as
a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a
step-by-step
basis as if the equity method had been in effect during all previous periods that the investment had been held. This Update also requires that the equity method investor add the cost of acquiring
the additional interest in the investee to the current basis of the investor’s previously held interest and requires that an entity that has an
available-for
sale equity security that becomes qualified
for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. This Update is effective for
fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The amendments in this Update should be applied prospectively. Early application is permitted. Generally, the effect of adopting this Update on the
Company and its subsidiaries’ results of operations or financial position will depend on future transactions.
In June 2016, Accounting Standards Update
2016-13
(“Measurement of Credit Losses on Financial Instruments”—ASC 326 (“Financial
Instruments—Credit Losses”)) was issued. This Update significantly changes how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss model requires companies to immediately
recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are within the scope of this Update. This Update also makes targeted amendments to the current impairment model for
available-for-sale
debt securities. This Update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The amendments in this Update should be applied
through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Early application is permitted for fiscal year beginning after December 15, 2018, including
interim periods within the fiscal year. The Company and its subsidiaries are currently evaluating the effect that adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.
– 38 –
In August 2016, Accounting Standards Update
2016-15
(“Classification of Certain Cash Receipts and Cash Payments”—ASC 230 (“Statement of Cash Flows”) was issued. This Update amends ASC 230 to add or clarify guidance on the
classification of certain cash receipts and cash payments in the statement of cash flows. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted.
This Update should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as
of the earliest date practicable. The Company and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ Statement of Cash Flows.
In October 2016, Accounting Standards Update
2016-16
(“Intra-Entity
Transfers of Assets Other Than Inventory”—ASC 740 (“Income Taxes”) was issued. This Update eliminates the exception to defer the income tax consequences of intra-entity transfers of assets other than inventory until the assets
are ultimately sold to an outside party and requires the recognition of the current and deferred tax consequences when those transfers occur. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods
within those fiscal years. Early adoption is permitted. This Update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company
and its subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.
In October 2016, Accounting Standards Update
2016-17
(“Interests Held
through Related Parties That Are under Common Control”—ASC 810 (“Consolidation”) was issued. This Update amends the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect
interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. This Update is effective for fiscal years beginning after
December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the
beginning of the fiscal year that includes that interim period. The Company and its subsidiaries have already adopted the amendments in Accounting Standards Update
2015-02
and accordingly would be required to
apply the amendments in this Update retrospectively to all relevant prior periods beginning with the fiscal year in which the amendments in that Update
2015-02
initially were applied. The Company and its
subsidiaries are currently evaluating the effect that the adoption of this Update will have on the Company and its subsidiaries’ results of operations or financial position.
In November 2016, Accounting Standards Update
2016-18
(“Restricted
Cash”—ASC230 (“Statement of Cash Flows”)) was issued. This Update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted
cash or restricted cash equivalents. This Update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity
early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company and its subsidiaries are currently evaluating the effect that the adoption of
this Update will have on the Company and its subsidiaries’ Statement of Cash Flows.
In January 2017,
Accounting Standards Update
2017-04
(“Simplifying the Test for Goodwill Impairment”—ASC350 (“Intangible—Goodwill and Other”)) was issued. This Update eliminated Step 2 from the
current goodwill impairment test. Instead, goodwill impairments would be measured by the amount by which the carrying amount exceeds the reporting unit’s fair value. This Update also eliminated the requirement for any reporting unit with a zero
or negative carrying amount to perform a qualitative assessment and, if it is more likely than not that the goodwill is impaired, to perform Step 2 of the goodwill impairment test. This Update is effective for its annual or any interim goodwill
impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.
Generally, the effect of adopting this update on the Company and its subsidiaries’ results of operation or financial position will depend on future conditions.
– 39 –
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3.
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Fair Value Measurements
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ASC 820 (“Fair Value Measurement”) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.
This Codification Section classifies and prioritizes inputs used in valuation techniques to measure fair value into the
following three levels:
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Level 1:
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Inputs of quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement
date.
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Level 2:
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Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
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Level 3:
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Unobservable inputs for the assets or liabilities.
|
This Codification Section differentiates between those assets and liabilities required to
be carried at fair value at every reporting period (“recurring”) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (“nonrecurring”). The Company and its subsidiaries
mainly measure certain loans held for sale, trading securities,
available-for-sale
securities, certain investment funds, derivatives, certain reinsurance recoverables,
certain contingent consideration, and variable annuity and variable life insurance contracts at fair value on a recurring basis.
– 40 –
The following table presents recorded amounts of major financial assets and
liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2016:
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Total
Carrying
Value in
Consolidated
Balance Sheets
|
|
|
Quoted Prices
in
Active
Markets
for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale*1
|
|
¥
|
20,673
|
|
|
¥
|
0
|
|
|
¥
|
20,673
|
|
|
¥
|
0
|
|
|
Trading securities
|
|
|
725,821
|
|
|
|
37,592
|
|
|
|
688,229
|
|
|
|
0
|
|
|
Available-for-sale
securities
|
|
|
1,347,890
|
|
|
|
99,347
|
|
|
|
1,149,021
|
|
|
|
99,522
|
|
|
Japanese and foreign government bond securities
|
|
|
497,355
|
|
|
|
988
|
|
|
|
496,367
|
|
|
|
0
|
|
|
Japanese prefectural and foreign municipal bond securities*2
|
|
|
169,534
|
|
|
|
0
|
|
|
|
169,534
|
|
|
|
0
|
|
|
Corporate debt securities
|
|
|
410,779
|
|
|
|
0
|
|
|
|
410,774
|
|
|
|
5
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
3,461
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,461
|
|
|
CMBS and RMBS in the Americas
|
|
|
97,186
|
|
|
|
0
|
|
|
|
58,693
|
|
|
|
38,493
|
|
|
Other asset- backed securities and debt securities
|
|
|
58,230
|
|
|
|
0
|
|
|
|
667
|
|
|
|
57,563
|
|
|
Equity securities*4
|
|
|
111,345
|
|
|
|
98,359
|
|
|
|
12,986
|
|
|
|
0
|
|
|
Other securities
|
|
|
17,751
|
|
|
|
0
|
|
|
|
0
|
|
|
|
17,751
|
|
|
Investment funds*5
|
|
|
17,751
|
|
|
|
0
|
|
|
|
0
|
|
|
|
17,751
|
|
|
Derivative assets
|
|
|
33,747
|
|
|
|
48
|
|
|
|
25,491
|
|
|
|
8,208
|
|
|
Interest rate swap agreements
|
|
|
93
|
|
|
|
0
|
|
|
|
93
|
|
|
|
0
|
|
|
Options held/written and other
|
|
|
8,789
|
|
|
|
0
|
|
|
|
581
|
|
|
|
8,208
|
|
|
Futures, foreign exchange contracts
|
|
|
18,294
|
|
|
|
48
|
|
|
|
18,246
|
|
|
|
0
|
|
|
Foreign currency swap agreements
|
|
|
6,571
|
|
|
|
0
|
|
|
|
6,571
|
|
|
|
0
|
|
|
Netting*6
|
|
|
(5,757
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Net derivative assets
|
|
|
27,990
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other assets
|
|
|
37,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,855
|
|
|
Reinsurance recoverables*7
|
|
|
37,855
|
|
|
|
0
|
|
|
|
0
|
|
|
|
37,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
2,183,737
|
|
|
¥
|
136,987
|
|
|
¥
|
1,883,414
|
|
|
¥
|
163,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
¥
|
19,870
|
|
|
¥
|
533
|
|
|
¥
|
19,337
|
|
|
¥
|
0
|
|
|
Interest rate swap agreements
|
|
|
5,921
|
|
|
|
0
|
|
|
|
5,921
|
|
|
|
0
|
|
|
Options held/written and other
|
|
|
3,637
|
|
|
|
0
|
|
|
|
3,637
|
|
|
|
0
|
|
|
Futures, foreign exchange contracts
|
|
|
6,655
|
|
|
|
533
|
|
|
|
6,122
|
|
|
|
0
|
|
|
Foreign currency swap agreements
|
|
|
3,601
|
|
|
|
0
|
|
|
|
3,601
|
|
|
|
0
|
|
|
Credit derivatives held
|
|
|
56
|
|
|
|
0
|
|
|
|
56
|
|
|
|
0
|
|
|
Netting*6
|
|
|
(5,757
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Net derivative Liabilities
|
|
|
14,113
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Policy Liabilities and Policy Account Balances
|
|
|
795,001
|
|
|
|
0
|
|
|
|
0
|
|
|
|
795,001
|
|
|
Variable annuity and variable life insurance contracts*8
|
|
|
795,001
|
|
|
|
0
|
|
|
|
0
|
|
|
|
795,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
814,871
|
|
|
¥
|
533
|
|
|
¥
|
19,337
|
|
|
¥
|
795,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 41 –
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Total
Carrying
Value in
Consolidated
Balance Sheets
|
|
|
Quoted Prices
in
Active
Markets
for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for sale*1
|
|
¥
|
14,735
|
|
|
¥
|
0
|
|
|
¥
|
14,735
|
|
|
¥
|
0
|
|
|
Trading securities
|
|
|
648,322
|
|
|
|
39,030
|
|
|
|
606,134
|
|
|
|
3,158
|
|
|
Available-for-sale
securities
|
|
|
1,172,098
|
|
|
|
78,172
|
|
|
|
964,582
|
|
|
|
129,344
|
|
|
Japanese and foreign government bond securities
|
|
|
335,767
|
|
|
|
2,788
|
|
|
|
332,979
|
|
|
|
0
|
|
|
Japanese prefectural and foreign municipal bond securities*2
|
|
|
175,618
|
|
|
|
0
|
|
|
|
175,618
|
|
|
|
0
|
|
|
Corporate debt securities*3
|
|
|
409,659
|
|
|
|
838
|
|
|
|
407,368
|
|
|
|
1,453
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
1,162
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,162
|
|
|
CMBS and RMBS in the Americas
|
|
|
97,453
|
|
|
|
0
|
|
|
|
34,712
|
|
|
|
62,741
|
|
|
Other asset- backed securities and debt securities
|
|
|
76,639
|
|
|
|
0
|
|
|
|
12,651
|
|
|
|
63,988
|
|
|
Equity securities*4
|
|
|
75,800
|
|
|
|
74,546
|
|
|
|
1,254
|
|
|
|
0
|
|
|
Other securities
|
|
|
19,520
|
|
|
|
0
|
|
|
|
0
|
|
|
|
19,520
|
|
|
Investment funds*5
|
|
|
19,520
|
|
|
|
0
|
|
|
|
0
|
|
|
|
19,520
|
|
|
Derivative assets
|
|
|
16,705
|
|
|
|
176
|
|
|
|
11,901
|
|
|
|
4,628
|
|
|
Interest rate swap agreements
|
|
|
287
|
|
|
|
0
|
|
|
|
287
|
|
|
|
0
|
|
|
Options held/written and other
|
|
|
7,094
|
|
|
|
0
|
|
|
|
2,466
|
|
|
|
4,628
|
|
|
Futures, foreign exchange contracts
|
|
|
1,994
|
|
|
|
176
|
|
|
|
1,818
|
|
|
|
0
|
|
|
Foreign currency swap agreements
|
|
|
7,330
|
|
|
|
0
|
|
|
|
7,330
|
|
|
|
0
|
|
|
Netting*6
|
|
|
(1,306
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Net derivative assets
|
|
|
15,399
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other assets
|
|
|
26,156
|
|
|
|
0
|
|
|
|
0
|
|
|
|
26,156
|
|
|
Reinsurance recoverables*7
|
|
|
26,156
|
|
|
|
0
|
|
|
|
0
|
|
|
|
26,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
1,897,536
|
|
|
¥
|
117,378
|
|
|
¥
|
1,597,352
|
|
|
¥
|
182,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
¥
|
80,306
|
|
|
¥
|
1,303
|
|
|
¥
|
79,003
|
|
|
¥
|
0
|
|
|
Interest rate swap agreements
|
|
|
4,999
|
|
|
|
0
|
|
|
|
4,999
|
|
|
|
0
|
|
|
Options held/written and other
|
|
|
2,332
|
|
|
|
0
|
|
|
|
2,332
|
|
|
|
0
|
|
|
Futures, foreign exchange contracts
|
|
|
72,466
|
|
|
|
1,303
|
|
|
|
71,163
|
|
|
|
0
|
|
|
Foreign currency swap agreements
|
|
|
393
|
|
|
|
0
|
|
|
|
393
|
|
|
|
0
|
|
|
Credit derivatives held
|
|
|
116
|
|
|
|
0
|
|
|
|
116
|
|
|
|
0
|
|
|
Netting*6
|
|
|
(1,306
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Net derivative Liabilities
|
|
|
79,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Policy Liabilities and Policy Account Balances
|
|
|
675,938
|
|
|
|
0
|
|
|
|
0
|
|
|
|
675,938
|
|
|
Variable annuity and variable life insurance contracts*8
|
|
|
675,938
|
|
|
|
0
|
|
|
|
0
|
|
|
|
675,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
756,244
|
|
|
¥
|
1,303
|
|
|
¥
|
79,003
|
|
|
¥
|
675,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*1
|
A certain subsidiary elected the fair value option on the loans held for sale originated on or after October 1, 2011. These loans are
multi-family and seniors housing loans and are sold to Federal National Mortgage Association (“Fannie Mae”) or institutional investors. Included in “Other (income) and expense, net” in the consolidated statements of income were
losses of ¥667 million and ¥633 million from the change in the fair value of the loans for the nine months ended December 31, 2015 and 2016, respectively. Included in “Other (income) and expense, net” in the
consolidated statements of income were losses of ¥691 million and ¥1,314 million from the change in the fair value of the loans for the three months ended December 31, 2015 and 2016, respectively. No gains or losses were
recognized in earnings during the nine months ended December 31, 2015 and 2016 attributable to changes in instrument-specific credit risk. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as
of March 31, 2016, were ¥19,848 million and ¥20,673 million, respectively, and the amount of aggregate fair value exceeded the amount of aggregate unpaid principal balance by ¥825 million. The amounts of aggregate
unpaid principal balance and aggregate fair value of the loans held for sale as of December 31, 2016, were ¥14,512 million and ¥14,735 million, respectively, and the amount of aggregate fair value exceeds the amount of
aggregate unpaid principal balance by ¥223 million. As of March 31, 2016 and December 31, 2016, there were no loans that are 90 days or more past due, in
non-accrual
status, or both.
|
– 42 –
|
*2
|
A certain subsidiary elected the fair value option for investments in foreign government bond securities included in
available-for-sale
securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were losses of
¥6 million and ¥21 million from the change in the fair value of those investments for the nine months ended December 31, 2015 and 2016, respectively. Included in “Gains on investment securities and dividends” in the
consolidated statements of income was a loss of ¥8 million from the change in the fair value of those investments for the three months ended December 31, 2016. The amounts of aggregate fair value elected the fair value option were
¥988 million and ¥990 million as of March 31, 2016 and December 31, 2016.
|
|
*3
|
A certain subsidiary elected the fair value option for investments in foreign corporate debt securities included in
available-for-sale
securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income was a loss of
¥6 million from the change in the fair value of those investments for the nine and three months ended December 31, 2016. The amounts of aggregate fair value elected the fair value option was ¥838 million as of
December 31, 2016.
|
|
*4
|
A certain subsidiary elected the fair value option for investments in equity securities included in
available-for-sale
securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a loss of ¥161 million and a gain of
¥352 million from the change in the fair value of those investments for the nine months ended December 31, 2015 and 2016, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements
of income were gains of ¥155 million and ¥7 million from the change in the fair value of those investments for the three months ended December 31, 2015 and 2016, respectively. The amounts of aggregate fair value elected the
fair value option were ¥16,227 million and ¥16,215 million as of March 31, 2016 and December 31, 2016, respectively.
|
|
*5
|
Certain subsidiaries elected the fair value option for investments in some funds. Included in “Gains on investment securities and
dividends” in the consolidated statements of income were a loss of ¥90 million and a gain of ¥951 million from the change in the fair value of those investments for the nine months ended December 31, 2015 and 2016,
respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a loss of ¥74 million and a gain of ¥336 million from the change in the fair value of those
investments for the three months ended December 31, 2015 and 2016, respectively. The amounts of aggregate fair value were ¥10,152 million and ¥7,876 million as of March 31, 2016 and December 31, 2016, respectively.
|
|
*6
|
It represents the amount offset under counterparty netting of derivative assets and liabilities.
|
|
*7
|
Certain subsidiaries elected the fair value option for certain reinsurance contracts held. The fair value of the reinsurance contracts elected for
the fair value option in other assets were ¥37,855 million and ¥26,156 million as of March 31, 2016 and December 31, 2016, respectively. For the effect of changes in the fair value of those reinsurance recoverables on
earnings during the nine and three months ended December 31, 2015 and 2016, see Note 15 “Life Insurance Operations.”
|
|
*8
|
A certain subsidiary elected the fair value option for the entire variable annuity and variable life insurance contracts held in order to match the
earnings recognized for the changes in fair value of policy liabilities and policy account balances with earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and variable life policyholders,
derivative contracts and the changes in fair value of reinsurance contracts. The fair value of the variable annuity and variable life insurance contracts elected for the fair value option in policy liabilities and policy account balances were
¥795,001 million and ¥675,938 million as of March 31, 2016 and December 31, 2016, respectively. For the effect of changes in the fair value of the variable annuity and variable life insurance contracts on earnings during
the nine and three months ended December 31, 2015 and 2016, see Note 15 “Life Insurance Operations.”
|
– 43 –
Changes in economic conditions or valuation methodologies may require the
transfer of assets and liabilities from one fair value level to another. In such instances, the Company and its subsidiaries recognize the transfer at the beginning of the quarter during which the transfers occur. The Company and its subsidiaries
evaluate the significance of transfers between levels based upon size of the transfer relative to total assets, total liabilities or total earnings. For the nine months ended December 31, 2015 and 2016, there were no transfers between
Level 1 and Level 2.
The following table presents the reconciliation for financial assets and
liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended December 31, 2015 and 2016:
Nine months ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Balance at
April
1,
2015
|
|
|
Gains or
losses
(realized/unrealized)
|
|
|
Purchases *3
|
|
|
Sales
|
|
|
Settlements *4
|
|
|
Transfers
in
and/
or out of
Level
3
(net) *5
|
|
|
Balance
at
December 31,
2015
|
|
|
Change
in
unrealized
gains or
losses
included in
earnings
for
assets and
liabilities
still held at
December 31,
2015 *1
|
|
|
|
|
Included in
earnings
*1
|
|
|
Included in
other
comprehensive
income *2
|
|
|
Total
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
¥
|
97,051
|
|
|
¥
|
816
|
|
|
¥
|
(3,679
|
)
|
|
¥
|
(2,863
|
)
|
|
¥
|
38,690
|
|
|
¥
|
(12,655
|
)
|
|
¥
|
(14,352
|
)
|
|
¥
|
(869
|
)
|
|
¥
|
105,002
|
|
|
¥
|
(779
|
)
|
|
Corporate debt securities
|
|
|
0
|
|
|
|
1
|
|
|
|
0
|
|
|
|
1
|
|
|
|
5
|
|
|
|
(1
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
5
|
|
|
|
0
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
7,280
|
|
|
|
4
|
|
|
|
14
|
|
|
|
18
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(1,457
|
)
|
|
|
0
|
|
|
|
5,841
|
|
|
|
4
|
|
|
CMBS and RMBS in the Americas
|
|
|
22,658
|
|
|
|
435
|
|
|
|
(581
|
)
|
|
|
(146
|
)
|
|
|
19,856
|
|
|
|
(2,401
|
)
|
|
|
(3,224
|
)
|
|
|
0
|
|
|
|
36,743
|
|
|
|
(776
|
)
|
|
Other asset- backed securities and debt securities
|
|
|
66,252
|
|
|
|
376
|
|
|
|
(3,120
|
)
|
|
|
(2,744
|
)
|
|
|
18,829
|
|
|
|
(10,253
|
)
|
|
|
(9,671
|
)
|
|
|
0
|
|
|
|
62,413
|
|
|
|
(7
|
)
|
|
Equity securities
|
|
|
861
|
|
|
|
0
|
|
|
|
8
|
|
|
|
8
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(869
|
)
|
|
|
0
|
|
|
|
0
|
|
|
Other securities
|
|
|
8,723
|
|
|
|
(430
|
)
|
|
|
36
|
|
|
|
(394
|
)
|
|
|
2,257
|
|
|
|
(742
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
9,844
|
|
|
|
(373
|
)
|
|
Investment funds
|
|
|
8,723
|
|
|
|
(430
|
)
|
|
|
36
|
|
|
|
(394
|
)
|
|
|
2,257
|
|
|
|
(742
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
9,844
|
|
|
|
(373
|
)
|
|
Derivative assets and liabilities (net)
|
|
|
11,870
|
|
|
|
(6,492
|
)
|
|
|
0
|
|
|
|
(6,492
|
)
|
|
|
3,711
|
|
|
|
0
|
|
|
|
(4,487
|
)
|
|
|
0
|
|
|
|
4,602
|
|
|
|
(6,492
|
)
|
|
Options held/written and other
|
|
|
11,870
|
|
|
|
(6,492
|
)
|
|
|
0
|
|
|
|
(6,492
|
)
|
|
|
3,711
|
|
|
|
0
|
|
|
|
(4,487
|
)
|
|
|
0
|
|
|
|
4,602
|
|
|
|
(6,492
|
)
|
|
Other asset
|
|
|
36,038
|
|
|
|
(11,795
|
)
|
|
|
0
|
|
|
|
(11,795
|
)
|
|
|
8,351
|
|
|
|
0
|
|
|
|
(260
|
)
|
|
|
0
|
|
|
|
32,334
|
|
|
|
(11,795
|
)
|
|
Reinsurance recoverables *6
|
|
|
36,038
|
|
|
|
(11,795
|
)
|
|
|
0
|
|
|
|
(11,795
|
)
|
|
|
8,351
|
|
|
|
0
|
|
|
|
(260
|
)
|
|
|
0
|
|
|
|
32,334
|
|
|
|
(11,795
|
)
|
|
Accounts payable
|
|
|
5,533
|
|
|
|
3,059
|
|
|
|
0
|
|
|
|
3,059
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(2,474
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Contingent consideration
|
|
|
5,533
|
|
|
|
3,059
|
|
|
|
0
|
|
|
|
3,059
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(2,474
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Policy Liabilities and Policy Account Balances
|
|
|
1,254,483
|
|
|
|
20,653
|
|
|
|
0
|
|
|
|
20,653
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(366,198
|
)
|
|
|
0
|
|
|
|
867,632
|
|
|
|
20,653
|
|
|
Variable annuity and variable life insurance contracts *7
|
|
|
1,254,483
|
|
|
|
20,653
|
|
|
|
0
|
|
|
|
20,653
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(366,198
|
)
|
|
|
0
|
|
|
|
867,632
|
|
|
|
20,653
|
|
– 44 –
Nine months ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Balance at
April
1,
2016
|
|
|
Gains or
losses
(realized/unrealized)
|
|
|
Purchases *3
|
|
|
Sales
|
|
|
Settlements *4
|
|
|
Transfers
in
and/
or out of
Level
3
(net) *5
|
|
|
Balance at
December 31,
2016
|
|
|
Change
in
unrealized
gains or
losses
included in
earnings
for
assets and
liabilities
still
held at
December 31,
2016 *1
|
|
|
|
|
Included in
earnings
*1
|
|
|
Included in
other
comprehensive
income *2
|
|
|
Total
|
|
|
|
|
|
|
|
|
Trading securities
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
228
|
|
|
¥
|
228
|
|
|
¥
|
2,930
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
3,158
|
|
|
¥
|
0
|
|
|
Available-for-sale
securities
|
|
|
99,522
|
|
|
|
247
|
|
|
|
11,382
|
|
|
|
11,629
|
|
|
|
33,131
|
|
|
|
(1,666
|
)
|
|
|
(13,272
|
)
|
|
|
0
|
|
|
|
129,344
|
|
|
|
74
|
|
|
Corporate debt securities
|
|
|
5
|
|
|
|
0
|
|
|
|
(2
|
)
|
|
|
(2
|
)
|
|
|
1,500
|
|
|
|
0
|
|
|
|
(50
|
)
|
|
|
0
|
|
|
|
1,453
|
|
|
|
0
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
3,461
|
|
|
|
1
|
|
|
|
(27
|
)
|
|
|
(26
|
)
|
|
|
0
|
|
|
|
(1,200
|
)
|
|
|
(1,073
|
)
|
|
|
0
|
|
|
|
1,162
|
|
|
|
0
|
|
|
CMBS and RMBS in the Americas
|
|
|
38,493
|
|
|
|
182
|
|
|
|
4,513
|
|
|
|
4,695
|
|
|
|
24,061
|
|
|
|
(466
|
)
|
|
|
(4,042
|
)
|
|
|
0
|
|
|
|
62,741
|
|
|
|
18
|
|
|
Other asset- backed securities and debt securities
|
|
|
57,563
|
|
|
|
64
|
|
|
|
6,898
|
|
|
|
6,962
|
|
|
|
7,570
|
|
|
|
0
|
|
|
|
(8,107
|
)
|
|
|
0
|
|
|
|
63,988
|
|
|
|
56
|
|
|
Other securities
|
|
|
17,751
|
|
|
|
1,394
|
|
|
|
413
|
|
|
|
1,807
|
|
|
|
3,334
|
|
|
|
(3,372
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
19,520
|
|
|
|
1,394
|
|
|
Investment funds
|
|
|
17,751
|
|
|
|
1,394
|
|
|
|
413
|
|
|
|
1,807
|
|
|
|
3,334
|
|
|
|
(3,372
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
19,520
|
|
|
|
1,394
|
|
|
Derivative assets and liabilities (net)
|
|
|
8,208
|
|
|
|
(3,689
|
)
|
|
|
0
|
|
|
|
(3,689
|
)
|
|
|
1,312
|
|
|
|
0
|
|
|
|
(1,203
|
)
|
|
|
0
|
|
|
|
4,628
|
|
|
|
(3,689
|
)
|
|
Options held/written and other
|
|
|
8,208
|
|
|
|
(3,689
|
)
|
|
|
0
|
|
|
|
(3,689
|
)
|
|
|
1,312
|
|
|
|
0
|
|
|
|
(1,203
|
)
|
|
|
0
|
|
|
|
4,628
|
|
|
|
(3,689
|
)
|
|
Other asset
|
|
|
37,855
|
|
|
|
(17,079
|
)
|
|
|
0
|
|
|
|
(17,079
|
)
|
|
|
6,493
|
|
|
|
0
|
|
|
|
(1,113
|
)
|
|
|
0
|
|
|
|
26,156
|
|
|
|
(17,079
|
)
|
|
Reinsurance recoverables *6
|
|
|
37,855
|
|
|
|
(17,079
|
)
|
|
|
0
|
|
|
|
(17,079
|
)
|
|
|
6,493
|
|
|
|
0
|
|
|
|
(1,113
|
)
|
|
|
0
|
|
|
|
26,156
|
|
|
|
(17,079
|
)
|
|
Policy Liabilities and Policy Account Balances
|
|
|
795,001
|
|
|
|
(1,679
|
)
|
|
|
0
|
|
|
|
(1,679
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(120,742
|
)
|
|
|
0
|
|
|
|
675,938
|
|
|
|
(1,679
|
)
|
|
Variable annuity and variable life insurance contracts *7
|
|
|
795,001
|
|
|
|
(1,679
|
)
|
|
|
0
|
|
|
|
(1,679
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(120,742
|
)
|
|
|
0
|
|
|
|
675,938
|
|
|
|
(1,679
|
)
|
|
*1
|
Principally, gains and losses from
available-for-sale
securities are
included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; other securities are included in “Gains on investment securities
and dividends” and derivative assets and liabilities (net) are included in “Other (income) and expense, net” and gains and losses from accounts payable are included in “Other (income) and expense, net” respectively. Also,
for
available-for-sale
securities, amortization of interest recognized in finance revenues is included in these columns.
|
|
*2
|
Unrealized gains and losses from trading securities are included in “Net change of foreign currency translation adjustments” and
unrealized gains and losses from
available-for-sale
securities are included in “Net change of unrealized gains (losses) on investment in securities” and
“Net change of foreign currency translation adjustments.”
|
|
*3
|
Increases resulting from insurance contracts ceded to reinsurance companies are included.
|
|
*4
|
Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and
variable life policyholders due to death, surrender and maturity of the investment period are included.
|
|
*5
|
The amount reported in “Transfers in and/or out of Level 3 (net)” is the fair value at the beginning of quarter during which the
transfers occur.
|
|
*6
|
“Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance
costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”
|
|
*7
|
“Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy
liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable
annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.
|
In the nine months ended December 31, 2015, equity securities totaling ¥869 million were transferred from
Level 3 to Level 2, since the inputs became observable. There were no transfers in or out of Level 3 in the nine months ended December 31, 2016.
– 45 –
Changes in economic conditions or valuation methodologies may require the
transfer of assets and liabilities from one fair value level to another. In such instances, the Company and its subsidiaries recognize the transfer at the beginning of the quarter during which the transfers occur. The Company and its subsidiaries
evaluate the significance of transfers between levels based upon size of the transfer relative to total assets, total liabilities or total earnings. For the three months ended December 31, 2015 and 2016, there were no transfers between
Level 1 and Level 2.
The following table presents the reconciliation for financial assets and
liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended December 31, 2015 and 2016:
Three months ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
Gains or losses
(realized/unrealized)
|
|
|
Purchases *3
|
|
|
Sales
|
|
|
Settlements *4
|
|
|
Transfers
in and/ or
out of
Level 3
(net) *5
|
|
|
Balance at
December 31,
2015
|
|
|
Change in
unrealized
gains or losses
included in
earnings for
assets
and
liabilities
still held at
December 31,
2015 *1
|
|
|
|
Balance
at
September 30,
2015
|
|
|
Included in
earnings *1
|
|
|
Included in
other
comprehensive
income *2
|
|
|
Total
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
¥
|
93,133
|
|
|
¥
|
405
|
|
|
¥
|
(2,043
|
)
|
|
¥
|
(1,638
|
)
|
|
¥
|
16,503
|
|
|
¥
|
(694
|
)
|
|
¥
|
(2,302
|
)
|
|
¥
|
0
|
|
|
¥
|
105,002
|
|
|
¥
|
(31
|
)
|
|
Corporate debt securities
|
|
|
5
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5
|
|
|
|
0
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
5,893
|
|
|
|
2
|
|
|
|
(7
|
)
|
|
|
(5
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(47
|
)
|
|
|
0
|
|
|
|
5,841
|
|
|
|
(38
|
)
|
|
CMBS and RMBS in the Americas
|
|
|
28,533
|
|
|
|
374
|
|
|
|
(304
|
)
|
|
|
70
|
|
|
|
9,046
|
|
|
|
(500
|
)
|
|
|
(406
|
)
|
|
|
0
|
|
|
|
36,743
|
|
|
|
2
|
|
|
Other asset- backed securities and debt securities
|
|
|
58,702
|
|
|
|
29
|
|
|
|
(1,732
|
)
|
|
|
(1,703
|
)
|
|
|
7,457
|
|
|
|
(194
|
)
|
|
|
(1,849
|
)
|
|
|
0
|
|
|
|
62,413
|
|
|
|
5
|
|
|
Other securities
|
|
|
10,017
|
|
|
|
(205
|
)
|
|
|
67
|
|
|
|
(138
|
)
|
|
|
247
|
|
|
|
(282
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
9,844
|
|
|
|
(165
|
)
|
|
Investment funds
|
|
|
10,017
|
|
|
|
(205
|
)
|
|
|
67
|
|
|
|
(138
|
)
|
|
|
247
|
|
|
|
(282
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
9,844
|
|
|
|
(165
|
)
|
|
Derivative assets and liabilities (net)
|
|
|
7,400
|
|
|
|
(2,531
|
)
|
|
|
0
|
|
|
|
(2,531
|
)
|
|
|
656
|
|
|
|
0
|
|
|
|
(923
|
)
|
|
|
0
|
|
|
|
4,602
|
|
|
|
(2,531
|
)
|
|
Options held/written and other
|
|
|
7,400
|
|
|
|
(2,531
|
)
|
|
|
0
|
|
|
|
(2,531
|
)
|
|
|
656
|
|
|
|
0
|
|
|
|
(923
|
)
|
|
|
0
|
|
|
|
4,602
|
|
|
|
(2,531
|
)
|
|
Other asset
|
|
|
42,825
|
|
|
|
(12,922
|
)
|
|
|
0
|
|
|
|
(12,922
|
)
|
|
|
2,517
|
|
|
|
0
|
|
|
|
(86
|
)
|
|
|
0
|
|
|
|
32,334
|
|
|
|
(12,922
|
)
|
|
Reinsurance recoverables *6
|
|
|
42,825
|
|
|
|
(12,922
|
)
|
|
|
0
|
|
|
|
(12,922
|
)
|
|
|
2,517
|
|
|
|
0
|
|
|
|
(86
|
)
|
|
|
0
|
|
|
|
32,334
|
|
|
|
(12,922
|
)
|
|
Accounts payable
|
|
|
3,739
|
|
|
|
1,265
|
|
|
|
0
|
|
|
|
1,265
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(2,474
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Contingent consideration
|
|
|
3,739
|
|
|
|
1,265
|
|
|
|
0
|
|
|
|
1,265
|
|
|
|
0
|
|
|
|
0
|
|
|
|
(2,474
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Policy Liabilities and Policy Account Balances
|
|
|
934,909
|
|
|
|
(18,929
|
)
|
|
|
0
|
|
|
|
(18,929
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(86,206
|
)
|
|
|
0
|
|
|
|
867,632
|
|
|
|
(18,929
|
)
|
|
Variable annuity and variable life insurance contracts *7
|
|
|
934,909
|
|
|
|
(18,929
|
)
|
|
|
0
|
|
|
|
(18,929
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(86,206
|
)
|
|
|
0
|
|
|
|
867,632
|
|
|
|
(18,929
|
)
|
– 46 –
Three months ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Balance
at
September 30,
2016
|
|
|
Gains or losses
(realized/unrealized)
|
|
|
Purchases *3
|
|
|
Sales
|
|
|
Settlements *4
|
|
|
Transfers
in and/ or
out of
Level 3
(net) *5
|
|
|
Balance at
December 31,
2016
|
|
|
Change in
unrealized
gains or losses
included in
earnings
for
assets and
liabilities
still held at
December 31,
2016 *1
|
|
|
|
|
Included in
earnings *1
|
|
|
Included in
other
comprehensive
income *2
|
|
|
Total
|
|
|
|
|
|
|
|
|
Trading securities
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
228
|
|
|
¥
|
228
|
|
|
¥
|
2,930
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
3,158
|
|
|
¥
|
0
|
|
|
Available-for-sale
securities
|
|
|
105,687
|
|
|
|
24
|
|
|
|
14,702
|
|
|
|
14,726
|
|
|
|
12,049
|
|
|
|
0
|
|
|
|
(3,118
|
)
|
|
|
0
|
|
|
|
129,344
|
|
|
|
15
|
|
|
Corporate debt securities
|
|
|
1,507
|
|
|
|
0
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(50
|
)
|
|
|
0
|
|
|
|
1,453
|
|
|
|
0
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
1,261
|
|
|
|
0
|
|
|
|
(9
|
)
|
|
|
(9
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(90
|
)
|
|
|
0
|
|
|
|
1,162
|
|
|
|
(1
|
)
|
|
CMBS and RMBS in the Americas
|
|
|
48,788
|
|
|
|
4
|
|
|
|
8,503
|
|
|
|
8,507
|
|
|
|
7,148
|
|
|
|
0
|
|
|
|
(1,702
|
)
|
|
|
0
|
|
|
|
62,741
|
|
|
|
4
|
|
|
Other asset- backed securities and debt securities
|
|
|
54,131
|
|
|
|
20
|
|
|
|
6,212
|
|
|
|
6,232
|
|
|
|
4,901
|
|
|
|
0
|
|
|
|
(1,276
|
)
|
|
|
0
|
|
|
|
63,988
|
|
|
|
12
|
|
|
Other securities
|
|
|
15,321
|
|
|
|
543
|
|
|
|
2,289
|
|
|
|
2,832
|
|
|
|
3,046
|
|
|
|
(1,679
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
19,520
|
|
|
|
555
|
|
|
Investment funds
|
|
|
15,321
|
|
|
|
543
|
|
|
|
2,289
|
|
|
|
2,832
|
|
|
|
3,046
|
|
|
|
(1,679
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
19,520
|
|
|
|
555
|
|
|
Derivative assets and liabilities (net)
|
|
|
9,873
|
|
|
|
(3,822
|
)
|
|
|
0
|
|
|
|
(3,822
|
)
|
|
|
(1,181
|
)
|
|
|
0
|
|
|
|
(242
|
)
|
|
|
0
|
|
|
|
4,628
|
|
|
|
(3,822
|
)
|
|
Options held/written and other
|
|
|
9,873
|
|
|
|
(3,822
|
)
|
|
|
0
|
|
|
|
(3,822
|
)
|
|
|
(1,181
|
)
|
|
|
0
|
|
|
|
(242
|
)
|
|
|
0
|
|
|
|
4,628
|
|
|
|
(3,822
|
)
|
|
Other asset
|
|
|
37,554
|
|
|
|
(12,809
|
)
|
|
|
0
|
|
|
|
(12,809
|
)
|
|
|
2,040
|
|
|
|
0
|
|
|
|
(629
|
)
|
|
|
0
|
|
|
|
26,156
|
|
|
|
(12,808
|
)
|
|
Reinsurance recoverables *6
|
|
|
37,554
|
|
|
|
(12,809
|
)
|
|
|
0
|
|
|
|
(12,809
|
)
|
|
|
2,040
|
|
|
|
0
|
|
|
|
(629
|
)
|
|
|
0
|
|
|
|
26,156
|
|
|
|
(12,808
|
)
|
|
Policy Liabilities and Policy Account Balances
|
|
|
715,434
|
|
|
|
(18,224
|
)
|
|
|
0
|
|
|
|
(18,224
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(57,720
|
)
|
|
|
0
|
|
|
|
675,938
|
|
|
|
(18,224
|
)
|
|
Variable annuity and variable life insurance contracts *7
|
|
|
715,434
|
|
|
|
(18,224
|
)
|
|
|
0
|
|
|
|
(18,224
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(57,720
|
)
|
|
|
0
|
|
|
|
675,938
|
|
|
|
(18,224
|
)
|
|
*1
|
Principally, gains and losses from
available-for-sale
securities are
included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; other securities are included in “Gains on investment securities
and dividends” and derivative assets and liabilities (net) are included in “Other (income) and expense, net” and gains and losses from accounts payable are included in “Other (income) and expense, net” respectively. Also,
for
available-for-sale
securities, amortization of interest recognized in finance revenues is included in these columns.
|
|
*2
|
Unrealized gains and losses from trading securities are included in “Net change of foreign currency translation adjustments” and
unrealized gains and losses from
available-for-sale
securities are included in “Net change of unrealized gains (losses) on investment in securities” and
“Net change of foreign currency translation adjustments.”
|
|
*3
|
Increases resulting from insurance contracts ceded to reinsurance companies are included.
|
|
*4
|
Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and
variable life policyholders due to death, surrender and maturity of the investment period are included.
|
|
*5
|
The amount reported in “Transfers in and/or out of Level 3 (net)” is the fair value at the beginning of quarter during which the
transfers occur.
|
|
*6
|
“Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance
costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”
|
|
*7
|
“Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy
liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable
annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.
|
There were no transfers in or out of Level 3 in the three months ended December 31, 2015 and 2016.
– 47 –
The following table presents recorded amounts of assets measured at fair
value on a nonrecurring basis as of March 31, 2016 and December 31, 2016. These assets are measured at fair value on a nonrecurring basis mainly to recognize impairment:
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Total
Carrying
Value in
Consolidated
Balance Sheets
|
|
|
Quoted Prices
in
Active
Markets
for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate collateral-dependent loans (net of allowance for probable loan losses)
|
|
¥
|
17,511
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
17,511
|
|
|
Investment in operating leases and property under facility operations
|
|
|
25,681
|
|
|
|
0
|
|
|
|
0
|
|
|
|
25,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
43,192
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
43,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Total
Carrying
Value in
Consolidated
Balance Sheets
|
|
|
Quoted Prices
in
Active
Markets for
Identical Assets
(Level
1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate collateral-dependent loans (net of allowance for probable loan losses)
|
|
¥
|
14,642
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
14,642
|
|
|
Investment in operating leases and property under facility operations
|
|
|
14,291
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
28,933
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
28,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 48 –
The following is a description of the valuation process and the main
valuation methodologies used for assets and liabilities measured at fair value.
Valuation process
The Company and its subsidiaries determine fair value of Level 3 assets and liabilities by using valuation
techniques, such as internally developed models, or using third-party pricing information. Internally developed models include the discounted cash flow methodologies and direct capitalization methodologies. To measure the fair value of the assets
and liabilities, the Company and its subsidiaries select the valuation technique which best reflects the nature, characteristics and risks of each asset and liability. The appropriateness of valuation methods and unobservable inputs is verified when
measuring fair values of the assets and liabilities by using internally developed models. The Company and its subsidiaries also use third-party pricing information to measure the fair value of certain assets and liabilities. In that case, the
Company and its subsidiaries verify the appropriateness of the prices by monitoring available information about the assets and liabilities, such as current conditions of the assets or liabilities, as well as surrounding market information. When
these prices are determined to be able to reflect the nature, characteristics and risks of assets and liabilities reasonably, the Company and its subsidiaries use these prices as fair value of the assets and liabilities.
Loans held for sale
Certain loans, which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered
held-for-sale.
The loans held for sale in the Americas are classified as Level 2, because the Company and its subsidiaries measure their fair value based on a market approach using inputs other than
quoted prices that are observable for the assets such as treasury rate, swap rate and market spread.
Real estate
collateral-dependent loans
The valuation allowance for large balance
non-homogeneous
loans is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the
loans are collateral-dependent. According to ASC 820 (“Fair Value Measurement”), measurement for impaired loans determined using a present value technique is not considered a fair value measurement. However, measurement for impaired loans
determined using the loan’s observable market price or the fair value of the collateral securing the collateral-dependent loans are fair value measurements and are subject to the disclosure requirements for nonrecurring fair value measurements.
The Company and its subsidiaries determine the fair value of the real estate collateral of real estate
collateral-dependent loans using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash
flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries generally obtain a new appraisal once a fiscal year.
In addition, the Company and its subsidiaries periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a significant change in economic and/or physical conditions, which may materially
affect the fair value of the collateral. Real estate collateral-dependent loans whose fair values are estimated using appraisals of the underlying collateral based on these valuation techniques are classified as Level 3 because such appraisals
involve unobservable inputs. These unobservable inputs contain discount rates and cap rates as well as future cash flows estimated to be generated from real estate collateral. An increase (decrease) in the discount rate or cap rate and a decrease
(increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of real estate collateral-dependent loans.
Investment in operating leases and property under facility operations and land and buildings undeveloped or under construction
Investment in operating leases measured at fair value is mostly real estate. The Company and its subsidiaries determine
the fair value of investment in operating leases and property under facility operations and land and buildings undeveloped or under construction using appraisals prepared by independent third party appraisers or the Company’s own staff of
qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flow methodologies using future cash flows estimated to be generated from operation of the existing assets or
completion of development projects, as appropriate. The Company and its subsidiaries classified the assets as Level 3 because such appraisals involve unobservable inputs. These unobservable inputs contain discount rates as well as future cash
flows estimated to be generated from the assets or projects. An increase (decrease) in the discount rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of investment in operating
leases and property under facility operations and land and buildings undeveloped or under construction.
– 49 –
Trading securities,
Available-for-sale
securities and Investment in affiliates
If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not
available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets and accordingly these securities are classified as Level 2. If market prices are not
available and there are no observable inputs, then fair value is estimated by using valuation models including discounted cash flow methodologies and broker quotes. Such securities are classified as Level 3, as the valuation models and broker
quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company and its subsidiaries check the validity of received prices based on comparison to prices of other similar assets and market data
such as relevant bench mark indices.
The Company and its subsidiaries classified CMBS and RMBS in the
Americas and other asset-backed securities as Level 2 if the inputs such as trading price and/or bid price are observable. The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as
Level 3 if the company and subsidiaries evaluate the fair value based on the unobservable inputs. In determining whether the inputs are observable or unobservable, the Company and its subsidiaries evaluate various factors such as the lack of
recent transactions, price quotations that are not based on current information or vary substantially over time or among market makers, a significant increase in implied risk premium, a wide
bid-ask
spread,
significant decline in new issuances, little or no public information (e.g. a
principal-to-principal
market) and other factors. With respect to certain CMBS and RMBS in
the Americas and other asset-backed securities, the Company and its subsidiaries judged that there has been increased overall trading activity, and the Company and its subsidiaries classified these securities as Level 2 for those securities
that were measured at fair value based on the observable inputs such as trading price and/or bit price. But for those securities that lacked observable trades because they are older vintage or below investment grade securities, the Company and its
subsidiaries limit the reliance on independent pricing service vendors and brokers. As a result, the Company and its subsidiaries established internally developed pricing models using valuation techniques such as discounted cash flow model using
Level 3 inputs in order to estimate fair value of these securities and classified them as Level 3. Under the models, the Company and its subsidiaries use anticipated cash flows of the security discounted at a risk-adjusted discount rate
that incorporates our estimate of credit risk and liquidity risk that a market participant would consider. The cash flows are estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security.
An increase (decrease) in the discount rate or default rate would result in a decrease (increase) in the fair value of CMBS and RMBS in the Americas and other asset-backed securities.
The Company and its subsidiaries classified the specified bonds as Level 3 because the Company and its subsidiaries
measure their fair value using unobservable inputs. Since the specified bonds are not traded in an open market, no relevant observable market data is available. Accordingly the Company and its subsidiaries use the discounted cash flow methodologies
that incorporates significant unobservable inputs to measure their fair value. When evaluating the specified bonds issued by SPEs in Japan, the Company and its subsidiaries estimate the fair value by discounting future cash flows using a discount
rate based on market interest rates and a risk premium. The future cash flows for the specified bonds issued by the SPEs in Japan are estimated based on contractual principal and interest repayment schedules on each of the specified bonds issued by
the SPEs in Japan. Since the discount rate is not observable for the specified bonds, the Company and its subsidiaries use an internally developed model to estimate a risk premium considering the value of the real estate collateral (which also
involves unobservable inputs in many cases when using valuation techniques such as discounted cash flow methodologies) and the seniority of the bonds. Under the model, the Company and its subsidiaries consider the
loan-to-value
ratio and other relevant available information to reflect both the credit risk and the liquidity risk in our own estimate of the risk premium. Generally, the higher the
loan-to-value
ratio, the larger the risk premium the Company and its subsidiaries estimate under the model. The fair value of the specified bonds issued by SPEs in Japan rises
when the fair value of the collateral real estate rises and the discount rate declines. The fair value of the specified bonds issued by SPEs in Japan declines when the fair value of the collateral real estate declines and the discount rate rises.
Investment funds
Certain subsidiaries elected the fair value option for investments in some funds. These investment funds for which the fair value option is elected are classified as Level 3, because the subsidiaries
measure their fair value using discounting to net asset value based on inputs that are unobservable in the market. A certain subsidiary measures its investment held by the investment company which is owned by the subsidiary at fair value.
– 50 –
Derivatives
For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, classified as Level 1.
For nonexchange traded derivatives, fair value is based on commonly used models and discounted cash flow methodologies. If the inputs used for these measurements including yield curves and volatilities, are observable, the Company and its
subsidiaries classify it as Level 2. If the inputs are not observable, the Company and its subsidiaries classify it as Level 3. These unobservable inputs contain discount rates. An increase (decrease) in the discount rate would result in a
decrease (increase) in the fair value of derivatives.
Reinsurance recoverables
Certain subsidiaries of the Company have elected the fair value option for certain reinsurance contracts related to
variable annuity and variable life insurance contracts to partially offset the changes in fair value recognized in earnings of the policy liabilities and policy account balances attributable to the changes in the minimum guarantee risks of the
variable annuity and variable life insurance contracts. These reinsurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiaries measure their fair value using discounted cash flow methodologies
based on inputs that are unobservable in the market.
Contingent consideration
The Company will be required to pay certain contingent consideration described in Note 4 “Acquisitions and
divestitures” depending on the future performance of a certain asset management business of the acquired subsidiary, and the Company recognizes a liability for the contingent consideration at its estimated fair value. The fair value of the
contingent consideration is classified as Level 3 because the Company measures its fair value using a Monte Carlo model based on inputs that are unobservable in the market.
Variable annuity and variable life insurance contracts
A certain subsidiary has elected the fair value option for the entire variable annuity and variable life insurance
contracts held in order to match earnings recognized for changes in fair value of policy liabilities and policy account balances with the earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and
variable life policyholders, derivative contracts and changes in fair value of reinsurance contracts. The changes in fair value of the variable annuity and variable life insurance contracts are linked to the fair value of the investment in
securities managed on behalf of variable annuity and variable life policyholders. These securities consist mainly of equity securities traded in the market and are categorized as trading securities. In addition, variable annuity and variable life
insurance contracts are exposed to the minimum guarantee risk, and the subsidiary adjusts the fair value of the underlying investments by incorporating changes in fair value of the minimum guarantee risk in the evaluation of the fair value of the
entire variable annuity and variable life insurance contracts. The variable annuity and variable life insurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiary measures the fair value using
discounted cash flow methodologies based on inputs that are unobservable in the market.
– 51 –
Information about Level 3 Fair Value Measurements
The following tables provide information about the valuation techniques and significant unobservable inputs used in the
valuation of Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
Valuation technique(s)
|
|
Significant unobservable inputs
|
|
Range
(Weighted average)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
¥
|
5
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
Specified bonds issued by SPEs in Japan
|
|
|
806
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
0.9%
(0.9%)
|
|
|
|
|
2,655
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
CMBS and RMBS in the Americas
|
|
|
38,493
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
6.4% – 32.4%
|
|
|
|
|
|
|
|
|
|
|
|
(18.5%)
|
|
|
|
|
|
|
|
|
|
Probability of default
|
|
0.0% – 34.0%
|
|
|
|
|
|
|
|
|
|
|
|
(8.2%)
|
|
|
|
|
|
|
|
Other asset-backed securities and debt securities
|
|
|
7,432
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
1.0% – 32.4%
|
|
|
|
|
|
|
|
|
|
|
|
(12.7%)
|
|
|
|
|
|
|
|
|
|
Probability of default
|
|
0.7% – 1.1%
|
|
|
|
|
|
|
|
|
|
|
|
(0.9%)
|
|
|
|
|
50,131
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Other securities
|
|
|
|
|
|
|
|
|
|
|
|
Investment funds
|
|
|
10,152
|
|
|
Internal cash flows
|
|
Discount rate
|
|
10.0% – 40.0%
|
|
|
|
|
|
|
|
|
|
|
|
(13.6%)
|
|
|
|
|
7,599
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
Options held/written and other
|
|
|
4,876
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
10.0% – 15.0%
|
|
|
|
|
|
|
|
|
|
|
|
(11.7%)
|
|
|
|
|
3,332
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables
|
|
|
37,855
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
(0.2)% – 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
|
Mortality rate
|
|
0.0% – 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
(0.9%)
|
|
|
|
|
|
|
|
|
|
Lapse rate
|
|
1.5% – 54.0%
|
|
|
|
|
|
|
|
|
|
|
|
(15%)
|
|
|
|
|
|
|
|
|
|
Annuitization rate
(guaranteed minimum annuity benefit)
|
|
0.0% – 100.0%
(99.4%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
163,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Policy liabilities and Policy Account Balances
|
|
|
|
|
|
|
|
|
|
|
|
Valuable annuity and variable life insurance contracts
|
|
¥
|
795,001
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
(0.2)% – 0.5%
|
|
|
|
|
|
|
|
|
|
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
|
Mortality rate
|
|
0.0% – 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
(1.0%)
|
|
|
|
|
|
|
|
|
|
Lapse rate
|
|
1.5% – 54.0%
|
|
|
|
|
|
|
|
|
|
|
|
(14.5%)
|
|
|
|
|
|
|
|
|
|
Annuitization rate
(guaranteed minimum annuity benefit)
|
|
0.0% – 100.0%
(85.2%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
795,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 52 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
Valuation technique(s)
|
|
Significant unobservable inputs
|
|
Range
(Weighted average)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
¥
|
3,158
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
5.4% – 10.0%
(8.6%)
|
|
Available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
1,448
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
0.7% – 1.6%
|
|
|
|
|
|
|
|
|
|
|
|
(1.2%)
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
1,162
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
CMBS and RMBS in the Americas
|
|
|
57,658
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
6.4% – 32.4%
|
|
|
|
|
|
|
|
|
|
|
|
(18.0%)
|
|
|
|
|
|
|
|
|
|
Probability of default
|
|
0.0% – 37.3%
|
|
|
|
|
|
|
|
|
|
|
|
(4.7%)
|
|
|
|
|
5,083
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Other asset-backed securities and debt securities
|
|
|
12,382
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
1.0% – 51.2%
|
|
|
|
|
|
|
|
|
|
|
|
(10.0%)
|
|
|
|
|
|
|
|
|
|
Probability of default
|
|
0.6% – 11.0%
|
|
|
|
|
|
|
|
|
|
|
|
(0.8%)
|
|
|
|
|
51,606
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Other securities
|
|
|
|
|
|
|
|
|
|
|
|
Investment funds
|
|
|
7,876
|
|
|
Internal cash flows
|
|
Discount rate
|
|
0.0% – 40.0%
|
|
|
|
|
|
|
|
|
|
|
|
(9.8%)
|
|
|
|
|
11,644
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
Options held/written and other
|
|
|
2,348
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
10.0% – 15.0%
|
|
|
|
|
|
|
|
|
|
|
|
(11.4%)
|
|
|
|
|
2,280
|
|
|
Appraisals/Broker quotes
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance recoverables
|
|
|
26,156
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
(0.2)% – 0.6%
|
|
|
|
|
|
|
|
|
|
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
|
Mortality rate
|
|
0.0% – 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
(1.0%)
|
|
|
|
|
|
|
|
|
|
Lapse rate
|
|
1.5% – 54.0%
|
|
|
|
|
|
|
|
|
|
|
|
(14.0%)
|
|
|
|
|
|
|
|
|
|
Annuitization rate
(guaranteed minimum annuity benefit)
|
|
0.0% – 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
(99.3%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
182,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Policy liabilities and Policy Account Balances
|
|
|
|
|
|
|
|
|
|
|
|
Valuable annuity and variable life insurance contracts
|
|
¥
|
675,938
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
(0.2)% – 0.6%
|
|
|
|
|
|
|
|
|
|
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
|
Mortality rate
|
|
0.0% – 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
(1.0%)
|
|
|
|
|
|
|
|
|
|
Lapse rate
|
|
1.5% – 54.0%
|
|
|
|
|
|
|
|
|
|
|
|
(14.0%)
|
|
|
|
|
|
|
|
|
|
Annuitization rate
(guaranteed minimum annuity benefit)
|
|
0.0% – 100.0%
|
|
|
|
|
|
|
|
|
|
|
|
(83.6%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
675,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 53 –
The following tables provide information about the valuation techniques and
significant unobservable inputs used in the valuation of Level 3 assets measured at fair value on a nonrecurring basis as of March 31, 2016 and December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
Valuation technique(s)
|
|
Significant unobservable inputs
|
|
Range
(Weighted average)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate collateral-dependent loans (net of allowance for probable loan losses)
|
|
¥
|
17,511
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
5.3% – 10.9%
|
|
|
|
|
|
|
|
|
|
|
|
(9.3%)
|
|
|
|
|
|
|
|
Direct capitalization
|
|
Capitalization rate
|
|
5.9% – 17.0%
|
|
|
|
|
|
|
|
|
|
|
|
(9.9%)
|
|
Investment in operating leases and property under facility operations
|
|
|
5,679
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
5.3% – 10.0%
|
|
|
|
|
|
|
|
|
|
|
|
(5.5%)
|
|
|
|
|
20,002
|
|
|
Appraisals
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
43,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
|
Valuation technique(s)
|
|
Significant unobservable inputs
|
|
Range
(Weighted average)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Real estate collateral-dependent loans (net of allowance for probable loan losses)
|
|
¥
|
14,642
|
|
|
Discounted cash flows
|
|
Discount rate
|
|
7.9% – 10.9%
|
|
|
|
|
|
|
|
|
|
|
|
(9.8%)
|
|
|
|
|
|
|
|
Direct capitalization
|
|
Capitalization rate
|
|
8.4% – 11.3%
|
|
|
|
|
|
|
|
|
|
|
|
(10.4%)
|
|
Investment in operating leases and property under facility operations
|
|
|
203
|
|
|
Direct capitalization
|
|
Capitalization rate
|
|
8.5% – 10.0%
|
|
|
|
|
|
|
|
|
|
|
|
(8.7%)
|
|
|
|
|
14,088
|
|
|
Appraisals
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
28,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries generally use discounted cash flow methodologies or
similar internally developed models to determine the fair value of Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as
indicated in the preceding table. Accordingly, changes in these unobservable inputs may have a significant impact on the fair value.
Certain of these unobservable inputs will have a directionally consistent impact on the fair value of the asset or liability for a given change in that input. Alternatively, the fair value of the asset or
liability may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change
in another input having a potentially muted impact to the overall fair value of that particular asset or liability. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in certain
inputs are interrelated to one another), which may counteract or magnify the fair value impact.
For more
analysis of the sensitivity of each input, see the description of the valuation process and the main valuation methodologies used for assets and liabilities measured at fair value.
– 54 –
|
4.
|
Acquisitions and divestitures
|
(1) Robeco Groep N.V. acquisition
On July 1, 2013,
the Company acquired approximately 90.01% of the total voting equity interests of Robeco Groep N.V. (Head office: Rotterdam, the Netherlands, hereinafter, “Robeco”) from Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Head
office: Utrecht, the Netherlands). As a result, Robeco has become a consolidated subsidiary of the Company. Furthermore, the Company acquired additional voting equity interests of Robeco during the three months ended December 31, 2016.
Therefore, Robeco has become the Company’s wholly owned subsidiary. Robeco, a
mid-size
global asset manager, offers a mix of investment solutions in a broad range of strategies to institutional and
private investors worldwide.
In accordance with the share purchase agreement, the Company agreed to pay
contingent consideration depending on the future performance of a certain section of asset management business for each of Robeco’s fiscal years until the fiscal year ending in December 2015. The estimated fair value of such contingent
consideration was ¥5,176 million, which is included in the total consideration transferred. During the three months ended September 30, 2016, the Company settled ¥2,398 million which had been included in trade notes, accounts
and other payable in the Company’s consolidated balance sheets as of March 31, 2016.
(2) Other acquisitions
There were no material acquisitions during the nine months ended December 31, 2015 and 2016. The
Company recognized a bargain purchase gain of ¥4,287 million associated with one of its acquisitions for the three months ended June 30, 2016. The bargain purchase gain could possibly be adjusted because the purchase price allocation
has not been completed yet.
(3) Divestitures
Gains on sales of subsidiaries and affiliates and liquidation losses, net for the nine months ended December 31, 2015
and 2016 amounted to ¥57,012 million and ¥56,431 million, respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the nine months ended December 31, 2015 mainly consisted of
¥47,095 million in the Overseas Business segment and ¥9,189 million in the Investment and Operating segment. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the nine months ended December 31, 2016
mainly consisted of ¥28,904 million in the Investment and Operating segment, ¥25,963 million in the Overseas Business segment and ¥1,301 million in the Corporate Financial Services Segment.
Gains on sales of subsidiaries and affiliates and liquidation losses, net for the three months ended December 31,
2015 and 2016 amounted to ¥603 million and ¥23,597 million, respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the three months ended December 31, 2016 mainly consisted of
¥23,611 million in the Overseas Business segment, and included gains on the sales of the automotive supply wholesale business unit of ORIX USA Corporation (hereinafter, “OUC”) a consolidated subsidiary of the Company.
During the three months ended September 30, 2015, OUC, a wholly owned subsidiary of the Company, sold 14.7% of its
shares of Class A common stock of Houlihan Lokey, Inc. (hereinafter, “Houlihan Lokey”), a subsidiary of OUC, through the initial public offering (hereinafter, “IPO”), concurrently allotting its shares to Houlihan
Lokey’s management and other employees. OUC retains a 33.0% interest in Houlihan Lokey’s Class B common stock and thus Houlihan Lokey became an equity method investee during the three months ended September 30, 2015. The partial
sale of the ownership interest resulted in a gain of ¥10,498 million, and the remeasurement of the retained interest to its fair value due to a loss of control resulted in a gain of ¥29,087 million, both of which were included in
earnings as gains on sales of subsidiaries and affiliates and liquidation losses, net during the three months ended September 30, 2015. The fair value of the retained interest was remeasured based on the sale price in the IPO.
|
5.
|
Credit Quality of Financing Receivables and the Allowance for Credit Losses
|
The Company and its subsidiaries apply ASC 310 (“Receivables”), which requires an entity to provide the
following information disaggregated by portfolio segment and class of financing receivable.
Allowance for
credit losses—by portfolio segment
Credit quality of financing receivables—by class
|
|
•
|
|
Credit quality indicators
|
|
|
•
|
|
Non-accrual
and
past-due
financing receivables
|
Information about troubled debt restructurings—by class
– 55 –
A portfolio segment is defined as the level at which an entity develops and
documents a systematic methodology to determine its allowance for credit losses. The Company and its subsidiaries classify our portfolio segments by instruments of loans and direct financing leases. Classes of financing receivables are determined
based on the initial measurement attribute, risk characteristics of the financing receivables and the method for monitoring and assessing obligors’ credit risk, and are defined as the level of detail necessary for a financial statement user to
understand the risks inherent in the financing receivables. Classes of financing receivables generally are a disaggregation of a portfolio segment, and the Company and its subsidiaries disaggregate our portfolio segments into classes by regions,
instruments or industries of our debtors.
– 56 –
The following table provides information about the allowance for credit
losses as of March 31, 2016, for the nine and three months ended December 31, 2015 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2015
|
|
|
|
|
Millions of yen
|
|
|
|
|
Loans
|
|
|
Direct
financing
leases
|
|
|
Total
|
|
|
|
|
Consumer
|
|
|
Corporate
|
|
|
Purchased
loans
*1
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
|
Other
|
|
|
|
|
|
Allowance for Credit Losses :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
¥
|
12,585
|
|
|
¥
|
8,148
|
|
|
¥
|
25,672
|
|
|
¥
|
10,717
|
|
|
¥
|
15,204
|
|
|
¥
|
72,326
|
|
|
Provision (Reversal)
|
|
|
5,417
|
|
|
|
(587
|
)
|
|
|
910
|
|
|
|
(997
|
)
|
|
|
1,197
|
|
|
|
5,940
|
|
|
Charge-offs
|
|
|
(4,918
|
)
|
|
|
(512
|
)
|
|
|
(4,368
|
)
|
|
|
(1,190
|
)
|
|
|
(2,290
|
)
|
|
|
(13,278
|
)
|
|
Recoveries
|
|
|
308
|
|
|
|
0
|
|
|
|
372
|
|
|
|
196
|
|
|
|
13
|
|
|
|
889
|
|
|
Other *2
|
|
|
178
|
|
|
|
(5,232
|
)
|
|
|
(77
|
)
|
|
|
(117
|
)
|
|
|
(457
|
)
|
|
|
(5,705
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
13,570
|
|
|
¥
|
1,817
|
|
|
¥
|
22,509
|
|
|
¥
|
8,609
|
|
|
¥
|
13,667
|
|
|
¥
|
60,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
2,745
|
|
|
|
1,412
|
|
|
|
11,378
|
|
|
|
6,255
|
|
|
|
0
|
|
|
|
21,790
|
|
|
Not Individually evaluated for impairment
|
|
|
10,825
|
|
|
|
405
|
|
|
|
11,131
|
|
|
|
2,354
|
|
|
|
13,667
|
|
|
|
38,382
|
|
|
|
|
|
|
|
|
|
|
Financing receivables :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
1,441,913
|
|
|
¥
|
83,383
|
|
|
¥
|
999,890
|
|
|
¥
|
29,845
|
|
|
¥
|
1,207,133
|
|
|
¥
|
3,762,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
14,693
|
|
|
|
11,355
|
|
|
|
32,498
|
|
|
|
11,872
|
|
|
|
0
|
|
|
|
70,418
|
|
|
Not Individually evaluated for impairment
|
|
|
1,427,220
|
|
|
|
72,028
|
|
|
|
967,392
|
|
|
|
17,973
|
|
|
|
1,207,133
|
|
|
|
3,691,746
|
|
|
|
|
|
|
|
Three months ended December 31, 2015
|
|
|
|
|
Millions of yen
|
|
|
|
|
Loans
|
|
|
Direct
financing
leases
|
|
|
Total
|
|
|
|
|
Consumer
|
|
|
Corporate
|
|
|
Purchased
loans
*1
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
|
Other
|
|
|
|
|
|
Allowance for Credit Losses :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
¥
|
13,009
|
|
|
¥
|
7,652
|
|
|
¥
|
22,977
|
|
|
¥
|
9,429
|
|
|
¥
|
13,743
|
|
|
¥
|
66,810
|
|
|
Provision (Reversal)
|
|
|
2,137
|
|
|
|
(343
|
)
|
|
|
1,020
|
|
|
|
(211
|
)
|
|
|
389
|
|
|
|
2,992
|
|
|
Charge-offs
|
|
|
(1,137
|
)
|
|
|
(265
|
)
|
|
|
(1,628
|
)
|
|
|
(570
|
)
|
|
|
(495
|
)
|
|
|
(4,095
|
)
|
|
Recoveries
|
|
|
(550
|
)
|
|
|
0
|
|
|
|
97
|
|
|
|
(47
|
)
|
|
|
0
|
|
|
|
(500
|
)
|
|
Other *2
|
|
|
111
|
|
|
|
(5,227
|
)
|
|
|
43
|
|
|
|
8
|
|
|
|
30
|
|
|
|
(5,035
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
13,570
|
|
|
¥
|
1,817
|
|
|
¥
|
22,509
|
|
|
¥
|
8,609
|
|
|
¥
|
13,667
|
|
|
¥
|
60,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
Millions of yen
|
|
|
|
|
Loans
|
|
|
Direct
financing
leases
|
|
|
Total
|
|
|
|
|
Consumer
|
|
|
Corporate
|
|
|
Purchased
loans
*1
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
|
Other
|
|
|
|
|
|
Allowance for Credit Losses :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
13,267
|
|
|
¥
|
1,800
|
|
|
¥
|
23,391
|
|
|
¥
|
8,233
|
|
|
¥
|
13,380
|
|
|
¥
|
60,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
2,770
|
|
|
|
1,323
|
|
|
|
12,552
|
|
|
|
5,888
|
|
|
|
0
|
|
|
|
22,533
|
|
|
Not Individually evaluated for impairment
|
|
|
10,497
|
|
|
|
477
|
|
|
|
10,839
|
|
|
|
2,345
|
|
|
|
13,380
|
|
|
|
37,538
|
|
|
|
|
|
|
|
|
|
|
Financing receivables :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
1,461,982
|
|
|
¥
|
81,211
|
|
|
¥
|
996,649
|
|
|
¥
|
30,524
|
|
|
¥
|
1,190,136
|
|
|
¥
|
3,760,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
14,101
|
|
|
|
11,057
|
|
|
|
37,422
|
|
|
|
11,013
|
|
|
|
0
|
|
|
|
73,593
|
|
|
Not individually evaluated for impairment
|
|
|
1,447,881
|
|
|
|
70,154
|
|
|
|
959,227
|
|
|
|
19,511
|
|
|
|
1,190,136
|
|
|
|
3,686,909
|
|
– 57 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2016
|
|
|
|
|
Millions of yen
|
|
|
|
|
Loans
|
|
|
Direct
financing
leases
|
|
|
Total
|
|
|
|
|
Consumer
|
|
|
Corporate
|
|
|
Purchased
loans
*1
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
|
Other
|
|
|
|
|
|
Allowance for Credit Losses :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
¥
|
13,267
|
|
|
¥
|
1,800
|
|
|
¥
|
23,391
|
|
|
¥
|
8,233
|
|
|
¥
|
13,380
|
|
|
¥
|
60,071
|
|
|
Provision (Reversal)
|
|
|
7,731
|
|
|
|
1,064
|
|
|
|
3,538
|
|
|
|
(975
|
)
|
|
|
1,013
|
|
|
|
12,371
|
|
|
Charge-offs
|
|
|
(4,802
|
)
|
|
|
(2
|
)
|
|
|
(3,892
|
)
|
|
|
(785
|
)
|
|
|
(3,085
|
)
|
|
|
(12,566
|
)
|
|
Recoveries
|
|
|
441
|
|
|
|
0
|
|
|
|
192
|
|
|
|
235
|
|
|
|
11
|
|
|
|
879
|
|
|
Other *2
|
|
|
584
|
|
|
|
129
|
|
|
|
(1,465
|
)
|
|
|
1
|
|
|
|
(124
|
)
|
|
|
(875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
17,221
|
|
|
¥
|
2,991
|
|
|
¥
|
21,764
|
|
|
¥
|
6,709
|
|
|
¥
|
11,195
|
|
|
¥
|
59,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
2,980
|
|
|
|
2,207
|
|
|
|
11,088
|
|
|
|
4,780
|
|
|
|
0
|
|
|
|
21,055
|
|
|
Not individually evaluated for impairment
|
|
|
14,241
|
|
|
|
784
|
|
|
|
10,676
|
|
|
|
1,929
|
|
|
|
11,195
|
|
|
|
38,825
|
|
|
|
|
|
|
|
|
|
|
Financing Receivables :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
1,588,413
|
|
|
¥
|
89,235
|
|
|
¥
|
1,090,366
|
|
|
¥
|
24,826
|
|
|
¥
|
1,199,487
|
|
|
¥
|
3,992,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
|
15,565
|
|
|
|
6,214
|
|
|
|
30,917
|
|
|
|
8,414
|
|
|
|
0
|
|
|
|
61,110
|
|
|
Not individually evaluated for impairment
|
|
|
1,572,848
|
|
|
|
83,021
|
|
|
|
1,059,449
|
|
|
|
16,412
|
|
|
|
1,199,487
|
|
|
|
3,931,217
|
|
|
|
|
|
|
|
Three months ended December 31, 2016
|
|
|
|
|
Millions of yen
|
|
|
|
|
Loans
|
|
|
Direct
financing
leases
|
|
|
Total
|
|
|
|
|
Consumer
|
|
|
Corporate
|
|
|
Purchased
loans
*1
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
|
Other
|
|
|
|
|
|
Allowance for Credit Losses :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance
|
|
¥
|
15,719
|
|
|
¥
|
1,878
|
|
|
¥
|
19,330
|
|
|
¥
|
7,110
|
|
|
¥
|
11,751
|
|
|
¥
|
55,788
|
|
|
Provision (Reversal)
|
|
|
2,456
|
|
|
|
803
|
|
|
|
2,352
|
|
|
|
(236
|
)
|
|
|
253
|
|
|
|
5,628
|
|
|
Charge-offs
|
|
|
(1,476
|
)
|
|
|
0
|
|
|
|
(1,202
|
)
|
|
|
(275
|
)
|
|
|
(1,287
|
)
|
|
|
(4,240
|
)
|
|
Recoveries
|
|
|
203
|
|
|
|
0
|
|
|
|
47
|
|
|
|
15
|
|
|
|
0
|
|
|
|
265
|
|
|
Other *2
|
|
|
319
|
|
|
|
310
|
|
|
|
1,237
|
|
|
|
95
|
|
|
|
478
|
|
|
|
2,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
¥
|
17,221
|
|
|
¥
|
2,991
|
|
|
¥
|
21,764
|
|
|
¥
|
6,709
|
|
|
¥
|
11,195
|
|
|
¥
|
59,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Loans held for sale are not included in the table above.
|
|
*1
|
Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that
collection of all contractually required payments from the debtors is unlikely.
|
|
*2
|
Other mainly includes foreign currency translation adjustments and decrease in allowance related to deconsolidated subsidiaries.
|
– 58 –
In developing the allowance for credit losses, the Company and its
subsidiaries consider, among other things, the following factors:
|
|
•
|
|
business characteristics and financial conditions of obligors;
|
|
|
•
|
|
current economic conditions and trends;
|
|
|
•
|
|
prior
charge-off
experience;
|
|
|
•
|
|
current delinquencies and delinquency trends; and
|
|
|
•
|
|
value of underlying collateral and guarantees.
|
The Company and its subsidiaries individually develop the allowance for credit losses for impaired loans. For
non-impaired
loans, including loans that are not individually evaluated for impairment, and direct financing leases, the Company and its subsidiaries evaluate prior
charge-off
experience as segmented by debtor’s industry and the purpose of the loans and develop the allowance for credit losses based on such prior
charge-off
experience as well as current economic conditions.
In common with all portfolio segments, a deterioration of debtors’ condition may increase the risk of
delay in payments of principal and interest. For loans to consumer borrowers, the amount of the allowance for credit losses is changed by the variation of individual debtors’ creditworthiness and value of underlying collateral and guarantees,
and the prior
charge-off
experience. For loans to corporate other borrowers and direct financing leases, the amount of the allowance for credit losses is changed by current economic conditions and trends, the
value of underlying collateral and guarantees, and the prior
charge-off
experience in addition to the debtors’ creditworthiness.
The decline of the value of underlying collateral and guarantees may increase the risk of inability to collect from the
loans and direct financing leases. Particularly for
non-recourse
loans for which cash flow from real estate is the source of repayment, their collection depends on the real estate collateral value, which may
decline as a result of decrease in liquidity of the real estate market, rise in vacancy rate of rental properties, fall in rents and other factors. These risks may change the amount of the allowance for credit losses. For purchased loans, their
collection may decrease due to a decline in the real estate collateral value and debtors’ creditworthiness. Thus, these risks may change the amount of the allowance for credit losses.
In common with all portfolio segments, the Company and its subsidiaries charge off doubtful receivables when the
likelihood of any future collection is believed to be minimal, mainly based upon an evaluation of the relevant debtors’ creditworthiness and the liquidation status of collateral.
– 59 –
The following table provides information about the impaired loans as of
March 31, 2016 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Loans
Individually
Evaluated for
Impairment
|
|
|
Unpaid
Principal
Balance
|
|
|
Related
Allowance
|
|
|
With no related allowance recorded *1 :
|
|
|
|
¥
|
14,601
|
|
|
¥
|
14,498
|
|
|
¥
|
0
|
|
|
Consumer borrowers
|
|
|
|
|
931
|
|
|
|
852
|
|
|
|
0
|
|
|
|
|
Housing loans
|
|
|
931
|
|
|
|
852
|
|
|
|
0
|
|
|
|
|
Card loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
Other
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Corporate borrowers
|
|
|
|
|
13,670
|
|
|
|
13,646
|
|
|
|
0
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
4,776
|
|
|
|
4,776
|
|
|
|
0
|
|
|
|
|
The Americas
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other
|
|
Real estate companies
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
Entertainment companies
|
|
|
211
|
|
|
|
211
|
|
|
|
0
|
|
|
|
|
Other
|
|
|
8,683
|
|
|
|
8,659
|
|
|
|
0
|
|
|
Purchased loans
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
With an allowance recorded *2 :
|
|
|
|
|
58,992
|
|
|
|
57,758
|
|
|
|
22,533
|
|
|
Consumer borrowers
|
|
|
|
|
13,170
|
|
|
|
12,628
|
|
|
|
2,770
|
|
|
|
|
Housing loans
|
|
|
3,580
|
|
|
|
3,058
|
|
|
|
1,401
|
|
|
|
|
Card loans
|
|
|
4,123
|
|
|
|
4,113
|
|
|
|
590
|
|
|
|
|
Other
|
|
|
5,467
|
|
|
|
5,457
|
|
|
|
779
|
|
|
Corporate borrowers
|
|
|
|
|
34,809
|
|
|
|
34,117
|
|
|
|
13,875
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
292
|
|
|
|
292
|
|
|
|
72
|
|
|
|
|
The Americas
|
|
|
5,989
|
|
|
|
5,988
|
|
|
|
1,251
|
|
|
Other
|
|
Real estate companies
|
|
|
8,612
|
|
|
|
8,480
|
|
|
|
2,140
|
|
|
|
|
Entertainment companies
|
|
|
2,218
|
|
|
|
2,209
|
|
|
|
840
|
|
|
|
|
Other
|
|
|
17,698
|
|
|
|
17,148
|
|
|
|
9,572
|
|
|
Purchased loans
|
|
|
|
|
11,013
|
|
|
|
11,013
|
|
|
|
5,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total :
|
|
|
|
¥
|
73,593
|
|
|
¥
|
72,256
|
|
|
¥
|
22,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer borrowers
|
|
|
|
|
14,101
|
|
|
|
13,480
|
|
|
|
2,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing loans
|
|
|
4,511
|
|
|
|
3,910
|
|
|
|
1,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Card loans
|
|
|
4,123
|
|
|
|
4,113
|
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
5,467
|
|
|
|
5,457
|
|
|
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate borrowers
|
|
|
|
|
48,479
|
|
|
|
47,763
|
|
|
|
13,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
5,068
|
|
|
|
5,068
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
|
5,989
|
|
|
|
5,988
|
|
|
|
1,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Real estate companies
|
|
|
8,612
|
|
|
|
8,480
|
|
|
|
2,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment companies
|
|
|
2,429
|
|
|
|
2,420
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
26,381
|
|
|
|
25,807
|
|
|
|
9,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased loans
|
|
|
|
|
11,013
|
|
|
|
11,013
|
|
|
|
5,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 60 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Loans
individually
evaluated for
impairment
|
|
|
Unpaid
principal
balance
|
|
|
Related
allowance
|
|
|
With no related allowance recorded *1 :
|
|
|
|
¥
|
6,104
|
|
|
¥
|
6,089
|
|
|
¥
|
0
|
|
|
Consumer borrowers
|
|
|
|
|
810
|
|
|
|
799
|
|
|
|
0
|
|
|
|
|
Housing loans
|
|
|
810
|
|
|
|
799
|
|
|
|
0
|
|
|
|
|
Card loans
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
Other
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Corporate borrowers
|
|
|
|
|
5,294
|
|
|
|
5,290
|
|
|
|
0
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
The Americas
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other
|
|
Real estate companies
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
Entertainment companies
|
|
|
182
|
|
|
|
179
|
|
|
|
0
|
|
|
|
|
Other
|
|
|
5,112
|
|
|
|
5,111
|
|
|
|
0
|
|
|
Purchased loans
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
With an allowance recorded *2 :
|
|
|
|
|
55,006
|
|
|
|
53,837
|
|
|
|
21,055
|
|
|
Consumer borrowers
|
|
|
|
|
14,755
|
|
|
|
13,831
|
|
|
|
2,980
|
|
|
|
|
Housing loans
|
|
|
3,214
|
|
|
|
2,727
|
|
|
|
1,346
|
|
|
|
|
Card loans
|
|
|
4,117
|
|
|
|
4,107
|
|
|
|
609
|
|
|
|
|
Other
|
|
|
7,424
|
|
|
|
6,997
|
|
|
|
1,025
|
|
|
Corporate borrowers
|
|
|
|
|
31,837
|
|
|
|
31,592
|
|
|
|
13,295
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
278
|
|
|
|
278
|
|
|
|
48
|
|
|
|
|
The Americas
|
|
|
5,936
|
|
|
|
5,935
|
|
|
|
2,159
|
|
|
Other
|
|
Real estate companies
|
|
|
7,133
|
|
|
|
7,066
|
|
|
|
1,701
|
|
|
|
|
Entertainment companies
|
|
|
1,876
|
|
|
|
1,868
|
|
|
|
692
|
|
|
|
|
Other
|
|
|
16,614
|
|
|
|
16,445
|
|
|
|
8,695
|
|
|
Purchased loans
|
|
|
|
|
8,414
|
|
|
|
8,414
|
|
|
|
4,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total :
|
|
|
|
¥
|
61,110
|
|
|
¥
|
59,926
|
|
|
¥
|
21,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer borrowers
|
|
|
|
|
15,565
|
|
|
|
14,630
|
|
|
|
2,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Housing loans
|
|
|
4,024
|
|
|
|
3,526
|
|
|
|
1,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Card loans
|
|
|
4,117
|
|
|
|
4,107
|
|
|
|
609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
7,424
|
|
|
|
6,997
|
|
|
|
1,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate borrowers
|
|
|
|
|
37,131
|
|
|
|
36,882
|
|
|
|
13,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
278
|
|
|
|
278
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Americas
|
|
|
5,936
|
|
|
|
5,935
|
|
|
|
2,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Real estate companies
|
|
|
7,133
|
|
|
|
7,066
|
|
|
|
1,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entertainment companies
|
|
|
2,058
|
|
|
|
2,047
|
|
|
|
692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
21,726
|
|
|
|
21,556
|
|
|
|
8,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased loans
|
|
|
|
|
8,414
|
|
|
|
8,414
|
|
|
|
4,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Loans held for sale are not included in the table above.
|
|
*1
|
“With no related allowance recorded” represents impaired loans with no allowance for credit losses as all amounts are considered to be
collectible.
|
|
*2
|
“With an allowance recorded” represents impaired loans with the allowance for credit losses as all or a part of the amounts are not
considered to be collectible.
|
– 61 –
The Company and its subsidiaries recognize installment loans other than
purchased loans and loans to consumer borrowers as impaired loans when principal or interest is
past-due
90 days or more, or it is probable that the Company and its subsidiaries will be unable to collect all
amounts due according to the contractual terms of the loan agreements due to various debtor conditions, including insolvency filings, suspension of bank transactions, dishonored bills and deterioration of businesses. For
non-recourse
loans, in addition to these conditions, the Company and its subsidiaries perform an impairment review using financial covenants, acceleration clauses,
loan-to-value
ratios, and other relevant available information.
For
purchased loans, the Company and its subsidiaries recognize them as impaired loans when it is probable that the Company and its subsidiaries will be unable to collect book values of the remaining investment due to factors such as a decline in the
real estate collateral value and debtors’ creditworthiness since the acquisition of these loans.
The
Company and its subsidiaries consider that loans to consumer borrowers, including housing loans, card loans and other, are impaired when terms of these loans are modified as troubled debt restructurings.
Interest payments received on impaired loans other than purchased loans are recorded as interest income unless the
collection of the remaining investment is doubtful at which time payments received are recorded as reductions of principal. For purchased loans, although the acquired assets may remain loans in legal form, collections on these loans often do not
reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly,
the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans regardless of whether impairment is recognized or not.
In common with all classes, impaired loans are individually evaluated for a valuation allowance based on the present
value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. For
non-recourse
loans, in principle,
the estimated collectible amount is determined based on the fair value of the collateral securing the loans as they are collateral-dependent. Further for certain
non-recourse
loans, the estimated collectible
amount is determined based on the present value of expected future cash flows. The fair value of the real estate collateral securing the loans is determined using appraisals prepared by independent third-party appraisers or our own staff of
qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or
completion of development projects, as appropriate. We generally obtain a new appraisal once a fiscal year. In addition, we periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a
significant change in economic and/or physical conditions which may materially affect its fair value. For impaired purchased loans, the Company and its subsidiaries develop the allowance for credit losses based on the difference between the book
value and the estimated collectible amount of such loans.
The following table provides information about the
average recorded investments in impaired loans and interest income on impaired loans for the nine and three months ended December 31, 2015 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31,
2015
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Average Recorded
Investments
in
Impaired Loans *
|
|
|
Interest Income
on
Impaired Loans
|
|
|
Interest on
Impaired
Loans
Collected in Cash
|
|
|
Consumer borrowers
|
|
|
|
¥
|
12,838
|
|
|
¥
|
248
|
|
|
¥
|
214
|
|
|
|
|
Housing loans
|
|
|
5,226
|
|
|
|
140
|
|
|
|
124
|
|
|
|
|
Card loans
|
|
|
3,898
|
|
|
|
55
|
|
|
|
45
|
|
|
|
|
Other
|
|
|
3,714
|
|
|
|
53
|
|
|
|
45
|
|
|
Corporate borrowers
|
|
|
|
|
61,924
|
|
|
|
785
|
|
|
|
774
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
5,147
|
|
|
|
9
|
|
|
|
9
|
|
|
|
|
The Americas
|
|
|
13,442
|
|
|
|
242
|
|
|
|
242
|
|
|
Other
|
|
Real estate companies
|
|
|
15,853
|
|
|
|
166
|
|
|
|
165
|
|
|
|
|
Entertainment companies
|
|
|
3,856
|
|
|
|
75
|
|
|
|
75
|
|
|
|
|
Other
|
|
|
23,626
|
|
|
|
293
|
|
|
|
283
|
|
|
Purchased loans
|
|
|
|
|
13,685
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
88,447
|
|
|
¥
|
1,033
|
|
|
¥
|
988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 62 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31,
2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Average
Recorded
Investments in
Impaired Loans *
|
|
|
Interest Income
on
Impaired Loans
|
|
|
Interest on
Impaired
Loans
Collected in Cash
|
|
|
Consumer borrowers
|
|
|
|
¥
|
14,791
|
|
|
¥
|
215
|
|
|
¥
|
180
|
|
|
|
|
Housing loans
|
|
|
4,265
|
|
|
|
84
|
|
|
|
70
|
|
|
|
|
Card loans
|
|
|
4,116
|
|
|
|
54
|
|
|
|
46
|
|
|
|
|
Other
|
|
|
6,410
|
|
|
|
77
|
|
|
|
64
|
|
|
Corporate borrowers
|
|
|
|
|
40,855
|
|
|
|
481
|
|
|
|
432
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
1,479
|
|
|
|
6
|
|
|
|
6
|
|
|
|
|
The Americas
|
|
|
5,641
|
|
|
|
52
|
|
|
|
52
|
|
|
Other
|
|
Real estate companies
|
|
|
7,847
|
|
|
|
156
|
|
|
|
145
|
|
|
|
|
Entertainment companies
|
|
|
2,234
|
|
|
|
55
|
|
|
|
55
|
|
|
|
|
Other
|
|
|
23,654
|
|
|
|
212
|
|
|
|
174
|
|
|
Purchased loans
|
|
|
|
|
9,824
|
|
|
|
571
|
|
|
|
571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
65,470
|
|
|
¥
|
1,267
|
|
|
¥
|
1,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
2015
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Average Recorded
Investments
in
Impaired Loans *
|
|
|
Interest Income on
Impaired
Loans
|
|
|
Interest on
Impaired
Loans
Collected in Cash
|
|
|
Consumer borrowers
|
|
|
|
¥
|
13,870
|
|
|
¥
|
118
|
|
|
¥
|
110
|
|
|
|
|
Housing loans
|
|
|
5,269
|
|
|
|
83
|
|
|
|
77
|
|
|
|
|
Card loans
|
|
|
4,046
|
|
|
|
17
|
|
|
|
16
|
|
|
|
|
Other
|
|
|
4,555
|
|
|
|
18
|
|
|
|
17
|
|
|
Corporate borrowers
|
|
|
|
|
52,251
|
|
|
|
241
|
|
|
|
238
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
5,075
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
The Americas
|
|
|
10,417
|
|
|
|
48
|
|
|
|
48
|
|
|
Other
|
|
Real estate companies
|
|
|
11,524
|
|
|
|
53
|
|
|
|
52
|
|
|
|
|
Entertainment companies
|
|
|
3,355
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
Other
|
|
|
21,880
|
|
|
|
119
|
|
|
|
117
|
|
|
Purchased loans
|
|
|
|
|
12,125
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
78,246
|
|
|
¥
|
359
|
|
|
¥
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Average
Recorded
Investments in
Impaired Loans *
|
|
|
Interest Income on
Impaired
Loans
|
|
|
Interest on
Impaired
Loans
Collected in Cash
|
|
|
Consumer borrowers
|
|
|
|
¥
|
15,255
|
|
|
¥
|
72
|
|
|
¥
|
68
|
|
|
|
|
Housing loans
|
|
|
4,069
|
|
|
|
30
|
|
|
|
29
|
|
|
|
|
Card loans
|
|
|
4,112
|
|
|
|
16
|
|
|
|
16
|
|
|
|
|
Other
|
|
|
7,074
|
|
|
|
26
|
|
|
|
23
|
|
|
Corporate borrowers
|
|
|
|
|
37,055
|
|
|
|
128
|
|
|
|
128
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
281
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
The Americas
|
|
|
5,526
|
|
|
|
17
|
|
|
|
17
|
|
|
Other
|
|
Real estate companies
|
|
|
7,384
|
|
|
|
42
|
|
|
|
42
|
|
|
|
|
Entertainment companies
|
|
|
2,096
|
|
|
|
17
|
|
|
|
17
|
|
|
|
|
Other
|
|
|
21,768
|
|
|
|
50
|
|
|
|
50
|
|
|
Purchased loans
|
|
|
|
|
8,853
|
|
|
|
237
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
61,163
|
|
|
¥
|
437
|
|
|
¥
|
433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Loans held for sale are not included in the table above.
|
|
*
|
Average balances are calculated on the basis of fiscal beginning and
quarter-end
balances.
|
– 63 –
The following table provides information about the credit quality indicators
as of March 31, 2016 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
|
|
Non-performing
|
|
|
|
|
|
Portfolio segment
|
|
Class
|
|
Performing
|
|
|
Loans
individually
evaluated for
impairment
|
|
|
90+
days
past-due
loans not
individually
evaluated for
impairment
|
|
|
Subtotal
|
|
|
Total
|
|
|
Consumer borrowers
|
|
|
|
¥
|
1,439,703
|
|
|
¥
|
14,101
|
|
|
¥
|
8,178
|
|
|
¥
|
22,279
|
|
|
¥
|
1,461,982
|
|
|
|
|
Housing loans
|
|
|
1,131,276
|
|
|
|
4,511
|
|
|
|
2,267
|
|
|
|
6,778
|
|
|
|
1,138,054
|
|
|
|
|
Card loans
|
|
|
255,753
|
|
|
|
4,123
|
|
|
|
657
|
|
|
|
4,780
|
|
|
|
260,533
|
|
|
|
|
Other
|
|
|
52,674
|
|
|
|
5,467
|
|
|
|
5,254
|
|
|
|
10,721
|
|
|
|
63,395
|
|
|
Corporate borrowers
|
|
|
|
|
1,029,381
|
|
|
|
48,479
|
|
|
|
0
|
|
|
|
48,479
|
|
|
|
1,077,860
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
14,883
|
|
|
|
5,068
|
|
|
|
0
|
|
|
|
5,068
|
|
|
|
19,951
|
|
|
|
|
The Americas
|
|
|
55,271
|
|
|
|
5,989
|
|
|
|
0
|
|
|
|
5,989
|
|
|
|
61,260
|
|
|
Other
|
|
Real estate companies
|
|
|
261,558
|
|
|
|
8,612
|
|
|
|
0
|
|
|
|
8,612
|
|
|
|
270,170
|
|
|
|
|
Entertainment companies
|
|
|
98,852
|
|
|
|
2,429
|
|
|
|
0
|
|
|
|
2,429
|
|
|
|
101,281
|
|
|
|
|
Other
|
|
|
598,817
|
|
|
|
26,381
|
|
|
|
0
|
|
|
|
26,381
|
|
|
|
625,198
|
|
|
Purchased loans
|
|
|
|
|
19,511
|
|
|
|
11,013
|
|
|
|
0
|
|
|
|
11,013
|
|
|
|
30,524
|
|
|
Direct financing leases
|
|
|
|
|
1,177,580
|
|
|
|
0
|
|
|
|
12,556
|
|
|
|
12,556
|
|
|
|
1,190,136
|
|
|
|
|
Japan
|
|
|
831,207
|
|
|
|
0
|
|
|
|
7,918
|
|
|
|
7,918
|
|
|
|
839,125
|
|
|
|
|
Overseas
|
|
|
346,373
|
|
|
|
0
|
|
|
|
4,638
|
|
|
|
4,638
|
|
|
|
351,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
3,666,175
|
|
|
¥
|
73,593
|
|
|
¥
|
20,734
|
|
|
¥
|
94,327
|
|
|
¥
|
3,760,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
|
|
Non-performing
|
|
|
|
|
|
Portfolio segment
|
|
Class
|
|
Performing
|
|
|
Loans
individually
evaluated for
impairment
|
|
|
90+
days
past-due
loans not
individually
evaluated for
impairment
|
|
|
Subtotal
|
|
|
Total
|
|
|
Consumer borrowers
|
|
|
|
¥
|
1,563,754
|
|
|
¥
|
15,565
|
|
|
¥
|
9,094
|
|
|
¥
|
24,659
|
|
|
¥
|
1,588,413
|
|
|
|
|
Housing loans
|
|
|
1,242,161
|
|
|
|
4,024
|
|
|
|
2,095
|
|
|
|
6,119
|
|
|
|
1,248,280
|
|
|
|
|
Card loans
|
|
|
262,260
|
|
|
|
4,117
|
|
|
|
1,064
|
|
|
|
5,181
|
|
|
|
267,441
|
|
|
|
|
Other
|
|
|
59,333
|
|
|
|
7,424
|
|
|
|
5,935
|
|
|
|
13,359
|
|
|
|
72,692
|
|
|
Corporate borrowers
|
|
|
|
|
1,142,470
|
|
|
|
37,131
|
|
|
|
0
|
|
|
|
37,131
|
|
|
|
1,179,601
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
13,917
|
|
|
|
278
|
|
|
|
0
|
|
|
|
278
|
|
|
|
14,195
|
|
|
|
|
The Americas
|
|
|
69,104
|
|
|
|
5,936
|
|
|
|
0
|
|
|
|
5,936
|
|
|
|
75,040
|
|
|
Other
|
|
Real estate companies
|
|
|
307,304
|
|
|
|
7,133
|
|
|
|
0
|
|
|
|
7,133
|
|
|
|
314,437
|
|
|
|
|
Entertainment companies
|
|
|
95,424
|
|
|
|
2,058
|
|
|
|
0
|
|
|
|
2,058
|
|
|
|
97,482
|
|
|
|
|
Other
|
|
|
656,721
|
|
|
|
21,726
|
|
|
|
0
|
|
|
|
21,726
|
|
|
|
678,447
|
|
|
Purchased loans
|
|
|
|
|
16,412
|
|
|
|
8,414
|
|
|
|
0
|
|
|
|
8,414
|
|
|
|
24,826
|
|
|
Direct financing leases
|
|
|
|
|
1,187,804
|
|
|
|
0
|
|
|
|
11,683
|
|
|
|
11,683
|
|
|
|
1,199,487
|
|
|
|
|
Japan
|
|
|
849,050
|
|
|
|
0
|
|
|
|
6,630
|
|
|
|
6,630
|
|
|
|
855,680
|
|
|
|
|
Overseas
|
|
|
338,754
|
|
|
|
0
|
|
|
|
5,053
|
|
|
|
5,053
|
|
|
|
343,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
3,910,440
|
|
|
¥
|
61,110
|
|
|
¥
|
20,777
|
|
|
¥
|
81,887
|
|
|
¥
|
3,992,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note:
|
|
Loans held for sale are not included in the table above.
|
In common with all classes, the Company and its subsidiaries monitor the credit quality
indicators as performing and
non-performing
assets. The category of
non-performing
assets includes financing receivables for debtors who have filed for insolvency
proceedings, whose bank transactions are suspended, whose bills are dishonored, whose businesses have deteriorated, whose repayment is
past-due
90 days or more, financing receivables modified as troubled debt
restructurings, and performing assets include all other financing receivables. Regarding purchased loans, they are classified as
non-performing
assets when considered impaired, while all the other loans are
included in the category of performing assets.
– 64 –
Out of
non-performing
assets, the
Company and its subsidiaries consider smaller balance homogeneous loans, including housing loans, card loans and other, which are not restructured and direct financing leases, as 90 days or more
past-due
financing receivables not individually evaluated for impairment, and consider the others as loans individually evaluated for impairment. After the Company and its subsidiaries have set aside provision for those
non-performing
assets, the Company and its subsidiaries continue to monitor at least on a quarterly basis the quality of any underlying collateral, the status of management of the debtors and other important
factors in order to report to management and develop additional provision as necessary.
The following table
provides information about the
non-accrual
and
past-due
financing receivables as of March 31, 2016 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
Past-due
financing receivables
|
|
|
|
|
|
|
|
|
Portfolio segment
|
|
Class
|
|
30-89
days
past-due
|
|
|
90 days
or more
past-due
|
|
|
Total
past-due
|
|
|
Total
financing
receivables
|
|
|
Non-accrual
|
|
|
Consumer borrowers
|
|
|
|
¥
|
5,002
|
|
|
¥
|
11,348
|
|
|
¥
|
16,350
|
|
|
¥
|
1,461,982
|
|
|
¥
|
11,348
|
|
|
|
|
Housing loans
|
|
|
2,283
|
|
|
|
4,435
|
|
|
|
6,718
|
|
|
|
1,138,054
|
|
|
|
4,435
|
|
|
|
|
Card loans
|
|
|
503
|
|
|
|
1,103
|
|
|
|
1,606
|
|
|
|
260,533
|
|
|
|
1,103
|
|
|
|
|
Other
|
|
|
2,216
|
|
|
|
5,810
|
|
|
|
8,026
|
|
|
|
63,395
|
|
|
|
5,810
|
|
|
Corporate borrowers
|
|
|
|
|
3,018
|
|
|
|
18,944
|
|
|
|
21,962
|
|
|
|
1,077,860
|
|
|
|
31,464
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
0
|
|
|
|
4,776
|
|
|
|
4,776
|
|
|
|
19,951
|
|
|
|
4,776
|
|
|
|
|
The Americas
|
|
|
2,370
|
|
|
|
400
|
|
|
|
2,770
|
|
|
|
61,260
|
|
|
|
5,924
|
|
|
Other
|
|
Real estate companies
|
|
|
44
|
|
|
|
2,727
|
|
|
|
2,771
|
|
|
|
270,170
|
|
|
|
2,727
|
|
|
|
|
Entertainment companies
|
|
|
0
|
|
|
|
145
|
|
|
|
145
|
|
|
|
101,281
|
|
|
|
145
|
|
|
|
|
Other
|
|
|
604
|
|
|
|
10,896
|
|
|
|
11,500
|
|
|
|
625,198
|
|
|
|
17,892
|
|
|
Direct financing leases
|
|
|
|
|
6,457
|
|
|
|
12,556
|
|
|
|
19,013
|
|
|
|
1,190,136
|
|
|
|
12,556
|
|
|
|
|
Japan
|
|
|
500
|
|
|
|
7,918
|
|
|
|
8,418
|
|
|
|
839,125
|
|
|
|
7,918
|
|
|
|
|
Overseas
|
|
|
5,957
|
|
|
|
4,638
|
|
|
|
10,595
|
|
|
|
351,011
|
|
|
|
4,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
14,477
|
|
|
¥
|
42,848
|
|
|
¥
|
57,325
|
|
|
¥
|
3,729,978
|
|
|
¥
|
55,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
Past-due
financing receivables
|
|
|
|
|
|
|
|
|
Portfolio segment
|
|
Class
|
|
30-89 days
past-due
|
|
|
90 days
or more
past-due
|
|
|
Total
past-due
|
|
|
Total
financing
receivables
|
|
|
Non-accrual
|
|
|
Consumer borrowers
|
|
|
|
¥
|
5,631
|
|
|
¥
|
12,496
|
|
|
¥
|
18,127
|
|
|
¥
|
1,588,413
|
|
|
¥
|
12,496
|
|
|
|
|
Housing loans
|
|
|
2,227
|
|
|
|
4,052
|
|
|
|
6,279
|
|
|
|
1,248,280
|
|
|
|
4,052
|
|
|
|
|
Card loans
|
|
|
448
|
|
|
|
1,531
|
|
|
|
1,979
|
|
|
|
267,441
|
|
|
|
1,531
|
|
|
|
|
Other
|
|
|
2,956
|
|
|
|
6,913
|
|
|
|
9,869
|
|
|
|
72,692
|
|
|
|
6,913
|
|
|
Corporate borrowers
|
|
|
|
|
4,566
|
|
|
|
14,681
|
|
|
|
19,247
|
|
|
|
1,179,601
|
|
|
|
23,884
|
|
|
Non-recourse
loans
|
|
Japan
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,195
|
|
|
|
0
|
|
|
|
|
The Americas
|
|
|
1,503
|
|
|
|
5,012
|
|
|
|
6,515
|
|
|
|
75,040
|
|
|
|
5,871
|
|
|
Other
|
|
Real estate companies
|
|
|
37
|
|
|
|
1,898
|
|
|
|
1,935
|
|
|
|
314,437
|
|
|
|
1,898
|
|
|
|
|
Entertainment companies
|
|
|
0
|
|
|
|
136
|
|
|
|
136
|
|
|
|
97,482
|
|
|
|
136
|
|
|
|
|
Other
|
|
|
3,026
|
|
|
|
7,635
|
|
|
|
10,661
|
|
|
|
678,447
|
|
|
|
15,979
|
|
|
Direct financing leases
|
|
|
|
|
4,221
|
|
|
|
11,683
|
|
|
|
15,904
|
|
|
|
1,199,487
|
|
|
|
11,683
|
|
|
|
|
Japan
|
|
|
736
|
|
|
|
6,630
|
|
|
|
7,366
|
|
|
|
855,680
|
|
|
|
6,630
|
|
|
|
|
Overseas
|
|
|
3,485
|
|
|
|
5,053
|
|
|
|
8,538
|
|
|
|
343,807
|
|
|
|
5,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
14,418
|
|
|
¥
|
38,860
|
|
|
¥
|
53,278
|
|
|
¥
|
3,967,501
|
|
|
¥
|
48,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Loans held for sale and purchased loans are not included in the table above.
In common with all classes, the Company and its subsidiaries consider financing receivables as
past-due
financing receivables when principal or interest is
past-due
30 days or more. Loans whose terms have been modified are not classified as
past-due
financing receivables if the principals and interests are not
past-due
30 days or more in accordance with the modified terms.
– 65 –
The Company and its subsidiaries suspend accruing revenues on
past-due
installment loans and direct financing leases when principal or interest is
past-due
90 days or more, or earlier, if management determines that their collections are
doubtful based on factors such as individual debtors’ creditworthiness, historical loss experience, current delinquencies and delinquency trends. Cash repayments received on
non-accrual
loans are applied
first against past due interest and then any surpluses are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries return to accrual status
non-accrual
loans and lease receivables when it becomes probable that the Company and its subsidiaries will be able to collect all amounts due according to the contractual terms of these loans and lease receivables, as evidenced by continual payments from the
debtors. The period of such continual payments before returning to accrual status varies depending on factors that we consider are relevant in assessing the debtor’s creditworthiness, such as the debtor’s business characteristics and
financial conditions as well as relevant economic conditions and trends.
The following table provides
information about troubled debt restructurings of financing receivables that occurred during the nine and three months ended December 31, 2015 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31,
2015
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Pre-modification
Outstanding
Recorded Investment
|
|
|
Post-modification
Outstanding
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
4,609
|
|
|
¥
|
3,418
|
|
|
|
|
Housing loans
|
|
|
62
|
|
|
|
18
|
|
|
|
|
Card loans
|
|
|
1,819
|
|
|
|
1,387
|
|
|
|
|
Other
|
|
|
2,728
|
|
|
|
2,013
|
|
|
Corporate borrowers
|
|
|
|
|
156
|
|
|
|
154
|
|
|
Non-recourse
loans
|
|
The Americas
|
|
|
147
|
|
|
|
147
|
|
|
Other
|
|
Other
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
4,765
|
|
|
¥
|
3,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31,
2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Pre-modification
Outstanding
Recorded Investment
|
|
|
Post-modification
Outstanding
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
8,079
|
|
|
¥
|
6,086
|
|
|
|
|
Housing loans
|
|
|
143
|
|
|
|
117
|
|
|
|
|
Card loans
|
|
|
1,578
|
|
|
|
1,279
|
|
|
|
|
Other
|
|
|
6,358
|
|
|
|
4,690
|
|
|
Corporate borrowers
|
|
|
|
|
539
|
|
|
|
535
|
|
|
Other
|
|
Other
|
|
|
539
|
|
|
|
535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
8,618
|
|
|
¥
|
6,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 66 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
2015
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Pre-modification
Outstanding
Recorded Investment
|
|
|
Post-modification
Outstanding
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
1,630
|
|
|
¥
|
1,265
|
|
|
|
|
Housing loans
|
|
|
7
|
|
|
|
7
|
|
|
|
|
Card loans
|
|
|
590
|
|
|
|
458
|
|
|
|
|
Other
|
|
|
1,033
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
1,630
|
|
|
¥
|
1,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Pre-modification
Outstanding
Recorded Investment
|
|
|
Post-modification
Outstanding
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
2,770
|
|
|
¥
|
2,093
|
|
|
|
|
Housing loans
|
|
|
11
|
|
|
|
4
|
|
|
|
|
Card loans
|
|
|
473
|
|
|
|
371
|
|
|
|
|
Other
|
|
|
2,286
|
|
|
|
1,718
|
|
|
Corporate borrowers
|
|
|
|
|
86
|
|
|
|
82
|
|
|
Other
|
|
Other
|
|
|
86
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
2,856
|
|
|
¥
|
2,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A troubled debt restructuring is defined as a restructuring of a financing receivable in
which the creditor grants a concession to the debtor for economic or other reasons related to the debtor’s financial difficulties.
The Company and its subsidiaries offer various types of concessions to our debtors to protect as much of our investment as possible in troubled debt restructurings. For the debtors of
non-recourse
loans, the Company and its subsidiaries offer concessions including an extension of the maturity date at an interest rate lower than the current market rate for a debt with similar risk characteristics.
For the debtors of all financing receivables other than
non-recourse
loans, the Company and its subsidiaries offer concessions such as a reduction of the loan principal, a temporary reduction in the interest
payments, or an extension of the maturity date at an interest rate lower than the current market rate for a debt with similar risk characteristics. In addition, the Company and its subsidiaries may acquire collateral assets from the debtors in
troubled debt restructurings to satisfy fully or partially the loan principal or past due interest.
In common
with all portfolio segments, financing receivables modified as troubled debt restructurings are recognized as impaired and are individually evaluated for a valuation allowance. In most cases, these financing receivables have already been considered
impaired and individually evaluated for allowance for credit losses prior to the restructurings. However, as a result of the restructuring, the Company and its subsidiaries may recognize additional provision for the restructured receivables.
– 67 –
The following table provides information about financing receivables
modified as troubled debt restructurings within the previous 12 months from December 31, 2015 and for which there was a payment default during the nine and three months ended December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2015
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
90
|
|
|
|
|
Card loans
|
|
|
59
|
|
|
|
|
Other
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2015
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
46
|
|
|
|
|
Card loans
|
|
|
26
|
|
|
|
|
Other
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
46
|
|
|
|
|
|
|
|
|
|
– 68 –
The following table provides information about financing receivables
modified as troubled debt restructurings within the previous 12 months from December 31, 2016 and for which there was a payment default during the nine and three months ended December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
1,549
|
|
|
|
|
Card loans
|
|
|
32
|
|
|
|
|
Other
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
1,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2016
|
|
|
|
|
|
|
Millions of yen
|
|
|
Portfolio segment
|
|
Class
|
|
Recorded Investment
|
|
|
Consumer borrowers
|
|
|
|
¥
|
554
|
|
|
|
|
Card loans
|
|
|
20
|
|
|
|
|
Other
|
|
|
534
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
¥
|
554
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries consider financing receivables whose terms have been
modified in a restructuring as defaulted receivables when principal or interest is
past-due
90 days or more in accordance with the modified terms.
In common with all portfolio segments, the Company and its subsidiaries suspend accruing revenues and may recognize
additional provision as necessary for the defaulted financing receivables.
As of March 31, 2016 and
December 31, 2016, there were no foreclosed residential real estate properties. The carrying amounts of installment loans in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure were
¥601 million and ¥511 million as of March 31, 2016 and December 31, 2016, respectively.
– 69 –
|
6.
|
Investment in Securities
|
Investment in securities as of March 31, 2016 and December 31, 2016 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
Trading securities *
|
|
¥
|
725,821
|
|
|
¥
|
648,322
|
|
|
Available-for-sale
securities
|
|
|
1,347,890
|
|
|
|
1,172,098
|
|
|
Held-to-maturity
securities
|
|
|
114,858
|
|
|
|
114,714
|
|
|
Other securities
|
|
|
156,223
|
|
|
|
172,712
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
2,344,792
|
|
|
¥
|
2,107,846
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
The amount of assets under management of variable annuity and variable life insurance contracts included in trading securities were
¥704,313 million and ¥612,483 million as of March 31, 2016 and December 31, 2016, respectively.
|
Other securities consist mainly of
non-marketable
equity securities, preferred capital shares carried at cost and investment funds carried at an amount that
reflects equity income and loss based on the investor’s share. The aggregate carrying amount of other securities accounted for under the cost method totaled ¥27,349 million and ¥25,246 million as of March 31, 2016 and
December 31, 2016, respectively. Investments with an aggregate cost of ¥27,125 million and ¥25,230 million, respectively, were not evaluated for impairment because the Company and its subsidiaries did not identify any events
or changes in circumstances that might have had a significant adverse effect on the fair value of those investments and it was not practicable to estimate the fair value of the investments.
A certain subsidiary elected the fair value option for investments in foreign government bond securities included in
available-for-sale
securities, which as of March 31, 2016 and December 31, 2016, were fair valued at ¥988 million and ¥990 million, respectively.
A certain subsidiary elected the fair value option for investments in foreign corporate debt securities
included in
available-for-sale
securities, which as of December 31, 2016, were fair valued at ¥838million.
A certain subsidiary elected the fair value option for certain investments in equity securities included in
available-for-sale
securities to mitigate volatility in the consolidated statements of income caused by the differences in classification of recognized gain or loss that would
otherwise exist between the equity securities and the derivatives used to manage the risk of changes in fair value of these equity securities. As of March 31, 2016 and December 31, 2016, these equity securities were fair valued at
¥16,227 million and ¥16,215 million, respectively.
Certain subsidiaries elected the fair
value option for certain investments in a trust and investment funds included in other securities whose net asset values do not represent the fair value of investments due to the illiquid nature of these investments. The subsidiaries manage these
investments on a fair value basis and the election of the fair value option enables the subsidiaries to reflect more appropriate assumptions to measure the fair value of these investments. As of March 31, 2016 and December 31, 2016, the
fair values of these investments were ¥10,152 million and ¥7,876 million, respectively.
– 70 –
The amortized cost basis amounts, gross unrealized holding gains, gross
unrealized holding losses and fair values of
available-for-sale
securities and
held-to-maturity
securities in each major security type as of March 31, 2016 and December 31, 2016 are as follows:
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Amortized
cost
|
|
|
Gross
unrealized
gains
|
|
|
Gross
unrealized
losses
|
|
|
Fair value
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese and foreign government bond securities
|
|
¥
|
464,854
|
|
|
¥
|
32,501
|
|
|
¥
|
0
|
|
|
¥
|
497,355
|
|
|
Japanese prefectural and foreign municipal bond securities
|
|
|
165,465
|
|
|
|
4,106
|
|
|
|
(37
|
)
|
|
|
169,534
|
|
|
Corporate debt securities
|
|
|
403,349
|
|
|
|
7,443
|
|
|
|
(13
|
)
|
|
|
410,779
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
3,422
|
|
|
|
39
|
|
|
|
0
|
|
|
|
3,461
|
|
|
CMBS and RMBS in the Americas
|
|
|
97,692
|
|
|
|
1,906
|
|
|
|
(2,412
|
)
|
|
|
97,186
|
|
|
Other asset-backed securities and debt securities
|
|
|
63,079
|
|
|
|
1,744
|
|
|
|
(6,593
|
)
|
|
|
58,230
|
|
|
Equity securities
|
|
|
85,452
|
|
|
|
33,492
|
|
|
|
(7,599
|
)
|
|
|
111,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,283,313
|
|
|
|
81,231
|
|
|
|
(16,654
|
)
|
|
|
1,347,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese government bond securities and other
|
|
|
114,858
|
|
|
|
30,662
|
|
|
|
0
|
|
|
|
145,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
1,398,171
|
|
|
¥
|
111,893
|
|
|
¥
|
(16,654
|
)
|
|
¥
|
1,493,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Amortized
cost
|
|
|
Gross
unrealized
gains
|
|
|
Gross
unrealized
losses
|
|
|
Fair value
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese and foreign government bond securities
|
|
¥
|
322,083
|
|
|
¥
|
14,789
|
|
|
¥
|
(1,105
|
)
|
|
¥
|
335,767
|
|
|
Japanese prefectural and foreign municipal bond securities
|
|
|
173,512
|
|
|
|
3,325
|
|
|
|
(1,219
|
)
|
|
|
175,618
|
|
|
Corporate debt securities
|
|
|
410,485
|
|
|
|
3,814
|
|
|
|
(4,640
|
)
|
|
|
409,659
|
|
|
Specified bonds issued by SPEs in Japan
|
|
|
1,149
|
|
|
|
13
|
|
|
|
0
|
|
|
|
1,162
|
|
|
CMBS and RMBS in the Americas
|
|
|
95,668
|
|
|
|
2,645
|
|
|
|
(860
|
)
|
|
|
97,453
|
|
|
Other asset-backed securities and debt securities
|
|
|
74,666
|
|
|
|
3,218
|
|
|
|
(1,245
|
)
|
|
|
76,639
|
|
|
Equity securities
|
|
|
51,966
|
|
|
|
24,025
|
|
|
|
(191
|
)
|
|
|
75,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,129,529
|
|
|
|
51,829
|
|
|
|
(9,260
|
)
|
|
|
1,172,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese government bond securities and other
|
|
|
114,714
|
|
|
|
27,179
|
|
|
|
0
|
|
|
|
141,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
1,244,243
|
|
|
¥
|
79,008
|
|
|
¥
|
(9,260
|
)
|
|
¥
|
1,313,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 71 –
The following tables provide information about
available-for-sale
securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss portion as of
March 31, 2016 and December 31, 2016, respectively:
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
|
Fair value
|
|
|
Gross
unrealized
losses
|
|
|
Fair value
|
|
|
Gross
unrealized
losses
|
|
|
Fair value
|
|
|
Gross
unrealized
losses
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese prefectural and foreign municipal bond securities
|
|
¥
|
14,821
|
|
|
¥
|
(30
|
)
|
|
¥
|
554
|
|
|
¥
|
(7
|
)
|
|
¥
|
15,375
|
|
|
¥
|
(37
|
)
|
|
Corporate debt securities
|
|
|
32,969
|
|
|
|
(13
|
)
|
|
|
1,802
|
|
|
|
0
|
|
|
|
34,771
|
|
|
|
(13
|
)
|
|
CMBS and RMBS in the Americas
|
|
|
55,226
|
|
|
|
(2,234
|
)
|
|
|
5,002
|
|
|
|
(178
|
)
|
|
|
60,228
|
|
|
|
(2,412
|
)
|
|
Other asset-backed securities and debt securities
|
|
|
14,220
|
|
|
|
(1,857
|
)
|
|
|
18,846
|
|
|
|
(4,736
|
)
|
|
|
33,066
|
|
|
|
(6,593
|
)
|
|
Equity securities
|
|
|
17,040
|
|
|
|
(7,550
|
)
|
|
|
594
|
|
|
|
(49
|
)
|
|
|
17,634
|
|
|
|
(7,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
134,276
|
|
|
¥
|
(11,684
|
)
|
|
¥
|
26,798
|
|
|
¥
|
(4,970
|
)
|
|
¥
|
161,074
|
|
|
¥
|
(16,654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
|
Fair value
|
|
|
Gross
unrealized
losses
|
|
|
Fair value
|
|
|
Gross
unrealized
losses
|
|
|
Fair value
|
|
|
Gross
unrealized
losses
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese and foreign government bond securities
|
|
¥
|
44,750
|
|
|
¥
|
(1,105
|
)
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
44,750
|
|
|
¥
|
(1,105
|
)
|
|
Japanese prefectural and foreign municipal bond securities
|
|
|
48,934
|
|
|
|
(1,200
|
)
|
|
|
255
|
|
|
|
(19
|
)
|
|
|
49,189
|
|
|
|
(1,219
|
)
|
|
Corporate debt securities
|
|
|
195,734
|
|
|
|
(4,640
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
195,734
|
|
|
|
(4,640
|
)
|
|
CMBS and RMBS in the Americas
|
|
|
22,409
|
|
|
|
(558
|
)
|
|
|
18,223
|
|
|
|
(302
|
)
|
|
|
40,632
|
|
|
|
(860
|
)
|
|
Other asset-backed securities and debt securities
|
|
|
5,201
|
|
|
|
(146
|
)
|
|
|
18,849
|
|
|
|
(1,099
|
)
|
|
|
24,050
|
|
|
|
(1,245
|
)
|
|
Equity securities
|
|
|
3,133
|
|
|
|
(184
|
)
|
|
|
79
|
|
|
|
(7
|
)
|
|
|
3,212
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
320,161
|
|
|
¥
|
(7,833
|
)
|
|
¥
|
37,406
|
|
|
¥
|
(1,427
|
)
|
|
¥
|
357,567
|
|
|
¥
|
(9,260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The number of investment securities that were in an unrealized loss position as of
March 31, 2016 and December 31, 2016 were 259 and 403, respectively. The gross unrealized losses on these securities are attributable to a number of factors including changes in interest rates, credit spreads and market trends.
– 72 –
For debt securities, in the case of the fair value being below the amortized
cost, the Company and its subsidiaries consider whether those securities are other-than-temporarily impaired using all available information about their collectability. The Company and its subsidiaries do not consider a debt security to be
other-than-temporarily impaired if (1) the Company and its subsidiaries do not intend to sell the debt security, (2) it is not more likely than not that the Company and its subsidiaries will be required to sell the debt security before
recovery of its amortized cost basis and (3) the present value of estimated cash flows will fully cover the amortized cost of the security. On the other hand, the Company and its subsidiaries consider a debt security to be
other-than-temporarily impaired if any of the above mentioned three conditions are not met.
Debt securities
with unrealized loss position mainly include CMBS and RMBS in the Americas, and other asset-backed securities.
The unrealized loss associated with CMBS and RMBS in the Americas and other asset-backed securities is primarily caused
by changes in credit spreads and interest rates. In order to determine whether a credit loss exists, the Company and its subsidiaries estimate the present value of anticipated cash flows, discounted at the current yield to accrete the security. The
cash flows are estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security. Then, a credit loss is assessed by comparing the present value of the expected cash flows to the
security’s amortized cost basis. Based on that assessment, the Company and its subsidiaries expect to recover the entire amortized cost basis and no credit impairment was identified. Because the Company and its subsidiaries do not intend to
sell the investments and it is not more likely than not that the Company and its subsidiaries will be required to sell the investments before recovery of their amortized cost basis, the Company and its subsidiaries do not consider these investments
to be other-than-temporarily impaired as of December 31, 2016.
For equity securities with unrealized
losses, the Company and its subsidiaries consider various factors to determine whether the decline is other-than-temporary, including the length of time and the extent to which the fair value has been less than the carrying value and the
issuer’s specific economic conditions as well as the ability and intent to hold these securities for a period of time sufficient to recover the securities’ carrying amounts. Based on our ongoing monitoring process, the Company and its
subsidiaries do not consider these investments to be other-than-temporarily impaired as of December 31, 2016.
The total other-than-temporary impairment with an offset for the amount of the total other-than-temporary impairment recognized in other comprehensive income (loss) for the nine months ended
December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Total other-than-temporary impairment losses
|
|
¥
|
3,954
|
|
|
¥
|
6,363
|
|
|
Portion of loss recognized in other comprehensive income (before taxes)
|
|
|
(2
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings
|
|
¥
|
3,952
|
|
|
¥
|
6,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 73 –
The total other-than-temporary impairment with an offset for the amount of
the total other-than-temporary impairment recognized in other comprehensive income (loss) for the three months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Total other-than-temporary impairment losses
|
|
¥
|
470
|
|
|
¥
|
151
|
|
|
Portion of loss recognized in other comprehensive income (before taxes)
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impairment losses recognized in earnings
|
|
¥
|
470
|
|
|
¥
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other-than-temporary impairment losses for the nine and three months ended
December 31, 2015 related to equity securities, debt securities and other securities. Total other-than-temporary impairment losses for the nine and three months ended December 31, 2016 related to equity securities and other securities.
During the nine months ended December 31, 2015, other-than-temporary impairment losses related to debt
securities were recognized mainly on certain other asset-backed securities. Other asset-backed securities have experienced credit losses due to decline in the value of the underlying assets. Because the Company and its subsidiaries do not intend to
sell the investments and it is not more likely than not that the Company and its subsidiaries will be required to sell the investments before recovery of their amortized cost basis, the credit loss component is recognized in earnings, and the
non-credit
loss component is recognized in other comprehensive income (loss), net of applicable income taxes. The credit loss assessment is made by comparing the securities’ amortized cost basis with the
portion of the estimated fair value of the underlying assets available to repay the specified bonds, or with the present value of the expected cash flows from the mortgage-backed securities, that were estimated based on a number of assumptions such
as seniority of the security.
Roll-forwards of the amount related to credit losses on other-than-temporarily
impaired debt securities recognized in earnings for the nine months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Beginning
|
|
¥
|
2,633
|
|
|
¥
|
1,413
|
|
|
Addition during the period
:
|
|
|
|
|
|
|
|
|
|
Credit loss for which an other-than-temporary impairment was previously recognized
|
|
|
49
|
|
|
|
0
|
|
|
Reduction during the period
:
|
|
|
|
|
|
|
|
|
|
For securities sold
|
|
|
(604
|
)
|
|
|
0
|
|
|
Due to change in intent to sell or requirement to sell
|
|
|
(661
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
¥
|
1,417
|
|
|
¥
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
Roll-forwards of the amount related to credit losses on other-than-temporarily impaired
debt securities recognized in earnings for the three months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Beginning
|
|
¥
|
2,421
|
|
|
¥
|
1,391
|
|
|
Addition during the period
:
|
|
|
|
|
|
|
|
|
|
Credit loss for which an other-than-temporary impairment was previously recognized
|
|
|
0
|
|
|
|
0
|
|
|
Reduction during the period
:
|
|
|
|
|
|
|
|
|
|
For securities sold
|
|
|
(343
|
)
|
|
|
0
|
|
|
Due to change in intent to sell or requirement to sell
|
|
|
(661
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
|
|
¥
|
1,417
|
|
|
¥
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
– 74 –
The Company and its subsidiaries recorded other-than-temporary impairments
related to the
non-credit
losses arising from foregoing debt securities for CMBS and RMBS in the Americas. These impairments included the amount of unrealized gains or losses for the changes in fair value of
the debt securities after recognition of other-than-temporary impairments in earnings. As of March 31, 2016, an unrealized gain of ¥61 million and an unrealized loss of ¥6 million, before taxes, were included and an unrealized
gain of ¥39 million and an unrealized loss of ¥4 million, net of taxes, were included in unrealized gains or losses of accumulated other comprehensive income. As of December 31, 2016, an unrealized gain of
¥53 million, before taxes, was included and an unrealized gain of ¥34 million, net of taxes, was included in unrealized gains or losses of accumulated other comprehensive income. As of December 31, 2016, no unrealized loss was
included in unrealized gains or losses of accumulated other comprehensive income.
|
7.
|
Securitization Transactions
|
The Company and its subsidiaries have securitized various financial assets such as lease receivables and installment loans (commercial mortgage loans, housing loans and other).
In the securitization process, these financial assets are transferred to SPEs, such as trusts and special-purpose
companies that issue beneficial interests of the securitization trusts and securities backed by the financial assets to investors. The cash flows collected from these assets transferred to the SPEs are then used to repay these asset-backed
beneficial interests and securities. As the transferred assets are isolated from the Company and its subsidiaries, the investors and the SPEs have no recourse to other assets of the Company and its subsidiaries in cases where the debtors or the
issuers of the transferred financial assets fail to perform under the original terms of those financial assets.
The Company and its subsidiaries often retain interests in the SPEs in the form of the beneficial interest of the
securitization trusts. Those interests that continue to be held include interests in the transferred assets and are often subordinate to other tranche(s) of the securitization. Those beneficial interests that continue to be held by the Company and
its subsidiaries are subject to credit risk, interest rate risk and prepayment risk on the securitized financial assets. With regards to these subordinated interests that the Company and its subsidiaries retain, they are subordinated to the senior
investments and are exposed to different credit and prepayment risks, since they first absorb the risk of the decline in the cash flows from the financial assets transferred to the SPEs for defaults and prepayment of the transferred assets. If there
is any excess cash remaining in the SPEs after payment to investors in the securitization of the contractual rate of returns, most of such excess cash is distributed to the Company and its subsidiaries for payments of the subordinated interests.
Trusts or SPEs used in securitization transactions have been consolidated if the Company and its subsidiaries
are the primary beneficiary of the trusts or SPEs.
During the nine months ended December 31, 2015 and
2016, there was no securitization transaction accounted for as a sale.
– 75 –
Quantitative information about delinquencies, impaired loans and components
of financial assets sold on securitization and other assets managed together as of March 31, 2016 and December 31, 2016, and quantitative information about net credit loss for the nine and three months ended December 31, 2015 and 2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Total principal
amount
of
receivables
|
|
|
Principal amount
of
receivables that are 90 days
or more past-due
and impaired loans
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
Direct financing leases
|
|
¥
|
1,190,136
|
|
|
¥
|
1,199,487
|
|
|
¥
|
12,556
|
|
|
¥
|
11,683
|
|
|
Installment loans
|
|
|
2,592,233
|
|
|
|
2,808,316
|
|
|
|
81,771
|
|
|
|
70,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,782,369
|
|
|
|
4,007,803
|
|
|
|
94,327
|
|
|
|
81,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct financing leases sold on securitization
|
|
|
706
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
3,783,075
|
|
|
¥
|
4,007,803
|
|
|
¥
|
94,327
|
|
|
¥
|
81,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Credit loss
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Direct financing leases
|
|
¥
|
2,277
|
|
|
¥
|
3,074
|
|
|
¥
|
495
|
|
|
¥
|
1,287
|
|
|
Installment loans
|
|
|
10,112
|
|
|
|
8,613
|
|
|
|
4,100
|
|
|
|
2,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,389
|
|
|
|
11,687
|
|
|
|
4,595
|
|
|
|
3,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct financing leases sold on securitization
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
12,389
|
|
|
¥
|
11,687
|
|
|
¥
|
4,595
|
|
|
¥
|
3,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A certain subsidiary originates and sells loans into the secondary market while retaining
the obligation to service those loans. In addition, it undertakes obligations to service loans originated by others. The servicing assets related to those servicing activities are included in other assets and roll-forwards of the amount of the
servicing assets for the nine and three months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months ended
December 31, 2015
|
|
|
Nine months ended
December 31, 2016
|
|
|
Three months ended
December 31, 2015
|
|
|
Three months ended
December 31, 2016
|
|
|
Beginning balance
|
|
¥
|
18,376
|
|
|
¥
|
16,852
|
|
|
¥
|
18,158
|
|
|
¥
|
15,136
|
|
|
Increase mainly from loans sold with servicing retained
|
|
|
3,508
|
|
|
|
3,330
|
|
|
|
1,230
|
|
|
|
1,549
|
|
|
Decrease mainly from amortization
|
|
|
(3,407
|
)
|
|
|
(2,776
|
)
|
|
|
(941
|
)
|
|
|
(997
|
)
|
|
Increase from the effects of changes in foreign exchange rates
|
|
|
67
|
|
|
|
622
|
|
|
|
97
|
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
¥
|
18,544
|
|
|
¥
|
18,028
|
|
|
¥
|
18,544
|
|
|
¥
|
18,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the servicing assets as of March 31, 2016 and December 31,
2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
The fair value of the servicing assets
|
|
¥
|
24,229
|
|
|
¥
|
26,186
|
|
– 76 –
|
8.
|
Variable Interest Entities
|
The Company and its subsidiaries use special purpose companies, partnerships and trusts (hereinafter referred to as SPEs) in the ordinary course of business.
These SPEs are not always controlled by voting rights, and there are cases where voting rights do not exist for these
SPEs. The Company and its subsidiaries determine a variable interest entity (hereinafter referred to as VIE) among those SPEs when (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without
additional subordinated financial support provided by any parties, including the equity holders or (b) as a group, the holders of the equity investment at risk do not have (1) the ability to make decisions about an entity’s activities
that most significantly impact the entity’s economic performance through voting rights or similar rights, (2) the obligation to absorb the expected losses of the entity or (3) the right to receive the expected residual returns of the
entity.
The Company and its subsidiaries perform a qualitative analysis to identify the primary beneficiary
of VIEs. An enterprise that has both of the following characteristics is considered to be the primary beneficiary and therefore results in the consolidation of the VIE:
|
|
•
|
|
The power to direct the activities of a VIE that most significantly impact the entity’s economic performance
|
|
|
•
|
|
The obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that
could potentially be significant to the VIE
|
All facts and circumstances are taken into
consideration when determining whether the Company and its subsidiaries have variable interests that would deem it the primary beneficiary and therefore require consolidation of the VIE. The Company and its subsidiaries make ongoing reassessment of
whether they are the primary beneficiaries of a VIE.
The following are the items that the Company and its
subsidiaries are considering in a qualitative assessment:
|
|
•
|
|
Which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities
|
|
|
•
|
|
Characteristics of the Company and its subsidiaries’ variable interest or interests and other involvements (including involvement of related
parties and de facto agents)
|
|
|
•
|
|
Involvement of other variable interest holders
|
|
|
•
|
|
The entity’s purpose and design, including the risks that the entity was designed to create and pass through to its variable interest holders
|
The Company and its subsidiaries generally consider the following types of involvement to
be significant when determining the primary beneficiary:
|
|
•
|
|
Designing the structuring of a transaction
|
|
|
•
|
|
Providing an equity investment and debt financing
|
|
|
•
|
|
Being the investment manager, asset manager or servicer and receiving variable fees
|
|
|
•
|
|
Providing liquidity and other financial support
|
The Company and its subsidiaries do not have the power to direct activities of the VIEs that most significantly impact
the VIEs’ economic performance if that power is shared among multiple unrelated parties, and accordingly do not consolidate such VIEs.
– 77 –
Information about VIEs (consolidated and
non-consolidated)
for the Company and its subsidiaries are as follows:
March 31, 2016 *4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
Types of VIEs
|
|
Total
assets
*1
|
|
|
Total
liabilities
*1
|
|
|
Assets which
are
pledged as
collateral *2
|
|
|
Commitments *3
|
|
|
(a) VIEs for liquidating customer assets
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
(b) VIEs for acquisition of real estate and real estate development projects for customers
|
|
|
953
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related
business
|
|
|
174,854
|
|
|
|
56,325
|
|
|
|
113,869
|
|
|
|
7,000
|
|
|
(d) VIEs for corporate rehabilitation support business
|
|
|
2,055
|
|
|
|
40
|
|
|
|
0
|
|
|
|
0
|
|
|
(e) VIEs for investment in securities
|
|
|
24,882
|
|
|
|
9,657
|
|
|
|
17,336
|
|
|
|
2,422
|
|
|
(f) VIEs for securitizing financial assets such as direct financing lease receivable and loan receivable
|
|
|
381,313
|
|
|
|
256,620
|
|
|
|
346,169
|
|
|
|
0
|
|
|
(g) VIEs for securitization of loan receivable originated by third parties
|
|
|
21,550
|
|
|
|
20,548
|
|
|
|
21,550
|
|
|
|
0
|
|
|
(h) VIEs for power generation projects
|
|
|
159,593
|
|
|
|
82,535
|
|
|
|
88,119
|
|
|
|
121,390
|
|
|
(i) Other VIEs
|
|
|
216,632
|
|
|
|
97,979
|
|
|
|
213,466
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
981,832
|
|
|
¥
|
523,704
|
|
|
¥
|
800,509
|
|
|
¥
|
130,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
|
|
|
Millions of yen
|
|
|
Types of VIEs
|
|
Total
assets
*1
|
|
|
Total
liabilities
*1
|
|
|
Assets which
are
pledged as
collateral *2
|
|
|
Commitments *3
|
|
|
(a) VIEs for liquidating customer assets
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
¥
|
0
|
|
|
(b) VIEs for acquisition of real estate and real estate development projects for customers
|
|
|
699
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related
business
|
|
|
144,190
|
|
|
|
50,351
|
|
|
|
91,332
|
|
|
|
7,000
|
|
|
(d) VIEs for corporate rehabilitation support business
|
|
|
1,806
|
|
|
|
18
|
|
|
|
0
|
|
|
|
0
|
|
|
(e) VIEs for investment in securities
|
|
|
39,323
|
|
|
|
3,795
|
|
|
|
6,899
|
|
|
|
2,169
|
|
|
(f) VIEs for securitizing financial assets such as direct financing lease receivable and loan receivable
|
|
|
389,102
|
|
|
|
268,664
|
|
|
|
357,648
|
|
|
|
0
|
|
|
(g) VIEs for securitization of loan receivable originated by third parties
|
|
|
19,811
|
|
|
|
18,368
|
|
|
|
19,811
|
|
|
|
0
|
|
|
(h) VIEs for power generation projects
|
|
|
193,956
|
|
|
|
102,829
|
|
|
|
121,659
|
|
|
|
92,506
|
|
|
(i) Other VIEs
|
|
|
218,124
|
|
|
|
89,611
|
|
|
|
193,710
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
1,007,011
|
|
|
¥
|
533,636
|
|
|
¥
|
791,059
|
|
|
¥
|
101,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*1
|
The assets of most VIEs are used only to repay the liabilities of the VIEs, and the creditors of the liabilities of most VIEs have no recourse to
other assets of the Company and its subsidiaries.
|
|
*2
|
The assets are pledged as collateral by VIE for financing of the VIE.
|
|
*3
|
This item represents remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the
VIE.
|
|
*4
|
The amounts as of March 31, 2016 were disclosed according to ASC810 (“Consolidation”) before amendment, and were not adjusted to reflect
the Accounting Standards Update
2015-02
(“Amendments to the Consolidation Analysis”—ASC810 (“Consolidation”)).
|
– 78 –
March 31, 2016 *2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
Carrying amount
of
the variable interests in
the VIEs held by
the Company and its subsidiaries
|
|
|
|
|
|
Types of VIEs
|
|
Total assets
|
|
|
Specified
bonds and
non-recourse
loans
|
|
|
Investments
|
|
|
Maximum
exposure
to loss *1
|
|
|
(a) VIEs for liquidating customer assets
|
|
¥
|
33,406
|
|
|
¥
|
0
|
|
|
¥
|
2,091
|
|
|
¥
|
9,551
|
|
|
(b) VIEs for acquisition of real estate and real estate development projects for customers
|
|
|
170,001
|
|
|
|
4,776
|
|
|
|
13,039
|
|
|
|
24,964
|
|
|
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(d) VIEs for corporate rehabilitation support business
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(e) VIEs for investment in securities
|
|
|
2,964,616
|
|
|
|
0
|
|
|
|
26,174
|
|
|
|
47,636
|
|
|
(f) VIEs for securitizing financial assets such as direct financing lease receivable and loan receivable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(g) VIEs for securitization of loan receivable originated by third parties
|
|
|
1,070,683
|
|
|
|
0
|
|
|
|
10,671
|
|
|
|
10,721
|
|
|
(h) VIEs for power generation projects
|
|
|
20,007
|
|
|
|
0
|
|
|
|
1,182
|
|
|
|
1,182
|
|
|
(i) Other VIEs
|
|
|
104,284
|
|
|
|
0
|
|
|
|
4,868
|
|
|
|
4,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
4,362,997
|
|
|
¥
|
4,776
|
|
|
¥
|
58,025
|
|
|
¥
|
98,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
|
|
|
Carrying amount
of
the variable interests in
the VIEs held by
the Company and its subsidiaries
|
|
|
|
|
|
Types of VIEs
|
|
Total assets
|
|
|
Specified
bonds and
non-recourse
loans
|
|
|
Investments
|
|
|
Maximum
exposure
to loss *1
|
|
|
(a) VIEs for liquidating customer assets
|
|
¥
|
33,060
|
|
|
¥
|
0
|
|
|
¥
|
2,091
|
|
|
¥
|
9,551
|
|
|
(b) VIEs for acquisition of real estate and real estate development projects for customers
|
|
|
99,815
|
|
|
|
0
|
|
|
|
11,837
|
|
|
|
12,061
|
|
|
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(d) VIEs for corporate rehabilitation support business
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(e) VIEs for investment in securities
|
|
|
24,455,816
|
|
|
|
0
|
|
|
|
82,469
|
|
|
|
113,396
|
|
|
(f) VIEs for securitizing financial assets such as direct financing lease receivable and loan receivable
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
(g) VIEs for securitization of loan receivable originated by third parties
|
|
|
1,351,505
|
|
|
|
0
|
|
|
|
16,806
|
|
|
|
16,848
|
|
|
(h) VIEs for power generation projects
|
|
|
10,514
|
|
|
|
0
|
|
|
|
1,149
|
|
|
|
1,149
|
|
|
(i) Other VIEs
|
|
|
224,361
|
|
|
|
0
|
|
|
|
13,730
|
|
|
|
16,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
26,175,071
|
|
|
¥
|
0
|
|
|
¥
|
128,082
|
|
|
¥
|
169,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 79 –
|
*1
|
Maximum exposure to loss includes remaining balance of commitments that could require the Company and its subsidiaries to provide investments or
loans to the VIE.
|
|
*2
|
The amounts as of March 31, 2016 were disclosed according to ASC810 (“Consolidation”) before amendment, and were not adjusted to
reflect the Accounting Standards Update
2015-02
(“Amendments to the Consolidation Analysis”—ASC810 (“Consolidation”)).
|
|
*3
|
On April 1, 2016, the Company and its subsidiaries adopted the Accounting Standards Update
2015-02
(“Amendments to the Consolidation Analysis”—ASC810 (“Consolidation”)), issued in February 2015. As a result of the adoption, the effect on the
non-consolidated
VIEs as of April 1,
2016 was an increase of ¥2,401,930 million in total assets, an increase of ¥56,931 million in investments and an increase of ¥69,660 million in maximum exposure to loss. This was due primarily to the increases of
¥2,021,460 million in total assets, ¥49,275 million in investments and ¥62,003 million in maximum exposure to loss, included in “(e) VIEs for investment in securities.”
|
(a) VIEs for liquidating customer assets
The Company and its subsidiaries may use VIEs in structuring financing for customers to liquidate specific customer assets. The VIEs are typically used to provide a structure that is bankruptcy remote
with respect to the customer and the use of VIE structure is requested by such customer. Such VIEs typically acquire assets to be liquidated from the customer, borrow
non-recourse
loans from financial
institutions and have an equity investment made by the customer. By using cash flows from the liquidated assets, these VIEs repay the loan and pay dividends to equity investors if sufficient funds exist.
Variable interests of
non-consolidated
VIEs, which the Company and its
subsidiaries have, are mainly included in other assets in the Company’s condensed consolidated balance sheets. The Company has a commitment agreement by which the Company may be required to make additional investment in certain such
non-consolidated
VIEs.
(b) VIEs for acquisition of real estate and real estate
development projects for customers
Customers and the Company and its subsidiaries are involved with VIEs
formed to acquire real estate and/or develop real estate projects. In each case, a customer establishes and makes an equity investment in a VIE that is designed to be bankruptcy remote from the customer. The VIEs acquire real estate and/or develop
real estate projects.
The Company and its subsidiaries provide
non-recourse
loans to such VIEs and hold specified bonds issued by them and/or make investments in them. The Company and its subsidiaries have consolidated certain VIEs because the Company or its subsidiary
effectively controls the VIEs by acting as the asset manager of the VIEs.
In the Company’s condensed
consolidated balance sheets, assets of consolidated VIEs are mainly included in cash and cash equivalents and liabilities of those consolidated VIEs are mainly included in other liabilities.
With respect to the variable interests of
non-consolidated
VIEs, which the
Company and its subsidiaries have, specified bonds are included in investment in securities,
non-recourse
loans are included in installment loans, and investments are mainly included in investment in
securities, investment in affiliates and other assets in the Company’s condensed consolidated balance sheets. The Company and its subsidiaries have commitment agreements by which the Company and its subsidiaries may be required to provide
additional investment in certain
non-consolidated
VIEs as long as the agreed-upon terms are met. Under these agreements, the Company and its subsidiaries are committed to invest in these VIEs with the other
investors based on their respective ownership percentages. The Company and its subsidiaries concluded that the VIEs are not consolidated because the power to direct these VIEs is held by unrelated parties. In some cases, the Company and its
subsidiaries concluded that the VIEs are not consolidated because the power to direct these VIEs is shared among multiple unrelated parties.
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
The Company and its subsidiaries establish VIEs and acquire real estate to borrow
non-recourse
loans from financial institutions and simplify the administration activities necessary for the real estate. The Company and its subsidiaries consolidate such VIEs even though the Company and its
subsidiaries may not have voting rights if substantially all of such VIEs’ subordinated interests are issued to the Company and its subsidiaries, and therefore the VIEs are controlled by and for the benefit of the Company and its subsidiaries.
– 80 –
The Company and its subsidiaries contributed additional funding to certain
consolidated VIEs, since those VIEs had difficulty repaying debt and accounts payable. There was no additional funding or acquisition of subordinated interests during fiscal 2016 and the nine months ended December 31, 2016.
In the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs are mainly included in cash
and cash equivalents, restricted cash, investment in operating leases, property under facility operations and other assets, and liabilities of those consolidated VIEs are mainly included in long-term debt. The Company has a commitment agreement by
which the Company may be required to make additional investment in certain such consolidated VIEs.
(d) VIEs for corporate
rehabilitation support business
Financial institutions, the Company and its subsidiary are involved with
VIEs established for the corporate rehabilitation support business. VIEs receive the funds from investors including the financial institutions, the Company and the subsidiary, and purchase loan receivables due from borrowers which have financial
problems, but are deemed to have the potential to recover in the future. The servicing operations for the VIEs are conducted by the subsidiary.
The Company and its subsidiary consolidated such VIEs since the Company and the subsidiary have the majority of the investment share of such VIEs, and have the power to direct the activities of the VIEs
that most significantly impact the entities’ economic performance through the servicing operations.
In
the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs are mainly included in installment loans, and liabilities of those consolidated VIEs are mainly included in other liabilities.
(e) VIEs for investment in securities
The Company and its subsidiaries have interests in VIEs that are investment funds and mainly invest in equity and debt securities. Such VIEs are managed by certain subsidiaries or fund management
companies that are independent of the Company and its subsidiaries.
The Company consolidated certain such
VIEs since the Company has the majority of the investment share of them, and has the power to direct the activities of those VIEs that most significantly impact the entities’ economic performance through involvement with the design of the VIEs
or other means.
In the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs
are mainly included in investment in securities and investment in affiliates, and liabilities of those consolidated VIEs are mainly included in other liabilities. A subsidiary has a commitment agreement by which the subsidiary may be required to
make additional investment in certain such consolidated VIEs.
Variable interests of
non-consolidated
VIEs, which the Company and its subsidiaries have, are included in investment in securities in the Company’s condensed consolidated balance sheets. The Company and its subsidiaries have a
commitment agreement by which the Company and its subsidiaries may be required to make additional investment in certain such
non-consolidated
VIEs.
(f) VIEs for securitizing financial assets such as direct financing lease receivable and loan receivable
The Company and its subsidiaries use VIEs to securitize financial assets such as direct financing leases receivables and
loans receivables. In the securitization process, these financial assets are transferred to SPEs, and the SPEs issue beneficial interests or securities backed by the transferred financial assets to investors. After the securitization, the Company
and its subsidiaries continue to hold a subordinated part of the securities and act as a servicer.
The
Company and its subsidiaries consolidated such VIEs since the Company and its subsidiaries have the power to direct the activities that most significantly impact the entity’s economic performance by designing the securitization scheme and
conducting servicing activities, and have a responsibility to absorb losses of the VIEs that could potentially be significant to the entities by retaining the subordinated part of the securities.
In the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs are mainly included in
restricted cash, investment in direct financing leases and installment loans, and liabilities of those consolidated VIEs are mainly included in long-term debt.
– 81 –
(g) VIEs for securitization of loan receivable originated by third parties
The Company and its subsidiaries invest in CMBS, RMBS and other asset-backed securities originated by
third parties. In some cases of such securitization, certain subsidiaries hold the subordinated portion and the subsidiaries act as a special-servicer of the securitization transaction. As the special servicer, the subsidiaries have rights to
dispose of real estate collateral related to the securitized commercial mortgage loans.
The subsidiaries
consolidate certain of these VIEs when the subsidiaries have the power to direct the activities of the VIEs that most significantly impact the entities’ economic performance through its role as special-servicer, including the right to dispose
of the collateral, and have a responsibility to absorb losses of the VIEs that could potentially be significant to the entities by holding the subordinated part of the securities.
In the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs are mainly included in
installment loans, and liabilities of those consolidated VIEs are mainly included in long-term debt.
Variable
interests of
non-consolidated
VIEs, which the Company and its subsidiaries have, are included in investment in securities in the Company’s condensed consolidated balance sheets. The Company has a
commitment agreement by which the Company may be required to make additional investment in certain such
non-consolidated
VIEs.
(h) VIEs for power generation projects
The Company and its
subsidiaries may use VIEs in power generation projects. VIEs receive the funds from the Company and its subsidiaries, install solar panels on acquired or leased lands, and sell the generated power to electric power companies. The Company and its
subsidiaries have consolidated certain VIEs because the Company and its subsidiaries have the majority of the investment shares of such VIEs and effectively control the VIEs by acting as the asset manager of the VIEs.
In the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs are mainly included in
restricted cash, property under facility operations and other assets, and liabilities of those consolidated VIEs are mainly included in long-term debt and other liabilities. The Company has commitment agreements by which the Company may be required
to make additional investment or execute loans in certain such consolidated VIEs.
Variable interests of
non-consolidated
VIEs, which the Company has, is included in investment in securities in the Company’s condensed consolidated balance sheets.
(i) Other VIEs
The Company and its subsidiaries are involved with other types of VIEs for various purposes. Consolidated and
non-consolidated
VIEs of this category are mainly
kumiai structures. In addition, certain subsidiaries has consolidated VIEs that are not included in the categories (a) through (h) above, because the subsidiaries hold the subordinated portion of the VIEs and the VIEs are effectively controlled
by the subsidiaries.
In Japan, certain subsidiaries provide investment products to their customers that
employ a contractual mechanism known as a kumiai, which in part result in the subsidiaries forming a type of SPE. As a means to finance the purchase of aircraft or other
large-ticket
items to be leased to
third parties, the Company and its subsidiaries arrange and market kumiai products to investors, who invest a portion of the funds necessary into the kumiai structure. The remainder of the purchase funds is borrowed by the kumiai structure in the
form of a nonrecourse loan from one or more financial institutions. The kumiai investors (and any lenders to the kumiai structure) retain all of the economic risks and rewards in connection with purchasing and leasing activities of the kumiai
structure, and all related gains or losses are recorded on the financial statements of the investors in the kumiai. The Company and its subsidiaries are responsible for the arrangement and marketing of these products and may act as servicer or
administrator in kumiai transactions. The fee income for the arrangement and administration of these transactions is recognized in the Company’s condensed consolidated statements of income. In some cases, the Company and its subsidiaries make
investments in the kumiai or its related SPE, and these VIEs are consolidated because the Company and its subsidiaries have a responsibility to absorb any significant potential loss through the investments and have the power to direct the activities
that most significantly impact their economic performance. In other cases, the Company and its subsidiaries are not considered to be the primary beneficiary of the VIEs or kumiais because the Company and its subsidiaries did not make significant
investments or guarantee or otherwise undertake any significant financial commitments or exposure with respect to the kumiai or its related SPE.
– 82 –
The Company may use VIEs to finance. The Company transfers its own held
assets to SPEs, which borrow
non-recourse
loan from financial institutions and effectively pledge such assets as collateral. The Company continually holds subordinated interests in the SPEs and performs
administrative work of such assets. The Company consolidates such SPEs because the Company has a right to direct the activities of them that most significantly impact their economic performance by setting up the scheme and performing administrative
work of the assets and has the obligation to absorb expected losses of them by holding the subordinated interests.
In the Company’s condensed consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in operating leases, investment in affiliates and office facilities, and
liabilities of those consolidated VIEs are mainly included in long-term debt.
Variable interests in
non-consolidated
VIEs, which the Company and its subsidiaries hold, are mainly included in investment in securities in the Company’s condensed consolidated balance sheets. The Company and its subsidiaries have
a commitment agreement by which the Company and its subsidiaries may be required to make additional investment in certain such
non-consolidated
VIEs.
|
9.
|
Investment in Affiliates
|
Investment in affiliates at March 31, 2016 and December 31, 2016 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
Shares
|
|
¥
|
499,922
|
|
|
¥
|
460,109
|
|
|
Loans
|
|
|
30,745
|
|
|
|
29,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
530,667
|
|
|
¥
|
489,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Redeemable Noncontrolling Interests
|
Changes in redeemable noncontrolling interests for the nine months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Beginning balance
|
|
¥
|
66,901
|
|
|
¥
|
7,467
|
|
|
Adjustment of redeemable noncontrolling interests to redemption value
|
|
|
(1,811
|
)
|
|
|
0
|
|
|
Transaction with noncontrolling interests
|
|
|
1,004
|
|
|
|
0
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
810
|
|
|
|
224
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
Net change of foreign currency translation adjustments
|
|
|
1,264
|
|
|
|
275
|
|
|
Total other comprehensive income (loss)
|
|
|
1,264
|
|
|
|
275
|
|
|
Comprehensive income
|
|
|
2,074
|
|
|
|
499
|
|
|
Cash dividends
|
|
|
(11,272
|
)
|
|
|
0
|
|
|
Property dividends
|
|
|
(3,776
|
)
|
|
|
0
|
|
|
Partial sale of the parent’s ownership interest in subsidiaries that results in the loss of control
|
|
|
(34,961
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
¥
|
18,159
|
|
|
¥
|
7,966
|
|
|
|
|
|
|
|
|
|
|
|
– 83 –
|
11.
|
Accumulated Other Comprehensive Income (Loss)
|
Changes in each component of accumulated other comprehensive income (loss) for the nine months ended December 31,
2015 and 2016, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2015
|
|
|
|
|
Millions of yen
|
|
|
|
|
Net unrealized gains
(losses) on investment
in securities
|
|
|
Defined benefit
pension
plans
|
|
|
Foreign
currency
translation
adjustments
|
|
|
Net unrealized
gains
(losses) on
derivative
instruments
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
|
Balance at March 31, 2015
|
|
¥
|
50,330
|
|
|
¥
|
(19,448
|
)
|
|
¥
|
431
|
|
|
¥
|
(940
|
)
|
|
¥
|
30,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains on investment in securities, net of tax of ¥(704) million
|
|
|
3,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,265
|
|
|
Reclassification adjustment included in net income, net of tax of ¥10,069 million
|
|
|
(17,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,480
|
)
|
|
Defined benefit pension plans, net of tax of ¥105 million
|
|
|
|
|
|
|
(358
|
)
|
|
|
|
|
|
|
|
|
|
|
(358
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥(15) million
|
|
|
|
|
|
|
245
|
|
|
|
|
|
|
|
|
|
|
|
245
|
|
|
Foreign currency translation adjustments, net of tax of ¥2,253 million
|
|
|
|
|
|
|
|
|
|
|
(5,683
|
)
|
|
|
|
|
|
|
(5,683
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥0 million
|
|
|
|
|
|
|
|
|
|
|
975
|
|
|
|
|
|
|
|
975
|
|
|
Net unrealized gains on derivative instruments, net of tax of ¥850 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,943
|
)
|
|
|
(1,943
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥(527) million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,320
|
|
|
|
1,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(14,215
|
)
|
|
|
(113
|
)
|
|
|
(4,708
|
)
|
|
|
(623
|
)
|
|
|
(19,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income (loss) Attributable to the Noncontrolling Interest
|
|
|
28
|
|
|
|
45
|
|
|
|
(168
|
)
|
|
|
(32
|
)
|
|
|
(127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
|
|
|
0
|
|
|
|
0
|
|
|
|
1,264
|
|
|
|
0
|
|
|
|
1,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
¥
|
36,087
|
|
|
¥
|
(19,606
|
)
|
|
¥
|
(5,373
|
)
|
|
¥
|
(1,531
|
)
|
|
¥
|
9,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 84 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2016
|
|
|
|
|
Millions of yen
|
|
|
|
|
Net unrealized gains
(losses) on investment
in securities
|
|
|
Defined benefit
pension plans
|
|
|
Foreign
currency
translation
adjustments
|
|
|
Net unrealized
gains (losses) on
derivative
instruments
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
|
Balance at March 31, 2016
|
|
¥
|
47,185
|
|
|
¥
|
(23,884
|
)
|
|
¥
|
(24,766
|
)
|
|
¥
|
(4,757
|
)
|
|
¥
|
(6,222
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains on investment in securities, net of tax of ¥(494) million
|
|
|
(1,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,740
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥8,324 million
|
|
|
(15,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,132
|
)
|
|
Defined benefit pension plans, net of tax of ¥(168) million
|
|
|
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
350
|
|
|
Reclassification adjustment included in net income, net of tax of ¥(118) million
|
|
|
|
|
|
|
327
|
|
|
|
|
|
|
|
|
|
|
|
327
|
|
|
Foreign currency translation adjustments, net of tax of ¥5,832 million
|
|
|
|
|
|
|
|
|
|
|
(18,448
|
)
|
|
|
|
|
|
|
(18,448
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥13 million
|
|
|
|
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
(80
|
)
|
|
Net unrealized losses on derivative instruments, net of tax of ¥(592) million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,700
|
|
|
|
1,700
|
|
|
Reclassification adjustment included in net income, net of tax of ¥457 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,347
|
)
|
|
|
(1,347
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(16,872
|
)
|
|
|
677
|
|
|
|
(18,528
|
)
|
|
|
353
|
|
|
|
(34,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction with noncontrolling interests
|
|
|
12
|
|
|
|
(954
|
)
|
|
|
(4,244
|
)
|
|
|
0
|
|
|
|
(5,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income (loss) Attributable to the Noncontrolling Interest
|
|
|
(19
|
)
|
|
|
127
|
|
|
|
(3,224
|
)
|
|
|
53
|
|
|
|
(3,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
|
|
|
0
|
|
|
|
0
|
|
|
|
275
|
|
|
|
0
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
¥
|
30,344
|
|
|
¥
|
(24,288
|
)
|
|
¥
|
(44,589
|
)
|
|
¥
|
(4,457
|
)
|
|
¥
|
(42,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 85 –
Changes in each component of accumulated other comprehensive income (loss)
for the three months ended December 31, 2015 and 2016, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2015
|
|
|
|
|
Millions of yen
|
|
|
|
|
Net unrealized gains
(losses) on investment
in securities
|
|
|
Defined benefit
pension
plans
|
|
|
Foreign
currency
translation
adjustments
|
|
|
Net unrealized
gains
(losses) on
derivative
instruments
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
|
Balance at September 30, 2015
|
|
¥
|
36,530
|
|
|
¥
|
(19,904
|
)
|
|
¥
|
(4,924
|
)
|
|
¥
|
(930
|
)
|
|
¥
|
10,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on investment in securities, net of tax of ¥(501) million
|
|
|
1,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,458
|
|
|
Reclassification adjustment included in net income, net of tax of ¥1,232 million
|
|
|
(1,859
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,859
|
)
|
|
Defined benefit pension plans, net of tax of ¥(113) million
|
|
|
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
270
|
|
|
Reclassification adjustment included in net income, net of tax of ¥(4) million
|
|
|
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
|
Foreign currency translation adjustments, net of tax of ¥1,171 million
|
|
|
|
|
|
|
|
|
|
|
(1,794
|
)
|
|
|
|
|
|
|
(1,794
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥0 million
|
|
|
|
|
|
|
|
|
|
|
226
|
|
|
|
|
|
|
|
226
|
|
|
Net unrealized losses on derivative instruments, net of tax of ¥235 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(588
|
)
|
|
|
(588
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥38 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(401
|
)
|
|
|
348
|
|
|
|
(1,568
|
)
|
|
|
(635
|
)
|
|
|
(2,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income (loss) Attributable to the Noncontrolling Interest
|
|
|
42
|
|
|
|
50
|
|
|
|
(1,225
|
)
|
|
|
(34
|
)
|
|
|
(1,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
|
|
|
0
|
|
|
|
0
|
|
|
|
106
|
|
|
|
0
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
¥
|
36,087
|
|
|
¥
|
(19,606
|
)
|
|
¥
|
(5,373
|
)
|
|
¥
|
(1,531
|
)
|
|
¥
|
9,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 86 –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2016
|
|
|
|
|
Millions of yen
|
|
|
|
|
Net unrealized gains
(losses) on investment
in securities
|
|
|
Defined benefit
pension plans
|
|
|
Foreign
currency
translation
adjustments
|
|
|
Net unrealized
gains (losses) on
derivative
instruments
|
|
|
Accumulated
other
comprehensive
income (loss)
|
|
|
Balance at September 30, 2016
|
|
¥
|
44,387
|
|
|
¥
|
(22,523
|
)
|
|
¥
|
(77,080
|
)
|
|
¥
|
(6,470
|
)
|
|
¥
|
(61,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gains on investment in securities, net of tax of ¥2,663 million
|
|
|
(8,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,676
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥4,256 million
|
|
|
(5,343
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,343
|
)
|
|
Defined benefit pension plans, net of tax of ¥336 million
|
|
|
|
|
|
|
(931
|
)
|
|
|
|
|
|
|
|
|
|
|
(931
|
)
|
|
Reclassification adjustment included in net income, net of tax of ¥(41) million
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
109
|
|
|
Foreign currency translation adjustments, net of tax of ¥(4,364) million
|
|
|
|
|
|
|
|
|
|
|
41,351
|
|
|
|
|
|
|
|
41,351
|
|
|
Reclassification adjustment included in net income, net of tax of ¥0 million
|
|
|
|
|
|
|
|
|
|
|
(367
|
)
|
|
|
|
|
|
|
(367
|
)
|
|
Net unrealized losses on derivative instruments, net of tax of ¥(1,261) million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,136
|
|
|
|
3,136
|
|
|
Reclassification adjustment included in net income, net of tax of ¥335 million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(983
|
)
|
|
|
(983
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(14,019
|
)
|
|
|
(822
|
)
|
|
|
40,984
|
|
|
|
2,153
|
|
|
|
28,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction with noncontrolling interests
|
|
|
12
|
|
|
|
(954
|
)
|
|
|
(4,244
|
)
|
|
|
0
|
|
|
|
(5,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income (loss) Attributable to the Noncontrolling Interest
|
|
|
36
|
|
|
|
(11
|
)
|
|
|
3,202
|
|
|
|
140
|
|
|
|
3,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Other Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
|
|
|
0
|
|
|
|
0
|
|
|
|
1,047
|
|
|
|
0
|
|
|
|
1,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
¥
|
30,344
|
|
|
¥
|
(24,288
|
)
|
|
¥
|
(44,589
|
)
|
|
¥
|
(4,457
|
)
|
|
¥
|
(42,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 87 –
Amounts reclassified to net income from accumulated other comprehensive
income (loss) in the nine months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2015
|
|
Details about accumulated
other
comprehensive income components
|
|
Reclassification
adjustment
included in
net income
|
|
|
Consolidated statements of income
caption
|
|
|
Millions of yen
|
|
|
|
Net unrealized gains (losses) on investment in securities
|
|
|
|
|
|
|
|
Sales of investment securities
|
|
¥
|
25,010
|
|
|
Gains on investment securities and dividends
|
|
Sales of investment securities
|
|
|
6,515
|
|
|
Life insurance premiums and related investment income
|
|
Amortization of investment securities
|
|
|
(158
|
)
|
|
Finance revenues
|
|
Amortization of investment securities
|
|
|
(1,165
|
)
|
|
Life insurance premiums and related investment income
|
|
Others
|
|
|
(2,653
|
)
|
|
Write-downs of securities and other
|
|
|
|
|
|
|
|
|
|
|
|
|
27,549
|
|
|
Total before tax
|
|
|
|
|
(10,069
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
17,480
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
¥
|
776
|
|
|
See Note 14 “Pension Plans”
|
|
Amortization of net actuarial loss
|
|
|
(997
|
)
|
|
See Note 14 “Pension Plans”
|
|
Amortization of transition obligation
|
|
|
(39
|
)
|
|
See Note 14 “Pension Plans”
|
|
|
|
|
|
|
|
|
|
|
|
|
(260
|
)
|
|
Total before tax
|
|
|
|
|
15
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(245
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
Sales or liquidation
|
|
¥
|
(975
|
)
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
(975
|
)
|
|
Total before tax
|
|
|
|
|
0
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(975
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
7
|
|
|
Finance revenues/Interest expense
|
|
Foreign exchange contracts
|
|
|
2,618
|
|
|
Other (income) and expense, net
|
|
Foreign currency swap agreements
|
|
|
(4,472
|
)
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,847
|
)
|
|
Total before tax
|
|
|
|
|
527
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(1,320
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
– 88 –
|
|
|
|
|
|
|
|
|
|
|
Nine months ended December 31, 2016
|
|
Details about accumulated
other
comprehensive income components
|
|
Reclassification
adjustment included in
net income
|
|
|
Consolidated statements of income
caption
|
|
|
Millions of yen
|
|
|
|
Net unrealized gains (losses) on investment in securities
|
|
|
|
|
|
|
|
Sales of investment securities
|
|
¥
|
16,183
|
|
|
Gains on investment securities and dividends
|
|
Sales of investment securities
|
|
|
14,858
|
|
|
Life insurance premiums and related investment income
|
|
Amortization of investment securities
|
|
|
(415
|
)
|
|
Finance revenues
|
|
Amortization of investment securities
|
|
|
(967
|
)
|
|
Life insurance premiums and related investment income
|
|
Others
|
|
|
(6,203
|
)
|
|
Write-downs of securities and other
|
|
|
|
|
|
|
|
|
|
|
|
|
23,456
|
|
|
Total before tax
|
|
|
|
|
(8,324
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
15,132
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
¥
|
766
|
|
|
See Note 14 “Pension Plans”
|
|
Amortization of net actuarial loss
|
|
|
(1,174
|
)
|
|
See Note 14 “Pension Plans”
|
|
Amortization of transition obligation
|
|
|
(37
|
)
|
|
See Note 14 “Pension Plans”
|
|
|
|
|
|
|
|
|
|
|
|
|
(445
|
)
|
|
Total before tax
|
|
|
|
|
118
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(327
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
Sales or liquidation
|
|
¥
|
93
|
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
93
|
|
|
Total before tax
|
|
|
|
|
(13
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
80
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
6
|
|
|
Finance revenues/Interest expense
|
|
Foreign exchange contracts
|
|
|
(135
|
)
|
|
Other (income) and expense, net
|
|
Foreign currency swap agreements
|
|
|
1,933
|
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
1,804
|
|
|
Total before tax
|
|
|
|
|
(457
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
1,347
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
– 89 –
Amounts reclassified to net income from accumulated other comprehensive
income (loss) in the three months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2015
|
|
Details about accumulated
other
comprehensive income components
|
|
Reclassification
adjustment
included in
net income
|
|
|
Consolidated statements of income
caption
|
|
|
Millions of yen
|
|
|
|
Net unrealized gains (losses) on investment in securities
|
|
|
|
|
|
|
|
Sales of investment securities
|
|
¥
|
3,973
|
|
|
Gains on investment securities and dividends
|
|
Sales of investment securities
|
|
|
27
|
|
|
Life insurance premiums and related investment income
|
|
Amortization of investment securities
|
|
|
(56
|
)
|
|
Finance revenues
|
|
Amortization of investment securities
|
|
|
(430
|
)
|
|
Life insurance premiums and related investment income
|
|
Others
|
|
|
(423
|
)
|
|
Write-downs of securities and other
|
|
|
|
|
|
|
|
|
|
|
|
|
3,091
|
|
|
Total before tax
|
|
|
|
|
(1,232
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
1,859
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
¥
|
259
|
|
|
See Note 14 “Pension Plans”
|
|
Amortization of net actuarial loss
|
|
|
(328
|
)
|
|
See Note 14 “Pension Plans”
|
|
Amortization of transition obligation
|
|
|
(13
|
)
|
|
See Note 14 “Pension Plans”
|
|
|
|
|
|
|
|
|
|
|
|
|
(82
|
)
|
|
Total before tax
|
|
|
|
|
4
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(78
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
Sales or liquidation
|
|
¥
|
(226
|
)
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
(226
|
)
|
|
Total before tax
|
|
|
|
|
0
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(226
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
5
|
|
|
Finance revenues/Interest expense
|
|
Foreign exchange contracts
|
|
|
21
|
|
|
Other (income) and expense, net
|
|
Foreign currency swap agreements
|
|
|
59
|
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
Total before tax
|
|
|
|
|
(38
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
47
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
– 90 –
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2016
|
|
Details about accumulated
other
comprehensive income components
|
|
Reclassification
adjustment included in
net income
|
|
|
Consolidated statements of income
caption
|
|
|
Millions of yen
|
|
|
|
Net unrealized gains (losses) on investment in securities
|
|
|
|
|
|
|
|
Sales of investment securities
|
|
¥
|
4,587
|
|
|
Gains on investment securities and dividends
|
|
Sales of investment securities
|
|
|
5,532
|
|
|
Life insurance premiums and related investment income
|
|
Amortization of investment securities
|
|
|
(290
|
)
|
|
Finance revenues
|
|
Amortization of investment securities
|
|
|
(207
|
)
|
|
Life insurance premiums and related investment income
|
|
Others
|
|
|
(23
|
)
|
|
Write-downs of securities and other
|
|
|
|
|
|
|
|
|
|
|
|
|
9,599
|
|
|
Total before tax
|
|
|
|
|
(4,256
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
5,343
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
¥
|
255
|
|
|
See Note 14 “Pension Plans”
|
|
Amortization of net actuarial loss
|
|
|
(392
|
)
|
|
See Note 14 “Pension Plans”
|
|
Amortization of transition obligation
|
|
|
(13
|
)
|
|
See Note 14 “Pension Plans”
|
|
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
|
Total before tax
|
|
|
|
|
41
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
(109
|
)
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
Sales or liquidation
|
|
¥
|
367
|
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
|
|
|
|
|
|
|
|
|
|
|
367
|
|
|
Total before tax
|
|
|
|
|
0
|
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
367
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
Net unrealized gains (losses) on derivative instruments
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
5
|
|
|
Finance revenues/Interest expense
|
|
Foreign exchange contracts
|
|
¥
|
(103
|
)
|
|
Other (income) and expense, net
|
|
Foreign currency swap agreements
|
|
|
1,416
|
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
|
|
|
|
|
|
|
|
|
|
1,318
|
|
|
Total before tax
|
|
|
|
|
(335
|
)
|
|
Tax expenses or benefits
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
983
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
– 91 –
|
12.
|
ORIX Corporation Shareholders’ Equity
|
Information about ORIX Corporation Shareholders’ Equity for the nine months ended December 31, 2015 and 2016 are
as follows:
|
|
|
|
|
|
|
|
|
Nine months ended December 31,
2015
|
|
Nine months ended December 31,
2016
|
|
Resolution
|
|
The board of directors on May 20, 2015
|
|
The board of directors on May 23, 2016
|
|
Type of shares
|
|
Common stock
|
|
Common stock
|
|
Total dividends paid
|
|
¥47,188 million
|
|
¥31,141 million
|
|
Dividend per share
|
|
¥36.00
|
|
¥23.75
|
|
Date of record for dividend
|
|
March 31, 2015
|
|
March 31, 2016
|
|
Effective date for dividend
|
|
June 3, 2015
|
|
June 1, 2016
|
|
Dividend resource
|
|
Retained earnings
|
|
Retained earnings
|
|
|
|
|
|
|
|
Resolution
|
|
The board of directors on October 29, 2015
|
|
The board of directors on October 26, 2016
|
|
Type of shares
|
|
Common stock
|
|
Common stock
|
|
Total dividends paid
|
|
¥28,846 million
|
|
¥30,157 million
|
|
Dividend per share
|
|
¥22.00
|
|
¥23.00
|
|
Date of record for dividend
|
|
September 30, 2015
|
|
September 30, 2016
|
|
Effective date for dividend
|
|
December 2, 2015
|
|
December 2, 2016
|
|
Dividend resource
|
|
Retained earnings
|
|
Retained earnings
|
Total dividends paid by resolution of the board of directors on May 20, 2015 include
¥77 million of dividends paid to the Board Incentive Plan Trust. Total dividends paid by resolution of the board of directors on May 23, 2016 include ¥40 million of dividends paid to the Board Incentive Plan Trust.
Total dividends to be paid by resolution of the board of directors on October 29, 2015 include ¥42 million
of dividends to be paid to the Board Incentive Plan Trust. Total dividends to be paid by resolution of the board of directors on October 26, 2016 include ¥57 million of dividends to be paid to the Board Incentive Plan Trust.
|
(2)
|
There were no applicable dividends for which the date of record was in the nine months ended December 31, 2015 and 2016, and for which the
effective date was after December 31, 2015 and 2016.
|
– 92 –
|
13.
|
Selling, General and Administrative Expenses
|
Selling, general and administrative expenses for the nine months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Nine months ended
December 31, 2015
|
|
|
Nine months ended
December 31, 2016
|
|
|
Personnel expenses
|
|
¥
|
189,281
|
|
|
¥
|
176,933
|
|
|
Selling expenses
|
|
|
49,391
|
|
|
|
54,145
|
|
|
Administrative expenses
|
|
|
74,559
|
|
|
|
72,323
|
|
|
Depreciation of office facilities
|
|
|
3,722
|
|
|
|
3,879
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
316,953
|
|
|
¥
|
307,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses for the three months ended December 31, 2015 and 2016 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Personnel expenses
|
|
¥
|
57,608
|
|
|
¥
|
58,965
|
|
|
Selling expenses
|
|
|
16,796
|
|
|
|
19,041
|
|
|
Administrative expenses
|
|
|
24,965
|
|
|
|
24,230
|
|
|
Depreciation of office facilities
|
|
|
1,240
|
|
|
|
1,345
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
100,609
|
|
|
¥
|
103,581
|
|
|
|
|
|
|
|
|
|
|
|
– 93 –
The Company and certain subsidiaries have contributory and
non-contributory
pension plans covering substantially all of their employees. Those contributory funded
pension plans include defined benefit pension plans and defined contribution pension plans. Under the plans, employees are entitled to
lump-sum
payments at the time of termination of their employment or
pension payments. Defined benefit pension plans consist of a plan of which the amounts of such payments are determined on the basis of length of service and remuneration at the time of termination and a cash balance plan.
The Company and its subsidiaries’ funding policy is to contribute annually the amounts actuarially determined.
Assets of the plans are invested primarily in interest-bearing securities and marketable equity securities.
Net pension cost of the plans for the nine months ended December 31, 2015 and 2016 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Nine months ended
December 31, 2015
|
|
|
Nine months ended
December 31, 2016
|
|
|
Japanese plans:
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
¥
|
3,288
|
|
|
¥
|
3,856
|
|
|
Interest cost
|
|
|
739
|
|
|
|
508
|
|
|
Expected return on plan assets
|
|
|
(1,933
|
)
|
|
|
(1,904
|
)
|
|
Amortization of prior service credit
|
|
|
(696
|
)
|
|
|
(694
|
)
|
|
Amortization of net actuarial loss (gain)
|
|
|
(13
|
)
|
|
|
709
|
|
|
Amortization of transition obligation
|
|
|
37
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
¥
|
1,422
|
|
|
¥
|
2,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Nine months ended
December 31, 2015
|
|
|
Nine months ended
December 31, 2016
|
|
|
Overseas plans:
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
¥
|
2,820
|
|
|
¥
|
2,417
|
|
|
Interest cost
|
|
|
1,273
|
|
|
|
1,317
|
|
|
Expected return on plan assets
|
|
|
(3,429
|
)
|
|
|
(2,684
|
)
|
|
Amortization of prior service credit
|
|
|
(80
|
)
|
|
|
(72
|
)
|
|
Amortization of net actuarial loss
|
|
|
1,010
|
|
|
|
465
|
|
|
Amortization of transition obligation
|
|
|
2
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
¥
|
1,596
|
|
|
¥
|
1,446
|
|
|
|
|
|
|
|
|
|
|
|
– 94 –
Net pension cost of the plans for the three months ended December 31,
2015 and 2016 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Three months ended
December 31, 2015
|
|
|
Three months ended
December 31, 2016
|
|
|
Japanese plans:
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
¥
|
1,081
|
|
|
¥
|
1,300
|
|
|
Interest cost
|
|
|
256
|
|
|
|
170
|
|
|
Expected return on plan assets
|
|
|
(642
|
)
|
|
|
(635
|
)
|
|
Amortization of prior service credit
|
|
|
(232
|
)
|
|
|
(231
|
)
|
|
Amortization of net actuarial loss (gain)
|
|
|
(4
|
)
|
|
|
236
|
|
|
Amortization of transition obligation
|
|
|
13
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
¥
|
472
|
|
|
¥
|
852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
Three months ended
December 31, 2015
|
|
|
Three months ended
December 31, 2016
|
|
|
Overseas plans:
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
¥
|
873
|
|
|
¥
|
790
|
|
|
Interest cost
|
|
|
390
|
|
|
|
437
|
|
|
Expected return on plan assets
|
|
|
(1,102
|
)
|
|
|
(896
|
)
|
|
Amortization of prior service credit
|
|
|
(27
|
)
|
|
|
(24
|
)
|
|
Amortization of net actuarial loss
|
|
|
332
|
|
|
|
156
|
|
|
Amortization of transition obligation
|
|
|
0
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
¥
|
466
|
|
|
¥
|
464
|
|
|
|
|
|
|
|
|
|
|
|
– 95 –
|
15.
|
Life Insurance Operations
|
Life insurance premiums and related investment income for the nine and three months ended December 31, 2015 and 2016 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Life insurance premiums
|
|
¥
|
152,326
|
|
|
¥
|
176,302
|
|
|
Life insurance related investment income
|
|
|
8,409
|
|
|
|
45,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
160,735
|
|
|
¥
|
221,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months ended
December 31, 2015
|
|
|
Three months ended
December 31, 2016
|
|
|
Life insurance premiums
|
|
¥
|
51,480
|
|
|
¥
|
61,552
|
|
|
Life insurance related investment income
|
|
|
38,763
|
|
|
|
44,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
¥
|
90,243
|
|
|
¥
|
105,662
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance premiums include reinsurance benefits, net of reinsurance premiums. For
the nine and three months ended December 31, 2015 and 2016, reinsurance benefits and reinsurance premiums included in life insurance premiums are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Reinsurance benefits
|
|
¥
|
1,302
|
|
|
¥
|
2,476
|
|
|
Reinsurance premiums
|
|
|
(8,839
|
)
|
|
|
(7,441
|
)
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months ended
December 31, 2015
|
|
|
Three months ended
December 31, 2016
|
|
|
Reinsurance benefits
|
|
¥
|
511
|
|
|
¥
|
979
|
|
|
Reinsurance premiums
|
|
|
(2,798
|
)
|
|
|
(2,343
|
)
|
The benefits and expenses of life insurance operations included in life insurance costs
in the consolidated statements of income are recognized so as to associate with earned premiums over the life of contracts. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs (principally commissions and certain other expenses relating to policy issuance and underwriting). Amortization charged to income for the nine months ended December 31, 2015 and 2016 amounted to
¥9,153 million and ¥10,234 million, respectively. Also, amortization charged to income for the three months ended December 31, 2015 and 2016 amounted to ¥3,067 million and ¥3,581 million, respectively.
Life insurance premiums and related investment income include net realized and unrealized gains or losses
from investment assets under management on behalf of variable annuity and variable life policyholders and, net gains or losses from derivative contracts, which consist of gains or losses from futures, foreign exchange contracts and options held,
entered to economically hedge a portion of the minimum guarantee risk relating to variable annuity and variable life insurance contracts. In addition, life insurance costs include the net amount of the changes in fair value of the variable annuity
and variable life insurance contracts elected for the fair value option and insurance costs recognized for insurance and annuity payouts as a result of insured events. Certain subsidiaries have elected the fair value option for certain reinsurance
contracts to partially offset the changes in fair value recognized in earnings of the policy liabilities and policy account balances attributable to the changes in the minimum guarantee risks of the variable annuity and variable life insurance
contracts, and the changes in the fair value of the reinsurance contracts were recorded in life insurance costs.
– 96 –
The above mentioned major gains or losses relating to variable annuity and
variable life insurance contracts for the nine and three months ended December 31, 2015 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months ended
December 31, 2015
|
|
|
Nine months ended
December 31, 2016
|
|
|
Life insurance premiums and related investment income :
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains or losses from investment assets
|
|
¥
|
558
|
|
|
¥
|
33,210
|
|
|
Net gains or losses from derivative contracts :
|
|
|
(2,575
|
)
|
|
|
(9,669
|
)
|
|
Futures
|
|
|
(1,604
|
)
|
|
|
(8,401
|
)
|
|
Foreign exchange contracts
|
|
|
(194
|
)
|
|
|
(180
|
)
|
|
Options held
|
|
|
(777
|
)
|
|
|
(1,088
|
)
|
|
|
|
|
|
Life insurance costs :
|
|
|
|
|
|
|
|
|
|
Changes in the fair value of the policy liabilities and policy account balances
|
|
¥
|
(386,851
|
)
|
|
¥
|
(119,063
|
)
|
|
Insurance costs recognized for insurance and annuity payouts as a result of insured events
|
|
|
366,198
|
|
|
|
120,742
|
|
|
Changes in the fair value of the reinsurance contracts
|
|
|
3,704
|
|
|
|
11,699
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months ended
December 31,
2016
|
|
|
Life insurance premiums and related investment income :
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gains or losses from investment assets
|
|
¥
|
40,253
|
|
|
¥
|
45,834
|
|
|
Net gains or losses from derivative contracts :
|
|
|
(4,381
|
)
|
|
|
(9,925
|
)
|
|
Futures
|
|
|
(3,525
|
)
|
|
|
(6,284
|
)
|
|
Foreign exchange contracts
|
|
|
31
|
|
|
|
(2,082
|
)
|
|
Options held
|
|
|
(887
|
)
|
|
|
(1,559
|
)
|
|
|
|
|
|
Life insurance costs :
|
|
|
|
|
|
|
|
|
|
Changes in the fair value of the policy liabilities and policy account balances
|
|
¥
|
(67,277
|
)
|
|
¥
|
(39,496
|
)
|
|
Insurance costs recognized for insurance and annuity payouts as a result of insured events
|
|
|
86,206
|
|
|
|
57,720
|
|
|
Changes in the fair value of the reinsurance contracts
|
|
|
10,491
|
|
|
|
11,398
|
|
– 97 –
|
16.
|
Write-Downs of Long-Lived Assets
|
The Company and its subsidiaries perform tests for recoverability on long-lived assets classified as held and used for which events or changes in circumstances indicated that the assets might be impaired.
The Company and its subsidiaries consider an asset’s carrying amount as not recoverable when such carrying amount exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. The net
carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount.
As of
March 31, 2016 and December 31, 2016, the long-lived assets classified as held for sale in the accompanying consolidated balance sheets are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
As of March 31, 2016
|
|
|
As of December 31, 2016
|
|
|
Investment in operating leases
|
|
¥
|
70,300
|
|
|
¥
|
56,756
|
|
|
Property under facility operations
|
|
|
2,811
|
|
|
|
0
|
|
|
Other assets
|
|
|
9,959
|
|
|
|
0
|
|
The long-lived assets classified as held for sale as of March 31, 2016 are included
in Real Estate segment, Investment and Operation segment and Overseas Business segment. The long-lived assets classified as held for sale as of December 31, 2016 are included in Real Estate segment, Investment and Operation segment and Overseas
Business segment.
The Company and its subsidiaries determine the fair value using appraisals prepared by
independent third party appraisers or our own staff of qualified appraisers, based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated
to be generated from operation of the existing assets or completion of development projects, as appropriate.
For the nine months ended December 31, 2015 and 2016, the Company and its subsidiaries recognized impairment losses
for the difference between carrying amounts and fair values in the amount of ¥4,547 million and ¥4,802 million, respectively, which are reflected as write-downs of long-lived assets. Breakdowns of these amounts are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
December 31,
2015
|
|
|
Nine months ended
December 31,
2016
|
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Write-downs of the assets held for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings
|
|
¥
|
597
|
|
|
|
3
|
|
|
¥
|
0
|
|
|
|
0
|
|
|
Commercial facilities other than office buildings
|
|
|
59
|
|
|
|
1
|
|
|
|
236
|
|
|
|
1
|
|
|
Condominiums
|
|
|
0
|
|
|
|
0
|
|
|
|
317
|
|
|
|
1
|
|
|
Land undeveloped or under construction
|
|
|
22
|
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
Others *
|
|
|
0
|
|
|
|
—
|
|
|
|
1,678
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
678
|
|
|
|
—
|
|
|
¥
|
2,231
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
For the “Others”, the number of properties are omitted. Write-downs of long-lived assets for the nine months ended December 31, 2016
include write-downs of ¥1,156 million of aircraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
December 31,
2015
|
|
|
Nine months ended
December 31,
2016
|
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Write-downs due to decline in estimated future cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings
|
|
¥
|
3,026
|
|
|
|
3
|
|
|
¥
|
1,161
|
|
|
|
5
|
|
|
Commercial facilities other than office buildings
|
|
|
741
|
|
|
|
2
|
|
|
|
544
|
|
|
|
1
|
|
|
Condominiums
|
|
|
0
|
|
|
|
0
|
|
|
|
69
|
|
|
|
1
|
|
|
Land undeveloped or under construction
|
|
|
0
|
|
|
|
0
|
|
|
|
786
|
|
|
|
5
|
|
|
Others *
|
|
|
102
|
|
|
|
—
|
|
|
|
11
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
3,869
|
|
|
|
—
|
|
|
¥
|
2,571
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
For the “Others”, the number of properties are omitted.
|
– 98 –
Losses of ¥4,411 million in Real Estate segment,
¥124 million in Investment and Operation segment and ¥12 million in Overseas Business segment were recorded for the nine months ended December 31, 2015. Losses of ¥622 million in Real Estate segment and
¥11 million in Investment and Operation segment and ¥3,912 million in Overseas Business segment were mainly recorded for the nine months ended December 31, 2016.
For the three months ended December 31, 2015 and 2016, the Company and its subsidiaries recognized impairment losses
for the difference between carrying amounts and fair values in the amount of ¥3,601 million and ¥3,393 million, respectively, which are reflected as write-downs of long-lived assets. Breakdowns of these amounts are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
2015
|
|
|
Three months ended
December 31,
2016
|
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Write-downs of the assets held for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings
|
|
¥
|
550
|
|
|
|
2
|
|
|
¥
|
0
|
|
|
|
0
|
|
|
Commercial facilities other than office buildings
|
|
|
59
|
|
|
|
1
|
|
|
|
0
|
|
|
|
0
|
|
|
Condominiums
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Land undeveloped or under construction
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Others *
|
|
|
0
|
|
|
|
—
|
|
|
|
1,660
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
609
|
|
|
|
—
|
|
|
¥
|
1,660
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
For the “Others”, the number of properties are omitted. Write-downs of long-lived assets for the three months ended December 31, 2016
include write-downs of ¥1,156 million of aircraft.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
2015
|
|
|
Three months ended
December 31,
2016
|
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Amount
(Millions of
yen)
|
|
|
The number of
properties
|
|
|
Write-downs due to decline in estimated future cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office buildings
|
|
¥
|
2,890
|
|
|
|
1
|
|
|
¥
|
403
|
|
|
|
2
|
|
|
Commercial facilities other than office buildings
|
|
|
0
|
|
|
|
0
|
|
|
|
544
|
|
|
|
1
|
|
|
Condominiums
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Land undeveloped or under construction
|
|
|
0
|
|
|
|
0
|
|
|
|
786
|
|
|
|
5
|
|
|
Others *
|
|
|
102
|
|
|
|
—
|
|
|
|
0
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
2,992
|
|
|
|
—
|
|
|
¥
|
1,733
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
For the “Others”, the number of properties are omitted.
|
Losses of ¥3,499 million in Real Estate segment and ¥102 Investment and Operation segment were recorded for
the three months ended December 31, 2015. Losses of ¥3,393 million in Overseas Business segment was recorded for the three months ended December 31, 2016.
– 99 –
Reconciliation of the differences between basic and diluted earnings per share (EPS) in the nine and three months ended December 31, 2015 and 2016 is as follows:
During the nine months ended December 31, 2015, the diluted EPS calculation excludes stock option for
4,403 thousand shares, as they were antidilutive. During the nine months ended December 31, 2016, the diluted EPS calculation excludes stock options for 2,720 thousand shares, as they were antidilutive.
During the three months ended December 31, 2015, the diluted EPS calculation excludes stock options for
2,249 thousand shares, as they were antidilutive. During the three months ended December 31, 2016, the diluted EPS calculation excludes stock options for 1,765 thousand shares, as they were antidilutive.
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Net Income attributable to ORIX Corporation Shareholders
|
|
¥
|
215,364
|
|
|
¥
|
217,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Net Income attributable to ORIX Corporation Shareholders
|
|
¥
|
54,066
|
|
|
¥
|
74,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Shares
|
|
|
|
|
Nine months ended
December 31,
2015
|
|
|
Nine months ended
December 31,
2016
|
|
|
Weighted-average shares
|
|
|
1,309,022
|
|
|
|
1,308,792
|
|
|
Effect of dilutive securities—
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
1,363
|
|
|
|
1,236
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares for diluted EPS computation
|
|
|
1,310,385
|
|
|
|
1,310,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thousands of Shares
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Weighted-average shares
|
|
|
1,309,259
|
|
|
|
1,307,882
|
|
|
Effect of dilutive securities—
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
1,338
|
|
|
|
1,288
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares for diluted EPS computation
|
|
|
1,310,597
|
|
|
|
1,309,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yen
|
|
|
|
|
Nine months ended
December 31,
2015
|
|
|
Nine months ended
December 31,
2016
|
|
|
Earnings per share for net income attributable to ORIX Corporation shareholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
¥
|
164.52
|
|
|
¥
|
165.89
|
|
|
Diluted
|
|
¥
|
164.35
|
|
|
¥
|
165.74
|
|
|
|
|
|
|
|
Yen
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Earnings per share for net income attributable to ORIX Corporation shareholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
¥
|
41.30
|
|
|
¥
|
57.32
|
|
|
Diluted
|
|
¥
|
41.25
|
|
|
¥
|
57.26
|
|
|
|
|
|
|
Note:
|
|
The Company’s shares held through the Board Incentive Plan Trust are included in the number of treasury stock shares to be deducted in calculation of the
weighted-average shares for EPS computation. (2,071,000 and 2,082,551 shares for the nine months ended December 31, 2015 and 2016, 1,946,800 and 2,489,951 shares for the three months ended December 31, 2015 and 2016)
|
– 100 –
|
18.
|
Derivative Financial Instruments and Hedging
|
Risk management policy
The Company and its subsidiaries
manage interest rate risk through asset and liability management systems. The Company and its subsidiaries use derivative financial instruments to hedge interest rate risk and avoid changes in interest rates that could have a significant adverse
effect on the Company’s results of operations. As a result of interest rate changes, the fair value and/or cash flow of interest sensitive assets and liabilities will fluctuate. However, such fluctuation will generally be offset by using
derivative financial instruments as hedging instruments. Derivative financial instruments that the Company and its subsidiaries use as part of the interest risk management include interest rate swaps.
The Company and its subsidiaries utilize foreign currency borrowings, foreign exchange contracts and foreign currency
swap agreements to hedge exchange rate risk that are associated with certain transactions and investments denominated in foreign currencies. Similarly, overseas subsidiaries generally structure their liabilities to match the currency-denomination of
assets in each region. A certain subsidiary holds option agreements, futures and foreign exchange contracts for the purpose of economic hedges against minimum guarantee risk of variable annuity and variable life insurance contracts.
By using derivative instruments, the Company and its subsidiaries are exposed to credit risk in the event of
nonperformance by counterparties. The Company and its subsidiaries attempt to manage the credit risk by carefully evaluating the content of transactions and the quality of counterparties in advance and regularly monitoring the amount of notional
principal, fair value, type of transaction and other factors pertaining to each counterparty.
(a) Cash flow hedges
The Company and its subsidiaries designate interest rate swap agreements, foreign currency swap agreements
and foreign exchange contracts as cash flow hedges for variability of cash flows originating from floating rate borrowings and forecasted transactions and for exchange fluctuations.
(b) Fair value hedges
The Company and its subsidiaries use financial instruments designated as fair value hedges to hedge their exposure to interest rate risk and foreign currency exchange risk. The Company and its
subsidiaries designate foreign currency swap agreements and foreign exchange contracts to minimize foreign currency exposures on lease receivables, loan receivables and borrowings and others denominated in foreign currency. The Company and its
subsidiaries designate interest rate swap to hedge interest rate exposure of the fair values of loan receivables. The Company and certain overseas subsidiaries, which issued medium-term notes or bonds with fixed interest rates, use interest rate
swap agreements to hedge interest rate exposure of the fair values of these medium-term notes or bonds. In cases where the medium-term notes were denominated in other than the subsidiaries’ local currencies, foreign currency swap agreements are
used to hedge foreign exchange rate exposure. A certain overseas subsidiary uses foreign currency long-term-debt to hedge foreign exchange rate exposure from unrecognized firm commitment.
(c) Hedges of net investment in foreign operations
The Company uses foreign exchange contracts and borrowings and bonds denominated in the subsidiaries’ local
currencies to hedge the foreign currency exposure of the net investment in overseas subsidiaries.
(d) Derivatives not
designated as hedging instruments
The Company and the subsidiaries entered into interest rate swap
agreements, foreign currency swap agreements and foreign exchange contracts for risk management purposes which are not qualified for hedge accounting. A certain subsidiary holds option agreements, futures and foreign exchange contracts for the
purpose of economic hedges against minimum guarantee risk of variable annuity and variable life insurance contracts.
– 101 –
The effect of derivative instruments on the consolidated statement of
income,
pre-tax,
for the nine months ended December 31, 2015 is as follows.
(1) Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
(ineffective portion and amount
excluded from effectiveness testing)
|
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Interest rate swap agreements
|
|
¥
|
(1,467
|
)
|
|
Finance revenues/Interest expense
|
|
¥
|
7
|
|
|
—
|
|
¥
|
0
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
255
|
|
|
Other (income) and expense, net
|
|
|
2,618
|
|
|
—
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
(1,581
|
)
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
(4,472
|
)
|
|
Other (income) and expense, net
|
|
|
444
|
|
(2) Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative and
other
|
|
Gains (losses) recognized in income on hedged item
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Interest rate swap agreements
|
|
¥
|
(604
|
)
|
|
Finance revenues/Interest expense
|
|
¥
|
604
|
|
|
Finance revenues/Interest expense
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
3,139
|
|
|
Other (income) and expense, net
|
|
|
(3,139
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
2,227
|
|
|
Other (income) and expense, net
|
|
|
(2,226
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency long-term debt
|
|
|
(282
|
)
|
|
Other (income) and expense, net
|
|
|
282
|
|
|
Other (income) and expense, net
|
(3) Hedges of net investment in foreign operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
and others
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
and others (ineffective portion and
amount
excluded from effectiveness testing)
|
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Foreign exchange contracts
|
|
¥
|
(813
|
)
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
¥
|
(226
|
)
|
|
—
|
|
¥
|
0
|
|
|
Borrowings and bonds in local currency
|
|
|
166
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
(4) Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements of income location
|
|
Interest rate swap agreements
|
|
¥
|
(38
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
Futures
|
|
|
(1,615
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(231
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
|
|
|
|
|
|
Credit derivatives held
|
|
|
230
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
Options held/written and other
|
|
|
(949
|
)
|
|
Other (income) and expense, net
Life insurance premiums and related investment income *
|
|
*
|
Futures, foreign exchange contracts and options held/written and other in the above table include gains or losses arising from futures, foreign
exchange contracts and options held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the nine months ended December 31, 2015 (see Note 15 “Life Insurance Operations”).
|
– 102 –
The effect of derivative instruments on the consolidated statement of
income,
pre-tax,
for the nine months ended December 31, 2016 is as follows.
(1) Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
(ineffective portion and amount excluded
from
effectiveness testing)
|
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Interest rate swap agreements
|
|
¥
|
1,322
|
|
|
Finance revenues/Interest expense
|
|
¥
|
6
|
|
|
—
|
|
¥
|
0
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
144
|
|
|
Other (income) and expense, net
|
|
|
(135
|
)
|
|
—
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
826
|
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
1,933
|
|
|
Other (income) and expense, net
|
|
|
385
|
|
(2) Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative and
other
|
|
Gains (losses) recognized in income on hedged item
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Interest rate swap agreements
|
|
¥
|
(43
|
)
|
|
Finance revenues/Interest expense
|
|
¥
|
43
|
|
|
Finance revenues/Interest expense
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(9,787
|
)
|
|
Other (income) and expense, net
|
|
|
9,787
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
3,067
|
|
|
Other (income) and expense, net
|
|
|
(3,067
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency long-term debt
|
|
|
78
|
|
|
Other (income) and expense, net
|
|
|
(78
|
)
|
|
Other (income) and expense, net
|
(3) Hedges of net investment in foreign operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
and others
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
and others (ineffective portion and
amount
excluded from effectiveness testing)
|
|
|
|
|
Millions
of
yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Foreign exchange contracts
|
|
¥
|
(6,142
|
)
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
¥
|
624
|
|
|
—
|
|
¥
|
0
|
|
|
Borrowings and bonds in local currency
|
|
|
945
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
(4) Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements of income location
|
|
Interest rate swap agreements
|
|
¥
|
261
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
Futures
|
|
|
(8,201
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(6,802
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
Other (income) and
expense, net
|
|
|
|
|
|
Credit derivatives held
|
|
|
(60
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
Options held/written and other
|
|
|
(370
|
)
|
|
Other (income) and expense, net
Life insurance premiums and related investment income *
|
|
*
|
Futures, foreign exchange contracts and options held/written and other in the above table include gains or losses arising from futures, foreign
exchange contracts and options held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the nine months ended December 31, 2016 (see Note 15 “Life Insurance Operations”).
|
– 103 –
The effect of derivative instruments on the consolidated statement of
income,
pre-tax,
for the three months ended December 31, 2015 is as follows.
(1) Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on
derivative
(ineffective portion and amount excluded from
effectiveness testing)
|
|
|
|
|
Millions
of yen
|
|
|
Consolidated
statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Interest rate swap agreements
|
|
¥
|
831
|
|
|
Finance revenues/Interest expense
|
|
¥
|
5
|
|
|
—
|
|
¥
|
0
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
284
|
|
|
Other (income) and expense, net
|
|
|
21
|
|
|
—
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
(1,938
|
)
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
59
|
|
|
Other (income) and expense, net
|
|
|
(86
|
)
|
(2) Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative and
other
|
|
Gains (losses) recognized in income on hedged item
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Interest rate swap agreements
|
|
¥
|
(207
|
)
|
|
Finance revenues/Interest expense
|
|
¥
|
207
|
|
|
Finance revenues/Interest expense
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(527
|
)
|
|
Other (income) and expense, net
|
|
|
527
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
(523
|
)
|
|
Other (income) and expense, net
|
|
|
524
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency long-term debt
|
|
|
146
|
|
|
Other (income) and expense, net
|
|
|
(146
|
)
|
|
Other (income) and expense, net
|
(3) Hedges of net investment in foreign operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
and others
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
and others (ineffective portion and
amount
excluded from effectiveness testing)
|
|
|
|
|
Millions
of
yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Foreign exchange contracts
|
|
¥
|
1,913
|
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
¥
|
(226
|
)
|
|
—
|
|
¥
|
0
|
|
|
Borrowings and bonds in local currency
|
|
|
2,226
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
(4) Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements of income
location
|
|
Interest rate swap agreements
|
|
¥
|
(26
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
Futures
|
|
|
(3,751
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
367
|
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
|
|
|
|
|
|
Credit derivatives held
|
|
|
67
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
Options held/written and other
|
|
|
(1,411
|
)
|
|
Other (income) and expense, net
Life insurance premiums and related investment income *
|
|
*
|
Futures, foreign exchange contracts and options held/written and other in the above table include gains or losses arising from futures, foreign
exchange contracts and options held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended December 31, 2015 (see Note 15 “Life Insurance Operations”).
|
– 104 –
The effect of derivative instruments on the consolidated statement of
income,
pre-tax,
for the three months ended December 31, 2016 is as follows.
(1) Cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
(ineffective portion and
amount
excluded from effectiveness testing)
|
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Interest rate swap agreements
|
|
¥
|
2,216
|
|
|
Finance revenues/Interest expense
|
|
¥
|
5
|
|
|
—
|
|
¥
|
0
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(683
|
)
|
|
Other (income) and expense, net
|
|
|
(103
|
)
|
|
—
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
2,864
|
|
|
Finance revenues/Interest expense/
Other (income) and expense, net
|
|
|
1,416
|
|
|
Other (income) and expense, net
|
|
|
334
|
|
(2) Fair value hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative and
other
|
|
Gains (losses) recognized in income on hedged item
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Interest rate swap agreements
|
|
¥
|
(15
|
)
|
|
Finance revenues/Interest expense
|
|
¥
|
15
|
|
|
Finance revenues/Interest expense
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(28,714
|
)
|
|
Other (income) and expense, net
|
|
|
28,714
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
1,591
|
|
|
Other (income) and expense, net
|
|
|
(1,591
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
|
|
Foreign currency long-term debt
|
|
|
22
|
|
|
Other (income) and expense, net
|
|
|
(22
|
)
|
|
Other (income) and expense, net
|
(3) Hedges of net investment in foreign operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses)
recognized
in other
comprehensive
income on
derivative
and others
(effective
portion)
|
|
|
Gains (losses) reclassified from accumulated
other comprehensive income (loss) into
income
(effective portion)
|
|
|
Gains (losses) recognized in income on derivative
and others (ineffective portion
and amount
excluded from effectiveness testing)
|
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Consolidated statements
of income location
|
|
Millions
of yen
|
|
|
Foreign exchange contracts
|
|
¥
|
(52,557
|
)
|
|
Gains on sales of subsidiaries and affiliates and liquidation losses, net
|
|
¥
|
367
|
|
|
—
|
|
¥
|
0
|
|
|
Borrowings and bonds in local currency
|
|
|
(22,494
|
)
|
|
—
|
|
|
0
|
|
|
—
|
|
|
0
|
|
(4) Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) recognized in income on derivative
|
|
|
|
Millions
of yen
|
|
|
Consolidated statements of income location
|
|
Interest rate swap agreements
|
|
¥
|
346
|
|
|
Other (income) and expense, net
|
|
|
|
|
|
Futures
|
|
|
(6,119
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
(34,582
|
)
|
|
Gains on investment securities and dividends
Life insurance premiums and related investment income *
Other (income) and
expense, net
|
|
|
|
|
|
Credit derivatives held
|
|
|
(35
|
)
|
|
Other (income) and expense, net
|
|
|
|
|
|
Options held/written and other
|
|
|
(775
|
)
|
|
Other (income) and expense, net
Life insurance premiums and related investment income *
|
|
*
|
Futures, foreign exchange contracts and options held/written and other in the above table include gains or losses arising from futures, foreign
exchange contracts and options held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended December 31, 2016 (see Note 15 “Life Insurance Operations”).
|
– 105 –
Notional amounts of derivative instruments and other, fair values of
derivative instruments and other before offsetting at March 31, 2016 and December 31, 2016 are as follows.
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset derivatives
|
|
Liability derivatives
|
|
|
|
Notional
amount
|
|
|
Fair value
|
|
|
Consolidated balance sheets
location
|
|
Fair value
|
|
|
Consolidated balance sheets location
|
|
|
|
Millions
of yen
|
|
|
Millions
of yen
|
|
|
|
|
Millions
of yen
|
|
|
|
|
Derivatives designated as hedging instruments and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
257,700
|
|
|
¥
|
80
|
|
|
Other Assets
|
|
¥
|
5,686
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Futures, foreign exchange contracts
|
|
|
1,035,342
|
|
|
|
17,636
|
|
|
Other Assets
|
|
|
5,966
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
96,539
|
|
|
|
6,571
|
|
|
Other Assets
|
|
|
3,601
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Foreign currency long-term debt
|
|
|
225,711
|
|
|
|
0
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
4,856
|
|
|
¥
|
13
|
|
|
Other Assets
|
|
¥
|
235
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Options held/written and other *
|
|
|
246,068
|
|
|
|
8,789
|
|
|
Other Assets
|
|
|
3,637
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Futures, foreign exchange contracts *
|
|
|
1,047,878
|
|
|
|
658
|
|
|
Other Assets
|
|
|
689
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Credit derivatives held
|
|
|
3,380
|
|
|
|
0
|
|
|
—
|
|
|
56
|
|
|
Other Liabilities
|
|
* The notional amounts of options held/written and other and futures, foreign exchange contracts in the above table include options held of
¥46,926 million, futures contracts of ¥51,021 million and foreign exchange contracts of ¥20,884 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at
March 31, 2016, respectively. Asset derivatives in the above table includes fair value of the options held, futures and foreign exchange contracts before offsetting of ¥3,332 million, ¥25 million and ¥568 million and
liability derivatives includes fair value of the futures and foreign exchange contracts before offsetting of ¥417 million and ¥98 million at March 31, 2016, respectively.
December 31, 2016
|
|
|
|
|
|
|
Asset derivatives
|
|
Liability derivatives
|
|
|
|
Notional
amount
|
|
|
Fair value
|
|
|
Consolidated balance sheets
location
|
|
Fair value
|
|
|
Consolidated balance sheets location
|
|
|
|
Millions
of yen
|
|
|
Millions
of yen
|
|
|
|
|
Millions
of yen
|
|
|
|
|
Derivatives designated as hedging instruments and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
251,621
|
|
|
¥
|
84
|
|
|
Other Assets
|
|
¥
|
4,827
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Futures, foreign exchange contracts
|
|
|
810,189
|
|
|
|
983
|
|
|
Other Assets
|
|
|
49,790
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Foreign currency swap agreements
|
|
|
82,071
|
|
|
|
7,330
|
|
|
Other Assets
|
|
|
393
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Foreign currency long-term debt
|
|
|
210,024
|
|
|
|
0
|
|
|
—
|
|
|
0
|
|
|
—
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
¥
|
7,293
|
|
|
¥
|
203
|
|
|
Other Assets
|
|
¥
|
172
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Options held/written and other *
|
|
|
248,727
|
|
|
|
7,094
|
|
|
Other Assets
|
|
|
2,332
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Futures, foreign exchange contracts *
|
|
|
501,378
|
|
|
|
1,011
|
|
|
Other Assets
|
|
|
22,676
|
|
|
Other Liabilities
|
|
|
|
|
|
|
|
|
Credit derivatives held
|
|
|
4,310
|
|
|
|
0
|
|
|
—
|
|
|
116
|
|
|
Other Liabilities
|
|
*
|
The notional amounts of options held/written and other and futures, foreign exchange contracts in the above table include options held of
¥47,203 million, futures contracts of ¥53,680 million and foreign exchange contracts of ¥22,689 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at
December 31, 2016, respectively. Asset derivatives in the above table includes fair value of the options held, futures and foreign exchange contracts before offsetting of ¥2,280 million, ¥28 million and ¥176 million
and liability derivatives includes fair value of the futures and foreign exchange contracts before offsetting of ¥1,255 million and ¥1,516 million at December 31, 2016, respectively.
|
– 106 –
Certain of the Company’s derivative instruments contain provisions that
require the Company to maintain an investment grade credit rating from each of the major credit rating agencies. If the Company’s credit rating were to fall below investment grade, it would be in violation of these provisions, and the
counterparties to the derivative instruments could request immediate payment on derivative instruments that are in net liability positions. There are no derivative instruments with credit-risk-related contingent features that are in a liability
position on March 31, 2016 and December 31, 2016.
|
19.
|
Offsetting Assets and Liabilities
|
The gross amounts recognized, gross amounts offset, and net amounts presented in the consolidated balance sheets regarding to derivative assets and liabilities and other assets and liabilities as of
March 31, 2016 and December 31, 2016 are as follows.
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Gross
amounts
recognized
|
|
|
Gross
amounts
offset in
the
consolidated
balance sheets
|
|
|
Net
amounts
presented in
the
consolidated
balance sheets
|
|
|
Gross amounts not offset in the
consolidated balance sheets
*1
|
|
|
Net amount
|
|
|
|
|
|
|
|
Financial
instruments
|
|
|
Collateral
received/pledged
|
|
|
|
Derivative assets
|
|
¥
|
33,747
|
|
|
¥
|
(5,757
|
)
|
|
¥
|
27,990
|
|
|
¥
|
0
|
|
|
¥
|
(3,332
|
)
|
|
¥
|
24,658
|
|
|
Reverse repurchase, securities borrowing, and similar arrangements *2
|
|
|
5,186
|
|
|
|
(5,186
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
¥
|
38,933
|
|
|
¥
|
(10,943
|
)
|
|
¥
|
27,990
|
|
|
¥
|
0
|
|
|
¥
|
(3,332
|
)
|
|
¥
|
24,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
¥
|
19,870
|
|
|
¥
|
(5,757
|
)
|
|
¥
|
14,113
|
|
|
¥
|
0
|
|
|
¥
|
(225
|
)
|
|
¥
|
13,888
|
|
|
Repurchase, securities lending, and similar arrangements *2
|
|
|
5,203
|
|
|
|
(5,186
|
)
|
|
|
17
|
|
|
|
0
|
|
|
|
0
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
¥
|
25,073
|
|
|
¥
|
(10,943
|
)
|
|
¥
|
14,130
|
|
|
¥
|
0
|
|
|
¥
|
(225
|
)
|
|
¥
|
13,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Gross
amounts
recognized
|
|
|
Gross
amounts
offset in
the
consolidated
balance sheets
|
|
|
Net
amounts
presented in
the
consolidated
balance sheets
|
|
|
Gross amounts not offset in the
consolidated balance sheets
*1
|
|
|
Net amount
|
|
|
|
|
|
|
|
Financial
instruments
|
|
|
Collateral
received/pledged
|
|
|
|
Derivative assets
|
|
¥
|
16,705
|
|
|
¥
|
(1,306
|
)
|
|
¥
|
15,399
|
|
|
¥
|
0
|
|
|
¥
|
(2,226
|
)
|
|
¥
|
13,173
|
|
|
Reverse repurchase, securities borrowing, and similar arrangements *2
|
|
|
7,451
|
|
|
|
(7,372
|
)
|
|
|
79
|
|
|
|
0
|
|
|
|
0
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
¥
|
24,156
|
|
|
¥
|
(8,678
|
)
|
|
¥
|
15,478
|
|
|
¥
|
0
|
|
|
¥
|
(2,226
|
)
|
|
¥
|
13,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
¥
|
80,306
|
|
|
¥
|
(1,306
|
)
|
|
¥
|
79,000
|
|
|
¥
|
0
|
|
|
¥
|
(347
|
)
|
|
¥
|
78,653
|
|
|
Repurchase, securities lending, and similar arrangements *2
|
|
|
7,372
|
|
|
|
(7,372
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
¥
|
87,678
|
|
|
¥
|
(8,678
|
)
|
|
¥
|
79,000
|
|
|
¥
|
0
|
|
|
¥
|
(347
|
)
|
|
¥
|
78,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*1
|
The balances related to enforceable master netting agreements or similar agreements which were not offset in the consolidated balance sheets.
|
|
*2
|
Reverse repurchase agreements and securities borrowing, and similar transactions are reported within other assets in the consolidated balance
sheets. Repurchase agreements and securities lending, and similar transactions are reported within other liabilities in the consolidated balance sheets.
|
– 107 –
|
20.
|
Estimated Fair Value of Financial Instruments
|
The following information is provided to help readers gain an understanding of the relationship between carrying amount of
financial instruments reported in the Company’s consolidated balance sheets and the related market or fair value. For derivative financial instruments, see Note 3 “Fair Value Measurements.”
The disclosures do not include investment in direct financing leases, investment in affiliates, pension obligations and
insurance contracts and reinsurance contracts except for those classified as investment contracts.
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Carrying
amount
|
|
|
Estimated
fair
value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
¥
|
725,821
|
|
|
¥
|
725,821
|
|
|
¥
|
37,592
|
|
|
¥
|
688,229
|
|
|
¥
|
0
|
|
|
Cash and cash equivalents
|
|
|
730,420
|
|
|
|
730,420
|
|
|
|
730,420
|
|
|
|
0
|
|
|
|
0
|
|
|
Restricted cash
|
|
|
80,979
|
|
|
|
80,979
|
|
|
|
80,979
|
|
|
|
0
|
|
|
|
0
|
|
|
Installment loans (net of allowance for probable loan losses)
|
|
|
2,545,542
|
|
|
|
2,553,006
|
|
|
|
0
|
|
|
|
264,452
|
|
|
|
2,288,554
|
|
|
Investment in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
|
1,480,499
|
|
|
|
1,511,161
|
|
|
|
99,347
|
|
|
|
1,271,506
|
|
|
|
140,308
|
|
|
Not practicable to estimate fair value *1
|
|
|
138,472
|
|
|
|
138,472
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
9,843
|
|
|
|
9,843
|
|
|
|
0
|
|
|
|
9,843
|
|
|
|
0
|
|
|
Derivative assets *2
|
|
|
27,990
|
|
|
|
27,990
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Reinsurance recoverables (Investment contracts)
|
|
|
93,838
|
|
|
|
94,656
|
|
|
|
0
|
|
|
|
0
|
|
|
|
94,656
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
¥
|
349,624
|
|
|
¥
|
349,624
|
|
|
¥
|
0
|
|
|
¥
|
349,624
|
|
|
¥
|
0
|
|
|
Deposits
|
|
|
1,398,472
|
|
|
|
1,400,528
|
|
|
|
0
|
|
|
|
1,400,528
|
|
|
|
0
|
|
|
Policy liabilities and Policy account balances (Investment contracts)
|
|
|
306,058
|
|
|
|
308,064
|
|
|
|
0
|
|
|
|
0
|
|
|
|
308,064
|
|
|
Long-term debt *3
|
|
|
3,936,918
|
|
|
|
3,955,178
|
|
|
|
0
|
|
|
|
1,102,332
|
|
|
|
2,852,846
|
|
|
Other Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities *2
|
|
|
14,113
|
|
|
|
14,113
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
*1
|
The fair value of investment securities of ¥138,472 million was not estimated, as it was not practical.
|
|
*2
|
It represents the amount after offset under counterparty netting of derivative assets and liabilities. For the information of input level before
netting, see Note 3 “Fair Value Measurements.”
|
|
*3
|
Prior-year amounts have been adjusted for the retrospective application of Accounting Standards Update
2015-03
(“Simplifying the Presentation of Debt Issuance Costs”—ASC
835-30
(“Interest—Imputation of Interest”)) on April 1, 2016.
|
– 108 –
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Carrying
amount
|
|
|
Estimated
fair
value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities
|
|
¥
|
648,322
|
|
|
¥
|
648,322
|
|
|
¥
|
39,030
|
|
|
¥
|
606,134
|
|
|
¥
|
3,158
|
|
|
Cash and cash equivalents
|
|
|
941,326
|
|
|
|
941,326
|
|
|
|
941,326
|
|
|
|
0
|
|
|
|
0
|
|
|
Restricted cash
|
|
|
105,399
|
|
|
|
105,399
|
|
|
|
105,399
|
|
|
|
0
|
|
|
|
0
|
|
|
Installment loans (net of allowance for probable loan losses)
|
|
|
2,759,631
|
|
|
|
2,777,371
|
|
|
|
0
|
|
|
|
267,542
|
|
|
|
2,509,829
|
|
|
Investment in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Practicable to estimate fair value
|
|
|
1,306,332
|
|
|
|
1,333,511
|
|
|
|
78,172
|
|
|
|
1,106,475
|
|
|
|
148,864
|
|
|
Not practicable to estimate fair value *1
|
|
|
153,192
|
|
|
|
153,192
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Time deposits
|
|
|
4,180
|
|
|
|
4,180
|
|
|
|
0
|
|
|
|
4,180
|
|
|
|
0
|
|
|
Derivative assets *2
|
|
|
15,399
|
|
|
|
15,399
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Reinsurance recoverables (Investment contracts)
|
|
|
72,990
|
|
|
|
74,396
|
|
|
|
0
|
|
|
|
0
|
|
|
|
74,396
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
¥
|
296,289
|
|
|
¥
|
296,289
|
|
|
¥
|
0
|
|
|
¥
|
296,289
|
|
|
¥
|
0
|
|
|
Deposits
|
|
|
1,526,300
|
|
|
|
1,527,582
|
|
|
|
0
|
|
|
|
1,527,582
|
|
|
|
0
|
|
|
Policy liabilities and Policy account balances (Investment contracts)
|
|
|
284,390
|
|
|
|
285,453
|
|
|
|
0
|
|
|
|
0
|
|
|
|
285,453
|
|
|
Long-term debt
|
|
|
3,876,543
|
|
|
|
3,869,347
|
|
|
|
0
|
|
|
|
1,277,719
|
|
|
|
2,591,628
|
|
|
Other Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities *2
|
|
|
79,000
|
|
|
|
79,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
*1
|
The fair value of investment securities of ¥153,192 million was not estimated, as it was not practical.
|
|
*2
|
It represents the amount after offset under counterparty netting of derivative assets and liabilities. For the information of input level before
netting, see Note 3 “Fair Value Measurements.”
|
– 109 –
Input level of fair value measurement
If active market prices are available, fair value measurement is based on quoted active market prices and classified as
Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1 such as quoted market prices of similar assets and classified as Level 2. If
market prices are not available and there are no observable inputs, then fair value is estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes and classified as
Level 3, as the valuation models and broker quotes are based on inputs that are unobservable in the market.
Estimation of fair value
The following methods and significant assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate a value:
Cash and cash equivalents, restricted cash, time deposits and short-term debt—
The carrying amounts
recognized in the balance sheets were determined to be reasonable estimates of their fair values due to their short maturity.
Installment loans—
The carrying amounts of floating-rate installment loans with no significant changes in credit risk and which could be repriced within a short-term period were
determined to be reasonable estimates of their fair values. The carrying amounts of purchased loans were determined to be reasonable estimates of their fair values because the carrying amounts (net of allowance) are considered to properly reflect
the recoverability and value of these loans. For certain homogeneous categories of medium- and long-term fixed-rate loans, such as housing loans, the estimated fair values were calculated by discounting the future cash flows using the current
interest rates charged by the Company and its subsidiaries for new loans made to borrowers with similar credit ratings and remaining maturities. Concerning above, if available, estimated fair values were based on quoted market prices or quotations
provided by dealers.
Investment in securities—
For trading securities and
available-for-sale
securities other than specified bonds issued by SPEs and certain other mortgage-backed and asset-backed securities, the estimated fair values, which are
also the carrying amounts recorded in the balance sheets, were generally based on quoted market prices or quotations provided by dealers. As for the specified bonds issued by the SPEs and certain other mortgage-backed and asset-backed securities
included in
available-for-sale
securities, the Company and its subsidiaries estimated the fair value by using valuation models including discounted cash flow
methodologies and broker quotes (see Note 3 Fair Value Measurement). For
held-to-maturity
securities, the estimated fair values were mainly based on quoted market
prices. For certain investment funds included in other securities, the fair values were estimated based on net asset value per share or discounted cash flow methodologies. With regard to other securities other than the investment funds described
above, the Company and its subsidiaries have not estimated the fair value, as it is not practicable to do so. Those other securities mainly consist of
non-marketable
equity securities and preferred capital
shares. Because there were no quoted market prices for such other securities and each security has a different nature and characteristics, reasonable estimates of fair values could not be made without incurring excessive costs.
Deposits—
The carrying amounts of demand deposits recognized in the consolidated balance sheets were
determined to be reasonable estimates of their fair values. The estimated fair values of time deposits were calculated by discounting the future cash flows. The current interest rates offered for the deposits with similar terms and remaining average
maturities were used as the discount rates.
Long-term debt—
The carrying amounts of
long-term debt with floating rates which could be repriced within short-term periods were determined to be reasonable estimates of their fair values. For
medium-and
long-term fixed-rate debt, the estimated
fair values were calculated by discounting the future cash flows. The borrowing interest rates that were currently available to the Company and its subsidiaries offered by financial institutions for debt with similar terms and remaining average
maturities were used as the discount rates. Concerning above, if available, estimated fair values were based on quoted market prices or quotations provided by dealers.
Derivatives—
For exchange-traded derivatives, fair value is based on quoted market prices. Fair value
estimates for other derivatives generally reflect the estimated amounts that the Company and its subsidiaries would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses
of open contracts. In estimating the fair value of most of the Company’s and its subsidiaries’ derivatives, estimated future cash flows are discounted using the current interest rate.
Reinsurance recoverables and Policy liabilities and Policy account balances—
A certain subsidiary has
fixed annuity contracts, variable annuity and variable life insurance contracts, and reinsurance contracts which are classified as investment contracts because they do not expose the subsidiary to mortality or morbidity risks. In estimating the fair
value of those contracts, estimated future cash flows are discounted using the current interest rate.
– 110 –
|
21.
|
Commitments, Guarantees, and Contingent Liabilities
|
Commitments
—The Company and certain subsidiaries have commitments for the purchase of equipment to be
leased, having a cost of ¥1,033 million and ¥780 million as of March 31, 2016 and December 31, 2016, respectively.
The minimum future rentals on
non-cancelable
operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
Within one year
|
|
¥
|
7,959
|
|
|
¥
|
6,563
|
|
|
More than one year
|
|
|
59,282
|
|
|
|
56,768
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
67,241
|
|
|
¥
|
63,331
|
|
|
|
|
|
|
|
|
|
|
|
The Company and certain subsidiaries lease office space under operating lease agreements,
which are primarily cancelable, and made rental payments totaling ¥10,785 million and ¥10,297 million for the nine months ended December 31, 2015 and 2016, respectively, and ¥3,288 million and ¥3,517 million
for the three months ended December 31, 2015 and 2016, respectively.
Certain computer systems of the
Company and certain subsidiaries have been operated and maintained under
non-cancelable
contracts with third-party service providers. For such services, the Company and certain subsidiaries made payments
totaling ¥3,461 million and ¥3,433 million for the nine months ended December 31, 2015 and 2016, respectively, and ¥1,222 million and ¥1,215 million for the three months ended December 31, 2015 and 2016,
respectively. As of March 31, 2016 and December 31, 2016, the amounts due are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
Within one year
|
|
¥
|
3,385
|
|
|
¥
|
5,544
|
|
|
More than one year
|
|
|
7,289
|
|
|
|
8,374
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
10,674
|
|
|
¥
|
13,918
|
|
|
|
|
|
|
|
|
|
|
|
The Company and certain subsidiaries have commitments to fund estimated construction
costs to complete ongoing real estate development projects and other commitments, totaling ¥88,728 million and ¥82,366 million as of March 31, 2016 and December 31, 2016, respectively.
The Company and certain subsidiaries have agreements to commit to execute loans for customers, and to invest in funds, as
long as the agreed-upon terms are met. The total unused credit and capital amount available are ¥347,603 million and ¥340,510 million as of March 31, 2016 and December 31, 2016, respectively.
Guarantees
—At the inception of a guarantee, the Company and its subsidiaries recognize a liability in
the consolidated balance sheets at fair value for the guarantee within the scope of ASC460(“Guarantees”). The following table represents the summary of potential future payments, book value recorded as guarantee liabilities of the
guarantee contracts outstanding and maturity of the longest guarantee contracts as of March 31, 2016 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
|
|
Millions of yen
|
|
|
Fiscal year
|
|
|
Millions of yen
|
|
|
Fiscal year
|
|
|
Guarantees
|
|
Potential
future
payment
|
|
|
Book
value of
guarantee
liabilities
|
|
|
Maturity of
the
longest
contract
|
|
|
Potential
future
payment
|
|
|
Book
value of
guarantee
liabilities
|
|
|
Maturity of
the
longest
contract
|
|
|
Corporate loans
|
|
¥
|
396,340
|
|
|
¥
|
5,875
|
|
|
|
2023
|
|
|
¥
|
454,983
|
|
|
¥
|
6,755
|
|
|
|
2024
|
|
|
Transferred loans
|
|
|
174,322
|
|
|
|
1,587
|
|
|
|
2046
|
|
|
|
154,666
|
|
|
|
1,181
|
|
|
|
2047
|
|
|
Consumer loans
|
|
|
179,225
|
|
|
|
21,748
|
|
|
|
2018
|
|
|
|
229,981
|
|
|
|
29,057
|
|
|
|
2018
|
|
|
Housing loans
|
|
|
28,919
|
|
|
|
5,853
|
|
|
|
2051
|
|
|
|
24,185
|
|
|
|
5,488
|
|
|
|
2048
|
|
|
Other
|
|
|
482
|
|
|
|
179
|
|
|
|
2024
|
|
|
|
1,213
|
|
|
|
104
|
|
|
|
2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
779,288
|
|
|
¥
|
35,242
|
|
|
|
—
|
|
|
¥
|
865,028
|
|
|
¥
|
42,585
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
– 111 –
Guarantee of corporate loans:
The Company and certain
subsidiaries mainly guarantee corporate loans issued by financial institutions for customers. The Company and the subsidiaries are obliged to pay the outstanding loans when the guaranteed customers fail to pay principal and/or interest in accordance
with the contract terms. In some cases, the corporate loans are secured by the guaranteed customers’ assets. Once the Company and the subsidiaries assume the guaranteed customers’ obligation, the Company and the subsidiaries obtain a right
to claim the collateral assets. In other cases, certain contracts that guarantee corporate loans issued by financial institutions for customers include contracts that the amounts of performance guarantee are limited to a certain range of guarantee
commissions. As of March 31, 2016 and December 31, 2016, total notional amount of the loans subject to such guarantees are ¥1,278,000 million and ¥1,304,000 million, respectively, and book value of guarantee liabilities
are ¥1,080 million and ¥1,565 million, respectively. The potential future payment amounts for these guarantees are limited to a certain range of the guarantee commissions, which are less than the total notional amounts of the loans
subject to these guarantees. The potential future payment amounts for the contract period are calculated from the guarantee limit which is arranged by financial institutions in advance as to contracts that the amounts of performance guarantee are
unlimited to a certain range of guarantee commissions. For this reason, the potential future payment amounts for these guarantees include the amount of the guarantee which may occur in the future, which is larger than the balance of guarantee
executed as of the end of fiscal year or the end of interim period. The executed guarantee balance includes defrayment by financial institutions which we bear temporarily at the time of execution, and credit risk for financial institutions until
liquidation of this guarantee. Our substantial amounts of performance guarantee except credit risk for financial institutions are limited to our defrayment which is arranged by financial institutions in advance.
Payment or performance risk of the guarantees is considered based on the historical experience of credit events.
There were no significant changes in the payment or performance risk of the guarantees for the nine months
ended December 31, 2016.
Guarantee of transferred loans:
A subsidiary in the United States
is authorized to underwrite, originate, fund, and service multi-family and seniors housing loans without prior approval from Fannie Mae under Fannie Mae’s Delegated Underwriting and Servicing program. As part of this program, Fannie Mae
provides a commitment to purchase the loans.
In return for the delegated authority, the subsidiary guarantees
the performance of certain housing loans transferred to Fannie Mae and has the payment or performance risk of the guarantees to absorb some of the losses when losses arise from the transferred loans.
There were no significant changes in the payment or performance risk of these guarantees for the nine months ended
December 31, 2016.
Guarantee of consumer loans:
A certain subsidiary guarantees consumer
loans, typically card loans, issued by Japanese financial institutions. The subsidiary is obliged to pay the outstanding obligations when these loans become delinquent generally a month or more.
Payment or performance risk of the guarantees is considered based on the historical experience of credit events.
There were no significant changes in the payment or performance risk of the guarantees for the nine months
ended December 31, 2016.
Guarantee of housing loans:
The Company and certain subsidiaries
guarantee housing loans issued by Japanese financial institutions to third party individuals. The Company and the subsidiaries are typically obliged to pay the outstanding loans when these loans become delinquent three months or more. The housing
loans are usually secured by the real properties. Once the Company and the subsidiaries assume the guaranteed parties’ obligation, the Company and the subsidiaries obtain a right to claim the collateral assets.
Payment or performance risk of the guarantees is considered based on the historical experience of credit events.
There were no significant changes in the payment or performance risk of the guarantees for the nine months
ended December 31, 2016.
– 112 –
Other guarantees:
Other guarantees include the guarantees to
financial institutions and the guarantees derived from collection agency agreements. Pursuant to the contracts of the guarantees to financial institutions, a certain subsidiary pays to the financial institutions when customers of the financial
institutions become debtors and default on the debts. Pursuant to the agreements of the guarantees derived from collection agency agreements, the Company and certain subsidiaries collect third parties’ debt and pay the uncovered amounts.
Litigation—
The Company and certain subsidiaries are involved in legal proceedings and
claims in the ordinary course of business. In the opinion of management, none of such proceedings and claims will have a significant impact on the Company’s financial position or results of operations.
Collateral—
Other than the assets of the consolidated VIEs pledged as collateral for financing
described in Note 8 “Variable Interest Entities”, the Company and certain subsidiaries provide the following assets as collateral for the short-term and long-term debt payables to financial institutions as of March 31, 2016 and
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
March 31, 2016
|
|
|
December 31, 2016
|
|
|
Minimum lease payments, loans and investment in operating leases
|
|
¥
|
106,118
|
|
|
¥
|
98,739
|
|
|
Investment in securities
|
|
|
177,266
|
|
|
|
172,987
|
|
|
Property under facility operations
|
|
|
8,781
|
|
|
|
4,879
|
|
|
Other assets
|
|
|
17,079
|
|
|
|
17,418
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
¥
|
309,244
|
|
|
¥
|
294,023
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2016 and December 31, 2016, ¥25,808 million and
¥34,343 million, respectively, were pledged primarily by investment in securities for collateral deposits, deposit for office, lease and other for real estate related transaction, and assets for liquidation of future rent. In addition, debt
liabilities of affiliates amounted to ¥184,950 million and ¥182,122 million, respectively, were secured by investment in affiliates of ¥32,097 million and ¥35,049 million, respectively, as of March 31, 2016
and December 31, 2016.
Under loan agreements relating to short-term and long-term debt from commercial
banks and certain insurance companies, the Company and certain subsidiaries are required to provide collateral against these debts at anytime if requested by the lenders. The Company and the subsidiaries did not receive any such requests from the
lenders as of December 31, 2016.
– 113 –
Financial information about the operating segments reported below is that which is available by segment and evaluated regularly by the management in deciding how to allocate resources and in assessing
performance.
An overview of operations for each of the six segments follows below.
|
|
|
|
|
|
|
|
|
Corporate Financial Services
|
|
|
:
|
|
|
Lending, leasing and fee business.
|
|
Maintenance Leasing
|
|
|
:
|
|
|
Automobile leasing and rentals, car sharing, and test and measurement instruments and
IT-related
equipment rentals and
leasing
|
|
Real Estate
|
|
|
:
|
|
|
Real estate development and rental, facility operation, REIT asset management, and real estate investment advisory services
|
|
Investment and Operation
|
|
|
:
|
|
|
Environment and energy business, principal investment, loan servicing (asset recovery), and concession business
|
|
Retail
|
|
|
:
|
|
|
Life insurance, banking and card loan business
|
|
Overseas Business
|
|
|
:
|
|
|
Leasing, lending, investment in bonds, asset management and ship- and aircraft-related operations
|
Financial information of the segments for the nine months ended December 31, 2015 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Corporate
Financial
Services
|
|
|
Maintenance
Leasing
|
|
|
Real
Estate
|
|
|
Investment
and
Operation
|
|
|
Retail
|
|
|
Overseas
Business
|
|
|
Total
|
|
|
Segment revenues
|
|
¥
|
81,475
|
|
|
¥
|
204,743
|
|
|
¥
|
154,691
|
|
|
¥
|
751,084
|
|
|
¥
|
208,751
|
|
|
¥
|
399,856
|
|
|
¥
|
1,800,600
|
|
|
Segment profits
|
|
|
33,841
|
|
|
|
33,691
|
|
|
|
44,374
|
|
|
|
46,672
|
|
|
|
48,835
|
|
|
|
116,001
|
|
|
|
323,414
|
|
Financial information of the segments for the nine months ended December 31, 2016 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Corporate
Financial
Services
|
|
|
Maintenance
Leasing
|
|
|
Real
Estate
|
|
|
Investment
and
Operation
|
|
|
Retail
|
|
|
Overseas
Business
|
|
|
Total
|
|
|
Segment revenues
|
|
¥
|
75,546
|
|
|
¥
|
202,657
|
|
|
¥
|
153,243
|
|
|
¥
|
870,404
|
|
|
¥
|
274,708
|
|
|
¥
|
351,733
|
|
|
¥
|
1,928,291
|
|
|
Segment profits
|
|
|
26,314
|
|
|
|
28,642
|
|
|
|
49,721
|
|
|
|
68,783
|
|
|
|
60,055
|
|
|
|
95,600
|
|
|
|
329,115
|
|
Financial information of the segments for the three months ended December 31, 2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Corporate
Financial
Services
|
|
|
Maintenance
Leasing
|
|
|
Real
Estate
|
|
|
Investment
and
Operation
|
|
|
Retail
|
|
|
Overseas
Business
|
|
|
Total
|
|
|
Segment revenues
|
|
¥
|
28,763
|
|
|
¥
|
68,819
|
|
|
¥
|
45,644
|
|
|
¥
|
257,559
|
|
|
¥
|
106,350
|
|
|
¥
|
122,013
|
|
|
¥
|
629,148
|
|
|
Segment profits
|
|
|
12,277
|
|
|
|
10,574
|
|
|
|
10,657
|
|
|
|
10,222
|
|
|
|
16,773
|
|
|
|
18,120
|
|
|
|
78,623
|
|
Financial information of the segments for the three months ended December 31, 2016
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Corporate
Financial
Services
|
|
|
Maintenance
Leasing
|
|
|
Real
Estate
|
|
|
Investment
and
Operation
|
|
|
Retail
|
|
|
Overseas
Business
|
|
|
Total
|
|
|
Segment revenues
|
|
¥
|
23,551
|
|
|
¥
|
67,837
|
|
|
¥
|
49,159
|
|
|
¥
|
331,362
|
|
|
¥
|
123,613
|
|
|
¥
|
111,090
|
|
|
¥
|
706,612
|
|
|
Segment profits
|
|
|
6,440
|
|
|
|
8,987
|
|
|
|
14,274
|
|
|
|
16,742
|
|
|
|
24,548
|
|
|
|
44,090
|
|
|
|
115,081
|
|
– 114 –
Segment assets information as of March 31, 2016 and December 31,
2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Corporate
Financial
Services
|
|
|
Maintenance
Leasing
|
|
|
Real
Estate
|
|
|
Investment
and
Operation
|
|
|
Retail
|
|
|
Overseas
Business
|
|
|
Total
|
|
|
March 31, 2016
|
|
¥
|
1,049,867
|
|
|
¥
|
731,329
|
|
|
¥
|
739,592
|
|
|
¥
|
704,156
|
|
|
¥
|
3,462,772
|
|
|
¥
|
2,284,733
|
|
|
¥
|
8,972,449
|
|
|
December 31, 2016
|
|
|
1,038,857
|
|
|
|
731,492
|
|
|
|
680,231
|
|
|
|
697,591
|
|
|
|
3,331,594
|
|
|
|
2,416,885
|
|
|
|
8,896,650
|
|
The accounting policies of the segments are almost the same as those described in Note 2
“Significant Accounting and Reporting Policies” except for the treatment of income tax expenses, net income attributable to the noncontrolling interests, net income attributable to the redeemable noncontrolling interests, and the
consolidation of certain variable interest entities (VIEs).Income taxes are not included in segment profits or losses because the management evaluates segments’ performance on a
pre-tax
basis. Also, net
income attributable to noncontrolling interests and redeemable noncontrolling interests are not included in segment profits or losses because the management evaluates segments’ performance based on profits or losses
(per-tax)
attributable to ORIX Corporation Shareholders. Since the Company and its subsidiaries evaluate performance for the segments based on profit or loss before income taxes, tax expenses are not included in
segment profits or losses. Net income attributable to the noncontrolling interests, net income attributable to the redeemable noncontrolling interests, which are recognized net of tax in the accompanying consolidated statements of income, are
adjusted to profit or loss before income tax, when calculating segment profits or losses. Most of selling, general and administrative expenses, including compensation costs that are directly related to the revenue generating activities of each
segment, have been accumulated by and charged to each segment. Gains and losses that management does not consider for evaluating the performance of the segments, such as write-downs of certain securities, write-downs of certain long-lived assets and
certain foreign exchange gains or losses(included in other (income) and expense, net) are excluded from the segment profits or losses, and are regarded as corporate items.
Assets attributed to each segment are investment in direct financing leases, installment loans, investment in operating
leases, investment in securities, property under facility operations, investment in affiliates, inventories, advances for investment in operating leases (included in other assets), advances for investment in property under facility operations
(included in other assets) and goodwill and other intangible assets recognized as a result of business combination (included in other assets). This has resulted in the depreciation of office facilities being included in each segment’s profit or
loss while the carrying amounts of corresponding assets are not allocated to each segment’s assets. However, the effect resulting from this allocation is not significant.
For those VIEs that are used for securitization and are consolidated, for which the VIE’s assets can be used only to
settle related obligations of those VIEs and the creditors (or beneficial interest holders) do not have recourse to other assets of the Company or its subsidiaries, segment assets are measured based on the amount of the Company and its
subsidiaries’ net investments in the VIEs, which is different from the amount of total assets of the VIEs, and accordingly, segment revenues are also measured at a net amount representing the revenues earned on the net investments in the VIEs.
Certain gains or losses related to assets and liabilities of consolidated VIEs, which are not ultimately
attributable to the Company and its subsidiaries, are excluded from segment profits.
Prior-year amounts have
been adjusted for the retrospective application of Accounting Standards Update
2015-03
(“Simplifying the Presentation of Debt Issuance Costs”—ASC
835-30
(“Interest—Imputation of Interest”)) on April 1, 2016.
– 115 –
The reconciliation of segment totals to consolidated financial statement
amounts is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Nine months
ended
December 31, 2015
|
|
|
Nine months
ended
December 31, 2016
|
|
|
Segment revenues:
|
|
|
|
|
|
|
|
|
|
Total revenues for segments
|
|
¥
|
1,800,600
|
|
|
¥
|
1,928,291
|
|
|
Revenues related to corporate assets
|
|
|
8,488
|
|
|
|
8,251
|
|
|
Revenues related to assets of certain VIEs
|
|
|
4,259
|
|
|
|
3,327
|
|
|
Revenues from inter-segment transactions
|
|
|
(16,267
|
)
|
|
|
(14,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues
|
|
¥
|
1,797,080
|
|
|
¥
|
1,925,769
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profits:
|
|
|
|
|
|
|
|
|
|
Total profits for segments
|
|
¥
|
323,414
|
|
|
¥
|
329,115
|
|
|
Corporate gains (losses)
|
|
|
(2,233
|
)
|
|
|
(1,812
|
)
|
|
Gains related to assets or liabilities of certain VIEs
|
|
|
5,672
|
|
|
|
27
|
|
|
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests,
net of applicable tax effect
|
|
|
7,819
|
|
|
|
6,766
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated income before income taxes
|
|
¥
|
334,672
|
|
|
¥
|
334,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Three months
ended
December 31, 2015
|
|
|
Three months
ended
December 31, 2016
|
|
|
Segment revenues:
|
|
|
|
|
|
|
|
|
|
Total revenues for segments
|
|
¥
|
629,148
|
|
|
¥
|
706,612
|
|
|
Revenues related to corporate assets
|
|
|
1,453
|
|
|
|
1,284
|
|
|
Revenues related to assets of certain VIEs
|
|
|
1,354
|
|
|
|
1,096
|
|
|
Revenues from inter-segment transactions
|
|
|
(5,069
|
)
|
|
|
(4,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues
|
|
¥
|
626,886
|
|
|
¥
|
704,644
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profits:
|
|
|
|
|
|
|
|
|
|
Total profits for segments
|
|
¥
|
78,623
|
|
|
¥
|
115,081
|
|
|
Corporate gains (losses)
|
|
|
(1,152
|
)
|
|
|
(2,119
|
)
|
|
Gains (losses) related to assets or liabilities of certain VIEs
|
|
|
5,448
|
|
|
|
(78
|
)
|
|
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests,
net of applicable tax effect
|
|
|
1,008
|
|
|
|
1,977
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated income before income taxes
|
|
¥
|
83,927
|
|
|
¥
|
114,861
|
|
|
|
|
|
|
|
|
|
|
|
– 116 –
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
March 31, 2015
|
|
|
December 31, 2016
|
|
|
Segment assets:
|
|
|
|
|
|
|
|
|
|
Total assets for segments
|
|
¥
|
8,972,449
|
|
|
¥
|
8,896,650
|
|
|
Cash and cash equivalents, restricted cash
|
|
|
811,399
|
|
|
|
1,046,725
|
|
|
Allowance for doubtful receivables on direct financing leases and probable loan losses
|
|
|
(60,071
|
)
|
|
|
(59,880
|
)
|
|
Trade notes, accounts and other receivable
|
|
|
294,638
|
|
|
|
270,520
|
|
|
Other corporate assets
|
|
|
700,612
|
|
|
|
702,321
|
|
|
Assets of certain VIEs
|
|
|
273,891
|
|
|
|
286,204
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
¥
|
10,992,918
|
|
|
¥
|
11,142,540
|
|
|
|
|
|
|
|
|
|
|
|
The following information represents geographical revenues and income before income
taxes, which are attributed to geographic areas, based on the country location of the Company and its subsidiaries.
For
the nine months ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Japan
|
|
|
The Americas *1
|
|
|
Other *2*3
|
|
|
Total
|
|
|
Total Revenues
|
|
¥
|
1,384,265
|
|
|
¥
|
143,227
|
|
|
¥
|
269,588
|
|
|
¥
|
1,797,080
|
|
|
Income before Income Taxes
*
1
|
|
|
212,559
|
|
|
|
61,372
|
|
|
|
60,741
|
|
|
|
334,672
|
|
|
|
|
For the nine months ended December 31, 2016
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Japan
|
|
|
The Americas *1
|
|
|
Other *2*3
|
|
|
Total
|
|
|
Total Revenues
|
|
¥
|
1,555,622
|
|
|
¥
|
116,680
|
|
|
¥
|
253,467
|
|
|
¥
|
1,925,769
|
|
|
Income before Income Taxes
*
1
|
|
|
239,166
|
|
|
|
35,626
|
|
|
|
59,304
|
|
|
|
334,096
|
|
|
|
|
For the three months ended December 31, 2015
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Japan
|
|
|
The Americas *1
|
|
|
Other *2*3
|
|
|
Total
|
|
|
Total Revenues
|
|
¥
|
498,982
|
|
|
¥
|
40,351
|
|
|
¥
|
87,553
|
|
|
¥
|
626,886
|
|
|
Income before Income Taxes
*
1
|
|
|
59,005
|
|
|
|
10,062
|
|
|
|
14,860
|
|
|
|
83,927
|
|
|
|
|
For the three months ended December 31, 2016
|
|
|
|
|
|
|
|
Millions of yen
|
|
|
|
|
Japan
|
|
|
The Americas *1
|
|
|
Other *2*3
|
|
|
Total
|
|
|
Total Revenues
|
|
¥
|
588,151
|
|
|
¥
|
29,382
|
|
|
¥
|
87,111
|
|
|
¥
|
704,644
|
|
|
Income before Income Taxes
*
1
|
|
|
72,695
|
|
|
|
19,594
|
|
|
|
22,572
|
|
|
|
114,861
|
|
– 117 –
|
*1
|
Mainly the United States
|
|
*2
|
Mainly Asia, Europe, Australasia and Middle East
|
|
*3
|
Robeco, one of the Company’s subsidiaries domiciled in the Netherlands, conducts principally an asset management business. Due to the
integrated nature of such business with its customer base spread across the world, “Other” locations include the total revenues and the income before income taxes of Robeco, respectively, for the nine and three months ended
December 31, 2015 and 2016. The revenues of Robeco aggregated on a legal entity basis were ¥84,410 million in the Americas and ¥58,748 million in Other for the nine months ended December 31, 2015, and
¥71,914 million in the Americas and ¥56,102 million in Other for the nine months ended December 31, 2016, and ¥27,483 million in the Americas and ¥19,755 million in Other for the three months ended
December 31, 2015, and ¥24,730 million in the Americas and ¥19,235 million in Other for the three months ended December 31, 2016.
|
No single customer accounted for 10% or more of the total revenues for the nine and three months ended December 31,
2015 and 2016.
There are no material subsequent events.
– 118 –