ANNUAL REPORT 2011 for the year ended March 31, 2011

Notes To Consolidated Financial Statements

Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years Ended March 31, 2011 and 2010

10. Lease Transactions

(A) Finance Leases That Do Not Transfer Ownership (LESSEE)

i. Lease assets

Property and equipment - mainly servers and other equipment

Intangible assets - mainly software used in the credit service business

ii. Depreciation

Depreciation equivalent is computed by the straight-line method under the assumption that the lease term equals the useful life, and that there is no residual value.

iii. As discussed in Note 3(E), the Companies accounts for leases which existed at the transition date (March 31, 2008) and do not transfer ownership of the leased property to the lessee as operating lease transactions.

Pro forma information of such leases existing at the transition date, such as acquisition cost, accumulated depreciation, obligations under finance leases, depreciation expense, interest expense, on an "as if capitalized" basis for the years ended March 31, 2011 and 2010 is as follows:


Pro forma capitalization of leased items

  Millions of yen   Thousands of U.S. dollars
2011 2010   2011
Building:        
Acquisition cost ¥157 ¥285   $1,882
Accumulated depreciation (111) (194)   (1,332)
Net leased property value 46 91   550
Other (fixtures and equipment):        
Acquisition cost 487 1,265   5,860
Accumulated depreciation (377) (969)   (4,532)
Net leased property value 110 296   1,328
Total:        
Acquisition cost 644 1,550   7,742
Accumulated depreciation (488) (1,163)   (5,864)
Net leased property value ¥156 ¥387   $1,878

Obligations under finance leases


  Millions of yen   Thousands of U.S. dollars
2011 2010   2011
Due within one year ¥113 ¥238   $1,359
Due after one year 67 194   800
Total ¥180 ¥432   $2,159

Allowance for impairment loss on leased property of ¥1 million ($22 thousand) as of March 31, 2011 and ¥3 million as of March 31, 2010 is not included in the obligations under finance leases.

Lease payments, depreciation equivalent and interest equivalent


  Millions of yen   Thousands of U.S. dollars
2011 2010   2011
Lease payments ¥217 ¥398   $2,604
Reversal of allowance for impairment loss on leased property 1 4   12
Depreciation equivalent 189 362   2,271
Interest payable equivalent 8 18   97
Impairment loss - 1   -

Depreciation equivalent is computed by the straight-line method over its lease term determined by its useful life, with zero residual value.

Interest equivalent, which represents the aggregate lease payments less the acquisition cost equivalent, is allocated over the lease term based on the interest method.

(B) Finance Leases That Do Not Transfer Ownership (LESSOR)

i. Lease investment assets

Lease investment assets at March 31, 2011 and 2010 consisted of the following:


  Millions of yen   Thousands of U.S. dollars
2011 2010   2011
Gross lease receivables ¥252,134 ¥249,354   $3,032,273
Residual value - -   -
Unearned interest income (32,239) (35,122)   (387,715)
Lease investment assets ¥219,895 ¥214,232   $2,644,558

ii. Collection schedule for the amount of lease payments related to lease investment assets after March 31, 2011 and 2010

  Millions of yen   Thousands of U.S. dollars
2011 2010   2011
Lease
investment
assets
Gross lease
receivables
Lease
investment
assets
Gross lease
receivables
  Lease
investment
assets
Gross lease
receivables
Due within one year ¥56,081 ¥68,574 ¥52,427 ¥64,859   $674,448 $824,707
Due within two years and after one year 52,434 61,652 50,103 59,969   630,599 741,457
Due within three years and after two years 45,419 51,339 43,864 50,764   546,235 617,421
Due within four years and after three years 34,668 37,718 34,312 38,230   416,939 453,609
Due within five years and after four years 21,095 22,287 21,693 23,256   253,695 268,032
Due after five years 10,198 10,563 11,833 12,277   122,642 127,047
Total ¥219,895 ¥252,133 ¥214,232 ¥249,355   $2,644,558 $3,032,273

iii. The Companies account for the value of lease investment assets of leases which existed at the transition date (March 31, 2008) and do not transfer ownership of the leased property to the lessee to take over the appropriate book value (net of accumulated depreciation) of the leased property as of March 31, 2008, and after the adoption of the revised accounting standard, the aggregate amount equivalent to interest is allocated over the lease term based on the straight-line method.

As a result, Income before income taxes and minority interests as of March 31, 2011 was increased by ¥2,687 million (US$32,310 thousand) more than it would have been if the revised accounting standard had been retroactively adopted starting from the lease transaction commencement dates.

(C) Operating Leases

i. Lessee

The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010 were as follows:


  Millions of yen   Thousands of U.S. dollars
2011 2010   2011
Due within one year ¥1,591 ¥2,440   $19,128
Due after one year 399 2,025   4,806
Total ¥1,990 ¥4,465   $23,934

ii. Lessor

The minimum rental commitments under noncancellable operating leases at March 31, 2011 were as follows:


  Millions of yen   Thousands of U.S. dollars
2011   2011
Due within one year ¥87   $1,042
Due after one year 41   495
Total ¥128   $1,537
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