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

14. Deferred Tax Assets And Liabilities

The Company and consolidated subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2011 and 2010.

(A) Effective Tax Rate

The effective income tax rate of the Companies differs from the statutory tax rates for the year ended March 31, 2010 for the following reasons:


  2010
Statutory tax rate 40.70%
Reconciliation:  
Expenses not deductible for tax purposes 0.34
Non-taxable dividend income (0.35)
Inhabitants' taxes per capita 0.53
Amortization of negative goodwill (0.47)
Equity in net earnings of affiliated companies (0.68)
Increase of valuation allowance 9.79
Gains on changes in equity interest (0.34)
Income tax credit (0.02)
Other (2.09)
Effective tax rate 47.41%

A difference of 5% or less between the effective income tax rate of the Companies and the statutory tax rate has been omitted from the 2011 column above.

(B) Deferred Tax Assets And Liabilities

The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2011 and 2010 are as follows:


  Millions of yen   Thousands of
U.S. dollars
2011 2010   2011
Deferred tax assets:        
Inventories ¥ 16,807 ¥ 18,463   $ 202,129
Accumulated impairment loss 2,077 2,130   24,984
Accumulated depreciation expense 1,476 1,762   17,750
Asset retirement obligations 601 -   7,231
Operational investment securities - 6,414   -
Investment securities 3,416 3,597   41,086
Allowance for doubtful accounts 28,504 29,758   342,805
Allowance for losses on interest repayments 14,319 14,487   172,205
Accrued expenses 313 481   3,768
Accrued enterprise taxes 157 923   1,883
Accrued pension and severance costs 1,069 1,393   12,852
Allowance for losses on point program 26,813 24,924   322,467
Allowance for losses on guarantees 2,223 1,826   26,735
Other allowance 965 1,108   11,604
Long-term unearned revenue 228 311   2,745
Tax loss carryforwards 19,473 9,421   234,188
Unrealized loss on available-for-sale securities 43 6   522
Deferred loss on derivatives under hedge accounting 1,104 1,178   13,274
Other 4,172 2,238   50,172
Subtotal 123,760 120,420   1,488,400
Less valuation allowance (61,325) (60,049)   (737,531)
Total deferred tax assets 62,435 60,371   750,869
Deferred tax liabilities:        
Capital gains deferred for tax purposes (212) (212)   (2,545)
Unrealized gain on available-for-sale securities (2,682) (2,418)   (32,253)
Deferred gain on derivatives under hedge accounting - (0)   -
Adjustment account of retirement debt (162) (429)   (1,954)
Adjustment account of debt (407) (266)   (4,896)
Other (2,962) (1,419)   (35,625)
Total deferred tax liabilities (6,425) (4,744)   (77,273)
Net deferred tax assets ¥ 56,010 ¥ 55,627   $ 673,596

Net deferred tax assets are presented on the consolidated balance sheets as of March 31, 2011 and 2010 as follows:


  Millions of yen   Thousands of
U.S. dollars
2011 2010   2011
Current assets ¥23,558 ¥24,376   $283,320
Investment and other assets 32,454 31,255 390,307
Current liabilities-other - - -
Long-term liabilities-other 2 4 30

15. Losses From A Natural Disaster

Losses from a natural disaster recorded as a result of the Great East Japan Earthquake in March 2011 consisted of the following:


  Millions of yen   Thousands of
U.S. dollars
2011   2011
Provision for allowance for doubtful accounts ¥8,156   $ 98,093
Provision for allowance for losses on guarantees 1,41717,042
Restoration costs 4014,817
Other 12150
Total ¥9,986   $120,102

16. Operating Revenues

Operating revenues for the years ended March 31, 2011 and 2010 comprised of the following revenues and expenses:


  Millions of yen   Thousands of
U.S. dollars
2011 2010   2011
Income from the credit service business ¥229,536 ¥248,323   $2,760,508
Income from the lease business 14,437 12,572   173,629
Income from the finance business 15,261 15,955   183,539
Real estate related business:      
Sales 44,469 61,176   534,802
Costs of sales 32,351 47,103   389,070
Income from the real estate related business 12,118 14,073   145,732
Entertainment business:        
Sales 79,674 83,522   958,185
Costs of sales 65,746 68,884   790,692
Income from the entertainment business 13,928 14,638   167,493
Financial income 433 1,295   5,211
Total operating revenues ¥285,713 ¥306,856   $3,436,112
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