ANNUAL REPORT 2011 for the year ended March 31, 2011

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years Ended March 31, 2012 and 2011

11. 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 account 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, and on an "as if capitalized" basis for the years ended March 31, 2012 and 2011 is as follows:


Pro forma capitalization of leased items

  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Building:        
Acquisition cost ¥115 ¥157   $1,399
Accumulated depreciation (88) (111)   (1,066)
Net leased property value 27 46   333
Other (fixtures and equipment):        
Acquisition cost 138 487   1,686
Accumulated depreciation (108) (377)   (1,316)
Net leased property value 30 110   370
Total:        
Acquisition cost 253 644   3,085
Accumulated depreciation (196) (488)   (2,382)
Net leased property value ¥57 ¥156   $703

Obligations under finance leases


  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Due within one year ¥35 ¥113   $420
Due after one year 32 67   390
Total ¥67 ¥180   $810

Allowance for impairment losses on leased property of ¥1 million as of March 31, 2011 is not included in the obligations under finance leases.

Lease payments, depreciation equivalent and interest equivalent


  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Lease payments ¥116 ¥217   $1,414
Reversal of allowance for impairment losses on leased property 1 1   13
Depreciation equivalent 98 189   1,198
Interest payable equivalent 4 8   46

Depreciation equivalent is computed by the straight-line method over their lease term determined by their useful lives, 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, 2012 and 2011, consisted of the following:


  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Gross lease receivables ¥247,679 ¥252,134   $3,015,321
Residual value  
Unearned interest income (29,289) (32,239)   (356,573)
Lease investment assets ¥218,390 ¥219,895   $2,658,748

ii. Collection schedule for the amount of lease payments related to lease investment assets after March 31, 2012 and 2011

  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Lease
investment
assets
Gross lease
receivables
Lease
investment
assets
Gross lease
receivables
  Lease
investment
assets
Gross lease
receivables
Due within one year ¥57,093 ¥68,837 ¥56,081 ¥68,574   $695,060 $838,041
Due within two years and after one year 52,520 60,792 52,434 61,652   639,395 740,108
Due within three years and after two years 44,873 49,977 45,419 51,339   546,302 608,431
Due within four years and after three years 33,805 36,482 34,668 37,718   411,555 444,143
Due within five years and after four years 20,081 21,214 21,095 22,287   244,469 258,264
Due after five years 10,018 10,376 10,198 10,563   121,967 126,334
Total ¥218,390 ¥247,678 ¥219,895 ¥252,133   $2,658,748 $3,015,321

iii. The Companies account for the value of lease investment assets 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 (loss) before income taxes and minority interests as of March 31, 2012 and 2011 increased (decreased) more than it would have if the revised accounting standard had been retroactively adopted starting from the lease transaction commencement dates as follows:

  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Income (loss) before income taxes and minority interests ¥2,218 ¥2,687   $27,008

(C) OPERATING LEASES

i. Lessee

The minimum rental commitments under noncancellable operating leases at March 31, 2012 and 2011 were as follows:


  Millions of yen   Thousands of U.S. dollars
2012 2011   2012
Due within one year ¥390 ¥1,591   $4,741
Due after one year 21 399   259
Total ¥411 ¥1,990   $5,000

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
2012 2011   2012
Due within one year ¥194 ¥87   $2,365
Due after one year 249 41   3,032
Total ¥443 ¥128   $5,397
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