Sumitomo Realty & Development : Consolidated Financial Statements for FY2021 ended March 31, 2022 ( 263.9KB )

Consolidated Financial Statements

Consolidated Balance Sheets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries

As of March 31, 2022 and 2021

						Thousands of									Thousands of
		Millions of yen				U.S. dollars (Note 1)					Millions of yen				U.S. dollars (Note 1)
		2022		2021			2022					2022		2021			2022
Assets									Liabilities and Net Assets
Current assets:									Current liabilities:
Cash and deposits (Notes 5, 7 and 8)	¥	151,393	¥	188,340	$	1,236,770		Short-term debt (Notes 8 and 10)	¥	68,610	¥	146,620	$	560,493
Accounts receivable-trade (Note 19)		23,286		18,714			190,230		Long-term debt due within one year (Notes 7, 8 and 10)		237,386		211,446			1,939,270
Allowance for doubtful accounts		(44)		(38)			(359)		Long-termnon-recourse debt due within one year (Notes 7, 8 and 10)		4,786		16,344			39,098
Inventories (Notes 3, 6 and 22)		712,451		636,803			5,820,203		Notes and accounts payable-trade		42,308		24,697			345,625
Other current assets		54,447		68,377			444,791		Accrued income taxes		40,145		40,742			327,955
Total current assets		941,533		912,196			7,691,635		Provison for bonuses		5,804		4,023			47,414
									Deposits received		55,156		65,964			450,584
									Other current liabilities (Notes 13 and 19)		185,836		152,124			1,518,145
									Total current liabilities		640,031		661,960			5,228,584
Property and equipment (Notes 3, 6, 20 and 22):
Land (Note 7)		2,847,702		2,778,475			23,263,639		Long-term liabilities:
Buildings and structures (Note 7)		1,759,702		1,705,467			14,375,476		Long-term debt due after one year (Notes 7, 8 and 10)		2,957,325		2,890,210			24,159,178
Construction in progress (Note 7)		139,860		107,850			1,142,554		Long-termnon-recourse debt due after one year (Notes 7, 8 and 10)		291,887		296,673			2,384,503
Other property and equipment (Note 7)		48,718		46,854			397,990		Guarantee and lease deposits received (Note 8)		249,276		258,219			2,036,402
Subtotal of property and equipment		4,795,982		4,638,646			39,179,659		Long-term deposits received		8,764		27,932			71,596
Accumulated depreciation and accumulated impairment losses		(681,665)		(626,477)			(5,568,704)		Net defined benefit liability (Note 11)		5,796		5,258			47,349
Total property and equipment		4,114,317		4,012,169			33,610,955		Other long-term liabilities (Notes 8, 13, 14 and 18)		18,912		30,393			154,497
									Total long-term liabilities		3,531,960		3,508,685			28,853,525
									Contingent liabilities (Note 23)
Intangibles (Note 20) :
Leasehold rights (Note 3 and 22)		61,803		60,162			504,885		Net assets (Note 16):
Other intangibles		2,191		2,249			17,899		Shareholders' equity
Total intangibles		63,994		62,411			522,784		Common stock:
									Authorized -1,900,000 thousand shares
									Issued	-476,086 thousand shares		122,805		122,805			1,003,227
									Capital surplus		104,154		104,154			850,862
Investments and other assets:									Retained earnings (Note 24)		1,256,742		1,126,670			10,266,661
Investments in unconsolidated subsidiaries and affiliates (Note 8)		70,274		68,689			574,087		Treasury stock			(4,475)		(4,475)			(36,557)
Investment securities (Notes 8 and 9)		503,230		505,448			4,111,020		Total shareholders' equity		1,479,226		1,349,154			12,084,193
Guarantee and lease deposits (Notes 8 and 9)		66,994		68,743			547,292		Accumulated other comprehensive income (loss)
Net defined benefit asset (Note 11)		258		-			2,108		Net unrealized holding gains on securities (Note 9)		155,863		160,441			1,273,286
Deferred income taxes (Note 14)		11,457		11,071			93,595		Net deferred gains (losses) on hedges (Note 18)		705		(2,989)			5,759
Other investments and other assets (Notes 8 and 18)		34,642		35,023			283,000		Foreign currency translation adjustments		(1,450)		(4,266)			(11,845)
Allowance for doubtful accounts		(659)		(2,084)			(5,384)		Remeasurements of defined benefit plans (Note 11)		(295)		681			(2,410)
Total investments and other assets		686,196		686,890			5,605,718		Total accumulated other comprehensive income		154,823		153,867			1,264,790
Total assets	¥	5,806,040	¥	5,673,666		$	47,431,092		Total net assets		1,634,049		1,503,021			13,348,983
See accompanying notes.									Total liabilities and net assets	¥	5,806,040	¥	5,673,666		$	47,431,092

Sumitomo Realty & Development Co., Ltd.

Consolidated Financial Statements

Consolidated Statements of Income

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries

For the years ended March 31, 2022, 2021 and 2020

		Millions of yen
	2022	2021	2020
Revenue from operations (Notes 17, 19, 20 and 22)	¥939,431	¥917,473	¥1,013,513
Costs and expenses (Note 17):
Cost of revenue from operations (Note 22)	636,988	629,565	691,832
Selling, general and administrative expenses (Note 11)	68,560	68,664	87,349
	705,548	698,229	779,181
Operating income (Note 20)	233,883	219,244	234,332
Other income (expenses) (Note 22) :
Interest income	131	275	656
Interest expense (Notes 10 and 18)	(18,034)	(18,318)	(19,186)
Dividend income	12,662	11,561	11,024
Gain on sale of property and equipment	98	536	278
Loss on sale of property and equipment	(0)	-	(2,131)
Loss on impairment of fixed assets (Notes 12, 20 and 22)	(3,453)	(3,876)	(9,660)
Loss on disposal of property and equipment (Note 22)	(4,015)	(7,890)	(1,567)
Gain on sale of investment securities (Note 9)	2,427	13,116	1,417
Loss on sale of investment securities (Note 9)	(2)	(312)	-
Loss on devaluation of investment securities (Note 9)	(1,160)	(489)	(7,838)
Loss related to COVID-19	-	(629)	-
Reversal of allowance for doubtful accounts	-	-	4,824
Other, net	(3,883)	(2,859)	(6,339)
	(15,229)	(8,885)	(28,522)
Income before income taxes	218,654	210,359	205,810
Income taxes (Note 12):
Current	77,311	64,930	68,180
Deferred	(9,109)	4,040	(3,367)
Total	68,202	68,970	64,813
Profit	150,452	141,389	140,997
Profit attributable to non-controlling interests	-	-	-
Profit attributable to owners of parent	¥150,452	¥141,389	¥ 140,997
		Yen
	2022	2021	2020
Amounts per share of common stock:
Profit attributable to owners of parent:
-Basic	¥317.45	¥298.33	¥297.50
-Diluted	-	-	-
Cash dividend applicable to the year (Note 24)	45.00	40.00	35.00

See accompanying notes.

Thousands of

U.S. dollars (Note 1)

2022

$7,674,463

5,203,725

560,085

5,763,810

1,910,653

1,070

(147,325)

103,439

801

(0)

(28,208)

(32,800)

19,827

(16)

(9,476)

-

-

(31,722)

(124,410)

1,786,243

631,574

(74,414)

557,160

1,229,083

-

$1,229,083

U.S. dollars (Note 1)

2022

$2.59

-

0.37

Consolidated Statements of Changes in Net Assets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries

For the years ended March 31, 2022, 2021 and 2020

		Thousands							Millions of yen
						Shareholders' equity					Accumulated other comprehensive income (loss)
													Remeasure-	Total
		Number of							Net unrealized		Foreign	ments of	accumulated
		shares of					Total		holding gains	Net deferred	currency	defined	other
		common	Common	Capital	Retained	Treasury	shareholders'		(losses) on	gains (losses)	translation	benefit	comprehensive	Total net
		stock	stock	surplus	earnings	stock	equity		securities	on hedges	adjustments	plans	income (loss)	assets
Balance at April 1, 2019	476,086		¥122,805	¥104,154	¥ 876,803	¥(4,470)	¥1,099,292	¥109,210	¥(3,972)	¥(2,352)	¥ (74)	¥102,812	¥1,202,104
Profit attributable to owners of parent	-	-	-	140,997	-	140,997		-	-	-	-	-	140,997
Foreign currency translation adjustments	-	-	-	-	-	-		-	-	(366)	-	(366)	(366)
Net unrealized holding gains (losses) on securities	-	-	-	-	-	-	(32,875)	-	-	-	(32,875)	(32,875)
Acquisition of treasury stock	-	-	-	-	(3)	(3)		-	-	-	-	-	(3)
Disposal of treasury stock	-	-	0	-	0	0		-	-	-	-	-	0
Change in scope of consolidation	-	-	-	-	-	-		-	-	-	-	-	-
Cash dividends paid:
Final for prior year (¥16 per share)	-	-	-	(7,583)	-	(7,583)		-	-	-	-	-	(7,583)
Interim for current year (¥16 per share)	-	-	-	(7,583)	-	(7,583)		-	-	-	-	-	(7,583)
Net deferred gains (losses) on hedges	-	-	-	-	-	-		-	412	-	-	412	412
Remeasurements of defined benefit plans	-	-	-	-	-	-		-	-	-	(103)	(103)	(103)
Balance at April 1, 2020	476,086		¥122,805	¥104,154	¥1,002,634	¥(4,473)	¥1,225,120	¥ 76,335	¥(3,560)	¥(2,718)	¥(177)	¥ 69,880	¥1,295,000
Profit attributable to owners of parent	-	-	-	141,389	-	141,389		-	-	-	-	-	141,389
Foreign currency translation adjustments	-	-	-	-	-	-		-	-	(1,548)	-	(1,548)	(1,548)
Net unrealized holding gains (losses) on securities	-	-	-	-	-	-	84,106	-	-	-	84,106	84,106
Acquisition of treasury stock	-	-	-	-	(2)	(2)		-	-	-	-	-	(2)
Disposal of treasury stock	-	-	-	-	-	-		-	-	-	-	-	-
Change in scope of consolidation	-	-	-	657	-	657		-	-	-	-	-	657
Cash dividends paid:
Final for prior year (¥19 per share)	-	-	-	(9,005)	-	(9,005)		-	-	-	-	-	(9,005)
Interim for current year (¥19 per share)	-	-	-	(9,005)	-	(9,005)		-	-	-	-	-	(9,005)
Net deferred gains (losses) on hedges	-	-	-	-	-	-		-	571	-	-	571	571
Remeasurements of defined benefit plans	-	-	-	-	-	-		-	-	-	858	858	858
Balance at April 1, 2021	476,086		¥122,805	¥104,154	¥1,126,670	¥(4,475)	¥1,349,154	¥160,441	¥(2,989)	¥(4,266)	¥681	¥153,867	¥1,503,021
Profit attributable to owners of parent	-	-	-	150,452	-	150,452		-	-	-	-	-	150,452
Foreign currency translation adjustments	-	-	-	-	-	-		-	-	2,816	-	2,816	2,816
Net unrealized holding gains (losses) on securities	-	-	-	-	-	-	(4,578)	-	-	-	(4,578)	(4,578)
Acquisition of treasury stock	-	-	-	-	(0)	-		-	-	-	-	-	(0)
Disposal of treasury stock	-	-	-	-	-	-		-	-	-	-	-	-
Change in scope of consolidation	-	-	-	(0)	-	-		-	-	-	-	-	(0)
Cash dividends paid:
Final for prior year (¥21 per share)	-	-	-	(9,953)	-	(9,953)		-	-	-	-	-	(9,953)
Interim for current year (¥22 per share)	-	-	-	(10,427)	-	(10,427)		-	-	-	-	-	(10,427)
Net deferred gains (losses) on hedges	-	-	-	-	-	-		-	3,694	-	-	3,694	3,694
Remeasurements of defined benefit plans	-	-	-	-	-	-		-	-	-	(976)	(976)	(976)
Balance at March 31, 2022	476,086		¥122,805	¥104,154	¥1,256,742	¥(4,475)	¥1,479,226	¥155,863	¥ 705	¥(1,450)	¥(295)	¥154,823	¥1,634,049
								Thousands of U.S. dollars (Note 1)
						Shareholders' equity					Accumulated other comprehensive income (loss)
													Remeasure-	Total
										Net unrealized		Foreign	ments of	accumulated
								Total		holding gains	Net deferred	currency	defined	other
				Common	Capital	Retained	Treasury	shareholders'		(losses) on	gains (losses)	translation	benefit	comprehensive	Total net
				stock	surplus	earnings	stock	equity		securities	on hedges	adjustments	plans	income (loss)	assets
Balance at April 1, 2021			$1,003,227	$850,862	$ 9,204,068	$(36,557)	$11,021,600	$1,310,685	$(24,418)	$(34,850)	$ 5,564	$1,256,981	$12,278,581
Profit attributable to owners of parent			-	-	1,229,083	-	1,229,083		-	-	-	-	-	1,229,083

Consolidated Statements of Comprehensive Income

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries

For the years ended March 31, 2022, 2021 and 2020

		Millions of yen
	2022	2021	2020
Profit	¥150,452	¥141,389	¥140,997
Other comprehensive income (loss) (Note 21)
Net unrealized holding gains (losses) on securities	(4,578)	84,106	(32,875)
Net deferred gains (losses) on hedges	3,694	571	412
Foreign currency translation adjustments	2,816	(1,548)	(366)
Remeasurements of defined benefit plans	(976)	858	(103)
Total other comprehensive income (loss)	956	83,987	(32,932)
Comprehensive income	¥151,408	¥225,376	¥108,065
Comprehensive income attributable to:
Owners of the parent	¥151,408	¥225,376	¥108,065
Non-controlling interests	-	-	-

See accompanying notes.

Thousands of

U.S. dollars (Note 1)

2022

$1,229,083

(37,399)

30,177

23,005

(7,974)

7,809 $1,236,892

$1,236,892

-

Foreign currency translation adjustments	-	-	-	-	-	-	-	23,005	-	23,005	23,005
Net unrealized holding gains (losses) on securities	-	-	-	-	-	(37,399)	-	-	-	(37,399)	(37,399)
Acquisition of treasury stock	-	-	-	(0)	(0)	-	-	-	-	-	(0)
Disposal of treasury stock	-	-	-	-	-	-	-	-	-	-	-
Change in scope of consolidation	-	-	(0)	-	(0)	-	-	-	-	-	(0)
Cash dividends paid:
Final for prior year ($0.17 per share)	-	-	(81,309)	-	(81,309)	-	-	-	-	-	(81,309)
Interim for current year ($0.17 per share)	-	-	(85,181)	-	(85,181)	-	-	-	-	-	(85,181)
Net deferred gains (losses) on hedges	-	-	-	-	-	-	30,177	-	-	30,177	30,177
Remeasurements of defined benefit plans	-	-	-	-	-	-	-	-	(7,974)	(7,974)	(7,974)
Balance at March 31, 2022	$1,003,227	$850,862	$10,266,661	$(36,557)	$12,084,193	$1,273,286	$ 5,759	$(11,845)	$(2,410)	$1,264,790	$13,348,983

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

Consolidated Financial Statements

Consolidated Statements of Cash Flows

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries

For the years ended March 31, 2022, 2021 and 2020

Notes to Consolidated Financial Statements

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries

As of March 31, 2022 and 2021, and for the years ended March 31, 2022, 2021 and 2020

					Thousands of
		Millions of yen			U.S. dollars (Note 1)
	2022	2021	2020	2022
Cash flows from operating activities:
Income before income taxes	¥ 218,654	¥ 210,359	¥ 205,810	$ 1,786,243
Depreciation and amortization (Notes 20 and 22)	60,645	57,813	48,974	495,425
Loss on impairment of fixed assets	3,453	3,876	9,660	28,208
Provision for (Reversal of) allowance for doubtful accounts	135	(21)	(4,848)	1,103
Increase (Decrease) in net defined benefit liability	(196)	226	60	(1,601)
Loss (Gain) on sale of property and equipment, net	(98)	(536)	1,853	(801)
Loss on disposal of property and equipment	4,015	7,890	1,567	32,800
Loss (Gain) on sale of investment securities, net	(2,425)	(12,803)	(1,417)	(19,810)
Loss (Gain) on devaluation of investment securities	1,160	489	7,838	9,476
Interest and dividend income	(12,793)	(11,836)	(11,680)	(104,509)
Interest expense	18,034	18,318	19,186	147,325
Decrease (Increase) in accounts receivable-trade	(4,572)	(1,185)	4,637	(37,350)
Decrease (Increase) in inventories	(48,327)	7,304	46,767	(394,796)
Increase (Decrease) in notes and accounts payable-trade	17,611	(12,041)	(18,543)	143,869
Increase (Decrease) in advances received	2,082	(4,922)	(416)	17,008
Other, net	18,965	26,434	(6,117)		154,930
Total	276,343	289,365	303,331	2,257,520
Proceeds from interest and dividend income	12,793	11,836	11,680	104,509
Payments for interest	(18,150)	(18,224)	(19,334)	(148,272)
Payments for income tax and other taxes	(78,019)	(57,030)	(65,218)		(637,358)
Net cash provided by operating activities	192,967	225,947	230,459	1,576,399
Cash flows from investing activities:
Payments for purchases of property and equipment	(179,553)	(355,432)	(270,347)	(1,466,816)
Proceeds from sale of property and equipment	525	1,659	11,307	4,289
Payments for purchases of investment securities	(9,024)	(20,500)	(46,695)	(73,719)
Proceeds from sale and redemption of investment securities	4,241	49,141	2,676	34,646
Payments for guarantee and lease deposits	(1,278)	(748)	(1,121)	(10,440)
Proceeds from guarantee and lease deposits	2,731	1,954	804	22,310
Repayments for guarantee and lease deposits received	(35,829)	(16,549)	(10,950)	(292,697)
Proceeds from guarantee and lease deposits received	27,858	24,264	29,525	227,579
Other, net	(19,656)	(20,471)	(5,318)		(160,575)
Net cash used in investing activities	(209,985)	(336,682)	(290,119)	(1,715,423)
Cash flows from financing activities:
Increase (Decrease) in short-term debt, net	(78,010)	(106)	121,083	(637,285)
Proceeds from issuance of bonds	40,000	-	-	326,771
Redemption of bonds	(20,000)	-	(40,000)	(163,385)
Proceeds from non-recourse bonds	-	6,000	2,000		-
Redemption of non-recourse bonds	(1,500)	(8,000)	(2,000)	(12,254)
Proceeds from long-term loans payable	264,500	259,500	153,300	2,160,771
Repayments of long-term loans payable	(191,446)	(131,471)	(129,619)	(1,563,974)
Proceeds from long-termnon-recourse loans	-	57,140	93,720		-
Repayments of long-termnon-recourse loans	(14,844)	(62,678)	(100,363)	(121,265)
Decrease (Increase) in treasury stocks, net	(0)	(2)	(3)	(0)
Cash dividends paid	(20,375)	(18,005)	(15,163)	(166,449)
Other, net	(242)	(292)	(310)		(1,976)
Net cash provided by (used in) financing activities	(21,917)	102,086	82,645	(179,046)
Effect of exchange rate changes on cash and cash equivalents	1,964	(1,088)	(244)		16,044
Net increase (decrease) in cash and cash equivalents	(36,971)	(9,737)	22,741	(302,026)
Cash and cash equivalents at beginning of year	187,281	193,448	170,707	1,529,949
Increase in cash and cash equivalents of newly consolidated
subsidiaries	0	3,570	-		0
Cash and cash equivalents at end of year (Note 3)	¥ 150,310	¥ 187,281	¥ 193,448	$ 1,227,923

See accompanying notes.

1 Basis of presenting consolidated financial statements

The accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. (the "Company") and its consolidated subsidiaries (collectively referred to as the "Group") have been prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards ("IFRS").

The accounts of the Company's overseas subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries of domicile. The accompanying consolidated financial statements have been restructured and translated into English from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In addition, the notes to the consolidated financial statements include information which may not be required under Japanese GAAP but is presented herein as additional information.

The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2022, which was ¥122.41 to U.S. $1. The translation should not be construed as representations that the Japanese yen amounts have been, could have been or could in the future be converted into U.S. dollars at this or any other rate of exchange.

2 Accounting policies

(1) Consolidation

The accompanying consolidated financial statements include the accounts of the Company and significant companies over which the Company has power of control through majority voting rights or existence of certain conditions evidencing control by the Company. Non-consolidated subsidiaries are excluded from the scope of consolidation because they are small and their combined total assets, revenues from operations, profit (amount corresponding to the Company's equity interest), retained earnings (amount corresponding to the Company's equity interest), and any other figures do not have a material impact on the consolidated financial statements.

In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to non- controlling interests, are recorded based on the fair value at the time the Company acquired control of the respective subsidiaries.

All significant intercompany balances, transactions and profits have been eliminated in consolidation.

In the year ended March 31, 2022, SRD Finance Co., Ltd. is included in the scope of consolidation due to increasing its materiality on the consolidated financial statement, and Sumitomo Fudosan Finance Co., Ltd. was dissolved and excluded from the scope of consolidation because of the absorption-type merger with the Company as the surviving company.

1. Cash and cash equivalents in the consolidated statements of cash flows

In preparing the consolidated statements of cash flows, cash on hand, readily available deposits and short-term, highly liquid investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents. Reconciliation between cash and deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash flows at March

31, 2022 and 2021 is presented in Note 5 "Cash and cash equivalents."

(3) Recognition of significant revenue

In relation to recognition of revenue from contracts with customers, the nature of principal performance obligations for major businesses of the Group and typical timing of the satisfaction of these performance obligations (typical timing of revenue recognition) are as follows: (Leasing Business)

Leasing business mainly consists of leasing of office buildings and high-grade rental apartments. The Group recognizes revenue in accordance with "Accounting Standard for Lease Transactions" (ASBJ Statement No. 13) based on lease contracts with customers.

(Sales Business)

Sales business mainly consists of sales of condominium units and detached houses. The Group recognizes revenue at the time the buyer (the customer) acquires control of the real estate by fulfilling the delivery obligations stipulated in the sales contract.

(Construction Business)

Construction business mainly consists of construction and renovation of custom homes and "Shinchiku Sokkurisan" remodeling. The Group recognizes revenue at the time the owner (the customer) acquires control of the real estate by fulfilling delivery obligations stipulated in the construction contract.

(Brokerage Business)

Brokerage business mainly consists of brokerage of real estate sales. The Group recognizes revenue at the time the delivery of the real estate from the seller to the buyer is completed by fulfilling the brokerage obligations for the sale and purchase of real estate stipulated in the brokerage contract.

(4) Inventories

Inventories are stated at cost, determined by the specific identification method principally. The carrying amount of inventories is written down when the profitability declines.

(5) Securities

Investments in unconsolidated subsidiaries and affiliates are stated at moving-average cost. Available-for-sale securities except for equity securities without market prices are stated at fair value, and equity securities without market prices are mainly stated at moving-average cost.

(6) Property and equipment (except for leased assets)

The Company and its consolidated domestic subsidiaries depreciate buildings using the straight-line method, and other property and equipment (excluding facilities attached to buildings and structures acquired on or after April 1, 2016) using the declining-balance method over their estimated useful lives. The consolidated overseas subsidiaries depreciate property and equipment using primarily the straight-line method in accordance with the accounting principles in the respective countries.

In addition, the Company and its consolidated domestic subsidiaries depreciate facilities attached to buildings and structures acquired on or after April 1, 2016 using the straight-line method.

(7) Intangibles (except for leased assets)

Software costs recognized as other intangibles are amortized using the straight-line method over the estimated useful lives (five years).

(8) Allowance for doubtful accounts

The Group provides for doubtful accounts at an estimated uncollectable amount based on the evaluation of certain identified doubtful and bankrupt receivables plus an amount calculated using the

Sumitomo Realty & Development Co., Ltd.

Consolidated Financial Statements

percentage of actual collection losses in certain reference periods with respect to remaining receivables.

(9) Leased assets

Actuarial gains and losses are wholly recognized in the next fiscal year.

(12) Derivatives

In case the impairment indicator exists, and an impairment loss is to	the impact on the consolidated financial statements may be significant.
be recognized due to the change of the above-mentioned assumption,

4 Changes in accounting policies

Leased assets are recognized as other property and equipment or other intangibles. Leased assets related to finance lease transactions without title transfer are depreciated using the straight-line method over the lease periods as their useful lives with no residual value.

(10) Income taxes

Income taxes are provided for on the basis of income for financial statement purposes. The tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statements and income tax purposes are recognized as deferred income taxes.

(11) Net defined benefit asset and liability

For the calculation of defined benefit obligations, the estimated amount of defined benefits is allocated to the respective fiscal years by the straight-line method.

Some of the Company's consolidated subsidiaries calculate net defined benefit liability and retirement benefit expenses by using a simplified method in which defined benefit obligations are equal to the amount that would be paid if all employees resigned voluntarily at the

The Group states derivatives at fair value. If derivatives are used as hedges and meet certain hedging criteria, the Group defers recognition of gains or losses resulting from changes in fair value of the derivative financial instruments until the related gains or losses on the hedged items are recognized.

The assessment of hedge effectiveness is performed by comparing the accumulated cash flows of the hedged item to those of the hedging instrument over the term of the relationship. Interest rate swap contracts adopting exceptional accounting is excluded from the effectiveness assessment.

(13) Amounts per share of common stock

The computation of earnings per share is based on the weighted- average number of shares of common stock outstanding during each year. Diluted earnings per share is not presented as there are no potential shares.

Cash dividends per share represent actual amounts applicable to the respective year.

(Application of the Accounting Standard for Revenue Recognition)

Effective from the beginning of the year ended March 31, 2022, the Group adopted "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and the related standard, and the Group recognizes the amount expected to be received for promised goods or services as revenue when they are transferred to customers.

The new accounting policy was applied from the balance of retained earnings as of the beginning of the year ended March 31, 2022 in which the cumulative effect of applying the new accounting policy retrospectively was recognized, in accordance with transitional provision set out in the proviso of Article 84 of the Standard.

As a result, there is no impact on retained earnings for the beginning of the year ended March 31, 2022 and the impact on the consolidated financial statements for the year is immaterial.

Note 19 "Revenue recognition" for the year ended March 31, 2021 is not provided in accordance with the transitional provision set out in Article 89-3 of the Standard.

(Application of Accounting Standard for Fair Value Measurement)

Effective from the beginning of the year ended March 31, 2022, the Group adopted "Accounting Standard for Fair Value Measurement" (ASBJ Statement No. 30, July 4, 2019) and other related standards, and henceforth adopts prospectively the new accounting policies in accordance with the transitional provision set out in Article 19 of the "Accounting Standard for Fair Value Measurement" and Article 44-2 of "Accounting Standard for Financial Instruments" (ASBJ Statement No. 10, July 4, 2019). There is no impact on the consolidated financial statements.

In addition, breakdown by level of fair value of financial instruments for the year ended March 31, 2022 is disclosed in Note 8 "Financial instruments." Such information for the year ended March 31, 2021 is not provided in accordance with the transitional provision set out in Article 7-4 of "Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No. 19, March 31, 2020).

end of the fiscal year.

3 Significant accounting estimates

5 Cash and cash equivalents

Cash and cash equivalents at March 31, 2022 and 2021 consisted of the following:

	Thousands of
Millions of yen	U.S. dollars

(Evaluation of real estate for sale including that in process)

(1) Carrying amounts in the consolidated financial statements for the years ended March 31, 2022 and 2021:

				Thousands of
	Millions of yen			U.S. dollars
	2022	2021	2022
Inventories:
Real estate for sale	¥308,156	¥260,825	$2,517,409
Real estate for sale in process	394,922	366,597		3,226,223

	2022	2021		2022
Cash and deposits	¥151,393	¥188,340	$1,236,770
Restricted deposits in trust	(783)	(773)	(6,397)
Time deposits with maturities exceeding three months	(300)	(286)		(2,450)
Cash and cash equivalents	¥150,310	¥187,281		$1,227,923

6 Inventories

1. Information on the nature of significant accounting estimates for identified items

Real estate for sale including that in process is recognized as inventories in the consolidated balance sheets and stated at cost. In case the net realizable value is lower than the book value, the profitability is regarded to have declined, and the net realizable value is used as the carrying amount. The difference between the book value and the net realizable value (loss on devaluation of inventories) is recognized as cost of revenue from operations for the current fiscal year.

The net realizable value is estimated based on business plans with the consideration of expected selling price, construction cost trend, and other data. The business plans are mainly based on unit sales price and construction cost, and these assumptions are determined by comparable data in the same sales area or actual data in the Group.

In case a loss on devaluation of inventories is to be recognized due to the change of the above-mentioned assumption, the impact on the consolidated financial statements may be significant.

Inventories at March 31, 2022 and 2021 are as follows:

				Thousands of
	Millions of yen			U.S. dollars
	2022	2021	2022
Real estate for sale	¥308,156	¥260,825	$2,517,409
Real estate for sale in process	394,922	366,597	3,226,223
Costs on uncompleted construction contracts	8,210	8,638	67,070
Other	1,163	743		9,501
Total	¥712,451	¥636,803		$5,820,203

(Loss on impairment of fixed assets)

(1) Carrying amounts in the consolidated financial statements for the years ended March 31, 2022 and 2021:

				Thousands of
	Millions of yen		U.S. dollars
	2022	2021	2022
Property and equipment	¥4,114,317	¥4,012,169	$33,610,955
Leasehold rights	61,803	60,162		504,885

(Change in purpose of holding inventories and property and equipment)

As a result of review of holding purposes, the Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2022 and 2021 are as follows:

						Thousands of
		Millions of yen			U.S. dollars
		2022		2021			2022
Inventories:
Transferred to property and equipment	¥	-	¥(5,759)	$	-

1. Information on the nature of significant accounting estimates for identified items

The amounts of property and equipment are determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs, and used as the carrying amount. When a property's profitability has declined and an impairment indicator exists, the Group is required to determine whether an impairment loss should be recognized. Impairment indicators include recurring operating losses, a significant adverse change that could affect the recoverable amount, a significant deterioration of business environment and a significant decrease in the market prices. Such market prices are calculated by the Company using income approach, and future cash flow and discount

rate is estimated based on current rent per unit, rent level in the market, occupancy rate, discount rate and other assumptions.

For fixed assets of which the impairment indicator exists, the impairment loss is recognized if the total amount of their future cash flow before discount is lower than the book value.

The carrying amount of fixed assets of which the impairment loss is to be recognized, have been reduced to the recoverable amounts, and the amount of the reduction is recognized as impairment loss for the current fiscal year. The recoverable amounts are determined based on the appraisal value by a real estate appraiser, the amounts equivalent to the publicly notified land price and the amounts calculated by discounting the future cash flow.

Transferred from property and equipment

37,860

6,164

309,288

Sumitomo Realty & Development Co., Ltd.

Consolidated Financial Statements

7 Pledged assets

Assets pledged as collateral at March 31, 2022 and 2021 are as follows:

	Thousands of
Millions of yen	U.S. dollars

2. Matters concerning fair values and breakdown by level of fair value of financial instruments

The carrying amounts of financial instruments on the consolidated balance sheets, their fair values and the differences between them as

Level 1: Fair value measured based on unadjusted quoted prices in an active market for identical assets or liabilities

Level 2: Fair value measured based on direct or indirect observable inputs for the assets or liabilities other than level 1 inputs

		2022		2021
Cash and deposits	¥	1,988	¥	2,087
Buildings and structures		129,469		98,200
Land		396,008		404,372
Construction in progress		772		-
Other property and equipment		823		107
Total	¥	529,060	¥	504,766

2022

$ 16,241 1,057,667 3,235,095 6,307 6,723

$4,322,033

of March 31, 2022 and 2021 are as follows. (Financial instruments whose fair values are extremely difficult to estimate and equity securities with no market price are not included; please see (Note 3) and (Note 4).)

The fair value of financial instruments is classified into the following three levels based on observability and significance of the inputs used to measure the fair value.

Level 3: Fair value measured based on significant unobservable inputs for the assets or liabilities

In cases where multiple inputs are used that have a significant impact on fair value, the fair value level is classified into the lowest priority level among the levels to which those inputs respectively belong.

Secured liabilities at March 31, 2022 and 2021 are as follows:
		Millions of yen
		2022			2021
Long-term debt due within one year	¥	190		¥	190
Long-termnon-recourse debt due within one year		4,786			16,344
Long-term debt due after one year		134,430			104,620
Long-termnon-recourse debt due after one year		291,887			296,673
Total	¥	431,293		¥	417,827

Specified assets for non-recourse debts at March 31, 2022 and 2021 are as follows:

Millions of yen

Thousands of

U.S. dollars

2022

$ 1,552 39,098 1,098,195 2,384,503

$3,523,348

Thousands of

U.S. dollars

1. Financial instruments whose fair values are regarded as their carrying amounts on the consolidated balance sheets For 2022

			Millions of yen
			Fair Value
	Level 1	Level 2	Level 3	Total
Investment securities*
Available-for-sale securities
Equity securities	¥499,521	¥	-	¥-	¥499,521
Debt securities	-		536	-	536
Derivative transactions
(1) Non-hedge accounting	-		-	-	-
(2) Hedge accounting
Interest-related derivatives	-	3,363	-	3,363
Total assets	¥499,521	¥3,899	¥-	¥503,420

		2022		2021			2022
Cash and deposits	¥	2,042	¥	2,995	$	16,682
Buildings and structures		70,334		77,088			574,577
Land		250,361		258,725			2,045,266
Other property and equipment		82		85			670
Total	¥	322,819	¥	338,893	$	2,637,195

(Note) "Specified assets for non-recourse debts" is included in "Assets pledged as collateral" for the years ended March 31, 2022 and 2021 except for cash and deposits.

Derivative transactions
(1)	Non-hedge accounting	¥	-	¥	-	¥-	¥	-
(2)	Hedge accounting
	Interest-related derivatives		-	2,348	-		2,348
Total derivative transactions	¥	-	¥2,348	¥-	¥	2,348
* Of investment securities, ¥536 million ($4,379 thousand) accounts as guarantee and lease deposits in the consolidated balance sheets.

8 Financial instruments

1. Overview

(1) Policy for financial instruments

The Group has the policy to limit its fund management to short-term deposits, and also raise funds through loans from banks, the issuance of corporate bonds and commercial paper.

The Group utilizes interest rate swap contracts within the amount of fundraising, and does not utilize derivatives for any speculative purposes.

1. Details of financial instruments, these risks, and risk management systems

Investment securities are equities of business-related companies and are exposed to market price fluctuation risk. The Group regularly checks the market value of the securities and the financial condition of the equity issuers, and continuously reviews whether it continues to hold securities with consideration for its relationships with the equity issuers.

Floating rate debt are exposed to interest rate fluctuation risk, so the Group utilizes derivatives (interest swap contracts) to hedge these risks for certain loans and corporate bonds interest. Interest rate swap contracts are exposed to risks of interest rate fluctuation. The derivative

transactions are executed with creditworthy financial institutions, so the Group management believes there are few risks of default by counterparties. Derivative transactions are executed by the Company's Finance Department in accordance with the decisions of a committee whose chairman is the director of the Finance Department. The Finance Department prepares reports on derivatives that are provided to the director of the Finance Department periodically.

Guarantee and lease deposits received is mainly for avoiding customers' credit risk.

1. Supplemental information on fair values of financial instruments

The fair values of financial instruments are based on their market prices, and if the market price is not available, other rational valuation techniques are used instead. The rational valuation techniques incorporate variable factors, and as a result the values may change due to using different assumptions.

Contract amounts of derivatives shown in Note 18 "Derivative transactions" itself are not representing the market risks related to derivatives.

For 2021
			Millions of yen
	Carrying amount	Fair Value	Difference
Investment securities*1
Available-for-sale securities
Equity securities	¥	503,108	¥	503,108	¥-
Debt securities		535		535	-
Total assets	¥	503,643	¥	503,643	¥-
Derivative transactions*2
(1) Non-hedge accounting	¥	-	¥	-	¥-
(2) Hedge accounting		(4,310)		(4,310)	-
Total derivative transactions	¥	(4,310)	¥	(4,310)	¥-

*1 Of investment securities, ¥535 million accounts as guarantee and lease deposits in the consolidated balance sheets. *2 Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

Sumitomo Realty & Development Co., Ltd.