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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  Sumitomo Realty & Development Co., Ltd.    8830   JP3409000001

SUMITOMO REALTY & DEVELOPMENT CO., LTD.

(8830)
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Sumitomo Realty & Development : English Integrated Report 2020 (Financial Section)

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08/07/2020 | 03:54am EDT

Financial Section

Consolidated Balance Sheets

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

As of March 31, 2020 and 2019

Thousands of

Thousands of

Millions of yen

U.S. dollars (Note 1)

Millions of yen

U.S. dollars (Note 1)

2020

2019

2020

2020

2019

2020

Assets

Liabilities and Net Assets

Current assets:

Current liabilities:

Cash, time and notice deposits (Notes 3, 5 and 6)

¥   195,361

¥   172,192

$  1,795,432

Short-term debt (Notes 6 and 8)

¥   146,726

¥     25,643

$  1,348,461

Notes and accounts receivable-trade (Note 6)

17,406

21,567

159,967

Long-term debt due within one year (Notes 5, 6 and 8)

131,471

169,619

1,208,262

Allowance for doubtful accounts

(61)

(73)

(561)

Long-termnon-recourse debt due within one year (Notes 5, 6 and 8)

70,373

102,298

646,751

Inventories (Note 4)

648,881

679,903

5,963,432

Notes and accounts payable-trade (Note 6)

36,393

54,937

334,464

Other current assets

54,447

59,422

500,386

Accrued income taxes

32,344

29,260

297,252

Total current assets

916,034

933,011

8,418,656

Accrued bonuses

5,440

5,573

49,995

Deposits received (Note 14)

51,196

61,582

470,508

Other current liabilities

148,102

137,128

1,361,108

Total current liabilities

622,045

586,040

5,716,801

Investments:

Investments in unconsolidated subsidiaries and affiliates (Note 6)

100,156

61,544

920,467

Long-term liabilities:

Investments in securities and other (Notes 6 and 7)

372,414

433,301

3,422,608

Long-term debt due after one year (Notes 5, 6 and 8)

2,842,156

2,744,327

26,120,357

Allowance for doubtful accounts

(2,082)

(9,154)

(19,134)

Long-termnon-recourse debt due after one year (Notes 5, 6 and 8)

250,182

300,900

2,299,256

Total investments

470,488

485,691

4,323,941

Guarantee and deposits received (Notes 6 and 14)

293,505

278,766

2,697,408

Net defined benefit liability (Note 9)

6,270

6,019

57,623

Other long-term liabilities (Note 12)

8,465

11,964

77,796

Total long-term liabilities

3,400,578

3,341,976

31,252,440

Property and equipment:

Land (Notes 4, 5 and 20)

2,558,356

2,523,937

23,512,140

Contingent liabilities (Note 21)

Buildings and structures (Notes 4, 5 and 20)

1,584,047

1,378,337

14,557,917

Machinery and equipment (Notes 4, 5 and 20)

40,382

35,518

371,124

Net assets (Note 15):

Leased assets

2,054

2,150

18,877

Shareholders' equity

Construction in progress (Notes 4, 5 and 20)

133,718

139,451

1,228,914

Common stock:

4,318,557

4,079,393

39,688,972

Authorized -1,900,000 thousand shares

Issued        -476,086 thousand shares

122,805

122,805

1,128,619

Accumulated depreciation and accumulated impairment losses

(578,302)

(548,382)

(5,314,788)

Capital surplus

104,154

104,154

957,210

Net property and equipment

3,740,255

3,531,011

34,374,184

Retained earnings

1,002,634

876,803

9,214,539

Treasury stock

(4,473)

(4,470)

(41,109)

Total shareholders' equity

1,225,120

1,099,291

11,259,259

Accumulated other comprehensive income (loss)

Other assets:

Net unrealized holding gains on securities

76,335

109,210

701,544

Guarantee and lease deposits paid to lessors (Notes 6 and 7)

70,172

70,299

644,904

Net deferred losses on hedges

(3,560)

(3,972)

(32,718)

Leasehold rights and other intangible assets

57,562

56,752

529,014

Foreign currency translation adjustments

(2,718)

(2,352)

(24,979)

Deferred income taxes (Note 12)

30,067

17,464

276,326

Remeasurements of defined benefit plans

(177)

(74)

(1,627)

Other

33,045

35,892

303,695

Total accumulated other comprehensive income

69,880

102,812

642,220

Total other assets

190,846

180,407

1,753,939

Total net assets

1,295,000

1,202,104

11,901,479

Total assets

¥5,317,623

¥5,130,120

$48,870,720

Total liabilities and net assets

¥5,317,623

¥5,130,120

$48,870,720

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Consolidated Statements of Income

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

For the years ended March 31, 2020, 2019 and 2018

Millions of yen

2020

2019

2018

Revenue from operations

¥1,013,513

¥1,012,198

¥948,402

Costs and expenses:

Cost of revenue from operations

691,832

711,050

664,015

Selling, general and administrative expenses

87,349

81,759

78,750

779,181

792,809

742,765

Operating income

234,332

219,389

205,637

Other income (expenses):

Interest expense, net

(18,530)

(19,589)

(20,096)

Dividend income

11,024

9,472

8,229

Gain on sale of property and equipment

278

75

38

Loss on sale of property and equipment

(2,131)

(3,724)

(217)

Loss on impairment of fixed assets (Note 10)

(9,660)

(8,576)

(10,635)

Loss on disposal of property and equipment

(1,567)

(1,280)

(601)

Gain on sale of investments in securities (Note 7)

1,417

12

1,010

Loss on sale of investments in securities

-

-

(47)

Loss on devaluation of investments in securities (Note 7)

(7,838)

(1,105)

-

Reversal of allowance for doubtful accounts

4,824

-

-

Other, net

(6,339)

(6,115)

(6,874)

(28,522)

(30,830)

(29,193)

Income before income taxes

205,810

188,559

176,444

Income taxes (Note 12):

Current

68,180

62,823

62,098

Deferred

(3,367)

(4,367)

(6,180)

Total

64,813

58,456

55,918

Profit

140,997

130,103

120,526

Profit attributable to non-controlling interests

-

-

795

Profit attributable to owners of parent

¥   140,997

¥   130,103

¥119,731

Yen

2020

2019

2018

Amounts per share of common stock:

Profit attributable to owners of parent:

-Basic

¥297.50

¥274.51

¥252.62

-Diluted

-

-

-

Cash dividend applicable to the year

35.00

30.00

27.00

See accompanying notes.

Consolidated Statements of Comprehensive Income

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

For the years ended March 31, 2020, 2019 and 2018

Millions of yen

2020

2019

2018

Profit

¥140,997

¥130,103

¥120,526

Other comprehensive income (loss) (Note 19)

Net unrealized holding gains (losses) on securities

(32,875)

(21,905)

33,935

Net deferred gains (losses) on hedges

412

(1,923)

538

Foreign currency translation adjustments

(366)

(259)

(1,098)

Remeasurements of defined benefit plans

(103)

(234)

188

Total other comprehensive income (loss)

(32,932)

(24,321)

33,563

Comprehensive income

¥108,065

¥105,782

¥154,089

Comprehensive income attributable to:

Owners of the parent

¥108,065

¥105,782

¥153,493

Non-controlling interests

-

-

596

See accompanying notes.

Thousands of

U.S. dollars (Note 1)

2020

$9,314,521

6,358,166

802,766

7,160,932

2,153,589

(170,297)

101,314

2,555

(19,585)

(88,779)

(14,401)

13,023

-

(72,034)

44,334

(58,257)

(262,127)

1,891,462

626,597

(30,944)

595,653

1,295,809

-

$1,295,809

U.S. dollars (Note 1)

2020

$2.73

-

0.32

Thousands of

U.S. dollars (Note 1)

2020

$1,295,809

(302,132)

3,786

(3,364)

(946)

(302,656) $   993,153

$   993,153

-

Consolidated Statements of Changes in Net Assets

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

For the years ended March 31, 2020, 2019 and 2018

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

Non-

common

Common

Capital

Retained

Treasury

shareholders'

(losses) on

gains (losses)

translation

benefit

comprehensive

controlling

Total net

stock

stock

surplus

earnings

stock

equity

securities

on hedges

adjustments

plans

income (loss)

interests

assets

Balance at April 1, 2017

476,086

¥122,805

¥132,748

¥   662,802

¥(4,379)

¥   913,976

¥  97,192

¥(2,529)

¥(1,265)

¥  (27)

¥  93,371

¥ 31,756

¥1,039,103

Profit attributable to owners of parent

-

-

-

119,731

-

119,731

-

-

-

-

-

-

119,731

Foreign currency translation adjustments

-

-

-

-

-

-

-

-

(828)

-

(828)

-

(828)

Net unrealized holding gains (losses) on securities

-

-

-

-

-

-

33,923

-

-

-

33,923

-

33,923

Acquisition of treasury stock

-

-

-

-

(64)

(64)

-

-

-

-

-

-

(64)

Disposal of treasury stock

-

-

-

-

-

-

-

-

-

-

-

-

-

Change in scope of consolidation

-

-

-

(4,885)

-

(4,885)

-

-

-

-

-

-

(4,885)

Cash dividends paid:

Final for prior year (¥13 per share)

-

-

-

(6,161)

-

(6,161)

-

-

-

-

-

-

(6,161)

Interim for current year (¥13 per share)

-

-

-

(6,161)

-

(6,161)

-

-

-

-

-

-

(6,161)

Change in treasury shares of parent arising from

transactions with non-controlling shareholders

-

-

(28,594)

-

-

(28,594)

-

-

-

-

-

-

(28,594)

Profit attributable to non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

(31,756)

(31,756)

Net deferred gains (losses) on hedges

-

-

-

-

-

-

-

480

-

-

480

-

480

Remeasurements of defined benefit plans

-

-

-

-

-

-

-

-

-

187

187

-

187

Balance at April 1, 2018

476,086

¥122,805

¥104,154

¥   765,326

¥(4,443)

¥   987,842

¥131,115

¥(2,049)

¥(2,093)

¥ 160

¥127,133

¥        -

¥1,114,975

Cumulative effects of changes in accounting policies

-

-

-

(5,299)

-

(5,299)

-

-

-

-

-

-

(5,299)

Restated balance

476,086

122,805

104,154

760,027

(4,443)

982,543

131,115

(2,049)

(2,093)

160

127,133

-

1,109,676

Profit attributable to owners of parent

-

-

-

130,103

-

130,103

-

-

-

-

-

-

130,103

Foreign currency translation adjustments

-

-

-

-

-

-

-

-

(259)

-

(259)

-

(259)

Net unrealized holding gains (losses) on securities

-

-

-

-

-

-

(21,905)

-

-

-

(21,905)

-

(21,905)

Acquisition of treasury stock

-

-

-

-

(27)

(27)

-

-

-

-

-

-

(27)

Disposal of treasury stock

-

-

0

-

0

0

-

-

-

-

-

-

0

Change in scope of consolidation

-

-

-

(57)

-

(57)

-

-

-

-

-

-

(57)

Cash dividends paid:

Final for prior year (¥14 per share)

-

-

-

(6,635)

-

(6,635)

-

-

-

-

-

-

(6,635)

Interim for current year (¥14 per share)

-

-

-

(6,635)

-

(6,635)

-

-

-

-

-

-

(6,635)

Profit attributable to non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

-

-

Net deferred gains (losses) on hedges

-

-

-

-

-

-

-

(1,923)

-

-

(1,923)

-

(1,923)

Remeasurements of defined benefit plans

-

-

-

-

-

-

-

-

-

(234)

(234)

-

(234)

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)

Profit attributable to non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

-

-

Net deferred gains (losses) on hedges

-

-

-

-

-

-

-

412

-

-

412

-

412

Remeasurements of defined benefit plans

-

-

-

-

-

-

-

-

-

(103)

(103)

-

(103)

Balance at March 31, 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

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

Non-

Common

Capital

Retained

Treasury

shareholders'

(losses) on

gains (losses)

translation

benefit

comprehensive

controlling

Total net

stock

surplus

earnings

stock

equity

securities

on hedges

adjustments

plans

income (loss)

interests

assets

Balance at April 1, 2019

$1,128,619

$957,210

$8,058,110

$(41,081)

$10,102,858

$1,003,676

$(36,504)

$(21,616)

$  (680)

$944,876

$-

$11,047,734

Profit attributable to owners of parent

-

-

1,295,809

-

1,295,809

-

-

-

-

-

-

1,295,809

Foreign currency translation adjustments

-

-

-

-

-

-

-

(3,363)

-

(3,363)

-

(3,363)

Net unrealized holding gains (losses) on securities

-

-

-

-

-

(302,132)

-

-

-

(302,132)

-

(302,132)

Acquisition of treasury stock

-

-

-

(28)

(28)

-

-

-

-

-

-

(28)

Disposal of treasury stock

-

0

-

0

0

-

-

-

-

-

-

0

Change in scope of consolidation

-

-

-

-

-

-

-

-

-

-

-

-

Cash dividends paid:

Final for prior year ($0.15 per share)

-

-

(69,690)

-

(69,690)

-

-

-

-

-

-

(69,690)

Interim for current year ($0.15 per share)

-

-

(69,690)

-

(69,690)

-

-

-

-

-

-

(69,690)

Profit attributable to non-controlling interests

-

-

-

-

-

-

-

-

-

-

-

-

Net deferred gains (losses) on hedges

-

-

-

-

-

-

3,786

-

-

3,786

-

3,786

Remeasurements of defined benefit plans

-

-

-

-

-

-

-

-

(947)

(947)

-

(947)

Balance at March 31, 2020

$1,128,619

$957,210

$9,214,539

$(41,109)

$11,259,259

$   701,544

$(32,718)

$(24,979)

$(1,627)

$642,220

$-

$11,901,479

See accompanying notes.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Consolidated Statements of Cash Flows

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

For the years ended March 31, 2020, 2019 and 2018

Notes to Consolidated Financial Statements

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

As of and for the years ended March 31, 2020, 2019 and 2018

Thousands of

Millions of yen

U.S. dollars (Note 1)

2020

2019

2018

2020

Cash flows from operating activities:

¥ 205,810

$ 1,891,462

Income before income taxes

¥ 188,559

¥ 176,444

Depreciation and amortization

48,974

46,313

41,628

450,087

Loss on impairment of fixed assets (Note 10)

9,660

8,576

10,635

88,779

Provision for (Reversal of) allowance for doubtful accounts

(4,848)

(309)

(525)

(44,555)

Increase (Decrease) in net defined benefit liability

60

(242)

91

551

Loss (Gain) on sale of property and equipment, net

1,853

3,649

179

17,030

Loss on disposal of property and equipment

1,567

1,280

601

14,401

Loss (Gain) on sale of investments in securities, net

(1,417)

(12)

(963)

(13,023)

Loss (Gain) on devaluation of investments in securities

7,838

1,105

-

72,034

Interest and dividend income

(11,680)

(10,067)

(8,484)

(107,343)

Interest expense

19,186

20,184

20,352

176,326

Decrease (Increase) in notes and accounts receivable-trade

4,637

2,233

(5,669)

42,616

Decrease (Increase) in inventories

46,767

65,981

25,915

429,804

Increase (Decrease) in notes and accounts payable-trade

(18,543)

26,189

(12,536)

(170,416)

Increase (Decrease) in advances received

(416)

(12,073)

17,076

(3,823)

Other, net

(6,117)

(1,800)

(6,648)

(56,217)

Total

303,331

339,566

258,096

2,787,713

Proceeds from interest and dividend income

11,680

10,066

8,484

107,343

Payments for interest

(19,334)

(20,147)

(20,395)

(177,686)

Payments for income tax and other taxes

(65,218)

(69,427)

(56,252)

(599,375)

Net cash provided by operating activities

230,459

260,058

189,933

2,117,995

Cash flows from investing activities:

(270,347)

(2,484,579)

Payments for purchases of property and equipment

(188,573)

(220,017)

Proceeds from sale of property and equipment

11,307

6,617

357

103,915

Payments for purchases of investments in securities

(46,695)

(31,281)

(28,835)

(429,143)

Proceeds from sale and redemption of investments in securities

2,676

334

2,197

24,593

Payments for guarantee and lease deposits paid to lessors

(1,121)

(738)

(1,317)

(10,302)

Proceeds from guarantee and lease deposits paid to lessors

804

4,475

28,462

7,389

Payments for guarantee and lease deposits received

(10,950)

(14,324)

(11,276)

(100,634)

Proceeds from guarantee and lease deposits received

29,525

35,664

25,271

271,345

Receipts of deposits from partnership investors

23

1,004

2,420

211

Restitution of deposits from partnership investors

(22,208)

(10,442)

(11,544)

(204,099)

Other, net

16,867

(11,949)

(6,252)

155,013

Net cash used in investing activities

(290,119)

(209,213)

(220,534)

(2,666,291)

Cash flows from financing activities:

121,083

1,112,793

Increase (Decrease) in short-term debt, net

(35,773)

(2,892)

Proceeds from issuance of bonds

-

-

30,000

-

Redemption of bonds

(40,000)

(60,000)

(80,000)

(367,613)

Proceeds from non-recourse bonds

2,000

4,900

1,700

18,381

Redemption of non-recourse bonds

(2,000)

(4,900)

(1,700)

(18,381)

Proceeds from long-term loans payable

153,300

198,300

376,000

1,408,878

Repayment of long-term loans payable

(129,619)

(225,752)

(209,622)

(1,191,242)

Proceeds from long-termnon-recourse loans

93,720

37,110

12,610

861,318

Repayment of long-termnon-recourse loans

(100,363)

(44,611)

(21,258)

(922,369)

Decrease (Increase) in treasury stocks, net

(3)

(27)

(64)

(28)

Cash dividends paid

(15,163)

(13,269)

(12,337)

(139,353)

Payments for purchases of investments in subsidiaries not resulting

-

-

in change in scope of consolidation

-

(60,910)

Other, net

(310)

(2,036)

(5,066)

(2,849)

Net cash provided by (used in) financing activities

82,645

(146,058)

26,461

759,535

Effect of exchange rate changes on cash and cash equivalents

(244)

243

(124)

(2,242)

Net increase (decrease) in cash and cash equivalents

22,741

(94,970)

(4,264)

208,997

Cash and cash equivalents at beginning of year

170,707

262,046

267,944

1,568,854

Increase in cash and cash equivalents of a newly consolidated

subsidiary

-

3,631

-

-

Decrease in cash and cash equivalents resulting from exclusion

of subsidiaries from consolidation

-

-

(1,634)

-

Cash and cash equivalents at end of year (Note 3)

¥ 193,448

¥ 170,707

¥ 262,046

$ 1,777,851

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 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 (with certain expanded disclosure) 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. Certain supplementary information included in the statutory Japanese-language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements.
    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, 2020, which was ¥108.81 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.

In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, 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, 2020, the Company acquired the entire shares of PrimeQuest Three Co., Ltd. (the operator of PrimeQuest Three silent partnership) and PrimeQuest Four Co., Ltd (the operator of PrimeQuest Four silent partnership), to make them wholly owned subsidiaries, after which the Company merged the two companies in an absorption-type merger with the Company as the surviving company. As a result, the two companies were included in the scope of consolidation while the silent partnerships were excluded, then the two companies were dissolved and excluded from the scope of consolidation.

(2) Foreign currency translation

Receivables and payables denominated in foreign currencies are translated into Japanese yen at the year-end rate.

Financial statements of consolidated overseas subsidiaries are translated into Japanese yen at the year-end rate, except for shareholders' equity accounts, which are translated at historical rates,

and income statement items resulting from transactions with the Company, which are translated at the rates used by the Company. Differences arising from translation are presented as "Foreign

currency translation adjustments" in net assets.

(3) Cash and cash equivalents

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.

(4) Recognition of revenue

Revenues from sales operations of condominiums, detached houses and land lots are recognized when the units are delivered and customers accepted the delivery. Revenues from leasing operations of office buildings, residences and other properties are recognized as rent accrues over the lease term.

The Company's consolidated subsidiary, Sumitomo Real Estate Sales Co., Ltd. recognizes brokerage fees as revenue at the delivery of the property. However, the amount received of the brokerage fees was previously recognized as revenue on the date it was received in case of which the brokerage fees are received after the conclusion of the sales contracts and before the delivery of property. From the year ended March 31, 2020, its revenue recognition has been changed and the total amount received of the brokerage fees are recognized as revenue at the timing of the delivery of the property.

This change was made as a result of reviewing the revenue recognition policy of Sumitomo Real Estate Sales Co., Ltd. to be aligned with the policy of the Company, after it was delisted and became a wholly owned subsidiary to the Company, and implemented as the Company completed the preparation of the operation system to accommodate the change at the timing of formulating the Eighth Management Plan starting from the year ended March 31, 2020.

The consolidated financial statements for the year ended March 31, 2019 have been adjusted reflecting the retroactive application of the new accounting policy.

As a result, revenue from operations decreased by ¥1,032 million,

operating income and income before income taxes decreased by ¥1,030 million respectively. In addition, the balance of retained earnings at April 1, 2018 decreased by ¥5,299 million reflecting cumulative effects to net assets at the beginning of the year ended March 31, 2019.

As the effect of the change on amounts per share of common stock, earnings per share decreased by ¥1.51 for the year ended March 31, 2019.

(5) 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.

(6) Securities

Held-to-maturity securities are stated at amortized cost. Investments in subsidiaries and affiliates that are not consolidated or accounted for using the equity method are stated at moving-average cost. Available-for-sale securities with available fair values are stated at fair value. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of net assets. Realized gains and losses on the sale of such securities are computed using moving-average cost.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Preferred equity securities are stated at cost determined by the specific identification method, and securities with no available fair value are stated at moving-average cost.

Investments in limited partnerships, which are regarded as securities under the Financial Instruments and Exchange Act, are accounted for in a manner similar to the equity method based on the recent financial statements.

If the market value of held-to-maturity securities, investments in subsidiaries and affiliates and available-for-sale securities declines significantly, such securities are stated at fair value and the difference between fair value and the carrying amount is recognized as a loss in the period of the decline. If the fair value of investments in unconsolidated subsidiaries and affiliated companies not accounted for using the equity method is not readily available, such securities should be written down to the net asset value with a corresponding charge in the income statement in the event net asset value declines significantly. In these cases, such fair value or the net asset value will be the carrying amount of the securities at the beginning of the next fiscal year.

(7) Property and equipment

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.

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.

Estimated useful lives used in the computation of depreciation are

generally as follows:

Buildings and structures......................

6 to 60 years

Machinery and equipment..................

2 to 20 years

Leased assets......................................

Lease periods

(8) Software costs

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

(9) Allowance for doubtful accounts

(11) 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.

(12) Employees' severance and retirement benefits

The Company and its certain consolidated subsidiaries provide two types of post-employment benefit plans, lump-sum payment plans and defined benefit corporate pension plans, under which all eligible employees are entitled to benefits based on their current rate of pay, length of service and the conditions under which termination occurs.

For the calculation of retirement benefit obligations, the estimated amount of retirement 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 retirement benefit obligations are equal to the amount that would be paid if all employees resigned voluntarily at the end of the fiscal year.

Prior service costs are recognized as expenses in the period in which they are incurred, and actuarial gains and losses are recognized as expenses in the following period.

(13) Construction contracts

The construction projects for which the outcome of the portion completed by the end of the fiscal year under review can be reliably estimated are accounted for by the percentage-of-completion method (the degree of completion of each construction project is estimated using the cost-comparison method), while other construction projects are accounted for by the completed-contract method.

(14) Derivative transactions and hedge accounting

The Company and its consolidated subsidiaries state derivative financial instruments at fair value and recognize changes in the fair value as gains or losses unless derivative financial instruments are used for hedging purposes and qualify for hedge accounting.

If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated subsidiaries defer 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.

Also, if interest rate swap contracts are used as a hedge and meet certain hedging criteria (regarding interest rate swap contracts), the net amount to be paid or received under the interest rate swap contracts is

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.

  1. New accounting pronouncements (Accounting standards and guidance issued but not yet effective)

"Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020)

"Implementation Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No. 30, March 31, 2020)

  1. Overview
    The standard and guidance provide comprehensive principles for revenue recognition. Under the standard and guidance, revenue is recognized by applying the following 5 steps:
    Step 1: Identify contract(s) with customers
    Step 2: Identify the performance obligations in the contract
    Step 3: Determine the transaction price
    Step 4: Allocate the transaction price to the performance obligation in the contract
    Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
  2. Effective date
    Effective from the beginning of the year ending March 31, 2022
  3. Effects of the application of the standards
    The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of these new standards on the consolidated financial statements.

"Accounting Standard for Fair Value Measurement" (ASBJ Statement No. 30, July 4, 2019)

"Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31, July 4, 2019)

"Accounting Standard for Measurement of Inventories" (ASBJ Statement No. 9, July 4, 2019)

"Accounting Standard for Financial Instruments" (ASBJ Statement No. 10, July 4, 2019)

"Implementation Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No. 19, March 31,2020)

  1. Overview
    In order to enhance comparability with internationally recognized accounting standards, "Accounting Standard for Fair Value Measurement" and "Implementation Guidance on Accounting Standard for Fair Value Measurement" (together, hereinafter referred

to as "Fair Value Accounting Standards") were developed and guidance on methods measuring fair value was issued. Fair Value Accounting Standards are applicable to the fair value measurement of the following items:

  • Financial instruments in "Accounting Standard for Financial Instruments"; and
  • Inventories held for trading purposes in "Accounting Standard for Measurement of Inventories."

In addition, "Implementation Guidance on Disclosures about Fair Value of Financial Instruments" has been revised, and items of notes such as the breakdown by the fair value level of financial instruments are required.

  1. Effective date
    Effective from the beginning of the year ending March 31, 2022
  2. Effects of the application of the standards
    The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of these new standards on the consolidated financial statements.

"Accounting Standard for Disclosure of Accounting Estimates" (ASBJ Statement No. 31, March 31, 2020)

  1. Overview
    For the purpose of disclosing information that contributes to the users of financial statements to understand, the standard addresses figures recorded in the financial statements for the current fiscal year based on accounting estimates for items that have a risk of a significantly impacting financial statements in the next fiscal year.
  2. Effective date
    Effective from the end of the year ending March 31, 2021

(17) Additional information

(Accounting estimates regarding the impact of COVID-19 pandemic) The accounting estimates such as the valuation of real estate for sale and the loss on impairment of fixed assets are calculated reasonably based on data available at the time of preparing the consolidated financial statements.

The Company and its consolidated subsidiaries calculated the accounting estimates based on the assumption that the impact of COVID-19 shall be temporary. However, its effect to the business activities and business results is unclear for the time being. Despite the anticipation that business activities will be gradually resumed and return toward normal from the second quarter of the next fiscal year, the Company assumes that they will not return to the level of the previous fiscal year during the next fiscal year and will take 1 - 2 years to recover.

The Company and its consolidated subsidiaries provide 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 percentage of actual collection losses in certain reference periods with respect to remaining receivables.

(10) Lease transactions

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.

added to or deducted from the interest on the assets or liabilities relative to which the swap contract was executed as a hedge.

(15) 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 computed based on the amount of profit attributable to owners of parent on common stock and the weighted- average number of shares of common stock outstanding during each year after giving effect to the dilutive potential of shares of common stock to be issued upon the exercise of stock options.

3 Cash and cash equivalents

Cash and cash equivalents at March 31, 2020 and 2019 consisted of the following:

Thousands of

Millions of yen

U.S. dollars

2020

2019

2020

Cash, time and notice deposits

¥195,361

¥172,192

$1,795,432

Time deposits

(1,913)

(1,485)

(17,581)

Cash and cash equivalents

¥193,448

¥170,707

$1,777,851

Sumitomo Realty & Development Co., Ltd.

Financial Section

4 Inventories

6 Financial instruments

Inventories at March 31, 2020 and 2019 are as follows:

Thousands of

Millions of yen

U.S. dollars

2020

2019

2020

Real estate for sale

¥351,369

¥390,026

$3,229,198

Real estate for sale in process

286,254

282,595

2,630,769

Costs on uncompleted construction contracts

10,370

5,827

95,304

Other

888

1,455

8,161

Total

¥648,881

¥679,903

$5,963,432

The Company transferred amounts between inventories and property and equipment. Such transfers at March 31, 2020 and 2019 are as follows:

1. Policy for financial instruments

The Company and its consolidated subsidiaries ("the Group") have the policy to limit its fund management to short-term deposits with funds through loans from banks and the issuance of corporate bonds and commercial paper.

The Group utilizes derivative financial instruments only for the

purpose of hedging the interest rate risk associated with the Group's loans payable, and does not utilize derivative financial instruments for any speculative purposes.

2. Details of financial instruments, risks, and policies and

fluctuations in interest rates on certain loans and corporate bonds. In regard to derivative transactions, the Group utilizes interest rate

swaps for bank loans and deposits, and utilizes foreign exchange forward contracts and cross currency swap contracts for foreign currency- denominated transactions. Interest rate swap contracts are exposed to the risks of interest rate changes, and foreign exchange forward contracts and cross currency swap contracts are exposed to the risks of foreign exchange rate changes. The derivative financial instruments are executed with creditworthy financial institutions, and the Group's management believes there is insignificant risk of default by counterparties. Derivative transactions are executed by the Group's

Millions of yen

2020

2019

Inventories:

Transferred to property and equipment

¥(6,785)

¥(23,162)

Transferred from property and equipment

3,523

4,822

Net decrease

¥(3,262)

¥(18,340)

5 Pledged assets

Assets pledged as collateral at March 31, 2020 and 2019 are as follows:

Millions of yen

Thousands of

U.S. dollars

2020

$(62,356) 32,378

$(29,978)

Thousands of

U.S. dollars

systems of risk management

Operating receivables such as notes and accounts receivable-trade are exposed to customers' credit risk, but this risk is generally avoided through the receipt of deposits.

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

Guarantee and lease deposits are mostly deposits related to leasing properties, and are exposed to the counterparty credit risk.

In addition, the Group accommodates counterparties with loans and

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 derivative transactions that are provided to the director of the Finance Department periodically.

3. 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.

The amounts of derivative transactions shown in Note 17 "Derivative

2020

2019

Cash, time and notice deposits

¥    2,091

¥    2,068

Buildings and structures

108,863

103,708

Land

418,971

393,316

Construction in progress

-

85

Machinery and equipment

127

210

Total

¥530,052

¥499,387

2020

$     19,217 1,000,487 3,850,482

-

1,168

$4,871,354

consequently is exposed to the borrowers' credit risk. However, the Group constantly checks the financial condition of principal borrowers and their performance using the funds lent to those borrowers even after accommodation.

The majority of due dates of operating debt, such as notes and accounts payable, are within one year.

Interest rate swap contracts are used to hedge risks arising from

For 2020

transactions" are not representing the market risks related to derivative

transactions.

The carrying amounts of financial instruments on the consolidated

balance sheets, their fair values and the differences between them as of

March 31, 2020 and 2019 are as follows. (Financial instruments whose

fair value is extremely difficult to estimate are not included; please see

(Note 2).)

Secured liabilities at March 31, 2020 and 2019 are as follows:

Millions of yen

Thousands of

U.S. dollars

Millions of yen

Thousands of U.S. dollars

Carrying amount

Fair value

Difference

Carrying amount

Fair value

Difference

Assets:

2020

2019

Long-term debt due within one year

¥       190

¥          -

Long-termnon-recourse debt due within one year

70,373

102,298

Long-term debt due after one year

94,810

-

Long-termnon-recourse debt due after one year

250,182

300,900

Total

¥415,555

¥403,198

Specified assets for non-recourse debts at March 31, 2020 and 2019 are as follows:

Millions of yen

2020

$       1,746 646,751 871,335 2,299,256

$3,819,088

Thousands of

U.S. dollars

(1)

Cash, time and notice deposits

¥   195,361

¥   195,361

¥        -

(2)

Notes and accounts receivable-trade

17,406

17,406

-

(3)

Investments in securities

Available-for-sale securities

366,734

366,734

-

(4)

Guarantee and lease deposits

Held-to-maturity securities

200

200

0

Available-for-sale securities

747

747

-

Total assets

¥   580,448

¥   580,448

¥         0

Liabilities:

(1)

Notes and accounts payable-trade

¥     36,393

¥     36,393

¥        -

$  1,795,432

$  1,795,432

$          -

159,967

159,967

-

3,370,407

3,370,407

-

1,838

1,838

0

6,865

6,865

-

$  5,334,509

$  5,334,509

$           0

$     334,464

$     334,464

$          -

2020

2019

Cash, time and notice deposits

¥    3,261

¥  11,345

Buildings and structures

86,741

103,708

Land

273,324

393,316

Construction in progress

-

85

Machinery and equipment

96

210

Total

¥363,422

¥508,664

(Note) "Specified assets for non-recourse debts" includes a portion of the amount of "Assets pledged as collateral" for the years ended March 31, 2020 and 2019.

2020

$     29,970 797,179 2,511,938

-

882

$3,339,969

(2)

Short-term debt

146,726

146,726

-

(3)

Long-term debt (including due within one year)

2,973,627

3,026,438

52,811

(4)

Long-termnon-recourse debt (including due within one year)

320,555

325,637

5,082

Total liabilities

¥3,477,301

¥3,535,194

¥57,893

Derivative transactions*:

Hedge accounting

¥      (5,134)

¥      (5,134)

¥        -

Total derivative transactions

¥      (5,134)

¥      (5,134)

¥        -

1,348,461

1,348,461

-

27,328,619

27,813,969

485,350

2,946,007

2,992,712

46,705

$31,957,551

$32,489,606

$532,055

$      (47,183)

$      (47,183)

$          -

$      (47,183)

$      (47,183)

$          -

Sumitomo Realty & Development Co., Ltd.

Financial Section

For 2019

Millions of yen

Carrying amount

Fair value

Difference

Assets:

(1)

Cash, time and notice deposits

¥   172,192

¥   172,192

¥       -

(2)

Notes and accounts receivable-trade

21,567

21,567

-

(3)

Investments in securities

Available-for-sale securities

414,743

414,743

-

(4)

Guarantee and lease deposits

Held-to-maturity securities

3,169

3,167

(2)

Available-for-sale securities

1,170

1,170

-

Total assets

¥   612,841

¥   612,839

¥        (2)

Liabilities:

(1)

Notes and accounts payable-trade

¥    54,937

¥    54,937

¥       -

(2)

Short-term debt

25,643

25,643

-

(3)

Long-term debt (including due within one year)

2,913,946

2,964,782

50,836

(4)

Long-termnon-recourse debt (including due within one year)

403,198

410,218

7,020

Total liabilities

¥3,397,724

¥3,455,580

¥57,856

Derivative transactions*:

Hedge accounting

¥      (5,733)

¥      (5,733)

¥       -

Total derivative transactions

¥      (5,733)

¥      (5,733)

¥       -

* Derivative transactions are stated at net of assets and liabilities. Figures in parentheses indicate net liabilities.

Derivative transactions:

Please see Note 17 "Derivative transactions."

(Note 2) Financial instruments whose fair value is extremely difficult to estimate

Carrying amount

Thousands of

Millions of yen

U.S. dollars

2020

2019

2020

Investments in subsidiaries and affiliates*1

¥  74,468

¥  35,856

$   684,386

Unlisted equity securities*1

2,338

2,327

21,487

Preferred equity securities, etc.*1

25,688

25,688

236,081

Investments in limited partnerships, etc.*1

2

352

18

Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities)*2

69,224

65,960

636,192

Guarantee and deposits received*3

247,610

228,959

2,275,618

*1. The fair value of these items are not disclosed since their market price is unavailable and the assessment of their fair value is deemed extremely difficult.

*2. Guarantee and lease deposits (excluding held-to-maturity securities and available-for-sale securities) are not included in "Assets (4) Guarantee and lease deposits" because their remaining terms cannot be determined and the assessment of their fair value is deemed extremely difficult.

*3. The fair value of guarantee and deposits received (mainly consisting of lease deposits) are not disclosed because their remaining terms cannot be determined and the assessment of their fair value is deemed extremely difficult.

(Note 3) Redemption schedule of pecuniary claims and securities with maturities For 2020

Millions of yen

1 year or less

1 to 5 years

5 to 10 years

Over 10 years

Cash, time and notice deposits

¥195,361

¥  -

¥-

¥-

(Note 1) The calculation methods of fair value for financial instruments Assets:

(1) Cash, time and notice deposits

The fair value of cash, time and notice deposits approximates their carrying amounts because of their short-term maturities.

(2) Notes and accounts receivable-trade

The fair value of notes and accounts receivable-trade approximates their carrying amounts unless the credit standing of debtors has changed significantly since the loan origination.

The allowance for doubtful receivables is estimated based on expected recoverable amounts, considering the possibility of individual collections. Therefore, the fair value of doubtful receivables approximates the carrying amount deducted by the estimated allowance for doubtful accounts on the consolidated balance sheets as of the end of the fiscal year.

(3) Investments in securities

The fair value of listed shares is based on the exchange prices at market. For floating rate notes, the carrying amount is presented as the fair value, as the fair value approximates the carrying amount because the market interest rate is reflected in such notes within a short time period. The fair value of the fixed-coupon debt is determined based on the present value discounted at the interest rate which reflects the period remaining to maturity and the credit risk.

For notes on securities classified by purpose of holding, please see Note 7 "Securities."

(4) Guarantee and lease deposits

The fair value of guarantee and lease deposits are based on the value offered by correspondent financial institutions.

For notes on securities classified by purpose of holding, please see Note 7 "Securities."

Liabilities:

  1. Notes and accounts payable-trade and (2) Short-term debt The fair value of these items approximates their carrying amounts because of their short-termmaturities.
  1. Long-termdebt (including due within one year)
    For floating rate notes, the carrying amount is used as the fair value because the market interest rate is reflected in such notes within a short time period and because the credit standing of the Company is the same after borrowing. The fixed-coupon debt is calculated by discounting the combined total of principal and interest at an interest rate assumed for similar new borrowings.
    The specific matching criteria of interest rate swaps are applicable to some long-term debts with floating interest rates (please see Note 17 "Derivative transactions"). The fair value of these items is calculated by discounting the combined total of interest and principal, with which the interest rate swap has been accounted for, at an interest rate rationally estimated for similar borrowings.
    The fair value of corporate bonds issued by the Company (included in
  1. Long-termdebt (including due within one year)) is based on the market price.
  2. Long-termnon-recourse debt (including due within one year) For floating rate notes, the carrying amount is used as the fair value because the market interest rate is reflected in such notes within a short time period and the value of its non-exemptproperties has not been changed.
    The fixed-coupon debt is calculated by discounting the combined total of principal and interest at an interest rate assumed for similar new borrowings or bonds.
    The specific matching criteria of interest rate swaps are applicable to some long-termnon-recourse debts with floating interest rates (please see Note 17 "Derivative transactions"). The fair value of these items is calculated by discounting the combined total of interest and principal, with which the interest rate swap has been accounted for, at an interest rate rationally estimated for similar borrowings or bonds.

Notes and accounts receivable-trade

17,406

-

-

-

Guarantee and lease deposits:

Held-to-maturity securities (National government bonds)

200

-

-

-

Available-for-sale securities with maturities (National government bonds)

206

483

43

-

Total

¥213,173

¥483

¥43

¥-

For 2019

Millions of yen

1 year or less

1 to 5 years

5 to 10 years

Over 10 years

Cash, time and notice deposits

¥172,192

¥  -

¥  -

¥-

Notes and accounts receivable-trade

21,567

-

-

-

Guarantee and lease deposits:

Held-to-maturity securities (National government bonds)

2,969

200

-

-

Available-for-sale securities with maturities (National government bonds)

407

561

171

-

Total

¥197,135

¥761

¥171

¥-

For 2020

Thousands of U.S. dollars

1 year or less

1 to 5 years

5 to 10 years

Over 10 years

Cash, time and notice deposits

$1,795,432

$     -

$  -

$-

Notes and accounts receivable-trade

159,967

-

-

-

Guarantee and lease deposits:

Held-to-maturity securities (National government bonds)

1,838

-

-

-

Available-for-sale securities with maturities (National government bonds)

1,893

4,439

395

-

Total

$1,959,130

$4,439

$395

$-

Sumitomo Realty & Development Co., Ltd.

Millions of yen
Fair value
Thousands of U.S. dollars
Fair value

Financial Section

(Note 4) Repayment schedule of corporate bonds, long-term debt, long-termnon-recourse debt and other interest-bearing debt For 2020

Millions of yen

Year ending March 31

2021

2022

2023

2024

2025

2026 and thereafter

Short-term debt

¥146,726

¥         -

¥         -

¥         -

¥         -

¥            -

Long-term debt (including due within one year)

131,471

211,446

237,386

289,472

379,414

1,724,438

Long-termnon-recourse debt (including due within one year)

70,373

15,404

3,846

3,700

3,434

223,798

Total

¥348,570

¥226,850

¥241,232

¥293,172

¥382,848

¥1,948,236

For 2019

Millions of yen

Year ending March 31

2020

2021

2022

2023

2024

2025 and thereafter

Short-term debt

¥  25,643

¥         -

¥         -

¥         -

¥         -

¥            -

Long-term debt (including due within one year)

169,619

131,281

211,256

237,196

289,282

1,875,312

Long-termnon-recourse debt (including due within one year)

102,298

69,913

14,944

3,386

3,240

209,417

Total

¥297,560

¥201,194

¥226,200

¥240,582

¥292,522

¥2,084,729

For 2020

Thousands of U.S. dollars

Year ending March 31

2021

2022

2023

2024

2025

2026 and thereafter

Short-term debt

$1,348,461

$            -

$            -

$            -

$            -

$              -

Long-term debt (including due within one year)

1,208,262

1,943,259

2,181,656

2,660,344

3,486,941

15,848,157

Long-termnon-recourse debt (including due within one year)

646,751

141,568

35,346

34,004

31,560

2,056,778

Total

$3,203,474

$2,084,827

$2,217,002

$2,694,348

$3,518,501

$17,904,935

7 Securities

For 2020

A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2020:

(a) Held-to-maturity securities:

For 2019

A. The following tables summarize the acquisition costs, carrying amounts and fair values of securities with available fair values as of March 31, 2019:

(a) Held-to-maturity securities:

Millions of yen

Carrying amount

Fair value

Difference

Securities whose fair value exceeds carrying amount:

National and local government bonds, etc.

¥   461

¥   462

¥ 1

Securities whose fair value does not exceed carrying amount:

National and local government bonds, etc.

2,708

2,705

(3)

Total

¥3,169

¥3,167

¥(2)

(b) Available-for-sale securities:

Millions of yen

Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds acquisition cost:

Equity securities

¥348,562

¥180,791

¥167,771

Debt securities*

1,171

1,140

31

Other

-

-

-

Subtotal

349,733

181,931

167,802

Securities whose carrying amount does not exceed acquisition cost:

Equity securities

65,517

75,824

(10,307)

Debt securities

-

-

-

Other

664

664

-

Subtotal

66,181

76,488

(10,307)

Total

¥415,914

¥258,419

¥157,495

  • Debt securities in securities whose carrying amount exceeds acquisition cost are included in "Guarantee and lease deposits paid to lessors" on the consolidated balance sheets. (Note) The Company recognized impairment loss on investments in securities of ¥1,105 million related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2019 amounted to ¥264 million and the related gains amounted to ¥12 million.

Carrying amount

Difference

Securities whose fair value exceeds carrying amount:

National and local government bonds, etc.

¥200

¥200

¥  0

Securities whose fair value does not exceed carrying amount:

National and local government bonds, etc.

-

-

-

Total

¥200

¥200

¥  0

(b) Available-for-sale securities:

Millions of yen

Carrying amount

Acquisition cost

Difference

Carrying amountDifference

$1,838

$1,838

$  0

-

-

-

$1,838

$1,838

$  0

Thousands of U.S. dollars

Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds acquisition cost:

Equity securities

¥257,807

¥124,727

¥133,080

Debt securities*

747

732

15

Other

-

-

-

Subtotal

258,554

125,459

133,095

Securities whose carrying amount does not exceed acquisition cost:

Equity securities

108,045

130,965

(22,920)

Debt securities

-

-

-

Other

882

891

(9)

Subtotal

108,927

131,856

(22,929)

Total

¥367,481

¥257,315

¥110,166

$2,369,332

$1,146,283

$1,223,049

6,865

6,727

138

-

-

-

2,376,197

1,153,010

1,223,187

992,969

1,203,612

(210,643)

-

-

-

8,106

8,189

(83)

1,001,075

1,211,801

(210,726)

$3,377,272

$2,364,811

$1,012,461

  • Debt securities in securities whose carrying amount exceeds acquisition cost are included in "Guarantee and lease deposits paid to lessors" on the consolidated balance sheets. (Note) The Company recognized impairment loss on investments in securities of ¥7,838 million ($72,034 thousand) related to equity securities in available-for-sale securities.

B. Total sales of available-for-sale securities sold in the year ended March 31, 2020 amounted to ¥2,302 million ($21,156 thousand) and the related gains amounted to ¥1,417 million ($13,023 thousand).

Sumitomo Realty & Development Co., Ltd.

Financial Section

8 Short-term debt and long-term debt

Short-term debt at March 31, 2020 and 2019 consisted of the following:

Thousands of

Non-recourse debt at March 31, 2020 and 2019 consisted of the following:

Thousands of

Millions of yen

U.S. dollars

Millions of yen

U.S. dollars

2020

Average interest

Average interest

2020

rate (%)

2019

rate (%)

Loans, principally from banks

¥  26,726

0.27

¥25,643

0.27

$   245,621

Commercial paper

120,000

0.00

-

-

1,102,840

Total

¥146,726

¥25,643

$1,348,461

The interest rates represent weighted-average rates in effect at March 31, 2020 and 2019, regardless of borrowing currencies, though the range of the interest rate varies by borrowing currency.

Long-term debt at March 31, 2020 and 2019 consisted of the following:

Thousands of

Millions of yen

U.S. dollars

2020

2019

2020

2.50% domestic straight bonds, due 2019

¥            -

¥     10,000

$              -

0.563% domestic straight bonds, due 2020

-

10,000

-

0.877% domestic straight bonds, due 2020

-

20,000

-

1.098% domestic straight bonds, due 2023

10,000

10,000

91,903

0.950% domestic straight bonds, due 2023

10,000

10,000

91,903

0.968% domestic straight bonds, due 2023

10,000

10,000

91,903

0.987% domestic straight bonds, due 2024

20,000

20,000

183,807

0.914% domestic straight bonds, due 2024

20,000

20,000

183,807

0.904% domestic straight bonds, due 2024

20,000

20,000

183,807

0.884% domestic straight bonds, due 2024

20,000

20,000

183,807

0.836% domestic straight bonds, due 2024

20,000

20,000

183,807

0.809% domestic straight bonds, due 2024

20,000

20,000

183,807

0.429% domestic straight bonds, due 2021

10,000

10,000

91,903

0.392% domestic straight bonds, due 2022

10,000

10,000

91,903

0.670% domestic straight bonds, due 2025

10,000

10,000

91,903

0.826% domestic straight bonds, due 2025

20,000

20,000

183,807

0.992% domestic straight bonds, due 2025

20,000

20,000

183,807

0.400% domestic straight bonds, due 2026

10,000

10,000

91,903

0.230% domestic straight bonds, due 2026

10,000

10,000

91,903

0.400% domestic straight bonds, due 2027

30,000

30,000

275,710

Loans, principally from banks and insurance companies, with interest at weighted-average rates of 0.31%

in 2020 and 2019, respectively:

Secured

95,000

-

873,082

Unsecured

2,608,627

2,603,946

23,974,147

Subtotal

2,973,627

2,913,946

27,328,619

2020

2019

Non-recourse bonds, with interest at weighted-average rates of 0.09% in 2020 and 0.07% in 2019:

Due within one year

¥    8,000

¥    2,000

Due after one year

31,100

37,100

Subtotal

39,100

39,100

Non-recourse loans, with interest at weighted-average rates of 0.11% in 2020 and 2019, respectively:

Due within one year

62,373

100,298

Due after one year

219,082

263,800

Subtotal

281,455

364,098

Total

¥320,555

¥403,198

Secured

¥320,555

¥403,198

Unsecured

-

-

Total

¥320,555

¥403,198

The aggregate annual maturities of long-term debt at March 31, 2020 are as follows:

Year ending March 31

Millions of yen

2021

¥   131,471

2022

211,446

2023

237,386

2024

289,472

2025

379,414

2026 and thereafter

1,724,438

Total

¥2,973,627

The aggregate annual maturities of non-recourse debt at March 31, 2020 are as follows:

Year ending March 31

Millions of yen

2021

¥  70,373

2022

15,404

2023

3,846

2024

3,700

2025

3,434

2026 and thereafter

223,798

Total

¥320,555

2020

$     73,523 285,819

359,342

573,229

2,013,436

2,586,665

$2,946,007

$2,946,007

-

$2,946,007

Thousands of

U.S. dollars

$  1,208,262 1,943,259 2,181,656 2,660,344 3,486,941

15,848,157

$27,328,619

Thousands of

U.S. dollars

$   646,751 141,568 35,346 34,004 31,560 2,056,778

$2,946,007

Amount due within one year

(131,471)

(169,619)

(1,208,262)

Total

¥2,842,156

¥2,744,327

$26,120,357

It is customary in Japan that security must be given if requested by lending banks under certain circumstances, and generally banks have the right to offset cash deposited with them against any debt or obligations payable to the bank that becomes due in the case of default and certain other specified events. The Company and its consolidated subsidiaries have never received such a request.

Sumitomo Realty & Development Co., Ltd.

Thousands of
U.S. dollars

Financial Section

9 Employees' severance and retirement benefits

As explained in Note 2 (12), the liabilities and expenses for severance and retirement benefits are determined based on the amounts obtained by actuarial calculations except for the cases using the simplified method.

(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

Thousands of

Millions of yen

U.S. dollars

2020

2019

2020

Unrecognized actuarial differences

¥257

¥66

$2,362

For 2020 and 2019

1. Defined benefit plan

(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Millions of yen

2020

2019

Retirement benefit obligations at beginning of year

¥11,876

¥11,615

Service costs

732

714

Interest costs

48

48

Actuarial differences

(64)

(1)

Retirement benefits paid

(523)

(500)

Retirement benefit obligations at end of year

¥12,069

¥11,876

(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Millions of yen

2020

2019

Plan assets at beginning of year

¥5,857

¥5,650

Expected return on plan assets

117

113

Actuarial differences

(321)

(67)

Employer contributions

380

388

Retirement benefits paid

(234)

(227)

Plan assets at end of year

¥5,799

¥5,857

Thousands of

U.S. dollars

2020

$109,144 6,727 441 (588) (4,806)

$110,918

Thousands of

U.S. dollars

2020

$53,828 1,075 (2,950) 3,492 (2,150)

$53,295

Total

¥257

¥66

$2,362

(7) Major breakdown of plan assets

2020

2019

Debt securities

29.7%

25.6%

Equity securities

29.1

34.9

General life insurance accounts

39.5

37.8

Other

1.7

1.7

Total

100.0%

100.0%

(8) Actuarial assumptions

2020

2019

Discount rate

0.4%

0.4%

Rate of expected return on plan assets

2.0

2.0

2. Defined contribution plan

The required contribution amount for a defined contribution plan that one of the Company's consolidated subsidiaries adopted is ¥394 million ($3,621 thousand) and ¥389 million for the years ended March 31, 2020 and 2019, respectively.

10 Loss on impairment of fixed assets

The Company and its consolidated domestic subsidiaries recognized impairment losses on the following assets for the years ended March 31, 2020, 2019 and 2018, respectively.

  1. Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidated balance sheets

For 2020

Millions of yen

2020

2019

Obligations under retirement benefit plans (funded)

¥ 6,307

¥ 6,295

Fair value of plan assets

(5,799)

(5,857)

508

438

Obligations under retirement benefit plans (unfunded)

5,762

5,581

Net amount of liabilities on the consolidated balance sheets

¥ 6,270

¥ 6,019

Net defined benefit liability

¥ 6,270

¥ 6,019

Net amount of liabilities on the consolidated balance sheets

¥ 6,270

¥ 6,019

2020

$ 57,963 (53,295)

4,668

52,955

$ 57,623

$ 57,623

$ 57,623

Use

Location

Number of properties

Assets leased to others

Tokyo

2

For 2019

Use

Location

Number of properties

Asset leased to others

Tokyo

1

For 2018

Use

Location

Number of properties

Asset leased to others

Tokyo

1

(4) Components of retirement benefit expenses

Millions of yen

2020

2019

Service costs

¥ 732

¥ 714

Interest costs

48

48

Expected return on plan assets

(117)

(113)

Actuarial differences

66

(229)

Retirement benefit expenses

¥ 729

¥ 420

(5) Remeasurements of defined benefit plans (before deducting tax effect)

Millions of yen

Thousands of

U.S. dollars

2020

$ 6,727 441 (1,075) 607

$ 6,700

Thousands of

U.S. dollars

The Company and its consolidated domestic subsidiaries recognized losses on the impairment of certain properties, which are generally assessed individually for impairment. The Company's houses are treated as common assets.

Loss on sales of property and equipment of ¥9,660 million ($88,779 thousand) and ¥8,576 million were recognized by a consolidated subsidiary by restructuring of assets within the Group for the years ended March 31, 2020 and 2019, respectively. The selling price of the asset, based on evaluation by a real estate appraiser, was determined as its

recoverable amount, and loss on sales of property and equipment of the asset was recognized as impairment losses in other expenses for the years ended March 31, 2020 and 2019, respectively.

The carrying value of the asset has been reduced to its recoverable

amount by ¥10,635 million since the total amount of its future cash flow is estimated to be less than the carrying value for the year ended March 31, 2018. The recoverable amount is calculated by discounting the future cash flow at 4.0%. The write-down was recognized as impairment losses in other expenses for the years ended March 31, 2018.

2020

2019

2020

Actuarial differences

¥191

¥295

$1,755

Total

¥191

¥295

$1,755

Sumitomo Realty & Development Co., Ltd.

Financial Section

11 Asset retirement obligations

13 Business Combination

Even though removing asbestos is required for some buildings the Company and its consolidated subsidiaries ("the Group") operate at the time of demolishing, it is difficult to estimate the fair value of obligations associated with such assets reasonably since the timing and/or method of settlement for the retirement obligations are not clear enough. Therefore, for the years ended March 31, 2020 and 2019, asset retirement obligations related to such a case are not recorded (except for the asset retirement obligations recorded on the financial statements).

In addition, under the partial lease contracts, the Group has obligations for restoring office spaces when they move out. For the asset retirement obligations associated with such a case, the duration of use of the assets is not clear enough and these assets do not have any relocation plans. Therefore, the Group is unable to estimate the asset retirement obligations since it is difficult to estimate the timing of fulfillment of the obligations. Consequently, for the years ended March 31, 2020 and 2019, asset retirement obligations related to such a case are not recorded (except for the asset retirement obligations recorded on the financial statements).

(Transactions conducted by commonly controlled entities) (An absorption-type merger of consolidated subsidiaries)

The Company resolved at its board of directors meeting held on August 13, 2019 to merger by absorption with its consolidated subsidiaries, PrimeQuest Three Co., Ltd. and PrimeQuest Four Co., Ltd. The merger agreement had been executed on the same date, and these subsidiaries were absorbed and merged as of October 1, 2019.

1. Overview of business combination

(1) Name and business of the target companies

(4)

Name of company after combination

No change

(5)

Purpose of business combination

The purpose is to simplify the organization of the Company's

consolidated Group as PrimeQuest Three Co., Ltd. and

PrimeQuest Four Co., Ltd. jointly own 100% of the trust

beneficiary rights of Shinjuku Sumitomo Building.

2. Overview of accounting treatments

The transaction is treated as a common control transaction

12 Income taxes

The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants' taxes was approximately 30.62% for the years ended March 31, 2020 and 2019 respectively, and 30.86% for the year ended March 31, 2018.

Details of deferred tax assets and liabilities at March 31, 2020 and 2019 are as follows:

Thousands of

Millions of yen

U.S. dollars

Name: PrimeQuest Three Co., Ltd. and PrimeQuest Four Co., Ltd.

Business: Property leasing

(2)

Date of business combination

October 1, 2019

(3)

Legal form of business combination

An absorption-type merger in which the Company is the

pursuant to "Accounting Standard for Business Combinations"

(ASBJ Statement No. 21, January 16, 2019), as well as "Guidance

on Accounting Standard for Business Combinations and

Accounting Standard for Business Divestitures" (ASBJ Guidance No.

10, January 16, 2019).

2020

2019

Deferred tax assets:

Loss on devaluation of real estate for sale

¥ 18,582

¥ 14,415

Loss on impairment of fixed assets

13,899

17,077

Loss on adjustment of profit and loss on transfer

11,633

4,254

Depreciation and amortization of consolidated adjustment

6,312

7,258

2020

$ 170,775 127,736 106,911 58,009

surviving company and PrimeQuest Three Co., Ltd. and

PrimeQuest Four Co., Ltd. are absorbed.

14 Deposits received with interest rate

Guarantee and deposits received at March 31, 2020 and 2019 are as follows:

Thousands of

Millions of yen

U.S. dollars

Net operating loss carryforwards

3,136

1,593

Accrued enterprise tax and business office tax

2,284

1,834

Loss on devaluation of investments in securities

1,951

797

Net defined benefit liability

1,847

1,759

Accrued bonuses

1,742

1,875

Net deferred losses on hedges

1,571

1,752

Loss on devaluation of investments in SPEs' holding properties for sale

1,413

1,413

Allowance for doubtful accounts

1,290

3,439

Elimination of unrealized profit

909

926

Other

17,495

15,767

Subtotal of deferred tax assets

84,064

74,159

Valuation allowance

(14,613)

(9,247)

Total deferred tax assets

¥ 69,451

¥ 64,912

Deferred tax liabilities:

Net unrealized holding gains on securities

¥(33,756)

¥(48,241)

28,821

20,991

17,930

16,975

16,010

14,438

12,986

11,856

8,354

160,784

772,576

(134,298)

$ 638,278

$(310,229)

2020

Average interest

Average interest

rate (%)

2019

rate (%)

Short-term deposits and long-term deposits due within one year:

Non-interest-bearing

¥  51,196

¥  61,582

Interest-bearing

-

-

-

-

51,196

61,582

Guarantee and lease deposits from tenants:

Non-interest-bearing

247,610

228,959

Interest-bearing

-

-

-

-

Long-term deposits:

Non-interest-bearing

45,895

49,807

Interest-bearing

-

-

-

-

293,505

278,766

Total

¥344,701

¥340,348

15 Net assets

2020

$   470,508

-

470,508

2,275,618

-

421,790

-

2,697,408

$3,167,916

Retained earnings appropriated for tax allowable reserves

(3,731)

(3,731)

Other

(1,908)

(637)

Total deferred tax liabilities

¥(39,395)

¥(52,609)

Net deferred tax assets

¥ 30,056

¥ 12,303

(34,289)

(17,535)

$(362,053)

$ 276,225

Under the Japanese Corporate Law ("the Law") and its regulations, the entire amount paid for new shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus.

Under the Law, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit and capitalized by a resolution of the shareholders' meeting.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital

(Notes)

  1. Valuation allowance increased by ¥5,366 million ($49,315 thousand) as a result of mainly the recognition of loss on adjustment of profit and loss on transfer.
  2. The amounts of deferred tax assets for the year ended March 31, 2019 are restated after reflecting retroactive application of the new accounting policy as stated in (4) "Recognition of revenue" in Note 2 "Accounting policies."

The difference between the statutory tax rate and the effective tax rate for the years ended March 31, 2020, 2019 and 2018 was insignificant and not presented.

Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings on the accompanying consolidated balance sheets.

and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.

The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company in accordance with the Law and its regulations.

Sumitomo Realty & Development Co., Ltd.

Financial Section

16 Information for certain lease transactions

18 Segment information

Future lease payments and receipts under such non-cancelable operating leases at March 31, 2020, 2019 and 2018 are as follows:

Thousands of

Millions of yen

U.S. dollars

2020

2019

2018

2020

Operating leases:

Future lease payments:

  Due within one year

¥    1,526

¥    1,526

¥    1,401

$     14,024

  Due after one year

39,395

42,211

38,241

362,053

Total

¥  40,921

¥  43,737

¥  39,642

$   376,077

The Company and its consolidated subsidiaries mainly operate their business in five segments: (1) Leasing business consists of leasing of office buildings, residences and other properties, and management of these properties; (2) Sales business consists of sale of condominiums, detached houses and land lots; (3) Construction business consists of construction of housing, condominiums and buildings; (4) Brokerage business; and (5) Other businesses including fitness business and restaurant business.

The calculation method for segment profit/loss has been changed reflecting the change of the revenue recognition method of brokerage fees as stated in (4) "Recognition of revenue" in Note 2 "Accounting policies". The segment information for the year ended March 31, 2019 has been adjusted retroactively, and as a result, revenue from operations from customers decreased ¥1,032 million and segment profit decreased ¥1,030 million, respectively, compared to the amount before its application.

Future lease receipts:

Due within one year

¥  89,154

¥  95,607

¥  83,254

$   819,355

Due after one year

122,544

142,321

153,777

1,126,220

Total

¥211,698

¥237,928

¥237,031

$1,945,575

17 Derivative transactions

Hedge accounting was applied to all derivative transactions for the years ended March 31, 2020 and 2019.

The summary of these transactions is as follows:

  1. Foreign currency-related derivatives Not applicable
  2. Interest-relatedderivatives

For 2020

Millions of yen

Contract amounts

Hedging accounting

Types of derivative transactions

Hedged items

Contract amounts

due after one year

Fair value

Deferred hedge

Interest rate swap contracts

Bank loans

¥   342,900

¥   302,900

¥(5,134)

accounting

Fixed rate payments / Floating rate receipts

Exceptional accounting for

Interest rate swap contracts

Bank loans and bonds

1,474,995

1,333,990

- (*)

interest rate swaps

Fixed rate payments / Floating rate receipts

Thousands of U.S. dollars

Contract amounts

Hedging accounting

Types of derivative transactions

Hedged items

Contract amounts

due after one year

Fair value

Deferred hedge

Interest rate swap contracts

Bank loans

$  3,151,365

$  2,783,751

$(47,183)

accounting

Fixed rate payments / Floating rate receipts

Exceptional accounting for

Interest rate swap contracts

Bank loans and bonds

13,555,693

12,259,811

- (*)

interest rate swaps

Fixed rate payments / Floating rate receipts

For 2019

Millions of yen

Contract amounts

Hedging accounting

Types of derivative transactions

Hedged items

Contract amounts

due after one year

Fair value

Deferred hedge

Interest rate swap contracts

Bank loans

accounting

Fixed rate payments / Floating rate receipts

¥   248,600

¥   208,600

¥(5,733)

Exceptional accounting for

Interest rate swap contracts

Bank loans and bonds

interest rate swaps

Fixed rate payments / Floating rate receipts

1,507,198

1,415,693

- (*)

(Note) Fair value is determined based on the quoted price obtained from relevant financial institutions.

  1. Interest rate swap contracts which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received under the swap agreements is recognized and included in interest expenses or income of the long-term debt or the long-termnon-recourse debt as hedged items. Thus, the fair value of such interest rate swap contracts is included in the fair value of the long-term debt.

Information by business segment for the years ended March 31, 2020, 2019 and 2018 is summarized as follows:

Millions of yen

For 2020

Reportable segments

Leasing

Sales

Construction

Brokerage

Consolidated financial

business

business

business

business

Other businesses

Total

Adjustments

statements amounts

Revenue from operations:

Customers

¥   392,110

¥324,700

¥216,622

¥69,119

¥10,962

¥1,013,513

¥         -

¥1,013,513

Intersegment

3,482

267

2,309

212

1,135

7,405

(7,405)

-

Total

395,592

324,967

218,931

69,331

12,097

1,020,918

(7,405)

1,013,513

Segment profit

¥   169,416

¥  47,374

¥  20,583

¥19,337

¥     775

¥   257,485

¥ (23,153)

¥   234,332

Segment assets

¥3,922,318

¥670,079

¥  25,053

¥  8,181

¥72,476

¥4,698,107

¥619,516

¥5,317,623

Other:

Depreciation and amortization

¥     45,421

¥       119

¥    1,283

¥     462

¥     314

¥     47,599

¥ 1,375

¥     48,974

Loss on impairment of fixed assets

9,660

-

-

-

-

9,660

-

9,660

Increase in property and equipment,

273,245

2,919

1,553

429

608

278,754

620

279,374

and intangible assets

Millions of yen

For 2019

Reportable segments

Leasing

Sales

Construction

Brokerage

Consolidated financial

business

business

business

business

Other businesses

Total

Adjustments

statements amounts

Revenue from operations:

Customers

¥   378,091

¥331,516

¥219,776

¥71,490

¥11,325

¥1,012,198

¥         -

¥1,012,198

Intersegment

3,673

236

1,917

377

1,419

7,622

(7,622)

-

Total

381,764

331,752

221,693

71,867

12,744

1,019,820

(7,622)

1,012,198

Segment profit

¥   149,933

¥  47,115

¥  20,407

¥20,978

¥  1,528

¥   239,961

¥ (20,572)

¥   219,389

Segment assets

¥3,737,136

¥713,300

¥  30,057

¥14,074

¥32,545

¥4,527,112

¥603,008

¥5,130,120

Other:

Depreciation and amortization

¥     43,201

¥       145

¥    1,182

¥     458

¥     227

¥     45,213

¥    1,100

¥     46,313

Loss on impairment of fixed assets

8,576

-

-

-

-

8,576

-

8,576

Increase in property and equipment,

and intangible assets

179,872

590

2,015

920

1,001

184,398

397

184,795

Millions of yen

For 2018

Reportable segments

Leasing

Sales

Construction

Brokerage

Consolidated financial

business

business

business

business

Other businesses

Total

Adjustments

statements amounts

Revenue from operations:

Customers

¥   350,211

¥310,914

¥206,839

¥68,858

¥11,580

¥   948,402

¥         -

¥   948,402

Intersegment

3,670

279

2,517

311

1,297

8,074

(8,074)

-

Total

353,881

311,193

209,356

69,169

12,877

956,476

(8,074)

948,402

Segment profit

¥   139,368

¥  46,839

¥  16,109

¥21,457

¥  1,628

¥   225,401

¥ (19,764)

¥   205,637

Segment assets

¥3,565,088

¥826,574

¥  27,946

¥12,200

¥25,203

¥4,457,011

¥710,187

¥5,167,199

Other:

Depreciation and amortization

¥     38,981

¥       174

¥    1,022

¥     471

¥     217

¥     40,865

¥       763

¥     41,628

Loss on impairment of fixed assets

10,635

-

-

-

-

10,635

-

10,635

Increase in property and equipment,

and intangible assets

220,785

672

1,027

859

428

223,771

4,523

228,294

Sumitomo Realty & Development Co., Ltd.

Thousands of
U.S. dollars

Financial Section

Thousands of U.S. dollars

For 2020

Reportable segments

Leasing

Sales

Construction

Brokerage

Consolidated financial

business

business

business

business

Other businesses

Total

Adjustments

statements amounts

Revenue from operations:

Customers

$  3,603,621

$2,984,101

$1,990,828

$635,227

$100,744

$  9,314,521

$             -

$  9,314,521

Intersegment

32,001

2,454

21,220

1,948

10,431

68,054

(68,054)

-

20 Investment and rental properties

The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and residences in Tokyo and other areas. Certain domestic office buildings are not recognized as rental properties but as a portion used as investment and rental properties since the Company or its certain consolidated subsidiaries use some of the floor space of these properties.

The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March 31,

2020 and 2019 are as follows:

Total

3,635,622

2,986,555

2,012,048

637,175

111,175

9,382,575

(68,054)

9,314,521

Segment profit

$  1,556,989

$   435,383

$   189,165

$177,713

$    7,123

$  2,366,373

$  (212,784)

$  2,153,589

Segment assets

$36,047,404

$6,158,248

$   230,245

$  75,186

$666,079

$43,177,162

$5,693,558

$48,870,720

Other:

Depreciation and amortization

$     417,434

$       1,094

$     11,791

$    4,246

$    2,886

$     437,451

$     12,636

$     450,087

Loss on impairment of fixed assets

88,779

-

-

-

-

88,779

-

88,779

Increase in property and equipment,

2,511,212

26,827

14,273

3,943

5,587

2,561,842

5,698

2,567,540

and intangible assets

(Note) Information for the year ended March 31, 2018 has been adjusted retroactively reflecting the adoption of "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018) effective from the beginning of the year ended March 31, 2019.

Millions of yen

2020

2019

Balance at beginning of fiscal year

¥3,373,449

¥3,208,325

Investment and rental properties

Changes during the fiscal year

42,533

165,124

Balance at end of fiscal year

3,415,982

3,373,449

Fair value at end of fiscal year

6,330,951

5,838,717

Balance at beginning of fiscal year

¥   141,889

¥   141,950

A portion used as investment and rental properties

Changes during the fiscal year

(2,798)

(61)

Balance at end of fiscal year

139,091

141,889

Fair value at end of fiscal year

400,272

379,883

2020

$31,003,116 390,892 31,394,008 58,183,540

$  1,304,007 (25,715)

1,278,292

3,678,632

Intercompany eliminations between the Company and its

Intercompany eliminations between the Company and its consolidated

consolidated subsidiaries and undistributed corporate expenses to each

subsidiaries and undistributed corporate assets to each segment are included

segment are included in adjustments of segment profit, and the

in adjustments of segment assets, and the Company classified cash, time and

Company classified expenses of the general administrative division in the

notice deposits, investments in securities and assets of the general

Company and its certain consolidated subsidiaries to corporate expenses

administrative division in the Company and its certain consolidated subsidiaries

(Notes)

  • Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs.
  • Fair values as of March 31, 2020 and 2019 are calculated by the Company primarily based on their fair values according to Real Estate Appraisal Standards.

Significant changes during the years ended March 31, 2020 and 2019 are as follows:

Thousands of

Millions of yen

U.S. dollars

for the years ended March 31, 2020, 2019 and 2018.

to corporate assets for the years ended March 31, 2020, 2019 and 2018.

19 Comprehensive income

Amounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods and tax effects for each component of other comprehensive income (loss) for the years ended March 31, 2020, 2019 and 2018 are as follows:

Thousands of

Millions of yen

U.S. dollars

2020

2019

2018

2020

Unrealized holding gains (losses) on securities:

Increase (Decrease) during the fiscal year

¥(53,788)

¥(32,668)

¥ 50,290

$(494,330)

Reclassification adjustments

6,434

1,088

(1,373)

59,131

  Amounts before tax effects

(47,354)

(31,580)

48,917

(435,199)

  Tax effects

14,479

9,675

(14,982)

133,067

2020

2019

Increase:

Acquired real estate

¥181,035

¥173,144

Transferred from real estate for sale in process, etc.

6,785

23,162

Decrease:

Depreciation and amortization

¥ (42,436)

¥ (42,374)

Transferred to real estate for sale, etc.

(1,940)

(4,822)

Loss on impairment of fixed assets

(9,660)

(8,576)

Transferred to owner-occupied properties, etc.

(67,244)

-

Income and expenses for investment and rental properties for the years ended March 31, 2020 and 2019 are as follows:

Millions of yen

2020

$1,663,772 62,356

$  (390,001) (17,829) (88,779)

(617,995)

Thousands of

U.S. dollars

Total

¥(32,875)

¥(21,905)

¥ 33,935

$(302,132)

Deferred gains (losses) on hedges:

Increase (Decrease) during the fiscal year

¥     (349)

¥  (3,628)

¥     (453)

$    (3,207)

Reclassification adjustments

942

876

1,208

8,657

  Amounts before tax effects

593

(2,752)

755

5,450

  Tax effects

(181)

829

(217)

(1,664)

Total

¥      412

¥  (1,923)

¥      538

$     3,786

Foreign currency translation adjustments:

Increase (Decrease) during the fiscal year

¥     (366)

¥     (259)

¥  (1,098)

$    (3,364)

2020

2019

Income

¥291,163

¥269,493

Investment and rental properties

Expenses

135,568

137,784

Balance

155,595

131,709

Other income (expenses)

(12,197)

(9,193)

Income

¥  18,536

¥  18,413

A portion used as investment and rental properties

Expenses

8,869

9,176

Balance

9,667

9,237

Other income (expenses)

(45)

(4)

2020

$2,675,885 1,245,915 1,429,970 (112,094)

$   170,352 81,509 88,843 (414)

Remeasurements of defined benefit plans:

Increase (Decrease) during the fiscal year

¥     (257)

¥       (66)

¥      229

$    (2,362)

Reclassification adjustments

66

(229)

41

607

  Amounts before tax effects

(191)

(295)

270

(1,755)

  Tax effects

88

61

(82)

809

Total

¥     (103)

¥     (234)

¥      188

$       (946)

Total other comprehensive income (loss)

¥(32,932)

¥(24,321)

¥ 33,563

$(302,656)

(Notes)

  • As a portion used as investment and rental properties includes a portion used by the Company or its certain consolidated subsidiaries for providing services as well as management and administration, income for these are not recorded above. The expenses primarily consist of rent, depreciation, taxes and dues, and others.
  • Other income (expenses) for investment and rental properties is mostly the loss on impairment of fixed assets, and Other income (expenses) for a portion used as investment and rental properties is mostly the loss on disposal of property and equipment.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Independent Auditor's Report

21 Contingent liabilities

The Company and its consolidated subsidiaries were contingently liable as guarantors of borrowings by customers and others in an amount aggregating to ¥9,407 million ($86,453 thousand) and ¥7,316 million at March 31, 2020 and 2019, respectively.

22 Subsequent events

(Change in ownership of its subsidiary with transfer of equity interest)

The Company decided to transfer all of its equity interest in its subsidiary, Dalian Qingyun Sky Realty and Development Co., Ltd., to Dalian Jiaguan Guangcheng Corporate Management Centre (Limited Partnership) as of June 12, 2020.

  1. Reason for transfer of equity interest
    The Company established the subsidiary in 2013, with business objectives of development and sales of condominiums, as a joint-venture with Yida Group Co., Ltd., a prominent developer in Dalian, China (due to the reorganization of Yida Group, the current partner is Dalian Yida Management Consultancy Co., Ltd., herein referred to as "Yida"). Although the subsidiary had been promoting its business thereafter, Yida offered to dissolve the joint venture and the Company decided to transfer all of its equity interest in the subsidiary to a LLP led by Yida, in which the Company holds no stake.
  2. Overview of the subsidiary transferred
    Name: Dalian Qingyun Sky Realty and Development Co., Ltd.
    Address: Room 524, 9-1 Kuiying Street, Zhongshan District, Dalian City, Liaoning Province, PRC
    Position and name of representative: Executive Director, Yusuke Menjo
    Description of business: Development, construction, sale, lease and related operations of real estate
    Paid-in capital: RMB 2,963,280,000
    Establishment: February, 2013
    Shareholding ratio: Sumitomo Realty & Development Co., Ltd. 75%, Dalian Yida Management Consultancy Co., Ltd. 25%
  3. Name of the counterparty of the transfer
    Dalian Jiaguan Guangcheng Corporate Management Centre (Limited Partnership)
  4. Amount of transfer RMB 3,030,000,000
  5. Date of transfer June 12, 2020
  6. Effect on the financial statements
    The gain on sale of investments in securities of ¥12,293 million (¥15.06/RMB) will be recognized as Other income for the year ending March 31, 2021.

(Dividends)

On June 26, 2020, the shareholders of the Company approved payments of a year-end cash dividend of ¥19 ($0.17) per share or a total of ¥9,004 million ($82,750 thousand) to shareholders of record at March 31, 2020. Such appropriations are recognized in the period in which they are approved by the shareholders.

To the Board of Directors of Sumitomo Realty & Development Co., Ltd.:

Opinion

We have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. ("the Company") and its consolidated subsidiaries (collectively referred to as "the Group"), which comprise the consolidated balance sheets as at March 31, 2020 and 2019, the consolidated statements of income and comprehensive income, changes in net assets and cash flows for each of the years in the three-year period ended March 31, 2020, and notes, comprising a summary of significant accounting policies, other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2020 and 2019, and its consolidated financial performance and cash flows for each of the years in the three-year period ended March 31, 2020, in accordance with accounting principles generally accepted in Japan.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Corporate auditors and the board of corporate auditors are responsible for overseeing the directors' performance of their duties including the design, implementation and maintenance of the Group's financial reporting process.

Sumitomo Realty & Development Co., Ltd.

Financial Section

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Group's internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting standards generally accepted in Japan, the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned scope and timing of the audit, significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Convenience Translation

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2020 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements.

Interest required to be disclosed by the Certified Public Accountants Act of Japan

We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

/S/ Atsuji Maeno

Designated Engagement Partner

Certified Public Accountant

/S/ Hidekazu Takahashi

Designated Engagement Partner

Certified Public Accountant

/S/ Masako Kanno

Designated Engagement Partner

Certified Public Accountant

KPMG AZSA LLC

Tokyo Office, Japan

July 29, 2020

Notes to the Reader of Independent Auditor's Report:

This is a copy of the Independent Auditor's Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

Sumitomo Realty & Development Co., Ltd.

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Sumitomo Realty & Development Co. Ltd. published this content on 07 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 August 2020 06:53:19 UTC


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Financials
Sales 2021 909 B 8 676 M 8 676 M
Net income 2021 135 B 1 287 M 1 287 M
Net Debt 2021 3 228 B 30 819 M 30 819 M
P/E ratio 2021 10,4x
Yield 2021 1,29%
Capitalization 1 401 B 13 369 M 13 374 M
EV / Sales 2021 5,09x
EV / Sales 2022 4,83x
Nbr of Employees 13 676
Free-Float 72,1%
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Technical analysis trends SUMITOMO REALTY & DEVELOPMENT CO., LTD.
Short TermMid-TermLong Term
TrendsBearishNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 18
Average target price 3 663,89 JPY
Last Close Price 2 955,50 JPY
Spread / Highest target 75,6%
Spread / Average Target 24,0%
Spread / Lowest Target -22,9%
EPS Revisions
Managers
NameTitle
Kojun Nishima President & Representative Director
Junji Takashima Chairman
Ken’ichi Onodera Chairman
Yoshiyuki Odai Director & Manager-Finance
Masato Kobayashi Representative Director & Vice President