MITSUBISHI ESTATE Annual Report 2013

37MITSUBISHI ESTATE CO., LTD. ANNUAL REPORT 2013 Derivative nancial instruments are carried at fair value with any changes in unrealized gain or loss charged or credited to operations, except for those which meet the criteria for deferral hedge accounting under which unrealized gain or loss is deferred as an asset or liability.m. Revenue recognitionThe consolidated statements of income re ect revenue from operations in the following manner:(a) Revenue from the leasing of of ce space is recognized as rent accrued over the leasing period.(b) Revenue from sales of condominiums, residential houses and land is recognized when the units are delivered and accepted by the customers. Revenue from consignment commissions for residential sales earned by the real estate service business segment is recognized at the time of contract conclusion for services provided up to the conclusion and at the time of ownership transfer for services provided up to the transfer.(c) Revenue from real estate brokerage is recognized when an underlying lease agreement goes into force or the underlying units are delivered.(d) Revenue of construction contracts, of which the percentage of completion can be reliably estimated, is recognized by the percentage-of-completion method. The percentage-of-completion method is calculated at the cost incurred by the end of the consolidated scal year as a percentage of estimated total cost. The completed-contract method continues to be applied for other contracts for which the percentage of completion cannot be reliably estimated.(e) Other operating revenue is recognized on an accrual basis.n. Appropriation of retained earningsUnder the Companies Act of Japan, the appropriation of retained earnings with respect to a given nancial year is made by resolution of the shareholders at a general meeting held subsequent to the close of such nancial year. The accounts for that year do not, therefore, re ect such appropriations. See Note 9 for more information.o. Standards issued but not yet effectiveOn May 17, 2012, the Accounting Standards Board of Japan (ASBJ) issued “Accounting Standard for Retirement Bene ts” (ASBJ Statement No. 26) and “Guidance on Accounting Standard for Retirement Bene ts” (ASBJ Guidance No. 25), which replaced the Accounting Standard for Retirement Bene ts that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000 and the other related practical guidance, being followed by partial amendments from time to time through 2009. The major changes are as follows:(1) Treatment in the balance sheet–Actuarial gains and losses and prior service cost that have yet to be recognized in pro t or loss shall be recognized within net assets (accumulated other comprehensive income), after adjusting for tax effects, and the de cit or surplus shall be recognized as a liability (liability for retirement bene ts) or asset (asset for retirement bene ts). (2) Treatment in the statement of income and the statement of comprehensive income–Actuarial gains and losses and prior service cost that arose in the current period and have yet to be recognized in pro t or loss shall be included in other comprehensive income and actuarial gains and losses and prior service cost that were recognized in other comprehensive income in prior periods and then recognized in pro t or loss in the current period shall be treated as reclassi cation adjustments. This standard and related guidance are effective as of the end of scal years beginning on or after April 1, 2013. The Company is currently evaluating the effect these modi cations will have on its consolidated results of operations and nancial position.Consolidated Financial Statements,” and their assets and liabilities are measured at fair value. As a result, retained earnings decreased by ¥89,146 million ($947,867 thousand) as at April 1, 2012.(“Changes in depreciation method”)In accordance with an amendment to the Corporation Tax Law of Japan effective April 1, 2012, the Company and its domestic consolidated subsidiaries have changed their depreciation method for property, plant and equipment acquired on or after April 1, 2012, other than certain buildings, to re ect the methods prescribed in the amended Corporation Tax Law. The previously applied 250% declining-balance method was changed to the 200% declining-balance method. The impact of this change on consolidated operating income and income before income taxes and minority interests for the year ended March 31, 2013 is immaterial.(“Revised Accounting Standard for Consolidated Financial Statements”)Effective April 1, 2012, the Company early adopted the new accounting standard, “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22 issued on March 25, 2011), “Revised Guidance on Disclosures about Certain Special Purpose Entities” (ASBJ Guidance No. 15 issued on March 25, 2011) and other related standards and guidance. Accordingly, 6 special purpose companies, including Shinjuku 6-chome Tokutei Mokuteki Kaisya, Otemachi Development Tokutei Mokuteki Kaisya, Toyosu 3-1 Tokutei Mokuteki Kaisya, Shinjuku 6-chome S-Block Tokutei Mokuteki Kaisya, have been newly included within the scope of consolidation. The accounting policies of the newly consolidated 6 entities comply with the rules under paragraph 44-4, item (4) of “Accounting Standard for 2Changes in Accounting Policy4InventoriesInventories at March 31, 2013 and 2012 are summarized as follows:Millions of yenThousands of U.S. dollars201320122013Real estate for sale¥152,354¥120,573$1,619,934Land and housing projects in progress343,621328,1273,653,600Land held for development8,6158,63291,607Other6,4448,06868,524 Total¥511,036¥465,401$5,433,6663U.S. Dollar AmountsTranslation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at the rate of ¥94.05 = U.S. $1.00, the approximate rate of exchange prevailing on March 31, 2013. The inclusion of such amounts is not intended to imply that yen amounts have been or could be readily converted, realized or settled in U.S. dollars at the above or any other rate.