MITSUBISHI ESTATE Annual Report 2014
Financial sectionThe changes in the carrying value during the year ended March 31, 2013 and the fair values of these rental properties and real estate including space used as rental properties as of March 31, 2013 are as follows;Millions of yen2013Carrying ValueFair ValueAs of April 1, 2012Net ChangeAs of March 31, 2013As of March 31, 2013Rental properties¥2,622,741¥342,654¥2,965,396¥4,920,768Real estate including spaces used as rental properties232,419 (4,854)227,564 339,800 1.The carrying value represents the acquisition cost less accumulated depreciation and accumulated impairment loss.2.The components of net change in carrying value included increases mainly due to the consolidation of Shinjuku 6-chome Tokutei Mokuteki Kaisya in the amount of ¥166,998 million.3.The fair value is based on the following:(1)The fair value of real estate in Japan is calculated by the Company based mainly on the Real Estate Appraisal Standards.(2)The fair value of real estate in overseas countries is appraised principally by local real estate appraisers.The income or loss from rental properties and real estate including space used as rental properties for the years ended March 31, 2014 and 2013 were as follows:Millions of yenThousands of U.S. dollars201420132014Lease income*1Lease costLease income, netOther, net*2Lease income*1Lease costLease income, netOther, net*2Lease income*1Lease costLease income, netOther, net*2Rental properties¥373,047¥256,935¥116,111¥(30,873)¥349,767¥231,696¥118,070¥(17,189)$3,624,631 $2,496,455 $1,128,176 $(299,977)Real estate including space used as rental properties17,07416,227847(1,474)17,64616,4311,215(5,534)165,900 157,669 8,230 (14,324)*1Lease income excludes that from real estate including space used as rental properties used by the Company and some of its consolidated subsidiaries for leasing service and operating management.*2Other, net includes impairment loss in the amount of ¥32,365 million ($314,474 thousand) in 2014.20 Asset Retirement Obligations(1) Asset retirement obligations presented in the consolidated balance sheet1.Outline of asset retirement obligationsAsset retirement obligations include obligations of restoration related to leasehold and rental contracts.2.Calculation method for asset retirement obligationsAsset retirement obligations are calculated based on the remaining contract years as an expected use period with a discount rate between 0.3% and 2.6%.3.The changes in asset retirement obligations during the years ended March 31, 2014 and 2013 are as follows:Millions of yenThousands of U.S. dollars201420132014Balance at the beginning of the year¥ 490¥401$ 4,763Increase due to the acquisition of property and equipment8192227,962Adjustments due to the elapse of time1010100Increase (Decrease) due to the change of estimate—(52)—Decrease due to the fulfillment of asset retirement obligations(3)(10)(34)Other—(81)—Balance at the end of the year¥1,316¥490$12,791 (2) Asset retirement obligations not recognized in the consolidated balance sheetAs below stated, certain obligations are excluded from recognition of asset retirement obligations.1)Obligation to remove asbestos that is used for some properties and equipments in a particular way required by the Ordinance on Preventing Asbestos HazardsFor such properties, the Company has an obligation to remove asbestos at demolition of buildings. However, no demolition has taken place in the past other than those related to redevelopment or other projects involving many other business associates. It is therefore difficult to reasonably estimate the timing to fulfill such obligation based on the physical useful life of the assets caused by aging and it is impossible to estimate the timing without specific business plans. Although the Company has been voluntarily conducting asbestos removal work when that is feasible due to such as termination of tenancy, it is impractical to make a reasonable estimation of progress of such voluntary removal work based on the actual record of the tenancy termination and of the remaining amount of asbestos at demolition. Moreover, it is difficult to distinguish costs of asbestos removal from total costs of demolition. Although the Company made the best estimation taking into account all the evidence available as of March 31, 2014, these obligations are excluded from recognition of asset retirement obligations since the probability of obligations in terms of scope and amount was not reasonably estimated.2)Obligation of restoration based on some real estate rental agreementsFor some commercial facilities, the Company has an obligation of restoration at the termination of leasehold rental agreements. However, the timing to fulfill the obligation is uncertain since it is practically possible to continue to use those facilities by re-signing contracts and some contracts set forth a special provision to reduce the possibility to fulfill the obligation. Furthermore, given its business strategies and the current business environment, the Company intends to continue its operation and not to fulfill the obligation. Although the Company made the best estimation taking into account all the evidence available as of March 31, 2014, these obligations are excluded from recognition of asset retirement obligations since the probability of obligations in terms of scope and amount was not reasonably estimated.74MITSUBISHI ESTATE CO., LTD.