EXHIBIT 99.1
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders of
Yahoo Japan Corporation
Tokyo, Japan:
Yahoo Japan Corporation
Tokyo, Japan:
We have audited the accompanying consolidated balance sheet of Yahoo Japan Corporation and Consolidated Subsidiaries (the “Company”) as of March 31, 2008, and the related consolidated statements of income, changes in equity, and cash flows for the year then ended (all expressed in Japanese Yen). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Yahoo Japan Corporation and Consolidated Subsidiaries as of March 31, 2008 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in Japan.
Accounting principles generally accepted in Japan differ in certain respects from accounting principles generally accepted in the United States of America. Information relating to the nature of such differences is presented in Note 15 to the consolidated financial statements.
As discussed in Note 13 to the consolidated financial statements, on May 23, 2008, the Board of Directors of the Company approved a proposal authorizing the Company to acquire up to 2% of its entire issued shares. The acquisition was made via market by a trust from June 2, 2008 to July 11, 2008, and the Company retired all of the treasury stock acquired.
Our audit also comprehended the translation of Japanese Yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 1. The translation of the financial statement amounts into U.S. dollars has been made solely for the convenience of readers outside Japan.
/s/Deloitte Touche Tohmatsu
Tokyo, Japan
September 29, 2008
September 29, 2008
Yahoo Japan Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
As of March 31, | ||||||||||||
Thousands of | ||||||||||||
U.S. Dollars | ||||||||||||
Millions of Yen | (Note 1) | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | ¥ 113,027 | ¥ 75,212 | $ | 1,128,131 | ||||||||
Receivables: | ||||||||||||
Trade accounts | 36,831 | 30,245 | 367,615 | |||||||||
Other | 4,511 | 3,426 | 45,027 | |||||||||
Allowance for doubtful accounts | (2,095 | ) | (2,300 | ) | (20,913 | ) | ||||||
Inventories (Note 3) | 240 | 173 | 2,397 | |||||||||
Deferred tax assets (Note 8) | 4,306 | 4,345 | 42,974 | |||||||||
Other current assets | 7,490 | 4,220 | 74,755 | |||||||||
Total current assets | 164,310 | 115,321 | 1,639,986 | |||||||||
Property and equipment: | ||||||||||||
Buildings and structures | 4,514 | 4,265 | 45,053 | |||||||||
Machinery and equipment | 37,698 | 31,757 | 376,264 | |||||||||
Construction in progress | 54 | 63 | 536 | |||||||||
Total | 42,266 | 36,085 | 421,853 | |||||||||
Accumulated depreciation | (25,642 | ) | (19,534 | ) | (255,929 | ) | ||||||
Net property and equipment | 16,624 | 16,551 | 165,924 | |||||||||
Investments and other assets: | ||||||||||||
Investment securities (Note 4) | 151,818 | 149,767 | 1,515,301 | |||||||||
Investments in unconsolidated subsidiaries and associated companies | 12,179 | 12,501 | 121,558 | |||||||||
Goodwill | 2,526 | 4,062 | 25,210 | |||||||||
Deferred tax assets (Note 8) | 3,899 | 2,990 | 38,914 | |||||||||
Other assets | 18,323 | 17,260 | 182,885 | |||||||||
Allowance for doubtful accounts | (19 | ) | (24 | ) | (187 | ) | ||||||
Total investments and other assets | 188,726 | 186,556 | 1,883,681 | |||||||||
Total assets | ¥ 369,660 | ¥ 318,428 | $ | 3,689,591 | ||||||||
See notes to consolidated financial statements.
1
Yahoo Japan Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets — (Continued)
As of March 31, | ||||||||||||
Thousands of | ||||||||||||
U.S. Dollars | ||||||||||||
Millions of Yen | (Note 1) | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Short-term bank loans (Note 5) | ¥ | — | ¥ | 120 | $ | — | ||||||
Current portion of long-term debt (Note 5) | 20,000 | 20,000 | 199,621 | |||||||||
Payables: | ||||||||||||
Trade accounts | 6,621 | 1,022 | 66,084 | |||||||||
Other | 13,744 | 13,345 | 137,184 | |||||||||
Income taxes payable (Note 8) | 29,154 | 28,372 | 290,988 | |||||||||
Provision for Yahoo! Points (Note 2.k) | 2,293 | 2,065 | 22,883 | |||||||||
Other current liabilities | 17,165 | 11,108 | 171,322 | |||||||||
Total current liabilities | 88,977 | 76,032 | 888,082 | |||||||||
Long-term liabilities: | ||||||||||||
Long-term debt (Note 5) | 30,000 | 50,000 | 299,431 | |||||||||
Other | 11 | 11 | 108 | |||||||||
Total long-term liabilities | 30,011 | 50,011 | 299,539 | |||||||||
Commitments (Notes 9 and 10) | ||||||||||||
Equity (Notes 6 and 13): | ||||||||||||
Common stock — 241,600,000 shares authorized; 60,502,022 shares issued in 2008 and 60,477,014 shares issued in 2007 (unaudited) | 7,366 | 7,187 | 73,521 | |||||||||
Capital surplus | 2,447 | 2,268 | 24,424 | |||||||||
Stock acquisition rights | 116 | 30 | 1,159 | |||||||||
Retained earnings | 236,606 | 179,897 | 2,361,568 | |||||||||
Net unrealized gain on available-for-sale securities | 1,717 | 1,369 | 17,136 | |||||||||
Treasury stock — at cost, 1,932 shares in 2008 and 1,926 shares in 2007 (unaudited) | (29 | ) | (28 | ) | (283 | ) | ||||||
Total | 248,223 | 190,723 | 2,477,525 | |||||||||
Minority interests | 2,449 | 1,662 | 24,445 | |||||||||
Total equity | 250,672 | 192,385 | 2,501,970 | |||||||||
Total liabilities and equity | ¥ | 369,660 | ¥ | 318,428 | $ | 3,689,591 | ||||||
See notes to consolidated financial statements.
2
Yahoo Japan Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
Years Ended March 31, | ||||||||||||||||
Thousands of | ||||||||||||||||
U.S. Dollars | ||||||||||||||||
Millions of Yen | (Note 1) | |||||||||||||||
2008 | 2007 | 2006 | 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
NET SALES | ¥ 262,027 | ¥ 212,553 | ¥ 173,696 | $ | 2,615,304 | |||||||||||
COST OF SALES | 28,260 | 8,487 | 12,843 | 282,071 | ||||||||||||
Gross profit | 233,767 | 204,066 | 160,853 | 2,333,233 | ||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | 108,959 | 97,833 | 78,720 | 1,087,523 | ||||||||||||
Operating income | 124,808 | 106,233 | 82,133 | 1,245,710 | ||||||||||||
OTHER INCOME (EXPENSES): | ||||||||||||||||
Interest and dividend income | 359 | 256 | 654 | 3,586 | ||||||||||||
Interest expense | (625 | ) | (480 | ) | (5 | ) | (6,233 | ) | ||||||||
Gain (loss) on exchange — net | 276 | (7 | ) | (24 | ) | 2,758 | ||||||||||
Equity in losses of associated companies | (6,750 | ) | (3,523 | ) | (2,690 | ) | (67,369 | ) | ||||||||
Lump-sum amortization of goodwill (Note 2.i) | (1,827 | ) | — | — | (18,231 | ) | ||||||||||
Other — net | (2,251 | ) | (711 | ) | (104 | ) | (22,485 | ) | ||||||||
Other expenses — net | (10,818 | ) | (4,465 | ) | (2,169 | ) | (107,974 | ) | ||||||||
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS | 113,990 | 101,768 | 79,964 | 1,137,736 | ||||||||||||
INCOME TAXES (Note 8): | ||||||||||||||||
Current | 51,593 | 45,223 | 35,711 | 514,947 | ||||||||||||
Deferred | (902 | ) | (1,808 | ) | (3,118 | ) | (9,000 | ) | ||||||||
Total income taxes | 50,691 | 43,415 | 32,593 | 505,947 | ||||||||||||
MINORITY INTERESTS IN NET INCOME | 681 | 390 | 280 | 6,797 | ||||||||||||
NET INCOME | ¥ 62,618 | ¥ 57,963 | ¥ 47,091 | $ | 624,992 | |||||||||||
U.S. Dollars | ||||||||||||||||
Yen | (Note 1) | |||||||||||||||
PER SHARE OF COMMON STOCK | ||||||||||||||||
(Notes 2.t and 12): | ||||||||||||||||
Basic net income | ¥ 1,035.27 | ¥ 958.66 | ¥ 776.62 | $ | 10.33 | |||||||||||
Diluted net income | 1,033.79 | 956.70 | 774.57 | 10.32 | ||||||||||||
Cash dividends applicable to the year | 104.00 | 96.00 | 78.00 | 1.04 |
See notes to consolidated financial statements.
3
Yahoo Japan Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Equity
Years Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||
Thousands | Millions of Yen | |||||||||||||||||||||||||||||||||||||||||||
Issued | Net Unrealized | |||||||||||||||||||||||||||||||||||||||||||
Number of | Gain (Loss) on | Foreign | ||||||||||||||||||||||||||||||||||||||||||
Shares of | Stock | Available- | Currency | |||||||||||||||||||||||||||||||||||||||||
Common | Common | Capital | Acquisition | Retained | for-sale | Translation | Treasury | Minority | Total | |||||||||||||||||||||||||||||||||||
Stock | Stock | Surplus | Rights | Earnings | Securities | Adjustments | Stock | Total | Interests | Equity | ||||||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2005 (unaudited) | 7,550 | ¥ 6,692 | ¥ 1,773 | ¥ — | ¥ 83,461 | ¥ 4,162 | ¥ — | ¥(28 | ) | ¥ 96,060 | ¥ | — | ¥ 96,060 | |||||||||||||||||||||||||||||||
Exercise of stock options | 21 | 341 | 341 | — | — | — | — | — | 682 | — | 682 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 47,091 | — | — | — | 47,091 | — | 47,091 | |||||||||||||||||||||||||||||||||
Cash dividends (¥60.5 per share) | — | — | — | — | (3,654 | ) | — | — | — | (3,654 | ) | — | (3,654 | ) | ||||||||||||||||||||||||||||||
Bonuses to directors and corporate auditors | — | — | — | — | (160 | ) | — | — | — | (160 | ) | — | (160 | ) | ||||||||||||||||||||||||||||||
Stock splits (Note 6) | 22,655 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net change in the year | — | — | — | — | — | 2,435 | 1 | — | 2,436 | — | 2,436 | |||||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2006 (unaudited) | 30,226 | 7,033 | 2,114 | — | 126,738 | 6,597 | 1 | (28 | ) | 142,455 | — | 142,455 | ||||||||||||||||||||||||||||||||
Reclassified balance as of March 31, 2006 | — | — | — | — | — | — | — | — | — | 1,367 | 1,367 | |||||||||||||||||||||||||||||||||
Exercise of stock options | 25 | 154 | 154 | — | — | — | — | — | 308 | — | 308 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 57,963 | — | — | — | 57,963 | — | 57,963 | |||||||||||||||||||||||||||||||||
Cash dividends (¥78 per share) | — | — | — | — | (4,715 | ) | — | — | — | (4,715 | ) | — | (4,715 | ) | ||||||||||||||||||||||||||||||
Bonuses to directors and corporate auditors | — | — | — | — | (168 | ) | — | — | — | (168 | ) | — | (168 | ) | ||||||||||||||||||||||||||||||
Deconsolidation of subsidiaries | — | — | — | — | 79 | — | — | — | 79 | — | 79 | |||||||||||||||||||||||||||||||||
Stock splits (Note 6) | 30,226 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Net change in the year | — | — | — | 30 | — | (5,228 | ) | (1 | ) | — | (5,199 | ) | 295 | (4,904 | ) | |||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2007 (unaudited) | 60,477 | 7,187 | 2,268 | 30 | 179,897 | 1,369 | — | (28 | ) | 190,723 | 1,662 | 192,385 | ||||||||||||||||||||||||||||||||
Exercise of stock options | 25 | 179 | 179 | — | — | — | — | — | 358 | — | 358 | |||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 62,618 | — | — | — | 62,618 | — | 62,618 | |||||||||||||||||||||||||||||||||
Cash dividends (¥96 per share) | — | — | — | — | (5,805 | ) | — | — | — | (5,805 | ) | — | (5,805 | ) | ||||||||||||||||||||||||||||||
Decrease in associated companies accounted for by the equity method | — | — | — | — | (89 | ) | — | — | — | (89 | ) | — | (89 | ) | ||||||||||||||||||||||||||||||
Deconsolidation of subsidiaries | — | — | — | — | (15 | ) | — | — | — | (15 | ) | — | (15 | ) | ||||||||||||||||||||||||||||||
Purchase of treasury stocks | — | — | — | — | — | — | — | (1 | ) | (1 | ) | — | (1 | ) | ||||||||||||||||||||||||||||||
Net change in the year | — | — | — | 86 | — | 348 | — | — | 434 | 787 | 1,221 | |||||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2008 | 60,502 | ¥ 7,366 | �� | ¥ 2,447 | ¥ 116 | ¥ 236,606 | ¥ 1,717 | ¥ — | ¥(29 | ) | ¥ 248,223 | ¥ | 2,449 | ¥ 250,672 | ||||||||||||||||||||||||||||||
Thousands of U.S. Dollars (Note 1) | ||||||||||||||||||||||||||||||||||||||||
Net Unrealized | ||||||||||||||||||||||||||||||||||||||||
Gain (Loss) on | ||||||||||||||||||||||||||||||||||||||||
Stock | Available- | |||||||||||||||||||||||||||||||||||||||
Common | Capital | Acquisition | Retained | for-sale | Treasury | Minority | Total | |||||||||||||||||||||||||||||||||
Stock | Surplus | Rights | Earnings | Securities | Stock | Total | Interests | Equity | ||||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2007 (unaudited) | $ | 71,734 | $ | 22,637 | $ | 300 | $ | 1,795,562 | $ | 13,657 | $ | (281 | ) | $ | 1,903,609 | $ | 16,594 | $ | 1,920,203 | |||||||||||||||||||||
Exercise of stock options | 1,787 | 1,787 | — | — | — | — | 3,574 | — | 3,574 | |||||||||||||||||||||||||||||||
Net income | — | — | — | 624,992 | — | — | 624,992 | — | 624,992 | |||||||||||||||||||||||||||||||
Cash dividends ($0.96 per share) | — | — | — | (57,947 | ) | — | — | (57,947 | ) | — | (57,947 | ) | ||||||||||||||||||||||||||||
Decrease in associated companies accounted for by the equity method | — | — | — | (889 | ) | — | — | (889 | ) | — | (889 | ) | ||||||||||||||||||||||||||||
Deconsolidation of subsidiaries | — | — | — | (150 | ) | — | — | (150 | ) | — | (150 | ) | ||||||||||||||||||||||||||||
Purchase of treasury stocks | — | — | — | — | — | (2 | ) | (2 | ) | — | (2 | ) | ||||||||||||||||||||||||||||
Net change in the year | — | — | 859 | — | 3,479 | — | 4,338 | 7,851 | 12,189 | |||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2008 | $ | 73,521 | $ | 24,424 | $ | 1,159 | $ | 2,361,568 | $ | 17,136 | $ | (283 | ) | $ | 2,477,525 | $ | 24,445 | $ | 2,501,970 | |||||||||||||||||||||
See notes to consolidated financial statements.
4
Yahoo Japan Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Years Ended March 31, | ||||||||||||||||
Thousands of | ||||||||||||||||
U.S. Dollars | ||||||||||||||||
Millions of Yen | (Note 1) | |||||||||||||||
2008 | 2007 | 2006 | 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Income before income taxes and minority interests | ¥ | 113,990 | ¥ | 101,768 | ¥ | 79,964 | $ | 1,137,736 | ||||||||
Adjustments for: | ||||||||||||||||
Income taxes — paid | (51,139 | ) | (40,418 | ) | (28,893 | ) | (510,421 | ) | ||||||||
Depreciation and amortization | 10,180 | 8,576 | 6,922 | 101,605 | ||||||||||||
Amortization of goodwill | 3,432 | 1,384 | 1,039 | 34,257 | ||||||||||||
Equity in losses of associated companies | 6,750 | 3,523 | 2,690 | 67,369 | ||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Increase in trade receivables | (3,894 | ) | (4,730 | ) | (6,354 | ) | (38,868 | ) | ||||||||
Increase in other receivables | (4,193 | ) | (4,128 | ) | (2,549 | ) | (41,847 | ) | ||||||||
Increase in trade payables | 5,584 | 102 | 1,386 | 55,731 | ||||||||||||
(Decrease) increase in other payables | (2,447 | ) | 4,232 | 5,305 | (24,422 | ) | ||||||||||
Increase in consumption tax payables | 2,228 | 654 | 391 | 22,233 | ||||||||||||
Other — net | 1,003 | 1,747 | (297 | ) | 10,021 | |||||||||||
Total adjustments | (32,496 | ) | (29,058 | ) | (20,360 | ) | (324,342 | ) | ||||||||
Net cash provided by operating activities | 81,494 | 72,710 | 59,604 | 813,394 | ||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Payment into time deposits | (20,000 | ) | (4 | ) | (1 | ) | (199,621 | ) | ||||||||
Decrease in time deposits | 20,000 | 4 | 1 | 199,621 | ||||||||||||
Purchase of property and equipment | (7,513 | ) | (10,204 | ) | (7,228 | ) | (74,987 | ) | ||||||||
Purchase of other assets | (4,181 | ) | (7,855 | ) | (5,149 | ) | (41,726 | ) | ||||||||
Purchase of investment securities | (8,836 | ) | (146,600 | ) | (15,210 | ) | (88,193 | ) | ||||||||
Payment for purchase of newly consolidated subsidiaries’ stocks | (356 | ) | (719 | ) | (3,984 | ) | (3,555 | ) | ||||||||
Proceeds from purchase of newly consolidated subsidiaries’ stocks | 2,355 | — | — | 23,509 | ||||||||||||
Collection on loans receivable | 1 | 3,658 | 2,264 | 6 | ||||||||||||
Other — net | 1,548 | 1,318 | 1,774 | 15,452 | ||||||||||||
Net cash used in investing activities | (16,982 | ) | (160,402 | ) | (27,533 | ) | (169,494 | ) | ||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from long-term debt | — | 80,070 | — | — | ||||||||||||
Repayment of long-term debt | (20,000 | ) | (10,048 | ) | — | (199,621 | ) | |||||||||
Dividends paid | (5,805 | ) | (4,715 | ) | (3,654 | ) | (57,946 | ) | ||||||||
Other — net | (387 | ) | (274 | ) | 626 | (3,861 | ) | |||||||||
Net cash (used in) provided by financing activities | (26,192 | ) | 65,033 | (3,028 | ) | (261,428 | ) | |||||||||
See notes to consolidated financial statements.
5
Yahoo Japan Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows — (Continued)
Years Ended March 31, | ||||||||||||||||
Thousands of | ||||||||||||||||
U.S. Dollars | ||||||||||||||||
Millions of Yen | (Note 1) | |||||||||||||||
2008 | 2007 | 2006 | 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Net increase (decrease) in cash and cash equivalents — (Forward) | ¥ | 38,320 | ¥ | (22,659 | ) | ¥ | 29,043 | $ | 382,472 | |||||||
Cash and cash equivalents, beginning of year | 75,212 | 98,035 | 68,992 | 750,697 | ||||||||||||
Decrease in cash and cash equivalents due to deconsolidation of subsidiaries | (505 | ) | (164 | ) | — | (5,038 | ) | |||||||||
Cash and cash equivalents, end of year | ¥ | 113,027 | ¥ | 75,212 | ¥ | 98,035 | $ | 1,128,131 | ||||||||
ADDITIONAL CASH FLOW INFORMATION: | ||||||||||||||||
Current assets | ¥ | (6,905 | ) | ¥ | — | ¥ | — | $ | (68,918 | ) | ||||||
Non-current assets | (1,173 | ) | — | — | (11,703 | ) | ||||||||||
Goodwill | (1,448 | ) | — | — | (14,453 | ) | ||||||||||
Current liabilities | 7,293 | — | — | 72,789 | ||||||||||||
Acquisition costs | (2,233 | ) | — | — | (22,285 | ) | ||||||||||
Cash and cash equivalents acquired | 4,588 | — | — | 45,794 | ||||||||||||
Proceeds from purchase of newly consolidated subsidiaries’ stocks | ¥ | 2,355 | ¥ | — | ¥ | — | $ | 23,509 | ||||||||
Current assets | ¥ | (154 | ) | ¥ | (861 | ) | ¥ | (1,340 | ) | $ | (1,532 | ) | ||||
Non-current assets | (2 | ) | (117 | ) | (824 | ) | (15 | ) | ||||||||
Goodwill | (436 | ) | (734 | ) | (3,319 | ) | (4,354 | ) | ||||||||
Current liabilities | 24 | 333 | 508 | 235 | ||||||||||||
Non-current liabilities | — | 12 | 14 | — | ||||||||||||
Minority interests | 77 | 65 | 631 | 765 | ||||||||||||
Acquisition costs | (491 | ) | (1,302 | ) | (4,330 | ) | (4,901 | ) | ||||||||
Cash and cash equivalents acquired | 135 | 583 | 745 | 1,346 | ||||||||||||
Subtotal | (356 | ) | (719 | ) | (3,585 | ) | (3,555 | ) | ||||||||
Payment for acquisitions in prior year | — | — | (399 | ) | — | |||||||||||
Payment for purchase of newly consolidated subsidiaries’ stocks | ¥ | (356 | ) | ¥ | (719 | ) | ¥ | (3,984 | ) | $ | (3,555 | ) | ||||
See notes to consolidated financial statements.
6
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Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Years Ended March 31, 2008, 2007 (unaudited), and 2006 (unaudited)
Note 1 | Nature of Operations and Basis of Presenting Consolidated Financial Statements |
Yahoo Japan Corporation (the “Company”) was incorporated in Japan in 1996. The overwhelming leader in the Internet market in Japan, the Company classifies its services into three segments: (1) advertising, (2) business services and (3) personal services, as discussed in Note 14.
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law (formerly, the Japanese Securities and Exchange Law) and its related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), as described in Note 2, which are different in certain respects from accounting principles generally accepted in the United States of America (“U.S. GAAP”) as to application and disclosure requirements. A discussion on the differences between Japanese GAAP and U.S. GAAP is presented under Note 15 of these consolidated financial statements.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made to the 2007 (unaudited) consolidated financial statements to conform to the classifications used in 2008.
The consolidated financial statements are stated in Japanese Yen, the currency of the country in which the Company is incorporated and operates. The translations of Japanese Yen amounts into U.S. dollar amounts are included solely for the convenience of readers and have been made at the rate of ¥100.19 to $1, the approximate rate of exchange at March 31, 2008. Such translations should not be construed as representations that the Japanese Yen amounts could be converted into U.S. dollars at that or any other rate.
Note 2 | Summary of Significant Accounting Policies |
a. Consolidation —The accompanying consolidated financial statements as of March 31, 2008 include the accounts of the Company and its 12 (13 in 2007 (unaudited)) significant subsidiaries. Under the control or influence concept, those companies in which the Company is able to directly or indirectly exercise control over operations are fully consolidated, and those companies over which the Company and consolidated subsidiaries (collectively, the “Group”) have the ability to exercise significant influence are accounted for by the equity method.
Investments in 20 (17 in 2007 (unaudited)) associated companies are accounted for by the equity method. Investments in the remaining eight (six in 2007 (unaudited)) unconsolidated subsidiaries are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not have been material.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.
For consolidated subsidiaries or associated companies whose closing dates are different from that of the Company, certain adjustments necessary for consolidation have been made.
(Unaudited) — In February 2007, the Company acquired a majority shareholding in Interscope Inc. (“Interscope”). In July 2007, Interscope was merged into INFO PLANT CO, LTD. (“INFO PLANT”), a consolidated subsidiary of the Company. Immediately after the merger, INFO PLANT changed its name to Yahoo Japan Value Insight Corporation (“Value Insight”).
(Unaudited) — In August 2006 and in October 2006, the Company sold all of its common shares of BridalNet Inc. (“BridalNet”) and NETGENE Co., Ltd. (“NETGENE”). As a result, they were excluded from the scope of consolidation. The profit and loss items of BridalNet and NETGENE incurred up to the date of sale were included in the consolidation.
7
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
In September 2007, the Company acquired a majority shareholding in Overture K.K. and Brainer.jp. (“Brainer”). As a result, they became consolidated subsidiaries of the Company.
b. Cash Equivalents —Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits, all of which mature or become due within three months of the date of acquisition.
c. Inventories —Merchandise, work in process and supplies are principally stated at cost determined by the specific identification method, whereas thefirst-in first-out method is applied to finished goods.
d. Property and Equipment —Property and equipment are stated at cost. Depreciation is computed by using the declining-balance method.
e. Long-lived Assets —The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.
As a result of reviewing the Group’s long-lived assets for impairment, the Group recognized no impairment loss for the years ended March 31, 2008 and 2007 (unaudited).
f. Marketable and Investment Securities —Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) trading securities, which are held for the purpose of earning capital gains in the near term, are reported at fair value, and the related unrealized gains and losses are included in earnings; (2) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent and ability to hold to maturity, are reported at amortized cost; and (3) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported as a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value and charged to income.
g. Investments in Unconsolidated Subsidiaries and Associated Companies —Investments in equity securities of unconsolidated subsidiaries and associated companies are stated at cost determined by the moving-average method.
h. Investments in Limited Partnerships and Others —Investments in limited partnerships and others consist primarily of the Company’s contributed capital in investment partnerships. The investments in these partnerships are accounted for by the equity method on the Company’s consolidated balance sheets and statements of income.
i. Goodwill —Goodwill represents the excess of the costs of acquiring a company over the fair value of acquired company’s net assets and is amortized on a straight-line basis over an estimated period of no more than five years, whereas immaterial goodwill is immediately charged to income as incurred.
Lump-sum amortization of goodwill in other expenses is recognized in accordance with the Article 32 in the statement No. 7, “Guideline for Consolidation Procedures” issued by the Accounting Standard Committee. The Company recognized ¥1,827 million as a lump-sum amortization of goodwill related to the goodwill of its subsidiary, Value Insight, for the year ended March 31, 2008.
j. Allowance for Doubtful Accounts —The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.
8
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
k. Provision for Yahoo! Points —The Yahoo! Points system was established as a sales promotion whereby shopping points are awarded to the users of Yahoo! JAPAN redeemable against purchases made via Yahoo! Shopping. The Company provides for future exercise of these points based on the number of unredeemed points held by users as of the balance sheet date.
l. Employees’ Retirement Benefits —The Company and certain subsidiaries primarily participate in defined contribution pension plans, since the transfer of the previous defined benefit pension plans in July 2000, following the enactment of the Act for Defined Contribution Pension. In addition, the Company and its domestic consolidated subsidiaries participate in a multi-employer contributory defined benefit welfare pension plan (the “welfare pension plan”) covering substantially all of their employees.
Contributions made by the Company and its domestic consolidated subsidiaries to the welfare pension plan are expensed when paid because the plan assets attributable to each participant cannot be reasonably determined. The participation ratio of the Company and relevant subsidiaries was 3.1% based on the number of employees.
At March 31, 2008, the fair value of the welfare pension plan’s entire assets amounted to ¥146,083 million ($1,458,061 thousand), and the plan’s actuarial pension liability stood at ¥112,700 million ($1,124,866 thousand). The major components of the difference between the entire assets and liabilities were as follows:
Thousands of | ||||||||
Millions of Yen | U.S. Dollars | |||||||
2008 | 2008 | |||||||
Other reserve | ¥ 15,463 | $ | 154,340 | |||||
Adjustment for valuation of assets | 11,947 | 119,241 | ||||||
Retained earnings | 9,652 | 96,339 | ||||||
Unamortized obligations | (3,679 | ) | (36,725 | ) | ||||
Total | ¥ 33,383 | $ | 333,195 | |||||
Prior service cost is amortized over 20 years by using the straight-line method under the welfare pension plan.
The total contributions to the defined contribution pension plans and the welfare pension plan recognized as net periodic benefit cost for the years ended March 31, 2008, 2007 (unaudited) and 2006 (unaudited) were ¥627 million ($6,257 thousand), ¥544 million and ¥447 million, respectively.
m. Bonuses to Directors and Corporate Auditors —Bonuses to directors and corporate auditors are accrued at the end of the year to which such bonuses are attributable.
n. Stock Options —The Accounting Standards Board of Japan (the “ASBJ”) Statement No. 8, “Accounting Standard for Stock Options,” and related guidance are applicable to stock options granted on or after May 1, 2006. This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the grant date and over the vesting period as consideration for receiving goods or services. The standard also requires companies to account for stock options granted to non-employees based on the fair value of either the stock option or the goods or services received. Included in the balance sheet as a separate component of equity, the stock option is presented as a stock acquisition right until exercised. The standard allows unlisted companies to measure options at their intrinsic value if fair value cannot be estimated reliably. The Company has applied this standard to stock options granted on or after May 1, 2006.
o. Presentation of Equity —On December 9, 2005, the ASBJ published a new accounting standard for presentation of equity. Under this accounting standard, certain items which were previously presented as liabilities or assets, as the case may be, are now presented as components of equity. Such items include stock acquisition rights, minority interests, and any deferred gain or loss on derivatives accounted for under hedge accounting. This standard is applied to fiscal years ending on or after May 1, 2006. The balances of such items as of March 31, 2006 (unaudited) were reclassified as separate components of equity as of April 1, 2006 in the consolidated statements of changes in equity.
9
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
p. Leases —Under the Japanese accounting standard for leases, finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized, whereas other finance leases are permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the lessee’s financial statements. All other leases are accounted for as operating leases.
q. Income Taxes —The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are determined by applying currently enacted tax laws to the temporary differences.
r. Foreign Currency Translations —All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese Yen at the exchange rates at the balance sheet date. Foreign exchange translation gains and losses are recognized in the consolidated statements of income to the extent that they are not hedged by forward exchange contracts.
s. Derivative Financial Instruments —The Company uses a variety of derivative financial instruments, including foreign currency forward contracts and foreign currency option contracts, as a means of hedging exposure to foreign exchange risks. The Company does not hold or issue derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: (a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statements of income, and; (b) if derivatives used for hedging purposes qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on such derivatives are deferred until maturity of the hedged transactions.
If foreign currency forward contracts and foreign currency option contracts qualify for hedge accounting and meet specific matching criteria, assets and liabilities denominated in foreign currencies are translated at the contract rates and no gains or losses on derivative transactions are recognized.
t. Per Share Information —Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year, retroactively adjusted for stock splits.
u. New Accounting Pronouncements
Lease Accounting —On March 30, 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the existing accounting standard for lease transactions issued on June 17, 1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
Under the existing accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized. However, other finance leases are permitted to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the lessee’s financial statements.
10
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
The revised accounting standard requires that all finance lease transactions be capitalized recognizing lease assets and lease obligations in the balance sheet.
Note 3 | Inventories |
Inventories at March 31, 2008 and 2007 (unaudited) consisted of the following:
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Finished goods | ¥ | 30 | ¥ | 32 | $ | 301 | ||||||
Merchandise | 1 | — | 5 | |||||||||
Work in process | 28 | 29 | 286 | |||||||||
Supplies | 181 | 112 | 1,805 | |||||||||
Total | ¥ | 240 | ¥ | 173 | $ | 2,397 | ||||||
Note 4 | Investment Securities |
Investment securities as of March 31, 2008 and 2007 (unaudited) consisted of the following:
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Non-current: | ||||||||||||
Marketable equity securities | ¥ | 5,218 | ¥ | 2,950 | $ | 52,083 | ||||||
Non-marketable equity securities | 146,566 | 146,144 | 1,462,881 | |||||||||
Investments in limited partnerships and similar investments | 34 | 344 | 337 | |||||||||
Other | — | 329 | — | |||||||||
Total | ¥ | 151,818 | ¥ | 149,767 | $ | 1,515,301 | ||||||
The carrying amounts and aggregate fair value of investment securities at March 31, 2008 and 2007 (unaudited) were as follows:
Millions of Yen | ||||||||||||||||
Unrealized | Unrealized | Fair | ||||||||||||||
March 31, 2008 | Cost | Gains | Losses | Value | ||||||||||||
Securities classified as available-for-sale — Equity securities | ¥ | 2,296 | ¥ | 2,932 | ¥ | 10 | ¥ | 5,218 | ||||||||
March 31, 2007 (unaudited) | ||||||||||||||||
Securities classified as available-for-sale — Equity securities | 684 | 2,266 | — | 2,950 |
Thousands of U.S. Dollars | ||||||||||||||||
Unrealized | Unrealized | Fair | ||||||||||||||
March 31, 2008 | Cost | Gains | Losses | Value | ||||||||||||
Securities classified as available-for-sale — Equity securities | $ | 22,918 | $ | 29,262 | $ | 97 | $ | 52,083 |
11
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Available-for-sale securities whose fair value is not readily determinable as of March 31, 2008 and 2007 (unaudited) were as follows:
Carrying Amount | ||||||||||||
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Available-for-sale: | ||||||||||||
Equity securities — preferred stocks | ¥ | 120,000 | ¥ | 120,000 | $ | 1,197,725 | ||||||
Equity securities — common stocks | 26,566 | 26,144 | 265,156 | |||||||||
Investments in limited partnerships and others | 34 | 344 | 337 | |||||||||
Other | — | 329 | — | |||||||||
Total | ¥ | 146,600 | ¥ | 146,817 | $ | 1,463,218 | ||||||
Proceeds from sales of available-for-sale securities for the years ended March 31, 2008, 2007 and 2006 were ¥234 million ($2,338 thousand), ¥428 million (unaudited) and ¥1,963 million (unaudited), respectively. Both of gross realized gains and losses on these sales, computed on the moving average cost basis, were immaterial (less than ¥1 million ($10 thousand)) for the year ended March 31, 2008, whereas those gains and losses for the year ended March 31, 2007 were ¥216 million (unaudited) and ¥14 million (unaudited), for the year ended March 31, 2006 were ¥1,040 million (unaudited) and zero (unaudited), respectively.
Note 5 | Short-Term Bank Loans and Long-Term Debt |
(Unaudited) — Short-term bank loans at March 31, 2007 consisted of notes to banks and bank overdrafts. The annual interest rate applicable to the short-term bank loans was the variable interest rate imputed at the short-term prime rate plus 1.00%. The average interest rate for the year ended March 31, 2007 was 1.62%.
Long-term debt at March 31, 2008 and 2007 (unaudited) consisted of the following:
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Unsecured syndicated loan from banks and other financial institutions, due serially to 2011 with variable interest rate | ¥ | 50,000 | ¥ | 70,000 | $ | 499,052 | ||||||
Less current portion | (20,000 | ) | (20,000 | ) | (199,621 | ) | ||||||
Long-term debt, less current portion | ¥ | 30,000 | ¥ | 50,000 | $ | 299,431 | ||||||
The variable interest rate applicable to the syndicated loan above is imputed at the TIBOR (Tokyo Inter-Bank Offered Rate) plus 0.3% at the calculation date defined in the loan agreement.
Annual maturities of long-term debt at March 31, 2008 were as follows:
Year Ending | Thousands of | |||||||
March 31 | Millions of Yen | U.S. Dollars | ||||||
2009 | ¥ | 20,000 | $ | 199,621 | ||||
2010 | 20,000 | 199,621 | ||||||
2011 | 10,000 | 99,810 | ||||||
Total | ¥ | 50,000 | $ | 499,052 | ||||
12
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Note 6 | Equity |
Since May 1, 2006, Japanese companies have been subject to the Corporate Law of Japan (the “Corporate Law”), which reformed and replaced the Commercial Code of Japan (the “Code”). The significant provisions in the Corporate Law that affect financial and accounting matters are summarized below:
a. | Dividends |
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as (1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except fordividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all the above criteria. The Corporate Law permits companies to distributedividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements. Semi-annual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Corporate Law provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.
b. | Increases/Decreases and Transfer of Common Stock, Reserve and Surplus |
The Corporate Law requires that an amount equal to 10% of dividends be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Law also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
c. | Treasury Stock and Treasury Stock Acquisition Rights |
The Corporate Law also provides for companies to purchase treasury stock and retire such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specific formula. Under the Corporate Law, stock acquisition rights, which were previously presented as a liability, are now presented as a separate component of equity. The Corporate Law also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.
(Unaudited) — Upon resolution and approval of the Board of Directors on February 16, 2005, the Company made a stock split by way of a free share distribution at the rate of two shares for each outstanding share on May 20, 2005. As a result, 7,550,124 shares of common stock were issued to shareholders of record on March 31, 2005.
(Unaudited) — Upon resolution and approval of the Board of Directors on August 17, 2005, the Company made a stock split by way of a free share distribution at the rate of two shares for each outstanding share on November 18, 2005. As a result, 15,104,854 shares of common stock were issued to shareholders of record on September 30, 2005.
(Unaudited) — Upon resolution and approval of the Board of Directors on February 16, 2006, the Company made a stock split by way of a free share distribution at the rate of two shares for each outstanding share on April 1, 2006. As a result, 30,226,068 shares of common stock were issued to shareholders of record on March 31, 2006.
13
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Note 7 | Stock Option |
Stock options outstanding as of March 31, 2008 are as follows:
The Company
Number of | ||||||||||||||||||
Stock Option | Persons Granted | Options Granted | Date of Grant | Exercise Price | Exercise Period | |||||||||||||
2000 Stock Option(1) | 20 employees | 57,344 shares | 2000.1.31 | ¥ | 51,270 | From January 22, 2002 | ||||||||||||
($ | 511.7 | ) | to January 21, 2010 | |||||||||||||||
2000 Stock Option(2) | 7 employees | 11,264 shares | 2000.6.27 | ¥ | 38,086 | From June 17, 2002 | ||||||||||||
($ | 380.1 | ) | to June 16, 2010 | |||||||||||||||
2000 Stock Option(3) | 3 directors | 148,992 shares | 2000.12.18 | ¥ | 19,416 | From December 9, 2002 | ||||||||||||
84 employees | ($ | 193.8 | ) | to December 8, 2010 | ||||||||||||||
2001 Stock Option(1) | 3 directors | 108,544 shares | 2001.6.29 | ¥ | 9,559 | From June 21, 2003 | ||||||||||||
72 employees | ($ | 95.4 | ) | to June 20, 2011 | ||||||||||||||
2001 Stock Option(2) | 3 directors | 112,640 shares | 2001.12.18 | ¥ | 8,497 | From December 8, 2003 | ||||||||||||
72 employees | ($ | 84.8 | ) | to December 7, 2011 | ||||||||||||||
2002 Stock Option(1) | 2 directors | 47,616 shares | 2002.7.29 | ¥ | 10,196 | From June 21, 2004 | ||||||||||||
65 employees | ($ | 101.8 | ) | to June 20, 2012 | ||||||||||||||
2002 Stock Option(2) | 19 employees | 5,888 shares | 2002.11.20 | ¥ | 11,375 | From November 21, 2004 | ||||||||||||
($ | 113.5 | ) | to June 20, 2012 | |||||||||||||||
2003 Stock Option(1) | 5 directors | 19,840 shares | 2003.7.25 | ¥ | 33,438 | From June 21, 2005 | ||||||||||||
83 employees | ($ | 333.7 | ) | to June 20, 2013 | ||||||||||||||
2003 Stock Option(2) | 43 employees | 2,464 shares | 2003.11.4 | ¥ | 51,478 | From November 5, 2005 | ||||||||||||
($ | 513.8 | ) | to June 20, 2013 | |||||||||||||||
2003 Stock Option(3) | 38 employees | 2,400 shares | 2004.1.29 | ¥ | 47,813 | From January 30, 2006 | ||||||||||||
($ | 477.2 | ) | to June 20, 2013 | |||||||||||||||
2003 Stock Option(4) | 41 employees | 1,168 shares | 2004.5.13 | ¥ | 78,512 | From May 14, 2006 | ||||||||||||
($ | 783.6 | ) | to June 20, 2013 | |||||||||||||||
2004 Stock Option(1) | 5 directors | 9,856 shares | 2004.7.29 | ¥ | 65,290 | From June 18, 2006 | ||||||||||||
131 employees | ($ | 651.7 | ) | to June 17, 2014 | ||||||||||||||
2004 Stock Option(2) | 46 employees | 712 shares | 2004.11.1 | ¥ | 62,488 | From November 2, 2006 | ||||||||||||
($ | 623.7 | ) | to June 17, 2014 | |||||||||||||||
2004 Stock Option(3) | 29 employees | 344 shares | 2005.1.28 | ¥ | 65,375 | From January 29, 2007 | ||||||||||||
($ | 652.5 | ) | to June 17, 2014 | |||||||||||||||
2004 Stock Option(4) | 42 employees | 276 shares | 2005.5.12 | ¥ | 60,563 | From May 13, 2007 | ||||||||||||
($ | 604.5 | ) | to June 17, 2014 | |||||||||||||||
2005 Stock Option(1) | 5 directors | 5,716 shares | 2005.7.28 | ¥ | 58,500 | From June 18, 2007 | ||||||||||||
180 employees | ($ | 583.9 | ) | to June 17, 2015 | ||||||||||||||
2005 Stock Option(2) | 31 employees | 234 shares | 2005.11.1 | ¥ | 62,000 | From November 2, 2007 | ||||||||||||
($ | 618.8 | ) | to June 17, 2015 | |||||||||||||||
2005 Stock Option(3) | 65 employees | 316 shares | 2006.1.31 | ¥ | 79,500 | From February 1, 2008 | ||||||||||||
($ | 793.5 | ) | to June 17, 2015 | |||||||||||||||
2005 Stock Option(4) | 49 employees | 112 shares | 2006.5.2 | ¥ | 67,940 | From May 3, 2008 | ||||||||||||
($ | 678.1 | ) | to June 17, 2015 | |||||||||||||||
2006 Stock Option(1) | 5 directors | 8,569 shares | 2006.9.6 | ¥ | 47,198 | From August 24, 2008 | ||||||||||||
157 employees | ($ | 471.1 | ) | to August 23, 2016 | ||||||||||||||
2006 Stock Option(2) | 49 employees | 313 shares | 2006.11.6 | ¥ | 44,774 | From October 24, 2008 | ||||||||||||
($ | 446.9 | ) | to October 23, 2016 | |||||||||||||||
2006 Stock Option(3) | 62 employees | 360 shares | 2007.2.7 | ¥ | 47,495 | From January 25, 2009 | ||||||||||||
($ | 474.0 | ) | to January 24, 2017 |
14
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Number of | ||||||||||||||||||
Stock Option | Persons Granted | Options Granted | Date of Grant | Exercise Price | Exercise Period | |||||||||||||
2007 Stock Option(1) | 66 employees | 651 shares | 2007.5.8 | ¥ | 45,500 | From April 25, 2009 | ||||||||||||
($ | 454.1 | ) | to April 24, 2017 | |||||||||||||||
2007 Stock Option(2) | 5 directors | 10,000 shares | 2007.8.7 | ¥ | 40,320 | From July 25, 2009 | ||||||||||||
225 employees | ($ | 402.4 | ) | to July 24, 2017 | ||||||||||||||
2007 Stock Option(3) | 119 employees | 766 shares | 2007.11.7 | ¥ | 51,162 | From October 25, 2009 | ||||||||||||
($ | 510.6 | ) | to October 24, 2017 | |||||||||||||||
2007 Stock Option(4) | 124 employees | 817 shares | 2008.2.13 | ¥ | 47,500 | From January 31, 2010 | ||||||||||||
($ | 474.1 | ) | to January 31, 2018 |
Notes: | 1. Each stock option in the table above will vest in three phases according to the respective vesting conditions and vesting periods. For each stock option, the initiation date of the exercise period, defined as the day after the first vesting date, indicates the first day on which the first part of the option becomes exercisable. |
2. | The options will be forfeited upon termination of employment even if they were vested. |
Consolidated Subsidiaries
Number of | ||||||||||||||||||
Stock Option | Persons Granted | Options Granted | Date of Grant | Exercise Price | Exercise Period | |||||||||||||
Value Insight | ||||||||||||||||||
2000 Stock Option(1) | 3 directors | 300 shares | 2000.3.30 | ¥ | 50,000 | From April 1, 2002 | ||||||||||||
($ | 499.1 | ) | to March 29, 2010 | |||||||||||||||
2000 Stock Option(2) | 2 directors | 300 shares | 2000.9.20 | ¥ | 150,000 | From October 1, 2002 | ||||||||||||
18 employees | ($ | 1,497.2 | ) | to September 14, 2010 | ||||||||||||||
2001 Stock Option | 19 employees | 190 shares | 2001.4.2 | ¥ | 400,000 | From April 1, 2003 | ||||||||||||
($ | 3,992.4 | ) | to March 29, 2011 | |||||||||||||||
2002 Stock Option | 32 employees | 92 shares | 2002.3.31 | ¥ | 450,000 | From April 1, 2004 | ||||||||||||
($ | 4,491.5 | ) | to March 21, 2012 | |||||||||||||||
2003 Stock Option | 3 directors | 182 shares | 2003.3.31 | ¥ | 450,000 | From April 1, 2005 | ||||||||||||
30 employees | ($ | 4,491.5 | ) | to March 27, 2013 | ||||||||||||||
NewsWatch | ||||||||||||||||||
2004 Stock Option | 3 directors | 3,035 shares | 2004.11.26 | ¥ | 50,000 | From November 27, 2006 | ||||||||||||
33 employees | ($ | 499.1 | ) | to November 26, 2014 | ||||||||||||||
2005 Stock Option | 6 employees | 200 shares | 2005.11.18 | ¥ | 50,000 | From November 27, 2006 | ||||||||||||
($ | 499.1 | ) | to November 26, 2014 | |||||||||||||||
Brainer | ||||||||||||||||||
2006 Stock Option | 3 directors | 85,000 shares | 2006.9.18 | ¥ | 30 | From October 1, 2008 | ||||||||||||
3 others | ($ | 0.3 | ) | to October 1, 2016 |
Note: | The stock options of NewsWatch, Inc. (“NewsWatch”) in the table above will vest in three phases according to the respective vesting conditions and vesting periods. For each stock option, the initiation date of the exercise period, defined as the day after the first vesting date, indicates the first day on which the first part of the option becomes exercisable. |
15
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
The stock option activity for the year ended March 31, 2008 is as follows:
The Company
2000 Stock | 2000 Stock | 2000 Stock | 2001 Stock | 2001 Stock | ||||||||||||||||
For The Year Ended March 31, 2008 | Option(1) | Option(2) | Option(3) | Option(1) | Option(2) | |||||||||||||||
(Shares) | ||||||||||||||||||||
Non-vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | — | — | — | — | — | |||||||||||||||
Granted | — | — | — | — | — | |||||||||||||||
Canceled | — | — | — | — | — | |||||||||||||||
Vested | — | — | — | — | — | |||||||||||||||
March 31, 2008 — outstanding | ||||||||||||||||||||
Vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 18,432 | 2,048 | 50,448 | 19,777 | 26,478 | |||||||||||||||
Vested | — | — | — | — | — | |||||||||||||||
Exercised | — | — | (9,704 | ) | (2,942 | ) | (4,746 | ) | ||||||||||||
Canceled | — | — | — | — | — | |||||||||||||||
March 31, 2008 — outstanding | 18,432 | 2,048 | 40,744 | 16,835 | 21,732 | |||||||||||||||
Exercise price | ¥ | 51,270 | ¥ | 38,086 | ¥ | 19,416 | ¥ | 9,559 | ¥ | 8,497 | ||||||||||
($ | 511.7 | ) | ($ | 380.1 | ) | ($ | 193.8 | ) | ($ | 95.4 | ) | ($ | 84.8 | ) | ||||||
Average stock price at exercise | — | — | ¥ | 47,579 | ¥ | 45,751 | ¥ | 45,975 | ||||||||||||
— | — | ($ | 474.9 | ) | ($ | 456.6 | ) | ($ | 458.9 | ) |
2002 Stock | 2002 Stock | 2003 Stock | 2003 Stock | 2003 Stock | ||||||||||||||||
For The Year Ended March 31, 2008 | Option(1) | Option(2) | Option(1) | Option(2) | Option(3) | |||||||||||||||
(Shares) | ||||||||||||||||||||
Non-vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | — | — | 7,296 | 1,312 | 928 | |||||||||||||||
Granted | — | — | — | — | — | |||||||||||||||
Canceled | — | — | — | (192 | ) | (160 | ) | |||||||||||||
Vested | — | — | (7,296 | ) | (1,120 | ) | (768 | ) | ||||||||||||
March 31, 2008 — outstanding | — | — | — | — | — | |||||||||||||||
Vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 25,600 | 2,304 | 9,920 | 416 | 512 | |||||||||||||||
Vested | — | — | 7,296 | 1,120 | 768 | |||||||||||||||
Exercised | (5,632 | ) | (1,024 | ) | (960 | ) | — | — | ||||||||||||
Canceled | — | — | — | (96 | ) | (64 | ) | |||||||||||||
March 31, 2008 — outstanding | 19,968 | 1,280 | 16,256 | 1,440 | 1,216 | |||||||||||||||
Exercise price | ¥ | 10,196 | ¥ | 11,375 | ¥ | 33,438 | ¥ | 51,478 | ¥ | 47,813 | ||||||||||
($ | 101.8 | ) | ($ | 113.5 | ) | ($ | 333.7 | ) | ($ | 513.8 | ) | ($ | 477.2 | ) | ||||||
Average stock price at exercise | ¥ | 48,855 | ¥ | 50,975 | ¥ | 45,593 | — | — | ||||||||||||
($ | 487.6 | ) | ($ | 508.8 | ) | ($ | 455.1 | ) | — | — |
16
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
2003 Stock | 2004 Stock | 2004 Stock | 2004 Stock | 2004 Stock | ||||||||||||||||
For The Year Ended March 31, 2008 | Option(4) | Option(1) | Option(2) | Option(3) | Option(4) | |||||||||||||||
(Shares) | ||||||||||||||||||||
Non-vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 496 | 5,280 | 352 | 200 | 232 | |||||||||||||||
Granted | — | — | — | — | — | |||||||||||||||
Canceled | (32 | ) | (112 | ) | (32 | ) | (8 | ) | (4 | ) | ||||||||||
Vested | (48 | ) | (1,776 | ) | (48 | ) | (24 | ) | (68 | ) | ||||||||||
March 31, 2008 — outstanding | 416 | 3,392 | 272 | 168 | 160 | |||||||||||||||
Vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 176 | 3,968 | 184 | 64 | — | |||||||||||||||
Vested | 48 | 1,776 | 48 | 24 | 68 | |||||||||||||||
Exercised | — | — | — | — | — | |||||||||||||||
Canceled | — | — | (24 | ) | — | — | ||||||||||||||
March 31, 2008 — outstanding | 224 | 5,744 | 208 | 88 | 68 | |||||||||||||||
Exercise price | ¥ | 78,512 | ¥ | 65,290 | ¥ | 62,488 | ¥ | 65,375 | ¥ | 60,563 | ||||||||||
($ | 783.6 | ) | ($ | 651.7 | ) | ($ | 623.7 | ) | ($ | 652.5 | ) | ($ | 604.5 | ) | ||||||
Average stock price at exercise | — | — | — | — | — |
2005 Stock | 2005 Stock | 2005 Stock | 2005 Stock | 2006 Stock | ||||||||||||||||
For The Year Ended March 31, 2008 | Option(1) | Option(2) | Option(3) | Option(4) | Option(1) | |||||||||||||||
(Shares) | ||||||||||||||||||||
Non-vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 5,472 | 186 | 282 | 98 | 8,518 | |||||||||||||||
Granted | — | — | — | — | — | |||||||||||||||
Canceled | (96 | ) | (28 | ) | (20 | ) | (13 | ) | (250 | ) | ||||||||||
Vested | (2,704 | ) | (72 | ) | (114 | ) | — | — | ||||||||||||
March 31, 2008 — outstanding | 2,672 | 86 | 148 | 85 | 8,268 | |||||||||||||||
Vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | — | — | — | — | — | |||||||||||||||
Vested | 2,704 | 72 | 114 | — | — | |||||||||||||||
Exercised | — | — | — | — | — | |||||||||||||||
Canceled | (68 | ) | (2 | ) | — | — | — | |||||||||||||
March 31, 2008 — outstanding | 2,636 | 70 | 114 | — | — | |||||||||||||||
Exercise price | ¥ | 58,500 | ¥ | 62,000 | ¥ | 79,500 | ¥ | 67,940 | ¥ | 47,198 | ||||||||||
($ | 583.9 | ) | ($ | 618.8 | ) | ($ | 793.5 | ) | ($ | 678.1 | ) | ($ | 471.1 | ) | ||||||
Average stock price at exercise | — | — | — | — | — |
17
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
2006 Stock | 2006 Stock | 2007 Stock | 2007 Stock | 2007 Stock | ||||||||||||||||
For The Year Ended March 31, 2008 | Option(2) | Option(3) | Option(1) | Option(2) | Option(3) | |||||||||||||||
(Shares) | ||||||||||||||||||||
Non-vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 302 | 360 | — | — | — | |||||||||||||||
Granted | — | — | 651 | 10,000 | 766 | |||||||||||||||
Canceled | (20 | ) | (30 | ) | (35 | ) | (119 | ) | (23 | ) | ||||||||||
Vested | — | — | — | — | — | |||||||||||||||
March 31, 2008 — outstanding | 282 | 330 | 616 | 9,881 | 743 | |||||||||||||||
Vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | — | — | — | — | — | |||||||||||||||
Vested | — | — | — | — | — | |||||||||||||||
Exercised | — | — | — | — | — | |||||||||||||||
Canceled | — | — | — | — | — | |||||||||||||||
March 31, 2008 — outstanding | — | — | — | — | — | |||||||||||||||
Exercise price | ¥ | 44,774 | ¥ | 47,495 | ¥ | 45,500 | ¥ | 40,320 | ¥ | 51,162 | ||||||||||
($ | 446.9 | ) | ($ | 474.0 | ) | ($ | 454.1 | ) | ($ | 402.4 | ) | ($ | 510.6 | ) | ||||||
Average stock price at exercise | — | — | — | — | — |
2007 Stock | ||||
For The Year Ended March 31, 2008 | Option(4) | |||
(Shares) | ||||
Non-vested: | ||||
March 31, 2007 — outstanding (unaudited) | — | |||
Granted | 817 | |||
Canceled | (1 | ) | ||
Vested | — | |||
March 31, 2008 — outstanding | 816 | |||
Vested: | ||||
March 31, 2007 — outstanding (unaudited) | — | |||
Vested | — | |||
Exercised | — | |||
Canceled | — | |||
March 31, 2008 — outstanding | — | |||
Exercise price | ¥ | 47,500 | ||
($ | 474.1 | ) | ||
Average stock price at exercise | — |
18
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Fair value information of stock options granted on or after May 1, 2006, which is required under the accounting standard for stock options, is as follows:
2005 Stock | 2006 Stock | 2006 Stock | 2006 Stock | |||||||||||||
Option(4) | Option(1) | Option(2) | Option(3) | |||||||||||||
Fair value price at grant date: | ||||||||||||||||
a. | ¥ | 30,958 | ¥ | 24,564 | ¥ | 23,832 | ¥ | 20,435 | ||||||||
($ | 309.0 | ) | ($ | 245.2 | ) | ($ | 237.9 | ) | ($ | 204.0 | ) | |||||
b. | ¥ | 35,782 | ¥ | 26,803 | ¥ | 25,311 | ¥ | 23,448 | ||||||||
($ | 357.1 | ) | ($ | 267.5 | ) | ($ | 252.6 | ) | ($ | 234.0 | ) | |||||
c. | ¥ | 39,196 | ¥ | 28,156 | ¥ | 26,766 | ¥ | 25,578 | ||||||||
($ | 391.2 | ) | ($ | 281.0 | ) | ($ | 267.2 | ) | ($ | 255.3 | ) |
2007 Stock | 2007 Stock | 2007 Stock | 2007 Stock | |||||||||||||
Option(1) | Option(2) | Option(3) | Option(4) | |||||||||||||
Fair value price at grant date: | ||||||||||||||||
a. | ¥ | 22,586 | ¥ | 17,061 | ¥ | 20,900 | ¥ | 20,289 | ||||||||
($ | 225.4 | ) | ($ | 170.3 | ) | ($ | 208.6 | ) | ($ | 202.5 | ) | |||||
b. | ¥ | 25,697 | ¥ | 18,121 | ¥ | 23,651 | ¥ | 23,128 | ||||||||
($ | 256.5 | ) | ($ | 180.9 | ) | ($ | 236.1 | ) | ($ | 230.8 | ) | |||||
c. | ¥ | 27,206 | ¥ | 20,659 | ¥ | 26,853 | ¥ | 24,691 | ||||||||
($ | 271.5 | ) | ($ | 206.2 | ) | ($ | 268.0 | ) | ($ | 246.4 | ) |
Note: | The stock options of the Company will vest in three phases according to the respective vesting conditions and vesting periods. Therefore, the information above is presented to show fair values of the stock options applicable to each of the three phases. |
The assumptions used to measure fair value of stock options granted during the year ended March 31, 2008 and 2007 (unaudited) are as follows:
Estimate method: Black-Scholes option pricing model
2007 Stock | 2007 Stock | 2007 Stock | 2007 Stock | |||||
Option(1) | Option(2) | Option(3) | Option(4) | |||||
Volatility of stock price: | ||||||||
a. | 53.4% | 51.4% | 48.1% | 45.3% | ||||
b. | 60.2% | 52.7% | 53.0% | 50.7% | ||||
c. | 62.4% | 59.2% | 59.3% | 52.8% | ||||
Estimated remaining outstanding period: | ||||||||
a. | 5.96 years | 5.96 years | 5.96 years | 5.96 years | ||||
b. | 6.46 years | 6.46 years | 6.46 years | 6.46 years | ||||
c. | 6.96 years | 6.96 years | 6.96 years | 6.96 years | ||||
Estimated dividend (dividend yield) | 0.21% | 0.26% | 0.20% | 0.23% | ||||
Interest rate with risk free: | ||||||||
a. | 1.32% | 1.42% | 1.17% | 0.99% | ||||
b. | 1.37% | 1.46% | 1.21% | 1.03% | ||||
c. | 1.41% | 1.50% | 1.25% | 1.07% |
Notes: | 1. The a, b and c denoted in the table above correspond to those in the fair value information. |
19
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
2. | Periods for computation using actual stock price: |
2007 Stock Option(1): | a. | From May 14, 2001 to May 4, 2007 | ||
b. | From November 13, 2000 to May 4, 2007 | |||
c. | From May 15, 2000 to May 4, 2007 | |||
2007 Stock Option(2): | a. | From August 13, 2001 to August 3, 2007 | ||
b. | From February 12, 2001 to August 3, 2007 | |||
c. | From August 14, 2000 to August 3, 2007 | |||
2007 Stock Option(3): | a. | From November 12, 2001 to November 2, 2007 | ||
b. | From May 14, 2001 to November 2, 2007 | |||
c. | From November 13, 2000 to November 2, 2007 | |||
2007 Stock Option(4): | a. | From February 18, 2002 to February 8, 2008 | ||
b. | From August 20, 2001 to February 8, 2008 | |||
c. | From February 19, 2001 to February 8, 2008 |
3. | Estimated remaining outstanding period is determined based on the assumption that all the options are exercised by the middle date of the exercise period. | |
4. | Estimated dividend is determined based on the actual dividend applicable to the year ended March 31, 2007 (unaudited). | |
5. | For the risk free interest rate, the Company uses the yield of Japanese treasury bond applicable to the estimated remaining outstanding period of options. | |
6. | Estimated number of options vested is determined based on the actual termination ratio of employees. |
Consolidated Subsidiaries
Value Insight
2000 Stock | 2000 Stock | 2001 Stock | 2002 Stock | 2003 Stock | ||||||||||||||||
For The Year Ended March 31, 2008 | Option(1) | Option(2) | Option | Option | Option | |||||||||||||||
(Shares) | ||||||||||||||||||||
Non-vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | 100 | 230 | 100 | 53 | 106 | |||||||||||||||
Granted | — | — | — | — | — | |||||||||||||||
Canceled | — | (50 | ) | (20 | ) | (30 | ) | (49 | ) | |||||||||||
Vested | — | — | — | — | — | |||||||||||||||
March 31, 2008 — outstanding | 100 | 180 | 80 | 23 | 57 | |||||||||||||||
Vested: | ||||||||||||||||||||
March 31, 2007 — outstanding (unaudited) | — | — | — | — | — | |||||||||||||||
Vested | — | — | — | — | — | |||||||||||||||
Exercised | — | — | — | — | — | |||||||||||||||
Canceled | — | — | — | — | — | |||||||||||||||
March 31, 2008 — outstanding | — | — | — | — | — | |||||||||||||||
Exercise price | ¥ | 50,000 | ¥ | 150,000 | ¥ | 400,000 | ¥ | 450,000 | ¥ | 450,000 | ||||||||||
($ | 499.1 | ) | ($ | 1,497.2 | ) | ($ | 3,992.4 | ) | ($ | 4,491.5 | ) | ($ | 4,491.5 | ) | ||||||
Average stock price at exercise | — | — | — | — | — |
20
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
NewsWatch
2004 Stock | 2005 Stock | |||||||
For The Year Ended March 31, 2008 | Option | Option | ||||||
(Shares) | ||||||||
Non-vested: | ||||||||
March 31, 2007 — outstanding (unaudited) | 2,100 | 160 | ||||||
Granted | — | — | ||||||
Canceled | (140 | ) | — | |||||
Vested | — | — | ||||||
March 31, 2008 — outstanding | 1,960 | 160 | ||||||
Vested: | ||||||||
March 31, 2007 — outstanding (unaudited) | ||||||||
Vested | — | — | ||||||
Exercised | — | — | ||||||
Canceled | — | — | ||||||
March 31, 2008 — outstanding | — | — | ||||||
Exercise price | ¥ | 50,000 | ¥ | 50,000 | ||||
($ | 499.1 | ) | ($ | 499.1 | ) | |||
Average stock price at exercise | — | — |
Brainer
2006 Stock | ||||||||
For The Year Ended March 31, 2008 | Option | |||||||
(Shares) | ||||||||
Non-vested: | ||||||||
March 31, 2007 — outstanding (unaudited) | ||||||||
Granted | 85,000 | |||||||
Canceled | — | |||||||
Vested | — | |||||||
March 31, 2008 — outstanding | 85,000 | |||||||
Vested: | ||||||||
March 31, 2007 — outstanding (unaudited) | ||||||||
Vested | — | |||||||
Exercised | — | |||||||
Canceled | — | |||||||
March 31, 2008 — outstanding | — | |||||||
Exercise price | ¥ | 30 | ||||||
($ | 0.3 | ) | ||||||
Average stock price at exercise | — |
Note 8 | Income Taxes |
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2008, 2007 (unaudited) and 2006 (unaudited).
21
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March 31, 2008 and 2007 (unaudited) are as follows:
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Deferred tax assets: | ||||||||||||
Enterprise tax payable | ¥ | 2,175 | ¥ | 2,059 | $ | 21,713 | ||||||
Allowance for doubtful accounts | 736 | 995 | 7,349 | |||||||||
Depreciation and amortization | 3,777 | 2,949 | 37,702 | |||||||||
Provision for Yahoo! Points | 888 | 828 | 8,868 | |||||||||
Other | 2,082 | 1,868 | 20,770 | |||||||||
Less valuation allowance | (289 | ) | (419 | ) | (2,888 | ) | ||||||
Total | 9,369 | 8,280 | 93,514 | |||||||||
Deferred tax liabilities: | ||||||||||||
Unrealized gain on available-for-sale securities | 1,164 | 945 | 11,626 | |||||||||
Net deferred tax assets | ¥ | 8,205 | ¥ | 7,335 | $ | 81,888 | ||||||
Reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated statement of income for the year ended March 31, 2008 is as follows:
2008 | ||||
Normal effective statutory tax rate | 40.7 | % | ||
Loss on write-down of investment securities | 1.5 | |||
Amortization of goodwill | 1.2 | |||
Equity earnings and losses under the equity method | 1.1 | |||
Expenses not deductible for income tax purpose | 0.2 | |||
Other — net | (0.2 | ) | ||
Actual effective tax rate | 44.5 | % | ||
(Unaudited) — Reconciliations for the years ended March 31, 2007 and 2006 were not presented because the difference between the two tax rates was not material.
Note 9 | Lease |
The Group leases certain computer equipment, office equipment and vehicles.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2008, 2007 and 2006 were ¥5,877 million ($58,657 thousand), ¥4,624 million (unaudited) and ¥3,824 million (unaudited), respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations under finance leases, depreciation expense and interest expense and other information of finance leases that do not transfer
22
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2008 and 2007 (unaudited) is as follows:
Millions of Yen | ||||||||||||||||
2008 | ||||||||||||||||
Buildings | ||||||||||||||||
and | ||||||||||||||||
Structures | Equipment | Software | Total | |||||||||||||
Acquisition cost | ¥ | 13 | ¥ | 132 | ¥ | 60 | ¥ | 205 | ||||||||
Accumulated depreciation | (4 | ) | (48 | ) | (32 | ) | (84 | ) | ||||||||
Net leased property | ¥ | 9 | ¥ | 84 | ¥ | 28 | ¥ | 121 | ||||||||
Millions of Yen | ||||||||||||||||
2007 (unaudited) | ||||||||||||||||
Buildings | ||||||||||||||||
and | ||||||||||||||||
Structures | Equipment | Software | Total | |||||||||||||
Acquisition cost | ¥ | 13 | ¥ | 131 | ¥ | 60 | ¥ | 204 | ||||||||
Accumulated depreciation | (2 | ) | (59 | ) | (21 | ) | (82 | ) | ||||||||
Net leased property | ¥ | 11 | ¥ | 72 | ¥ | 39 | ¥ | 122 | ||||||||
Thousands of U.S. Dollars | ||||||||||||||||
2008 | ||||||||||||||||
Buildings | ||||||||||||||||
and | ||||||||||||||||
Structures | Equipment | Software | Total | |||||||||||||
Acquisition cost | $ | 133 | $ | 1,312 | $ | 603 | $ | 2,048 | ||||||||
Accumulated depreciation | (38 | ) | (475 | ) | (322 | ) | (835 | ) | ||||||||
Net leased property | $ | 95 | $ | 837 | $ | 281 | $ | 1,213 | ||||||||
Obligations under finance leases:
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Due within one year | ¥ | 34 | ¥ | 36 | $ | 345 | ||||||
Due after one year | 91 | 89 | 906 | |||||||||
Total | ¥ | 125 | ¥ | 125 | $ | 1,251 | ||||||
Depreciation expense and interest expense under finance leases:
Thousands of | ||||||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||||||
2008 | 2007 | 2006 | 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Depreciation expense | ¥ | 40 | ¥ | 40 | ¥ | 36 | $ | 396 | ||||||||
Interest expense | 5 | 4 | 2 | 48 | ||||||||||||
Total | ¥ | 45 | ¥ | 44 | ¥ | 38 | $ | 444 | ||||||||
23
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements of income, are computed by the straight-line method with no salvage value and the interest method, respectively.
The minimum rental commitments under noncancelable operating leases at March 31, 2008 were as follows:
Thousands of | ||||||||
Millions of Yen | U.S. Dollars | |||||||
Due within one year | ¥ | 1,299 | $ | 12,968 | ||||
Due after one year | 2,573 | 25,676 | ||||||
Total | ¥ | 3,872 | $ | 38,644 | ||||
Note 10 | Derivatives |
The Company enters into foreign currency forward contracts and foreign currency option contracts to hedge foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies.
It is the Group’s policy to use derivatives only for the purpose of reducing market risks associated with such assets and liabilities. The Group does not hold or issue derivatives for trading or speculative purposes.
Because the counterparties to those derivatives are limited to major international financial institutions, the Group does not anticipate any loss arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorization and credit limit amount. The basic policies for use of derivatives are approved by the directors and the execution and control of derivatives are controlled by the Management Department.
Since all of the Company’s derivative transactions qualify for hedge accounting and meet specific matching criteria for the years ended March 31, 2008, 2007 (unaudited) and 2006 (unaudited), assets and liabilities denominated in foreign currencies are translated at the contract rates and no gains or losses on derivative transactions are recognized. Therefore, market value information of derivatives is not presented.
Note 11 | Related Party Transactions |
Transactions of the Group with the parent company, SOFTBANK CORP., the parent company subsidiary, BB MOBILE CORP., unconsolidated subsidiaries and associated companies (together the “related companies”) for the years ended March 31, 2008, 2007 (unaudited), and 2006 (unaudited) are as follows:
Thousands of | ||||||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||||||
2008 | 2007 | 2006 | 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Royalty paid | ¥ | 7,510 | ¥ | 6,025 | ¥ | 4,709 | $ | 74,957 | ||||||||
Sales of advertisement | — | 40,100 | 28,687 | — | ||||||||||||
Sale of investment securities: | ||||||||||||||||
Proceeds from sale | — | 294 | — | — | ||||||||||||
Gain on sale | — | 241 | — | — | ||||||||||||
Stock subscription | — | 120,000 | — | — | ||||||||||||
Interest income | — | — | 629 | — |
24
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
The balances due to or from the related companies at March 31, 2008 and 2007 (unaudited) are as follows:
Thousands of | ||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||
2008 | 2007 | 2008 | ||||||||||
(unaudited) | ||||||||||||
Accounts receivable | — | ¥ | 4,191 | — | ||||||||
Investment securities | — | 120,000 | — | |||||||||
Other payable | ¥ | 2,719 | 2,411 | $ | 27,136 |
Transactions of the Group with directors for the years ended March 31, 2008, 2007 (unaudited), and 2006 (unaudited) are as follows:
Thousands of | ||||||||||||||||
Millions of Yen | U.S. Dollars | |||||||||||||||
2008 | 2007 | 2006 | 2008 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Exercise of stock options | ¥ | 57 | ¥ | 24 | ¥ | 45 | $ | 568 |
Note 12 | Net Income Per Share |
Reconciliation of the differences between basic and diluted net income per share (“EPS”) after the retroactive restatement of stock splits for the years ended March 31, 2008, 2007 (unaudited) and 2006 (unaudited) is as follows:
Millions | ||||||||||||||||
of Yen | Thousands | Yen | U.S. Dollars | |||||||||||||
Net | Weighted-average | |||||||||||||||
Year Ended March 31, 2008 | Income | Shares | EPS | |||||||||||||
Basic EPS — Net income available to common shareholders | ¥ | 62,618 | 60,485 | ¥ | 1,035.27 | $ | 10.33 | |||||||||
Effect of dilutive securities — Warrants | — | 86 | ||||||||||||||
Diluted EPS — Net income for computation | ¥ | 62,618 | 60,571 | ¥ | 1,033.79 | $ | 10.32 | |||||||||
Year Ended March 31, 2007 (unaudited) | ||||||||||||||||
Basic EPS — Net income available to common shareholders | ¥ | 57,963 | 60,462 | ¥ | 958.66 | |||||||||||
Effect of dilutive securities — Warrants | — | 125 | ||||||||||||||
Diluted EPS — Net income for computation | ¥ | 57,963 | 60,587 | ¥ | 956.70 | |||||||||||
Year Ended March 31, 2006 (unaudited) | ||||||||||||||||
Basic EPS — Net income available to common shareholders | ¥ | 46,923 | 60,420 | ¥ | 776.62 | |||||||||||
Effect of dilutive securities — Warrants | — | 160 | ||||||||||||||
Diluted EPS — Net income for computation | ¥ | 46,923 | 60,580 | ¥ | 774.57 | |||||||||||
25
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Note 13 | Subsequent Events |
a. | Appropriation of Retained Earnings |
The following appropriation of retained earnings at March 31, 2008 was approved at the Company’s general shareholders meeting held on June 24, 2008:
Thousands of | ||||||||
Millions of Yen | U.S. Dollars | |||||||
Year-end cash dividends, ¥104.00 ($1.04) per share | ¥ | 6,292 | $ | 62,801 |
b. | Acquisition of Treasury Shares |
At the Board of Directors meeting held on May 23, 2008, the Board approved a proposal authorizing the Company to acquire up to 1,210 thousand of its common shares, which is equivalent to 2.00% of the entire issued shares, at an aggregate acquisition price of up to ¥60,000 million ($598,862 thousand) as treasury stock in order to gain financial efficiency and to return its profit to investors. The acquisition was made via market by a trust from June 2, 2008 to July 11, 2008. The Company retired all of the treasury stock acquired.
Note 14 | Segment Information |
The Group classifies its services into three segments, namely, (1) advertising, (2) business services, and (3) personal services, as summarized below.
The advertising segment comprises Internet-based advertising-related services. Main sources of revenue for this segment include sales of banner and text advertisements on the Yahoo! JAPAN Web site, the paid search service, and advertisement planning and production services.
The business services segment includes non-advertising-related services for corporations. This segment derives revenue from fees and commissions for various information listing services, tenant fees and royalties from stores listed on the Yahoo! Auctions and Yahoo! Shopping sites, incentive fees for acquiring new subscribers to the Yahoo! BB broadband service, and fees for other information services.
The personal services segment consists of services to individual Internet users. Main revenue sources for this segment include Yahoo! Auctions system usage fees, Yahoo! Premium membership fees, Internet services provider (ISP) fees from Yahoo! BB subscribers, and sales of various kinds of content.
Information about business segments, geographical segments and sales to foreign customers of the Group as of and for the years ended March 31, 2008, 2007 (unaudited) and 2006 (unaudited) is as follows:
(1) | Business Segments |
a. | Sales and Operating Income |
Millions of Yen | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||
Advertising | Services | Services | Corporate | Consolidated | ||||||||||||||||
Sales to customers | ¥ | 131,041 | ¥ | 57,999 | ¥ | 72,987 | ¥ | — | ¥ | 262,027 | ||||||||||
Intersegment sales | 3 | 70 | 67 | (140 | ) | — | ||||||||||||||
Total sales | 131,044 | 58,069 | 73,054 | (140 | ) | 262,027 | ||||||||||||||
Operating expenses | 66,294 | 34,506 | 24,371 | 12,048 | 137,219 | |||||||||||||||
Operating income | ¥ | 64,750 | ¥ | 23,563 | ¥ | 48,683 | ¥ | (12,188 | ) | ¥ | 124,808 | |||||||||
26
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
b. | Assets, Depreciation and Amortization, and Capital Expenditures |
Millions of Yen | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||
Advertising | Services | Services | Corporate | Consolidated | ||||||||||||||||
Assets | ¥ | 44,829 | ¥ | 34,828 | ¥ | 31,923 | ¥ | 258,080 | ¥ | 369,660 | ||||||||||
Depreciation and amortization | 4,166 | 2,323 | 2,966 | 725 | 10,180 | |||||||||||||||
Capital expenditures | 4,530 | 2,516 | 3,190 | 744 | 10,980 |
a. | Sales and Operating Income |
Thousands of U.S. Dollars | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||
Advertising | Services | Services | Corporate | Consolidated | ||||||||||||||||
Sales to customers | $ | 1,307,930 | $ | 578,893 | $ | 728,481 | $ | — | $ | 2,615,304 | ||||||||||
Intersegment sales | 30 | 704 | 665 | (1,399 | ) | — | ||||||||||||||
Total sales | 1,307,960 | 579,597 | 729,146 | (1,399 | ) | 2,615,304 | ||||||||||||||
Operating expenses | 661,688 | 344,411 | 243,239 | 120,256 | 1,369,594 | |||||||||||||||
Operating income | $ | 646,272 | $ | 235,186 | $ | 485,907 | $ | (121,655 | ) | $ | 1,245,710 | |||||||||
b. | Assets, Depreciation and Amortization, and Capital Expenditures |
Thousands of U.S. Dollars | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||
Advertising | Services | Services | Corporate | Consolidated | ||||||||||||||||
Assets | $ | 447,436 | $ | 347,616 | $ | 318,626 | $ | 2,575,913 | $ | 3,689,591 | ||||||||||
Depreciation and amortization | 41,580 | 23,189 | 29,605 | 7,231 | 101,605 | |||||||||||||||
Capital expenditures | 45,213 | 25,115 | 31,839 | 7,426 | 109,593 |
a. | Sales and Operating Income |
Millions of Yen | ||||||||||||||||||||
2007 (unaudited) | ||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||
Advertising | Services | Services | Corporate | Consolidated | ||||||||||||||||
Sales to customers | ¥ | 89,197 | ¥ | 48,098 | ¥ | 75,258 | ¥ | — | ¥ | 212,553 | ||||||||||
Intersegment sales | 5 | 117 | 25 | (147 | ) | — | ||||||||||||||
Total sales | 89,202 | 48,215 | 75,283 | (147 | ) | 212,553 | ||||||||||||||
Operating expenses | 38,897 | 28,912 | 27,309 | 11,202 | 106,320 | |||||||||||||||
Operating income | ¥ | 50,305 | ¥ | 19,303 | ¥ | 47,974 | ¥ | (11,349 | ) | ¥ | 106,233 | |||||||||
27
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
b. | Assets, Depreciation and Amortization, and Capital Expenditures |
Millions of Yen | ||||||||||||||||||||
2007 (unaudited) | ||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||
Advertising | Services | Services | Corporate | Consolidated | ||||||||||||||||
Assets | ¥ | 32,622 | ¥ | 35,080 | ¥ | 32,826 | ¥ | 217,900 | ¥ | 318,428 | ||||||||||
Depreciation and amortization | 3,576 | 1,799 | 2,605 | 596 | 8,576 | |||||||||||||||
Capital expenditures | 5,941 | 3,216 | 4,741 | 1,097 | 14,995 |
a. | Sales and Operating Income |
Millions of Yen | ||||||||||||||||||||||||
2006 (unaudited) | ||||||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||||||
Advertising | Services | Services | Other | Corporate | Consolidated | |||||||||||||||||||
Sales to customers | ¥ | 68,363 | ¥ | 35,291 | ¥ | 61,095 | ¥ | 8,947 | ¥ | — | ¥ | 173,696 | ||||||||||||
Intersegment sales | 2 | 62 | 14 | — | (78 | ) | — | |||||||||||||||||
Total sales | 68,365 | 35,353 | 61,109 | 8,947 | (78 | ) | 173,696 | |||||||||||||||||
Operating expenses | 31,100 | 20,360 | 23,115 | 8,873 | 8,115 | 91,563 | ||||||||||||||||||
Operating income | ¥ | 37,265 | ¥ | 14,993 | ¥ | 37,994 | ¥ | 74 | ¥ | (8,193 | ) | ¥ | 82,133 | |||||||||||
b. | Assets, Depreciation and Amortization, and Capital Expenditures |
Millions of Yen | ||||||||||||||||||||||||
2006 (unaudited) | ||||||||||||||||||||||||
Business | Personal | Eliminations/ | ||||||||||||||||||||||
Advertising | Services | Services | Other | Corporate | Consolidated | |||||||||||||||||||
Assets | ¥ | 28,277 | ¥ | 32,401 | ¥ | 26,165 | ¥ | 41 | ¥ | 104,091 | ¥ | 190,975 | ||||||||||||
Depreciation and amortization | 3,018 | 1,192 | 2,191 | 77 | 444 | 6,922 | ||||||||||||||||||
Capital expenditures | 5,692 | 2,129 | 4,066 | 89 | 882 | 12,858 |
Note:“Other” in the table above primary consists of retail business operated by Seven and Y, a former consolidated subsidiary of the Company. |
(2) | Geographical Segments |
Because the Company and its subsidiaries are located and conduct their operations primarily in Japan, geographical segment information is not presented.
(3) | Sales to Foreign Customers |
Because sales to foreign customers are not material, such information is not presented.
Note 15 | Summary of Certain Significant Differences Between Japanese Gaap and Accounting Principles Generally Accepted in the United States of America |
The accompanying consolidated financial statements of the Company have been prepared in conformity with Japanese GAAP, which differs from U.S. GAAP in certain significant respects. Such differences are discussed below and address only those differences related to the consolidated financial statements. In addition, no attempt
28
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
has been made to identify disclosure, presentation or classification differences that would affect the manner in which transactions and events are presented in the financial statements.
Information relating to the nature of such differences is presented below.
a. | Business Combinations |
Under U.S. GAAP, all business combinations (excluding combinations of entities under common control) are accounted for using the purchase method as defined in Statements of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations.” SFAS No. 141 requires that the net assets, tangible and identifiable intangible assets less liabilities of the acquired company be recorded at fair value, with the difference between the cost of an acquired company and the fair value of the acquired net assets recorded as goodwill. If there is excess fair value over the cost (“negative goodwill”), negative goodwill shall be allocated as a pro rata reduction of all acquired assets (including research and development assets), except for (1) financial assets other than investments accounted for by the equity method, (2) assets to be disposed of by sale, (3) deferred taxes, (4) prepaid assets relating to pension and other postretirement benefit plans, and (5) any other current assets. After reducing all eligible assets, any remaining excess shall be recognized as an extraordinary gain immediately.
Also, after the adoption of SFAS No. 142, “Goodwill and Intangible Assets,” goodwill and recognized indefinite-lived intangible assets in a business combination are not amortized, but are tested for impairment at least annually, as well as on an interim basis if events or changes in circumstances indicate that the goodwill and indefinite-lived intangible assets might be impaired. Separate intangible assets that are not deemed to have an indefinite life are amortized over their expected economic life and also tested for impairment.
Under Japanese GAAP, the Business Accounting Council issued a Statement of Opinion, “Accounting for Business Combination” in October 2003 which is effective for fiscal years beginning on or after April 1, 2006. Before this statement, there was no specific accounting standard addressing accounting for business combinations; therefore, companies followed common business practices dictated by the Code.
Under the purchase method generally applied by Japanese companies, goodwill is measured as the excess of cost over carrying values of the individual assets acquired and liabilities assumed at the acquisition date. If there is excess carrying value of the individual assets acquired and liabilities assumed at the acquisition date over the acquisition cost, negative goodwill is recorded. Subsequently, the goodwill/negative goodwill is amortized on a straight-line basis over no more than twenty years. The amortization period may vary depending on the nature of the acquired business.
Also, Japanese GAAP allows for recognition of identifiable intangible assets if intangible assets or legal rights are separately transferable and an independent value can be reasonably allocated to these assets.
b. | Revenue Recognition |
Under U.S. GAAP, Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) 104 “Revenue Recognition,” which superseded SAB 101 “Revenue Recognition in Financial Statements,” summarizes certain of the SEC staff’s views regarding the basis of revenue recognition. Revenue should be recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller’s price to the buyer is fixed or determinable, and (4) collectibility is reasonably assured. In addition, Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force Issue (“EITF”)No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” provides guidance for determining whether to record revenue on a gross basis as a principal in the transaction or on a net basis as an agent in the transaction.
Under Japanese GAAP, revenue recognition is based on the realization principle, which is generally considered to be satisfied when delivery has occurred or services have been rendered.
29
Yahoo Japan Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Gross or net accounting requires judgment and depends on the particular facts and circumstances of each arrangement. In Japan, there is more diversity in practice regarding the alternatives or estimates than U.S. GAAP, as there are no explicit provisions or guidance such as SAB 104 andEITF 99-19 under U.S. GAAP.
c. | Stock Option Plans |
Under U.S. GAAP, from the beginning of the annual reporting period that begins after December 15, 2005, the fair-value-based method applies to all stock options. Additionally, compensation cost for the portion of awards for which the requisite service has not been rendered that is outstanding as of the required effective date shall be recognized as the requisite service is rendered on or after the effective date, based on the grant-date fair value of those awards.
Under Japanese GAAP, for stock options issued on or after May 1, 2006, compensation costs are valued based on the fair value of stock options and recognized in the statement of income. In previous years, no liability and expense were recognized until the subscription rights were exercised.
d. | Capital Leases |
U.S. GAAP requires the application of SFAS No. 13, “Accounting for Leases,” in order to determine whether a lease should be classified as an operating or capital lease.
Under Japanese GAAP, leases that deem to transfer ownership of the leased property to a lessee are to be capitalized, while other leases, that may be considered capital leases under U.S. GAAP, are permitted to be accounted for as an operating lease if certain “as if capitalized” information is disclosed in the notes to the lessee’s financial statements. Effective for the annual reporting period beginning on or after April 1, 2008, finance leases will be required to be capitalized.
e. | Asset Retirement Obligation |
Under U.S. GAAP, a legal obligation to perform an asset retirement activity requires the recognition of a liability at the fair value if the fair value of the liability can be reasonably estimated as required by FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations.”
Japanese GAAP does not provide guidance on the treatment of asset retirements obligations.
f. | Changes in accounting policies and presentation |
Under U.S. GAAP, previously issued financial statements are adjusted if there is a change in accounting policiesand/or presentation.
Under Japanese GAAP, prior year financial statements are not generally adjustedand/or reclassified to conform to the current year accounting policyand/or presentation if there is a change in accounting policiesand/or presentation.
30