The Group Companies pledge assets mainly to secure debts from borrowing contracts, e-money deposits, margin trading and security lending transactions conducted under normal terms and conditions, and as monetary deposits in derivative transactions.
The carrying amounts of assets pledged as collateral for liabilities and contingent liabilities by the Group Companies are as follows:
(Millions of yen) December 31, 2012 December 31, 2013
Cash and cash equivalents ¥1,097 ¥1,110
Loans for credit card business
(Note) 47,310 45,400
Investment securities 6,836 6,831
Total 55,243 53,341
(Note) Loans for credit card business include securitized receivables.
In addition to the above, investment securities for banking business, which were pledged as collateral for foreign exchange settlements, derivative trading and other transactions, and for commitment lines as of December 31, 2012 and 2013, were ¥57,105 million and ¥50,583 million, respectively.
Within other financial assets, guarantee deposits for futures trading held by a consolidated subsidiary involved in the banking business as of December 31, 2012 and 2013, were ¥8,837
For assets pledged as collateral, the counterparty has no right to sell or to repledge the collateral.
(2) Assets Received as Collateral
The Group Companies receive securities pledged as collateral in lieu of guarantee deposits and collateral for other transactions, which are conducted under normal terms and conditions. The Group Companies hold the rights to sell or repledge the received assets, provided that the securities are returned at the time the relevant transactions are completed. The fair values of securities received by the Group Companies as collateral to which the Group Companies held the right to sell or repledge the collateral as of December 31, 2012 and 2013 were ¥384,219 million and ¥719,585 million, respectively. Within such collateral, the fair value of the collateral actually sold or pledged as of December 31, 2012 and 2013, was ¥105,968 million and ¥201,333 million, respectively.
35. Hedge Accounting (1) Fair Value Hedges
In order to offset the risk of fair value fluctuation on certain fixed rate bonds as a result of fluctuations in interest rates, subsidiaries of the Group Companies have entered into fixed-for-floating interest rate swap contracts with financial institutions as fair value hedges. The fair values of the interest rate swaps as hedging instruments are stated in Note 12. Derivative Assets and Derivative Liabilities.
Gains or losses from remeasuring such interest rate swaps at fair value were a loss of ¥210 million for the year ended December 31, 2012 and a gain of ¥54 million in the year ended December 31, 2013. Additionally, gains or losses on the underlying hedged items due to the hedged risks were a gain of ¥210 million for the year ended December 31, 2012 and a loss of
¥54 million for the year ended December 31, 2013.
(2) Cash Flow Hedges
In order to offset the risk of fluctuations on future cash flows from floating rate borrowings, subsidiaries of the Group Companies have entered into fixed-for-floating interest rate swap contracts with financial institutions as cash flow hedges. The purpose of these hedges is to hedge the risk of future fluctuations of cash flows from borrowings by effectively converting floating rate borrowings into fixed rate borrowings. As a result of these hedges, it will become possible to offset the fluctuations of cash flows from floating rate borrowings with the fluctuations of cash flows from the interest rate swaps. Existing hedging relationships are expected to continue to the year ending December 31, 2018.
The fair values of the interest rate swaps used as the hedging instruments are stated in Note 12. Derivative Assets and Derivative Liabilities.
Schedule of changes in the amounts recognized in other comprehensive income (Millions of yen) Year ended December 31, 2012 Year ended December 31, 2013
January 1 ¥(374) ¥(203)
Changes for the period (271) (262)
Reclassification to net
income 442 144
December 31 (203) (321)
(Note) The amounts reclassified to net income are included in “Revenue” in the Consolidated Statement of Income.
36. Contingent Liabilities and Commitments
(1) Commitment Line Lending Contracts and Guarantee Obligations
A certain consolidated subsidiary is engaged in the consumer lending business through cash advances and credit card loans, which are incidental to the credit cards.
Since these contracts expire without the actual loan being drawn, in addition to the Group Companies having discretion to increase or decrease the limits on the loan amounts, the unused balance of these loans would not necessarily have a material impact on the Group Companies’
cash flows.
Certain consolidated subsidiaries are engaged in the credit guarantee business providing general customers with guarantees on liabilities corresponding to loans which such customers have received from business partners of the subsidiaries.
The balances of the unused lending commitment lines and guarantee obligations given in the credit guarantee business stated above are as follows:
(Millions of yen) December 31, 2012 December 31, 2013 Lending commitment lines ¥1,666,455 ¥2,034,622
Financial guarantee contracts 20,839 17,523
Total 1,687,294 2,052,145
(2) Commitment Line Borrowing Contracts
The Company and certain consolidated subsidiaries have entered into commitment line borrowing contracts with multiple financial institutions and the balances of the unused portions of such commitment lines available are as follows:
(Millions of yen) December 31, 2012 December 31, 2013 Total commitment line
borrowings ¥141,620 ¥111,798
Amounts borrowed 21,583 1,607
Unused commitment lines 120,037 110,191
(3) Commitments (Contracts)
As of December 31, 2012 and 2013, there were no significant capital expenditures (commitments) for which contracts had been entered into and which were unrecognized in the consolidated financial statements.
37. Share-based Payments
Employee expenses relating to stock options recognized by the Group Companies during the years ended December 31, 2012 and 2013 were ¥651 million and ¥1,679 million, respectively.
The Group Companies have elected to apply the exemption under IFRS 1 and have consequently accounted for the 2008 and 2009 stock options and 2012 and 2013 stock options 1) to 5) granted by the Company, and 2012 stock option 1) to 6) and 2013 stock option granted by Kobo Inc. in accordance with IFRS 2.
The Company has granted equity-settled stock options to its executives and employees, its subsidiaries, and associates. Kobo Inc. has granted stock options with a cash alternative option to executives and employees of Kobo Inc. and its subsidiaries. Conditions for vesting of the stock options require that those who received stock options continue to be employed by the Company, its subsidiaries or associates from the grant date to the vesting date.
On July 1, 2012, the Company implemented a 100-for-1 share split. The number of stock options issued for each year has been adjusted for the share split. The following is a summary of the Company’s stock options.
Name Grant date Vesting date
Exercise price (Yen)
Balance of outstanding
options (Note)
Exercise period 2003 stock
option 1)
July 14, 2003
March 27,
2007 193 ― From March 28, 2007 to
March 26, 2013 2003 stock
option 2)
August 29, 2003
March 27,
2007 275 ― From March 28, 2007 to
March 26, 2013 2004 stock
option
September 7, 2004
March 30,
2008 755 1,154,000 From March 31, 2008 to March 29, 2014 2005 stock
option 1)
December 15, 2005
March 30,
2009 913 2,838,800 From March 31, 2009 to March 29, 2015 2005 stock
option 2)
February 13, 2006
March 30,
2009 1,038 200,000 From March 31, 2009 to March 29, 2015 2006 stock
option 1)
April 20, 2006
March 30,
2010 1,010 1,666,600 From March 31, 2010 to March 29, 2016 2006 stock
option 2)
December 14, 2006
March 30,
2010 559 429,900 From March 31, 2010 to March 29, 2016 2008 stock
option
January 19, 2009
March 27,
2012 563 1,368,600 From March 28, 2012 to March 26, 2018 2009 stock
option
February 12, 2010
March 27,
2013 707 685,400 From March 28, 2013 to March 26, 2019 2012 stock
option 1) A
April 20, 2012
April 19,
2014 0.01 364,500 From April 20, 2014 to April 20, 2022 2012 stock
option 1) B
April 20, 2012
April 19,
2015 0.01 364,500 From April 20, 2015 to April 20, 2022 2012 stock
option 1) C
April 20, 2012
April 19,
2016 0.01 365,800 From April 20, 2016 to April 20, 2022 2012 stock
option 2)
July 1, 2012
March 29,
2016 0.01 298,200 From March 30, 2016 to March 28, 2022 2012 stock
option 3)
August 1, 2012
March 29,
2016 0.01 101,800 From March 30, 2016 to March 28, 2022 2012 stock
option 4)
August 20, 2012
March 29,
2016 0.01 500 From March 30, 2016 to
March 28, 2022 2012 stock
option 5) A
November 21, 2012
November 20,
2014 0.01 34,400 From November 21, 2014 to November 21, 2022 2012 stock
option 5) B
November 21, 2012
November 20,
2015 0.01 34,400 From November 21, 2015 to November 21, 2022 2012 stock
option 5) C
November 21, 2012
November 20,
2016 0.01 34,500 From November 21, 2016 to November 21, 2022 2013 stock
option 1)
February 1, 2013
March 29,
2016 0.01 1,351,400 From March 30, 2016 to March 28, 2022 2013 stock
option 2)
March 1, 2013
March 29,
2016 0.01 276,100 From March 30, 2016 to March 28, 2022 2013 stock
option 3) A
March 1, 2013
March 29,
2016 0.01 495,100 From March 30, 2016 to March 28, 2022 2013 stock
option 3) B
March 1, 2013
March 29,
2016 0.01 150,000 From March 30, 2016 to March 28, 2022 2013 stock
option 4)
July 1, 2013
March 28,
2017 0.01 1,045,500 From March 29, 2017 to March 27, 2023 2013 stock December 1, March 28,
0.01 12,000 From March 29, 2017 to
The following is a summary of Kobo Inc.’s stock options.
Name Grant date Vesting date
Exercise price (Canadian
dollars)
Balance of outstanding
options (Note)
Exercise period Kobo Inc.
2012 stock option 1) A
January 11, 2012
January 10,
2014 $1.00 5,218,842 From January 11, 2014 to January 11, 2018 Kobo Inc.
2012 stock option 1) B
January 11, 2012
January 10,
2015 1.00 5,218,840 From January 11, 2015 to January 11, 2018 Kobo Inc.
2012 stock option 1) C
January 11, 2012
January 10,
2016 1.00 5,218,842 From January 11, 2016 to January 11, 2018 Kobo Inc.
2012 stock option 2) A
February 27, 2012
February 26,
2014 1.00 158,333 From February 27, 2014 to February 27, 2018 Kobo Inc.
2012 stock option 2) B
February 27, 2012
February 26,
2015 1.00 158,334 From February 27, 2015 to February 27, 2018 Kobo Inc.
2012 stock option 2) C
February 27, 2012
February 26,
2016 1.00 158,333 From February 27, 2016 to February 27, 2018 Kobo Inc.
2012 stock option 3) A
April 9, 2012
April 8,
2014 1.00 121,667 From April 9, 2014 to April 9, 2018 Kobo Inc.
2012 stock option 3) B
April 9, 2012
April 8,
2015 1.00 121,666 From April 9, 2015 to April 9, 2018 Kobo Inc.
2012 stock option 3) C
April 9, 2012
April 8,
2016 1.00 121,667 From April 9, 2016 to April 9, 2018 Kobo Inc.
2012 stock option 4) A
April 23, 2012
April 22,
2014 1.00 ― From April 23, 2014 to
April 23, 2018 Kobo Inc.
2012 stock option 4) B
April 23, 2012
April 22,
2015 1.00 ― From April 23, 2015 to
April 23, 2018 Kobo Inc.
2012 stock option 4) C
April 23, 2012
April 22,
2016 1.00 ― From April 23, 2016 to
April 23, 2018 Kobo Inc.
2012 stock option 5) A
July 9, 2012
July 8,
2014 1.00 647,350 From July 9, 2014 to July 9, 2018 Kobo Inc.
2012 stock option 5) B
July 9, 2012
July 8,
2015 1.00 647,349 From July 9, 2015 to July 9, 2018 Kobo Inc.
2012 stock option 5) C
July 9, 2012
July 8,
2016 1.00 647,350 From July 9, 2016 to July 9, 2018 Kobo Inc.
2012 stock option 6) A
October 5, 2012
December 30,
2013 1.00 400,000 From December 31, 2013 to October 5, 2018 Kobo Inc.
2012 stock option 6) B
October 5, 2012
December 30,
2014 1.00 400,000 From December 31, 2014 to October 5, 2018
Name Grant date Vesting date
Exercise price (Canadian
dollars)
Balance of outstanding
options (Note)
Exercise period Kobo Inc.
2013 stock option
January 11, 2013
January 11,
2013 0.01 2,188,682 From January 11, 2013 to January 11, 2018 (Note) The balance of outstanding options has been converted into the number of shares.
The number of options and the weighted average exercise price related to stock options granted by the Company are as follows:
Year ended December 31, 2012 Year ended December 31, 2013 Number of
options (Note)
Weighted average exercise price
(Yen)
Number of options
(Note)
Weighted average exercise price
(Yen) Balance at the beginning of
the year 13,883,300 ¥747 13,684,400 ¥687
Granted 1,670,800 0.01 3,567,300 0.01
Forfeited 700,900 774 739,200 530
Exercised 1,168,800 375 3,236,500 665
Expired ― ― 4,000 275
Outstanding balance at the
end of the year 13,684,400 687 13,272,000 516
Exercisable amount at the
end of the year 11,112,100 786 8,343,300 821
Weighted average remaining
contract years 3.89 years 4.53 years
(Note) The number of options has been converted into the number of shares.
The number of options and the weighted average exercise price related to stock options granted by Kobo Inc. are as follows:
Year ended December 31, 2012 Year ended December 31, 2013 Number of
options (Note)
Weighted average exercise price
(Canadian dollars)
Number of options
(Note)
Weighted average exercise price
(Canadian dollars) Balance at the beginning of
the year ― $― 20,303,573 $1.00
Granted 20,303,573 1.00 2,188,682 0.01
Forfeited ― ― 1,065,000 1.00
Exercised ― ― ― ―
Expired ― ― ― ―
Outstanding balance at the
end of the year 20,303,573 1.00 21,427,255 0.90
Exercisable amount at end of
the year ― ― 2,588,682 0.16
Weighted average remaining
contract years 5.18 years 4.16 years
(Note) The number of options has been converted into the number of shares.
The weighted average stock prices of the Company as of the exercise date were ¥779 and
¥1,231 for the years ended December 31, 2012 and 2013, respectively.
The expiration dates and the exercise prices of the outstanding options for stock options granted by the Company are as follows:
Exercise price (Yen)
Number of options (Note)
December 31, 2012 December 31, 2013
2013 ¥193~275 351,000 ―
2014 755 1,978,000 1,154,000
2015 913~1,038 3,771,500 3,038,800
2016 559~1,010 2,641,400 2,096,500
2018 563 2,370,200 1,368,600
2019 707 933,100 685,400
2022 0.01 1,639,200 3,871,200
2023 0.01 ― 1,057,500
Balance at end of the
period ― 13,684,400 13,272,000
(Note) The number of options has been converted into the number of shares.
The expiration dates and the exercise prices of the outstanding options related to stock options granted by Kobo Inc. are as follows:
Exercise price (Canadian
dollars)
Number of options (Note)
December 31, 2012 December 31, 2013
2018 $0.01~1.00 20,303,573 21,427,255
Balance at end of the
period ― 20,303,573 21,427,255
(Note) The number of options has been converted into the number of shares.
The Company granted equity-settled stock options to its executives and employees, its subsidiaries, and associates during the year ended December 31, 2013. Kobo Inc. granted stock options with a cash alternative option to the executives of Kobo Inc. during the year ended December 31, 2013. The fair value of the options granted has been calculated using the Black-Scholes model adjusted for dividends. The fair value and assumptions used in the calculation are as follows.
Expected volatility of the Company has been calculated as an annual rate based on the historical period of stock prices corresponding to the expected remaining period and weekly data (weekly closing price versus volatility of the previous week), assuming 52 weeks in a year.
Expected volatility of Kobo Inc. is based on the stock price volatility of a comparable company as Kobo Inc. is not listed.
December 31, 2013 The Company 2013 stock option 5) Weighted average stock
prices (Yen) ¥1,585
Exercise price (Yen) ¥0.01
Expected volatility (%) 33.8
Remaining term (Years) 3.33
December 31, 2013 The Company
2013 stock option 1)
The Company 2013 stock option
2), 3) A, B
The Company 2013 stock option 4) Weighted average stock
prices (Yen) ¥844 ¥800 ¥1,198
Exercise price (Yen) ¥0.01 ¥0.01 ¥0.01
Expected volatility (%) 26.9 26.7 29.5
Remaining term (Years) 3.20 3.08 3.75
Expected dividend (Yen) ¥2.50 ¥2.50 ¥3.00
Risk-free rate (%) 0.1 0.1 0.2
Fair value per option (Yen) ¥835 ¥792 ¥1,187
December 31, 2013 Kobo Inc.
2013 stock option Weighted average stock
prices (Canadian dollars) $1.08 Exercise price (Canadian
dollars) $0.01
Expected volatility (%) 56.8
Remaining term (Years) 2.50
Expected dividend
(Canadian dollars) $―
Risk-free rate (%) 1.2
Fair value per option
(Canadian dollars) $1.07
38. Dividends
Year ended December 31, 2012 Year ended December 31, 2013 Dividends per
share (Yen)
Amount of dividends (Millions of
yen)
Dividends per share (Yen)
Amount of dividends (Millions of yen)
Dividends paid
Dividends by resolution at the Board of Directors in the previous year
¥250 ¥3,284 ¥3 ¥3,944
Dividends paid during the
current year ― ― ― ―
Total dividends paid
applicable to the year 250 3,284 3 3,944
(Note) On July 1, 2012, the Company implemented a 100-for-1 share split of common stock.
The Company continues to make stable dividend payments under the principle of returning profits with the maximization of corporate value in mind, while maintaining a sound financial position and enhancing retained earnings to prepare for proactive business development.
Furthermore, the Board of Directors of the Company determines the payment of dividends. In principle, the Company distributes dividends once a year at year-end. For dividend distributions pursuant to Article 459, Paragraph 1 of the Companies Act, the Company makes its determination taking into consideration the business environment and other factors.
(Note) Cash dividends paid with record date during the year ended December 31, 2013 are as follows:
Date of resolution Total dividends (Millions of yen) Dividends per share (Yen) Resolution at the Board of
Directors on November 26, 2013
Resolution at the Board of Directors on February 14, 2014
¥5,271 ¥4