Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 (6-k)

false2022-09-3020220001070304--03-31Q2It represents the amount offset under counterparty netting of derivative assets and liabilities.Certain subsidiaries elected the fair value option for certain reinsurance contracts held. The fair value of the reinsurance contracts elected for the fair value option in other assets were ¥5,214 million and ¥5,702 million as of March 31, 2022 and September 30, 2022, respectively. For the effect of changes in the fair value of those reinsurance contracts on earnings during the six and three months ended September 30, 2021 and 2022, see Note 17 “Life Insurance Operations.”Certain subsidiaries elected the fair value option for the entire variable annuity and variable life insurance contracts held. The fair value of the variable annuity and variable life insurance contracts elected for the fair value option in policy liabilities and policy account balances were ¥198,905 million and ¥170,177 million as of March 31, 2022 and September 30, 2022, respectively. For the effect of changes in the fair value of the variable annuity and variable life insurance contracts on earnings during the six and three months ended September 30, 2021 and 2022, see Note 17 “Life Insurance Operations.”“Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.Principally, gains and losses from available-for-sale debt securities are included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; equity securities are included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” and derivative assets and liabilities (net) are included in “Other (income) and expense” respectively. Additionally, for available-for-sale debt securities, amortization of interest recognized in finance revenues is included in these columns.Unrealized gains and losses from available-for-sale debt securities are included in “Net change of unrealized gains (losses) on investment in securities” and “Net change of foreign currency translation adjustments”, unrealized gains and losses from equity securities and derivative assets and liabilities (net) are included mainly in “Net change of foreign currency translation adjustments”, unrealized gains and losses from policy liabilities and policy account balances are included in “Net change of debt valuation adjustments.”“Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”Increases resulting from an acquisition of a subsidiary and insurance contracts ceded to reinsurance companies are included.Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and variable life policyholders due to death, surrender and maturity of the investment period are included.Other revenues are not considered to be within the scope of revenue from contracts with customers, such as life insurance premiums and related investment income, operating leases, finance revenues that include interest income, and others.The amount of assets under management of variable annuity and variable life insurance contracts included in equity securities were ¥185,115 million and ¥154,984 million as of March 31, 2022 and September 30, 2022, respectively. The amount of investment funds that are accounted for under the equity method included in equity securities were ¥90,650 million and ¥96,836 million as of March 31, 2022 and September 30, 2022, respectively. The amount of investment funds elected for the fair value option included in equity securities, and others were ¥11,709 million and ¥14,714 million as of March 31, 2022 and September 30, 2022, respectively.The assets of most VIEs are used only to repay the liabilities of the VIEs, and the creditors of the liabilities of most VIEs have no recourse to other assets of the Company and its subsidiaries.The assets are pledged as collateral by VIE for financing of the VIE.This item represents remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the VIE.Maximum exposure to loss includes remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the VIE.For “Others,” the number of properties is omitted.The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥15,088 million and foreign exchange contracts of ¥7,415 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at March 31, 2022, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥79 million and ¥57 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥1,325 million and ¥378 million at March 31, 2022, respectively.The balances related to enforceable master netting agreements or similar agreements which were not offset in the consolidated balance sheets.A certain subsidiary elected the fair value option for investments in foreign government bond securities included in available-for-sale debt securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥51 million and a loss of ¥21 million from the change in the fair value of those investments for the six months ended September 30, 2021 and 2022, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥20 million and a loss of ¥13 million from the change in the fair value of those investments for the three months ended September 30, 2021 and 2022, respectively. There were no such investments elected the fair value option as of September 30, 2021. The amount of aggregate fair value elected the fair value option was ¥263 million as of March 31, 2022.A certain subsidiary elected the fair value option for investments in foreign corporate debt securities included in available-for-sale debt securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥24 million and a loss of ¥977 million from the change in the fair value of those investments for the six months ended September 30, 2021 and 2022, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were losses of ¥18 million and ¥325 million from the change in the fair value of those investments for the three months ended September 30, 2021 and 2022, respectively. The amounts of aggregate fair value elected the fair value option were ¥7,644 million and ¥10,591 million as of March 31, 2022 and September 30, 2022, respectively.Certain subsidiaries elected the fair value option for certain investments in investment funds, and others included in equity securities. Included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” in the consolidated statements of income were gains of ¥585 million and ¥546 million from the change in the fair value of those investments for the six months ended September 30, 2021 and 2022, respectively. Included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” in the consolidated statements of income were gains of ¥248 million and ¥6 million from the change in the fair value of those investments for the three months ended September 30, 2021 and 2022, respectively. The amounts of aggregate fair value elected the fair value option were ¥11,709 million and ¥14,714 million as of March 31, 2022 and September 30, 2022, respectively.The amounts of investment funds measured at net asset value per share which are not included in the above tables were ¥25,999 million and ¥47,934 million as of March 31, 2022 and September 30, 2022, respectively.A certain subsidiary elected the fair value option on certain loans held for sale. These loans are multi-family and seniors housing loans and are sold to Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and institutional investors. Included in “Other (income) and expense” in the consolidated statements of income were a gain of ¥1,069 million and a loss of ¥3,508 million from the change in the fair value of the loans for the six months ended September 30, 2021 and 2022, respectively. Included in “Other (income) and expense” in the consolidated statements of income were a loss of ¥525 million and a gain of ¥191 million from the change in the fair value of the loans for the three months ended September 30, 2021 and 2022, respectively. No gains or losses were recognized in earnings during the six months ended September 30, 2021 and 2022 attributable to changes in instrument-specific credit risk. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of March 31, 2022, were ¥151,672 million and ¥151,601 million, respectively, and the amount of the aggregate fair value was less than the amount of aggregate unpaid principal balance by ¥71 million. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of September 30, 2022, were ¥219,811 million and ¥215,774 million, respectively, and the amount of the aggregate fair value was less than the amount of aggregate unpaid principal balance by ¥4,037 million. As of March 31, 2022 and September 30, 2022, there were no loans that are 90 days or more past due or, in non-accrual status.The amount of ¥25,999 million of investment funds measured at net asset value per share is not included.The amount of ¥47,936 million of investment funds measured at net asset value per share is not included.It represents the amount after offset under counterparty netting of derivative assets and liabilities. For the information of input level before netting, see Note 3 “Fair Value Measurements.”The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥17,701 million and foreign exchange contracts of ¥6,494 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at September 30, 2022, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥728 million and ¥46 million and derivative liabilities include fair value of futures and foreign exchange contracts before offsetting of ¥4 million and ¥429 million at September 30, 2022, respectively.Gains from the disposition of real estate under operating leases included in operating lease revenues were ¥15,440 million and ¥12,487 million, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues were ¥10,798 million and ¥19,090 million, for the six months ended September 30, 2021 and 2022, respectively.Gains from the disposition of real estate under operating leases included in operating lease revenues were ¥7,475 million and ¥2,766 million, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues were ¥5,731 million and ¥9,320 million, for the three months ended September 30, 2021 and 2022, respectively.The allowance for off-balance sheet credit exposure were ¥22,120 million and ¥22,023 million as of March 31, 2022 and September 30, 2022, respectively, and the amounts are recorded in “Other liabilities” on the consolidated balance sheets. For further information, see Note 23 “Commitments, Guarantees and Contingent Liabilities.”The allowance for available-for-sale debt securities were ¥153 million and ¥172 million as of March 31, 2022 and September 30, 2022, respectively, and the amounts are recorded as a reduction in “Investments in securities” on the consolidated balance sheets. For further information, see Note 8 “Investment in Securities.”The provision for credit losses on loans to affiliates were a provision of ¥637 million and a reversal of ¥78 million during the six months ended September 30, 2021 and 2022, a provision of ¥57 million and a reversal of ¥16 million during the three months ended September 30, 2021 and 2022, respectively, and the amounts are recorded in “Equity in net income (loss) of affiliates” in the consolidated statements of income. The allowance for credit losses on loans to affiliates were ¥1,957 million and ¥2,183 million as of March 31, 2022 and September 30, 2022, respectively, and the amounts are recorded as a reduction in “Investments in affiliates” on the consolidated balance sheets.Other in loans to consumer borrowers includes claims receivable arising from payments on guarantee of consumer loans. For further information, see Note 23 “Commitments, Guarantees and Contingent Liabilities”.Life insurance related investment income for the six months ended September 30, 2021 and 2022 include net unrealized holding a gain of ¥9,689 million and a loss of ¥9,465 million on equity securities held as of September 30, 2021 and 2022, respectively.Life insurance related investment income for the three months ended September 30, 2021 and 2022 include net unrealized holding a gain of ¥5,543 million and a loss of ¥1,222 million on equity securities held as of September 30, 2021 and 2022, respectively.Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2021 (see Note 17 “Life Insurance Operations”).Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2022 (see Note 17 “Life Insurance Operations”).Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2021 (see Note 17 “Life Insurance Operations”).Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2022 (see Note 17 “Life Insurance Operations”).Mainly the United StatesMainly Asia, Europe, Australasia and Middle East Other 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Table of Contents
 
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM
6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE
13a-16
OR
15d-16
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2022.
Commission File Number:
001-14856
 
 
ORIX Corporation
(Translation of Registrant’s Name into English)
 
 
World Trade Center Bldg., SOUTH TOWER,
2-4-1
Hamamatsu-cho,
Minato-ku,
Tokyo, JAPAN
(Address of Principal Executive Offices)
 
 
(Indicate by check mark whether the registrant files or will file annual reports under cover of Form
20-F
or Form
40-F.)
Form
20-F  ☒        Form
40-F  ☐
Indicate by check mark if the registrant is submitting the Form
6-K
in paper as permitted by Regulation
S-T
Rule 101(b)(1):  ☐
Indicate by check mark if the registrant is submitting the Form
6-K
in paper as permitted by Regulation
S-T
Rule 101(b)(7):  ☐
 
 
 

Table of Contents
Table of Document(s) Submitted
 
1.
  
 
Exhibit 101   
Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101   
Inline XBRL Schema Document.
Exhibit 101   
Inline XBRL Calculation Linkbase Document.
Exhibit 101   
Inline XBRL Definition Linkbase Document.
Exhibit 101   
Inline XBRL Labels Linkbase Document.
Exhibit 101   
Inline XBRL Presentation Linkbase Document.
Exhibit 104   
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ORIX Corporation
Date: November 10, 2022
 
By
 
/s/ HITOMARO YANO
   
Hitomaro Yano
   
Executive Officer
Head of Treasury and Accounting Headquarters
   
ORIX Corporation

Table of Contents
CONSOLIDATED FINANCIAL INFORMATION
Notes to Translation
 
1.
The following is an English translation of ORIX Corporation’s quarterly financial report (
shihanki houkokusho
) as filed with the Kanto Financial Bureau in Japan on November 10, 2022, which includes unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) as of March 31, 2022 and September 30, 2022 and for the three and six months ended September 30, 2021 and 2022.
 
2.
Significant differences between U.S. GAAP and generally accepted accounting principles in Japan (“Japanese GAAP”) are stated in Note 1 “Overview of Accounting Principles Utilized” of the notes to Consolidated Financial Statements.
In preparing its consolidated financial information, ORIX Corporation (the “Company”) and its subsidiaries have complied with U.S. GAAP.
This document may contain forward-looking statements about expected future events and financial results that involve risks and uncertainties. Such statements are based on the Company’s current expectations and are subject to uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, those described under “Risk Factors” in the Company’s most recent annual report on Form
20-F
filed with the U.S. Securities and Exchange Commission.
The Company believes that it may have been a “passive foreign investment company” for U.S. federal income tax purposes in the year to which these consolidated financial results relate by reason of the composition of its assets and the nature of its income. In addition, the Company may be a PFIC for the foreseeable future. Assuming that the Company is a PFIC, a U.S. holder of the shares or American depository shares of the Company will be subject to special rules generally intended to eliminate any benefits from the deferral of U.S. federal income tax that a holder could derive from investing in a foreign corporation that does not distribute all of its earnings on a current basis. Investors should consult their tax advisors with respect to such rules, which are summarized in the Company’s annual report.
 
– 1 –

Table of Contents
1.
Information on the Company and its Subsidiaries
(1) Consolidated Financial Highlights
 
    
Millions of yen

(except for per share amounts and ratios)
 
    
Six months

ended

September 30,

2021
   
Six months

ended

September 30,

2022
   
Fiscal year

ended

March 31,

2022
 
Total revenues
   ¥ 1,241,534     ¥ 1,364,816     ¥ 2,520,365  
Income before income taxes
     220,789       164,346       504,876  
Net income attributable to ORIX Corporation shareholders
     146,682       121,776       312,135  
Comprehensive Income attributable to ORIX Corporation shareholders
     171,510       171,831       382,219  
ORIX Corporation shareholders’ equity
     3,117,654       3,344,812       3,261,419  
Total assets
     13,834,678       14,786,006       14,270,672  
Earnings per share for net income attributable to ORIX Corporation shareholders
      
Basic (yen)
     121.12       102.52       259.37  
Diluted (yen)
     121.00       102.40       259.07  
ORIX Corporation shareholders’ equity ratio (%)
     22.5       22.6       22.9  
Cash flows from operating activities
     603,273       262,902       1,103,370  
Cash flows from investing activities
     (446,478     (440,563     (808,846
Cash flows from financing activities
     (76,204     96,042       (306,618
Cash, Cash Equivalents and Restricted Cash at end of Period
     1,161,892       1,046,021       1,091,812  
 
      
Note: Consumption tax is excluded from the stated amount of total revenues.
      
    
Millions of yen

(except for per share amounts)
   
                        
 
    
Three months

ended

September 30,

2021
   
Three months

ended

September 30,

2022
 
Total revenues
   ¥      632,721      ¥      707,003   
Net income attributable to ORIX Corporation shareholders
     81,466       59,914  
Earnings per share for net income attributable to ORIX Corporation shareholders
    
Basic (yen)
     67.51       50.60  
 
Note: Consumption tax is excluded from the stated amount of total revenues
(2) Overview of Activities
During the six months ended September 30, 2022, no significant changes were made in the Company and its subsidiaries’ operations. Additionally, there were no changes of principal subsidiaries and affiliates.
 
– 2 –

Table of Contents
2.
Risk Factors
Investing in the Company’s securities involves risks. You should carefully consider the information described herein as well as the risks described under “Risk Factors” in our Form
20-F
for the fiscal year ended March 31, 2022 and the other information in that annual report, including, but not limited to, the Company’s consolidated financial statements and related notes and “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” The Company’s business activities, financial condition and results of operations and the trading prices of the Company’s securities could be adversely affected by any of the factors or other factors.
 
3.
Analysis of Financial Results and Condition
The following discussion provides management’s explanation of factors and events that have significantly affected the Company’s financial condition and results of operations. Also included is management’s assessment of factors and trends that could have a material effect on the Company’s financial condition and results of operations in the future. However, please be advised that financial conditions and results of operations in the future may also be affected by factors other than those discussed herein. These factors and trends regarding the future were assessed as of the issue date of this quarterly financial report
(shihanki houkokusho)
.
 
(1)
Qualitative Information Regarding Consolidated Financial Results
Financial Highlights
Financial Results for the Six Months Ended September 30, 2022
 
Total revenues
   ¥1,364,816 million (Up 10% year on year)
Total expenses
   ¥1,215,683 million (Up 18% year on year)
Income before income taxes
   ¥164,346 million (Down 26% year on year)
Net income attributable to ORIX Corporation Shareholders
   ¥121,776 million (Down 17% year on year)
Earnings per share for net income attributable to ORIX Corporation Shareholders
  
(Basic)
   ¥102.52 (Down 15% year on year)
(Diluted)
   ¥102.40 (Down 15% year on year)
ROE (Annualized) *1
   7.4% (9.5% during the same period in the previous fiscal year)
ROA (Annualized) *2
   1.68% (2.14% during the same period in the previous fiscal year)
 
*1
ROE is the ratio of net income attributable to ORIX Corporation Shareholders for the period to average ORIX Corporation Shareholders’ Equity.
*2
ROA is the ratio of net income attributable to ORIX Corporation Shareholders for the period to average Total Assets.
Total revenues for the six months ended September 30, 2022 increased 10% to ¥1,364,816 million compared to ¥1,241,534 million during the same period of the previous fiscal year due to increases in services income, sales of goods and real estate and life insurance premiums and related investment income despite a decrease in gains (losses) on investment securities and dividends.
Total expenses increased 18% to ¥1,215,683 million compared to ¥1,032,617 million during the same period of the previous fiscal year due to increases in life insurance costs, services expense and costs of goods and real estate sold.
Equity in net income (loss) of affiliates increased 23% to ¥6,624 million compared to ¥5,399 million and gains on sales of subsidiaries and affiliates and liquidation losses, net increased 33% to ¥8,589 million compared to ¥6,473 million during the same period of the previous fiscal year.
Due to the above results, income before income taxes for the six months ended September 30, 2022 decreased 26% to ¥164,346 million compared to ¥220,789 million during the same period of the previous fiscal year and net income attributable to ORIX Corporation shareholders decreased 17% to ¥121,776 million compared to ¥146,682 million during the same period of the previous fiscal year.
 
– 3 –

Table of Contents
Segment Information
Our operating segments, used by the chief operating decision maker to make decisions about resource allocations and assess performance, are organized into ten segments based on our business management organization which is classified by the nature of major products and services, customer base, regulations, and business areas. The ten segments are Corporate Financial Services and Maintenance Leasing, Real Estate, PE Investment and Concession, Environment and Energy, Insurance, Banking and Credit, Aircraft and Ships, ORIX USA, ORIX Europe, and Asia and Australia.
Since April 1, 2022, a portion of interest expenses and a portion of selling, general and administrative expenses, which were initially included in the difference between segment total profits and consolidated amounts, have been charged directly to their respective segments. As a result of these changes, segment data for the six months ended September 30, 2021 has been retrospectively restated.
Total revenues and profits by segment for the six months ended September 30, 2021 and 2022 are as follows:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
   
Change

(revenues)
   
Change

(profits)
 
    
Segment

Revenues
   
Segment

Profits
   
Segment

Revenues
    
Segment

Profits
   
Amount
   
Percent (%)
   
Amount
   
Percent (%)
 
Corporate Financial Services and Maintenance Leasing
   ¥ 230,275     ¥ 46,263     ¥ 211,427      ¥ 35,482     ¥ (18,848     (8   ¥ (10,781     (23
Real Estate
     202,514       23,031       190,487        18,949       (12,027     (6     (4,082     (18
PE Investment and Concession
     192,150       1,614       250,873        3,905       58,723       31       2,291       142  
Environment and Energy
     63,898       9,502       110,914        10,582       47,016       74       1,080       11  
Insurance
     235,088       32,322       265,870        13,007       30,782       13       (19,315     (60
Banking and Credit
     43,097       20,909       40,944        15,215       (2,153     (5     (5,694     (27
Aircraft and Ships
     17,748       369       28,496        10,649       10,748       61       10,280       —    
ORIX USA
     84,988       47,094       79,932        21,596       (5,056     (6     (25,498     (54
ORIX Europe
     101,104       28,458       89,836        16,419       (11,268     (11     (12,039     (42
Asia and Australia
     71,705       19,942       92,434        24,148       20,729       29       4,206       21  
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
     1,242,567       229,504       1,361,213        169,952       118,646       10       (59,552     (26
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Difference between Segment Total and Consolidated Amounts
     (1,033     (8,715     3,603        (5,606     4,636       —         3,109       —    
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Consolidated Amounts
   ¥ 1,241,534     ¥ 220,789     ¥ 1,364,816      ¥ 164,346     ¥ 123,282       10     ¥ (56,443     (26
  
 
 
   
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total assets by segment as of March 31, 2022 and September 30, 2022 are as follows:
 
                  
Millions of yen
 
                  
March 31, 2022
    
September 30, 2022
    
Change
 
                  
Segment

Assets
    
Composition

Ratio (%)
    
Segment

Assets
    
Composition

Ratio (%)
    
Amount
   
Percent (%)
 
Corporate Financial Services and Maintenance Leasing
                                                                ¥ 1,516,795        11      ¥ 1,476,243        10      ¥ (40,552     (3
Real Estate
           910,101        6        907,859        6        (2,242     (0
PE Investment and Concession
           353,581        2        370,091        3        16,510       5  
Environment and Energy
           703,608        5        772,944        5        69,336       10  
Insurance
           2,072,145        14        2,052,684        14        (19,461     (1
Banking and Credit
           2,687,156        19        2,677,388        18        (9,768     (0
Aircraft and Ships
           684,098        5        752,565        5        68,467       10  
ORIX USA
           1,364,142        10        1,624,316        11        260,174       19  
ORIX Europe
           401,869        3        409,463        3        7,594       2  
Asia and Australia
           1,306,089        9        1,399,094        9        93,005       7  
        
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Total
           11,999,584        84        12,442,647        84        443,063       4  
        
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Difference between Segment Total and Consolidated Amounts
           2,271,088        16        2,343,359        16        72,271       3  
        
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
Total Consolidated Amounts
         ¥ 14,270,672        100      ¥ 14,786,006        100      ¥ 515,334       4  
        
 
 
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
 
 
– 4 –

Table of Contents
Segment information for the six months ended September 30, 2022 is as follows:
Corporate Financial Services and Maintenance Leasing
:
Finance and fee business; leasing and rental of automobiles, electronic measuring instruments and
ICT-related
equipment
In corporate financial services, we are engaged in financial businesses with a focus on profitability, and fee businesses by providing life insurance and environment and energy-related products and services to domestic small and
medium-sized
enterprise customers, as well as business succession support and M&A broking. In the automobile-related businesses, we aim to increase market share in small and
medium-sized
enterprises and individual customers, as well as large corporate customers by enhancing our competitive advantages stemming from our industry-leading number of fleets under management and
one-stop
automobile-related services. In the rental business operated by ORIX Rentec Corporation, we are not only providing electronic measuring instruments and
ICT-related
equipment lending, but also developing new services relating to robots, drones, etc.
Segment profits decreased 23% to ¥35,482 million compared to the same period of the previous fiscal year due to the absence of gains on investment securities and dividends resulting from the listing of an investee recorded in the same period of the previous fiscal year, and a decrease in services income resulting from the sale of the business of Yayoi Co., Ltd. in the three months ended March 31, 2022.
Segment assets decreased 3% to ¥1,476,243 million compared to the end of the previous fiscal year due to decreases in net investment in leases and installment loans.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 28,026     ¥ 30,264     ¥ 2,238       8  
Gains on investment securities and dividends
     10,804       (1,804     (12,608     —    
Operating leases
     127,003       128,564       1,561       1  
Sales of goods and real estate
     5,512       2,804       (2,708     (49
Services income
     58,930       51,599       (7,331     (12
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     230,275       211,427       (18,848     (8
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     2,963       2,870       (93     (3
Costs of operating leases
     96,659       93,521       (3,138     (3
Costs of goods and real estate sold
     3,855       1,980       (1,875     (49
Services expense
     28,132       27,974       (158     (1
Selling, general and administrative expenses
     43,737       40,961       (2,776     (6
Provision for credit losses, and write-downs of long-lived assets and securities
     721       610       (111     (15
Other
     7,996       8,446       450       6  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     184,063       176,362       (7,701     (4
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     46,212       35,065       (11,147     (24
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     51       417              366       718  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 46,263     ¥ 35,482     ¥ (10,781     (23
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Net investment in leases
   ¥ 580,161     ¥ 562,882     ¥ (17,279     (3
Installment loans
     325,482       310,550       (14,932     (5
Investment in operating leases
     517,233       512,524       (4,709     (1
Investment in securities
     34,987       32,870       (2,117     (6
Property under facility operations
     17,199       16,604       (595     (3
Inventories
     594       483       (111     (19
Advances for finance lease and operating lease
     1,800       680       (1,120     (62
Investment in affiliates
     16,929       17,565       636       4  
Goodwill, intangible assets acquired in business combinations
     22,410       22,085       (325     (1
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥   1,516,795        ¥   1,476,243        ¥ (40,552     (3
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 5 –

Table of Contents
Real Estate
:
Real estate development, rental and management; facility operations; real estate asset management
In our real estate business, we aim to promote portfolio rebalancing by selling rental properties in favorable market conditions while investing in real estate development projects that can generate added value. We are also expanding our asset management business, which is less affected by volatility in the real estate market, and our housing-related business with a focus on residential condominiums. Our real estate business also operates hotels and Japanese inns, and we aim to improve profitability by attracting customers in response to diversifying customer needs. In the future, we will promote the innovation and the efficiency of our business through digital transformation, and develop businesses that take advantage of our strengths in a diverse value chain that includes real estate development and rental, asset management, facility operations, residential condominiums management, office building management, construction contracting, and real estate brokerage.
Segment profits decreased 18% to ¥18,949 million compared to the same period of the previous fiscal year. This decrease was due to a decrease in operating leases revenues resulting from sales of real estate under operating leases, and a decrease in sales of goods and real estate at DAIKYO INCORPORATED and its subsidiaries, partially offset by an increase in services income from operating facilities.
Segment assets totaled ¥907,859 million, remaining relatively unchanged compared to the end of the previous fiscal year due to a decrease in investment in operating leases, despite an increase in inventories.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 2,747     ¥ 2,858     ¥ 111       4  
Operating leases
     30,878       27,449       (3,429     (11
Sales of goods and real estate
     60,556       40,510       (20,046     (33
Services income
     108,331       120,035       11,704       11  
Other
     2       (365     (367     —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     202,514       190,487       (12,027     (6
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     1,398       1,477       79       6  
Costs of operating leases
     12,251       12,343       92       1  
Costs of goods and real estate sold
     48,553       33,934       (14,619     (30
Services expense
     102,147       107,234       5,087       5  
Selling, general and administrative expenses
     17,353       17,854       501       3  
Provision for credit losses, and write-downs of long-lived assets and securities
     11       204       193       —    
Other
     (1,280     (1,106     174       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     180,433               171,940          (8,493     (5
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     22,081       18,547       (3,534     (16
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     950       402       (548     (58
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 23,031     ¥ 18,949     ¥ (4,082     (18
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Net investment in leases
   ¥ 62,498     ¥ 60,315     ¥ (2,183     (3
Investment in operating leases
     300,460       285,051       (15,409     (5
Investment in securities
     4,289       3,856       (433     (10
Property under facility operations
     155,750       152,170          (3,580     (2
Inventories
     97,667          109,684       12,017       12  
Advances for finance lease and operating lease
     112,309       111,538       (771     (1
Investment in affiliates
     113,178       119,960           6,782       6  
Advances for property under facility operations
     6,857       9,241       2,384         35  
Goodwill, intangible assets acquired in business combinations
     57,093       56,044       (1,049     (2
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥      910,101     ¥      907,859     ¥ (2,242     (0
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 6 –

Table of Contents
PE Investment and Concession
:
Private equity investment; concession
In the private equity business, we aim to enhance the corporate value of investees and to earn sustainable gains on sales through rebalancing our portfolio. We aim to expand investment in focused industries and increase value through rollups and alliances with existing investees as a starting point. At the same time, we seek business opportunities created by changes in the industrial structure and explore diversified investment methods. In the concession business, we aim to strengthen our operations in the three airports in Kansai (Kansai International Airport, Osaka International Airport and Kobe Airport), and proactively engage in the operation of public infrastructures other than airports.
Segment profits increased 142% to ¥3,905 million compared to the same period of the previous fiscal year due to a decrease in equity in net loss of affiliates at our three airports in Kansai in our concession business.
Segment assets increased 5% to ¥370,091 million compared to the end of the previous fiscal year due to an increase in investment securities, goodwill and intangible assets acquired in business combinations resulting from the acquisition of a subsidiary, despite a decrease in property under facility operations at a certain investee.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 124     ¥ 188     ¥ 64       52  
Gains on investment securities and dividends
     1,107       315       (792     (72
Operating leases
     16,127       18,119       1,992       12  
Sales of goods and real estate
     161,106       216,680       55,574       34  
Services income
     13,686       15,571       1,885       14  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     192,150       250,873       58,723       31  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     1,481       933       (548     (37
Costs of operating leases
     11,767       11,840       73       1  
Costs of goods and real estate sold
     149,592       192,916       43,324       29  
Services expense
     9,188       9,800       612       7  
Selling, general and administrative expenses
     25,275       25,499       224       1  
Provision for credit losses, and write-downs of long-lived assets and securities
     951       124       (827     (87
Other
     (13,710     623       14,333       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     184,544       241,735       57,191       31  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     7,606       9,138       1,532       20  
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     (5,992     (5,233     759       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 1,614     ¥ 3,905     ¥ 2,291       142  
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Net investment in leases
   ¥ 1,689     ¥ 1,513     ¥ (176     (10
Investment in operating leases
     43,686       50,554           6,868         16  
Investment in securities
     12,129       17,727       5,598       46  
Property under facility operations
     40,725       33,238       (7,487     (18
Inventories
     39,554       42,288       2,734       7  
Investment in affiliates
     43,498       39,035       (4,463     (10
Advances for property under facility operations
     1,323       1,173       (150     (11
Goodwill, intangible assets acquired in business combinations
     170,977       184,563       13,586       8  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥      353,581        ¥      370,091        ¥ 16,510       5  
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 7 –

Table of Contents
Environment and Energy
:
Domestic and overseas renewable energy; electric power retailing; ESCO services; sales of solar panels and battery energy storage system; recycling and waste management
In the environment and energy business, we aim to increase services revenue as a comprehensive energy service provider by promoting our renewable energy business and electric power retailing business. In our solar power generation business, we have owned and operated one of the largest solar power capacities in total in Japan. In the recycling and waste management business, we are making new investments in facilities with the aim of further expansion of business. We intend to accelerate our renewable energy business overseas by utilizing the expertise we have gained in the domestic market.
Segment profits increased 11% to ¥10,582 million compared to the same period of the previous fiscal year due to a profit contribution from a renewable energy business subsidiary in Spain.
Segment assets increased 10% to ¥772,944 million compared to the end of the previous fiscal year due to increases in investment in affiliates, advances for property under facility operations, and property under facility operations, primarily resulting from foreign exchange effects.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 474     ¥ 558     ¥ 84       18  
Services income
     61,699       108,469       46,770       76  
Other
     1,725       1,887              162           9  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     63,898       110,914       47,016       74  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     2,204       5,312       3,108       141  
Services expense
     47,075       84,110       37,035       79  
Selling, general and administrative expenses
     5,263       8,547       3,284       62  
Provision for credit losses, and write-downs of long-lived assets and securities
     (4     31       35       —    
Other
     388       1,512       1,124       290  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     54,926       99,512       44,586       81  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     8,972       11,402       2,430       27  
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     530       (820     (1,350     —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥          9,502        ¥ 10,582        ¥ 1,080       11  
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Net investment in leases
   ¥ 7,910     ¥ 7,334     ¥ (576     (7
Installment loans
     711       779       68       10  
Investment in operating leases
     279       272       (7     (3
Investment in securities
     961       1,251       290         30  
Property under facility operations
     330,598       343,837         13,239       4  
Inventories
     356       409       53       15  
Advances for finance lease and operating lease
     6       0       (6     —    
Investment in affiliates
     204,260       233,148       28,888       14  
Advances for property under facility operations
     57,520       73,143       15,623       27  
Goodwill, intangible assets acquired in business combinations
     101,007       112,771       11,764       12  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥ 703,608        ¥      772,944        ¥ 69,336       10  
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 8 –

Table of Contents
Insurance
:
Life insurance
In the life insurance business, we sell life insurance through agents, banks and other financial institutions,
face-to-face
sales through our own consulting services, and online sales. With
“simple-to-understand”
and “providing reasonable guarantee at reasonable price” as the concepts of product development, we aim to expand the number of new life insurance contracts and increase life insurance premium income by constantly incorporating our customer needs while expanding the product lineup.
Segment profits decreased 60% to ¥13,007 million compared to the same period of the previous fiscal year due to an increase in life insurance costs as a result of increased payouts to policy holders, despite an increase in life insurance premiums and related investment income in line with an increase in insurance contracts.
Segment assets decreased 1% to ¥2,052,684 million compared to the end of the previous fiscal year due to decrease in investment in securities.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 126     ¥ 149     ¥ 23       18  
Life insurance premiums and related investment income
     233,960       264,433       30,473       13  
Other
     1,002       1,288       286       29  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     235,088       265,870       30,782       13  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     282       114       (168     (60
Life insurance costs
     174,766       223,247       48,481       28  
Selling, general and administrative expenses
     27,814       29,502       1,688       6  
Provision for credit losses, and write-downs of long-lived assets and securities
     1       (0     (1     —    
Other
     (92     (1     91       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     202,771       252,862       50,091       25  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     32,317       13,008       (19,309     (60
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     5       (1     (6     —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 32,322     ¥ 13,007     ¥ (19,315     (60
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Installment loans
   ¥ 17,983     ¥ 18,309     ¥        326           2  
Investment in operating leases
     28,296       28,031       (265     (1
Investment in securities
     2,021,134       2,001,635       (19,499     (1
Goodwill, intangible assets acquired in business combinations
     4,732       4,709       (23     (0
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥   2,072,145        ¥   2,052,684        ¥ (19,461     (1
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 9 –

Table of Contents
Banking and Credit
:
Banking; consumer finance
In the banking business, we aim to increase finance revenues mainly by origination of real estate investment loans, which is the core of our banking business. In the consumer finance business, we aim to increase finance revenues by providing loans directly to our customers with our expertise in credit screening. We also aim to increase guarantee fees income by expanding guarantees against loans disbursed by other financial institutions. In the mortgage bank business, we aim to expand our market share by expanding our agency network and strengthening our product lineup.
Segment profits decreased 27% to ¥15,215 million compared to the same period of the previous fiscal year due to the absence of gains on investment securities and dividends at ORIX Bank Corporation recorded in the same period of the previous fiscal year, and an increase in advertising expenses at ORIX Credit Corporation recorded in the consolidated cumulative second quarter.
Segment assets totaled ¥2,677,388 million, remaining relatively unchanged compared to the end of the previous fiscal year.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 38,795     ¥ 38,610     ¥ (185     (0
Gains on investment securities and dividends
     1,335       (1,163     (2,498     —    
Services income
     2,967       3,497       530       18  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     43,097       40,944       (2,153     (5
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     2,620       2,755       135       5  
Services expense
     3,977       4,208       231       6  
Selling, general and administrative expenses
     13,719       16,559       2,840       21  
Provision for credit losses, and write-downs of long-lived assets and securities
     1,894       2,595       701       37  
Other
     (21     (388     (367     —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     22,189       25,729       3,540       16  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     20,908       15,215       (5,693     (27
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     1       0       (1     —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥     20,909     ¥     15,215     ¥ (5,694     (27
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Installment loans
   ¥ 2,397,532     ¥ 2,381,726     ¥ (15,806     (1
Investment in securities
     277,786       283,858           6,072           2  
Investment in affiliates
     67       33       (34     (51
Goodwill, intangible assets acquired in business combinations
     11,771       11,771       0       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥   2,687,156        ¥   2,677,388        ¥ (9,768     (0
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 10 –

Table of Contents
Aircraft and Ships
:
Aircraft investment and management; ship-related finance and investment
In the aircraft-related business, we are focusing on a wide range of profit opportunities, including operating leases of owned aircraft, sale of aircraft to investors, and asset management services for aircraft owned by domestic and overseas investors. We aim for medium- and long-term growth by further enhancing our presence in the global aircraft-leasing market including through mutually complementary relationships with Avolon Holdings Limited. In the ship-related business, we flexibly replace assets while closely monitoring the market environment, and aim to achieve goals such as an increase of commission income by arranging investment in ships for domestic corporate investors. In the future, we aim to expand our business by collaborating with excellent partners based on our expertise in finance and investment.
Segment profits increased by ¥10,280 million to ¥10,649 million as compared to ¥369 million of segment profits in the same period of the previous fiscal year due to an increase in equity in net income (loss) of affiliates at Avolon Holdings Limited, and an increase in operating leases revenues in our ship-related businesses and aircraft-related business.
Segment assets increased 10% to ¥752,565 million compared to the end of the previous fiscal year due to an increase in investment in affiliates, primarily resulting from foreign exchange effects.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 805     ¥ 2,419     ¥ 1,614       200  
Operating leases
     13,771       20,983       7,212       52  
Services income
     3,172       5,094       1,922       61  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     17,748       28,496       10,748       61  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     6,045       7,680       1,635       27  
Costs of operating leases
     8,609       7,460       (1,149     (13
Services expense
     481       690       209       43  
Selling, general and administrative expenses
     3,378       4,129       751       22  
Provision for credit losses, and write-downs of long-lived assets and securities
     (0     (0     0       —    
Other
     (2,734     360       3,094       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     15,779       20,319       4,540       29  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     1,969       8,177       6,208       315  
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     (1,600     2,472           4,072       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 369        ¥ 10,649        ¥ 10,280       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Installment loans
   ¥ 81,695     ¥ 91,083     ¥ 9,388       11  
Investment in operating leases
     271,910       263,096       (8,814     (3
Investment in securities
     0       0       0       —    
Inventories
     113       0       (113     —    
Investment in affiliates
     320,058       385,119       65,061       20  
Goodwill, intangible assets acquired in business combinations
     10,322       13,267       2,945       29  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥      684,098        ¥      752,565        ¥   68,467       10  
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 11 –

Table of Contents
ORIX USA
:
Finance, investment and asset management in the Americas
ORIX Corporation USA provides various types of finance services such as corporate finance, real estate finance, private equity investment, and investment in bonds to our clients in response to their needs. We aim to expand such asset businesses by making the most of our expertise in them. We are also engaged in expanding the function of our asset management and servicing platform to increase stable fee revenues. With the expansion of both principal investments and assets under management, we aim for the growth of profits along with improvement of capital efficiency.
Segment profits decreased 54% to ¥21,596 million compared to the same period of the previous fiscal year, primarily due to the absence of gains on investment securities and dividends resulting from the sales of investees recorded in the same period of the previous fiscal year.
Segment assets increased 19% to ¥1,624,316 million compared to the end of the previous fiscal year, primarily due to foreign exchange effects.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 44,261     ¥ 49,631     ¥ 5,370       12  
Gains on investment securities and dividends
     27,085       9,504       (17,581     (65
Services income
     12,052       19,387       7,335       61  
Other
     1,590       1,410       (180     (11
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     84,988       79,932       (5,056     (6
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     8,249       16,637       8,388       102  
Services expense
     1,659       2,469       810       49  
Selling, general and administrative expenses
     35,775       42,837       7,062       20  
Provision for credit losses, and write-downs of long-lived assets and securities
     (1,500     (2,054     (554     —    
Other
     (382     2,759       3,141       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     43,801       62,648       18,847       43  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     41,187       17,284       (23,903     (58
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     5,907       4,312       (1,595     (27
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 47,094     ¥ 21,596     ¥ (25,498     (54
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Net investment in leases
   ¥ 475     ¥ 543     ¥ 68       14  
Installment loans
     717,183       863,881       146,698       20  
Investment in operating leases
     4,653       3,854       (799     (17
Investment in securities
     367,190       430,849       63,659       17  
Property under facility operations and servicing assets
     79,000       90,255       11,255       14  
Inventories
     685       1,102       417         61  
Advances for finance lease and operating lease
     945       0       (945     —    
Investment in affiliates
     45,337       59,009       13,672       30  
Goodwill, intangible assets acquired in business combinations
     148,674       174,823       26,149       18  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥   1,364,142        ¥   1,624,316        ¥ 260,174       19  
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 12 –

Table of Contents
ORIX Europe
:
Asset management of global equity and fixed income
Under ORIX Corporation Europe N.V. (hereinafter, “OCE”) as the holding company, Robeco Institutional Asset Management B.V. (hereinafter, “Robeco”) and Transtrend B.V. headquartered in the Netherlands, Boston Partners Global Investors, Inc. and Harbor Capital Advisors, Inc. headquartered in the United States are engaged in the asset management business through investments in stocks, bonds, etc. In addition to the focus on expanding the existing businesses by leveraging the expertise of Robeco, a pioneer in sustainable investment, we aim to increase assets under management with expanding products and investment strategies through M&A activities. ORIX Europe is also engaged in capturing a wide range of business opportunities as the strategic business location of ORIX Group in Europe.
Segment profits decreased 42% to ¥16,419 million compared to the same period of the previous fiscal year due to a decrease in services income due to a decrease in the average amount of assets under management, and a decrease in gains on investment securities and dividends resulting from weaker market conditions.
Segment assets increased 2% to ¥409,463 million compared to the end of the previous fiscal year, primarily due to foreign exchange effects, despite a decrease in investment in securities.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 7     ¥ 183     ¥ 176       —    
Gains on investment securities and dividends
     1,821       (8,761     (10,582     —    
Services income
     99,276       98,414       (862     (1
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     101,104       89,836       (11,268     (11
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     (319     587       906       —    
Services expense
     26,466       24,847       (1,619     (6
Selling, general and administrative expenses
     44,499       50,849       6,350       14  
Other
     1,476       (2,658     (4,134     —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     72,122       73,625       1,503       2  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     28,982       16,211       (12,771     (44
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     (524     208       732       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 28,458     ¥ 16,419     ¥ (12,039     (42
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Investment in securities
   ¥ 82,770     ¥ 80,562     ¥ (2,208     (3
Investment in affiliates
     2,221       2,636       415       19  
Goodwill, intangible assets acquired in business combinations
     316,878       326,265       9,387       3  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥      401,869        ¥      409,463        ¥     7,594           2  
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 13 –

Table of Contents
Asia and Australia
:
Finance and investment businesses in Asia and Australia
Our overseas subsidiaries are well-versed in business practices and laws and regulations that vary from region to region, and are primarily engaged in financial services such as leasing and lending. Our overseas subsidiaries also invest in private equity in Asian countries, particularly in China. We will further enhance the functions of our overseas subsidiaries and further invest in targeted markets in order to expand our business with an emphasis on profitability.
Segment profits increased 21% to ¥24,148 million compared to the same period of the previous fiscal year due to an increase in operating leases revenues in South Korea and Australia, partially offset by a decrease in gains on investment securities and dividends.
Segment assets increased 7% to ¥1,399,094 million compared to the end of the previous fiscal year, primarily due to foreign exchange effects, despite a decrease in installment loans in Greater China.
 
    
Six months
ended
September 30,
2021
   
Six months
ended
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Segment Revenues:
        
Finance revenues
   ¥ 22,628     ¥ 29,025     ¥ 6,397       28  
Gains on investment securities and dividends
     3,530       1,158       (2,372     (67
Operating leases
     38,694       51,571       12,877       33  
Services income
     6,825       10,022       3,197       47  
Other
     28       658       630       —    
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Revenues
     71,705       92,434       20,729       29  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Expenses:
        
Interest expense
     9,729       13,895       4,166       43  
Costs of operating leases
     28,842       37,649       8,807       31  
Services expense
     4,617       6,591       1,974       43  
Selling, general and administrative expenses
     14,194       18,002       3,808       27  
Provision for credit losses, and write-downs of long-lived assets and securities
     183       497       314       172  
Other
     521       553       32       6  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Expenses
     58,086       77,187       19,101       33  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Operating Income
     13,619       15,247       1,628       12  
  
 
 
   
 
 
   
 
 
   
 
 
 
Equity in Net income (Loss) of Affiliates and others
     6,323       8,901       2,578       41  
  
 
 
   
 
 
   
 
 
   
 
 
 
Segment Profits
   ¥ 19,942     ¥ 24,148     ¥ 4,206       21  
  
 
 
   
 
 
   
 
 
   
 
 
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen, except percentage data)
 
Net investment in leases
   ¥ 405,043     ¥ 450,165     ¥ 45,122       11  
Installment loans
     321,994       313,883       (8,111     (3
Investment in operating leases
     286,214       313,798       27,584       10  
Investment in securities
     48,052       55,510       7,458       16  
Property under facility operations
     1,084       1,176       92       8  
Inventories
     483       500       17       4  
Advances for finance lease and operating lease
     3,919       6,990       3,071         78  
Investment in affiliates
     232,471       249,756       17,285       7  
Goodwill, intangible assets acquired in business combinations
     6,829       7,316       487       7  
  
 
 
   
 
 
   
 
 
   
 
 
 
Total Segment Assets
   ¥   1,306,089        ¥   1,399,094        ¥   93,005       7  
  
 
 
   
 
 
   
 
 
   
 
 
 
 
– 14 –

Table of Contents
(2) Financial Condition
 
    
As of
March 31,
2022
   
As of
September 30,
2022
   
Change
 
 
 
 
   
Amount
   
Percent
(%)
 
 
 
 
 
 
 
 
 
 
    
(Millions of yen except per share, ratios and
percentages)
 
Total assets
   ¥ 14,270,672     ¥ 14,786,006     ¥ 515,334       4  
(Segment assets)
     11,999,584       12,442,647       443,063       4  
Total liabilities
     10,899,271       11,333,820       434,549       4  
(Short- and long-term debt)
     4,866,685       5,410,385       543,700         11  
(Deposits)
     2,276,158       2,252,295       (23,863     (1
ORIX Corporation shareholders’ equity
     3,261,419       3,344,812       83,393       3  
ORIX Corporation shareholders’ equity per share (yen)*1
     2,732.88       2,836.85       103.97       4  
ORIX Corporation shareholders’ equity ratio*2
     22.9     22.6     —         —    
D/E ratio
(Debt-to-equity
ratio)
(Short-and
long-term debt (excluding deposits) / ORIX Corporation shareholders’ equity)
     1.5x       1.6x       —         —    
 
*1 ORIX Corporation shareholders’ equity per share is calculated using total ORIX Corporation shareholders’ equity.
*2 ORIX Corporation shareholders’ equity ratio is the ratio as of the period end of ORIX Corporation shareholders’ equity to total assets.
Total assets increased 4% to ¥14,786,006 million compared to the balance as of March 31, 2022 due to increases in other assets, installment loans and investments in affiliates, partially offset by a decrease in cash and cash equivalents. In addition, segment assets increased 4% to ¥12,442,647 million compared to the balance as of March 31, 2022.
Total liabilities increased 4% to ¥11,333,820 million compared to the balance as of March 31, 2022 due to increases in
short-and
long-term debt, policy liabilities and policy account balances, despite decreases in trade notes, accounts and other payable and current and deferred income taxes.
Shareholders’ equity increased 3% to ¥3,344,812 million compared to the balance as of March 31, 2022.
 
– 15 –

Table of Contents
(3) Liquidity and Capital Resources
ORIX Group formulates funding policies that are designed to maintain and improve procurement stability and reduce liquidity risk. As a concrete measure to maintain and improve procurement stability while engaging in activities such as borrowing, capital market procurement and securitization of assets, we are diversifying our procurement methods and our country and investor base. To reduce liquidity risk, we are prolonging our borrowings from financial institutions and issuing long-term corporate bonds domestically and internationally with dispersed redemption periods. We are also holding cash and entering into committed credit facilities agreements. In order to maintain an appropriate level of liquidity at hand, we conduct stress tests from the perspective of both procurement stability and financial efficiency and review the necessary levels accordingly.
The Company continues to closely monitor the effects of
COVID-19,
the Russia-Ukraine crisis, increased inflation and increase in interest cost around the world on the liquidity and capital resources of the ORIX Group.
Our funding is comprised of borrowings from financial institutions, direct fund procurement from capital markets, and deposits. ORIX Group’s total funding including that from short-term and long-term debt and deposits on a consolidated basis was ¥7,662,680 million as of September 30, 2022. Borrowings are procured from a diverse range of financial institutions including major banks, regional banks, foreign banks and life and casualty insurance companies. The number of financial institutions from which we procured borrowings was about 200 as of September 30, 2022. Our debt from capital markets is mainly composed of bonds, MTNs, CP, and securitization of loans receivables and other assets. The majority of deposits are attributable to ORIX Bank Corporation.
Short-term and long-term debt and deposits
(a) Short-term debt
 
    
Millions of yen
 
    
March 31, 2022
    
September 30, 2022
 
Borrowings from financial institutions
   ¥ 399,589      ¥ 376,293  
Commercial paper
     40,050        85,380  
  
 
 
    
 
 
 
Total short-term debt
   ¥ 439,639      ¥ 461,673  
  
 
 
    
 
 
 
 
Short-term debt as of September 30, 2022 was ¥461,673 million, which accounted for 9% of the total amount of short-term and long-term debt (excluding deposits) as compared to 9% as of March 31, 2022.
 
 
While the amount of short-term debt as of September 30, 2022 was ¥461,673 million, the sum of cash and cash equivalents and the unused amount of committed credit facilities as of September 30, 2022 was ¥1,483,169 million, maintaining a sufficient level of liquidity.
 
 
(b) Long-term debt
 
    
Millions of yen
 
    
March 31, 2022
    
September 30, 2022
 
Borrowings from financial institutions
   ¥ 3,240,763      ¥ 3,523,205  
Bonds
     997,654        1,177,875  
Medium-term notes
     32,279        78,726  
Payables under securitized loan receivables and other assets
     156,350        168,906  
  
 
 
    
 
 
 
Total long-term debt
   ¥ 4,427,046      ¥ 4,948,712  
  
 
 
    
 
 
 
 
The balance of long-term debt as of September 30, 2022 was ¥4,948,712 million, which accounted for 91% of the total amount of short-term and long-term debt (excluding deposits) as compared to 91% as of March 31, 2022.
 
 
(c) Deposits
 
    
Millions of yen
 
    
  March 31, 2022  
    
September 30, 2022
 
Deposits
   ¥              2,276,158      ¥              2,252,295  
Apart from the short-term and long-term debt noted above, ORIX Bank Corporation and ORIX Asia Limited accept deposits. These deposit-taking subsidiaries are regulated institutions, and loans from these subsidiaries to ORIX Group entities are subject to maximum regulatory limits.
 
– 16 –

Table of Contents
(4) Summary of Cash Flows
Cash, cash equivalents and restricted cash as of September 30, 2022 decreased by ¥45,791 million to ¥1,046,021 million compared to March 31, 2022.
Cash flows provided by operating activities were ¥262,902 million in the six months ended September 30, 2022, down from ¥603,273 million during the same period of the previous fiscal year. This change resulted primarily from an increase in an increase in inventories, a decrease in a decrease in trade notes, accounts and other receivable, and an increase in payment of income taxes resulting from the sale of the business of Yayoi Co., Ltd. in the three months ended March 31, 2022, and other. Cash outflow resulting from payment of income taxes is included in other, net
Cash flows used in investing activities were ¥440,563 million in the six months ended September 30, 2022, down from ¥446,478 million during the same period of the previous fiscal year. This change resulted primarily from an increase in principal collected on installment loans, partially offset by an increase in purchases and a decrease in proceeds from redemption of
available-for-sale
debt securities
Cash flows provided by financing activities were ¥96,042 million in the six months ended September 30, 2022, compared to the outflow of ¥76,204 million during the same period of the previous fiscal year. This change resulted primarily from an increase in proceeds from debt with maturities longer than three months, partially offset by a change from an increase to a decrease in debt with maturities of three months or less.
(5) Management Policy and Strategy
There were no significant changes for the six months ended September 30, 2022.
(6) Challenges to be addressed on a priority basis
There were no significant changes for the six months ended September 30, 2022.
(7) Research and Development Activity
There were no significant changes in research and development activities for the six months ended September 30, 2022.
(8) Major Facilities
There were no significant changes in major facilities for the six months ended September 30, 2022.
 
4.
Material Contracts
Not applicable.
 
– 17 –

Table of Contents
5.
Company Stock Information
(The following disclosure is provided for ORIX Corporation on a stand-alone basis and has been prepared based on Japanese GAAP.)
(1) Issued Shares, Common Stock and Capital Reserve
The number of issued shares, the amount of common stock and capital reserve for the three months ended September 30, 2022 is as follows:
 
In thousands
 
Millions of yen
Number of issued shares
 
Common stock
 
Capital reserve
Increase, net
 
September 30, 2022
 
Increase, net
 
September 30, 2022
 
Increase, net
 
September 30, 2022
0   1,258,277   ¥0   ¥221,111   ¥0   ¥248,290
(2) List of Major Shareholders
The following is a list of major shareholders based on our share registry as of September 30, 2022:
 
Name
  
Number of shares held

(in thousands)
    
Percentage of total
shares issued
 
Address
The Master Trust Bank of Japan, Ltd. (Trust Account)
2-11-3,
Hamamatsu-cho,
Minato-ku,
Tokyo
                     243,041                    20.56
Custody Bank of Japan, Ltd. (Trust Account)
1-8-12,
Harumi,
Chuo-ku,
Tokyo
     103,154        8.72  
SSBTC Client Omnibus Account
One Lincoln Street, Boston MA USA 02111
     25,935        2.19  
Citibank,
N.A.-NY,
As Depositary Bank For Depositary Share Holders
388 Greenwich Street New York, NY 10013 USA
     23,547        1.99  
JP Morgan Securities Inc.
Tokyo Building,
2-7-3,
Marunouchi,
Chiyoda-ku,
Tokyo
     23,314        1.97  
State Street Bank West Client-Treaty 505234
1776 Heritage Drive, North Quincy, MA 02171 USA
     20,872        1.76  
BNYM AS AGT/CLTS Non Treaty JASDEC
240 Greenwich Street, New York, NY 10286 USA
     17,373        1.46  
JP Morgan Chase Bank 385781
25 Bank Street, Canary Wharf, London, E14 5JP, United Kingdom
     14,940        1.26  
SMBC Nikko Securities Inc.
3-3-1,
Marunouchi,
Chiyoda-ku,
Tokyo
     14,009        1.18  
Northern Trust Co. (AVFC) Sub A/C Non Treat
50 Bank Street Canary Wharf London E14 5NT, UK
     13,945        1.17  
  
 
 
    
 
 
 
     500,136        42.31
  
 
 
    
 
 
 
 
Notes:
  
1
  
The number of shares held in relation to a trust business may not be all inclusive and therefore is reported with reference to the names listed as shareholders.
         :
  
2
  
In addition to the above, the Company has treasury stock shares of 76,368 thousand shares. The Company’s shares held through the Board Incentive Plan Trust (2,849 thousand shares) are not included in the number of treasury stock shares.
 
6.
Directors and Executive Officers
Between the filing date of Form
20-F
for the fiscal year ended March 31, 2022 and September 30, 2022, there were no changes of directors and executive officers.
 
– 18 –

Table of Contents
7.
Financial Information
(1) Condensed Consolidated Balance Sheets (Unaudited)
 
    
Millions of yen
 
Assets
  
  March 31, 2022  
   
September 30, 2022
 
Cash and Cash Equivalents
   ¥ 954,827     ¥ 925,965  
Restricted Cash
     136,985       120,056  
Net Investment in Leases
     1,057,973       1,082,943  
Installment Loans
     3,862,604       3,980,231  
The amounts which are measured at fair value by electing the fair value option are as follows:
                
March 31, 2022
  ¥151,601 million                 
September 30, 2022
  ¥215,774 million                 
Allowance for Credit Losses
     (69,459     (66,975
Investment in Operating Leases
     1,463,202       1,466,487  
Investment in Securities
     2,852,349       2,911,282  
The amounts which are measured at fair value by electing the fair value option are as follows:
                
March 31, 2022
  ¥19,353 million                 
September 30, 2022
  ¥25,568 million                 
The amounts which are associated to
available-for-sale
debt securities are as follows:
                
March 31, 2022
                    
Amortized Cost
  ¥2,276,425 million                 
Allowance for Credit Losses
  ¥(153) million                 
September 30, 2022
                    
Amortized Cost
  ¥2,514,538 million                 
Allowance for Credit Losses
  ¥(172) million                 
Property under Facility Operations
     561,846       564,655  
Investment in Affiliates
     978,033       1,106,570  
Trade Notes, Accounts and Other Receivable
     359,949       356,894  
Inventories
     139,563       154,565  
Office Facilities
     240,421       246,380  
Other Assets
     1,732,379       1,936,953  
The amounts which are measured at fair value by electing the fair value option are as follows:
                
March 31, 2022
  ¥5,214 million                 
September 30, 2022
  ¥5,702 million                 
        
 
 
   
 
 
 
Total Assets
   ¥          14,270,672     ¥          14,786,006  
    
 
 
   
 
 
 
 
Note:    The assets of consolidated variable interest entities (VIEs) that can be used only to settle obligations of those VIEs are below:
 
    
Millions of yen
 
    
  March 31, 2022  
   
September 30, 2022
 
Cash and Cash Equivalents
   ¥ 3,899     ¥ 4,554  
Installment Loans (Net of Allowance for Credit Losses)
     212,371        238,637   
Investment in Operating Leases
     101,881       72,675  
Property under Facility Operations
     210,307       165,362  
Investment in Affiliates
     51,877       51,561  
Other
     95,613       73,969  
    
 
 
   
 
 
 
     ¥               675,948     ¥               606,758  
    
 
 
   
 
 
 
 
– 19 –

Table of Contents
    
Millions of yen
 
Liabilities and Equity
  
March 31, 2022
   
September 30, 2022
 
Liabilities:
                
Short-Term Debt
   ¥ 439,639     ¥ 461,673  
Deposits
     2,276,158       2,252,295  
Trade Notes, Accounts and Other Payable
     291,422       248,523  
Policy Liabilities and Policy Account Balances
     1,963,623       2,049,300  
The amounts which are measured at fair value by electing the fair value option are as follows:
                
March 31, 2022
  ¥198,905 million                 
September 30, 2022
  ¥170,177 million                 
Current and Deferred Income Taxes
     461,181       315,657  
Long-Term Debt
     4,427,046       4,948,712  
Other Liabilities
     1,040,202       1,057,660  
    
 
 
   
 
 
 
Total Liabilities
     10,899,271       11,333,820  
    
 
 
   
 
 
 
Redeemable Noncontrolling Interests
     0       965  
    
 
 
   
 
 
 
Commitments and Contingent Liabilities
    


 
Equity:
                
Common Stock
     221,111       221,111  
Additional
Paid-in
Capital
     260,479       260,880  
Retained Earnings
     2,909,317       2,975,389  
Accumulated Other Comprehensive Income (Loss)
     (16,041     34,014  
Treasury Stock, at Cost
     (113,447     (146,582
    
 
 
   
 
 
 
ORIX Corporation Shareholders’ Equity
     3,261,419       3,344,812  
Noncontrolling Interests
     109,982       106,409  
    
 
 
   
 
 
 
Total Equity
     3,371,401       3,451,221  
        
 
 
   
 
 
 
Total Liabilities and Equity
   ¥          14,270,672     ¥          14,786,006  
    
 
 
   
 
 
 
 
Note:
   The liabilities of consolidated VIEs for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company and its subsidiaries are below:
 
    
Millions of yen
 
    
  March 31, 2022  
    
September 30, 2022
 
Trade Notes, Accounts and Other Payable
   ¥ 2,251      ¥ 1,846  
Long-Term Debt
     431,312        376,611  
Other
     38,891        27,715  
    
 
 
    
 
 
 
     ¥               472,454      ¥               406,172  
    
 
 
    
 
 
 
 
– 20 –

Table of Contents
(2) Condensed Consolidated Statements of Income (Unaudited)
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Revenues:
                
Finance revenues
   ¥ 137,191     ¥ 153,151  
Gains (Losses) on investment securities and dividends
     45,744       (746
Operating leases
     227,933       249,144  
Life insurance premiums and related investment income
     232,797       263,211  
Sales of goods and real estate
     230,655       265,020  
Services income
     367,214       435,036  
    
 
 
   
 
 
 
Total revenues
     1,241,534       1,364,816  
    
 
 
   
 
 
 
Expenses:
                
Interest expense
     33,432       51,473  
Costs of operating leases
     159,578       164,841  
Life insurance costs
                   174,215                     222,493  
Costs of goods and real estate sold
     204,182       232,209  
Services expense
     223,630       267,774  
Other (income) and expense
     (10,558     6,941  
Selling, general and administrative expenses
     245,884       267,954  
Provision for credit losses
     2,106       1,674  
Write-downs of long-lived assets
     88       253  
Write-downs of securities
     60       71  
    
 
 
   
 
 
 
Total expenses
     1,032,617       1,215,683  
    
 
 
   
 
 
 
Operating Income
     208,917       149,133  
Equity in Net Income of Affiliates
     5,399       6,624  
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net
     6,473       8,589  
    
 
 
   
 
 
 
Income before Income Taxes
     220,789       164,346  
Provision for Income Taxes
     68,070       38,737  
    
 
 
   
 
 
 
Net Income
     152,719       125,609  
    
 
 
   
 
 
 
Net Income Attributable to the Noncontrolling Interests
     6,037       3,821  
    
 
 
   
 
 
 
Net Income Attributable to the Redeemable Noncontrolling Interests
     0       12  
    
 
 
   
 
 
 
Net Income Attributable to ORIX Corporation Shareholders
   ¥ 146,682     ¥ 121,776  
    
 
 
   
 
 
 
   
    
Yen
 
    
Six months ended

 September 30, 2021 
   
Six months ended

 September 30, 2022 
 
Amounts per Share of Common Stock for Net Income Attributable to ORIX Corporation Shareholders:
                
Basic:
   ¥ 121.12     ¥ 102.52  
Diluted:
                     121.00                        102.40   
 
– 21 –

Table of Contents
    
Millions of yen
 
    
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Revenues:
                
Finance revenues
   ¥ 68,889     ¥ 79,308  
Gains on investment securities and dividends
     21,615       4,894  
Operating leases
     114,467       122,945  
Life insurance premiums and related investment income
     124,699       136,934  
Sales of goods and real estate
     111,551       133,722  
Services income
     191,500       229,200  
    
 
 
   
 
 
 
Total revenues
     632,721       707,003  
    
 
 
   
 
 
 
Expenses:
                
Interest expense
     16,513       29,575  
Costs of operating leases
     79,824       82,953  
Life insurance costs
     94,452       120,927  
Costs of goods and real estate sold
     105,114       119,779  
Services expense
     117,734       145,237  
Other (income) and expense
     (14,069     5,211  
Selling, general and administrative expenses
                   123,799                     135,872  
Provision for credit losses
     2,361       1,426  
Write-downs of long-lived assets
     1       145  
Write-downs of securities
     54       38  
    
 
 
   
 
 
 
Total expenses
     525,783       641,163  
    
 
 
   
 
 
 
Operating Income
     106,938       65,840  
Equity in Net Income of Affiliates
     10,319       8,005  
Gains on Sales of Subsidiaries and Affiliates and Liquidation Losses, net
     3,476       5,486  
    
 
 
   
 
 
 
Income before Income Taxes
     120,733       79,331  
Provision for Income Taxes
     38,614       18,010  
    
 
 
   
 
 
 
Net Income
     82,119       61,321  
    
 
 
   
 
 
 
Net Income Attributable to the Noncontrolling Interests
     653       1,395  
    
 
 
   
 
 
 
Net Income Attributable to the Redeemable Noncontrolling Interests
     0       12  
    
 
 
   
 
 
 
Net Income Attributable to ORIX Corporation Shareholders
   ¥ 81,466     ¥ 59,914  
    
 
 
   
 
 
 
   
    
Yen
 
    
Three months ended

 September 30, 2021 
   
Three months ended

 September 30, 2022 
 
Amounts per Share of Common Stock for Net Income Attributable to ORIX Corporation Shareholders:
                
Basic:
   ¥ 67.51      ¥ 50.60   
Diluted:
                       67.43                         50.54  
 
– 22 –

Table of Contents
(3) Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Net Income
   ¥ 152,719     ¥ 125,609  
    
 
 
   
 
 
 
Other comprehensive income (loss), net of tax:
                
Net change of unrealized gains (losses) on investment in securities
     8,320       (143,867
Net change of debt valuation adjustments
     (61     60  
Net change of defined benefit pension plans
     149       (316
Net change of foreign currency translation adjustments
                     14,932       185,095  
Net change of unrealized gains on derivative instruments
     2,170                       18,531  
    
 
 
   
 
 
 
Total other comprehensive income
     25,510       59,503  
    
 
 
   
 
 
 
Comprehensive Income
     178,229       185,112  
    
 
 
   
 
 
 
Comprehensive Income Attributable to the Noncontrolling Interests
     6,719       13,181  
    
 
 
   
 
 
 
Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
     0       100  
    
 
 
   
 
 
 
Comprehensive Income Attributable to ORIX Corporation Shareholders
   ¥ 171,510     ¥ 171,831  
    
 
 
   
 
 
 
   
    
Millions of yen
 
    
Three months ended

 September 30, 2021 
   
Three months ended

 September 30, 2022 
 
Net Income
   ¥ 82,119     ¥ 61,321  
    
 
 
   
 
 
 
Other comprehensive income (loss), net of tax:
                
Net change of unrealized gains (losses) on investment in securities
     1,939       (62,494
Net change of debt valuation adjustments
     (37     76  
Net change of defined benefit pension plans
     196       (151
Net change of foreign currency translation adjustments
     5,891       70,976  
Net change of unrealized gains on derivative instruments
     1,278       7,600  
    
 
 
   
 
 
 
Total other comprehensive income
     9,267       16,007  
    
 
 
   
 
 
 
Comprehensive Income
     91,386       77,328  
    
 
 
   
 
 
 
Comprehensive Income Attributable to the Noncontrolling Interests
     1,169       3,615  
    
 
 
   
 
 
 
Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
     0       62  
    
 
 
   
 
 
 
Comprehensive Income Attributable to ORIX Corporation Shareholders
   ¥ 90,217      ¥ 73,651   
    
 
 
   
 
 
 
 
– 23 –

Table of Contents
(4) Condensed Consolidated Statements of Changes in Equity (Unaudited)
Six months ended September 30, 2021
 
    
Millions of yen
 
    
ORIX Corporation Shareholders’ Equity
             
    
Common

Stock
    
Additional

Paid-in

Capital
   
Retained

Earnings
   
Accumulated

Other

Comprehensive

Income (Loss)
   
Treasury

Stock
   
Total ORIX

Corporation

Shareholders’

Equity
   
Noncontrolling

Interests
   
Total

Equity
 
Balance at March 31, 2021
   ¥ 221,111      ¥ 259,361     ¥ 2,744,588     ¥ (84,650   ¥ (111,954   ¥ 3,028,456     ¥ 74,688     ¥ 3,103,144  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Cumulative effect of adopting Accounting Standards Update
2019-12
                      215                       215       0       215  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at April 1, 2021
   ¥ 221,111      ¥ 259,361     ¥ 2,744,803     ¥ (84,650   ¥ (111,954   ¥ 3,028,671     ¥ 74,688     ¥ 3,103,359  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Contribution to subsidiaries
                                              0       28,040       28,040  
Transaction with noncontrolling interests
              20                               20       (5,733     (5,713
Comprehensive income, net of tax:
                                                                 
Net income
                      146,682                       146,682       6,037       152,719  
Other comprehensive income (loss)
                                                                 
Net change of unrealized gains on investment in securities
                              8,320               8,320       0       8,320  
Net change of debt valuation adjustments
                              (61             (61     0       (61
Net change of defined benefit pension plans
                              150               150       (1     149  
Net change of foreign currency translation adjustments
                              14,317               14,317       615       14,932  
Net change of unrealized gains on derivative instruments
                                   2,102               2,102       68       2,170  
                                             
 
 
   
 
 
   
 
 
 
Total other comprehensive income
                                              24,828       682       25,510  
                                             
 
 
   
 
 
   
 
 
 
Total comprehensive income
                                              171,510       6,719       178,229  
                                             
 
 
   
 
 
   
 
 
 
Cash dividends
                      (52,438                     (52,438     (12,869     (65,307
Acquisition of treasury stock
                                      (30,547     (30,547     0       (30,547
Disposal of treasury stock
              (12                     18       6       0       6  
Other, net
              433                       (1     432       0       432  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
   ¥ 221,111      ¥ 259,802     ¥ 2,839,047     ¥ (59,822   ¥ (142,484   ¥ 3,117,654     ¥   90,845     ¥ 3,208,499  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Six months ended September 30, 2022
 
    
Millions of yen
 
    
ORIX Corporation Shareholders’ Equity
             
    
Common

Stock
    
Additional

Paid-in

Capital
   
Retained

Earnings
   
Accumulated

Other

Comprehensive

Income (Loss)
   
Treasury

Stock
   
Total ORIX

Corporation

Shareholders’

Equity
   
Noncontrolling

Interests
   
Total

Equity
 
Balance at March 31, 2022
   ¥ 221,111      ¥ 260,479     ¥ 2,909,317     ¥ (16,041   ¥ (113,447   ¥ 3,261,419     ¥ 109,982     ¥ 3,371,401  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Contribution to subsidiaries
                                              0       1,722       1,722  
Transaction with noncontrolling interests
              (14                             (14     (3,421     (3,435
Comprehensive income, net of tax:
                                                                 
Net income
                      121,776                       121,776       3,821       125,597  
Other comprehensive income (loss)
                                                                 
Net change of unrealized gains (losses) on investment in securities
                              (143,867             (143,867     0       (143,867
Net change of debt valuation adjustments
                              60               60       0       60  
Net change of defined benefit pension plans
                              (318             (318     2       (316
Net change of foreign currency translation adjustments
                              177,121               177,121       7,886       185,007  
Net change of unrealized gains on derivative instruments
                              17,059               17,059       1,472       18,531  
                                             
 
 
   
 
 
   
 
 
 
Total other comprehensive income
                                              50,055       9,360       59,415  
                                             
 
 
   
 
 
   
 
 
 
Total comprehensive income
                                              171,831       13,181       185,012  
                                             
 
 
   
 
 
   
 
 
 
Cash dividends
                      (55,704                     (55,704     (15,055     (70,759
Acquisition of treasury stock
                                      (33,151     (33,151     0       (33,151
Disposal of treasury stock
              (29                     16       (13     0       (13
Other, net
              444                               444       0       444  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2022
   ¥ 221,111      ¥ 260,880     ¥ 2,975,389     ¥ 34,014     ¥ (146,582   ¥ 3,344,812     ¥ 106,409     ¥ 3,451,221  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Note:
  
Changes in the redeemable noncontrolling interests are not included in this table. For further information, see Note 12 “Redeemable Noncontrolling Interests.”
 
– 24 –

Table of Contents
Three months ended September 30, 2021
 
    
Millions of yen
 
    
ORIX Corporation Shareholders’ Equity
             
    
Common

Stock
    
Additional

Paid-in

Capital
   
Retained

Earnings
   
Accumulated

Other

Comprehensive

Income (Loss)
   
Treasury

Stock
   
Total ORIX

Corporation

Shareholders’

Equity
   
Noncontrolling

Interests
   
Total

Equity
 
Balance at June 30, 2021
   ¥ 221,111      ¥ 259,585     ¥ 2,757,581      ¥ (68,573   ¥ (122,172   ¥ 3,047,532     ¥ 67,719     ¥ 3,115,251  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Contribution to subsidiaries
                                              0       27,286       27,286  
Transaction with noncontrolling interests
                                              0       (4,599     (4,599
Comprehensive income, net of tax:
                                                                 
Net income
                      81,466                       81,466       653       82,119  
Other comprehensive income (loss)
                                                                 
Net change of unrealized gains on investment in securities
                              1,939               1,939       0       1,939  
Net change of debt valuation adjustments
                              (37             (37     0       (37
Net change of defined benefit pension plans
                              196               196       0       196  
Net change of foreign currency translation adjustments
                              5,414               5,414       477       5,891  
Net change of unrealized gains on derivative instruments
                                   1,239               1,239       39       1,278  
                                             
 
 
   
 
 
   
 
 
 
Total other comprehensive income
                                              8,751       516       9,267  
                                             
 
 
   
 
 
   
 
 
 
Total comprehensive income
                                              90,217       1,169       91,386  
                                             
 
 
   
 
 
   
 
 
 
Cash dividends
                                              0       (730     (730
Acquisition of treasury stock
                                      (20,330     (20,330     0       (20,330
Disposal of treasury stock
              (12                     18       6       0       6  
Other, net
              229                               229       0       229  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021
   ¥ 221,111      ¥ 259,802     ¥ 2,839,047     ¥ (59,822   ¥ (142,484   ¥ 3,117,654     ¥   90,845     ¥ 3,208,499  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Three months ended September 30, 2022
 
    
Millions of yen
 
    
ORIX Corporation Shareholders’ Equity
             
    
Common

Stock
    
Additional

Paid-in

Capital
   
Retained

Earnings
   
Accumulated

Other

Comprehensive

Income (Loss)
   
Treasury

Stock
   
Total ORIX

Corporation

Shareholders’

Equity
   
Noncontrolling

Interests
   
Total

Equity
 
Balance at June 30, 2022
   ¥ 221,111      ¥ 260,653     ¥ 2,915,475      ¥ 20,277     ¥ (123,790   ¥ 3,293,726     ¥ 109,759     ¥ 3,403,485  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Contribution to subsidiaries
                                              0       1,250       1,250  
Transaction with noncontrolling interests
                                              0       (1,242     (1,242
Comprehensive income, net of tax:
                                                                 
Net income
                      59,914                       59,914       1,395       61,309  
Other comprehensive income (loss)
                                                                 
Net change of unrealized gains (losses) on investment in securities
                              (62,494             (62,494     0       (62,494
Net change of debt valuation adjustments
                              76               76       0       76  
Net change of defined benefit pension plans
                              (151             (151     0       (151
Net change of foreign currency translation adjustments
                                 69,445               69,445       1,481       70,926  
Net change of unrealized gains on derivative instruments
                              6,861               6,861       739       7,600  
                                             
 
 
   
 
 
   
 
 
 
Total other comprehensive income
                                              13,737       2,220       15,957  
                                             
 
 
   
 
 
   
 
 
 
Total comprehensive income
                                              73,651       3,615       77,266  
                                             
 
 
   
 
 
   
 
 
 
Cash dividends
                                              0       (6,973     (6,973
Acquisition of treasury stock
                                      (22,808     (22,808     0       (22,808
Disposal of treasury stock
              (29                     16       (13     0       (13
Other, net
              256                               256       0       256  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2022
   ¥ 221,111      ¥ 260,880     ¥ 2,975,389     ¥ 34,014     ¥ (146,582   ¥ 3,344,812     ¥ 106,409     ¥ 3,451,221  
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Note:
  
Changes in the redeemable noncontrolling interests are not included in this table. For further information, see Note 12 “Redeemable Noncontrolling Interests.”
 
– 25 –

Table of Contents
(5) Condensed Consolidated Statements of Cash Flows (Unaudited)
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Cash Flows from Operating Activities:
                
Net income
   ¥ 152,719     ¥ 125,609  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     164,237       167,284  
Principal payments received under net investment in leases
     223,891       246,557  
Provision for credit losses
     2,106       1,674  
Equity in net income of affiliates (excluding interest on loans)
     (4,760     (5,777
Gains on sales of subsidiaries and affiliates and liquidation losses, net
     (6,473     (8,589
Gains on sales of securities other than trading
     (13,017     (6,476
Gains on sales of operating lease assets
     (26,238     (31,577
Write-downs of long-lived assets
     88       253  
Write-downs of securities
     60       71  
Decrease in trading securities
     38,414       30,377  
Increase in inventories
     (211     (13,502
Decrease in trade notes, accounts and other receivable
     31,665                       19,260  
Decrease in trade notes, accounts and other payable
     (45,908     (35,647
Increase in policy liabilities and policy account balances
     63,412       85,677  
Other, net
                     23,288       (312,292
    
 
 
   
 
 
 
Net cash provided by operating activities
     603,273       262,902  
    
 
 
   
 
 
 
Cash Flows from Investing Activities:
                
Purchases of lease equipment
     (436,752     (443,345
Installment loans made to customers
     (586,801     (589,094
Principal collected on installment loans
     580,149       664,246  
Proceeds from sales of operating lease assets
     88,398       142,067  
Investment in affiliates, net
     (13,881     (18,340
Proceeds from sales of investment in affiliates
     17,734       17,766  
Purchases of
available-for-sale
debt securities
     (240,909     (299,368
Proceeds from sales of
available-for-sale
debt securities
     179,630       156,589  
Proceeds from redemption of
available-for-sale
debt securities
     34,180       26,160  
Purchases of equity securities other than trading
     (30,450     (39,144
Proceeds from sales of equity securities other than trading
     47,813       31,752  
Purchases of property under facility operations
     (12,799     (34,678
Acquisitions of subsidiaries, net of cash acquired
     (90,090     (30,980
Sales of subsidiaries, net of cash disposed
     4,143       (993
Other, net
     13,157       (23,201
    
 
 
   
 
 
 
Net cash used in investing activities
     (446,478     (440,563
    
 
 
   
 
 
 
Cash Flows from Financing Activities:
                
Net increase (decrease) in debt with maturities of three months or less
     159,408       (14,943
Proceeds from debt with maturities longer than three months
     475,898       873,820  
Repayment of debt with maturities longer than three months
     (591,890     (619,926
Net decrease in deposits due to customers
     (31,813     (25,343
Cash dividends paid to ORIX Corporation shareholders
     (52,438     (55,704
Acquisition of treasury stock
     (30,547     (33,151
Contribution from noncontrolling interests
     7,271       2,164  
Purchases of shares of subsidiaries from noncontrolling interests
     (1,289     (1,273
Net increase (decrease) in call money
     2,500       (15,000
Other, net
     (13,304     (14,602
    
 
 
   
 
 
 
Net cash provided by (used in) financing activities
     (76,204     96,042  
    
 
 
   
 
 
 
Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
     1,726       35,828  
    
 
 
   
 
 
 
Net increase (decrease) in Cash, Cash Equivalents and Restricted Cash
     82,317       (45,791
    
 
 
   
 
 
 
Cash, Cash Equivalents and Restricted Cash at Beginning of Period
     1,079,575       1,091,812  
    
 
 
   
 
 
 
Cash, Cash Equivalents and Restricted Cash at End of Period
   ¥ 1,161,892     ¥ 1,046,021  
    
 
 
   
 
 
 
 
Note:
  
The following tables provide information about Cash, Cash Equivalents and Restricted Cash which are included in the Company’s consolidated balance sheets as of September 30, 2021 and September 30, 2022, respectively.
 
    
Millions of yen
 
    
September 30, 2021
   
September 30, 2022
 
Cash and Cash Equivalents
   ¥ 1,030,893     ¥ 925,965  
Restricted Cash
                   130,999                       120,056   
    
 
 
   
 
 
 
Cash, Cash Equivalents and Restricted Cash
   ¥ 1,161,892     ¥ 1,046,021  
    
 
 
   
 
 
 
 
– 26 –

Table of Contents
Notes to Consolidated Financial Statements
 
1.
Overview of Accounting Principles Utilized
In preparing the accompanying consolidated financial statements, ORIX Corporation (the “Company”) and its subsidiaries have complied with generally accepted accounting principles in the United States (“U.S. GAAP”).
These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. These consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our March 31, 2022 consolidated financial statements on Form
20-F.
Since the Company listed on the New York Stock Exchange in September 1998, the Company has filed the annual report (Form
20-F)
including the consolidated financial statements with the Securities and Exchange Commission.
Significant differences between U.S. GAAP and generally accepted accounting principles in Japan (“Japanese GAAP”) are as follows:
(a) Initial direct costs
Under U.S. GAAP, initial direct costs of sales-type leases and direct financing leases are mainly being deferred and amortized as a yield adjustment over the life of the related lease using the interest method. Initial direct costs of operating leases are being deferred and amortized on a straight-line basis over the life of the related lease. Initial direct costs of loans are mainly being deferred and amortized over the term of the related loans using the interest method.
Under Japanese GAAP, those initial direct costs are recognized as expenses when they are incurred.
(b) Allowance for credit losses
Under U.S. GAAP, the allowance for credit losses to financial assets not individually evaluated is accounted for estimating all credit losses expected to occur in future over the remaining life. And for the credit losses over the remaining life resulting from
off-balance
sheet credit exposures, the allowance is recognized.
Under Japanese GAAP, the allowance for loan losses to financial receivables, etc. not individually evaluated is accounted for based on the prior
charge-off
experience to the outstanding balance of financial receivables at the reporting date.
(c) Operating leases
Under U.S. GAAP, revenues from operating leases are recognized on a straight-line basis over the contract terms. Operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis.
Japanese GAAP allows for operating lease assets to be depreciated using mainly either a declining-balance basis or a straight-line basis.
(d) Accounting for life insurance operations
Under U.S. GAAP, certain costs related directly to the successful acquisition of new (or renewal of) insurance contracts are deferred and amortized over the respective policy periods in proportion to anticipated premium revenue.
Under Japanese GAAP, such costs are recorded as expenses currently in earnings in each accounting period.
In addition, under U.S. GAAP, policy liabilities for future policy benefits are established using the net level premium method based on actuarial estimates of the amount of future policyholder benefits. Under Japanese GAAP, these are calculated by the methodology which relevant authorities accept.
 
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(e) Accounting for goodwill and other intangible assets in business combinations
Under U.S. GAAP, goodwill and indefinite-lived intangible assets are not amortized, but assessed for impairment at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for impairment when such events or changes occur.
Under Japanese GAAP, goodwill is amortized over an appropriate period up to 20 years.
(f) Accounting for pension plans
Under U.S. GAAP, the net actuarial gain (loss) is amortized using the corridor approach.
Under Japanese GAAP, the net actuarial gain (loss) is fully amortized over a certain term within the average remaining service period of employees.
(g) Partial sale of the parent’s ownership interest in subsidiaries
Under U.S. GAAP, in a transaction that results in the loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the remeasurement to fair value of the interest retained.
Under Japanese GAAP, in a transaction that results in the loss of control, only the realized gain or loss related to the portion of ownership interest sold is recognized in income and the gain or loss on the remeasurement to fair value of the interest retained is not recognized.
(h) Consolidated statements of cash flows
Classification in the statements of cash flows under U.S. GAAP differs from that under Japanese GAAP. As significant differences, purchase of lease equipment, proceeds from sales of operating lease assets, installment loans made to customers and principal collected on installment loans (excluding issues and collections of loans held for sale) are included in “Cash Flows from Investing Activities” under U.S. GAAP while they are classified as “Cash Flows from Operating Activities” under Japanese GAAP.
Under U.S. GAAP, in addition, restricted cash is required to be added to the balance of cash and cash equivalents.
(i) Transfer of financial assets
Under U.S. GAAP, an entity is required to perform analysis to determine whether or not to consolidate trusts or special purpose companies, collectively called special purpose entities (“SPEs”) for securitization under the VIE’s consolidation rules. If it is determined from the analysis that the enterprise transferred financial assets in a securitization transaction to a SPE that needs to be consolidated, the transaction is not accounted for as a sale.
In addition, if the transferor transfers a portion of financial assets, the transaction is not accounted for as a sale but accounted for as a secured borrowing unless each interest held by the transferor and transferee meets the definition of a participating interest and the transfer of a portion of financial assets meets criteria for derecognition of transferred financial assets.
Under Japanese GAAP, a SPE that meets certain conditions may be considered not to be a subsidiary of the transferor. Therefore, if an enterprise transfers financial assets to this type of SPE in a securitization transaction, the transferee SPE is not required to be consolidated, and the enterprise accounts for the transaction as a sale and recognizes a gain or loss on the sale into earnings when control over the transferred assets is surrendered.
In addition, if the transferor transfers a portion of financial assets, the enterprise accounts for the transaction as a sale and recognizes a gain or loss on the sale into earnings when the transfer of a portion of financial assets meets criteria for derecognition of transferred financial assets.
(j) Investment in securities
Under U.S. GAAP, unrealized gains and losses from all equity securities are generally recognized in income. In addition, credit losses on
available-for-sale
debt securities are recognized in earnings through an allowance, and unrealized gains and losses on
available-for-sale
debt securities related to other factors than credit losses are recognized in other comprehensive income (loss), net of applicable income taxes.
Under Japanese GAAP, such unrealized gains and losses from securities other than trading or
held-to-maturity
are recognized in other comprehensive income (loss), net of applicable income taxes.
 
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(k) Fair value option
Under U.S. GAAP, an entity is permitted to carry certain eligible financial assets and liabilities at fair value and to recognize changes in that item’s fair value in earnings through the election of the fair value option. The portion of the total change in the fair value of the financial liability that results from a change in the instrument-specific credit risk is to be recognized in other comprehensive income (loss), net of applicable income taxes.
Under Japanese GAAP, there is no accounting standard for fair value option.
(l) Lessee’s lease
Under U.S. GAAP,
right-of-use
(hereinafter, “ROU”) assets and lease liabilities from the lessee’s lease transaction are generally recognized on the balance sheet.
Under Japanese GAAP, operating leases from the lessee’s lease transaction are
off-balance
sheet.
 
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2.
Significant Accounting and Reporting Policies
(a) Principles of consolidation
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. VIEs, for which the Company and its subsidiaries are the primary beneficiaries, are also included in the consolidated financial statements.
In a transaction that results in the loss of control, the gain or loss recognized in income includes the realized gain or loss related to the portion of ownership interest sold and the gain or loss on the remeasurement to fair value of the interest retained. On the other hand, additional acquisition of the parent’s ownership interest in subsidiaries and partial sale of such interest where the parent continues to retain control of the subsidiary are accounted for as equity transactions.
Investments in affiliates, of which the Company has 20% – 50% ownership or has the ability to exercise significant influence, are accounted for by using the equity method. When the Company holds majority voting interests of an entity but noncontrolling shareholders hold substantive participating rights to make decisions on activities that occur over the ordinary course of the business, the equity method is applied. Investments in affiliates are recorded at cost plus/minus the Company and its subsidiaries’ portion of equity in undistributed earnings. If the value of an investment has declined and is judged to be other-than-temporary, the investment is written down to its fair value.
When an affiliate issues stocks, which price per share is more or less than the Company and its subsidiaries’ average carrying amount per share, to unrelated third parties, the Company and its subsidiaries adjust the carrying amount of its investment in the affiliate and recognize the gain or loss in the consolidated statements of income in the year in which the change in ownership interest occurs.
A certain overseas subsidiary consolidates subsidiaries determined as investment companies under ASC 946 (“Financial Services – Investment Companies”). Investments held by the investment company subsidiaries are carried at fair value with changes in fair value recognized in earnings.
A lag period of up to three months is used on a consistent basis for recognizing the results of certain subsidiaries and affiliates.
All significant intercompany accounts and transactions have been eliminated in consolidation.
(b) Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company has identified ten areas where it believes assumptions and estimates are particularly critical to the financial statements. The Company makes estimates and assumptions to the selection of valuation techniques and determination of assumptions used in fair value measurements, the determination and periodic reassessment of the unguaranteed residual value for finance leases and operating leases, the determination and reassessment of insurance policy liabilities and deferred policy acquisition costs, the determination of the allowance for credit losses (including the allowance for
off-balance
sheet credit exposures), the recognition and measurement of impairment of long-lived assets, the recognition and measurement of impairment of investment in securities, the determination of the valuation allowance for deferred tax assets and the evaluation of tax positions, the assessment and measurement of effectiveness in hedging relationship using derivative financial instruments, the determination of benefit obligation and net periodic pension cost and the recognition and measurement of impairment of goodwill and other intangible assets.
In addition, we carefully considered the future outlook regarding the spread of the
COVID-19
etc. As of September 30, 2022, there were no significant changes in the forecast assumed at the end of the previous fiscal year, and there was no significant impact on our accounting estimates. However, the outlook for future outbreaks of
COVID-19
etc. and the resulting global economic slowdown is uncertain and may change rapidly. Therefore, our accounting estimates may change over time.
(c) Foreign currencies translation
The Company and its subsidiaries maintain their accounting records in their functional currency. Transactions in foreign currencies are recorded in the entity’s functional currency based on the prevailing exchange rates on the transaction date. Monetary assets and liabilities in foreign currencies are recorded in the entity’s functional currency based on the prevailing exchange rates at the end of each fiscal year.
 
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The financial statements of overseas subsidiaries and affiliates are translated into Japanese yen by applying the exchange rates in effect at the end of each fiscal year to all assets and liabilities. Income and expenses are translated at the average rates of exchange prevailing during the fiscal year. The currencies in which the operations of the overseas subsidiaries and affiliates are conducted are regarded as the functional currencies of these companies. Foreign currency translation adjustments reflected in other comprehensive income (loss), net of applicable income taxes, arise from the translation of foreign currency financial statements into Japanese yen.​​​​​​​
(d) Revenue recognition
The Company and its subsidiaries recognize revenues from only contracts with customers, such as sales of goods and real estate, and services income, revenues are recognized to depict the transfer of promised goods or services to customers in the amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services. Revenues are recognized net of discount, incentives and estimated sales returns. In case that the Company and its subsidiaries receive payment from customers before satisfying performance obligations, the amounts are recognized as contract liabilities. In transactions that involve third parties, if the Company and its subsidiaries control the goods or services before they are transferred to the customers, revenue is recognized on gross amount as the principal.
Excluding the aforementioned policy, the policies as specifically described hereinafter are applied for each of revenue items.
Finance Revenues
—Finance revenues mainly include revenues from finance leases, installment loans, and financial guarantees.
(1) Revenues from finance leases
Lessor leases consist of leases for various equipment types, including office equipment, industrial machinery, transportation equipment and real estates. Net investment in leases includes sales-type leases and direct financing leases which are full-payout leases. Leases not qualifying as sales-type leases or direct financing leases are accounted for as operating leases. Interest income on net investment in leases is recognized over the life of each respective lease using the interest method. When lease payment is variable, it is accounted for as income in profit or loss in the period when the changes in facts and circumstances on which the variable payment is based occur. When providing leasing services, the Company and its subsidiaries simultaneously conduct supplementary businesses, such as handling taxes and paying insurance on leased assets on behalf of lessees. The compensations for those lessor costs received from lessees are recognized in revenues from finance leases and those costs are recognized in other (income) and expense. The estimated unguaranteed residual value represents estimated proceeds from the disposition of equipment at the time the lease is terminated. Estimates of residual values are determined based on market values of used equipment, estimates of when and the extent to which equipment will become obsolete and actual recovery being experienced for similar used equipment. Initial direct costs of sales-type leases and direct financing leases are being deferred and amortized as a yield adjustment over the life of the related lease by using interest method. The unamortized balance of initial direct costs of sales-type leases and direct financing leases is reflected as a component of net investment in leases.
(2) Revenues from installment loans
Interest income on installment loans is recognized on an accrual basis. Certain direct loan origination costs, net of origination fees, are being deferred and amortized over the contractual term of the loan as an adjustment of the related loan’s yield using the interest method. Interest payments received on loans other than purchased loans are recorded as interest income unless the collection of the remaining investment is doubtful at which time payments received are recorded as reductions of principal. For purchased loans, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans.
(3) Revenues from financial guarantees
At the inception of a guarantee, fair value for the guarantee is recognized as a liability in the consolidated balance sheets. The Company and its subsidiaries recognize revenue mainly over the term of guarantee by a systematic and rational amortization method as the Company and the subsidiaries are released from the risk of the obligation.
 
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(4)
Non-accrual
policy
In common with all classes, for net investment in leases and installment loans,
past-due
financing receivables are receivables for which principal or interest is
past-due
30 days or more. Loans whose terms have been modified are not classified as
past-due
financing receivables if the principal and interest is not
past-due
30 days or more in accordance with the modified terms. The Company and its subsidiaries suspend accruing revenues on
past-due
installment loans and net investment in leases when principal or interest is
past-due
90 days or more, or earlier, if management determines that their collections are doubtful based on factors such as individual debtors’ creditworthiness, historical loss experience, current delinquencies and delinquency trends. However, delinquencies during the relevant period of
past-due
financing receivables are out of the scope of the suspension of revenue recognition unless their collections are doubtful when the government issues a request for grace of repayment within a maximum of 6 months due to reasons that cannot be attributed to the obligor, such as a disaster, or when similar requests are made by public bodies. Accrued but uncollected interest is reclassified to net investment in leases or installment loans in the accompanying consolidated balance sheets and becomes subject to the allowance for credit losses process. Cash repayments received on
non-accrual
loans are applied first against past due interest and then any surpluses are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries return
non-accrual
loans and net investment in leases to accrual status when it becomes probable that the Company and its subsidiaries will be able to collect all amounts due according to the contractual terms of these loans and receivables, as evidenced by continual payments from the debtors. The period of such continual payments before returning to accrual status varies depending on factors that we consider are relevant in assessing the debtors’ creditworthiness, such as the debtors’ business characteristics and financial conditions as well as relevant economic conditions and trends.
Operating leases
Revenues from operating leases are recognized on a straight-line basis over the contract terms. When lease payment is variable, it is accounted for as income in profit or loss in the period when the changes in facts and circumstances on which the variable payment is based occur. In principle, any conditions changed from original lease agreement should be accounted for as a lease modification. However, if lessees applied for
COVID-19
related rent concessions and changes of lease payments do not result in a substantial increase to the rights of the lessor or the obligations of the lessee, the concessions are eligible to be applied for the practical expedient. The Company and its subsidiaries applied the practical expedient when accounting for eligible rent concessions mentioned above. Taking lessees’ future business performance into consideration, the Company and its subsidiaries applied the practical expedient by the following 3 approaches: recognize revenue under the original lease contract, recognize revenue under the conditions changed by rent concessions or only recognize revenue when receiving the lease payments.
In providing leasing services, the Company and its subsidiaries simultaneously conduct supplementary businesses, such as handling taxes and paying insurance on leased assets on behalf of lessees. The compensations for those lessor costs received from lessees are recognized in operating lease revenues and those costs are recognized in costs of operating leases. Investment in operating leases is recorded at cost less accumulated depreciation, which was ¥819,839 million and ¥844,944 million as of March 31, 2022 and September 30, 2022, respectively. In addition, operating lease assets are depreciated over their estimated useful lives mainly on a straight-line basis. Depreciation expenses are included in costs of operating leases. Gains or losses arising from dispositions of operating lease assets are included in operating lease revenues.
Estimates of residual values are based on market values of used equipment, estimates of when and the extent to which equipment will become obsolete and actual recovery being experienced for similar used equipment. Initial direct costs of operating leases are being deferred and amortized as a straight-line basis over the life of the related lease. The unamortized balance of initial direct costs is reflected as investment in operating leases.
(e) Insurance and reinsurance transactions
Premium income from life insurance policies, net of premiums on reinsurance ceded, is recognized as earned premiums when due.
Life insurance benefits are recorded as expenses when they are incurred. Policy liabilities and policy account balances for future policy benefits are measured using the net level premium method, based on actuarial estimates of the amount of future policyholder benefits. The policies are characterized as long-duration policies and mainly consist of whole life, term life, endowments, medical insurance and individual annuity insurance contracts. For policies other than individual annuity insurance contracts, computation of policy liabilities necessarily includes assumptions about mortality, morbidity, lapse rates, future yields on related investments and other factors applicable at the time the policies are written. A certain subsidiary continually evaluates the potential for changes in the estimates and assumptions applied in determining policy liabilities, both positive and negative, and uses the results of these evaluations both to adjust recorded liabilities and to adjust underwriting criteria and product offerings.
 
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The insurance contracts sold by the subsidiary include variable annuity, variable life and fixed annuity insurance contracts. The subsidiary manages investment assets on behalf of variable annuity and variable life policyholders, which consist of equity securities and are included in investment in securities in the consolidated balance sheets. These investment assets are measured at fair value with realized and unrealized gains or losses recognized in life insurance premiums and related investment income in the consolidated statements of income. The subsidiary elected the fair value option for the entire variable annuity and variable life insurance contracts with changes in the fair value recognized in life insurance costs.
The subsidiary provides minimum guarantees to variable annuity and variable life policyholders under which it is exposed to the risk of compensating losses incurred by the policyholders to the extent contractually required. To mitigate the risk, a portion of the minimum guarantee risk related to variable annuity and variable life insurance contracts is ceded to reinsurance companies and the remaining risk is economically hedged by entering into derivative contracts. The reinsurance contracts do not relieve the subsidiary from the obligation as the primary obligor to compensate certain losses incurred by the policyholders, and the default of the reinsurance companies may impose additional losses on the subsidiary. Certain subsidiaries have elected the fair value option for certain reinsurance contracts relating to variable annuity and variable life insurance contracts, which are included in other assets in the consolidated balance sheets.
Policy liabilities and policy account balances for fixed annuity insurance contracts are measured based on the single-premiums plus interest based on expected rate and fair value adjustments relating to the acquisition of the subsidiary, less withdrawals, expenses and other charges. The credited interest is recorded in life insurance costs in the consolidated statements of income.
Certain costs related directly to the successful acquisition of new or renewal insurance contracts, or deferred policy acquisition costs are deferred and amortized over the respective policy periods in proportion to anticipated premium revenue. These deferred policy acquisition costs consist primarily of agent commissions, except for recurring policy maintenance costs and certain variable costs and expenses for underwriting policies.
(f) Allowance for credit losses
The allowance for credit losses estimates all credit losses expected to occur in future over the remaining life of net investment in leases, financial assets measured at amortized cost, such as installment loans,
held-to-maturity
debt securities and other receivables, and is recognized adequately based on the management judgement. Expected prepayments are reflected in the remaining life. The allowance for credit losses is increased by provision charged to income and is decreased by charge-offs, net of recoveries mainly.
Developing the allowance for credit losses is subject to numerous estimates and judgments. In evaluating the appropriateness of the allowance, management considers various factors, including the business characteristics and financial conditions of the obligors, prior
charge-off
experience, current delinquencies and delinquency trends, value of underlying collateral and guarantees, current economic and business conditions and expected outlook in the future.
The Company and its subsidiaries estimate the allowance for credit losses by using various methods according to these estimates and judgments. When certain financial assets have similar risk characteristics to other financial assets, these financial assets are collectively evaluated as a pool. On the contrary, when financial assets do not have similar risk characteristics to other financial assets, the financial assets are evaluated individually. The Company and its subsidiaries select the most appropriate calculation method based on available information, such as the nature and related risk characteristics on financial assets, the prior
charge-off
experience and future forecast scenario with correlated economic indicators.
The Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal considering debtors’ creditworthiness and the liquidation status of collateral, etc.
In addition, if the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable by the entity, credit losses related the loan commitments of card loans and installment loans and financial guarantees are in the scope of the allowance for credit losses. For the loan commitments of card loans and installment loans, credit losses are recognized on the loan commitments for the portion expected to be drawn. For financial guarantees, the allowance is recognized for the contingent obligation which generates credit risk exposures. These allowance for
off-balance
sheet credit exposures is measured using the same measurement objectives as the allowance for loans and net investment leases, considering quantitative and qualitative factors including historical loss experience, current economic and business conditions and reasonable and supportable forecasts. The allowance for
off-balance
sheet credit exposure is accounted for in other liabilities on the consolidated balance sheets.
 
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(g) Impairment of long-lived assets
The Company and its subsidiaries perform a recoverability test for long-lived assets to be held and used in operations, including tangible assets and intangible assets being depreciated or amortized, consisting primarily of office buildings, condominiums, aircraft, ships, mega solar facilities and other properties under facility operations, whenever events or changes in circumstances indicated that the assets might be impaired. The assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets. The carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount. The Company and its subsidiaries determine the fair value using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers, and others based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate.
(h) Investment in securities
Equity securities are generally reported at fair value with unrealized gains and losses included in income. Equity securities without readily determinable fair values are recorded at fair value at its cost minus impairment, if any, plus or minus changes resulting from observable price changes under the election of the measurement alternative, except for investments which are valued at net asset value per share.
Equity securities elected to apply the measurement alternative are written down to its fair value with losses included in income if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than its carrying value.
In addition, investments included in equity securities that are accounted for under the equity method are recorded at fair value with unrealized gains and losses included in income if certain subsidiaries elect the fair value option.
Trading debt securities are reported at fair value with unrealized gains and losses included in income.
Available-for-sale
debt securities are reported at fair value, and unrealized gains or losses are recorded in other comprehensive income (loss), net of applicable income taxes, except for investments which are recorded at fair value with unrealized gains and losses included in income by electing the fair value option.
For
available-for-sale
debt securities, if the fair value is less than the amortized cost, the debt securities are impaired. The Company and its subsidiaries identify per each impaired security whether the decline of fair value is due to credit losses component or
non-credit
losses component. Impairment related to credit losses is recognized in earnings through an allowance for credit losses. Impairment related to other factors than credit losses is recognized in other comprehensive income (loss), net of applicable income taxes. In estimating an allowance for credit losses, the Company and its subsidiaries consider that credit losses exist when the present value of estimated cash flows is less than the amortized cost basis. When the Company and its subsidiaries intend to sell the debt securities for which an allowance for credit losses is previously established or it is more likely than not that the Company and its subsidiaries will be required to sell the debt securities before recovery of the amortized cost basis, the allowance for credit losses is fully written off and the amortized cost is reduced to the fair value after recognizing additional impairment in earnings. In addition, the Company and its subsidiaries recognize in earnings the full difference between the amortized cost and the fair value of the debt securities by direct write-down, without any allowance for credit losses, if the debt securities are expected to be sold and the fair value is less than the amortized cost.
Held-to-maturity
debt securities are recorded at amortized cost.
Held-to-maturity
debt securities are in the scope of ASC 326 (“Financial Instruments—Credit Losses”) (hereinafter, “Credit Losses Standard”), see Note 2 “Significant Accounting and Reporting Policies (f) Allowance for credit losses.”
(i) Income taxes
The Company, in general, determines its provision for income taxes for quarterly periods by applying the current estimate of the effective tax rate for the full fiscal year to the actual
year-to-date
income before income taxes. The estimated effective tax rate is determined by dividing the estimated provision for income taxes for the full fiscal year by the estimated income before income taxes for the full fiscal year.
 
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At the fiscal year end, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period that includes the enactment date. The Company and its subsidiaries release to earnings stranded income tax effects in accumulated other comprehensive income (loss) resulting from changes in tax laws or rates or changes in judgment about realization of a valuation allowance on a specific identification basis when the individual items are completely sold or terminated. A valuation allowance is recognized if, based on the weight of available evidence, it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.
The effective income tax rates for the six months ended September 30, 2021 and 2022 were approximately 30.8% and 23.6%, respectively. These rates are approximately 32.0% and 22.7% for the three months ended September 30, 2021 and 2022, respectively. For the six and three months ended September 30, 2021 and 2022, the Company and its subsidiaries in Japan were subject to a National Corporate tax of approximately 24%, an Inhabitant tax of approximately 4% and a deductible Enterprise tax of approximately 4%, which in the aggregate result in a statutory income tax rate of approximately 31.5%. The effective income tax rate is different from the statutory tax rate primarily because of certain nondeductible expenses for tax purposes,
non-taxable
income for tax purposes, changes in valuation allowance, the effect of lower tax rates on certain subsidiaries and the effect of investor taxes on earnings of subsidiaries. The Company and its certain subsidiaries have applied Japanese Group Relief System for National Corporation tax purposes.
The Company and its subsidiaries file tax returns in Japan and certain foreign tax jurisdictions and recognize the financial statement effects of a tax position taken or expected to be taken in a tax return when it is more likely than not, based on the technical merits, that the position will be sustained upon tax examination, including resolution of any related appeals or litigation processes, and measure tax positions that meet the recognition threshold at the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company and its subsidiaries present an unrecognized tax benefit as either a reduction of a deferred tax asset or a liability, based on the intended method of settlement. The Company and its subsidiaries classify penalties and interest expense related to income taxes as part of provision for income taxes in the consolidated statements of income.
(j) Securitized assets
The Company and its subsidiaries have securitized and sold to investors various financial assets such as lease receivables and loan receivables. In the securitization process, the assets to be securitized are sold to SPEs that issue asset-backed beneficial interests and securities to the investors.
SPEs used in securitization transactions are consolidated if the Company and its subsidiaries are the primary beneficiary of the SPEs, and the transfers of the financial assets to those consolidated SPEs are not accounted for as sales. Assets held by consolidated SPEs continue to be accounted for as lease receivables or loan receivables, as they were before the transfer, and asset-backed beneficial interests and securities issued to the investors are accounted for as debt. When the Company and its subsidiaries have transferred financial assets to a transferee that is not subject to consolidation, the Company and its subsidiaries account for the transfer as a sale if control over the transferred assets is surrendered.
The Company and certain subsidiaries originate and sell loans into the secondary market, while retaining the obligation to service those loans. In addition, a certain subsidiary undertakes obligations to service loans originated by others. The subsidiary recognizes servicing assets if it expects the benefit of servicing to more than adequately compensate it for performing the servicing or recognizes servicing liabilities if it expects the benefit of servicing to less than adequately compensate it. These servicing assets and liabilities are initially recognized at fair value and subsequently accounted for using the amortization method whereby the assets and liabilities are amortized in proportion to and over the period of estimated net servicing income or net servicing loss. On a quarterly basis, servicing assets and liabilities are evaluated for impairment or increased obligations. The fair value of servicing assets and liabilities is estimated using an internal valuation model, or by obtaining an opinion of value from an independent third-party vendor. Both methods are based on calculating the present value of estimated future net servicing cash flows, taking into consideration discount rates, prepayments and servicing costs. The internal valuation model is validated at least semiannually through third-party valuations.
 
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(k) Derivative financial instruments
The Company and its subsidiaries recognize all derivatives on the consolidated balance sheets at fair value. The accounting treatment of subsequent changes in the fair value depends on their use, and whether they qualify as effective “hedges” for accounting purposes. Derivatives for the purpose of trading or economic hedge that are not qualified for hedge accounting are adjusted to fair value through the consolidated statements of income. If derivatives are qualified for hedge accounting, then depending on its nature, changes in its fair value will be either offset against changes in the fair value of hedged assets or liabilities through the consolidated statements of income, or recorded in other comprehensive income (loss), net of applicable income taxes.
If a derivative is held as a hedge of the variability of fair value related to a recognized asset or liability or an unrecognized firm commitment (“fair value” hedge), changes in the fair value of the derivative are recorded in earnings along with the changes in the fair value of the hedged item.
If a derivative is held as a hedge of the variability of cash flows related to a forecasted transaction or a recognized asset or liability (“cash flow” hedge), changes in the fair value of the derivative are recorded in other comprehensive income (loss), net of applicable income taxes, until earnings are affected by the variability in cash flows of the designated hedged item.
If a derivative is held as a hedge of a net investment in a foreign operation, changes in the fair value of the derivative are recorded in the foreign currency translation adjustments account within other comprehensive income (loss), net of applicable income taxes.
The Company and its subsidiaries select either the amortization approach or the fair value approach, depending on the type of hedging activity, for the initial value of the component excluded from the assessment of effectiveness, and recognize it through the consolidated statements of income. When the amortization approach is adopted, the change in fair value is recognized in earnings using a systematic and rational method over the life of the hedging instrument and then any difference between the change in fair value and the amount recognized in earnings is recognized in other comprehensive income (loss), net of applicable income taxes. When the fair value approach is adopted, the change in the fair value is immediately recognized through the consolidated statements of income.
For all hedging relationships that are designated and qualified for hedge accounting, at the inception of the hedge, the Company and its subsidiaries formally document the details of the hedging relationship and the hedging activity. The Company and its subsidiaries formally assess, both at the hedge’s inception and on an ongoing basis, the effectiveness of the hedge relationship. The Company and its subsidiaries cease hedge accounting prospectively when the derivative no longer qualifies for hedge accounting.
(l) Pension plans
The Company and certain subsidiaries have contributory and
non-contributory
pension plans covering substantially all of their employees. Among the plans, the costs of defined benefit pension plans are accrued based on amounts determined using actuarial methods, with assumptions of discount rate, rate of increase in compensation level, expected long-term rate of return on plan assets and others.
The Company and its subsidiaries also recognize the funded status of pension plans, measured as the difference between the fair value of plan assets and the benefit obligation, on the consolidated balance sheets. Changes in that funded status are recognized in the year in which the changes occur through other comprehensive income (loss), net of applicable income taxes.
(m) Stock-based compensation
In principle, the Company and its subsidiaries measure stock-based compensation expense as consideration for services provided by employees based on the fair value on the grant date. The costs are recognized over the requisite service period.
(n) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits placed with banks and short-term highly liquid investments with original maturities of three months or less.
(o) Installment loans
Certain loans, for which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held for sale and are carried at the lower of cost or market value determined on an individual basis, except loans held for sale for which the fair value option was elected. A subsidiary elected the fair value option on its loans held for sale. The subsidiary enters into forward sale agreements to offset the change in the fair value of loans held for sale, and the election of the fair value option allows the subsidiary to recognize both the change in the fair value of the loans and the change in the fair value of the forward sale agreements due to changes in interest rates in the same accounting period.
 
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Loans held for sale are included in installment loans, and the outstanding balances of these loans as of March 31, 2022 and September 30, 2022 were ¥155,680 million and ¥219,353 million, respectively. There were ¥151,601 million and ¥215,774 million of loans held for sale as of March 31, 2022 and September 30, 2022, respectively, measured at fair value by electing the fair value option.
(p) Property under facility operations
Property under facility operations consist primarily of operating facilities (including hotels and training facilities) and environmental assets (including mega solar facilities and
coal-biomass
co-fired
power plants), which are stated at cost less accumulated depreciation, and depreciation is calculated mainly on a straight-line basis over the estimated useful lives of the assets. Accumulated depreciation were ¥147,459 million and ¥162,475 million as of March 31, 2022 and September 30, 2022, respectively.
(q) Inventories
Inventories consist primarily of residential condominiums under development, completed residential condominiums (including those waiting to be delivered to buyers under the contract for sale), and merchandise for sale. Residential condominiums under development are carried at cost less any impairment losses, and completed residential condominiums and merchandise for sale are stated at the lower of cost or fair value less cost to sell. The cost of inventories that are unique and not interchangeable is determined on the specific identification method and the cost of other inventories is principally determined on the average method. As of March 31, 2022 and September 30, 2022, residential condominiums under development were ¥62,414 million and ¥77,274 million, respectively, and completed residential condominiums and merchandise for sale were ¥77,149 million and ¥77,291 million, respectively.
The Company and its subsidiaries recorded ¥9,914 million and ¥508 million of write-downs principally on completed residential condominiums and merchandise for sale for the six months ended September 30, 2021 and 2022, respectively, primarily resulting from a decrease in expected sales price. The amounts of such write-downs for the three months ended September 30, 2021 and 2022 were ¥9,870 million and ¥21 
million, respectively. These write-downs were recorded in costs of goods and real estate sold and included in Real Estate segment, PE Investment and Concession segment, and Environment and Energy segment.
(r) Office facilities
Office facilities are stated at cost less accumulated depreciation. Depreciation is calculated on a declining-balance basis or straight-line basis over the estimated useful lives of the assets. Accumulated depreciation was ¥73,063 million and ¥76,734 million as of March 31, 2022 and September 30, 2022, respectively.
(s)
Right-of-use
assets
The Company and its subsidiaries record the
Right-of-use
assets (hereinafter, “ROU assets”) recognized from the lessee’s lease transaction as investment in operating leases, property under facility operations and office facilities. Lease liabilities are included in other liabilities.
ROU assets are consisted of the amount of the initial measurement of the lease liability and any lease payments made to the lessor at or before the commencement date and stated at cost less accumulated amortization. The initial measurement of the lease liability is at the present value of the lease payments not yet paid, discounted using the lessee’s incremental borrowing rate at lease commencement. ROU assets of finance leases are amortized mainly on a straight-line basis over the lease term. ROU assets of operating leases are amortized over the lease term by the fixed term operating cost minus the interest cost. Amortization of ROU assets of finance leases and operating leases expenses are included in costs of operating leases, services expense and selling, general and administrative expenses.
(t) Other assets
Other assets consist primarily of goodwill and other intangible assets in acquisitions, reinsurance recoverables in relation to reinsurance contracts, deferred insurance policy acquisition costs which are amortized over the contract periods, leasehold deposits, advance payments made in relation to construction of real estate under operating leases and property under facility operations, prepaid benefit cost, prepaid expenses for property tax, maintenance fees and insurance premiums in relation to lease contracts, servicing assets, derivative assets, contract assets related to real estate contract works and deferred tax assets.
 
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(u) Business combinations
The Company and its subsidiaries account for all business combinations using the acquisition method. The Company and its subsidiaries recognize intangible assets acquired in a business combination apart from goodwill if the intangible assets meet one of two criteria—either the contractual-legal criterion or the separately identifiable criterion. Goodwill is measured as an excess of the aggregate of consideration transferred and the fair value of noncontrolling interests over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed in the business combination measured at fair value. The Company and its subsidiaries would recognize a bargain purchase gain when the amount of recognized net assets exceeds the sum of consideration transferred and the fair value of noncontrolling interests. In a business combination achieved in stages, the Company and its subsidiaries remeasure their previously held equity interest at their acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings.
(v) Goodwill and other intangible assets
The Company and its subsidiaries perform an impairment test for goodwill and any indefinite-lived intangible assets at least annually. Additionally, if events or changes in circumstances indicate that the asset might be impaired, the Company and its subsidiaries test for impairment whenever such events or changes occur.
The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether to calculate the fair value of a reporting unit under the quantitative goodwill impairment test. The Company and its subsidiaries perform the qualitative assessment for some goodwill but bypass the qualitative assessment and proceed directly to the quantitative impairment test for other goodwill. For the goodwill for which the qualitative assessment is performed, if, after assessing the totality of events or circumstances, the Company and/or its subsidiaries determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company and/or its subsidiaries do not perform the quantitative goodwill impairment test. However, if the Company and/or its subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or its subsidiaries proceed to perform the quantitative goodwill impairment test. The quantitative goodwill impairment test calculates the fair value of the reporting unit and compares the fair value with the carrying amount of the reporting unit. If the fair value of the reporting unit falls below its carrying amount, an impairment loss is recognized in an amount equal to the difference. The Company and its subsidiaries test the goodwill either at the operating segment level or one level below the operating segments.
The Company and its subsidiaries have the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The Company and its subsidiaries perform the qualitative assessment for some indefinite-lived intangible assets but bypass the qualitative assessment and perform the quantitative impairment test for other indefinite-lived intangible assets. For those indefinite-lived intangible assets for which the qualitative assessment is performed, if, after assessing the totality of events and circumstances, the Company and/or its subsidiaries conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the Company and/or its subsidiaries do not perform the quantitative impairment test. However, if the Company and/or its subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or its subsidiaries calculate the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
Intangible assets with finite lives are amortized over their useful lives and tested for impairment. The Company and its subsidiaries perform a recoverability test for the intangible assets whenever events or changes in circumstances indicate that the assets might be impaired. The intangible assets are considered not recoverable when the undiscounted future cash flows estimated to be generated by those assets are less than the carrying amount of those assets, and the net carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount.
The amount of goodwill was ¥488,856 million and ¥546,352 million as of March 31, 2022 and September 30, 2022, respectively.
The amount of other intangible assets was ¥403,621 million and ¥410,324 million as of March 31, 2022 and September 30, 2022, respectively.
(w) Other Liabilities
Other liabilities include primarily lease liabilities recognized from the lessee’s lease transaction, accrued expenses related to interest and bonus, accrued benefit liability, advances received from lessees in relation to lease contracts, deposits received from real estate transaction, contract liabilities mainly related to automobile maintenance services and software services, and derivative liabilities and allowance for credit losses on
off-balance
sheet credit exposures.
 
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(x) Earnings per share
Basic earnings per share is computed by dividing net income attributable to ORIX Corporation shareholders by the weighted average number of shares of outstanding common stock in each period. Diluted earnings per share is calculated by reflecting the potential dilution that could occur if securities or other contracts issuing common stock were exercised or converted into common stock.
(y) Redeemable noncontrolling interests
Noncontrolling interests in a certain subsidiary are redeemable interests which are subject to call and put rights upon certain equity holder events. As redemption of the noncontrolling interest is not solely in the control of the subsidiary, it is recorded between liabilities and equity on the consolidated balance sheets at its estimated redemption value.
(z) New accounting pronouncements
In August 2018, Accounting Standards Update
2018-12
(“Targeted Improvements to the Accounting for Long-Duration Contracts”—ASC 944 (“Financial Services—Insurance”)) was issued, and the original effective date was deferred by two years by related amendments which were issued thereafter. These updates change the recognition, measurement, presentation and disclosure requirements for long-duration contracts issued by an insurance entity. These updates require an insurance entity to review and, if there is a change, update cash flow assumptions at least annually and to update discount rate used for liability for future policy benefits at each reporting date for nonparticipating traditional long-duration and limited-payment contracts. The effect of updating the discount rate is recognized in other comprehensive income (loss). These updates also require market risk benefits to be measured at fair value, and simplify amortization of deferred acquisition costs. Furthermore, these updates require additional disclosures for long-duration contracts. These updates are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early application is permitted. For the liability for future policy benefits and deferred acquisition costs, these updates are applied to contracts in force as of beginning of the earliest period presented (hereinafter, “the transition date” of these updates) on a modified retrospective basis, and an insurance entity may elect to apply retrospectively. For the market risk benefits, these updates are applied retrospectively at the transition date, and the difference between fair value and carrying value requires an adjustment to retained earnings at the transition date. The cumulative effect of changes in the instrument-specific credit risk between contract inception date and the transition date should be recognized in accumulated other comprehensive income at the transition date. The Company and its subsidiaries will adopt these updates on April 1, 2023. The Company and its subsidiaries are currently evaluating the effect that the adoption of these updates will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by these updates.
In March 2020, Accounting Standards Update
2020-04
(“Facilitation of the Effects of Reference Rate Reform on Financial Reporting”—ASC 848 (“Reference Rate Reform”)) was issued, and related amendments were issued thereafter. These updates provide companies with optional expedients and exceptions to contract, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. These updates are effective as of March 12, 2020 through December 31, 2022. The Company and its subsidiaries adopted certain optional expedients to relevant contract modifications and hedge accounting relationships from the three months ended December 31, 2021, mainly in order to ease the administrative burden of accounting for contract modifications that replace a reference rate impacted by reference rate reform. The adoption of these updates had no material impact on the Company and its subsidiaries’ results of operations or financial position. Also, we do not expect a material impact in future reporting periods.
In July 2021, Accounting Standards Update
2021-05
(“Lessors—Certain Leases with Variable Lease Payments”—ASC 842 (“Leases”)) was issued as the amendments to ASC 842 (“Leases”). This update requires that lessors classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if classifying the lease as a sales-type lease or a direct financing lease would result in the recognition of a selling loss at lease commencement. The Company and its subsidiaries adopted this update on April 1, 2022 using the option to apply the amendments prospectively to leases that commence or are modified on or after the date that an entity first applies the amendments. The adoption of this update had no material effect on the Company and its subsidiaries’ results of operations or financial position.
In October 2021, Accounting Standards Update
2021-08
(“Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”—ASC 805 (“Business Combinations”)) was issued. This update requires us to apply ASC 606 (“Revenue from Contracts with Customers”) to recognize and measure contract assets and contract liabilities acquired in a business combination. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 and early adoption is permitted. This update is applied prospectively to business combinations occurring on or after the date that an entity first applies the amendments. The Company and its subsidiaries will adopt this update on April 1, 2023. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will have on the Company and its subsidiaries’ results of operations or financial position.
 
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In November 2021, Accounting Standards Update
2021-10
(“Disclosures by Business Entities about Government Assistance”—ASC 832 (“Government Assistance”)) was issued. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance. The annual disclosure shall include; (1) information about the nature of the transactions and the related accounting policy used to account for the transactions, (2) the line items on the consolidated balance sheet and consolidated income statement that are affected by the transactions, and the amounts applicable to each financial statement line item, and (3) significant terms and conditions of the transactions, including commitments and contingencies. This update is effective for fiscal years beginning after December 15, 2021, and early adoption is permitted. The Company and its subsidiaries adopted this update that require the annual disclosure on April 1 2022. Since this update relates to disclosure requirements, the adoption had no effect on the Company and its subsidiaries’ results of operations or financial position.
In March 2022, Accounting Standards Update
2022-02
(“Troubled Debt Restructurings and Vintage Disclosures”—ASC 326 (“Financial Instruments—Credit Losses”)) was issued. This update eliminates the recognition and measurement guidance on troubled debt restructuring (hereinafter, “TDR”) and, instead, requires that an entity evaluate whether certain modifications on contractual terms made to borrowers experiencing financial difficulty should be accounted for as a new loan or a continuation of an existing loan. Additionally, enhanced disclosures for certain modifications made to borrowers experiencing financial difficulty are newly required. In addition, this update also requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic
326-20
(“Financial Instruments—Credit Losses—Measured at Amortized Cost”) in the existing vintage disclosure, where an entity discloses the amortized cost basis by credit quality indicator and class of financing receivable by year of origination. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 and early adoption is permitted. This update should be applied prospectively from the beginning of the fiscal year of adoption, including interim periods, except for the optional transition method related to the recognition and measurement of TDRs for which an entity may elect to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company and its subsidiaries will adopt this update on April 1, 2023. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this update.
In June 2022, Accounting Standards Update
2022-03
(“Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”—ASC 820 (“Fair Value Measurement”)) was issued. This update clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value of an equity security. This update also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This update also requires new disclosures for equity securities subject to contractual sale restrictions. The new disclosure shall include; (1) the fair value of equity securities subject to contractual sale restrictions reflected in the balance sheet, (2) the nature and remaining duration of the restrictions, and (3) the circumstances that could cause a lapse in the restrictions. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. This update should be applied prospectively for fair value measurement and disclosures from the adoption of the amendments. The Company and its subsidiaries will adopt this update on April 1, 2024. The Company and its subsidiaries are currently evaluating the effect that the adoption of this update will have on the Company and its subsidiaries’ results of operations or financial position, as well as changes in disclosures required by this update.
In September 2022, Accounting Standards Update
2022-04
(“Disclosure of Supplier Finance Program Obligations”—ASC
405-50
(“Liabilities—Supplier Finance Programs”)) was issued. This update requires that a buyer in a supplier finance program disclose sufficient information about the program in mainly annual disclosure, to allow a user of financial statements to understand the program’s nature, activities during the period, changes from period to period, and potential magnitude. The disclosure shall include (1) the key terms of the program and (2) the obligations that the buyer has confirmed as valid to the finance provider or intermediary. This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company and its subsidiaries will adopt this update on April 1, 2023. Since this update relates to disclosure requirements, the adoption will not have an effect on the Company and its subsidiaries’ results of operations or financial position. The Company and its subsidiaries are currently evaluating the changes in disclosures required by this update.
 
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3.
Fair Value Measurements
The Company and its subsidiaries classify and prioritize inputs used in valuation techniques to measure fair value into the following three levels:
 
Level 1 — 
 
Inputs of quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — 
 
Inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3 — 
 
Unobservable inputs for the assets or liabilities.
The Company and its subsidiaries differentiate between those assets and liabilities required to be carried at fair value at every reporting period (“recurring”) and those assets and liabilities that are only required to be adjusted to fair value under certain circumstances (“nonrecurring”). The Company and its subsidiaries mainly measure certain loans held for sale, trading debt securities,
available-for-sale
debt securities, certain equity securities, derivatives, certain reinsurance recoverables, and variable annuity and variable life insurance contracts at fair value on a recurring basis.
 
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The following tables present recorded amounts of major financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and September 30, 2022:
March 31, 2022
 
    
Millions of yen
 
    
Total

Carrying

Value in

Consolidated

Balance Sheets
   
Quoted Prices

in Active

Markets for

Identical Assets
or Liabilities

(Level 1)
    
Significant

Other

Observable

Inputs

(Level 2)
    
Significant

Unobservable

Inputs

(Level 3)
 
Assets:
                                  
Loans held for sale*1
   ¥ 151,601     ¥ 0      ¥ 151,601      ¥ 0  
Trading debt securities
     2,503       0        2,503        0  
Available-for-sale
debt securities:
     2,174,891       1,095        2,032,736        141,060  
Japanese and foreign government bond securities*2
     832,613       1,095        831,518        0  
Japanese prefectural and foreign municipal bond securities
     325,604       0        322,551        3,053  
Corporate debt securities*3
     849,560       0        848,863        697  
CMBS and RMBS in the Americas
     28,732       0        28,732        0  
Other asset-backed securities and debt securities
     138,382       0        1,072        137,310  
Equity securities*4*5
     385,271       112,200        160,099        112,972  
Derivative assets:
     51,366       292        46,214        4,860  
Interest rate swap agreements
     9,570       0        9,570        0  
Options held/written and other
     25,664       0        20,804        4,860  
Futures, foreign exchange contracts
     16,006       292        15,714        0  
Foreign currency swap agreements
     126       0        126        0  
Netting*6
     (20,333     0        0        0  
Net derivative assets
     31,033       0        0        0  
Other assets:
     5,214       0        0        5,214  
Reinsurance recoverables*7
     5,214       0        0        5,214  
    
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 2,770,846     ¥    113,587      ¥ 2,393,153      ¥ 264,106  
    
 
 
   
 
 
    
 
 
    
 
 
 
Liabilities:
                                  
Derivative liabilities:
   ¥ 105,705     ¥ 2,026      ¥ 95,047      ¥ 8,632  
Interest rate swap agreements
     8,182       0        8,182        0  
Options held/written and other
     21,562       0        12,930        8,632  
Futures, foreign exchange contracts
     71,443       2,026        69,417        0  
Foreign currency swap agreements
     4,518       0        4,518        0  
Netting*6
     (20,333     0        0        0  
Net derivative Liabilities
     85,372       0        0        0  
Policy Liabilities and Policy Account Balances:
     198,905       0        0        198,905  
Variable annuity and variable life insurance contracts*8
     198,905       0        0        198,905  
    
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 304,610     ¥ 2,026      ¥ 95,047      ¥ 207,537  
    
 
 
   
 
 
    
 
 
    
 
 
 
 
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September 30, 2022
 
    
Millions of yen
 
    
Total

Carrying

Value in

Consolidated

Balance Sheets
   
Quoted Prices

in Active

Markets for

Identical Assets
or Liabilities

(Level 1)
    
Significant

Other

Observable

Inputs

(Level 2)
    
Significant

Unobservable

Inputs

(Level 3)
 
Assets:
                                  
Loans held for sale*1
   ¥ 215,774     ¥ 0      ¥ 215,774      ¥ 0  
Trading debt securities
     2,948       0        2,948        0  
Available-for-sale
debt securities:
     2,215,540       5,674        2,014,861        195,005  
Japanese and foreign government bond securities*2
     795,875       4,100        791,775        0  
Japanese prefectural and foreign municipal bond securities
     362,722       0        359,110        3,612  
Corporate debt securities*3
     821,666       1,574        819,742        350  
CMBS and RMBS in the Americas
     43,134       0        43,134        0  
Other asset-backed securities and debt securities
     192,143       0        1,100        191,043  
Equity securities*4*5
     362,265       98,885        133,008        130,372  
Derivative assets:
     124,540       2,898        113,594        8,048  
Interest rate swap agreements
     25,142       0        25,142        0  
Options held/written and other
     62,889       0        54,841        8,048  
Futures, foreign exchange contracts
     34,478       2,898        31,580        0  
Foreign currency swap agreements
     2,031       0        2,031        0  
Netting*6
     (35,089     0        0        0  
Net derivative assets
     89,451       0        0        0  
Other assets:
     5,702       0        0        5,702  
Reinsurance recoverables*7
     5,702       0        0        5,702  
    
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 2,926,769     ¥    107,457      ¥ 2,480,185      ¥ 339,127  
    
 
 
   
 
 
    
 
 
    
 
 
 
Liabilities:
                                  
Derivative liabilities:
   ¥ 120,079     ¥ 64      ¥ 87,128      ¥ 32,887  
Interest rate swap agreements
     2,557       0        2,557        0  
Options held/written and other
     56,456       0        23,569        32,887  
Futures, foreign exchange contracts
     59,191       64        59,127        0  
Foreign currency swap agreements
     1,871       0        1,871        0  
Credit derivatives written
     4       0        4        0  
Netting*6
     (35,089     0        0        0  
Net derivative Liabilities
     84,990       0        0        0  
Policy Liabilities and Policy Account Balances:
     170,177       0        0        170,177  
Variable annuity and variable life insurance contracts*8
     170,177       0        0        170,177  
    
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 290,256     ¥ 64      ¥ 87,128      ¥ 203,064  
    
 
 
   
 
 
    
 
 
    
 
 
 
 
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Table of Contents
 
*1
A certain subsidiary elected the fair value option on certain loans held for sale. These loans are multi-family and seniors housing loans and are sold to Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and institutional investors. Included in “Other (income) and expense” in the consolidated statements of income were a gain of ¥1,069 million and a loss of ¥3,508 million from the change in the fair value of the loans for the six months ended September 30, 2021 and 2022, respectively. Included in “Other (income) and expense” in the consolidated statements of income were a loss of ¥525 million and a gain of ¥191 million from the change in the fair value of the loans for the three months ended September 30, 2021 and 2022, respectively. No gains or losses were recognized in earnings during the six months ended September 30, 2021 and 2022 attributable to changes in instrument-specific credit risk. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of March 31, 2022, were ¥151,672 million and ¥151,601 million, respectively, and the amount of the aggregate fair value was less than the amount of aggregate unpaid principal balance by ¥71 million. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of September 30, 2022, were ¥219,811 million and ¥215,774 million, respectively, and the amount of the aggregate fair value was less than the amount of aggregate unpaid principal balance by ¥4,037 million. As of March 31, 2022 and September 30, 2022, there were no loans that are 90 days or more past due or, in
non-accrual
status.
*2
A certain subsidiary elected the fair value option for investments in foreign government bond securities included in
available-for-sale
debt securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥51 million and a loss of ¥21 million from the change in the fair value of those investments for the six months ended September 30, 2021 and 2022, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥20 million and a loss of ¥13 million from the change in the fair value of those investments for the three months ended September 30, 2021 and 2022, respectively. There were no such investments elected the fair value option as of September 30, 2021. The amount of aggregate fair value elected the fair value option was ¥263 million as of March 31, 2022.
*3
A certain subsidiary elected the fair value option for investments in foreign corporate debt securities included in
available-for-sale
debt securities. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥24 million and a loss of ¥977 million from the change in the fair value of those investments for the six months ended September 30, 2021 and 2022, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were losses of ¥18 million and ¥325 million from the change in the fair value of those investments for the three months ended September 30, 2021 and 2022, respectively. The amounts of aggregate fair value elected the fair value option were ¥7,644 million and ¥10,591 million as of March 31, 2022 and September 30, 2022, respectively.
*4
Certain subsidiaries elected the fair value option for certain investments in investment funds, and others included in equity securities. Included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” in the consolidated statements of income were gains of ¥585 million and ¥546 million from the change in the fair value of those investments for the six months ended September 30, 2021 and 2022, respectively. Included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” in the consolidated statements of income were gains of ¥248 million and ¥6 million from the change in the fair value of those investments for the three months ended September 30, 2021 and 2022, respectively. The amounts of aggregate fair value elected the fair value option were ¥11,709 million and ¥14,714 million as of March 31, 2022 and September 30, 2022, respectively.
*5
The amounts of investment funds measured at net asset value per share which are not included in the above tables were ¥25,999 million and ¥47,936 million as of March 31, 2022 and September 30, 2022, respectively.
*6
It represents the amount offset under counterparty netting of derivative assets and liabilities.
*7
Certain subsidiaries elected the fair value option for certain reinsurance contracts held. The fair value of the reinsurance contracts elected for the fair value option in other assets were ¥5,214 million and ¥5,702 million as of March 31, 2022 and September 30, 2022, respectively. For the effect of changes in the fair value of those reinsurance contracts on earnings during the six and three months ended September 30, 2021 and 2022, see Note 17 “Life Insurance Operations.”
*8
Certain subsidiaries elected the fair value option for the entire variable annuity and variable life insurance contracts held. The fair value of the variable annuity and variable life insurance contracts elected for the fair value option in policy liabilities and policy account balances were ¥198,905 million and ¥170,177 million as of March 31, 2022 and September 30, 2022, respectively. For the effect of changes in the fair value of the variable annuity and variable life insurance contracts on earnings during the six and three months ended September 30, 2021 and 2022, see Note 17 “Life Insurance Operations.”
 
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Table of Contents
The following tables present the reconciliation of financial assets and liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended September 30, 2021 and 2022:
Six months ended September 30, 2021
 
   
Millions of yen
 
   
Balance at

April 1,

2021
   
Gains or losses

(realized/unrealized)
   
Purchases *3
   
Sales
   
Settlements *4
   
Transfers

in and/

or out of

Level 3

(net)
   
Balance at

September 30,

2021
   
Change in

unrealized

gains or losses

included in

earnings for

assets and

liabilities

still held at

September 30,

2021 *1
   
Change in

unrealized

gains or losses

included in

other
comprehensive
income for

assets and

liabilities

still held at

September 30,

2021 *2
 
   
Included in

earnings *1
   
Included in

other

comprehensive

income *2
   
Total
 
Available-for-sale debt
securities
  ¥ 133,457     ¥ 4,281     ¥ 1,827     ¥ 6,108     ¥ 22,270     ¥ (7,485   ¥ (17,114   ¥ 0     ¥ 137,236     ¥ 321     ¥ 1,904  
Japanese prefectural and foreign municipal bond securities
    2,761       0       30       30       0       0       0       0       2,791       0       30  
Corporate debt securities
    1,021        0       (0     (0     0       0       (212     0       809       0       (0
Other asset-backed
securities and debt securities
    129,675       4,281       1,797       6,078       22,270       (7,485     (16,902     0       133,636       321       1,874  
Equity securities
    91,410        12,735         1,018       13,753       13,691       (26,375     (471     0       92,008       1,528         1,008  
Investment funds, and others
    91,410       12,735       1,018        13,753       13,691       (26,375     (471     0       92,008       1,528       1,008  
Derivative assets and liabilities (net)
    13,790       1,618       197       1,815       0       0       0       0       15,605       1,618       197  
Options held/written and other
    13,790       1,618       197       1,815       0       0       0       0       15,605          1,618       197  
Other asset
    6,297       (1,277     0       (1,277     1,050       0       (506     0       5,564       (1,277     0  
Reinsurance recoverables *5
    6,297       (1,277     0       (1,277     1,050       0       (506     0       5,564       (1,277     0  
Policy Liabilities and Policy Account Balances
    266,422       (6,731     (84     (6,815     0       0       (47,016     0       226,221        (6,731     (84
Variable annuity and variable life insurance contracts *6
    266,422       (6,731     (84     (6,815     0       0       (47,016     0       226,221       (6,731     (84
 
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Table of Contents
Six months ended September 30, 2022
 
   
Millions of yen
 
 
 
 
 
 
Balance at

April 1,

2022
   
Gains or losses

(realized/unrealized)
   
Purchases *3
   
Sales
   
Settlements *4
   
Transfers

in and/

or out of

Level 3

(net)
   
Balance at

September 30,

2022
   
Change in

unrealized

gains or losses

included in

earnings for

assets and

liabilities

still held at

September 30,

2022 *1
   
Change in

unrealized

gains or losses

included in

other
comprehensive
income for

assets and

liabilities

still held at

September 30,

2022 *2
 
   
Included in

earnings *1
   
Included in

other

comprehensive

income *2
   
Total
 
Available-for-sale debt
securities
  ¥ 141,060     ¥ 10,011     ¥ 5,711     ¥ 15,722     ¥ 47,361     ¥ (5,678   ¥ (3,460   ¥ 0     ¥ 195,005     ¥ 9,995     ¥ 6,090  
Japanese prefectural and foreign municipal bond securities
    3,053       0       559       559       0       0       0       0       3,612       0       559  
Corporate debt securities
    697       0       (1     (1     0                 0       (346     0       350       0       (0
Other asset-backed
securities and debt securities
    137,310       10,011       5,153       15,164       47,361       (5,678     (3,114     0       191,043       9,995       5,531  
Equity securities
    112,972       3,874       19,692       23,566       2,500       (7,144     (1,522     0       130,372       3,155       19,688  
Investment funds, and others
    112,972       3,874       19,692       23,566       2,500       (7,144     (1,522     0       130,372       3,155       19,688  
Derivative assets and liabilities (net)
    (3,772     (18,486     (2,581     (21,067     0       0       0       0       (24,839     (18,486     (2,581
Options held/written and other
    (3,772     (18,486     (2,581     (21,067     0       0       0       0       (24,839     (18,486     (2,581
Other asset
    5,214       121       0       121       632       0       (265     0       5,702       121       0  
Reinsurance recoverables *5
    5,214       121       0       121       632       0       (265     0       5,702       121       0  
Policy Liabilities and Policy Account Balances
    198,905       11,679       83       11,762       0       0       (16,966     0       170,177       11,679       83  
Variable annuity and variable life insurance contracts *6
    198,905       11,679       83       11,762       0       0       (16,966     0       170,177       11,679       83  
 
*1
Principally, gains and losses from
available-for-sale
debt securities are included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; equity securities are included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” and derivative assets and liabilities (net) are included in “Other (income) and expense” respectively. Additionally, for
available-for-sale
debt securities, amortization of interest recognized in finance revenues is included in these columns.
*2
Unrealized gains and losses from
available-for-sale
debt securities are included in “Net change of unrealized gains (losses) on investment in securities” and “Net change of foreign currency translation adjustments”, unrealized gains and losses from equity securities and derivative assets and liabilities (net) are included mainly in “Net change of foreign currency translation adjustments”, unrealized gains and losses from policy liabilities and policy account balances are included in “Net change of debt valuation adjustments.”
*3
Increases resulting from an acquisition of a subsidiary and insurance contracts ceded to reinsurance companies are included.
*4
Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and variable life policyholders due to death, surrender and maturity of the investment period are included.
*5
“Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”
*6
“Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.
There were no transfers in or out of Level 3 in the six months ended September 30, 2021 and 2022.
 
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Table of Contents
The following tables present the reconciliation of financial assets and liabilities (net) measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended September 30, 2021 and 2022:
Three months ended September 30, 2021
 
   
Millions of yen
 
   
Balance at

June 30,
2021
   
Gains or losses

(realized/unrealized)
   
Purchases *3
   
Sales
   
Settlements *4
   
Transfers

in and/

or out of

Level 3

(net)
   
Balance at

September 30,
2021
   
Change in

unrealized

gains or losses

included in

earnings for

assets and

liabilities

still held at

September 30,
2021 *1
   
Change in

unrealized

gains or losses

included in

other
comprehensive
income for

assets and

liabilities

still held at

September 30,
2021 *2
 
   
Included in

earnings *1
   
Included in

other

comprehensive

income *2
   
Total
 
Available-for-sale
debt securities
  ¥ 131,538     ¥ 4,291     ¥ 1,394     ¥ 5,685     ¥ 14,859     ¥ (7,480   ¥ (7,366   ¥ 0     ¥ 137,236     ¥ 285     ¥ 1,410  
Japanese prefectural and foreign municipal bond securities
    2,758       0       33       33       0       0       0       0       2,791       0       33  
Corporate debt securities
    901       0       0       0       0                 0       (92     0       809       0       (0
Other asset-backed
securities and debt securities
    127,879          4,291         1,361       5,652       14,859       (7,480     (7,274     0       133,636       285         1,377  
Equity securities
    88,113        1,373       1,022       2,395       2,339       (496     (343     0       92,008       301       1,012  
Investment funds, and others
    88,113       1,373       1,022          2,395       2,339       (496     (343     0       92,008             301       1,012  
Derivative assets and liabilities (net)
    19,012       (3,590     183       (3,407     0       0       0       0       15,605       (3,590     183  
Options held/written and other
    19,012       (3,590     183       (3,407     0       0       0       0       15,605       (3,590     183  
Other asset
    5,878       (555     0       (555     481       0       (240     0       5,564       (555     0  
Reinsurance recoverables *5
    5,878       (555     0       (555     481       0       (240     0       5,564       (555     0  
Policy Liabilities and Policy Account Balances
    244,523       (3,172     (51     (3,223     0       0       (21,525     0       226,221        (3,172     (51
Variable annuity and variable life insurance contracts *6
    244,523       (3,172     (51     (3,223     0       0       (21,525     0       226,221       (3,172     (51
 
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Table of Contents
Three months ended September 30, 2022
 
   
Millions of yen
 
 
 
 
 
 
Balance at

June 30,
2022
   
Gains or losses

(realized/unrealized)
   
Purchases *3
   
Sales
   
Settlements *4
   
Transfers

in and/

or out of

Level 3

(net)
   
Balance at
September 30,
2022
   
Change in

unrealized

gains or losses

included in

earnings for

assets and

liabilities

still held at

September 30,
2022 *1
   
Change in

unrealized

gains or losses

included in

other
comprehensive
income for

assets and

liabilities

still held at

September 30,
2022 *2
 
   
Included in

earnings *1
   
Included in

other

comprehensive

income *2
   
Total
 
Available-for-sale
debt securities
  ¥ 176,919     ¥ 4,393     ¥ 2,401     ¥ 6,794     ¥ 13,190     ¥           0     ¥ (1,898   ¥ 0     ¥ 195,005     ¥ 4,391     ¥ 2,558  
Japanese prefectural and foreign municipal bond securities
    3,409       0       203       203       0       0                 0       0       3,612       0       203  
Corporate debt securities
    625        0       (0 )     (0 )     0       0       (275     0       350       0       0  
Other asset-backed
securities and debt securities
    172,885       4,393       2,198       6,591       13,190       0       (1,623     0       191,043       4,391       2,355  
Equity securities
    124,735       2,539       6,881       9,420       621       (4,040     (364     0       130,372       2,336       6,880  
Investment funds, and others
    124,735          2,539         6,881          9,420       621       (4,040     (364     0       130,372          2,336         6,880  
Derivative assets and liabilities (net)
    (17,781     (5,681     (1,377     (7,058     0       0       0       0       (24,839     (5,681     (1,377
Options held/written and other
    (17,781     (5,681     (1,377     (7,058     0       0       0       0       (24,839     (5,681     (1,377
Other asset
    5,732       (216     0       (216     321       0       (135     0       5,702       (216     0  
Reinsurance recoverables *5
    5,732       (216     0       (216     321       0       (135     0       5,702       (216     0  
Policy Liabilities and Policy Account Balances
    180,791       2,204       106       2,310       0       0       (8,304     0       170,177       2,204       106  
Variable annuity and variable life insurance contracts *6
    180,791       2,204       106       2,310       0       0       (8,304     0       170,177       2,204       106  
 
*1
Principally, gains and losses from
available-for-sale
debt securities are included in “Gains on investment securities and dividends”, “Write-downs of securities” or “Life insurance premiums and related investment income”; equity securities are included in “Gains on investment securities and dividends” and “Life insurance premiums and related investment income” and derivative assets and liabilities (net) are included in “Other (income) and expense” respectively. Additionally, for
available-for-sale
debt securities, amortization of interest recognized in finance revenues is included in these columns.
*2
Unrealized gains and losses from
available-for-sale
debt securities are included in “Net change of unrealized gains (losses) on investment in securities” and “Net change of foreign currency translation adjustments”, unrealized gains and losses from equity securities and derivative assets and liabilities (net) are included mainly in “Net change of foreign currency translation adjustments”, unrealized gains and losses from policy liabilities and policy account balances are included in “Net change of debt valuation adjustments.”
*3
Increases resulting from an acquisition of a subsidiary and insurance contracts ceded to reinsurance companies are included.
*4
Decreases resulting from the receipts of reimbursements for benefits, and decreases resulting from insurance payouts to variable annuity and variable life policyholders due to death, surrender and maturity of the investment period are included.
*5
“Included in earnings” in the above table includes changes in the fair value of reinsurance contracts recorded in “Life insurance costs” and reinsurance premiums, net of reinsurance benefits received, recorded in “Life insurance premiums and related investment income.”
*6
“Included in earnings” in the above table is recorded in “Life insurance costs” and includes changes in the fair value of policy liabilities and policy account balances resulting from gains or losses on the underlying investment assets managed on behalf of variable annuity and variable life policyholders, and the changes in the minimum guarantee risks relating to variable annuity and variable life insurance contracts as well as insurance costs recognized for insurance and annuity payouts as a result of insured events.
There were no transfers in or out of Level 3 in the three months ended September 30, 2021 and 2022.
 
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Table of Contents
The following tables present recorded amounts of assets measured at fair value on a nonrecurring basis during year ended March 31, 2022 and the six months ended September 30, 2022. These assets are measured at fair value on a nonrecurring basis mainly to recognize impairment:
Year ended March 31, 2022
 
    
Millions of yen
 
    
Total

Carrying

Value in

Consolidated

Balance Sheets
    
Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)
    
Significant

Other

Observable

Inputs

(Level 2)
    
Significant

Unobservable

Inputs

(Level 3)
 
Assets:
                                   
Loans held for sale
   ¥ 235      ¥ 0      ¥ 235      ¥ 0  
Real estate collateral-dependent loans (net of allowance for credit losses)
     6,972        0        0        6,972  
Investment in operating leases, property under facility operations, office facilities and other assets
     59,847        0        262        59,585  
Certain equity securities
     9,451        0        9,451        0  
Certain investments in affiliates
     2,846        0        0        2,846  
Certain reporting units including goodwill
     192        0        0        192  
Certain intangible assets acquired in
business combinations
     98,014        0        0        98,014  
    
 
 
    
 
 
    
 
 
    
 
 
 
     ¥ 177,557      ¥ 0      ¥ 9,948      ¥ 167,609  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
Six months ended September 30, 2022
 
 
    
Millions of yen
 
    
Total

Carrying

Value in

Consolidated

Balance Sheets
    
Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)
    
Significant

Other

Observable

Inputs

(Level 2)
    
Significant

Unobservable

Inputs

(Level 3)
 
Assets:
                                   
Loans held for sale
   ¥ 213      ¥ 0      ¥ 213      ¥ 0  
Real estate collateral-dependent loans (net of allowance for credit losses)
     2,048        0        0        2,048  
Investment in operating leases, property under facility operations, office facilities and other assets
     1,002        0        31        971  
Certain equity securities
     5,816        0        5,816        0  
    
 
 
    
 
 
    
 
 
    
 
 
 
     ¥ 9,079      ¥ 0      ¥ 6,060      ¥ 3,019  
    
 
 
    
 
 
    
 
 
    
 
 
 
The following is a description of the main valuation methodologies used for assets and liabilities measured at fair value.
Loans held for sale
Certain loans, which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered
held-for-sale.
The loans held for sale in the Americas are classified as Level 2, if the Company and its subsidiaries measure their fair value based on a market approach using inputs other than quoted prices that are observable for the assets such as treasury rate, swap rate and market spread. The loans held for sale in the Americas are classified as Level 3, if the Company and its subsidiaries measure their fair value based on discounted cash flow methodologies using inputs that are unobservable in the market.
 
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Table of Contents
Real estate collateral-dependent loans
The allowance for credit losses for large balance
non-homogeneous
loans is individually evaluated based on the present value of expected future cash flows, the loan’s observable market price or the fair value of the collateral securing the loans if the loans are collateral-dependent. According to ASC 820 (“Fair Value Measurement”), measurement for loans with deterioration in credit quality determined using a present value technique is not considered a fair value measurement. However, measurement for loans with deterioration in credit quality determined using the loan’s observable market price or the fair value of the collateral securing the collateral-dependent loans are fair value measurements and are subject to the disclosure requirements for nonrecurring fair value measurements.
The Company and its subsidiaries determine the fair value of the real estate collateral of real estate collateral-dependent loans using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries generally obtain a new appraisal once a fiscal year. In addition, the Company and its subsidiaries periodically monitor circumstances of the real estate collateral and then obtain a new appraisal in situations involving a significant change in economic and/or physical conditions, which may materially affect the fair value of the collateral. Real estate collateral-dependent loans whose fair values are estimated using appraisals of the underlying collateral based on these valuation techniques are classified as Level 3 because such appraisals involve unobservable inputs. These unobservable inputs contain discount rates and cap rates as well as future cash flows estimated to be generated from real estate collateral. An increase (decrease) in the discount rate or cap rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of real estate collateral-dependent loans.
Investment in operating leases, property under facility operations, office facilities and other assets, and land and buildings undeveloped or under construction
Investment in operating leases measured at fair value is mostly real estate. The Company and its subsidiaries determine the fair value of investment in operating leases, property under facility operations, office facilities and other assets, and land and buildings undeveloped or under construction using appraisals prepared by independent third party appraisers or the Company’s own staff of qualified appraisers, and others based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flow methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate. The Company and its subsidiaries classified these assets as Level 3 because such appraisals involve unobservable inputs. These unobservable inputs contain discount rates as well as future cash flows estimated to be generated from the assets or projects. An increase (decrease) in the discount rate and a decrease (increase) in the estimated future cash flows would result in a decrease (increase) in the fair value of investment in operating leases and property under facility operations and land and buildings undeveloped or under construction.
Movable properties owned by a certain subsidiary are classified as Level 2, because fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets.
Trading debt securities and
available-for-sale
debt securities
If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets and accordingly these securities are classified as Level 2. If market prices are not available and there are no observable inputs, then fair value is estimated by using valuation models such as discounted cash flow methodologies and broker quotes. Such securities are classified as Level 3, as the valuation models and broker quotes are based on inputs that are unobservable in the market. If fair value is based on broker quotes, the Company and its subsidiaries check the validity of received prices based on comparison to prices of other similar assets and market data such as relevant benchmark indices.
The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as Level 2 if the inputs such as trading price and/or bid price are observable. The Company and its subsidiaries classified CMBS and RMBS in the Americas and other asset-backed securities as Level 3 if the Company and subsidiaries evaluate the fair value based on the unobservable inputs. In determining whether the inputs are observable or unobservable, the Company and its subsidiaries evaluate various factors such as the lack of recent transactions, price quotations that are not based on current information or vary substantially over time or among market makers, a significant increase in implied risk premium, a wide
bid-ask
spread, significant decline in new issuances, little or no public information (e.g. a
principal-to-principal
market) and other factors. With respect to certain CMBS and RMBS in the Americas and other asset-backed securities, the Company and its subsidiaries classified these securities that were measured at fair value based on the observable inputs such as trading price and/or bit price as Level 2. But for those securities that lacked observable trades because they are older vintage or below investment grade securities, the Company and its subsidiaries limit the reliance on independent pricing service vendors and brokers. As a result, the Company and its subsidiaries established internally developed pricing models using valuation techniques such as discounted cash flow model using Level 3 inputs in order to estimate fair value of these debt securities and classified them as Level 3. Under the models, the Company and its subsidiaries use anticipated cash flows of the security, discounted at a risk-adjusted discount rate that incorporates our estimate of credit risk and liquidity risk that a market participant would consider. The cash flows are estimated based on a number of assumptions such as default rate and prepayment speed, as well as seniority of the security. An increase (decrease) in the discount rate or default rate would result in a decrease (increase) in the fair value of CMBS and RMBS in the Americas and other asset-backed securities.
 
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Equity securities and investment in affiliates
If active market prices are available, fair value measurement is based on quoted active market prices and, accordingly, these securities are classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1, such as prices for similar assets and accordingly these securities are classified as Level 2. In addition, a certain Americas subsidiary measures its investments held by the investment companies which are owned by the subsidiary at fair value. These investment funds, certain equity securities and certain investments in affiliates are classified as Level 3, because fair value measurement is based on the combination of discounted cash flow methodologies and market multiple valuation methods, or broker quotes. Discounted cash flow methodologies use future cash flows to be generated from investees, weighted average cost of capital (WACC) and others. Market multiple valuation methods use earnings before interest, taxes, depreciation and amortization (EBITDA) multiples based on actual and projected cash flows, comparable peer companies, and comparable precedent transactions and others. Furthermore, certain subsidiaries elected the fair value option for investments in some funds. These investment funds for which the fair value option is elected are classified as level 3, because the subsidiaries measure their fair value using discounting to net asset value based on inputs that are unobservable in the market, or broker quotes.
Derivatives
For exchange-traded derivatives, fair value is based on quoted market prices, and accordingly, classified as Level 1. For
non-exchange
traded derivatives, fair value is based on commonly used models and discounted cash flow methodologies. If the inputs used for these measurements including yield curves and volatilities, are observable, the Company and its subsidiaries classify it as Level 2. If the inputs are not observable, the Company and its subsidiaries classify it as Level 3. These unobservable inputs contain discount rates. An increase (decrease) in the discount rate would result in a decrease (increase) in the fair value of derivatives.
Reinsurance recoverables
Certain subsidiaries have elected the fair value option for certain reinsurance contracts related to variable annuity and variable life insurance contracts to partially offset the changes in fair value recognized in earnings of the policy liabilities and policy account balances attributable to the changes in the minimum guarantee risks of the variable annuity and variable life insurance contracts. These reinsurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiaries measure their fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.
Variable annuity and variable life insurance contracts
A certain subsidiary has elected the fair value option for the entire variable annuity and variable life insurance contracts held in order to match earnings recognized for changes in fair value of policy liabilities and policy account balances with the earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and variable life policyholders, derivative contracts and changes in fair value of reinsurance contracts. The changes in fair value of the variable annuity and variable life insurance contracts are linked to the fair value of the investment in securities managed on behalf of variable annuity and variable life policyholders. These securities consist mainly of equity securities traded in the market. In addition, variable annuity and variable life insurance contracts are exposed to the minimum guarantee risk, and the subsidiary adjusts the fair value of the underlying investments by incorporating changes in fair value of the minimum guarantee risk in the evaluation of the fair value of the entire variable annuity and variable life insurance contracts. The variable annuity and variable life insurance contracts for which the fair value option is elected are classified as Level 3 because the subsidiary measures the fair value using discounted cash flow methodologies based on inputs that are unobservable in the market.
Reporting units including goodwill
Certain reporting units including goodwill are classified as level 3, because fair value measurement is based on discounted cash flow methodologies and business enterprise value multiples methodologies using inputs that are unobservable in the market. Discounted cash flow methodologies use future cash flows to be generated, weighted average cost of capital (WACC) and others. Business enterprise value multiples methodologies use earnings before interest, taxes, depreciation and amortization (EBITDA) multiples based on comparable peer companies, comparable precedent transactions and others.
Intangible assets acquired in business combinations
Certain intangible assets acquired in business combinations are classified as level 3, because fair value measurement is based on discounted cash flow methodologies using inputs that are unobservable in the market. Discounted cash flow methodologies use future cash flows, weighted average cost of capital (WACC) and others.
 
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Information about Level 3 Fair Value Measurements
The following tables provide information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and September 30, 2022.
 
    
March 31, 2022
    
Millions of yen
                
    
Fair value
    
        Valuation technique(s)        
  
  Significant unobservable inputs  
  
Range
(Weighted average)
Assets:
           
Available-for-sale
debt securities:
                            
Japanese prefectural and foreign municipal bond securities
   ¥ 3,053      Appraisals/Broker quotes    —      —  
Corporate debt securities
     697      Discounted cash flows    Discount rate   
0.4
% – 
0.7
%
(
0.5
%)
Other asset-backed securities and debt securities
     25,666      Discounted cash flows    Discount rate   
0.1% – 51.2%
(10.6%)
         Probability of default   
1.9%
(1.9%)
     111,644      Appraisals/Broker quotes    —      —  
Equity securities:
           
Investment funds, and others
     86,903      Discounted cash flows    WACC   
11.9% – 18.6%
(16.3%)
         EV/Terminal EBITDA multiple   
8.3x-12.0x
(9.9x)
      Market multiples    EV/Last twelve months EBITDA multiple   
6.4x-12.6x
(9.5x)
         EV/Forward EBITDA multiple   
5.7x-12.5x
(9.4x)
         EV/Precedent transaction last twelve months EBITDA multiple   
7.6x-14.5x
(10.3x)
     26,069      Appraisals/Broker quotes    —      —  
Derivative assets:
           
Options held/written and other
     4,792      Discounted cash flows    Discount rate   
12.0% – 34.0%
(14.9%)
     68      Appraisals/Broker quotes    —      —  
Other assets:
           
Reinsurance recoverables
     5,214      Discounted cash flows    Discount rate   
(0.2)% – 0.7%
(0.2%)
         Mortality rate   
0.0% – 100.0%
(2.1%)
         Lapse rate   
1.5% – 14.0%
(5.5%)
        
Annuitization rate
(guaranteed minimum annuity benefit)
  
0.0% – 100.0%
(100.0%)
  
 
 
          
Total
   ¥ 264,106           
  
 
 
          
Liabilities:
           
Derivative liabilities:
           
Options held/written and other
   ¥ 8,600      Discounted cash flows    Discount rate   
12.0% – 34.0%
(14.9%)
     32      Appraisals/Broker quotes    —      —  
Policy liabilities and Policy Account Balances:
           
Variable annuity and variable life insurance contracts
     198,905      Discounted cash flows    Discount rate   
(0.2)% – 0.7%
(0.2%)
         Mortality rate   
0.0% – 100.0%
(1.9%)
         Lapse rate   
1.5% – 30.0%
(6.2%)
        
Annuitization rate
(guaranteed minimum annuity benefit)
  
0.0% – 100.0%
(71.8%)
  
 
 
          
Total
   ¥ 207,537           
  
 
 
          
 
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Table of Contents
    
September 30, 2022
    
Millions of yen
                
    
Fair value
    
        Valuation technique(s)        
  
  Significant unobservable inputs  
  
Range
(Weighted average)
Assets:
           
Available-for-sale
debt securities:
                            
Japanese prefectural and foreign municipal bond securities
   ¥ 3,612      Appraisals/Broker quotes    —      —  
Corporate debt securities
     350      Discounted cash flows    Discount rate   
0.4%
(0.4%)
Other asset-backed securities and debt securities
     32,064      Discounted cash flows    Discount rate   
0.1% – 51.2%
(10.4%)
         Probability of default   
1.9%
(1.9%)
     158,979      Appraisals/Broker quotes    —      —  
Equity securities:
           
Investment funds, and others
     111,844      Discounted cash flows    WACC   
11.9% – 26.4%
(17.3%)
         EV/Terminal EBITDA multiple   
7.5x – 12.0x
(9.8x)
      Market multiples    EV/Last twelve months EBITDA multiple   
6.0x – 10.4x
(8.4x)
         EV/Forward EBITDA multiple   
4.9x – 10.6x
(8.0x)
         EV/Precedent transaction last twelve months EBITDA multiple    7.5x – 14.5x
         (10.1x)
     18,528      Appraisals/Broker quotes    —      —  
Derivative assets:
           
Options held/written and other
     8,048      Discounted cash flows    Discount rate   
12.0% – 32.0%
(14.9%)
Other assets:
           
Reinsurance recoverables
     5,702      Discounted cash flows    Discount rate   
(0.2)% – 1.1%
(0.3%)
         Mortality rate   
0.0% – 100.0%
(2.3%)
         Lapse rate   
1.5% – 14.0%
(5.1%)
        
Annuitization rate
(guaranteed minimum annuity benefit)
  
0.0% – 100.0%
(100.0%)
  
 
 
          
Total
   ¥ 339,127           
  
 
 
          
Liabilities:
           
Derivative liabilities:
           
Options held/written and other
   ¥ 32,863      Discounted cash flows    Discount rate   
12.0% – 32.0%
(14.9%)
     24      Appraisals/Broker quotes    —      —  
Policy liabilities and Policy Account Balances:
           
Variable annuity and variable life insurance contracts
     170,177      Discounted cash flows    Discount rate   
(0.2)% – 1.1%
(0.3%)
         Mortality rate   
0.0% – 100.0%
(2.0%)
         Lapse rate   
1.5% – 30.0%
(6.0%)
        
Annuitization rate
(guaranteed minimum annuity benefit)
  
0.0% – 100.0%
(69.8%)
  
 
 
          
Total
   ¥ 203,064           
  
 
 
          
 
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Table of Contents
The following tables provide information about the valuation techniques and significant unobservable inputs used in the valuation of Level 3 assets measured at fair value on a nonrecurring basis during year ended March 31, 2022 and the six months ended September 30, 2021.
 
    
Year ended March 31, 2022
    
Millions of yen
                
    
Fair value
    
        Valuation technique(s)        
  
  Significant unobservable inputs  
  
Range
(Weighted average)
Assets:
                                      
Real estate collateral-dependent loans (net of allowance for credit losses)
   ¥ 1,511      Direct capitalization    Capitalization rate   
5.0% – 8.5%
(6.1%)
       5,461      Appraisals    —      —  
Investment in operating leases, property under facility operations, office facilities and other assets
     32,328      Discounted cash flows    Discount rate   
5.2%
(5.2%)
       27,257      Appraisals    —      —  
Certain investments in affiliates
     2,846      Appraisals    —      —  
Certain reporting units including goodwill
     192      Discounted cash flows    Discount rate   
10.7%
(10.7%)
Certain intangible assets acquired in business combinations
     98,014      Discounted cash flows    Discount rate   
10.9%
(10.9%)
    
 
 
                
     ¥ 167,609                 
    
 
 
                
   
    
Six months ended September 30, 2022
    
Millions of yen
                
    
Fair value
    
Valuation technique(s)
  
Significant unobservable inputs
  
Range
(Weighted average)
Assets:
                       
Real estate collateral-dependent loans (net of allowance for credit losses)
   ¥ 1,520      Direct capitalization    Capitalization rate   
4.7% – 6.9%
(5.9%)
       528      Appraisals    —      —  
Investment in operating leases, property under facility operations, office facilities and other assets
     330     
Discounted cash flows
   Discount rate   
0.5%
(0.5%)
       641      Appraisals    —     
—  
    
 
 
                
     ¥ 3,019                 
    
 
 
                
The Company and its subsidiaries generally use discounted cash flow methodologies or similar internally developed models to determine the fair value of Level 3 assets and liabilities. Use of these techniques requires determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, changes in these unobservable inputs may have a significant impact on the fair value.
Certain of these unobservable inputs will have a directionally consistent impact on the fair value of the asset or liability for a given change in that input. Alternatively, the fair value of the asset or liability may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change in another input having a potentially muted impact to the overall fair value of that particular asset or liability. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in certain inputs are interrelated to one another), which may counteract or magnify the fair value impact.
Unobservable inputs are weighted by the relative fair value of the asset or liability.
For more analysis of the uncertainty of each input, see the description of the main valuation methodologies used for assets and liabilities measured at fair value.
 
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4.
Acquisitions and Divestitures
(1) Acquisitions
There were no material acquisitions during the six months ended September 30, 2021 and 2022.
(2) Divestitures
Gains on sales of subsidiaries and affiliates and liquidation losses, net for the six months ended September 30, 2021 and 2022 amounted to ¥6,473 million and ¥8,589 million, respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the six months ended September 30, 2021 mainly consisted of ¥6,305 million in ORIX USA segment. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the six months ended September 30, 2022 mainly consisted of ¥137 million in Real Estate segment, ¥4,048 million in ORIX USA segment and ¥4,420 million in Asia and Australia segment.
Gains on sales of subsidiaries and affiliates and liquidation losses, net for the three months ended September 30, 2021 and 2022 amounted to ¥3,476 million and ¥5,486 million, respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the three months ended September 30, 2021 mainly consisted of ¥3,397 million in ORIX USA segment. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the three months ended September 30, 2022 mainly consisted of ¥137 million in Real Estate segment, ¥3,299 million in ORIX USA segment and ¥2,066 million in Asia and Australia segment.
 
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Table of Contents
5.
Revenues from Contracts with Customers
The following table provides information about revenues from contracts with customers, and other sources of revenue for the six and three months ended September 30, 2021 and 2022 are as follows;
 
    
Millions of yen
    
Millions of yen
 
    
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
 
Revenues from contracts with customers
   ¥ 595,111      ¥ 693,599  
Other revenues *
     646,423        671,217  
    
 
 
    
 
 
 
Total revenues
   ¥ 1,241,534      ¥ 1,364,816  
    
 
 
    
 
 
 
     
    
Millions of yen
    
Millions of yen
 
    
Three months ended

September 30, 2021
    
Three months ended

September 30, 2022
 
Revenues from contracts with customers
   ¥ 301,299      ¥ 359,235  
Other revenues *
     331,422        347,768  
    
 
 
    
 
 
 
Total revenues
   ¥ 632,721      ¥ 707,003  
    
 
 
    
 
 
 
 
*
Other revenues are not considered to be within the scope of revenue from contracts with customers, such as life insurance premiums and related investment income, operating leases, finance revenues that include interest income, and others.
The Company and its subsidiaries recognize revenues when control of the promised goods or services is transferred to our customers, in the amounts that reflect the consideration we expect to receive in exchange for those goods or services. Revenues are recognized net of discounts, incentives and estimated sales returns. Amount to be collected for third party is deducted from revenues. The Company and its subsidiaries evaluate whether we are principal or agent on distinctive goods or services. When a revenue transaction involves a third party, if the Company and its subsidiaries control the goods or services before they are transferred to customers, revenue is recognized on gross amount as the principal. There is no significant variability in considerations included in revenues, except for the performance fees regarding asset management business hereinafter, and there is no significant financing component in considerations on transactions.
For further information about breakdowns of revenues disaggregated by goods or services category and geographical location by segment, see Note 24 “Segment Information.”
 
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Revenue recognition criteria on each goods or services category are mainly as follows:
Sales of goods
The Company and its subsidiaries sell various goods such as precious metals, medical equipment, business management software and other to customers. Revenues from sales of goods are recognized when there is a transfer of control of the product to customers. The Company and its subsidiaries determine transfer of control based on when the products are shipped or delivered to customers, or inspected by customers.
Real estate sales
Certain subsidiaries are involved in condominium business. Revenues from sales of detached houses and residential condominiums are recognized when the real estate is delivered to customers.
Asset management and servicing
Certain subsidiaries offer customers investment management services for their financial assets, asset management as well as maintenance and administrative services for their real estate properties. Furthermore, the Company and its subsidiaries perform servicing on behalf of customers. Revenues from asset management and servicing primarily include management fees, servicing fees, and performance fees. Management and servicing fees are recognized over the contract period with customers, since the customers simultaneously receive and consume all of the benefits provided by the subsidiaries as the subsidiaries perform. Management fees are calculated based on the predetermined percentages of the market value of the assets under management or net assets of the investment funds in accordance with contract terms. Servicing fees are calculated based on the predetermined percentages of the amount in assets under management in accordance with contract terms. Fees based on the performance of the assets under management are recognized when the performance obligations are satisfied, to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The performance fee is estimated by using the most likely amount method, in accordance with contract terms. Servicing fees related to financial assets that the Company and its subsidiaries had originated and transferred to investors, are not in the scope of revenue from contracts with customers. These fees are accounted for servicing assets under which the benefits of servicing are expected to more than adequately compensate for performing the servicing, or servicing liabilities under which the benefits of servicing are not expected to adequately compensate for performing the servicing.
Automobile related services
Certain subsidiaries mainly provide automobile maintenance services to customers, as automobile related services. In the service, since customers simultaneously receive and consume all of the benefits provided by the subsidiaries as the subsidiaries perform, revenues are recognized over the contract period with customers. For measurement of progress, the cost incurred is used, because that reasonably describes transfer of control of services to customers. The subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Facilities operation
The Company and its subsidiaries are running hotels, Japanese inns, training facilities, a multipurpose dome and other facilities. Revenues from these operations are recognized over the customers’ usage period of the facilities, since customers simultaneously receive and consume all of the benefits provided by the Company and its subsidiaries as the Company and its subsidiaries perform. The value transferred to customers is directly measured based on the usage period. With respect to operation of a multipurpose dome, a certain subsidiary receives payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities. Gains on sale of property under facility operations included in services income are not within the scope of revenue from contracts with customers because these gains refer to transfers of
non-financial
assets to counterparties that are not considered to be our customers.
Environment and energy services
The Company and its subsidiaries offer services that provide electric power to business operators’ factories, office buildings and other facilities. Revenues from electric power supply by purchasing electricity or running power plants are recognized over the contracted distribution period with customers, since customers simultaneously receive and consume all of the benefits provided by the Company and its subsidiaries as the Company and its subsidiaries perform. The value transferred to customers is directly measured based on electricity usage by customers. Furthermore, certain subsidiaries are running waste processing facilities. Revenues from resources and waste processing business are primarily recognized over the service contract period with customers, since customers simultaneously receive and consume all of the benefits provided by the subsidiaries as the subsidiaries perform. The value transferred to customers is directly measured based on the amount of resources and waste to be processed.
 
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Table of Contents
Real estate management and brokerage
The Company and its subsidiaries mainly offer management of condominiums, office buildings, facilities and others, to customers, as real estate management and brokerage business. Since customers simultaneously receive and consume all of the benefits provided by the Company and its subsidiaries as the Company and its subsidiaries perform, revenues from these services are recognized over the contract period with customers. Direct measurement of the value transferred to customers based on time elapsed, is used as method of measuring progress. The Company and its subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Real estate contract work
Certain subsidiaries offer repair and contract work for condominiums, office buildings, facilities and others, to customers. The work is held on the real estate where customers own or rent, and the subsidiaries’ performance creates the asset that the customers’ control as the asset is created or enhanced. Additionally, the performance does not create an asset with an alternative use to the subsidiaries, and the subsidiaries have a substantial enforceable right to payment for performance completed to date so that revenues are recognized over the contract work period. For measurement of progress, the cost incurred is used, because that reasonably describes transfer of control of services to customers. The subsidiaries recognize a part of its performance obligations that it performs as contract assets, and the amounts are reported under other assets on the consolidated balance sheet. Furthermore, the subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Other
The Company and its subsidiaries have been developing a variety of businesses. Main revenue streams are as follows:
Maintenance services of software, measurement equipment and other:
Certain subsidiaries offer information system hardware, software maintenance services and support, and maintenance of measurement equipment to customers. Revenues from these services are recognized over the contract period with customers, since customers simultaneously receive and consume all of the benefits provided by the subsidiaries as the subsidiaries perform. For measurement of progress, the cost incurred is used, because that reasonably describes transfer of control of services to customers. The subsidiaries receive payments from customers before satisfying performance obligations, and the amounts are reported in other liabilities on the consolidated balance sheets as contract liabilities.
Fee business:
The Company and its subsidiaries are involved in insurance policy referrals and other agency business. Commission revenues from these businesses are primarily recognized when the contract between our customers and their client is signed.
 
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Table of Contents
The following table provides information about balances from contracts with customers as of March 31, 2022 and September 30, 2022.
 
    
Millions of yen
 
    
March 31, 2022
    
September 30, 2022
 
Trade Notes, Accounts and Other Receivable
   ¥ 174,667      ¥ 171,244  
Contract assets (Included in Other Assets)
     13,802        23,036  
Contract liabilities (Included in Other Liabilities)
     32,978        30,678  
For the six and three months ended September 30, 2021 and 2022, there were no significant changes in contract assets and contract liabilities.
For the six months ended September 30, 2021 and 2022, revenues amounting to
¥25,631 million and ¥21,319 
million were included in contract liabilities as of the beginning of each fiscal year, respectively.
For the three months ended September 30, 2021 and 2022, revenues amounting to
 ¥6,468 million and ¥3,627 
million were included in contract liabilities as of the beginning of each fiscal year, respectively.
As of September 30, 2022, transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) is mainly related to automobile related services, real estate sales and amounted to ¥213,789 million. Remaining term for the obligations ranges up to 12 years. Furthermore, automobile related services primarily constitute the performance obligations that are unsatisfied (or partially unsatisfied) will be recognized as revenue over the next 10 years. The Company and its subsidiaries applied practical expedients in the disclosure, and performance obligations for contracts that have an original expected duration of one year or less and contracts under which the value transferred to a customer is directly measured and recognized as revenue by the amount it has a right to invoice to the customer are not included. The transaction price allocated to unsatisfied performance obligations does not include the estimate of material variable consideration.
 
– 59 –

Table of Contents
6.
Leases
Lessor
Lease income for the six and three months ended September 30, 2021 and 2022 are as follows:
 
    
Millions of yen
 
    
Six months ended

 September 30, 2021 
    
Six months ended

 September 30, 2022 
 
Lease income—net investment in leases
                 
Interest income
   ¥ 35,962      ¥ 39,936  
Other
     998        1,147  
Lease income—operating leases *
     227,933        249,144  
    
 
 
    
 
 
 
Total lease income
   ¥ 264,893      ¥ 290,227  
    
 
 
    
 
 
 
 
*
Gains from the disposition of real estate under operating leases included in operating lease revenues were ¥15,440 million and ¥12,487 million, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues were ¥10,798 million and ¥19,090 million, for the six months ended September 30, 2021 and 2022, respectively.
 
    
Millions of yen
 
    
Three months ended

 September 30, 2021 
    
Three months ended

 September 30, 2022 
 
Lease income—net investment in leases
                 
Interest income
   ¥ 18,157      ¥ 20,256  
Other
     429        614  
Lease income—operating leases *
     114,467        122,945  
    
 
 
    
 
 
 
Total lease income
   ¥ 133,053      ¥ 143,815  
    
 
 
    
 
 
 
 
*
Gains from the disposition of real estate under operating leases included in operating lease revenues were ¥7,475 million and ¥2,766 million, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues were ¥5,731 million and ¥9,320 million, for the three months ended September 30, 2021 and 2022, respectively.
Lease income from net investment in leases is included in finance revenues in the consolidated statements of income. Gains and losses from the disposition of net investment in leases were not material for the six and three months ended September 30, 2021 and 2022.
 
– 60 –

Table of Contents
7.
Credit Quality of Financial Assets and the Allowance for Credit Losses
The Company and its subsidiaries provide the following information disaggregated by portfolio segment and class of financial assets.
Allowance for credit losses
Credit quality of financial assets
 
   
Credit quality indicators
 
   
Past-due
financing receivables
 
   
Non-accrual
Information about troubled debt restructurings
A portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. The Company and its subsidiaries classify our portfolio segments by instruments of loans, net investment in leases and other financial assets measured at amortized cost. Classes of financial assets are determined based on the initial measurement attribute, risk characteristics of the financing receivables and the method for monitoring and assessing obligors’ credit risk and are defined as the level of detail necessary for a financial statement user to understand the risks inherent in the financial assets. Classes of financial assets generally are a disaggregation of a portfolio segment, and the Company and its subsidiaries disaggregate our portfolio segments into classes by regions, instruments or industries of our debtors.
 
– 61 –

Table of Contents
The following table provides information about the allowance for credit losses for installment loans, net investment in leases and other financial assets measured at amortized cost as of March 31, 2022, and for the six and three months ended September 30, 2021 and 2022:
 
    
Six months ended September 30, 2021
 
    
Millions of yen
 
    
Beginning
balance
    
Provision
(Reversal) *3
   
Allowance
of
purchased
loans

during the
reporting
period
    
Charge-offs *4
   
Recoveries
    
Other *5
   
Ending
balance *3
    
Collective
(pool)
assessment
    
Individual
assessment
 
Allowance for credit losses :
                                                                             
Installment loans to consumer borrowers:
                                                                             
Real estate loans
                                                                             
Japan
   ¥ 5,922      ¥ 63     ¥ 0      ¥ (74   ¥ 12      ¥ (1   ¥ 5,922      ¥ 5,384      ¥ 538  
Overseas
     470        (35     0        0       3        (15     423        423        0  
Card loans
                                                                             
Japan
     12,984        (122     0        (443     3        1       12,423        11,722        701  
Other
                                                                             
Japan
     8,359        2,675       0        (2,094     4        0       8,944        6,186        2,758  
Overseas
     1,275        205       0        (414     0        31       1,097        896        201  
Installment loans to corporate borrowers:
                                                                             
Non-recourse
loans
                                                                             
Japan
     32        14       0        0       0        (1     45        45        0  
The Americas
     3,450        (559     0        0       0        37       2,928        2,694        234  
Real estate companies
                                                                             
Japan
     901        84       0        (3     14        0       996        740        256  
Overseas
     1,539        (438     0        0       0        8       1,109        1,109        0  
Commercial, industrial companies
                                                                             
Japan
     1,938        (64     0        (147     7        1       1,735        574        1,161  
Overseas
     18,763        1,116       0        (1,345     29        110       18,673        14,093        4,580  
Purchased loans *1
     1,835        (86     1,752        (1,811     9        3       1,702        639        1,063  
Net investment in leases:
     16,522        672       0        (998     10        37       16,243        12,758        3,485  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
Subtotal
     73,990        3,525       1,752        (7,329     91        211       72,240        57,263        14,977  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
Other financial assets measured at amortized cost *2
     6,005        1,587       0        (573     11        14       7,044        638        6,406  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 79,995      ¥ 5,112     ¥ 1,752      ¥ (7,902   ¥ 102      ¥ 225     ¥ 79,284      ¥ 57,901      ¥ 21,383  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
 
– 62 –

Table of Contents
    
Three months ended September 30, 2021
 
    
Millions of yen
 
    
Beginning
balance
    
Provision
(Reversal) *3
   
Allowance
of
purchased
loans

during the
reporting
period
    
Charge-offs *4
   
Recoveries
    
Other *5
   
Ending
balance *3
    
Collective
(pool)
assessment
    
Individual
assessment
 
Allowance for credit losses :
                                                                             
Installment loans to consumer borrowers:
                                                                             
Real estate loans
                                                                             
Japan
   ¥ 5,877      ¥ 82     ¥ 0      ¥ (41   ¥ 5      ¥ (1   ¥ 5,922      ¥ 5,384      ¥ 538  
Overseas
     487        (50     0        0       0        (14     423        423        0  
Card loans
                                                                             
Japan
     12,562        61       0        (202     2        0       12,423        11,722        701  
Other
                                                                             
Japan
     8,850        1,134       0        (1,042     2        0       8,944        6,186        2,758  
Overseas
     1,187        103       0        (224     0        31       1,097        896        201  
Installment loans to corporate borrowers:
                                                                             
Non-recourse
loans
                                                                             
Japan
     31        15       0        0       0        (1     45        45        0  
The Americas
     2,951        (65     0        0       0        42       2,928        2,694        234  
Real estate companies
                                                                             
Japan
     905        86       0        (1     6        0       996        740        256  
Overseas
     1,416        (316     0        0       0        9       1,109        1,109        0  
Commercial, industrial companies
                                                                             
Japan
     1,795        80       0        (145     4        1       1,735        574        1,161  
Overseas
     19,112        557       0        (1,135     3        136       18,673        14,093        4,580  
Purchased loans *1
     1,815        (66     1,537        (1,589     7        (2     1,702        639        1,063  
Net investment in leases:
     16,335        399       0        (521     8        22       16,243        12,758        3,485  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
Subtotal
     73,323        2,020       1,537        (4,900       37        223       72,240        57,263        14,977  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
Other financial assets measured at amortized cost *2
     6,216        866       0        (54     7        9       7,044        638        6,406  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 79,539      ¥ 2,886     ¥ 1,537      ¥ (4,954   ¥   44      ¥ 232     ¥ 79,284      ¥ 57,901      ¥ 21,383  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
    
 
 
 
 
– 63 –

Table of Contents
    
March 31, 2022
 
    
Millions of yen
 
    
Ending
balance *3
    
Collective
(pool)
assessment
    
Individual
assessment
 
Allowance for credit losses :
                          
Installment loans to consumer borrowers:

                          
Real estate loans
                          
Japan
   ¥ 5,716      ¥ 5,211      ¥ 505  
Overseas
     455        455        0  
Card loans

                          
Japan
     10,019        9,423        596  
Other
                          
Japan
     5,204        2,946        2,258  
Overseas
     1,105        961        144  
Installment loans to corporate borrowers:
                          
Non-recourse
loans
                          
Japan

     81        81        0  
The Americas
     2,691        1,836        855  
Real estate companies
                          
Japan
     617        490        127  
Overseas
     735        735        0  
Commercial, industrial companies
                          
Japan
     1,337        505        832  
Overseas
     18,296        13,367        4,929  
Purchased loans *1
     1,575        608        967  
Net investment in leases:
     16,303        12,480        3,823  
    
 
 
    
 
 
    
 
 
 
Subtotal
     64,134        49,098        15,036  
    
 
 
    
 
 
    
 
 
 
Other financial assets measured at amortized cost *2
     7,282        562        6,720  
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 71,416      ¥ 49,660      ¥ 21,756  
    
 
 
    
 
 
    
 
 
 
 
– 64 –

Table of Contents
    
Six months ended September 30, 2022
 
    
Millions of yen
 
    
Beginning
balance
    
Provision
(Reversal) *3
   
Allowance
of
purchased
loans

during the
reporting
period
    
Charge-offs *4
   
Recoveries
   
Other *5
   
Ending
balance *3
    
Collective
(pool)
assessment
    
Individual
assessment
 
Allowance for credit losses :
                                                                            
Installment loans to consumer borrowers:
                                                                            
Real estate loans
                                                                            
Japan
   ¥ 5,716      ¥ (0   ¥ 0      ¥ (82   ¥ 13     ¥ 1     ¥ 5,648      ¥ 5,153      ¥ 495  
Overseas
     455        (2     0        0       0       3       456        456        0  
Card loans
                                                                            
Japan
     10,019        228       0        (265     4       0       9,986        9,357        629  
Other
                                                                            
Japan
     5,204        2,152       0        (865     4       0       6,495        4,167        2,328  
Overseas
     1,105        286       0        (206     0       137       1,322        1,187        135  
Installment loans to corporate borrowers:
                                                                            
Non-recourse
loans
                                                                            
Japan
     81        1       0        0       0       0       82        82        0  
The Americas
     2,691        (944     0        0       0       122
      1,869
       857
       1,012
 
Real estate companies
                                                                            
Japan
     617        (21 )     0        0       13       1       610        489        121  
Overseas
     735        (98     0        (14     0       57       680        680        0  
Commercial, industrial companies
                                            
                               
Japan
     1,337        256       0        (277     7       0       1,323        475        848  
Overseas
     18,296        114       0        (1,825     310       3,144
      20,039
       16,169
       3,870  
Purchased loans *1
     1,575        (242     2,095        (2,309     56       12       1,187        563        624  
Net investment in leases:
     16,303        582       0        (1,430     25       760       16,240        12,030        4,210  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Subtotal
     64,134        2,312       2,095        (7,273     432       4,237       65,937        51,665        14,272  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Other financial assets measured at amortized cost *2
     7,282        157       0        (4,567     15        334       3,221        629        2,592  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 71,416      ¥ 2,469     ¥ 2,095      ¥ (11,840   ¥ 447     ¥ 4,571     ¥ 69,158      ¥ 52,294      ¥ 16,864  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
 
– 65 –

Table of Contents
    
Three months ended September 30, 2022
 
    
Millions of yen
 
    
Beginning
balance
    
Provision
(Reversal) *3
   
Allowance
of
purchased
loans

during the
reporting
period
    
Charge-offs *4
   
Recoveries
   
Other *5
   
Ending
balance *3
    
Collective
(pool)
assessment
    
Individual
assessment
 
Allowance for credit losses :
                                                                            
Installment loans to consumer borrowers:
                                                                            
Real estate loans
                                                                            
Japan
   ¥ 5,725      ¥ (80   ¥ 0      ¥ (3   ¥ 5     ¥ 1     ¥ 5,648      ¥ 5,153      ¥ 495  
Overseas
     471        1       0        0       0       (16     456        456        0  
Card loans
                                                                            
Japan
     9,933        209       0        (158     2       0       9,986        9,357        629  
Other
                                                                            
Japan
     5,915        1,038       0        (460     2       0       6,495        4,167        2,328  
Overseas
     1,164        242       0        (140     0       56       1,322        1,187        135  
Installment loans to corporate borrowers:
                                                                            
Non-recourse
loans
                                                                            
Japan
     65        17       0        0       0       0       82        82        0  
The Americas
     2,235        (218     0        0       0       (148
)     1,869
       857
       1,012
 
Real estate companies
                                                                            
Japan
     600        4       0                  0       5       1       610        489        121  
Overseas
     630        54       0        (14    
0       10       680        680        0  
Commercial, industrial companies
                                                                            
Japan
     1,206        220       0        (107     4       0       1,323        475        848  
Overseas
     18,720        78       0        (190     281       1,150
      20,039
       16,169
       3,870  
Purchased loans *1
     1,546        (214     2,067        (2,261     56       (7     1,187        563        624  
Net investment in leases:
     16,665        123       0        (650     18       84       16,240        12,030        4,210  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Subtotal
     64,875        1,474       2,067        (3,983     373       1,131       65,937        51,665        14,272  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Other financial assets measured at amortized cost *2
     2,976        161       0        (31     (12     127       3,221        629        2,592  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total
   ¥ 67,851      ¥ 1,635     ¥ 2,067      ¥ (4,014   ¥ 361     ¥ 1,258     ¥ 69,158      ¥ 52,294      ¥ 16,864  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
 
Notes:
  
1.
  
Loans held for sale and policy loan receivables of an insurance entity are not scope to allowance for credit losses.
 
  
2.
  
Held-to-maturity
debt securities held by the Company and subsidiaries consist of Japanese government bonds (JGBs) and other securities secured by JGBs. There was no allowance for credit losses on these
held-to-maturity
debt securities. And there is no delinquency or on
non-accrual
status on
held-to-maturity
debt securities.
 
– 66 –

Table of Contents
*1
Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely.
*2
The allowance for other financial assets measured at amortized cost includes the allowance for credit losses on financial receivables, such as loans to affiliates and accounts receivable. Other financial assets measured at amortized cost are mainly “Trade notes, accounts and other receivables”, and loans to affiliates included in “Investment in affiliates” on the consolidated balance sheets.
*3
“Provision for credit losses” in the consolidated statements of income amounted to provisions of
 ¥2,106 
million and
 ¥1,674 
million during the six months ended September 30, 2021 and 2022, provisions of
 ¥2,361 
million and
 ¥1,426 million during the three months ended September 30, 2021 and 2022, respectively. “Allowance for credit losses” on the consolidated balance sheets amounted to ¥69,459 million and ¥66,975 million as of March 31, 2022 and September 30, 2022, respectively. The reconciliation between the above table and the amounts reported on the consolidated financial statements during the six and three months ended September 30, 2021 and 2022, and as of March 31, 2022 and September 30, 2022 are as follows:

 
  
Millions of yen
 
 
  
Six months
ended
September 30,
2021
 
 
Three months
ended
September 30,
2021
 
 
March 31,
2022
 
 
Six months
ended
September 30,
2022
 
 
Three months
ended
September 30,
2022
 
 
September 30,
2022
 
Net investment in leases
   ¥ 672     ¥ 399     ¥ 16,303     ¥ 582      ¥ 123      ¥ 16,240  
Installment loans
     2,853       1,621       47,831       1,730       
1,351
       49,697  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Subtotal in the above table
     3,525       2,020       64,134       2,312       
1,474
       65,937  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Other financial assets measured at amortized cost
     1,587       866       7,282       157       
161
       3,221  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total in the above table
     5,112       2,886       71,416       2,469       
1,635
       69,158  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Off-balance
sheet credit exposures *3(a)
     (2,369     (468    
0
      (868 )     
(225
)
    
0
 
Available-for-sale
debt securities *3(b)
     0      
0
     
0
      (5 )     
0
      
0
 
Less: Loans to affiliates *3(c)
     (637     (57     (1,957     78       
16
       (2,183 )
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Amount reported on the consolidated financial statements
   ¥ 2,106     ¥ 2,361     ¥ 69,459     ¥ 1,674      ¥ 1,426      ¥ 66,975  
    
 
 
   
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 

  *3(a)
The allowance for
off-balance
sheet credit exposure were ¥22,120 million and ¥22,023 million as of March 31, 2022 and September 30, 2022, respectively, and the amounts are recorded in “Other liabilities” on the consolidated balance sheets. For further information, see Note 23 “Commitments, Guarantees and Contingent Liabilities.”
  *3(b)
The allowance for
available-for-sale
debt securities were ¥153 million and ¥172 million as of March 31, 2022 and September 30, 2022, respectively, and the amounts are recorded as a reduction in “Investments in securities” on the consolidated balance sheets. For further information, see Note 8 “Investment in Securities.”
  *3(c)
The provision for credit losses on loans to affiliates were a provision of
 ¥637 
million and a reversal of
 ¥78 
million during the six months ended September 30, 2021 and 2022, a provision of
¥57 
million and a reversal of
 ¥16 million during the three months ended September 30, 2021 and 2022, respectively, and the amounts are recorded in “Equity in net income (loss) of affiliates” in the consolidated statements of income. The allowance for credit losses on loans to affiliates were ¥1,957 million and ¥2,183 million as of March 31, 2022 and September 30, 2022, respectively, and the amounts are recorded as a reduction in “Investments in affiliates” on the consolidated balance sheets.
*4
Included in Charge-off in write-offs of purchased loans at acquisition date were
 ¥1,752 million and ¥2,095 
million during the six months ended September 30, 2021 and 2022,
¥1,537 million and ¥2,067 
million during the three months ended September 30, 2021 and 2022, respectively.
*5
Other mainly includes foreign currency translation adjustments and increases or decreases in allowance due to consolidation or deconsolidation of subsidiaries.
 
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The following table provides information about purchased loans which were acquired for the six and three months ended September 30, 2021 and 2022:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
 
Purchase price
   ¥ 1,420      ¥ 1,940  
Allowance for credit losses at acquisition date
     1,752        2,095  
Discount or premium attributable to other factors
     122        226  
    
 
 
    
 
 
 
Par value
   ¥ 3,294      ¥ 4,261  
    
 
 
    
 
 
 
   
    
Millions of yen
 
    
Three months ended

September 30, 2021
    
Three months ended

September 30, 2022
 
Purchase price
   ¥ 460      ¥ 1,537  
Allowance for credit losses at acquisition date
     1,537        2,067  
Discount or premium attributable to other factors
     30        208  
    
 
 
    
 
 
 
Par value
   ¥ 2,027      ¥ 3,812  
    
 
 
    
 
 
 
The Company and its subsidiaries estimate an allowance for credit losses for all credit losses expected to occur in future over the remaining life of financial assets, and recognize the allowance adequately based on management judgement. In developing the allowance for credit losses, the Company and its subsidiaries consider, among other things, the following factors in collective assessment and individual assessment by each portfolio:
 
   
business characteristics and financial conditions of obligors;
 
   
prior
charge-off
experience;
 
   
current delinquencies and delinquency trends;
 
   
value of underlying collateral and guarantees; and
 
   
current economic and business conditions and expected outlook in future.
The Company and its subsidiaries manage credit risk using various indicators specific to the region, industry, and types of assets, in accordance with the group risk management policy. For credit transactions, the basic group policy is to obtain sufficient collateral and guarantees, and to diversify industries and borrowers, and the Company and its subsidiaries comprehensively evaluate and monitor the financial condition and cash flows of borrowers, underlying collateral and guarantees, and profitability. The Company and its subsidiaries also manage exposure to potentially high-risk markets by establishing appropriate credit limits through portfolio analysis.
Due to the diversity of assets and risk indicators held by the Company and its subsidiaries, the Company and its subsidiaries monitor the credit quality indicators as performing and
non-performing
assets as indicators that are common across all classes. The category of
non-performing
assets includes financing receivables for debtors who have filed for insolvency proceedings, whose bank transactions are suspended, whose bills are dishonored, whose businesses have deteriorated, whose repayment is
past-due
90 days or more, financing receivables modified as troubled debt restructurings, and performing assets include all other financing receivables. Regarding purchased loans, they are classified as
non-performing
assets when it is probable that the acquisition cost of purchased loans cannot be collected, while all the other purchased loans are included in the category of performing assets.
When certain performing financial assets mainly have similar risk characteristics to other financial assets, the performing financial assets are collectively evaluated as a pool. On the contrary, when financial assets do not have similar risk characteristics to other financial assets, the financial assets are evaluated individually.
Loans to consumer borrowers
Loans to consumer borrowers mainly consist of real estate loans and card loans.
The credit quality of real estate loans is affected by the cash flows derived from the property and its collateral value.
 
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Table of Contents
The credit quality of card loans is affected by the repayment ability of customers such as customer credit standing or payment history.
The Company and its subsidiaries use these factors to estimate the allowance for credit losses because they are reflected in the probability of default and loss given default in each portfolio.
Loans to corporate borrowers
Loans to corporate borrowers are classified into
non-recourse
loans and loans other than
non-recourse
loans.
The credit quality of
non-recourse
loans for which cash flows from real estate are the source of repayment depends mainly on the real estate collateral value.
Loans other than
non-recourse
loans are classified into either real estate companies or commercial, industrial and other companies, each of which are further divided into Japan and overseas.
The credit quality of real estate companies is affected by mainly Japanese and Americas real estate markets and trends.
The credit quality of commercial, industrial and other companies, which consist of various industries, is affected mainly by broader financial and economic conditions and trends in Japan, the Americas and Asian countries.
The allowance for credit losses for loans to corporate borrowers is estimated by considering, among others, debtors’ situation, as well as economic conditions and trends in its industries, the value of underlying collateral and guarantees, and probability of default and loss given default.
Net investment in leases
Net investment in leases consists of leases of various equipment types, including office equipment, industrial machinery, transportation equipment and real estate properties. The allowance for credit losses for net investment in leases is estimated based on the value of the underlying leased assets, debtors’ situation, economic conditions and trends in its industries, and probability of default and loss given default.
In common with portfolio segments, the forecasted future economic indicators correlated with the prior
charge-off
experience are reflected to the estimate of the allowance for credit losses. Economic indicators correlated with prior
charge-off
experience are determined over the reasonable and supportable forecasted period. Economic indicators include GDP growth rates, consumer price indices, unemployment rates, and government bond interest rates. It also considers forward-looking scenarios of how the selected economic indicators will change in the future. The Company and its subsidiaries use the latest economic forecasts available from the economic reports published by the government and the Financial Services Agency, the Bank of Japan and third-party information providers as economic indicators. For the impact of the spread of
COVID-19,
the Company and its subsidiaries revise forward-looking scenarios, as necessary, with a quantitative adjustment based on the analysis of impact to the portfolios and the referenced economic indicators.
On the other hand, for periods beyond which the Company and its subsidiaries are able to make or obtain reasonable and supportable forecasts of future economic indicators of the entire life of the financial asset, expected credit losses are estimated for the remaining life mainly using an appropriate reversion approach, mainly immediate reversion to historical credit loss information.
There have been no significant changes during the six months ended September 30, 2022 to methodologies and economic indicators used to estimate the allowance for Credit Losses.
When
non-performing
financial assets with deteriorated credit quality have similar risk characteristics to other financial assets, the allowance for credit losses is collectively evaluated based on mainly loss given default. On the other hand, if the
non-performing
financial assets do not have similar risk characteristics to other financial assets, the allowance for credit losses is individually evaluated.
In the individual assessment the allowance for credit losses is estimated individually based on the present value of expected future cash flows, the observable market price or the fair value of the collateral securing the financial receivables if the financial receivables are collateral-dependent.
 
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The collateral-dependent financial receivables are defined as the finance receivables, which a debtor would be in financial difficulty and the collection significantly depend on the collateral. These financial receivables are mainly
non-recourse
loans and purchased loans for which cash flows from underlying real estate is the source of repayment.
For
non-recourse
loans, their collection depends on the real estate collateral value, which may decline as a result of a decrease in liquidity of the real estate market, a rise in vacancy rate of rental properties, a fall in rents and other factors.
For purchased loans, their collection may decrease due to a decline in the real estate collateral value and debtors’ creditworthiness. Thus, the changes in these risks affect the amount of the allowance for credit losses.
In common with all portfolio segments, the Company and its subsidiaries charge off doubtful receivables when the likelihood of any future collection is believed to be minimal, mainly based upon an evaluation of the relevant debtors’ creditworthiness and the liquidation status of collateral.
 
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Table of Contents
The following table provides information about the origination years of financial assets as of March 31, 2022 and September 30, 2022. Card loans to consumer borrowers with a revolving repayment feature that cannot be classified into the origination year are excluded from the table.
 
March 31, 2022
 
Millions of yen
 
Portfolio segment
  
Origination year (years ended March 31)
        
Class
             
Credit Quality
  
2022
    
2021
    
2020
    
2019
    
2018
    
Prior
    
Total
 
Consumer borrowers:
                                                              
Performing
   ¥ 322,924      ¥ 314,935      ¥ 387,988      ¥ 314,163      ¥ 202,309      ¥ 595,321      ¥ 2,137,640  
Non-Performing
     8,282        4,595        3,852        2,098        961        11,915      ¥ 31,703  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Real estate loans
                                                              
Performing
     302,695        309,893        382,612        311,959        198,974        594,612      ¥ 2,100,745  
Non-Performing
     26        94        489        380        222        11,474      ¥ 12,685  
Other*
                                                              
Performing
     20,229        5,042        5,376        2,204        3,335        709      ¥ 36,895  
Non-Performing
     8,256        4,501        3,363        1,718        739        441      ¥ 19,018  
Corporate borrowers:
                                                              
Performing
     487,433        188,634        283,950        127,128        96,851        111,640      ¥ 1,295,636  
Non-Performing
     412        3,184        4,138        4,747        14,562        21,000      ¥ 48,043  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Non-recourse
loans
                                                              
Japan
                                                              
Performing
     26,991        6,686        24,244        5,256        2,750        8,158      ¥ 74,085  
The Americas
                                                              
Performing
     0        5,547        51,467        11,744        7,721        1,397      ¥ 77,876  
Non-Performing
     0        64        0        1,587        0        1,391      ¥ 3,042  
Other than
non-recourse
loans
                                                              
Real estate companies in Japan
                                                              
Performing
     102,719        48,420        37,845        28,727        24,481        34,111      ¥ 276,303  
Non-Performing
     0        245        938        71        0        1,050      ¥ 2,304  
Real estate companies in overseas
                                                              
Performing
     24,104        26,751        41,644        2,256        5,478        740      ¥ 100,973  
Non-Performing
     0        0        0        371        12,790        7,717      ¥ 20,878  
Commercial, industrial and other companies in Japan
                                                              
Performing
     75,273        24,808        26,748        13,746        6,457        13,806      ¥ 160,838  
Non-Performing
     156        457        1,392        124        392        773      ¥ 3,294  
Commercial, industrial and other companies in overseas
                                                              
Performing
     258,346        76,422        102,002        65,399        49,964        53,428      ¥ 605,561  
Non-Performing
     256        2,418        1,808        2,594        1,380        10,069      ¥ 18,525  
Purchased loans:
                                                              
Performing
     0        0        24        281        1,072        10,885      ¥ 12,262  
Non-Performing
     0        0        0        0        0        1,485      ¥ 1,485  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Net investment in leases:
                                                              
Performing
     328,428        249,106        190,125        113,190        77,683        80,217      ¥ 1,038,749  
Non-Performing
     2,608        2,899        3,474        2,787        2,178        5,278      ¥ 19,224  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Japan
                                                              
Performing
     119,538        154,757        133,589        91,691        68,087        78,283      ¥ 645,945  
Non-Performing
     402        605        1,044        1,103        1,247        2,109      ¥ 6,510  
Overseas
                                                              
Performing
     208,890        94,349        56,536        21,499        9,596        1,934      ¥ 392,804  
Non-Performing
     2,206        2,294        2,430        1,684        931        3,169      ¥ 12,714  
Other financial assets measured at amortized cost
                                                              
Performing
     14,287        2,220        345        0        817        17,743      ¥ 35,412  
Non-Performing
     0        0        58        0        1,586        0      ¥ 1,644  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total (excluding revolving repayment card loans)
                                                              
Performing
   ¥ 1,153,072      ¥    754,895      ¥ 862,432      ¥ 554,762      ¥ 378,732      ¥    815,806      ¥ 4,519,699  
Non-Performing
   ¥ 11,302      ¥ 10,678      ¥ 11,522      ¥ 9,632      ¥ 19,287      ¥ 39,678      ¥ 102,099  
 
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Table of Contents
September 30, 2022
 
Millions of yen
 
Portfolio segment
  
Origination year (years ended March 31)
    
Total
 
Class
                                         
Credit Quality
  
2023
    
2022
    
2021
    
2020
    
2019
    
Prior
 
Consumer borrowers:
                                                              
Performing
   ¥ 199,452      ¥ 235,815      ¥ 300,255      ¥ 376,894      ¥ 304,989      ¥ 718,803      ¥ 2,136,208  
Non-Performing
     6,128        6,361        3,649        3,167        1,542        13,164      ¥ 34,011  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Real estate loans
                                                              
Performing
     182,957        219,738        296,600        373,800        303,520        715,494      ¥ 2,092,109  
Non-Performing
     3        71        171        700        290        12,383      ¥ 13,618  
Other*
                                                              
Performing
     16,495        16,077        3,655        3,094        1,469        3,309      ¥ 44,099  
Non-Performing
     6,125        6,290        3,478        2,467        1,252        781      ¥ 20,393  
Corporate borrowers:
                                                              
Performing
     222,517        432,629        155,614        231,115        135,561        175,726
     ¥ 1,353,162  
Non-Performing
     245        6,830        4,135
       3,401        2,683        29,721      ¥ 47,015  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Non-recourse
loans
                                                              
Japan
                                                              
Performing

     9,936        19,468        6,695        24,152        5,230
       7,903      ¥ 73,384  
The Americas
                                                              
Performing
     1,795        0        5,611        32,998        13,899        1,372      ¥ 55,675  
Non-Performing
     0        0        75        0        0        3,715      ¥ 3,790  
Other than
non-recourse
loans
                                                              
Real estate companies in Japan
      
                                                       
Performing
     60,825        66,814        40,333        30,886        24,834        52,311      ¥ 276,003  
Non-Performing
     0        233        0        987        68        1,189
     ¥ 2,477  
Real estate companies in overseas
                                                              
Performing

     30,490        15,249        9,450        11,751        2,558        1,300      ¥ 70,798
 
Non-Performing
     0
       0        803        0        439        13,825      ¥ 15,067  
Commercial, industrial and other companies in Japan
                                                              
Performing
     35,852        45,863        19,727        22,291        11,618        16,822      ¥ 152,173  
Non-Performing
     226        126        449        554        166        619      ¥ 2,140  
Commercial, industrial and other companies in overseas
                                                              
Performing
     83,619        285,235        73,798        109,037        77,422        96,018      ¥ 725,129  
Non-Performing
     19        6,471        2,808        1,860        2,010        10,373      ¥ 23,541  
Purchased loans:
                                                              
Performing
     0        399        0        23        573        12,257      ¥ 13,252  
Non-Performing
     0        0        0        0        0        1,066      ¥ 1,066  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Net investment in leases:
                                                              
Performing
     239,698        331,966        179,392        138,148        74,088        99,260      ¥ 1,062,552  
Non-Performing
     1,855
       3,933        2,866        2,869        2,480  
     6,388      ¥ 20,391  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Japan
                                                              
Performing
     99,873        157,370        116,101        99,783        60,709        92,728      ¥ 626,564  
Non-Performing
     36        475        643        941        880        2,695      ¥ 5,670  
Overseas
                                                              
Performing
     139,825        174,596        63,291        38,365        13,379        6,532      ¥ 435,988  
Non-Performing
     1,819
       3,458        2,223        1,928        1,600        3,693      ¥ 14,721  
Other financial assets measured at amortized cost
                                                              
Performing
     2,830
       0
       2,091        316        0        33,859      ¥ 39,096  
Non-Performing
     0        0        0     
  0        0        1,876      ¥ 1,876  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total (excluding revolving repayment card loans)
                                                              
Performing
   ¥    664,497      ¥ 1,000,809      ¥ 637,352      ¥ 746,496      ¥ 515,211      ¥ 1,039,905      ¥ 4,604,270  
Non-Performing
  
8,228     
17,124     
10,650     
9,437     
6,705     
52,215      ¥ 104,359  
 

Note: Loans held for sale and policy loan receivables of an insurance entity are not included in the table above.
 
*
Other in loans to consumer borrowers includes claims receivable arising from payments on guarantee of consumer loans. For further information, see Note 23 “Commitments, Guarantees and Contingent Liabilities”.
 
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Table of Contents
The information about card loans to consumer borrowers with a revolving repayment feature that cannot be classified into the origination year as of March 31, 2022 and September 30, 2022 are as follows:
 
    
March 31, 2022
 
    
Millions of yen
 
Portfolio segment
  
Revolving repayment
card loans
    
Modification of
collection condition
by relief of contract
condition
    
Total—revolving
repayment card
loans
    
Total—

origination year

(excluding revolving

repayment card
loans)
    
Total—

financial assets
measured at amortized
cost
 
Credit quality
                                            
Consumer borrowers:
                                            
Performing
   ¥ 169,601      ¥ 0      ¥ 169,601      ¥ 4,519,699      ¥ 4,689,300  
                                        
 
 
 
Non-Performing
     671        3,415        4,086        102,099      ¥ 106,185  
                                        
 
 
 
   
    
September 30, 2022
 
    
Millions of yen
 
Portfolio segment

  
Revolving repayment
card loans
    
Modification of
collection condition
by relief of contract
condition
    
Total—revolving
repayment card
loans
    
Total—

origination year

(excluding revolving

repayment card
loans)
    
Total—

financial assets
measured at amortized
cost
 
Credit quality
                                            
Consumer borrowers:
                                            
Performing
   ¥ 164,652      ¥ 0      ¥ 164,652      ¥ 4,604,270
     ¥ 4,768,922  
                                        
 
 
 
Non-Performing
     1,054        3,473        4,527        104,359      ¥ 108,886  
                                        
 
 
 
Of
non-performing
assets, the Company and its subsidiaries consider smaller balance homogeneous loans (including real estate loans and card loans, among others, which are not restructured) and net investment in leases as the 90 days or more
past-due
financing receivables not individually evaluated, and consider all others as the loans individually evaluated. After the Company and its subsidiaries have set aside a provision for those
non-performing
assets, the Company and its subsidiaries continue to monitor at least on a quarterly basis the quality of any underlying collateral, the business conditions of the debtors and other important factors in order to report to management and develop additional provision for credit losses as necessary.
 
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Table of Contents
The following table provides information about the
past-due
financial assets as of March 31, 2022 and September 30, 2022:
 
    
March 31, 2022
 
         
Millions of yen
 
         
Past-due
financing assets
        
Portfolio segment
  
Class
  
30-89 days

past-due
    
90 days

or more

past-due
    
Total

past-due
    
Total

financing

receivables
 
Consumer borrowers
        ¥ 4,183      ¥ 5,637      ¥ 9,820      ¥ 2,343,030  
     Real estate loans      1,473        2,262        3,735        2,113,430  
     Card loans      371        503        874        173,687  
     Other      2,339        2,872        5,211        55,913  
Corporate borrowers
          20,840        31,935        52,775        1,343,679  
Non-recourse
loans
   Japan      0        0        0        74,085  
     The Americas      514        3,042        3,556        80,918  
Other than
Non-recourse
loans
   Real estate companies in Japan      578        350        928        278,607  
     Real estate companies in overseas      16,113        20,879        36,992        121,851  
    
Commercial, industrial and
other companies in Japan
     1,243        1,268        2,511        164,132  
    
Commercial, industrial and
other companies in overseas
     2,392        6,396        8,788        624,086  
Net investment in leases
          9,322        17,746        27,068        1,057,973  
     Japan      2,252        5,782        8,034        652,455  
     Overseas      7,070        11,964        19,034        405,518  
         
 
 
    
 
 
    
 
 
    
 
 
 
Total
        ¥   34,345      ¥   55,318      ¥   89,663      ¥   4,744,682  
         
 
 
    
 
 
    
 
 
    
 
 
 
   
    
September 30, 2022
 
         
Millions of yen
 
         
Past-due
financing assets
        
Portfolio segment
  
Class
  
30-89
days

past-due
    
90 days

or more

past-due
    
Total

past-due
    
Total

financing

receivables
 
Consumer borrowers
        ¥ 3,492      ¥ 7,916      ¥ 11,408      ¥ 2,339,398
 
     Real estate loans      961        2,459        3,420        2,105,727  
     Card loans      428        905        1,333        169,179  
 
   Other      2,103        4,552        6,655        64,492
 
Corporate borrowers
          5,202        23,377        28,579        1,400,177  
Non-recourse
loans
   Japan      0        0        0        73,384  
     The Americas      0        1,722        1,722        59,465  
Other than
Non-recourse
loans
   Real estate companies in Japan      194        291        485        278,480  
     Real estate companies in overseas      0        15,067        15,067        85,865
 
    
Commercial, industrial and
other companies in Japan
     1,448        1,323        2,771     
  154,313  
    
Commercial, industrial and
other companies in overseas
     3,560
       4,974        8,534        748,670  
Net investment in leases
          14,836        19,043        33,879        1,082,943  
     Japan      3,698        4,930        8,628        632,234
 
     Overseas      11,138        14,113        25,251        450,709  
         
 
 
    
 
 
    
 
 
    
 
 
 
Total
        ¥ 23,530
     ¥ 50,336      ¥ 73,866      ¥ 4,822,518  
         
 
 
    
 
 
    
 
 
    
 
 
 
 
Note: Loans held for sale, policy loans receivable of an insurance entity and purchased loans are not included in the table above.
In common with all classes, the Company and its subsidiaries consider financial assets as
past-due
financial assets when principal or interest is
past-due
30 days or more. Loans whose terms have been modified are not classified as
past-due
financial assets if the principals and interests are not
past-due
30 days or more in accordance with the modified terms.
 
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The following table provides information about
non-accrual
of financial assets as of March 31, 2022 and September 30, 2022:
 
         
March 31, 2022
 
         
Millions of yen
 
         
Beginning balance
    
Ending balance
    
Interest income
recognized during
the reporting
period
    
Balance not
associated
allowance for credit
losses among
financial assets
measured at
amortized cost,
which is
suspending
recognition of
income
 
Non-accrual
of financial assets:
                                   
Installment loans to consumer borrowers:
                                   
Real estate loans
                                        
    
Japan
   ¥ 1,976      ¥ 1,824      ¥ 193      ¥ 21  
    
Overseas
     570        475        0        129  
Card loans
  
Japan
     1,115        503        35        0  
Other
                                        
    
Japan
     5,970        2,391        208        0  
    
Overseas
     691        519        0        39  
Installment loans to corporate borrowers:
                                   
Non-recourse
loans
  
The Americas
     10,148        8,787        0        0  
Real estate companies
                                        
    
Japan
     778        351        51        61  
    
Overseas
     14,505        20,879        0        0  
Commercial, industrial companies and other
                                   
    
Japan
     1,993        1,267        91        28  
    
Overseas
     26,396        18,634        112        4,018  
Net investment in leases
     17,166        17,771        0        0  
         
 
 
    
 
 
    
 
 
    
 
 
 
Total
        ¥ 81,308      ¥ 73,401      ¥ 690      ¥ 4,296  
         
 
 
    
 
 
    
 
 
    
 
 
 
 
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Table of Contents
         
September 30, 2022
 
         
Millions of yen
 
         
Beginning balance
    
Ending balance
    
Interest income
recognized during
the reporting
period
    
Balance not
associated
allowance for credit
losses among
financial assets
measured at
amortized cost,
which is
suspending
recognition of
income
 
Non-accrual
of financial assets:
                                   
Installment loans to consumer borrowers:
                                   
Real estate loans
                                        
    
Japan
   ¥ 1,824      ¥ 2,013      ¥ 116      ¥ 225  
    
Overseas
     475        498        0        153  
Card loans
  
Japan
     503        907        16        0  
Other
                                        
    
Japan
     2,391        4,043        94        11  
    
Overseas
     519        551        0        0  
Installment loans to corporate borrowers:
                                   
Non-recourse
loans
  
The Americas
     8,787        3,156        0        0  
Real estate companies
                                   
    
Japan
     351        291        31        76  
    
Overseas
     20,879        15,067        0        0  
Commercial, industrial companies and other
                                   
    
Japan
     1,267        1,323        25        72  
    
Overseas
     18,634        24,255        0        2,320  
Net investment in leases
     17,771        20,487        0        0  
         
 
 
    
 
 
    
 
 
    
 
 
 
Total
        ¥ 73,401      ¥ 72,591      ¥ 282      ¥ 2,857  
         
 
 
    
 
 
    
 
 
    
 
 
 
The Company and its subsidiaries suspend accruing interest on
past-due
installment loans and net investment in leases when principal or interest is
past-due
90 days or more, or earlier, if management determines that their collections are doubtful based on factors such as individual debtors’ creditworthiness, historical loss experience, current delinquencies and delinquency trends. Cash repayments received on
non-accrual
loans are applied first against past due interest and then any surpluses are applied to principal in view of the conditions of the contract and obligors. The Company and its subsidiaries return to accrual status
non-accrual
loans and net investment in leases when it becomes probable that the Company and its subsidiaries will be able to collect all amounts due according to the contractual terms of these loans and lease receivables, as evidenced by continual payments from the debtors. The period of such continual payments before returning to accrual status varies depending on factors that are considered relevant in assessing the debtor’s creditworthiness, such as the debtor’s business characteristics and financial conditions as well as relevant economic conditions and trends.
 
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Table of Contents
The following table provides information about troubled debt restructurings of financing receivables that occurred during the six and three months ended September 30, 2021 and 2022:
 
Six months ended September 30, 2021
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Pre-modification

outstanding

recorded investment
   
Post-modification

outstanding

recorded investment
 
Consumer borrowers
        ¥ 4,047     ¥ 3,061  
     Real estate loans      4       1  
     Card loans      691       528  
     Other      3,352       2,532  
Corporate borrowers
          4,996       4,866  
Other than
Non-recourse
loans
   Commercial, industrial and other companies in overseas      4,996       4,866  
         
 
 
   
 
 
 
Total
        ¥ 9,043     ¥ 7,927  
         
 
 
   
 
 
 
 
Six months ended September 30, 2022
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Pre-modification

outstanding

recorded investment
   
Post-modification

outstanding

recorded investment
 
Consumer borrowers
        ¥ 3,979     ¥ 3,175  
     Real estate loans      5       3  
     Card loans      713       619  
     Other      3,261       2,553  
Corporate borrowers
          8,213       8,212  
Other than
Non-recourse
loans
   Commercial, industrial and other companies in overseas      8,213       8,212  
         
 
 
   
 
 
 
Total
        ¥  12,192       ¥  11,387   
         
 
 
   
 
 
 
 
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Table of Contents
Three months ended September 30, 2021
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Pre-modification

outstanding

recorded investment
   
Post-modification

outstanding

recorded investment
 
Consumer borrowers
        ¥ 1,903     ¥ 1,389  
     Real estate loans      4       1  
     Card loans      339       257  
     Other      1,560       1,131  
Corporate borrowers
          4,988       4,862  
Other than
Non-recourse
loans
   Commercial, industrial and other companies in overseas      4,988       4,862  
         
 
 
   
 
 
 
Total
        ¥ 6,891     ¥ 6,251  
         
 
 
   
 
 
 
 
Three months ended September 30, 2022
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Pre-modification

outstanding

recorded investment
   
Post-modification

outstanding

recorded investment
 
Consumer borrowers
        ¥ 1,938     ¥ 1,527  
     Real estate loans      5       3  
     Card loans      332       284  
     Other      1,601       1,240  
Corporate borrowers
          2,582       2,582  
Other than
Non-recourse
loans
   Commercial, industrial and other companies in overseas      2,582       2,582  
         
 
 
   
 
 
 
Total
        ¥ 4,520     ¥ 4,109  
         
 
 
   
 
 
 
A troubled debt restructuring is defined as a restructuring of a financing receivable in which the creditor grants a concession to the debtor for economic or other reasons related to the debtor’s financial difficulties.
The Company and its subsidiaries offer various types of concessions to our debtors to protect as much of the investment as possible in troubled debt restructurings. For the debtors of all financing receivables, the Company and its subsidiaries offer concessions including an extension of the maturity date at an interest rate lower than the current market rate for a debt with similar risk characteristics. In addition, for the debtors of all financing receivables other than
non-recourse
loans, the Company and its subsidiaries also offer concessions such as a reduction of the loan principal or a temporary reduction in the interest payments. Furthermore, the Company and its subsidiaries may acquire collateral assets from the debtors in troubled debt restructurings to satisfy fully or partially the loan principal or past due interest.
In common with all portfolio segments, financing receivables modified as troubled debt restructurings are recognized as impaired and are individually evaluated for allowance for credit losses. In most cases, these financing receivables have already been considered impaired and individually evaluated for allowance for credit losses prior to the restructurings. However, as a result of the restructuring, the Company and its subsidiaries may recognize additional allowance for credit losses for the restructured receivables.
For the three months ended September 30, 2021 and 2022, while there are financial assets for which the payments were deferred other than those in the troubled debt restructuring stated above due to the spread of
COVID-19,
the payment deferrals, which are determined not to meet the definition of a troubled debt restructuring are not included in the troubled debt restructuring stated the above.
 
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Table of Contents
The following table provides information about financing receivables modified as troubled debt restructurings within the previous 12 months from September 30, 2021 and for which there was a payment default during the six and three months ended September 30, 2021:
 
Six months ended September 30, 2021
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Recorded investment
 
Consumer borrowers
                                                   ¥ 329  
     Card loans      4  
     Other      325  
         
 
 
 
Total
        ¥ 329  
         
 
 
 
 
Three months ended September 30, 2021
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Recorded investment
 
Consumer borrowers
        ¥ 19  
     Card loans      2  
     Other      17  
         
 
 
 
Total
        ¥ 19  
         
 
 
 
 
The following table provides information about financing receivables modified as troubled debt restructurings within the previous 12 months from September 30, 2022 and for which there was a payment default during the six and three months ended September 30, 2022:
 
 
Six months ended September 30, 2022
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Recorded investment
 
Consumer borrowers
        ¥ 395  
     Card loans      7  
     Other      388  
Corporate borrowers
          1,671  
Other than Non-recourse loans
 
Commercial,
 
industrial
 
and
 
other
 
companies
 
in
 
overseas
 
 
1,671
 
         
 
 
 
Total
        ¥ 2,066  
         
 
 
 
 
Three months ended September 30, 2022
 
         
Millions of yen
 
Portfolio segment
  
Class
  
Recorded investment
 
Consumer borrowers
        ¥ 208  
     Card loans      3  
     Other      205  
Corporate borrowers
 
 
 
¥ 1,671
 
Other than Non-recourse loans
 
Commercial,
 
industrial
 
and
 
other
 
companies
 
in
 
overseas
 
 
1,671
 
         
 
 
 
Total
        ¥ 1,879  
         
 
 
 
The Company and its subsidiaries consider financing receivables whose terms have been modified in a restructuring as defaulted receivables when principal or interest is
past-due
90 days or more in accordance with the modified terms.
In common with all portfolio segments, the Company and its subsidiaries suspend accruing interest and may recognize additional allowance for credit losses as necessary for the defaulted financing receivables.
As of March 31, 2022 and September 30, 2022, there were no foreclosed residential real estate properties. The carrying amounts of installment loans in consumer real estate loans collateralized by residential real estate property that are in the process of foreclosure were
¥162 million and ¥171 million as of March 31, 2022 and September 30, 2022, respectively.
 
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Table of Contents
8.
Investment in Securities
Investment in securities as of March 31, 2022 and September 30, 2022 consists of the following:
 
    
Millions of yen
 
    
March 31, 2022
    
September 30, 2022
 
Equity securities *
   ¥ 560,643      ¥ 577,333  
Trading debt securities
     2,503        2,948  
Available-for-sale
debt securities
     2,174,891        2,215,540  
Held-to-maturity
debt securities
     114,312        115,461  
    
 
 
    
 
 
 
Total
   ¥ 2,852,349      ¥ 2,911,282  
    
 
 
    
 
 
 
 
*
The amount of assets under management of variable annuity and variable life insurance contracts included in equity securities were ¥185,115 million and ¥154,984 million as of March 31, 2022 and September 30, 2022, respectively. The amount of investment funds that are accounted for under the equity method included in equity securities were ¥90,650 million and ¥96,836 million as of March 31, 2022 and September 30, 2022, respectively. The amount of investment funds elected for the fair value option included in equity securities, and others were ¥11,709 million and ¥14,714 million as of March 31, 2022 and September 30, 2022, respectively.
Gains and losses realized from the sale of equity securities and net unrealized holding gains (losses) on equity securities are included in gains on investment securities and dividends, life insurance premiums and related investment income, and write-downs of securities. For further information, see Note 17 “Life Insurance Operations.” Net unrealized holding gains (losses) on equity securities held as of September 30, 2021 were gains of ¥31,919 million and ¥16,059 million for the six and three months ended September 30, 2021, respectively. Net unrealized holding gains (losses) on equity securities held as of September 30, 2022 were losses of ¥15,645 million and ¥949 
million for the six and three months ended September 30, 2022, respectively, which did not include net unrealized holding gains (losses) on both investment funds above mentioned.
Equity securities include
non-marketable
equity securities and preferred equity securities, etc. elected for the measurement alternative. Upward or downward adjustments resulting from observable price changes are included in gains on investment securities and dividends and life insurance premiums and related investment income. Impairments are included in write-downs of securities. The following tables provide information about impairment and upward or downward adjustments resulting from observable price changes as of March 31, 2022 and September 30, 2022, and for the six and three months ended September 30, 2021 and 2022.

 
  
Millions of yen
 
 
  
March 31, 2022
 
  
Six months ended
September 30, 2021
 
  
Three months ended
September 30, 2021
 
 
  
Carrying
value
 
  
Accumulated
impairments
and

downward
adjustments
 
 
Accumulated
upward
adjustments
 
  
Impairments
and

downward
adjustments
 
 
Upward
adjustments
 
  
Impairments
and
downward
adjustments
 
 
Upward
adjustments
 
Equity securities measured using the measurement alternative
  
¥
58,723
 
  
¥
(13,880
 
¥
401
 
  
¥
(19
 
¥
48
 
  
¥
(19
 
¥
12
 
   
 
  
Millions of yen
 
 
  
September 30, 2022
 
  
Six months ended
September 30, 2022
 
  
Three months ended
September 30, 2022
 
 
  
Carrying
value
 
  
Accumulated
impairments
and
downward
adjustments
 
 
Accumulated
upward
adjustments
 
  
Impairments
and
downward
adjustments
 
 
Upward
adjustments
 
  
Impairments
and
downward
adjustments
 
 
Upward
adjustments
 
Equity securities measured using the measurement alternative
  
¥
70,296
 
  
¥
(13,737
 
¥
1,328
 
  
¥
(368
 
¥
896
 
  
¥
(278
 
¥
27
 
 
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Table of Contents
Gains and losses realized from the sale of trading debt securities and net unrealized holding gains (losses) on trading debt securities are included in gains on investment securities and dividends. Net unrealized holding gains (losses) on trading debt securities held as of September 30, 2021 were gains of ¥88 million and ¥27 million, respectively, for the six and three months ended September 30, 2021. Net unrealized holding gains (losses) on trading debt securities held as of September 30, 2022 were gains of ¥198 million and ¥104 million, respectively, for the six and three months ended September 30, 2022.
Certain subsidiaries elected the fair value option for certain investments in investment funds, and others included in equity securities whose net asset values do not represent the fair value of investments due to the illiquid nature of these investments. The subsidiaries manage these investments on a fair value basis and the election of the fair value option enables the subsidiaries to reflect more appropriate assumptions to measure the fair value of these investments. As of March 31, 2022 and September 30, 2022, these investments were fair valued at ¥11,709 million and ¥14,714 million, respectively.
A certain subsidiary elected the fair value option for investments in foreign government bond securities included in
available-for-sale
debt securities to mitigate volatility in the consolidated statements of income caused by the difference in recognition of gain or loss that would otherwise exist between the foreign government bond securities and the derivatives used to reduce the risks of fluctuations in market interest rates and exchange rates on these foreign government bond securities. As of March 31, 2022, there were no such investments. As of September 30, 2022, these investments were fair valued at ¥263 million.
A certain subsidiary elected the fair value option for investments in foreign corporate debt securities included in
available-for-sale
debt securities to mitigate volatility in the consolidated statements of income caused by the difference in recognition of gain or loss that would otherwise exist between the foreign corporate debt securities and the derivatives used to reduce the risks of fluctuations in market interest rates and exchange rates on these foreign corporate debt securities. As of March 31, 2022 and September 30, 2022, these investments were fair valued at ¥7,644 million and ¥10,591 million, respectively.
 
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Table of Contents
The amortized cost basis amounts, gross unrealized holding gains, gross unrealized holding losses and fair values of
available-for-sale
debt securities and
held-to-maturity
debt securities in each major security type as of March 31, 2022 and September 30, 2022 are as follows:
March 31, 2022
 
    
Millions of yen
 
    
Amortized

cost
    
Allowance
for credit
losses
   
Gross

unrealized

gains
    
Gross

unrealized

losses
   
Fair value
 
Available-for-sale
debt securities:
                                          
Japanese and foreign government bond securities
   ¥ 905,004      ¥ 0     ¥ 5,178      ¥ (77,569   ¥ 832,613  
Japanese prefectural and foreign municipal bond securities
     333,449        (132     2,482        (10,195     325,604  
Corporate debt securities
     873,178        0       10,014        (33,632     849,560  
CMBS and RMBS in the Americas
     29,349        0       112        (729     28,732  
Other asset-backed securities and debt securities
     135,445        (21     5,456        (2,498     138,382  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
       2,276,425        (153     23,242        (124,623     2,174,891  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
Held-to-maturity
debt securities:
                                          
Japanese government bond securities and other
     114,312        0       21,129        0       135,441  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
     ¥ 2,390,737      ¥ (153   ¥ 44,371      ¥ (124,623   ¥ 2,310,332  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
           
September 30, 2022
                                          
   
    
Millions of yen
 
    
Amortized

cost
    
Allowance
for credit
losses
   
Gross

unrealized

gains
    
Gross

unrealized

losses
   
Fair value
 
Available-for-sale
debt securities:
                                          
Japanese and foreign government bond securities
   ¥ 986,444      ¥ 0     ¥ 3,476      ¥ (194,045   ¥ 795,875  
Japanese prefectural and foreign municipal bond securities
     388,286        (156     736        (26,144     362,722  
Corporate debt securities
     895,483        0       12,131        (85,948     821,666  
CMBS and RMBS in the Americas
     45,298        0       29        (2,193     43,134  
Other asset-backed securities and debt securities
     199,027        (16     5,581        (12,449     192,143  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
       2,514,538        (172     21,953        (320,779     2,215,540  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
Held-to-maturity
debt securities:
                                          
Japanese government bond securities and other
     115,461        0       15,525        (104     130,882  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
     ¥ 2,629,999      ¥ (172   ¥ 37,478      ¥ (320,883   ¥ 2,346,422  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
 
 
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Table of Contents
The following table presents a rollforward of the allowance for credit losses for the six months ended September 30, 2021 and 2022:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
 
    
Foreign municipal bond
securities
   
Total
 
Beginning
   ¥ 120     ¥ 120  
Increase (Decrease) from the effects of changes in foreign exchange rates
     1       1  
    
 
 
   
 
 
 
Ending
   ¥ 121     ¥                     121  
    
 
 
   
 
 
 
 
 
  
Millions of yen
 
 
  
Six months ended

September 30, 2022
 
 
  
Foreign municipal bond
securities
 
  
Japanese other asset-
  backed securities and  
debt securities
 
 
Total
 
Beginning
   ¥ 132      ¥ 21     ¥ 153  
Additional increases (decreases) to the allowance for credit losses on AFS debt securities that had an allowance recorded in a previous period, net
     0        (5 )     (5 )
Increase (Decrease) from the effects of changes in foreign exchange rates
     24        0       24  
    
 
 
    
 
 
   
 
 
 
Ending
   ¥ 156      ¥ 16     ¥                     172  
    
 
 
    
 
 
   
 
 
 
The following table presents a rollforward of the allowance for credit losses for the three months ended September 30, 2021 and 2022:
 
   
Millions of yen
 
   
Three months ended

September 30, 2021
 
   
Foreign municipal bond
securities
   
Total
 
Beginning
  ¥ 120     ¥                     120  
Increase (Decrease) from the effects of changes in foreign exchange rates
    1       1  
   
 
 
   
 
 
 
Ending
  ¥ 121     ¥ 121  
   
 
 
   
 
 
 
 
    
Millions of yen
 
    
Three months ended

September 30, 2022
 
    
Foreign municipal bond
securities
    
Japanese other asset-
  backed securities and  
debt securities
   
Total
 
Beginning
   ¥ 147      ¥ 16     ¥ 163  
Increase (Decrease) from the effects of changes in foreign exchange rates
     9        0       9  
    
 
 
    
 
 
   
 
 
 
Ending
   ¥ 156      ¥ 16     ¥                     172  
    
 
 
    
 
 
   
 
 
 
 
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Table of Contents
The following tables provide information about
available-for-sale
debt securities with gross unrealized losses (including allowance for credit losses) and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2022 and September 30, 2022, respectively:
March 31, 2022
 
    
Millions of yen
 
    
Less than 12 months
   
12 months or more
   
Total
 
    
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
 
Available-for-sale
debt securities:
                                                   
Japanese and foreign government bond securities
   ¥ 217,457      ¥ (16,117   ¥ 521,633      ¥ (61,452   ¥ 739,090      ¥ (77,569
Japanese prefectural and foreign municipal bond securities
     190,081        (6,509     46,391        (3,818     236,472        (10,327
Corporate debt securities
     373,506        (19,340     156,687        (14,292     530,193        (33,632
CMBS and RMBS in the Americas
     6,458        (98     17,542        (631     24,000        (729
Other asset-backed securities and debt securities
     66,543        (995     37,432        (1,524     103,975        (2,519
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
     ¥ 854,045      ¥ (43,059   ¥ 779,685      ¥ (81,717   ¥ 1,633,730      ¥ (124,776
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
             
September 30, 2022
                                                   
   
    
Millions of yen
 
    
Less than 12 months
   
12 months or more
   
Total
 
    
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
 
Available-for-sale
debt securities:
                                                   
Japanese and foreign government bond securities
   ¥ 235,080      ¥ (55,161   ¥ 505,054      ¥ (138,884   ¥ 740,134      ¥ (194,045
Japanese prefectural and foreign municipal bond securities
     255,170        (17,989     60,292        (8,311     315,462        (26,300
Corporate debt securities
     407,682        (45,126     195,657        (40,822     603,339        (85,948
CMBS and RMBS in the Americas
     28,609        (1,326     13,206        (867     41,815        (2,193
Other asset-backed securities and debt securities
     106,329        (5,921     41,913        (6,544     148,242        (12,465
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
     ¥ 1,032,870      ¥ (125,523   ¥ 816,122      ¥ (195,428   ¥ 1,848,992      ¥ (320,951
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
 
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Table of Contents
The following table provides information about
available-for-sale
debt securities with gross unrealized losses for which allowance for credit losses were not recorded and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2022 and September 30, 2022, respectively:
March 31, 2022
 
    
Millions of yen
 
    
Less than 12 months
   
12 months or more
   
Total
 
    
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
 
Available-for-sale
debt securities:
                                                   
Japanese and foreign government bond securities
   ¥ 217,457      ¥ (16,117   ¥ 521,633      ¥ (61,452   ¥ 739,090      ¥ (77,569
Japanese prefectural and foreign municipal bond securities
     190,081        (6,509     43,338        (3,686     233,419        (10,195
Corporate debt securities
     373,506        (19,340     156,687        (14,292     530,193        (33,632
CMBS and RMBS in the Americas
     6,458        (98     17,542        (631     24,000        (729
Other asset-backed securities and debt securities
     66,489        (974     37,432        (1,524     103,921        (2,498
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
     ¥ 853,991      ¥ (43,038   ¥ 776,632      ¥ (81,585   ¥ 1,630,623      ¥ (124,623
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
 
September 30, 2022
 
    
Millions of yen
 
    
Less than 12 months
   
12 months or more
   
Total
 
    
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
   
Fair

value
    
Gross

unrealized

losses
 
Available-for-sale
debt securities:
                                                   
Japanese and foreign government bond securities
   ¥ 235,080      ¥ (55,161   ¥ 505,054      ¥ (138,884   ¥ 740,134      ¥ (194,045
Japanese prefectural and foreign municipal bond securities
     255,170        (17,989     56,680        (8,155     311,850        (26,144
Corporate debt securities
     407,682        (45,126     195,657        (40,822     603,339        (85,948
CMBS and RMBS in the Americas
     28,609        (1,326     13,206        (867     41,815        (2,193
Other asset-backed securities and debt securities
     106,270        (5,905     41,913        (6,544     148,183        (12,449
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
     ¥ 1,032,811      ¥ (125,507   ¥ 812,510      ¥ (195,272   ¥ 1,845,321      ¥ (320,779
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
    
 
 
 
The number of investment securities that were in an unrealized loss position as of March 31, 2022 and September 30, 2022 were 963 and 1,199, respectively. The gross unrealized losses on these debt securities are attributable to a number of factors including changes in interest rates, credit spreads and market trends.
As of March 31, 2022 and September 30, 2022, the amount of accrued revenues on
available-for-sale
debt securities were ¥8,798 million and ¥11,738 million, respectively, which were included in other assets. The Company and its subsidiaries estimate credit losses and develop an allowance for credit losses for accrued interest receivables. There was no
allowance for credit losses for accrued interest receivables as of March 31, 2022 and September 30, 2022.
For
available-for-sale
debt securities, if the fair value is less than the amortized cost, the debt securities are impaired. The Company and its subsidiaries identify per each impaired security whether the decline of fair value is due to credit losses component or
non-credit
losses component. Impairment related to credit losses is recognized in earning through an allowance for credit losses. Impairment related to other factors than credit losses is recognized in other comprehensive income (loss), net of applicable income taxes. In estimating an allowance of credit losses, the Company and its subsidiaries consider the existence of credit losses if the present value of estimated cash flows is less than the amortized cost basis. When the Company and its subsidiaries intend to sell the debt securities for which an allowance for credit losses is previously established or it is more likely than not that the Company and its subsidiaries will be required to sell the debt securities before recovery of the amortized cost basis, the allowance for credit losses is fully
written-off
and the amortized cost is reduced to the fair value after recognizing additional impairment in earnings. In addition, the Company and its subsidiaries recognize in earnings the full difference between the amortized cost and the fair value of the debt securities by direct write-down, without any allowance for credit losses, if the debt securities are expected to be sold and the fair value is less than the amortized cost.
 
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Table of Contents
There were no credit losses related to available-for-sale debt securities recognized for the six months ended September 30, 2021. Reversals of credit losses related to available-for-sale debt securities recognized for the six months ended September 30, 2022 were resulting from Japanese other asset-backed securities and debt securities due to the reduced credit risk by postponement of maturity date. The evaluation of credit losses with available-for-sale debt securities is compared to the amortized cost of debt securities with the present value of cash flows estimated based on a number of overall conditions, including estimated fair value of the underlying receivables and the repayment priority of the securities. Because the Company and its subsidiaries do not intend to sell the debt security or it is more likely than not that the Company and its subsidiaries will be required to sell the debt security before recovery of its amortized cost basis, the Company and its subsidiaries recognized the allowance for credit losses.
Unrealized losses on
available-for-sale
debt securities mainly result from changes in market interest rates and foreign exchange rates, and changes in risk premiums. In order to evaluate the recoverability of the
available-for-sale
debt securities, the Company and its subsidiaries utilize all available information such as issuer’s financial condition and business outlook. The fair value of Japanese and foreign government bond securities, Japanese prefectural and foreign municipal bond, and corporate debt securities is mainly estimated based on prices for similar assets. If there are no prices for similar assets available, the fair value of these securities is estimated by using discounted cash flow methodologies and broker quotes. The fair value of CMBS and RMBS in the Americas and other asset-backed securities and debt securities refers to prices from independent pricing service vendors and brokers, such as trading prices and bit prices. If the Company and its subsidiaries cannot rely on such prices, the fair value is calculated by using discounted cash flow methodologies and broker quotes. In discounted cash flow methodologies, future cash flows estimated based on a number of assumptions such as default rate, prepayment rate, and seniority are discounted by discount rate adjusted for credit risk and liquidity risk.
There were no
available-for-sale
debt securities accounted for as purchased credit deterioration financial assets acquired for the six months ended September 30, 2021 and 2022.
 
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Table of Contents
9.
Transfer of Financial Assets
The Company and its subsidiaries have securitized and transferred financial assets such as installment loans (commercial mortgage loans, housing loans and other).
In the securitization process, these financial assets are transferred to SPEs that issue beneficial interests of the securitization trusts and securities backed by the financial assets to investors. The cash flows collected from these assets transferred to the SPEs are then used to repay these asset-backed beneficial interests and securities. As the transferred assets are isolated from the Company and its subsidiaries, the investors and the SPEs have no recourse to other assets of the Company and its subsidiaries in cases where the debtors or the issuers of the transferred financial assets fail to perform under the original terms of those financial assets.
The Company and its subsidiaries often have continuing involvement with transferred financial assets by retaining the servicing arrangements and the interests in the SPEs in the form of the beneficial interest of the securitization trusts. Those interests that continue to be held include interests in the transferred assets and are often subordinate to other tranche(s) of the securitization. Those beneficial interests that continue to be held by the Company and its subsidiaries are subject to credit risk, interest rate risk and prepayment risk on the securitized financial assets. With regards to these subordinated interests that the Company and its subsidiaries retain, they are subordinated to the senior investments and are exposed to different credit and prepayment risks, since they first absorb the risk of the decline in the cash flows from the financial assets transferred to the SPEs for defaults and prepayment of the transferred assets. If there is any excess cash remaining in the SPEs after payment to investors in the securitization of the contractual rate of returns, most of such excess cash is distributed to the Company and its subsidiaries for payments of the subordinated interests. SPEs used in securitization transactions have been consolidated if the Company and its subsidiaries are the primary beneficiary of the SPEs.
When the Company and its subsidiaries have transferred financial assets to a transferee that is not subject to consolidation, the Company and its subsidiaries account for the transfer as a sale if control over the transferred assets is surrendered.
For the six months ended September 30, 2021 and 2022, the amount of installment loans that has been derecognized due to new securitization and transfer of loans were ¥608,122 million and ¥512,156 million, respectively. For the six months ended September 30, 2021 and 2022, gains (losses) from the securitization and transfer of loans were ¥18,637 million and ¥11,156 million, respectively, which is included in finance revenues in the consolidated statements of income.
For the three months ended September 30, 2021 and 2022, the amount of installment loans that has been derecognized due to new securitization and transfer of loans were ¥316,281 million and ¥285,760 million, respectively. For the three months ended September 30, 2021 and 2022, gains (losses) from the securitization and transfer of loans were ¥9,585 million and ¥5,744 million, respectively, which is included in finance revenues in the consolidated statements of income.

A certain subsidiary originates and sells loans into the secondary market while retaining the obligation to service those loans. In addition, the subsidiary undertakes obligations to service loans originated by others. The servicing assets related to those servicing activities are included in other assets in the consolidated balance sheets and roll-forwards of the amount of the servicing assets for the six and three months ended September 30, 2021 and 2022 are as follows:
 
                                                                                                                                                     
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
   
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Beginning balance
  
¥
63,754
 
 
¥
70,254
 
 
¥
63,725
 
 
¥
77,199
 
Increase mainly from loans sold with servicing retained
  
 
7,138
 
 
 
5,426
 
 
 
3,624
 
 
 
2,546
 
Decrease mainly from amortization
  
 
(6,362
 
 
(8,146
 
 
(2,894
 
 
(4,079
Increase from the effects of changes in foreign exchange rates
  
 
708
 
 
 
12,656
 
 
 
783
 
 
 
4,524
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance
  
¥
65,238
 
 
¥
80,190
 
 
¥
65,238
 
 
¥
80,190
 
    
 
 
   
 
 
   
 
 
   
 
 
 
                                                                                                                                                         
 
The fair value of the servicing assets as of March 31, 2022 and September 30, 2022 are as follows:
 
 
                  
Millions of yen
 
                  
March 31, 2022
    
September 30, 2022
 
Beginning balance
                    
¥
74,135
 
  
¥
83,732
 
Ending balance
                    
¥
83,732
 
  
¥
97,725
 
 
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Table of Contents
10.
Variable Interest Entities
The Company and its subsidiaries use SPEs in the ordinary course of business.
These SPEs are not always controlled by voting rights, and there are cases where voting rights do not exist for these SPEs. The Company and its subsidiaries determine a variable interest entity (hereinafter, “VIE”) among those SPEs when (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including the equity holders or (b) as a group, the holders of the equity investment at risk do not have (1) the ability to make decisions about an entity’s activities that most significantly impact the entity’s economic performance through voting rights or similar rights, (2) the obligation to absorb the expected losses of the entity or (3) the right to receive the expected residual returns of the entity.
The Company and its subsidiaries perform a qualitative analysis to identify the primary beneficiary of VIEs. An enterprise that has both of the following characteristics is considered to be the primary beneficiary and therefore results in the consolidation of the VIE:
 
   
the power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and
 
   
the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.
All facts and circumstances are taken into consideration when determining whether the Company and its subsidiaries have variable interests that would deem it the primary beneficiary and therefore require consolidation of the VIE. The Company and its subsidiaries make ongoing reassessment of whether they are the primary beneficiaries of a VIE.
The following are the factors that the Company and its subsidiaries are considering in a qualitative assessment:
 
   
which activities most significantly impact the economic performance of the VIE and who has the power to direct such activities;
 
   
characteristics of the Company and its subsidiaries’ variable interest or interests and other involvements (including involvement of related parties and de facto agents);
 
   
involvement of other variable interest holders; and
 
   
the entity’s purpose and design, including the risks that the entity was designed to create and pass through to its variable interest holders.
The Company and its subsidiaries generally consider the following types of involvement to be significant when determining the primary beneficiary:
 
   
designing the structuring of a transaction;
 
   
providing an equity investment and debt financing;
 
   
being the investment manager, asset manager or servicer and receiving variable fees; and
 
   
providing liquidity and other financial support.
The Company and its subsidiaries do not have the power to direct activities of a VIE that most significantly impact the VIE’s economic performance if that power is shared among multiple unrelated parties, and accordingly do not consolidate such VIE.
 
– 88 –

Table of Contents
Information about VIEs (consolidated and
non-consolidated)
for the Company and its subsidiaries are as follows:
 
1.
Consolidated VIEs
March 31, 2022
 
    
Millions of yen
 
Types of VIEs
  
Total

assets *1
    
Total

liabilities *1
    
Assets which

are pledged as

collateral *2
    
Commitments *3
 
(a) VIEs for liquidating customer assets
   ¥ 0      ¥ 0      ¥ 0      ¥ 0  
(b) VIEs for acquisition of real estate and real estate development projects for customers
     1,988        0        0        0  
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
     60,762        12,576        16,241        0  
(d) VIEs for corporate rehabilitation support business
     214        5        0        0  
(e) VIEs for investment in securities
     132,805        302        0        45,241  
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable
     223,807        160,434        223,807        0  
(g) VIEs for securitization of loan receivable originated by third parties
     542        1,093        542        0  
(h) VIEs for power generation projects
     278,660        219,476        260,551        42,742  
(i) Other VIEs
     199,186        89,672        174,807        0  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 897,964      ¥ 483,558      ¥ 675,948      ¥     87,983  
    
 
 
    
 
 
    
 
 
    
 
 
 
         
September 30, 2022
                           
   
    
Millions of yen
 
Types of VIEs
  
Total

assets *1
    
Total

liabilities *1
    
Assets which

are pledged as

collateral *2
    
Commitments *3
 
(a) VIEs for liquidating customer assets
   ¥ 0      ¥ 0      ¥ 0      ¥ 0  
(b) VIEs for acquisition of real estate and real estate development projects for customers
     2,111        0        0        0  
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
     56,134        13,048        16,141        0  
(d) VIEs for corporate rehabilitation support business
     655        4        0        0  
(e) VIEs for investment in securities
     163,792        399        0        70,125  
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable
     247,605        173,607        247,605        0  
(g) VIEs for securitization of loan receivable originated by third parties
     636        1,285        636        0  
(h) VIEs for power generation projects
     283,670        175,596        197,180        38,078  
(i) Other VIEs
     179,254        71,805        145,196        0  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥     933,857      ¥ 435,744      ¥ 606,758      ¥ 108,203  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
*1
The assets of most VIEs are used only to repay the liabilities of the VIEs, and the creditors of the liabilities of most VIEs have no recourse to other assets of the Company and its subsidiaries.
*2
The assets are pledged as collateral by VIE for financing of the VIE.
*3
This item represents remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the VIE.
 
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2.
Non-consolidated
VIEs
March 31, 2022
 
    
Millions of yen
 
           
Carrying amount of

the variable interests in
the VIEs held by

the Company and its subsidiaries
    
Maximum

exposure

to loss *
 
Types of VIEs
  
Total assets
    
Non-recourse

loans
    
Investments
 
(a) VIEs for liquidating customer assets
   ¥ 13,391      ¥ 405      ¥ 991      ¥ 1,396  
(b) VIEs for acquisition of real estate and real estate development projects for customers
     546,953        8,134        9,119        18,735  
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
     0        0        0        0  
(d) VIEs for corporate rehabilitation support business
     0        0        0        0  
(e) VIEs for investment in securities
     6,901,686        0        79,050        123,674  
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable
     154        0        2        2  
(g) VIEs for securitization of loan receivable originated by third parties
     1,231,246        0        15,254        15,254  
(h) VIEs for power generation projects
     9,103        0        402        402  
(i) Other VIEs
     914,801        3,140        15,098        32,123  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 9,617,334      ¥ 11,679      ¥ 119,916      ¥ 191,586  
    
 
 
    
 
 
    
 
 
    
 
 
 
     
September 30, 2022
 
                 
   
    
Millions of yen
 
           
Carrying amount of

the variable interests in
the VIEs held by

the Company and its subsidiaries
    
Maximum

exposure

to loss *
 
Types of VIEs
  
Total assets
    
Non-recourse

loans
    
Investments
 
(a) VIEs for liquidating customer assets
   ¥ 109,573      ¥ 101      ¥ 991      ¥ 1,092  
(b) VIEs for acquisition of real estate and real estate development projects for customers
     639,689        8,203        9,385        19,070  
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
     0        0        0        0  
(d) VIEs for corporate rehabilitation support business
     0        0        0        0  
(e) VIEs for investment in securities
     8,995,923        0        95,395        161,752  
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable
     0        0        0        0  
(g) VIEs for securitization of loan receivable originated by third parties
     1,058,236        0        13,870        13,870  
(h) VIEs for power generation projects
     9,091        0        575        4,905  
(i) Other VIEs
     1,473,488        5,070        25,795        43,652  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 12,286,000      ¥            13,374      ¥    146,011      ¥        244,341  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
*
Maximum exposure to loss includes remaining balance of commitments that could require the Company and its subsidiaries to provide investments or loans to the VIE.
 
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(a) VIEs for liquidating customer assets
The Company and its subsidiaries may use VIEs in structuring financing for customers to liquidate specific customer assets. The VIEs are typically used to provide a structure that is bankruptcy remote with respect to the customer and the use of VIE structure is requested by such customer. Such VIEs typically acquire assets to be liquidated from the customer, borrow
non-recourse
loans from financial institutions and have an equity investment made by the customer. The Company and its subsidiaries provide
non-recourse
loans to such VIEs and make investments in them. By using cash flows from the liquidated assets, these VIEs repay the loan and pay dividends to equity investors if sufficient funds exist.
With respect to variable interests of
non-consolidated
VIEs held by the Company and its subsidiaries,
non-recourse
loans are included in installment loans, and investments are mainly included in other assets in the Company’s consolidated balance sheets.
(b) VIEs for acquisition of real estate and real estate development projects for customers
Customers, and the Company and its subsidiaries, are involved with VIEs formed to acquire real estate and/or develop real estate projects. In each case, a customer establishes and makes an equity investment in a VIE that is designed to be bankruptcy remote from the customer. The VIEs acquire real estate and/or develop real estate projects.
The Company and its subsidiaries provide
non-recourse
loans to such VIEs and hold specified bonds issued by them and/or make investments in them. The Company and its subsidiaries have consolidated certain VIEs because the Company or its subsidiary effectively controls the VIEs by acting as the asset manager of the VIEs.
In the Company’s consolidated balance sheets, assets of consolidated VIEs are mainly included in cash and cash equivalents and investment in affiliates.
With respect to variable interests of
non-consolidated
VIEs held by the Company and its subsidiaries,
non-recourse
loans are included in installment loans, and investments are mainly included in investment in securities, investment in affiliates and other assets in the Company’s consolidated balance sheets. The Company and its subsidiaries concluded that the VIEs are not consolidated because the power to direct these VIEs is held by unrelated parties. In some cases, the Company and its subsidiaries concluded that the VIEs are not consolidated because the power to direct these VIEs is shared among multiple unrelated parties. Certain subsidiaries have commitment agreements by which the Company and its subsidiaries may be required to make additional investment in certain such
non-consolidated
VIEs.
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business
The Company and its subsidiaries establish VIEs and acquire real estate to borrow
non-recourse
loans from financial institutions and simplify the administration activities necessary for the real estate.
The Company and its subsidiaries consolidate such VIEs even though the Company and its subsidiaries may not have voting rights if substantially all of such VIEs’ subordinated interests are issued to the Company and its subsidiaries, and therefore the VIEs are controlled by and for the benefit of the Company and its subsidiaries.
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in cash and cash equivalents, restricted cash, investment in operating leases, investment in securities, property under facility operations and other assets, and liabilities of those consolidated VIEs are mainly included in short-term debt, long-term debt and other liabilities.
(d) VIEs for corporate rehabilitation support business
Financial institutions, the Company and its subsidiaries are involved with VIEs established for the corporate rehabilitation support business. VIEs receive the funds from investors including the financial institutions, the Company and the subsidiary, and purchase loan receivables due from borrowers which have financial problems, but are deemed to have the potential to recover in the future. The servicing operations for the VIEs are conducted by the subsidiary.
The Company and its subsidiaries consolidated such VIEs since the Company and its subsidiaries have the majority of the investment share of such VIEs, and have the power to direct the activities of the VIEs that most significantly impact the entities’ economic performance through the servicing operations.
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in installment loans, and liabilities of those consolidated VIEs are mainly included in other liabilities.
 
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(e) VIEs for investment in securities
The Company and its subsidiaries have interests in VIEs that are investment funds and mainly invest in equity and debt securities. Such VIEs are managed by certain subsidiaries or fund management companies that are independent of the Company and its subsidiaries.
Certain subsidiaries consolidated certain such VIEs since the subsidiaries have the majority of the investment share of them, and have the power to direct the activities of those VIEs that most significantly impact the entities’ economic performance through involvement with the design of the VIEs or other means.
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in securities and investment in affiliates, and liabilities of those consolidated VIEs are mainly included in other liabilities. The Company and certain subsidiaries have commitment agreements by which the Company and the subsidiaries may be required to make additional investment or execute loans in certain such consolidated VIEs.
Variable interests of
non-consolidated
VIEs, which the Company and its subsidiaries have, are included in investment in securities in the Company’s consolidated balance sheets. The Company and its subsidiaries have commitment agreements by which the Company and its subsidiaries may be required to make additional investment in certain such
non-consolidated
VIEs.
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable
The Company and its subsidiaries use VIEs to securitize financial assets such as loan receivables. In the securitization process, these financial assets are transferred to SPEs, and the SPEs issue beneficial interests or securities backed by the transferred financial assets to investors. After the securitization, the Company and its subsidiaries continue to hold a subordinated part of the securities and act as a servicer.
The Company and its subsidiaries consolidated such VIEs since the Company and its subsidiaries have the power to direct the activities that most significantly impact the entity’s economic performance by designing the securitization scheme and conducting servicing activities, and have a responsibility to absorb losses of the VIEs that could potentially be significant to the entities by retaining the subordinated part of the securities.
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in restricted cash and installment loans, and liabilities of those consolidated VIEs are mainly included in long-term debt.
Variable interests of
non-consolidated
VIEs, which the Company and its subsidiaries have, are included in other assets in the Company’s consolidated balance sheets.
(g) VIEs for securitization of loan receivable originated by third parties
The Company and its subsidiaries invest in CMBS, RMBS and other asset-backed securities originated by third parties. In some cases of such securitization, certain subsidiaries hold the subordinated portion and the subsidiaries act as a special-servicer of the securitization transaction. As the special servicer, the subsidiaries have rights to dispose of real estate collateral related to the securitized commercial mortgage loans.
The subsidiaries consolidate certain of these VIEs when the subsidiaries have the power to direct the activities of the VIEs that most significantly impact the entities’ economic performance through its role as special-servicer, including the right to dispose of the collateral, and have a responsibility to absorb losses of the VIEs that could potentially be significant to the entities by holding the subordinated part of the securities.
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in installment loans, and liabilities of those consolidated VIEs are mainly included in long-term debt.
Variable interests of
non-consolidated
VIEs, which the Company and its subsidiaries have, are included in investment in securities in the Company’s consolidated balance sheets.
(h) VIEs for power generation projects
The Company and its subsidiaries may use VIEs in power generation projects. VIEs receive the funds from the Company and its subsidiaries, construct solar power stations and coal-biomass
co-fired
power plants on acquired or leased lands, and sell the generated power to electric power companies. The Company and its subsidiaries have consolidated certain VIEs because the Company and its subsidiaries have the majority of the investment shares of such VIEs and effectively control the VIEs by acting as the asset manager of the VIEs.
 
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Table of Contents
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in cash and cash equivalents, restricted cash, property under facility operations and other assets, and liabilities of those consolidated VIEs are mainly included in long-term debt, and other liabilities. The Company and certain subsidiaries have commitment agreements by which the Company and the subsidiaries may be required to make additional investment or execute loans in certain such consolidated VIEs.
Variable interests of
non-consolidated
VIEs, which the Company has, are included in investment in affiliates in the Company’s consolidated balance sheets. The Company has commitment agreements by which the Company may be required to make additional investment in certain such non-consolidated VIEs.
(i) Other VIEs
The Company and its subsidiaries are involved with other types of VIEs for various purposes. Consolidated and
non-consolidated
VIEs of this category are mainly kumiai structures. In addition, certain subsidiaries have consolidated VIEs that are not included in the categories (a) through (h) above, because the subsidiaries hold the subordinated portion of the VIEs and the VIEs are effectively controlled by the subsidiaries.
In Japan, certain subsidiaries provide investment products to their customers that employ a contractual mechanism known as a kumiai, which in part result in the subsidiaries forming a type of SPE. As a way to finance the purchase of aircraft or other large-ticket items to be leased to third parties, the Company and its subsidiaries arrange and market kumiai products to investors, who invest a portion of the funds necessary into the kumiai structure. The remainder of the purchase funds is borrowed by the kumiai structure in the form of a
non-recourse
loan from one or more financial institutions. The kumiai investors (and any lenders to the kumiai structure) retain all of the economic risks and rewards in connection with purchasing and leasing activities of the kumiai structure, and all related gains or losses are recorded on the financial statements of the investors in the kumiai. The Company and its subsidiaries are responsible for the arrangement and marketing of these products and may act as servicer or administrator in kumiai transactions. The fee income for the arrangement and administration of these transactions is recognized in the Company’s consolidated statements of income. In some cases, the Company and its subsidiaries make investments in the kumiai or its related SPE, and these VIEs are consolidated because the Company and its subsidiaries have a responsibility to absorb any significant potential loss through the investments and have the power to direct the activities that most significantly impact their economic performance. In other cases, the Company and its subsidiaries are not considered to be the primary beneficiary of the VIEs or kumiais because the Company and its subsidiaries did not make significant investments or guarantee or otherwise undertake any significant financial commitments or exposure with respect to the kumiai or its related SPE.
The Company may use VIEs for financing. The Company transfers its own held assets to SPEs, which borrow
non-recourse
loan from financial institutions and effectively pledge such assets as collateral. The Company continually holds subordinated interests in the SPEs and performs administrative work of such assets. The Company consolidates such SPEs because the Company has a right to direct the activities of them that most significantly impact their economic performance by setting up the scheme and performing administrative work of the assets and has the obligation to absorb expected losses of them by holding the subordinated interests.
In the Company’s consolidated balance sheets, assets of the consolidated VIEs are mainly included in investment in operating leases, investment in affiliates, office facilities and other assets, and liabilities of those consolidated VIEs are mainly included in long-term debt and other liabilities.
With respect to variable interests of
non-consolidated
VIEs held by the Company and its subsidiaries,
non-recourse
loans are included in installment loans, and investments are mainly included in investment in securities and investment in affiliates in the Company’s consolidated balance sheets. Certain subsidiaries have commitment agreements by which the Company and its subsidiaries may be required to make additional investment in certain such
non-consolidated
VIEs.
 
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Table of Contents
11.
Investment in Affiliates
Investment in affiliates at March 31, 2022 and September 30, 2022 consists of the following:
 
                                                                     
    
Millions of yen
 
  
March 31, 2022
    
September 30, 2022
 
Shares
  
¥
943,090
 
  
¥
1,067,957
 
Loans and others
  
 
34,943
 
  
 
38,613
 
    
 
 
    
 
 
 
    
¥
              978,033
 
  
¥
1,106,570
 
    
 
 
    
 
 
 
 
12.
Redeemable Noncontrolling Interests
Changes in redeemable noncontrolling interests for the six months ended September 30, 2021 and 2022 are as follows:
 
                                                                     
    
Millions of yen
 
    
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
 
Beginning balance
  
¥
0
 
  
¥
0
 
Transaction with noncontrolling interests
  
 
0
 
  
 
865
 
Comprehensive income
                 
Net income
  
 
0
 
  
 
12
 
Other comprehensive income
                 
Net change of foreign currency translation adjustments
  
 
0
 
  
 
88
 
Total other comprehensive income
  
 
0
 
  
 
88
 
Comprehensive income
  
 
0
 
  
 
100
 
    
 
 
    
 
 
 
Ending balance
  
¥
                       0
 
  
¥
           965
 
    
 
 
    
 
 
 
 
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Table of Contents
13.
Accumulated Other Comprehensive Income (Loss)
Changes in each component of accumulated other comprehensive income (loss) attributable to ORIX Corporation Shareholders for the six months ended September 30, 2021 and 2022, are as follows:
 
    
Six months ended September 30, 2021
 
    
Millions of yen
 
    
Net unrealized

gains (losses)

on investment

in securities
   
Debt
valuation
adjustments
   
Defined

benefit

pension
plans
   
Foreign

currency

translation

adjustments
   
Net unrealized

gains (losses)

on derivative

instruments
   
Accumulated

other

comprehensive

income (loss)
 
Balance at March 31, 2021
   ¥ (16,208   ¥ 558     ¥ (21,073   ¥ (36,456   ¥ (11,471   ¥ (84,650
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net unrealized gains (losses) on investment in securities, net of tax of ¥(4,353) million
     12,378                                       12,378  
Reclassification adjustment included in net income, net of tax of ¥1,204 million
     (4,058                                     (4,058
Debt valuation adjustments, net of tax of ¥17 million
             (46                             (46
Reclassification adjustment included in net income, net of tax of ¥6 million
             (15                             (15
Defined benefit pension plans, net of tax of ¥24 million
                     (38                     (38
Reclassification adjustment included in net income, net of tax of ¥(74) million
                     187                       187  
Foreign currency translation adjustments, net of tax of ¥(1,341) million
                             14,380               14,380  
Reclassification adjustment included in net income, net of tax of ¥(267) million
                             552               552  
Net unrealized gains (losses) on derivative instruments, net of tax of ¥(64) million
                                     348       348  
Reclassification adjustment included in net income, net of tax of ¥(593) million
                                     1,822       1,822  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     8,320       (61     149       14,932       2,170       25,510  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: Other Comprehensive Income (loss) Attributable to the Noncontrolling Interests
     0       0       (1     615       68       682  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021 *
   ¥     (7,888   ¥        497     ¥   (20,923   ¥   (22,139   ¥   (9,369   ¥ (59,822
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
As of September 30, 2021, there were no net unrealized gains (losses) on investment in securities related to
available-for-sale
debt securities with allowance for credit losses.
 
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Table of Contents
    
Six months ended September 30, 2022
 
    
Millions of yen
 
    
Net unrealized

gains (losses)

on investment

in securities
   
Debt
valuation
adjustments
   
Defined

benefit

pension
plans
   
Foreign

currency

translation

adjustments
   
Net unrealized

gains (losses)

on derivative

instruments
   
Accumulated

other

comprehensive

income (loss)
 
Balance at March 31, 2022
   ¥ (72,892   ¥ 221     ¥ (8,072   ¥ 61,914     ¥ 2,788     ¥ (16,041
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net unrealized gains (losses) on investment in securities, net of tax of ¥54,025 million
     (142,995                                     (142,995
Reclassification adjustment included in net income, net of tax of ¥292 million
     (872                                     (872
Debt valuation adjustments, net of tax of ¥(25) million
             66                               66  
Reclassification adjustment included in net income, net of tax of ¥2 million
             (6                             (6
Defined benefit pension plans, net of tax of ¥81 million
                     (225                     (225
Reclassification adjustment included in net income, net of tax of ¥33 million
                     (91                     (91
Foreign currency translation adjustments, net of tax of ¥27,143 million
                             184,993               184,993  
Reclassification adjustment included in net income, net of tax of ¥(12) million
                             102               102  
Net unrealized gains (losses) on derivative instruments, net of tax of ¥(4,707) million
                                     17,082       17,082  
Reclassification adjustment included in net income, net of tax of ¥(436) million
                                     1,449       1,449  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     (143,867     60       (316      185,095        18,531        59,503  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: Other Comprehensive Income Attributable to the Noncontrolling Interests
     0       0       2       7,886       1,472       9,360  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: Other Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
     0       0       0       88       0       88  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2022 *
   ¥ (216,759   ¥        281     ¥     (8,390   ¥ 239,035      ¥ 19,847     ¥ 34,014  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
As of September 30, 2022, there were no net unrealized gains (losses) on investment in securities related to
available-for-sale
debt securities with allowance for credit losses.
 
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Table of Contents
Changes in each component of accumulated other comprehensive income (loss) attributable to ORIX Corporation Shareholders for the three months ended September 30, 2021 and 2022, are as follows:
 
    
Three months ended September 30, 2021
 
    
Millions of yen
 
    
Net unrealized

gains (losses)

on investment

in securities
   
Debt
valuation
adjustments
   
Defined

benefit

pension
plans
   
Foreign

currency

translation

adjustments
   
Net unrealized

gains (losses)

on derivative

instruments
   
Accumulated

other

comprehensive

income (loss)
 
Balance at June 30, 2021
   ¥ (9,827   ¥ 534     ¥ (21,119   ¥ (27,553   ¥ (10,608   ¥ (68,573
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net unrealized gains (losses) on investment in securities, net of tax of ¥(1,713) million
     5,856                                       5,856  
Reclassification adjustment included in net income, net of tax of ¥1,173 million
     (3,917                                     (3,917
Debt valuation adjustments, net of tax of ¥11 million
             (29                             (29
Reclassification adjustment included in net income, net of tax of ¥3 million
             (8                             (8
Defined benefit pension plans, net of tax of ¥(22) million
                     106                       106  
Reclassification adjustment included in net income, net of tax of ¥(34) million
                     90                       90  
Foreign currency translation adjustments, net of tax of ¥1,996 million
                                 5,635               5,635  
Reclassification adjustment included in net income, net of tax of ¥(113) million
                             256               256  
Net unrealized gains (losses) on derivative instruments, net of tax of ¥(51) million
                                     66       66  
Reclassification adjustment included in net income, net of tax of ¥(394) million
                                     1,212       1,212  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     1,939       (37     196       5,891       1,278       9,267  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: Other Comprehensive Income Attributable to the Noncontrolling Interests
     0       0       0       477       39       516  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2021 *
   ¥     (7,888   ¥        497     ¥   (20,923   ¥   (22,139   ¥   (9,369   ¥ (59,822
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
As of September 30, 2021, there were no net unrealized gains (losses) on investment in securities related to
available-for-sale
debt securities with allowance for credit losses.
 
– 97 –

Table of Contents
    
Three months ended September 30, 2022
 
    
Millions of yen
 
    
Net unrealized

gains (losses)

on investment

in securities
   
Debt
valuation
adjustments
   
Defined

benefit

pension
plans
   
Foreign

currency

translation

adjustments
   
Net unrealized

gains (losses)

on derivative

instruments
   
Accumulated

other

comprehensive

income (loss)
 
Balance at June 30, 2022
   ¥ (154,265   ¥ 205     ¥ (8,239   ¥ 169,590     ¥ 12,986     ¥ 20,277  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net unrealized gains (losses) on investment in securities, net of tax of ¥23,591 million
     (62,396                                     (62,396
Reclassification adjustment included in net income, net of tax of ¥10 million
     (98                                     (98
Debt valuation adjustments, net of tax of ¥(31) million
             80                               80  
Reclassification adjustment included in net income, net of tax of ¥1 million
             (4                             (4
Defined benefit pension plans, net of tax of ¥45 million
                     (105                     (105
Reclassification adjustment included in net income, net of tax of ¥17 million
                     (46                     (46
Foreign currency translation adjustments, net of tax of ¥3,827 million
                             70,964               70,964  
Reclassification adjustment included in net income, net of tax of ¥(3) million
                             12               12  
Net unrealized gains (losses) on derivative instruments, net of tax of ¥(3,069) million
                                     8,763       8,763  
Reclassification adjustment included in net income, net of tax of ¥399 million
                                     (1,163     (1,163
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     (62,494     76       (151        70,976        7,600       16,007  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: Other Comprehensive Income Attributable to the Noncontrolling Interests
     0       0       0       1,481       739       2,220  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Less: Other Comprehensive Income Attributable to the Redeemable Noncontrolling Interests
     0       0       0       50       0       50  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance at September 30, 2022 *
   ¥  (216,759   ¥        281     ¥      (8,390   ¥ 239,035     ¥  19,847      ¥ 34,014  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
As of September 30, 202
2
, there were no net unrealized gains (losses) on investment in securities related to
available-for-sale
debt securities with allowance for credit losses.
 
– 98 –

Table of Contents
Amounts reclassified to net income from accumulated other comprehensive income (loss) in the six months ended September 30, 2021 and 2022 are as follows:
 
    
Six months ended September 30, 2021
Details about accumulated other
comprehensive income components
  
Reclassification

adjustment included in

net income
     
  
Millions of yen
   
Consolidated statements of income caption
Net unrealized gains (losses) on investment in securities
                                                                                                           
Sales of debt securities
   ¥ 4,177     Gains on investment securities and dividends
Sales of debt securities
     1,415     Life insurance premiums and related investment income
Amortization of debt securities
     58     Finance revenues
Amortization of debt securities
     (347   Life insurance premiums and related investment income
Others
     (41   Write-downs of securities
    
 
 
     
       5,262     Total before income tax
       (1,204   Income tax (expense) or benefit
    
 
 
     
     ¥ 4,058     Net of tax
    
 
 
     
Debt valuation adjustments
            
Fulfillment of policy liabilities and amortization of policy account balances
   ¥ 21     Life insurance costs
    
 
 
     
       21     Total before income tax
       (6   Income tax (expense) or benefit
    
 
 
     
     ¥ 15     Net of tax
    
 
 
     
Defined benefit pension plans
            
Amortization of prior service credit
   ¥ 201     See Note 16 “Pension Plans”
Amortization of net actuarial loss
     (461   See Note 16 “Pension Plans”
Amortization of transition obligation
     (1   See Note 16 “Pension Plans”
    
 
 
     
       (261   Total before income tax
       74     Income tax (expense) or benefit
    
 
 
     
     ¥ (187   Net of tax
    
 
 
     
Foreign currency translation adjustments
            
Foreign exchange contracts
   ¥ (898   Gains on sales of subsidiaries and affiliates and liquidation losses, net/Interest expense/Other (income) and expense
Sales or liquidation
     79     Gains on sales of subsidiaries and affiliates and liquidation losses, net
    
 
 
     
       (819   Total before income tax
       267     Income tax (expense) or benefit
    
 
 
     
     ¥ (552   Net of tax
    
 
 
     
Net unrealized gains (losses) on derivative instruments
            
Interest rate swap agreements
   ¥ (542   Interest expense
Foreign exchange contracts
     (124   Interest expense/Other (income) and expense
Foreign currency swap agreements
     (1,749   Interest expense/Other (income) and expense
    
 
 
     
       (2,415   Total before income tax
       593     Income tax (expense) or benefit
    
 
 
     
     ¥ (1,822   Net of tax
    
 
 
     
 
– 99 –

Table of Contents
    
Six months ended September 30, 2022
Details about accumulated other
comprehensive income components
  
Reclassification

adjustment included in

net income
     
  
Millions of yen
   
Consolidated statements of income caption
Net unrealized gains (losses) on investment in securities
                                                                                                           
Sales of debt securities
   ¥ 17     Gains on investment securities and dividends
Sales of debt securities
     811     Life insurance premiums and related investment income
Amortization of debt securities
     162     Finance revenues
Amortization of debt securities
     174     Life insurance premiums and related investment income
    
 
 
     
       1,164     Total before income tax
       (292   Income tax (expense) or benefit
    
 
 
     
     ¥ 872     Net of tax
    
 
 
     
Debt valuation adjustments
            
Fulfillment of policy liabilities and amortization of policy account balances
   ¥ 8     Life insurance costs
    
 
 
     
       8     Total before income tax
       (2   Income tax (expense) or benefit
    
 
 
     
     ¥ 6     Net of tax
    
 
 
     
Defined benefit pension plans
            
Amortization of prior service credit
   ¥ 170     See Note 16 “Pension Plans”
Amortization of net actuarial loss
     (45   See Note 16 “Pension Plans”
Amortization of transition obligation
     (1   See Note 16 “Pension Plans”
    
 
 
     
       124     Total before income tax
       (33   Income tax (expense) or benefit
    
 
 
     
     ¥ 91     Net of tax
    
 
 
     
Foreign currency translation adjustments
            
Foreign exchange contracts
   ¥ (1,653   Gains on sales of subsidiaries and affiliates and liquidation losses, net/Interest expense/Other (income) and expense
Sales or liquidation
     1,539     Gains on sales of subsidiaries and affiliates and liquidation losses, net
    
 
 
     
       (114   Total before income tax
       12     Income tax (expense) or benefit
    
 
 
     
     ¥ (102   Net of tax
    
 
 
     
Net unrealized gains (losses) on derivative instruments
            
Interest rate swap agreements
   ¥ (157   Interest expense
Foreign exchange contracts
     (164   Interest expense/Other (income) and expense
Foreign currency swap agreements
     (1,564   Interest expense/Other (income) and expense
    
 
 
     
       (1,885   Total before income tax
       436     Income tax (expense) or benefit
    
 
 
     
     ¥ (1,449   Net of tax
    
 
 
     
 
– 100 –

Table of Contents
Amounts reclassified to net income from accumulated other comprehensive income (loss) in the three months ended September 30, 2021 and 2022 are as follows:
 
Details about accumulated other
comprehensive income components
  
Three months ended September 30, 2021
  
Reclassification
adjustment included in

net income
   
Consolidated statements of income caption
  
Millions of yen
 
Net unrealized gains (losses) on investment in securities
                                                                                                           
Sales of debt securities
   ¥ 3,964     Gains on investment securities and dividends
Sales of debt securities
         1,319     Life insurance premiums and related investment income
Amortization of debt securities
     27     Finance revenues
Amortization of debt securities
     (185   Life insurance premiums and related investment income
Others
     (35   Write-downs of securities and other
    
 
 
     
       5,090     Total before income tax
       (1,173   Income tax (expense) or benefit
    
 
 
     
     ¥ 3,917     Net of tax
    
 
 
     
Debt valuation adjustments
            
Fulfillment of policy liabilities and amortization of policy account balances
   ¥ 11     Life insurance costs
    
 
 
     
       11     Total before income tax
       (3   Income tax (expense) or benefit
    
 
 
     
     ¥ 8     Net of tax
    
 
 
     
Defined benefit pension plans
            
Amortization of prior service credit
   ¥ 101     See Note 16 “Pension Plans”
Amortization of net actuarial loss
     (224   See Note 16 “Pension Plans”
Amortization of transition obligation
     (1   See Note 16 “Pension Plans”
    
 
 
     
       (124   Total before income tax
       34     Income tax (expense) or benefit
    
 
 
     
     ¥ (90   Net of tax
    
 
 
     
Foreign currency translation adjustments
            
Foreign exchange contracts
   ¥ (404   Gains on sales of subsidiaries and affiliates and liquidation losses, net/Interest expense
Sales or liquidation
     35     Gains on sales of subsidiaries and affiliates and liquidation losses, net
    
 
 
     
       (369   Total before income tax
       113     Income tax (expense) or benefit
    
 
 
     
     ¥ (256   Net of tax
    
 
 
     
Net unrealized gains (losses) on derivative instruments
            
Interest rate swap agreements
   ¥ (266   Interest expense
Foreign exchange contracts
     (75   Interest expense/Other (income) and expense
Foreign currency swap agreements
     (1,265   Interest expense/Other (income) and expense
    
 
 
     
       (1,606   Total before income tax
       394     Income tax (expense) or benefit
    
 
 
     
     ¥ (1,212   Net of tax
    
 
 
     
 
– 101 –

Table of Contents
 
  
Three months ended September 30, 2022
Details about accumulated other
comprehensive income components
  
Reclassification
adjustment included in

net income
 
 
Consolidated statements of income caption
  
Millions of yen
 
Net unrealized gains (losses) on investment in securities
                                                                                                           
Sales of debt securities
   ¥            1     Gains on investment securities and dividends
Sales of debt securities
     (143   Life insurance premiums and related investment income
Amortization of debt securities
     50     Finance revenues
Amortization of debt securities
     200     Life insurance premiums and related investment income
    
 
 
     
       108     Total before income tax
       (10   Income tax (expense) or benefit
    
 
 
     
     ¥ 98     Net of tax
    
 
 
     
Debt valuation adjustments
            
Fulfillment of policy liabilities and amortization of policy account balances
   ¥ 5     Life insurance costs
    
 
 
     
       5     Total before income tax
       (1   Income tax (expense) or benefit
    
 
 
     
     ¥ 4     Net of tax
    
 
 
     
Defined benefit pension plans
            
Amortization of prior service credit
   ¥ 86     See Note 16 “Pension Plans”
Amortization of net actuarial loss
     (22   See Note 16 “Pension Plans”
Amortization of transition obligation
     (1   See Note 16 “Pension Plans”
    
 
 
     
       63     Total before income tax
       (17   Income tax (expense) or benefit
    
 
 
     
     ¥ 46     Net of tax
    
 
 
     
Foreign currency translation adjustments
            
Foreign exchange contracts
   ¥ (1,171  
Gains on sales of subsidiaries and affiliates and liquidation losses, net/Interest expense
Sales or liquidation
   ¥ 1,156     Gains on sales of subsidiaries and affiliates and liquidation losses, net
    
 
 
     
       (15 )   Total before income tax
       3     Income tax (expense) or benefit
    
 
 
     
     ¥ (12 )   Net of tax
    
 
 
     
Net unrealized gains (losses) on derivative instruments
            
Interest rate swap agreements
   ¥ 63     Interest expense
Foreign exchange contracts
     (84   Interest expense/Other (income) and expense
Foreign currency swap agreements
     1,583     Interest expense/Other (income) and expense
    
 
 
     
       1,562     Total before income tax
       (399   Income tax (expense) or benefit
    
 
 
     
     ¥ 1,163     Net of tax
    
 
 
     
 
– 102 –

Table of Contents
14.
ORIX Corporation Shareholders’ Equity
Information about ORIX Corporation Shareholders’ Equity for the six months ended September 30, 2021 and 2022 are as follows:
 
(1)
Dividend payments
 
    
Six months ended September 30, 2021
  
Six months ended September 30, 2022
Resolution
   The board of directors on May 20, 2021    The board of directors on May 18, 2022
Type of shares
   Common stock    Common stock
Total dividends paid
   ¥52,438 million    ¥55,704 million
Dividend per share
   ¥43.00    ¥46.60
Date of record for dividend
   March 31, 2021    March 31, 2022
Effective date for dividend
   June 7, 2021    June 3, 2022
Dividend resource
   Retained earnings    Retained earnings
Total dividends paid by resolution of the board of directors on May 20, 2021 include ¥92 million of dividends paid to the Board Incentive Plan Trust for the six months ended September 30, 2021. Total dividends paid by resolution of the board of directors on May 18, 2022 include ¥91 million of dividends paid to the Board Incentive Plan Trust for the six months ended September 30, 2022.
 
(2)
Applicable dividends for which the date of record was in the six months ended September 30, 2021 and 2022, and for which the effective date was after September 30, 2021 and 2022
 
    
Six months ended September 30, 2021
  
Six months ended September 30, 2022
Resolution
   The board of directors on November 4, 2021    The board of directors on November 7, 2022
Type of shares
   Common stock    Common stock
Total dividends paid
   ¥46,957 million    ¥50,586 million
Dividend per share
   ¥39.00    ¥42.80
Date of record for dividend
   September 30, 2021    September 30, 2022
Effective date for dividend
   December 9, 2021    December 6, 2022
Dividend resource
   Retained earnings    Retained earnings
Total dividends to be paid by resolution of the board of directors on November 4, 2021 include ¥83 million of dividends to be paid to the Board Incentive Plan Trust for the six months ended September 30, 2021. Total dividends to be paid by resolution of the board of directors on November 
7
, 2022 include ¥122 million of dividends to be paid to the Board Incentive Plan Trust for the six months ended September 30, 2022.
 
– 103 –

Table of Contents
15.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended September 30, 2021 and 2022 are as follows:
 
    
Millions of yen
 
  
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Personnel expenses
   ¥               144,462     ¥ 154,100  
Selling expenses
     32,209       41,251  
Administrative expenses
     64,774       68,253  
Depreciation of office facilities
     4,439       4,350  
    
 
 
   
 
 
 
Total
   ¥ 245,884      ¥ 267,954   
    
 
 
   
 
 
 
 
Selling, general and administrative expenses for the three months ended September 30, 2021 and 2022 are as follows:
 
 
    
Millions of yen
 
  
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Personnel expenses
   ¥ 71,969     ¥ 77,513  
Selling expenses
     16,432       21,725  
Administrative expenses
     33,341       34,456  
Depreciation of office facilities
     2,057       2,178  
    
 
 
   
 
 
 
Total
   ¥ 123,799      ¥ 135,872   
    
 
 
   
 
 
 
 
– 104 –

Table of Contents
16.
Pension Plans
The Company and certain subsidiaries have contributory and
non-contributory
pension plans covering substantially all of their employees. Those contributory funded pension plans include defined benefit pension plans and defined contribution pension plans. Under the plans, employees are entitled to
lump-sum
payments at the time of termination of their employment or pension payments. Defined benefit pension plans consist of a plan of which the amounts of such payments are determined on the basis of length of service and remuneration at the time of termination and a cash balance plan.
The Company and certain subsidiaries’ funding policy is to contribute annually the amounts actuarially determined. Assets of the plans are invested primarily in debt securities and marketable equity securities.
Net periodic pension cost for the six months ended September 30, 2021 and 2022 consists of the following:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Japanese plans:
                
Service cost
   ¥                   3,023     ¥                   2,825  
Interest cost
     419       347  
Expected return on plan assets
     (1,331     (1,362
Amortization of prior service credit
     (33     (13
Amortization of net actuarial loss
     206       38  
    
 
 
   
 
 
 
Net periodic pension cost
   ¥ 2,284     ¥ 1,835  
    
 
 
   
 
 
 
   
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Overseas plans:
                
Service cost
   ¥ 1,974     ¥ 1,813  
Interest cost
     659       1,010  
Expected return on plan assets
     (2,093     (2,348
Amortization of prior service credit
     (168     (157
Amortization of net actuarial loss
     255       7  
Amortization of transition obligation
     1       1  
    
 
 
   
 
 
 
Net periodic pension cost
   ¥ 628     ¥ 326  
    
 
 
   
 
 
 
 
Note:       
Net periodic pension cost is charged in personnel expenses, which is included in selling, general and administrative expenses in the consolidated statements of income.
 
– 105 –

Table of Contents
Net periodic pension cost for the three months ended September 30, 2021 and 2022 consists of the following:
 
    
Millions of yen
 
    
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Japanese plans:
                
Service cost
   ¥ 1,517     ¥ 1,413  
Interest cost
     198       174  
Expected return on plan assets
     (665     (681
Amortization of prior service credit
     (17     (7
Amortization of net actuarial loss
     97       19  
    
 
 
   
 
 
 
Net periodic pension cost
   ¥                   1,130     ¥                   918  
    
 
 
   
 
 
 
   
    
Millions of yen
 
    
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Overseas plans:
                
Service cost
   ¥ 976     ¥ 908  
Interest cost
     328       508  
Expected return on plan assets
     (1,041     (1,180
Amortization of prior service credit
     (84     (79
Amortization of net actuarial loss
     127       3  
Amortization of transition obligation
     1       1  
    
 
 
   
 
 
 
Net periodic pension cost
   ¥ 307     ¥ 161  
    
 
 
   
 
 
 
 
Note:       
Net periodic pension cost is charged in personnel expenses, which is included in selling, general and administrative expenses in the consolidated statements of income.
 
– 106 –

Table of Contents
17.
Life Insurance Operations
Life insurance premiums and related investment income for the six and three months ended September 30, 2021 and 2022 consist of the following:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Life insurance premiums
   ¥ 208,475     ¥ 220,762  
Life insurance related investment income*
     24,322       42,449  
    
 
 
   
 
 
 
     ¥               232,797       ¥                263,211   
    
 
 
   
 
 
 
 
*
Life insurance related investment income for the six months ended September 30, 2021 and 2022 include net unrealized holding
a
gain of ¥9,689 
million and a loss of 
¥9,465 million on equity securities held as of September 30, 2021 and 2022, respectively.
 
    
Millions of yen
 
    
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Life insurance premiums
   ¥               110,822     ¥                117,752   
Life insurance related investment income*
     13,877       19,182  
    
 
 
   
 
 
 
     ¥ 124,699       ¥ 136,934   
    
 
 
   
 
 
 
 
*
Life insurance related investment income for the three months ended September 30, 2021 and 2022 include net unrealized holding
a
gain of ¥5,543 
million and a loss of ¥1,222 million on equity securities held as of September 30, 2021 and 2022, respectively. 
Life insurance premiums include reinsurance benefits, net of reinsurance premiums. For the six and three months ended September 30, 2021 and 2022, reinsurance benefits and reinsurance premiums included in life insurance premiums are as follows:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
   
Six months ended

September 30, 2022
 
Reinsurance benefits
   ¥                      852     ¥                       657   
Reinsurance premiums
     (2,226     (2,390
   
    
Millions of yen
 
    
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Reinsurance benefits
   ¥ 507     ¥ 344  
Reinsurance premiums
     (1,097     (1,199
The benefits and expenses of life insurance operations included in life insurance costs in the consolidated statements of income are recognized so as to associate with earned premiums over the life of contracts. This association is accomplished by means of the provision for future policy benefits and the deferral and subsequent amortization of policy acquisition costs (principally commissions and certain other expenses directly relating to policy issuance and underwriting). Amortization charged to income for the six months ended September 30, 2021 and 2022 amounted to ¥11,339 million and ¥7,884 million, respectively. In addition, amortization charged to income for the three months ended September 30, 2021 and 2022 amounted to ¥6,144 million and ¥5,305 million, respectively.
Life insurance premiums and related investment income include net realized and unrealized gains or losses from investment assets under management on behalf of variable annuity and variable life policyholders, and net gains or losses from derivative contracts, which consist of gains or losses from futures and foreign exchange contracts, entered to economically hedge a portion of the minimum guarantee risk relating to variable annuity and variable life insurance contracts. In addition, the fair value option was elected for the entire variable annuity and variable life insurance contracts to offset earnings recognized for gains or losses from the investment assets managed on behalf of variable annuity and variable life policyholders, derivative contracts and the changes in the fair value of reinsurance contracts. Life insurance costs include the net amount of the changes in fair value of the variable annuity and variable life insurance contracts for which the fair value option was elected and insurance costs recognized for insurance and annuity payouts as a result of insured events. Certain subsidiaries have elected the fair value option for certain reinsurance contracts to partially offset the changes in fair value recognized in earnings of the policy liabilities and policy account balances attributable to the changes in the minimum guarantee risks of the variable annuity and variable life insurance contracts, and the changes in the fair value of the reinsurance contracts were recorded in life insurance costs.
 
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The portion of the total change in the fair value of variable annuity and variable life insurance contracts that results from a change in the instrument-specific credit risk is recognized in other comprehensive income (loss), net of applicable income taxes.
The above mentioned gains or losses relating to variable annuity and variable life insurance contracts for the six and three months ended September 30, 2021 and 2022 are mainly as
follows:
 
 
  
Millions of yen
 
 
  
Six months ended

September 30, 2021
 
 
Six months ended

September 30, 2022
 
Life insurance premiums and related investment income :
                
Net realized and unrealized gains or losses from investment assets
   ¥                 10,863     ¥                 (11,820
Net gains or losses from derivative contracts :
     (1,161     252  
Futures
     (1,123     852  
Foreign exchange contracts
     (38     (600
     
Life insurance costs :
                
Changes in the fair value of the policy liabilities and policy account balances
   ¥ (40,285   ¥ (28,645
Insurance costs recognized for insurance and annuity payouts as a result of insured events
     47,016       16,966  
Changes in the fair value of the reinsurance contracts
     733       (488
   
    
Millions of yen
 
    
Three months ended

September 30, 2021
   
Three months ended

September 30, 2022
 
Life insurance premiums and related investment income :
                
Net realized and unrealized gains or losses from investment assets
   ¥ 5,592     ¥ (1,259
Net gains or losses from derivative contracts :
     (878     (1
Futures
     (863     173  
Foreign exchange contracts
     (15     (174
     
Life insurance costs :
                
Changes in the fair value of the policy liabilities and policy account balances
   ¥ (18,353   ¥ (10,508
Insurance costs recognized for insurance and annuity payouts as a result of insured events
     21,525       8,304  
Changes in the fair value of the reinsurance contracts
     314       30  
 
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Table of Contents
18.
Write-Downs of Long-Lived Assets
The Company and its subsidiaries perform tests for recoverability on long-lived assets classified as held and used for which events or changes in circumstances indicated that the assets might be impaired. The Company and its subsidiaries consider an asset’s carrying amount as not recoverable when such carrying amount exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. The net carrying amount of assets not recoverable is reduced to fair value if lower than the carrying amount.
As of March 31, 2022 and September 30, 2022, the long-lived assets and liabilities associated with those assets classified as held for sale in the accompanying consolidated balance sheets are as follows.
 
    
Millions of yen
 
    
As of March 31, 2022
    
As of September 30, 2022
 
Investment in operating leases
   ¥            35,061      ¥           9,912  
Property under facility operations
     8,376        0  
Office facilities
     1,375        0  
Other assets
     1,556        0  
Other liabilities
     1,761        0  
The long-lived assets classified as held for sale as of March 31, 2022 are included in Corporate Financial Services and Maintenance Leasing segment, Real Estate segment, PE Investment and Concession segment, Aircraft and Ships segment and ORIX USA segment. The long-lived assets classified as held for sale as of September 30, 2022 are included in Corporate Financial Services and Maintenance Leasing segment, Real Estate segment, Aircraft and Ships segment, and ORIX USA segment.
The Company and its subsidiaries determine the fair value using appraisals prepared by independent third party appraisers or our own staff of qualified appraisers, and others
based on recent transactions involving sales of similar assets or other valuation techniques such as discounted cash flows methodologies using future cash flows estimated to be generated from operation of the existing assets or completion of development projects, as appropriate.
For the six months ended September 30, 2021 and 2022, the Company and its subsidiaries recognized impairment losses for the difference between carrying amounts and fair values in the amount of ¥88 million and ¥253 million, respectively, which are reflected as write-downs of long-lived assets. Breakdowns of these amounts are as
follows.
 
 
  
Six months ended

September 30, 2021
 
  
Six months ended

September 30, 2022
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
Write-downs of the assets held for sale:
                                   
Condominiums
   ¥                         1        1      ¥                         0        —    
Others*
     0       
—  

       56        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥                         1        —        ¥                         56        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
 
 
 
 
 
 
 
 
  
Six months ended

September 30, 2021
 
  
Six months ended

September 30, 2022
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
Write-downs due to decline in estimated future cash flows:
                                   
Commercial facilities other than office buildings
  
¥
11                                1     
¥
51                                2  
Condominiums
     1        1        3        3  
Others*
     75        —          143        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 87        —        ¥ 197        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
 
*
For “Others,” the number of properties is omitted.
Losses
 
of ¥12 million in Real Estate segment, ¥1 million in PE Investment and Concession segment, ¥71 million in ORIX USA segment and ¥4 million in Asia and Australia segment were recorded for the six months ended September 30, 2021. Losses of ¥174 million in Real Estate segment, ¥39 million in PE Investment and Concession segment, ¥39 million in Environment and Energy segment and ¥1 million in Asia and Australia segment were recorded for the six months ended September 30, 2022.
 
– 109 –

Table of Contents
For the three months ended September 30, 2021 and 202
2
, the Company and its subsidiaries recognized impairment losses for the difference between carrying amounts and fair values in the amount of ¥1 million and ¥145 million, respectively, which are reflected as write-downs of long-lived assets. Breakdowns of these amounts are as
follows.
 
 
  
Three months ended

September 30, 2021
 
  
Three months ended

September 30, 2022
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
Write-downs of the assets held for sale:
                                   
Condominiums
   ¥                       1                              1      ¥ 0                                0  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 1        —        ¥ 0        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
 
 
  
Three months ended

September 30, 2021
 
  
Three months ended

September 30, 2022
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
  
Amount

(Millions of yen)
 
  
The number of
properties
 
Write-downs due to decline in estimated future cash flows:
                                   
Commercial facilities other than office buildings
   ¥                       0                              0      ¥ 51                                2  
Others*
     0        —          94        —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 0        —        ¥ 145        —    

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
*
For “Others,” the number of properties is omitted.
A loss 
of ¥1 
million in PE Investment and Concession segment was recorded for the three months ended September 30, 2021. Losses
 of ¥106 million in Real Estate segment, ¥39 
million in PE Investment and Concession segment were recorded for the three months ended September 30, 2022. 
 
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Table of Contents
19.
Per Share Data
Reconciliation of the differences between basic and diluted earnings per share (EPS) in the six and three months ended September 30, 2021 and 2022 is as follows:
During the six and three months ended September 30, 2021 and 2022, there was no stock compensation which was antidilutive.
 
    
Millions of yen
 
  
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
 
Net Income attributable to ORIX Corporation shareholders
   ¥ 146,682      ¥ 121,776  
    
 
 
    
 
 
 
   
    
Millions of yen
 
  
 
 
 
    
Three months ended

September 30, 2021
    
Three months ended

September 30, 2022
 
Net Income attributable to ORIX Corporation shareholders
   ¥ 81,466      ¥ 59,914  
    
 
 
    
 
 
 
   
    
Thousands of Shares
 
  
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
 
Weighted-average shares
     1,211,058        1,187,885  
Effect of dilutive securities—
                 
Stock compensation
     1,202        1,365  
    
 
 
    
 
 
 
Weighted-average shares for diluted EPS computation
     1,212,260        1,189,250  
    
 
 
    
 
 
 
   
    
Thousands of Shares
 
  
Three months ended

September 30, 2021
    
Three months ended

September 30, 2022
 
Weighted-average shares
     1,206,784        1,184,070  
Effect of dilutive securities—
                 
Stock compensation
     1,341        1,498  
    
 
 
    
 
 
 
Weighted-average shares for diluted EPS computation
     1,208,125        1,185,568  
    
 
 
    
 
 
 
   
    
Yen
 
  
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
 
Earnings per share for net income attributable to ORIX Corporation shareholders:
                 
Basic
   ¥ 121.12      ¥ 102.52  
Diluted
     121.00        102.40  
   
    
Yen
 
  
Three months ended

September 30, 2021
    
Three months ended

September 30, 2022
 
Earnings per share for net income attributable to ORIX Corporation shareholders:
                 
Basic
   ¥ 67.51      ¥ 50.60  
Diluted
     67.43        50.54  
 
Note:
  
The Company’s shares held through the Board Incentive Plan Trust are included in the number of treasury stock to be deducted in calculation of the weighted-average shares for EPS computation. (2,149,105 and 2,215,068 shares for the six months ended September 30, 2021 and 2022, 2,145,248 and 2,403,907 shares for the three months ended September 30, 2021 and 2022)
 
– 111 –

Table of Contents
20.
Derivative Financial Instruments and Hedging
Risk management policy
The Company and its subsidiaries manage interest rate risk through asset-liability management (“ALM”). The Company and its subsidiaries use derivative financial instruments to hedge interest rate risk and avoid changes in interest rates that could have a significant adverse effect on the Company’s results of operations. As a result of interest rate changes, the fair value and/or cash flow of interest sensitive assets and liabilities will fluctuate. However, such fluctuation will generally be offset by using derivative financial instruments as hedging instruments. Derivative financial instruments that the Company and its subsidiaries use as part of the interest risk management include interest rate swaps.
The Company and its subsidiaries utilize foreign currency borrowings, foreign exchange contracts and foreign currency swap agreements to hedge exchange rate risk that are associated with certain transactions and investments denominated in foreign currencies. Similarly, overseas subsidiaries generally structure their liabilities to match the currency-denomination of assets in each region. A certain subsidiary holds futures and foreign exchange contracts for the purpose of economic hedges against minimum guarantee risk of variable annuity and variable life insurance contracts.
By using derivative instruments, the Company and its subsidiaries are exposed to credit risk in the event of nonperformance by counterparties. The Company and its subsidiaries attempt to manage the credit risk by carefully evaluating the content of transactions and the quality of counterparties in advance and regularly monitoring the amount of notional principal, fair value, type of transaction and other factors pertaining to each counterparty.
The Company and its subsidiaries have no derivative instruments with credit-risk-related contingent features as of March 31, 2022 and September 30, 2022.
(a) Cash flow hedges
The Company and its subsidiaries designate interest rate swap agreements, foreign currency swap agreements and foreign exchange contracts as cash flow hedges for variability of cash flows originating from floating rate borrowings and forecasted transactions and for exchange fluctuations.
(b) Fair value hedges
The Company and its subsidiaries use financial instruments designated as fair value hedges to hedge their exposure to interest rate risk and foreign currency exchange risk. A certain subsidiary designates foreign exchange contracts to minimize foreign currency exposures on bonds in foreign currencies in the insurance business. The subsidiary also uses interest rate swap agreements to hedge interest rate exposure of the fair values of bonds in foreign currencies in the insurance business
(c) Hedges of net investment in foreign operations
The Company and its subsidiaries use foreign exchange contracts and borrowings and bonds denominated in foreign currencies to hedge the foreign currency exposure of the net investment in overseas subsidiaries and affiliates.
(d) Derivatives not designated as hedging instruments
The Company and its subsidiaries entered into interest rate swap agreements, futures and foreign exchange contracts for risk management purposes which are not qualified for hedge accounting. A certain subsidiary holds futures and foreign exchange contracts for the purpose of economic hedges against minimum guarantee risk of variable annuity and variable life insurance contracts.
 
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Table of Contents
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for the six months ended September 30, 2021 is as follows.
(1) Cash flow hedges
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

    income on derivative    
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
    Interest expense    
   
   Other (income) and   

expense
 
Interest rate swap agreements
   ¥   1,150     ¥ 542     ¥ 0  
Foreign exchange contracts
     (171     (54     178   
Foreign currency swap agreements
     (567     290       1,459  
(2) Fair value hedges
 
                                 
                                 
                                 
                                 
 
  
Millions of yen
 
 
  
Gains (losses) recognized in income

on derivative and other
 
 
Gains (losses) recognized in income

on hedged item
 
 
  
Life insurance premiums
and related investment
income
 
 
Other (income) and
expense
 
 
Life insurance premiums
and related investment
income
 
  
Other (income) and
expense
 
Interest rate swap agreements
  
¥
(921
 
¥
0
 
 
¥
1,031
 
  
¥
0
 
Foreign exchange contracts
  
 
(4,627
 
 
   98
  
 
 
4,667
 
  
 
(75
(3) Hedges of net investment in foreign operations
 
                                 
                                 
                                 
                                 
 
 
Millions of yen
 
 
 
Gains (losses) recognized

in other comprehensive

    income on derivative    

and others
 
 
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
 
 
Gains on sales of
subsidiaries and affiliates
and liquidation losses, net
 
 
Interest expense
 
  
Other (income) and
expense
 
Foreign exchange contracts
 
¥
(544
 
¥
(104
 
¥
789
 
  
¥
5
 
Borrowings and bonds in foreign currencies
 
 
(6,399
 
 
0
 
 
 
       0
 
  
 
   0
  
(4) Derivatives not designated as hedging instruments
 
    
Millions of yen
 
    
Gains (losses) recognized in income on derivative
 
    
Life insurance premiums and
related investment income*
   
    Interest expense    
   
   Other (income) and   
expense
 
Interest rate swap agreements
   ¥ 0     ¥ 3     ¥ (21
Futures
     (1,123     0       733  
Foreign exchange contracts
     3,746       718        2,415  
Credit derivatives held
     0       0       (1
Options held/written and other
     0       0       759  
 
*
Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2021 (see Note 17 “Life Insurance Operations”).
 
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Table of Contents
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for the six months ended September 30, 2022 is as follows.
(1) Cash flow hedges
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

    income on derivative    
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
    Interest expense    
    
   Other (income) and   

expense
 
Interest rate swap agreements
   ¥ 22,506     ¥ 157      ¥ 0  
Foreign exchange contracts
     (172     17        147  
Foreign currency swap agreements
     (545        302          1,262   
(2) Fair value hedges
 
     
                                           
     
                                           
     
                                           
     
                                           
 
    
Millions of yen
 
    
Gains (losses) recognized in income

on derivative and other
   
Gains (losses) recognized in income

on hedged item
 
    
Life insurance premiums
and related investment
income
   
Other (income) and
expense
   
Life insurance premiums
and related investment
income
   
Other (income) and
expense
 
Interest rate swap agreements
  
¥
3,173
 
 
¥
0
 
 
¥
(3,058
 
¥
0
 
Foreign exchange contracts
  
 
(78,667
 
 
(449
 
 
78,817
 
 
 
399
  
(3) Hedges of net investment in foreign operations
 
     
                                           
     
                                           
     
                                           
     
                                           
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

income on derivative

and others
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
Gains on sales of
subsidiaries and affiliates
and liquidation losses, net
    
Interest expense
   
Other (income) and
expense
 
Foreign exchange contracts
  
¥
(24,595
 
¥
51
 
  
¥
  1,956
  
 
¥
(252
Borrowings and bonds in foreign currencies
  
 
(122,739
 
 
0
 
  
 
0
 
 
 
0
 
(4) Derivatives not designated as hedging instruments
 
    
Millions of yen
 
    
Gains (losses) recognized in income on derivative
 
    
Life insurance premiums and
related investment income*
    
    Interest expense    
    
   Other (income) and   
expense
 
Interest rate swap agreements
   ¥ 0      ¥ 3      ¥ (139
Futures
     852        0        (4,105
Foreign exchange contracts
     34,472        1,950        51,589  
Credit derivatives written
     0        0        4  
Options held/written and other
     0        0        (886
 
*
Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2022 (see Note 17 “Life Insurance Operations”).
 
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Table of Contents
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for the three months ended September 30, 2021 is as follows.
(1) Cash flow hedges
 
     
                                                 
     
                                                 
     
                                                 
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

    income on derivative    
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
Interest expense
   
Other (income)

and expense
 
Interest rate swap agreements
  
¥
  1,007
 
 
¥
266
 
 
¥
0
 
Foreign exchange contracts
  
 
(110
 
 
(12
 
 
87
 
Foreign currency swap agreements
  
 
(780
 
 
94
 
 
 
1,171
  
(2) Fair value hedges
 
    
Millions of yen
 
    
Gains (losses) recognized in income

on derivative and other
   
Gains (losses) recognized in income

on hedged item
 
    
Life insurance premiums
and related investment
income
   
Other (income) and
expense
   
Life insurance premiums
and related investment
income
   
Other (income) and
expense
 
Interest rate swap agreements
   ¥ 299     ¥ 0     ¥ (321   ¥ 0  
Foreign exchange contracts
     (4,146     (27     4,187       42  
(3) Hedges of net investment in foreign operations
 
     
                                                 
     
                                                 
     
                                                 
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

    income on derivative    

and others
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
Gains on sales of
subsidiaries and affiliates
and liquidation losses, net
   
Interest expense
 
Foreign exchange contracts
  
¥
2,755
 
 
¥
(86
 
¥
318
 
Borrowings and bonds in foreign currencies
  
 
(6,552
 
 
0
 
 
 
0
  
(4) Derivatives not designated as hedging instruments
 
     
                                                 
     
                                                 
     
                                                 
 
    
Millions of yen
 
    
Gains (losses) recognized in income on derivative
 
    
Life insurance premiums and
related investment income*
   
   Interest expense   
   
   Other (income) and   
expense
 
Interest rate swap agreements
  
¥
0
 
 
¥
2
 
 
¥
(12
Futures
  
 
(863
 
 
0
 
 
 
(422
Foreign exchange contracts
  
 
2,938
 
 
 
203
  
 
 
(2,831
Options held/written and other
  
 
0
 
 
 
0
 
 
 
246
 
 
*
Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2021 (see Note 17 “Life Insurance Operations”).
 
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Table of Contents
The effect of derivative instruments on the consolidated statements of income,
pre-tax,
for the three months ended September 30, 2022 is as follows.
(1) Cash flow hedges
 
     
                                                 
     
                                                 
     
                                                 
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

income on derivative
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
Interest expense
   
Other (income) and
expense
 
Interest rate swap agreements
  
¥
10,230
 
 
¥
(63
 
¥
0
 
Foreign exchange contracts
  
 
(186
 
 
(155
 
 
239
 
Foreign currency swap agreements
  
 
1,788
 
 
 
180
 
 
 
(1,763
(2) Fair value hedges
 
    
Millions of yen
 
    
Gains (losses) recognized in income

on derivative and other
   
Gains (losses) recognized in income

on hedged item
 
    
Life insurance premiums
and related investment
income
   
Other (income) and
expense
   
Life insurance premiums
and related investment
income
   
Other (income) and
expense
 
Interest rate swap agreements
   ¥ 1,305     ¥ 0     ¥ (1,309   ¥ 0  
Foreign exchange contracts
     (29,199     (314     29,275       218  
(3) Hedges of net investment in foreign operations
 
     
                                                 
     
                                                 
     
                                                 
 
    
Millions of yen
 
    
Gains (losses) recognized

in other comprehensive

    income on derivative    

and others
   
Gains (losses) reclassified from

other comprehensive income (loss) into income
 
   
Gains on sales of
subsidiaries and affiliates
and liquidation losses, net
   
Interest expense
 
Foreign exchange contracts
  
¥
(2,042
 
¥
(5
 
¥
1,166
  
Borrowings and bonds in foreign currencies
  
 
(42,929
 
 
0
 
 
 
0
 
(4) Derivatives not designated as hedging instruments
 
     
                                                 
     
                                                 
     
                                                 
 
    
Millions of yen
 
    
Gains (losses) recognized in income on derivative
 
    
Life insurance premiums and
related investment income*
   
Interest expense
   
Other (income) and
expense
 
Interest rate swap agreements
  
¥
0
 
 
¥
2
 
 
¥
(70
Futures
  
 
173
 
 
 
0
 
 
 
(1,424
Foreign exchange contracts
  
 
13,332
  
 
 
1,696
  
 
 
14,519
 
Credit derivatives written
  
 
0
 
 
 
0
 
 
 
4
 
Options held/written and other
  
 
0
 
 
 
0
 
 
 
(170
 
*
Futures and foreign exchange contracts in the above table include gains (losses) arising from futures and foreign exchange contracts to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2022 (see Note 17 “Life Insurance Operations”).
 
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Table of Contents
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for the six months ended September 30, 2021 is as follows.
Fair value hedges
 
    
Millions of yen
 
    
Gains (losses) recognized in income
 
    
Life insurance premiums and related
investment income
   
Interest expense
    
Other (income) and

expense
 
Foreign exchange contracts
   ¥ (697   ¥   2      ¥ 0  
Options held/written and other
                               0               0        14  
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for the three months ended September 30, 2021 is as follows.
Fair value hedges
 
    
Millions of yen
 
    
Gains (losses) recognized in income
 
    
Life insurance premiums and related
investment income
   
Interest expense
    
Other (income) and

expense
 
Foreign exchange contracts
   ¥ (282   ¥   1      ¥ 0  
Options held/written and other
                               0               0        7  
The carrying amount of hedged assets and liabilities recognized in balance sheets in fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying amount at March 31, 2022 is as follows.
 
Assets as hedged items in fair value hedges
    
Liabilities as hedged items in fair value hedges
 
    
Millions of yen
         
Millions of yen
 
Consolidated balance
sheets location
  
Carrying
amount
    
The cumulative
amount of fair value
hedging adjustments
included in the
carrying amount
    
Consolidated balance
sheets location
  
Carrying
amount
    
The cumulative
amount of fair value
hedging adjustments
included in the
carrying amount
 
Investment in Securities
   ¥ 422,938      ¥ 1,147      —      ¥ 0      ¥ 0  
Installment Loans
     28,836        55      —        0        0  
 
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Table of Contents
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for the six months ended September 30, 2022 is as follows.
Fair value hedges
 
    
Millions of yen
 
    
Gains (losses) recognized in income
 
    
Life insurance premiums and related
investment income
   
Interest expense
    
Other (income) and

expense
 
Foreign exchange contracts
   ¥ (1,474   ¥ 14      ¥ 0  
Options held/written and other
                               0       0        27  
The effect of the components excluded from the assessment of hedge effectiveness on the consolidated statements of income,
pre-tax,
for the three months ended September 30, 2022 is as follows.
Fair value hedges
 
    
Millions of yen
 
    
Gains (losses) recognized in income
 
    
Life insurance premiums and related
investment income
   
Interest expense
    
Other (income) and

expense
 
Foreign exchange contracts
   ¥ (2,155   ¥   7      ¥ 0  
Options held/written and other
                               0         0        14  
The carrying amount of hedged assets and liabilities recognized in balance sheets in fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying amount at September 30, 2022 is as follows.
 
Assets as hedged items in fair value hedges
   
Liabilities as hedged items in fair value hedges
 
    
Millions of yen
        
Millions of yen
 
Consolidated balance
sheets location
  
Carrying
amount
    
The cumulative
amount of fair value
hedging adjustments
included in the
carrying amount
   
Consolidated balance
sheets location
  
Carrying
amount
    
The cumulative
amount of fair value
hedging adjustments
included in the
carrying amount
 
Investment in Securities
   ¥ 511,490      ¥ (1,954   —      ¥ 0      ¥ 0  
Installment Loans
     15,152        0     —        0        0  
 
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Notional amounts of derivative instruments and other, fair values of derivative instruments and other before offsetting at March 31, 2022 and September 30, 2022 are as follows.
March 31, 2022
 
         
Derivative assets
 
Derivative liabilities
   
Notional

amount
   
  Fair value  
   
Consolidated balance
sheets location
 
  Fair value  
   
Consolidated balance
sheets location
   
Millions

of yen
   
Millions

of yen
       
Millions

of yen
     
Derivatives designated as hedging instruments and other:
                               
           
Interest rate swap agreements
  ¥   511,224     ¥ 9,570     Other Assets   ¥ 8,170     Other Liabilities
           
Options held/written and other
    847       11     Other Assets     0                           —  
           
Futures, foreign exchange contracts
        944,282       445     Other Assets     51,953     Other Liabilities
           
Foreign currency swap agreements
    78,445       126     Other Assets     4,518     Other Liabilities
           
Foreign currency long-term debt
    690,381       0                     —     0                           —  
           
Derivatives not designated as hedging instruments:
                               
           
Interest rate swap agreements
  ¥ 432     ¥ 0                     —   ¥ 12     Other Liabilities
           
Options held/written and other
    794,774             25,653     Other Assets     21,562     Other Liabilities
           
Futures, foreign exchange contracts *
    725,685       15,561     Other Assets     19,490     Other Liabilities
 
*
The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥15,088 million and foreign exchange contracts of ¥7,415 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at March 31, 2022, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥79 million and ¥57 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥1,325 million and ¥378 million at March 31, 2022, respectively.
September 30, 2022
 
         
Derivative assets
 
Derivative liabilities
   
Notional

amount
   
  Fair value  
   
Consolidated balance
sheets location
 
  Fair value  
   
Consolidated balance
sheets location
   
Millions

of yen
   
Millions

of yen
       
Millions

of yen
     
Derivatives designated as hedging instruments and other:
                               
           
Interest rate swap agreements
  ¥     518,907     ¥ 25,142     Other Assets   ¥ 2,549     Other Liabilities
           
Options held/written and other
    863       14     Other Assets     0                           —  
           
Futures, foreign exchange contracts
    1,014,351       2,038     Other Assets     53,468     Other Liabilities
           
Foreign currency swap agreements
    92,395       2,031     Other Assets     1,871     Other Liabilities
           
Foreign currency long-term debt
    838,051       0                     —     0                           —  
           
Derivatives not designated as hedging instruments:
                               
           
Interest rate swap agreements
  ¥ 406     ¥ 0                     —   ¥ 8     Other Liabilities
           
Options held/written and other
    813,319       62,875     Other Assets     56,456     Other Liabilities
           
Futures, foreign exchange contracts *
    663,236       32,440     Other Assets     5,723     Other Liabilities
           
Credit derivatives written
    1,000       0                     —     4     Other Liabilities
 
*
The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥17,701 million and foreign exchange contracts of ¥6,494 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at September 30, 2022, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥728 million and ¥46 million and derivative liabilities include fair value of futures and foreign exchange contracts before offsetting of ¥4 million and ¥429 million at September 30, 2022, respectively.
 
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Table of Contents
The Company and its subsidiaries have contracted credit derivatives for the purpose of trading. Details of credit derivatives written as of September 30, 2022 are as follows and there are
no
credit derivatives written as of March 31, 2022.
 
Types of derivatives
  
The events or circumstances
that would require the seller
to perform under the credit
derivative
  
Maximum potential
amount of future
payment under the
credit derivative
    
Approximate
remaining term
of the credit
derivative
    
Fair value of
the credit
derivative
 
  
Millions of yen
    
Millions of yen
 
Credit default swap
   In case of credit event (bankruptcy, failure to pay, restructuring) occurring in underlying reference company *    ¥ 1,000       
Less than
five years
 
 
   ¥ (4
 
*
Underlying reference company’s credit ratings are A1 or better rated by rating agencies as of September 30, 2022.
 
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21.
Offsetting Assets and Liabilities
The gross amounts recognized, gross amounts offset, and net amounts presented in the consolidated balance sheets regarding derivative assets and liabilities as of March 31, 2022 and September 30, 2022 are as follows.
March 31, 2022

 
 
  
Millions of yen
 
 
  
Gross amounts

recognized
 
  
Gross amounts

offset in the

consolidated

balance sheets
 
 
Net amounts

presented in

the consolidated

balance sheets
 
  
Gross amounts not offset in

the consolidated balance sheets *
 
 
Net amount
 
 
  
Financial

instruments
 
 
Collateral

received/pledged
 
Derivative assets
   ¥ 51,366      ¥ (20,333   ¥ 31,033      ¥ 0     ¥ (1,060   ¥ 29,973  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Total assets
   ¥ 51,366      ¥ (20,333   ¥ 31,033      ¥ 0     ¥ (1,060   ¥ 29,973  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Derivative liabilities
   ¥ 105,705      ¥ (20,333   ¥ 85,372      ¥ (15,409   ¥ 0     ¥ 69,963  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Total liabilities
   ¥ 105,705      ¥ (20,333   ¥ 85,372      ¥ (15,409   ¥ 0     ¥ 69,963  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
September 30, 2022

 
 
  
Millions of yen
 
 
  
Gross amounts

recognized
 
  
Gross amounts

offset in the

consolidated

balance sheets
 
 
Net amounts

presented in

the consolidated

balance sheets
 
  
Gross amounts not offset in

the consolidated balance sheets *
 
 
Net amount
 
 
  
Financial

instruments
 
 
Collateral

received/pledged
 
Derivative assets
   ¥ 124,540      ¥ (35,089   ¥ 89,451      ¥ 0     ¥ (5,257   ¥ 84,194  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Total assets
   ¥ 124,540      ¥ (35,089   ¥ 89,451      ¥ 0     ¥ (5,257   ¥ 84,194  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Derivative liabilities
   ¥ 120,079      ¥ (35,089   ¥ 84,990      ¥ (13,171   ¥ 0     ¥ 71,819  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
Total liabilities
   ¥ 120,079      ¥ (35,089   ¥ 84,990      ¥ (13,171   ¥ 0     ¥ 71,819  
    
 
 
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
 
 
*
The balances related to enforceable master netting agreements or similar agreements which were not offset in the consolidated balance sheets.
 
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Table of Contents
22.
Estimated Fair Value of Financial Instruments
The following information is provided to help readers gain an understanding of the relationship between carrying amounts of financial instruments reported in the Company’s consolidated balance sheets and the related market or fair value. The disclosures do not include net investment in leases, investment in affiliates, pension obligations and insurance contracts and reinsurance contracts except for those classified as investment contracts.
March 31, 2022
 
    
Millions of yen
 
    
Carrying

amount
    
Estimated

fair value
    
Level 1
    
Level 2
    
Level 3
 
Assets:
                                            
Cash and cash equivalents
   ¥ 954,827      ¥ 954,827      ¥   954,827      ¥ 0      ¥ 0  
Restricted cash
     136,985        136,985        136,985        0        0  
Installment loans (net of allowance for credit losses)
     3,814,773        3,806,552        0        261,031        3,545,521  
Equity securities*1
     385,271        385,271        112,200        160,099        112,972  
Trading debt securities
     2,503        2,503        0        2,503        0  
Available-for-sale
debt securities
     2,174,891        2,174,891        1,095        2,032,736        141,060  
Held-to-maturity
debt securities
     114,312        135,441        0        112,678        22,763  
Other Assets:
                                            
Time deposits
     4,197        4,197        0        4,197        0  
Derivative assets*2
     31,033        31,033        0        0        0  
Reinsurance recoverables (Investment contracts)
     6,216        6,049        0        0        6,049  
Liabilities:
                                            
Short-term debt
   ¥ 439,639      ¥ 439,639      ¥ 0      ¥ 439,639      ¥ 0  
Deposits
     2,106,900        2,108,169        0        2,108,169        0  
Policy liabilities and Policy account balances (Investment contracts)
     178,170        178,159        0        0        178,159  
Long-term debt
     4,427,046        4,426,629        0        1,456,822        2,969,807  
Other Liabilities:
                                            
Derivative liabilities*2
     85,372        85,372        0        0        0  
 
*1
The amount of ¥25,999 million of investment funds measured at net asset value per share is not included.
*2
It represents the amount after offset under counterparty netting of derivative assets and liabilities. For the information of input level before netting, see Note 3 “Fair Value Measurements.”
 
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Table of Contents
September 30, 2022
 
    
Millions of yen
 
    
Carrying

amount
    
Estimated

fair value
    
Level 1
    
Level 2
    
Level 3
 
Assets:
                                            
Cash and cash equivalents
   ¥ 925,965      ¥ 925,965      ¥   925,965      ¥ 0      ¥ 0  
Restricted cash
     120,056        120,056        120,056        0        0  
Installment loans (net of allowance for credit losses)
     3,930,534        3,897,327        0        356,411        3,540,916  
Equity securities*1
     362,265        362,265        98,885        133,008        130,372  
Trading debt securities
     2,948        2,948        0        2,948        0  
Available-for-sale
debt securities
     2,215,540        2,215,540        5,674        2,014,861        195,005  
Held-to-maturity
debt securities
     115,461        130,882        0        109,443        21,439  
Other Assets:
                                            
Time deposits
     5,544        5,544        0        5,544        0  
Derivative assets*2
     89,451        89,451        0        0        0  
Reinsurance recoverables (Investment contracts)
     5,772        5,551        0        0        5,551  
Liabilities:
                                            
Short-term debt
   ¥ 461,673      ¥ 461,673      ¥ 0      ¥ 461,673      ¥ 0  
Deposits
     2,098,724        2,099,855        0        2,099,855        0  
Policy liabilities and Policy account balances (Investment
contracts)
     169,380        169,339        0        0        169,339  
Long-term debt
     4,948,712        4,895,318        0        1,709,834        3,185,484  
Other Liabilities:
                                            
Derivative liabilities*2
     84,990        84,990        0        0        0  
 
*1
The amount of ¥47,936 million of investment funds measured at net asset value per share is not included.
*2
It represents the amount after offset under counterparty netting of derivative assets and liabilities. For the information of input level before netting, see Note 3 “Fair Value Measurements.”
Input level of fair value measurement
If active market prices are available, fair value measurement is based on quoted active market prices and classified as Level 1. If active market prices are not available, fair value measurement is based on observable inputs other than quoted prices included within Level 1 such as quoted market prices of similar assets and classified as Level 2. If market prices are not available and there are no observable inputs, then fair value is estimated by using valuation models including discounted cash flow methodologies, commonly used option-pricing models and broker quotes and classified as Level 3, as the valuation models and broker quotes are based on inputs that are unobservable in the market.
 
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Table of Contents
23.
Commitments, Guarantees and Contingent Liabilities
Commitments
—The Company and certain subsidiaries have commitments for the purchase of equipment to be leased, having a cost of ¥3,475 million and ¥3,475 million as of March 31, 2022 and September 30, 2022, respectively.
Certain computer systems of the Company and certain subsidiaries have been operated and maintained under
non-cancelable
contracts with third-party service providers. For such services, the Company and certain subsidiaries made payments totaling ¥3,906 million and ¥4,138 million for the six months ended September 30, 2021 and 2022, respectively, and ¥1,256 million and ¥2,055 million for the three months ended September 30, 2021 and 2022, respectively. As of March 31, 2022 and September 30, 2022, the amounts due are as follows:
 
    
Millions of yen
 
    
March 31,
2022
    
September 30,
2022
 
Within one year
   ¥ 5,205      ¥ 5,333  
More than one year
     5,569        7,747  
    
 
 
    
 
 
 
Total
   ¥         10,774      ¥         13,080  
    
 
 
    
 
 
 
The Company and certain subsidiaries have commitments to fund estimated construction costs and so forth to complete ongoing real estate development projects and other commitments, totaling ¥128,449 million and ¥142,224 million as of March 31, 2022 and September 30, 2022, respectively.
The Company and certain subsidiaries have agreements to commit to execute loans for customers, and to invest in funds, as long as the agreed-upon terms are met. The total unused credit and capital amount available are ¥436,784 million and ¥487,335 million as of March 31, 2022 and September 30, 2022, respectively.
 
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Table of Contents
Guarantees
—At the inception of a guarantee, the Company and its subsidiaries recognize a liability in the consolidated balance sheets at fair value for the guarantee within the scope of ASC 460 (“Guarantees”). Some of these guarantees, whose contractual obligations cannot be unconditionally cancelled, are in the scope of the Credit Losses Standard and are recognized as other liabilities in the consolidated balance sheets. The following table represents the summary of potential future payments, book value recorded as guarantee liabilities of the guarantee contracts outstanding and maturity of the longest guarantee contracts as of March 31, 2022 and September 30, 2022:
 
    
March 31, 2022
    
September 30, 2022
 
    
Millions of yen
    
Fiscal year
    
Millions of yen
    
Fiscal year
 
Guarantees
  
Potential

future

payment
    
Book

value of

guarantee

  liabilities  
    
Maturity of

the longest

contract
    
Potential

future

payment
    
Book

value of

guarantee

  liabilities  
    
Maturity of

the longest

contract
 
Corporate loans
   ¥ 436,414      ¥ 4,895        2027      ¥ 473,961      ¥ 5,018        2028  
Transferred loans
     417,587        4,103        2062        478,152        3,569        2062  
Consumer loans
     284,891        47,461        2033        284,499        47,862        2033  
Real estate loans
     12,087        3,953        2048        7,860        2,599        2048  
Other
     2,294        46        2035        2,745        55        2035  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥ 1,153,273      ¥ 60,458        —        ¥ 1,247,217      ¥ 59,103        —    
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Guarantee of corporate loans:
The Company and certain subsidiaries mainly guarantee corporate loans issued by financial institutions for customers. The Company and the subsidiaries are obliged to pay the outstanding loans when the guaranteed customers fail to pay principal and/or interest in accordance with the contract terms. In some cases, the corporate loans are secured by the guaranteed customers’ assets. Once the Company and the subsidiaries assume the guaranteed customers’ obligation, the Company and the subsidiaries obtain a right to claim the collateral assets. In other cases, certain contracts that guarantee corporate loans issued by financial institutions for customers include contracts that the amounts of performance guarantee are limited to a certain range of guarantee commissions. As of March 31, 2022 and September 30, 2022, total notional amount of the loans subject to such guarantees are ¥563,000 million and ¥563,000 million, respectively, and book value of guarantee liabilities are ¥2,317 million and ¥2,393 million, respectively. The potential future payment amounts for these guarantees are limited to a certain range of the guarantee commissions, which are less than the total notional amounts of the loans subject to these guarantees. The potential future payment amounts for the contract period are calculated from the guarantee limit which is arranged by financial institutions in advance as to contracts that the amounts of performance guarantee are unlimited to a certain range of guarantee commissions. For this reason, the potential future payment amounts for these guarantees include the amount of the guarantee which may occur in the future, which is larger than the balance of guarantee executed as of the end of fiscal year or the end of interim period. The executed guarantee balance includes defrayment by financial institutions which we bear temporarily at the time of execution, and credit risk for financial institutions until liquidation of this guarantee. Our substantial amounts of performance guarantee except credit risk for financial institutions are limited to our defrayment which is arranged by financial institutions in advance.
Payment or performance risk of the guarantees is considered based on the historical experience of credit events. There have been no significant changes in the payment or performance risk of the guarantees for the six months ended September 30, 2022.
Guarantee of transferred loans:
A subsidiary in the United States is authorized to underwrite, originate, fund, and service multi-family and seniors housing loans without prior approval mainly from Fannie Mae under the Delegated Underwriting and Servicing program and Freddie Mac under the Delegated Underwriting Initiative program. As part of these programs, Fannie Mae and Freddie Mac provide a commitment to purchase the loans.
Under these programs, the subsidiary guarantees the performance of the loans transferred to Fannie Mae and Freddie Mac and has the payment or performance risk of the guarantees to absorb some of the losses when losses arise from the transferred loans. There were no significant changes in the payment or performance risk of these guarantees for the six months ended September 30, 2022.
As of March 31, 2022 and September 30, 2022, the total outstanding principal amount of loans transferred under the Delegated Underwriting and Servicing program, for which the subsidiary guarantees to absorb some of the losses, were ¥2,121,074 million and ¥2,424,888 million, respectively.
 
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Table of Contents
Guarantee of consumer loans:
A certain subsidiary guarantees consumer loans, typically card loans, issued by Japanese financial institutions. The subsidiary is obligated to pay the outstanding obligations when these loans become delinquent generally three months or more.
Payment or performance risk of the guarantees is considered based on the historical experience of credit events. There were no significant changes in the payment or performance risk of the guarantees for the six months ended September 30, 2022.
Guarantee of real estate loans:
The Company and certain subsidiaries guarantee real estate loans for consumer issued by Japanese financial institutions to third party individuals. The Company and the subsidiaries are typically obliged to pay the outstanding loans when these loans become delinquent three months or more. The real estate loans are usually secured by the real properties. Once the Company and the subsidiaries assume the guaranteed parties’ obligation, the Company and the subsidiaries obtain a right to claim the collateral assets.
Payment or performance risk of the guarantees is considered based on the historical experience of credit events. There were no significant changes in the payment or performance risk of the guarantees for the six months ended September 30, 2022.
Other guarantees:
Other guarantees include the guarantees to financial institutions and the guarantees derived from collection agency agreements. Pursuant to the contracts of the guarantees to financial institutions, a certain subsidiary pays to the financial institutions when customers of the financial institutions become debtors and default on the debts. Pursuant to the agreements of the guarantees derived from collection agency agreements, the Company and certain subsidiaries collect third parties’ debt and pay the uncovered amounts.
Allowance for
off-balance
sheet credit exposures—
If the entity has a present contractual obligation to extend the credit and the obligation is not unconditionally cancelable by the entity, credit losses related the loan commitments of card loans and installment loans and financial guarantees are in the scope of the allowance for credit losses. For the loan commitments of card loans and installment loans, credit losses are recognized on the loan commitments for the portion expected to be drawn. For financial guarantees, the allowance is recognized for the contingent obligation which generates credit risk exposures. These allowance for
off-balance
sheet credit exposures is measured using the same measurement objectives as the allowance for loans and net investment leases, considering quantitative and qualitative factors including historical loss experience, current conditions and reasonable and supportable forecasts. The allowance for
off-balance
sheet credit exposure is recorded as other liabilities in the consolidated balance sheets and the allowance were ¥22,120 million and ¥22,023 million as of March 31 and September 30, 2022, respectively. Additionally, for the six months ended September 30, 2021 and 2022, provision for credit losses for
off-balance
sheet credit exposure were reversals of ¥2,369 million and ¥868 
million, respectively, which was mainly due to improved macroeconomic forecast in the Americas. For the three months ended September 30, 2021 and 2022, provision for credit losses for
off-balance
sheet credit exposure were reversals
of ¥468 million and ¥225 
million, respectively, which was mainly due to improved macroeconomic forecast in the Americas.
Contingencies—
The Company and certain subsidiaries are involved in legal proceedings and claims in the ordinary course of business. In the opinion of management, none of such proceedings and claims will have a significant impact on the Company’s financial position or results of operations.
Collateral—
Other than the assets of the consolidated VIEs pledged as collateral for financing described in Note 10 “Variable Interest Entities”, the Company and certain subsidiaries provide the following assets as collateral for the short-term and long-term debt payables to financial institutions as of March 31, 2022 and September 30, 2022:
 
    
Millions of yen
 
    
March 31, 2022
    
September 30, 2022
 
Lease payments, loans and investment in operating leases
   ¥ 106,699      ¥ 140,945  
Investment in securities
     175,912        177,986  
Property under facility operations
     112,730        127,032  
Other assets and other
     27,784        38,685  
    
 
 
    
 
 
 
Total
   ¥ 423,125      ¥ 484,648  
    
 
 
    
 
 
 
As of March 31, 2022 and September 30, 2022, debt liabilities were secured by shares of subsidiaries, which were eliminated through consolidation adjustment, of ¥147,428 million and ¥147,873 million, respectively, and debt liabilities of affiliates were secured by investment in affiliates of ¥38,399 million and ¥33,933 million, respectively. As of March 31, 2022 and September 30, 2022, and debt liabilities were secured by loans to subsidiaries, which were eliminated through consolidation adjustment, of ¥10,531 million and ¥10,138 million, respectively. In addition, ¥74,334 million and ¥92,239 million, respectively, were pledged primarily by investment in securities for collateral deposits and deposit for real estate transaction as of March 31, 2022 and September 30, 2022.
Under loan agreements relating to short-term and long-term debt from commercial banks and certain insurance companies, the Company and certain subsidiaries are required to provide collateral against these debts at any time if requested by the lenders. The Company and the subsidiaries did not receive any such requests from the lenders as of September 30, 2022.
 
– 126 –

Table of Contents
24.
Segment Information
Financial information about the operating segments reported below is available by segment and evaluated regularly by the chief operating decision maker to make decisions about resource allocations and assess performance.
An overview of operations for each of the ten segments follows below.
 
Corporate Financial Services and Maintenance Leasing
  :    Finance and fee business; leasing and rental of automobiles, electronic measuring instruments and
ICT-related
equipment
Real Estate
  :    Real estate development, rental and management; facility operations; real estate asset management
PE Investment and Concession
  :    Private equity investment; concession
Environment and Energy
  :    Domestic and overseas renewable energy; electric power retailing; ESCO services; sales of solar panels and battery energy storage system; recycling and waste management
Insurance
  :    Life insurance
Banking and Credit
  :    Banking; consumer finance
Aircraft and Ships
  :    Aircraft investment and management; ship-related finance and investment
ORIX USA
  :    Finance, investment and asset management in the Americas
ORIX Europe
  :    Asset management of global equity and fixed income
Asia and Australia
  :    Finance and investment businesses in Asia and Australia
Since April 1, 2022, a portion of interest expenses and a portion of selling, general and administrative expenses, which were initially included in the difference between segment total profits and consolidated amounts, have been charged directly to their respective segments. As a result of these changes, segment data for the three and six months ended September 30, 2021 has been retrospectively restated.
Financial information of the segments for the six months ended September 30, 2021 and 2022, and segment assets information as of March 31, 2022 and September 30, 2022 are as follows:
 
    
Millions of yen
 
    
Six months ended

September 30, 2021
    
Six months ended

September 30, 2022
    
March 31, 2022
    
September 30,
2022
 
    
Segment

revenues
    
Segment

profits
    
Segment

revenues
    
Segment

profits
    
Segment

assets
    
Segment

assets
 
Corporate Financial Services and Maintenance Leasing
   ¥ 230,275      ¥ 46,263      ¥ 211,427      ¥ 35,482      ¥ 1,516,795      ¥ 1,476,243  
Real Estate
     202,514        23,031        190,487        18,949        910,101        907,859  
PE Investment and Concession
     192,150        1,614        250,873        3,905        353,581        370,091  
Environment and Energy
     63,898        9,502        110,914        10,582        703,608        772,944  
Insurance
     235,088        32,322        265,870        13,007        2,072,145        2,052,684  
Banking and Credit
     43,097        20,909        40,944        15,215        2,687,156        2,677,388  
Aircraft and Ships
     17,748        369        28,496        10,649        684,098        752,565  
ORIX USA
     84,988        47,094        79,932        21,596        1,364,142        1,624,316  
ORIX Europe
     101,104        28,458        89,836        16,419        401,869        409,463  
Asia and Australia
     71,705        19,942        92,434        24,148        1,306,089        1,399,094  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   ¥     1,242,567      ¥        229,504      ¥     1,361,213      ¥        169,952      ¥   11,999,584      ¥   12,442,647  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
 
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Table of Contents
Financial information of the segments for the three months ended September 30, 2021 and 2022 are as follows:
 
    
Millions of yen
               
    
Three months ended

September 30, 2021
    
Three months ended

September 30, 2022
               
    
Segment

revenues
    
Segment

profits
    
Segment

revenues
    
Segment

profits
               
Corporate Financial Services and Maintenance Leasing
   ¥ 120,483      ¥ 29,061      ¥ 107,302      ¥ 19,757                    
Real Estate
     105,752        12,439        93,622        7,011                                                            
PE Investment and Concession
     92,526        1,456        129,095        1,718                    
Environment and Energy
     34,569        5,159        64,113        5,990                    
Insurance
     125,907        17,175        138,328        2,117                    
Banking and Credit
     20,271        8,729        20,903        7,979                    
Aircraft and Ships
     9,285        5,323        13,932        5,233                    
ORIX USA
     37,294        22,194        44,350        15,557                    
ORIX Europe
     50,648        15,062        46,139        7,118                    
Asia and Australia
     37,057        11,430        47,433        11,531                    
    
 
 
    
 
 
    
 
 
    
 
 
                   
Total
   ¥        633,792      ¥        128,028      ¥        705,217      ¥          84,011                    
    
 
 
    
 
 
    
 
 
    
 
 
                   
The accounting policies of the segments are almost the same as those described in Note 2 “Significant Accounting and Reporting Policies” except for the treatment of income tax expenses, net income attributable to the noncontrolling interests, net income attributable to the redeemable noncontrolling interests. Net income attributable to noncontrolling interests and redeemable noncontrolling interests are not included in segment profits or losses because the management evaluates segments’ performance based on profits or losses
(pre-tax)
attributable to ORIX Corporation Shareholders. Income taxes are not included in segment profits or losses because the management evaluates segments’ performance on a
pre-tax
basis. Most of selling, general and administrative expenses, including compensation costs that are directly related to the revenue generating activities of each segment and excluding the expenses that should be borne by ORIX Group as a whole, have been accumulated by and charged to each segment. Gains and losses that management does not consider for evaluating the performance of the segments, such as write-downs of certain long-lived assets and certain foreign exchange gains or losses (included in other (income) and expense) are excluded from the segment profits or losses, and are regarded as corporate items.
Assets attributed to each segment are net investment in the leases, installment loans, investment in operating leases, investment in securities, property under facility operations, investment in affiliates, inventories, advances for finance lease and operating lease (included in other assets), advances for property under facility operations (included in other assets), goodwill, intangible assets acquired in business combinations (included in other assets) and servicing assets (included in other assets). This has resulted in the depreciation of office facilities being included in each segment’s profit or loss while the carrying amounts of corresponding assets are not allocated to each segment’s assets. However, the effect resulting from this allocation is not significant.
 
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The reconciliation of segment totals to consolidated financial statement amounts is as follows:
Significant items to be reconciled are segment revenues, segment profits and segment assets. Other items do not have a significant difference between segment amounts and consolidated amounts.
 
    
Millions of yen
 
    
Six months ended
September 30, 2021
   
Six months ended
September 30, 2022
 
Segment revenues:
                
Total revenues for segments
   ¥ 1,242,567     ¥ 1,361,213  
Revenues related to corporate assets
     8,580       12,652  
Revenues from inter-segment transactions
     (9,613     (9,049
    
 
 
   
 
 
 
Total consolidated revenues
   ¥ 1,241,534     ¥ 1,364,816  
    
 
 
   
 
 
 
Segment profits:
                
Total profits for segments
   ¥ 229,504     ¥ 169,952  
Corporate profits (losses)
     (14,934     (10,176
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests
     6,219       4,570  
    
 
 
   
 
 
 
Total consolidated income before income taxes
   ¥ 220,789     ¥ 164,346  
    
 
 
   
 
 
 
   
    
Millions of yen
 
    
Three months ended
September 30, 2021
   
Three months ended
September 30, 2022
 
Segment revenues:
                
Total revenues for segments
   ¥ 633,792     ¥ 705,217  
Revenues related to corporate assets
     5,616       6,354  
Revenues from inter-segment transactions
     (6,687     (4,568
    
 
 
   
 
 
 
Total consolidated revenues
   ¥ 632,721     ¥ 707,003  
    
 
 
   
 
 
 
Segment profits:
                
Total profits for segments
   ¥ 128,028     ¥ 84,011  
Corporate profits (losses)
     (7,898     (6,330
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests
     603       1,650  
    
 
 
   
 
 
 
Total consolidated income before income taxes
   ¥ 120,733     ¥ 79,331  
    
 
 
   
 
 
 
   
    
Millions of yen
 
    
March 31, 2022
   
September 30, 2022
 
Segment assets:
                
Total assets for segments
   ¥ 11,999,584     ¥ 12,442,647  
Cash and cash equivalents, restricted cash
     1,091,812       1,046,021  
Allowance for credit losses
     (69,459     (66,975
Trade notes, accounts and other receivable
     359,949       356,894  
Other corporate assets
     888,786       1,007,419  
    
 
 
   
 
 
 
Total consolidated assets
   ¥          14,270,672     ¥           14,786,006  
    
 
 
   
 
 
 
 
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Table of Contents
The following information represents geographical revenues and income before income taxes, which are attributed to geographic areas, based on the country location of the Company and its subsidiaries for the six months ended September 30, 2021 and 2022.
For the six months ended September 30, 2021
 
    
Millions of yen
 
    
Six months ended September 30, 2021
 
    
Japan
    
The Americas *1
    
Other *2
    
Total
 
Total Revenues
   ¥ 964,192      ¥   123,687      ¥ 153,655      ¥ 1,241,534  
Income before Income Taxes
        118,925        60,057        41,807        220,789  
For the six months ended September 30, 2022
 
    
Millions of yen
 
    
Six months ended September 30, 2022
 
    
Japan
    
The Americas *1
    
Other *2
    
Total
 
Total Revenues
   ¥ 1,065,266      ¥    109,392      ¥ 190,158      ¥ 1,364,816  
Income before Income Taxes
     85,684        24,916        53,746        164,346  
The following information represents geographical revenues and income before income taxes, which are attributed to geographic areas, based on the country location of the Company and its subsidiaries for the three months ended September 30, 2021 and 2022.
For the three months ended September 30, 2021
 
    
Millions of yen
 
    
Three months ended September 30, 2021
 
    
Japan
    
The Americas *1
    
Other *2
    
Total
 
Total Revenues
   ¥ 497,902      ¥     56,246      ¥   78,573      ¥    632,721  
Income before Income Taxes
          66,184        26,190        28,359        120,733  
For the three months ended September 30, 2022
 
    
Millions of yen
 
    
Three months ended September 30, 2022
 
    
Japan
    
The Americas *1
    
Other *2
    
Total
 
Total Revenues
   ¥ 549,794      ¥      60,575      ¥   96,634      ¥     707,003  
Income before Income Taxes
           35,235        16,791        27,305        79,331  
 
*1
 
Mainly the United States
*2
 
Mainly Asia, Europe, Australasia and Middle East
 
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Table of Contents
The following information represents disaggregation of revenues for revenues from contracts with customers, by goods and services category and geographical location for the six months ended September 30, 2021 and 2022.
For the six months ended September 30, 2021
 
   
Millions of yen
 
   
Six months ended September 30, 2021
 
   
Reportable segments
 
   
Corporate
Financial
Services and
Maintenance
Leasing
   
Real Estate
   
PE
Investment
and
Concession
   
Environment
and Energy
   
Insurance
   
Banking and
Credit
   
Aircraft and
Ships
 
Goods or services category
                                                       
Sales of goods
  ¥ 5,512     ¥ 1,446     ¥ 161,106     ¥ 1,688     ¥ 0     ¥ 0     ¥ 0  
Real estate sales
    0       59,110       0       0       0       0       0  
Asset management and servicing
    160       3,117       12       0       0       145       15  
Automobile related services
    31,332       0       0       101       0       0       0  
Facilities operation
    0       13,004       0       0       0       0       0  
Environment and energy services
    1,561       0       44       61,166       0       0       0  
Real estate management and brokerage
    0       51,685       0       0       0       0       0  
Real estate contract work
    0       39,371       0       0       0       0       0  
Other
    25,877       717       13,630       432       1,002       2,822       3,157  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    64,442       168,450       174,792       63,387       1,002       2,967       3,172  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                                       
Japan
    63,975       168,450       174,792       63,387       1,002       2,967       2,180  
The Americas
    0       0       0       0       0       0       0  
Other
    467       0       0       0       0       0       992  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    64,442       168,450       174,792       63,387       1,002       2,967       3,172  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    165,833       34,064       17,358       511       234,086       40,130       14,576  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 230,275     ¥ 202,514     ¥ 192,150     ¥ 63,898     ¥ 235,088     ¥ 43,097     ¥ 17,748  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
   
Millions of yen
       
   
Six months ended September 30, 2021
 
   
Reportable segments
   
Corporate

revenue and

intersegment

transactions
   
Total

revenues
 
   
ORIX USA
   
ORIX Europe
   
Asia and
Australia
   
Total
 
Goods or services category
                                               
Sales of goods
  ¥ 1,066     ¥ 0     ¥ 28     ¥ 170,846     ¥ 632     ¥ 171,478  
Real estate sales
    67       0       0       59,177       0       59,177  
Asset management and servicing
    7,806       99,238       0       110,493       (31     110,462  
Automobile related services
    0       0       6,371       37,804       (6     37,798  
Facilities operation
    0       0       0       13,004       308       13,312  
Environment and energy services
    681       0       0       63,452       (1,014     62,438  
Real estate management and brokerage
    0       0       0       51,685       (1,480     50,205  
Real estate contract work
    0       0       0       39,371       (108     39,263  
Other
    1,302       38       396       49,373       1,605       50,978  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    10,922       99,276       6,795       595,205       (94     595,111  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                               
Japan
    0       0       0       476,753       (72     476,681  
The Americas
    10,922       37,587       0       48,509       0       48,509  
Other
    0       61,689       6,795       69,943       (22     69,921  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    10,922       99,276       6,795       595,205       (94     595,111  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    74,066       1,828       64,910       647,362       (939     646,423  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 84,988     ¥ 101,104     ¥ 71,705     ¥ 1,242,567     ¥ (1,033   ¥ 1,241,534  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
For the six months ended September 30, 2022
 
   
Millions of yen
 
   
Six months ended September 30, 2022
 
   
Reportable segments
 
   
Corporate
Financial
Services and
Maintenance
Leasing
   
Real Estate
   
PE
Investment
and
Concession
   
Environment
and Energy
   
Insurance
   
Banking and
Credit
   
Aircraft and
Ships
 
Goods or services category
                                                       
Sales of goods
  ¥ 2,804     ¥ 1,446     ¥ 216,680     ¥ 1,832     ¥ 0     ¥ 0     ¥ 0  
Real estate sales
    0       39,064       0       0       0       0       0  
Asset management and servicing
    161       3,173       0       136       0       223       34  
Automobile related services
    30,919       0       0       151       0       0       0  
Facilities operation
    0       24,609       0       0       0       0       0  
Environment and energy services
    1,749       24       40       107,095       0       0       0  
Real estate management and brokerage
    0       50,103       0       0       0       0       0  
Real estate contract work
    0       40,912       0       0       0       0       0  
Other
    18,770       779       15,531       538       1,288       3,274       5,060  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    54,403       160,110       232,251       109,752       1,288       3,497       5,094  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                                       
Japan
    54,403       160,110       232,251       99,135       1,288       3,497       1,439  
The Americas
    0       0       0       0       0       0       0  
Other
    0       0       0       10,617       0       0       3,655  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    54,403       160,110       232,251       109,752       1,288       3,497       5,094  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    157,024       30,377       18,622       1,162       264,582       37,447       23,402  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 211,427     ¥ 190,487     ¥ 250,873     ¥ 110,914     ¥ 265,870     ¥ 40,944     ¥ 28,496  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
   
Millions of yen
       
   
Six months ended September 30, 2022
 
   
Reportable segments
   
Corporate

revenue and

intersegment

transactions
   
Total

revenues
 
   
ORIX USA
   
ORIX Europe
   
Asia and
Australia
   
Total
 
Goods or services category
                                               
Sales of goods
  ¥ 1,267     ¥ 0     ¥ 658     ¥ 224,687     ¥ 1,260     ¥ 225,947  
Real estate sales
    9       0       0       39,073       0       39,073  
Asset management and servicing
    10,226       98,373       0       112,326       (19     112,307  
Automobile related services
    0       0       8,935       40,005       1       40,006  
Facilities operation
    0       0       0       24,609       388       24,997  
Environment and energy services
    914       0       0       109,822       (953     108,869  
Real estate management and brokerage
    0       0       0       50,103       (750     49,353  
Real estate contract work
    0       0       0       40,912       21       40,933  
Other
    2,793       41       1,069       49,143       2,971       52,114  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    15,209       98,414       10,662       690,680       2,919       693,599  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                               
Japan
    0       0       0       552,123       3,257       555,380  
The Americas
    15,209       36,694       0       51,903       0       51,903  
Other
    0       61,720       10,662       86,654       (338     86,316  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    15,209       98,414       10,662       690,680       2,919       693,599  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    64,723       (8,578     81,772       670,533       684       671,217  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 79,932     ¥ 89,836     ¥ 92,434     ¥ 1,361,213     ¥ 3,603     ¥ 1,364,816  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
The following information represents disaggregation of revenues for revenues from contracts with customers, by goods and services category and geographical location for the three months ended September 30, 2021 and 2022.
For the three months ended September 30, 2021
 
   
Millions of yen
 
   
Three months ended September 30, 2021
 
   
Reportable segments
 
   
Corporate
Financial
Services and
Maintenance
Leasing
   
Real Estate
   
PE
Investment
and
Concession
   
Environment
and Energy
   
Insurance
   
Banking and
Credit
   
Aircraft and
Ships
 
Goods or services category
                                                       
Sales of goods
  ¥ 2,251     ¥ 836     ¥ 76,664     ¥ 920     ¥ 0     ¥ 0     ¥ 0  
Real estate sales
    0       29,864       0       0       0       0       0  
Asset management and servicing
    89       1,387       3       0       0       77       9  
Automobile related services
    14,897       0       0       51       0       0       0  
Facilities operation
    0       7,927       0       0       0       0       0  
Environment and energy services
    806       0       44       33,170       0       0       0  
Real estate management and brokerage
    0       26,217       0       0       0       0       0  
Real estate contract work
    0       22,567       0       0       0       0       0  
Other
    13,395       377       6,838       178       515       1,436       1,872  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    31,438       89,175       83,549       34,319       515       1,513       1,881  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                                       
Japan
    31,273       89,175       83,549       34,319       515       1,513       1,432  
The Americas
    0       0       0       0       0       0       0  
Other
    165       0       0       0       0       0       449  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    31,438       89,175       83,549       34,319       515       1,513       1,881  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    89,045       16,577       8,977       250       125,392       18,758       7,404  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 120,483     ¥ 105,752     ¥ 92,526     ¥ 34,569     ¥ 125,907     ¥ 20,271     ¥ 9,285  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
   
Millions of yen
       
   
Three months ended September 30, 2021
 
   
Reportable segments
   
Corporate

revenue and

intersegment

transactions
   
Total

revenues
 
   
ORIX USA
   
ORIX Europe
   
Asia and
Australia
   
Total
 
Goods or services category
                                               
Sales of goods
  ¥ 552     ¥ 0     ¥ 27     ¥ 81,250     ¥ 404     ¥ 81,654  
Real estate sales
    33       0       0       29,897       0       29,897  
Asset management and servicing
    3,328       50,700       0       55,593       (13     55,580  
Automobile related services
    0       0       3,297       18,245       (7     18,238  
Facilities operation
    0       0       0       7,927       166       8,093  
Environment and energy services
    424       0       0       34,444       (573     33,871  
Real estate management and brokerage
    0       0       0       26,217       (1,094     25,123  
Real estate contract work
    0       0       0       22,567       (114     22,453  
Other
    962       22       221       25,816       574       26,390  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    5,299       50,722       3,545       301,956       (657     301,299  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                               
Japan
    0       0       0       241,776       (647     241,129  
The Americas
    5,299       19,116       0       24,415       0       24,415  
Other
    0       31,606       3,545       35,765       (10     35,755  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    5,299       50,722       3,545       301,956       (657     301,299  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    31,995       (74     33,512       331,836       (414     331,422  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 37,294     ¥ 50,648     ¥ 37,057     ¥ 633,792     ¥ (1,071   ¥ 632,721  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
For the three months ended September 30, 2022
 
   
Millions of yen
 
   
Three months ended September 30, 2022
 
   
Reportable segments
 
   
Corporate
Financial
Services and
Maintenance
Leasing
   
Real Estate
   
PE
Investment
and
Concession
   
Environment
and Energy
   
Insurance
   
Banking and
Credit
   
Aircraft and
Ships
 
Goods or services category
                                                       
Sales of goods
  ¥ 1,445     ¥ 781     ¥ 111,496     ¥ 1,107     ¥ 0     ¥ 0     ¥ 0  
Real estate sales
    0       17,387       0       0       0       0       0  
Asset management and servicing
    90       1,342       0       100       0       118       17  
Automobile related services
    15,145       0       0       64       0       0       0  
Facilities operation
    0       14,064       0       0       0       0       0  
Environment and energy services
    878       11       26       62,310       0       0       0  
Real estate management and brokerage
    0       25,185       0       0       0       0       0  
Real estate contract work
    0       22,816       0       0       0       0       0  
Other
    9,295       473       7,956       200       652       1,636       2,625  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    26,853       82,059       119,478       63,781       652       1,754       2,642  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                                       
Japan
    26,853       82,059       119,478       57,763       652       1,754       568  
The Americas
    0       0       0       0       0       0       0  
Other
    0       0       0       6,018       0       0       2,074  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    26,853       82,059       119,478       63,781       652       1,754       2,642  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    80,449       11,563       9,617       332       137,676       19,149       11,290  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 107,302     ¥ 93,622     ¥ 129,095     ¥ 64,113     ¥ 138,328     ¥ 20,903     ¥ 13,932  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
     
   
Millions of yen
       
   
Three months ended September 30, 2022
 
   
Reportable segments
   
Corporate

revenue and

intersegment

transactions
   
Total

revenues
 
   
ORIX USA
   
ORIX Europe
   
Asia and
Australia
   
Total
 
Goods or services category
                                               
Sales of goods
  ¥ 564     ¥ 0     ¥ 213     ¥ 115,606     ¥ 719     ¥ 116,325  
Real estate sales
    10       0       0       17,397       0       17,397  
Asset management and servicing
    4,607       48,586       0       54,860       (10     54,850  
Automobile related services
    0       0       4,679       19,888       4       19,892  
Facilities operation
    0       0       0       14,064       173       14,237  
Environment and energy services
    510       0       0       63,735       (514     63,221  
Real estate management and brokerage
    0       0       0       25,185       (352     24,833  
Real estate contract work
    0       0       0       22,816       (31     22,785  
Other
    763       23       805       24,428       1,267       25,695  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    6,454       48,609       5,697       357,979       1,256       359,235  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Geographical location
                                               
Japan
    0       0       0       289,127       1,384       290,511  
The Americas
    6,454       18,267       0       24,721       0       24,721  
Other
    0       30,342       5,697       44,131       (128     44,003  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues from contracts with customers
    6,454       48,609       5,697       357,979       1,256       359,235  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other revenues *
    37,896       (2,470     41,736       347,238       530       347,768  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Segment revenues/Total revenues
  ¥ 44,350     ¥ 46,139     ¥ 47,433     ¥ 705,217     ¥ 1,786     ¥ 707,003  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
*
Other revenues include revenues that are not in the scope of revenue from contracts with customers, such as life insurance premiums and related investment income, operating leases, finance revenues that include interest income, and others.
 
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Table of Contents
25.
Subsequent Events
There are no material subsequent events.
 
– 135 –