Notes to Consolidated Financial Statements
1.
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Overview of Accounting Principles Utilized
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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), except for the accounting for stock splits.
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, 2019 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) Revenue recognition for revenue from contracts with customers
Under U.S. GAAP, revenues from contracts with customers such as sales of goods and real estate, and services income 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.
Under Japanese GAAP, revenues are generally recognized when cash or monetary assets are received as a consideration by sales of
goods or rendering of services in accordance with realization principle.
(b) 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 by using interest method. Initial direct costs of operating leases are being deferred and amortized as a straight-line basis over the life of the related lease.
Under Japanese GAAP, those initial direct costs are recognized as expenses when they are incurred.
(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.
(e) Accounting for goodwill and other intangible assets in business combination
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 a corridor test.
Under Japanese GAAP, the net actuarial gain (loss) is fully amortized over a certain term within the average remaining service
period of employees.
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