30. Estimated Fair Value of Financial Instruments

The following information is provided to help readers gain an understanding of the relationship between amounts reported in the accompanying consolidated financial statements and the related market or fair value.

The disclosures include financial instruments and derivatives financial instruments, except for investment in direct financing leases, investment in subsidiaries and affiliates, pension obligations and insurance contracts.

March 31, 2010


	Millions of yen
	Carrying amount		Estimated fair value
Trading instruments
Trading securities	¥	49,596	¥	49,596
Futures, Foreign exchange contracts:
Assets		1,198		1,198
Liabilities		766		766
Credit derivatives held/written:
Assets		528		528
Liabilities		40		40
Options held/written, Caps held:
Assets		555		555
Liabilities		189		189
Non-trading instruments
Assets:
Cash and cash equivalents	¥	639,087	¥	639,087
Restricted cash		77,486		77,486
Time deposits		548		548
Installment loans (net of allowance for probable loan losses)		2,330,697		2,318,466
Investment in securities:
Practicable to estimate fair value		903,658		902,943
Not practicable to estimate fair value		150,904		150,904
Liabilities:
Short-term debt		573,565		573,565
Deposits		853,269		855,620
Long-term debt		3,836,270		3,869,238
Futures, Foreign exchange contracts:
Assets		877		877
Liabilities		4,971		4,971
Foreign currency swap agreements:
Assets		13,724		13,724
Liabilities		23,053		23,053
Interest rate swap agreements:
Assets		192		192
Liabilities		2,956		2,956

March 31, 2011


	Millions of yen				Millions of U.S. dollars
	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
Trading instruments
Trading securities	¥	71,991	¥	71,991	$	866	$	866
Futures, Foreign exchange contracts:
Assets		1,524		1,524		18		18
Liabilities		1,254		1,254		15		15
Credit derivatives held/written:
Assets		49		49		1		1
Liabilities		236		236		3		3
Options held/written, Caps held, and other:
Assets		3,467		3,467		42		42
Liabilities		2,071		2,071		25		25

Non-trading instruments
Assets:
Cash and cash equivalents	¥	732,127	¥	732,127	$	8,805	$	8,805
Restricted cash		118,065		118,065		1,420		1,420
Time deposits		5,148		5,148		62		62
Installment loans (net of allowance for probable loan losses)		2,850,215		2,860,886		34,278		34,406
Investment in securities:
Practicable to estimate fair value		937,129		937,541		11,270		11,275
Not practicable to estimate fair value		166,261		166,261		2,000		2,000
Liabilities:
Short-term debt		478,633		478,633		5,756		5,756
Deposits		1,065,175		1,070,513		12,810		12,874
Long-term debt		4,531,268		4,491,271		54,495		54,014
Futures, Foreign exchange contracts:
Assets		1,109		1,109		13		13
Liabilities		3,714		3,714		45		45
Foreign currency swap agreements:
Assets		14,766		14,766		178		178
Liabilities		33,481		33,481		403		403
Interest rate swap agreements:
Assets		2,070		2,070		25		25
Liabilities		1,320		1,320		16		16

Estimation of fair value

The following methods and significant assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate a value:

Cash and cash equivalents, restricted cash, time deposits and short-term debt—The carrying amounts recognized in the balance sheets were determined to be reasonable estimates of their fair values due to their short maturity.

Installment loans—The carrying amounts of floating-rate installment loans with no significant changes in credit risk and which could be repriced within a short-term period were determined to be reasonable estimates of their fair values. The carrying amounts of purchased loans were determined to be reasonable estimates of their fair values. For certain homogeneous categories of medium- and long-term fixed-rate loans, such as housing loans, the estimated fair values were calculated by discounting the future cash flows using the current interest rates charged by the Company and its subsidiaries for new loans made to borrowers with similar credit ratings and remaining maturities. Concerning above, if available, estimated fair values were based on quoted market prices or quotations provided by dealers.

Investment in securities—For trading securities and available-for-sale securities other than specified bonds issued by SPEs and certain other mortgage-backed and asset-backed securities, the estimated fair values, which are also the carrying amounts recorded in the balance sheets, were generally based on quoted market prices or quotations provided by dealers. As for the specified bonds issued by the SPEs and certain other mortgage-backed and asset-backed securities included in available-for-sale securities, the Company and its subsidiaries estimated the fair value by discounting future cash flows (see Note 2). For held-to-maturity securities, the estimated fair values were based on quoted market prices, if available. If a quoted market price was not available, estimated fair values were determined using quoted market prices for similar securities or the carrying amounts (where carrying amounts were believed to approximate the estimated fair values). For certain investments funds included in other securities, the fair values are estimated based on net asset value per share. With regard to other securities other than the investment funds described above, the Company and its subsidiaries have not estimated the fair value, as it is not practicable to do so. Those other securities mainly consist of non-marketable equity securities and preferred capital shares. Because there were no quoted market prices for such other securities and each security has a different nature and characteristics, reasonable estimates of fair values could not be made without incurring excessive costs.

Deposits—The carrying amounts of demand deposits recognized in the consolidated balance sheets were determined to be reasonable estimates of their fair values. The estimated fair values of time deposits were calculated by discounting the future cash flows. The current interest rates offered for the deposits with similar terms and remaining average maturities were used as the discount rates.

Long-term debt—The carrying amounts of long-term debt with floating rates which could be repriced within short-term periods were determined to be reasonable estimates of their fair values. For medium-and long-term fixed-rate debt, the estimated fair values were calculated by discounting the future cash flows. The borrowing interest rates that were currently available to the Company and its subsidiaries offered by financial institutions for debt with similar terms and remaining average maturities were used as the discount rates. Concerning above, if available, estimated fair values were based on quoted market prices or quotations provided by dealers.

Derivatives—For exchange-traded derivatives, fair value is based on quoted market prices. Fair value estimates for other derivatives generally reflect the estimated amounts that the Company and its subsidiaries would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts. Discounted amounts of future cash flows using the current interest rate are used when estimating the fair values for most of the Company’s and its subsidiaries’ derivatives.