Ricoh 2005 Annual Report Download - page 36

As of March 31, 2005, the minimum lease payments receivable due in each of
the next five years and thereafter are as follows:
Thousands of
Years ending March 31 Millions of Yen U.S. Dollars
2006 ¥181,272 $1,694,131
2007 156,743 1,464,888
2008 118,513 1,107,598
2009 73,263 684,701
2010 32,161 300,570
2011 and thereafter 6,959 65,037
Total ¥568,911 $5,316,925
Ricoh Leasing Company, Ltd. has also extended certain other types of loans as
part of its business activity, which are primarily residential housing loans to
individuals in Japan secured by the underlying real estate properties. Loan
terms range from 15 years to 30 years with monthly repayments. The total
balance of these loans, net of allowance for doubtful receivables, as of March
31, 2004 and 2005 was ¥51,455 million and ¥50,131 million ( $468,514
thousand) , respectively. The current portions of loan receivables were ¥2,506
million and ¥1,341 million ( $12,533 thousand) , respectively, as of March 31,
2004 and 2005, and are included in short-term finance receivables, net in the
accompanying balance sheet. Loan activity for the years ended March 31, 2003,
2004 and 2005 is as follow:
Thousands of
Millions of Yen U.S. Dollars
2003 2004 2005 2005
Extension of new loans ¥11,559 ¥13,686 ¥12,456 $116,411
Repayment of outstanding loans 9,993 12,706 13,001 121,505
Ricoh sold finance lease receivables in prior years through securitization
transactions. Servicing assets or liabilities related to securitization transactions
initiated were not recorded, because the servicing fees adequately compensate
Ricoh. Ricoh’s retained interests are subordinate to the investor’s interests.
Their value is subject to credit and interest rate risk on the sold financial assets.
The investors and Special Purpose Entities that hold the lease receivables have
limited recourse to Ricoh’s other assets for failure of debtors to pay. Ricoh
recognizes gains or losses attributable to the change in the fair value of the
retained interests, which are recorded at estimated fair value and accounted for
as “trading” securities. Ricoh determines the value of the retained interests by
discounting the future cash flows. Those cash flows are estimated based on
credit losses and other information as available and are discounted at a rate
which Ricoh believes is commensurate with the risk free rate plus a risk
premium.
Key economic assumptions used in measuring the fair value of retained
interests related to securitization transactions completed during the years ended
March 31, 2004 and 2005 were as follows:
2004 2005
Expected credit losses 0.75% – 1.35% 0.75% – 1.35%
Discount rate 0.90% – 3.00% 2.00% – 3.00%
35 ANNUAL REPORT 2005
The impacts of 10% and 20% adverse changes to the key economic assumptions on the fair value of retained interests as of March 31, 2005 are
presented below.
Thousands of
Millions of Yen U.S. Dollars
2005 2005
Carrying value of retained interests ( included in lease deposits and other in the consolidated balance sheet) ¥5,373 $50,215
Expected credit losses:
+ 10% 84 785
+ 20% 168 1,570
Discount rate:
+ 10% 20 187
+ 20% 40 374
The hypothetical scenario does not reflect expected market conditions and
should not be used as a prediction of future performance. As the figures
indicate, changes in fair value may not be linear. Also, in the above table, the
effect of a variation in a particular assumption on the fair value of the retained
interest is calculated without changing any other assumption; in reality,
changes in one factor may result in changes in another, which might magnify
or counteract the sensitivities.
The following table summarizes certain cash flows received from and paid to
the Special Purpose Entities for all securitization activity for the years ended
March 31, 2003, 2004 and 2005:
Thousands of
Millions of Yen U.S. Dollars
2003 2004 2005 2005
Servicing fees received ¥ 37 ¥ 25 ¥ 22 $ 206
Repurchases of delinquent or ineligible assets 5,750 4,643 4,060 37,944