Ricoh 2006 Annual Report Download - page 36

As of March 31, 2006, the m inim um lease paym ents 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
2007 ¥201,372 $1,721,128
2008 163,493 1,397,376
2009 123,527 1,055,786
2010 75,409 644,521
2011 30,851 263,684
2012 and thereafter 9,046 77,317
Total ¥603,698 $5,159,812
Ricoh Leasing Com pany, Ltd. has also extended certain other types of loans as
part of its business activity, which are prim arily 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, 2005 and 2006 was ¥50,131 m illion and ¥52,295 m illion ( $446,966
thousand) , respectively. The current portions of loan receivables were ¥1,341
million and ¥1,468 m illion ( $12,547 thousand) , respectively, as of March 31,
2005 and 2006, and are included in short-term finance receivables, net in the
accompanying balance sheet. Loan activity for the years ended March 31, 2004,
2005 and 2006 is as follow:
Thousands of
Millions of Yen U.S. Dollars
2004 2005 2006 2006
Extension of new loans ¥13,686 ¥12,456 ¥12,657 $108,179
Repayment of outstanding loans 12,706 13,001 10,495 89,701
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 subj ect 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 retained interest in such receivable for failure of
debtors to pay. 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 comm ensurate with the risk free rate plus a risk
prem ium.
Key economic assum ptions used in measuring the fair value of retained
interests related to securitization transactions com pleted during the years ended
March 31, 2005 and 2006 were as follows:
2005 2006
Expected credit losses 0.75% – 1.35% 0.35% – 0.50%
Discount rate 2.00% – 3.00% 2.00% – 3.00%
35 ANNUAL REPORT 2006
The impacts of 10% and 20% adverse changes to the key economic assum ptions on the fair value of retained interests as of March 31, 2006 are
presented below.
Thousands of
Millions of Yen U.S. Dollars
2006 2006
Carrying value of retained interests ( included in lease deposits and other in the consolidated balance sheet) ¥5,914 $50,547
Expected credit losses:
+ 10% 32 274
+ 20% 65 556
Discount rate:
+ 10%
22 188
+ 20% 44 376
Thousands of
Millions of Yen U.S. Dollars
2005 2006 2006
Minimum lease payments receivable ¥568,911 ¥603,698 $5,159,812
Estimated non-guaranteed residual value 3,030 4,144 35,419
Unearned income ( 48,290) (50,797) (434,162)
Allowance for doubtful receivables ( 15,199) (15,023) (128,402)
Lease receivables, net 508,452 542,022 4,632,667
Less: Current portion of lease receivable, net ( 165,295) (177,414) (1,516,359)
Amounts due after one year, net ¥343,157 ¥364,608 $3,116,308