Form 6-K

(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

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 ¥7,131,552 million as of September 30, 2021. 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, 2021. 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.

During the six months ended September 30, 2021, we made an advance prepayment of ¥60,000 million of subordinated syndicated loan (hybrid loan), that may be repaid after 5 years from the execution, out of the total amount of ¥94,000 million borrowed in fiscal 2017. On the other hand, in order to procure the same amount, in fiscal 2021, we issued ¥50,000 million of unsecured subordinated bonds with interest payment deferrable clauses and optional early redemption conditions (hybrid bonds), and during the six months ended September 30, 2021, we procured ¥10,000 million in financing by entering into a subordinated syndicated loan (hybrid loan). We intend to continue to strengthen our financial condition, while maintaining appropriately diverse funding.

Short-term and long-term debt and deposits

(a) Short-term debt


	Millions of yen
	March 31, 2021		September 30, 2021
Borrowings from financial institutions	¥	291,578	¥	368,115
Medium-term notes		1,336		1,337
Commercial paper		14,355		124,524

Total short-term debt	¥	307,269	¥	493,976

Short-term debt as of September 30, 2021 was ¥493,976 million, which accounted for 10% of the total amount of short-term and long-term debt (excluding deposits) as compared to 7% as of March 31, 2021.
While the amount of short-term debt as of September 30, 2021 was ¥493,976 million, the sum of cash and cash equivalents and the unused amount of committed credit facilities as of September 30, 2021 was ¥1,499,856 million, maintaining a sufficient level of liquidity.
(b) Long-term debt

	Millions of yen
	March 31, 2021		September 30, 2021
Borrowings from financial institutions	¥	3,189,083	¥	3,142,338
Bonds		927,088		974,262
Medium-term notes		141,296		86,878
Payables under securitized loan receivables and other assets		159,366		148,016

Total long-term debt	¥	4,416,833	¥	4,351,494

The balance of long-term debt as of September 30, 2021 was ¥4,351,494 million, which accounted for 90% of the total amount of short-term and long-term debt (excluding deposits) as compared to 93% as of March 31, 2021.
(c) Deposits
	Millions of yen
	March 31, 2021		September 30, 2021
Deposits	¥	2,317,785	¥	2,286,082

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.

– 21 –

(4) Condensed Consolidated Statements of Changes in Equity (Unaudited)

Six months ended September 30, 2020


	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, 2020	¥	221,111	¥	257,638		¥	2,754,461		¥	(118,532	)	¥	(121,070	)	¥	2,993,608		¥	72,227		¥	3,065,835

Cumulative effect of adopting Accounting Standards Update 2016-13							(42,855	)								(42,855	)		(71	)		(42,926	)

Balance at April 1, 2020	¥	221,111	¥	257,638		¥	2,711,606		¥	(118,532	)	¥	(121,070	)	¥	2,950,753		¥	72,156		¥	3,022,909

Contribution to subsidiaries																0			3,825			3,825
Transaction with noncontrolling interests				3,152												3,152			(8,312	)		(5,160	)
Comprehensive income, net of tax:
Net income							93,842									93,842			1,673			95,515
Other comprehensive income (loss)
Net change of unrealized gains (losses) on investment in securities										1,871						1,871			8			1,879
Net change of debt valuation adjustments										(534	)					(534	)		0			(534	)
Net change of defined benefit pension plans										127						127			(2	)		125
Net change of foreign currency translation adjustments										(6,671	)					(6,671	)		(1,798	)		(8,469	)
Net change of unrealized gains (losses) on derivative instruments										(525	)					(525	)		5			(520	)

Total other comprehensive income (loss)																(5,732	)		(1,787	)		(7,519	)

Total comprehensive income (loss)																88,110			(114	)		87,996

Cash dividends							(51,493	)								(51,493	)		(6,554	)		(58,047	)
Acquisition of treasury stock													(11,243	)		(11,243	)		0			(11,243	)
Disposal of treasury stock				(183	)								257			74			0			74
Cancellation of treasury stock				(17,877	)								17,877			0			0			0
Other, net				331			(1	)					1			331			0			331

Balance at September 30, 2020	¥	221,111	¥	243,061		¥	2,753,954		¥	(124,264	)	¥	(114,178	)	¥	2,979,684		¥	61,001		¥	3,040,685

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
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

Note:

Changes in the redeemable noncontrolling interests are not included in this table. For further information, see Note 12 “Redeemable Noncontrolling Interests.”

– 30 –

Table of Contents

Three months ended September 30, 2020


	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, 2020	¥	221,111	¥	239,888		¥	2,710,160	¥	(122,704	)	¥	(113,281	)	¥	2,935,174		¥	70,378		¥	3,005,552

Contribution to subsidiaries															0			2,525			2,525
Transaction with noncontrolling interests				3,216											3,216			(8,234	)		(5,018	)
Comprehensive income, net of tax:
Net income							43,794								43,794			1,243			45,037
Other comprehensive income (loss)
Net change of unrealized gains (losses) on investment in securities									3,282						3,282			3			3,285
Net change of debt valuation adjustments									(102	)					(102	)		0			(102	)
Net change of defined benefit pension plans									29						29			(1	)		28
Net change of foreign currency translation adjustments									(5,618	)					(5,618	)		(1,682	)		(7,300	)
Net change of unrealized gains (losses) on derivative instruments									849						849			16			865

Total other comprehensive income (loss)															(1,560	)		(1,664	)		(3,224	)

Total comprehensive income (loss)															42,234			(421	)		41,813

Cash dividends															0			(3,247	)		(3,247	)
Acquisition of treasury stock												(1,155	)		(1,155	)		0			(1,155	)
Disposal of treasury stock				(183	)							257			74			0			74
Other, net				140								1			141			0			141

Balance at September 30, 2020	¥	221,111	¥	243,061		¥	2,753,954	¥	(124,264	)	¥	(114,178	)	¥	2,979,684		¥	61,001		¥	3,040,685

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
Net change of unrealized gains o n 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


Note:		Changes in the redeemable noncontrolling interests are not included in this table.

– 31 –

Table of Contents

(5) Condensed Consolidated Statements of Cash Flows (Unaudited)


	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021
Cash Flows from Operating Activities:
Net income	¥	95,492		¥	152,719
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		154,979			164,237
Principal payments received under net investment in leases		208,285			213,774
Provision for credit losses		7,336			2,106
Equity in net income of affiliates (excluding interest on loans)		(1,483	)		(4,760	)
Gains on sales of subsidiaries and affiliates and liquidation losses, net		(7,681	)		(6,473	)
Bargain purchase gain		(4,365	)		0
Gains on sales of securities other than trading		(6,510	)		(13,017	)
Gains on sales of operating lease assets		(15,888	)		(26,238	)
Write-downs of long-lived assets		583			88
Write-downs of securities		3,876			60
(Increase) d ecrease in trading securities		(14,617	)		38,414
Increase in inventories		(7,436	)		(211	)
Decrease in trade notes, accounts and other receivable		17,982			31,665
Decrease in trade notes, accounts and other payable		(48,200	)		(45,908	)
Increase in policy liabilities and policy account balances		136,488			63,412
Other, net		931			23,288

Net cash provided by operating activities		519,772			593,156

Cash Flows from Investing Activities:
Purchases of lease equipment		(313,194	)		(426,635	)
Installment loans made to customers		(541,225	)		(586,801	)
Principal collected on installment loans		501,231			580,149
Proceeds from sales of operating lease assets		81,998			88,398
Investment in affiliates, net		(6,206	)		(13,881	)
Proceeds from sales of investment in affiliates		18,550			17,734
Purchases of available-for-sale debt securities		(265,217	)		(240,909	)
Proceeds from sales of available-for-sale debt securities		129,725			179,630
Proceeds from redemption of available-for-sale debt securities		18,970			34,180
Purchases of equity securities other than trading		(12,443	)		(30,450	)
Proceeds from sales of equity securities other than trading		14,402			47,813
Purchases of property under facility operations		(26,396	)		(12,799	)
Acquisitions of subsidiaries, net of cash acquired		(1,709	)		(90,090	)
Sales of subsidiaries, net of cash disposed		319			4,143
Other, net		(18,953	)		13,157

Net cash used in investing activities		(420,148	)		(436,361	)

Cash Flows from Financing Activities:
Net increase in debt with maturities of three months or less		68,417			159,408
Proceeds from debt with maturities longer than three months		515,997			475,898
Repayment of debt with maturities longer than three months		(526,556	)		(591,890	)
Net increase (decrease) in deposits due to customers		90,431			(31,813	)
Cash dividends paid to ORIX Corporation shareholders		(51,493	)		(52,438	)
Acquisition of treasury stock		(11,243	)		(30,547	)
Contribution from noncontrolling interests		7,723			7,271
Purchases of shares of subsidiaries from noncontrolling interests		(4,282	)		(1,289	)
Net increase (decrease) in call money		(10,000	)		2,500
Other, net		(6,849	)		(13,304	)

Net cash provided by (used in) financing activities		72,145			(76,204	)

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash		253			1,726

Net increase in Cash, Cash Equivalents and Restricted Cash		172,022			82,317

Cash, Cash Equivalents and Restricted Cash at Beginning of Period		1,135,284			1,079,575

Cash, Cash Equivalents and Restricted Cash at End of Period	¥	1,307,306		¥	1,161,892


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, 2020 and September 30, 2021, respectively.


	Millions of yen
	September 30, 2020		September 30, 2021
Cash and Cash Equivalents	¥	1,182,557	¥	1,030,893
Restricted Cash		124,749		130,999

Cash, Cash Equivalents and Restricted Cash	¥	1,307,306	¥	1,161,892

– 32 –

Table of Contents

(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.

– 34 –

(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.

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.

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.

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 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 indefinite-lived intangible assets.

In addition, we carefully considered the future outlook regarding the spread of the

COVID-19.

As of September 30, 2021, 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

and the resulting global economic slowdown is uncertain and it may change rapidly. Therefore, our accounting estimates and assumptions may change over time.

– 35 –

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.

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, based on the following five steps;

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

In accordance with these steps, 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.

– 36 –

Table of Contents

(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.

(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 principals and interests are 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.

Gains on investment securities and dividends

—

Gains on investment securities are recorded on a trade date basis. Dividends are recorded when right to receive dividends is established.

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.

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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 ¥741,022 million and ¥767,801 million as of March 31, 2021 and September 30, 2021, 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.

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.

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(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 conditions and trends and expected outlook in 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 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.

(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 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.

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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.

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, 2020 and 2021 were approximately 28.8% and 30.8%

, respectively. These rates are approximately 32.3% and 32.0% for the three months ended September 30, 2020 and 2021, respectively. For the six and three months ended September 30, 2020 and 2021, 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.

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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.

The Company and certain subsidiaries have elected to file a consolidated tax return in Japan for National Corporation tax purposes.

(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.

(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 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.

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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) Stock splits

Stock splits implemented prior to October 1, 2001 had been accounted for by transferring an amount equivalent to the par value of the shares from additional

paid-in

capital to common stock as required by the Japanese Commercial Code (the “Code”) before amendment. However, no such reclassification was made for stock splits when common stock already included a portion of the proceeds from shares issued at a price in excess of par value. This method of accounting was in conformity with accounting principles generally accepted in Japan.

As a result of a revision to the Code before amendment effective on October 1, 2001 and the Companies Act implemented on May 1, 2006, the above-mentioned method of accounting required by the Code became unnecessary.

In the United States, stock splits in comparable circumstances are considered to be stock dividends and are accounted for by transferring from retained earnings to common stock and additional

paid-in

capital amounts equal to the fair market value of the shares issued. Common stock is increased by the par value of the shares and additional

paid-in

capital is increased by the excess of the market value over par value of the shares issued.

Had such stock splits made prior to October 1, 2001 been accounted for in this manner, additional

paid-in

capital as of September 30, 2021 would have increased by approximately ¥24,674 million, with a corresponding decrease in retained earnings. Total ORIX Corporation shareholders’ equity would remain unchanged. Stock splits on May 19, 2000 were excluded from the above amounts because the stock splits were not considered to be stock dividends under U.S. GAAP.

(o) 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.

(p) Restricted cash

Restricted cash consists of trust accounts under securitization programs and real estate, deposits related to servicing agreements, deposits collected on the underlying assets and applied to

non-recourse

loans, deposits held on behalf of third parties in the aircraft-related business and others.

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(q) 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

Loans held for sale are included in installment loans, and the outstanding balances of these loans as of March 31, 2021 and September 30, 2021 were ¥72,658 million and ¥82,320 million, respectively. There were ¥63,272 million and ¥73,857 million of loans held for sale as of March 31, 2021 and September 30, 2021, respectively, measured at fair value by electing the fair value option.

(r) 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 thermal power stations), 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 was ¥132,184 million and ¥146,919 million as of March 31, 2021 and September 30, 2021, respectively.

(s) Trade notes, accounts and other receivable

Trade notes, accounts and other receivable primarily include accounts receivables in relation to sales of assets to be leased, inventories and other assets, and receivables relating to debt securities sold.

(t) 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, 2021 and September 30, 2021, residential condominiums under development were ¥57,502 million and ¥67,848 million, respectively, and completed residential condominiums and merchandise for sale were ¥84,654 million and ¥65,043 million, respectively.

The Company and its subsidiaries recorded ¥125 million and ¥9,914

million of write-downs principally on completed residential condominiums and merchandise for sale for the six months ended September 30, 2020 and 2021, respectively, primarily resulting from a decrease in expected sales price. The amounts of such write-downs for the three months ended September 30, 2020 and 2021 were ¥63 million and ¥9,870 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.

(u) 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 ¥68,524 million and ¥70,820 million as of March 31, 2021 and September 30, 2021, respectively.

(v)

Right-of-use

assets

The Company and its subsidiaries record the 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.

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(w) 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.

(x) 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.

(y) 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 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 subsidiaries do not perform the quantitative goodwill impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or 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 subsidiaries conclude that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the Company and/or subsidiaries do not perform the quantitative impairment test. However, if the Company and/or subsidiaries conclude otherwise or determine to bypass the qualitative assessment, the Company and/or 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 ¥495,276 million and ¥561,118 million as of March 31, 2021 and September 30, 2021, respectively.

The amount of other intangible assets was ¥425,548 million and ¥422,738 million as of March 31, 2021 and September 30, 2021, respectively.

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(z) Trade notes, accounts and other payable

Trade notes, accounts and other payable include primarily accounts payable in relation to purchase of assets to be leased, merchandise for sale and other assets, accounts payable in relation to construction work of residential condominiums and deposits received mainly for withholding income tax.

(aa) 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.

(ab) Capitalization of interest costs

The Company and its subsidiaries capitalize interest costs primarily related to assets under construction such as specific environmental assets, long-term real estate development and ship projects.

(ac) Advertising

The costs of advertising are expensed as incurred.

(ad) 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.

(ae) Additional acquisition and partial sale of the parent’s ownership interest in subsidiaries

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. On the other hand, 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.

(af) Redeemable noncontrolling interests

Noncontrolling interests in a certain subsidiary are redeemable preferred shares which are subject to call and put rights upon certain shareholder 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.

(ag) Issuance of stock by an affiliate

When an affiliate issues stocks to unrelated third parties, the Company and its subsidiaries’ ownership interest in the affiliate decreases. In the event that the price per share is more or less than the Company and its subsidiaries’ average carrying amount per share, 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.

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(ah) 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 December 2019, Accounting Standards Update

2019-12

(“Simplifying the Accounting for Income Taxes”—ASC 740 (“Income Taxes”)) was issued. This update removes the exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment, the exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary, and other exceptions. This update also simplifies certain other elements of the accounting for income taxes. The income tax simplifications related to changes in ownership of foreign equity method investments and foreign subsidiaries shall be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The other amendments in this update shall be applied on a retrospective basis to all periods presented, or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, or on a prospective basis. The Company and its subsidiaries adopted this update on April 1, 2021. The effects of adopting this update on the Company and its subsidiaries’ financial position at the adoption date were a decrease of ¥215 million in current and deferred income taxes and an increase of ¥215 million in retained earnings in the consolidated balance sheets. There is no material effect on the Company and its subsidiaries’ results of operation and financial position as of and for the six and three months ended September 30, 2021 by adopting this update, as compared to the guidance that was in effect before the change.

In January 2020, Accounting Standards Update

2020-01

(“Clarifying the Interactions between Equity Securities, Equity Method and Joint Ventures, and Derivatives and Hedging”—ASC 321 (“Investments—Equity Securities”), ASC 323 (“Investments—Equity Method and Joint Ventures), and ASC 815 (“Derivatives and Hedging)) was issued. This update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with ASC 321 (“Investments—Equity Securities”) immediately before applying or upon discontinuing the equity method. This update also clarifies the scope of considerations for forward contracts and purchased options on certain securities that do not meet the definition of a derivative. The Company and its subsidiaries adopted this update on April 1, 2021. The adoption of this update had no material effect on the Company and its subsidiaries’ results of operations or financial position.

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 did not adopt these updates as of September 30, 2021. The Company and its subsidiaries expect to adopt these updates during the reference rate transition period. We are currently in the process of identifying the potential effect on the Company and its subsidiaries’ results of operations or financial position by the adoption of these updates.

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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. This update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted. Entities that have adopted ASC 842 (“Leases”) before the issuance date of this Update have the option to apply the amendments either retrospectively to leases that commenced or were modified on or after the adoption of Update

2016-02

(ASC 842 (“Leases”)) or prospectively to leases that commence or are modified on or after the date that an entity first applies the amendments. The Company and its subsidiaries will adopt this update on April 1, 2022. 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.

In October 2021, Accounting Standard Update 2021-08 (“Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”—ASC 805 (“Business Combinations”)) was issued. This update requires 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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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 financia

assets and liabilities measured at fair value on a recurring basis as of March 31, 2021 and September 30, 2021:

March 31, 2021


	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	¥	63,272		¥	0	¥	63,272	¥	0
Trading debt securities		2,654			0		2,654		0
Available-for-sale debt securities:		2,003,917			6,012		1,864,448		133,457
Japanese and foreign government bond securities*2		821,158			3,105		818,053		0
Japanese prefectural and foreign municipal bond securities		276,276			0		273,515		2,761
Corporate debt securities*3		742,251			2,907		738,323		1,021
CMBS and RMBS in the Americas		34,457			0		34,457		0
Other asset-backed securities and debt securities		129,775			0		100		129,675
Equity securities45		396,465			82,039		223,016		91,410
Derivative assets:		22,696			352		8,521		13,823
Interest rate swap agreements		1,867			0		1,867		0
Options held/written and other		19,504			0		5,681		13,823
Futures, foreign exchange contracts		1,179			352		827		0
Foreign currency swap agreements		146			0		146		0
Netting*6		(1,944	)		0		0		0
Net derivative assets		20,752			0		0		0
Other assets:		6,297			0		0		6,297
Reinsurance recoverables*7		6,297			0		0		6,297

Total	¥	2,495,301		¥	88,403	¥	2,161,911	¥	244,987

Liabilities:
Derivative liabilities:	¥	71,034		¥	475	¥	70,526	¥	33
Interest rate swap agreements		23,818			0		23,818		0
Options held/written and other		17,009			0		16,976		33
Futures, foreign exchange contracts		25,739			475		25,264		0
Foreign currency swap agreements		4,459			0		4,459		0
Credit derivatives held		9			0		9		0
Netting*6		(1,944	)		0		0		0
Net derivative Liabilities		69,090			0		0		0
Policy Liabilities and Policy Account Balances:		266,422			0		0		266,422
Variable annuity and variable life insurance contracts*8		266,422			0		0		266,422

Total	¥	337,456		¥	475	¥	70,526	¥	266,455

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September 30, 2021


	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	¥	73,857		¥	0	¥	73,857	¥	0
Trading debt securities		2,483			0		2,483		0
Available-for-sale debt securities:		2,051,245			8,581		1,905,428		137,236
Japanes e and foreign government bond securities*2		790,202			1,150		789,052		0
Japanese prefectural and foreign municipal bond securities		289,172			0		286,381		2,791
Corporate debt securities*3		805,653			7,431		797,413		809
CMBS and RMBS in the Americas		32,482			0		32,482		0
Other asset-backed securities and debt securities		133,736			0		100		133,636
Equity securities45		390,965			114,346		184,611		92,008
Derivative assets:		26,693			816		10,240		15,637
Interest rate swap agreements		1,706			0		1,706		0
Options held/written and other		18,699			0		3,062		15,637
Futures, foreign exchange contracts		5,228			816		4,412		0
Foreign currency swap agreements		1,060			0		1,060		0
Netting*6		(4,686	)		0		0		0
Net derivative assets		22,007			0		0		0
Other assets:		5,564			0		0		5,564
Reinsurance recoverables*7		5,564			0		0		5,564

Total	¥	2,550,807		¥	123,743	¥	2,176,619	¥	250,445

Liabilities:
Derivative liabilities:	¥	51,270		¥	6	¥	51,232	¥	32
Interest rate swap agreements		19,594			0		19,594		0
Options held/written and other		16,996			0		16,964		32
Futures, foreign exchange contracts		13,173			6		13,167		0
Foreign currency swap agreements		1,507			0		1,507		0
Netting*6		(4,686	)		0		0		0
Net derivative Liabilities		46,584			0		0		0
Policy Liabilities and Policy Account Balances:		226,221			0		0		226,221
Variable annuity and variable life insurance contracts*8		226,221			0		0		226,221

Total	¥	277,491		¥	6	¥	51,232	¥	226,253

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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 loss of ¥461 million and a gain of ¥1,069 million from the change in the fair value of the loans for the six months ended September 30, 2020 and 2021, respectively. Included in “Other (income) and expense” in the consolidated statements of income were a gain of ¥1,982 million and a loss of ¥525 million from the change in the fair value of the loans for the three months ended September 30, 2020 and 2021, respectively. No gains or losses were recognized in earnings during the six months ended September 30, 2020 and 2021 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, 2021, were ¥60,556 million and ¥63,272 million, respectively, and the amount of the aggregate fair value exceeded the amount of aggregate unpaid principal balance by ¥2,716 million. The amounts of aggregate unpaid principal balance and aggregate fair value of the loans held for sale as of September 30, 2021, were ¥70,022 million and ¥73,857 million, respectively, and the amount of the aggregate fair value exceeded the amount of aggregate unpaid principal balance by ¥3,835 million. As of March 31, 2021 and September 30, 2021, there were no loans that are 90 days or more past due or, in

non-accrual

status.

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 gains of ¥14 million and ¥51 million from the change in the fair value of those investments for the six months ended September 30, 2020 and 2021, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a loss of ¥3 million and a gain of ¥20 million from the change in the fair value of those investments for the three months ended September 30, 2020 and 2021, respectively. The amount of aggregate fair value elected the fair value option was ¥1,537

million as of March 31, 2021. There were no such investments elected the fair value option as of September 30, 2021.

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 gains of ¥1,147 million and ¥24 million from the change in the fair value of those investments for the six months ended September 30, 2020 and 2021, respectively. Included in “Gains on investment securities and dividends” in the consolidated statements of income were a gain of ¥18 million and a loss of ¥18 million from the change in the fair value of those investments for the three months ended September 30, 2020 and 2021, respectively. The amounts of aggregate fair value elected the fair value option were ¥2,907 million and ¥7,431 million as of March 31, 2021 and September 30, 2021, 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 ¥2,614 million and ¥585 million from the change in the fair value of those investments for the six months ended September 30, 2020 and 2021, 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 ¥2,724 million and ¥248 million from the change in the fair value of those investments for the three months ended September 30, 2020 and 2021, respectively. The amounts of aggregate fair value elected the fair value option were ¥4,940 million and ¥8,552 million as of March 31, 2021 and September 30, 2021, respectively.

*5	The amounts of investment funds measured at net asset value per share which are not included in the above tables were ¥13,737 million and ¥15,732 million as of March 31, 2021 and September 30, 2021, respectively.

*6	It 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 ¥6,297 million and ¥5,564 million as of March 31, 2021 and September 30, 2021, 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, 2020 and 2021, 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 ¥266,422 million and ¥226,221 million as of March 31, 2021 and September 30, 2021, 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, 2020 and 2021, see Note 17 “Life Insurance Operations.”

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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
	Balance at April 1, 2021		Included in earnings *1			Included in other comprehensive income *2			Total			Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net)		Balance at September 30, 2021
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		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	)

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.”

*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.”

“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.

In the six months ended September 30, 2020, corporate debt securities totaling ¥2,000 million and investment funds totaling ¥325 million were transferred from Level 3 to Level 2, since the inputs became observable. There were no transfers in or out of Level 3 in the six months ended September 30, 2021,

– 53 –

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
	Balance at June 30, 2021		Included in earnings *1			Included in other comprehensive income *2			Total			Purchases*3		Sales			Settlements*4			Transfers in and/ or out of Level 3 (net)		Balance at September 30, 2021
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		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	)

Principally, gains and losses from

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

*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.”

In the three months ended September 30, 2020, corporate debt securities totaling ¥2,000 million and investment funds totaling ¥325 million were transferred from Level 3 to Level 2, since the inputs became observable. There were no transfers in or out of Level 3 in the three months ended September 30, 2021.

– 55 –

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 and property under facility operations, 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 and property under facility operations, 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 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

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.

Goodwill

The Company and its subsidiaries mainly use discounted cash flow methodologies and business enterprise value multiples methodologies to measure the fair value of goodwill. The fair value of goodwill is classified as Level 3 because unobservable inputs are used in the methodologies.

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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, 2021 and September 30, 2021.


	March 31, 2021
	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	¥	2,761	Appraisals/Broker quotes	—	—
Corporate debt securities		1,021	Discounted cash flows	Discount rate	0.3% – 1.8% (0.7%)
Other asset-backed securities and debt securities		25,891	Discounted cash flows	Discount rate	1.0% – 51.2% (11.1%)
				Probability of default	1.9% (1.9%)
		103,784	Appraisals/Broker quotes	—	—
Equity securities:
Investment funds		78,134	Discounted cash flows	WACC	13.1% – 18.7% (16.8%)
				EV/Terminal EBITDA multiple	7.3x-10.5x (8.6x)
			Market multiples	EV/Last twelve months EBITDA multiple	6.8x-9.5x (7.8x)
				EV/Forward EBITDA multiple	7.6x-11.6x (9.0x)
				EV/Precedent transaction last twelve months EBITDA multiple	7.7x-10.9x (9.1x)
		13,276	Appraisals/Broker quotes	—	—
Derivative assets:
Options held/written and other		13,762	Discounted cash flows	Discount rate	12.0% – 33.0% (14.3%)
		61	Appraisals/Broker quotes	—	—
Other assets:
Reinsurance recoverables		6,297	Discounted cash flows	Discount rate	0.0% – 0.4% (0.1%)
				Mortality rate	0.0% – 100.0% (1.6%)
				Lapse rate	1.5% – 14.0% (6.7%)
				Annuitization rate (guaranteed minimum annuity benefit)	0.0% – 100.0% (100.0%)

Total	¥	244,987

Liabilities:
Derivative liabilities:
Options held/written and other	¥	33	Appraisals/Broker quotes	—	—
Policy liabilities and Policy Account Balances:
Variable annuity and variable life insurance contracts		266,422	Discounted cash flows	Discount rate	0.0% – 0.4% (0.1%)
				Mortality rate	0.0% – 100.0% (1.6%)
				Lapse rate	1.5% – 30.0% (6.9%)
				Annuitization rate (guaranteed minimum annuity benefit)	0.0% – 100.0% (76.7%)

Total	¥	266,455

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Table of Contents

	September 30, 2021
	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	¥	2,791	Appraisals/Broker quotes	—	—
Corporate debt securities		809	Discounted cash flows	Discount rate	0.3% – 0.7% (0.5%)
Other asset-backed securities and debt securities		25,596	Discounted cash flows	Discount rate	0.1% – 51.2% (10.6%)
				Probability of default	1.9% (1.9%)
		108,040	Appraisals/Broker quotes	—	—
Equity securities:
Investment funds, and others		73,632	Discounted cash flows	WACC	10.0% – 18.6% (16.0%)
				EV/Terminal EBITDA multiple	8.0x – 10.5x (8.6x)
			Market multiples	EV/Last twelve months EBITDA multiple	7.4x – 9.1x (7.9x)
				EV/Forward EBITDA multiple	6.2x – 10.6x (9.1x)
				EV/Precedent transaction last twelve months EBITDA multiple	7.6x – 11.8x
					(9.4x)
		18,376	Appraisals/Broker quotes	—	—
Derivative assets:
Options held/written and other		15,577	Discounted cash flows	Discount rate	12.0% – 33.0% (14.4%)
		60	Appraisals/Broker quotes	—	—
Other assets:
Reinsurance recoverables		5,564	Discounted cash flows	Discount rate	(0.1)% – 0.4% (0.1%)
				Mortality rate	0.0% – 100.0% (1.9%)
				Lapse rate	1.5% – 14.0% (5.9%)
				Annuitization rate (guaranteed minimum annuity benefit)	0.0% – 100.0% (100.0%)

Total	¥	250,445

Liabilities:
Derivative liabilities:
Options held/written and other	¥	32	Appraisals/Broker quotes	—	—
Policy liabilities and Policy Account Balances:
Variable annuity and variable life insurance contracts		226,221	Discounted cash flows	Discount rate	(0.1)% – 0.4% (0.1%)
				Mortality rate	0.0% – 100.0% (1.7%)
				Lapse rate	1.5% – 30.0% (6.5%)
				Annuitization rate (guaranteed minimum annuity benefit)	0.0% – 100.0% (72.2%)

Total	¥	226,253

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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, 2021 and the six months ended September 30, 2021.


	Year ended March 31, 2021
	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)	¥	1,953	Direct capitalization	Capitalization rate	5.1% – 7.0% (5.9%)
		8,726	Appraisals	—	—
Investment in operating leases and property under facility operations		4,934	Appraisals	—	—
Certain equity securities		3,577	Appraisals	—	—
Certain investments in affiliates		2,614	Appraisals	—	—
Certain goodwill		775	Market multiples	EV/Precedent transaction last twelve months EBITDA multiple	5.5x (5.5x)

	¥	22,579


	Six months ended September 30, 2021
	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)	¥	1,171	Direct capitalization	Capitalization rate	5.2% – 8.5% (6.1%)
		6,603	Appraisals	—	—
Investment in operating leases and property under facility operations		672	Appraisals	—	—
Certain investments in affiliates		228	Appraisals	—	—

	¥	8,674

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, 2020 and 2021.

In addition, purchase price allocations have been completed during the three months ended June 30, 2020, for investees engaged in wind power generation in India, which were acquired as wholly-owned subsidiaries. As a result, the fair value of the consideration paid fell below the fair value of net assets, which was the difference between identifiable assets and underwriting liabilities, by ¥4,365 million and the amount was recognized as bargain purchase gains. The Company did not recognize any bargain purchase gain during the six months ended September 30, 2021.

(2) Divestitures

Gains on sales of subsidiaries and affiliates and liquidation losses, net for the six months ended September 30, 2020 and 2021 amounted to ¥7,681 million and ¥6,473 million, respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the six months ended September 30, 2020 mainly consisted of ¥2,426 million in ORIX USA segment and ¥4,936 million in Asia and Australia segment. 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 three months ended September 30, 2020 and 2021 amounted to ¥2,361 million and ¥3,476 million, respectively. Gains on sales of subsidiaries and affiliates and liquidation losses, net for the three months ended September 30, 2020 mainly consisted of ¥2,040 million in ORIX USA segment and ¥126 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 mainly consisted of ¥3,397 million in ORIX USA segment.

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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, 2020 and 2021 are as follows;


	Millions of yen		Millions of yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Revenues from contracts with customers	¥	505,743	¥	595,111
Other revenues *		578,995		646,423

Total revenues	¥	1,084,738	¥	1,241,534


	Millions of yen		Millions of yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Revenues from contracts with customers	¥	249,114	¥	301,299
Other revenues *		297,983		331,422

Total revenues	¥	547,097	¥	632,721

*	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, and 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, and facilities, and other, 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 business management 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, 2021 and September 30, 2021.


	Millions of yen
	March 31, 2021		September 30, 2021
Trade Notes, Accounts and Other Receivable	¥	180,828	¥	176,293
Contract assets (Included in Other Assets)		6,558		11,415
Contract liabilities (Included in Other Liabilities)		40,436		34,767

For the six months ended September 30, 2020 and 2021, there were no significant changes in contract assets. For the six months ended September 30, 2020 and 2021, there were no significant changes in contract liabilities.

For the six months ended September 30, 2020, revenue amounted to ¥21,579 million was included in contract liabilities as of the beginning of the previous fiscal year. For the six months ended September 30, 2021, revenue amounted to ¥25,631 million was included in contract liabilities as of the end of the previous fiscal year.

For the three months ended September 30, 2020, revenue amounted to ¥7,622 million was included in contract liabilities as of the beginning of the previous fiscal year. For the three months ended September 30, 2021, revenue amounted to ¥6,468 million was included in contract liabilities as of the end of the previous fiscal year.

As of September 30, 2021, 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 ¥139,993 million. Remaining term for the obligations ranges up to 13 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.

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Table of Contents

Leases

Lessor

Lease income for the six and three months ended September 30, 2020 and 2021 are as follows:


	Millions of yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Lease income—net investment in leases
Interest income	¥	34,313	¥	35,962
Other		865		998
Lease income—operating leases *		197,961		227,933

Total lease income	¥	233,139	¥	264,893

Gains from the disposition of real estate under operating leases included in operating lease revenues were ¥12,754 million and ¥15,440 million, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues were ¥3,134 million and ¥10,798 million, for the six months ended September 30, 2020 and 2021, respectively.



	Millions of yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Lease income—net investment in leases
Interest income	¥	17,217	¥	18,157
Other		478		429
Lease income—operating leases *		103,015		114,467

Total lease income	¥	120,710	¥	133,053

Gains from the disposition of real estate under operating leases included in operating lease revenues were ¥8,050 million and ¥7,475 million, and gains from the disposition of operating lease assets other than real estate included in operating lease revenues were ¥2,022 million and ¥5,731 million, for the three months ended September 30, 2020 and 2021, 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, 2020 and 2021.

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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—by portfolio segment

Credit quality of financial assets—by class

•

Credit quality indicators

•

Past-due

financing receivables

•

Non-accrual

Information about troubled debt restructurings—by class

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.

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, 2021, and for the six and three months ended September 30, 2020 and 2021:


	Six months ended September 30, 2020
	Millions of yen
	Installment loans												Net investment in leases			Other financial assets measured at amortized cost *2			Total
	Consumer			Corporate						Purchased loans *1
	Consumer			Non-recourse loans			Other than non-recourse loans			Purchased loans *1
Allowance for credit losses :
Beginning balance	¥	20,542		¥	1,786		¥	20,209		¥	1,458		¥	11,692		¥	1,149		¥	56,836
Cumulative effect of adopting According Standards Update 2016-13		14,500			1,601			10,725			0			3,550			1,369			31,745
Reclassification to allowance for investment in operating leases *3		0			0			0			0			0			(312	)		(312	)
Balance at April 1, 2020		35,042			3,387			30,934			1,458			15,242			2,206			88,269
Provision (Reversal)		4,007			124			6,149			5			1,464			782			12,531
Allowance of purchased loans during the reporting period		0			0			0			340			0			0			340
Charge-offs *4		(5,178	)		0			(7,903	)		(427	)		(604	)		(146	)		(14,258	)
Recoveries		251			0			69			30			8			0			358
Other *6		228			(97	)		(828	)		102			96			54			(445	)

Ending balance	¥	34,350		¥	3,414		¥	28,421		¥	1,508		¥	16,206		¥	2,896		¥	86,795

Collective (pool) assessment		30,168			3,193			18,618			664			9,090			1,210			62,943
Individual assessment		4,182			221			9,803			844			7,116			1,686			23,852

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	Three months ended September 30, 2020
	Millions of yen
	Installment loans												Net investment in leases			Other financial assets measured at amortized cost *2			Total
	Consumer			Corporate						Purchased loans *1
	Consumer			Non-recourse loans			Other than non-recourse loans			Purchased loans *1
Allowance for credit losses :
Beginning balance	¥	36,322		¥	3,755		¥	31,646		¥	1,152		¥	16,219		¥	2,766		¥	91,860
Provision (Reversal)		956			(273	)		2,570			393			449			177			4,272
Allowance of purchased loans during the reporting period		0			0			0			302			0			0			302
Charge-offs *5		(2,975	)		0			(5,374	)		(340	)		(381	)		(117	)		(9,187	)
Recoveries		162			0			16			(1	)		(2	)		0			175
Other *6		(115	)		(68	)		(437	)		2			(79	)		70			(627	)

Ending balance	¥	34,350		¥	3,414		¥	28,421		¥	1,508		¥	16,206		¥	2,896		¥	86,795


	March 31, 2021
	Millions of yen
	Installment loans												Net investment in leases			Other financial assets measured at amortized cost *2			Total
	Consumer			Corporate						Purchased loans *1
	Consumer			Non-recourse loans			Other			Purchased loans *1
Allowance for credit losses :
Ending balance	¥	29,010		¥	3,482		¥	23,141		¥	1,835		¥	16,522		¥	6,005		¥	79,995

Individually evaluated for impairment		24,761			3,250			15,372			681			13,267			810			58,141
Not individually evaluated for impairment		4,249			232			7,769			1,154			3,255			5,195			21,854

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	Six months ended September 30, 2021
	Millions of yen
	Installment loans												Net investment in leases			Other financial assets measured at amortized cost *2			Total
	Consumer			Corporate						Purchased loans *1
	Consumer			Non-recourse loans			Other than non-recourse loans			Purchased loans *1
Allowance for credit losses :
Beginning balance	¥	29,010		¥	3,482		¥	23,141		¥	1,835		¥	16,522		¥	6,005		¥	79,995
Provision (Reversal)		2,786			(545	)		698			(86	)		672			1,587			5,112
Allowance of purchased loans during the reporting period		0			0			0			1,752			0			0			1,752
Charge-offs *4		(3,025	)		0			(1,495	)		(1,811	)		(998	)		(573	)		(7,902	)
Recoveries		22			0			50			9			10			11			102
Other *6		16			36			119			3			37			14			225

Ending balance	¥	28,809		¥	2,973		¥	22,513		¥	1,702		¥	16,243		¥	7,044		¥	79,284

Collective (pool) assessment		24,611			2,739			16,516			639			12,758			638			57,901
Individual assessment		4,198			234			5,997			1,063			3,485			6,406			21,383

	Three months ended September 30, 2021
	Millions of yen
	Installment loans												Net investment in leases			Other financial assets measured at amortized cost *2			Total
	Consumer			Corporate						Purchased loans *1
	Consumer			Non-recourse loans			Other than non-recourse loans			Purchased loans *1
Allowance for credit losses :
Beginning balance	¥	28,963		¥	2,982		¥	23,228		¥	1,815		¥	16,335		¥	6,216		¥	79,539
Provision (Reversal)		1,330			(50	)		407			(66	)		399			866			2,886
Allowance of purchased loans during the reporting period		0			0			0			1,537			0			0			1,537
Charge-offs *5		(1,509	)		0			(1,281	)		(1,589	)		(521	)		(54	)		(4,954	)
Recoveries		9			0			13			7			8			7			44
Other *6		16			41			146			(2	)		22			9			232

Ending balance	¥	28,809		¥	2,973		¥	22,513		¥	1,702		¥	16,243		¥	7,044		¥	79,284


Notes	1:	Loans held for sale and policy loan receivables of an insurance entity are not in the scope of 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.

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. Due to the adoption of Credit Losses Standard, allowance of ¥176,714 million was recorded as credit loss

gross-up

treatment for purchased loans on April 1, 2020, and the same amount has been

charged-off.

Other financial assets measured at amortized cost includes the allowance for credit losses on financial receivables, such as loans to affiliates and accounts receivable. The provision for credit losses of loans to affiliates recorded in equity in net income (loss) of affiliates were ¥261 million and ¥637

million during six months ended September 30, 2020 and 2021, respectively. The provision for credit losses of loans to affiliates were ¥173 million and ¥58 million during three months ended September 30, 2020 and 2021, respectively. In addition, the allowance for credit losses on loans to affiliates recorded as a reduction in investment in affiliates were

¥1,050 million and ¥1,713 million as of March 31, 2021 and September 30, 2021, respectively.

*3	The allowance for accrued lease payments for receivable from operating leases was reclassified to the investment in operating leases balance on April 1, 2020, due to the application of the Credit Losses Standard.

*4	Included in Charge-off in write-offs of purchased loans were ¥340 million and ¥1,752 million during six months ended September 30, 2020 and 2021, respectively.

*5	Included in Charge-off in write-offs of purchased loans were ¥302 million and ¥1,537 million during three months ended September 30, 2020 and 2021, respectively.

*6	Other mainly includes foreign currency translation adjustments and decreases in allowance related to sales of subsidiaries.

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The following table provides information about purchased loans which is acquired for the six and three months ended September 30, 2020 and 2021:

	Millions of yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Purchase price	¥	387	¥	1,420
Allowance for credit losses at acquisition date		340		1,752
Discount or premium attributable to other factors		57		122

Par value	¥	784	¥	3,294


	Millions of yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Purchase price	¥	311	¥	460
Allowance for credit losses at acquisition date		302		1,537
Discount or premium attributable to other factors		51		30

Par value	¥	664	¥	2,027

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 conditions and trends and expected outlook in future.

In common with all classes, the Company and its subsidiaries monitor the credit quality indicators as performing and

non-performing

assets.

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.

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.

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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 oth

r compani

s, 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, 2021 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.

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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The following table provides information about the origination years of financial assets as of March 31, 2021 and September 30, 2021. 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, 2021
Millions of yen
Portfolio segment	Origination year (years ended March 31)
Class
Credit Quality	2021		2020		2019		2018		2017		Prior		Total
Consumer borrowers:
Performing	¥	371,914	¥	443,079	¥	332,461	¥	220,035	¥	223,814	¥	498,350	¥	2,089,653
Non-Performing		11,041		7,854		5,132		3,176		2,612		3,609	¥	33,424

Real estate loans
Performing		362,832		431,483		327,967		217,380		223,540		498,080	¥	2,061,282
Non-Performing		96		735		1,598		1,683		2,068		3,459	¥	9,639
Other*
Performing		9,082		11,596		4,494		2,655		274		270	¥	28,371
Non-Performing		10,945		7,119		3,534		1,493		544		150	¥	23,785
Corporate borrowers:
Performing		341,346		378,732		207,214		124,889		71,400		97,113	¥	1,220,694
Non-Performing		6,972		12,215		6,594		7,266		4,110		10,709	¥	47,866

Non-recourse loans
Japan
Performing		6,637		24,428		5,283		2,802		0		8,806	¥	47,956
The Americas
Performing		1,349		52,413		28,291		15,817		5,178		8,764	¥	111,812
Non-Performing		58		0		0		0		0		1,259	¥	1,317
Other than non-recourse loans
Real estate companies in Japan
Performing		103,982		62,274		35,065		28,743		25,487		21,753	¥	277,304
Non-Performing		70		252		192		0		690		538	¥	1,742
Real estate companies in overseas
Performing		42,980		55,678		10,695		4,992		1,976		2,976	¥	119,297
Non-Performing		0		3,049		2,057		4,946		1,056		3,397	¥	14,505
Commercial, industrial and other companies in Japan
Performing		78,281		41,166		30,116		12,746		11,798		18,664	¥	192,771
Non-Performing		1,210		3,865		205		878		82		1,022	¥	7,262
Commercial, industrial and other companies in overseas
Performing		108,117		142,773		97,764		59,789		26,961		36,150	¥	471,554
Non-Performing		5,634		5,049		4,140		1,442		2,282		4,493	¥	23,040
Purchased loans:
Performing		527		0		0		168		119		9,714	¥	10,528
Non-Performing		0		0		0		15		0		1,808	¥	1,823

Net investment in leases:
Performing		333,190		268,966		171,040		105,708		62,977		68,712	¥	1,010,593
Non-Performing		1,366		3,057		3,441		3,151		2,980		4,930	¥	18,925

Japan
Performing		184,342		165,580		121,072		84,928		57,393		67,040	¥	680,355
Non-Performing		151		776		1,194		1,512		1,261		2,213	¥	7,107
Overseas
Performing		148,848		103,386		49,968		20,780		5,584		1,672	¥	330,238
Non-Performing		1,215		2,281		2,247		1,639		1,719		2,717	¥	11,818
Other financial assets measured at amortized cost
Performing		14,882		1,045		67		938		2,502		13,762	¥	33,196
Non-Performing		0		0		0		908		0		0	¥	908

Total (excluding revolving repayment card loans)
Performing	¥	1,061,859	¥	1,091,822	¥	710,782	¥	451,738	¥	360,812	¥	687,651	¥	4,364,664
Non-Performing	¥	19,379	¥	23,126	¥	15,167	¥	14,516	¥	9,702	¥	21,056	¥	102,946

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September 30, 2021
Millions of yen
Portfolio segment	Origination year (years ended March 31)												Total
Class
Credit Quality	2022		2021		2020		2019		2018		Prior
Consumer borrowers:
Performing	¥	168,093	¥	327,780	¥	428,311	¥	322,084	¥	207,577	¥	675,265	¥	2,129,110
Non-Performing		6,354		8,392		8,073		5,324		2,963		5,883	¥	36,989

Real estate loans
Performing		157,470		321,295		419,984		318,539		203,971		673,761	¥	2,095,020
Non-Performing		1		176		2,696		2,729		1,866		5,253	¥	12,721
Other*
Performing		10,623		6,485		8,327		3,545		3,606		1,504	¥	34,090
Non-Performing		6,353		8,216		5,377		2,595		1,097		630	¥	24,268
Corporate borrowers:
Performing		244,783		245,189		314,568		156,733		99,529		124,014	¥	1,184,816
Non-Performing		662		5,615		7,074		4,541		6,873		16,986	¥	41,751

Non-recourse loans
Japan
Performing		18,708		6,680		24,336		5,282		2,777		8,418	¥	66,201
The Americas
Performing		0		2,847		49,365		21,306		9,829		6,904	¥	90,251
Non-Performing		0		58		0		0		0		1,272	¥	1,330
Other than non-recourse loans
Real estate companies in Japan
Performing		70,363		69,028		50,431		30,885		26,230		39,535	¥	286,472
Non-Performing		0		50		1,027		179		0		1,242	¥	2,498
Real estate companies in overseas
Performing		17,884		30,945		45,578		3,573		5,048		912	¥	103,940
Non-Performing		0		0		469		682		4,980		3,998	¥	10,129
Commercial, industrial and other companies in Japan
Performing		45,096		43,786		31,435		17,625		8,346		18,527	¥	164,815
Non-Performing		655		580		2,401		184		443		793	¥	5,056
Commercial, industrial and other companies in overseas
Performing		92,732		91,903		113,423		78,062		47,299		49,718	¥	473,137
Non-Performing		7		4,927		3,177		3,496		1,450		9,681	¥	22,738
Purchased loans:
Performing		0		518		26		0		207		10,242	¥	10,993
Non-Performing		0		0		0		0		0		1,706	¥	1,706

Net investment in leases:
Performing		226,955		264,198		217,472		130,477		79,941		96,423	¥	1,015,466
Non-Performing		886		1,568		3,528		2,806		2,504		6,926	¥	18,218

Japan
Performing		107,485		152,961		143,172		99,576		66,401		93,168	¥	662,763
Non-Performing		28		443		962		1,037		1,415		3,027	¥	6,912
Overseas
Performing		119,470		111,237		74,300		30,901		13,540		3,255	¥	352,703
Non-Performing		858		1,125		2,566		1,769		1,089		3,899	¥	11,306
Other financial assets measured at amortized cost
Performing		13,198		3,602		330		33		1,179		16,405	¥	34,747
Non-Performing		0		0		774		0		1,476		0	¥	2,250

Total (excluding revolving repayment card loans)
Performing	¥	653,029	¥	841,287	¥	960,707	¥	609,327	¥	388,433	¥	922,349	¥	4,375,132
Non-Performing	¥	7,902	¥	15,575	¥	19,449	¥	12,671	¥	13,816	¥	31,501	¥	100,914

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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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, 2021 and September 30, 2021 are as follows:

	March 31, 2021
	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	¥	183,722	¥	0	¥	183,722	¥	4,364,664	¥	4,548,386

Non-Performing		1,132		3,693		4,825		102,946	¥	107,771


	September 30, 2021
	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	¥	174,094	¥	0	¥	174,094	¥	4,375,132	¥	4,549,226

Non-Performing		1,317		3,582		4,899		100,914	¥	105,813

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 financing receivables 90 days or more

past-due

that are not individually evaluated, and consider all others as loans that are 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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The following table provides information about the

past-due

financial assets as of March 31, 2021 and September 30, 2021:


	March 31, 2021
		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		¥	4,553	¥	10,257	¥	14,810	¥	2,311,624
	Real estate loans		1,375		2,515		3,890		2,070,921
	Card loans		371		1,105		1,476		188,547
	Other		2,807		6,637		9,444		52,156
Corporate borrowers			8,296		24,443		32,739		1,268,560
Non-recourse loans	Japan		0		0		0		47,956
	The Americas		5,193		1,316		6,509		113,129
Other than Non-recourse loans	Real estate companies in Japan		144		778		922		279,046
	Real estate companies in overseas		0		14,505		14,505		133,802
	Commercial, industrial and other companies in Japan		592		1,993		2,585		200,033
	Commercial, industrial and other companies in overseas		2,367		5,851		8,218		494,594
Net investment in leases			9,332		17,128		26,460		1,029,518
	Japan		2,257		6,347		8,604		687,462
	Overseas		7,075		10,781		17,856		342,056

Total		¥	22,181	¥	51,828	¥	74,009	¥	4,609,702


	September 30, 2021
		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		¥	3,980	¥	11,098	¥	15,078	¥	2,345,092
	Real estate loans		1,209		2,336		3,545		2,107,741
	Card loans		321		1,310		1,631		178,993
	Other		2,450		7,452		9,902		58,358
Corporate borrowers			8,490		19,313		27,803		1,226,567
Non-recourse loans	Japan		0		0		0		66,201
	The Americas		0		1,331		1,331		91,581
Other than Non-recourse loans	Real estate companies in Japan		350		643		993		288,970
	Real estate companies in overseas		0		10,130		10,130		114,069
	Commercial, industrial and other companies in Japan		3,281		1,591		4,872		169,871
	Commercial, industrial and other companies in overseas		4,859		5,618		10,477		495,875
Net investment in leases			10,473		16,765		27,238		1,033,684
	Japan		2,980		6,201		9,181		669,675
	Overseas		7,493		10,564		18,057		364,009

Total		¥	22,943	¥	47,176	¥	70,119	¥	4,605,343

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, 2021 and September 30, 2021:

March 31, 2021
Millions of yen
	Installment loans						Net investment in leases		Total
	Consumer borrowers		Corporate borrowers
	Consumer borrowers		Non- recourse loans		Other than non- recourse loans
Non-accrual of financial assets:
Ending balance	¥	10,322	¥	10,148	¥	43,672	¥	17,166	¥	81,308
Interest income recognized during the reporting period		519		0		229		0		748
Balance not associated allowance for credit losses among financial assets measured at amortized cost, which is suspending recognition of income		736		0		10,572		0		11,308

September 30, 2021
Millions of yen
	Installment loans						Net investment in leases		Total
	Consumer borrowers		Corporate borrowers
	Consumer borrowers		Non- recourse loans		Other than non- recourse loans
Non-accrual of financial assets:
Beginning balance	¥	10,322	¥	10,148	¥	43,672	¥	17,166	¥	81,308
Ending balance		11,167		10,256		36,318		16,805		74,546
Interest income recognized during the reporting period		259		0		184		0		443
Balance not associated allowance for credit losses among financial assets measured at amortized cost, which is suspending recognition of income		667		0		11,303		0		11,970

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

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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The following table provides information about troubled debt restructurings of financing receivables that occurred during the six and three months ended September 30, 2020 and 2021:

Six months ended September 30, 2020
		Millions of yen
Portfolio segment	Class	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Consumer borrowers		¥	5,379	¥	4,151
	Real estate loans		15		13
	Card loans		869		670
	Other		4,495		3,468
Corporate borrowers			7,101		6,768
Non-recourse loans	The Americas		340		340
Other than Non-recourse loans	Real estate companies in overseas		104		104
	Commercial, industrial and other companies in Japan		38		38
	Commercial, industrial and other companies in overseas		6,619		6,286

Total		¥	12,480	¥	10,919


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


Three months ended September 30, 2020
		Millions of yen
Portfolio segment	Class	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment
Consumer borrowers		¥	2,488	¥	1,982
	Card loans		479		360
	Other		2,009		1,622
Corporate borrowers			3,755		3,755
Other than Non-recourse loans	Real estate companies in overseas		104		104
	Commercial, industrial and other companies in Japan		38		38
	Commercial, industrial and other companies in overseas		3,613		3,613

Total		¥	6,243	¥	5,737

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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

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

non-recourse

loans, 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. For the debtors of all financing receivables other than

non-recourse

loans, the Company and its subsidiaries offer concessions such as a reduction of the loan principal, a temporary reduction in the interest payments, or 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, 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, 2020 and 2021, 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.

The following table provides information about financing receivables modified as troubled debt restructurings within the previous 12 months from September 30, 2020 and for which there was a payment default during the six and three months ended September 30, 2020:


Six months ended September 30, 2020
		Millions of yen
Portfolio segment	Class	Recorded investment
Consumer borrowers		¥	556
	Card loans		32
	Other		524
Corporate borrowers			2
Other than Non-recourse loans	Commercial, industrial and other companies in overseas		2

Total		¥	558

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Three months ended September 30, 2020
		Millions of yen
Portfolio segment	Class	Recorded investment
Consumer borrowers		¥	185
	Card loans		17
	Other		168

Total		¥	185

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 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, 2021 and September 30, 2021, there were no foreclosed residential real estate properties. The carrying amounts of installment loans in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure were ¥70 million and ¥208 million as of March 31, 2021 and September 30, 2021, respectively.

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8.	Investment in Securities

Investment in securities as of March 31, 2021 and September 30, 2021 consists of the following:


	Millions of yen
	March 31, 2021		September 30, 2021
Equity securities *	¥	540,082	¥	533,599
Trading debt securities		2,654		2,483
Available-for-sale debt securities		2,003,917		2,051,245
Held-to-maturity debt securities		113,790		113,795

Total	¥	2,660,443	¥	2,701,122

The amount of assets under management of variable annuity and variable life insurance contracts included in equity securities were ¥249,830 million and ¥211,643 million as of March 31, 2021 and September 30, 2021, respectively. The amount of investment funds that are accounted for under the equity method included in equity securities were ¥82,420 million and ¥79,089 million as of March 31, 2021 and September 30, 2021, respectively. The amount of investment funds elected for the fair value option included in equity securities, and others were ¥4,940 million and ¥8,552 million as of March 31, 2021 and September 30, 2021, 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, 2020 were gains of ¥41,484 million and ¥16,183 million for the six and three months ended September 30, 2020, respectively.

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, which did not include net unrealized holding gains (losses) on the 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, 2021 and September 30, 2021, and for the six and three months ended September 30, 2020 and 2021.


	Millions of yen
	March 31, 2021							Six months ended September 30, 2020					Three months ended September 30, 202 0
	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	¥	47,460	¥	(13,474	)	¥	350	¥	(774	)	¥	96	¥	(134	)	¥	82

	Millions of yen
	September 30, 2021							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	¥	47,813	¥	(13,594	)	¥	283	¥	(19	)	¥	48	¥	(19	)	¥	12

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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, 2020 were losses of ¥7 million and gains of ¥14 million, respectively, for the six and three months ended September 30, 2020. 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.

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, 2021 and September 30, 2021, these investments were fair valued at ¥4,940 million and ¥8,552 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, 2021, these investments were fair valued at ¥1,537 million. There were no such investments as of September 30, 2021.

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, 2021 and September 30, 2021, these investments were fair valued at ¥2,907 million and ¥7,431 million, respectively.

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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, 2021 and September 30, 202

are as follows:

March 31, 2021


	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	¥	846,736	¥	0		¥	6,071	¥	(31,649	)	¥	821,158
Japanese prefectural and foreign municipal bond securities		274,770		(120	)		4,238		(2,612	)		276,276
Corporate debt securities		742,862		0			10,125		(10,736	)		742,251
CMBS and RMBS in the Americas		35,668		0			549		(1,760	)		34,457
Other asset-backed securities and debt securities		126,731		0			4,308		(1,264	)		129,775

		2,026,767		(120	)		25,291		(48,021	)		2,003,917

Held-to-maturity debt securities:
Japanese government bond securities and other		113,790		0			25,342		0			139,132

	¥	2,140,557	¥	(120	)	¥	50,633	¥	(48,021	)	¥	2,143,049


September 30, 2021
	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	¥	812,688	¥	0		¥	6,173	¥	(28,659	)	¥	790,202
Japanese prefectural and foreign municipal bond securities		286,338		(121	)		5,037		(2,082	)		289,172
Corporate debt securities		801,102		0			12,883		(8,332	)		805,653
CMBS and RMBS in the Americas		32,826		0			445		(789	)		32,482
Other asset-backed securities and debt securities		129,651		0			5,019		(934	)		133,736

		2,062,605		(121	)		29,557		(40,796	)		2,051,245

Held-to-maturity debt securities:
Japanese government bond securities and other		113,795		0			25,722		0			139,517

	¥	2,176,400	¥	(121	)	¥	55,279	¥	(40,796	)	¥	2,190,762

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There were no credit losses on

available-for-sale

securities for the six and three months ended September 30, 2020. The following table presents a rollforward of the allowance for credit losses for the six and three months ended September 30, 2021:


	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
	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

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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, 2021 and September 30, 2021, respectively:

March 31, 2021


	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	¥	475,023	¥	(21,472	)	¥	264,105	¥	(10,177	)	¥	739,128	¥	(31,649	)
Japanese prefectural and foreign municipal bond securities		48,367		(519	)		63,316		(2,213	)		111,683		(2,732	)
Corporate debt securities		231,552		(5,798	)		141,559		(4,938	)		373,111		(10,736	)
CMBS and RMBS in the Americas		345		(6	)		24,782		(1,754	)		25,127		(1,760	)
Other asset-backed securities and debt securities		4,296		(112	)		29,750		(1,152	)		34,046		(1,264	)

	¥	759,583	¥	(27,907	)	¥	523,512	¥	(20,234	)	¥	1,283,095	¥	(48,141	)


September 30, 2021
	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	¥	210,142	¥	(3,884	)	¥	510,171	¥	(24,775	)	¥	720,313	¥	(28,659	)
Japanese prefectural and foreign municipal bond securities		64,658		(307	)		46,458		(1,896	)		111,116		(2,203	)
Corporate debt securities		153,000		(1,613	)		144,775		(6,719	)		297,775		(8,332	)
CMBS and RMBS in the Americas		327		(1	)		19,860		(788	)		20,187		(789	)
Other asset-backed securities and debt securities		8,665		(45	)		22,705		(889	)		31,370		(934	)

	¥	436,792	¥	(5,850	)	¥	743,969	¥	(35,067	)	¥	1,180,761	¥	(40,917	)

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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, 2021 and September 30, 2021, respectively:

March 31, 2021


	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	¥	475,023	¥	(21,472	)	¥	264,105	¥	(10,177	)	¥	739,128	¥	(31,649	)
Japanese prefectural and foreign municipal bond securities		45,486		(399	)		63,316		(2,213	)		108,802		(2,612	)
Corporate debt securities		231,552		(5,798	)		141,559		(4,938	)		373,111		(10,736	)
CMBS and RMBS in the Americas		345		(6	)		24,782		(1,754	)		25,127		(1,760	)
Other asset-backed securities and debt securities		4,296		(112	)		29,750		(1,152	)		34,046		(1,264	)

	¥	756,702	¥	(27,787	)	¥	523,512	¥	(20,234	)	¥	1,280,214	¥	(48,021	)


September 30, 2021
	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	¥	210,142	¥	(3,884	)	¥	510,171	¥	(24,775	)	¥	720,313	¥	(28,659	)
Japanese prefectural and foreign municipal bond securities		61,745		(186	)		46,458		(1,896	)		108,203		(2,082	)
Corporate debt securities		153,000		(1,613	)		144,775		(6,719	)		297,775		(8,332	)
CMBS and RMBS in the Americas		327		(1	)		19,860		(788	)		20,187		(789	)
Other asset-backed securities and debt securities		8,665		(45	)		22,705		(889	)		31,370		(934	)

	¥	433,879	¥	(5,729	)	¥	743,969	¥	(35,067	)	¥	1,177,848	¥	(40,796	)

The number of investment securities that were in an unrealized loss position as of March 31, 2021 and September 30, 2021 were 638 and 558, 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, 2021 and September 30, 2021, the amount of accrued revenues on

available-for-sale

debt securities were ¥7,374 million and ¥7,143 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 September 30, 2021.

For

available-for-sale

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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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, 2020 and 2021.

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, 2020 and 2021, the amount of installment loans that has been derecognized due to new securitization and transfer of loans were ¥552,905 million and ¥608,122 million, respectively. For the six months ended September 30, 2020 and 2021, gains (losses) from the securitization and transfer of loans were ¥16,045 million and ¥18,637 million, respectively, which is included in finance revenues in the consolidated statements of income.

For the three months ended September 30, 2020 and 2021, the amount of installment loans that has been derecognized due to new securitization and transfer of loans were ¥282,763 million and ¥316,281 million, respectively. For the three months ended September 30, 2020 and 2021, gains (losses) from the securitization and transfer of loans were ¥9,243 million and ¥9,585 million, respectively, which is included in finance revenues in the consolidated statements of income.

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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, 2020 and 2021 are as follows:


	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021			Three months ended September 30, 2020			Three months ended September 30, 2021
Beginning balance	¥	57,705		¥	63,754		¥	57,861		¥	63,725
Increase mainly from loans sold with servicing retained		6,962			7,138			3,612			3,624
Decrease mainly from amortization		(5,345	)		(6,362	)		(2,730	)		(2,894	)
Increase (Decrease) from the effects of changes in foreign exchange rates		(1,621	)		708			(1,042	)		783

Ending balance	¥	57,701		¥	65,238		¥	57,701		¥	65,238

The fair value of the s e rvicing assets as of March 31, 2021 and September 30, 2021 are as follows:
	Millions of yen
	March 31, 2021		September 30, 2021

Beginning balance	¥	60,419	¥	74,135
Ending balance	¥	74,135	¥	77,108

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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 subs

diaries 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.

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Information about VIEs (consolidated and

non-consolidated)

for the Company and its subsidiaries are as follows:

1.	Consolidated VIEs

March 31, 2021


	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		1,996		0		0		0
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business		63,935		12,977		17,923		3,720
(d) VIEs for corporate rehabilitation support business		431		158		0		0
(e) VIEs for investment in securities		104,364		316		35		25,299
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable		266,662		158,620		266,662		828
(g) VIEs for securitization of loan receivable originated by third parties		511		992		511		0
(h) VIEs for power generation projects		304,064		226,224		285,149		35,194
(i) Other VIEs		171,344		67,346		144,260		0

Total	¥	913,307	¥	466,633	¥	714,540	¥	65,041


September 30, 2021

	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		2,067		0		0		0
(c) VIEs for acquisition of real estate for the Company and its subsidiaries’ real estate-related business		63,342		13,160		16,377		0
(d) VIEs for corporate rehabilitation support business		214		4		0		0
(e) VIEs for investment in securities		98,490		257		0		45,136
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable		222,949		152,142		222,949		0
(g) VIEs for securitization of loan receivable originated by third parties		523		1,005		523		0
(h) VIEs for power generation projects		305,556		222,328		287,023		36,532
(i) Other VIEs		197,666		84,469		170,735		0

Total	¥	890,807	¥	473,365	¥	697,607	¥	81,668

*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, 2021


	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		Maximum exposure to loss *
(a) VIEs for liquidating customer assets	¥	27,273	¥	1,255	¥	991	¥	2,246
(b) VIEs for acquisition of real estate and real estate development projects for customers		317,027		6,905		4,884		11,789
(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		4,108,847		0		56,818		75,607
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable		709		0		2		2
(g) VIEs for securitization of loan receivable originated by third parties		1,485,653		0		18,268		18,271
(h) VIEs for power generation projects		10,103		0		442		442
(i) Other VIEs		370,516		2,845		10,101		12,946

Total	¥	6,320,128	¥	11,005	¥	91,506	¥	121,303


September 30, 2021
	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		Maximum exposure to loss *
(a) VIEs for liquidating customer assets	¥	28,357	¥	2,923	¥	991	¥	3,914
(b) VIEs for acquisition of real estate and real estate development projects for customers		262,333		6,849		4,789		11,638
(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		5,933,548		0		63,318		93,712
(f) VIEs for securitizing financial assets such as finance lease receivable and loan receivable		474		0		2		2
(g) VIEs for securitization of loan receivable originated by third parties		1,192,909		0		16,787		16,790
(h) VIEs for power generation projects		9,682		0		477		477
(i) Other VIEs		503,945		2,973		12,782		22,849

Total	¥	7,931,248	¥	12,745	¥	99,146	¥	149,382

*	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.

The Company and its subsidiari

s 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 loans 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.

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 has a commitment agreement by which the Company may be required to make additional investment in certain such

non-consolidated

VIEs.

(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, thermal power stations and wind power stations 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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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.

(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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11.	Investment in Affiliates

Investment in affiliates at March 31, 2021 and September 30, 2021 consists of the following:


	Millions of yen
	March 31, 2021		September 30, 2021
Shares	¥	853,937	¥	873,281
Loans and others		33,827		35,059

	¥	887,764	¥	908,340

12.	Redeemable Noncontrolling Interests

Changes in redeemable noncontrolling interests for the six months ended September 30, 2020 and 2021 are as follows:


	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021
Beginning balance	¥	10,331		¥	0
Transaction with noncontrolling interests		(10,028	)		0
Comprehensive income (loss)
Net income (loss)		(23	)		0
Other comprehensive income (loss)
Net change of foreign currency translation adjustments		(280	)		0
Total other comprehensive income (loss)		(280	)		0
Comprehensive income (loss)		(303	)		0

Ending balance	¥	0		¥	0

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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, 2020 and 2021, are as follows:


	Six months ended September 30, 2020
	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, 2020	¥	(5,001	)	¥	1,457		¥	(26,375	)	¥	(72,471	)	¥	(16,142	)	¥	(118,532	)

Net unrealized gains (losses) on investment in securities, net of tax of ¥449 million		1,190															1,190
Reclassification adjustment included in net income, net of tax of ¥(17) million		689															689
Debt valuation adjustments, net of tax of ¥196 million					(508	)											(508	)
Reclassification adjustment included in net income, net of tax of ¥11 million					(26	)											(26	)
Defined benefit pension plans, net of tax of ¥105 million								(259	)								(259	)
Reclassification adjustment included in net income, net of tax of ¥(178) million								384									384
Foreign currency translation adjustments, net of tax of ¥(3,466) million											(10,257	)					(10,257	)
Reclassification adjustment included in net income, net of tax of ¥(679) million											1,508						1,508
Net unrealized gains (losses) on derivative instruments, net of tax of ¥793 million														(2,106	)		(2,106	)
Reclassification adjustment included in net income, net of tax of ¥(473) million														1,586			1,586

Total other comprehensive income (loss)		1,879			(534	)		125			(8,749	)		(520	)		(7,799	)

Less: Other Comprehensive Income (Loss) Attributable to the Noncontrolling Interests		8			0			(2	)		(1,798	)		5			(1,787	)

Less: Other Comprehensive Income (Loss) Attributable to the Redeemable Noncontrolling Interests		0			0			0			(280	)		0			(280	)

Balance at September 30, 2020 *	¥	(3,130	)	¥	923		¥	(26,248	)	¥	(79,142	)	¥	(16,667	)	¥	(124,264	)

*	As of September 30, 2020, 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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	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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Changes in each component of accumulated other comprehensive income (loss) attributable to ORIX Corporation Shareholders for the three months ended September 30, 2020 and 2021, are as follows:


	Three months ended September 30, 2020
	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, 2020	¥	(6,412	)	¥	1,025		¥	(26,277	)	¥	(73,524	)	¥	(17,516	)	¥	(122,704	)

Net unrealized gains (losses) on investment in securities, net of tax of ¥(1,186) million		3,591															3,591
Reclassification adjustment included in net income, net of tax of ¥230 million		(306	)														(306	)
Debt valuation adjustments, net of tax of ¥34 million					(90	)											(90	)
Reclassification adjustment included in net income, net of tax of ¥6 million					(12	)											(12	)
Defined benefit pension plans, net of tax of ¥64 million								(164	)								(164	)
Reclassification adjustment included in net income, net of tax of ¥(89) million								192									192
Foreign currency translation adjustments, net of tax of ¥503 million											(7,997	)					(7,997	)
Reclassification adjustment included in net income, net of tax of ¥(234) million											521						521
Net unrealized gains (losses) on derivative instruments, net of tax of ¥270 million														181			181
Reclassification adjustment included in net income, net of tax of ¥(35) million														684			684

Total other comprehensive income (loss)		3,285			(102	)		28			(7,476	)		865			(3,400	)

Less: Other Comprehensive Income (Loss) Attributable to the Noncontrolling Interests		3			0			(1	)		(1,682	)		16			(1,664	)

Less: Other Comprehensive Income (Loss) Attributable to the Redeemable Noncontrolling Interests		0			0			0			(176	)		0			(176	)

Balance at September 30, 2020 *	¥	(3,130	)	¥	923		¥	(26,248	)	¥	(79,142	)	¥	(16,667	)	¥	(124,264	)

*	As of September 30, 2020, 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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	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.

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Amounts reclassified to net income from accumulated other comprehensive income (loss) in the six months ended September 30, 2020 and 2021 are as follows:


	Six months ended September 30, 2020
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	¥	368		Gains on investment securities and dividends
Sales of debt securities		3,921		Life insurance premiums and related investment income
Amortization of debt securities		(1,129	)	Finance revenues
Amortization of debt securities		(627	)	Life insurance premiums and related investment income
Others		(3,239	)	Write-downs of securities and other

		(706	)	Total before income tax
		17		Income tax (expense) or benefit

	¥	(689	)	Net of tax

Debt valuation adjustments
Fulfillment of policy liabilities and amortization of policy account balances	¥	37		Life insurance costs

		37		Total before income tax
		(11	)	Income tax (expense) or benefit

	¥	26		Net of tax

Defined benefit pension plans
Amortization of prior service credit	¥	236		See Note 16 “Pension Plans”
Amortization of net actuarial loss		(797	)	See Note 16 “Pension Plans”
Amortization of transition obligation		(1	)	See Note 16 “Pension Plans”

		(562	)	Total before income tax
		178		Income tax (expense) or benefit

	¥	(384	)	Net of tax

Foreign currency translation adjustments
Foreign exchange contracts	¥	(2,211	)	Gains on sales of subsidiaries and affiliates and liquidation losses, net/Interest expense/Other (income) and expense
Sales or liquidation, other		24		Gains on sales of subsidiaries and affiliates and liquidation losses, net

		(2,187	)	Total before income tax
		679		Income tax (expense) or benefit

	¥	(1,508	)	Net of tax

Net unrealized gains (losses) on derivative instruments
Interest rate swap agreements	¥	(546	)	Interest expense
Foreign exchange contracts		(149	)	Interest expense/Other (income) and expense
Foreign currency swap agreements		(1,364	)	Interest expense/Other (income) and expense

		(2,059	)	Total before income tax
		473		Income tax (expense) or benefit

		(1,586	)	Net of tax

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	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

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Amounts reclassified to net income from accumulated other comprehensive income (loss) in the three months ended September 30, 2020 and 2021 are as follows:


Details about accumulated other comprehensive income components	Three months ended September 30, 2020
	Reclassification adjustment included in net income			Consolidated statements of income caption
	Millions of yen			Consolidated statements of income caption
Net unrealized gains (losses) on investment in securities
Sales of debt securities	¥	1,017		Gains on investment securities and dividends
Sales of debt securities		2,649		Life insurance premiums and related investment income
Amortization of debt securities		(566	)	Finance revenues
Amortization of debt securities		(318	)	Life insurance premiums and related investment income
Others		(2,246	)	Write-downs of securities and other

		536		Total before income tax
		(230	)	Income tax (expense) or benefit

	¥	306		Net of tax

Debt valuation adjustments
Fulfillment of policy liabilities and amortization of policy account balances	¥	18		Life insurance costs

		18		Total before income tax
		(6	)	Income tax (expense) or benefit

	¥	12		Net of tax

Defined benefit pension plans
Amortization of prior service credit	¥	120		See Note 16 “Pension Plans”
Amortization of net actuarial loss		(400	)	See Note 16 “Pension Plans”
Amortization of transition obligation		(1	)	See Note 16 “Pension Plans”

		(281	)	Total before income tax
		89		Income tax (expense) or benefit

	¥	(192	)	Net of tax

Foreign currency translation adjustments
Foreign exchange contracts	¥	(755	)	Interest expense

		(755	)	Total before income tax
		234		Income tax (expense) or benefit

	¥	(521	)	Net of tax

Net unrealized gains (losses) on derivative instruments
Interest rate swap agreements	¥	(287	)	Interest expense
Foreign exchange contracts		(70	)	Interest expense/Other (income) and expense
Foreign currency swap agreements		(362	)	Interest expense/Other (income) and expense

		(719	)	Total before income tax
		35		Income tax (expense) or benefit

	¥	(684	)	Net of tax

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	Three months ended September 30, 2021
Details about accumulated other comprehensive income components	Reclassification adjustment included in net income			Consolidated statements of income caption
	Millions of yen			Consolidated statements of income caption
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

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14.	ORIX Corporation Shareholders’ Equity

Information about ORIX Corporation Shareholders’ Equity for the six months ended September 30, 2020 and 2021 are as follo

ws:

( 1)	Dividend payments


	Six months ended September 30, 2020	Six months ended September 30, 2021
Resolution	The board of directors on May 21, 2020	The board of directors on May 20, 2021
Type of shares	Common stock	Common stock
Total dividends paid	¥51,493 million	¥52,438 million
Dividend per share	¥41.00	¥43.00
Date of record for dividend	March 31, 2020	March 31, 2021
Effective date for dividend	June 18, 2020	June 7, 2021
Dividend resource	Retained earnings	Retained earnings

Total dividends paid by resolution of the board of directors on May 21, 2020 include ¥60 million of dividends paid to the Board Incentive Plan Trust for the six months ended September 30, 2020. 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.

(2)	Applicable dividends for which the date of record was in the six months ended September 30, 2020 and 2021, and for which the effective date was after September 30, 2020 and 2021


	Six months ended September 30, 2020	Six months ended September 30, 2021
Resolution	The board of directors on November 2, 2020	The board of directors on November 4, 2021
Type of shares	Common stock	Common stock
Total dividends paid	¥43,670 million	¥46,957 million
Dividend per share	¥35.00	¥39.00
Date of record for dividend	September 30, 2020	September 30, 2021
Effective date for dividend	December 9, 2020	December 9, 2021
Dividend resource	Retained earnings	Retained earnings

Total dividends to be paid by resolution of the board of directors on November 2, 2020 include ¥76 million of dividends to be paid to the Board Incentive Plan Trust for the six months end

d September 30, 2020. 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.

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15.	Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended Septemb

r 30, 2020 and 2021 are as follows:


	Millions of yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Personnel expenses	¥	128,129	¥	144,462
Selling expenses		28,613		32,209
Administrative expenses		57,801		64,774
Depreciation of office facilities		4,076		4,439

Total	¥	218,619	¥	245,884

Selling, general and administrative expenses for the three months ended September 30, 2020 and 2021 are as follows:
	Millions of yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Personnel expenses	¥	64,511	¥	71,969
Selling expenses		14,052		16,432
Administrative expenses		29,565		33,341
Depreciation of office facilities		2,124		2,057

Total	¥	110,252	¥	123,799

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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, 2020 and 2021 consists of the following:


	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021
Japanese plans:
Service cost	¥	2,829		¥	3,023
Interest cost		346			419
Expected return on plan assets		(1,213	)		(1,331	)
Amortization of prior service credit		(89	)		(33	)
Amortization of net actuarial loss		660			206
Amortization of transition obligation		0			0

Net periodic pension cost	¥	2,533		¥	2,284


	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021
Overseas plans:
Service cost	¥	1,626		¥	1,974
Interest cost		827			659
Expected return on plan assets		(1,773	)		(2,093	)
Amortization of prior service credit		(147	)		(168	)
Amortization of net actuarial loss		137			255
Amortization of transition obligation		1			1

Net periodic pension cost	¥	671		¥	628

Note:

The components of net periodic pension cost other than the service cost component are included in personnel expenses, which is included in selling, general and administrative expenses in the consolidated statements of income.

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Net periodic pension cost for the three months ended September 30, 2020 and 2021 consists of the following:


	Millions of yen
	Three months ended September 30, 2020			Three months ended September 30, 2021
Japanese plans:
Service cost	¥	1,409		¥	1,517
Interest cost		173			198
Expected return on plan assets		(606	)		(665	)
Amortization of prior service credit		(45	)		(17	)
Amortization of net actuarial loss		331			97
Amortization of transition obligation		0			0

Net periodic pension cost	¥	1,262		¥	1,130


	Millions of yen
	Three months ended September 30, 2020			Three months ended September 30, 2021
Overseas plans:
Service cost	¥	833		¥	976
Interest cost		420			328
Expected return on plan assets		(903	)		(1,041	)
Amortization of prior service credit		(75	)		(84	)
Amortization of net actuarial loss		69			127
Amortization of transition obligation		1			1

Net periodic pension cost	¥	345		¥	307

Note:

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17.	Life Insurance Operations

Life insurance premiums and r

lated investment income for the six and three months ended September 30, 2020 and 2021 consist of the following:


	Millions of yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Life insurance premiums	¥	191,000	¥	208,475
Life insurance related investment income*		42,751		24,322

	¥	233,751	¥	232,797


* Life insurance related investment income for the six months ended September 30, 2020 and 2021 include net unrealized holding gains of ¥36,951 million and ¥9,689 million on equity securities held as of September 30, 2020 and 2021, respectively.


	Millions of yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Life insurance premiums	¥	101,349	¥	110,822
Life insurance related investment income*		16,279		13,877

	¥	117,628	¥	124,699

* Life insurance related investment income for the three months ended September 30, 2020 and 2021 include net unrealized holding gains of ¥12,432 million and ¥5,543 million on equity securities held as of September 30, 2020 and 2021, respectively.


Life insurance premiums include reinsurance benefits, net of reinsurance premiums. For the six and three months ended September 30, 2020 and 2021, reinsurance benefits and reinsurance premiums included in life insurance premiums are as follows:


	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021
Reinsurance benefits	¥	1,163		¥	852
Reinsurance premiums		(2,526	)		(2,226	)

	Millions of yen
	Three months ended September 30, 2020			Three months ended September 30, 2021
Reinsurance benefits	¥	333		¥	507
Reinsurance premiums		(1,170	)		(1,097	)

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, 2020 and 2021 amounted to ¥9,918 million and ¥11,339 million, respectively. In addition, amortization charged to income for the three months ended September 30, 2020 and 2021 amounted to ¥5,461 million and ¥6,144 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, 2020 and 2021 are mainly as follows:

	Millions of yen
	Six months ended September 30, 2020			Six months ended September 30, 2021
Life insurance premiums and related investment income :
Net realized and unrealized gains or losses from investment assets	¥	39,900		¥	10,863
Net gains or losses from derivative contracts :		(6,010	)		(1,161	)
Futures		(5,460	)		(1,123	)
Foreign exchange contracts		39			(38	)
Options held		(589	)		0

Life insurance costs :
Changes in the fair value of the policy liabilities and policy account balances	¥	(4,670	)	¥	(40,285	)
Insurance costs recognized for insurance and annuity payouts as a result of insured events		22,111			47,016
Changes in the fair value of the reinsurance contracts		9,144			733

	Millions of yen
	Three months ended September 30, 2020			Three months ended September 30, 2021
Life insurance premiums and related investment income :
Net realized and unrealized gains or losses from investment assets	¥	12,984		¥	5,592
Net gains or losses from derivative contracts :		(1,544	)		(878	)
Futures		(1,499	)		(863	)
Foreign exchange contracts		16			(15	)
Options held		(61	)		0

Life insurance costs :
Changes in the fair value of the policy liabilities and policy account balances	¥	(5,533	)	¥	(18,353	)
Insurance costs recognized for insurance and annuity payouts as a result of insured events		12,883			21,525
Changes in the fair value of the reinsurance contracts		1,792			314

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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, 2021 and September 30, 2021, the long-lived ass

ts classified as held for sale in the accompanying consolidated balance sheets are as follows.


	Millions of yen
	As of March 31, 2021		As of September 30, 2021
Investment in operating leases	¥	8,055	¥	13,634

The long-lived assets classified as held for sale as of March 31, 2021 are included in Real Estate segment and ORIX USA segment. The long-lived assets classified as held for sale as of September 30, 2021 are included in Corporate Financial Services and Maintenance Leasing segment, Real Estate segment, PE Investment and Concession segment, and Aircraft and Ships 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, 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, 2020 and 2021, the Company and its subsidiaries recognized impairment losses for the difference between carrying amounts and fair values in the amount of ¥583 million and ¥88 million, respectively, which are reflected as write-downs of long-lived assets. Breakdowns of these amounts are as follows.


	Six months ended September 30, 2020				Six months ended September 30, 2021
	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	¥	0		0	¥	1		1

Total	¥	0		0	¥	1		1


	Six months ended September 30, 2020				Six months ended September 30, 2021
	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	¥	11		1
Condominiums		64		2		1		1
Land undeveloped or under construction		17		1		0		0
Others*		502		—		75		—

Total	¥	583		—	¥	87		—

*	For “Others,” the number of properties is omitted. In addition, write-downs of other long-lived assets for the six months ended September 30, 2020, include a write-down of ¥433 million of two hotels.

Losses of ¥433 million in Real Estate segment, ¥17 million in Environment and Energy segment, ¥60 million in ORIX USA segment and ¥73 million in Asia and Australia segment were recorded for the six months ended September 30, 2020. 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.

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For the three months ended September 30, 2020 and 2021, the Company and its subsidiaries recognized impairment losses for the difference between carrying amounts and fair values in the amount of ¥326 million and ¥1 million, respectively, which are reflected as write-downs of long-lived assets. Breakdowns of these amounts are as follows.


	Three months ended September 30, 2020				Three months ended September 30, 2021
	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	¥	0		0	¥	1		1

Total	¥	0		0	¥	1		1


	Three months ended September 30, 2020				Three months ended September 30, 2021
	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:
Condominiums	¥	26		1	¥	0		0
Land undeveloped or under construction		17		1		0		0
Others*		283		—		0		—

Total	¥	326		—	¥	0		—

*	For “Others,” the number of properties is omitted. In addition, write-downs of other long-lived assets for the three months ended September 30, 2020, include a write-down of ¥280 million of one hotel.

Losses of ¥280 million in Real Estate segment, ¥17 million in Environment and Energy segment and ¥29 million in Asia and Australia segment were recorded for the three months ended September 30, 2020.

A loss of

¥1 million in PE Investment and Concession segment

was

recorded for the three months ended September 30, 2021.

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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, 2020 and 2021 is as follows:

During the six and three months ended September 30, 2020 and 2021, there was no stock compensation which was antidilutive.


	Millions of yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Net Income attributable to ORIX Corporation shareholders	¥	93,842	¥	146,682


	Millions of yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Net Income attributable to ORIX Corporation shareholders	¥	43,794	¥	81,466


	Thousands of Shares
	Six months ended September 30, 2020		Six months ended September 30, 2021
Weighted-average shares		1,247,495		1,211,058
Effect of dilutive securities—
Stock compensation		1,006		1,202

Weighted-average shares for diluted EPS computation		1,248,501		1,212,260


	Thousands of Shares
	Three months ended September 30, 2020		Three months ended September 30, 2021
Weighted-average shares		1,245,927		1,206,784
Effect of dilutive securities—
Stock compensation		1,126		1,341

Weighted-average shares for diluted EPS computation		1,247,053		1,208,125


	Yen
	Six months ended September 30, 2020		Six months ended September 30, 2021
Earnings per share for net income attributable to ORIX Corporation shareholders:
Basic	¥	75.22	¥	121.12
Diluted		75.16		121.00

	Yen
	Three months ended September 30, 2020		Three months ended September 30, 2021
Earnings per share for net income attributable to ORIX Corporation shareholders:
Basic	¥	35.15	¥	67.51
Diluted		35.12		67.43

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. (1,659,728 and 2,149,105 shares for the six months ended September 30, 2020 and 2021, 1,796,903 and 2,145,248 shares for the three months ended September 30, 2020 and 2021)

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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, 2021 and September 30, 2021.

(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

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.

(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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The effect of derivative instruments on the consolidated statements of income,

pre-tax,

for the six months ended September 30, 2020 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	¥	(642	)	¥	546	¥	0
Foreign exchange contracts		(79	)		255		(106	)
Foreign currency swap agreements		(2,178	)		283		1,081

(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	¥	1,108		¥	0		¥	(910	)	¥	0
Foreign exchange contracts		3,492			220			(4,068	)		(208	)
(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	¥	(8,009	)	¥	(154	)	¥	2,036		¥	21
Borrowings and bonds in foreign currencies		12,815			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	¥	4
Futures		(5,460	)		0		3,799
Foreign exchange contracts		96			1,512		1,392
Options held/written and other		(589	)		0		(318	)

Futures, foreign exchange contracts and options held/written and other in the above table include gains (losses) arising from futures, foreign exchange contracts and options held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the six months ended September 30, 2020 (see Note 17 “Life Insurance Operations”).

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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 for

ign 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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The effect of derivative instruments on the consolidated statements of income,

pre-tax,

for the three months ended September 30, 2020 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	¥	702		¥	287	¥	0
Foreign exchange contracts		(39	)		201		(131	)
Foreign currency swap agreements		(752	)		177		185

(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	¥	1,776	¥	0	¥	(1,792	)	¥	0
Foreign exchange contracts		1,816		129		(2,392	)		(126	)

(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
				Interest expense
Foreign exchange contracts	¥	(4,384	)	¥	755
Borrowings and bonds in foreign currencies		7,556			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		¥	1	¥	(1	)
Futures		(1,499	)		0		1,101
Foreign exchange contracts		61			527		(1,857	)
Options held/written and other		(61	)		0		1,535

Futures, foreign exchange contracts and options held/written and other in the above table include gains (losses) arising from futures, foreign exchange contracts and options held to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts for the three months ended September 30, 2020 (see Note 17 “Life Insurance Operations”).

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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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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, 2020 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	¥	(922	)	¥	5	¥	0
Options held/written and other		0			0		16

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, 2020 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	¥	(185	)	¥	3	¥	0
Options held/written and other	¥	0		¥	0	¥	8

The carrying amount of hedged ass

ts 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, 2021 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	¥	314,248	¥	12,764	—	¥	0	¥	0
Installment Loans		17,942		43	—		0		0

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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 September 30, 2021 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	¥	370,882	¥	6,491	—	¥	0	¥	0
Installment Loans		17,688		21	—		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, 2021 and September 30, 2021 are as follows.

March 31, 2021


			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	¥	531,971	¥	1,867	Other Assets	¥	23,751	Other Liabilities

Options held/written and other		840		26	Other Assets		0	—

Futures, foreign exchange contracts		657,411		437	Other Assets		18,941	Other Liabilities

Foreign currency swap agreements		76,023		146	Other Assets		4,459	Other Liabilities

Foreign currency long-term debt		582,174		0	—		0	—

Derivatives not designated as hedging instruments:

Interest rate swap agreements	¥	6,409	¥	0	—	¥	67	Other Liabilities

Options held/written and other		746,058		19,478	Other Assets		17,009	Other Liabilities

Futures, foreign exchange contracts *		320,908		742	Other Assets		6,798	Other Liabilities

Credit derivatives held		171		0	—		9	Other Liabilities

The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥19,127 million and foreign exchange contracts of ¥7,245 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at March 31, 2021, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥41 million and ¥24 million and derivative liabilities include fair value of the futures and foreign exchange contracts before offsetting of ¥438 million and ¥302 million at March 31, 2021, respectively.

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September 30, 2021


			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	¥	500,146	¥	1,706	Other Assets	¥	19,564	Other Liabilities

Options held/written and other		849		21	Other Assets		0	—

Futures, foreign exchange contracts		823,934		830	Other Assets		10,898	Other Liabilities

Foreign currency swap agreements		75,379		1,060	Other Assets		1,507	Other Liabilities

Foreign currency long-term debt		578,200		0	—		0	—

Derivatives not designated as hedging instruments:

Interest rate swap agreements	¥	3,479	¥	0	—	¥	30	Other Liabilities

Options held/written and other		787,724		18,678	Other Assets		16,996	Other Liabilities

Futures, foreign exchange contracts *		556,597		4,398	Other Assets		2,275	Other Liabilities

The notional amounts of futures and foreign exchange contracts in the above table include futures contracts of ¥17,163 million and foreign exchange contracts of ¥6,523 million to economically hedge the minimum guarantee risk of variable annuity and variable life insurance contracts at September 30, 2021, respectively. Derivative assets in the above table include fair value of the futures and foreign exchange contracts before offsetting of ¥173 million and ¥28 million and derivative liabilities include fair value of futures and foreign exchange contracts before offsetting of ¥4 million and ¥78 million at September 30, 2021, respectively.

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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, 2021 and September 30, 2021 are as follows.

March 31, 2021


	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
	Gross amounts recognized		Gross amounts offset in the consolidated balance sheets			Net amounts presented in the consolidated balance sheets		Financial instruments			Collateral received/pledged			Net amount
Derivative assets	¥	22,696	¥	(1,944	)	¥	20,752	¥	0		¥	0		¥	20,752

Total assets	¥	22,696	¥	(1,944	)	¥	20,752	¥	0		¥	0		¥	20,752

Derivative liabilities	¥	71,034	¥	(1,944	)	¥	69,090	¥	(18,913	)	¥	(147	)	¥	50,030

Total liabilities	¥	71,034	¥	(1,944	)	¥	69,090	¥	(18,913	)	¥	(147	)	¥	50,030

September 30, 2021


	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
	Gross amounts recognized		Gross amounts offset in the consolidated balance sheets			Net amounts presented in the consolidated balance sheets		Financial instruments			Collateral received/pledged			Net amount
Derivative assets	¥	26,693	¥	(4,686	)	¥	22,007	¥	0		¥	(398	)	¥	21,609

Total assets	¥	26,693	¥	(4,686	)	¥	22,007	¥	0		¥	(398	)	¥	21,609

Derivative liabilities	¥	51,270	¥	(4,686	)	¥	46,584	¥	(7,492	)	¥	0		¥	39,092

Total liabilities	¥	51,270	¥	(4,686	)	¥	46,584	¥	(7,492	)	¥	0		¥	39,092

*	The balances related to enforceable master netting agreements or similar agreements which were not offset in the consolidated balance sheets.

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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, 2021


	Millions of yen
	Carrying amount		Estimated fair value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	¥	951,242	¥	951,242	¥	951,242	¥	0	¥	0
Restricted cash		128,333		128,333		128,333		0		0
Installment loans (net of allowance for credit losses)		3,613,316		3,631,561		0		166,410		3,465,151
Equity securities*1		396,465		396,465		82,039		223,016		91,410
Trading debt securities		2,654		2,654		0		2,654		0
Available-for-sale debt securities		2,003,917		2,003,917		6,012		1,864,448		133,457
Held-to-maturity debt securities		113,790		139,132		0		115,893		23,239
Other Assets:
Time deposits		4,146		4,146		0		4,146		0
Derivative assets*2		20,752		20,752		0		0		0
Reinsurance recoverables (Investment contracts)		7,299		7,507		0		0		7,507
Liabilities:
Short-term debt	¥	307,269	¥	307,269	¥	0	¥	307,269	¥	0
Deposits		2,165,293		2,167,449		0		2,167,449		0
Policy liabilities and Policy account balances (Investment contracts)		196,549		196,624		0		0		196,624
Long-term debt		4,416,833		4,442,351		0		1,286,463		3,155,888
Other Liabilities:
Derivative liabilities*2		69,090		69,090		0		0		0

*1	The amount of ¥13,737 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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September 30, 2021


	Millions of yen
	Carrying amount		Estimated fair value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	¥	1,030,893	¥	1,030,893	¥	1,030,893	¥	0	¥	0
Restricted cash		130,999		130,999		130,999		0		0
Installment loans (net of allowance for credit losses)		3,616,577		3,610,206		0		171,230		3,438,976
Equity securities*1		390,965		390,965		114,346		184,611		92,008
Trading debt securities		2,483		2,483		0		2,483		0
Available-for-sale debt securities		2,051,245		2,051,245		8,581		1,905,428		137,236
Held-to-maturity debt securities		113,795		139,517		0		115,875		23,642
Other Assets:
Time deposits		4,435		4,435		0		4,435		0
Derivative assets*2		22,007		22,007		0		0		0
Reinsurance recoverables (Investment contracts)		6,758		6,907		0		0		6,907
Liabilities:
Short-term debt	¥	493,976	¥	493,976	¥	0	¥	493,976	¥	0
Deposits		2,129,531		2,131,750		0		2,131,750		0
Policy liabilities and Policy account balances (Investment contracts)		201,272		201,344		0		0		201,344
Long-term debt		4,351,494		4,377,341		0		1,299,274		3,078,067
Other Liabilities:
Derivative liabilities*2		46,584		46,584		0		0		0

*1	The amount of ¥15,732 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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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 ¥1,573 million and ¥90 million as of March 31, 2021 and September 30, 2021, 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 ¥3,134 million and ¥3,906 million for the six months ended September 30, 2020 and 2021, respectively, and ¥1,517 million and ¥1,256 million for the three months ended September 30, 2020 and 2021, respectively. As of March 31, 2021 and September 30, 2021, the amounts due are as follows:


	Millions of yen
	March 31, 2021		September 30, 2021
Within one year	¥	3,806	¥	5,166
More than one year		3,982		5,366

Total	¥	7,788	¥	10,532

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 ¥69,235 million and ¥110,307 million as of March 31, 2021 and September 30, 2021, 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 ¥393,634 million and ¥394,730 million as of March 31, 2021 and September 30, 2021, respectively.

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 Loss 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, 2021 and September 30, 2021:


	March 31, 2021						September 30, 2021
	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	¥	469,377	¥	4,768		2028	¥	467,131	¥	4,795		2028
Transferred loans		365,546		5,827		2061		379,892		4,601		2061
Consumer loans		294,250		49,025		2032		284,050		47,098		2032
Real estate loans		17,621		4,119		2048		13,236		4,034		2048
Other		598		104		2035		8,530		147		2035

Total	¥	1,147,392	¥	63,843		—	¥	1,152,839	¥	60,675		—

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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, 2021 and September 30, 2021, total notional amount of the loans subject to such guarantees are ¥690,000 million and ¥690,000 million, respectively, and book value of guarantee liabilities are ¥1,998 million and ¥2,163 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, 2021.

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, 2021.

As of March 31, 2021 and September 30, 2021, 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 ¥1,857,499 million and ¥1,927,508 million, respectively.

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, 2021.

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.

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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 ¥26,094 million and ¥23,723 million as of March 31 and September 30, 2021, respectively. Additionally, for the six months ended September 30, 2020 and 2021, provision for credit losses for

off-balance

sheet credit exposure were reversals of ¥4,934 million and ¥2,369 million, respectively, which are recorded as provision for credit losses in the consolidated statements of income.

For the three months ended September 30, 2020 and 2021, provision for credit losses for off-balance sheet credit exposure were reversals of ¥3,080 million and ¥468 million, respectively, which are recorded as provision for credit losses.

Contingencies—

Among some of our private equity investees, which are consolidated subsidiaries, manufacturing defects have been found in certain parts of their products. The Company recognizes the allowances for losses, when the losses are highly probable that an outflow of resources embodying economic benefits will occur in relation to this matter and the amount of such losses can be reasonably estimated. It is possible that additional write-downs or allowances for losses may be recorded due to the occurrence of new events, however at this time, the amount and timing of the potential losses cannot be reasonably estimated.

In addition, 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, 2021 and September 30, 2021:


	Millions of yen
	March 31, 2021		September 30, 2021
Lease payments, loans and investment in operating leases	¥	125,196	¥	106,350
Investment in securities		172,503		180,056
Property under facility operations		27,125		113,679
Other assets and other		14,026		16,299

Total	¥	338,850	¥	416,384

As of March 31, 2021 and September 30, 2021, debt liabilities were secured by shares of subsidiaries, which were eliminated through consolidation adjustment, of ¥226,987 million and ¥147,428 million, respectively, and debt liabilities of affiliates were secured by investment in affiliates of ¥50,538 million and ¥43,589 million, respectively. As of March 31

2021 and September 30, 2021, and debt liabilities were secured by loans to subsidiaries, which were eliminated through consolidation adjustment, of ¥10,101 million and ¥9,745 million, respectively. In addition, ¥73,191 million and ¥61,855 million, respectively, were pledged primarily by investment in securities for collateral deposits and deposit for real estate transaction as of March 31, 2021 and September 30, 2021.

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, 2021.

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24.	Segment Information

Financial information about the operating segments reported below is that which is available by segment and evaluated regularly by the chief operating decision maker to make decision 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; Yayoi
Real Estate	:	Real estate development, rental and management; facility operations; real estate asset management
PE Investment and Concession	:	Private equity investment and concession
Environment and Energy	:	Domestic and overseas renewable energy; electric power retailing; ESCO services; sales of solar panels and electricity storage system; recycling and waste management
Insurance	:	Life insurance
Banking and Credit	:	Banking and consumer finance
Aircraft and Ships	:	Aircraft leasing 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, 2021, a portion of interest expenses, which were initially included in the difference between segment total profits and consolidated amounts, have been charged directly to its respective segments. In addition, a portion of selling, general and administrative expenses, which were initially recorded in each its respective segments, have been included in the difference between segment total profits and consolidated amounts. Furthermore, a portion of the leasing business in the Environment and Energy segment was transferred to the Corporate Financial Services and Maintenance Leasing segment. As a result of these changes, segment assets information as of March 31, 2021, and financial information of the segments for the three and six months ended September 30, 2020 has been retrospectively restated.

Financial information of the segments for the six months ended September 30, 2020 and 2021, and segment assets information as of March 31, 2021 and September 30, 2021 are as follows:


	Millions of yen
	Six months ended September 30, 2020				Six months ended September 30, 2021				March 31, 2021		September 30, 2021
	Segment revenues		Segment profits		Segment revenues		Segment profits		Segment assets		Segment assets
Corporate Financial Services and Maintenance Leasing	¥	209,144	¥	31,094	¥	230,275	¥	52,401	¥	1,676,063	¥	1,659,642
Real Estate		167,276		11,009		202,514		23,860		872,095		878,068
PE Investment and Concession		157,826		4,294		192,150		1,834		378,698		368,794
Environment and Energy		70,865		13,599		63,898		9,663		489,174		695,445
Insurance		235,754		35,308		235,088		33,009		1,959,521		1,962,961
Banking and Credit		41,661		25,170		43,097		22,065		2,690,627		2,709,991
Aircraft and Ships		14,876		5,527		17,748		618		601,762		615,640
ORIX USA		57,859		9,881		84,988		47,614		1,220,081		1,188,438
ORIX Europe		73,046		17,103		101,104		28,591		369,546		397,073
Asia and Australia		58,962		3,791		71,705		20,485		1,084,222		1,125,430

Total	¥	1,087,269	¥	156,776	¥	1,242,567	¥	240,140	¥	11,341,789	¥	11,601,482

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Financial information of the segments for the three months ended September 30, 2020 and 2021 are as follows:


	Millions of yen
	Three months ended September 30, 2020					Three months ended September 30, 2021
	Segment revenues		Segment profits			Segment revenues		Segment profits
Corporate Financial Services and Maintenance Leasing	¥	107,072	¥	17,802		¥	120,483	¥	32,122
Real Estate		88,627		9,159			105,752		12,847
PE Investment and Concession		68,053		(307	)		92,526		1,566
Environment and Energy		36,909		5,878			34,569		5,174
Insurance		118,682		17,053			125,907		17,520
Banking and Credit		20,997		13,267			20,271		9,306
Aircraft and Ships		7,329		(2,057	)		9,285		5,449
ORIX USA		33,090		10,466			37,294		22,451
ORIX Europe		36,881		9,914			50,648		15,119
Asia and Australia		30,635		(3,066	)		37,057		11,705

Total	¥	548,275	¥	78,109		¥	633,792	¥	133,259

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. Additionally, net income attributable to the noncontrolling interests, net income attributable to the redeemable noncontrolling interests, which are recognized net of tax in the accompanying consolidated statements of income, are adjusted to profit or loss before income taxes, when calculating segment profits or losses. 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 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, 2020			Six months ended September 30, 2021
Segment revenues:
Total revenues for segments	¥	1,087,269		¥	1,242,567
Revenues related to corporate assets		5,933			8,580
Revenues from inter-segment transactions		(8,464	)		(9,613	)

Total consolidated revenues	¥	1,084,738		¥	1,241,534

Segment profits:
Total profits for segments	¥	156,776		¥	240,140
Corporate profits (losses)		(24,765	)		(25,570	)
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests		2,163			6,219

Total consolidated income before income taxes	¥	134,174		¥	220,789


	Millions of yen
	Three months ended September 30, 2020			Three months ended September 30, 2021
Segment revenues:
Total revenues for segments	¥	548,275		¥	633,792
Revenues related to corporate assets		3,225			5,616
Revenues from inter-segment transactions		(4,403	)		(6,687	)

Total consolidated revenues	¥	547,097		¥	632,721

Segment profits:
Total profits for segments	¥	78,109		¥	133,259
Corporate profits (losses)		(13,052	)		(13,129	)
Net income attributable to the noncontrolling interests and net income attributable to the redeemable noncontrolling interests		1,486			603

Total consolidated income before income taxes	¥	66,543		¥	120,733


	Millions of yen
	March 31, 2021			September 30, 2021
Segment assets:
Total assets for segments	¥	11,341,789		¥	11,601,482
Cash and cash equivalents, restricted cash		1,079,575			1,161,892
Allowance for credit losses		(78,945	)		(77,571	)
Trade notes, accounts and other receivable		354,334			288,311
Other corporate assets		866,329			860,564

Total consolidated assets	¥	13,563,082		¥	13,834,678

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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, 2020 and 2021.

For the six months ended September 30, 2020


	Millions of yen
	Six months ended September 30, 2020
	Japan		The Americas *1		Other *2		Total
Total Revenues	¥	870,327	¥	91,871	¥	122,540	¥	1,084,738
Income before Income Taxes		97,972		18,275		17,927		134,174

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		118,760		60,328		41,701		220,789

For the three months ended September 30, 2020


	Millions of yen
	Three months ended September 30, 2020
	Japan		The Americas *1		Other *2		Total
Total Revenues	¥	433,698	¥	49,757	¥	63,642	¥	547,097
Income before Income Taxes		49,552		15,414		1,577		66,543

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		66,204		26,321		28,208		120,733


*1		Mainly the United States
*2		Mainly Asia, Europe, Australasia and Middle East

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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, 2020 and 2021.

For the six months ended September 30, 2020


	Millions of yen
	Six months ended September 30, 2020
	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	¥	4,661	¥	1,390	¥	144,417	¥	1,278	¥	0		¥	0	¥	0
Real estate sales		0		38,903		0		0		0			0		0
Asset management and servicing		168		2,967		17		0		0			95		13
Automobile related services		29,140		0		0		119		0			0		0
Facilities operation		0		7,644		0		0		0			0		0
Environment and energy services		1,740		0		0		68,016		0			0		0
Real estate management and brokerage		0		50,210		0		0		0			0		0
Real estate contract work		0		33,678		0		0		0			0		0
Other		23,428		814		9,534		662		780			2,033		1,492

Total revenues from contracts with customers		59,137		135,606		153,968		70,075		780			2,128		1,505

Geographical location
Japan		58,715		135,606		153,968		64,122		780			2,128		355
The Americas		0		0		0		0		0			0		0
Other		422		0		0		5,953		0			0		1,150

Total revenues from contracts with customers		59,137		135,606		153,968		70,075		780			2,128		1,505

Other revenues *		150,007		31,670		3,858		790		234,974			39,533		13,371

Segment revenues/Total revenues	¥	209,144	¥	167,276	¥	157,826	¥	70,865	¥	235,754		¥	41,661	¥	14,876


	Millions of yen
	Six months ended September 30, 2020
	Reportable segments								Corporate revenue and intersegment transactions			Total revenues
	ORIX USA		ORIX Europe		Asia and Australia		Total		Corporate revenue and intersegment transactions			Total revenues
Goods or services category
Sales of goods	¥	1,202	¥	0	¥	57	¥	153,005	¥	306		¥	153,311
Real estate sales		439		0		0		39,342		0			39,342
Asset management and servicing		6,817		66,902		0		76,979		(52	)		76,927
Automobile related services		0		0		5,540		34,799		(2	)		34,797
Facilities operation		0		0		0		7,644		243			7,887
Environment and energy services		609		0		0		70,365		(725	)		69,640
Real estate management and brokerage		0		0		0		50,210		(1,256	)		48,954
Real estate contract work		0		0		0		33,678		(119	)		33,559
Other		1,439		52		317		40,551		775			41,326

Total revenues from contracts with customers		10,506		66,954		5,914		506,573		(830	)		505,743

Geographical location
Japan		0		0		1		415,675		(804	)		414,871
The Americas		10,506		29,163		0		39,669		0			39,669
Other		0		37,791		5,913		51,229		(26	)		51,203

Total revenues from contracts with customers		10,506		66,954		5,914		506,573		(830	)		505,743

Other revenues *		47,353		6,092		53,048		580,696		(1,701	)		578,995

Segment revenues/Total revenues	¥	57,859	¥	73,046	¥	58,962	¥	1,087,269	¥	(2,531	)	¥	1,084,738

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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		Corporate revenue and intersegment transactions			Total revenues
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

– 13

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Table of Contents

For the three months ended September 30, 2020


	Millions of yen
	Three months ended September 30, 2020
	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	¥	2,269	¥	782	¥	61,382	¥	719	¥	0		¥	0	¥	0
Real estate sales		0		18,035		0		0		0			0		0
Asset management and servicing		107		1,345		8		0		0			50		10
Automobile related services		14,465		0		0		60		0			0		0
Facilities operation		0		6,276		0		0		0			0		0
Environment and energy services		818		0		0		35,515		0			0		0
Real estate management and brokerage		0		25,660		0		0		0			0		0
Real estate contract work		0		18,722		0		0		0			0		0
Other		12,496		487		4,438		270		397			1,191		699

Total revenues from contracts with customers		30,155		71,307		65,828		36,564		397			1,241		709

Geographical location
Japan		29,976		71,307		65,828		33,402		397			1,241		292
The Americas		0		0		0		0		0			0		0
Other		179		0		0		3,162		0			0		417

Total revenues from contracts with customers		30,155		71,307		65,828		36,564		397			1,241		709

Other revenues *		76,917		17,320		2,225		345		118,285			19,756		6,620

Segment revenues/Total revenues	¥	107,072	¥	88,627	¥	68,053	¥	36,909	¥	118,682		¥	20,997	¥	7,329


	Millions of yen
	Three months ended September 30, 2020
	Reportable segments								Corporate revenue and intersegment transactions			Total revenues
	ORIX USA		ORIX Europe		Asia and Australia		Total		Corporate revenue and intersegment transactions			Total revenues
Goods or services category
Sales of goods	¥	623	¥	0	¥	4	¥	65,779	¥	240		¥	66,019
Real estate sales		234		0		0		18,269		0			18,269
Asset management and servicing		3,208		35,238		0		39,966		(27	)		39,939
Automobile related services		0		0		2,788		17,313		(1	)		17,312
Facilities operation		0		0		0		6,276		138			6,414
Environment and energy services		365		0		0		36,698		(365	)		36,333
Real estate management and brokerage		0		0		0		25,660		(607	)		25,053
Real estate contract work		0		0		0		18,722		(95	)		18,627
Other		716		37		8		20,739		409			21,148

Total revenues from contracts with customers		5,146		35,275		2,800		249,422		(308	)		249,114

Geographical location
Japan		0		0		0		202,443		(407	)		202,036
The Americas		5,146		15,218		0		20,364		0			20,364
Other		0		20,057		2,800		26,615		99			26,714

Total revenues from contracts with customers		5,146		35,275		2,800		249,422		(308	)		249,114

Other revenues *		27,944		1,606		27,835		298,853		(870	)		297,983

Segment revenues/Total revenues	¥	33,090	¥	36,881	¥	30,635	¥	548,275	¥	(1,178	)	¥	547,097

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Table of Contents

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		Corporate revenue and intersegment transactions			Total revenues
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

*	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.

– 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)


	ORIX Corporation

Date: November 12, 2021	By	/s/ SHOJI TANIGUCHI
		Shoji Taniguchi
		Member of the Board of Directors Senior Managing Executive Officer Responsible for Treasury and Accounting Headquarters Responsible for Enterprise Risk Management Headquarters Responsible for Corporate Communications Department Assistant to CEO
		ORIX Corporation


Total revenues		¥1,241,534 million (Up 14% year on year)
Total expenses		¥1,032,617 million (Up 7% year on year)
Income before income taxes		¥220,789 million (Up 65% year on year)
Net income attributable to ORIX Corporation Shareholders		¥146,682 million (Up 56% year on year)
Earnings per share for net income attributable to ORIX Corporation Shareholders
(Basic)		¥121.12 (Up 61% year on year)
(Diluted)		¥121.00 (Up 61% year on year)
ROE (Annualized) *1		9.5% (6.3% during the same period in the previous fiscal year)
ROA (Annualized) *2		2.14% (1.43% during the same period in the previous fiscal year)


	Six months ended September 30, 2020			Six months ended September 30, 2021			Change

							Amount			Percent (%)

	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	3,113		¥	2,747		¥	(366	)		(12	)
Operating leases		28,111			30,878			2,767			10
Sales of goods and real estate		40,293			60,556			20,263			50
Services income		95,749			108,331			12,582			13
Other		10			2			(8	)		(80	)

Total Segment Revenues		167,276			202,514			35,238			21

Segment Expenses:
Interest expense		1,082			1,239			157			15
Costs of operating leases		12,526			12,251			(275	)		(2	)
Costs of goods and real estate sold		34,826			48,553			13,727			39
Services expense		93,113			102,113			9,000			10
Selling, general and administrative expenses		17,304			16,717			(587	)		(3	)
Provision for credit losses and write-downs of long-lived assets and securities		413			11			(402	)		(97	)
Other		(1,594	)		(1,280	)		314			—

Total Segment Expenses		157,670			179,604			21,934			14

Segment Operating Income		9,606			22,910			13,304			138

Equity in Net income (Loss) of Affiliates, and others		1,403			950			(453	)		(32	)

Segment Profits	¥	11,009		¥	23,860		¥	12,851			117


	As of March 31, 2021		As of September 30, 2021		Change

					Amount			Percent (%)

	(Millions of yen, except percentage data)
Net investment in leases	¥	66,371	¥	62,335	¥	(4,036	)		(6	)
Investment in operating leases		291,877		292,185		308			0
Investment in securities		8,543		7,642		(901	)		(11	)
Property under facility operations		149,479		147,959		(1,520	)		(1	)
Inventories		94,429		94,121		(308	)		(0	)
Advances for finance lease and operating lease		98,820		106,979		8,159			8
Investment in affiliates		99,105		101,835		2,730			3
Advances for property under facility operations		4,089		6,679		2,590			63
Goodwill, intangible assets acquired in business combinations		59,382		58,333		(1,049	)		(2	)

Total Segment Assets	¥	872,095	¥	878,068	¥	5,973			1


1.		This is an English translation of ORIX Corporation’s quarterly financial report (shihanki houkokusho) as filed with the Kanto Financial Bureau in Japan on November 12, 2021, which includes unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States as of March 31, 2021 and September 30, 2021 and for the three and six months ended September 30, 2020 and 2021.


	Millions of yen (except for per share amounts and ratios)
	Six months ended September 30, 2020			Six months ended September 30, 2021			Fiscal year ended March 31, 2021
Total revenues	¥	1,084,738		¥	1,241,534		¥	2,292,708
Income before income taxes		134,174			220,789			287,561
Net income attributable to ORIX Corporation shareholders		93,842			146,682			192,384
Comprehensive Income attributable to ORIX Corporation shareholders		88,110			171,510			226,266
ORIX Corporation shareholders’ equity		2,979,684			3,117,654			3,028,456
Total assets		13,168,070			13,834,678			13,563,082
Earnings per share for net income attributable to ORIX Corporation shareholders
Basic (yen)		75.22			121.12			155.54
Diluted (yen)		75.16			121.00			155.39
ORIX Corporation shareholders’ equity ratio (%)		22.6			22.5			22.3
Cash flows from operating activities		519,772			593,156			1,095,676
Cash flows from investing activities		(420,148	)		(436,361	)		(1,203,252	)
Cash flows from financing activities		72,145			(76,204	)		39,884
Cash, Cash Equivalents and Restricted Cash at end of Period		1,307,306			1,161,892			1,079,575

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, 2020			Three months ended September 30, 2021
Total revenues	¥	547,097		¥	632,721
Net income attributable to ORIX Corporation shareholders		43,794			81,466
Earnings per share for net income attributable to ORIX Corporation shareholders
Basic (yen)		35.15			67.51


	Six months ended September 30, 2020			Six months ended September 30, 2021			Change

							Amount			Percent (%)

	(Millions of yen, except percentage data)
Segment Revenues:
Finance revenues	¥	80		¥	124		¥	44			55
Gains on investment securities and dividends		542			1,107			565			104
Operating leases		3,236			16,127			12,891			398
Sales of goods and real estate		144,417			161,106			16,689			12
Services income		9,551			13,686			4,135			43

Total Segment Revenues		157,826			192,150			34,324			22

Segment Expenses:
Interest expense		732			1,335			603			82
Costs of operating leases		1,631			11,767			10,136			621
Costs of goods and real estate sold		123,508			149,592			26,084			21
Services expense		6,827			9,188			2,361			35
Selling, general and administrative expenses		17,061			25,201			8,140			48
Provision for credit losses and write-downs of long-lived assets and securities		13			951			938			—
Other		(176	)		(13,710	)		(13,534	)		—

Total Segment Expenses		149,596			184,324			34,728			23

Segment Operating Income		8,230			7,826			(404	)		(5	)

Equity in Net income (Loss) of Affiliates, and others		(3,936	)		(5,992	)		(2,056	)		—

Segment Profits	¥	4,294		¥	1,834		¥	(2,460	)		(57	)


	As of March 31, 2021			As of September 30, 2021			Change

							Amount			Percent (%)

	(Millions of yen, except percentage data)
Net investment in leases	¥	1,541		¥	1,365		¥	(176	)		(11	)
Investment in operating leases		23,455			45,593			22,138			94
Investment in securities		12,918			12,465			(453	)		(4	)
Property under facility operations		43,972			46,809			2,837			6
Inventories		45,597			36,666			(8,931	)		(20	)
Investment in affiliates		55,421			48,619			(6,802	)		(12	)
Advances for property under facility operations		6,732			4,245			(2,487	)		(37	)
Goodwill, intangible assets acquired in business combinations		189,062			173,032			(16,030	)		(8	)

Total Segment Assets	¥	378,698		¥	368,794		¥	(9,904	)		(3	)


	As of March 31, 2021			As of September 30, 2021			Change

							Amount			Percent (%)

	(Millions of yen except per share, ratios and percentages)
Total assets	¥	13,563,082		¥	13,834,678		¥	271,596			2
(Segment assets)		11,341,789			11,601,482			259,693			2
Total liabilities		10,459,938			10,626,179			166,241			2
(Short- and long-term debt)		4,724,102			4,845,470			121,368			3
(Deposits)		2,317,785			2,286,082			(31,703	)		(1	)
ORIX Corporation shareholders’ equity		3,028,456			3,117,654			89,198			3
ORIX Corporation shareholders’ equity per share (yen)*1		2,487.77			2,593.96			106.19			4
ORIX Corporation shareholders’ equity ratio*2		22.3	%		22.5	%		—			—
D/E ratio (Debt-to-equity ratio) (Short-and long-term debt (excluding deposits) / ORIX Corporation shareholders’ equity)		1.6x			1.6x			—			—


In thousands		Millions of yen
Number of issued shares		Common stock		Capital reserve
Increase, net	September 30, 2021	Increase, net	September 30, 2021	Increase, net	September 30, 2021
0	1,285,724	¥0	¥221,111	¥0	¥248,290


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		175,714		14.59	%

Custody Bank of Japan, Ltd. (Trust Account) 1-8-12, Harumi, Chuo-ku, Tokyo		77,559		6.44

SSBTC Client Omnibus Account One Lincoln Street, Boston MA USA 02111		29,797		2.47

Custody Bank of Japan, Ltd. (Trust Account9) 1-8-12, Harumi, Chuo-ku, Tokyo		29,497		2.44

Custody Bank of Japan, Ltd. (Trust Account7) 1-8-12, Harumi, Chuo-ku, Tokyo		24,407		2.02

Citibank, N.A.-NY, As Depositary Bank For Depositary Share Holders 388 Greenwich Street New York, NY 10013 USA		23,672		1.96

State Street Bank West Client-Treaty 505234 1776 Heritage Drive, North Quincy, MA 02171 USA		21,263		1.76

JP Morgan Securities Inc. Tokyo Building, 2-7-3, Marunouchi, Chiyoda-ku, Tokyo		20,930		1.73

Northern Trust Co. (AVFC) Sub A/C Non Treaty 50 Bank Street Canary Wharf London E14 5Nt, UK		19,157		1.59

SMBC Nikko Securities Inc. 3-3-1, Marunouchi, Chiyoda-ku, Tokyo		18,283		1.51


		440,283		36.56	%


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 81,692 thousand shares. The Company’s shares held through the Board Incentive Plan Trust (2,142 thousand shares) are not included in the number of treasury stock shares.
	3:	On August 19, 2021, Sumitomo Mitsui Trust Asset Management Co., Ltd. and Nikko Asset Management Co., Ltd. jointly filed a large shareholding report (an alteration report), as required under Japanese regulations, that shows their shareholdings of the Company as of August 13, 2021 as follows. The following information is not included in the List of Major Shareholders above because we were unable to confirm our share registry as of September 30, 2021 with regard to the reported number of shares held.


Name	Number of shares held (in thousands)		Percentage of total shares issued
Sumitomo Mitsui Trust Asset Management Co., Ltd.		43,872		3.41	%
Nikko Asset Management Co, Ltd.		20,572		1.60

Total		64,444		5.01	%


		Millions of yen
Liabilities and Equity		March 31, 2021			September 30, 2021
Liabilities:
Short-Term Debt		¥	307,269		¥	493,976
Deposits			2,317,785			2,286,082
Trade Notes, Accounts and Other Payable			260,712			230,282
Policy Liabilities and Policy Account Balances			1,822,422			1,885,834
The amounts which are measured at fair value by electing the fair value option are as follows:
March 31, 2021	¥266,422 million
September 30, 2021	¥226,221 million
Current and Deferred Income Taxes			363,460			412,267
Long-Term Debt			4,416,833			4,351,494
Other Liabilities			971,457			966,244

Total Liabilities			10,459,938			10,626,179

Commitments and Contingent Liabilities
Equity:
Common Stock			221,111			221,111
Additional Paid-in Capital			259,361			259,802
Retained Earnings			2,744,588			2,839,047
Accumulated Other Comprehensive Income (Loss)			(84,650	)		(59,822	)
Treasury Stock, at Cost			(111,954	)		(142,484	)

ORIX Corporation Shareholders’ Equity			3,028,456			3,117,654
Noncontrolling Interests			74,688			90,845

Total Equity			3,103,144			3,208,499

Total Liabilities and Equity		¥	13,563,082		¥	13,834,678


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
	Balance at April 1, 2020		Gains or losses (realized/unrealized)									Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net)			Balance at September 30, 2020		Change in unrealized gains or losses included in earnings for assets and liabilities still held at September 30, 2020 *1			Change in unrealized gains or losses included in other comprehensive income for assets and liabilities still held at September 30, 2020 *2
	Balance at April 1, 2020		Included in earnings *1			Included in other comprehensive income *2			Total			Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net)			Balance at September 30, 2020
Available-for-sale debt securities	¥	88,353	¥	(1,383	)	¥	8,838		¥	7,455		¥	13,631	¥	(3,999	)	¥	(2,148	)	¥	(2,000	)	¥	101,292	¥	59		¥	8,696
Japanese prefectural and foreign municipal bond securities		2,832		0			(79	)		(79	)		0		0			0			0			2,753		0			(79	)
Corporate debt securities		3,994		0			2			2			0		0			(495	)		(2,000	)		1,501		0			2
Other asset-backed securities and debt securities		81,527		(1,383	)		8,915			7,532			13,631		(3,999	)		(1,653	)		0			97,038		59			8,773
Equity securities		83,901		1,844			(2,243	)		(399	)		869		(3,372	)		(4,010	)		(325	)		76,664		1,776			(2,239	)
Investment funds		83,901		1,844			(2,243	)		(399	)		869		(3,372	)		(4,010	)		(325	)		76,664		1,776			(2,239	)
Derivative assets and liabilities (net)		19,230		1,791			(559	)		1,232			30		0			0			0			20,492		1,791			(559	)
Options held/written and other		19,230		1,791			(559	)		1,232			30		0			0			0			20,492		1,791			(559	)
Other asset		18,206		(10,359	)		0			(10,359	)		1,373		0			(158	)		0			9,062		(10,359	)		0
Reinsurance recoverables *5		18,206		(10,359	)		0			(10,359	)		1,373		0			(158	)		0			9,062		(10,359	)		0
Policy Liabilities and Policy Account Balances		300,739		(17,441	)		(741	)		(18,182	)		0		0			(22,111	)		0			296,810		(17,441	)		(741	)
Variable annuity and variable life insurance contracts *6		300,739		(17,441	)		(741	)		(18,182	)		0		0			(22,111	)		0			296,810		(17,441	)		(741	)


	Millions of yen
	Balance at June 30, 2020		Gains or losses (realized/unrealized)									Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net)			Balance at September 30, 2020		Change in unrealized gains or losses included in earnings for assets and liabilities still held at September 30, 2020 *1			Change in unrealized gains or losses included in other comprehensive income for assets and liabilities still held at September 30, 2020 *1
	Balance at June 30, 2020		Included in earnings *1			Included in other comprehensive income *2			Total			Purchases *3		Sales			Settlements *4			Transfers in and/ or out of Level 3 (net)			Balance at September 30, 2020
Available-for-sale debt securities	¥	99,953	¥	(265	)	¥	1,287		¥	1,022		¥	7,158	¥	(3,999	)	¥	(842	)	¥	(2,000	)	¥	101,292	¥	33		¥	1,122
Japanese prefectural and foreign municipal bond securities		2,804		0			(51	)		(51	)		0		0			0			0			2,753		0			(51	)
Corporate debt securities		3,657		0			3			3			0		0			(159	)		(2,000	)		1,501		0			2
Other asset-backed securities and debt securities		93,492		(265	)		1,335			1,070			7,158		(3,999	)		(683	)		0			97,038		33			1,171
Equity securities		78,797		3,862			(1,322	)		2,540			456		(2,924	)		(1,880	)		(325	)		76,664		3,841			(1,295	)
Investment funds		78,797		3,862			(1,322	)		2,540			456		(2,924	)		(1,880	)		(325	)		76,664		3,841			(1,295	)
Derivative assets and liabilities (net)		19,334		1,530			(372	)		1,158			0		0			0			0			20,492		1,530			(372	)
Options held/written and other		19,334		1,530			(372	)		1,158			0		0			0			0			20,492		1,530			(372	)
Other asset		10,854		(2,453	)		0			(2,453	)		727		0			(66	)		0			9,062		(2,453	)		0
Reinsurance recoverables *5		10,854		(2,453	)		0			(2,453	)		727		0			(66	)		0			9,062		(2,453	)		0
Policy Liabilities and Policy Account Balances		302,201		(7,350	)		(142	)		(7,492	)		0		0			(12,883	)		0			296,810		(7,350	)		(142	)
Variable annuity and variable life insurance contracts *6		302,201		(7,350	)		(142	)		(7,492	)		0		0			(12,883	)		0			296,810		(7,350	)		(142	)