Daiwa Securities Group Annual Report 2012 Leased assets— Leased assets in finance lease transactions other  than the ones that transfer ownership to the lessee are amortized  under the straight-line method over estimated useful lives taken to be  leasing periods and residual values taken to be nil. The accounting for  finance lease transactions other than the ones that transfer ownership  to the lessee has changed from the manner similar to the accounting  treatment for ordinary rental transactions to the manner similar to the  accounting treatment for ordinary sale transactions and are capitalized  as leased assets. Finance lease transactions other than the ones that transfer owner- ship to the lessee, which started before the fiscal year that “Accounting  Standard for Lease Transactions” (ASBJ Statement No. 13) was  applied for the first time, were accounted for in the accounting treat- ment similar to that of ordinary rental transactions. Certain information  regarding these non-capitalized finance lease transactions is contained  in Note 10. Impairment— Non-current assets, principally property and equipment,  leased assets used under finance lease contracts, intangible fixed  assets, and goodwill are reviewed for impairment whenever events or  changes in circumstances indicate that a carrying amount of an asset  may not be recoverable. Recoverability is measured by a comparison  of the carrying amount to future undiscounted net cash flows expected  to be generated by the asset or certain asset group. If an asset is  considered to be impaired, then an impairment loss is recognized for  the difference between the carrying amount and the fair value of the  asset or the related asset group. Bonuses— Accrued bonuses for employees and directors represent  liabilities estimated as of the balance sheet date. Share-based payment— Daiwa allocates the share-based compen- sation costs, which are measured at fair value of the options at grant  date, over the period in which the related requisite service is rendered. Retirement benefits— The Company and domestic subsidiaries have  unfunded retirement benefit plans for eligible employees, under which  the benefit amount is determined annually based on the performance  during the year in which the related service is rendered, plus interest  earned to date. Accordingly this liability does not change subsequently  due to the changes in compensation level in the subsequent years. The  annually earned benefits and the related interest to the accumulated  benefits are expensed annually. The Company and most domestic consolidated subsidiaries also  have defined contribution plans for which annual contribution is  charged to expense. Retirement benefits for directors and corporate auditors are recog- nized based on the amount as calculated in accordance with the  internal rule. Accounting standard for revenue and cost recognition of long  term construction contracts— Concerning some consolidated  domestic subsidiaries which engage in made-to-order software, when  the outcome of individual contracts is deemed certain during the  course of the activity, the domestic subsidiaries apply the percentage- of-completion method to work, otherwise the completed-contract  method is applied. The percentage / stage of completion at the end of  the reporting period is measured by the proportion of the cost  incurred to the estimated total cost. Income taxes— Income taxes consist of corporation, enterprise and  inhabitants’ taxes. The provision for current income taxes is computed  based on the pre-tax income of the Company and each of its consoli- dated subsidiaries with certain adjustments, as appropriate. Deferred  tax assets and liabilities are recognized for the future tax consequences  attributable to differences between the financial statements carrying  amounts of existing assets and liabilities and their respective tax bases  and operating loss and tax credit carry-forwards, if any. A valuation  allowance is recognized for any portion of the deferred tax assets if it  is considered not realizable based on its tax planning, other studies,  and reference to certain set requirements under Japanese GAAP. Translation of foreign currencies— The Company and its domestic  consolidated subsidiaries translate assets and liabilities in foreign  currencies into yen at the year-end exchange rate, and translate  income and expenses in foreign currencies into yen using generally  the applicable exchange rate on the day when the related transaction  occurred. Any gains and losses resulting from such translation are  included in current income or expense. The financial statements of  overseas consolidated subsidiaries and affiliates are translated into  yen using the year-end exchange rates. Income and expenses are  translated at the average exchange rates of the applicable year.  Differences in yen amounts arising from the use of different rates are  included in adjustments on foreign currency translation in “Net assets”  in the accompanying consolidated balance sheets. Net income (loss) per share— Net income (loss) per share of  common stock is based on the average number of common shares  outstanding. Diluted net income per share is computed based on the  average number of common shares outstanding for the year with an  adjustment for dilutive stock subscription rights based on the number  of shares of common stock that would have been issued provided that  the outstanding dilutive stock subscription rights were converted at the  beginning of the year. The diluted net income per share amounts for  the years ended March 31, 2012 and 2011 are not presented, since  net loss is reported in the consolidated statements of income. 69