Daiwa Securities Group Annual Report 2012 Corporate Summary Executive Messages Business Strategy Other Information Management Systems & CSR Financial Section With regards to the assets which are managed individually, such as  sales branches, Daiwa grouped them individually. The other operating  assets are grouped in accordance with classifications used for internal  management. Assets to be disposed are grouped individually. The decline of the profitability and the changes in the way of use  arose with these assets. The book values of certain assets were  reduced to recoverable amounts and the amounts of the differences  between the book value and recoverable amounts were recorded as  impairment loss of ¥17,884 million ($218,098 thousand). The break- down of the amounts is ¥14,193 million ($173,085 thousand) for idle  assets (¥21 million ($256 thousand) for buildings, ¥11,794 million  ($143,829 thousand) for software, ¥2,367 million ($28,866 thousand)  for goodwill and ¥11 million ($134 thousand) for the others) and  ¥3,691 million ($45,013 thousand) for the assets to be disposed  (¥357 million ($4,354 thousand) for buildings, ¥1,343 million ($16,378  thousand) for lands, ¥1,986 million ($24,220 thousand) for leasehold  rights and ¥5 million ($60 thousand) for the others). The recoverable amounts of software in idle assets are measured  by value in use, which is calculated by discounting future cash flows  at a discount rate of 2.0%. The recoverable amount of goodwill is  measured by re-evaluated company value. The recoverable amounts  for assets to be disposed are measured by net selling price and  valued by appraisal price. Granting stock options— Stock subscription rights were issued free  to directors, executive officers and employees of the Company and  its affiliated companies by the resolutions in the meeting of share- holders on June 27, 2012 in accordance with Articles 236, 238 and  239 of the Companies Act of Japan, and the amount paid in upon  exercise of such subscription rights is ¥1 ($0.01) per share. Regarding Internal Reorganization— Daiwa Securities Co. Ltd. and  Daiwa Securities Capital Markets Co. Ltd. conducted a merger on  April 1, 2012 based on a Merger Agreement on February 20, 2012. An outline of the transactions is as follows: 1. Company’s name, the substance of business, date of business  combination, legal form of business combination, Company’s name  after business combination and outline of the deal including the objec- tive of the deal. The Company processed the deal as under common control in con- formity with the “Accounting Standard for Business Combinations”  (ASBJ Statement No. 21 of December 26, 2008) and the “Guidance  on Accounting Standard for Business Combinations and Accounting  Standard for Business Divestitures” (ASBJ Guidance No. 10 of  December 26, 2008). With regards to assets which are managed individually, such as  sales branches, Daiwa grouped them individually. The other operating  assets are grouped in accordance with classifications used for internal  management. Assets to be disposed are grouped individually. For idle assets for which profitability has declined, the book values  of certain assets were reduced to the recoverable amounts and the  amounts of the reductions were recorded as impairment loss of ¥594  million. The breakdown of the amounts are ¥13 million for equipment  and vehicles, ¥27 million for lands, ¥479 million for goodwill and ¥75  million for software and others. The recoverable amounts of assets are mainly measured by net  selling price and buildings and lands are valued by the assessed value  for property taxes. The recoverable amount of goodwill is measured  by reevaluated company value. (Fiscal year ended March 31, 2011) Daiwa recognized impairment loss for the following asset groups. 28. Subsequent events 2. Outline of accounting procedure (1) Name and business of combined entities (2) Date of business combination (3) Legal form of business combination (4) Name of the entity after the business combination (5) Outline of the deal including the objective of the deal The integration of Daiwa Securities Co. Ltd. and Daiwa  Securities Capital Markets Co. Ltd. vastly elevates the reliability  of the strong management foundation, by means of further  optimization of administrations and augmentation of added  value, to meet the highly diversifying client demands. Daiwa Securities Co. Ltd. A merger by absorption with Daiwa Securities Co. Ltd. as the  surviving company April 1, 2012 Corporate name Daiwa Securities  Co. Ltd. Daiwa Securities  Capital Markets  Co. Ltd The substance of  business Securities Related  Business  Investment Advisory  and Agency Business Securities Related  Business Millions of yen Condition Location Impairment loss Idle assets Low profit-earning  assets Kanto region and  others ¥594 92