SMFG Notes to Consolidated Financial Statements 28. Employee Retirement Benefits (1) Outline of employee retirement benefits (2) Projected benefit obligation Consolidated subsidiaries in Japan have contributory and non-contributory funded or unfunded defined benefit pension plans such as  employee pension plans, qualified pension plans and lump-sum severance indemnity plans. Consolidated subsidiaries in Japan have  adopted the defined-contribution pension plan. Certain domestic consolidated subsidiaries have a general type of employee pension  plans. They may grant additional benefits in cases where certain requirements are met when employees retire.  Some overseas consolidated subsidiaries adopt defined benefit pension plans and defined-contribution pension plans. SMBC and some  consolidated subsidiaries in Japan contributed some of their marketable equity securities to employee retirement benefits trusts. Notes: 1. Pension expenses of consolidated subsidiaries which adopt the simple method are included in “Service cost.”  2. Premium paid to defined-contribution pension is included in “Other.” The principal assumptions used in determining benefit obligation and pension expenses at or for the fiscal years ended March 31, 2011  and 2010 were as follows: Estimated amounts of retirement benefits are allocated to each period by the straight-line method.  Unrecognized prior service cost is amortized using the straight-line method within the employees’ average remaining service period  from the fiscal year of its incurrence, over mainly 9 years for the fiscal years ended March 31, 2011 and 2010. Unrecognized net actuarial gain or loss is amortized using the straight-line method within the employees’ average remaining service  period, commencing from the next fiscal year of incurrence, over mainly 9 years for the fiscal years ended March 31, 2011 and 2010. Tangible fixed assets mainly consisted of branches and equipment. Intangible fixed assets are software. Depreciation method of lease assets is reported in Note 2. (5) Depreciation. SMFG  2011 96 (3) Pension  expenses (4) Assumptions 29. Lease Transactions (1) Financing  leases (a) Lessee side (i) Lease assets (ii) Depreciation method of lease assets Millions of yen Millions of  U.S. dollars March 31 2011 2010 2011 Projected benefit obligation (A) ................................... ¥(976,271) ¥(938,161) $(11,741) Plan assets (B) ................................... 883,255  891,366 10,622  Unfunded projected benefit obligation (C)=(A)+(B)..................... (93,016) (46,794) (1,119) Unrecognized net actuarial gain or loss (D) .................................. 266,775  226,268 3,208  Unrecognized prior service cost (E) ................................... (10,365) (15,234) (124) Net amount recorded on the consolidated balance sheet (F)=(C)+(D)+(E) .............. 163,393  164,240 1,965  Prepaid pension cost (G) .................................. 207,997  205,931 2,501  Reserve for employee retirement benefits (F)–(G) ........................... ¥ (44,604) ¥ (41,691) $ (536) Note: Some consolidated subsidiaries adopt the simple method in calculating the projected benefit obligation. Millions of yen Millions of  U.S. dollars Year ended March 31 2011 2010 2011 Service cost ................................................................................................ ¥23,505  ¥21,052 $283 Interest cost on projected benefit obligation .............................................. 23,621  22,459 284  Expected return on plan assets ................................................................... (27,624) (23,883) (332) Amortization of unrecognized net actuarial gain or loss ............................. 45,902  60,456 552  Amortization of unrecognized prior service cost ......................................... (6,229) (11,167) (75) Other (nonrecurring additional retirement allowance paid and other) ........ 4,812  4,229 58  Total .......................................................................................................... ¥63,988  ¥73,146 $770 Year ended March 31 2011 2010 Discount rate .............................................................. Domestic consolidated subsidiaries Overseas consolidated subsidiaries 1.4% to 2.5% 5.4% to 9.0% 1.4% to 2.5% Expected rate of return on plan assets ......................... Domestic consolidated subsidiaries Overseas consolidated subsidiaries 0% to 4.0% 5.5% to 5.6% 0% to 4.0%