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Annual Reportは、ごうぎんの決算や活動内容にて海外の皆様に知っていただくために作成しています

(3) The assumptions used to measure fair value of 2014 Stock Option are as follows:(a) Valuation method used: Black-Scholes option pricing model(b) Major fundamental numerical values and estimation methodEstimated remaining outstanding period (Year) (*1) 3.6Stock price at the time of computation (Yen) \ 716Volatility of stock price (%) (*2) 27.034Estimated dividend payout ratio (%) (*3) 1.536Interest rate with risk-free (%) (*4) 0.090(*1) Remaining outstanding period is estimated based on the actual periods and retirement ages of directors, corporateauditors and executive officers for the past 16 years.(*2) Weekly historical volatility, which is computed based on the stock prices during the period corresponding to theestimated remaining outstanding period (3.6 years), is adopted.(*3) Estimated dividend payout ratio is computed by dividing cash dividends applicable to the fiscal year ended March31, 2014, by stock price.(*4) An average compound yield of long-term Japanese government bonds, with estimated outstanding period (3.6years) is adopted.(4) Estimation method of the vested number of stock optionsSince it is difficult to estimate the number of forfeiture for the future, only the actual number of forfeited options is reflected.23. Income TaxesIncome taxes consist of corporation tax, inhabitant tax and enterprise tax. Major components of deferred tax assets andliabilities as of March 31, 2014 and 2015 are summarized as follows:Thousands ofMillions of YenU.S. Dollars201420152015Deferred tax assets:Reserve for possible loan losses\ 11,812\11,670$ 97,112Depreciation1,5851,25010,401Impairment loss on fixed assets2,6922,68422,335Write-offs of securities1,1829828,171Net defined benefit liability4,1943,72731,014Tax loss carry-forwards3434282Deferred loss on hedging instruments440332Others2,7042,85023,716Subtotal24,20923,240193,392Valuation allowances(3,374)(3,125)(26,004)Total deferred tax assets20,83420,115167,387Deferred tax liabilities:Reserve for deferred revenue of tangible fixed assets(115)(102)(848)Unrealized gains on other securities(21,911)(30,071)(250,237)Others(54)(48)(399)Total deferred tax liabilities(22,081)(30,222)(251,493)Net deferred tax assets (liabilities)\ (1,246)\(10,106)$ (84,097)A reconciliation of the statutory tax rate to the effective tax rate for the years ended March 31, 2014 and 2015 are as follows:20142015Statutory tax rate37.75%35.37%Adjustment:Entertainment and other permanently non-deductible expenses0.510.33Dividend and other permanently non-taxable income(1.08)(1.14)Changes in valuation allowances(0.49)0.24Decrease in deferred tax assets due to change in tax rates2.377.67Others0.890.08Effective tax rate39.94%42.56%Changes in the statutory tax rate to determine deferred tax assets and liabilitiesFollowing the promulgation of the“Act on the Partial Revision of the Income Tax”(Act No. 9 of 2015) on March 31, 2015,corporation tax rate has been reduced, from the fiscal year beginning April 1, 2015. In line with these changes, the statutorytax rate used to measure deferred tax assets and liabilities has been changed from 35.37% to 32.82% for temporarydifferences expected to be eliminated in the fiscal year beginning April 1, 2015 and to 32.06% for those expected to beeliminated in the fiscal year beginning on or after April 1, 2016.As a result of this change, deferred tax assets and deferred tax liabilities decreased by \18 million ($149 thousand) and\1,186 million ($9,869 thousand), respectively, net unrealized gain on other securities and income taxes-deferred increasedby \3,091 million ($25,721 thousand) and \1,711 million ($14,238 thousand), respectively. Deferred tax liabilities for landrevaluation excess decreased by \271 million ($2,255 thousand) and land revaluation excess increased by the same amount.35