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Income Taxes
 12 Months Ended
Mar. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
16. Income Taxes
Income before income taxes and the provision for income taxes in fiscal 2023, 2024 and 2025 are as follows:
 
    
Millions of yen
  
    
2023
     
2024
     
2025
  
Income before income taxes:
         
Japan
    ¥ 201,168      ¥ 298,321      ¥ 307,830  
Overseas
      191,010        171,654        172,633  
  
 
 
     
 
 
     
 
 
  
   ¥ 392,178      ¥ 469,975      ¥ 480,463  
  
 
 
     
 
 
     
 
 
  
Provision for income taxes:
         
Current—
         
Japan
    ¥ 30,808      ¥ 80,274      ¥ 72,230  
Overseas
      27,490        31,114        33,252  
  
 
 
     
 
 
     
 
 
  
     58,298        111,388        105,482  
  
 
 
     
 
 
     
 
 
  
Deferred—
         
Japan
      22,047        9,049        26,803  
Overseas
      14,900        10,951        (3,457 ) 
  
 
 
     
 
 
     
 
 
  
     36,947        20,000        23,346  
  
 
 
     
 
 
     
 
 
  
Provision for income taxes
    ¥ 95,245      ¥ 131,388      ¥ 128,828  
  
 
 
     
 
 
     
 
 
  
In fiscal 2023, 2024 and 2025, the Company and its subsidiaries in Japan were subject to a national corporation tax of approximately 24%, a local inhabitant tax of approximately 4% and a deductible local enterprise tax of approximately 4%, which in the aggregate result in a statutory income tax rate of approximately 31.5%.
Reconciliations of the differences between the tax provision computed at the statutory income tax rate of 31.5%, the aggregate statutory income tax rate of the Company’s tax domicile, and the consolidated provision for income taxes in fiscal 2023, 2024 and 2025 are as follows:
 
    
Millions of yen
  
    
2023
    
2024
    
2025
  
Income before income taxes
    ¥ 392,178     ¥ 469,975     ¥ 480,463  
  
 
 
    
 
 
    
 
 
  
Tax provision computed at the statutory rate
    ¥ 123,536     ¥ 148,042     ¥ 151,346  
Increases (reductions) in taxes due to:
       
Change in valuation allowance
      2,533       5,441       1,973  
Nondeductible expenses
      4,794       4,762       5,813  
Nontaxable income
      (3,347 )      (3,574 )      (5,893 ) 
Effect of lower tax rates on certain subsidiaries
      (19,764 )      (17,627 )      (22,271 )
Effect of investor taxes on earnings of subsidiaries
      4,789       7,674       3,494  
Effect of the tax law and rate changes
      180       (1,295 )      2,218  
Effect of sale or liquidation of subsidiaries
      (16,754 )      (14,995 )      (8,423 ) 
Other, net
      (722 )      2,960       571  
  
 
 
    
 
 
    
 
 
  
Provision for income taxes
    ¥ 95,245     ¥ 131,388     ¥ 128,828  
  
 
 
    
 
 
    
 
 
  
 
 
The effective income tax rate is different from the statutory income tax rate primarily because of certain nondeductible expenses, nontaxable income, changes in valuation allowance, the effect of lower tax rates on certain subsidiaries, effect of investor taxes on earnings of subsidiaries and effect of sale or liquidation of subsidiaries.
Due to the enactment of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No.13 of 2025) in the Japanese Diet on March 31, 2025, the “Special Corporation Tax for National Defense” will be imposed from the fiscal years beginning on or after April 1, 2026. As a result, the statutory income tax rate used to calculate deferred tax assets and liabilities has been changed from approximately 31.0% to approximately 31.9% for temporary differences expected to be resolved from the fiscal year beginning on April 1, 2026. The increase and decrease of the deferred tax assets and liabilities due to the change in the tax rates resulted in an increase of provision for income taxes by ¥6,124 million in the consolidated statements of income.
Total income tax expense recognized in fiscal 2023, 2024 and 2025 was allocated as follows:
 
    
Millions of yen
  
    
2023
    
2024
    
2025
  
Provision for income taxes
    ¥ 95,245     ¥ 131,388     ¥ 128,828  
Income tax expense (benefit) allocated to other comprehensive income (loss):
       
Net change of unrealized gains (losses) on investment in securities
      (41,961 )      (27,157 )      (60,260 ) 
Net change of impact of changes in policy liability discount rate
      43,576       32,471       54,382  
Net change of debt valuation adjustments
      20       (74 )      (13 ) 
Net change of defined benefit pension plans
      1,630       5,554       2,063  
Net change of foreign currency translation adjustments
      (17,325 )      (30,992 )      2,484  
Net change of unrealized gains (losses) on derivative instruments
      3,514       (1,523 )      (441 )
Other direct adjustments to shareholders’ equity
      36       32       22  
  
 
 
    
 
 
    
 
 
  
Total income tax expense
    ¥ 84,735     ¥ 109,699     ¥ 127,065  
  
 
 
    
 
 
    
 
 
  
 
 
The tax effects of temporary differences and carryforwards giving rise to the deferred tax assets and liabilities as of March 31, 2024 and 2025 are as follows:
 
    
Millions of yen
  
    
2024
    
2025
  
Assets:
     
Net operating loss carryforwards
    ¥ 62,493     ¥ 48,953  
Allowance for credit losses
      8,650       14,842  
Investment in securities
      14,382       4,581  
Accrued expenses
      26,401       26,516  
Investment in operating leases
      12,728       11,576  
Property under facility operations
      24,996       28,007  
Installment loans
      5,459       8,075  
Unrealized losses on investment in securities
      98,025       158,375  
Lease liabilities
      69,697       74,215  
Other*
      156,516       159,391  
  
 
 
    
 
 
  
     479,347       534,531  
Less: valuation allowance
      (39,046 )      (35,845 ) 
  
 
 
    
 
 
  
     440,301       498,686  
Liabilities:
     
Net investment in leases
      10,867       12,755  
Investment in operating leases
      175,727       171,455  
Unrealized gains on investment in securities
      9,139       9,259  
Deferred insurance policy acquisition costs
      85,830       90,934  
Policy liabilities and policy account balances
      194,713       263,515  
Property under facility operations
      22,615       33,075  
Other intangible assets
      152,125       143,701  
Undistributed earnings
      95,720       103,808  
Prepaid benefit cost
      23,473       27,224  
Advances paid
      8,102       8,387  
Right-of-use
assets
      68,715       72,034  
Other
      31,946       24,834  
  
 
 
    
 
 
  
     878,972       960,981  
  
 
 
    
 
 
  
Net deferred tax liability
    ¥ 438,671     ¥ 462,295  
  
 
 
    
 
 
  
 
*
As of March 31, 2024 and 2025, other deferred tax assets includes amounts related to net investment hedges of ¥95,551 million and ¥96,778 million.
Net deferred tax assets and liabilities at March 31, 2024 and 2025 are reflected in the accompanying consolidated balance sheets under the following captions:
 
    
Millions of yen
  
    
2024
     
2025
  
Other assets
    ¥ 66,519      ¥ 63,337  
Income taxes: Deferred
      505,190        525,632  
  
 
 
     
 
 
  
Net deferred tax liability
    ¥ 438,671      ¥ 462,295  
  
 
 
     
 
 
  
 
 
The valuation allowance is primarily recognized for deferred tax assets of consolidated subsidiaries with operating loss carryforwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible and operating loss carryforwards are utilizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax-planning
strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company and its subsidiaries will realize the benefits of these deductible temporary differences and operating loss carryforwards, net of the existing valuation allowances at March 31, 2025. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The net changes in the total valuation allowance were increases of ¥2,132 million in fiscal 2023, increases of ¥1,759 million in fiscal 2024, and decreases of ¥3,201 million in fiscal 2025. The decrease in the total valuation allowance recognized in earnings due to the utilization of net operating loss carryforwards were ¥1,465 million in fiscal 2023, ¥3,660 million in fiscal 2024 and ¥3,380 million in fiscal 2025. The adjustments to the
beginning-of-the-year
amount in the total valuation allowance resulting from changes in judgment about the realizability of deferred tax assets in future years were net increases of ¥628 million in fiscal 2023 (increases of ¥2,120 million and decreases of ¥1,492 million on a gross basis), net increases of ¥513 million in fiscal 2024 (increases of ¥4,125 million and decreases of ¥3,612 million on a gross basis), and net decreases of ¥1,986 million in fiscal 2025 (increases of ¥1,143 million and decreases of ¥3,129 million on a gross basis), respectively.
The Company and certain subsidiaries have net operating loss carryforwards of ¥369,010 million at March 31, 2025, which expire as follows:
 
Years ending March 31,
   
Millions of yen
  
2026
    ¥ 8,129  
2027
      9,828  
2028
      4,246  
2029
      24,606  
2030
      53,538  
Thereafter
      214,227  
Indefinite period
      54,436  
  
 
 
  
Total
    ¥ 369,010  
  
 
 
  
The unrecognized tax benefits as of March 31, 2024 and 2025 were not material. The Company and its subsidiaries do not believe that it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of March 31, 2025.
The total amounts of penalties and interest expense related to income taxes recognized in the consolidated balance sheets as of March 31, 2024 and 2025, and in the consolidated statements of income for fiscal 2023, 2024 and 2025 were not material.
The Company and its subsidiaries file tax returns in Japan and certain foreign tax jurisdictions. The Company is no longer subject to ordinary tax examination in Japan for the tax years prior to fiscal 2023, and its major domestic subsidiaries are no longer subject to ordinary tax examination for the tax years prior to fiscal 2018, respectively.
Subsidiaries in the United States remain subject to a tax examination for the tax years after fiscal 2020. Subsidiaries in the Netherlands remain subject to a tax examination for the tax years after fiscal 2018.