Nippon Telegraph and Telephone Corporation – Annual report – 31 March 2023
Industry: telecoms
4.8. Financial Instruments (extract)
(2) Continuing Involvement in Derecognized Financial Assets
Credit card receivables (extract)
NTT Group concluded an agreement for the transfer to third parties of the rights to receive cash flows from credit card receivables (trade and other receivables) for a period until March 31, 2024, and transferred such rights on June 29, 2022, September 29, 2022, December 27, 2022 and March 30, 2023, during the fiscal year ended March 31, 2023.
The credit card receivables subject to the transfer are classified into senior, mezzanine and subordinated portions based on the risk of default. For the mezzanine portion, NTT Group deposits cash for third parties and bears the credit risk.
Although NTT Group bears the credit risk for the mezzanine portion as stated above, the credit risk assumed by the NTT Group is insignificant because the default risk is highly likely to be absorbed by the subordinated portion. NTT Group is also properly monitoring the default risk by tracking that actual collections of the transferred receivables are adequate. Claim rights against the third parties for the cash deposit portions are recognized as “Trade and other receivables” in the consolidated statement of financial position.
In the fiscal years ended March 31, 2022 and 2023, NTT Group derecognized the transferred assets because substantially all the risks and rewards of ownership had been transferred to third parties.
Of the transferred assets, the total amount of the mezzanine portion held by NTT Group to third parties as of March 31, 2022 and 2023 was ¥47,859 million and ¥58,920 million, respectively, and the fair value of the derecognized assets as of March 31, 2022 and 2023 was same as their book value.
The maximum amount of exposure to losses pertaining to this matter as of March 31, 2022 and 2023 were the same as the amounts described above, which represent the total amount of cash deposits provided by NTT Group to the third parties.
The losses recognized in these transfer transactions during the fiscal year ended March 31, 2022 and 2023 were immaterial.
The largest transfer transactions during the fiscal years ended March 31, 2022 and 2023 occurred on March 30, 2022 and December 27, 2022, respectively.
The amounts of credit card receivables that were derecognized were ¥483,420 million and ¥643,370 million, respectively, and the consideration received for the transferred assets was ¥435,074 million and ¥579,026 million, respectively. No credit losses were incurred in the fiscal year ended March 31, 2022 and 2023.
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