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2. Commitments and Contingent LiabilitiesThe Company and its consolidated subsidiaries had unused lines of credit for short-term financing aggregating ¥22,208 million (U.S. $197,094 thousand) and ¥22,286 million at March 31, 2016 and 2015, respectively.3. InventoriesFinished goods and merchandise, work in process, and raw materials and supplies as of March 31, 2016 and 2015 were as follows: Millions of yen Thousands ofU.S. dollars201620152016Finished goods and merchandise¥10,956 ¥10,714$ 97,239Work in process11,51311,678102,175Raw materials and supplies8,5969,74976,288Total¥31,066¥32,142$275,7024. Selling, General and Administrative ExpensesMajor items included in selling, general and administrative expenses for the years ended March 31, 2016 and 2015 were as follows: Millions of yen Thousands ofU.S. dollars201620152016Transportation and warehousing expenses¥ 5,274 ¥ 5,250$ 46,806 Provision for allowance for doubtful accounts4815431Salaries and allowances8,0117,43071,098Retirement benefit expenses2843962,521Provision for directors’ bonuses93111833Depreciation1,0681,0599,482Research and development expenses7,6446,77167,838Other13,50712,215119,876Total¥35,932 ¥33,251$318,888(o) Cash and cash equivalentsCash and cash equivalents are composed of cash and time deposits having maturities within three months from acquisition, all of which are low-risk, short-term financial instruments readily convertible into cash.(p) Research and development costsResearch and development costs are charged to income when incurred.(q) Income taxesDeferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse.(r) Shareholders’ equityThe Corporation Law of Japan provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.(s) Changes in accounting principlesThe Company has applied the “Accounting Standard for Business Combinations” (Accounting Standards Board of Japan (ASBJ) Statement No. 21, September 13, 2013), the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013) and the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, September 13, 2013) from this consolidated fiscal year. Under the adopted accounting standards, differences arising from the change in the Company’s ownership interest in subsidiaries are recorded as capital surplus as long as the Company retains control over its subsidiaries, and acquisition-related costs are recorded as expenses in the fiscal year in which such costs are incurred. For business combinations which occur on or after the begin-ning of this consolidated fiscal year, adjustments of the provisional allocation of acquisition costs for a business combination shall be reflected in the consolidated financial statements for the fiscal year in which the business combination occurred. Furthermore, the title “Net income” has been changed to “Profit attributable to owners of parent,” and the title “Minority interests” has been changed to “Non-controlling interests.” To reflect these changes in presentation, the consolidated financial state-ments for the previous consolidated fiscal year have been reclassified.In accordance with the transitional treatment set forth in Article 58-2 (4) of the “Accounting Standard for Business Combinations,” Article 44-5 (4) of the “Accounting Standard for Consolidated Financial Statements,” and Article 57-4 (4) of the “Accounting Standard for Business Divestitures,” the aforementioned accounting standards have been applied prospectively from the beginning of this consolidated fiscal year.In addition, there was no applicable event for the year ended March 31, 2016, and no impact on the consolidated financial statements and amounts per share as well.The Company has applied the “Revised Practical Solution on Accounting for Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ Practical Issues Task Force (PITF) No. 18, March 26, 2015) from this consolidated fiscal year. In accor-dance with the transitional treatment set forth in the PITF, the Company has selected amortization treatment as in the past in which amortization is based on the remaining amortization period for goodwill in the consoli-dated financial statements. In addition, this adoption does not affect the consolidated financial statements and amounts per share.LINTEC ANNUAL REPORT 201652:: FINANCIAL SECTION

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