Consolidated Financial Report for FY2022
Ended March 31, 2023

Eleven-year Financial Summary

01

Management’s Discussion and Analysis

03

Consolidated Financial Statements
Consolidated Balance Sheets

05

Consolidated Statements of Income

07

Consolidated Statements of Comprehensive Income

07

Consolidated Statements of Changes in Net Assets

08

Consolidated Statements of Cash Flows09

Notes to Consolidated Financial Statements

10

Independent Auditor’s Report30

Eleven-year Financial Summary

Eleven-year Financial Summary
Millions
Millionsof yenof yen

FY2012FY2012FY2013
FY2013

FY2014FY2014FY2015FY2015FY2016FY2016FY2017FY2017FY2018FY2018FY2019FY2019FY2020
FY2020

FY2021
FY2021

FY2022
FY2022For theFor Yearthe Year
Revenue
Revenue
fromfrom
operations
operations
Leasing
Leasing
SalesSales
Construction
Construction
Brokerage
Brokerage

736,652
736,652
278,317
278,317232,149
232,149
171,082
171,082
50,95750,957780,273780,273283,730
283,730
234,093234,093
201,190
201,190
57,211
57,211

806,835
806,835
289,117289,117264,207264,207
188,995
188,995
58,48658,486854,964
854,964
313,340
313,340
274,761
274,761
199,115
199,115
61,496
61,496925,151
925,151
337,466
337,466
314,299
314,299
203,623
203,623
66,714
66,714

948,402
948,402353,881353,881311,193311,193
209,356
209,356
69,16969,1691,012,198
1,012,198
381,764
381,764
331,752
331,752
221,693
221,693
71,867
71,867

1,013,513
1,013,513
395,592
395,592
324,928
324,928
218,931
218,931
71,19971,199917,473
917,473
398,238
398,238
263,395
263,395
188,708
188,708
65,79365,793

939,431
939,431425,082
425,082
233,788
233,788
204,362204,362
73,48473,484

939,905
939,905425,369
425,369
222,077
222,077
213,584
213,584
75,10775,107

Cost Costof revenueof revenue
fromfrom
operations
operations

529,913529,913558,987
558,987

579,964
579,964

614,191
614,191

664,184
664,184

664,015664,015

711,050
711,050

691,832
691,832

629,565
629,565

636,988636,988625,452
625,452

SG&ASG&A
expenses
expenses% of%revenueof revenue
fromfrom
operations
operations

55,39455,394
7.5%7.5%

60,81560,815
7.8%7.8%

60,97660,976
7.6%7.6%

66,532
66,532
7.8%7.8%

72,796
72,796
7.9%7.9%

78,75078,7508.3%8.3%

81,75981,7598.1%8.1%

87,34987,3498.6%8.6%

68,664
68,664
7.5%7.5%

68,56068,5607.3%7.3%

73,17973,1797.8%7.8%

OperatingOperatingincomeincome% of%revenueof revenue
fromfrom
operations
operations

151,345
151,345
20.5%
20.5%

160,471
160,471
20.6%
20.6%

165,895
165,895
20.6%
20.6%

174,241
174,241
20.4%
20.4%

188,171
188,171
20.3%
20.3%

205,637
205,637
21.7%
21.7%

219,389
219,389
21.7%
21.7%

234,332
234,332
23.1%
23.1%

219,244219,244
23.9%
23.9%

233,883
233,883
24.9%
24.9%

241,274
241,274
25.7%
25.7%

1
1
Ordinary
Ordinary
profit*profit*114,916
114,916

130,537
130,537

139,055
139,055

148,424
148,424

167,697
167,697

186,871
186,871203,227
203,227

220,521220,521

209,950
209,950

225,115
225,115

236,651
236,651

ProfitProfit
attributable
attributableto owners
to ownersof parentof parent

59,82559,82569,697
69,69780,56780,567

87,79887,798103,489
103,489

119,731
119,731130,103130,103

140,997
140,997

141,389
141,389

150,452
150,452

161,926
161,926

Depreciation
Depreciation
and amortization
and amortization

37,761
37,76135,31135,311

33,51933,51934,57434,57439,44639,446

41,62841,62846,31346,313

48,974
48,97457,81357,81360,64560,64564,63564,635At Year-end
At Year-end
TotalTotal
assetsassets22
Equity*Equity*Net interest-bearing
Net interest-bearing
debt debt
Unrealized
Unrealized
gainsgains
on investment
on investment
and rental
and rental
properties
properties

4,105,500
4,105,500
627,012
627,0122,424,932
2,424,932
1,001,547
1,001,547

4,220,429
4,220,429
707,948
707,948
2,652,929
2,652,929
1,132,644
1,132,644

4,523,804
4,523,804
832,462
832,462
2,875,660
2,875,660
1,290,145
1,290,145

4,675,915
4,675,915
888,100
888,100
2,971,667
2,971,667
1,697,562
1,697,562

4,980,040
4,980,040
1,007,347
1,007,347
3,101,162
3,101,162
1,996,441
1,996,441

5,167,199
5,167,199
1,114,975
1,114,975
3,210,302
3,210,302
2,328,140
2,328,140

5,130,120
5,130,120
1,202,104
1,202,104
3,170,595
3,170,595
2,703,263
2,703,263

5,317,623
5,317,623
1,295,000
1,295,000
3,245,547
3,245,547
3,176,151
3,176,151

5,673,666
5,673,666
1,503,021
1,503,021
3,372,953
3,372,953
3,432,632
3,432,632

5,806,040
5,806,040
1,634,049
1,634,049
3,408,600
3,408,600
3,494,974
3,494,974

6,365,436
6,365,436
1,799,372
1,799,372
3,752,902
3,752,902
3,736,711
3,736,711

Per Share
Per Share
Amounts
Amounts(Yen)(Yen)ProfitProfit
attributable
attributableto owners
to ownersof parentof parent
Net assets
Net assets
CashCashdividend
dividend
applicableapplicableto thetoyear
the year

126.18126.181,322.52
1,322.52
20 20

147.02147.02
1,493.48
1,493.48
20.0020.00

169.97169.97
1,756.25
1,756.25
21.0021.00

185.23185.23
1,873.71
1,873.71
22.0022.00

218.34218.342,125.36
2,125.36
24.0024.00

252.62
252.62
2,352.53
2,352.53
27.0027.00

274.51274.512,536.40
2,536.40
30.0030.00

297.5297.5
2,732.41
2,732.41
35.0035.00

298.33298.33
3,171.34
3,171.34
40.0040.00

317.45317.45
3,447.81
3,447.81
45.0045.00

341.66341.66
3,796.64
3,796.64
52.00
52.00

15.315.3
10.110.1
3.9 3.9
4.8 4.893 93
80 80
3.9 3.94.9 4.9

16.816.8
10.410.4
4.0 4.0
4.7 4.7
95 95
82 82
3.7 3.7
6.1 6.1

18.418.4
10.510.5
3.9 3.9
4.7 4.7
97 97
87 87
3.5 3.5
6.5 6.5

19.019.0
10.210.2
3.9 3.9
4.8 4.8
98 98
94 94
3.3 3.3
7.3 7.3

20.220.2
10.910.9
4.0 4.0
5.3 5.3
98 98
95 95
3.1 3.1
9.0 9.0

21.621.6
11.311.3
4.2 4.2
5.5 5.5
98 98
94 94
2.9 2.9
10.510.5

23.423.4
11.211.2
4.5 4.5
5.6 5.699 99
96 96
2.6 2.6
11.411.4

24.424.4
11.311.3
4.7 4.7
6.0 6.0
96 96
95 95
2.5 2.5
12.812.8

26.526.5
10.110.1
4.2 4.2
5.5 5.5
96 96
94 94
2.2 2.2
12.612.6

28.128.1
9.6 9.6
4.3 4.3
5.5 5.5
98 98
96 96
2.1 2.1
13.713.7

28.328.3
9.4 9.4
4.2 4.2
5.4 5.4
95 95
86 86
2.1 2.1
14.614.6

Key Key
RatiosRatiosEquityEquityratio ratio(%) (%)ROE ROE(%) (%)ROA ROA(%) (%)
3
ReturnReturnon leasing
on leasing
business*business*(%)3 (%)
Long-termLong-term
debt debt
ratio ratio(%) (%)
Fixed-interest
Fixed-interest
rate debt
rate debt
ratio ratio(%) (%)
4
4
ND/END/E
ratio*ratio*(Times)(Times)55Interest
Interest
coveragecoverageratio*ratio*(Times)(Times)*1. Ordinary*1. Ordinary
profit,profit,
whichwhichequalsequals
operatingoperatingincomeincomeafter adjustment
after adjustment
for non-operating
for non-operating
income/expenses,
income/expenses,
is a management
is a management
index index
that isthat
widelyis widelyused in
used
Japan.
in Japan.
Ordinary
Ordinary
profit profit
is not isreferred
not referred
to in theto inconsolidated
the consolidated
financialfinancialstatements
statements
but is but
includedis included
here because
here because
it playsit an
plays
importantan importantrole inrole
theincalculation
the calculationof compensationof compensation
for directors.
for directors.
*2. Equity*2. Equity= Shareholders’= Shareholders’equityequity+ Accumulated+ Accumulated
other othercomprehensive
comprehensive
incomeincome(loss) (loss)*3. Return*3. Returnon leasing
on leasing
businessbusiness= Cash= flows
Cash flows
from leasingfrom leasing
businessbusiness/ Net investments/ Net investmentsof leasingof leasing
businessbusiness*4. ND/E*4. ND/E
ratio =ratio
Net=interest-bearing
Net interest-bearing
debt /debt
Equity/ Equity*5. Interest*5. Interest
coveragecoverageratio =ratio(Operating= (Operating
incomeincome+ Interest+ Interestand dividendand dividend
income)income)/ Interest/ Interest
expenseexpenseNotes:Notes:
1. The1.Company
The Company
changedchangedits accounting
its accounting
policypolicy(revenue(revenue
recognition
recognition
standards
standardsof Sumitomoof Sumitomo
Real Estate
Real Estate
Sales)Sales)from thefrombeginningthe beginningof FY2019.
of FY2019.
The figures
The figures
providedprovidedfor FY2018
for FY2018
are those
are those
after after
retroactive
retroactive
application.
application.
2. From
2. theFrombeginningthe beginningof FY2020,
of FY2020,
the businessthe businesssegments
segments
for revenue
for revenue
and income
and income
from Sumitomo
from Sumitomo
Real Estate
Real Estate
Sales Sales
have been
have changed,
been changed,
from thefromallocation
the allocation
to “Sales,”to “Sales,”“Brokerage”“Brokerage”
and “Adjustments
and “Adjustments(not presented(not presented
in theindocument),”
the document),”
to be toconsolidated
be consolidated
into “Brokerage.”
into “Brokerage.”
Financial
Financialresultsresultsfor FY2019
for FY2019
have been
have adjusted
been adjusted
retroactively.
retroactively.

1

2

Management's Discussion and Analysis

Management’s Discussion and Analysis for FY2022 (Fiscal year ended March 31, 2023)
Overview
The financial results were as follows: revenue from operations recorded¥939.9 billion (¥0.5 billion increase year on year), operating income¥241.3 billion (¥7.4 billion increase year on year), ordinary profit¥236.7 billion (¥11.5 billion increase year on year), and profit
attributable to owners of parent ¥161.9 billion (¥11.5 billion increase
year on year). Revenue from operations, operating income, ordinary
profit and profit all increased from the previous fiscal year. Ordinary
profit achieved a record high for the second consecutive year, while
profit attributable to owners of parent achieved a record high for thetenth consecutive year.
Revenue from operations and operating income
The steady progress in the mainstay office building businessunderpinned the achievement, and the decline due to COVID-19 incommercial facility business such as hotels and event halls shrank,
resulting in increased revenue and profit in the leasing business. In
addition, the construction business including “Shinchiku Sokkurisan”
remodeling, as well as the brokerage business with good performancein brokerage of existing homes, both contributed to overall
performance with their record high profits.
In the sales business primarily for condominium sales, even thoughrevenue decreased owing to a decline in the number of units delivered,it achieved higher operating income by improved profit margins.
Other income (expenses)
Non-operating income recorded ¥16.6 billion (¥2.4 billion increase
year on year), mainly due to an increase in dividend income.
Non-operating expenses decreased to ¥21.2 billion (¥1.8 billion
decrease year on year), mainly due to decreases in interest expense. As
a result, non-operating loss recorded ¥4.6 billion (an improvement of¥4.1 billion year on year).
Extraordinary income recorded ¥4.7 billion (¥2.2 billion increase
year on year), mainly owing to gain on sale of investment securities,
while extraordinary loss recorded ¥11.0 billion (¥2.1 billion increase
year on year), mainly due to loss on impairment of fixed assets andloss on disposal of property and equipment. As a result, extraordinary
income/loss deteriorated to ¥6.3 billion, recording an improvement of¥0.1 billion from the previous fiscal year.
Notes: 1. Non-operating income and expenses = Operating income – Ordinary profit. They
refer to Other income and expenses except for Extraordinary income and loss.
2. Extraordinary income and loss = Ordinary profit – Income before income taxes. They
refer to the part of Other income and expenses that are occasional and thecompany deems them as extraordinary items.

Cash flows
Cash flows were as follows:
Cash flows from operating activities: ¥165.1 billion (¥27.9 billion
decrease year on year)
Cash flows from investing activities: ¥(489.8) billion (¥279.8 billion
decrease year on year)
Cash flows from financing activities: ¥355.6 billion (¥377.5 billion
increase year on year)

3

Cash and cash equivalents increased to ¥184.1 billion (¥33.7
billion increase year on year).
<Cash flows from operating activities>
Ordinary profit recorded ¥236.7 billion. In addition to ¥55.5 billion
increase in inventories, with payments for income tax and othertaxes, net cash provided by operating activities amounted to ¥165.1
billion.

Revenue from Operations

Operating Income and Operating Margin

Billion yen

Billion yen

1,200

270

1,012.2 1,013.5

970.0
917.5 939.4 939.9

219.4

800

21.7

180

400

255.0

234.3
23.1

219.2
23.9

233.9 241.3
25.7
24.9

Ordinary Profit* andProfit Attributable to Owners of Parent%

Billion yen

30

250

26.3

203.2

200
20

90

10

150

220.5

209.9

141.0

130.1

225.1

141.4

236.7

150.5

250.0

161.9

175.0

100
50

<Cash flows from investing activities>
As the result of investments in property and equipment totaling¥449.3 billion mainly for the purpose of augmenting the leasing
business, net cash used in investing activities amounted to ¥489.8
billion.
<Cash flows from financing activities>
Issuance of bonds and long-term loans payable (including nonrecourse debt) amounted to ¥482.6 billion to make repayments oflong-term loans payable at maturity totaled ¥244.6 billion andinvestments in property and equipment for augmenting the leasing
business. With the net commercial paper issuance of ¥140.0 billion,
net cash provided by financing activities amounted to ¥355.6 billion.

Financial resources for capital and liquidity of funds
AssetsTotal assets as of the end of the fiscal year under review amounted to¥6,365.4 billion (¥559.4 billion increase year on year). Property andequipment increased to ¥4,464.5 billion (¥350.1 billion increase year
on year) mainly due to investments in buildings for leasing.

00

FY ’18 FY ’19 FY ’20 FY ’21 FY ’22 FY ’23

0

FY ’18 FY ’19 FY ’20 FY ’21 FY ’22 FY ’23(Forecast)

Operating margin (right scale)

Ordinary profit

Profit attributable to owners of parent* Please refer to note *1 on Page 1

Total Assets

Equity and Equity Ratio

Billion yen

Billion yen

7,500

1,800

5,000

5,130.1

5,317.6

5,673.7

5,806.0

ROE and ROA
1,799.4

6,365.4

1,503.0
1,200

1,202.1

2,500

1,634.0

FY ’19FY ’20

FY ’21

0

FY ’22

FY ’18

%

15

30

10

15

5

11.2

24.4

28.1

26.5

28.3

600

FY ’18%45

1,295.0

23.4

Liabilities
Total liabilities amounted to ¥4,566.1 billion (¥394.1 billion increase
year on year). Consolidated interest-bearing debt increased to¥3,938.0 billion (¥378.0 billion increase year on year). ND/E ratio
was 2.1 times, same as the previous fiscal year.

As of the end of the fiscal year under review, long-term debt
accounted for 95% of consolidated interest-bearing debt, and fixedinterest rate debt for 86% (those numbers were 98% and 96%,
respectively, at the end of the previous fiscal year).

0(Forecast)

Operating income0

Net assets
Total net assets amounted to ¥1,799.4 billion (¥165.3 billion increase
year on year). Profit attributable to owners of parent as of the end of
the fiscal year under review stood at ¥161.9 billion, and retained
earnings increased. As a result, the equity ratio improved from 28.1%
at the end of the previous fiscal year to 28.3%, and ROE was 9.4%
(9.6% at the end of the previous fiscal year).

FY ’18 FY ’19 FY ’20 FY ’21 FY ’22 FY ’23(Forecast)

FY ’19FY ’20

FY ’21

FY ’22

0

11.3
10.1

0

9.6

9.4

4.2

4.5

4.7

4.2

4.3

FY ’18

FY ’19FY ’20

FY ’21

FY ’22

ROE (Net income / Equity)
ROA ((Operating income + Interest and dividend income) / Total assets)

Equity(Shareholders’ equity + Accumulated other comprehensive income (loss))
Equity ratio (right scale) (Equity / Total assets)

Net Interest-bearing Debt and ND/E Ratio
Billion yen

3,752.9

3,900

3,170.6

3,245.5

3,373.0

0

Times

%

6

100

FY ’18

96

95

98

96
95

Cash Flows from Leasing Business andReturn on Leasing Business

94

96

80
4

2.6

99
96

3,408.6

2,600

1,300

Long-term Debt Ratio and
Fixed-interest Rate Debt Ratio

2.5

FY ’192.2

FY ’20Net interest-bearing debt
ND/E ratio (right scale)(Net interest-bearing debt / Equity)

2.1

FY ’21

2.1

FY ’22

2

0

86

60

%

Billion yen

250
214.8

200
150

193.1

5.6

209.6

220.0

226.9

10
8

6.0

5.5

5.5

5.4

6

40

100

4

20

50

2

0

FY ’18

FY ’19FY ’20

FY ’21

Short-term debt and commercial paper
Long-term debt and bonds
Fixed-interest rate debt ratio

FY ’22

0

FY ’18

FY ’19FY ’20

FY ’21

FY ’220Cash flows from leasing business
Return on leasing business (right scale)(Cash flows from leasing business / Net investments of leasing business)

4Consolidated Financial Statements

Consolidated Balance Sheets
Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2023 and 2022
Thousands of
U.S. dollars (Note 1)

Millions of yen

2023

2022

2023

AssetsCurrent assets:
Cash and deposits (Notes 5, 7 and 8)
Accounts receivable—trade (Note 18)
Allowance for doubtful accounts
Inventories (Notes 3, 6 and 21)
Other current assets
Total current assets¥ 185,120
38,047(24)
790,070
73,6591,086,872¥ 151,393
23,286(44)712,451
54,447
941,533$ 1,386,251
284,911(180)
5,916,355
551,588
8,138,925

Property and equipment (Notes 3, 6, 19 and 21):Land (Note 7)
Buildings and structures (Note 7)
Construction in progress (Note 7)
Other property and equipment (Note 7)
Subtotal of property and equipment
Accumulated depreciation and accumulated impairment losses
Total property and equipment

3,057,437
1,965,322
126,592
54,7655,204,116(739,651)
4,464,465

2,847,702
1,759,702
139,860
48,7184,795,982(681,665)
4,114,317

22,895,290
14,717,103
947,971410,10238,970,466(5,538,798)
33,431,668

Thousands of
U.S. dollars (Note 1)

Millions of yen

2023

2022

2023

68,610237,386
4,786
42,30840,145
5,804
55,156
185,836
640,031$ 1,562,154
2,167,680
34,746217,665
230,845
36,873
562,513
1,489,216
6,301,692

3,148,053
287,247
254,009
2,325
5,534
27,3683,724,536

2,957,325
291,887
249,2768,764
5,796
18,9123,531,960

23,573,858
2,151,018
1,902,119
17,411
41,441
204,942
27,890,789

122,805
104,154
1,396,393(4,477)
1,618,875

122,805
104,154
1,256,742(4,475)
1,479,226

919,612779,946
10,456,740(33,526)
12,122,772

171,827
5,979
2,660
31
180,497
1,799,372¥6,365,436

155,863705(1,450)(295)
154,823
1,634,049¥5,806,040

1,286,709
44,773
19,919232
1,351,633
13,474,405$47,666,886

Liabilities and Net Assets
Current liabilities:
Short-term debt (Notes 8 and 10)
Long-term debt due within one year (Notes 7, 8 and 10)
Long-term non-recourse debt due within one year (Notes 7, 8 and 10)
Notes and accounts payable—trade
Accrued income taxes
Provison for bonuses
Deposits received
Other current liabilities (Notes 13 and 18)
Total current liabilities¥ 208,610
289,472
4,640
29,06730,827
4,924
75,118
198,870
841,528

Long-term liabilities:
Long-term debt due after one year (Notes 7, 8 and 10)
Long-term non-recourse debt due after one year (Notes 7, 8 and 10)
Guarantee and lease deposits received (Note 8)Long-term deposits received
Net defined benefit liability (Note 11)
Other long-term liabilities (Notes 8, 13, 14 and 17)
Total long-term liabilities¥

Contingent liabilities (Note 22)
Intangibles (Note 19):
Leasehold rights (Notes 3 and 21)
Other intangibles
Total intangibles

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates (Note 8)
Investment securities (Notes 8 and 9)
Guarantee and lease deposits (Notes 8 and 9)
Net defined benefit asset (Note 11)
Deferred income taxes (Note 14)
Other investments and other assets (Notes 8 and 17)
Allowance for doubtful accounts
Total investments and other assets
Total assets
See accompanying notes.

560,846
2,447
63,293

104,557
523,839
67,044293
13,25042,728(905)
750,806¥6,365,436

61,803
2,191
63,99470,274503,230
66,994258
11,45734,642(659)
686,196¥5,806,040

455,639
18,324473,963

782,964
3,922,712
502,052
2,194
99,221
319,964(6,777)
5,622,330$47,666,886

Net assets (Note 15):
Shareholders’ equity
Common stock:
Authorized —1,900,000 thousand shares
Issued—476,086 thousand shares
Capital surplus
Retained earnings (Note 23)
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Net unrealized holding gains on securities (Note 9)
Net deferred gains (losses) on hedges (Note 17)
Foreign currency translation adjustments
Remeasurements of defined benefit plans (Note 11)
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

6

Consolidated Financial Statements

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2023, 2022 and 2021

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2023, 2022 and 2021

Millions of yen

Revenue from operations (Notes 16, 18, 19 and 21)
Costs and expenses (Note 16):
Cost of revenue from operations (Note 21)
Selling, general and administrative expenses (Note 11)
Operating income (Note 19)
Other income (expenses) (Note 21):
Interest income
Interest expense (Notes 10 and 17)
Dividend income
Gain on sale of property and equipment
Loss on sale of property and equipment
Loss on impairment of fixed assets (Notes 12, 19 and 21)
Loss on disposal of property and equipment (Note 21)
Gain on sale of investment securities (Note 9)
Loss on sale of investment securities (Note 9)
Loss on devaluation of investment securities (Note 9)
Loss related to COVID-19
Other, net
Income before income taxes
Income taxes (Note 12):Current
Deferred
Total
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Thousands

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

476,086¥122,805¥104,154¥1,002,634

2023

2022

2021

2023

¥939,905¥939,431¥917,473$7,038,378

625,452
73,179698,631241,274454(17,577)
15,62515—(8,100)(1,742)
4,713
(7)
(214)
—
(4,105)(10,938)
230,336

636,988
68,560705,548
233,883131(18,034)
12,66298(0)(3,453)(4,015)2,427(2)(1,160)—(3,883)(15,229)
218,654629,565
68,664
698,229219,244275(18,318)
11,561536—(3,876)(7,890)13,116
(312)
(489)
(629)
(2,859)(8,885)
210,359

4,683,630
547,993
5,231,623
1,806,755
3,400(131,623)
117,006
112—(60,656)(13,045)
35,293(52)(1,603)—(30,740)(81,908)
1,724,847

69,675(1,265)68,410161,926—¥161,926

77,311(9,109)68,202
150,452—¥150,452

64,9304,040
68,970141,389—¥141,389

2023

521,754(9,473)512,281
1,212,566—$1,212,566
U.S. dollars (Note 1)

2022

2021

2023

Balance at April 1, 2020

¥317.45—45.00¥298.33—
40.00¥1,225,120¥ 76,335¥(3,560)¥(2,718)¥(177)

Total
accumulated
othercomprehensive
income (loss)

Total net
assets¥ 69,880¥1,295,000
141,389———

141,389—

141,389

—

—

—

—

—

—

—

—

—

—

—

—

—

(1,548)—(1,548)(1,548)Net unrealized holding gains (losses) on securities

—

—

—

—

—

—

84,106———

84,106

84,106

Acquisition of treasury stock

—

—

—

—

(2)

(2)

—

—

—

—

—

(2)

Change in scope of consolidation

—

—

—

657

—

657

—

—

—

—

—

657

Cash dividends paid:
Final for prior year (¥19 per share)

—

—

—

(9,005)—(9,005)

—

—

—

—

—

(9,005)Interim for current year (¥19 per share)

—

—

—

(9,005)—(9,005)

—

—

—

—

—

(9,005)Net deferred gains (losses) on hedges

—

—

—

—

—

—

—

571

—

—

571

571

Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

—

858

858

858

Balance at April 1, 2021

476,086¥122,805¥104,154¥1,126,670¥(4,475)¥1,349,154¥160,441¥(2,989)¥(4,266)¥681¥153,867¥1,503,021

Profit attributable to owners of parent

—

—

—

150,452—

150,452

—

—

—

—

—

150,452

Foreign currency translation adjustments

—

—

—

—

—

—

—

—

2,816

—

2,816

2,816

Net unrealized holding gains (losses) on securities

—

—

—

—

—

—

(4,578)———(4,578)(4,578)Acquisition of treasury stock

—

—

—

—

(0)

(0)

—

—

—

—

—

(0)

Change in scope of consolidation

—

—

—

(0)

—

(0)

—

—

—

—

—

(0)

Cash dividends paid:
Final for prior year (¥21 per share)

—

—

—

(9,953)—(9,953)

—

—

—

—

—

(9,953)

Interim for current year (¥22 per share)

—

—

—

(10,427)—(10,427)

—

—

—

—

—

(10,427)
3,694

Net deferred gains (losses) on hedges

—

—

—

—

—

—

—

3,694

—

—

3,694

Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

—

(976)

(976)

(976)

476,086¥122,805¥104,154¥1,256,742¥(4,475)¥1,479,226¥155,863¥ 705¥(1,450)¥(295)¥154,823¥1,634,049

Profit attributable to owners of parent

—

—

—

161,926—

161,926

—

—

—

—

—

161,926

Foreign currency translation adjustments

—

—

—

—

—

—

—

—

4,110

—

4,110

4,110

Net unrealized holding gains (losses) on securities

—

—

—

—

—

—

15,964———

15,964

15,964

Acquisition of treasury stock

—

—

—

—

(2)

(2)

—

—

—

—

—

(2)

Change in scope of consolidation

—

—

—

—

—

—

—

—

—

—

—

—

Final for prior year (¥23 per share)

—

—

—

(10,900)—(10,900)

—

—

—

—

—

(10,900)

Interim for current year (¥24 per share)

—

—

—

(11,375)—(11,375)

—

—

—

—

—

(11,375)

Net deferred gains (losses) on hedges

—

—

—

—

—

—

—

5,274

—

—

5,274

5,274

Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

—

326

326

326

476,086¥122,805¥104,154¥1,396,393¥(4,477)¥1,618,875¥171,827¥5,979¥2,660¥31¥180,497¥1,799,372

Total
accumulated
othercomprehensive
income (loss)

Total net
assetsCash dividends paid:

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income (loss)

Shareholders’ equity

See accompanying notes.
Balance at April 1, 2022

Commonstock

CapitalsurplusRetainedearnings

Total
shareholders’equityNet unrealized
holding gains(losses) on
securities

Net deferredgains (losses)on hedges$(33,511) $11,077,025

Treasurystock

Foreigncurrencytranslation
adjustments

Remeasurements ofdefinedbenefit plans$919,612$779,946$ 9,410,978$1,167,163$ 5,279$(10,858)

Profit attributable to owners of parent——

1,212,566—

1,212,566———$(2,208) $1,159,376 $12,236,401——

Foreign currency translation adjustments

—

—

—

—

—

—

—

30,777—30,77730,777Net unrealized holding gains (losses) on securities

—

—

—

—

—

119,546———

119,546

119,546

Acquisition of treasury stock

—

—

—

(15)

(15)

—

—

—

—

—

(15)

Change in scope of consolidation

—

—

(0)

—

(0)

—

—

—

—

—

(0)

Final for prior year ($0.17 per share)——(81,623)—(81,623)

—

—

—

—

—

(81,623)

Interim for current year ($0.17 per share)——(85,181)—(85,181)

—

—

—

—

—

(85,181)

Net deferred gains (losses) on hedges

—

—

—

—

—

—

39,494——39,49439,494Remeasurements of defined benefit plans

—

—

—

—

—

—

—

—

2,440

2,440

2,440

$919,612$779,946$10,456,740$(33,526) $12,122,772$1,286,709$44,773$19,919

1,212,566

Cash dividends paid:

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2023, 2022 and 2021

Thousands of
U.S. dollars (Note 1)

Millions of yen

ProfitOther comprehensive income (loss) (Note 20)
Net unrealized holding gains (losses) on securities
Net deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥(4,473)

Accumulated other comprehensive income (loss)
RemeasureForeign
ments ofNet deferredcurrency
definedgains (losses)
translation
benefiton hedges
adjustments
plans

Profit attributable to owners of parent

$2.56
—
0.39

Consolidated Statements of Comprehensive Income

Treasury
stock

Total
shareholders’equityNet unrealized
holding gains(losses) on
securities

Foreign currency translation adjustments

Balance at March 31, 2023

¥341.66—
52.00

Millions of yen
Shareholders’ equity

Balance at April 1, 2022

Yen

Amounts per share of common stock:
Profit attributable to owners of parent:—Basic—Diluted
Cash dividend applicable to the year (Note 23)

Thousands of
U.S. dollars (Note 1)

2023

2022

2021

2023

¥161,926¥150,452¥141,389$1,212,566

15,964
5,274
4,110
326
25,674¥187,600(4,578)
3,694
2,816
(976)
956
¥151,408

84,106571(1,548)858
83,987¥225,376

119,546
39,49430,7772,440
192,257$1,404,823¥187,600—¥151,408—¥225,376—$1,404,823—

Balance at March 31, 2023$

232

$1,351,633 $13,474,405

See accompanying notes.

See accompanying notes.

78Consolidated Financial Statements

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
For the years ended March 31, 2023, 2022 and 2021

Sumitomo Realty & Development Co., Ltd. and its consolidated subsidiaries
As of March 31, 2023 and 2022, and for the years ended March 31, 2023, 2022 and 2021

Thousands of
U.S. dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes
Depreciation and amortization (Notes 19 and 21)
Loss on impairment of fixed assets
Provision for (Reversal of) allowance for doubtful accounts
Increase (Decrease) in net defined benefit liability
Loss (Gain) on sale of property and equipment, net
Loss on disposal of property and equipment
Loss (Gain) on sale of investment securities, net
Loss (Gain) on devaluation of investment securities
Interest and dividend income
Interest expense
Decrease (Increase) in accounts receivable—trade
Decrease (Increase) in inventories
Increase (Decrease) in notes and accounts payable—trade
Increase (Decrease) in advances received
Other, net
Total
Proceeds from interest and dividend income
Payments for interest
Payments for income tax and other taxes
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of property and equipment
Proceeds from sale of property and equipment
Payments for purchases of investment securities
Proceeds from sale and redemption of investment securities
Payments for guarantee and lease deposits
Proceeds from guarantee and lease deposits
Repayments for guarantee and lease deposits received
Proceeds from guarantee and lease deposits received
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Increase (Decrease) in short-term debt, net
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from non-recourse bonds
Redemption of non-recourse bonds
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from long-term non-recourse loans
Repayments of long-term non-recourse loans
Decrease (Increase) in treasury stocks, net
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents of newly consolidated
subsidiaries
Cash and cash equivalents at end of year (Note 3)
See accompanying notes.

9

2023

2022

2021

2023

¥ 230,336
64,635
8,100
226
(328)
(15)
1,742
(4,705)
214(16,080)
17,577(14,761)(55,461)(13,283)
7,189
19,959245,345
16,080(17,602)(78,711)
165,112¥ 218,654
60,645
3,453
135
(196)
(98)
4,015
(2,425)
1,160(12,793)
18,034(4,572)(48,327)
17,611
2,082
18,965276,343
12,793(18,150)(78,019)
192,967¥ 210,359
57,813
3,876
(21)
226
(536)
7,890
(12,803)489(11,836)
18,318(1,185)
7,304(12,041)(4,922)
26,434289,365
11,836(18,224)(57,030)
225,947$ 1,724,846
484,01260,656
1,692(2,456)(112)
13,045(35,233)
1,603(120,413)
131,623(110,536)(415,314)(99,468)
53,834
149,461
1,837,240
120,413(131,811)(589,419)
1,236,423(449,345)
597(39,603)
12,088(2,631)
2,435(20,541)
27,072(19,871)(489,799)(179,553)
525(9,024)
4,241(1,278)2,731(35,829)
27,858(19,656)(209,985)(355,432)
1,659(20,500)
49,141(748)
1,954(16,549)
24,264(20,471)(336,682)(3,364,872)
4,471(296,563)
90,520(19,702)
18,234(153,819)
202,726(148,802)(3,667,807)

140,000
30,000———450,200(237,386)
2,420(7,206)(1)(22,271)(200)
355,556
2,874
33,743
150,310(78,010)40,000(20,000)—(1,500)264,500(191,446)—(14,844)(0)(20,375)(242)(21,917)
1,964(36,971)
187,281

(106)
—
—
6,000
(8,000)259,500(131,471)
57,140(62,678)(2)(18,005)(292)
102,086(1,088)(9,737)
193,448

1,048,375
224,652———
3,371,275(1,777,640)
18,122(53,961)(7)(166,774)(1,499)2,662,543
21,522
252,681
1,125,580—¥ 184,053

0¥ 150,310

3,570¥ 187,281—$ 1,378,261

1

Basis of presenting consolidated
financial statements

The accompanying consolidated financial statements of Sumitomo
Realty & Development Co., Ltd. (the “Company”) and its consolidated
subsidiaries (collectively referred to as the “Group”) have been
prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act and its related accounting regulations,and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial
Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are based on
their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countries of
domicile. The accompanying consolidated financial statements havebeen restructured and translated into English from the consolidated
financial statements of the Company prepared in accordance withJapanese GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Financial Instruments andExchange Act. In addition, the notes to the consolidated financial
statements include information which may not be required underJapanese GAAP but is presented herein as additional information.
The translation of the Japanese yen amounts into U.S. dollars is
included solely for the convenience of readers outside Japan, using theprevailing exchange rate at March 31, 2023, which was ¥133.54 to
U.S. $1. The translation should not be construed as representations
that the Japanese yen amounts have been, could have been or could in
the future be converted into U.S. dollars at this or any other rate ofexchange.
2

Accounting policies(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and significant companies over which theCompany has power of control through majority voting rights orexistence of certain conditions evidencing control by the Company.
Non-consolidated subsidiaries are excluded from the scope of
consolidation because they are small and their combined total assets,revenues from operations, profit (amount corresponding to theCompany’s equity interest), retained earnings (amount corresponding
to the Company’s equity interest), and any other figures do not have amaterial impact on the consolidated financial statements.
In the elimination of investments in subsidiaries, the assets andliabilities of the subsidiaries, including the portion attributable to noncontrolling interests, are recorded based on the fair value at the time
the Company acquired control of the respective subsidiaries.
All significant intercompany balances, transactions and profits havebeen eliminated in consolidation.
(2) Cash and cash equivalents in the consolidated statements ofcash flows
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term, highly liquid investments withmaturities not exceeding three months at the time of purchase areconsidered to be cash and cash equivalents. Reconciliation between
cash and deposits in the consolidated balance sheets and cash andcash equivalents in the consolidated statements of cash flows at March
31, 2023 and 2022 is presented in Note 5 “Cash and cash
equivalents.”(3) Recognition of significant revenue
In relation to recognition of revenue from contracts with customers,
the nature of principal performance obligations for major businesses of
the Group and typical timing of the satisfaction of these performanceobligations (typical timing of revenue recognition) are as follows:(Leasing Business)
Leasing business mainly consists of leasing of office buildings andhigh-grade rental apartments. The Group recognizes revenue inaccordance with “Accounting Standard for Lease Transactions” (ASBJ
Statement No. 13) based on lease contracts with customers.
(Sales Business)
Sales business mainly consists of sales of condominium units anddetached houses. The Group recognizes revenue at the time the buyer(the customer) acquires control of the real estate by fulfilling thedelivery obligations stipulated in the sales contract.
(Construction Business)
Construction business mainly consists of construction and renovationof custom homes and “Shinchiku Sokkurisan” remodeling. The Group
recognizes revenue at the time the owner (the customer) acquires
control of the real estate by fulfilling delivery obligations stipulated in
the construction contract.
(Brokerage Business)
Brokerage business mainly consists of brokerage of real estate sales.
The Group recognizes revenue at the time the delivery of the realestate from the seller to the buyer is completed by fulfilling thebrokerage obligations for the sale and purchase of real estate
stipulated in the brokerage contract.
(4) Inventories
Inventories are stated at cost, determined by the specific identification
method principally. The carrying amount of inventories is written downwhen the profitability declines.
(5) Securities
Investments in unconsolidated subsidiaries and affiliates are stated atmoving-average cost. Available-for-sale securities except for equity
securities without market prices are stated at fair value, and equity
securities without market prices are mainly stated at moving-averagecost. Investments in investment limited partnerships, regarded as
securities under Article 2-2 of the Financial Investment and ExchangeAct, are stated at the net amount of equities based on the most recent
financial statements available as of the financial reporting datestipulated in the respective partnership agreements.
(6) Property and equipment (except for leased assets)
The Company and its consolidated domestic subsidiaries depreciatebuildings using the straight-line method, and other property andequipment (excluding facilities attached to buildings and structuresacquired on or after April 1, 2016) using the declining-balance method
over their estimated useful lives. The consolidated overseas subsidiaries
depreciate property and equipment using primarily the straight-line
method in accordance with the accounting principles in the respective
countries.
In addition, the Company and its consolidated domestic subsidiaries
depreciate facilities attached to buildings and structures acquired on orafter April 1, 2016 using the straight-line method.
(7) Intangibles (except for leased assets)
Software costs recognized as other intangibles are amortized using thestraight-line method over the estimated useful lives (five years).
(8) Allowance for doubtful accounts
The Group provides for doubtful accounts at an estimateduncollectable amount based on the evaluation of certain identified
doubtful and bankrupt receivables plus an amount calculated using thepercentage of actual collection losses in certain reference periods withrespect to remaining receivables.

10

Consolidated Financial Statements(9) Leased assets
Leased assets are recognized as other property and equipment or otherintangibles. Leased assets related to finance lease transactions without
title transfer are depreciated using the straight-line method over thelease periods as their useful lives with no residual value.
(10) Income taxes
Income taxes are provided for on the basis of income for financial
statement purposes. The tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial statements
and income tax purposes are recognized as deferred income taxes.
(11) Net defined benefit asset and liability
For the calculation of defined benefit obligations, the estimatedamount of defined benefits is allocated to the respective fiscal years by
the straight-line method.
Some of the Company’s consolidated subsidiaries calculate net
defined benefit liability and retirement benefit expenses by using asimplified method in which defined benefit obligations are equal to theamount that would be paid if all employees resigned voluntarily at theend of the fiscal year.
Actuarial gains and losses are wholly recognized in the next fiscal
year.
3(12) Derivatives
The Group states derivatives at fair value. If derivatives are used ashedges and meet certain hedging criteria, the Group defers recognitionof gains or losses resulting from changes in fair value of the derivative
financial instruments until the related gains or losses on the hedged
items are recognized.
The assessment of hedge effectiveness is performed by comparing
the accumulated cash flows of the hedged item to those of thehedging instrument over the term of the relationship. Interest rate
swap contracts adopting exceptional accounting are excluded from theeffectiveness assessment. Foreign exchange forward contracts are also
excluded from the effectiveness assessment, as the terms of thetransaction are the same as those of the hedged items.
(13) Amounts per share of common stock
The computation of earnings per share is based on the weightedaverage number of shares of common stock outstanding during eachyear. Diluted earnings per share is not presented as there are no
potential shares.
Cash dividends per share represent actual amounts applicable to therespective year.

Significant accounting estimates5

the impact on the consolidated financial statements may be significant.

New accounting pronouncements (Accounting standards and guidance issued but not yet effective)
the tax effects on the sale of shares of subsidiaries or affiliates incase of application of group taxation.
(2) Effective date
Effective from the beginning of the year ending March 31, 2025
(3) Effects of the application of the standards and the guidance
The Group is currently in the process of evaluating the effects of theapplication of the new standards and the guidance on the
consolidated financial statements.

Cash and cash equivalents

Cash and cash equivalents at March 31, 2023 and 2022 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash and deposits
Restricted deposits in trust
Time deposits with maturities exceeding three months
Cash and cash equivalents

2023

2022

2023

¥185,120
(781)
(286)
¥184,053¥151,393
(783)
(300)
¥150,310$1,386,251(5,848)(2,142)$1,378,261

Inventories

Inventories at March 31, 2023 and 2022 are as follows:
Thousands of
U.S. dollars

Millions of yen(2) Information on the nature of significant accounting estimates for
identified items
Real estate for sale including that in process is recognized as
inventories in the consolidated balance sheets and stated at cost. In
case the net realizable value is lower than the book value, theprofitability is regarded to have declined, and the net realizable value isused as the carrying amount. The difference between the book value
and the net realizable value (loss on devaluation of real estate for saleincluding that in process) is recognized as cost of revenue fromoperations for the current fiscal year.

4“Accounting Standard for Current Income Taxes” (ASBJ Statement
No.27, October 28, 2022)“Accounting Standard for Presentation of Comprehensive Income”(ASBJ Statement No.25, October 28, 2022)“Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance
No.28, October 28, 2022)(1) Overview
The standards and guidance are set for (i) the classification of tax
expenses in case of taxation on other comprehensive income and (ii)6

(Evaluation of real estate for sale including that in process)(1) Carrying amounts in the consolidated financial statements for the years ended March 31, 2023 and 2022:

Inventories:
Real estate for sale
Real estate for sale in process

In case the impairment indicator exists, and an impairment loss is tobe recognized due to the change of the above-mentioned assumption,

2023

2022

2023

¥399,245
381,753¥308,156
394,922$2,989,703
2,858,716

The net realizable value is estimated based on business plans withthe consideration of expected selling price, trends in building costs, andother data. The business plans are mainly based on unit sales price andconstruction cost, and these assumptions are determined bycomparable data in the same sales area or actual data in the Group.
In case a loss on devaluation of real estate for sale including that inprocess is to be recognized due to the change of the above-mentioned
assumption, the impact on the consolidated financial statements may
be significant.

Thousands of
U.S. dollars

Millions of yen

Real estate for sale
Real estate for sale in process
Costs on uncompleted construction contracts
Other
Total

2023

2022

2023

¥399,245
381,753
8,002
1,070¥790,070¥308,156
394,9228,210
1,163¥712,451$2,989,703
2,858,716
59,922
8,014$5,916,355(Change in purpose of holding inventories)
As a result of review of holding purposes, the Company transferred amounts to inventories from property and equipment and intangibles. Suchtransfers at March 31, 2023 and 2022 are as follows:
Thousands of
U.S. dollars

Millions of yen

Inventories:
Transferred from property and equipment
Transferred from intangibles

2023

2022

2023

¥30,645
2,014¥37,860—$229,482
15,082(Loss on impairment of fixed assets)(1) Carrying amounts in the consolidated financial statements for the years ended March 31, 2023 and 2022:
Thousands of
U.S. dollars

Millions of yen

Property and equipment
Leasehold rights(2) Information on the nature of significant accounting estimates for
identified items
The amounts of property and equipment are determined by deducting
accumulated depreciation and accumulated impairment losses from theacquisition costs, and used as the carrying amount. When a property’s
profitability has declined and an impairment indicator exists, the Groupis required to determine whether an impairment loss should berecognized. Impairment indicators include recurring operating losses,changes that significantly reduce the recoverable amount in the extent
to which, or manner in which, a property is used or is expected to be
used, a significant deterioration of business environment and asignificant decrease in the market prices. Such market prices arecalculated by the Company using income approach, and future cash

11

2023

2022

2023

¥4,464,465
60,846¥4,114,317
61,803$33,431,668
455,639

flow and discount rate is estimated based on current rent per unit, rent
level in the market, occupancy rate, discount rate and otherassumptions.
For fixed assets of which the impairment indicator exists, theimpairment loss is recognized if the total amount of their future cash
flow before discount is lower than the book value.
The carrying amount of fixed assets of which the impairment loss is
to be recognized, have been reduced to the recoverable amounts, andthe amount of the reduction is recognized as impairment loss for thecurrent fiscal year. The recoverable amounts are measured by theamounts calculated based on the productive value or assessed value of
fixed assets for tax purposes or the amounts calculated by discounting
the future cash flow.

12Consolidated Financial Statements

7

Pledged assets

Assets pledged as collateral at March 31, 2023 and 2022 are as follows:
Thousands of
U.S. dollars

Millions of yen¥

Cash and deposits

2023

2022

2,057

¥ 1,9882023$

15,404

Buildings and structures

123,733

129,469

926,561Land

396,008

396,008

2,965,463

704

772

5,272

Construction in progress

635

823

4,755

¥523,137¥529,060$3,917,455

Other property and equipment
Total
Secured liabilities at March 31, 2023 and 2022 are as follows:

Thousands of
U.S. dollars

Millions of yen

2023

¥

190
4,640
134,240
287,247¥426,317

Long-term debt due within one year
Long-term non-recourse debt due within one year
Long-term debt due after one year
Long-term non-recourse debt due after one year
Total

190
4,786
134,430
291,887¥431,293$

1,423
34,746
1,005,242
2,151,018$3,192,429

Specified assets for non-recourse debts at March 31, 2023 and 2022 are as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and deposits
Buildings and structures
Land
Other property and equipment
Total

2023

2022

2,167
66,916250,36181¥319,525¥ 2,042
70,334
250,36182¥322,819

¥

2023

$

16,227501,093
1,874,802
607$2,392,729(Note) “Specified assets for non-recourse debts” is included in “Assets pledged as collateral” for the years ended March 31, 2023 and 2022 except for cash and deposits.

8

In cases where multiple inputs are used that have a significant
impact on fair value, the fair value level is classified into the lowest
priority level among the levels to which those inputs respectively
belong.

(1) Financial instruments whose fair values are regarded as their carrying amounts on the consolidated balance sheets
For 2023
Millions of yen
Fair value

Investment securities
Available-for-sale securities
Equity securities
Debt securities*
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Foreign currency related derivatives
Total assets
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total derivative transactions

Level 1

Level 2

Level 3

Total

¥519,693
—

¥

—
421

¥—
—

¥519,693
421

—

—

—

—

—
—
¥519,693

9,514
1¥9,936

—
—
¥—

9,514
1
¥529,629

¥

—

¥

—

¥—

¥

—

¥

—
—

896
¥ 896

—
¥—

¥

896
896

* Debt securities account as guarantee and lease deposits in the consolidated balance sheets.

Financial instruments

1. Overview(1) Policy for financial instruments
The Group has the policy to limit its fund management to short-term
deposits, and also raise funds through loans from banks, the issuanceof corporate bonds and commercial paper.
The Group utilizes interest rate swap contracts within the amountof fundraising and foreign exchange forward contracts within theamount of foreign currency transaction, and does not utilize derivatives
for any speculative purposes.
(2) Details of financial instruments, these risks, and risk
management systems
Investment securities are equities of business-related companies andare exposed to market price fluctuation risk. The Group regularly
checks the market value of the securities and the financial condition of
the equity issuers, and continuously reviews whether it continues tohold securities with consideration for its relationships with the equity
issuers.
Floating rate debt are exposed to interest rate fluctuation risk, so
the Group utilizes derivatives (interest swap contracts) to hedge theserisks for certain loans and corporate bonds interest.
For derivative transactions, the Group utilizes interest rate swap
contracts for interests on fundraising, and foreign exchange forward
contracts for foreign currency denominated transactions. Interest rate

13

Level 1: Fair value measured based on unadjusted quoted prices in an
active market for identical assets or liabilities
Level 2: Fair value measured based on direct or indirect observable
inputs for the assets or liabilities other than level 1 inputs
Level 3: Fair value measured based on significant unobservable inputs
for the assets or liabilities

2023

2022

¥

2. Matters concerning fair values and breakdown by level of fairvalue of financial instruments
The carrying amounts of financial instruments on the consolidatedbalance sheets, their fair values and the differences between them asof March 31, 2023 and 2022 are as follows. (Equity securities with nomarket price are not included; please see (Note 3).)
The fair value of financial instruments is classified into the following
three levels based on observability and significance of the inputs used
to measure the fair value.

swap contracts are exposed to risks of interest rate fluctuation, andforeign exchange forward contracts are exposed to risks of exchange
rate fluctuations. The derivative transactions are executed withcreditworthy financial institutions, so the Group management believes
there are few risks of default by counterparties. Derivative transactions
are executed by the Company’s Finance Department in accordancewith the decisions of a committee whose chairman is the director of
the Finance Department. The Finance Department prepares reports onderivatives that are provided to the director of the Finance Department
periodically.
Guarantee and lease deposits received is mainly for avoiding
customers’ credit risk.
(3) Supplemental information on fair values of financial
instruments
The fair values of financial instruments are based on their market
prices, and if the market price is not available, other rational valuation
techniques are used instead. The rational valuation techniques
incorporate variable factors, and as a result the values may change due
to using different assumptions.
Contract amounts of derivatives shown in Note 17 “Derivativetransactions” itself are not representing the market risks related toderivatives.

For 2022
Millions of yen
Fair value

Investment securities
Available-for-sale securities
Equity securities
Debt securities*
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Foreign currency related derivatives
Total assets
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total derivative transactions

Level 1

Level 2

Level 3

Total

¥499,521
—

¥

—
536

¥—
—

¥499,521
536

—

—

—

—

—
—
¥499,521

3,363—¥3,899

—
—
¥—

3,363
—
¥503,420

¥

—

¥

—

¥—

¥

¥

—
—

2,348
¥2,348—¥—2,348¥ 2,348—* Debt securities account as guarantee and lease deposits in the consolidated balance sheets.

14

Consolidated Financial Statements

For 2023
Thousands of U.S. dollars
Fair value
Level 1

Investment securities
Available-for-sale securities
Equity securities
Debt securities*
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Foreign currency related derivatives
Total assets
Derivative transactions(1) Non-hedge accounting(2) Hedge accounting
Interest-related derivatives
Total derivative transactions

Level 2

Level 3

Total

—
3,153

$—
—

$3,891,665
3,153

—

—

—

—

—
—
$3,891,665

71,245
7$74,405——$—

71,245
7$3,966,070

$

—

$

—

$—

$

—

$

—
—

6,710
$ 6,710

—
$—

$

6,710
6,710

$3,891,665—$* Debt securities account as guarantee and lease deposits in the consolidated balance sheets.

(2) Financial instruments whose fair values are not regarded as their carrying amounts on the consolidated balance sheets
Cash and deposits and short-term debt are not presented below tables because their fair values approximate their carrying amounts due to theirshort-term maturities.
For 2023
Millions of yen(1) Long-term debt (including due within one year)(2) Long-term non-recourse debt (including due within one year)(3) Guarantee and lease deposits received
Total liabilities

Fair value

Carrying
amountLevel 1

Level 2

Level 3Total

¥3,437,524
291,887
254,009¥3,983,420

¥—
—
—
¥—

¥3,414,298
285,105
252,766¥3,952,169

¥—
—
—
¥—

¥3,414,298
285,105
252,766¥3,952,169

Difference¥(23,226)(6,782)(1,243)¥(31,251)

non-recourse debts have not changed significantly from the time whenthese transactions occurred.
The fair value of floating rate debt which is hedged item subject tothe exceptional accounting for interest rate swaps, and the fixedcoupon debt are calculated by discounting the combined total ofprincipal and interest including interest rate swap receipts andpayments using interest rates expected to be currently available. They
are classified as level 2.
* If interest rate swap contracts are used as hedge and meet certain
hedging criteria, the net amount to be paid or received under theinterest rate swap contracts is added to or deducted from the intereston hedged item.

(3) Guarantee and lease deposits received
The fair values of the guarantee and lease deposits received are
calculated based on the deposit period expected to be returned anddiscounting its future cash flows using the credit risk-adjusted
discount rate over the remaining deposit period, and they areclassified as level 2.
(Note 2) Financial instruments whose fair values are regarded as
their carrying amounts on the consolidated balance
sheets and are classified as level 3
Not applicable(Note 3) Equity securities with no market price are not included in investment securities. The carrying amounts of such financial
instruments are as follows:
Thousands of
U.S. dollars

Millions of yen

Investments in unconsolidated subsidiaries and affiliates
Unlisted equity securities
Total

2023

2022

2023

¥104,557
4,146¥108,703¥70,274
3,709¥73,983$782,964
31,047$814,011(Note 4) Redemption schedule of pecuniary claims and securities with maturities
For 2023
Millions of yen
1 year or less

Cash and deposits
Investment securities*
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥185,120

¥ —

¥ —

¥—

127
¥185,247

173
¥173

121
¥121

—
¥—

* Investment securities account as guarantee and lease deposits in the consolidated balance sheets.

For 2022
Millions of yen
1 year or less

For 2022
Millions of yen(1) Long-term debt (including due within one year)(2) Long-term non-recourse debt (including due within one year)(3) Guarantee and lease deposits received
Total liabilities

Fair value

Carrying
amountLevel 1

Level 2

Level 3Total

¥3,194,711
296,673249,276¥3,740,660

¥—
—
—
¥—

¥3,205,136
299,447
248,475¥3,753,058

¥—
—
—
¥—

¥3,205,136
299,447
248,475¥3,753,058

Difference¥10,4252,774(801)¥12,398

Cash and deposits
Investment securities*
Available-for-sale securities with maturities (National government bonds)
Total

1 to 5 years

5 to 10 years

Over 10 years¥151,393

¥ —

¥ —

¥—

112
¥151,505

302
¥302

122
¥122

—
¥—

* Investment securities account as guarantee and lease deposits in the consolidated balance sheets.

For 2023
Thousands of U.S. dollars

For 2023
Thousands of U.S. dollars
Carrying
amount15

Fair value

Difference

Level 1

Level 2

Level 3Total

(1) Long-term debt (including due within one year)$25,741,530(2) Long-term non-recourse debt (including due within one year)
2,185,765(3) Guarantee and lease deposits received
1,902,119
Total liabilities$29,829,414

$—
—
—
$—

$25,567,605
2,134,9781,892,811$29,595,394

$—
—
—
$—

$25,567,605
2,134,9781,892,811$29,595,394(Note 1) Explanation of valuation techniques and inputs used in
the measurement of fair value(1) Investment securities and Derivative transactions
The fair values of listed equity securities are measured using quoted
market price and are classified as level 1.
The fair values of debt securities are measured mainly based onreference bond trading statistics published by the Japan Securities
Dealers Association and the fair values of interest rate swap contracts
and foreign exchange forward contracts are calculated by discounting

the future cash flows using observable inputs including interest rates
and foreign exchange rates. Their fair values are classified as level 2.
(2) Long-term debt (including due within one year) and Longterm non-recourse debt (including due within one year)
The fair value of floating rate debt (excluding hedged item subject tothe exceptional accounting for interest rate swaps*) are measured
based on their carrying amounts because the market interest rate isreflected in such debt within a short time period, and the credit
standing of the Company and status of specified assets for$(173,925)(50,787)(9,308)$(234,020)

Cash and deposits
Investment securities*
Available-for-sale securities with maturities (National government bonds)
Total

1 year or less

1 to 5 years$1,386,251$—

5 to 10 years$ —Over 10 years$—

951$1,387,202

1,295$1,295

906
$906

—
$—

* Investment securities account as guarantee and lease deposits in the consolidated balance sheets.

16Consolidated Financial Statements(Note 5) Repayment schedule of short-term debt, long-term debt and long-term non-recourse debt
For 2023
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total

2024

2025

2026

2027

¥208,610
289,472
4,640¥502,722¥—
379,4154,374¥383,789¥—
293,855
52,007¥345,862¥—
333,063
107,502¥440,565

2023

2024

2025

2028 2029 and thereafter¥—
300,715
1,656¥302,371¥—
1,841,005
121,708¥1,962,713

For 2022
Millions of yen
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total¥ 68,610
237,386
4,786¥310,782¥—
289,472
4,640¥294,112¥—
379,4154,374¥383,789

2026

2027 2028 and thereafter¥—
293,855
52,007¥345,862¥—
313,063
107,502¥420,565¥—
1,681,520
123,364¥1,804,884

For 2023
Thousands of U.S. dollars
Year ending March 31

Short-term debt
Long-term debt (including due within one year)
Long-term non-recourse debt (including due within one year)
Total
9

2024

2025

2026

2027

$1,562,154
2,167,680
34,746$3,764,580$—
2,841,209
32,754$2,873,963$—
2,200,502
389,449$2,589,951$—
2,494,107805,017$3,299,1242028 2029 and thereafter$—
2,251,872
12,401$2,264,273

For 2022
1. The following tables summarize the book value, carrying amounts and fair values of securities with available fair values as of March 31, 2022:(1) Available-for-sale securities:
Millions of yen

Carrying amount

Securities whose carrying amount exceeds book value:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed book value:
Equity securities
Debt securities*
Other
Subtotal
Total

Book value

Difference¥442,654
414—
443,068¥203,995
409—
204,404¥238,6595—
238,664

56,866122—
56,988¥500,056

70,887
123—
71,010¥275,414(14,021)(1)—(14,022)¥224,642* Debt securities account as guarantee and lease deposits in the consolidated balance sheets.
(Note) The Group recognized impairment loss on investment securities of ¥1,160 million related to equity securities in available-for-sale securities.

2. Total sales of available-for-sale securities sold in the year ended March 31, 2022 amounted to ¥4,226 million and the related gains and losses
amounted to ¥2,427 million and ¥2 million, respectively.

$—
13,786,169
911,397$14,697,566

Securities

For 2023
1. The following tables summarize the book value, carrying amounts and fair values of securities with available fair values as of March 31, 2023:(1) Available-for-sale securities:
Millions of yen

Carrying amount

Securities whose carrying amount exceeds book value:
Equity securities
Debt securities*
Other
Subtotal
Securities whose carrying amount does not exceed book value:
Equity securities
Debt securities*
Other
Subtotal
Total

Thousands of U.S. dollars

Book value

Difference

Carrying amountBook value

Difference¥468,227300—
468,527¥210,575
298—
210,873¥257,652
2—
257,654$3,506,267
2,247—
3,508,514$1,576,868
2,232—
1,579,100$1,929,399
15—
1,929,414

51,466
121—
51,587¥520,114

61,459123—
61,582¥272,455(9,993)(2)—(9,995)¥247,659

385,398
906—
386,304$3,894,818

460,229921—
461,150$2,040,250(74,831)(15)—(74,846)$1,854,568* Debt securities account as guarantee and lease deposits in the consolidated balance sheets.
(Note) The Group recognized impairment loss on investment securities of ¥171 million ($1,281 thousand) related to equity securities in available-for-sale securities.

2. Total sales of available-for-sale securities sold in the year ended March 31, 2023 amounted to ¥12,036 million ($90,130 thousand) and the related
gains and losses amounted to ¥4,713 million ($35,293 thousand) and ¥7 million ($52 thousand), respectively.

17

18

Consolidated Financial Statements

10 Short-term debt and long-term debt

Non-recourse debt at March 31, 2023 and 2022 consisted of the following:

Short-term debt at March 31, 2023 and 2022 consisted of the following:
Millions of yen

2023

Loans, principally from banks
Commercial paper
Total¥ 28,610
180,000¥208,610

Average interest
rate (%)

2022

0.27
0.04

Average interest
rate (%)¥28,61040,000¥68,6102023$ 214,243
1,347,911$1,562,1540.27(0.08)All of short-term debts are raised in yen, and the interest rates represent weighted-average rates in effect balance at March 31, 2023 and 2022.
Long-term debt at March 31, 2023 and 2022 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2023

1.098% domestic straight bonds, due 2023
0.950% domestic straight bonds, due 2023
0.968% domestic straight bonds, due 2023
0.987% domestic straight bonds, due 2024
0.914% domestic straight bonds, due 2024
0.904% domestic straight bonds, due 2024
0.884% domestic straight bonds, due 2024
0.836% domestic straight bonds, due 2024
0.809% domestic straight bonds, due 2024
0.670% domestic straight bonds, due 2025
0.826% domestic straight bonds, due 2025
0.992% domestic straight bonds, due 2025
0.400% domestic straight bonds, due 2026
0.230% domestic straight bonds, due 2026
0.400% domestic straight bonds, due 2027
0.310% domestic straight bonds, due 2031
0.260% domestic straight bonds, due 2031
0.520% domestic straight bonds, due 2028 (Green bonds)
Loans from banks and insurance companies, with interest at weighted-average rates of 0.31% in 2023 and 0.32%
in 2022, respectively:
SecuredUnsecured
Subtotal
Amount due within one year
Total

¥

10,000*10,000*10,000*20,000*20,000*20,00020,00020,00020,00010,00020,00020,00010,00010,00030,00030,00010,00030,000134,430
2,983,095
3,437,525(289,472)¥3,148,053

2023

2022

¥

10,00010,00010,00020,00020,00020,00020,00020,00020,00010,00020,00020,00010,00010,00030,00030,00010,000—134,6202,770,091
3,194,711(237,386)¥2,957,325$

74,884*74,884*74,884*
149,768*
149,768*
149,768
149,768
149,768
149,768
74,884
149,768
149,768
74,88474,884
224,651
224,651
74,884
224,651

1,006,665
22,338,584
25,741,534(2,167,680)$23,573,854

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

2023

2023

2022

Non-recourse bonds, with interest at weighted-average rates of 0.11% in 2023 and 0.09% in 2022, respectively:
Due within one year
Due after one year
Subtotal
Non-recourse loans, with interest at weighted-average rates of 0.15% in 2023 and 0.12% in 2022, respectively:
Due within one year
Due after one year
Subtotal
Total

4,640
251,647
256,287¥291,887

4,786
256,287
261,073¥296,673

34,746
1,884,432
1,919,178$2,185,765

SecuredUnsecured
Total¥291,887—¥291,887¥296,673—¥296,673$2,185,765—$2,185,765¥—
35,60035,600¥—35,60035,600$—266,587
266,587

All of non-recourse debts are raised in yen, and the interest rates represent weighted-average rates in effect balance at March 31, 2023 and 2022.
The aggregate annual maturities of long-term debt and long-term non-recourse debt are seen Note 8 “Financial instruments.”
11 Employees’ severance and retirement benefits
The Company and its certain consolidated subsidiaries provide two types of post-employment benefit plans, lump-sum payment plans and defined
benefit corporate pension plans, under which all eligible employees are entitled to benefits based on their current rate of pay, length of service andthe conditions under which termination occurs.
As explained in Note 2 (11), “Net defined benefit asset and liability” the liabilities and expenses for severance and retirement benefits are
determined based on the amounts obtained by actuarial calculations except for the cases using the simplified method.
For 2023 and 2022
1. Defined benefit plan
(1) Adjustment table of retirement benefit obligations between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations at beginning of year
Service costs
Interest costs
Actuarial differences
Retirement benefits paid
Retirement benefit obligations at end of year

2023

2022

2023

¥12,823
697
55
(111)
(734)
¥12,730¥12,153
732
49
565
(676)
¥12,823$96,024
5,219
412
(831)
(5,496)$95,328* Due within one year

All of long-term debts are raised in yen, and the interest rates represent weighted-average rates in effect balance at March 31, 2023 and 2022.

(2) Adjustment table of plan assets between the beginning and the end of the fiscal year

Thousands of
U.S. dollars

Millions of yen

Plan assets at beginning of year
Expected return on plan assets
Actuarial differences
Employer contributions
Retirement benefits paid
Plan assets at end of year

19

2023

2022

2023

¥7,285
146
(69)
333
(206)
¥7,489¥6,895
138
138
361
(247)
¥7,285$54,553
1,093
(516)
2,494
(1,543)$56,08120

Consolidated Financial Statements(3) Adjustment table of retirement benefit obligations and plan assets at the end of the fiscal year and net defined benefit liability on the consolidatedbalance sheets
Thousands of
U.S. dollars

Millions of yen

Obligations under retirement benefit plans (funded)
Fair value of plan assets
Obligations under retirement benefit plans (unfunded)
Net amount of liabilities on the consolidated balance sheets
Net defined benefit liability
Net defined benefit asset
Net amount of liabilities on the consolidated balance sheets

2023

2022

2023

¥ 7,277(7,489)(212)
5,453¥ 5,241¥ 7,108(7,285)(177)
5,715¥ 5,538$ 54,493(56,081)(1,588)40,835$ 39,247¥ 5,534(293)¥ 5,241¥ 5,796(258)¥ 5,538(4) Components of retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

Service costs
Interest costs
Expected return on plan assets
Actuarial differences
Retirement benefit expenses

2023

2022

2023

¥ 697
55
(146)
427
¥1,033

¥ 732
49
(138)
(980)
¥(337)$ 5,219412(1,093)
3,197$ 7,735(5) Remeasurements of defined benefit plans (before deducting tax effect)

Thousands of
U.S. dollars

Millions of yen

Actuarial differences
Total

2023

2022

2023

¥(469)¥(469)¥1,407¥1,407$(3,512)$(3,512)(6) Components of remeasurements of defined benefit plans (before deducting tax effect)

Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial differences
Total(7) Major breakdown of plan assets
Debt securities
Equity securities
General life insurance accounts
Other
Total
(8) Actuarial assumptions
Discount rate
Rate of expected return on plan assets$ 41,441(2,194)$ 39,247

2023

2022

2023

¥(42)
¥(42)

¥427
¥427

$(315)$(315)

2023

2022

29.1%
35.4
34.3
1.2
100.0%

28.0%
36.5
34.1
1.4
100.0%

2023

2022

0.4%
2.0

0.4%
2.0

12 Loss on impairment of fixed assets
The Group recognized impairment losses on the following assets for the years ended March 31, 2023, 2022 and 2021, respectively.
For 2023
Use

Location

Land for development

Tokyo and other cities in Japan

Number of properties

11

For 2022
Use

Location

Number of properties

Asset leased to others
Idle asset

Tokyo
Nagano1
1

Use

Location

Number of properties

Assets leased to others

Tokyo and other cities in JapanFor 2021

The Group recognized losses on the impairment of certain properties,
which are generally assessed individually for impairment. The Company
houses and other welfare facilities are treated as common assets.
For 2023
The carrying values of the land holdings summarized above have been
reduced to their recoverable amounts by ¥8,100 million ($60,656
thousand) as a result of the determination of reviewing their businessplans, and the amount of the reduction is recognized as loss on
impairment of fixed assets for the year ended March 31, 2023. It
consists of ¥1,598 million ($11,966 thousand) of land and ¥6,502
million ($48,690 thousand) of construction in progress.
The recoverable amounts are measured by the net realizable value
calculated based on productive value or assessed value of fixed assets
for tax purposes.
For 2022
For the asset leased to others, loss on sales of property and equipmentof ¥3,053 million was recognized by a consolidated subsidiary as aresult of reorganization of assets within the Group. The selling price of
the asset was determined as its recoverable amount, and the loss on
sales of property and equipment was recognized as loss on impairment

4of fixed assets for the year ended March 31, 2022.
For the idle asset, the carrying value has been reduced to its
recoverable amount by ¥400 million due to a change in use from
common assets.
The selling price of the asset leased to others above was based on
the appraisal value by a real estate appraiser, and the recoverable
amount of the idle asset above was measured by net realizable value
calculated based on assessed value of fixed assets for tax purposes.
For 2021
The carrying value of assets have been reduced to their recoverable
amounts by ¥3,578 million since the total amount of the future cash
flow is estimated to be lower than the carrying value for the year
ended March 31, 2021. The recoverable amounts were calculated bydiscounting the future cash flow at 3.6%.
Loss on sales of property and equipment of ¥299 million wasrecognized by a consolidated subsidiary due to restructuring of assets
within the Group. The selling price of the assets were based on theamounts equivalent to the publicly notified land price. These amounts
were determined as their recoverable amounts, and the loss on sales ofproperty and equipment of the assets was recognized as loss on
impairment of fixed assets for the year ended March 31, 2021.

13 Asset retirement obligations
Even though removing asbestos is required for some buildings theGroup operates at the time of demolishing, it is difficult to estimate
the fair value of obligations associated with such assets reasonably
since the timing and/or method of settlement for the retirement
obligations are not clear enough. Therefore, for the years ended
March 31, 2023 and 2022, asset retirement obligations related tosuch a case are not recorded (except for the asset retirement
obligations recorded on the financial statements).

In addition, under the partial lease contracts, the Group has
obligations for restoring office spaces when they move out. For theasset retirement obligations associated with such a case, the durationof use of the assets is not clear enough and these assets do not have
any relocation plans. Therefore, the Group is unable to estimate theasset retirement obligations since it is difficult to estimate the timingof fulfillment of the obligations. Consequently, for the years ended
March 31, 2023 and 2022, asset retirement obligations related tosuch a case are not recorded (except for the asset retirement
obligations recorded on the financial statements).

2. Defined contribution plan
The required contribution amount for a defined contribution plan that one of the Company’s consolidated subsidiaries adopted is ¥340 million($2,546 thousand) and ¥360 million for the years ended March 31, 2023 and 2022, respectively.

21

22

Consolidated Financial Statements

14 Income taxes

15 Net assets

The normal effective statutory income tax rate in Japan arising out of the aggregation of corporate, enterprise and inhabitants’ taxes wasapproximately 30.62% for the years ended March 31, 2023, 2022 and 2021 respectively.

Under the Japanese Corporate Law (“the Law”) and its regulations, theentire amount paid for new shares is required to be designated ascommon stock. However, a company may, by a resolution of the Boardof Directors, designate an amount not exceeding one-half of the priceof the new shares as additional paid-in capital, which is included incapital surplus.
Under the Law, in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or theexcess, if any, of 25% of common stock over the total of additional
paid-in capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. Legal earnings
reserve is included in retained earnings on the accompanying
consolidated balance sheets.

Details of deferred tax assets and liabilities at March 31, 2023 and 2022 are as follows:

Thousands of
U.S. dollars

Millions of yen

2023

2022

2023

Deferred tax assets:
Loss on devaluation of real estate for sale including that in process
Loss on impairment of fixed assets
Loss on transfer involving wholly owned subsidiaries
Net operating loss carryforwards
Adjustments of book value in consolidation
Loss on devaluation of investments and other loss, in subsidiaries and affiliates
Accrued enterprise tax and other taxes
Net defined benefit liability
Provision for bonuses
Loss on devaluation of investment securities
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets¥ 21,444
17,023
12,709
7,156
6,370
2,423
2,104
1,701
1,592
1,502
19,26393,287(18,779)¥ 74,508¥ 22,646
15,124
12,164
7,368
6,501
2,187
2,592
1,782
1,855
2,047
20,06994,335(20,488)¥ 73,847$ 160,581
127,475
95,17053,58747,701
18,14415,756
12,738
11,922
11,248144,248
698,570(140,625)$ 557,945

Deferred tax liabilities:
Net unrealized holding gains on securities
Retained earnings appropriated for tax allowable reserves
Deferred gains on hedges
Other
Total deferred tax liabilities
Net deferred tax liabilities¥(75,886)(3,731)(2,913)(1,992)¥(84,522)¥(10,014)¥(68,826)(3,731)(1,030)(2,006)¥(75,593)¥ (1,746)$(568,264)(27,939)(21,814)(14,917)$(632,934)$ (74,989)

Under the Law, legal earnings reserve and additional paid-in capital
could be used to eliminate or reduce a deficit and capitalized by aresolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be
distributed as dividends. Under the Law, all additional paid-in capitaland all legal earnings reserve may be transferred to other capitalsurplus and retained earnings, respectively, which are potentiallyavailable for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with the Law and its
regulations.

16 Information for certain lease transactions
Future lease payments and receipts under such non-cancelable operating leases at March 31, 2023, 2022 and 2021 are as follows:
Thousands of
U.S. dollars

Millions of yen

2023

2022

2021

Operating leases:
Future lease payments:
Due within one year
Due after one year
Total

2023

¥

1,596
41,866¥ 43,462¥ 1,538
41,134¥ 42,672¥ 1,574
41,880¥ 43,454

11,951
313,510$ 325,461

Future lease receipts:
Due within one year
Due after one year
Total

¥ 89,980
166,227¥256,207¥ 87,055
124,271¥211,326¥ 91,310
140,152¥231,462$ 673,806
1,244,773$1,918,579$(Note) Net deferred tax liabilities are included in the following items on the consolidated balance sheets for the years ended March 31, 2023 and 2022.
Thousands of
U.S. dollars

Millions of yen

Investments and other assets—Deferred income taxes
Long-term liabilities—Other long-term liabilities

2023

2022

2023

¥13,250
23,264¥11,457
13,203$ 99,221
174,210The difference between the statutory tax rate and the effective tax rate for the year ended March 31, 2023 and 2022 is less than five-hundredthsof the statutory tax rate and not presented.

23

24

Consolidated Financial Statements

17 Derivative transactions

18 Revenue recognition

Hedge accounting was applied to all derivative transactions for the years ended March 31, 2023 and 2022.
The summary of these transactions is as follows:

1. Information for breakdown of revenues from contracts with customers
Millions of yen

For 2023

1. Foreign currency-related derivatives
For 2023

Millions of yen

Hedging accounting

Types of derivative transactions

Hedged items

Deferred hedge
accounting

Foreign Exchange forward contracts
Receipts in Indian rupee / Payments in yen

Investments in unconsolidated
subsidiaries and affiliates

Contract amounts

Contract amounts
due after one year

¥3,214¥—¥1

Office buildings and other properties leasing*
Condominiums and detached houses
Shinchiku Sokkurisan remodeling
Custom homes
Real estate brokerage
OthersTotal$7

For 2022

Fair value

Thousands of U.S. dollars
Hedging accounting

Types of derivative transactions

Hedged items

Deferred hedge
accounting

Foreign Exchange forward contracts
Receipts in Indian rupee / Payments in yen

Investments in unconsolidated
subsidiaries and affiliates

Contract amounts

Contract amounts
due after one year

$24,068$—

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Bank loans
Bank loans and bonds

Sales
business

Construction
business

Brokeragebusiness¥358,910————
64,045¥422,955¥—
200,358———
21,595¥221,953¥¥——
110,749
91,952—9,464¥212,165

Contract amounts

Contract amounts
due after one year

¥ 468,400¥ 468,400¥8,6181,165,339

1,040,300— (*)

For 2022

Fair value

Office buildings and other properties leasing*
Condominiums and detached houses
Shinchiku Sokkurisan remodeling
Custom homes
Real estate brokerage
Others
Total

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Contract amounts

Contract amounts
due after one year

¥ 447,400¥ 447,400¥1,016

1,329,433

1,142,274— (*)

For 2023

Fair value

Thousands of U.S. dollars

Hedging accounting

Types of derivative transactions

Deferred hedge
accounting
Exceptional accounting forinterest rate swaps

Interest rate swap contracts
Fixed rate payments / Floating rate receipts
Interest rate swap contracts
Fixed rate payments / Floating rate receipts

Hedged items

Bank loans
Bank loans and bonds

Total

¥

¥358,910
200,358
110,749
91,952
71,438106,498¥939,905

—
—
—
—
—
8,836
¥8,836

Leasingbusiness

Salesbusiness

Construction
business¥365,402————
57,271¥422,673¥¥—
218,177———
15,499¥233,676

Contract amounts

Contract amounts
due after one year

$3,507,563$3,507,563

Brokeragebusiness——
105,747
88,432—9,129¥203,308

7,790,175

Total

¥

¥365,402
218,177
105,747
88,432
70,106
91,567¥939,431————
70,106
2,205¥72,311

—
—
—
—
—
7,463
¥7,463

Reportable segments
Leasingbusiness

Salesbusiness

Office buildings and other properties leasing*
Condominiums and detached houses
Shinchiku Sokkurisan remodeling
Custom homes
Real estate brokerage
OthersTotal$2,687,659————
479,594$3,167,253$—
1,500,359———
161,712$1,662,071

Construction
business

Brokeragebusiness$$——
829,332
688,573—
70,870$1,588,775————
534,956
19,155$554,111

Other businesses

$

—
—
—
—
—
66,168$66,168

Total$2,687,659
1,500,359
829,332
688,573
534,956
797,499$7,038,378* Revenue from office buildings and other properties leasing is mainly leasing revenue based on lease contracts and includes revenue from contracts with customers associated with such contracts.
Fair value$64,535

2. Information for understanding the amount of revenue in the current and subsequent fiscal years(1) Receivables arising from contracts with customers and contract liabilities

Thousands of
U.S. dollars

Millions of yen

8,726,516

Other businesses¥

Thousands of U.S. dollars

Millions of yen
Types of derivative transactions

Other businesses

Reportable segments

For 2023

Hedging accounting————
71,4382,558¥73,996

Fair value

Millions of yen
Hedged items

Leasingbusiness

Millions of yen

2. Interest-related derivatives
For 2023
Hedging accounting

Reportable segments— (*)(*) Interest rate swap contracts adopting exceptional accounting for interest rate swaps which meet specific matching criteria are not remeasured at market value, but the differential paid or received
under the swap agreements is recognized and included in interest expenses of the long-term debt or the long-term non-recourse debt as hedged items. Thus, the fair value of such interest rate
swap contracts is included in the fair value of the long-term debt or the long-term non-recourse debt.

2023
Beginning offiscal year

Receivables arising from contracts with customers*
Contract liabilities¥23,286
61,1802023

2022
End offiscal year

Beginning offiscal year

¥38,047
68,453¥18,71457,879End offiscal year

¥23,286
61,180

Beginning offiscal year

$174,375
458,140

End offiscal year

$284,911
512,603* Receivables arising from contracts with customers include receivables from revenue from leases based on lease contracts.

Contract liabilities are (1) advances received from customers such as
deposits and other advances based on real estate sales contracts inSales business, (2) advances received on construction contracts inprogress from customers such as deposits and intermediate payments
based on construction contracts in Construction business, (3) advances
received from customers such as advances received at the time of theconclusion of real estate sales contracts based on real estate brokeragecontracts in Brokerage business and other advances from customers.
Contract liabilities are transferred to revenue upon satisfaction ofrelated performance obligations.
Out of the amount of revenue from operations for the year ended
March 31, 2023 and 2022, ¥41,562 million ($311,233 thousand) and¥41,062 million are transferred from contract liabilities of the
beginning of the year, respectively.

(2) Transaction price allocated to remaining performance obligations
The aggregate amounts of transaction prices allocated to the remaining performance obligations by each segment are as follows. The amount inSales business includes the amount expected to be recognized as revenue after over one year.
Thousands of
U.S. dollars

Millions of yen

Sales business
Construction business
Brokerage business
Total

25

2023

2022

2023

¥255,446
122,731
21,718¥399,895¥230,902
134,859
21,051¥386,812$1,912,880
919,058
162,633$2,994,571

26

Consolidated Financial Statements

19 Segment information

Thousands of U.S. dollars

The Group operates their business in five segments: (1) Leasing
business consists of leasing and management of office buildings, rental
apartments, etc., and operation and management of hotels,
multipurpose halls, retail facilities, etc.; (2) Sales business consists ofsales of condominium units, detached houses, etc.; (3) Construction

business consists of construction and remodeling of detached houses,
condominiums, etc.; (4) Brokerage business consists of brokerage ofreal estate sales and sales agent of residential properties; and (5) Other
businesses including fitness business and restaurant business.

Information by business segment for the years ended March 31, 2023, 2022 and 2021 is summarized as follows:
Millions of yen

For 2023
Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥ 422,955
2,414
425,369¥ 165,693¥4,588,063¥221,953
124
222,077¥ 53,928¥927,788¥212,165
1,419
213,584¥ 21,422¥ 22,977¥ 73,996
1,111
75,107¥ 20,031¥230,095

¥

8,836
1,227
10,063¥ 1,181¥153,726¥ 939,905
6,295
946,200¥ 262,255¥5,922,649—(6,295)(6,295)¥ (20,981)¥442,787¥ 939,905—
939,905¥ 241,274¥6,365,436

¥

¥

¥

¥

¥

¥

¥

¥

61,172286

860

Other businesses

655

264

Total

63,237

Adjustments

¥

1,398

Consolidated financial
statements amounts

64,635

7,413

687

—

—

—

8,100

—

8,100

444,776

16,524

888

1,042

54

463,284

467

463,751

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness

Other businesses

Total¥ 422,673
2,409
425,082¥ 162,650¥4,297,595¥233,676
112
233,788¥ 50,486¥761,443¥203,308
1,054
204,362¥ 18,523¥ 23,626¥ 72,311
1,173
73,484¥ 18,026¥193,444¥ 7,463
1,621
9,084
¥
617
¥125,049¥ 939,431
6,369
945,800¥ 250,302¥5,401,157¥—(6,369)(6,369)¥ (16,419)¥404,883¥ 939,431—
939,431¥ 233,883¥5,806,040

¥

¥

167

¥ 1,032¥¥¥

59,562¥ 1,083

¥

3,453

—

—

—

—

3,453

—

3,453

164,430

21,741

281

802

286

187,540286

187,826

57,394

676

293

Adjustments

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

60,64527

Reportable segments
Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness¥ 395,288
2,950
398,238¥ 155,246¥4,226,734¥263,30392
263,395¥ 53,932¥658,010¥187,564
1,144
188,708¥ 15,566¥ 23,460¥ 64,026
1,767
65,793¥ 11,480¥179,632¥ 7,292
979
8,271¥ (49)¥71,731¥ 917,473
6,932
924,405¥ 236,175¥5,159,567¥—(6,932)(6,932)¥ (16,931)¥514,099¥ 917,473—
917,473¥ 219,244¥5,673,666

¥

¥

97

¥ 1,209¥¥¥

56,641¥ 1,172

¥

3,876

—

—

—

—

3,876

—

3,876

363,798

2,262

341

550

663

367,614107

367,72154,332

673

Leasingbusiness

Salesbusiness

Construction
business

Brokeragebusiness$ 3,167,253
18,0773,185,330$ 1,240,774$34,357,219$1,662,071
929
1,663,000$ 403,834$6,947,641$1,588,775
10,626
1,599,401$ 160,416$ 172,061$ 554,111
8,320
562,431$ 150,000$1,723,042$

66,168 $ 7,038,378
9,187
47,13975,355
7,085,517$
8,845 $ 1,963,869$1,151,160 $44,351,123—(47,139)(47,139)$ (157,114)$3,315,763$ 7,038,378—
7,038,378$ 1,806,755$47,666,886

$

$

$

$

$

$

$

458,080

2,142

6,440

4,905

Other businesses

Total

1,977 $

473,544

Adjustments$

10,468

Consolidated financial
statements amounts

484,01255,511

5,145

—

—

—

60,656—60,6563,330,657

123,738

6,650

7,803

405

3,469,253

3,497

3,472,750

Adjustments of segment profit consist mainly of intersegment
transaction eliminations and undistributed corporate expenses to eachsegment, and the Group classified these expenses of the generaladministrative division in the Company and its certain consolidated
subsidiaries into corporate expenses.

Adjustments of segment assets consist mainly of intersegment
transaction eliminations and undistributed corporate assets to eachsegment, and the Group classified cash and deposits, investments inunconsolidated subsidiaries and affiliates, investment securities, andassets of the general administrative division in the Company and its
certain consolidated subsidiaries into corporate assets.

20 Comprehensive income

Consolidated financial
statements amounts

Millions of yen

For 2021

Revenue from operations:Customers
Intersegment
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Loss on impairment of fixed
assetsIncrease in property andequipment, and intangibles

Reportable segments

Amounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods and tax
effects for each component of other comprehensive income (loss) for the years ended March 31, 2023, 2022 and 2021 are as follows:

Millions of yen

For 2022

For 2023

Other businesses

330

Total

Adjustments

Consolidated financial
statements amounts

57,813Thousands of
U.S. dollars

Millions of yen

Unrealized holding gains (losses) on securities:
Increase (Decrease) during fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Deferred gains (losses) on hedges:
Increase (Decrease) during fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Foreign currency translation adjustments:
Increase (Decrease) during fiscal year
Remeasurements of defined benefit plans:
Increase (Decrease) during fiscal year
Reclassification adjustments
Amounts before tax effects
Tax effects
Total
Total other comprehensive income (loss)

2023

2022

2021

2023

¥27,560(4,535)23,025(7,061)¥15,964¥(5,332)(1,266)(6,598)2,020¥(4,578)¥133,468(12,272)
121,196(37,090)¥ 84,106$206,380(33,959)
172,421(52,875)$119,546¥ 6,654948
7,602(2,328)¥ 5,274¥ 4,343981
5,324(1,630)¥ 3,694

¥

(112)
935
823
(252)
571

$ 49,828
7,099
56,927(17,433)$ 39,494¥ 4,110¥ 2,816¥ (1,548)$ 30,777¥¥ (427)(980)(1,407)431¥ (976)
¥ 956

¥

$

42
427
469
(143)
¥ 326
¥25,674

¥

980
257
1,237
(379)
¥
858
¥ 83,987

315
3,197
3,512
(1,072)$ 2,440$192,257

28

Consolidated Financial Statements

Independent Auditor’s Report

21 Investment and rental properties
The Company and its certain consolidated subsidiaries own some rental properties such as office buildings and rental apartments in Tokyo and otherareas. The carrying amount on the consolidated balance sheets for the year ended March 31, 2023 is ¥4,310,628 million ($32,279,677 thousand).
Certain domestic office buildings are not recognized as rental properties since the Company or its certain consolidated subsidiaries use some of thefloor space of these properties.
The carrying amounts of these properties on the consolidated balance sheets, their changes during the fiscal year and their fair values at March
31, 2023 and 2022 are as follows:
Millions of yen

Investment and rental properties

A portion used as investment andrental properties

Balance at beginning of fiscal year
Carrying amount
Changes during fiscal year, net
Balance at end of fiscal year
Fair value at end of fiscal year
Balance at beginning of fiscal year
Carrying amount
Changes during fiscal year, net
Balance at end of fiscal year
Fair value at end of fiscal year

2023

2022

2023

¥3,643,736
381,639
4,025,375
7,438,152¥ 301,331(16,078)
285,253
609,187¥3,705,532(61,796)
3,643,736
6,807,876¥ 133,004
168,327
301,331
632,166$27,285,727
2,857,863
30,143,590
55,699,805$ 2,256,485(120,398)
2,136,087
4,561,832(Notes)*Carrying amounts on the consolidated balance sheets are the amounts determined by deducting accumulated depreciation and accumulated impairment losses from the acquisition costs.
*Fair values as of March 31, 2023 and 2022 are calculated by the Group primarily based on their fair values according to Japanese Real Estate Appraisal Standards.

Significant changes during the years ended March 31, 2023 and 2022 are as follows:

Thousands of
U.S. dollars

Millions of yen

Increase:
Acquired real estate
Decrease:
Depreciation and amortization
Transferred to inventories
Loss on impairment of fixed assets

2023

2022

2023

¥454,795¥196,018$3,405,684¥ (53,699)(32,659)(8,100)¥ (48,862)(37,860)—$ (402,119)(244,563)(60,656)

Income and expenses for investment and rental properties for the years ended March 31, 2023 and 2022 are as follows:

Investment and rental properties

A portion used as investment and rental properties

OpinionWe have audited the accompanying consolidated financial statements of Sumitomo Realty & Development Co., Ltd. (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group”), which comprise the consolidated balance sheets as at March 31, 2023 and 2022,
the consolidated statements of income, comprehensive income, changes in net assets and cash flows for each of the years in the three-year period
ended, and notes, comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of theGroup as at March 31, 2023 and 2022, and its consolidated financial performance and its consolidated cash flows for each of the years in the threeyear period ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of theGroup in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we havefulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, andin forming our opinion thereon, and we do not provide a separate opinion on these matters.

Thousands of
U.S. dollars

Millions of yen

Revenue from operations
Cost of revenue from operations
Operating income
Other income (expenses), net
Revenue from operations
Cost of revenue from operations
Operating income
Other income (expenses), net

To the Board of Directors of Sumitomo Realty & Development Co., Ltd.:

Thousands of
U.S. dollars

2023

2022

2023

¥296,696
145,462
151,234(8,158)¥ 26,248
16,5159,733(368)¥299,165
148,260
150,905(3,480)¥ 29,965
17,853
12,112(309)$2,221,776
1,089,276
1,132,500(61,090)$ 196,555
123,670
72,885(2,756)(Notes)*As a portion used as investment and rental properties includes a portion used by the Company or its certain consolidated subsidiaries for providing services as well as management and administration,
revenue from operation for these are not recorded above. On the other hand, cost of revenue from operations for these (mainly rent, depreciation, taxes and dues) is included above.
*Other income (expenses), net for investment and rental properties is mostly loss on impairment of fixed assets and that for a portion used as investment and rental properties is mostly loss on disposalof property and equipment.

22 Contingent liabilities
The Group is contingently liable mainly for defects in condominiums, detached houses and other real estate, to our brokerage business customers
who bought or sold these, in an amount aggregating to ¥16,150 million ($120,938 thousand) and ¥13,913 million at March 31, 2023 and 2022,
respectively.
23 Subsequent events(Dividends)
On June 29, 2023, the shareholders of the Company approved payments of a year-end cash dividend of ¥28 ($0.21) per share or a total of ¥13,270
million ($99,371 thousand) to shareholders of record at March 31, 2023. Such appropriations are recognized in the period in which they areapproved by the shareholders.

2930Independent Auditor’s Report

Appropriateness of management’s judgments concerning the identification of an impairment indicator for the Investment and rental
properties
The key audit matter

How the matter was addressed in our audit

Office buildings, rental apartments and other properties (including
construction in progress and those held for development, hereinafterreferred to as the “Investment and rental properties”) owned by theGroup were recognized as property and equipment in the consolidatedbalance sheet of the Group as of March 31, 2023. As described in
Note 21, “Investment and rental properties” to the consolidated
financial statements, the Investment and rental properties amounted to¥4,310,628 million and accounted for approximately 68% of the total
assets in the consolidated financial statements.

The primary procedures we performed to assess the appropriateness ofmanagement’s judgments as to whether there was an impairment
indicator for the Investment and rental properties included thefollowing:

As described in Note 3, “Significant accounting estimates” to theconsolidated financial statements, when the profitability of theInvestment and rental properties which is recognized as property andequipment has declined and an impairment indicator exists, the Groupis required to determine whether an impairment loss should berecognized. Impairment indicators include recurring operating losses,changes that significantly reduce the recoverable amount in the extent
to which, or manner in which, a property is used or is expected to be
used, a significant deterioration of business environment and asignificant decrease in the market prices.

(2) Assessment of the appropriateness of the judgments concerning
the identification of an impairment indicator for the Investment andrental properties.

The probability of achieving the business plans including thedevelopment plans which were basis for estimating the recoverable
amount and the assumptions used for calculating the market prices
such as expected rents, occupancy rates and discount rates were
determined by management with subjective judgments. Also, thesejudgments are largely influenced by economic trends, corporate
performance, trends in land prices, financial market situations, taxation
system and other social aspects.
Accordingly, these estimates involved a high degree of uncertainty.
We, therefore, determined that our assessment of the appropriatenessof management’s judgments as to whether there was an impairment
indicator for the Investment and rental properties was one of the mostsignificant matters in our audit of the consolidated financial statements
for the current fiscal year, and accordingly, a key audit matter.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls to identify impairment indicators for theInvestment and rental properties.

1. The probability of achieving the business plans• We inquired of management and the personnel in the responsible
divisions their judgments about the current progress against thebusiness plans, the probability of achieving the business plans andwhether any events which cause changes of the business plans
incurred. In addition, we inspected the supporting documents
including contracts and other relevant materials regarding their
judgments about the current progress of the business plans and their
responses to our inquiries.
• We observed certain properties which have been completed orwhose occupancy rates had fluctuated in the current fiscal year, andcertain projects in progress, in order to assess if these properties havebeen actually rented or if the current progress against the business plan
was consist with their judgments.
2. Reasonableness of the calculated market prices• We assessed that the expected rents and occupancy rates were
determined based on the actual results or current contract rents in thesame project, or the observable actual rent data of comparable
properties.
• With the assistance of our own real-estate valuation specialists, we
assessed the appropriateness of the discount rates determined bymanagement and evaluated the reasonableness of the calculated
market prices.

Reasonableness of the valuation of the Real Estate for Sale
The key audit matter

How the matter was addressed in our audit

Condominium units, detached houses and land lots for sale (including
those in process and those held for development, hereinafter referred
to as the “Real Estate for Sale”) owned by the Group were recognized
as inventories in the consolidated balance sheet of the Group as ofMarch 31, 2023. As described in Note 6 “Inventories” to theconsolidated financial statements, real estate for sale and real estate
for sale in process amounted to ¥399,245 million and ¥381,753
million, respectively, which accounted for approximately 12% of thetotal assets in the consolidated financial statements.

The primary procedures we performed to assess the reasonableness ofthe valuation of the Real Estate for Sale included the following:

As described in Note 3, “Significant accounting estimates” to theconsolidated financial statements, in case the net realizable value of theReal Estate for Sale is lower than the book value, the profitability is
regarded to have declined, and the net realizable value is used as the
carrying amount. The difference between the book value and the net
realizable value (loss on devaluation of the Real Estate for Sale) is
recognized as cost of revenue from operations for the current fiscal year.
The probability of achieving the business plans including thedevelopment plans which were basis for estimating the net realizablevalue and the assumptions underlying the business plan including
expected selling prices were determined by management withsubjective judgments. Also, these judgments are largely influenced byeconomic trends, trends in personal income, trends in land prices,
trends in building costs, financial market situations, taxation systemand other social aspects.

(1) Internal control testing
We tested the design and operating effectiveness of certain of theGroup’s internal controls relevant to the valuation of the Real Estate forSale.
(2) Assessment of the reasonableness of the valuation of the Real
Estate for Sale
1. The probability of achieving the business plans• We inquired of management and the personnel in the responsible
divisions their judgments about the current progress against thebusiness plans and the probability of achieving the business plansconsidering the outlook of the expected selling prices and the building
costs. In addition, we inspected the supporting documents including
contracts and other relevant materials regarding their judgments about
the current progress of the business plans and their responses to ourinquiries.
• We observed certain properties in order to assess if the current
progress against the business plan was consistent with their judgments.

Accordingly, these estimates involved a high degree of uncertainty.

2. Appropriateness of the expected selling prices• With regard to the Real Estate for Sale whose certain units have beensold or contracted, we assessed that the expected selling prices were
determined based on the actual sales results in the same project.

We, therefore, determined that the reasonableness of the valuation of
the Real Estate for Sale was one of the most significant matters in our
audit of the consolidated financial statements for the current fiscal
year, and accordingly, a key audit matter.

• With regard to the Real Estates for Sale which have no sales
transaction record, we assessed that the expected selling prices were
determined based on the actual price data or observable selling pricesof comparable properties in the same sales area.
• With the assistance of our own real-estate valuation specialists, weevaluated the appropriateness of the expected selling prices.

Other Information
The other information comprises the information included in the Consolidated Financial Report, but does not include the consolidated financial
statements, the financial statements, and our auditor’s reports thereon. Management is responsible for the preparation and presentation of the otherinformation. Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties with regard
to the design, implementation and maintenance of the reporting process for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.

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Independent Auditor’s Report

Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern in accordance with accounting principles generally accepted in Japan and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties with regard to thedesign, implementation and maintenance of the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design andperform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made bymanagement.

•

Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease tocontinue as a going concern.

•

Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting standards
generally accepted in Japan, the overall presentation, structure and content of the consolidated financial statements, including the disclosures,and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

•

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express
an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.

From the matters communicated with corporate auditors and the board of corporate auditors, we determine those matters that were of mostsignificance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe thesematters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2023 are presented solely
for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been madeon the basis described in Note 1 to the consolidated financial statements.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

/S/ Atsuji Maeno
Atsuji Maeno
Designated Engagement Partner
Certified Public Accountant/S/ Hidekazu Takahashi
Hidekazu Takahashi
Designated Engagement Partner
Certified Public Accountant/S/ Yoshimori Takahashi
Yoshimori Takahashi
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
July 31, 2023

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned scope and timing of theaudit, significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.

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