Consolidated Financial Statements

Sekisui Chemical Co., Ltd.

Year ended March 31, 2021 with Independent Auditor's ReportFinancial Highlights (6 years)
Millions of Yen
FY2015FY2016FY2017FY2018FY2019FY2020

Achievement Transition
Net Sales

1,096,317

1,065,776

1,107,429

1,142,713

1,129,254

1,056,560

Operating Income

89,82396,47699,231

95,686

87,97467,300Ordinary Income

81,21391,51393,92993,146

87,20262,649Net Income Attributable to Owners of the Parent

56,65360,85063,45966,09359,181

41,544Comprehensive Income

37,08057,63873,89855,64836,364

93,956

8.2

9.1

9.0

8.4

7.8

6.4

Total Assets

936,043

943,640

994,137

1,023,706

1,105,781

1,150,143

Net Assets

544,156

570,549

612,757

632,746634,219694,392

Equity523,057

549,344587,766

607,123

609,253

667,066

Equity to Total Assets (%)

55.9

58.2

59.1

59.3

55.1

58.0

Current Ratio (%)

138.0

160.7

153.6

151.0

147.2

179.1

Operating Income Ratio (%)
Assets, Liabilities and Net Assets

Fixed Ratio (%)

95.9

86.9

91.0

91.2

100.8

96.6

Interest-bearing Debt

52,33843,734

46,326

53,848

117,665

138,168

Debt/Equity Ratio (%)

10.0

8.0

7.9

8.9

19.3

20.7

Total Assets Turnover (Times)

1.15

1.13

1.14

1.13

1.06

0.94

Inventory Turnover (Times)

7.11

7.00

6.84

6.30

5.52

4.80

Tangible Fixed Assets Turnover (Times)

4.11

4.01

4.09

3.88

3.49

3.07

Cash Flow
Net cash provided by operating activities

71,389108,229

82,272

85,21392,64775,271

Net cash used in investing activities(23,715)(44,057)(60,881)(62,553)(100,562)(58,495)

Net cash (used in) provided by financing activities(41,726)(39,633)(35,981)(31,539)

15,450(19,157)

33,375

48,107

2,325

2,043

(30,317)(5,417)

Capital Expenditures

49,74043,86853,51873,59566,66755,326

Depreciation and Amortization

34,73534,84336,01638,78942,01844,926

Amortization of Goodwill

2,156

2,118

2,416

2,848

3,238

4,419

R&D Expenditures

31,69334,16936,974

38,83837,14635,110

2.89

3.21

3.34

3.40

3.29

3.32

1,071.24

1,147.91

1,245.91

1,307.75

1,333.76

1,485.89

115.08126.13133.80141.74128.8091.92

Dividends per Share (Yen)

30

35

40

44

46

47

Dividends Payout Ratio (%)

26.1

27.7

29.9

31.0

35.7

51.1

Dividend on Equity Ratio (%)

2.8

3.1

3.3

3.4

3.5

3.3

Return on Equity (%)

10.9

11.3

11.2

11.1

9.7

6.5

Return on Total Assets (%)

8.5

9.7

9.7

9.2

8.2

5.6

Free Cash Flow
Capital Expenditures, Depreciation and R&D Expenditures

R&D Expenditures to Revenues (%)
Per Share Data
Net Assets per Share (Yen)Net Income Attributable to Owners of the Parent per Share (Yen)

Other Data

Return on invested capital (%)

-

-

-

-

7.7

5.4

126,714

133,437

137,665

137,324

133,231

116,647

Interest Coverage Ratio (Times)

64.5

100.4

109.9

113.5

85.3

58.2

PER (Times)

12.04

14.83

13.87

12.55

11.17

23.12

Number of Employees

23,901

23,00626,08026,48627,003

26,577

Net Sales per Employee (Ten thousands of yen)

4,588

4,544

4,512

4,347

4,222

3,943

EBITDA

EquityDividend on Equity Ratio = Total Dividend Payment (full year) / Average Equity= Shareholders' Equity including Accumulated Other Comprehensive Income

Return on Equity = Net Income Attributable to Owners of the Parent / Average Equity

Equity to Total Assets = Equity / Total Assets

Return on Total Assets = Ordinary Income / Average Total Assets

Current Ratio = Current Assets / Current Liabilities

Return on invested capital = Operating Income / Average Invested capital

Fixed Ratio = Fixed Assets / Equity

EBITDA = Operating Income + Depreciation and Amortization + Amortization of Goodwill

Debt/Equity Ratio = Interest-bearing Debt / Equity

Interest Coverage Ratio =(Operating Income + Interest and Dividends) / Interest Expense

Total Assets Turnover = Net Sales / Average Total Assets

PER = Stock Prices at the End of Year / Net Income Attributable to Owners of the Parent

Inventory Turnover = Net Sales / Average Inventory
Tangible Fixed Assets Turnover = Net Sales / Average Tangible Fixed Assets

per Share
Net Sales per Employee = Net Sales / Average Number of Employees

Free Cash Flow
= CF Operating Activities + CF Investing Activities - Dividend Paid
R&D Expenditures to Revenues = R&D Expenditures / Net Sales
Note: “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No.28 issued on February 16, 2018) have been applied from the beginning of the fiscal
year ended March 31, 2019 (FY2018). Major management indicators etc. for the previous fiscal year have been calculated by retrospectively applying the accounting standard.
For the year ended March 31, 2021, the Companies completed the provisional accounting treatment related to a business combination.
As a result, certain amounts as of and for the year ended March 31, 2020 in the above table includes items that were adjusted retroactively to reﬂect the revision of the initial
allocated amounts of the acquisition price as the Companies finalized the provisional accounting treatment for the business combination.

-1-

Consolidated Financial Statements
Consolidated Balance Sheet
Sekisui Chemical Co., Ltd. and Consolidated Subsidiaries
March 31, 2021 and 2020
Millions of yen
FY2020FY2019AssetsCurrent assets:
Cash and deposits (Notes 24 and 26)￥

87,454￥76,819Notes receivable, trade (Note 26)

34,81039,436

Accounts receivable, trade (Note 26)

135,821

134,688

Marketable securities (Notes 7 and 26)

00Merchandise and finished goods

79,65273,744

Land for sale (Note 3)

58,76750,580Work in process

50,46956,554

Raw materials and supplies

34,021

36,311

Advance payments

3,362

2,631

Prepaid expenses

7,121

5,237

Short-term loans receivable

2

1,466

Other current assets

15,25915,789Allowance for doubtful accounts(1,172)(1,377)505,571

491,883

Buildings and structures (Note 22)

116,433

104,206

Machinery, equipment and vehicles (Note 22)

96,84484,284

Land (Note 20)

80,07979,708

Leased assets (Note 10)

19,203

18,520Construction in progress

27,22838,905

Other

11,607

11,624351,397337,250

Goodwill

50,91456,078

Software

10,5209,571

Total current assets
Fixed assets:
Property, plant and equipment, net (Notes 8, 11, 21 and 29):

Total property, plant and equipment, net
Intangible assets (Notes 3, 11, 21, 29 and 30):

Leased assets (Note 10)
Other
Total intangible assets

150

135

36,06338,71397,649104,498

Investments and other assets:
Investments in securities (Notes 7, 9 and 26)

174,656

140,862

Long-term loans receivable

1,613

1,379

Long-term prepaid expenses

2,021

1,394

Asset for retirement benefits (Note 13)

312

125

Deferred tax assets (Note 14)

5,347

16,536

Other

13,90813,884

Allowance for doubtful accounts
Total investments and other assets
Total ﬁxed assets(2,334)(2,034)

195,525

172,148644,571

Total assets (Note 29)￥-2-1,150,143

613,897￥

1,105,781

Millions of yen
FY2020FY2019Liabilities
Current liabilities:
Notes payable, trade (Notes 11 and 26)

￥

1,744

￥

3,002

Electronically recorded obligations (Note 26)

25,052

26,859Accounts payable, trade (Notes 11, 25 and 26)

90,798

101,914

7,278

8,446

Commercial paper (Notes 11 and 26)－

28,000Current portion of bonds (Notes 11 and 26)－

19

Lease obligations (Note 12)

4,625

4,694

Accrued expenses (Note 25)

43,91041,097

Accrued income taxes and other taxes (Note 14)

10,658

11,855

Allowance for bonuses to employees

17,62018,162

Short-term debt and current portion of long-term debt
(Notes 11 and 26)

Allowance for bonuses to directors and audit andsupervisory board members
Provision for compensation for completed construction
Provision for stock-based compensation
Advances received
Other

245

275

1,403

1,382

157

166

40,22742,18038,555

46,155282,278

334,212

Bonds (Notes 11 and 26)

40,00040,000Long-term debt less current portion (Notes 11 and 26)

71,20722,368

Lease obligations (Note 12)

15,057

14,137

Deferred tax liabilities (Notes 14 and 30)

10,362

7,777

Liability for retirement benefits (Note 13)

30,402

47,170Total current liabilities
Long-term liabilities:

Provision for stock-based compensation

648

479

5,793

5,416

173,472

137,349455,751

471,562

Common stock

100,002

100,002

Capital surplus

109,021109,273

Retained earnings (Note 31)

441,087

433,266

Treasury stock, at cost (Note 31)(43,414)(44,139)

606,696

598,403

Other
Total long-term liabilities
Total liabilities
Contingent liabilities (Note 17)
Net assets (Notes 15 and 28)
Shareholders' equity:

Total shareholders' equity
Accumulated other comprehensive income:Unrealized holding gain on securities

50,781

27,463

Deferred loss on hedges (Notes 26 and 27)

(33)

(16)

Unrealized gain on land revaluation (Note 16)

323

321

Translation adjustments

6,647(8,499)Retirement benefit adjustments (Note 13)

2,650(8,419)60,37010,850Non-controlling interests

27,32524,901

Total net assets

694,392

634,219

Total accumulated other comprehensive income
Stock acquisition rights (Notes 15 and 25)

64

Total liabilities and net assets￥

See accompanying notes to consolidated financial statements-3-

1,150,143￥

1,105,781

Consolidated Statement of Income
Sekisui Chemical Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2021 and 2020
Millions of yen
FY2020Net sales (Notes 25 and 29)￥

FY20191,056,560￥

1,129,254

Cost of sales

726,174

766,551

Gross profit

330,385362,702

Selling, general and administrative expenses (Note 18)

263,084

274,727

Operating income (Note 29)

67,30087,974Non-operating income:Interest income

484

957

Dividends income

4,368

4,363

Equity in earnings of affiliates

2,753

2,893

Foreign exchange gain, net

543

178

2,886

3,417

11,036

11,809Interest expenses

861

695

Sales discounts

378

399

5,011

2,694

Miscellaneous income
Total non-operating income
Non-operating expenses:

Inspection and maintenance expenses for external walls (Note 19)

9,436

8,793

Total non-operating expenses

15,687

12,581

Ordinary income

62,64987,202

Miscellaneous expenses

Extraordinary income:Gain on sales of fixed assets (Note 20)

3,128

-

Gain on sales of investments in securities (Note 7)

2,258

6,929

5,387

6,929

2,428

4,443

Total extraordinary income
Extraordinary loss:
Loss on impairment of fixed assets and goodwill (Notes 3, 21 and 29)
Loss on sales of investments in securities (Note 7)
Loss on revaluation of investments in securities (Note 7)
Loss on sales or disposal of property, plant and equipment (Note 22)

728

290

－

2,897

1,700

2,713

Total extraordinary loss

4,857

10,344

Income before income taxes

63,17983,787

Current

20,02922,659Deferred

(127)

(83)

Total income taxes

19,902

22,575

Net income

43,277

61,211

1,733

2,030

Income taxes (Note 14):

Net income attributable to:Non-controlling interests
Owners of the parent (Note 28)￥

See accompanying notes to consolidated financial statements-4-41,544￥

59,181

Consolidated Statement of Comprehensive Income
Sekisui Chemical Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2021 and 2020
Millions of yen
FY2020Net income￥

FY201943,277￥

61,211Other comprehensive income (loss) (Note 23)
Unrealized holding gain (loss) on securities

22,450(9,448)(32)

31

Translation adjustments

16,297(12,077)

Retirement benefit adjustments

11,068(3,297)

Deferred (loss) gain on hedges

Comprehensive gain (loss) of affiliates accounted forby the equity method attributable to the Company
Total other comprehensive income (loss)
Comprehensive income

894

(54)

50,679(24,847)￥

93,956￥36,364￥91,064￥35,801

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

2,892

See accompanying notes to consolidated financial statements

-5-

562

Consolidated Statement of Changes in Net Assets
Sekisui Chemical Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2021 and 2020
Millions of yen
Shareholders’ equity

Balance at April 1,
2019￥

Accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at costUnrealized
holding gain
on securities

100,002 ￥109,221 ￥408,008 ￥(44,337) ￥Deferredloss onhedges

Unrealized
gain on land
revaluation

Translation
adjustments

Retirement
benefitadjustments

Stockacquisitionrights

Noncontrollinginterests

Total net
assets36,828 ￥(32) ￥

321 ￥

2,123 ￥

(5,011) ￥156 ￥25,465 ￥632,746

Cash dividends－－(21,261)

－

－

－

－

－

－

－

－

(21,261)

Net income
attributable to owners of the parent－－

59,181

－

－

－

－

－

－

－

－

59,181

Increase in retained earnings resulting
from inclusion of subsidiaries in consolidation

－

－

45

－

－

－

－

－

－

－

－

45

Increase in retained earnings resulting
from exclusion of subsidiaries in consolidation

－

－

23

－

－

－

－

－

－

－

－

23

Retirement of treasury stock－(12,729)－

12,729

－

－

－

－

－

－

－

－

Purchase of treasury stock

－

－

－

(13,291)

－

－

－

－

－

－

－

(13,291)

Disposal of treasury stock

－

46

－

760

－

－

－

－

－

－

－

806

Transfer from retained earnings
to capital surplus－

12,729(12,729)

－

－

－

－

－

－

－

－

－

Change in shareholders’ equity due totransactions with non-controlling interests

－

5

－

－

－

－

－

－

－

－

－

5

Net changes of items other thanshareholders' equity

－

－

－

－

(9,365)15－(10,622)(3,407)

(92)

(564)

(24,035)

Total changes of items
during the year－52

25,258198(9,365)15－(10,622)(3,407)

(92)

(564)

1,472

109,273 ￥433,266 ￥(44,139) ￥27,463 ￥(16) ￥

321 ￥(8,499) ￥(8,419) ￥64 ￥24,901 ￥634,219

Balance at March
31, 2020￥

100,002 ￥Cash dividends－－(20,953)

－

－

－

－

－

－

－

－

(20,953)

Net income
attributable to owners of the parent－－

41,544

－

－

－

－

－

－

－

－

41,544

Decrease in retained earnings resulting
from inclusion of subsidiaries in consolidation

－

－

(117)

－

－

－

－

－

－

－

－

(117)

Retirement of treasury stock－(12,699)－

12,699

－

－

－

－

－

－

－

－

Purchase of treasury stock

－

－

－

(12,202)

－

－

－

－

－

－

－

(12,202)

Disposal of treasury stock

－

1

－

228

－

－

－

－

－

－

－

229

Transfer from retained earnings
to capital surplus－

12,651(12,651)

－

－

－

－

－

－

－

－

－

Change in shareholders’ equity due totransactions with non-controlling interests

－

(206)

－

－

－

－

－

－

－

－

－

(206)

Net changes of items other thanshareholders' equity

－

－

－

－

23,318(16)

115,146

11,069

(64)

2,424

51,879Total changes of items
during the year

－

(252)

7,820

725

23,318(16)

115,146

11,069

(64)

2,424

60,173109,021 ￥441,087 ￥(43,414) ￥50,781 ￥(33) ￥

6,647 ￥

2,650 ￥

27,325 ￥694,392

Balance at March
31, 2021￥

100,002 ￥See accompanying notes to consolidated financial statements

-6-

323 ￥

－ ￥

Consolidated Statement of Cash Flows
Sekisui Chemical Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2021 and 2020
Millions of yen
FY2020FY2019Operating activities:
Income before income taxes￥

63,179￥83,787

Adjustments for:
Depreciation and amortization

44,92642,018

Amortization of goodwill

4,419

3,238

Loss on impairment of fixed assets and goodwill

2,428

4,443

Loss on disposal of property, plant and equipment

1,672

2,664

(Gain) loss on sales of property, plant and equipment, net(3,101)49

Decrease in liability for retirement benefits(1,495)(1,056)

Gain on sales of investments in securities, net(1,530)(6,639)Loss on revaluation of investments in securities
Interest and dividends income

－

2,897

(4,853)(5,320)Interest expenses and sales discounts

1,239

1,094

Equity in earnings of affiliates(2,753)(2,893)

Decrease in notes and accounts receivable

4,629

9,644

Increase in inventories(4,165)(24,309)

Decrease in notes and accounts payable(11,246)(737)

Decrease in advances received(2,024)(1,004)

280

570

Other

Increase in deposits received

1,144

1,237

Subtotal

92,750109,685

Interest and dividends received

5,208

6,167

Interest paid

(1,190)(1,133)

Income taxes paid

(21,497)(22,071)

Net cash provided by operating activities

75,271

92,647(55,359)(52,683)

Investing activities:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments into time deposits

3,940

1,336

(14,619)(5,637)

Proceeds from withdrawal of time deposits

6,463

4,722

Purchases of investments in securities(620)(1,034)

Proceeds from sales or redemption of investments in securities

3,478

14,163ー(54,377)880

254

Acquisition of investments in subsidiaries resulting in change in scope of consolidation
Sales of investments in subsidiaries resulting in change in scope of consolidation
Acquisition of investments in subsidiaries
Purchases of intangible assets
Decrease (increase) in short-term loans receivable
Other
Net cash used in investing activities

￥

-7-

ー

(45)

(6,708)(4,544)15(5,277)

4,035

2,560

(58,495)(100,562)￥

Consolidated Statement of Cash Flows (continued)
Financing activities:
Decrease in short-term debt, net

￥

(823)

￥

(318)

Repayments of lease obligations(4,947)(5,073)(Decrease) increase in commercial paper(28,000)

11,000

Proceeds from long-term debt

51,531

17,165

Repayment of long-term debt

(3,256)(2,182)－30,000

Proceeds from issuance of bonds
Redemption of bonds
Cash dividends paid

(19)

(19)

(20,952)(21,286)

Cash dividends paid to non-controlling interests(1,240)(1,114)Purchase of treasury stock(12,201)(13,291)

2,632－(2,099)

(6)

219

579

Proceeds from issuance of common stock
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Other
Net cash (used in) provided by financing activities(19,157)

15,450Effect of exchange rate change on cash and cash equivalents

4,171(3,072)

Net increase in cash and cash equivalents

1,789

4,462

Cash and cash equivalents at beginning of year

74,721

68,613

Increase in cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of year (Note 24)

138￥

See accompanying notes to consolidated financial statements-8-

76,6491,646￥

74,721

Notes to Consolidated Financial Statements
1. Basis of Preparation of Consolidated Financial Statements
The accompanying consolidated financial statements of the Company and its consolidated subsidiaries (the “Companies”) are prepared on
the basis of accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by theCompany as required by the Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements were made to the consolidated
financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan.
Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s presentation.
As permitted by the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been omitted.
Consequently, the totals shown in the accompanying consolidated financial statements do not necessarily agree with the sum of theindividual amounts.

2. Summary of Significant Accounting Policies(1)

Principles of Consolidation
The accompanying consolidated financial statements for the year ended March 31, 2021 include the accounts of the Company and its
161 significant subsidiaries.
The accounts of the other subsidiaries have not been consolidated with those of the Companies at March 31, 2021, because their combined
assets, retained earnings, net sales and net income (loss) in the aggregate were not material to the consolidated financial statements.
The fiscal year end of 21 overseas consolidated subsidiaries was December 31. These consolidated subsidiaries have been
consolidated using provisional financial statements at March 31.
Unrealized intercompany profit and loss among the Company and its consolidated subsidiaries have been entirely eliminated and the
portion attributable to non-controlling interests has been charged to non-controlling interests.
At March 31, 2021, the Company has applied the equity method to investments in 8 major affiliates, including Sekisui Plastics Co.,
Ltd. and Sekisui Jushi Co., Ltd. for the purpose of the consolidated financial statements for the year then ended since the investmentsin the other unconsolidated subsidiaries and affiliates were not material.

(2)

Foreign Currency Transactions
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at the rates of
exchange in effect at the respective transaction dates. Gain or loss on foreign exchange is credited or charged to income in the period
in which the gain or loss is recognized for financial reporting purposes.
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at thebalance sheet date and gain or loss on each translation is credited or charged to income.
The balance sheet accounts of the overseas consolidated subsidiaries are translated into yen at the rates of exchange in effect at thebalance sheet date except that the components of net assets excluding non-controlling interests are translated at their historical exchange
rates. Revenue and expense accounts are translated at the average rates of exchange in effect during the year. Adjustments resulting
from translating foreign currency financial statements are not included in the determination of net income and are reported as translation
adjustments and non-controlling interests in the accompanying consolidated balance sheet and statement of comprehensive income.

-9-2. Summary of Significant Accounting Policies (continued)(3)

Cash and Cash Equivalents
For the purposes of the consolidated statements of cash flows, cash and cash equivalents include cash-on-hand and in banks and otherhighly liquid investments with maturities of three months or less when purchased.

(4)

Inventories
Inventories held for normal sales purposes are being determined primarily by the average method.
However, real estates for sales purposes are being determined by the individual identification method.
Inventories are stated at the lower of cost or net selling value(5)

Securities
Securities other than those of unconsolidated subsidiaries and affiliates are classified into three categories: trading securities, held-tomaturity debt securities or other securities. Trading securities are carried at fair value. Gain or loss, both realized and unrealized, iscredited or charged to income. Held-to-maturity debt securities are carried at amortized cost. Marketable securities classified asother securities are carried at fair value with any changes in unrealized holding gain or loss, net of the applicable income taxes, reported
as a separate component of accumulated other comprehensive income. Cost of securities sold is determined by the moving averagemethod. Non-marketable securities classified as other securities are carried at cost determined by the moving average method.

(6)

Property, Plant and Equipment and Depreciation (excluding leased assets)
Depreciation of property, plant and equipment is computed by the straight-line method based on the estimated useful lives of therespective assets.
The range of useful lives is principally from 3 to 60 years for buildings and structures and from 4 to 17 years for machinery, equipment
and vehicles.

(7)

Leased Assets
Leased assets arising from finance lease transactions which do not transfer ownership to the lessee are depreciated to a residual valueof zero by the straight-line method using the contract term as the useful life.

(8)

Goodwill
Goodwill is amortized by the straight-line method over a reasonable period not exceeding 20 years, with the exception of immaterial
and negative amounts, which are charged or credited to income in the year of acquisition.

(9)

Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided to cover possible losses on collection. With respect to normal accounts receivable,
trade, allowance for doubtful accounts is stated at an amount based on the actual rate of historical bad debts, and for certain doubtfulreceivables, the uncollectible amount has been individually estimated.

(10)

Allowance for Bonuses to Employees
Allowance for bonuses to employees is provided at the estimated amount of bonuses to be paid to the employees in the following year
which has been allocated to the current fiscal year.

(11)

Retirement Benefits
Asset for retirement benefits and liability for retirement benefits have been recorded mainly at the amount calculated based on theretirement benefit obligations and the fair value of the pension plan assets as of balance sheet date. The retirement benefit obligations
are attributed to each period on a benefit formula basis over the estimated years of service of the eligible employees.
Prior service cost is amortized by the straight-line method over a period of 5 years, which is within the estimated average remaining
years of service of the eligible employees.
Actuarial gain or loss is amortized in the year following the year in which the gain or loss is recognized by the straight-line method
over a period of 5 years, which is within the estimated average remaining years of service of the eligible employees.
Certain consolidated subsidiaries have adopted a simplified method of calculation with liability for retirement benefits and retirement
benefits expense. Under this simplified method, retirement benefit obligations for employees are stated the amount which would be
required to be paid if all eligible employees voluntarily retired at the balance sheet date.
Certain consolidated subsidiaries have retirement benefit plans for their officers which are stated at 100% of the estimated amountcalculated in accordance with each subsidiary’s internal rules. The related amount is included in liability for retirement benefits.

(12) Recognition of Revenue and Related Costs
Revenues and costs of construction contracts, of which the percentage of completion can be reliably estimated, are recognized by thepercentage-of-completion method, except for construction contracts with extremely short construction periods. To estimate theprogress of such construction projects, the Company and certain consolidated subsidiaries measure the percentage of completion bycomparing costs incurred to date with the most recent estimate of total costs required to complete the project (cost to cost basis). If areliable estimate cannot be made, revenues and costs of construction contract are recognized by the completed-contract method.

-10-

2. Summary of Significant Accounting Policies (continued)(13)

Research and Development Costs and Computer Software (excluding leased assets)
Research and development costs are charged to income when incurred. Expenditures relating to computer software developed forinternal use are charged to income when incurred, unless these contribute to the generation of future income or cost savings. Suchexpenditures are capitalized as assets and amortized by the straight-line method over their respective estimated useful lives, generally
a period of 5 years.

(14)

Income Taxes
Income taxes are calculated based on taxable income and charged to income on an accrual basis. Certain temporary differences exist
between taxable income and income reported for financial statement purposes which are entered into the determination of taxable
income in different periods. The Company and consolidated subsidiaries have recognized the tax effects of such temporary differencesin the accompanying consolidated financial statements.
The Company and certain consolidated subsidiaries have applied the consolidated taxation system.

(15)

Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Consumption taxes paid notoffset by consumption taxes received in accordance with Consumption Tax Act of Japan that arise from the purchases of property, plantand equipment are charged to income when incurred.

(16)

Derivatives and Hedging Activities
The Company and certain consolidated subsidiaries have entered into derivative transactions in order to manage the risk arising fromadverse fluctuation in foreign currency exchange rates and interest rates. Derivatives are carried at fair value with any changes in
unrealized gain or loss charged or credited to income, except for those which meet the criteria for deferral hedge accounting underwhich unrealized gain or loss, net of the applicable income taxes, is reported as a component of accumulated other comprehensive
income. Forward foreign exchange contracts and currency swap contracts which meet certain criteria are accounted for by allocation
method, which requires that recognized foreign currency receivables or payables be translated at the corresponding contract rates.
If interest rates swap contracts meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contract
is added to or deducted from the interest on the assets or liabilities for which the swap contract is executed.

-11-

3. Significant Accounting Estimates(1) Valuation of goodwill of Sekisui Aerospace Corporation Group(a) Amount recorded in the consolidated financial statements for the year ended March 31, 2021
Goodwill ¥40,802 million
The goodwill was recognized when the AIM Aerospace Corporation (currently Sekisui Aerospace Corporation) Group
was acquired in 2019 with the aim of expanding the business in the area of mobility materials and strengthening basic
technologies. No impairment loss related to the goodwill was recorded for the year ended March 31, 2021(b) Information about significant accounting estimates for the identified itemb-1 Method of calculation
No impairment loss was recognized for the year ended March 31, 2021 as the total undiscounted future cash
flows from the asset group, including goodwill of the Sekisui Aerospace Corporation Group, exceed the bookvalue of the asset group. Undiscounted future cash flows are calculated based on the business plan approvedby the management, and for the following period subsequent to the period covered by the business plan, an
estimated growth rate within the market's long-term average growth rate is applied.
b-2 Significant assumptions
The significant assumptions used in the estimation of undiscounted future cash flows are, the prospects for market recovery in the aircraft industry, the prospects for customer orders, and the growth rate for the following period
subsequent to the period covered by the business plan. The growth rate is set at 2%, taking into account the impact of COVID-19 on the long-term average growth rate of the market.
b-3 Impact on consolidated financial statements for the year ending March 31, 2022
An aircraft manufacturer in the United States, which is a major customer of Sekisui Aerospace Corporation Groupand accounts for the majority of orders received, has been affected by a sharp decline in air passenger demand
due to the spread of COVID-19, and its business environment has become increasingly uncertain.
Deterioration in the business environment of this major customer may have a significant impact on the future
performance of Sekisui Aerospace Corporation Group. There is a possibility that impairment loss would be recordedin the assets group, including goodwill, if the key assumptions underlying accounting estimates change.
(2) Valuation of intangible assets of Sekisui Aerospace Corporation Group(a) Amounts recorded in the consolidated financial statements for the year ended March 31, 2021
Loss on impairment of intangible assets ¥1,693 million
Intangible assets ¥12,564 million
The intangible assets represent customer-related assets recognized when the AIM Aerospace Corporation (currently, Sekisui Aerospace Corporation) Group was acquired in 2019 with the aim of expanding the business in themobility materials field and strengthening basic technologies.
(b) Information about significant accounting estimates for the identified itemb-1 Method of calculation
Customer-related assets of the Sekisui Aerospace Corporation Group are calculated based on fair value lesscosts of disposal, which is calculated by discounting future cash flows to present value. Furthermore, if the fairvalue is less than the corresponding book value, an impairment loss is recorded.
For the year ended March 31, 2021, an impairment loss of ¥1,693 million was recorded as a result of thedecline in profitability due to changes in the business environment.
b-2 Significant assumptions
The significant assumptions used in the estimation of the fair value less costs of disposal are, the prospects formarket recovery in the aircraft industry, the prospects for customer orders, and the discount rate. The discount rate is calculated based on the weighted average cost of capital before tax and is set at 12.5%.
b-3 Impact on consolidated financial statements for the year ending March 31, 2022
The aircraft manufacturer in the United States, which is a major customer of Sekisui Aerospace Corporation Group and accounts for the majority of orders received, has been affected by a sharp decline in air passenger demand due to the spread of COVID-19, and the business environment is becoming increasingly uncertain.
The deterioration in the business environment of this major customer may have a significant impact on theevaluation for the customer-related assets of Sekisui Aerospace Corporation Group. There is a possibility that impairment
loss would be recorded on the customer-related assets, if the key assumptions underlying accounting estimates change.
(3) Evaluation of land for sale(a) Amount recorded in the consolidated financial statements for the year ended March 31, 2021
Land for sale: ¥58,767 million(b) Information about the content of significant accounting estimates for the identified itemb-1 Method of calculation
Land for sale held for the purpose of housing sales (“Land for sale”) is stated at the acquisition cost in the
consolidated balance sheet, and if net selling price at the end of the year is less than the acquisition cost,that value is used as the amount recorded in the consolidated balance sheet.
Net selling price is the selling price for each individual property (in principle, the lowest publicly offered price.)
In addition, the Companies have standardized rules for writing down the book value based on the number of years
that have passed since the Companies have offered the land for sale.
b-2 Significant assumptions
The significant assumption used to evaluate land for sale is the selling price based on the management's
forecasts and expectations based on the housing market conditions and subjective judgments.
b-3 Impact on consolidated financial statements for the year ending March 31, 2022
In the evaluation of land for sale, it is necessary to review the selling price as appropriate due to the deterioration of the housing sales market and its sluggish sales. There is a possibility that loss would be recorded on
the land for sale, if the key assumptions underlying accounting estimates change.

-12-4. Accounting Standards Issued but Not Yet Effective
Accounting Standard and Implementation Guidance on Revenue Recognition
On March 31, 2020, the Accounting Standards Board of Japan (the “ASBJ”) issued revised “Accounting Standard for Revenue Recognition”(ASBJ Statement No.29) and “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19).
On March 26, 2021, the Accounting Standards Board of Japan (the “ASBJ”) issued revised “Implementation Guidance on AccountingStandard for Revenue Recognition” (ASBJ Guidance No.30)(1) Overview
The International Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) of the U.S.
have jointly developed a comprehensive accounting standard for revenue recognition. In May 2014, the IASB and the FASB
each issued “Revenue from Contracts with Customers” (IASB: IFRS 15 and FASB: Topic 606). Considering that IFRS 15 has
been applied from fiscal years beginning on or after January 1, 2018 and Topic 606 has been applied from fiscal years beginning
after December 15, 2017, the ASBJ has developed a comprehensive accounting standard for revenue recognition, which was
issued together with its implementation guidance.
As a basic policy in developing the accounting standard for revenue recognition, the ASBJ has incorporated the basic principles
of IFRS 15 from the viewpoint of comparability between financial statements, a factor essential for facilitating consistency withIFRS 15. In addition, if there are any business practices in Japan for which consideration is required, alternative accounting
treatments shall be added to the accounting standard to the extent that they do not impair comparability.
(2) Scheduled date of adoption
The Companies expect to adopt the accounting standard and related implementation guidance from the beginning of the fiscal
year ending March 31, 2022.
(3) Impact of adoption of revised accounting standard and related implementation guidance
The Companies are currently evaluating the effect of the adoption of the accounting standard and related implementation guidance on
the consolidated financial statements.
Accounting Standard for Fair Value Measurement and Related Implementation Guidance
On July 4, 2019, the ASBJ issued “Accounting Standard for Fair Value Measurement ” (ASBJ
Statement No. 30), and “Implementation Guidance on Accounting Standard for Fair Value Measurement ”(ASBJ Guidance No. 31), along with related updates to “Accounting Standard for Measurement of
Inventories” (ASBJ Statement No. 9, revised 2019), “Accounting Standard for Financial Instruments”(ASBJ Statement No. 10, revised 2019), and ”Implementation Guidance on Disclosures about Fair
Value of Financial Instruments” (ASBJ Guidance No. 19, revised 2020).
(1) Overview
The IASB and the FASB have provided almost identical detailed guidance for fair value measurement(IFRS 13 Fair Value Measurement under IFRS, and ASU 2018-13 Fair Value Measurement (Topic 820) under
U.S. GAAP).
As a result of initiatives mainly to promote consistency between Japanese and international accounting standards
regarding guidance for fair value measurement and required disclosures, the ASBJ then issued “AccountingStandard for Fair Value Measurement,” etc.
The basic objective of the ASBJ in developing the accounting standard for fair value measurement was to enhancecomparability between financial statements of domestic and foreign entities, through a unified measurement
method.
Accordingly, the accounting standard fundamentally incorporates the basic policies of IFRS 13. Also, where there
are items that should be considered to reflect the business practices in Japan, exceptional treatments have been
established for certain items to the extent that comparability is not impaired.
(2) Scheduled date of adoption
The Companies expect to adopt the accounting standards and related implementation guidance from the
beginning of the fiscal year ending March 31, 2022.
(3) Impact of adoption of revised accounting standard and related implementation guidance
The Companies are currently evaluating the effect of the adoption of the accounting standards andrelated implementation guidance on the consolidated financial statements.

-13-

5. Notes on Changes in Presentation Method(1) Consolidated Statement of Cash Flows
For the year ended March 31, 2020, "Sales of investments in subsidiaries resulting in change in scope of
consolidation" was included in "Proceeds from sales or redemption of investments in securities" in "Investing
activities."
From the viewpoint of enhancing the usefulness of the consolidated financial statements, the Companies reviewed
the presentation items and decided to post this separately from the year ended March 31, 2021. The consolidated
financial statements for the previous fiscal year have been reclassified to reflect this change in presentation method.
As a result, ¥14,417 million shown in “Proceeds from sales or redemption of investments in securities” in“Investing activities” in the consolidated statement of cash flows for the previous fiscal year was reclassified as"Sales of investments in subsidiaries resulting in change in scope of consolidation" of ¥254 million and "Proceedsfrom sales or redemption of investments in securities" ¥14,163 million.
For the year ended March 31, 2020, "Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation" was included in "other" in "Financing activities."
Due to increasing materiality, the Companies reviewed the presentation items and decided
to post it separately from the year ended March 31, 2021. The consolidated financial statements forthe previous fiscal year have been reclassified to reflect this change in presentation method.
As a result, ¥572 million shown in “other” in “Financing activities” in the consolidated statement of cash flows
for the previous fiscal year was reclassified as "Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation" of ¥(6) million and "other" of ¥579 million.
(2) Application of "Accounting Standards for Disclosure of Accounting Estimates"
Effective from the fiscal year ended March 31, 2021, the Companies have adopted "Accounting Standard forDisclosure of Accounting Estimates (ASBJ Statement No. 31) issued on March 31, 2020.
Significant accounting estimates for the consolidated financial statements are newly disclosed.
However, comparative information for the previous fiscal year is not included in accordance withthe transitional treatment stipulated in the proviso of paragraph 11 of the accounting standard.

6. Additional Information(Accounting estimates with respect to the impact of the spread of COVID-19)
The Companies make accounting estimates such as impairment accounting for fixed assets and the recoverabilityof deferred tax assets based on information known at the time of preparing the consolidated financial statements.
The Companies assume that the impact of the spread of COVID-19 will gradually improve for the year ending
March 31, 2022. The impact on the Companies' business and the degree of this impact differs by business.

-14-7. Marketable Securities and Investments in Securities(1) Held-to-maturity debt securities at March 31, 2021 and 2020 are summarized as follows:
Millions of yen
FY2020Carrying value
Unlisted foreign debt
securities
Total

Estimated fair

Gross

Gross

value

unrealized gain

unrealized loss

￥

14

￥

14

￥

ー ￥

ー

￥

14

￥

14

￥

ー ￥

ー

Millions of yen
FY2019Carrying value
Unlisted foreign debt
securities
Total

Estimated fair

Gross

Gross

value

unrealized gain

unrealized loss

￥

1

￥

1

￥

ー ￥

ー

￥

1

￥

1

￥

ー ￥

ー

(2) Other securities with available fair market value at March 31, 2021 and 2020 are summarized as follows:
Millions of yen
FY2020Acquisition cost

Gross

Carrying valueGrossunrealized gain

unrealized loss

Equity securities whosecarrying value exceeds
their acquisition cost￥

46,261 ￥

114,508 ￥68,246 ￥

－

229

191

－

(38)

46,491 ￥

114,699 ￥68,246 ￥(38)

Equity securities whosecarrying value does notexceed theiracquisition cost
Total

￥

Millions of yen
FY2019Acquisition cost

Gross

Carrying valueGrossunrealized gain

unrealized loss

Equity securities whosecarrying value exceeds
their acquisition cost￥

42,806 ￥78,918 ￥36,112 ￥

－

4,599

4,325

－

(273)

47,405 ￥83,243 ￥36,112 ￥(273)

Equity securities whosecarrying value does notexceed theiracquisition cost
Total

￥

Because no quoted market prices are available and it is extremely difficult to determine the fair value, unlisted
equity securities of ¥3,442 million and ¥3,303 million at March 31, 2021 and 2020, respectively, are not includedin the above tables.
(3) The proceeds from sales of, gross realized gain on and loss on, other securities
for the years ended March 31, 2021 and 2020 are summarized as follows:
Millions of yen
FY2020
Proceeds from sales￥

FY20193,478 ￥

12,790Gross realized gain

2,258

6,875

Gross realized loss

00(4) For the year ended March 31, 2020, the Companies recorded a loss on revaluation of investments in securities
in the amount of ¥2,897 million (investments in affiliates of ¥2,851 million and equity securities classified
as other securities of ¥45 million).

-15-

8. Accumulated Depreciation

Property, plant and equipment, net reflected in the accompanying consolidated balance sheet at March 31, 2021 and 2020 werestated at cost, less accumulated depreciation. Accumulated depreciation at March 31, 2021 and 2020 amounted to ¥594,486 millionand ¥577,906 million, respectively.

9. Investments and Other Assets

Investments in unconsolidated subsidiaries and affiliates included in “Investments in securities” as of March 31, 2021 and 2020
amounted to ¥56,500 million and ¥54,314 million, respectively.

10. Leases

The Companies enter into finance lease transactions (as lessees), and the details of finance lease transactions that do not transfer
ownership are as follows.
(1) Details of leased assets
Leased assets are mainly housing exhibition building and equipment for exhibition housing in the Housing business, factory
production equipment for Urban infrastructure and environmental products business and molds for High performance plastics
business ("Buildings and structures", "Machinery, equipment and vehicles" and "Other").

(2) Depreciation method of leased assets
See Note2 (7)11. Short-Term Debt, Bonds and Long-Term Debt

(1) Short-term debt
The average interest rates of short-term debt outstanding at March 31, 2021 and 2020 were 0.92% and 1.28%, respectively.
There were no commercial papers due within one year as at March 31, 2021.
The average interest rates of commercial papers due within one year of ¥28,000 million as at March 31, 2020 was 0.01%(2) Bonds outstanding at March 31, 2021 and 2020 were as follows:

Millions of yen

FY20200.28% bonds due June 2026
0.20% bonds due September 2029
6 month JPY TIBOR bonds due March 2021

FY2019￥10,00030,000－40,000－￥10,00030,00019
40,019(19)￥

40,000￥40,000Less current portion(3) Long-term debt at March 31, 2021 and 2020 was as follows:

Millions of yen

FY2020
SecuredUnsecuredFY2019￥－74,03474,034(2,826)￥35
25,91725,953(3,584)￥

71,207￥22,368Less current portion

As is customary in Japan, substantially all loans (including short-term loans) from banks are made under general agreements
which provide that, at the request of the respective banks, the Company or the relevant consolidated subsidiaries be required toprovide collateral or guarantors (or additional collateral or guarantors, as appropriate) with respect to such loans, and that all
assets pledged as collateral under such agreements be applicable to all present and future indebtedness to the banks concerned.
The generalagreements further provide that the banks have the right, as the indebtedness matures or becomes due prematurely
by reason of default, to offset deposits at such banks against any indebtedness due to the banks.
The annual maturities of bonds and long-term debt subsequent to March 31, 2021 are summarized below:
Millions of yen
Bonds
Long-term debt
Year ending March 31,
2022
2023
2024
2025
2026
2027 and thereafter

￥

－
－
－
－
－
40,000

￥

2,826
2,267
2,424
20,947
270
45,298(4) Commitment line contract
The Companies have a commitment line contract with a bank to ensure efficient and agile procurement of working capital.
The balance of unexecuted borrowings based on this contract at March 31,2021 was as follow:

Millions of yen
Total amount of commitment line
Borrowing amount
Balance￥￥-16-

100,000
100,000

11. Short-Term Debt, Bonds and Long-Term Debt (continued)(5) At March 31, 2021 and 2020, the following assets were pledged as collateral for notes and accounts payable, trade ,short-term debt and long-term debt:
Millions of yen
FY2020FY2019

￥

1,133
－
682
－
－

￥

1,827
491
1,300
81
2,043

Total

￥

1,816

￥

5,743

Liabilities

FY2020Notes payable, trade
Accounts payable, trade
Short-term debt
Long-term debt

￥

64
26
545
－

￥

62
1,090
980
35

Total

￥

636

￥

2,169

AssetsBuildings and structures
MachineryLand
Intangible assets
Other

Millions of yen
FY2019

12. Lease Obligations

The annual maturities of lease obligations subsequent to March 31, 2021 are summarized below:
Millions of yen
Year ending March 31,
2022
2023
2024
2025
2026
2027 and thereafter

￥

4,625
3,960
2,814
1,959
1,470
4,850

-17-

13. Retirement Benefits

The Company and domestic consolidated subsidiaries have set up funded and unfunded defined benefit plans and defined contribution plans
to provide for employees’ retirement benefits. Under the defined benefit pension plans, which are funded, lump-sum payments or pensions
are provided mainly based on the salary amounts and service periods. Under the lump-sum payment plans, which are unfunded, lumpsum payments are provided mainly based on the merit points acquired by the time of retirement.
Certain overseas consolidated subsidiaries have defined benefit plans and defined contribution plans to provide for employees’ retirement
benefits. Certain consolidated subsidiaries calculated liability for retirement benefits and retirement benefit expenses as for defined benefit
pension plans and lump-sum payment plans, using the simplified method. In addition, certain consolidated subsidiaries participate inmulti-employer pension plans. Contributions made by certain consolidated subsidiaries to the multi-employer pension plans are expensed
when paid in the event that the plan assets attributable to each participant cannot be reasonably determined.
Defined Benefit Plans(1) The changes in defined benefit obligation, excluding plans to which simplified methods are applied, for the years ended March 31,
2021 and 2020 were as follows:
Millions of yen
FY2020FY2019￥150,764
6,764
949(1,257)(7,693)－(2,241)￥150,679
6,835
1,011
413
(7,761)(280)－

Retirement benefit obligations at the end of the year￥
Note: “Others” include principally foreign exchange translation adjustments.

147,807￥

150,764

Retirement benefit obligations at the beginning of the year
Service cost
Interest cost
Actuarial (gain) loss
Retirement benefits paid
Prior service cost
Decrease caused by business withdrawal
Others522(134)(2) The changes in plan assets, excluding plans to which simplified methods are applied, for the years ended March 31, 2021 and 2020
were as follows:
Millions of yen
Plan assets at the beginning of the year
Expected return on plan assets
Actuarial gain (loss)
Contributions by the employer
Retirement benefits paid

FY2020FY2019￥￥Decrease caused by business withdrawal

112,565
2,346
11,4607,015(5,819)(1,676)

－

550

(271)

OthersPlan assets at the end of the year￥

114,911
2,443(5,181)
6,710(6,047)

126,441￥

112,565

Note: “Others” include principally foreign exchange translation adjustments.
(3) The changes in liability for retirement benefits of the plans to which simplified methods are applied for the years ended March 31,
2021 and 2020 were as follows:

Millions of yen
FY2020Liability for retirement benefits at the beginning of the year
Retirement benefit expenses￥

FY2019
8,027
2,453

￥

7,715
3,314

Retirement benefits paid

(914)

(848)

Contributions to the plans(2,099)(2,153)

Increase caused by business withdrawal

558

Liability for retirement benefits at the end of the year

￥

-18-

8,025

－
￥

8,027

13. Retirement Benefits (continued)(4) The balance of retirement benefit obligations and plan assets at fair value as of March 31, 2021 and 2020,
liabilities and assets recognized in the consolidated balance sheet were as follows:
Millions of yen
FY2020Funded retirement benefit obligations
Plan assets at fair value￥

Unfunded retirement benefit obligations
Net liability and asset recognizedin the consolidated balance sheet
Liability for retirement benefits
Asset for retirement benefits
Net liability and asset recognizedin the consolidated balance sheet

FY2019124,983
132,455(7,472)36,862￥29,39029,702
312￥

29,390127,667
117,755
9,911
36,31546,22646,352
125￥

46,226

Note: Plans to which simplified methods are applied are included. Liability for retirement benefits
included retirement benefits for directors and audit and supervisory board members of¥699 million and ¥817 million for the years ended March 31, 2021 and 2020, respectively.
(5) The components of retirement benefit expenses for the years ended March 31, 2021 and 2020
were as follows:
Millions of yen
FY2020FY2019Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain
Amortization of prior service cost
Retirement benefit expenses calculated bysimplified methods

￥

6,764
949
(2,346)
2,846
1
3,011

￥

6,835
1,011
(2,443)
927
(278)
3,314

Retirement benefit expenses￥

11,226￥

9,367(6) The components of retirement benefit adjustments included in other comprehensive income(before tax effect) for the years ended March 31, 2021 and 2020 were as follows:
Millions of yen
FY2020Prior service cost￥

Actuarial (gain) loss
Total

FY2019(1)￥(15,682)￥(15,683)

-19-

(2)
4,594

￥

4,592

13. Retirement Benefits (continued)(7) The components of retirement benefit adjustments in accumulated other comprehensive income (before tax effect) as of March 31,
2021 and 2020 were as follows:
Millions of yen
FY2020
Unrecognized prior service cost￥

Unrecognized actuarial (gain) loss

FY2019－￥(4,256)

Total￥(4,256)

1
11,425￥

11,426(8) Plan assets, by major category, as a percentage of total plan assets (excluding the system under the simplified method)
as of March 31, 2021 and 2020 were as follows:

FY2020FY2019Debt securities
Equity securities
General accounts at life insurance companies
Cash and deposits
Others

36%
25%
19%
7%
11%

42%
18%
19%
7%
13%

Total

100%

100%

The expected rate of return on plan assets is determined considering the allocation of the plan assets expectedcurrently and in the future and the long-term rates of return which are expected currently andin the future from the various components of the plan assets.
(9) The assumptions used in accounting for the above plans were as follows:

FY2020Discount rates
Expected long-term rates of return on plan assets
Expected rate of salary increases

FY20190.2%-0.7%
1.5%-2.0%
2.9%

0.2%-0.7%
1.5%-2.0%
2.9%Multi-employer Pension Plans
The contributions to the multi-employer pension plans, which were expensed when paid, were ¥1,586 million and ¥1,543 million for theyears ended March 31, 2021and 2020, respectively.
(1) The most recent funded status related to multi-employer pension plans as of March 31, 2021 and 2020 was as follows:
Millions of yen
FY2020FY2019Plan assets
Amount of actuarial obligations calculated under pension financing￥

120,416
109,486￥

123,296
112,299

Difference￥

10,930￥10,997(2) Benefit obligations calculated under pension financing of the Companies accounted for approximately 15% of the multi-employer
pension plans as of March 31, 2021 and 2020.
(3) Supplementary explanation
The above information is obtained from the latest available information. (Data for the years ended March 31, 2021 and 2020 is basedon the information as of March 31, 2020 and 2019, respectively.)
The ratio of benefit obligations noted in above (2) is not the same as the actual ratio of the Companies' obligation.
Defined Contribution Plans
The amounts of the required contribution to the defined contribution plans of the Company and certain consolidated subsidiaries were
¥1,708 million and ¥1,631 million for the years ended March 31, 2021 and 2020, respectively.

-20-14. Income Taxes
Income taxes applicable to the Company and its domestic subsidiaries consist of corporation, inhabitants’ and enterprise taxes, which,in the aggregate, resulted in a statutory tax rate of approximately 30.5% for the years ended March 31, 2021 and 2020.
A reconciliation between the statutory tax rate and the effective tax rate for the year ended March 31, 2021 is omitted because thedifference is less than 5% of the statutory tax rate.
The effective tax rate reflected in the accompanying consolidated statement of income for theyear ended March 31, 2020 differed from the above statutory tax rate for the following reasons:
FY201930.5%(3.8)

Statutory tax rate
Income tax credit
Other

0.4
27.1%

Effective tax rate

Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities
for financial reporting purposes and the corresponding amounts reported for income tax purposes. The significant components of theCompanies’ deferred tax assets and liabilities at March 31, 2021 and 2020 are summarized as follows:
Millions of yen
FY2020FY2019Deferred tax assets:
Liability for retirement benefits￥

Unrealized gain
Allowance for bonuses
Loss on impairment of fixed assets and goodwill
Tax loss carryforwards (Note)
Loss on revaluation of investments in securities
Accrued business tax
Asset adjustment account
Other
Total gross deferred tax assets
Valuation allowance for tax loss carryforwards (Note)
Valuation allowance for total future deductible
temporary differences
Total valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized holding gain on securities
Temporary differences arising from consolidation without tax effectAccelerated depreciation of property, plant and equipment
Deferred capital gains on property
Retained profit
Revaluation of investments in affiliates
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

-21-

￥

9,001
6,485
5,030
2,398
1,472
1,067
853
93
12,411
38,816(1,239)￥13,455
6,151
5,294
2,421
1,208
872
942
504
11,13041,981(1,208)(3,170)(2,798)(4,410)34,405(4,006)37,974(20,834)(5,817)(3,490)(3,005)(2,843)(1,921)(1,508)(39,421)(5,015)(10,897)(7,909)(2,280)(2,338)(2,637)(1,921)(1,230)(29,214)8,759￥

14. Income Taxes (continued)

Note: Tax loss carryforwards and their related deferred tax assets by expiry date at March 31, 2021 were as follows:
Millions of yen
Year ending March 31

Tax loss

Valuation

carryforwards*

allowance

2022

￥

525

￥

Deferred tax
assets

455

￥

69

2023

300

218

81

2024

282

200

81

2025

23

23

－

2026

6

6

－

333

333

－

2027 and thereafter
Total

￥

1,472

￥

1,239

￥

232

*The amount is determined by multiplying the corresponding tax loss carryforwards by the statutory tax rate.

15. Net Assets

The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be disbursed as distributions ofcapital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capitalreserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capitalstock account. Such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain
conditions are met.
Retained earnings include the legal reserve provided in accordance with the provisions of the Law. The legal reserve of theCompany included in retained earnings amounted to ¥10,363 million at March 31, 2021 and 2020.
Stock-based compensation plan
In accordance with the Law, certain stock option plan (the 2015 plan) for directors, executive officers and key employeesof the Company and for representative directors, certain directors and key employees of certain subsidiaries and affiliates
were approved at the annual general meetings of shareholders held on June 25, 2015, respectively.
The stock option plans outlined above are summarized as follows:
Number ofstock options granted

The 2015 plan

Exercise price

Exercisable period

1,542

From July 1, 2017 up to andincluding June 30, 2020

1,270,000

Information regarding the Company’s stock option plans is summarized as follows:
The 2015 plan
Number of stock options:
Balance at March 31, 2019825,000

Granted－Cancelled－

Exercised

182,000

Balance at March 31, 2020

643,000

Granted－Cancelled

622,000

Exercised

21,000

Balance at March 31, 2021－

Fair value of stock options
as of the grant date

￥

100

-22-

15. Net Assets (continued)

Common stock and treasury stock
Movements in common stock in issue and treasury stock for the years ended March 31, 2021 and 2020 are summarized as follows:
Number of shares
FY2020April 1, 2020
Common stock
Treasury stock

484,507,285
27,712,523

Increase

Decrease

8,003,741

8,000,000
8,142,529

March 31, 2021
476,507,285
27,573,735

Note1: The number of treasury stock as of March 31, 2021 included treasury stock of 795,200 shares held by an Employee
stock ownership plan (“ESOP”) trust and an Executive compensation board incentive plan (“BIP”) trust.
Note2: Breakdown of the decrease in the number of common stock
Decrease in cancellation of treasury stock
8,000,000
Note3: Breakdown of the increase in the number of treasury stock
Increase in acquisition of treasury stock by resolution of the Board of Directors
8,000,000
Increase in purchase of shares less than one unit
1,643
Increase in changes in equity of affiliated companies accounted for by the equity method
2,098
Note4: Breakdown of the decrease in the number of treasury stock
Decrease in cancellation of treasury stock
8,000,000
Decrease in exercise of stock options
21,000Share delivery by an Employee stock ownership
121,500
plan (“ESOP”) trust and an Executive compensation board incentive plan (“BIP”) trust
Decrease in purchase of shares less than one unit
29

Number of shares
FY2019April 1, 2019
Common stock
Treasury stock

492,507,285
28,256,059

Increase
8,571,343

Decrease
8,000,000
9,114,879

March 31, 2020
484,507,285
27,712,523

Note1: The number of treasury stock as of March 31, 2020 included treasury stock of 916,700 shares held by an Employee
stock ownership plan (“ESOP”) trust and an Executive compensation board incentive plan (“BIP”) trust.
Note2: Breakdown of the decrease in the number of common stock
Decrease in cancellation of treasury stock
8,000,000
Note3: Breakdown of the increase in the number of treasury stock
Increase in acquisition of treasury stock by resolution of the Board of Directors
8,000,000
Increase in purchase of shares less than one unit
1,343
Purchase based on an Employee stock ownership plan (“ESOP”) trust and
570,000
an Executive compensation board incentive plan (“BIP”) trust
Note4: Breakdown of the decrease in the number of treasury stock
Decrease in cancellation of treasury stock
8,000,000
Decrease in exercise of stock options
372,000
Disposal of treasury stock by third-party allotment to an Employee stock ownership
570,000
plan (“ESOP”) trust and an Executive compensation board incentive plan (“BIP”) trust
Decrease in changes in equity of affiliated companies accounted for by the equity method
3,379
Share delivery based on an Employee stock ownership plan (“ESOP”) trust and
169,500
an Executive compensation board incentive plan (“BIP”) trust-23-16. Land Revaluation

Sekisui Plastics Co., Ltd., which has been accounted for by the equity method, revalued its land held for business
use in accordance with the “Land Revaluation Law” and the “Amended Land Revaluation Law.” As a result of thisrevaluation by Sekisui Plastics Co., Ltd., the Companies recognized the portion attributable to the Companies' interest in the unrealized gain on land revaluation and this has been included in accumulated other comprehensive
income as unrealized gain on land revaluation of ¥323 million and ¥321 million in the accompanying consolidated balance sheets at March 31, 2021 and 2020, respectively.

17. Contingent Liabilities

Contingent liabilities at March 31, 2021 and 2020 were as follows:
FY2020
Guaranteed obligations
Housing loans of customers and employees
Other guaranteed obligations￥

54,8949,004

FY2020Notes receivable, trade with recourse
Notes receivable, trade endorsed

Millions of yen￥￥

Millions of yen

12

FY201934,5429,310

FY2019￥39

18. Selling, General and Administrative Expenses

Selling, general and administrative expenses for the years ended March 31, 2021 and 2020 are as follows:
Millions of yen
FY2020FY2019

Freight, packing and storage expenses￥
25,868￥
Salaries, allowances and bonuses
90,590
Provision for bonuses to employees
10,924Retirement benefit expenses
8,813
Depreciation and amortization
14,673
Provision of allowance for doubtful accounts
162
Research and development costs
35,110Research and development costs are general and administrative expenses only.

27,38091,864
11,713
7,385
13,9302
37,146

19. Inspection and Maintenance Expenses for External Walls

Inspection and maintenance expenses for external walls include inspection costs for specific exterior walls of houses
sold by the Companies in the past, and repair costs for those that are expected to be repaired due to defects.

20. Gain on Sales of Fixed Assets

Gain on sales of fixed assets for the years ended March 31, 2021 was as follow:

Millions of yen
Land

￥

3,077

￥

3,128

Others

51

Total

-24-

21. Loss on Impairment of Fixed Assets and Goodwill

The Companies group their fixed assets and goodwill by cash-generating units (except for idle property which is groupedindividually) and these are defined as the smallest identifiable groups of assets generating cash inflows which are largely
independent of the cash inflows from other assets or groups of assets.
For the year ended March 31, 2021, the Companies have written down the amount of certain intangible assets recorded
upon acquiring the mobility field business in the United States, to the recoverable amount as the income initially estimated in the business plan at the time of acquisition was no longer expected. As a result, the Companies recorded loss on
impairment of intangible assets under extraordinary loss in the amount of \1,693 million.
The recoverable amount is calculated based on fair value less costs of disposal, which was calculated by discounting future cash flows at a rate of 12.5%.
For the year ended March 31, 2020, the Companies have written down goodwill recorded upon acquiring the nursing carebusiness, to the recoverable amount as the income initially estimated in the business plan at the time of acquisition was
no longer expected. As a result, the Companies recorded loss on impairment of goodwill under extraordinary loss in theamount of ¥1,905 million. The recoverable value was measured at value in use and the Companies recorded the loss on
impairment in the full amount of the balance of goodwill since there was considerable uncertainty about estimated amountof future cash flows.
Furthermore, the Companies have written down the amount of certain buildings and structures, for which there was achange in holding purpose from welfare facilities to assets for business use has been decided, to the recoverable amount.
As a result, the Companies recorded loss on impairment of fixed assets under extraordinary loss in the amount of ¥1,736
million. The recoverable amount is calculated based on value in use, which was calculated by discounting future cash flows
at a rate of 5%.

22. Loss on Sales or Disposal of Property, Plant and Equipment

Loss on sales or disposal of property, plant and equipment for the years ended March 31, 2021 and 2020 were as follows:
Millions of yen
FY2020Machinery, equipment and vehicles￥

Buildings and structures

597

OthersTotal

FY2019
840 ￥

￥

-25-

984
1,160

262

568

1,700 ￥

2,713

23. Other Comprehensive Income
The reclassification adjustments and tax effects for components of other comprehensive income
for the years ended March 31, 2021 and 2020 are as follows:
Millions of yen
FY2020FY2019￥￥Unrealized holding gain (loss) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses
realized in net income

33,857(6,257)(1,530)(6,713)

Before tax effects

32,326(12,970)

Tax effects(9,876)

3,521

22,450(9,448)

(32)

31

(32)

31

15,976(12,077)

Unrealized holding gain (loss) on securities
Deferred (loss) gain on hedges:
Amount arising during the year
Deferred (loss) gain on hedges
Translation adjustments:
Amount arising during the year
Reclassification adjustment

321-

16,297(12,077)

12,956(5,323)

2,727

731

Before tax effects

15,683(4,592)

Tax effects(4,615)

1,294

11,068(3,297)

746

(117)

148

62

894

(54)

Translation adjustments
Retirement benefit adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses
realized in net income

Retirement benefit adjustments
Comprehensive income (loss) of affiliates accounted forby the equity method attributable to the Company:
Amount arising during the year
Reclassification adjustments for gains and losses
realized in net income
Comprehensive income (loss) of affiliates accounted forby the equity method attributable to the Company
Total other comprehensive income (loss)

￥

-26-

50,679￥(24,847)

24. Supplemental Information on Statement of Cash Flows

Reconciliations between cash and cash equivalents in the accompanying consolidated statement of cash flows and cash and deposits in theaccompanying consolidated balance sheet at March 31, 2021 and 2020 are presented as follows:
Millions of yen
FY2020￥Cash and deposits
Time deposits with maturities in excess of three months

FY201987,454￥76,819(10,805)￥

Cash and cash equivalents

76,649(2,097)￥74,721

Assets and liabilities related to finance lease transactions newly recognized were ¥5,835 million and ¥11,172 million during the years ended
March 31, 2021 and 2020, respectively.

25. Related Party Transactions

There were no related party transactions to be noted for the year ended March 31, 2021.
Principal transactions between the Company’s consolidated subsidiaries and their related parties for the years ended March 31, 2020 are
summarized as follows:
FY2019Millions of yen
Name

Description/
Principal business

Relative ofRelative ofHitoshiExecutive Officer

Paid-in capital

Transaction(Millions of yen)Transaction

Account

Endingamountnamebalance

Sales of- residence

Kobayashi

￥

33

-

-

￥

49

-

-

(Notes 1 and 2)

Relative ofRelative of

Akinori

Executive Officer

Sales of- residence

Kawase(Notes 1 and 2)

Musashi

Majority of voting

Processing

Accounts payable,

Kougyousha

rights of this companyof metaltradeCo., Ltd.

are owned by a￥

10 parts

director’s relative/￥

19 Accrued(Notes 1 and 2)

expenses

￥

0

￥

1

Manufacturing
FutoshiKamiwaki
Kunio
Ishizuka
Toshiyuki
Kamiyoshi

Director-

Outside Director-

Director-

Exercise of stock options(Note 3)
Exercise of stock options(Note 3)
Exercise of stock options(Note 3 and 4)

￥

11

-

-

￥

11

-

-

￥

10

-

-

Notes: 1. Above transaction amounts do not include consumption taxes but ending balances are inclusive of consumption taxes.
2. Conditions of transaction and policies for deciding conditions of transaction were determined based on the same terms as third party transactions.
3. Stock options that were granted based on the resolution at the Board of Directors meeting held on June 26, 2014
and exercised for the year ended March 31, 2020 are listed.
The amount listed in the “transaction amount” section is calculated by multiplying the number of shares granted upon exercise of stock options
for the year ended March 31, 2020 by the amount of payment upon exercise.
4. Stock options that were granted based on the resolution at the Board of Directors meeting held on June 25, 2015
and exercised for the year ended March 31, 2020 are listed.
The amount listed in the “transaction amount” section is calculated by multiplying the number of shares granted upon exercise of stock options
for the year ended March 31, 2020 by the amount of payment upon exercise.

-27-26. Financial Instruments
Overview(1) Policy for financial instruments
The Companies raise funds by bank borrowings and bonds, including short-term bonds. The Companies manage funds only throughshort-term deposits and others. The Companies use derivatives for the purposes of managing foreign currency exchange risk related
to notes and accounts receivable, trade and notes and accounts payable, trade and avoiding the risk of fluctuations of interest rates
related to debt. The Companies do not enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Notes and accounts receivable, trade are exposed to credit risk in relation to customers. In addition, the Companies are exposed toforeign currency exchange risk arising from receivables denominated in foreign currencies resulting from trade with overseas
customers.
Equity securities—the Companies hold equity securities, which are mainly issued by companies who have business relationships with
the Companies, and these securities are exposed to the risk of fluctuation in market prices.
Notes and accounts payable, trade and electronically recorded obligations mostly have payment due dates within one year. A portionof trade payables, which is denominated in foreign currencies, is exposed to foreign currency exchange risk.
Short-term debt of bank loans and bonds is raised mainly in connection with business activities. Long-term debt and bonds are taken out
principally for the purpose of acquiring the shares of subsidiaries. Long-term debt and bonds have maturity dates within 9 years, at thelongest, subsequent to March 31, 2021. Debt with variable interest rates is exposed to interest rate fluctuation risk.

(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies for managing credit risk of the Companies, the Companies monitor credit worthiness of
their main customers periodically, and monitor due dates and outstanding balances by customer.
To minimize the credit risk when entering into derivative transactions, counterparties are limited to financial institutions withhigh ratings.
(b) Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates, interest rates and others)
For equity securities included in investments in securities, the fair values of these securities are periodically reviewed andreported to the Board of Directors.
In conducting and managing derivative transactions, the accounting department confirms the effectiveness of hedging andobtains approval from the responsible person, depending on the notional contract value, based on the internal policies and formal
regulations on market risk for financial instruments.
(c) Monitoring of liquidity risk for financing (the risk that the Companies may not be able to meet its obligations on the scheduled
due dates)
The Companies manage liquidity risk mainly through the monthly cash-flow plans, which are prepared by each company.
(4) Supplementary explanation of the estimated fair value of financial instruments
Regarding the amount recorded on consolidated balance sheets related to the following derivative transactions, the amounts themselves
do not necessarily indicate the market risk relating to derivative transactions.

-28-26. Financial Instruments (continued)
Estimated Fair Value of Financial Instruments

The carrying value of the financial instruments on the consolidated balance sheet, fair value and the difference at March 31, 2021 and2020 are shown in the following table. The table does not include financial instruments for which it is extremely difficult to determine
the fair value. (Please refer to (2) below).
Estimated fair value information at March 31, 2021:
Millions of yen
Carrying value
Cash and deposits￥

Notes and accounts receivable, trade

Estimated fair value

87,454￥

170,631

Marketable securities and investments in securities

Notes and accounts payable, tradeand electronically recorded obligations

Difference￥

170,631

152,079

Total assets

87,454－－

144,673(7,405)￥410,165￥

402,759￥(7,405)￥

117,596￥

117,596￥－

Short-term debt

4,451

4,451

－

Long-term debt, including current portion

74,03473,959(75)

Bonds, including current portion

40,000Total liabilities

39,704(296)￥

236,082￥

235,711￥(371)

Derivatives for which hedge accounting is applied

￥

(33)

￥

(33)

￥

－

Total derivative transactions

￥

(33)

￥

(33)

￥

－

Derivative transactions (*):

-29-

26. Financial Instruments (continued)

Estimated Fair Value of Financial Instruments (continued)
Estimated fair value information at March 31, 2020:

Millions of yen
Carrying value

Cash and deposits
Notes and accounts receivable, trade￥

Notes and accounts payable, tradeand electronically recorded obligations
Short-term debt

Difference

76,819 ￥76,819 ￥174,124
118,184

174,124
110,540(7,643)￥369,128 ￥361,485 ￥(7,643)￥

131,777 ￥

131,777 ￥-Marketable securities and investments in securities
Total assets

Estimated fair value

-

4,862

4,862

-

28,00028,000-25,95325,965

12

40,01939,531(488)￥

230,611 ￥

230,135 ￥(475)

Derivatives for which hedge accounting is applied￥(16) ￥(16) ￥-

Total derivative transactions￥(16) ￥(16) ￥-

Commercial paper
Long-term debt, including current portion
Bonds, including current portion
Total liabilities
Derivative transactions (*):(*): Assets and liabilities arising from derivative transactions are shown at net value with the amount in parentheses representing net
liability position.
(1)

Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Cash and deposits and notes and accounts receivable, trade
Since these items are settled in a short period, their carrying value approximates fair value.
Marketable securities and investments in securities
The fair value of equity securities is based on quoted market prices. The fair value of debt securities is based on either quoted market
prices or prices provided by the financial institutions making markets in these securities. For information on securities classified byholding purpose, please refer to Note 6 “Marketable Securities and Investments in Securities.”
Notes and accounts payable, trade, electronically recorded obligations, short-term debt and commercial paper
Since these items are settled in a short period, their carrying value approximates fair value.
Long-term debt, including current portion
The fair value of long-term debt is based on the present value of the total amount including principal and interest, discounted by the
expected interest rate to be applied if similar new loans with a similar remaining period were entered into.
Bonds, including current portion
The fair value of bonds issued by the Companies is the quoted market price.
Derivative transactions
Please refer to Note 27 “Derivatives.”-30-

26. Financial Instruments (continued)(2) Financial instruments for which it is extremely difficult to determine the fair value were as follows:
Millions of yen
FY2020Unlisted equity securities￥

FY201922,577￥22,679Because no quoted market prices are available and it is extremely difficult to determine the fair value, the above financial instruments are
not included in the preceding table.
(3) Redemption schedule for cash and deposits, notes and accounts receivable, trade and marketable securities and investments insecurities with maturities at March 31, 2021 and 2020:
Maturity analysis at March 31, 2021:
Millions of yen

Cash and deposits

Due in One

Due after One

Due after Five

Due after

Year or Less

Year throughYears throughTen Years

Five Years

Ten Years￥

Notes and accounts receivable, trade87,454￥-

170,631

￥

-

-

￥

-

-

-

Marketable securities and investments in securities
Held-to-maturity debt

securities

0

Total

￥

258,086

14
￥

-

14

￥

-

￥

-

Millions of yen

Maturity analysis at March 31, 2020:

Cash and deposits

Due in One

Due after One

Due after Five

Due after

Year or Less

Year throughYears throughTen Years

Five Years

Ten Years￥

Notes and accounts receivable, trade

76,819￥-174,124

￥

-

-

￥

-

-

Marketable securities and investments in securities
Held-to-maturity debt

securities

0

Total

￥

250,945

0
￥

0

￥

-

￥

(4) The redemption schedule for long-term debt and bonds is disclosed in Note 11 “Short-Term Debt, Bonds and Long-Term Debt.”

-31-

-

27. Derivatives

The Company and certain consolidated subsidiaries enter into currency swap contracts, forward foreign exchange
contracts and interest-rate swap contracts in order to manage certain risks arising from adverse fluctuation in foreign
currency exchange rates and interest rates. The Company and certain consolidated subsidiaries are also exposed to
the risk of credit loss in the event of nonperformance by the counterparties to these currency swap contracts,
forward foreign exchange contracts and interest-rate swap contracts; however, they do not anticipate nonperformanceby any of the counterparties, all of whom are financial institutions with high credit ratings.
Summarized below are the notional amounts and the estimated fair value of the derivatives positions outstandingat March 31, 2021 and 2020 :(1) Derivatives for which hedge accounting is not applied
There were no derivatives for which hedge accounting is not applied at March 31, 2021 and 2020.
(2) Derivatives for which hedge accounting is applied(a) Currency-related transactions
Millions of yen
FY2020Foreign currency swaps:
Receive fixed – U.S. dollars/
pay fixed – Indian rupees

HedgedNotional

Fair

item

amountvalue

Long-term
debt

Total

￥

850

￥

(33)

￥

850

￥

(33)

Millions of yen
FY2019HedgedNotional

Fair

item

amountvalue

Foreign currency swaps:
Receive fixed – U.S. dollars/Long-term

pay fixed – Indian rupees

debt

Total

￥

951

￥

(16)

￥

951

￥

(16)

The notional amount of foreign currency swaps of receive fixed – U.S. dollars / pay fixed – Indian rupees includes
a portion over 1 year of ¥329 million and ¥951 million at March 31, 2021 and 2020, respectively.

-32-28. Amounts per ShareYen
FY2020FY2019Net income attributable to owners of the parent:
Basic
Diluted

￥

91.92

￥

－

Cash dividends
Net assets

128.80128.77

47.00

46.00

1,485.89

1,333.76

Basic net income attributable to owners of the parent per share has been computed based on the net income attributable to owners of theparent available for distribution to shareholders of common stock and the weighted-average number of shares of common stock outstanding
during the year. Diluted net income attributable to owners of the parent per share has been computed based on the net income attributableto owners of the parent available for distribution to the shareholders of common stock and the weighted-average number of shares of common
stock outstanding during the year after giving effect to the dilutive potential of the shares of common stock issuable upon the exercise ofstock options issued by the Company. The aggregate amounts of cash dividends include cash dividends of ¥19 million and ¥21 million
for the shares of the Company held by the BIP Trust and ESOP Trust for the years ended March 31, 2021 and 2020, respectively. The
amounts per share of net assets have been computed based on the number of shares of common stock outstanding at year end.
Millions of yen
Net income attributable to owners of the parent

FY2020FY2019￥￥41,544

59,181Thousands of shares
FY2020Weighted-average number of shares of common
stock outstanding
Increase in shares of common stock resulting from

FY2019451,961

459,494－

92

the exercise of stock acquisition rights

The financial data used in the computation of net assets per share as of March 31, 2021 and 2020 is summarized as follows:
Millions of yen
Total net assets
Deduction from total net assets:

FY2020FY2019￥￥Stock acquisition rights
Non-controlling interests
Total net assets attributable to commonshareholders￥

694,392

634,219(－)(64)(27,325)(24,901)(27,325)(24,965)

667,066￥

609,253

Thousands of shares
FY2020
Number of shares of common stock used in the448,933

FY2019456,794

calculation of net assets per share
For the year ended March 31, 2021, the Companies completed the provisional accounting treatment related to abusiness combination. As a result, figures for the year ended March 31, 2020 reflect the revision of the initial allocated amountsof the acquisition price as the Companies finalized the provisional accounting treatment for the business combination.
Net income per share (diluted) for the year ended March 31, 2021 is not disclosed because there are no potentiallydilutive common shares.

-33-28. Amounts per Share (continued)

The Company’s own shares held in the ESOP trust and the BIP trust recorded as treasury stock under shareholders’ equity are included intreasury stock to be deducted from the weighted-average number of shares of common stock during the year in computing net income
attributable to owners of the parent per share and from the number of shares of common stock at year-end in computing net assets per share.
The numbers of shares of treasury stock deducted from the weighted-average number of shares in computing net income attributable toowners of the parent per share were 835 thousand and 581 thousand shares for the years ended March 31, 2021 and 2020, respectively, andthe numbers of shares of treasury stock deducted from the number of shares outstanding at year-end in computing net assets per share were
795 thousand and 916 thousand shares as of March 31, 2021 and 2020, respectively.
Cash dividends per share represent the cash dividends proposed by the Board of Directors as applicable to the respective fiscal years together
with the interim cash dividends paid.

29. Segment Information(1) Overview of the Reportable segments
The reportable segments of the Companies are determined on the basis that separate financial information of such segments is available
and examined periodically by the Board of Directors of the Company to make decisions regarding the allocation of management resources
and assess the business performances of such segments. The Companies have divided the business operations into the four segments of
Housing, Urban Infrastructure and Environmental Products (UIEP), High Performance Plastics (HPP), and Medical based on manufacturingmethods, products, sales channels, and other business similarities. Each business segment formulates comprehensive strategies anddevelops business activities for its products in Japan and overseas. The Housing business comprises manufacturing, construction, sales,
refurbishing, and other operations related to unit housing, real estate, and residential service business. The UIEP business comprises
manufacturing, sales, and construction operations related to PVC pipes and joints, polyethylene pipes and joints, pipe and drain renewal
materials and construction methods, reinforced plastic pipe, construction materials, and Fiber-reinforced foamed urethane. The HPPbusiness comprises manufacturing and sales of interlayer films for laminated glass, polyolefin foam, tape, LCD fine particles andphotosensitive materials, functional resin for infrastructure, diagnostic drugs and other products. The Medical business comprises
manufacturing and sales of diagnostic reagents, analyzers, pharmaceutical ingredients and intermediates.
(2) Calculation methods used for sales, income, assets and the other items on each reportable segment
The accounting methods for the reportable segments are presented principally in accordance with the same accounting policies of theaccompanying consolidated financial statements defined in Note 2 “Summary of Significant Accounting Policies.” The amounts ofsegment income (loss) are calculated based on the same method as the calculation of operating income in the consolidated statementof income for the years ended March 31, 2021 and 2020. The figures of intersegment sales and transfers are presented based on thecurrent market prices at the time of these transactions.

-34-29. Segment Information (continued)(3) Information as to sales, income, assets and other items on each reportable segment
Reportable segment information of the Companies for the years ended March 31, 2021 and 2020 is summarized as follows:
Millions of yen
FY2020
Reportable segments
Urban
infrastructure

High

and

performanceenvironmental

plastics

Housing

Medical

Total

Other

Consolidated(*1)

products
Sales:
Sales to third parties￥

485,124￥

192,069￥

303,559￥

72,341￥

1,053,095

￥

3,465

￥

1,056,560

Intersegment sales ortransfers

140

12,5166,307

0

18,966

146

19,112

Net sales

485,265

204,586

309,867

72,342

1,072,061

3,611

1,075,672

Segment
income (loss)￥

30,546￥

11,251￥

28,935

￥

7,010

￥

77,744￥(8,746) ￥Segment assets
Other items:
Depreciation andamortization￥

324,795￥

210,361￥

422,924￥

123,656￥

1,081,738￥

28,410Investments in affiliates
accounted for by theequity method
Increase in property,
plant and equipment,
and intangible
assets

9,688

8,667

10,304

13,761

19,347-

14,076

4,079

2,872

17,184

41,783
-

6,519

2,199

13,17751,543￥43,982-

4,634(*1): Other represents segments other than the reportable segments, which includes provision of services and manufacturing and salesof film-type lithium-ion batteries and products not included in the Companies' reportable segments.

-35-

68,997
1,110,149

13,17756,177

29. Segment Information (continued)(3) Information as to sales, income, assets and other items on each reportable segment (continued)
Millions of yen
FY2019
Reportable segments
Urban
infrastructure

High

and

performanceenvironmental

plastics

Housing

Medical

Total

Other

Consolidated(*1)

products
Sales:
Sales to third parties￥

512,836￥

223,707￥

315,294￥

72,587￥

1,124,425

￥

4,828

￥

1,129,254

Intersegment sales ortransfers

101

13,6727,126

020,901

141

21,043

Net sales

512,937

237,380

322,42172,5881,145,327

4,970

1,150,297

Segment
income (loss)￥

37,792￥

15,480￥37,374

￥

9,204

￥

99,852￥(9,721) ￥Segment assets￥

331,761￥

216,898￥

376,483￥

120,420￥

1,043,563￥

21,820

Other items:
Depreciation andamortization￥

90,1301,067,383

9,447

7,823

17,742

3,709

38,723

2,018

40,741

9,985

-

2,750

-

12,735-

12,735

14,955

15,34029,425

7,669

67,3904,909

72,300Investments in affiliates
accounted for by theequity method
Increase in property,
plant and equipment,
and intangible
assets(*1): Other represents segments other than the reportable segments, which includes provision of services and manufacturing and salesof film-type lithium-ion batteries and products not included in the Companies' reportable segments.
(4) Information on the difference between the total amount of the reportable segments in the above tables and the corresponding amountreported in the consolidated financial statements
Net sales and income for the years ended March 31, 2021 and 2020
Millions of yen
FY2020FY2019Net sales:
Total of reportable segments￥

Other net sales
Eliminations
Net sales￥-36-

1,072,061￥

1,145,327

3,611

4,970

(19,112)(21,043)

1,056,560￥

1,129,254

29. Segment Information (continued)(4) Information on the difference between the total amount of the reportable segments in the above tables and the corresponding amountreported in the consolidated financial statements (continued)
Millions of yen
FY2020FY2019

Income:Total of reportable segments￥

77,744￥99,852Other loss

(8,746)

Eliminations

447

637

(2,144)(2,793)

Corporate expenses (*1)
￥

Operating income

67,300(9,721)

87,974￥(*1): Corporate expenses are mainly general administrative expenses not attributable to each reportable segment.
Assets at March 31, 2021 and 2020
Millions of yen
FY2020FY2019Assets:Total of reportable segments￥

Assets classified as “other”
Eliminations

1,081,738￥

21,820(316,651)(306,643)

356,645

Corporate assets (*1)
￥

Total assets

1,045,563

28,4101,150,143

345,040￥

1,105,781(*1): Corporate assets are assets not attributable to the reportable segments. The main items were cash and deposits, long-term
investments (investments in securities), assets related to administrative operations and deferred tax assets, etc. of the Company.
Other items for the years ended March 31, 2021 and 2020
Millions of yen
FY2020
Reporting

Adjustments

OthersSegments(*1)

Consolidated

Other items:
Depreciation and amortization
Investments in affiliates accounted￥

for by the equity method
Increase in property, plant andequipment, and intangible assets

41,783

￥

2,199

￥

943

￥

44,926

13,177-35,23948,41751,543

4,634

1,867

58,044

Millions of yen
FY2019
Reporting

Adjustments

OthersSegments(*1)

Consolidated

Other items:
Depreciation and amortization
Investments in affiliates accounted
for by the equity method
Increase in property, plant andequipment, and intangible assets￥

38,723

￥

2,018

￥

1,277

￥

42,01812,735-32,81345,54967,390

4,909

2,081

74,381(*1): Adjustment represents the amounts of investments in affiliates accounted for by the equity method, which are not attributable to
the reportable segments.

-37-29. Segment Information (continued)(5)

Related information(a)

Sales information by geographic area
Overseas net sales by geographical areas for the years ended March 31, 2021 and 2020 is as follows:
Millions of yen
FY2020Japan
Net sales￥

790,537 ￥America
76,359 ￥EuropeAsia

57,673 ￥119,359 ￥Other
12,630 ￥Total
1,056,560

Millions of yen
FY2019Japan
Net sales(b)￥854,600 ￥America
81,312 ￥EuropeAsia

57,508 ￥

121,161 ￥Other
14,672 ￥Total
1,129,254

Information of property, plant and equipment, net by geographic area
Information of property, plant and equipment, net by geographical areas as of March 31, 2021 and 2020 is as follows:
Millions of yen
FY2020Japan
Property, plant and equipment, net￥

238,128 ￥America
31,347 ￥EuropeAsia

42,036 ￥33,707 ￥Other
6,176 ￥

Total
351,397

Millions of yen
FY2019Japan
Property, plant and equipment, net￥

232,322 ￥America
30,184 ￥-38-

Europe35,576 ￥Asia
33,727 ￥Other
5,439 ￥

Total
337,250

29. Segment Information (continued)(6) Information of loss on impairment of fixed assets and goodwill
Information on loss on impairment of fixed assets and goodwill for the years ended March 31, 2021 and 2020is as follows:
Millions of yen
FY2020Elimination

Urban
infrastructure

High

and

performanceenvironmental

plastics

HousingorMedicalOther

unallocable

Total

accounts

products

Loss on impairment of fixed
assets and goodwill

￥

-

￥

373

￥

2,001

Urban
and
environmental
products

Loss on impairment of fixed
assets and goodwill

￥

1,905

￥

54

￥

-

Millions of yen
FY2019infrastructure

Housing

￥

474

High
performanceplastics
￥

327

￥

-

￥

-

￥

Eliminationorunallocableaccounts

Other

Medical

￥

-

￥

2,428

Total

1,736

￥

4,443

Note: The amount of “Elimination or unallocable accounts” denotes loss on impairment of the corporate assets which do not belong to any
reportable segment.
(7) Amortization and balance of goodwill
Information on amortization of goodwill by each segment and its remaining balance for the years ended March 31, 2021 and 2020 issummarized as follows:
Millions of yen
FY2020Elimination

Urban
infrastructure

High

and

performanceenvironmental

plastics

Housing

products

Amortization of goodwill￥

Balance at March 31, 2021

－ ￥

－

－

－

￥

2,801

or
Medical

Other

Total

unallocableaccounts￥

44,275

1,588

￥

29

6,634

￥

4

－

￥

－

4,419
50,914

Millions of yen
FY2019Eliminationorunallocableaccounts

Urban
infrastructure

Housingandenvironmental
products

Amortization of goodwill
Balance at March 31, 2020

￥

127 ￥

53

－

－

High
performanceplastics￥

1,235
47,959

-39-

Other

Medical

￥

1,792
8,085

￥

29
34

￥

Total

－
－

￥

3,238
56,078

30. Business Combinations(Finalization of a Provisional Accounting Treatment Related to Business Combinations)
For the year ended March 31 2020, the Companies applied provisional accounting treatment related to a business combination with AIM Aerospace Corporation (currently, Sekisui Aerospace Corporation) in which its shares were acquired on
November 21, 2019, and the provisional accounting treatment was finalized during the year ended March 31, 2021.
In conjunction with the finalization of the provisional accounting treatment, comparative information included in the consolidated financialstatements for the year ended March 31, 2021 reflects a significant review of the initial allocation of acquisition cost, and the Companies allocated ¥4,537 million to other intangible assets and ¥3,553 million to deferred tax liabilities.
As a result, the \38,392 million of goodwill calculated on a provisional basis decreased by \984 million to \37,408 million.
Furthermore, the assets acquired on the date of the business combination included ¥6,535 million of goodwill, and ¥10,582
million of other intangible assets. As a result of the finalization of the provisional accounting treatment, the whole amountof goodwill and other intangible assets arising from this business combination amounted to ¥43,943 millionand ¥15,119 million, respectively.

-40-

31. Subsequent Events(Year-end cash dividends)
The following distribution of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial
statements for the year ended March 31, 2021, was proposed by the Board of Directors at the meeting held on May 17, 2021.
The distribution proposed was approved by the shareholders at the meeting held on June 23, 2021.
Millions of yen
Year-end cash dividends (¥24.00 per share)￥

10,801

The aggregate amount of cash dividends includes cash dividends of ¥19 million for the shares of the Company held by the BIP Trust and
ESOP Trust.
(Acquisition of treasury stock)
For the purpose of implementing flexible capital policy and as a way to provide returns to shareholders, the Company resolved at the Boardof Directors’ meeting held on April 27, 2021 to acquire 5,000,000 shares of treasury stock for a maximum total amount of ¥10,000 million
through the market including advance notice type market buying system of ToSTNeT during the period from April 28, 2021 through March
31, 2022.
As of June 23, 2021, the status of the acquisition of treasury stock is as follows:
Type of shares acquired: Common stock
Total number of shares acquired: 3,000,000 shares
Total acquisition cost: ¥5,643 million
Acquisition date: May 14, 2021
Method of acquisition: Market purchases(Retirement of treasury stock)
For the purpose of strengthening measures to enhance capital efficiency and as a way to provide returns to shareholders, the Company
resolved at the Board of Directors’ meeting held on April 27, 2021 to retire 5,000,000 shares of treasury stock and executed the retirement
on May 25, 2021. The total number of shares issued after the retirement of treasury stock was 471,507,285 shares.

-41-Independent Auditor’s Report

The Board of Directors
Sekisui Chemical Co., Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Sekisui ChemicalCo., Ltd. and its consolidated subsidiaries (the Group), which comprise the consolidated balance
sheet as at March 31, 2021, and the consolidated statements of income, comprehensive
income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2021, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance 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
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.
Recognition and measurement of identifiable assets and liabilities in business combinations
Description of Key Audit Matter

Auditor’s Response

On November 21, 2019, the Company
acquired all shares of AIM Aerospace
Corporation (currently, Sekisui Aerospace
Corporation) Group, which then became aconsolidated subsidiary from the year ended
March 31, 2020. In addition, the Company
completed the allocation of acquisition costs inthe year ended March 31, 2021.
The

In order to assess the measurement ofcustomer-related assets related to major
customers, we have mainly performed thefollowing audit procedures.
・ We examined the consistency of the future
cash flows with the business plan at thetime of acquisition.

consideration paid for the acquisition of shares ・ In order to understand the transactionwas ¥37,916 million, and the Company used
related to the share acquisition, we
external valuation specialists to recognize andinspected the relevant contracts, mademeasure identifiable assets acquired andinquiries to management, and inspectedliabilities assumed. As a result, as describedmaterials reported to the Board of
in Note 30 “Business Combinations” to the
Directors.
consolidated financial statements, goodwill ・ In addition to our evaluation of theand other intangible assets of ¥43,943 million
competence, capabilities and objectivity ofand ¥15,119 million, respectively, werethe external valuation specialists used byrecorded.
the management, we made inquiries to the
The intangible assets identified represent
external valuation specialists in order tocustomer-related assets associated with major
understand the valuation model adopted
customers for which fair value at the date offor measuring the fair value of thethe business combination is measured as thecustomer-related assets.
present value of future cash flows to be ・ We made inquiries with management toderived from the assets, and this calculation
understand the prospects for market
process involves various estimates andrecovery in the aircraft industry and related
assumptions. Specifically, the prospects forcustomer orders assumed in the future
market recovery in the aircraft industry, thebusiness plan, and examined theprospects for customer orders, and theconsistency of these assumptions with past
discount rate are taken into account as
market trends in the aircraft industry andimportant factors in estimating future cashorders received using available external
flows in measuring customer-related assets.
data.
As the measurement of customer-related ・ We engaged our network firm valuation
assets in business combinations involves
specialists to review the valuation models
management’s
assumptions
andused to measure the fair value of thejudgments, we determined this to be a key
customer-related assets and compared theaudit matter.
discount rate with our own estimates using
available external data.

Valuation of intangible assets of Sekisui Aerospace Corporation Group
Description of Key Audit Matter

Auditor’s Response

As described in Note 3 “Significant
Accounting Estimates” to the consolidated
financial statements, the Company recorded
intangible assets (customer-related assets) in
the amount of ¥12,564 million in the
consolidated balance sheet that wererecognizedwhenSekisui
Aerospace
Corporation Group, which belongs to the High
Performance Plastics segment, was acquired.
Impairment loss of ¥1,693 million on suchintangible assets was recognized due to a

In order to assess the impairment loss oncustomer-related assets related to major
customers recorded by the Company for theyear ended March 31, 2021, we mainly
performed the following audit procedures.
・ We examined the consistency of future
cash flows with business plan at the timeof evaluation.
・ In order to assess the effectiveness ofmanagement’s estimation process, wedecline in profitability resulting from changes
in the business environment.

compared business plan in previous yearwith subsequent actual performance.

In considering the amount of impairment loss ・ In addition to our evaluation of thefor the customer-related assets attributable tocompetence, capabilities and objectivity of
the Sekisui Aerospace Corporation Group, thethe external valuation specialists used byCompany measured the recoverable amount ofmanagement, we made inquiries to thethe cash-generating unit based on fair value
external valuation specialists in order toless costs of disposal, which is calculated byunderstand the valuation model adopted
discounting future cash flows to present value.
for measuring the fair value of theSince Sekisui Aerospace Corporation
customer-related assets.
Group, consisting of certain overseas ・ We made inquiries with management to
subsidiaries, prepares its financial information
understand the prospects for market
in accordance with International Financial
recovery in the aircraft industry andReporting Standards, the Company consideredrelated customer orders assumed in thethe amount of impairment loss for the
future business plan, and examined thecustomer-related assets attributable to Sekisui
consistency of these assumptions with past
Aerospace Corporation Group in accordancemarket trends in the aircraft industry andwith the International Financial Reportingorders received using available externalStandards.
data.
The significant assumptions used in the ・ We engaged our network firm valuation
estimation of the fair value less costs ofspecialists to review the valuation models
disposal are, the prospects for market recovery
used to measure the fair value of thein the aircraft industry, the prospects forcustomer-related assets and compared thecustomer orders, and the discount rate.
discount rate with our own estimates using
As the estimation of the fair value less costs ofdisposal involves management’s assumptions
and judgements, we determined this to be a key
audit matter.

available external data.

Valuation of goodwill of Sekisui Aerospace Corporation Group
Description of Key Audit Matter

Auditor’s Response

As described in Note 3 “Significant
Accounting Estimates” to the consolidated
financial statements, for the year ended March
31, 2021, the Company did not recognize
impairment loss for the asset group, which
includes goodwill of ¥40,802 million of
Sekisui Aerospace Corporation Group, which
belongs to the high-performance plastics
segment, as the total undiscounted future cash
flows derived from the asset group exceeded
its book value.

In order to assess the determination of therecognition of impairment loss for the asset
group, including goodwill, we mainly
performed the following audit procedures.
・ We examined the consistency of future
cash flows with the latest business plan.
・ In order to assess the effectiveness ofmanagement’s estimation process, we
compared business plans in previous years
with subsequent actual performance.

An aircraft manufacturer in the United ・ We made inquiries with management toStates, which is a major customer of Sekisui
understand the prospects for market
Aerospace Corporation Group and accounts
recovery in the aircraft industry andfor the majority of orders received, has been
related customer orders assumed in theaffected by a sharp decline in air passenger
future business plan, and examined thedemand due to the spread of COVID-19, andconsistency of these assumptions with past
its business environment has becomemarket trends in the aircraft industry andincreasingly uncertain. As the deterioration
orders received using available externalin the business environment of this majordata.
customer may have a significant impact on the ・ We examined whether the growth rate
future performance of Sekisui Aerospace
applied for the following period
Corporation Group, the Company determined
subsequent to the period covered by thethat certain indications of impairment existed
business plan is consistent with thein the asset group, including goodwill.
market’s long-term average growth rate by
The undiscounted future cash flows used inusing available external data.
determining whether the recognition of an
impairment loss is necessary are based on thebusiness plan approved by the Company’s
management, and for the following period
subsequent to the period covered by thebusiness plan, an estimated growth rate within
the market’s long-term average growth rate isapplied.
The significant assumptions used in theestimation of undiscounted future cash flows
are, the prospects for market recovery in theaircraft industry, the prospects for customer
orders, and the growth rate for the following
period subsequent to the period covered by thebusiness plan.
As the determination of whether therecognition of an impairment loss is necessary
involves management’s assumptions andjudgements, we determined this to be a key
audit matter.

Evaluation of land for sale held for the purpose of housing sales
Description of Key Audit Matter

Auditor’s Response

The Company recorded land for sale held forthe purpose of housing sales (“Land for sale”)of ¥58,767 million in the consolidated balance
sheet.

In order to assess the evaluation of the Landfor sale, we mainly performed the following
audit procedures.

As described in Note 3 “Significant
Accounting Estimates” to the consolidated

・ For the acquisition of the Land for sale
above a certain amount, we inspected thesales plan included in the purchasefinancial statements, Land for sale is stated at
approval document of the land to
the acquisition cost in the consolidated balance
understand the estimated profit margin in
sheet and, if net selling price at the end of thethe business plan.
year is less than the acquisition cost, that value ・ We evaluated the Company’s evaluationis recorded in the consolidated balance sheet.
criteria by obtaining actual sales data for
Net selling price is the selling price for eachLand for sale and comparing the net
individual property (in principle, the lowest
selling price estimates in the previous year
publicly offered price.)with the subsequent actual selling price.
Because estimates of net selling prices are ・ We obtained the inventory list of the Land
based on subjective judgments fromfor sale to examine whether the evaluation
management’s forecasts and expectations
is conducted in accordance with theconsidering the housing market conditions andCompany’s evaluation criteria andthe valuation of the Land for sale may have acompared the net selling price with thepotentially significant impact on the
selling price publicly set by the Company.
consolidated financial statements, we
In addition, we made inquiries to thedetermined this to be a key audit matter.
department in charge regarding theexistence of events and circumstances thatneed to be considered in the valuation andassessed whether such information wasreflected in the estimates of the net selling
price.
・ With regards to pre-sale land, we
inspected the materials from the
management meeting regarding theexistence of delays in the start of sales andthe status of such delays and madeinquiries to the department in charge toevaluate whether that information wasreflected in the estimates of net selling
price.
Responsibilities of Management, the Corporate Auditor and the Board of Corporate
Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and forsuch 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 theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing theGroup’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 toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an 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 and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting 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 tocontinue as a going 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 to continue as a going
concern.
・ Evaluate 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 inaccordance with accounting principles generally accepted in Japan.
・ 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 groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Corporate Auditor and the Board of Corporate Auditors
regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that
we have complied with the ethical requirements regarding independence that are relevant to our
audit of the financial statements in Japan, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with the Corporate Auditor and the Board of Corporate
Auditors, we determine those matters that were of most significance in the audit of theconsolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters 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 mattershould not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners 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.

Ernst & Young ShinNihon LLC
Osaka, Japan
June 18, 2021

/s/Shunsuke Sakai
Designated Engagement Partner
Certified Public Accountant/s/Takao Oshitani
Designated Engagement Partner
Certified Public Accountant