Con s ol i date d Ba l a n ce S h e e t

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Balance Sheet
March 31, 2019 and 2020

AssetsCurrent assets:
Cash on hand and in banks (Notes 6 and 18)
Notes and accounts receivable:   Unconsolidated subsidiaries and affiliates   Trade (Note 18)  Other   Less allowance for doubtful accounts
Inventories (Note 5)
Other current assets    Total current assets

Property, plant and equipment, at cost (Notes 7 and 9):Land
Buildings and structures
Machinery and equipment
Leased assets
Construction in progress
Less accumulated depreciation    Property, plant and equipment, net

Intangible assets

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates
Investment securities (Notes 18 and 19)
Long-term loans receivable
Retirement benefit asset (Note 21)
Deferred tax assets (Note 22)
Other assets
Less allowance for doubtful accounts    Total investments and other assets   Total assets

2019

Millions of yen

Thousands of
U.S. dollars(Note 4)

2020

2020

¥ 74,304¥ 75,525$   693,972

1,009
63,916223(137)
69,447
6,316
215,080

161
51,141689(156)
72,363
10,789210,515

1,479
469,916
6,331(1,433)664,918
99,136
1,934,347

8,250
70,519135,423
2,458
1,764
218,416(183,901)
34,514

7,984
74,440137,407
2,500
2,397
224,729(185,583)
39,14673,362684,003
1,262,584
22,972
22,0252,064,955(1,705,256)
359,699

2,226

2,968

27,272

1,268
28,412333
2,374
18,5663,091(397)
53,650¥ 305,471

1,012
20,836323
1,588
18,2902,929(438)
44,542¥ 297,173

9,299
191,455
2,968
14,592
168,060
26,914(4,025)409,281$ 2,730,617

Liabilities and net assets
Current liabilities:
Short-term borrowings (Notes 11 and 18)
Current portion of long-term debt (Notes 11 and 18)
Notes and accounts payable:   Unconsolidated subsidiaries and affiliates   Trade (Note 18)  Other
Advances received for products
Accrued income taxes (Note 22)
Provision for loss on wind power generator business
Provision for business restructuring
Other current liabilities    Total current liabilities
Long-term liabilities:
Long-term debt (Notes 11 and 18)
Accrued retirement benefits   For directors and corporate auditors
Retirement benefit liability (Note 21)
Deferred tax liabilities (Note 22)
Other long-term liabilities    Total long-term liabilities
Net assets:
Shareholders’ equity (Note 15)
Common stock:  Authorized — 200,000,000 shares  Issued— 74,332,356 shares
Capital surplus
Retained earnings
Treasury stock, at cost(803,339 shares in 2020 and 803,082 shares in 2019)    Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Remeasurement of retirement benefit plans    Total accumulated other comprehensive income
Non-controlling interests    Total net assets    Total liabilities and net assets

2019

Millions of yen

Thousands of
U.S. dollars(Note 4)

2020

2020

¥ 12,088
696¥ 10,048
5,590$   92,327
51,365

205
55,374
3,685
16,619
3,326
1,887
5,295
13,290112,469523
47,886815
19,012
1,143
1,421
5,596
13,436
105,475

4,806
440,007
7,489
174,694
10,503
13,05751,420123,459
969,172

40,00436,425

334,69673
10,49490
12,511
63,17457
11,172371
11,17859,205

524
102,656
3,409
102,711544,014

19,716
5,362
102,915

19,737
5,383
108,454

181,356
49,462996,545(2,312)
125,682(2,312)
131,262(21,244)
1,206,120

3,290
(226)
(222)
(115)
2,725
1,419
129,827¥305,471

1,017
(69)
(356)
(1,049)(458)
1,688
132,492¥297,173

9,345
(634)
(3,271)(9,639)(4,208)15,5101,217,422$2,730,617

See notes to consolidated financial statements.

30

31

Co n s o l id ated Statement of I ncome

Co n so lid ate d St ate m e nt of C h a n g e s i n N e t As s e t s

Consoli d ated Statement of Comprehensive I n co m e

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

For the years ended March 31, 2019 and 2020

For the years ended March 31, 2019 and 2020

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets
Millions of yen

2019

Net sales
Cost of sales (Note 12)
Gross profit
Selling, general and administrative expenses (Note 12)
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Impairment loss (Note 9)
Other, net (Note 13)
Income before income taxes
Income taxes (Note 22):
Current
DeferredIncome (Note 28)
Profit attributable to non-controlling interests
Income attributable to shareholders of The Japan Steel Works, Ltd.

2020

Millions of yen

Thousands of
U.S. dollars(Note 4)

Shareholders’ equity

2020¥220,153
166,62253,531
29,24024,290¥217,527
167,251
50,27531,566
18,709$1,998,778
1,536,810
461,959
290,049
171,910903(246)(1,623)
5,992
5,027
29,317846(249)—(5,151)(4,554)
14,154

7,774(2,288)—(47,331)(41,845)130,056

5,335
3,791
20,190223¥ 19,966

2,646
1,974
9,534
223
¥  9,310

24,313
18,13887,6052,049$   85,546

See notes to consolidated financial statements.

Commonstock

CapitalsurplusRetainedearnings

Balance at April 1, 2018
Changes during the year
Issuance of new shares
Cash dividends paid
Income attributable to shareholdersof The Japan Steel Works, Ltd.
Purchase of shares of consolidated
subsidiaries
Purchases of treasury stock
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2019¥19,694¥5,467¥ 86,256

22

22

22
¥19,716(104)¥5,362

Balance at April 1, 2019
Changes during the year
Issuance of new shares
Cash dividends paid
Income attributable to shareholdersof The Japan Steel Works, Ltd.
Purchases of treasury stock
Change in scope of consolidation
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2020

¥19,716¥5,36220

20

Accumulated other comprehensive income

Treasury stock(Note 15)

Total
shareholders’equityUnrealized
holding gain
(loss) on
securities¥(2,310)¥109,107¥ 7,269

Translation
adjustments¥ 305¥ (21)

Total
Remeasurement accumulated
otherbenefit plansadjustments comprehensive Non-­controllingincomeinterest(Note 21)¥   370¥ 7,923¥1,569Total
net assets¥118,600(3,307)44(3,307)44(3,307)

19,966

19,966

19,966

(1)

(127)
(1)

(127)
(1)

16,659¥102,915(1)¥(2,312)

16,575¥125,682(3,978)(3,978)¥ 3,290

(532)
(532)
¥(226)(200)(200)¥(222)(486)(486)¥  (115)(5,197)(5,197)¥ 2,725

(150)
(150)
¥1,419(5,348)
11,227¥129,827¥102,915¥(2,312)¥125,682¥ 3,290¥(226)¥(222)¥  (115)¥ 2,725¥1,419¥129,827(127)(4,227)
9,310
(0)

20
¥19,737

Unrealized gain
(loss) fromhedging
instruments

0

454

21
¥5,383

5,538¥108,454(0)¥(2,312)41(4,227)41(4,227)

9,310
(0)
455

9,310
(0)
455

—
5,579
¥131,262(2,273)(2,273)¥ 1,017

157
157¥ (69)(133)(133)¥(356)(933)(933)¥(1,049)(3,184)(3,184)¥  (458)

269
269¥1,688(2,914)
2,665¥132,492

Thousands of U.S. dollars (Note 4)

Shareholders’ equity

Accumulated other comprehensive income

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Comprehensive Income
For the years ended March 31, 2019 and 20202019

IncomeOther comprehensive income:Unrealized holding gain (loss) on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Remeasurement of retirement benefit plans
Total other comprehensive income (Note 14)
Comprehensive income
Total comprehensive income attributable to:Shareholders of The Japan Steel Works, Ltd.
Non-controlling interests¥20,190

Millions of yen

Thousands of
U.S. dollars(Note 4)

2020

2020

¥ 9,534$ 87,605(3,978)
(532)
(232)
(478)
(5,221)¥14,968(2,273)
157
(122)
(927)
(3,166)¥ 6,368(20,886)
1,443(1,121)(8,518)(29,091)$ 58,513¥14,768¥   200¥ 6,126¥   241$ 56,290$ 2,214

Balance at April 1, 2019
Changes during the year
Issuance of new shares
Cash dividends paid
Income attributable to shareholdersof The Japan Steel Works, Ltd.
Purchases of treasury stock
Change in scope of consolidation
Net changes in items other thanthose in shareholders’ equity
Total changes during the year
Balance at March 31, 2020

Treasury stock(Note 15)

Total
shareholders’equityUnrealized
holding gain
(loss) on
securities

Unrealized gain
(loss) fromhedging
instruments

Translation
adjustments$ 30,231$(2,077)$(2,040)

Total
Remeasurement accumulated
otherbenefit plansadjustments comprehensive Non-­controllingincomeinterest(Note 21)Total
net assets

Commonstock

CapitalsurplusRetainedearnings$181,163$49,270$945,649$(21,244) $1,154,847

184

184
(38,840)

377(38,840)

377(38,840)
85,546(0)4,181

85,5460

4,172

85,546
(0)
4,181

193
$49,462

50,887$996,545—(0)51,263$(21,244) $1,206,120

(0)

184
$181,356(20,886)(20,886)$   9,345

1,443
1,443
$  (634)(1,222)(1,222)$(3,271)$(1,057)(8,573)(8,573)$(9,639)$ 25,039(29,257)(29,257)$ (4,208)$13,039

2,472
2,472
$15,510$1,192,934(26,776)
24,488$1,217,422

See notes to consolidated financial statements.

See notes to consolidated financial statements.

32

33

Consoli d ated Statement of Cash Flows

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

The Japan Steel Works, Ltd. and Consolidated Subsidiaries

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

For the years ended March 31, 2019 and 2020

Operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Interest and dividend income
Interest expense
Equity in losses (gains) of affiliates(Gain) loss on valuation of investment securities(Gain) loss on sales of investment securities
Loss on disposal of tangible and intangible assets
Gain on sales of property, plant and equipment and intangible assets
Gain on bargain purchase
Loss (gain) on step acquisitions
Decrease/increase in consumption taxes receivable/payable
Decrease in provision for loss on wind power generator business
Increase (decrease) in provision for business restructure
Changes in operating assets and liabilities:   Trade assets (Note 18)   Trade liabilities   Inventories (Note 5)  Other   Subtotal
Interest and dividends received
Interest paid
Income taxes paid    Net cash provided by operating activities
Investing activities
Investments into time deposits
Proceeds from withdrawal of time deposits
Increase in tangible and intangible assets
Decrease in tangible and intangible assets
Proceeds from sale of investment securities
Purchases of investment securities
Reimbursement of long-term deposits on contracts
Collection of long-term loans receivable
Payments for investments in capital of subsidiaries and associates
Proceeds from purchase of shares of subsidiaries resulting in change
in scope of consolidation
Payments for purchase of shares of subsidiaries resulting in change
in scope of consolidation
Purchase of investments in subsidiaries
Other    Net cash used in investing activities
Financing activities (Notes 11 and 18)
Net increase (decrease) in short-term borrowings
Increase in long-term debt
Decrease in long-term debt
Cash dividends paid
Acquisition of treasury stock
Repayments of finance lease obligations
Proceeds from share issuance to non-controlling shareholders
Other    Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents(Decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents resulting from inclusion ofsubsidiaries in consolidation
Cash and cash equivalents at end of the year (Notes 16 and 18)

Millions of yen

Thousands of
U.S. dollars(Note 4)

2019

2020

2020

¥ 29,317
4,639
1,623
(903)
246
(89)
51
(263)
228
(3,900)——(443)(1,478)(1,093)¥ 14,154
6,017
—
(846)
249
3
3,589
990
483
(1,295)
(361)
95
(484)
(465)
300

$ 130,056
55,288—(7,774)2,288
2832,978
9,097
4,438(11,899)(3,317)873(4,447)(4,273)
2,757(13,217)(1,155)(7,618)
1,143
4,797
893
(265)
(4,334)
1,092

15,059(10,436)(1,865)(695)
24,493843(275)(6,102)
18,959138,372(95,893)(17,137)(6,386)225,057
7,746(2,527)(56,069)
174,207(56)
544(7,347)
6,057
272
(43)
(177)
10
—

(533)
193
(12,824)
1,650
1,763
(2,016)
(628)
10
(384)

(4,898)
1,773(117,835)
15,161
16,200(18,524)(5,770)92(3,528)

—

240

2,205

—
(497)
(97)
(1,334)

(896)
—
253
(13,172)(8,233)—
2,325(121,033)

83
250
(242)
(3,307)
(1)
(550)
—
9
(3,758)(58)(4,059)77,879(2,140)1,200(315)(4,227)
(0)
(737)
49
7
(6,164)(65)(443)
73,820(19,664)
11,026(2,894)(38,840)(0)(6,772)450
64(56,639)(597)(4,071)
678,306—¥ 73,820

1,100¥ 74,477

10,108$ 684,343

1. Basis of Presentation
The Japan Steel Works, Ltd. (the “Company”) and its domestic subsidiaries maintain their books of account in conformity with thefinancial accounting standards of Japan, and its foreign subsidiaries maintain their books of account in conformity with those of
their respective countries of domicile.
The accompanying consolidated financial statements havebeen prepared in accordance with accounting principles generally
accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of IFRS, and have been
compiled from the consolidated financial statements prepared by
the Company as required by the Financial Instruments andExchange Law of Japan.
As permitted by the Financial Instruments and Exchange Law
of Japan, amounts of less than one million yen have been omitted.
As a result, the totals shown in the accompanying consolidated
financial statements (both in yen and in U.S. dollars) do not­necessarily agree with the sums of the individual amounts.
Certain amounts in the prior year’s consolidated financial
statements have been reclassified to conform to the current year’s
presentation.
2. Summary of Significant Accounting Policies(a)	Principles of consolidation and accounting for investments
in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include theaccounts of the Company and any significant companies­controlled directly or indirectly by the Company.
Companies over which the Company exercises significant
influence in terms of their operating and financial policies havebeen accounted for by the equity method. All significant intercompany balances and transactions have been eliminated inconsolidation.
As of March 31, 2020, the numbers of consolidated subsidiaries, and subsidiaries and affiliates accounted for by the equity
method were 36 and 2 (31 and 2 in 2019), respectively. Nikko
Information Systems Co., Ltd., which was a consolidated subsidiaryin the previous consolidated fiscal year, has been merged with theCompany, and as a result, the company has been excluded fromconsolidated subsidiaries from this consolidated fiscal year. Since
the Company acquired additional shares of GM Engineering Co.,
Ltd., which was an affiliate accounted for by the equity method in
the previous consolidated fiscal year, the company has been
included as a consolidated subsidiary from the current consolidated fiscal year. JSW Plastics Machinery (Shenzhen) Co., Ltd., JSW
Machinery Trading (Shanghai) Co., Ltd., and JSW Machinery(Ningbo) Co., Ltd., which were non-consolidated subsidiaries in theprevious consolidated fiscal year, have been included in the consolidation as consolidated subsidiaries due to materiality. Muroran
Copper Alloy Co., Ltd. was newly established in the current consolidated fiscal year and has been included in consolidated subsidiaries. The Company acquired all shares of Nichiyu Machinery Co., Ltd.
in the current consolidated fiscal year and has been included in
the consolidated subsidiaries.

Certain foreign subsidiaries are consolidated on the basis of
fiscal years ended December 31, which differ from that of theCompany. However, the necessary adjustments have been made if
the effect of the difference is material.
Investments in subsidiaries and affiliates which are neither
consolidated nor accounted for by the equity method are carriedat cost or less. Where there has been a permanent decline in thevalue of such investments, the Company has written them down.
Differences between the cost and the underlying net equity atfair value of investments in consolidated subsidiaries and in companies accounted for by the equity method have been amortizedby the straight-line method over five years after acquisition andare included in selling, general and administrative expenses.
(b) Foreign currency translation
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect at thebalance sheet date, except for the components of net assets
excluding Non-controlling interests which are translated at their
historical exchange rates. Revenue and expense accounts aretranslated at the average rates of exchange in effect during theyear. Differences arising from the translation are presented astranslation adjustments and Non-controlling interests in the consolidated financial statements.
Revenue and expense items arising from transactions denominated in foreign currencies are generally translated into yen at therates of exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect atthe balance sheet date and differences arising from the translation
are included in the consolidated statements of income.
(c) Cash equivalents
Short-term investments with a maturity of three months or lesswhen purchased which can easily be converted to cash and are
subject to little risk of change in value are considered to be cash
equivalents.
(d) Inventories
Finished products and work in process are stated at the lower ofcost or net realizable value determined principally by the specificidentification method. Raw materials are stated at the lower ofcost or replacement cost determined principally by the moving
average method.
(e) Investment securities
Marketable securities classified as other securities are carried atfair value with changes in unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. Nonmarketable securities classified as other securities are carried atcost. Cost of securities sold is determined by the moving averagemethod.

See notes to consolidated financial statements.

34

35

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s(f) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for possible bad
debts at an amount estimated based on the historical experience
with bad debts on normal receivables plus an additional allowance for specific uncollectible amounts determined by reference
to the collectability of individual doubtful accounts.
(g) Provision for warranties for completed construction
The Company provides a provision for warranties for completed
construction by estimating losses on possible future claims.
(h) Provision for loss on construction contracts
The Company provides a provision for loss on construction contracts, which has not been delivered by the fiscal year end, by estimating the amount of total losses anticipated in the following
fiscal year and thereafter to be incurred, when the amounts can bereasonably estimated.
(i) Provision for loss on wind power generator business
The Company provides a provision for loss on wind power generator business by estimating the amount of total losses caused by
the defects of certain parts used in wind power generators.
(j) Provision for business restructuring
The Company provides a provision for the anticipated losses onwind power generators sold in previous years in order to­restructure the wind power generator business.
(k) Property, plant and equipment and depreciation
Depreciation of property, plant and equipment is calculated by the
declining-balance method based on the estimated useful lives andthe residual value determined by the Company, except for certain
buildings which are depreciated by the straight-line method.
Significant renewals and additions are capitalized at cost.
Maintenance and repairs are charged to profit. The estimate useful
lives of the assets are as follows:
Buildings and structures:
6 to 65 years
Machinery, equipment and vehicles: 3 to 20 years(l) Intangible fixed assets
Amortization of intangible fixed assets is calculated using thestraight-line method.
Software products for internal use are amortized mainly overthe estimated useful lives of five years.
(m) Leases and depreciation
Finance lease transactions which do not stipulate the transfer ofownership of the leased assets to the lessee are accounted for aspurchase and sales transactions.
With regard to the depreciation method of leased assets, thestraight-line method is applied using the lease period as the­estimated useful life and a residual value of zero.

36(n) Retirement benefit
The retirement benefit obligation for employees is attributed toeach period by the benefit formula method.
Prior service cost is being amortized as incurred by thestraight-line method over ten years, which is shorter than the­average 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 ten years, which is shorter than the average r­emaining yearsof service of the employees participating in the plans.
Certain subsidiaries use a simplified method in the calculationof their retirement benefit obligation.

(u) Provision for directors’ retirement benefits
Provision for directors’ retirement benefits is provided based on
estimated amounts determined by internal rules.

(o) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated balance sheets with respect to the differences between
financial reporting and the tax bases of the assets and liabilities,
and are measured using the enacted tax rates and laws which will
be in effect when the differences are expected to reverse.

(1) Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes thefollowing five-step model that will apply to revenue from
customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price4. 	Allocate the transaction price to the performance­obligations in the contract
5. 	Recognize revenue when(or as)the entity satisfies a­performance obligation(p) Research and development expenses
Research and development expenses are charged to income whenincurred.
(q) Revenue and cost recognition
Revenues on sales of products are generally recognized at thetime of shipment.
Revenues and costs, of which the percentage of completioncan be reliably estimated, are recognized by the percentageof-completion method. The percentage of completion is calculated at the cost incurred as a percentage of the estimated total
cost. The completed-contract method is applied to contracts forwhich the percentage of completion cannot be reliably estimated.
(r) Derivative financial instruments
Derivative financial instruments are carried at fair value. Gain orloss on derivatives designated as hedging instruments is deferred
as a component of net assets until the loss or gain on the underlying hedged items is recognized. Foreign currency receivables andpayables are translated at the applicable forward foreign exchange
rates when certain conditions are met. In addition, the related
interest differential paid or received under interest-rate swaps utilized as hedging instruments is recognized over the terms of theswap agreements as an adjustment to the interest expense of theunderlying hedged items when certain conditions are met.
(s) Consumption tax
Accounting treatment of consumption tax is the tax exclusion
method.
(t) Provision for directors’ bonuses
Provision for directors’ bonuses is provided based on estimatedamounts to be paid in the subsequent period that are applicableto the current year.

(v) Standards issued but not yet effective
Accounting Standard and Implementation Guidance on Revenue
Recognition
On March 30, 2018, The Accounting Standards Board of Japan(ASBJ) issued “Accounting Standard for Revenue Recognition”(ASBJ Statement No. 29) and “Implementation Guidance on
Accounting Standard for Revenue Recognition” (ASBJ Guidance
No. 30).

(2) Scheduled date of adoption
The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal
year ending March 31, 2022.
(3)	Impact of adoption of accounting standard and­implementation guidance
The Company is currently evaluating the effect of the a­ doptionof this accounting standard and implementation guidance on
its consolidated financial statements.
Accounting Standards for Fair Value Measurement and­Implementation Guidance
Accounting Standards for Financial Instruments
Implementation guidance on disclosures about Fair Value of
Financial Instruments Accounting Standard for Measurement of
Inventories (Corporate Accounting Standard No. 9)
On July 4, 2019, the ASBJ issued “Accounting Standards for Fair
Value Measurement” (ASBJ Statement No. 30), Implementation
Guidance on Accounting Standard for Fair Value Measurement(ASBJ Guidance No. 31), Accounting Standards for Financial
Instruments (ASBJ Statement No. 10), and Implementation guidance on disclosures about Fair Value of Financial Instruments (ASBJ
Guidance No. 19), Accounting Standard for Measurement of
Inventories (ASBJ Statement No. 9)(1) Overview
This is accounting standards for Fair Value Measurement and
Implementation Guidance for applying accounting standards
for Fair Value Measurement (hereinafter referred to as “market
price accounting standards”) have been developed.
Accounting standards for Fair Value Measurement are applied
to the market prices of the following items.
・Financial instruments in “Accounting Standards for Financial
Instruments” and “Implementation guidance on disclosuresabout Fair Value of Financial Instruments” have been revised to
stipulate notes such as a breakdown of the fair value of financial instruments by level.
(2) Scheduled date of adoption
The Company expects to adopt the accounting standard andimplementation guidance from the beginning of the fiscal
year ending March 31, 2022.
(3)	Impact of the adoption of the accounting standard and­implementation guidance.
The Company is currently evaluating the effect of the adoption of the accounting standard and implementation guidanceon its consolidated financial statements.
Accounting Standard for Disclosure of Accounting Estimates
On March 31, 2020, the ASBJ issued Accounting Standard forDisclosure of Accounting Estimates (ASBJ Statement No. 31)(1) Overview
This accounting standard has been released to provide guidance on disclosure of information that deepens the understanding of users of the financial statements about estimatesthat embody a risk of a significant impact on the financial
statements of the ­following accounting period.
(2) Scheduled date of adoption
The Company expects to adopt the accounting standard fromthe of the fiscal year ending March 31, 2021.
Accounting Standard for Accounting Policy Disclosures,
Accounting Changes and Error Corrections
On March 31, 2020, the ASBJ issued “Accounting Standard for
Accounting Policy Disclosures, Accounting Changes and Error
Corrections” (ASBJ Statement No. 24)(1) Overview
This accounting standard has been released to provide an outline of the applicable accounting principles and procedures incases where directly relevant accounting standards are notavailable.
(2) Scheduled date of application
The Company expects to adopt the accounting standard fromthe ending of the fiscal year ending March 31, 2021.

37

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

3. Accounting Changes[Disclosure for the year ended March 31, 2020](a) Consolidated cash flow statement
The amount of “Decrease/increase in consumption taxes receivable/payable”, which was displayed in “Other” of “Cash flow fromoperating activities” in the previous consolidated fiscal year, hasbeen separately reported in the current consolidated fiscal year
due to increase in its materiality.
“Increase (decrease) in provision for warranties for completed
construction,” and “Increase (decrease) in provision for loss on construction contracts” which were included in the Operating activities section of the statement of cashflows, along with “Collectionof long-terms receivable” and “Payments for asset retirement obligations” which were included in the Investing activities section of
the statement of cashflows were reclassified into “Others” within
their respective sections due to its less significance in materiality.
The consolidated financial statements for the previous consolidated fiscal year have been reclassified to reflect this change inpresentation method.
As a result, in the cash flow statement for the previous consolidated fiscal year, “Increase (decrease) in provision for warranties forcompleted construction” of “Cash flow from operating activities”¥(1,409) million, “Increase (decrease) in provision for loss on construction contracts” ¥(553) million and “Other” ¥376 million havebeen reclassified as “Decrease/increase in consumption taxes
receivable/payable “ of ¥(443) million and “Other” of ¥(1,143) million. In “Cash flow from investing activities,” “Collection of longterm loans receivable” of ¥(50) million, “Payments for asset
retirement obligations” of ¥(71) million, and “others” of ¥25 million
are “others”. It has been reclassified as ¥(97) million.
4. U.S. Dollar Amounts
The translation of yen amounts into U.S. dollars is included solely
for convenience, as a matter of arithmetic computation only, at¥108.83 = U.S.$1.00, the approximate rate of exchange prevailingon March 31, 2020. This translation should not be construed as arepresentation that all amounts shown could be converted into
U.S. dollars at such rate.
5. Inventories
Inventories at March 31, 2020 and 2019 consisted of the following:

Finished products
Work in process
Raw materials andsupplies
Total

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥ 2,767
61,004¥ 3,792
62,927$ 34,843
578,214

5,675¥69,447

5,643¥72,364

51,852$664,927

Work in process related to construction contracts of which aloss is anticipated to be incurred was offset with a provision forloss on construction contracts of ¥223 million ($2,049 thousand) at
March 31, 2020 and ¥852 million at March 31, 2019.

38

6. Assets Pledged as Collateral
The assets pledged as collateral for derivative transactions etc., at
March 31, 2020 and 2019 were as follows:

Time deposit

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥99

¥194

$1,783

Note: The assets posted for derivative transactions were 99 million yen on March
31, 2019 and 94 million yen on March 31, 2020, and there are no corresponding liabilities as of the end of the current consolidated fiscal year.

7. Advanced Depreciation
Accumulated advanced depreciation related to government
grants received has been deducted directly from the acquisition
costs of certain tangible fixed assets (plant, machinery and equipment). Such accumulated depreciation at March 31, 2020 and2019 are summarized as follows:

Accumulated advanced
depreciation expense

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥1,455¥1,445$13,278

8.	Notes Receivable and Notes Payable Maturing at Fiscal
Year-End
Although March 31, 2019 was a bank holiday, notes maturing onthat date were accounted for as if they were settled on their maturity date. The corresponding amounts of notes receivable andnotes payable maturing on March 31, 2020 were as follows:

Trade notes and accounts
receivable
Trade notes and accounts
payableOther current
liabilities
Endorsed trade notes
receivable

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥  435¥—$—¥1,836¥—$—¥  941¥—$—¥    1¥—$—

9. Impairment Loss
Current fiscal year (From April 1, 2019 to March 31, 2020)
Not applicable
Prior fiscal year (From April 1, 2018 to March 31, 2019)
The Company and its consolidated subsidiaries (hereinafter collectively known as the “Group”) recorded an impairment loss on thefollowing groups of assets in the prior fiscal year:
Use

Asset type

Property for rent
Land
Other Businesses:
Machinery, equipment andBusiness assets at
vehicles, etc.
investee subsidiary

Location

Fuchu, Tokyo
Muroran,
Hokkaido andGuangdong,China(1) Grouping of assets
The Group determine whether to recognize an impairment
loss and measure the loss by grouping assets based on thesmallest units used in management accounting that generatecash flows which are largely independent and whose revenue
and expenditures are identified on an ongoing basis. Property
for rent is grouped by the individual properties. However, theGroup determines whether to recognize impairment and measures the impairment on an individual asset basis if the asset isidle and not expected to be used in the future.
(2)	Circumstances that led to the recognition of
the impairment loss
Carrying amounts of non-current assets were reduced torecoverable amounts and the reduced amounts were recognized in extraordinary losses as impairment loss because
investment amounts were no longer expected to be recovered
due to a decrease in profitability.
Breakdown of the impairment loss is as follows:
Machinery, equipment andvehicles
Land
Other
Total

¥   19 million
1,597
6¥1,623(3) Calculation method for recoverable amounts
The property for lease is measured by the net selling price andis evaluated by the real estate appraisal value. For business-use
assets, the recoverable value is measured based on the value
in use, and is assessed based on the memorandum value.

10. Contingent Liabilities
Contingent liabilities at March 31, 2020 and 2019 consisted of thefollowing:

As endorsers of trade notes
receivable:
Endorsed to otherAs guarantors of loans:
Muroran Environmental
Plant Service Co., Ltd.
Gotsu Wind Power
Co., Ltd
Employees and other

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥ 68

¥ 49

$  450

243

193

1,773

720
4

586
1

5,385
9

11. Short-Term Borrowings and Long-Term Debt
All short-term borrowings, with interest at annual rates ranging
from 0.2690% to 0.9900% at March 31, 2020 and 0.2690% to
1.4750% at March 31, 2019, were unsecured.
Long-term debt at March 31, 2020 and 2019 were as follows:

Loans from banks andinsurance companies withinterest at annual rates
ranging from 0.1600% to
0.7450%Less those maturing within
one yearLease obligations
Less those maturing within
one yearLong-term indebtedness
reflected in the
consolidated balance
sheetsMillions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥39,408¥40,847$375,328

(199)
1,292

(5,155)
1,168(47,367)
10,732

(496)

(434)

(3,988)¥40,004¥42,016$386,070

The aggregate annual maturities of long-term debt and leaseobligations subsequent to March 31, 2020 are summarized asfollows:
Millions of yen

Thousands of
U.S. dollars Millions of yen

Year ending March 31,

Long-term loans

2021
2022
2023
2024
2025
2026 and thereafter¥ 5,155
1,950
15,8892,398
4,689
10,765$ 47,367
17,918145,998
22,03443,086
98,916

Thousands of
U.S. dollars

Lease obligations

¥434
329
224
133
41
5

$3,988
3,023
2,058
1,222
377
46

39

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

12. Research and Development Expenses
Research and development expenses included in manufacturingcosts, and selling, general and administrative expenses for theyears ended March 31, 2020 and 2019 were as follows:

14. Other Comprehensive Income
The following table presents reclassification adjustments and tax
effects allocated to each component of other comprehensive
income for the years ended March 31, 2020 and 2019:

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

2020

2020

¥4,506¥4,708

Research and ­development
expenses$43,260

13. Other Income (Expenses)—Other, Net
The details of “Other, net” in “Other income (expenses)” for theyears ended March 31, 2020 and 2019 were as follows:

Foreign exchange
gain (loss)
Equity in gains (losses) ofaffiliates
Gain on sales of property,
plant and equipment
Gain on sales ofinvestment securities
Rent income on
non-current assets
Cancellation fee received
Loss on sales or disposal ofproperty, plant andequipment
Loss on valuation of
investment securities
Loss on sales of investment
securities
Provision for businessrestructuring
Other, net
Total

40

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥   38¥  (173)$ (1,590)

89

(3)

(28)

3,933

1,296

11,908

263

379

3,482

786
1,186

757
6

6,956
55

(260)

(484)

(4,447)(51)(3,589)(32,978)—(1,369)(12,579)(711)
717¥5,992(2,244)276¥(5,151)(20,619)2,536$(47,331)

2019

Unrealized holding gain
(loss) on securities:
Amount arising during
the year
Reclassification
adjustments for gains
and losses realized in
net income
The amount of
unrealized holding gain
(loss) on securities
before tax effectTax effectUnrealized holding gain
(loss) on securities
Unrealized gain (loss) fromhedging instruments:
Amount arising during
the yearTax effectUnrealized gain (loss) fromhedging instruments
Translation adjustments:
Amount arising during
the yearTranslation adjustments
Remeasurement benefits
plans adjustments:
Amount arising during
the year
Reclassification
adjustments for gains
and losses realized in
net income
The amount of
unrealized holding gain
(loss) on securities
before tax effectTax effectRemeasurement benefits
plans adjustments
Total other comprehensive
income15.	Supplementary Information for Consolidated Statementof Changes in Net Assets
Year ended March 31, 2020(a)	Information regarding the number and type of sharesissued and treasury stock:51¥(7,837)

4,578$(72,011)

Increaseduringthe year

Decreaseduringthe yearYear ended
March 31,2020

42,066

Shares issued:
Common stock
Treasury stock:
Common stock(Notes 1 and 2)

Notes: 1.	The increase in shares issued – common stock of 23,248 was due toissuance of new shares as restricted stock.
2.	The increase in treasury stock – common stock of 257 was due to theacquisition of fractional shares of less than one unit.

(5,699)1,720(3,258)985(29,937)
9,051(3,978)(2,273)(20,886)

(765)
233

226
(68)

2,077
(625)

(532)

157

1,443

(232)
(232)

(122)
(122)

(1,121)(1,121)(951)(1,228)(11,284)

261

(132)

(689)
210

Number of sharesYear ended
March 31,2018

Number of sharesYear ended
March 31,2019¥(5,750)

Year ended March 31, 2019(a)	Information regarding the number and type of sharesissued and treasury stock:74,309,108

23,248—74,332,356

803,082257—

803,339(b) Dividends(i) Dividends paid to shareholders

Shares issued:
Common stock
Treasury stock:
Common stock(Notes 1 and 2)

Increaseduringthe year

Decreaseduringthe yearYear ended
March 31,
2019

74,292,607

16,501—

74,309,108

802,503

579—

803,082

Notes: 1.	The increase in shares issued – common stock of 16,501 was due toissuance of new shares as restricted stock.
2.	The increase in treasury stock – common stock of 579 was due to theacquisition of fractional shares of less than one unit.

(b) Dividends(i) Dividends paid to shareholders
Resolution:	Annual general meeting ofshareholders held on June 26, 2018
Type of shares:
Common stock
Total amount ofdividends:¥1,469 million
Dividends per share: ¥20.0
Cut-off date:
March 31, 2018
Effective date:June 27, 2018

Resolution:	Annual general meeting ofshareholders held on June 21, 2019
Type of shares:
Common stock
Total amount ofdividends:¥2,205 million ($20,261 thousand)
Dividends per share: ¥30.0 ($0.276)
Cut-off date:
March 31, 2019
Effective date:June 24, 2019

Note: Dividends per share include ¥2.5 of commemorative 110th anniversary
dividend.

Resolution:	Meeting of Board of Directors held on
November 11, 2019
Type of shares:
Common stock
Total amount ofdividends:¥2,022 million ($18,579 thousand)
Dividends per share: ¥27.5 ($0.253)
Cut-off date:
September 30, 2019
Effective date:
December 11, 2019

Resolution:
Meeting of Board of Directors held on		November 5, 2018
Type of shares:
Common stock
Total amount ofdividends:¥1,837 million
Dividends per share: ¥25.0
Cut-off date:
September 30, 2018
Effective date:
December 5, 2018

(1,213)(ii)	Dividends of which the cut-off date was in the year ended
March 31, 2020, but the effective date is in the following fiscal
year(ii)	Dividends of which the cut-off date was in the year ended
March 31, 2019, but the effective date is in the following fiscal
year(1,361)
434(12,506)
3,988

(478)

(927)

(8,518)¥(5,221)¥(3,166)$(29,091)

Resolution:
Annual general meeting of		shareholders held on June 24, 2020
Type of shares:
Common stock
Total amount ofdividends:¥1,286 million ($11,817 thousand)
Dividends per share: ¥17.5 ($0.161)
Cut-off date:
March 31, 2020
Effective date:June 25, 2020
Source of dividends: Retained earnings

Resolution:
Annual general meeting of		shareholders held on June 21, 2019
Type of shares:
Common stock
Total amount ofdividends:¥2,205 million
Dividends per share: ¥30.0
Cut-off date:
March 31, 2019
Effective date:June 24, 2019
Source of dividends: Retained earnings

41

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

16. Cash Flow Information(a) Cash and cash equivalents
The reconciliation between cash and cash equivalents in theaccompanying consolidated statements of cash flows and cash on
hand and in banks in the accompanying consolidated balance
sheets at March 31, 2020 and 2019 are summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2020

2020

2019

Cash on hand and in banks
in the consolidatedbalance sheet
Other current assets
Time deposits withmaturities of more than
three months
Cash and cash equivalentsin the consolidated
statement of cash flows¥75,525
199¥74,304
283$693,972
1,829

(768)

(1,247)(11,458)¥73,820¥74,477$684,343(b) Significant transactions without cash flows
Assets and liabilities corresponding to finance lease transactions
that have been recorded by the Company and its domestic­consolidated subsidiaries at March 31, 2020 and 2019 were as
follows:

Lease assets
Lease obligations

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥557
601

¥385
604

$3,5385,550

17. Leases
Year ended March 31, 2020
Future minimum lease payments subsequent to March 31, 2020
under non-cancelable operating leases are summarized asfollows:
Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2021
2022 and thereafter
Total

¥118
121
¥239

$1,084
1,112$2,196

Year ended March 31, 2019
Future minimum lease payments subsequent to March 31, 2019
under non-cancelable operating leases are summarized asfollows:
Year ending March 31,
20202021 and thereafter
Total

42

Millions of yen

¥110
179
¥289

18. Financial Instruments
Overview(a) Policy for financial instruments
In consideration of plans for operations and capital investment,
the Group utilizes funds provided by operating cash flows first. The
Group uses bond issuances and bank borrowings in order to raise
additional funds, if needed. The Company manages temporary
cash surpluses through low-risk financial assets. The Company
uses derivatives for the purpose of reducing risks and does notenter into derivative contracts for speculative or trading purposes.
(b) Types of financial instruments and related risk
Trade receivables – trade notes and accounts receivable – areexposed to credit risk in relation to customers. In addition, theCompany is exposed to foreign currency exchange risk arisingfrom receivables denominated in foreign currencies. The foreign
currency exchange risks deriving from the trade receivables
denominated in foreign currencies are hedged by forward foreignexchange contracts, if needed.
Investment securities are exposed to market risk. These­securities are mainly composed of the shares of common stock ofcompanies with which the Company has business relationships.
Trade payables – trade notes and accounts payable – havepayment due dates within one year. Since the Company is exposed
to foreign currency exchange risk arising from those payables
denominated in foreign currencies, forward foreign exchange contracts are arranged to reduce the risk, if needed.
Loans payable are used to raise funds mainly in connection
with capital investments. The repayment dates of the long-term
debts extend up to nine years from the balance sheet date. Longterm debt with variable interest rates is exposed to interest rate
fluctuation risk and foreign currency exchange risk. However, toreduce such risk and fix the interest payments for long-term debt
with variable rates, the Company utilizes interest rate swap
transactions and interest-rate currency swaps as hedging­
instruments.
Regarding derivatives, the Company enters into forward
foreign exchange contracts to reduce the foreign currency­
exchange risk arising from the receivables and payables denominated in foreign currencies. The Company also enters into interest
rate swap transactions and interest-rate currency swaps to reduce
the fluctuation risk of interest payments for long-term debt withvariable rates.
Information regarding the method of hedge accounting,hedging instruments and hedged items, hedging policy, and theassessment of the effectiveness of hedging activities is found in
Note 2 (p).

(c) Risk management for financial instruments(i)	Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Company for
managing credit risk arising from receivables, each related
division monitors credit worthiness of their main customers
periodically, and monitors due dates and outstanding balances by individual customer. In addition, the Company ismaking efforts to identify and mitigate risks of bad debts from
customers who are having financial difficulties. The consolidated subsidiaries also manage credit risk using the C­ ompany’s
internal policies and methods.
The Company also believes that the credit risk of derivatives is insignificant as it enters into derivative transactions
only with financial institutions which have a high ­credit-rating.
(ii)	Monitoring of market risk (the risk arising from fluctuations inforeign exchange rates, interest rates and others)
For trade receivables and payables denominated in foreign
currencies, the Company identifies the foreign currency
exchange risk for each currency on a monthly basis and enters
into forward foreign exchange contracts to hedge such risk. In
order to mitigate the interest rate risk for loans payable bearing interest at variable rates, the Company may also enter into
interest rate swap transactions and interest-rate currency
swaps.
For investment securities, the Company periodicallyreviews the fair values of such financial instruments and thefinancial position of the issuers. In addition, the Company continuously evaluates whether securities should be maintained
taking into account their fair values and relationships with theissuers.
In conducting derivative transactions, the division in
charge of each derivative transaction follows the internal policies, which set forth delegation of authority. Monthly reports
including actual transaction data are submitted to top management for their review. The consolidated subsidiaries also
conduct derivative transactions using the Company’s internal
policies.
(iii)	Monitoring of liquidity risk (the risk that the Company may
not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Company preparesand updates its cash flow plans on a timely basis to manage
liquidity risk. The consolidated subsidiaries manage the liquidity risk using cash flow plans and report to the Company
periodically.
(d)	Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no available quoted market price, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in Note 20 Derivative
Transactions are not necessarily indicative of the actual market risk
involved in derivative transactions.

Estimated Fair Value of Financial Instruments
Carrying values and estimated fair values of financial instrumentson the consolidated balance sheets as of March 31, 2020 and 2019are shown in the following tables. The following tables do notinclude financial instruments for which it is extremely difficult todetermine the fair value (Please refer to Note (ii) below).
Year ended March 31, 2020
Millions of yen

AssetsCash on hand and inbanks
Trade notes andaccounts receivable
Securities:  Other securities
Total assets
Liabilities
Trade notes andaccounts payable
Short-term borrowings
Current portion of
long-term debt
Long-term debt
Total liabilities
Derivatives (*)

Carrying
amountEstimated
fair value

Difference¥ 75,525¥ 75,525¥ —51,29751,296(0)

19,268¥146,091

19,268¥146,090—¥  (0)¥ 48,409
10,048¥ 48,409
10,048

¥ —
—

5,155
35,691¥ 99,305¥    (98)5,155
36,142¥ 99,756¥    (98)

(0)
450
¥450
—

Carrying
amountEstimated
fair value$  693,972$  693,972

471,350

471,341

177,047$1,342,378

177,047$1,342,369$  444,813
92,327$  444,813
92,327

Thousands of U.S. dollars

AssetsCash on hand and inbanks
Trade notes andaccounts receivable
Securities:
Other securities
Total assets
Liabilities
Trade notes andaccounts payable
Short-term borrowings
Current portion of
long-term debt
Long-term debt
Total liabilities
Derivatives (*)

47,36747,367
327,952
332,096$  912,478 $  916,622$     (900) $     (900)Difference

$

—
(0)

$

$

—
(0)

—
—

(0)
4,135
$4,135—(*) The value of assets and liabilities arising from derivatives is shown at net value,with the amount in parentheses representing net liability position.

43

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Year ended March 31, 2019
Millions of yen

Carrying
amountAssetsCash on hand and inbanks
Trade notes andaccounts receivable
Securities:  Other securities
Total assets
Liabilities
Trade notes andaccounts payable
Short-term borrowings
Current portion of
long-term debt
Long-term debt
Total liabilities
Derivatives (*)

Estimated
fair value

Difference¥ 74,304¥ 74,304¥ —64,92164,921(0)26,852¥166,078

26,852¥166,077—¥  (0)¥ 55,579
12,088¥ 55,579
12,088¥ ——199
39,208¥107,076¥   (326)

199
39,723¥107,590¥   (326)

0
514
¥514
—

(*) The value of assets and liabilities arising from derivatives is shown at net value,with the amount in parentheses representing net liability position.

(i)	Method to determine the estimated fair value of financial
instruments and other matters related to securities and­derivative transactions
AssetsCash on hand and in banks
The carrying amount is used for bank deposits without maturities, because the fair value approximates the carrying value.
The fair value of time deposits in banks with maturities is calculated based on the present value of the total principal andinterest discounted at a rate supposing a newly made deposit.
Trade notes and accounts receivables
The fair value is calculated by categories of the remaining­periods of the receivables based on the present value using
discount rates determined by the period to maturity and credit
risk.
Securities
The carrying amount is used for other securities with maturities, because the fair value approximates the carrying amount.
Quoted market price is used for other securities.
Liabilities
Trade notes and accounts payable and short-termborrowings
The carrying amount is used for these items because the fairvalue approximates the carrying amount.

44

Current portion of long-term debt and long-term debt
The fair values are calculated by applying a discount rate,
based on the assumed interest rate if new debt is issued, to thetotal of the principal and interest. The current portion of longterm debt and long-term debt with variable interest rates are
subject to the special treatment of interest rate swaps or the
integral treatment of interest rate currency swaps and is calculated by applying a discount rate, based on the assumed interest rate if a similar new debt is issued, to the total of theprincipal and interest including that of the interest rate swap.
Derivative transactions
Please refer to Note 20 Derivative Transactions, of the notes tothe consolidated financial statements.
(ii)	
Financial instruments for which it is extremely difficult todetermine the fair value

2019

Unlisted stocks¥2,226

Millions of yen

Thousands of
U.S. dollars

2020

2020

¥2,027$18,625

Because the fair values of these financial instruments are
extremely difficult to determine, given that they do not havequoted market prices and future cash flows cannot be estimated, they are not included in “Securities” in the precedingtable.

Year ended March 31, 2019
Millions of yen

Due after
one yearthroughfive years

Due after
five years¥ 74,304¥ ——64,593¥138,898

327
¥327

—
—

Due inone yearor less

Cash on hand andin banks
Trade notes andaccounts receivable
Total

Year ended March 31, 2020

Due after
one yearthroughfive years

Due after
five years

Cash on hand andin banks
Trade notes andaccounts receivable
Total¥ 75,525¥ ——50,905¥126,431

391
¥391

—
—

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Cash on hand andin banks
Trade notes andaccounts receivable
Total

Due inone yearor less$  693,972

$

—

—

467,748$1,161,729

3,593$3,593——Due after
five years

Long-term
loans

Lease
obligations¥ 5,155
1,950
15,8892,398
4,689
10,765

¥434
329
224
133
41
5

Thousands of U.S. dollars

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Long-term
loans

Lease
obligations$ 47,367
17,918145,998
22,03443,086
98,916$3,988
3,023
2,058
1,222
377
46

Year ended March 31, 2019
Millions of yen

Thousands of U.S. dollars

Due after
one yearthroughfive years

Millions of yen

Carrying amountexceeding theacquisition cost:
		 Stocks
Carrying amount notexceeding theacquisition cost:
		 Stocks
Total

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥ 7,413¥11,596¥ 4,182

10,389¥17,802

7,672¥19,268(2,716)¥ 1,466

Acquisition
cost

Carrying
amountUnrealized
gain (loss)$68,115$106,552$ 38,427

95,461$163,576

70,495$177,047(24,956)$ 13,471

Acquisition
cost

Carrying
amountUnrealized
gain (loss)¥14,079¥21,598¥ 7,519

8,041¥22,120

5,253¥26,852(2,787)¥ 4,731

Thousands of U.S. dollars

Millions of yen

Year ended March 31, 2020

Due inone yearor less

March 31, 2020(iv) The redemption schedule for long-term debt(iii)	Redemption schedule for receivables and securities withmaturities at March 31, 2020 and 2019

Millions of yen

19. Securities(a) Other securities

Due in 1 year or lessDue after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Due after 5 years

Long-term
loans

Lease
obligations¥   199
5,000
1,800
15,7002,208
14,500

¥496
346
234
148
63
2

Carrying amountexceeding theacquisition cost:
		 Stocks
Carrying amount notexceeding theacquisition cost:
		 Stocks
Total
March 31, 2019

Millions of yen

Carrying amountexceeding theacquisition cost:
		 Stocks
Carrying amount notexceeding theacquisition cost:
		 Stocks
Total

When their fair values have declined by 50% or more, impairment
losses are recorded on those securities. When their fair values havedeclined by 30% up to 50%, impairment losses are recorded on
those securities on an individual basis to the values considered tobe recoverable.
(b) Impairment of investment securities
Millions of yen

Thousands of
U.S. dollars

2020

2020

For the year ended March 31, 20192019

Other securities
Stock¥51 ¥3,589 $32,97845

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

20. Derivative Transactions(a) Derivatives not subject to hedge accounting

Year ended March 31, 2019
Millions of yen

Year ended March 31, 2020
None applicableYear ended March 31, 2019
None applicable

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
JPY
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros
Sterling pound

Accounts receivable(b) Derivatives subject to hedge accounting
The contract amounts or the amount corresponding to principal as specified by the contract as of the date of the closing of the consolidated
accounts is shown below by type of hedge accounting method.
(i) Currency-related transactions
Year ended March 31, 2020

Contract
amountOver
one year

Fair value¥17,161
1,557
41¥2,670131—¥(266)
30(0)¥   853
2,661
124

¥

¥   8
(84)
(14)

Accounts payable—682—

Note: Calculation of fair value is based on the forward exchange rates.
Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
Canadian dollars
JPY
Thai baht
Chinese Yuan
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros

Accounts receivable(ii) Interest-related transactions

Contract
amountOver
one year

Fair value¥14,045
2,534
15
28
57
1

¥589
716
—
—
—
—

¥(100)
29
1
1
(0)
0

¥ 2,052
2,321

¥ —
218

¥   14(43)

Accounts payableYear ended March 31, 2020
Millions of yen

Hedge accounting method

Type of derivative

Principal items hedged

Special treatment forinterest rate swaps
Integral treatment forinterest rate currency swaps:(Special treatment andallocation method)

Receive/floating and pay/fixedLong-term borrowings

Receivable USD and floating rate/
payable JPY and fixed rateLong-term borrowings

Type of derivative

Principal items hedged

Allocation method

Foreign exchange forward contracts
Sell:
U.S. dollars
Euros
Canadian dollars
JPY
Thai baht
Chinese Yuan
Foreign exchange forward contracts
Buy:
U.S. dollars
Euros

Accounts receivable

Contract
amountOver oneyear

Fair value$129,054
23,284
138
257
524
9

$5,412
6,579
—
—
—
—

$(919)
266
9
9
(0)
0

$ 18,855
21,327

$ —
2,003

$ 129
(395)

Accounts payableOver
one year

Fair value¥25,000¥25,000

(*)

708

708

(*)

Contract
amountOver
one year

Fair value$229,716$229,716

(*)

6,506

6,506

(*)

Thousands of U.S. dollars

Thousands of U.S. dollars

Hedge accounting method

Contract
amountHedge accounting method

Type of derivative

Principal items hedged

Special treatment forinterest rate swaps
Integral treatment forinterest rate currency swaps:(Special treatment andallocation method)

Receive/floating and pay/fixedLong-term borrowings

Receivable USD and floating rate/
payable JPY and fixed rateLong-term borrowings(*) Interest rate swaps subject to the special treatment for interest rate swaps and interest rate currency swaps subject to integral treatment for interest rate currency swaps
are accounted for together with the long-term debt, accordingly the fair value of the interest rate swaps is included in the fair value of the corresponding long-term debt.
Note: Calculation of fair value is based on the stated price by financial institutions.

Note: Calculation of fair value is based on the forward exchange rates.

46

47

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Year ended March 31, 2019
Millions of yen

Hedge accounting method

Special treatment forinterest rate swaps
Integral treatment forinterest rate currency swaps:(Special treatment andallocation method)Type of derivative

Principal items hedged

Receive/floating and pay/fixedLong-term borrowings

Receivable USD and floating rate/
payable JPY and fixed rateLong-term borrowings

Contract
amount¥25,000

708

Over
one year¥25,000

708

Fair value(*)

Note: Calculation of fair value is based on the stated price by financial institutions.

The changes in the retirement benefit obligation for the years
ended March 31, 2020 and 2019 are as follows:

Balance at the beginningof the year
Service cost
Interest cost
Actuarial gain and loss
Retirement benefit paid
Prior service cost
Increase by merger
Other
Balance at the endof the year

48

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥19,792
996
112
438(1,328)20——¥20,031
1,110
97
60
(947)
—
404
8

$184,058
10,199891
551(8,702)—
3,712
74¥20,031¥20,764$190,793

The changes in plan assets for the years ended March 31, 2020 and2019 are as follows:

2019

Balance at the beginningof the year
Expected return on plan
assetsActuarial gain and loss
Contributions by theCompany
Retirement benefits paid
Balance at the end
the year

Millions of yen

Thousands of
U.S. dollars

2020

2020

¥15,517¥14,924$137,131

310
(493)

298
(1,168)

2,738(10,732)

475
(885)

562
(659)

5,164
(6,055)¥14,924¥13,956$128,237

The changes in retirement benefit liability accounted for using thesimplified method for the years ended March 31, 2020 and 2019are as follows:

Balance at the beginningof the year
Retirement benefit
expenses
Retirement benefits paid
Contributions
Transfer amountdue to change from
Simplified method
to principle method
Contributions
Balance at the end
the year

2019

(*)

(*) Interest rate swaps subject to the special treatment for interest rate swaps and interest rate currency swaps subject to integral treatment for interest rate currency swaps
are accounted for together with the long-term debt, accordingly the fair value of the interest rate swaps is included in the fair value of the corresponding long-term debt.

21. Retirement Benefit Plans
The Company and its consolidated subsidiaries have either fundedor unfunded defined benefit plans and/or defined contributionplans.
The Company and its domestic consolidated subsidiaries havedefined benefit plans, i.e. lump-sum payment plans, defined benefit plans, welfare pension fund and tax-qualified pension plans,
covering substantially all employees who are entitled to lump-sum
or annuity payments, the amounts of which are determined by reference to their basic rates of pay, length of service, and the conditions under which termination occurs.

The following table sets forth the funded status of the plans andthe amounts recognized in the consolidated balance sheets as ofMarch 31, 2020 and 2019 for the Company’s and the consolidated
subsidiaries’ defined benefit plans:Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥3,034¥3,012$27,676

642
(473)
(191)

589
(390)
(192)

5,412
(3,584)(1,764)

Funded retirement benefit
obligation
Plan assets at the value
Unfunded retirement
benefit obligation
Net liability for retirement
benefits in the balance
sheet
Retirement benefit liability
Retirement benefit assets
Net liability for retirement
benefits in the balance
sheet¥ 19,804(16,180)
3,623

Millions of yen

Thousands of
U.S. dollars

2020

2020

¥ 20,559 $ 178,430(15,215) (145,779)
5,343
32,643

4,496

4,239

40,508

8,119
10,494(2,374)

9,583
11,172(1,588)88,055
102,656(14,592)¥   8,119¥   9,583$   88,055

The components of retirement benefit expense for the years
ended March 31, 2020 and 2019 are as follows:

Service cost
Interest cost
Expected return on plan
assetsAmortization of actuarial
gain and loss
Amortization of priorservice cost
Simplified method for
retirement benefit
expenses
Transfer amountdue to change from
Simplified method
to principle method
Other
Retirement benefit
expenseMillions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥  996112¥1,110
97$10,199
891

(310)

(298)

(2,738)

261

(134)

(1,231)

2

2

18

642

589

5,412

—
42

156
2

1,433
18

¥1,747¥1,524$14,003

The components of retirement benefits plans adjustments
included in other comprehensive income (before tax effect) for theyears ended March 31, 2020 and 2019 are as follows:

Prior service costs
Actuarial gain and loss
Total

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥ (18)(670)¥(689)¥     2
(1,363)¥(1,361)$     18
(12,524)$(12,506)

The components of retirement benefits plans adjustments
included in accumulated other comprehensive income (before tax
effect) as of March 31, 2020 and 2019 are as follows:

Unrecognized prior service
costs
Unrecognized actuarial
gain and loss
Total

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥ (18)¥   (16)$   (147)(138)¥(157)(1,501)¥(1,518)(13,792)$(13,948)

The fair value of plan assets, by major category, as a percentage of
total plan as of March 31, 2020 and 2019 is as follows:
March 31,

Bonds
StocksCash on hand and in banks
General account
Other
Total

(247)
6

(2,270)55¥3,012¥2,776$25,508

2020

30%
44
0
17
9
100%

33%
40
0
18
9
100%

Retirement benefit trust set for the lump-sum and corporate pension plans accounts for 17% and 20% of the total plan assets, forthe years ended March 31, 2020 and 2019, respectively.
The expected return on assets has been estimated based on
the anticipated allocation to each asset class and the expectedlong-term returns on assets held in each category.
The assumptions used in accounting for the above plans are as
follows:
March 31,

—
—

2019

Discount rates
Expected rates of return on plan assets

2019

2020

0.51%
2.00

0.58%
2.00

Contributions made to defined contribution plans for the years
ended March 31, 2020 and 2019 were ¥56 million ($515 thousand)and ¥64 million, respectively.

4922. Income Taxes
The significant components of the Company’s deferred tax assets
and liabilities at March 31, 2020 and 2019 were as follows:

2019

Deferred tax assets:
Accrued enterprise taxes
Accrued bonuses
Depreciation
Amortization of long-term
prepaid expenses
Loss on revaluation of
inventory items
Loss on revaluation offinancial instruments
Impairment loss
Retirement benefit liability
Provision for warranties forcompleted construction
Provision for loss on
construction contracts
Provision for loss on wind
power generator business
Provision for businessrestructuring
Less allowance for doubtful
accounts
Asset retirement obligations
Percentage-of-completion
methodTax loss carry forwards
Unrealized loss on
investment securities
Deferred loss on hedges
Unrealized gain on
intercompany transactions
Other   Gross deferred tax assets
Valuation allowance for tax
loss carryforwards
Valuation allowance for the
total of future deductible
temporary differences etc.
Total valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for advanced
depreciation
Net defined benefit asset
Disposal cost with asset
retirement obligations
Unrealized gain on
investment securities
Deferred gain on hedges
Other
Total deferred tax liabilities
Net deferred tax assets

50¥   245
1,105
890

Millions of yen

Thousands of
U.S. dollars

2020

2020

¥    61 $    5611,10910,190
881
8,095

105

105

965

1,216

692

6,359

184
12,383
4,468

184
11,0294,821

1,691
101,342
44,298

137

61

561

86

168

1,544

575

433

3,979

1,615

1,706

15,676

131
397

149
397

1,369
3,648

280
1,630

423
1,473

3,887
13,535

849
120

814
56

7,480
515

624
1,113
28,163542
1,063
26,1784,980
9,768
240,540(1,465)(1,461)(13,425)(2,584)(4,049)24,113(2,517)(3,978)22,199(23,128)(36,552)
203,979

2,051
712

1,828
530

16,797
4,870

230

230

2,113

2,296
20
326
5,637
¥18,475

1,276
11,725
26
239
387
3,556
4,280
39,327¥17,919 $164,651

Tax loss carry forward and its deferred tax asset carry forward due
date at March 31, 2020 and 2019 were as follows:

Change in deferred tax assets and deferred tax liabilities due toreduction in corporate income tax rate
2019

2020

Notes are omitted
because the difference
between the statutory
effective tax rate andthe tax burden rate after
application of tax effectaccounting is less than
5% of the statutory
effective tax rate.

30.5%

Year ended March 31, 2020
Millions of yen

Tax losscarryforwards¥

Due in 1 year or lessDue after 1 year through2 years
Due after 2 years through3 years
Due after 3 years through4 years
Due after 4 years through5 years
Due after 5 years
Total

Valuation Deferred tax
allowance
assets

—

¥

—

¥—

28

(28)

—

329

(329)

—

464

(464)

—

208
443
¥1,473(208)(431)¥(1,461)—12¥12

Thousands of U.S. dollars

Due in 1 year or lessDue after 1 year through2 years
Due after 2 years through3 years
Due after 3 years through4 years
Due after 4 years through5 years
Due after 5 years
Total

Tax losscarryforwards

Valuation Deferred tax
allowance
assets

$

$

—

—

$ —

257

(257)

—

3,023

(3,023)—

4,264(4,264)

—

1,911
4,071
$13,535(1,911)(3,960)$(13,425)

—
110
$110

Year ended March 31, 2019
Millions of yen

Tax losscarryforwards

Due in 1 year or lessDue after 1 year through2 years
Due after 2 years through3 years
Due after 3 years through4 years
Due after 4 years through5 years
Due after 5 years
Total

Valuation Deferred tax
allowance
assets¥  234¥   (74)

¥159

—

—

—

33

(33)

—

358

(357)

0

569
434
¥1,630(569)(430)¥(1,465)—
3¥164

Statutory tax rates
Effect of:Permanent differences(Expense)
Expired loss carryforwards
Other
Effective tax rates

1.0
1.0
0.1
32.6%

23. Business Combinations
1. Transactions under common control(Nikko Information Systems Co., Ltd.)
Based on a resolution of the Board of Directors meeting held on
January 29, 2019, the Company absorbed Nikko Information­Systems Co., Ltd. On April 1, 2019.
(1) Transaction overview(a)	The names and business details of the company subject
to business combination
		 Name of the Company	Nikko Information Systems
Co., Ltd.
		 Business details	Computer system ­consulting,contract ­development, ­technicalguidance, etc.
(b) Date of business combination
		 April 1, 2019(c) Legal form of business combination
		 An absorption-type merger where the Company becomes
the surviving company and Nikko Information Systems
Co., Ltd. becomes the Merged company(d) The name of the Combined Enterprise		 The Japan Steel Works, Ltd.
(e) Matters concerning the outline of other transactions
		 Since its establishment in April 1990 as a wholly-owned
subsidiary of the Company, Nikko Information Systems
Co., Ltd. has been in charge of the Company’s information
system operation and management as well as theentrusted development business. However, given that
advanced information technology (Machine learning, etc.)
is an important element for the enhancement of theCompany’s product and service values, Nikko Information
Systems Co., Ltd. has decided to merge with the Company
to strengthen its functions.
(2) Overview of accounting
In accordance with “Accounting Standards for Business Combinations” (Corporate Accounting Standards No. 21, January 16,2019) and “Implementation Guidance for Accounting Standards for Business Combinations and Accounting Standards
for Business Separation” (Corporate Accounting Standards
Implementation Guidance No. 10, January 16, 2019) the
accounting treatment has been made as a transaction undercommon control .

2. Business combination by acquisition(GM Engineering Co., Ltd.)At the meeting of the Board of Directors held on March 19, 2019,
The Company resolved to acquire additional shares of GM
Engineering Co., Ltd, a former affiliate and became its subsidiaryon April 1, 2019.
(1) Transaction overview(a) The name of the acquired enterprise and the nature of its
business		 Name of recipient company: GM Engineering Co., Ltd.
		 Nature of business: 	Design, manufacture, andsale of plastic sheet equipment, extruders, etc.;
design, manufacture, andsale of dies and auxiliary
equipment(b) The main reasons for the business combination
		 Strengthen and expand sheet equipment business(c) Date of business combination
		 April 1, 2019(d) Legal form of business combination
		 Stock acquisition in exchange for cash(e) The name of the Combined Enterprise		 There is no change in the name of the combined
company.
(f ) Percentage of voting rights acquired
		 21.75% of the voting rights held immediately before thebusiness combination
		 60.5% of the voting rights additionally acquired on thedate of the business combination
		 82.25% of total voting rights after acquisition(g) Main basis for determining acquiring companies
		 The Company acquired the shares in exchange for cash.
(2)	The period of performance of the acquired company
included in the consolidated income statement of theCompany for the consolidated cumulative period
From April 1, 2019 to March 31, 2020(3)	Acquisition costs of acquired enterprises and their­breakdown type
	Market value of shares heldon business combination date:¥ 34 million
Cash spent for additional acquisition:¥ 96 million
Acquisition cost: 		¥131 million(4) Details and amounts of major acquisition-related expenses¥5 million for advisory expenses(5)	The difference between the acquisition cost of the AcquiredEnterprise and the total amount of the acquisition cost foreach transaction leading to the acquisition
Loss on phased acquisition:		
¥89 million

51

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s(6)	The amount of negative goodwill that occurred, and thecause for the occurrence(a) The amount of negative goodwill that occurred		¥361 million(b) Cause of occurrence		This was because the net assets at market value of GM
Engineering Co., Ltd. exceeded the acquisition cost.
(7)	The amount of assets accepted and liabilities assumed on
the date of the Business Combination, and the major­b­reakdown thereof
Current assets:¥1,722 million
Fixed assets:¥  654 million
Total assets:		
¥2,377 million(4) Details and amounts of major acquisition-related expenses¥1 million for advisory expenses¥1,275 million¥  503 million¥1,778 million(5)	The amount of goodwill that occurred, and the cause for theoccurrence(a) The amount of goodwill that occurred		¥809 million(b) Cause of occurrence		This was mainly due to the excess earning power
expected from future business development.
(c) Amortization method and period
		 Straight-line depreciation over 5 years(Nichiyu Machinery Co., Ltd.)At the meeting of the Board of Directors held on June 18, 2019,
The Company resolved to acquire the shares of Nichiyu MachineryCo., Ltd. and make it a subsidiary. Based on the resolution, theCompany entered into a stock purchase agreement on September
17, 2019, and acquired the shares on November 1, 2019.

(6)	The amount of assets accepted and liabilities assumed on
the date of the Business Combination, and the major­breakdown thereof
Current assets:¥957 million
Fixed assets:¥ 30 million
Total assets:¥987 million

Current liabilities:
Fixed liabilities:
Total liabilities:(1) Transaction overview(a)	The name of the acquired enterprise and the nature of its
business		 Name of acquired company: Nichiyu Machinery Co., Ltd.
		 Nature of business: 	Manufacture, sales, parts
sales, maintenance serviceof various unwinders andwinders(b) The main reasons for the business combination
		 To further expand business in the film sheet manufacturing equipment business by incorporating the winder business, which is indispensable for providing a full line
product(c) Date of business combination
		 November 1, 2019(d) Legal form of business combination
		 Share acquisition in exchange for cash(e) The name of the Combined Enterprise		 There is no change in the name of the combined
company.
(f ) Percentage of voting rights acquired		 100% of total voting rights after acquisition(g) Main basis for determining acquiring companies
		 Our Company acquired the shares in exchange for cash.
(2)	The period of performance of the acquired company
included in the consolidated income statement of theCompany for the consolidated cumulative period
From November 1, 2019 to March 31, 202052(3)	Acquisition costs of acquired enterprises and their­breakdown type
Cash spent on acquisition:		
¥950 million
Settlement payment confirmed after acquisition: ¥ (2) million
Acquisition cost:		¥948 million

Current liabilities:
Fixed liabilities:
Total liabilities:¥845 million¥   3 million¥849 million

Millions of yen

Reportable segments
Year ended March 31, 2020

Sales and operating income:Sales to third parties
Intra-segment sales and transfers
Total sales
Operating income
Assets, depreciation,and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures

Millions of yen

Thousands of
U.S. dollars

2019

2020

2020

¥1,364¥1,308$12,019

2
22
(71)
(9)
¥1,308—23(2)—¥1,329

—
211
(18)
—
$12,212

Industrial
Machinery
Products

Steel andEnergyProducts

Other
Businesses

Total

AdjustmentsandEliminations

Consolidated¥171,416
1,499
172,916¥ 19,272¥41,418
5,320
46,739¥ 2,484¥4,691
2,152
6,844¥ (146)¥217,527
8,972
226,499¥ 21,610¥—(8,972)(8,972)¥ (2,901)¥217,527—
217,527¥ 18,709¥147,703
4,022
5,813

¥39,036866
3,234¥9,946681
1,226¥196,686
5,570
10,275¥100,486
163
309¥297,173
5,733
10,585
Thousands of U.S. dollars

Reportable segments
Year ended March 31, 2020

24. Asset Retirement Obligations
The following table presents the changes in asset retirement­obligations for the years ended March 31, 2020 and 2019:

Balance at beginningof yearLiabilities incurred dueto the acquisition of­property, plant andequipment
Accretion expense
Liabilities settled
Other
Balance at end of year

26. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and whose operating results are
regularly reviewed by the Executive Committee to make decisions about resource allocation and to assess performance.
The Industrial Machinery Products segment includes injection molding machines, film and sheet machinery, other. The Steel and Energy
Products segment includes steel castings and forgings, steel plates and pipes. The Other Businesses segment includes deposition business,
crystal business and wind power generation equipment.

Sales and operating income:Sales to third parties
Intra-segment sales and transfers
Total sales
Operating income
Assets, depreciation,and capital expenditures:
Total assets
Depreciation and amortization
Capital expenditures

Industrial
Machinery
Products

Steel andEnergyProducts$1,575,080
13,774
1,588,863$  177,084$380,575
48,884429,468$ 22,825$43,104
19,77462,887$ (1,342)$1,998,778
82,441
2,081,218$  198,567$—(82,441)(82,441)$ (26,656)$1,998,778—
1,998,778$  171,910$1,357,190
36,95753,414$358,688
7,957
29,716$91,390
6,257
11,265$1,807,277
51,181
94,413$923,330
1,498
2,839

$2,730,617
52,67897,262

Other
Businesses

Total

AdjustmentsandEliminations

Consolidated

Notes: 1.	Adjustments and eliminations for segment profit of ¥2,901 million ($26,656 thousand) include elimination of inter-segment profit on inventories and corporate
general administration expense which are not allocable to a reportable segment.
2.	Adjustments and eliminations for segment assets of ¥100,486 million ($923,330 thousand) include offset of inter-segment debt and credit, and corporate assets
which are not allocable to a reportable segment.
3.	Adjustments and eliminations for depreciation and amortization of ¥163 million ($1,498 thousand) include depreciation and amortization for corporate assets.
		 Adjustments and eliminations for capital expenditures of ¥309 million ($2,839 thousand) include capital expenditures for corporate assets.

25. Investment and Rental Properties
The Company has omitted the disclosure of investment and rental
properties due to immateriality for the years ended March 31,
2020 and 2019.

53

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s

Millions of yen

Reportable segments
Industrial
Machinery
Products

Year ended March 31, 2019

Sales and operating income:Sales to third parties
Intra-segment sales and transfers
Total sales
Operating income
Assets, depreciation,and capital expenditures
Total assets
Depreciation and amortization
Capital expenditures

Steel andEnergyProducts¥173,648
1,038
174,687¥ 23,599¥149,979
3,450
7,171

Other
Businesses¥41,251
4,159
45,410¥ 2,676¥39,347
239
2,033¥5,252
3,740
8,993¥  343¥8,041
477
520

AdjustmentsandEliminations

Total¥220,153
8,938
229,091¥ 26,618

Millions of yen

Consolidated¥—(8,938)(8,938)¥ (2,328)¥197,369
4,166
9,725

¥108,102257
219¥220,153—
220,153¥ 24,290¥305,471
4,424
9,945

Notes: 1.	Adjustments and eliminations for segment profit of ¥2,328 million include elimination of inter-segment profit on inventories and corporate general administration
expense which are not allocable to a reportable segment.
2.	Adjustments and eliminations for segment assets of ¥108,102 million include offset of inter-segment debt and credit, and corporate assets which are not allocable
to a reportable segment.
3.	Adjustments and eliminations for depreciation and amortization of ¥257 million include depreciation and amortization for corporate assets.
		Adjustments and eliminations for capital expenditures of ¥219 million include capital expenditures for corporate assets.

(a) Product and service information
Millions of yen

Year ended
March 31,2020

Industrial
Machinery
Products

Steel andEnergyProducts

Other
Businesses

Sales tothird parties¥171,416¥41,418¥4,691

Year ended
March 31,2020

Industrial
Machinery
Products

Steel andEnergyProducts

Sales tothird parties $1,575,080$380,575¥217,527

Thousands of U.S. dollars

Other
Businesses

Total$43,104 $1,998,778
Millions of yen

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts

Other
Businesses

Sales tothird parties¥173,648¥41,251¥5,252(b) Geographical information(i) Sales

Total

Total

¥220,153

2019

Japan
China
OthersConsolidated¥103,898
54,31861,936¥220,153(d) Information on loss on impairment of fixed assets
Impairment losses on fixed assets by reportable segment for theyears ended March 31, 2020 and 2019 are summarized as follows:

Millions of yen

Thousands of
U.S. dollars

2020

2020

¥103,249 $  948,718
44,126405,458
70,151
644,592¥217,527 $1,998,778

Note: Net sales information above is based on customer location.

(ii) Tangible assets
The Company has omitted the disclosure of tangible assets bycountry or region as of March 31, 2020 and 2019 because theamount of tangible assets in Japan accounted for more than
90% of the carrying amount in the consolidated balance sheet.
(c) Significant customer information
The Company has omitted the disclosure of significant customer
information for the years ended March 31, 2020 and 2019 because
no individual customer accounted for more than 10% of net sales
in the consolidated statement of income.

Year ended
March 31,2020

Impairment
loss—

Steel andEnergyProducts—

Adjustments
Other
and
Businesses Eliminations

—

—

Total

—

Thousands of U.S. dollars

Year ended
March 31,2020

Industrial
Machinery
Products

Steel andEnergyProducts

Impairment
loss

—

—

Year ended
March 31,2019

Industrial
Machinery
Products

Steel andEnergyProducts

Impairment
loss

—

—

Adjustments
Other
and
Businesses Eliminations

—

—

Total

—
Millions of yen

Adjustments
Other
and
Businesses Eliminations¥25¥1,597

Total¥1,623(e) Amortization and balance of goodwill
The following table presents the amortization and balance of negative goodwill arising from business combinations on or prior to
March 31, 2010 as of and for the years ended March 31, 2020 and2019 by reportable segment:

Year ended March 31, 2020
In the Industrial Machinery segment, we recorded a negative
goodwill gain of ¥361 million ($3,317 thousand). This is because
GM Engineering Co., Ltd. became a consolidated subsidiary.
Year ended March 31, 2019
None applicable
27. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to
10% of the amount to be disbursed as distributions of capital­surplus (other than the capital reserve) and retained earnings(other than the legal reserve) be transferred to the capital reserveand the legal reserve, respectively, until the sum of the capitalreserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolutionof the meeting of shareholders, or by the Board of Directors if­certain conditions are met.
28. Amounts per ShareProfit (loss) attributable to owners of parent per share is calculated
based on the profit (loss) attributable to owners of parent available
for distribution to shareholders of common stock and the weighted-average number of shares of common stock outstanding during the year. Net assets per share are calculated based on thenumber of shares of common stock outstanding at year end.
Amounts per share at March 31, 2020 and 2019 and for the years
then ended were as follows:

Millions of yen

Year ended
March 31,2020

Industrial
Machinery
Products

Steel andEnergyProducts

¥283

—

—

—

¥283

782

—

—

—

782

Year ended
March 31,2020

Industrial
Machinery
Products

Steel andEnergyProducts

Amortization
Balance as ofMarch 31$2,600———$2,600

7,186

—

—

—

7,186

Year ended
March 31,2020

Industrial
Machinery
Products

Steel andEnergyProducts

¥215

—

—

—

¥215

268

—

—

—

268

Amortization
Balance as ofMarch 31

Adjustments
Other
and
Businesses Eliminations

Total

Thousands of U.S. dollars

Adjustments
Other
and
Businesses Eliminations

Total

Millions of yen

Amortization
Balance as ofMarch 31

54

Industrial
Machinery
Products(f) Information on gain on negative goodwill

Adjustments
Other
and
Businesses Eliminations

Total

Profit (loss) attributableto owners of parent
Net assets

Yen

U.S. dollars

2019

2020

2020

¥  271.69
1,746.91¥  126.66
1,778.94$ 1.16
16.35

29. Subsequent Events(Absorption-type split of steel business and absorption-typemerger of 4 four subsidiaries)
Based on a resolution of the Board of Directors meeting held on
January 28, 2020, the Company split the technical departments ofour material and energy business and wind power generationequipment maintenance service with April 1, 2020 as the effectivedate(Simplified absorption-type split). These departments weresucceeded to a consolidated subsidiary, Nikko MEC Co., Ltd.
(hereinafter, Nikko MEC). Nikko MEC has also merged Nikko­
Machine Center Co., Ltd. (hereinafter Nikko Machine Center), Nikko
Inspection Service Co., Ltd. (hereinafter, Nikko Inspection Service)and J-Win Co., Ltd. (hereinafter, J-Win), all a non-consolidated­subsidiary of the Company.

55

N o te s to Con s ol i date d Fi n a n c i a l St ate m e nt s(1)	Transaction overview including the purpose of thetransaction	Since the Great East Japan Earthquake in March 2011, the market for materials for nuclear power plants and thermal power
plants, which had been the main source of profits for our raw
materials/energy business, had shrinked and as a result thecompetition intensified.
We have been proceeding with a study on reorganization
centered on the Muroran manufacturing plant.
We have reorganized the material and energy business of
the Company, three subsidiaries responsible for its manufacturing function, the technical department and one subsidiary
responsible for the maintenance service function of wind
power generation equipment to optimize the organization for
aim to establish a stable profitable structure at the current
scale of this business by improving profitability through­construction and integrated operation.
(2) Summary of reorganization(a) Absorption-type split		 1.	Name of the company involved in the combination or
the target business and the content of the business			The Company:
				Engineering department of the raw material/
energy business and m­ aintenance service of wind
power g­ eneration equipment
			Nikko MEC:				
Installation/maintenance/­
maintenance of factoryequipment, manufacturing­processing/sales ofvarious cast steel products/steel plates/pipes
		 2. Business combination date
			April 1, 2020
		 3. Legal form of business combination
			An absorption-type company split (simplified­absorption-type company split) in which the­Company is the splitting company and Nikko MEC isthe succeeding company.
(b) Absorption merger
		 1.	Name of the company involved or the business to be
combined and the content of the business.
			Nikko MEC
				Installation/maintenance/maintenance of factoryequipment, manufacture/processing/sales of­various cast steel products/steel plates/pipes, etc.
			Nikko Machine Center				Machining of large cast and forged steel products,
welded structures and dies, finish assembly, etc.
Nikko Steel inspection service Intermediate andshipment inspection business of various cast andforged steel products, steel plates, welded­structures and industrial machines, etc.
			J-Win				Wind generator monitoring, maintenance,­inspection and repair work, etc.

56		 2. Business combination date
			April 1, 2020
		 3. Legal form of business combination
			Nikko MEC is the surviving company, Nikko Machinery
Center, Nikko Inspection Service and J-Win are­absorption-type mergers. J-Win is disbanded.
		 4. Name of the combined company
			Nikko MEC changed its trade name to Japan Steel
M&E Co., Ltd. as of April 1, 2020.
(3) Overview of accounting
In accordance with “Accounting Standards for Business Combinations” (Corporate Accounting Standards No. 21, January 16, 2019)
and “Implementation Guidance for Accounting Standards for Business Combinations and Accounting Standards for Business Separation” (Corporate Accounting Standards Implementation
Guidance No. 10, January 16, 2019) the accounting treatment will
be made as a transaction under common control.
(Absorption of consolidated subsidiary)
Following the resolution of the Board of Directors meeting held on
December 18, 2019, the Company merged with its consolidated
subsidiary Meiki Co., Ltd. on April 1, 2020.
(1) Transaction overview
1. Name and business content of the company
		 Name of the company involved in the merger
			Meiki Co., Ltd.
		Business description
			Manufacture and sale of injection molding machines,
etc.
2. Business combination date
		 April 1, 2020
3. Legal form of business combination
		Absorption-type merger with our company as the surviving company and Meiki Co., Ltd. as the merged company.
4. Name of the combined company
		 Japan Steel Works, Ltd.
5. Other matters regarding the outline of transactions
		Meiki Co., Ltd., as a pioneer in developing injection molding machines for the first time in Japan, has manufactured
and sold various products adapted to each era. In March
2016, we made Meiki Co., Ltd. a wholly owned subsidiarythrough a stock exchange method.
		The merger aims at further improving production capacityand production efficiency, strengthening new productdevelopment, and expanding sales and service systems.

(Important business transfer)
At the Board of Directors meeting held on February 18, 2020, theCompany resolved to transfer its compressor business to­Burckhardt Compression (Japan) Ltd. and transferred them on
April 17, 2020.
(1) Overview of business transfer
1. Name of company to be separated
		 Burckhardt Compression (Japan) Ltd.
2. Content of the separated business		Compressor business
3. Main reason for business separation		This is done to expand the business by putting theresources of the compressor business into a business thatis expected to grow.
4. Business separation date
		 April 17, 2020
5.	Matters concerning the outline of other transactions
including legal form		Business transfer where the consideration received is only
cash and other assets(2) Outline of accounting
1. Transfer amount
		 Gain on business transfer ¥2,537 million
2.	Appropriate book value of assets and liabilities related tothe transferred business and its main breakdown
		 Current assets¥112 million yen
		 Total assets		
¥112 million yen
3 Accounting		In accordance with “Accounting Standards for BusinessSeparation” (Corporate Accounting Standard No. 7,­September 13, 2017) and “Implementation Guidance for
Business Combination Accounting Standards andAccounting Standards for Business Separation” (Corporate
Accounting Standard Implementation Guidance No. 10,
January 16, 2019) the accounting treatment will be madeas a business transfer.

(Significant borrowings)
Based on a resolution of the Board of Directors meeting held on
January 28, 2020, the Company entered into a syndicate loan
agreement with Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank, Limited as arrangers on March 31, 2020 as
follows and borrowed on April 7, 2020.
(1) Use of funds
Repayment of debt, investment and loan funds(2) Borrowing amount
10,000 million yen(3) Borrowing rate
Fixed interest rate(4) Borrowing date
April 7, 2020
(5) Repayment deadline
April 7, 2027
(6) Repayment method
Lump sum repayment(7) Provision of collateralNone(3)	Segment classification that includes the transferredbusiness
Industrial machinery business(4) Approximate amount of sales related to the separated­business recorded in the income statement for the current
consolidated fiscal year.
Net sales ¥3,552 million yen(2) Overview of accounting
In accordance with “Accounting Standards for Business Combinations” (Corporate Accounting Standards No. 21, January 16, 2019)
and “Implementation Guidance for Accounting Standards for Business Combinations and Accounting Standards for Business Separation” (Corporate Accounting Standards Implementation
Guidance No. 10, January 16, 2019) the accounting treatment will
be made as a transaction under common control.

57

I n de p e n de nt Au di tor ’s R e p or t

Independent Auditor’s Report
The Board of Directors
The Japan Steel Works, Ltd.
OpinionWe have audited the accompanying consolidated financial statements of The Japan Steel Works, Ltd. and its consolidated subsidiaries(the Group), which comprise the consolidated balance sheet as at March 31, 2020, 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, 2020, and its consolidated financial performance and its consolidated cash flows for the year thenended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are
independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated 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 is sufficient and appropriate to provide a basis for our opinion.
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 withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as agoing 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 the Group’s financial reporting process.

・Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation in accordance with accounting principles generally accepted in Japan.
・Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Groupto express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance ofthe group audit. 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 ethicalrequirements regarding independence that are relevant to our audit of the financial statements in Japan, and to communicate withthem all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
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 of Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2020 are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 4 to the consolidated financial statements.
Ernst & Young ShinNihon LLC
Tokyo, Japan
June 30, 2020

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements can arise fromfraud 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 to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.
・Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances for ourrisk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an opinion on the effectiveness of the Group’s internal control.
・Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
・Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s reportto 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.

58

Yoshiyuki Nomizu
Designated Engagement Partner
Certified Public Accountant

Kazuki Hayashi
Designated Engagement Partner
Certified Public Accountant

Shingo Arai
Designated Engagement Partner
Certified Public Accountant

59