TKK Report 2021
Financial Section(Fiscal year ended March 31, 2021)

This material is the Financial Section of the TKK Report 2021, theintegrated report published by Toyo Kanetsu K.K. that summarizes
the financial information for the Company’s fiscal year 2020 (Apr.
2020 to Mar. 2021).

CONTENTS
1

Analysis of Operating Environment and Results

2

Business Risks

8

Consolidated Balance Sheet

10

Consolidated Statement of Income and Comprehensive Income

11

Consolidated Statement of Changes in Equity

13

Consolidated Statement of Cash Flows

15

Notes to Consolidated Financial Statements

44

Independent Auditor’s Report

50

Corporate Data

50

Directory

Analysis of Operating Environment and Results

During the fiscal year under review, the Japanese

Logistics Solutions Businesseconomy appeared to partially recover after rapidly

Sales were recorded mainly for airport equipment

worsening due to the impact of COVID-19. The

projects and warehouse automated equipment projects

economic outlook is uncertain, however, as new waves

incorporating our Multishuttle warehouse system forof infections occurred toward the end of the fiscal year.

co-ops, retailers, and manufacturers. Operating profit
grew mainly due to the improved profitability of large

Against that backdrop, the Logistics Solutions Businessprojects resulting from improved project management,

benefitted from strong demand for automated equipment

as well as increased maintenance projects and costfrom logistics facilities as we worked to overcome labor

cutting.

shortages and handle higher volumes of goods for
co-ops, which were facing increased demand from

As a result, consolidated net sales in this businessconsumers staying home during the pandemic. On thedecreased by 5.7% to ¥27,239 million, while operatingother hand, the business experienced falling demand forprofit increased by 11.7% year on year to ¥3,140 million

baggage handling systems for airports, reflecting thedue to the strengthening of project management and orders

drop in travel during the pandemic.

received declined by 15.6% year on year to ¥30,616 million.

At the same time, the Plant & Machinery Business met

Plant & Machinery Businessbrisk orders for maintenance services at oil refineries in

As difficult market conditions persisted, orders received

Japan, but orders for new facility construction remainedby this business fell mainly due to fewer large orders in

extremely sluggish both in Japan and overseas.

Japan and overseas, with the exception of one new

Anticipated orders in emerging countries, especially,order to construct an LPG tank in Malaysia together with

were seriously affected by the pandemic, as capital

the Company’s subsidiary, Toyo Kanetsu (Malaysia) Sdn.

investment plans were and continue to be significantly

Bhd. Nevertheless, a steady stream of orders for oil

delayed, scaled down, or reconsidered. With the end ofrefinery maintenance in Japan contributed to sales.

the pandemic now in sight, enquiries about projects haveSubsidiaries in other countries continued to pursue

increased, but their construction periods remainorders for steel structures other than tanks, but results

uncertain.

ended up below those of the previous fiscal year due tothe impact of COVID-19. Reflecting these circumstances,

Given this business environment, net sales for theand despite the Company’s efforts to further reduce

current fiscal year were ¥43,617 million (down 6.2% year

costs, operating losses increased again.

on year). Due to improvements of profitability in the
Logistics Solutions Business, the Company’s

As a result, consolidated net sales in this businessconsolidated operating profit was ¥2,623 million (updecreased 1.5% year on year to ¥9,800 million, and an1.2%) while ordinary profit was ¥3,053 million (up 2.8%).

operating loss of ¥602 million was posted (compared

Profit attributable to owners of parent came to ¥1,777

with ¥305 million in the previous fiscal year), while orders

million (up 3.5%). The main factors underlying this result

received decreased 6.5% to ¥9,262 million.

were a gain on sales of investment securities and an
impairment loss in the Plant & Machinery Business. In

Other Businesses

addition, orders received decreased 10.8% to ¥42,158

Efforts were focused mainly on leveraging themillion.

specializations of each subsidiary to develop sales forindustrial machinery, general construction andenvironmental surveys, etc. Consolidated net sales
decreased 14.4% year on year to ¥6,577 million.
Operating profit decreased 10.4% to ¥789 million, andorders received rose 116.3% to ¥2,279 million.

TKK Report 2021 Financial Section

1

Business Risks

Toyo Kanetsu’s risk management system includes a risk

Emissions Challenge sponsored by Japan’s Ministry ofmanagement officer—appointed from among the

Economy, Trade and Industry.

directors who oversee the risk management of theCompany and the Group—as well as a Group-wide risk

In addition, the Group recognizes that public trust could

management department, under the command of the

be lost if we or one of our subsidiaries causes anrisk management officer who identifies risks andenvironmental accident or disaster. To mitigate this risk,

monitors evaluations and results. Important risks are

we have acquired and periodically renew our ISO 14001

regularly reviewed after considering changes in thecertification, and we have established and actively

business environment and the status of risk responses,

implement a compliant environmental management

and we strive to ensure that effective risk

system in accordance with our environmental policies.

countermeasures are being quickly implemented.

(2) Risks related to the execution of projects
Out of all the risks that could affect our businessIn the Logistics Solutions Business, project management

activities, some that would have a significant impact are

and the ability to execute operations are becomingshown below. However, this is not an exhaustive list ofincreasingly important. This is because the role ofrisks related to the Group and there are risks that are

distribution centers in the supply chain is growing withdifficult to foresee. Forward-looking statements in thethe expansion of the e-commerce market and more

text are based on assessments as of March 31, 2021,

outsourcing of logistics operations, and because there is

the date of the fiscal year ended.

a tendency for distribution centers to grow larger in linewith the streamlining of logistics operations and the(1) Impact of climate change

consolidation of bases.

The TKK Group places great importance on the
promotion of ESG management and the international

For these reasons, we carefully manage delivery

goals set out in the SDGs and Paris Agreement.

deadlines from sales proposals through to construction

Especially, we recognize that “respond[ing] to changes inand strive to reduce costs and workloads by

the business environment caused by climate change” isstandardizing processes and improving productivity.

one of our most material management issues.

We also established a system for executing sustainableprojects and increased the number of companies using

Growing awareness of global environmental issues andthis system.

the transition to a low-carbon or decarbonized society
are accelerating the shift to clean energy. Accordingly,

However, unexpected costs could be incurred due tothe Company’s operating environment could become

various factors, such as shortened construction periods

unfavorable due to declining demand for tanks used todue to unexpected changes in construction plans understore LNG, crude oil, and other fossil fuels. Recognizingpressure to reduce delivery times and delivery deadline

these trends, and with the goal of helping achieve aadjustments due to carrying out multiple large projects

low-carbon society, the Group is applying oursimultaneously within a certain time period. Moreover,technologies to develop large-scale storage containers

some of the core products provided by this businessfor liquid hydrogen, and drawing on our strengths tosegment include products purchased from specificproactively build and supply increasingly needed

overseas business partners. The execution of projects

equipment and infrastructure for storing and using

could be affected if these products cannot be purchasedhydrogen and ammonia as fuel. To this end, Toyoconsistently due to changes in the business policies andKanetsu has joined the Japan Hydrogen Association andenvironment of our business partners, demand andthe Clean Fuel Ammonia Association, and endorsed the

supply fluctuations, or due to natural disasters,

Japan Business Federation’s Challenge Zero initiative.

accidents, and so on.

We are also recognized as a company taking on the Zero2

TKK Report 2021 Financial Section

The Plant & Machinery Business repairs storage tanks,

problems with a product, not only would profits from themainly at oil refineries in Japan. Our ability to execute

project deteriorate due to repair costs andthese projects could be negatively affected if there is aindemnification, this could also lead to a decline in the

shortage of construction workers, if the purchase priceGroup’s social reputation, which could adversely affectof materials and equipment rises sharply, or if the skills

our business results and financial position.

of site managers and foremen are passed down too
slowly. Therefore, we have taken steps to improve ties(3) Impact on securing and developing humanwith subcontractors and suppliers, have set up a stable

resources

construction organization, and have established a new

The TKK Group recognizes that securing and developing

company to hire and train construction site personnel.

human resources are two of our most important issues,

Furthermore, we have set up a centralized organizationand that any drain of human resources and increasing

led by a team of experts to collect information andrecruitment costs could affect our business activities.

manage all stages of new tank installation projects, fromreceiving orders through to construction work, in order

Therefore, we have broadened our hiring practices toto execute projects more quickly and efficiently.

recruit a more diverse range of employees and worked
hard to improve employee retention by creating a

The TKK Group conducts some operations in overseas

comfortable workplace environment and being flexible,

markets, primarily in the Plant & Machinery Business.

through numerous initiatives. For example, we have

Further, our consolidated subsidiary in Indonesia works

created an action plan to promote women’s participation

on local construction projects and processes steel

and advancement in the workplace, and we havematerials, including steel used for storage tanks. Our

implemented programs to train and promote female

local subsidiary in Malaysia maintains baggage handling

employees to management positions. We also allow

equipment at local airports and maintains equipment at

employees to choose staggered working hours, arelocal petrochemical plants. These overseas operations

working to improve the rate of taking paid leave, andcarry inherent risks, as stated below, and the TKK

encourage male employees to take childcare leave.

Group’s business results and financial position could be
adversely affected by these risks.

In addition, we have established a technical training
center as a Group-wide facility for handing down and(1) Unexpected changes in laws and regulations

improving skills, as well as for training young engineers(2) Political and economic instability

with a view to retaining them in the future.

(3) Difficulties in securing human resources(4) Tax system revisions that could be unfavorable to
the TKK Group(5) Social disorder due to terrorism, war, epidemics,
disasters, or other factors.

(4) Impact of intensifying competition for orders
The TKK Group’s main businesses are order based,
exposing us to severe competition for orders, so
unreasonable downward pressure on profitability could
adversely affect our business results and financial

In addition, when working on a project, we take out

position. Further, customer policies and plans, changes

product liability insurance for that project, and to ensurein the business environment of the industry, and industry

quality, the Group has established internal regulations

restructuring could affect our ability to obtain orders.

and put in place a quality management system tostrengthen quality control. We have also established a

In response to these risks, in the Logistics Solutions

system that enables a quick response to quality

Business we are expanding our customer areas in Japanproblems by placing the department responsible forand overseas, and providing optimal solutions by flexibly

quality control directly under the president. However, in

introducing outside technologies, while at the same time

the unlikely event of serious quality complaints or

promoting in-house production and standardized

TKK Report 2021 Financial Section

3

products to strengthen price competitiveness. We areunderpinned the Group’s earnings in a complementary

taking on other initiatives, such as revamping our internalway, but we recognize that fluctuations in thesystems, to further improve the efficiency of ourenvironmental surrounding these businesses are large

operations.

and the volatility of earnings is high.

In the Plant & Machinery Business, as the severe

To mitigate this risk, we are pursuing opportunities tobusiness environment drags on, we are improving andestablish a third main business segment through all

developing our core technology for tank EPC

available means, including mergers, acquisitions, setting(engineering, procurement, construction) contracts, andup corporate venture capital, and collaborations withare working to obtain orders by taking advantage of ourstartups. If, however, a lengthy amount of time is takensuperior quality, as well as expanding our businessto launch a third mainstay business segment, thedomains through overseas subsidiaries.

Group’s business results and financial position could be
negatively affected.

Further, given the tough competition for orders, the TKKGroup has established a management vision, Innovative(6) Impact on occupational health and safety

Solutions for Logistics & Energy, with the aims of

The TKK Group considers safety to be our highest

sustainably improving corporate value and contributing

priority. Under our Occupational Safety and Healthto social development. For this reason, we are working

Policy, we strive to ensure and improve the health andon technological developments in collaboration withsafety of our employees by acquiring and renewing

domestic and overseas companies that have state-of-

OHSAS 18001 and ISO 45001 certifications, establishing

the-art technology as well as collaborations with startups

a supervisory department directly under the president,

leveraging our corporate venture capital (CVC), and joint

holding group safety meetings, conducting on-site

research with universities and research institutions.

patrols, and maintaining and improving safety systems,
including at partner companies.

However, as the lifecycle of products and technologies
becomes shorter and shorter, any delays in meeting

However, in the event of problems or an accident, evenmarket requests could result in a decline in the Group’s

though countermeasures have been taken, they could

competitiveness, adversely affecting our business results

not only interfere with plant operations and customer

and financial position over the medium to long term.

service, but could also lead to compensation fordamages, criminal penalties, administrative punishment,

On a consolidated basis, the Group owns both tangible

and the loss of social trust, which could affect ourand intangible fixed assets, and continually monitors

business activities and financial position.

financial performance as a means to forecast when it
may be difficult to secure returns on investments in these(7) Compliance risks

assets. If we determine that these assets are less

The TKK Group operates in the field of social

profitable or cannot generate sufficient cash flow due toinfrastructure, a field that cannot exist without the trust

significant changes in the operating environment orof society. We recognize that compliance with laws andbusiness situation, we might record an impairment loss

regulations is one of the most important fundamentals ofon the assets, which could negatively affect ourtrusted business operations.

consolidated financial results and financial condition.
Therefore, in addition to putting in place an

4(5) Risks related to the launch of new businessesorganizational structure, such as of setting up the

For a long time, the TKK Group has been developing two

Compliance Committee and appointing supervisors, themain business segments: Logistics Solutions and Plant &Company has established regulations, including TKK

Machinery. So far, these two businesses haveGroup Charter of Corporate Behavior and we are

TKK Report 2021 Financial Section

promoting initiatives to maintain compliance, such as

The TKK Group handles, while doing business, a range

ensuring all Group directors and employees are fullyof confidential information, including customer andinformed of their social responsibility and public mission.

technical information. To strengthen the management of
this information, we have organized the Information

However, in the unlikely event that laws and regulations

Security Committee to thoroughly communicate thein Japan or overseas are violated, large surcharges andimportance of information security, for instance throughdamages could occur, which would not only adversely

employee education, and to implement security

affect the Group’s business results and financial position

measures for information systems.

but would also reduce the public’s trust in the Groupand affect our business continuity.

However, cyberattacks, including via computer viruses,
could interfere with the functioning of these information(8) Risks related to natural disasters, epidemics, etc.

systems, and if confidential information were lost or

To prepare for fires, earthquakes, large-scale natural

leaked, it could damage the Group’s reputation fordisasters, and epidemics, the TKK Group has written areliability and affect business activities.

business continuity plan (BCP) manual, and we havetaken all necessary steps for business continuity, such

Moreover, while the Group aims to transform theas establishing a contact system, building up stockpiles

business model through IT, including by automating andof emergency supplies, conducting seismic reinforcement

streamlining operations through robotic process

work, and setting up shelters at major manufacturing

automation (RPA), and by introducing businessand development bases in Japan.

standardization systems, if we lag behind in these digitaltransformation (DX) initiatives, we will not be able to

However, serious physical injury caused by a greater-

establish a competitive advantage and could lose out on

than-expected disaster could have a significant impact

business opportunities.

not only on the health of employees but also on theoperation of our plants, and although appropriate(10) Risks related to market trends

coverage is taken out through non-life insurance, theThe TKK Group’s core businesses could be affected bydirect and indirect damage and recovery costs could bemarket trends, such as the following:larger than anticipated, which would adversely affect ourbusiness results and financial position.

In the Logistics Solutions Business, we supply products
and systems mainly for the retail, wholesale, and co-op

The TKK Group recognizes that the impact of the global

industries. We also provide baggage handling systems,

spread of COVID-19, which began in 2020, poses risks

primarily to airports in Japan. Consequently, thisat many levels. In response to the pandemic, the Groupbusiness segment could be affected if investments in

has issued infection prevention guidelines, compiled alogistics facilities slow due to a lower volume in logistics

manual for dealing with practical situations, and put

as a result of a recession or declining birthrate and aging

measures in place to prevent the spread of infection.

population or trends in demand for air travel. We are

Human resource systems were updated to allow remote

therefore intensifying our business operations using AI

working and encourage paid days off, and improvements

and IoT technologies.

were made to IT systems, such as electronic application
systems and cloud storage, to facilitate the changes inIn the Plant & Machinery Business, we supply tanks forworkplace conditions.

LNG plants and refineries, as well as perform
maintenance on existing crude oil tanks, etc. This

(9) Impact of information security and maintaining

segment’s results could be adversely affected due to a

the information infrastructure

plant owner discontinuing, postponing, or making majorrevisions to investment plans due to global economic

TKK Report 2021 Financial Section

5

trends. Other factors that could affect business results
are the economic and social conditions of oil and gas
producing and consuming countries; trends in energy
and environmental policies in each country; trends incrude oil and LNG prices; and other factors. We are
therefore strengthening initiatives that improve theprofitability of maintenance projects, in this way
establishing a business structure that is resistant tofluctuations in orders and that secures a stable source ofincome.
In addition, risks such as the following are possible due
to a deterioration of the economic environment:a) Fluctuations in foreign exchange rates
The TKK Group’s business activities include theoverseas manufacture of products, sales of materials,
and construction work, and transactions that are mainly
conducted in U.S. dollars. Currently, we view the risk offluctuations in foreign exchange rates as low because
foreign currency-denominated transactions and theamount of assets held in foreign currencies are relatively
small, but the unexpected fluctuation could adversely
affect the Group’s business results and financial positionin the future.

b) Fluctuations in interest rates
To establish credit for trade receivables and to acquire
fixed assets, the TKK Group secures funding fromfinancial institutions that consider the balance of shortand long-term purchasing ratios. Although low interest
rates have continued due to large-scale monetaryeasing, etc., funding costs could increase if interest rates
rise, which could adversely affect the Group’s
performance and financial position.

c) Valuation of securities held
The TKK Group holds market value securities. We
revalue stock prices on the last day of the fiscal year,
and if the stock prices were to fall significantly, this could
adversely affect the Group’s performance and financial
position.

6

TKK Report 2021 Financial Section

TKK Report 2021 Financial Section

7

Consolidated financial statements, etc.
(1) Consolidated financial statements(i) Consolidated balance sheet(Millions of yen)Previous fiscal period(As of March 31, 2020)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Investments in leases
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Retirement benefit asset
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

8

TKK Report 2021 Financial Section

*1

*3
*3
*3
*3, *4*2

11,507
15,413
937
27
5,179
1,977
435
(16)
35,461

4,218
1,016
364
10,568253
20
16,442
381
8,013
45
38
889
(286)
8,699
25,52360,985Current fiscal period(As of March 31, 2021)

*1

*3
*3
*3
*3, *4*2

7,413
13,489
550
57
6,732
2,523
863
(13)
31,616

4,142
716
284
10,122356
18
15,641
481
9,909
42
452
847
(227)
11,024
27,14758,764

(Millions of yen)Previous fiscal period(As of March 31, 2020)
Liabilities
Current liabilities
Notes and accounts payable - trade
Short-term borrowings
Current portion of long-term borrowings
Accrued expenses
Income taxes payable
Advances received
Provision for bonuses
Provision for loss on order received
Provision for warranties for completed
construction
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

*3
*3

*3

*4

*4

919
7,849
619
4,763
553
2,790
267
241

Current fiscal period(As of March 31, 2021)

*3
*3

1,091
3,620
8
3,778
914
2,354
259
30

389

348

455
18,848681
13,086

–
4,488
1,520
1,095
152
235
40
7,534
26,382

*3

*4

1,000
4,580
2,138
1,095
107
230
41
9,193
22,28018,5801,273
15,224(2,355)32,722

18,5801,273
16,148(2,933)33,068

2,666

3,937

0
106
(729)
(165)
1,878
1
34,60260,985

*4

9
106
(833)
195
3,415
0
36,48458,764TKK Report 2021 Financial Section

9

(ii)

Consolidated statement of income and comprehensive income(Millions of yen)Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Foreign exchange gains
Subsidy income
Reversal of allowance for doubtful accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Bond issuance costs
Commission for purchase of treasury shares
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of non-current assets
Gain on sale of investment securities
Other
Total extraordinary income
Extraordinary losses
Loss on valuation of investment securities
Impairment losses
Loss on disaster
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable toProfit attributable to owners of parent
Loss attributable to non-controlling interests
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

10

TKK Report 2021 Financial Section*1*2, *346,51837,355
9,162
6,570
2,591

*1

*2, *3

43,61734,369
9,247
6,623
2,623

9
277
5
34
0
125
452

14
259
–
104
84
113
576

59
–
1
–
13
74
2,970

59
23
17
37
11
147
3,053

0
578
–
579

9
913
65
989

673
–
39
48
761
2,788
759
311
1,070
1,717

*5

Current fiscal year
(From April 1, 2020
to March 31, 2021)

*4

73
1,047
13
15
1,149
2,892
1,199
(83)
1,115
1,777

1,717
(0)

1,777
(0)

44
0
30
(104)
(29)
1,688

1,271
9
(104)
360
1,536
3,313

*5

1,688

3,314

(0)

(0)

(iii) Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2019 to March 31, 2020)(Millions of yen)
Shareholders’ equity
Share capital
Balance at beginning of
period18,580Capital surplus

Retained earnings

1,273

14,549Total shareholders’equityTreasury shares(1,077)33,324

Changes during period
Dividends of surplus

(903)

(903)

Profit attributable toowners of parent

1,717

1,717

Purchase of treasury
shares
Disposal of treasury
shares(1,416)(1,416)

(138)

138

–

Net changes in items otherthan shareholders’ equity
Total changes during period
Balance at end of period

–

–

675

(1,277)(602)

18,5801,273

15,224(2,355)32,722

Accumulated other comprehensive income
Valuation
Deferred gains Revaluationdifference onor losses onreserve foravailable-forland
hedgessale securities
Balance at beginning of
period

2,621

–

106

Foreigncurrencytranslation
adjustment
(759)

Total
Remeasureaccumulated
ments ofother
defined benefit
comprehensive
plansincome(61)

1,907

Noncontrollinginterests

Total net
assets1

35,234

Changes during period
Dividends of surplus(903)

Profit attributable toowners of parent

1,717

Purchase of treasury
shares(1,416)

Disposal of treasury
shares–Net changes in items otherthan shareholders’ equity

44

0

–

30

(104)

(29)

(0)

(29)

Total changes during period

44

0

–

30

(104)

(29)

(0)

(631)

Balance at end of period

2,666

0

106

(729)

(165)

1,878

1

34,602TKK Report 2021 Financial Section

11

Current fiscal year (From April 1, 2020 to March 31, 2021)(Millions of yen)
Shareholders’ equity
Share capital
Balance at beginning of
periodCapital surplus

18,580Retained earnings

Treasury shares

Total shareholders’equity15,224(2,355)32,722

1,273

Changes during period
Dividends of surplus

(853)

(853)

Profit attributable toowners of parent

1,777

1,777

Purchase of treasury
shares

(583)

(583)

Disposal of treasury
shares55Net changes in items otherthan shareholders’ equity
Total changes during period
Balance at end of period

–

–

924

(578)

345

18,5801,273

16,148(2,933)33,068

Accumulated other comprehensive income
Valuation
Deferred gains Revaluationdifference onor losses onreserve foravailable-forland
hedgessale securities
Balance at beginning of
period

2,666

0

106

Foreigncurrencytranslation
adjustment(729)

NonTotal
Remeasurecontrolling
accumulated
ments ofinterests
otherdefined benefit
comprehensive
plansincome
(165)

1,878

1

Total net
assets34,602

Changes during period
Dividends of surplus(853)

Profit attributable toowners of parent

1,777

Purchase of treasury
shares(583)

Disposal of treasury
shares5

Net changes in items otherthan shareholders’ equity

12

1,271

9

–

(104)

360

1,536

(0)

1,536

Total changes during period

1,271

9

–

(104)

360

1,536

(0)

1,882

Balance at end of period

3,937

9

106

(833)

195

3,415

0

36,484TKK Report 2021 Financial Section

(iv) Consolidated statement of cash flows(Millions of yen)Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment losses
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in retirement benefit liability
Decrease (increase) in retirement benefit asset
Increase (decrease) in provision for loss on order
received
Increase (decrease) in provision for warranties forcompleted construction
Interest and dividend income
Interest expenses
Loss on disaster
Foreign exchange losses (gains)
Loss (gain) on valuation of investment securities
Loss (gain) on sale of investment securities
Loss (gain) on sale of non-current assets
Loss on retirement of non-current assets
Decrease (increase) in trade receivables
Decrease (increase) in investments in leases
Decrease (increase) in inventories
Decrease (increase) in advance payments to
suppliers
Increase (decrease) in trade payables
Increase (decrease) in advances received
Other, net
SubtotalInterest and dividends received
Interest paid
Payments associated with disaster loss
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of non-current assets
Proceeds from sale of non-current assets
Purchase of investment securities
Proceeds from sale and redemption of investment
securities
Other, net
Net cash provided by (used in) investing activities

Current fiscal year
(From April 1, 2020
to March 31, 2021)

2,788
718
–

2,892
776
1,047

(9)

(61)

(195)
139

(39)
94

120

(211)

(165)

(41)

(287)
59
39
(17)
673
(578)
6
(18)
7,865
562
(1,221)

(273)
59
13
97
73
(913)
(9)
4
1,865
370
(2,134)1(228)(3,428)
769
(287)
7,533
287
(67)
(24)
(772)
6,955

(785)
(436)
(54)
2,104
273
(62)
(28)
(804)
1,482

(166)
118
(1,424)
4
(250)

(102)
102
(1,131)
11
(470)

878

1,238

27
(812)

12
(338)

TKK Report 2021 Financial Section

13

(Millions of yen)Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Proceeds from issuance of bonds
Purchase of treasury shares
Proceeds from disposal of treasury shares
Proceeds from share issuance to non-controllingshareholders
Dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

14

TKK Report 2021 Financial Section*

Current fiscal year
(From April 1, 2020
to March 31, 2021)

–
480
(514)
–
(1,566)149(4,229)
100
(619)
1,000
(583)
5

0

–

(901)
(2,351)(850)(5,176)

1

(59)

3,793
7,609
11,402(4,093)
11,402
7,309*

NotesBasis of presenting the consolidated financial statements
The accompanying consolidated financial statements of the Company and its domestic consolidated subsidiaries
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan. The accounts of overseas consolidated subsidiaries are based on theirfinancial statements prepared in conformity with generally accepted accounting principles and practices prevailingin the respective countries in which the subsidiaries are incorporated.
Significant accounting policies for preparation of the consolidated financial statements
1. Disclosure of scope of consolidation
Number of consolidated subsidiaries: 10 companies
Names of major consolidated subsidiaries are omitted since those names are described in “TKK Group Companies.”
2. Disclosure about application of the equity method
Not applicable
3. Disclosure about fiscal years, etc. of consolidated subsidiaries
Of the Company’s consolidated subsidiaries, Kankyo Research Institute Inc., Toyo Kanetsu Corporate Venture
Investment Partnership, Toyo Kanetsu Corporate Venture Fund Ⅱ, PT Toyo Kanetsu Indonesia, Toyo Kanetsu
Singapore Pte. Ltd. and Toyo Kanetsu (Malaysia) Sdn. Bhd. have a closing date of December 31. In preparation of
the consolidated financial statements, their financial statements as of December 31 are used. However, for majortransactions that occurred between that date and the consolidated balance sheet date, the necessary adjustments are
made in the consolidated financial statements.
4. Disclosure of accounting policies(1) Accounting policy for measuring significant assets(i) Securitiesa) Held-to-maturity bonds: Stated at amortized cost (straight-line method)b) Available-for-sale securities
Available-for-sale securities with available fair market values are stated at fair value based on the market
price or the like on the consolidated balance sheet date (valuation differences are directly charged or
credited to net assets, and cost of securities sold is determined by the moving-average method).
Available-for-sale securities without available fair market value are valued at cost determined by themoving-average method.
(ii)

Derivatives
Derivatives are valued at fair value.

(iii) Inventoriesa) Finished goods: Primarily, at cost using the first-in first-out method(The value on the balance sheet is written down to reflect a decline in profitability.)b) Work in process: Primarily, at cost using the specific identification method(The value on the balance sheet is written down to reflect a decline in profitability.)c) Raw materials: Primarily, at cost using the weighted-average method(The value on the balance sheet is written down to reflect a decline in profitability.)

TKK Report 2021 Financial Section15

(2) Accounting policy for depreciation of significant assets(i) Property, plant and equipment
The Company and its domestic consolidated subsidiaries use the declining-balance method, and overseas
consolidated subsidiaries use the straight-line method in accordance with provisions of accounting standards intheir respective countries.
However, the Company and its domestic consolidated subsidiaries use the straight-line method to depreciatebuildings (excluding facilities attached to buildings) acquired on or after April 1, 1998, and facilities attached
to buildings and structures acquired on or after April 1, 2016.
The estimated useful lives of major items are as follows:
Buildings and structures
2 to 57 years
Machinery and equipment
2 to 17 years(ii) Intangible assets
Intangible assets are amortized using the straight-line method.
Software for internal use is amortized using the straight-line method over the estimated useful life as internallydetermined (5 years).
(3) Accounting policy for significant provisions(i) Allowance for doubtful accounts
To cover losses from bad debts for trade receivables, loans receivable and others, an allowance for doubtful
accounts is provided based on historical experience of bad debts for general receivables. For specific receivables
such as highly doubtful receivables, the collectibility is individually considered and the estimated amount of
uncollectible accounts is provided as the allowance.
(ii) Provision for bonuses
To pay bonuses to employees, out of the estimated amount to be paid in the following fiscal year, an amountattributable to the current fiscal year is recorded.
(iii) Provision for loss on order received
To make provision for losses on orders received, as for existing construction, for which an amount of loss canbe reasonably estimated at the end of the current fiscal year, an expected amount of loss in future is recorded as
the provision.
(iv) Provision for warranties for completed construction
To cover costs of warranty against defects and after-sales service for completed construction, an amount isrecorded based on the historical loss rate as well as consideration of an amount for individual construction thatis expected to incur in future at the end of the current fiscal year.
(4) Method of accounting for retirement benefits(i) Method of attributing estimated retirement benefits to periods
For the purpose of attributing estimated retirement benefits over the period up to the end of the current fiscal
year in the calculation of retirement benefit obligations, the benefit formula method is applied.
(ii) Method of amortizing actuarial gain or loss and past service cost
Past service costs are recorded as an expense in the year they are incurred.
With regard to actuarial gain or loss, the amount is amortized by the straight-line method over a certain term
within the average remaining service period of the eligible employees (5 years) for each applicable fiscal year,
and expensed from the year following the year in which the gain or loss is recognized.
(5) Accounting policies for significant revenues and expenses(i) Recognition of revenues and costs of completed construction contracts
The percentage-of-completion method is applied to construction showing certainty of performance on the
progress made up until the end of the current fiscal year (the cost-to-cost method is applied to estimate the extent
of progress toward completion), and the completed-contract method is applied to other construction.
(ii) Standards for recognition of revenues and expenses related to finance lease transactions
Sales and costs are recognized at the time of receiving lease payments.
(6) Accounting policy for hedging(i) Method of hedge accounting
In principle, the deferral accounting is applied. The allocation method is applied to forward foreign exchange
contracts that meet requirements thereof, and the exceptional treatment is applied to interest rate swaps that meetrequirements thereof.

16

TKK Report 2021 Financial Section

(ii) Hedging instruments and hedged items
Hedging instruments: ......... Forward foreign exchange contracts, Interest rate swaps
Hedged items: ..................... Forecast transactions denominated in foreign currencies and borrowings(iii) Hedging policy
In accordance with the “Rules on Handling of Derivative Transactions” established by the Company, theCompany and its consolidated subsidiaries (collectively, the “Group”) do not enter into any derivativetransaction for speculative purposes but use derivative transactions only to hedge exchange rate fluctuation risk
and interest rate fluctuation risk.
(iv) Method of assessing the hedging effectiveness
The Group confirms effectiveness by comparing and examining cash flows of hedging instruments and hedged
items in advance. However, the Group omits assessment of effectiveness on interest rate swaps to which the
exceptional treatment is applied.
(7) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents include cash in hand, readily available deposits and short-term investments withmaturities of three months or less from the purchase date whose value is not subject to significant fluctuation risk.
(8) Other significant information for preparation of the consolidated financial statements
Accounting policy for consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of taxes.
Notes - Significant accounting estimates(Revenue recognition by the percentage-of-completion method)(1) Amount recognized in the consolidated statement of income for the current fiscal year
Net sales: ¥8,445 million(2) Information on the content of significant accounting estimates related to identified items
In the application of the percentage-of-completion method, the Group records net sales based on the progress rate
calculated as the proportion of construction cost incurred corresponding to value of work done at the end of thecurrent fiscal year to the total amount of estimated cost of construction work.
The estimated amount of total cost of construction work has been determined on the basis of management’s best
estimate and judgments based on past experience and available information collected as well as individual work
specifications. However, changes to original estimates may occur due to price fluctuations in the market, changes
to specifications, natural disasters and others, and such changes may have a significant effect on the amountrecognized in the consolidated statement of income for the next fiscal year.
Notes - Changes in accounting policies
Not applicableTKK Report 2021 Financial Section

17

Notes - New accounting standards to be applied“Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued by the Accounting Standards
Board of Japan on March 31, 2020)• “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, issued
by the Accounting Standards Board of Japan on March 26, 2021)• “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19,
issued by the Accounting Standards Board of Japan on March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB)
jointly developed comprehensive revenue recognition standards and issued “Revenue from Contracts with
Customers” in May 2014 (IASB’s IFRS 15 and FASB’s Topic 606). Considering that IFRS 15 shall apply to fiscal
years beginning on or after January 1, 2018, and Topic 606 shall apply to fiscal years beginning after December
15, 2017, the ASBJ developed a comprehensive accounting standard on revenue recognition and thus issued theaccounting standard together with the implementation guidance.
•

The ASBJ established the accounting standard on revenue recognition by following the basic policies in developing
it. The basic policies were: firstly, incorporating the core principle of IFRS 15 as the starting point from theperspective of facilitating comparability among financial statements, which is one of the benefits of ensuringconsistency with IFRS 15; secondly, adding alternative treatments, but to the extent not impairing comparability,
where consideration should be given to the practice having been used in Japan.
(2) Scheduled date of application
These ASBJ statement and guidance will be applied at the start of the fiscal year beginning on April 1, 2021.
(3) Effects of application of the accounting standard, etc.
The impact of the application of the Accounting Standard for Revenue Recognition on the consolidated financial
statements is currently under evaluation.
Notes - Changes in presentation
1. Application of the “Accounting Standard for Disclosure of Accounting Estimates”
The Group has applied the “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No.
31, issued on March 31, 2020) from the consolidated financial statements related to the end of the current fiscal
year, and provided a note on significant accounting estimates in the consolidated financial statements.
However, in accordance with the transitional treatment stipulated in the proviso in paragraph 11 of the accounting
standard, the content related to the previous fiscal year has not been described in this note.
2. Consolidated statement of income“Subsidy income” and “reversal of allowance for doubtful accounts” that were included in “other” under nonoperating income until the previous fiscal year have been presented separately from the current fiscal year since
the significance of the amount has increased.
In addition, “commission for purchase of treasury shares” that was included in “other” under non-operating
expenses until the previous fiscal year has been presented separately from the current fiscal year since thesignificance of the amount has increased.
In the previous fiscal year, “subsidy income” was ¥34 million, “reversal of allowance for doubtful accounts” was¥0 million, and “commission for purchase of treasury shares” was ¥1 million.
Notes - Additional information
1. Accounting estimates in association of the spread of COVID-19
With regard to the impact of COVID-19, although under the current situation, it is difficult to predict how it will
spread in the future and when the spread will end, the Group thinks at present that impact on accounting estimatesfor recoverability of deferred tax assets and others will be limited.
However, if the timing of when the spread of COVID-19 will come to an end and its impact on economic
environment change, the financial position and operating results may be affected.

18

TKK Report 2021 Financial Section

2. Transaction of granting the Company’s own shares to Directors, etc. through a trust
The Company has introduced a performance-linked share-based compensation using a trust for Directors(excluding Directors who are Audit and Supervisory Committee Members and outside Directors), and Managing
Officers who are not Directors and other Executive Officers in a higher rank (hereinafter collectively referred to as“Directors, etc.”) from the previous fiscal year, for the purpose of increasing the incentive to improve theCompany’s medium- to long-term performance and enhance the corporate value more than ever by clarifying thelinkage between remuneration of Directors, etc., and the Company’s medium- to long-term performance and stock
value, and sharing profits and risks resulting from the linkage with stock price between Directors, etc. andshareholders.
To the accounting treatment for this trust agreement, “Practical Solution on Transactions of Delivering theCompany’s Own Stock to Employees etc. through Trusts” (ASBJ PITF No. 30, issued on March 26, 2015) isapplied correspondingly.
(1) Outline of transaction
Money is entrusted to a trust designated by the Company (hereinafter referred to as the “Trust”), which acquires
shares of the Company. Points are given to each Director, etc. at the end of each fiscal year of the medium-termbusiness plan in accordance with the Share Delivery Regulations established by the Company’s Board of Directors,
and shares of the Company are delivered through the Trust in a certain period during the tenure of the Director, etc.
specified in the Regulations for the Provision of Shares for the Performance-linked Share-based Remuneration
Plan for officers, or at the time of retirement of the Director, etc. in the number corresponding to the number ofpoints accumulated by then.
(2) The Company’s shares remaining in the Trust
Shares of the Company remaining in the Trust have been recorded at the book value in the Trust (excluding theamount of incidental costs) as treasury shares in net assets. The book value and number of these treasury shares forthe previous fiscal year were ¥149 million and 84,400 shares, respectively, and for the current fiscal year were¥144 million and 81,200 shares, respectively.
Notes - Consolidated balance sheet*1.

The following amounts have been restricted by a bank in return for its issuing a bank guarantee, which wasprovided by the Company:
Previous fiscal year
(As of March 31, 2020)

Cash and deposits*2.

¥2 million

Current fiscal year
(As of March 31, 2021)¥1 million

Accumulated depreciation of property, plant and equipment are as follows:
Previous fiscal year
(As of March 31, 2020)¥11,542 million

Current fiscal year
(As of March 31, 2021)¥11,774 million

TKK Report 2021 Financial Section

19

*3.

Assets pledged and liabilities secured

Assets pledged and liabilities secured as collateral are as follows:
Assets pledged
Previous fiscal year
(As of March 31, 2020)
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
Land
Total

Current fiscal year
(As of March 31, 2021)¥300 million
0
0
5,458

[¥300 million][0][0][5,458]¥267 million
0
0
5,458

[¥267 million][0][0][5,458]5,759[5,759]5,726[5,726]

Liabilities secured as collateralPrevious fiscal year
(As of March 31, 2020)
Short-term borrowings
Long-term borrowings(including current portion of long-termborrowings)
Total

Current fiscal year
(As of March 31, 2021)¥1,670 million[¥1,670 million]¥939 million[¥939 million]

1,980[1,980]1,980[1,980]3,650[3,650]2,919[2,919]In the above table, figures in brackets present mortgages on factory foundation and the relevant debts. The amountsof land are after revaluation.
*4.

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on March 31, 1998), theCompany revalues its land for business use and, as for the valuation difference, records an amount equivalent
to tax relating to the valuation difference as “deferred tax liabilities for land revaluation” in the liabilities section
and an amount after deducting said amount as “revaluation reserve for land” in the net assets section.
- Method of revaluation – The Company revalues the land by the calculation method where a value based on theassessed value of fixed asset tax set forth in Article 2, Item 3 and road rating set forth in Article 2, Item 4 of the“Order for Enforcement of the Act on Revaluation of Land” (Cabinet Order No. 119 promulgated on March 31,
1998) is reasonably adjusted.
- Date of revaluation – March 31, 2002
Previous fiscal year
(As of March 31, 2020)

Difference between the year-end value ofrevaluated land and the book value after therevaluation¥(2,511) million

Current fiscal year
(As of March 31, 2021)¥(2,479) million

Notes - Consolidated statement of income and comprehensive income*1.

Provision for loss on order received included in cost of sales
Previous fiscal year
(From April 1, 2019
to March 31, 2020)¥133 million*2.

¥(211) million

Major components of selling, general and administrative expenses are as follows:
Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Salaries and allowances
Bonuses
Provision for bonuses
Retirement benefit expenses
Provision of allowance for doubtful accounts

20

Current fiscal year
(From April 1, 2020
to March 31, 2021)

TKK Report 2021 Financial Section¥1,913 million
395
137
171
(9)

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥1,975 million
458
133
215
(5)

*3.

Total of research and development expenses included in general and administrative expenses and manufacturingcosts for the period
Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥541 million*4.

¥597 million

Impairment losses

Previous fiscal year (From April 1, 2019 to March 31, 2020)
Not applicable
Current fiscal year (From April 1, 2020 to March 31, 2021)
The Company recorded impairment losses on the following asset groups.
(1)

Outline of asset groups on which impairment losses were recognized
Location

Use

Type

Chiba Plant (Kisarazu, Chiba)

Assets for Machinery & Plant
Business

Machinery and other assets

Head Office (Koto-ku, Tokyo)

Same as above

Software and other assets

PT Toyo Kanetsu Indonesia(Batam, Indonesia)

Same as above

Land, machinery, buildings andother assets

Toyo Kanetsu (Malaysia) Sdn. Bhd.
(Bintulu, Malaysia)

Same as above

Land, machinery, buildings andother assets(2) Circumstances leading to recognition of impairment losses
For asset groups of which cash flows arising from operating activities continued, or were expected to continue, tobe negative, the carrying amount was reduced to the recoverable amount, and the reduced amount was recorded as
impairment losses in extraordinary losses.
(3)

Amount of impairment losses and breakdown of the amount by type of major non-current assets
Type

Amount (Millions of yen)

Land

620

Machinery, equipment and vehicles

292

Buildings and structures

100

Tools, furniture and fixtures

18

Intangible assets
Total

(4)

14
1,047

Method of grouping assets

In principle, the Group’s assets for business use are grouped on the basis of the business, and the Group’s idle
assets are grouped by each asset. In addition, as for Head Office and Chiba Plant, the assets are grouped ascommonly used assets.
(5)

Method of calculating the recoverable amountThe recoverable amount of this asset group is measured at value in use, and the amount calculated by discounting
future cash flows at weighted average cost of capital of 5.32% is applied.

TKK Report 2021 Financial Section

21

*5.

Reclassification adjustments and tax effects relating to other comprehensive income
Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Valuation difference on available-for-salesecurities:
Amount recorded during the period
Reclassified amount¥64 million–¥1,832 million–

Pre-adjustment of tax effectTax effect amount

64
(19)

1,832
(561)

Valuation difference on available-forsale securities

44

1,271

Deferred gains or losses on hedges:
Amount recorded during the period
Reclassified amount

0
–

13
–

Pre-adjustment of tax effectTax effect amount

0
(0)

13
(4)

Deferred gains or losses on hedges

09Foreign currency translation adjustment:
Amount recorded during the period
Reclassified amount

30
–

(104)
–

Pre-adjustment of tax effectTax effect amount

30
–

(104)
–

Foreign currency translation adjustment

30

(104)

Remeasurements of defined benefit plans, netof tax:Amount recorded during the period
Reclassified amount

(164)
14

417
101

Pre-adjustment of tax effectTax effect amount

(149)
45

518
(158)

Remeasurements of defined benefit
plans,
net of tax

(104)

360

(29)

1,536

Total other comprehensive income

22

Current fiscal year
(From April 1, 2020
to March 31, 2021)

TKK Report 2021 Financial Section

Notes - Consolidated statement of changes in equity
Previous fiscal year (From April 1, 2019 to March 31, 2020)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares

9,323

–

–

9,323

Total

9,323

–

–

9,323

Common shares (Notes 1, 2, and
3)

283

675

84

874

Treasury shares(Notes) 1.
2.

3.

2.

Total
283
675
84
874
The number of treasury shares of common shares includes shares of the Company held by the benefit trust for officers(– thousand shares at beginning of period, 84 thousand shares at end of period).
Total number of treasury shares of common shares increased by 675 thousand shares because of an increase due toacquisition of treasury shares based on a resolution by the Board of Directors of 589 thousand shares, an increase
due to acquisition of shares of the Company by the trust of 84 thousand shares, and an increase due to purchase ofshares less than one unit of 1 thousand shares.
Total number of treasury shares of common shares decreased by 84 thousand shares due to a disposal of treasury
shares to the benefit trust for officers based on a resolution by the Board of Directors.

Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of
Shareholders on June 27,
2019

Common shares¥903 million¥100

March 31, 2019

June 28, 2019(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next fiscal
year

Resolution

Class ofsharesTotal
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Retained
Meeting ofCommonJune 29, 2020
¥100
March 31, 2020¥853 million
earnings
Shareholders on Juneshares26, 2020(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 26, 2020
includes dividends on shares of the Company held by the benefit trust for officers of ¥8 million.

Current fiscal year (From April 1, 2020 to March 31, 2021)
1.
Matters concerning class and total number of issued shares, and class and number of treasury shares
Number of shares at
beginning of period

Number of shares
increased in period

Number of shares
decreased in period(Thousands of shares)
Number of shares at
end of period

Issued shares
Common shares

9,323

–

–

9,323

Total

9,323

–

–

9,323

Common shares (Notes 1, 2, and
3)

874

273

3

1,144

Treasury shares(Notes) 1.
2.

Total
874
273
3
1,144
The number of treasury shares of common shares includes shares of the Company held by the benefit trust for officers(84 thousand shares at beginning of period, 81 thousand shares at end of period).
Total number of treasury shares of common shares increased by 273 thousand shares because of an increase due toacquisition of treasury shares based on a resolution by the Board of Directors of 269 thousand shares and an increase
due to purchase of shares less than one unit of 4 thousand shares.

TKK Report 2021 Financial Section

23

3.

2.

Total number of treasury shares of common shares decreased by 3 thousand shares due to a disposal of treasury
shares to the benefit trust for officers based on a resolution by the Board of Directors.

Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total
dividends

Dividends per
share

Record date

Effective dateOrdinary General Meeting of¥853 million¥100
March 31, 2020
June 29, 2020
Shareholders on June 26,
Common shares
2020(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 26, 2020
includes dividends on shares of the Company held by the benefit trust for officers of ¥8 million.

(2)

Dividends whose record dates are in the current fiscal year but whose effective dates fall in the next fiscal
yearClass ofsharesResolution

Total
dividends

Source ofdividends

Dividends per
share

Record date

Effective dateOrdinary General
Retained
Meeting ofCommonJune 30, 2021
¥115
March 31, 2021
¥949 million
earnings
Shareholders on Juneshares29, 2021(Note) The total amount of dividends based on a resolution at the Ordinary General Meeting of Shareholders on June 29, 2021
includes dividends on shares of the Company held by the benefit trust for officers of ¥9 million.

Notes - Consolidated statement of cash flows* Reconciliation of ending balance of cash and cash equivalents with account balances per balance sheet
Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Current fiscal year
(From April 1, 2020
to March 31, 2021)

Cash and deposits
Time deposits with maturity over 3 months
Restricted deposits¥11,507 million
(102)
(2)

¥7,413 million
(102)
(1)

Cash and cash equivalents

11,402

7,309

Notes - Leases(Borrower)
Operating lease transactions
Future lease payments under non-cancelable operating leases
Within 1 year
Over 1 year
Total

Previous fiscal year
(As of March 31, 2020)

Current fiscal year
(As of March 31, 2021)¥27 million¥65 million

65

213

93

279

Previous fiscal year
(As of March 31, 2020)

Current fiscal year
(As of March 31, 2021)¥925 million¥524 million(Lender)
Finance lease transactions(1) The components of investments in leases
Current assets

Lease payments receivable
Estimated residual value

24

65

48

Amount equivalent to interest income

(53)

(69)

Investments in leases

937

502

TKK Report 2021 Financial Section

(2)Amounts expected to be collected on lease payments receivable of investments in leases after consolidatedbalance sheet dateCurrent assets(Millions of yen)Previous fiscal year (As of March 31, 2020)
Within 1 year
Investments in leases

401

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

332

159

31

–

–
(Millions of yen)

Current fiscal year (As of March 31, 2021)
Within 1 year
Investments in leases

332Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Over 5 years

159

31

–

–

–

Notes - Financial instruments
1.
Status of financial instruments(1) Policy on treatment of financial instruments
The Group raises funds necessary to run its business smoothly by borrowing from banks. In the case where theGroup has temporary surplus funds, it invests them only in safe financial instruments.
The Group uses derivative transactions to hedge various risks described in (2) in accordance with the “Rules on
Handling of Derivative Transactions” established by the Company and has a policy not to enter into any speculativetransaction.
(2) Content and risks of financial instruments and risk management system therefor
The Group’s notes and accounts receivable - trade are subject to credit risk of its customers, and its certain
receivables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigatesthe credit risk of its customers by periodically confirming whether there is any overdue receivable using an aging
schedule and other documents and the exchange rate fluctuation risk such as by borrowing in foreign currencies asneeded.
The Company’s securities are subject to credit risk of its investees, but the Company invests surplus funds in safe
financial instruments with high ratings through prescribed internal procedures.
The Group’s investment securities are subject to credit risk of its investees and market price fluctuation risk. They
are equity securities of listed companies with which the Group has business relationships, most of which are
categorized as available-for-sale securities, and the Group periodically ascertains the fair value thereof.
The Group’s notes and accounts payable - trade and accrued expenses are subject to liquidity risk, and its certain
payables denominated in foreign currencies are subject to exchange rate fluctuation risk. The Group mitigates theliquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents and theexchange rate fluctuation risk by forward exchange contracts and other means as needed.
Of borrowings and bonds payable, short-term borrowings are primarily for daily business transactions, and bonds
payable and long-term borrowings are primarily for temporary advances on large-scale projects. Variable-rateborrowings are subject to interest rate fluctuation risk, and the Group uses interest rate swaps as hedging
instruments for respective contracts for most of the long-term borrowings in order to hedge the fluctuation risk of
the interest rates to be paid and fix interest expenses. The Group limits interest rate swaps to those to which the
exceptional treatment can be applied and omits assessment of hedge effectiveness thereon. The Group mitigates
the liquidity risk by periodically preparing a schedule of cash receipts and disbursements and other documents.
The Group executes and manages derivative transactions in accordance with the Company’s Rules on Handling of
Derivative Transactions and, when using derivatives, enters into transactions with financial institutions with highratings to mitigate credit risk. Please see “Accounting policy for hedging” of “Disclosure of accounting policies”
in “Significant accounting policies for preparation of the consolidated financial statements” described previously
for the hedging instruments, hedging policy, method of assessing the hedging effectiveness and other information
on hedge accounting.
(3) Supplementary explanation concerning fair values of financial instruments
Fair values of financial instruments comprise values based on market prices and reasonably measured values where
market prices are unavailable. As several variable factors are incorporated in calculating the relevant fair value,
the resulting amount may vary depending on the different preconditions employed. In addition, the contract
amounts of derivative transactions, mentioned in “Notes - Derivatives” in Notes, should not be considered
indicative of the sizes of the market risks involved in the derivative transactions.

TKK Report 2021 Financial Section25

2.
Fair values of financial instruments
Carrying amounts on the consolidated balance sheet, fair values and differences therebetween of the financial
instruments as of March 31, 2020 and 2021, are as shown below. However, financial instruments whose fair values
are deemed to be extremely difficult to determine are not included therein (Note 2).
Previous fiscal year (As of March 31, 2020)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

11,507
15,413(0)

11,507–

15,413

15,413

–

–
6,728

–
6,728

–
–

Total assets

33,64933,649–Notes and accounts payable - trade
Short-term borrowings
Accrued expenses
Long-term borrowings(including within 1 year)

919
7,849
4,763

919
7,849
4,763

–
–
–

5,107

5,197

90

Total liabilities

18,63818,729

90

–
0

–
0

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)

Fair value

Derivatives(1) Those not qualifying for hedge accounting(2) Those qualifying for hedge accounting

Total derivatives
00–(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.

Current fiscal year (As of March 31, 2021)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet(1) Cash and deposits(2) Notes and accounts receivable - trade
Allowance for doubtful accounts (*)

Difference

7,413
13,489–7,413–

13,48913,489

–

–
8,425

–
8,425

–
–

Total assets

29,32929,329–Notes and accounts payable - trade
Short-term borrowings
Accrued expenses
Bonds payable
Long-term borrowings(including within 1 year)

1,091
3,620
3,778
1,000

1,091
3,620
3,778
1,009

–
–
–
9

4,588

4,677

89

Total liabilities

14,07814,177

99

–
–

–
–

–
–

(3) Securities(4) Investment securities
(1)
(2)
(3)
(4)
(5)

Fair value

Derivatives(1) Those not qualifying for hedge accounting(2) Those qualifying for hedge accounting

Total derivatives–––(*) Amounts of allowance for doubtful accounts separately included in notes and accounts receivable - trade are excluded.

26

TKK Report 2021 Financial Section

(Notes) 1.

Calculation method of fair values of financial instruments and matters concerning securities and derivatives
Assets(1) Cash and deposits and (2) Notes and accounts receivable - trade
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(3) Securities
Because this account has a short-term maturity, its fair value approximates its book value. Therefore, the fairvalue is based on the book value.
(4) Investment securities
Fair value of this account is based on the price on exchanges, the price provided by counterparty financial
institutions or other prices. Please refer to “Notes - Securities” for the notes.
Liabilities(1) Notes and accounts payable - trade, (2) Short-term borrowings and (3) Accrued expenses
Because these accounts are settled in a short period, their fair values approximate their book values. Therefore,
the fair values are based on the book values.
(4) Bonds payable
Fair value of this account is determined at the present value derived by discounting the total amount of principal
and interest at the interest rate reflecting the remaining period and credit risk of said bond.
(5) Long-term borrowings (including within 1 year)
Fair value of this account is determined by discounting the total amount of principal and interest at the interest
rate available for a similar borrowing. Fair values of long-term borrowings with variable rates, to which the
exceptional treatment for the interest rate swap is applied, are determined by discounting the total amount ofprincipal and interest accounted for with the relevant interest rate swaps at the reasonably estimated interest
rates applied to similar borrowings.
Derivatives
Please refer to “Notes - Derivatives” in Notes.

2.
3.

“Assets (4) Investment securities” do not include unlisted equity securities (carrying amount on the consolidatedbalance sheet of ¥1,483 million) because there is no market price and their future cash flows cannot be estimatedand accordingly it is extremely difficult to ascertain their fair values.
Projected redemption amounts for monetary claims and securities with maturities after the consolidated balance
sheet datePrevious fiscal year (As of March 31, 2020)(Millions of yen)

Within 1 year

Over 1 year
to 5 years

Over 5 years
to 10 years

Over 10 years

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

11,455
15,413
–

–
–
–

–
–
–

–
–
–

–
–

–
–

–
–

–
–

Total

26,868–––Within 1 year

Over 1 year
to 5 years

Over 5 years
to 10 years

Over 10 years

Cash
Notes and accounts receivable - trade
Securities
Investment securities
Held-to-maturity bonds
Available-for-sale securities

7,386
13,489
–

–
–
–

–
–
–

–
–
–

–
–

–
–

–
–

–
–

Total

20,875–––Current fiscal year (As of March 31, 2021)(Millions of yen)

TKK Report 2021 Financial Section

27

4.

Scheduled repayment amounts of bonds payable, long-term borrowings and other interest-bearing liabilities
Previous fiscal year (As of March 31, 2020)
Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

8

–

1,700

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Long-term borrowings
Current fiscal year (As of March 31, 2021)(Millions of yen)Over 4 years
to 5 years
2,480(Millions of yen)Over 4 years
to 5 years

Bonds payable

–

–

–

–

Long-term borrowings

–

1,700

2,480

400

Notes - Securities
1.

Held-to-maturity bonds
Previous fiscal year (As of March 31, 2020)
Not applicable
Current fiscal year (As of March 31, 2021)
Not applicable

2.

Available-for-sale securities (securities classified as other securities under Japanese GAAP)
Previous fiscal year (As of March 31, 2020)
Type(1) Stocks(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Acquisition cost

Difference

5,828

2,000

3,828

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

5,828

2,000

3,828

899

1,067

(168)

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

899

1,067

(168)

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

Subtotal(1) Stocks(2) Bonds
Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost

Subtotal(Note)

28

Total
6,728
3,068
3,659
“Available-for-sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥1,284 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values.

TKK Report 2021 Financial Section

Current fiscal year (As of March 31, 2021)(Millions of yen)
Carrying amount on
the consolidatedbalance sheet

Type(1) Stocks

Acquisition cost

Difference

8,425

2,943

5,482

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(3) Other

–

–

–

8,425

2,943

5,482

–

–

–

(i) Government
bonds andmunicipal bonds,
etc.

–

–

–

(ii) Corporate
bonds

–

–

–

(iii) Other

–

–

–

(2) Bonds

Securities for which the carrying
amount on the consolidated balance
sheet exceeds the acquisition cost

Subtotal(1) Stocks(2) Bonds
Securities for which the carrying
amount on the consolidated balance
sheet does not exceed the acquisition
cost(3) Other
Subtotal(Note)

3.

–

–

–

–

–

–

Total
8,425
2,943
5,482
“Available-for-sale securities” in the above table do not include unlisted equity securities (carrying amount on the
consolidated balance sheet of ¥1,483 million) because there is no market value and accordingly it is extremely difficult
to ascertain their fair values.

Available-for-sale securities that were sold
Previous fiscal year (From April 1, 2019 to March 31, 2020)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount878

Total gain on sales
578(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

878

578

–

Current fiscal year (From April 1, 2020 to March 31, 2021)
Type(1) Shares(2) Bonds(i) Government bonds and municipal bonds,
etc.
(ii) Corporate bonds(iii) Other(3) Other
Total

Sales amount
1,238

Total gain on sales
913(Millions of yen)
Total loss on sales
–

–

–

–

–
–
–

–
–
–

–
–
–

1,238

913

–

TKK Report 2021 Financial Section29

4. Securities subject to the recognition of impairment loss
In the previous fiscal year, impairment loss of ¥451 million (shares in available-for-sale securities: ¥451 million)
was recognized on securities. In the current fiscal year, there were no securities on which impairment loss wasrecognized.
In the treatment for impairment loss, impairment loss is recognized in principle when the fair market value atthe period-end decreased by 50% or more compared with the acquisition cost, and impairment loss is recognized
to the extent of the amount considered necessary in light of materiality of the amount, recoverability and otherfactors when the fair market value at the period-end decreased by approximately 30 to 50%.

30

TKK Report 2021 Financial Section

Notes - Derivatives
1. Derivative transactions to which hedge accounting is not applied
Not applicable
2. Derivative transactions to which hedge accounting is applied(1) Currencies
Previous fiscal year (As of March 31, 2020)

Type of derivativetransaction, etc.

Classification

Principal hedged
items(Millions of yen)Contract
amountPortion ofcontract
amount over
1 yearFair value

Fair value iscalculated
based on theprice provided
bycounterparty
financial
628 institutions orother prices.

Forward exchange
contract
Allocation method
for forward
exchange contract

Buy contract
Euro

Accounts
payable - trade

Total

627

–

627

–

Fair value
calculation
method628

Current fiscal year (As of March 31, 2021)
Not applicable(2) Interest rates
Previous fiscal year (As of March 31, 2020)(Millions of yen)Classification

Type of derivativetransaction, etc.

Principal hedged
items

Exceptional
treatment ofinterest rate swaps

Interest rate swap
transactions
Receive variable,
pay fixed

Long-term
borrowings(Note)

Contract
amount3,200

Portion ofcontract
amount over
1 year2,700

Fair value

Fair value
calculation
method(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that of corresponding
long-term borrowings, as those interest rate swaps are treated as an adjustment to long-term borrowings as hedged items.

Current fiscal year (As of March 31, 2021)

Classification

Type of derivativetransaction, etc.

Principal hedged
items

Exceptional
treatment ofinterest rate swaps

Interest rate swap
transactions
Receive variable,
pay fixed

Long-term
borrowings(Note)(Millions of yen)Contract
amount2,700

Portion ofcontract
amount over
1 year2,700

Fair value

Fair value
calculation
method(Note)(Note)

The fair value of interest rate swaps that are accounted for using exceptional treatment is included in that of corresponding
long-term borrowings, as those interest rate swaps are treated as an adjustment to long-term borrowings as hedged items.

TKK Report 2021 Financial Section31Notes - Retirement benefits
1. Summary of retirement benefit plans adopted
The Company and certain consolidated subsidiaries have defined benefit corporate pension plans as defined benefit
plans, and certain consolidated subsidiaries have a small and medium sized enterprise retirement allowancecooperative plan and lump-sum retirement plans.
In addition, the Company and certain consolidated subsidiaries have defined contribution corporate pension plans.
The Company and certain consolidated subsidiaries participate in Nihon Sangyo Kikai Kougyo Kigyonenkin Kikin(pension fund of Japan industrial machinery manufacturers). For this fund, since the amount of pension plan assets
corresponding to contributions by the respective companies cannot be reasonably calculated, the fund is accounted
for similar to defined contribution plans.
2. Defined benefit plans(1) Reconciliation between beginning balance and ending balance of retirement benefit obligations
Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Beginning balance of retirement benefit
obligations
Service cost
Interest expenses
Unrecognized net actuarial gain or loss
Retirement benefits paid
Past service cost
Other
Ending balance of retirement benefit
obligations(2)¥3,428 million¥3,350 million

193
16
27
(318)
–
2

192
15
(20)
(156)
(13)
(6)

3,350

3,361

Reconciliation between beginning balance and ending balance of pension plan assets

Beginning balance of pension plan assets
Expected return on plan assets
Unrecognized net actuarial gain or loss
Amount of employer contribution
Retirement benefits paid
Other
Ending balance of pension plan assets

32

Current fiscal year
(From April 1, 2020
to March 31, 2021)

TKK Report 2021 Financial Section

Previous fiscal year
(From April 1, 2019
to March 31, 2020)¥3,403 million
42
(136)
240
(317)
3
3,235

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥3,235 million
37
397
232
(187)
(8)
3,707

(3)

Retirement benefit obligations and pension plan assets at the end of the fiscal year and reconciliation ofretirement benefit liability and retirement benefit asset on consolidated balance sheet
Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Retirement benefit obligations under
funded system
Pension plan assets
Retirement benefit obligations under
unfunded system
Net amount of assets and liabilities statedin the consolidated balance sheet
Retirement benefit liability
Retirement benefit asset
Net amount of assets and liabilities statedin the consolidated balance sheet(4)¥3,350 million¥3,361 million(3,235)(3,707)

114

345

–

–

114

345

152
(38)

107
(452)

114

345

Retirement benefit expenses and components thereofService cost
Interest expenses
Expected return on plan assets
Amortization of net actuarial gain or loss
Amortization of past service cost
Retirement benefit expenses pertaining todefined benefit plans(5)

Current fiscal year
(From April 1, 2020
to March 31, 2021)

Previous fiscal year
(From April 1, 2019
to March 31, 2020)¥193 million
16
(42)
15
–
183

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥192 million
15
(37)
101
(13)
258

Remeasurements of defined benefit plans on consolidated statement of income and comprehensive income

The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Past service cost
Actuarial gains and losses
Total

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥– million(149)¥– million
518

(149)

518

(6) Remeasurements of defined benefit plans on consolidated balance sheet
The components of remeasurements of defined benefit plans (before tax effects deduction) are as follows:
Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Unrecognized past service cost
Unrecognized net actuarial gain or loss
Total

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥– million
232¥– million
(280)

232

(280)

TKK Report 2021 Financial Section33

(7) Pension plan assets(i) Major components of pension plan assets
Ratio of major components for total pension plan assets is as follows:
Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Current fiscal year
(From April 1, 2020
to March 31, 2021)

30%
27
33
11

28%
33
30
9

100

100

Bonds
SharesGeneral account
Other
Total

(ii) Method of establishing expected long-term rates of return on plan assets
In order to determine the expected long-term rates of return on plan assets, the current and forecast distributionof plan assets and the current and expected future long-term rates of return from the diverse assets that comprisethe plan assets are taken into consideration.
(8) Matters relating to the basis for actuarial calculations
Main basis for actuarial calculations
Discount rate
Expected long-term rates of return on pension
plan assets

Previous fiscal year
(As of March 31, 2020)

Current fiscal year
(As of March 31, 2021)

0.25%

0.25%

1.00%

1.00%

3. Defined contribution plans
The required contribution from the Company and its consolidated subsidiaries into the defined contribution pension
plans was ¥83 million in the previous fiscal year and ¥81 million in the current fiscal year.
4. Multi-employer plan
The required contribution amount to the corporate pension fund plan under the multi-employer plan, which isaccounted for in the same manner as a defined contribution plan, was ¥95 million in the previous fiscal year and ¥103
million in the current fiscal year.
(1)

Funded status of multi-employer planPrevious fiscal year
(As of March 31, 2019)

Current fiscal year
(As of March 31, 2020)

Plan assets
Sum of actuarial obligations calculated forfinance status of pension plan and minimum
reserve¥11,138 million¥11,573 million

21,40621,129Net amount(10,268)(9,557)(2) Group’s proportion of total contributions to planPrevious fiscal year 7.51%(From April 1, 2019 to March 31, 2020)
Current fiscal year 7.69%(From April 1, 2020 to March 31, 2021)(3) Supplementary explanation
Major factors for the net amount in (1) above are the balance of past service liabilities (¥10,889 million as of March
31, 2019 and ¥9,946 million as of March 31, 2020) and surplus amount (¥622 million as of March 31, 2019 and ¥389
million as of March 31, 2020) for pension financing calculation.
The principal and interest of past service liabilities in this plan are amortized equally over 10 years and 6 months, and
the Group recorded special contributions applied to such amortization (¥67 million as of March 31, 2019 and ¥73
million as of March 31, 2020) as expenses in the consolidated financial statements.
The proportions in (2) above are not consistent with the proportions actually funded by the Group.

34

TKK Report 2021 Financial Section

Notes - Share options, etc.
Not applicable
Notes - Tax effect accounting
1. Significant components of deferred tax assets and liabilities
Previous fiscal year
(As of March 31, 2020)
Deferred tax assets
Tax loss carry-forward (Note)
Accrued business tax
Retirement benefit liability
Provision for bonuses
Allowance for doubtful accounts
Provision for loss on order received
Loss on valuation of investment securities
Loss on valuation of investments in capital
Impairment loss
Depreciation
Asset retirement obligations
Other

Current fiscal year
(As of March 31, 2021)¥206 million
46
114
81
94
74
246
181
136
39
72
227

¥122 million
57
32
79
74
9
225
203
393
56
70
244

Deferred tax assets subtotal
Valuation reserve for tax loss carryforwards (Note)
Valuation reserve for the total of deductible
temporary differences, etc.

1,520

1,569

(206)

(122)

(784)

(940)

Valuation reserve subtotal(991)(1,062)

528

506

1,095

1,095

989

1,550

871

866

77
65

138
47

Total deferred tax assets
Deferred tax liabilities
Revaluation reserve for land
Valuation difference on available-for-salesecurities
Reserve for tax purpose reduction entry of
non-current assets
Retirement benefit asset
Other

Total deferred tax liabilities
3,100
3,698
(Note)
Amounts of tax loss carry-forwards and related deferred tax assets by carry-forward period

Previous fiscal year (As of March 31, 2020)(Millions of yen)
Within 1
year

Over 1 year
to 2 years

Over 2
years to 3
years

Over 3
years to 4
years

Over 4
years to 5
years

Over 5years

Tax loss carry-forwards
(*)

–

–

84

30

91

–

206

Valuation reserve

–

–

(84)

(30)

(91)

–

(206)

Deferred tax assets

–

–

–

–

–

–

–

Total

TKK Report 2021 Financial Section

35

Current fiscal year (As of March 31, 2021)(Millions of yen)
Within 1
year

Over 1 year
to 2 years

Over 2
years to 3
years

Over 3
years to 4
years

Over 4
years to 5
years

Over 5years

Tax loss carry-forwards
(*)

–

71

2

5

42

–

122

Valuation reserve

–

(71)

(2)

(5)

(42)

–

(122)

Deferred tax assets

–

–

–

–

–

–

–

(*)

Total

Tax loss carry-forwards represent the amount multiplied by the statutory effective tax rate.

2. Main components causing significant differences between the statutory effective tax rate and the actual effective
tax rate after application of tax effect accounting
Previous fiscal year
(As of March 31, 2020)

Current fiscal year
(As of March 31, 2021)

Statutory effective tax rate
Adjustments
Increase/decrease in valuation reserve
Expenses not deductible for income tax
purposes, such as entertainment expenses
Income not included for income tax purposes,
such as dividends received
Per capita levy of inhabitant taxes
Effect of differences in tax rates applicable tosubsidiaries from tax rate applicable to theCompany
Retained earnings of overseas subsidiaries
Tax credits
Other

30.62%

30.62%

4.14

6.30

2.72

0.73

(0.52)(0.46)

1.18

1.14

1.10

3.64

0.22
(0.29)(0.78)(1.03)(2.17)(0.20)

Actual effective tax rate

38.40

38.56

Notes - Changes in presentation“Tax credits” that was included in “other” in the previous fiscal year has been presented separately from the current
fiscal year due to the increased significance. To reflect this change in presentation, notes for the previous fiscal year
have been reclassified.
Consequently, (1.07)% that was presented in “other” in the previous fiscal year has been reclassified into (0.29)% of“tax credits” and (0.78)% of “other.”
Notes - Asset retirement obligations
Of asset retirement obligations, items recorded on the consolidated balance sheeta) Outline of asset retirement obligations
The asset retirement obligations of the Group are obligations in certain facilities for rent under the Ordinanceon Prevention of Asbestos Hazards.
b) Calculation method for determining asset retirement obligation amountThe amount of asset retirement obligations was calculated assuming an estimated period of use of 31 years fromacquisition, and using a discount rate of 2.2%.
c) Increase (decrease) in total asset retirement obligations

36

Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Current fiscal year
(From April 1, 2020
to March 31, 2021)

Beginning balance
Increase due to change in estimates
Decrease due to settlement of asset retirement
obligations¥224 million
14¥235 million
–

(3)

(4)

Ending balance

235

230

TKK Report 2021 Financial Section

Notes - Real estate for lease, etc.
The Company and certain subsidiaries rent out a space such as in their business places as well as land mainly forrental housing and buildings in the Tokyo metropolitan area and other areas. Rental profit related to the real estate forrent, etc. for the previous fiscal year was ¥268 million (rent income is recorded in net sales, and rent expenses arerecorded in cost of sales). Rental profit related to the real estate for rent, etc. for the current fiscal year was ¥286
million (rent income is recorded in net sales, and rent expenses are recorded in cost of sales).
Carrying amounts on the consolidated balance sheet, changes during period for the previous and current fiscal years
and fair values of the real estate for rent, etc. are as follows:(Millions of yen)
Current fiscal year
(From April 1, 2020
to March 31, 2021)

Previous fiscal year
(From April 1, 2019
to March 31, 2020)
Carrying amount on the consolidated balance
sheet
Balance at beginning of
period

4,615

4,818

Increase (decrease)during period

203

(71)

Balance at end of
period

4,818

4,746

Fair value at end of period
3,267
3,299
(Notes) 1. Carrying amount on the consolidated balance sheet is calculated by subtracting accumulated depreciation andimpairment loss from acquisition cost.
2. The increase (decrease) during period for the previous fiscal year primarily consist of an increase in rentable space(¥230 million) and a decrease due to depreciation (¥27 million). The increase (decrease) during period for the current
fiscal year primarily consist of a decrease in rentable space (¥62 million) and a decrease due to depreciation (¥9million).
3. Fair value of property whose amount has significance at the end of the period is an amount based on a value
investigation report by an external real property appraiser, and that of other property whose amount has little
significance is an amount based on an index which is believed to reflect a market value appropriately.

Notes - Segment information, etc.
[Segment information]
1. Description of reportable segments
The reportable segments of the Company are components for which discrete financial information is available andwhose operating results are regularly reviewed by the Board of Directors of the Company to make decisions about
resource allocation and assess their performance.
The Group develops comprehensive business strategies and engages in business activities for respective products
and service of divisions by product and service in the Company.
Accordingly, the Company is comprised of segments by product and service, and its reportable segments consistof “Logistics Solutions Business” and “Plant & Machinery Business.”“Logistics Solutions Business” develops, designs, builds and executes construction works of, material handlingsystems focusing on sorting, picking and conveying systems and provides maintenance services and otheroperations for these systems. “Plant & Machinery Business” designs, builds, and executes construction works of,storage tanks for LNG, LPG, crude oil and other gas and liquid and provides maintenance services and otheroperations for these tanks.
2. Method of measurements of sales, profit (loss), asset, and other items for each reportable segment
The accounting procedures for the reporting operating segments are nearly the same as those stated in “Significant
accounting policies for preparation of the consolidated financial statements.” Profits of the reportable segments are
based on operating profit. Intersegment transactions are based on actual transaction amounts.

TKK Report 2021 Financial Section37

3. Disclosure of sales, profit (loss), asset, and other items for each reportable segment
Previous fiscal year (From April 1, 2019 to March 31, 2020)
Reportable segments

Sales
Sales to externalcustomers
Transactions withother segments
Total

Other
(Note)(Millions of yen)

Logistics
Solutions
Business

Plant &
MachineryBusiness

28,8879,950

38,837

7,680–

46,518

–

–

–

133

(133)

–
46,518Total

Adjustment

Total

28,8879,950

38,837

7,813

(133)

Segment profit (loss)

2,812

(305)

2,506

880

(795)

2,591

Segment assets

28,005

12,26240,267

12,6898,028

60,985

411

90

502

198

17

718

796

101

898

459

27

1,385

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)“Other” includes the Life & Work Environmental Business (building construction business, manufacturing and sales ofindustrial facilities and equipment, inspection, measurement and analysis of asbestos), real estate rental operations,leasing operations, etc.

Current fiscal year (From April 1, 2020 to March 31, 2021)(Millions of yen)

Reportable segments

Sales
Sales to externalcustomers
Transactions withother segments
Total

Other
(Note)

Logistics
Solutions
Business

Plant &
MachineryBusiness

27,2399,800

37,0396,577–

43,617

–

–

–

151

(151)

–

27,2399,800

37,039

6,729

(151)

43,617

Total

Adjustment

Total

Segment profit (loss)

3,140

(602)

2,538

789

(703)

2,623

Segment assets

25,742

11,19436,937

12,423

9,403

58,764

459

79

538

218

19

776

478

44

523

345

428

1,297

Other items
Depreciation
Increase in property,
plant and equipment,
and intangible assets(Note)“Other” includes the Life & Work Environmental Business (building construction business, manufacturing and salesof industrial facilities and equipment, inspection, measurement and analysis of asbestos), real estate rental operations, leasing
operations, etc.

38

TKK Report 2021 Financial Section

4. Differences between total amounts for reportable segments and amounts in the consolidated financial statements
and main details of these differences (matters relating to difference adjustments)
Profit(Millions of yen)
Current fiscal year

Previous fiscal year

Reportable segments total
Profit of “other”
Corporate expenses (Note)
Other adjustments

2,506
880
(795)
–

2,538
789
(700)
(3)

Operating profit in the consolidated financial
2,623
2,591
statements(Note) Corporate expenses mainly represent expenses related to administrative divisions such as the general affairs division,
which are not attributable to the reportable segments.
(Millions of yen)
Asset

Previous fiscal year

Reportable segments total
Assets of “other”
Corporate assets (Note)
Other adjustments

Current fiscal year
40,267
12,6898,052(23)36,937
12,4239,441(37)

Total assets in the consolidated financial
60,98558,764statements(Note) Corporate assets mainly represent assets related to divisions managing cash and deposits, investment securities and otherassets of the Company, which are not attributable to the reportable segments.

[Information associated with reportable segments]
Previous fiscal year (From April 1, 2019 to March 31, 2020)
1. Information for each product and service(Millions of yen)
Material handlingsystemStorage tank, etc.
equipment, etc.

Maintenanceservices ofstorage tanks

2,288

7,661

Sales to external customers

28,887Other

2. Information about geographical area
(1) Sales
Japan(Note)

Total

7,680

(Millions of yen)Southeast Asia

Total

Other

44,1942,284
39
Sales are classified by country or region on the basis of construction sites.

(2) Property, plant and equipment
Japan

46,518(Millions of yen)Southeast Asia

15,69046,518709

Oceania

Total
42

16,442

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income and comprehensive income.

TKK Report 2021 Financial Section

39Current fiscal year (From April 1, 2020 to March 31, 2021)
1. Information for each product and service(Millions of yen)
Material handlingsystemStorage tank, etc.
equipment, etc.
Sales to external customers

27,239Maintenanceservices ofstorage tanks

1,085

Other

8,715

6,577

2. Information about geographical area
(1) Sales
Japan(Note)

Total(Millions of yen)Southeast Asia

Total

Other

42,1591,416
40
Sales are classified by country or region on the basis of construction sites.

43,617(2) Property, plant and equipment
Japan

43,617(Millions of yen)Southeast Asia

15,593

Oceania
7

Total
40

15,641

3. Information for each of main customers
This information has been omitted since sales to a specific customer account for less than 10% of net sales in the
consolidated statement of income and comprehensive income.
[Disclosure of impairment loss on non-current assets for each reportable segment]
Previous fiscal year (From April 1, 2019 to March 31, 2020)
Not applicable
Current fiscal year (From April 1, 2020 to March 31, 2021)(Millions of yen)
Reportable segments
Logistics
Solutions
Business
Impairment losses

Plant &
MachineryBusiness
–

1,047

Other

Adjustment–[Amortization and unamortized balance of goodwill for each reportable segment]
Previous fiscal year (From April 1, 2019 to March 31, 2020)
Not applicable
Current fiscal year (From April 1, 2020 to March 31, 2021)
Not applicable[Gain on bargain purchase for each reportable segment]
Previous fiscal year (From April 1, 2019 to March 31, 2020)
Not applicable
Current fiscal year (From April 1, 2020 to March 31, 2021)
Not applicable40

TKK Report 2021 Financial Section

Total

–

1,047

[Information associated with related parties]
Subsidiaries and others
1.
Related party transactions
Not applicable2.

Notes concerning the parent company or important affiliated companies
Not applicable

Notes - Per share information

Net assets per share
Basic earnings per share(Notes) 1.
2.

3.

Previous fiscal year
(From April 1, 2019
to March 31, 2020)

Current fiscal year
(From April 1, 2020
to March 31, 2021)¥4,095.51¥4,461.06¥195.87¥212.41

The amount of diluted earnings per share is not provided because there are no potential shares.
In the calculation of “net assets per share,” shares of the Company held by the benefit trust for officers are included
in treasury shares deducted from the total number of shares issued at the end of the fiscal year (84 thousand sharesin the previous fiscal year, 81 thousand shares in the current fiscal year).
In addition, in the calculation of “basic earnings per share” and “diluted earnings per share,” such shares are included
in treasury shares deducted in the calculation of the average number of shares during the period (51 thousand sharesin the previous fiscal year, 82 thousand shares in the current fiscal year).
The basis for calculation for basic earnings per share is as follows:
Previous fiscal year
Current fiscal year
(From April 1, 2019
(From April 1, 2020
to March 31, 2020)
to March 31, 2021)

Profit attributable to owners of parent¥1,717 million

Profit not relating to common shareholders
Profit attributable to owners of parent
pertaining to common shares
Average number of shares during the period¥1,777 million

–

–

1,717

1,777

8,770
thousand shares

8,368
thousand shares

Notes - Significant events after reporting period
Acquisition of a company, etc. through acquisition of shares
The Company resolved at the Board of Directors meeting held on March 23, 2021 to acquire all issued shares of Eco
Analysis Corporation, and acquired all the shares as of April 30, 2021 under a share transfer agreement concluded
with FUJITSU LIMITED.
1.
(1)

Outline of the business combination
Name of the acquired entity and its line of business
Name of the acquired entity: Eco Analysis Corporation
Line of business:
Maintenance and management/checking/repair/data analysis ofenvironmental equipment and measurement instruments
Environmental research (living environment/natural environment),
environmental assessment, environmental monitoring, sale of systems andenvironmental measuring instruments/reagents(2)

Major reason why the business combination was conducted
Eco Analysis Corporation has supported environmental infrastructure over 50 years since its foundation
through maintenance and management of environmental measuring instruments for which the said
company boasts industry-leading performance and share, research on living environment and naturalenvironment, system solutions including a telemeter system that measures environmental data remotely,
as well as environmental assessment on disaster prevention monitoring and renewable energy, aiming tocontribute to health and building of a bright future.
As efforts to realize a decarbonized society are beginning in earnest in the face of occurrence of extreme
weather and disaster due to climate change, and others, constant needs for environmental conservation

TKK Report 2021 Financial Section

41

have been growing. Thus, the Company has brought in Eco Analysis Corporation for the Group to achievea better society and further strengthen and expand the business development in the environmental field by
providing a variety of solutions to environmental issues while integrating technologies and know-how in
the Group.
(3)

Date of the business combination
April 30, 2021

(4)

Legal form of the business combination
Acquisition of shares(5)

Name of the company after the business combination
There is no change.

(6)

Ratio of voting rights acquired
100%

(7)

Major grounds for determination of the acquiring entity
This is because the Company acquired the shares in exchange for cash.

2.

Acquisition cost of the acquired entity and breakdown of consideration by type
Since the Company has a duty of confidentiality in accordance with provisions of the share transfer agreement,
the information is not disclosed.

3.

Details and amount of major acquisition-related expenses
They are yet to be determined at this time.

4.

Amount, cause, amortization method and amortization period of goodwill arising
They are yet to be determined at this time.

5.

Amount of assets accepted and liabilities assumed on the date of the business combination, and their major
components
They are yet to be determined at this time.

(v)

Annexed consolidated detailed schedules

Annexed consolidated detailed schedule of bonds payable
Collateral

Date ofmaturity

500

0.39

None

September
24, 2027

–

500

0.41

None

March 24,
2028

–

1,000

–

–

–

Toyo Kanetsu
K.K.

1st Series ofUnsecured Bonds

September25, 2020–

Toyo Kanetsu
K.K.

2nd Series ofUnsecured Bonds

March 25,
2021
–

Total

–

(Note)

Endingbalance

Interest rate(%)

Type of bondCompany name(Millions ofyen)(Millions ofyen)

Projected redemption amounts for five years after the consolidated balance sheet date are as follows:(Millions of yen)Over 1 year
to 2 years

Within 1 year–

42

Beginningbalance

Date ofissuance

TKK Report 2021 Financial Section

Over 2 years
to 3 years–

Over 3 years
to 4 years–

Over 4 years
to 5 years––

Annexed consolidated detailed schedule of borrowings
Beginning balance

Classification(Millions of yen)

Short-term borrowings

Ending balance(Millions of yen)

Average interest
rate (%)

Repayment due

7,849

3,620

0.374

–

619

8

1.475

–

Long-term borrowings (excluding
current portion)

4,488

4,580

0.793

Between 2024 and 2026

Total

12,956

8,208–

Current portion of long-termborrowings(Notes) 1.
2.

–

In calculating the average interest rate, the weighted average interest rate on the ending balance of borrowings, isshown.
Repayment of long-term borrowings (excluding the current portion) scheduled within five years after the
consolidated balance sheet date is as follows:(Millions of yen)Over 1 year
to 2 years

Classification
Long-term
borrowings–

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

1,700

2,480

400

Annexed consolidated detailed schedule of asset retirement obligations
A schedule of asset retirement obligations has been omitted since matters to be stated in the schedule are stated as
notes prescribed in Article 15-23 of the Ordinance on Terminology, Forms, and Preparation Methods of Consolidated
Financial Statements.

(2) Other information
Quarterly information for the current fiscal year
First quarter(Cumulative)(Cumulative period)
Net sales(From April 1, 2020
to June 30, 2020)

Second quarter(Cumulative)

Third quarter(Cumulative)(From April 1, 2020
(From April 1, 2020
to September 30, 2020) to December 31, 2020)

Current fiscal year

(From April 1, 2020 toMarch 31, 2021)(Millions of yen)

9,798

20,17831,344

43,617

Profit before income taxes(Millions of yen)

727

1,130

2,054

2,892

Profit attributable to owners ofparent(Millions of yen)

465

736

1,359

1,777

Basic earnings per share

55.08

87.14

161.36212.41First quarter

Second quarter

Third quarter

Fourth quarter

55.08

32.06

74.28

51.05

(Yen)

(Accounting period)
Basic earnings per share(Yen)

TKK Report 2021 Financial Section

43

(TRANSLATION)
INDEPENDENT AUDITOR’S REPORT
June 29, 2021
To the Board of Directors of
Toyo Kanetsu K.K.
GYOSEI & CO.
Tokyo Office
Designated Partner
Engagement Partner
Certified Public Accountant

Takayuki Nakagawa (seal)

Designated Partner
Engagement Partner
Certified Public Accountant

Akira Mishima(seal)

Audit of Financial Statements
Audit Opinion
Pursuant to the first paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited the accompanying consolidated financial statements of Toyo Kanetsu K.K. (the “Company”), which comprisethe consolidated balance sheet as of March 31, 2021, and the consolidated statements of income and comprehensive
income, the consolidated statement of changes in equity, the consolidated statement of cash flows for the fiscal year
from April 1, 2020 to March 31, 2021, and significant accounting policies for preparation of the consolidated financial
statements, other notes, and annexed consolidated detailed schedules, all expressed in Japanese yen.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of the Company and its subsidiaries (the “Group”) as of March 31, 2021, and theconsolidated results of their operations and their cash flows for the year then ended in conformity with accounting
principles generally accepted in Japan.
Basis for Audit Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities underthose 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 thatare relevant to our audit in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of theconsolidated financial statements of the current fiscal year. These matters were addressed in the context of our auditof the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide aseparate opinion on these matters.

44

TKK Report 2021 Financial Section

1. Appropriateness of the amount of impairment losses recorded
Description of key audit matters and reason for
determining the matter

How we addressed the matter in our audit

In examining appropriateness of the amount of
impairment losses recorded, we mainly implemented the
The consolidated group of Toyo Kanetsu K.K. following audit procedures.
(hereinafter referred to as the “Company Group”) ismainly engaged in planning, design, building, execution (1) Assessment of internal control
of construction works and sale of machinery and plants, We assessed design of internal control related toand has developed business activities including related measurement of impairment losses on non-current assets,
maintenance as Plant & Machinery Business since its and effectiveness of the operational status.
inception.
(2) Assessment of reasonableness of the estimate of
In identifying whether there is any indication of future cash flows
impairment on non-current assets, the Company Groupconsiders that businesses such as Logistics Solutions To verify reasonableness of major assumptions used toBusiness and Plant & Machinery Business are the basis estimate future cash flows and the estimated amount ofand the smallest unit that generates independent cash future cash flows, we mainly implemented the following
flows, and that non-current assets related to Plant & procedures.
Machinery Business are one of asset groups.
- We inspected materials related to the business plan, andPlant & Machinery Business continues to face a harsh asked the person responsible for the Plant & Machinery
business environment with a declining trend in Business division that formulated the business plan about
investments in oil and gas related facilities on the back of grounds for major assumptions and the method of
the worldwide trend of decarbonization, and accelerated calculating future cash flows.
elimination and consolidation of refineries in Japan.
- We analyzed the cause of unachieved targets in actual
Amid this situation, as stated in notes in “Notes - results in relation to past business plans, and examined
Consolidated statement of income and comprehensive whether the cause was taken into account appropriately
income” and “Notes -Segment information, etc.,” ¥1,047 in the estimation of future cash flows.
million of impairment losses on the asset group related to - We conducted sensitivity analysis on major assumptions
Plant & Machinery Business were recorded in the and others (analysis to assess impact of changes in themconsolidated statement of income and comprehensive on future cash flows), and examined whether uncertainty
income for the current fiscal year.
was incorporated appropriately in future cash flows.
The estimated period of future cash flows used to - With regard to results of appraisal used to calculate net
measure impairment losses shall be remaining economic selling value of certain land, we examineduseful life and is a period of 10 years or more. Because appropriateness of the degree of professional competence
major assumptions established to calculate future cash of the appraiser and appropriateness of the appraisal
flows involve management’s judgment, there is method, and assessed credibility of the appraisal results.
uncertainty in the amount recorded in the consolidated
financial statements. In addition, the outlook is unclear in (3) Assessment of reasonableness of the discount rateview of the business environment currently faced by the With regard to the discount rate used to calculate value in
Company Group, and the degree of uncertainty is use, we mainly implemented the following procedures.
becoming higher.
- We assessed appropriateness of the method of
Due to the above factors, we have judged that calculating the discount rate in light of requirements ofappropriateness of the amount of impairment losses accounting standards and others.
arising from non-current assets of the asset group related- We assessed reasonableness of the application of input
to Plant & Machinery Business is a key audit matter.
parameters (risk-free rate, beta value, market risk
premium).

TKK Report 2021 Financial Section45

2. Consideration of the estimate of total cost of construction work by the percentage-of-completion method
Description of key audit matters and reason for
determining the matter

How we addressed the matter in our audit

As stated in the “Notes - Significant accounting In examining appropriateness of the estimate of total costestimates,” net sales recorded by the percentage-of- of construction work by the percentage-of-completion
completion method in the consolidated statement of method, we mainly implemented the following audit
income and comprehensive income for the current fiscal procedures.
year by the consolidated group of Toyo Kanetsu K.K.
(1) Assessment of internal control(hereinafter referred to as the “Company”) is ¥8,445
million. Most of the amount was recorded in the We assessed design of internal control related toCompany’s Logistics Solutions Business. Therefore, for estimation of total cost of construction work, andauditing purposes, there is significance of the amount in effectiveness of the operational status.
it.
(2) Assessment of reasonableness of the estimate of total
In the application of the percentage-of-completion cost of construction work
method, the Company recorded net sales based on theWith regard to the estimate of total cost of construction
progress rate calculated as the proportion of construction
cost incurred corresponding to value of work done at the work as at the end of the current fiscal year, we mainly
end of the current fiscal year to the total amount of implemented the following audit procedures.
estimated cost of construction work. The estimated - We directly asked the person responsible for the division
amount of total cost of construction work has been that estimates total cost of construction work questions todetermined on the basis of management’s best estimate understand the overview of the construction work, andand judgments based on past experience and available examined consistency between the description of theinformation collected as well as individual work work understood and major components of the total cost
specifications, and changes to original estimates may of construction work.
occur due to price fluctuations in the market, changes tospecifications, natural disasters and others. Therefore, for - We checked materials supporting estimation of cost ofauditing purposes, there is qualitative significance in it. construction work such as quotations received fromsubcontractors and suppliers of products against
Due to the above factors, we have judged that the components of the total cost of construction work, andestimate of total cost of construction work used by the examined appropriateness of the estimated amount of theCompany to recognize revenue by the percentage-of- total cost of construction work.
completion method in Logistics Solutions Business is a
- With regard to total cost of construction work for which
key audit matter.
the cost rate was estimated to be lower in light of pastrecords, we asked questions about reasons why the cost
rate was estimated to be lower in light of past results, andexamined reasonableness of the estimate.
- With regard to construction works that were completed
or delivered in the current fiscal year, we compared theestimated amount of total cost of construction work withthe actual amount, verified appropriateness of theestimate of total cost of construction work as at the endof the previous fiscal year ex post facto, and checked
whether there was any matter to be taken into account inexamining appropriateness of the estimated amount of
total cost of construction work as at the end of the current
fiscal year.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements inaccordance with accounting principles generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation 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 whether it is appropriate
to prepare the consolidated financial statements with the assumption of the Group’s ability to continue as a going

46

TKK Report 2021 Financial Section

concern, and for disclosing matters related to going concern, as applicable in accordance with accounting principles
generally accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing the Directors’ execution of duties relating todesigning and operating the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibilities 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 ouropinion on the consolidated financial statements based on our audit from an independent point of view. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
In accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due tofraud or error, and design and perform audit procedures responsive to those risks. Selecting audit procedures to be
applied is at the discretion of the auditor. Obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion.

•

Consider, in making those risk assessments, internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, 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 by management and their method of application, as wellas the reasonableness of accounting estimates made by management and related notes thereto.

•

Conclude on the appropriateness of management’s use of the going concern basis for preparing the consolidated
financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
notes to the consolidated financial statements or, if such notes are inadequate, to express a qualified opinion withexceptions on the consolidated financial statements. 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 Company to cease tocontinue as a going concern.

•

Evaluate whether the overall presentation of the consolidated financial statements and the notes thereto are inaccordance with accounting principles generally accepted in Japan, as well as the overall presentation, structure
and content of the consolidated financial statements, including the notes thereto, and whether the consolidated
financial statements represent the underlying transactions and accounting events in a manner that achieves fairpresentation.

•

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

We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the audit,
significant audit findings, including any significant deficiencies in internal control that we identify during our audit,
and other matters required by auditing standards.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethicalrequirements in Japan regarding independence, and communicate with it all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards in order to eliminate or
reduce obstruction factors.
We determine which of the matters discussed with the Audit and Supervisory Committee were of most significancein the audit of the consolidated financial statements of the current fiscal year and therefore are the key audit matters,
and describe the matters in the auditor’s report. However, we do not describe such a matter, if law or regulationprecludes public disclosure about the matter, or if in extremely rare circumstances, we determine that the matter should

TKK Report 2021 Financial Section

47

not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Audit of Internal Control
Audit Opinion
Pursuant to the second paragraph of Article 193-2 of the Financial Instruments and Exchange Act of Japan, we haveaudited management’s report on internal control of the Company as of March 31, 2021.
In our opinion, the management’s report on internal control referred to above, which represents that the internal
control over financial reporting of the Company as of March 31, 2021 was effective, presents fairly, in all material
respects, the results of the assessment of internal control over financial reporting in accordance with assessment
standards for internal control over financial reporting generally accepted in Japan.
Basis for Audit Opinion
We conducted our internal control audit in accordance with auditing standards for internal control over financial
reporting generally accepted in Japan. Our responsibilities under the auditing standards for internal control overfinancial reporting are further described in the “Auditor’s Responsibilities for the Audit of the Report on Internal
Control” section of our report. We are independent of the Group in accordance with the ethical requirements that are
relevant to our audit in Japan, and we have fulfilled our other ethical responsibilities as auditors. We believe that theaudit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management and the Audit and Supervisory Committee for the Report on Internal Control
Management is responsible for designing and operating effective internal control over financial reporting, and for the
preparation and fair presentation of the report on internal control in accordance with assessment standards for internal
control over financial reporting generally accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing and verifying the design and operation ofeffective internal control over financial reporting.
There is a possibility that misstatements may not be completely prevented or detected by internal control over financial
reporting.
Auditor’s Responsibilities for the Audit of the Report on Internal Control
Our responsibilities are to obtain reasonable assurance about whether the report on internal control is free frommaterial misstatement, and to issue a report on audit of internal control that includes our opinion on the report oninternal control based on our internal control audit from an independent point of view.
In accordance with auditing standards for internal control over financial reporting generally accepted in Japan, we
exercise professional judgment and maintain professional skepticism throughout the audit. We also:•

Perform audit procedures in order to obtain audit evidence regarding the evaluation results for internal control
over financial reporting in the report on internal control. The audit procedures for internal control auditing selected
and applied depend on the auditor’s judgment, including the significance of effects on the reliability of financial
reporting.

•

Evaluate disclosures on the scope, procedures and results of the assessment of internal control over financial
reporting made by management, as well as evaluate the overall presentation of the report on internal control.

•

Obtain audit evidence that is sufficient and appropriate regarding the results of the assessment of internal control
over financial reporting in the report on internal control. We are responsible for the direction, supervision andperformance of the audit of the report on internal control. We remain solely responsible for our audit opinion.

We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the internal
control audit, results of the internal control audit, significant identified deficiencies in internal control that should be
disclosed, results of their correction, and other matters required by auditing standards for internal control.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethicalrequirements in Japan regarding independence, and communicate with it all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards in order to eliminate or

48

TKK Report 2021 Financial Section

reduce obstruction factors.
Conflicts of Interest
Our firm and its 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.
The above represents a translation, for convenience only, of the original report issued in the Japanese language.

TKK Report 2021 Financial Section

49

Corporate Data
Date of Establishment

May 16, 1941

Common Stock¥18,580 million

Authorized Shares

297,000,000

Capital Stock Issued

9,323,074

Number of Shareholders

11,612

Security Traded

Tokyo Stock Exchange, First Section

Transfer Agent and Registrar

The Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

Annual Meeting

The annual meeting of shareholders is normally held in June in Tokyo, Japan

Directory
Head Office11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3333 Fax: +81-3-5857-1952
URL: https://www.toyokanetsu.co.jp/global/

Osaka Sales Office
1-9-2, Senrioka-Higashi, Settsu, Osaka 566-0011, Japan
Tel: +81-72-645-2520 Fax: +81-72-645-2532

Logistics Solutions Systems Business
Tel: +81-3-5857-3126 Fax: +81-3-5857-3185

Plant & Machinery Business
Tel: +81-3-5857-3109 Fax: +81-3-5857-3173

2 Tsukiji, Kisarazu, Chiba 292-0835, Japan
Tel: +81-438-36-7161 Fax: +81-438-36-8211

Domestic Subsidiaries

Overseas Subsidiaries

Toyo Kanetsu Builtec K.K.

PT Toyo Kanetsu Indonesia

11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-3640-5164 Fax: +81-3-6800-3156
URL: http://www.web-tkb.com(Jakarta Head Office)Midplaza Building 1, 8th Floor, Jl. Jend. Sudirman Kav. 10-11,
Jakarta 10220, Indonesia
Tel: +62-21-570-7805 / 7739 Fax: +62-21-570-3950
URL: http://www.pttki.com/

Toyo Service System K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3200 Fax: +81-3-5857-3171
URL: https://www.toyoservice.co.jp

Toyo Koken K.K.
11-1, Minamisuna 2-chome, Koto-ku, Tokyo 136-8666, Japan
Tel: +81-3-5857-3161 Fax: +81-3-5857-3198
URL: https://www.toyokoken.co.jp/en

Kankyo Research Institute Inc.
6-22, Okadomachi, Hachioji-shi, Tokyo 192-0054, Japan
Tel: +81-42-627-2810 Fax: +81-42-627-2820
URL: http://www.kankyo-research.co.jp/

Eco Analysis Corporation
84, Takedakitamitsuguicho, Fushimi-ku, Kyoto-shi, Kyoto
612-8419, Japan
Tel: +81-75-643-0341 Fax: +81-75-644-0645
URL: http://www.kankyou-keisoku.co.jp/

50

Chiba Plant

TKK Report 2021 Financial Section

Toyo Kanetsu Singapore Pte. Ltd.
16 Ayer Rajah Crescent, #03-04 Tempco Technominium,
3rd Floor, Singapore 139965
Tel: +65-6776-2393 Fax: +65-6773-1703

Toyo Kanetsu (Malaysia) Sdn. Bhd.
Sublot 51, 1st Floor, Medan Jaya Commercial Centre,
97000 Bintulu, Sarawak, Malaysia
Tel: +60-86-338-122 Fax: +60-86-338-123

Contact

TOYO KANETSU K.K.
Corporate Planning Department
Corporate Division
TEL: +81-3-5857-3333 FAX: +81-3-5857-3170
E-MAIL: tkkreport@toyokanetsu.co.jp
URL: https://www.toyokanetsu.co.jp/global/