Makita Corporation
Additional Information
for the year ended March 31, 2020
Consolidated Financial Statements(Partial translation of "YUKASHOKEN HOKOKUSHO"
originally issued in Japanese)Consolidated Financial Statements

3

Notes to Consolidated Financial Statements

9

Independent Auditor’s Report672Consolidated Statement of Financial Position
In Millions of Yen

ASSETS
Current Assets
Cash and Cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets

Notes

2019

2020

５
６,21
７
27

146,51279,450219,938
37,8289,401

143,439
69,599214,560
25,235
7,633

493,129

460,466

112,441
8,039
43,566
9,541
9,342
4,192

146,649
8,749
38,551
9,511
6,932
3,706

187,121214,098

680,250

674,564８

Total current assets
Non-current assets
Property, plant and equipment
Goodwill and Intangible assets
Other financial assets
Employee benefits assets
Deferred tax assets
Other non-current assets

９
10
27
15
24
８

Total non-current assets
Total assets

3

In Millions of Yen

LIABILITIESCurrent liabilities
Trade and other payables
Borrowings
Other financial liabilities
Income tax payables
Provisions
Other current liabilities

Notes

2019

2020

12
13
27

38,904
11,799
220
7,153
3,040
29,67834,959
7,997
2,468
3,757
2,931
27,26490,794

79,376

3,231
256
1,293
7,236
218

3,138
9,894
1,248
4,952
208

12,234

19,440103,028

98,81623,80545,571
508,622

23,80545,531
540,063

ሺ11,681)6,431

ሺ11,554)(26,570)

572,748571,275

4,474

4,473

17
14,21

Total current liabilities
Non-current liabilities
Employee benefit obligations
Other financial liabilities
Provisions
Deferred tax liabilities
Other non-current liabilities

15
27
17
24
14

Total non-current liabilities
Total liabilities
EQUITY
Share capital
Capital surplus
Retained earnings
Treasury shares
Other components of equity
Total equity attributable to ownersof the parent
Non-controlling interests

19
19
19
19
19

Total equity
Total liabilities and equity

4577,222575,748

680,250

674,564

Consolidated Statement of Profit or Loss
In millions of Yen, per share amounts in Yen

Revenue
Cost of sales

Notes

2019

４，21
22

490,578492,617

ሺ313,356)

ሺ323,776)

17,222

168,84122

ሺ98,917)

ሺ104,795)

Gross profit
Selling and general administrative expenses
Operating profit

2020

4

78,30564,046

４，23
４，23

2,680

2,558

ሺ1,066)

ሺ596)

４
24

79,91966,008

ሺ23,728)

ሺ17,957)

Profit for current year

56,191

48,051Attributable to:
Owners of the parent
Non-controlling interests

55,750441

47,731320

205.37205.34175.80-Financial income
Financial expenses
Profit before tax
Income tax expense

Earnings per share

25

Basic earnings per share
Diluted earnings per share5Consolidated statements of Comprehensive Income
In millions of Yen
Notes
Profit for current year
Other comprehensive income, net of tax
Items that will not be reclassified to profit orloss
Net gain(loss) on revaluation of financial
assets measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified subsequently
to profit or loss
Exchange difference on translation offoreign operations
Total of items that may be reclassified
subsequently to profit or loss
Other comprehensive income, net ofincome taxes
Total comprehensive income

26

2019

2020

56,191

48,051

ሺ7,889)

ሺ2,509)(87)

201

ሺ7,976)

ሺ2,308)(12,623)

ሺ30,328)(12,623)

ሺ30,328)(20,599)

ሺ32,636)

35,592

15,41535,286

15,271306

144

Attributable to:
Owners of Makita
Non-controlling interests

6Consolidated Statements of Changes in Equity
In millions of Yen

NonNoteIssuedcapitalCapitalsurplusRetainedearnings

Treasury
stock

Other
componentsof equitycontrolling Total equity

Total

interest
Balance at April 1, 2018
Profit for currency year
Other comprehensive
net of income taxes

23,80545,531

26

27,095(20,464)―

Dividends―

55,750―(20,464)

ሺ16,560)

20

Purchase of treasury shares

19

Disposal of treasury shares
Share-based
paymenttransactions
Transfer from other components ofequity to retained earnings
Other increase(decrease)

19

0

16

40

19

Balance at March 31,2019

20

Purchase of treasury shares

19

Disposal of treasury shares
Share-based
paymenttransactions
Transfer from other components ofequity to retained earnings

19
16

Total transactions with owners

55,750441

56,191(20,464)(135)(20,599)

35,286306

35,592

ሺ16,560)

ሺ225)

ሺ16,785)
ሺ4)

0

0

40

40

ሺ200)

―

―

200

ሺ60)

ሺ60)

―

40

ሺ16,360)

(64)

ሺ200)

ሺ16,584)

ሺ225)

ሺ16,809)23,80545,571

508,622

ሺ11,681)

6,431

572,748

4,474

577,22247,731

320

48,051

ሺ32,460)

ሺ32,460)

ሺ176)

ሺ32,636)

ሺ32,460)

15,271

144

15,415

ሺ16,831)

ሺ145)

ሺ16,976)―

Dividends

558,439

ሺ4)

26

Total comprehensive income

4,393

0

47,731income,554,046

ሺ4)

ሺ60)

Total transactions with owners

Balance at March 31, 2020

ሺ11,617)55,750income,Total comprehensive income

Net income
Other comprehensive
net of income taxes

469,232―

47,731―

ሺ16,831)
ሺ2)

ሺ2)

ሺ2)

(13)

61

48

48

(27)

68

41

41

ሺ541)

―

―

19

541
―

(40)

ሺ16,290)

127

ሺ541)

ሺ16,744)

ሺ145)

ሺ16,889)

23,80545,531

540,063(11,554)(26,570)

571,275

4,473

575,7487

Consolidated Statement of Cash Flows
In millions of Yen

Cash flows from operating activities
Net income
Depreciation and amortization
Income tax expenses
Financial (income) and expenses(Gains) losses on sale and disposal ofproperty, plant and equipment, and intangible
assets(Increase) decrease in trade and otherreceivables(Increase) decrease in inventories
Increase(decrease) in trade and otherpayablesIncrease, decrease in asset and liability ofPensionIncrease in guarantee deposits
OthersSubtotal
Dividends received
Interest received
Interest paid
Income taxes paid
Cash flows from operating activities
Cash flows from investing activities
Additions to intangible assets and property,
plant and equipment
Disposal of property, plant and equipment
Purchase of investments
Disposal and redemption of investments
Payments to time deposit
Proceeds from withdrawal of time deposits
OthersCash flows from investing activities
Cash flows from financing activities
Increase(decrease) in short-term borrowings
Purchase and re-issuance of treasury shares
Dividends paid
Lease liabilities paid
OthersCash flows from financing activities
Effect of changes in exchange rates on cash andcash equivalents
Increase(Decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
periodCash and cash equivalents at end of period

Notes

2019

2020

9,10
24

56,191
11,271
23,728(1,614)48,051
14,34917,957(1,962)

113

(808)

(2,085)

4,396(30,455)(9,148)2,581(1,499)395

586(8,990)(4,487)
46,648
643
2,004
(47)
(26,093)
23,155741
3,538
76,201
712
1,488
(431)
(20,660)
57,310(23,867)(44,409)382(12,745)
5,634(31,902)47,758(589)(15,329)

2,574(4,000)7,641(33,534)
40,960262(30,506)

8,704(4)(16,560)(36)(335)(8,231)(3,461)
46(16,831)(2,537)(148)(22,931)(403)(6,946)(808)(3,073)

5

147,320

146,5125

146,512

143,439

29
20
29

8

The consolidated financial statements of Makita Group for the year ended March 31, 2020, have been prepared according
to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.
The consolidated financial statements are in line with the provision of Article 93 of the Ordinance on Terminology, Forms, andPreparation methods of consolidated financial statements (Ordinance of the Ministry of Finance of Japan No.28 of 1976), as
they satisfy the requirements for an “IFRS Specified Company” in Article 1-2 of the same ordinance.
The consolidated financial statements have been prepared on the historical cost basis, except for certain assets and liabilities
including financial instruments measured at fair value as presented in Note3 “Significant Accounting Policies”.
The functional and presentation currency is Japanese Yen. Unless stated otherwise, all figures are in millions of Yen.
The consolidated financial statements prepared as of March 31, 2020 were authorized for publication by management onJune 26.
All accounting policies that are relevant to an understanding of financial statements are provided throughout the notes to thefinancial statements.
The group’s consolidated financial statements include estimates and assumptions made by management regarding income
and expenses, measurement of the carrying amounts of assets and liabilities, and disclosure of contingencies and others at
the end of the reporting period. These estimates and assumptions are based on management’s best judgement at the end of
the reporting period, and take into account historical experience and various other factors that can be considered andreasonable. However, due to their nature, actual results may differ from these estimates and assumptions.
The estimates and their underlying assumptions are reviewed by management on an ongoing basis. The effects of revisions toaccounting estimates and assumptions are recognized in the period when the estimates are revised and in future accounting
periods.
Estimates and assumptions that significantly affect the amounts recognized in the Group’s consolidated financial statements
are as follows:
Regarding the impact of the COVID-19, Makita Group, which has a high overseas sales ratio, had restrictions on sales activities
due to regulations in each country, including restrictions on outing, and there are some countries which sales were stagnant at
the end of the fourth quarter of the current consolidated fiscal year, but the impact on business results for the current
consolidated fiscal year was immaterial. However, in some countries, the impact will continue to remain in the next consolidated
fiscal year, and the impact may continue over a certain period in the future, leading to a decline in sales revenue.
In making accounting estimates such as determining the collectability of deferred tax assets, in addition to the available
information as of the end of the current consolidated fiscal year, in the consequence of judgment based on the business results
at the end of the current consolidated fiscal year, the accounting estimate is based on the assumption that the impact willcontinue for a certain period of the next consolidated fiscal year. Since there is a high degree of uncertainty regarding theimpact of COVID-19 on economic activities, in the event of changes in accounting assumptions, it could affect the financial
condition and operating results of the next consolidated fiscal year.
Fair value of financial instruments – refer to Note3 Significant accounting policies and Note27 Financial instrument
Makita Group uses fair value measured with inputs not based on observable market data for the asset or liability.
Unobservable inputs may be affected by the fluctuation of future uncertain financial condition. In the event that revision isnecessary, it may have an adverse impact on Makita Group’s financial condition and results of operations.

9Defined benefit obligation – refer to Note3 Significant accounting policies and Note15 Employee benefits
Makita has adopted defined benefit pension plans and defined contribution plans for post-employment benefits.
The present value of the defined benefit obligations and the related current service cost and past service cost arecalculated by actuarial assumptions. Actuarial assumptions requires estimates and judgement for various factors
including a discount rate. Actuarial assumptions is decided by estimates and judgement made by management, however
it may be affected by the fluctuation of future uncertain financial condition or by amending or promulgating related laws.
In the event that revision is necessary, it may have an adverse impact on Makita’s financial condition and results ofoperations.

Provision – refer to Note3 Significant accounting policies and Note17 Provisions
Provisions are calculated based on the best estimates made by management regarding an outflow of resources
embodying economic benefits. In the event when the result is different from the assumption for which the estimation isused, it may have an adverse impact on Makita’s financial condition and results of operations.
Period predicted an outflow of resources embodying economic benefits is as following.
Warranty provisions
Warranty provisions are provided to prepare for the expense of after-sales service for the products based on the pastactual cost, taking into consideration the defective rate of current products, the malfunction of specific products never
manufactured before, the effects of the costs of materials and shipping related to repair of defective products. Warranty
provisions are provided as provisions and cost of sales, when the revenue is recognized.
Makita generally guarantees the performance of products delivered and of services rendered for a certain period or term.
Estimates for product warranty cost are made based on historical warranty claim experience.
Product warranty provisions are recorded as provisions and cost of sales when revenue is recognized.



Deferred tax asset – refer to Note3 Significant accounting policies and Note24 Income taxes
Deferred tax assets are recognized for deductible temporary differences, the carryforward of unused tax losses and thecarryforwards of unused tax credits to the extent of that it is probable that future taxable income will be available against
such deferred tax assets. Period and amount which occurs taxable income may be affected by the fluctuation of future
uncertain financial condition. In the event when the actual period and amount are different from the assumption for which
the estimation is used, it may have an adverse impact on Makita’s financial condition and results of operations. In theevent when effective tax rate is changed, the balance of deferred tax assets may increase or decrease.

Inventories – refer to Note3 Significant accounting policies and Note7 Inventories
Inventories are measured at the acquisition cost, however if the net realizable value is lower than the acquisition cost,they are measured at the net realizable value and the difference between the acquisition cost is recognized as cost of
sales in principle.
For inventories that stay outside of the business cycle process, the net realizable value is calculated by reflecting future
demand and market trends. If the market environment deteriorates more than expected and the net realizable value falls
significantly, it may have a significant impact on the amount recognized in the consolidated financial statements from thenext consolidated fiscal year.

The judgments made by management in the process of applying accounting policies that have a significant impact on
consolidated financial statements are as follows:

Revenue – refer to Note3 Significant accounting policies and Note15 Revenue

10

IFRS

Standards

Mandatory Adoption

Adoption by the

Overview(from the fiscal year

Grouprevised standards andbeginning)
IAS 1

Presentation

of

new

or

interpretations

January1, 2020

March, 2021

of Financial

Amendments

to

the

definition of material

Statements
IAS 8

Accounting
Policies,
Changes in
Accounting
Estimates
and Errors

IAS 1

Presentation

January1, 2020

March, 2021

of Financial

Clasifying liabilities as
current or non-current

Statements
While the main impact of these adoptions are now on calculation, we have determined that they will not have a material impact
on our business result and financial position.
Makita adopts IFRS 16 Lease from this consolidated fiscal year.
In accordance with IFRS 16, Makita records leases that were previously classified as operating leases under IAS 17 “Leases”
as right-of-use assets and lease liabilities in the consolidated statement of financial position. Upon transitioning to IFRS 16,
Makita has adopted a practical expedient that retains its previous determination of whether the contract is a lease or not. In
accordance with IFRS 16 Transition rule, Makita adopt retrospective application with the cumulative effect recognized at thedate of initial application. In the beginning of this consolidated fiscal year, Makita additionally recognized 10,656 million yen as
totals assets including right-of-use assets which is included in the tangible fixed assets on the consolidated statement offinancial position and 10,656 million yen as lease liabilities which is included in other financial liabilities on the consolidated
statement of financial position. The present value of the lease liability at the beginning of the current consolidated fiscal year ismeasured by discounting the total residual lease payments at the date of initial application using the lessee's additionalborrowing rate as of the date of initial application. The weighted average additional interest rate applied to the lease liability asof the date of initial application is 2.5%. The difference between the total future minimum lease payments for non-cancellable
operating leases as of the end of the year immediately preceding the date of initial application and the lease liabilities recognizedin the consolidated statement of financial position as of the date of initial application is as follows.
(Unit：in million of yen）
Contract of non-cancellable operating lease disclosed on 31st March 2019

4,169

Discounted present value of contract of non-cancellable operating lease disclosed on
31st March 2019

3,844

Finance lease liabilities

161

Cancellable contracts operating lease

6,812

Lease liabilities at the date of 1st April 201910,817

Upon transitioning to IFRS 16, Makita has adopted following practical expedients.
・A single discount rate is applied to lease portfolios with reasonably similar characteristics.
・The exemption rule that does not recognize the right-of-use asset and lease liability is applied to leases within 12 months
from the date of initial application.

11

Regarding the impact of the new coronavirus infection, Makita Group, has a high overseas sales ratio, had restrictions on sales
activities due to regulations in each country, including going-out restrictions, and although sales were stagnant at the end of
the fourth quarter of the current consolidated fiscal year, the impact on business results for current consolidated fiscal year was
immaterial. However, in some countries, the impact will continue to remain in the next consolidated fiscal year, and the impact
may continue over a certain period in the future, leading to a decline in sales revenue.
In making accounting estimates such as determining the collectability of deferred tax assets, in addition to the information
available as of the end of the current consolidated fiscal year, the results of judgment is also based on the business performanceat the end of the current consolidated fiscal year. The accounting estimate is based on the assumption that the impact willcontinue for a certain period of the next consolidated fiscal year. Since there is a high degree of uncertainty regarding theimpact of new coronavirus infections on economic activities, changes in accounting assumptions could affect the financial
condition and operating results of the next consolidated fiscal year.

Basis of consolidation
The consolidated financial statements present the operations of Makita Japan and all its subsidiaries.
Subsidiaries refer to all business entities controlled by the company. Financial statements of subsidiaries are included in the
consolidated statements from the date the company gains the control of the subsidiary till the date the company loss the controlof the subsidiaries. A change in the company’s ownership interest without loss of control will be accounted for as equity
transaction. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of theconsideration paid or received is recognized directly in equity attribution to the owner of Makita.
All intergroup balances, transactions, income and expenses, unrealized gains and losses arising from intergroup transactions
are eliminated when prepare the consolidated statements.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration of an acquisition is measured as theaggregate of the acquisition-date fair value of the assets transferred, liabilities assumed and equity securities issued by theCompany to the former owners of the acquire in exchange for control of the acquire.
Any excess of the consideration over the net fair value of identifiable assets acquired and liabilities assumed at the acquisition
date is recognized as goodwill in the consolidated statement of financial position. Conversely, any deficit is immediately
recognized as income in the consolidated statement of income.
Costs associated with business combinations are expensed as incurred.
Foreign currency translation(1) Foreign Currency Transactions
Foreign currency transactions are conducted by translating into a functional currency of each company of Makita at theexchange rate as of the tansaction date.
Monetary assets and liabilities denominated in foreign currencies as of the reporting date are translated into functional
currencies at the exchange rate as of the reporting date.
As for non-monetary assets and liabilities denominated in foreign currencies, those measured at the acquisition cost
are translated by using the exchange rate as of the transaction date, and those measured at fair value are translated
by using the exchange rate as of the date of calculation of the fair value. The exchange differences arising from thetranslation or the settlement are recognized in profit or loss. However, the differences arising from the translation ofequity instruments measured at fair value through other comprehensive income are recognized in other comprehensive
income.
(2) Foreign operations
Assets and liabilities of a foreign operation are translated into Japanese yen at the exchange rate as of the reporting
date, and its revenue and expenses are translted at the average exchange rate for the period except the case that the12exchage rate changes significantly. The exchange differences as a result of this are recognized in other comprehensive
income. The exchange differences of a foreign operation are recognized in profit or loss during the period in which theforeign operation is disposed.
Financial instruments
Non-derivative financial assets(i) Initial recognition and measurement
At initial recognition, Makita classifies financial assets as financial assets measured at amortized cost, financial
assets measured at fair value through other comprehensive income, or financial assets measured at fair value
through profit or loss. We initially recognize trade receivables and other receivables on the effective date, and otherfinancial assets on the transaction date in which we become a party to the contract of the financial instrument.
All of the financial assets, except financial assets measured at fair value through profit or loss, are initially measured
at the amount of fair value added to the transaction cost directly attributable to the financial asset. However, tradereceivables without a significant financial component are initially measured at the transaction price.
(a) Financial assets measured at amortized cost
We classify financial assets that both of the following conditions are met as financial assets measured atamortized cost:
・The financial asset is held within a business model whose objective is to hold financial assets in order tocollect contractual cash flows, and・

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding.

(b) Financial assets measured at fair value through other comprehensive income
At initial recognition, Makita make an irrevocable election to present in other comprehensive income subsequentchanges in the fair value of a particular investment in an equity instrument not held for trading that would
otherwise be measured at fair value and not classified as financial assets measured at amortized cost. If thegroup derecognized an investment, or if the fair value of the investment declines significantly, the cumulative
gains or loss recognized in other comprehensive income is reclassified from other component of equity to retained
earnings.
(c) Financial assets measured at fair value through profit or loss
Financial assets, other than financial assets measured at amortized cost or at fair value through othercomprehensive income, are classified as financial assets measured at fair value through profit or loss.
(ii) Subsequent measurement(a) Financial assets measured at amortized cost
Financial assets measured at amortized cost are, after initial recognition, measured at amortized cost based on
the effective interest method. Interest revenue calculated by using the effective interest method is recognized in
profit or loss.
(b) Financial assets measured at fair value through other comprehensive income
Equity instruments measured at fair value through other comprehensive income are, after initial recognition,measured at fair value, and its subsequent changes are recognized in other comprehensive income. The
cumulative amount that is recognized in other comprehensive income is transferred to retained earnings, when
the amount is derecognized or when the fair value decreases significantly. In addition, dividends from equity
instruments measured at fair value through other comprehensive income are recognized in profit or loss.
(c) Financial assets measured at fair value through profit or loss
Financial assets measured at fair value through profit or losses are, after initial recognition, measured at fairvalue. Gain or loss of valuation arising from changes in fair value, dividends, and interest revenue are recognizedin profit or loss.

13

(iii) Derecognition
Financial assets are derecognized, when the contractual rights to the cash flows from the financial asset expire, or
when the contractual rights to receive the cash flows of the financial asset along with almost all of the risks related
to the contract and its economic value transferred.
Impairment of financial assets
Makita recognizes allowance for doubtful receivables for expected credit losses related to financial assets measured
at amortized cost. Expected credit losses are measured based on discounted present value of the difference between
contractual cash flows to be received based on the contract and cash flows to be expected to be received.
If the credit risks related to the financial asset increase significantly after initial recognition, lifetime expected credit
losses are recognized in allowance for doubtful receivables. If the risk does not increase significantly after initialrecognition, 12-month expected credit losses are recognized in allowance for doubtful receivables. In addition, tradereceivables without a significant financial component are classified in accordance with the credit risk of the other party
based on the past due information or the internal credit rating, and their allowance for doubtful receivables arenecessarily measured at an amount equal to lifetime expected credit losses, with the ratio of past credit losses
calculated by the classification multiplied the provision ratio in consideration of expected future economic conditions.
We assess whether credit risks related to financial assets increase significantly after initial recognition or not bycomparing the risk of default at initial recognition and the risk of default at each reporting date, taking into consideration
the reasonable information with evidence as well as the past due information. If entire or part of a financial asset isjudged to be impossible or incredibly difficult to be collected, it is considered to be in default and treated as creditimpaired financial assets.
We directly reduce the gross carrying amount of a financial asset when there is no reasonable expectation ofrecovering the financial asset in its entirety or a portion thereof.
Allowance for doubtful receivables and reversal of allowance for doubtful receivables of financial assets are recognizedin profit or loss.
Non-derivative financial liabilities(i) Initial recognition and measurement
At initial recognition, Makita classifies financial liabilities as financial liabilities measured at amortized cost or liabilities
measured at fair value through profit or loss. A financial liability is initially recognized on the transaction date in which
we become a party to the contract of the financial liability.
All of the financial liabilities are measured at fair value at initial recognition. However, financial liabilities measured
at amortized cost are measured at the amount after deduction of the transaction cost directly attributable to thefinancial liabilities from the fair value.
(ii) Subsequent measurement(a) Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost are, after initial recognition, measured at amortized cost basedon the effective interest method.
(b) Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or losses are, after initial recognition, measured at fairvalue. Gain or losses of valuation arising from changes in fair value are recognized in profit or loss.
(iii) Derecognition
A financial liability is derecognized, when it is extinguished, namely, when the obligation specified in the contract isdischarged, chancelled or expired.
Derivatives
Makita uses derivatives including forward exchange contracts and currency swap transactions in order to hedge theforeign currency risk. Derivatives are initially recognized at fair value and remeasured at fair value after initial

14

recongnition. Changes in fair value of derivatives are recognized in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash, demand deposits and short-term that are highly liquid and readily convertible
to known amounts of cash subject to an insignificantly risk of changes in value, and that mature or become due within
3 months from the date of acquisition.
Inventories
Inventories are measured at the lower of the acquisition cost and the net realizable value. Acquisition costs include allcosts of purchases, conversion and other costs incurred in bringing the inventories to their present location and condition.
Acquisition costs are calculated by using the weighted average cost formula. Costs of conversion include production
overheads based on the normal capacity of production. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated cost of completion and the estimated cost necessary to make the sale.

Property, plant and equipment
Property, plant and equipment are measured using the cost model and carried at cost less any accumulated
depreciation and any accumulated impairment losses.
The cost of an item of property, plant and equipment comprises any cost directly attributable to acquisition of the asset
and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Regarding subsequent expenditures for the repairs and improvement of the item of property, plant and equipment, if
they satisfy the requirements that it is probable that value of the property, plant and equipment will be improved andfuture economic benefits associated with the item will flow to the entity and it is clear that production capacity will besignificantly increased, these repairs and improvement shall be recognized as part of the acquisition cost.
Property, plant and equipment other than land and construction in progress are depreciated by using the straight-line
method, for its depreciable amount that is its acquisition cost less the residual value, over its estimated useful life
beginning from the point when the assets are available for use. The estimated useful lives of the major assets are as
follows.

Buildings and improvements:

3 to 60 years

Machinery and equipment:

3 to 15 years

Depreciation method, residual value and estimated useful lives are reviewed every year and revised if necessary.

Goodwill and Intangible Assets
1)

Goodwill
Goodwill arising from a business combination is not amortized, and is carried at cost, determined at the acquisitiondate, less any accumulated impairment losses.
In addition, goodwill is allocated to the cash generating unit or group of cash-generating units that is expected tobenefit from the synergies of the business combination, and is tested for impairment at least once a year by eachfiscal year end or if there are indications of impairment. Impairment loss on goodwill is recognized in profit or loss
and is not reversed in subsequent periods.

2)

Intangible Assets
Intangible assets are measured using the cost model and carried at cost less any accumulated amortization and any
accumulated impairment losses.

15

The costs of separately acquired intangible assets comprise any costs directly attributable to acquisition of the assets.
An intangible asset acquired in a business combination is recognized as an intangible asset and measured at fairvalue at the acquisition date.
Development expenditures are capitalized only if they can be measured reliably, future economic benefits areprobable and the Group intends to, and has sufficient resources to complete development and to use or sell the asset.
If it is probable that internally used software enables an entity to obtain future economic benefits and cut the cost, thedevelopment cost can be recognized as an intangible asset.
Intangible assets with definite useful lives are amortized by using the straight-line method over each estimated usefullife. The estimated useful lives of the major intagible assets are as follows:

Intangible asset arising from development

5 years

phase
Software

2-10 years

Trademarks

20 years

Amortization method, residual value and estimated useful lives are reviewed every year and revised if necessary.
Lease
Makita determines whether contracts are, or contain a lease based on the substance of the contract, even if it is notlegally a form of lease. Makita recognizes a right-of-use asset and a lease liability at inception date of the lease.
Right-of-use assets are initially measured at cost. This cost includes the initial measurement amount of the leaseliability, the lease payments made at or before the commencement date, an estimate of costs to be incurred by thelessee in dismantling and removing the underlying asset, restoring the underlying asset to the condition required by
the terms and conditions of the lease, and borrowing costs that meet the capitalization requirements. Depreciationis amortized by using the straight-line method over the useful life of the underlying asset if the ownership of theunderlying asset is transferred by the end of the lease term, or if it is reasonably certain to exercise the purchase
option after initial recognition, in other cases, using the straight-line method over the useful life or the lease period,
whichever is shorter. Right-of-use assets are measured at cost by deducting accumulated depreciation andaccumulated impairment losses and adjusting any remeasurement of the lease liability. Right-of-use assets areincluded in property, plant and equipment in the consolidated statement of financial position. The lease term isdetermined by adding to the non-cancellable term of the lease the term of the extension option reasonably certain to
be exercised or the term of the cancellation option reasonably sure not to be exercised. Lease liabilities are measured
at present value by discounting the total remaining lease payments at the lease commencement date using thelessee's incremental borrowing rate as of that date. After initial recognition, lease liability measured by increasing thecarrying amount to reflect interest on lease liability, reducing the carrying amount to reflect lease payments made andremeasuring the carrying amount to reflect any reassement or lease modification. Lease expenses are allocated tofinancial charges and the part of repayment of the lease liability. After the commencement date of the lease, the leaseliability is remeasured as necessary due to changes in the lease terms and conditions. Lease liabilities are included
in other financial liabilities in the consolidated statement of financial position. Interest expenses are shown as financial
charges separately from depreciation of right-of-use assets in the consolidated statement of profit or loss. Makita
has adopted not to recognize right-of-use assets and lease liabilities by applying the exemption provision of IFRS 16
for short-term leases with a lease term of 12 months or less and low-value leases. Makita recognizes lease payments
related to these leases as expenses using the straight-line method over the lease term.
In the previous consolidated fiscal year, the Group accounted for in accordance with the following policies.
The group classifies a lease that transfers substantially all the risks and rewards incidental to ownership of an asset
as a financial lease and a lease other than a finance lease as an operating lease.

16

Determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement, in
accordance with IFRIC Interpretation 4 “Determining Whether an Arrangement Contains a Lease.”
In finance lease transactions, lease assets and lease obligations are initially recognized at the lower of the fair valueof leased property and the present value of the minimum lease payments, each determined at the inception of thelease.
Lease assets are depreciated by using the straight-line method over the fewer years of the estimated useful life andthe lease term.
Lease payments under operating leases are recognized as an expense on a straight-line basis over the lease term.
Impariment of Non-financial Assets
We judge at the reporting date whether there are any indications that Makita’s non-financial assets except inventories
and deferred income taxes may be impaired.
If any of those indications is present, we conduct impairment tests to estimate recoverable amount of the assets.
Goodwill, intangible assets with no definite useful life, and intangible assets that are not yet available for use are notamortized, and the impairment tests are conducted every year and every time when indications of impairment arepresent.
Makita’s corporate assets do not generate independent cash inflow, therefore, if there is any indication that thecorporate assets may be impaired, the recoverable amount of cash-generating unit to which the corporate assets is
attributable is estimated.
A recoverable amount is the higher amount of the fair value less the cost of disposal and the value in use. In culculating
value in use, an estimate of the future cash flows is discounted to the present value by using the discount rate before
tax that reflects the time value of money and the risk inherent in the asset.
If the carrying amount of each asset or cash-generating unit exceeds the recoverable amount, the impaiement loss isrecognized in profit or loss, and the carrying amount of the asset is reduced to a recoverable amount. Any impairment
loss recognized related to cash-generating units or groups of cash-generating units is allocated to reduce the carrying
amount of goodwill allocated to the unit, and then the carrying amount of other assets in the unit is reduced
proportionally.
Impairment losses of goodwill are not reversed. As for impairment losses of non-financial assets other than goodwill,
the recorvarable amount of the asset is estimated if there is no impairment losses or any indication of possibility thatthe impairment loss is reduced, and the impairment loss is reversed if the recoverable amount exceeds the carrying
amount after impairment. In addition, reversal of impairment losses are recognized in profit or loss, within the range
not exceeding the carrying amount when there was no impairment loss recognized in the asset in the past.
Post-emplyment Benefits
Makita has adopted defined benefit pension plans and defined contribution plans for post-employment benefits.
(i) Defined benefit pension plans
The present value of the defined benefit obligations and the related current service cost and past service cost arecalculated by using the projected unit credit method.
A discount rate is calculated based on the market yields of high quality corporate bonds at the reporting datecorresponding to a discount period which is determined based on the period until the expected date of future benefit
payment in each fiscal year.
Assets and liabilities related to defined benefit pension plans are calculated by the amount of the present value of
defined benefit obligations less the fair value of the plan assets. The current service cost and net interest on the net
defined benefit liability are recognized in profit or loss. Past service costs are recognized as expense during the17period in which they occur.
Remeasurements of the net defined benefit liability or asset are entirely recognized in other comprehensive incomein the period in which they occur, and immediately transferred to retained earnings.
(ii) Defined contribution plans
The contribution payable to defined contribution plans is recognized as expense during the period in which
employees render the related service.
Share-based payments
The group enacted stock option plan to its members of the board of directors, excluding outside directors. The plan isdesigned as equity-settled. Fair value is measured at grant date and is expensed over the vesting period.

Provisions
Provisions are recognized when Makita has a present legal obligation or constructive obligation as a result of a past
event, and when it is probable that an outflow of resources embodying economic benefits will be required to settle theobligation and a reliable estimate can be made of the amount of the obligation.
When the effect of the time value of money is material, the provision is measured at the present value of theexpenditures that are expected to be required to settle the obligation. Present value is culculated by using the discountrate before tax that reflects the time value of money and the risks inherent in the liability. Rebate of the discounted
amount arising from the passage of time is recognized as financial cost.
Warranty provisions are provided to prepare for the expense of after-sales service for the products based on the pastactual cost, taking into consideration the defective rate of current products, the malfunction of specific products never
manufactured before, the effects of the costs of materials and shipping related to repair of defective products. Warranty
provisions are provided as provisions and cost of sales, when the revenue is recognized.
Makita generally guarantees the performance of products delivered and of services rendered for a certain period or
term. Estimates for product warranty cost are made based on historical warranty claim experience.
Product warranty provisions are recorded as provisions and cost of sales when revenue is recognized.

Equity and other capital
1) Ordinary shares
Ordinary shares are recognized in share capital and capital surplus at their issue price. Share issuance costs are
deducted from the issue price.
2)Treasury shares
Treasury shares are recognized at cost and deducted from equity. No gain or loss is recognized on the purchase,sale or retirement of the company’s treasury shares. Any difference between the carrying amount and consideration
received on the sale of treasury shares is recognized directly in equity.
Revenue Recognition
Makita recognizes revenue by applying the following five steps.
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the entity satisfies a performance obligation
Makita is engaged mainly in production and sales of electric power tools and gardening equipment, etc. Regardingthese product, we have determined that a performance obligation is satisfied when a product is transferred to acustomer as the customer has control of the product. Therefore, revenue of these products is recognized at the pointof transferring these products. In addition, the revenue is measured at the amount of the promised consideration in acontract with a customer less the amount of a reduction, rebate and returned products.

18

Financial income and expenses
Financial income consists of interest income, dividend income, foreign exchange gains, derivative income, etc. Interest
income is recognized as incurred using the effective interest rate method. Dividend income is recognized when theGroup's right to receive payment is established. Financial expenses consist of interest expense, foreign exchange loss,
derivative loss, etc. Interest expense is recognized as incurred using the effective interest rate method.
Income taxes
Income taxes consist of current income taxes and deferred income taxes. Income taxes are recognized as income or
expenses and included in profit or loss, except for taxes related to business combinations and taxes related to items
that are recognized directly in equity or in other comprehensive income.
Current income taxes are recognized in the amount of the expected taxes payable to or receivable from the taxation
authorities. Calculation of the amount of tax is based on the tax rates and tax laws enacted or substantively enacted by
the end of the reporting period in countries where the Group conducts business and earns taxable income.
Deferred income assets and liabilities are recognized for temporary differences between the carrying amounts of assets
or liabilities at the end of the reporting period and its tax base, and for tax loss carryforwards. Deferred tax assets arerecognized for deductible temporary differences, the carryforward of unused tax losses and the carryforwards of unused
tax credits to the extent of that it is probable that future taxable income will be available against such deferred tax assets.
Deferred tax liabilities are recognized, in principle, for all taxable temporary differences.
Deferred tax assets and liabilities are not recognized for the following temporary differences:

Taxable temporary differences arising from initial recognition of goodwill



Deductible temporary differences on investments in subsidiaries and associates, when it is probable that thetemporary differences will not reverse in the foreseeable future

Taxable temporary differences on investments in subsidiaries and associates, when the timing of the reversal of
the temporary differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future

Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to set off current tax assets
against current tax liabilities and income taxes are levied by the same taxation authority on the same taxable entity.
Earnings Per share
Basic earnings per share are calculated by dividing net income attributable to owners of the parent by the weighted
average number of ordinary shares outstanding during the period, adjusted for treasury shares held. Diluted earnings
per share are calculated by adjusting the effects of all dilutive potential ordinary shares.
Government Grant
Government grants will be recognised if it is assurance that the grant will be received and the conditions attaching tothem will be complied.
Government grant related to income will be included in “Other income”.
Government grant related to asset will be recognized as deferred income that is recognized in profit or loss on asystematic basis over the useful life of the asset.

19

The group’s reportable segment are the components of the Group for which discrete financial information is available and which
are regularly reviewed by the Board of Directors in deciding how to allocate resources and in assessing their performance.
Makita group has an single business with core activities in the field of production and sales of electric power tools, pneumatic
tools and gardening equipment. Local subsidiaries in Japan, Europe, North America, Asia and other regions work in cooperation
with each other to achieve our aims.
Accordingly, the group’s reportable segement is organized by the region of Japan, Europe, North-american and Asia.
Reportable Segment

Major Countries

Japan

Japan

EuropeGermany、England、Russia、France、Finland

North-America

America、Canada

Asia

China、Thailand

Reportable segment information
The accounting treatment in each reportable segment is the same as in Notes3 “Significant Accounting policies and criticalaccounting estimates”.

Previous consolidated fiscal year (2018.4.1~2019.3.31)
In millions of Yen

OthersReconciliation
to Consolidated
Consolidated
Financial
Statements

Japan

EuropeNorthAmerica

112,143

213,90374,854

26,414427,314

63,264―

490,578

220,111

5,902

3,941

220,999

450,953806

ሺ451,759)―

Total revenue

332,254219,805

78,795

247,413878,267

64,070ሺ451,759)

490,578

Operating Income

32,33018,424267

23,094

74,1155,715

ሺ1,525)78,305

Financial income

―

―

―

―

―

―

―

2,680

Financial expenses

―

―

―

―

―

―

―

ሺ1,066)

Income before income tax

―

―

―

―

―

―

―

79,919

3,948

2,163

702

4,108

10,921454

ሺ104)

11,271

425,982

228,123

68,582

160,642883,329

71,699ሺ274,778)

680,250

8,337

6,872

1,129

7,023

23,361743(237)

23,867

Asia

Subtotal

Revenue
External Revenue
Inter-segment revenue

Other items
Depreciation
Amortization

andSegment Assets
Capital expenditures

1.

Internal sales revenue or transfer amount between segments is based on the selling price decided through consultation in20

consideration of market conditions.
2.

“Other” mainly consists of the regions of Australia, Brazil and the United Arab Emirates.

3.

Reconciliation to Consolidated Financial Statements is as follows.

①

The adjustment of operating income of 1,525 million includes the elimination of intersegment transactions.

②

Depreciation and amortization adjustment of 104 million is the effect of consolidation adjustment between segments.

③

The adjustment amount of 274,778 million yen for segment assets includes inter-segment transaction elimination
amount.
The adjustment of capital expenditure of 237 million yen is the effect of consolidated adjustment between segments.

④

Current consolidated fiscal year (2019.4.1~2020.3.31)
In millions of yen

OthersReconciliation toConsolidated
Consolidated
Financial
Statements

Japan

EuropeNorthAmerica

External Revenue

118,797

217,11374,13924,912434,961

57,656―492,617

Inter-segment revenue

176,567

7,323

3,896

188,012375,798587

ሺ376,385)―

Total revenue

295,364

224,436

78,035

212,924

810,759

58,243

ሺ376,385)

492,617

Operating Income

22,726

13,252(201)

17,87753,654

1,327

9,065

64,046

Financial income

―

―

―

―

―

―

―

2,558

Financial Cost

―

―

―

―

―

―

―

ሺ596)

―

―

―

―

―

―

―

66,008

4,833

3,201

917

4,711

13,662815

ሺ128)

14,349Segment Assets

446,963

219,398

65,625

141,333

873,319

56,568

ሺ255,323)

674,564

Capital expenditures

19,420

9,000

5,966

9,121

43,507

1,028

ሺ126)

44,409Asia

Subtotal

Revenue

Income before income tax
Other items
Depreciation
Amortization

1.

and

Internal sales revenue or transfer amount between segments is based on the selling price decided through consultation inconsideration of market conditions.

2.

“Other” mainly consists of the regions of Australia, Brazil and the United Arab Emirates.

3.

Reconciliation to Consolidated Financial Statements is as follows.

①

The adjustment of operating income of 9,065 million includes the elimination of intersegment transactions.

②

Depreciation and amortization adjustment of △ 128 million is the effect of consolidation adjustment between
segments.

③

The adjustment amount of △255,323 million yen for segment assets includes inter-segment transaction elimination
amount.

④

The adjustment of capital expenditure of △126 million yen is the effect of consolidated adjustment between
segments.

21

Products and Service Information
In millions of Yen
Previous consolidated fiscal year(2018.4.1~2019.3.31)

Current consolidated fiscal year
(2019.4.1~2020.3.31)

electric power tools

300,118

292,497

pneumatic tools and gardening equipment

108,046

112,678

Parts, accessories and maintenance82,41487,442490,578492,617

Total

Information about Geographical Areas
The breakdown of sales revenue and non-current assets by region is as follows.
External revenue
In millions of Yen

Previous consolidated fiscal year(2018.4.1~2019.3.31)

Current consolidated fiscal year
(2019.4.1~2020.3.31)

Japan

92,129100,697

Europe213,238

216,230

North-America
America

72,508(62,892)

72,304(63,179)

Asia

40,90938,998Others

71,79464,388490,578492,617

Total

Non-current assets (excluding financial assets, deferred tax assets and retirement benefits assets)

Previous consolidated fiscal year
(2019.3.31)
Japan

In millions of Yen
Current consolidated fiscal year
(2020.3.31)

50,737

69,686

Europe（Romania）

29,732（13,370)

36,624（15,359)

North-America

5,259

10,83028,961(21,592)

32,436(23,938)

9,983

9,528

124,672

159,104

Asia（China）
OthersTotal

Excludes financial instruments, deferred tax assets, and retirement benefit assets(5) Information about major customers
It is omitted because there are no customers who account for 10% or more of the sales income in the consolidated profit
and loss statement among the sales income to external customers.

22

Cash and Cash equivalents comprise the following:
The balance of “cash and cash equivalents” in the consolidated statement of financial position and the balance of “cashand cash equivalents” in the consolidated statement of cash flows for the previous consolidated fiscal year and the current
consolidated fiscal year are the same.
In millions of Yen
Previous consolidated fiscal year
(2019.3.31)

Current consolidated fiscal year
(2020.3.31)

Cash and deposit

111,22087,030

Deposit within 3 months

35,29256,409146,512

143,439

Total

Cash and cash equivalents are classified as financial assets measured at amortized cost.

Trade receivables and other receivables comprise the following:
In millions of Yen
Previous consolidated fiscal year
(2019.3.31)

Current consolidated fiscal year
(2020.3.31)

Notes receivables andAccounts receivables

80,51170,781

Allowance of bad debt

ሺ1,061)

ሺ1,182)

Total

79,45069,599Trade and other receivables are classified as financial assets measured at amortized cost.

23

Inventories comprise the following:
Previous consolidated fiscal year
(2019.3.31)
Finished goods and goods for
sale

Current consolidated fiscal year
(2020.3.31)

185,774

175,510Work in progress

3,010

3,402

Raw materials and supplies

31,15435,648219,938

214,560

Total







The Cost of sales includes inventories recognized as expense amounted to 310,058 million and 320,523 respectively, in fiscal year
2019 and 2020
Write-downs to net realizable value amounted to 1,983 and 2,940 million, respectively, in fiscal year 2019 and 2020
There are no inventories pledged for debt.
There was no reversal of significant devaluation during the previous and current consolidated fiscal years

Other assets comprise the following:
Previous consolidated fiscal year
(2019.3.31)

Current consolidated fiscal year
(2020.3.31)

Tax receivable

1,433

1.588

Accrued expenses

1,647

1,949

Others

10,513

7,802

13,593

11,339Thereof Current

9,401

7,633

Thereof Non-Current

4,192

3,706

13,593

11,339

Total

Total

24

The following tables present changes in acquisition costs, accumulated depreciation and accumulated impairment losses,
and carrying amounts of property, plant and equipment.
Acquisition cost

April 1, 2018
Additions
Sales and Disposals
Reclassification
Exchange differences on translationof foreign operations
March 31, 2019
Changes in accounting rule
April 1, 2019
Additions
Sales and Disposals
Reclassification
Exchange differences on translationof foreign operations
March 31, 2020

Buildings and Machinery andstructures
vehicles
101,218
98,868Land
23,338In millions of Yen
Construction in Right-of-use
Total
asset
progress―
6.027
229,451――――

ሺ4,692)―

13,279―245,215
10,302
255,517

1,781

7,777

2.549

11,961

ሺ282)
919

ሺ4,140)
3,054

ሺ110)
167

ሺ160)
ሺ4,140)(1,262)(1,698)

(243)

(409)

102,374

103,861

25,701

―

(244)

―

―

10,546102,374

103,61725,701

13,27910,546

860

9,577

3,997

27,857

ሺ312)
7,523

ሺ5,350)2,830

ሺ1,357)665

ሺ2,208)
ሺ11,018)

4,154
(102)

ሺ2,964)

ሺ4,239)

ሺ571)

107,481

106,435

28,43524,068(3,612)

46,445―

ሺ9,329)
―

ሺ686)

(875)

ሺ9,335)27,224

13,723

283,298

Accumulated depreciation and accumulated impairment
In millions of Yen
Construction in Right-of-use
Total
asset
progress― ሺ128,638)―――
ሺ9,654)――
4,379

Buildings andstructuresሺ54,311)

Machinery andvehiclesሺ73,914)

ሺ2,668)240

ሺ6,986)
4,108

―
31

286

853

―

―

ሺ56,453)

ሺ75,939)

ሺ382)

―

104

―

April 1, 2019

ሺ56,453)(75,835)

Depreciation
Sales and Disposals
Exchange differences on translationof foreign operations
March 31, 2020

ሺ2,765)158

ሺ7,533)4,283

1184
ሺ57,876)

April 1, 2018
Depreciation
Sales and Disposals
Exchange differences on translationof foreign operations
March 31, 2019
Changes in accounting rule

Land
ሺ413)

―

ሺ1,139)――ሺ132,774)

―

(104)

―

ሺ382)

―
―
―

(104)
(2,292)
24(132,774)

―
382

2,559

―

―

125

3,868

ሺ76,526)――

ሺ2,247ሻ

ሺ136,649)25

ሺ12,590)
4,847

Carrying Amount
In millions of Yen
Buildings andstructures
March 31,2019
March 31,2020
1.

Machinery andvehicles

45,921

27,92249,60529.90925,319Construction in Right-of-use asset
progress―
13,27928,435

11,476

Land

27,224

Total
112,441
146,649

Depreciation of property, plant and equipment is included in cost of sales, selling, general and administrative expenses and otheroperating expenses in the consolidated statement of profit or loss.

2.

The amount of property, plant and equipment under construction is shown as construction in progress.

3.

There is no borrowing cost included in the acquisition cost of property, plant and equipment.

4.

There are no tangible fixed assets with mortgages as collateral for tangible fixed assets and liabilities with restrictions on ownership5.

In the previous consolidated fiscal year and the current consolidated fiscal year, the amount of significant commitments regarding theacquisition of property, plant and equipment was 24,068 and 33,129 million.

Right-of-use assets
The carrying amount of Right-of-use assets (finance leases in last fiscal year) included in property, plant and equipment are as
following:
In millions of Yen
Buildings andstructures

Machinery and vehicles

Land

Total

March 31,2019

―

140

―

140

March 31,2020

9,627

779

1,070

11,47626

(1)Change table
The following tables present changes in acquisition costs, accumulated depreciation and accumulated impairment losses, andcarrying amounts of Goodwill and Intangible assets.
Acquisition cost
In millions of Yen
Intangible Assets
Goodwill

Development
Expenses

SoftwareTrademark

Total

OthersApril 1,2018

721

5,441

5,442

2,796

1,636

16,036

Acquisition

141

―

1,076

72

311

1,600

Internal development

―

1,197

―

―

―

1,197

Sales and disposals

―

―

ሺ643)

―

ሺ177)

ሺ820)

Exchange differences ontranslation of foreign
operations

―

―

(104)

―

(6)

(110)

March 31,2019

862

6,638

5,771

2,868

1,764

17,903Acquisition

―

―

748

―

300

1,048

Internal development

―

1,636

―

―

―

1,636

Sales and disposals

―

―

ሺ423)

(19)

ሺ50)

ሺ492)

Exchange differences ontranslation of foreign
operations

―

―

ሺ217)

―

ሺ36)

ሺ253)

862

8,274

5,879

2,849

1,978

19,842

March 31,2020

Accumulated amortization and Accumulated impairment losses
In millions of Yen
Intangible Assets
Goodwill

Development
Expenses

SoftwareTrademark

Total

Others―ሺ2,483)

ሺ4,122)

ሺ1,716)

ሺ724)

ሺ9,045)depreciation

―

ሺ825)

ሺ555)

ሺ201)

ሺ36)

ሺ1,617)

Sales and disposals

―

―

560

―

174

734

Exchange differences ontranslation of foreign
operations

―

―

62

―

2

64

March 31, 2019―

ሺ3,308)

ሺ4,055)

ሺ1,917)

ሺ584)

ሺ9,864)depreciation

―

ሺ833)

ሺ671)

ሺ210)

ሺ45)

ሺ1,759)Impairment loss

―

(123)

―

―

―

(123)

Sales and disposals

―

―

416

19

48

483

Exchange differences ontranslation of foreign
operations

―

―

150

―

20

170

―

ሺ4,264)

ሺ4,160)

ሺ2,108)

ሺ561)

ሺ11,093)

April 1, 2018

March 31, 202027

Carrying amount
In millions of Yen
Goodwill
March31,2019

862

Intangible Assets
Research

Software

3,330

1,716

Trademark

Others

951

1,180

Total
8,039

March31,2020
862
4,010
1,719
741
1,417
8,749
1. Amortization of intangible assets is included in cost of sales, selling, general and administration of the consolidated
statement of Profit or Loss.
2. There are no intangible assets with mortgages as collateral for intangible assets and liabilities with restrictions onownership.
3. No significant commitment to acquire intangible assets.
4. There are no significant intangible assets with indefinite useful lives.

(2) Impairment loss
In the current consolidated fiscal year, an impairment loss of 123 million yen was recorded in the Japan segment, which isincluded in "Sales and general administrative expenses" in the consolidated statement of Profit or Loss. Assets for which an
impairment loss was recognized are development costs and are due to the suspension of development during the current
consolidated fiscal year. The valuation value is set to “0”, because no cash flow will occur in the future.
(3) R&D expenses
Research expenses and development expenses that do not meet the asset recognition standard are recognized as expenses
when incurred. R&D expenses recognized as expenses in selling, general and administration of the consolidated statementof Profit or Loss in the fiscal year 2019 and 2020 amounted to 10,433 and 10,768 respectively.

28

The group, as a lessee, leases land, buildings and structures, machinery and vehicles.
Although some lease contracts have renewal options and purchase options, option lease payments that are not included in
the lease term are immaterial to the lease payments. In addition, sublease agreements, variable lease payments andescalation clauses (clauses that raise the lease contract amount) and restrictions imposed by the lease agreements(dividends, additional borrowings, restrictions on additional leases, etc.) are not significant.
(1) Income and expensens relating to lease consisits of the followings.
In millions of Yen
2020
Recognition Exemption－Short-term lease expensens

801

Recognition Exemption－Low-valued lease expensens（exclude short-term lease）

161

Depreciation of Right-of-use assets
Buildings and structures

1,941

Machinery and vehicles

312

Land

39

Total of depreciation

2,292

Interest expenses on lease liabilities

249（2）The total cashout flow of leases including low-value lease and short-term lease.
In millions of Yen
Total cashout flow

3,499

Note 9 Property, plant and equipment presents additions and classification of right-of-use assets
Note 27 Financial Instrument presents maturity analysis of lease liablity
Fiscal year ended March 31, 2019.
(１) Finance Lease
The Group leases some vehicles as finance lease.
The total of future minimum lease payments and the present value under finance lease contracts comprise the following:
In millions of Yen
Present value of minimum
Minimum lease payments
lease payments
2019

2019

Not later than 1 year

44

37

Later than 1 year and not later than
5 years132

124

Later than 5 years

―

―

176

161

Total
Financial charges

15

Present value of minimum lease
payments161

29

(２)Non-cancellable Operating leases
The group leased some office buildings as cancellable and non-cancellable operating leases. The total future minimum
lease payments of non-cancellable operating lease are as following:
In millions of Yen
2019
Not later than 1 year

1,185

Later than 1 year and not later
than 5 years

2,314

Later than 5 years

670

Total

4,169

The lease expenses under operating lease recognized in fiscal year 2019 are as following:
In millions of Yen
2019total of minimum lease payments

4,037

30

Trade payables and other payables comprise the following:
In millions of Yen
2019

2020

Trade payables

29,11425,870Non-trade payables

9,790

9,089

38,90434,959Total

In millions of Yen

Short-term borrowings
Total

2019

2020

11,799

7,997

11,799

7,997

The average interest rate for loans from banks in fiscal year 2019 and 2020 were 0.33％ and 0.45％ respectively.

Other liabilities comprise the following:
In millions of Yen
2019

2020

Accrued expenses

12,243

10,764

Accrued payroll and bonus

10,667

10,433

Others

6,986

6,275

29,89627,472

29,67827,264218

208

29,89627,472

Total
Thereof Current
Thereof Non-current
Total

31

(１) Post-employment Benefits①

defined benefit plan

The Company and most of its consolidated subsidiaries have defined benefit plans, defined contribution plans and other plans
for their post-employment benefits. Under these plans, employees are entitled to lump-sum payments or retirement benefits
as pensions.
The Company's domestic retirement benefit plan covers all employees of the Company. Contribution to the defined benefit planis determined by various factors such as the employee’s salary level, service years, funded status of plan assets, actuarial
calculation, etc. According to the provisions of defined benefit corporate pension law, the contributions to the fund will be
reviewed every 5 years.
The defined benefit plan is legally separated from the parent company, and is responsible for the management and operationof the plan assets. Benefits payment is determined using the cumulative points granted each month and the position of theemployees at the time of retirement, service year etc.
The objective of managing pension assets is to earn returns to the greatest extent possible and ensure stable benefits andpayments for plan participants. In order to meet this objective, Makita determines an optimal asset mix from a three-to-fiveyear’s medium and long-term standpoint. To avoid a sharp decline in the asset value in the future, Makita updates the asset
mix as necessary by monitoring risks and assessing the magnitude of the risks. Makita has an acceptable divergence indicator
for the asset mix, and the proportion of the temporary asset allocations will be updated promptly when the divergence occurs.
Makita determined the mix of equity securities and debt securities after taking into consideration of the expected long-term rateof return on pension assets. To decide whether changes in the basic portfolio are necessary, Makita examines the divergence
between the expected long-term income and the actual income from the portfolio on an annual basis. Makita and somesubsidiaries revise the portfolio when it is deemed necessary to reach the expected long-term yield.
② Defined benefit plan(a) Defined benefit assets recognized in the consolidated statement of financial position
In millions of Yen
2019

2020

Present value of defined benefit
obligation

ሺ39,583)

ሺ39,612)Present value of Plan asset

45,89345,985

6,310

6,373

Retirement benefit assets

9,541

9,511

Retirement benefit liabilities

ሺ3,231)

ሺ3,138)

Total
Amount recognized inconsolidated statement offinancial position

32

(b) Defined benefit obligations
Changes in the present value of defined obligations are as follows:
In millions of Yen
2019

2020

Defined benefit obligations at beginning of year

39,42239,583Service cost

1,716

1,727

266

224

(184)

92

496

54

ሺ37)

22

―

―

ሺ1,919)

ሺ1,902)

(177)

ሺ188)

39,58339,612

Interest expenses
Premeasurement
Actuarial(gains)losses arisingdemographic assumptions
Actuarial(gains)losses arisingfinancial assumptions

fromchangesinfromchangesinActuarial(gains)losses arising from others
Past service cost
Benefits paid
Exchange differences
operationsontranslationofforeignDefined benefit obligations at ending of year

The weighted average duration of the defined benefit obligations was 12.5 years at March 31, 2019 and 12.4 years at
March 31, 2020.

(c) Plan asset
Changes in the present value of plan asset are as follows:
In millions of Yen

The fair value of plan assets at beginning ofyearInterest income
Contribution by employees
Measurements-Return on Plan asset
Benefits paid
Exchange differences on translation offoreign operations
The fair value of plan assets at end of year

2019

2020

45,94545,893

280

239

1,226

1,179

215

444

ሺ1,724)

ሺ1,730)

(49)

ሺ40)

45,89345,985

The group plans to contribute 1,185 Million in the year ending March 31, 2021.

33

The details of plan asset are as followings:
In millions of Yen
2019

2020

Market price in an active market

Market price in an active market

quotedquotedquotedquoted

7,752

―

7,660

―

1,330

―

717

―

Joint investment trust(domestic)

―

880

―

594

Joint investment trust(overseas)

―

2,467

―

1,090

Joint investment trust(domestic)―

11,545―

11,881

Joint investment trust(overseas)

―

5,757

―

5,542

Life Insurance general account

―

7,844

―

8,615

Alternative investment

―

8,318

―

9,886

Total

9,082

36,811

8,377

37,608Cash and cash equivalents
Equity financial products
Equity stock

Debt financial instruments

Virtually all equity securities have quoted prices in active markets. Makita group Conducted sufficient research and analysis on
the management content and growth potential of the investment target company and appropriately diversifies investments by
the type of industry.
Debt securities mainly composed of domestic and foreign government bonds and municipal bonds.Makita conducts a good
research and analysis on issuance conditions, such as rating, coupon, maturity date, and issuer. Regarding investments inforeign equity and bonds, Makita has investigated the political and economic stability of the markets to be invested in, themarket characteristics such as settlement systems and the taxation systems. On that basis, Makita selected countries andcurrencies appropriate for investment. For commingled funds, Makita selected those that have defined operating assets andmanagement style. Makita also has alternative investments in J-REIT, G-REIT, commodities, and hedge-funds (market neutral
strategy for Japanese equity and relative value strategy for bonds).

34

(d) Significant actuarial assumptions and related sensitivity analysis
Significant actuarial assumptions are as follows:

Discount rate

2019

2020

0.6％

0.6%

(e) Sensitivity analysis on defined benefit obligations
The sensitivity analysis on defined benefit obligation is as follows:
In millions of Yen
2019

2020

0.25％increaseሺ1,130)ሺ1,149)0.25％decrease

1,188

1,211

Discount rateDefined contribution plans
Expenses related to the defined contribution plan recognized in profit or loss were 378 million yen and 394 million yen

for the fiscal year ended March 31, 2019 and March 31, 2020.
(２) Other employee benefit expenses
Other employee benefit expenses recognized in cost of sales, selling, general and administrative expenses in the
consolidated statement of income for the fiscal years ended March 31, 2019 and 2020 were 75,007 million yen and 75,411
million yen, respectively.

35

The Company aims to further increase the motivation of its directors to contribute to the rise of stock prices and theimprovement of corporate value and share the merits and risks of stock price fluctuations with shareholders, We haveintroduced a stock compensation system that allocates restricted stock to eligible directors.Based on this plan, the accounting
treatment of equity-settled stock plans is applied. In addition, with the implementation of the restricted stock compensation
plan, the directors abandoned the stock acquisition rights as stock options which have not yet exercised and the stock option
plan will be abolished.

Stock-option plan
Share-based payment awards at Makita group are predominately designed as equity-settled, the group issued stock-option toits directors, excluding outside directors. The exercise period of the stock option is 50 years from the grant date. Directors
can exercise the stock acquisition right form the next day of their employment termination from the Group.

Content of stock-option

Number of person

First issue in Year 2015

Second issue in Year
2016

Directors
2
Operating officer 9

Directors
2
Operating officer 9

Granted shares
Grant dateConditions for vesting

Third issue in Year
2017

Fourth issue in Year2018

Directors
2
Operating officer 8

Directors
2
Operating officer 8

14,00013,640

10,2209,180July 31, 2015

July 28, 2016

July 31, 2017

July 31, 2018

Right can be exercised Right can be exercised Right can be exercised
Right
can
be
exercised from the from the next day of from the next day of from the next day of
next
day
of
employment
employment
employment
employment
termination
termination
termination
termination

Payment method

Equity settlement

Exercise period

From August19,2015
to August18,2065

Equity settlement

Equity settlement

Equity settlement

From August19,2016
to August18,2066

From August19,2017
to August18,2067

From August18,2018
to August17,2068

Number of stock option and the weighted average exercise price2019
Number of shares

2020

Weighted average
Weighted average
Number of shares
exercise priceexercise price

Beginning balance of outstanding

29,1801

38,360―Granted

9,180

1

―

―

Exercised

―

―

―

―

Abandonment of rights――(38,360)―

Ending balance of outstanding

38,3601

0―Ending balance of exercisable

―

―

―

―

The directors abandoned all of the stock options which have not been exercised (38,360 shares), and the same number ofrestricted stocks are allotted to them.

36

Fair value and assumption of the stock option granted
The weighted average fair value of stock options granted in the previous consolidated fiscal year was 4,407 Yen, which wasevaluated using the Black-Shoals model based on the following assumptions.

2019
Forth issue in 2018
Share price on granted date

4,900Yen

Expected Volatility

32.23%

Expected remaining period

8.5Year

Expected dividends

61Yen

Risk free rate

0.04％

Restricted stock compensation plan
The Company and the eligible Directors have entered into a restricted stock agreement, and the content of the agreement isthat the transfer restriction period is 50 years. During this period, transfer of restricted stocks to a third party, setting ofpledges, setting of security interests, gifts before birth, beneficiary and any other disposition acts are not permitted. With
regard to the transfer restriction, provided that the eligible directors who received the allocation of the transfer-restricted
stocks remained in the position of directors of the Company from the start of the transfer restriction period until the date of thefirst ordinary general meeting of shareholders of the Company, all of the shares will be released when the transfer restriction
period expires. On the other hand, if there are shares whose transfer restrictions have not been released when the transfer
restriction period has expired, the Company will acquire the shares free of charge.

Grant dateJuly 19, 2019

Granted shares

12,220Fair value of grant date

3,435 Yen

Fair value measurement

Calculated based on the closing price of the Company's
common stock on the Tokyo Stock Exchange on thebusiness day immediately preceding the resolution date of
the Board of Directors

Share-based payment expenses
Share-based payment expenses recognized in selling, general and administration for fiscal year 2019 and 2020 is as following:

March31, 2019

March31, 2020

Expenses on Stock-option plan

40

10

Expenses on Restricted stock compensation plan

―

31

Total

40

41

37

Components of and changes in provisions consist of the following:
In millions of Yen
Production warranty

Others

Total

3,300

980

4,280

3,717

43

3,760

ሺ2,601)

ሺ47)

ሺ2,648)Decrease(provision reversed)

ሺ913)

ሺ20)

ሺ933)

Exchangedifferencesontranslation of foreign operations

(53)

ሺ73)

ሺ126)

3,450

883

4,333

2,743

164

2,907

ሺ2,540)ሺ88)

ሺ2,628)Decrease(provision reversed)

ሺ62)

ሺ49)

ሺ111)

Exchangedifferencesontranslation of foreign operations

ሺ195)

ሺ127)

ሺ322)

3,396

783

4,179

Balance as of April 1, 2018
Additions
Decrease(provision used)

Balance as of March 31, 2019
Additions
Decrease(provision used)

Balance as of March 31, 2020

2019

2020

Thereof Current

3,040

2,931

Thereof Non-current

1,293

1,248

Although the Group is exposed to various legal allegations and litigation arising from its normal business activities, theultimate consequences of these events will not have a significant impact on the Company's consolidated financial position.

38

Capital and treasury shares
The number of authorized shares, the number of issued shares and the number of treasury shares are as follows.
SharesType of Shares

2019

2020

Ordinary Shares

Ordinary Shares

992,000,000

992,000,000

280,017,520

280,017,520――

280,017,520

280,017,520

8,549,592

8,550,463

871(49,933)

8,550,463

8,500,530

Number of authorized shares
Number of issued shares
Beginning
Increase/decrease
EndingTreasury shares
Beginning
Increase/decrease
EndingCapital surplus
Capital surplus consists of capital reserve and other capital surplus.
The Companies Act in Japan (hereinafter referred to as the “Company Act”) stipulates that over half of the capital contributed
from the issue of the shares must be included in share capital by resolution of the General Meeting of Shareholders.

Retained earnings
Retained earnings consist of legal reserve and other retained earnings.
The company Act requires that 10% of dividend payment must be appropriated as capital reserve or legal reserve till theiraggregate amount equals to 25% of the capital shares. Legal reserve can be used for deficit compensation and can be reversedby the resolution of the general meeting of the shareholders.

39(４) Other components of equity
Equity securities measured at fair value through other comprehensive incomesThis is the accumulated difference of changes in the fair value of financial assets. The amount recognized in othercomprehensive income will be reclassified to retained earnings if the financial asset is derecognized or the fair value
declined significantly.
Premeasurement of defined benefit plans
Premeasurement of defined benefit plans include the effect of any variances between actuarial assumptions at the
beginning of the year and actual results, the effects of changes in actuarial assumptions, actual return on plan assets andinterest income on plan assets(excluding amounts included in net interest on the net defined benefit liability (asset).
Premeasurements of defined benefit plans are recognized in other comprehensive income and immediately reclassified toretained earnings from other components of equity in the period when they occur.

Exchange difference on translation of foreign operations
Foreign currency translation differences arise from the translation of financial statements of foreign operations
prepared in foreign currencies. The exchange difference on the transition date is all transferred to retained earnings
because the group adopted the IFRS1 exemptions.

Other components of equity comprise the following:
Exchange
Remeasurmentof defined
benefit plans

equity securities
measured at fairvalue throughothercomprehensive
incomes

differenceontranslation

Totalof foreign
operations

April 1, 2018
Other comprehensive
incomeTransfer to retained
earnings
March 31, 2019
Other comprehensive
incomeTransfer to retained
earnings
March 31, 2020

17,459―9,636

27,095

ሺ7,889)(87)(12,488)(20,464)

(287)

87

―

ሺ200)

9,283

―

(2,852)6,431

ሺ2,509)201

ሺ30,152)

ሺ32,460)

ሺ340)

(201)

―

ሺ541)

6,434

―

ሺ33,004)(26,570)40



Payment of dividends

Fiscal year ended on March 31, 2019
Date of Resolution

Type of stocks

Amount of dividendin millions of Yen

Dividend per share(Yen)

Record date

Effective date

General meeting of
Shareholders on June27, 2018

Common stock

13,84551

March 31, 2018

June 28, 2018

Common stock

2,715

10

September 30,
2018

November 28,
2018Type of stocks

Amount of dividendin millions of Yen

Dividend per share(Yen)

Record date

Effective dateCommon stock

14,11652

Common stock

2,715

10

Board of directors on
October 30, 2018

Fiscal year ended on March 31, 2020
Date of Resolution
General meeting of
Shareholders on June
26, 2019
Board of directors on
October 30, 2019

March 31, 2019
September 30,
2019

June 27, 2019
November 28,
2019

Record date is belong to current fiscal year but the effective date belong to the next fiscal year

Fiscal year ended on March 31, 2019
Date of Resolution

Type ofstocks

Source ofdividends

Amount ofdividendin millions ofYen

Dividend per
share
(Yen)

General meeting of
Shareholders on
June 26, 2019

Commonstock

Retainedearnings

14,11652

Record date

Effective date

March 31, 2019

June 27, 2019

Record date

Effective date

March 31, 2020

June 26, 2020

Fiscal year ended on March 31, 2020
Date of Resolution

Type ofstocks

Source ofdividends

Amount ofdividendin millions ofYen

Dividend per
share
(Yen)

General meeting of
Shareholders on
June 25, 2020

Commonstock

Retainedearnings

11,67543

41

Revenues recognized from contracts with customers
A)

Revenue
Makita group has an single business with core activities in the field of production and sales of electric power tools,
pneumatic tools and gardening equipment. An analysis of revenue by segments is shown in Note 4 “Segment
Information”. The revenue is all from contracts with customers and is recognized at the time of delivery of the product.

B)

Contract balance
Assets and liabilities from the contract with customers are as follows:
In millions of Yen

Assets from the contract withcustomers
Contract liabilities

2019

2020

80,51170,781

278

246

Assets from the contract with customers are included in trade receivables and other receivables on the consolidated
financial statements. Contract liabilities are included in other current liabilities.
(２) Performance obligation
The normal payment deadline after fulfilling the performance obligation is within 2 months from the billing date. In addition, thecontract with customers does not contain any significant financial components.
If the consideration promised in a contract includes a variable amount and the uncertainty related to the variable consideration
is subsequently resolved, the variable consideration should be included in the transaction price only if the magnitude of arevenue reversal won’t occur.
(3) Transaction price allocated to the remaining performance obligation

As there are no transactions with an individual expected contract period exceeding one year, the Group applies practical
expedients and omits information on remaining performance obligations.

(4) Assets recognized from the cost of acquiring or fulfilling a contract with a customer
The Group has no assets recognized from the cost of acquiring or fulfilling a contract with a customer.

42

In millions of Yen
2019

2020

Materials and purchasing

298,110

288,959

Inventories (increase)/decrease(23,484)

5,378

Employee benefits

75,04775,452Advertising

9,383

9,269

Freight expenses

9,388

9,757

Research and development

10,433

10,768Depreciation and amortization

11,271

14,349113(808)

Others

22,012

15,447

Total

412,273428,571

Loss(profit) on disposal of Fixed Assets

43

(１) Financial income comprise the following:
In millions of Yen
2019

2020

Financial assets measured at amortized cost

1,587

1,179

Financial assets measured through profit or
loss

417

329

643

712

Financial assets measured at amortized cost00

Financial assets measured through profit or
loss

1

0

32

―

―

338

2,680

2,558

Interest Income

Dividend Income
Financial assets measured at fair value throughother comprehensive income
Gain on sale

Valuation gain
Financial assets measured through profit orloss
Exchange gains or losses(net)
Total(２) Financial expenses
Financial expenses comprise the following
In millions of Yen
2019

2020

Lease liabilities

0249

Financial liabilities measured at amortized cost

49

185

1

3

―

0

―

159

1,016

―

1,066

596

Interest expenses

Loss on saleFinancial assets measured at amortized cost
Financial assets measured through profit orloss
Loss on valuation of fair value
Financial assets and liabilities measured
through profit or loss
Exchange gains or losses(net)
Total

44

(１) Deferred tax assets and deferred tax liabilities
The allocation of deferred tax assets and liabilities to balance sheet line items at 31 March 2019 is shown in the following
table:In millions of
Yen
Recognized
April 1 2018 through profit orloss

Recognizedthrough equity

Recognized throughother comprehensive March 31,2019
incomeDeferred tax asset
Property,equipment

plant

and

2,317

△753

―

―

1,564

9,388

△323

―

―

9,065

21

△15

―

―

6

1,754

△342

―

―

1,412

164

△9

―

39

194

1,710

△10

―

―

1,700

△7,748225――△7,523

Employee benefit asset△2,76696―△66△2,736

Financial assets valued onfair value△4,617

△83

124

3,413

△1,163

△562

149

―

―

△413

△339

△1,065

124

3,386

2,106

Inventories
Tax loss carry forward
Accrued expenses
Employee benefit obligation
Accrued Bonuses
Undistributed
earnings

foreign

OthersTotal

The allocation of deferred tax assets and liabilities to balance sheet line items at 31 March 2020 is shown in the following
table:In millions of
Yen
Recognized
Recognized
Recognized throughApril 1,2019 through profit or
through equity
other comprehensive March 31,2020
loss
incomeDeferred tax asset
Property,equipment

plant

and

1,564

△400

―

―

1,164

9,065

△2,092

―

―

6,973

6

2

―

―

8

1,412

△41

―

―

1,371

194

△19

―

29

204

1,700

40

―

―

1,740

△7,523

1,713

―

―

△5,810Retirement benefit asset△2,736

181

―

△104

△2,659Valuation on debt securities△1,163

△43

147

1,085

26

△413

△624

―

―

△1,0372,106△1,283

147

1,010

1,980

Inventories
Tax loss carry forward
Accrued expenses
Retirement benefit obligation
Accrued Bonuses
Undistributed
earnings

OthersTotal

foreign45

Deferred tax assets and deferred tax liabilities on consolidated statement of financial position
In millions of Yen
2019

2020

Deferred tax assets

9,342

6,932

Deferred tax liabilities

ሺ7,236)△4,952

2,106

1,980

Total

The deductible temporary difference and unused tax loss carryforward for which no deferred tax asset is recognized are as
follows:
In millions of Yen

Deductible
difference

temporaryTax loss carry forward

2019

2020

9,459

10,015

8,703

8,968

46

Unused tax losses for which the deferred tax assets are not recognized will expires as following:
In millions of Yen

2019

2020

No later than 1 year

17

15

Later than 1 year and not later than 2 years

7291

Later than 2 years and not later than 3 years

74

3

Later than 3 years and not later than 4 years

69―

Later than 5 years

1,006

938

No limited

7,530

7,721

8,703

8,968

Total

The aggregate amounts of taxable temporary difference associated with investment in subsidiaries and associates for which
deferred liabilities were not recognized at March 2019 and 2020 were 142,378million yen and 150,545million yen. The group
did not recognize deferred tax liabilities because it was able to control the timing of the temporary difference.
(２) income tax expenses①Taxes on income comprise the following:
In millions of Yen
2019

2020

22,40916,869

1,289

1,084

30

4

Sub-total

1,319

1,088

Total

23,728

17,957

Current tax expense
Deferred tax expense
thereof relating to temporary
differences
Thereof Tax rate change

47

Reconciliation of effective rate
The details of difference between the effective statutory tax rate and the Group’s average actual tax rate consist of thefollowing:

2019

2020

30.2％

30.2％

0.3

0.5

0.1

0.9

Tax spring

ሺ0.1)

△0.0

Change in tax rates

ሺ4.2)

△4.8

3.7

0.9

ሺ0.3)

△0.5

29.7％

27.2％

Effective statutory tax rate
(Reconciliation)
Items that are not counted as a deduction
permanently such as entertainment expenses
Increase/Decrease of unrecognized deferred
tax assets

Undistributed foreign earnings
Others
Effective tax rate48

(１) The Basis for calculating basic earnings per share

Net profit attributable to the owners of the parent company
Weighted average number of ordinary shares during the period
Basic earnings per share

2019

2020

Yen Million

55,75047,731

Number271,467,574

271,502,528

Yen

205.37175.8020192020(２) The Basis for calculating Diluted earnings per share

Net profit attributable to the owners of the parent company

Yen Million

55,750-Adjustments

Yen Million--

Net profit used to calculate diluted earnings per share

Yen Million

55,750-Weighted average number of ordinary shares during the period

Number271,467,574-

Increase in ordinary shares by stock-option

Number

34,910-Weighted average number of ordinary shares after dilution

Number271,502,484-

Yen

205.34-

Diluted earnings per shareNote) Diluted earnings per share for the current consolidated fiscal year is not stated because there are no dilutive potential
shares.

49

Other comprehensive income for the period after tax comprises the following:
In millions of Yen

2019

2020

ሺ11,302)

ሺ3,594)

3,413

1,085

(7,889)

ሺ2,509)Before Tax

(60)

276

Deferred Taxes

ሺ27)

ሺ75)

After Tax

(87)

201

Sub-total

ሺ7,976)

ሺ2,308)(12,623)

ሺ30,328)--

After Tax

(12,623)

ሺ30,328)

Sub-total(12,623)

ሺ30,328)(20,599)

ሺ32,636)

Items not expected to be reclassified to the income statement in the future
Equity financial instruments measured at fair value through Other comprehensive
incomeBefore Tax
Deferred Taxes
After Tax
Premeasurement of defined benefit plans

Items expected to be reclassified to the income statement in the future
Exchange difference on translation of foreign operations
Before Tax
Deferred Taxes

Total

50

(１)Classification of Financial Instruments
The carrying amount of other financial assets is as follows:
In millions of Yen
2019

2020

Cash and cash equivalents

25,974

16,864

Debt securities

2,311

3,105

Deposit

9,508

8,744

374

274

38,16728,98731,032

26,58731,032

26,587

11,992

7,726

203

486

12,195

8,212

81,39463,786

Thereof Current Assets

37,82825,235

Thereof Non-current Assets

43,56638,551

81,39463,786At amortized cost

Loans to third party
Sub-Total
At fair value through othercomprehensive income
Equity securities
Sub-Total
At fair value through Profit orloss
Debt securities
Derivatives
Sub-Total
Total

Total

51

The carrying amount of other financial liabilities is as follows:
In millions of Yen
2019

2020

161

11,740

315

622

476

12,362

Thereof Current Liabilities

220

2,468

Thereof Non-current Liabilities

256

9,894

Total

476

12,362

Lease liabilities
At fair value through Profit
or loss
Derivatives
Sub-total(２) Financial assets measured at fair value through other comprehensive income
Equity securities held by the company for the purpose of maintaining and strengthening business relationships aredesignated as at fair value through other comprehensive income.
 Names of major equity securities and their fair value are as followings:
Fiscal year March 31, 2019
In millions of Yen
Company name

Fair value

Sharp Corporation

4,366

OMRON Corporation

3,574

Toyota Motor Corporation

3,087

Sumitomo Real Estate Co., Ltd.

2,100

Murata Manufacturing Co., Ltd.

1,845

Suzuki Corporation

1,602

Mitsubishi UFJ Financial Group, Inc.

1,426

SEINO Holdings Co., Ltd.

1,056

Toho Gas Co., Ltd.

1,046

Others10,930Total

31,03252

Fiscal year March 31, 2020
In millions of Yen
Company name

Fair value

Sharp Corporation

4,068

OMRON Corporation

3,884

Toyota Motor Corporation

3,094

Murata Manufacturing Co., Ltd.

1,832

Sumitomo Real Estate Co., Ltd.

1,207

Mitsubishi UFJ Financial Group, Inc.

1,045

Toho Gas Co., Ltd.

1,031

Fuji Machine Mfg. Co., Ltd.

882

Suzuki Corporation

845

SEINO Holdings Co., Ltd.

840

Others

7,859
Total

26,587

 Dividend Income
In millions of Yen
2019

2020

Investments derecognized during the period

7

15

Investments held at the end of the period

636

697

643

712

Total

53



Derecognized Finance assets measured at fair value through other comprehensive income
The fair value of financial assets derecognized and the cumulative gains or losses are as follows:
In millions of Yen
2019

2020

Fair value

683

851

Cumulative gains/losses

467

524

The group transfers the cumulative gains/losses arising from changes in the fair value of financial assets measured at fairvalue through other comprehensive income to retained earnings. The amount recognized in other comprehensive income
will be transferred to retained earnings when the assets derecognized or the fair value decreased significantly. The amounttransferred to retained earnings was 287 million yen in FY2019 and 340 million yen in FY2020.
(３) Risk management on financial instruments
The group manages financial instrument risk based on the following policies to avoid and mitigate market risk, Interest risk,
credit risk and liquidity risk.
 Capital management
The main indicators used by the company in capital management are as follows:

Capital amount in millions of
Yen
Capital adequacy ratio (％)

2019

2020

572,748571,275

84.2

84.7

54

 Financial risks
The Group is exposed to financial risks, such as foreign exchange risk, market price fluctuation risk, interest rate risk,
credit risk, liquidity risk. The group manages to mitigate the risks as following.
A)

Market risksCurrency risks
As an enterprise with worldwide operations, the Makita Group conducts business in a variety of currencies from whichcurrency risks arise. In order to hedge currency risks, the Group holds derivative financial instruments such as forward
currency exchange.
The group did not apply hedge accounting for these derivative transactions, but determined that these transactions
effectively offset the impact of fluctuations in exchange rate.
Currency exposure
At the end of the reporting period, the currency exposure for the following year was as follows:
2019

2020

U.S. Dollar

3,556

7,379

Euro

ሺ258)

2,544


Exchange risk sensitivity analysis
The following table illustrated the impact on income and equity in the consolidated statement ofincome from foreign currency-denominated financial instruments held by the Group at the end ofeach fiscal year if the Japanese yen appreciated by 10% against U.S. dollar and the euro.

In millions of Yen
Currency

2019

2020

Profit before tax After tax

Profit before tax After tax

U.S. Dollar

ሺ36)

ሺ25)

ሺ74)

ሺ52)

Euro

3

2

(25)

(18)


Stock price fluctuation risk management
The Group held marketable equity securities and exposed to price fluctuation risk. In order to manage this risk, thegroup regularly reviews market prices and financial conditions of the issuers, and review the holding status appropriately.
The effects of the 1% decline in market prices on other comprehensive income (after tax effects) on listed shares held by
the Group at the transition date, the end of the previous consolidated fiscal year and the end of the current consolidated
fiscal year are as follows:
In millions of Yen

Other comprehensive income(After tax)

55

2019

2020

ሺ208)

ሺ177)

B) Interest risk
The Group's borrowings and lease obligation generally have fixed interest rates.
Therefore, the interest rate risk is not important for the Group and interest rate risk sensitivity analysis has not been
conducted.
There were no outstanding balances of floating interest rate at the transition date, the end of the previous consolidated
fiscal year and the end of the current consolidated fiscal year.

Credit riskCredit risk management
The Group is exposed to credit risk if the counterparties default on contractual obligations resulting in financial losses to
the group.
Note and accounts receivables are trade receivables that expose the Group to customer credit risk. The Group sets up
credit limits for business partners in accordance with the credit management rules, the sales management department
regularly monitors the status of major business partners, and manages due dates and balances for each business
partner to identify quickly any concerns about collection due to deterioration of financial conditions.
The Group has no overly concentrated credit risk with respect to a single business partner or the group to which thebusiness partner belongs.
The Group's fund management is exposed to the credit risk of the depositors and bond issuers.
Based on the Fund Management Guidelines, cash and cash equivalents and other financial assets the Group holded areissued by high-rated financial institutions, therefore the credit risk the group exposed is limited.
Credit risk exposureCredit risk exposure related to trade receivables and other receivables is present as following by days pastdue:
In millions of Yen
2019

2020

Not due

76,276

65,674

Less than 30 days

2,315

3,843

Over 30days less than 60days

526

171

Over 60days less than 90days

462

386

Over 90days

932

707

80,51170,781

Total

56



Allowances for doubtful receivables
The changes of the allowances for doubtful receivables are as following:
In millions of Yen
2019

2020

1,340

1,061

Increase during the year

179

355

Decrease during the year(purpose use)

ሺ13)

ሺ70)

Decrease during the year (reversal)

ሺ423)

ሺ80)

Exchange difference on translation of foreign
operations

ሺ22)

ሺ84)

1,061

1,182

Beginning balanceEnding balance Liquidity risk
Liquidity risk is the risk that the Group will not be able to fulfill its obligations relating to pay financial liabilities that come due.
The group stipulated its financial plan to understand its liquidity and consistently ensure the availability of sufficient funding to
reduce the liquidity risk.

Financial year ended March 31, 2019

In millions of Yen
Book value

Cash flow oncontract

Within 1year

Over 1 year within
5 years

Over 5 years

Non-derivative financial liabilities
Trade liabilities and other liabilities

38,90438,90438,904――

Loan

11,79911,91011,910

―

―

161

176

44

132

―

Cash inflow

17,94017,94017,940――Cash outflow

18,255

18,255

18,255

―

―

315

315

315

―

―

Lease liabilities
Derivative financial liabilities
Currency related derivatives

Sub-total

57

Financial year ended March 31, 2020

In millions of Yen
Book value

Cashflow oncontract

Within 1year

Over 1 year within
5 years

Over 5 years

Non-derivative financial liabilities
Trade liabilities and other liabilities

34,95934,95934,959

―

―

Loan

7,997

8,042

8,042

―

―

Lease liabilities

11,74012,789

2,695

5,962

4,132

Cash inflow

15,70315,703

10,096

5,607―

Cash outflow

16,325

16,325

10,265

6,060

―

622

622

169

453

―

Derivative financial liabilities
Currency related derivatives

Sub-total(４) Fair value①

Fair value hierarchy
Level 1：Fair value measured with quoted prices in active market for identical assets and liabilities
Level 2：Fair value measured with inputs other than quoted prices categorized within Level 1 that are observable forthe asset or liability, either directly or indirectly
Level 3：Fair value measured with inputs not based on observable market data for the asset or liability②

Measurement of fair value
The fair value of financial assets and liabilities are decided as following:(Cash and Cash equivalent, Trade receivables and other receivables, Trade liabilities and other liabilities)
Carrying amounts approximate fair value because these are settled in the short term.

(Borrowings)
Carrying amounts approximate fair value because all repayments are made within one year
(Other financial assets and financial liabilities)
Regarding the other financial assets, time deposits longer than 3 months, carrying amounts approximate fair value
because they are settled in the short term. Equity securities are designated at fair value measured through othercomprehensive income and are measured using market prices on exchanges.
Debt securities measured at fair value through profit or loss is calculated on the price on the exchange or the pricepresented by the correspondent financial institution.
Derivative instruments measured at fair value through profit or loss is calculated based on observable market
conditions such as exchange rates, interest rates and volatility.

58

Financial instruments measured at amortized cost
The carrying amount and fair value hierarchy of financial asset measured at previous fiscal year ending on March
31,2019 and current fiscal year ending on March 31, 2020 are as following:

March 31, 2019
In millions of Yen
Book value

Debt securities

Fair value

2,311

Level 1

Level 2

Level 3

total

1,003

1,304

-

2,307

March 31, 2020
In millions of Yen
Book value

Debt securities

Fair value

3,105

59

Level 1

Level 2

Level 3

total

299

2,786

-

3,085



Fair value of the financial assets and liabilities measured at fair value
Fiscal year ending on March 31, 2019
In millions of Yen

Level 1

Level 2

Level 3

Total

Financial Assets
Financial assets measured at
fair
value
throughothercomprehensive income
Stocks29,806―

1,226

31,032

―

203

―

203

Debt securities

3,604

8,332

56

11,992

Total

33,410

8,535

1,282

43,227

―

315

―

315

―

315

―

315

Financial assets measured atfair value through profit or loss
Derivative assets

Financial liabilities
Financial liabilities measured
at fair value through profit orloss
Derivative liabilities
Total
Fiscal year ending on March 31, 2020
In millions of Yen

Level 1

Level 2

Level 3

Total

Financial Assets
Financial assets measured at
fair
value
throughothercomprehensive income
Stocks25,369―1,216

26,587

―

486

―

486

Debt securities

3,628

4,057

41

7,726

Total

28,997

4,543

1,259

34,799

―

622

―

622

―

622

―

622

Financial assets measured atfair value through profit or loss
Derivative assets

Financial liabilities
Financial liabilities measured
at fair value through profit orloss
Derivative liabilities
Total

60

Finance assets classified as level1 is mainly the publicly listed stocks and trade in active market。Publicly listed stocks are
based on quoted prices in active markets where there is sufficient trading volume and frequent trading.
Finance assets classified as level2 are mainly asset management products and derivatives. Asset management products areassessed based on the price that counterparty financial institutions calculate based on observable market data. Derivatives aremainly exchange contracts and are calculated based on the basic conditions observable in the market such as exchange rates.
Finance assets classified as level3 is primarily the unlisted equity securities. In accordance with the Group's accounting policies,
the fair value is measured using the most recently available data.

(１) Transactions with related parties
Fiscal year 2019

In millions of Yen
Company

Supplies and services
performed

Transaction Amount

Outstanding balance

Other related parties

Maruwa Co. Ltd.

Advertising expense

2―

Other related parties

Toa Co. Ltd.

Purchase of materials andproduction equipment

97

6

Fiscal year 2020

In millions of Yen
Company

Supplies and services
performed

Transaction
AmountOutstandingbalance

Other related parties

Maruwa Co. Ltd.

Advertising expense

2―

Other related parties

Toa Co. Ltd.

Purchase of materials andproduction equipment

903(２) Primary executive management compensation
Primary executive management includes the member of the Board of directors and executive officers of the company.
Primary executive management compensation consists of the following:
In millions of Yen
2019

2020

Short-term benefits

346

317

Compensation and bonus

140

145

Share-based payments

40

41

Total

526

503

61

The changes in liabilities related to financing activities are as follows
Fiscal year 2019

In millions of Yen
April 1,2018

Short-term
Borrowings
Lease
obligation
Total

Change withcashflow
fluctuation

Change with cashflow fluctuation
Exchangedifference of
foreign operations

Lease obligation

March 31, 2019

3,361

8,704

ሺ266)

―

11,799

183

ሺ36)

7

7

161

3,544

8,668

ሺ259)

7

11,960Fiscal year 2020
In millions of Yen
April 1,2019
Short-term
Borrowings
Lease
obligation
Total

Change withcashflow
fluctuation

Change with cashflow fluctuation
Exchangedifference of
foreign operations

Lease obligation

March 31, 2020

11,799(3,461)

ሺ341)

―

7,997

161

ሺ2,537)(497)

14,613

11,74011,960(5,998)

ሺ838)

14,613

19,73762

Principle subsidiaries consist of the followings. Voting rights on March 31, 2020 has no significant change from the former
year.

Company nameCountry

Capital(Thousand)Voting rights
Principle business

Proportion of
Ownership(％)

Makita U.S.A.Inc.

USA
Los Angeles

161,400 Sales of power tools

100.0

Makita Corporation ofAmerica

USA
Atlanta

73,600 Production of power tools

100.0(80.0)

Makita Canada Inc.

CanadaToronto16,000 Sales of power tools

100.0

Makita (U.K.) Ltd.

United Kingdom
London21,700 Sales of power tools

100.0(100.0)Makita Manufacturing
Europe Ltd.

United Kingdom
Telford37,600 Production of power tools

100.0(100.0)Makita France SAS

FranceBussy Saint Georges

12,436 Sales of power tools

55.0(55.0)

Makita S.p.A.

Italy
Milan

16,000 Sales of power tools

100.0(100.0)Makita Verkzeik G.m.b.H.
(Germany)

Germany
Ratingen7,669 Sales of power tools

100.0(99.0)

Germany
Hamburg

3,105 Manufacture and sale ofhorticultural equipment

100.0(10.6)

12,173 Sales of power tools

100.0(100.0)17,016 Sales of power tools

100.0(100.0)100 Sales of power tools

100.0(100.0)83,207 Sales of power tools

100.0(100.0)80,000 Manufacture and sale ofpower tools

100.0

25,000 Production of power tools

100.0

Makita Engineering
Germany G.m.b.H.

Makita Verkzeik G. m. B. H. Austria(Austria)
ViennaMakita Sp.zo.o.

PolandBielsko Beer

Makita Oy

FinlandHelsinki

RussiaMoscow
China
Makita (China) Co., Ltd.
Jiangsu Province
Kunshan
China
Makita (Kunshan) Co., Ltd. Jiangsu Province
Kunshan
Makita LLC

Makita Australia Pty. Ltd.

Australia
Sydney13,000 Sales of power tools

100.0

Makita de Brazil Ltda.

BrazilPontagrosa

and sale of717,495 Manufacture
power tools

99.9

Makita Gulf FZE

United Arab Emirates
Dubai

22,391 Sales of power tools

100.0

Other companies 35

63

There were no significant subsequent events.

64

(TRANSLATION)
Independent Auditor’s Report on the Financial Statements
andInternal Control Over Financial Reporting
To the Board of Directors of Makita Corporation:

Report on the Audit of the Consolidated Financial Statements

OpinionWe have audited the accompanying consolidated financial statements of Makita Corporation (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group"), which comprise the consolidated statement of financial
position as at March 31, 2020, and the consolidated statements of profit or loss, comprehensive income, changes in net assets
and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at March 31, 2020, and its consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with International Financial Reporting Standards prescribed in Artilce 93 of “theRegulation on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements” (hereinafter referred to as“IFRS”).

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements sectionof our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Responsibilities of Management and Audit & Supervisory Board Members and Audit & Supervisory Board for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordancewith IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue asa going concern, disclosing, as applicable, matters related to going concern in accordance with IFRS and using the going
concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Audit & Supervisory Board Members and Audit & Supervisory Board are responsible for overseeing the directors’ performanceof their duties including the design, implementation and maintenance of the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards
generally accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and65

appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud ishigher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Group’s
internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.

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



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

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

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

Report on the Audit of the Internal Control Report

OpinionWe also have audited the accompanying internal control report of Makita Corporation (“the Company”) and its consolidated
subsidiaries (collectively referred to as “the Group") as at March 31, 2020.
In our opinion, the accompanying internal control report, which states that the internal control over financial reporting was
effective as at March 31, 2020, presents fairly, in all material respects, the results of the assessments of internal control overfinancial reporting in accordance with assessment standards for internal control over financial reporting generally accepted inJapan.

Basis for Opinion
We conducted our audit of the internal control report in accordance with auditing standards for internal control over financial
reporting generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Internal Control Report section of our report. We are independent of the Group in accordancewith the ethical requirements that are relevant to our audit of the internal control report in Japan, and we have fulfilled our otherethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our opinion.

Responsibilities of Management and Audit & Supervisory Board Members and Audit & Supervisory Board for theInternal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the preparation and fairpresentation of the internal control report in accordance with assessment standards for internal control over financial reporting
generally accepted in Japan.
Audit & Supervisory Board Members and Audit & Supervisory Board are responsible for overseeing and examining the design66and operation of internal control over financial reporting.
Internal control over financial reporting may not completely prevent or detect financial statement misstatements.

Auditor’s Responsibilities for the Audit of the Internal Control Report
Our objectives are to obtain reasonable assurance about whether the internal control report is free from material misstatement
based on our audit of the internal control report and to issue an auditor’s report that includes our opinion.
As part of our audit in accordance with auditing standards for internal control over financial reporting generally accepted inJapan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Perform procedures to obtain audit evidence about the results of the assessments of internal control over financial
reporting in the internal control report. The procedures for the audit of the internal control report are selected andperformed, depending on the auditor’s judgment, based on significance of effect on the reliability of financial reporting.



Evaluate the overall presentation of the internal control report, including the appropriateness of the scope, procedures
and results of the assessments that management presents.

Obtain sufficient appropriate audit evidence about the results of the assessments of internal control over financial
reporting in the internal control report. We are responsible for the direction, supervision and performance of the audit of
the internal control report. We remain solely responsible for our audit opinion.

We communicate with Audit & Supervisory Board Members and Audit & Supervisory Board regarding, among other matters,
the planned scope and timing of our audit of the internal control report, the results thereof, material weaknesses in internal
control identified during our audit of internal control report, and those that were remediated.
We also provide Audit & Supervisory Board Members and Audit & Supervisory Board with a statement that we have compliedwith relevant ethical requirements regarding independence, and communicate with them all relationships and other mattersthat may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan

Yasuyuki Morimoto
Designated Engagement Partner
Certified Public Accountant

Masaki Kawaguchi
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Nagoya Office, Japan
June 26, 202067