Makita Corporation
Additional Information
for the year ended March 31, 2019

Consolidated Financial Statements(Partial translation of "YUKASHOKEN HOKOKUSHO"
originally issued in Japanese)Consolidated Financial Statements

2

Notes to Consolidated Financial Statements

8

Independent Auditor’s Report73

1Consolidated Statement of Financial Position
In Millions of Yen
Notes
ASSETS
Current Assets
Cash and Cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets

Transition Date
(April 1, 2017)

2018

2019

142,181
67,262
167,523
50,112
6,682

147,320
78,988
196,454
48,037
8,663

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

433,760

479,462

493,129

95,4886,637
43,800
8,382
9,169
2,317

100,813
6,991
45,561
9,729
10,0492,236

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

165,793

175,379

187,121599,553654,841

680,250

５
６,21
７
27
８

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

2

In Millions of Yen
Notes
LIABILITIESCurrent liabilities
Trade and other payables
Borrowings
Other financial liabilities
Income tax payables
Provisions
Other current liabilities

Transition Date
(April 1, 2017)

2018

2019

33,460
6,564
284
7,264
3,412
24,89935,024
3,361
429
10,071
2,928
29,29438,904
11,799
220
7,153
3,040
29,67875,883

81,107

90,794

3,161
18
1,440
10,738
234

3,206
133
1,352
10,388
216

3,231
256
1,293
7,236
218

15,591

15,295

12,234

91,47496,402103,028

23,80545,501
427,999
11,623)
18,55723,80545,531
469,232
11,617)27,09523,80545,571
508,622
11,681)
6,431

504,239554,046

572,748

3,840

4,393

4,474

508,079

558,439577,222599,553654,841

680,250

12
13
27
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

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

Revenue
Cost of sales

Notes

2018

2019

４，21
22

477,298
301,392)

490,578
313,356)

Gross profit
Selling and general administrative expenses
Operating profit

175,906

177,22222

95,675)98,917)

4

80,23178,305

４，23
４，23

3,180
3,546)

2,680
1,066)

４24

79,86579,91924,406)23,728)

Profit for current year

55,45956,191Attributable to:
Owners of the parent
Non-controlling interests

54,943516

55,750441

202.39202.37205.37205.34

Financial income
Financial expenses
Profit before tax
Income tax expense

Earnings per share

25

Basic earnings per share
Diluted earnings per share4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 throughother comprehensive 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

2018

2019

55,45956,191

1,098)

7,889)

188

87)

910)

7,976)

9,853

12,623)

9,853

12,623)

8,943

20,599)64,40235,592

63,66935,286733

306

Attributable to:
Owners of Makita
Non-controlling interests

5Consolidated Statements of Changes in Equity
In millions of Yen

NonNoteIssuedcapitalCapitalsurplusRetainedearnings

Treasury
stock

Other
componentsof equitycontrolling Total equity

Total

interest
Balance at April 1, 2017
Profit for currency year
Other comprehensive
net of income taxes

23,80545,501

26

18,557

8,726―

Dividends―

54,943―

8,726

13,845)20

Purchase of treasury shares

19

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

19

11)

16

41

19

Balance at March 31,2018

54,943516

55,459

8,726

217

8,943

63,669733

64,402

13,845)

180)

14,025)
5)

0

0

41

41

188)

―

―

188

53)

53)

―

30

13,710)6

188)

13,862)

180)

14,042)23,80545,531

469,232

11,617)27,095554,046

4,393

558,439

55,750441

56,191

20,464)

20,464)135)

20,599)20,464)35,286306

35,592

16,560)225)

16,785)――55,750―16,560)

Dividends

20

Purchase of treasury shares

19

Disposal of treasury shares
Share-based
paymenttransactions
Transfer from other componentsof equity to retained earnings
Other increase/decrease

19

0

16

40

Total transactions with owners

508,0795)

26

Total comprehensive income

3,840

5)

55,750income,504,239

11

53)

Total transactions with owners

Balance at March 31, 201911,623)54,943income,Total comprehensive income

Net income
Other comprehensive
net of income taxes

427,999

19

4)

4)

4)

0

0

0

40

40

―

―

60)

60)

200)

200
60)
―

40

16,360)64)

200)

16,584)225)

16,809)23,80545,571

508,622(11,681)

6,431

572,748

4,474

577,2226

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
OthersCash flows from financing activities
Effect of changes in exchange rates on cash
and cash equivalents
Increase(Decrease)
in
cash
and
cash
equivalents
Cash and cash equivalents at beginning of
periodCash and cash equivalents at end of period

Notes

2018

2019

9,10
24

55,45910,783
24,406366

56,191
11,271
23,7281,614)

18

113

11,187)2,085)

24,289)30,455)

2,495

2,581

1,433)

395―
3,103)
53,515
497
2,409
43)
22,187)34,1918,990)
4,487)
46,648
643
2,004
47)
26,093)23,15515,045)23,867)496
8,743)
16,19351,010)42,37427
15,708)382
12,745)
5,634
31,902)47,758589)
15,329)3,667)
5)
13,845)226)
17,743)8,704
4)16,560)371)
8,231)

4,399

403)

5,139

808)

5

142,181

147,320

5

147,320

146,51229
20

7

The consolidated financial statements of Makita Group for the year ended March 31, 2019, have been first preparedaccording to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards
Board. The previous-year figures have been determined using the same principles. The transition date to IFRS was April 1,
2017. The effective of this transition for the financial position, operating performance and cashflow on transition date andthe previous financial year are all listed in Note32 First adoption.
The consolidated financial statements are in line with the provision of Article 93 of the Ordinance on Terminology, Forms,
and Preparation methods of consolidated financial statements (Ordinance of the Ministry of Finance of Japan No.28 of1976), 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 andliabilities 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, 2019 were authorized for publication by management onJune 27.
All accounting policies that are relevant to an understanding of financial statements are provided throughout the notes tothe financial 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
to accounting estimates and assumptions are recognized in the period when the estimates are revised and in futureaccounting periods.
Estimates and assumptions that significantly affect the amounts recognized in the Group’s consolidated financial statements
are as follows:

Fair value of financial instruments – refer to Note3 Significant accounting policies and Note27 Financial instrument

Defined benefit obligation – refer to Note3 Significant accounting policies and Note15 Employee benefitsProvision – refer to Note3 Significant accounting policies and Note17 Provisions

Deferred tax asset – refer to Note3 Significant accounting policies and Note24 Income taxes

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

8

IFRS

Standards

Mandatory Adoption
(from

the

fiscalyear

Adoption by the

Overview

of

new

or

Group

revisedstandards

andbeginning)
IFRS16

Leasesinterpretations

January1, 2019

March, 2020

Revisedlease

definitions,accounting

treatment

anddisclosures
The new Standard IFRS 16 (Leases) sets out a new approach to accounting for leases by lessees. The leases classified as
operating lease under IAS 17 will be accounted for as right-of-use asset and lease liabilities except for the exemptions by thelessee on the consolidated statement of financial statement.
The main impact of this adoption on the Group’s consolidated financial statements is now on calculation.

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 thecontrol of 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 valueof the consideration 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
the aggregate of the acquisition-date fair value of the assets transferred, liabilities assumed and equity securities issued by
the Company 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 theacquisition date is recognized as goodwill in the consolidated statement of financial position. Conversely, any deficit isimmediately 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
the exchange rate as of the tansaction date.
Monetary assets and liabilities denominated in foreign currencies as of the reporting date are translated intofunctional 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 othercomprehensive income.

9(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 thatthe exchage rate changes significantly. The exchange differences as a result of this are recognized in othercomprehensive income. The exchange differences of a foreign operation are recognized in profit or loss during theperiod in which the foreign 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, andother financial 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 initiallymeasured at the amount of fair value added to the transaction cost directly attributable to the financial asset.
However, trade receivables 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
subsequent changes in the fair value of a particular investment in an equity instrument not held for trading thatwould otherwise be measured at fair value and not classified as financial assets measured at amortized cost. If
the group derecognized an investment, or if the fair value of the investment declines significantly, thecumulative gains or loss recognized in other comprehensive income is reclassified from other component ofequity 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

10

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 arerecognized in profit or loss.
(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 otherparty 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 afinancial asset is judged to be impossible or incredibly difficult to be collected, it is considered to be in default andtreated as credit-impaired 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 arerecognized in 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.

11

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 initialrecongnition. 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 becomedue 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 andcondition. 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 inthe ordinary course of business less the estimated cost of completion and the estimated cost necessary to make thesale.

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 theasset and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it islocated.
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 each12

fiscal 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 andany accumulated impairment losses.
The costs of separately acquired intangible assets comprise any costs directly attributable to acquisition of theassets. An intangible asset acquired in a business combination is recognized as an intangible asset and measured
at fair value 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 theasset. If it is probable that internally used software enables an entity to obtain future economic benefits and cut thecost, the development cost can be recognized as an intangible asset.
Intangible assets with definite useful lives are amortized by using the straight-line method over each estimateduseful life. 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
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.
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

13culculating value in use, an estimate of the future cash flows is discounted to the present value by using the discountrate 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
the period in which they occur.
Remeasurements of the net defined benefit liability or asset are entirely recognized in other comprehensive
income in 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 thediscount rate 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 never14

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.
3)

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.
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 recognizedwhen the Group's right to receive payment is established. Financial expenses consist of interest expense, foreignexchange 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 ofassets or liabilities at the end of the reporting period and its tax base, and for tax loss carryforwards. 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. Deferred tax liabilities are recognized, in principle, for all taxable temporary
differences.

15

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 arecalculated 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 to themwill 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 a systematic
basis over the useful life of the asset.

The group’s reportable segment are the components of the Group for which discrete financial information is available andwhich are regularly reviewed by the Board of Directors in deciding how to allocate resources and in assessing theirperformance.
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 incooperation 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

16

The accounting treatment in each reportable segment is the same as in Notes4 “Significant Accounting policies and criticalaccounting estimates”.

Transition Date (April 1, 2017)
In millions of Yen

Reportable segment

Segment assets

Japan

EuropeNorthAmerica

357,349

187,805

52,322"Other" mainly consists of the regions of Australia, Brazil and the UAE

17

Asia
162,115

Subtotal

Others(Note1)

759,591

70,973reconciliation
Consolidated(Note2)231,011)599,553

Fiscal Year 2018
In millions of Yen

OthersReconciliation
to Consolidated
Consolidated
Financial
Statements

Japan

EuropeNorthAmerica

106,862202,364

76,325

26,139411,690

65,608―477,298

202,827

4,811

4,388

212,697424,723

1,560

426,283)―

Total revenue

309,689

207,175

80,713

238,836

836,413

67,168426,283)

477,298

Operating Income

31,671

19,211

2,250

24,56577,6975,484

2,950)

80,231

Financial income

―

―

―

―

―

―

―

3,180

Financial expenses

―

―

―

―

―

―

―

3,546)

―

―

―

―

―

―

―

79,865

3,789

2,106

595

3,915

10,405461

83)

10,783

395,440

227,253

61,570162,975

847,238

72,067

264,464)

654,841

5,414

2,860

625

5,561

14,460497

88

15,045Asia

Subtotal

Revenue
External Revenue
Inter-segment revenue

Income before
tax

incomeOther items
Depreciation
Amortization

andSegment Assets
Capital expenditures18

Fiscal Year 2019
In millions of yen

OthersReconciliation toConsolidated
Consolidated
Financial
Statements

Japan

EuropeNorthAmerica

External Revenue

112,143

213,90374,854

26,414427,314

63,264―

490,578

Inter-segment revenue

220,111

5,902

3,941

220,999

450,953806

451,759)―

Total revenue

332,254219,805

78,795

247,413878,267

64,070451,759)

490,578

Operating Income

32,33018,424267

23,094

74,115

5,715

1,525)

78,305

Financial income

―

―

―

―

―

―

―

2,680

Financial Cost

―

―

―

―

―

―

―

1,066)

―

―

―

―

―

―

―

79,919

3,948

2,163

702

4,108

10,921454

104)

11,271

425,982

228,123

68,582

160,642883,329

71,699274,778)

680,250

8,337

6,872

1,129

7,023

23,361743

237)

23,867

Asia

Subtotal

Revenue

Income before income tax
Other items
Depreciation
Amortization
Segment Assets
Capital expenditures

and

19

Products and Service Information

In millions of Yen

2018

2019

electric power tools

299,264

300,118

pneumatic tools and gardening equipment

99,976108,046

Parts, accessories and maintenance

78,05882,414477,298

490,578

Total

Information about Geographical Areas
External revenue
In millions of Yen
2018

2019

Japan

82,575

92,129Europe202,054

213,238

North-America
America

73,873(64,089)

72,508(62,892)

Asia

44,09440,909Others

74,702

71,794477,298

490,578

Total

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

In millions of Yen
Transition Date
(Apr.1.2017)

2018

2019

Japan

44,45445,82150,737

Europe（Romania）

22,164(7,732)

24,709(8,619)29,732（13,370)

North-America

4,629

4,667

5,259

24,478(18,232)

26,676(20,146)

28,961(21,592)

8,717

8,167

9,983

104,442

110,040

124,672

Asia（China）
OthersTotal

20

Cash and Cash equivalents comprise the following:

In millions of Yen

Transition Date
(Apr.1.2017)

2018

2019

Cash and deposit

95,621

116,147

111,220

Deposit within 3 months

46,56031,17335,292

142,181

147,320

146,512

Total

21

Trade receivables and other receivables comprise the following:
In millions of Yen

Transition Date
(Apr.1, 2017)

2018

2019

Notes receivables andAccounts receivables

68,39980,32880,511

Allowance of bad debt

1,137)

1,340)

1,061)

Total

67,262

78,98879,45022

Inventories comprise the following:
In millions of Yen

Transition Date
(Apr.1, 2017)

2018

2019

144,268

164,785

185,774

Work in progress

2,431

3,117

3,010

Raw materials and supplies

20,82428,552

31,154

167,523

196,454219,938

Finished goods and goods for sale

Total



The Cost of sales includes inventories recognized as expense amounted to 298,119 million and 310,058, respectively, in fiscal year2018 and 2019.
Write-downs to net realizable value amounted to 2,768 and 1,983 million, respectively, in fiscal year 2018 and 2019.

23

Other assets comprise the following:
In millions of Yen
Transition Date
(Apr.1, 2017)

2018

2019

Tax receivable

1,650

736

1,433

Accrued expenses

1,398

1,859

1,647

Others

5,951

8,304

10,513

8,999

10,89913,593

Thereof Current

6,682

8,663

9,401

Thereof Non-Current

2,317

2,236

4,192

8,999

10,89913,593

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
In millions of Yen
Buildings
andstructures
97,504

Carrying amount at April 1, 2017
Additions
Sales and Disposals
Reclassification
Exchange differences on translation offoreign operations
Carrying amount at March 31, 2018

Machinery andvehiclesTotal

91,49323,072

5,531

217,600

1,366

7,271
4,230)
2,787

155
24)
―

5,081
699)
4,153)

14,034
5,302)
―

1,170

1,547

135

267

3,119

101,218

98,86823,3386,027

229,451

1,781
282)
919

7,777
4,140)
3,054

2,549
110)
167

11,961160)
4,140)

24,0684,692)―

1,262)

1,698)

243)

409)

3,612)

102,374

103,861

25,701

13,279245,215

1,527
349)

Additions
Sales and Disposals
Reclassification
Exchange differences on translation offoreign operations
Carrying amount at March 31, 2019

Construction inprogressLand

Accumulated depreciation and accumulated impairment
In millions of Yen

April 1, 2017
Depreciation
Sales and Disposals
Exchange differences ontranslationofforeign
operations
March 31, 2018
Depreciation
Sales and Disposals
Exchange differences ontranslationofforeign
operations
March 31, 2019

Buildings andstructures
51,660)Machinery andvehicles
70,039)413)

Construction inprogress―

2,639)
292

6,489)
3,888

―
―

―
―

9,128)
4,180

304)

1,274)――

1,578)

54,311)73,914)413)―

128,638)

2,668)
240

6,986)
4,108

―
31

―
―

9,654)
4,379

286

853

―

―

1,139

56,453)75,939)382)―

132,774)

25

Land

Total
122,112)

Carrying Amount
In millions of Yen
Buildings andstructures

Machinery andvehiclesApril 1, 2017

45,844

21,45422,6595,531

95,488March 31,2018

46,907

24,95422,925

6,027

100,813Land

Construction inprogress

Total

March 31,201945,921
27,922
25,31913,279112,441
Depreciation of property, plant and equipment is included in cost of sales, selling, general and administrative expenses andother operating expenses in the consolidated statement of profit or loss.

Leased asset
The carrying amount of lease assets from finance leases included in property, plant and equipment is as follows:
In millions of Yen
Machinery and vehicles

Total

April 1, 201731

31

March 31,2018

178

178

March 31,2019

140

140

26

The following tables present changes in acquisition costs, accumulated depreciation and accumulated impairment losses,
and carrying amounts of Goodwill and Intangible assets.
Acquisition cost
In millions of Yen
Intangible Assets
Goodwill
Carrying amount at April 1,
2017

Development
Expenses

SoftwareTrademark

Total

Others

721

4,544

4,860

2,790

1,352

14,267

Acquisition

―

―

752

6

295

1,053

Internal development

―

897

―

―

―

897

Sales and disposals

―

―

266)

―

46)

312)

―

―

96

―

35

131

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

―

―

643)

―

177)

820)

―

―

104)

―

6)

110)

862

6,638

5,771

2,868

1,764

17,903

Exchange differences ontranslation of foreign
operations
Carrying amount at March
31,2018

Exchange differences ontranslation of foreign
operations
Carrying amount at March
31,2019

Accumulated amortization and Accumulated impairment losses
In millions of Yen
Intangible Assets
Goodwill
April 1, 2017

Development
Expenses

SoftwareTrademark

Total

Others―1,642)

3,574)

1,514)

900)

7,630)

depreciation

―

841)

556)

202)

56)

1,655)

Sales and disposals

―

―

264

―

45

309

Exchange differences ontranslation of foreign
operations

―

―

256)

―

187

69)

March 31, 2018―

2,483)

4,122)

1,716)

724)

9,045)

depreciation

―

825)

555)

201)

36)

1,617)

Sales and disposals

―

―

560

―

174

734

Exchange differences ontranslation of foreign
operations

―

―

62

―

2

64

―

3,308)

4,055)

1,917)

584)

9,864)March 31, 201927

Carrying amount
In millions of Yen
Goodwill

Intangible Assets
Research

SoftwareTrademark

Others

Total

April 1, 2017

721

2,902

1,286

1,276

452

6,637

March 31,2018

721

2,958

1,320

1,080

912

6,991

March31,2019
862
3,330
1,716
951
1,180
8,039
Amortization of intangible assets is included in cost of sales, selling, general and administration of the consolidated statementof income.
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 income in the fiscal year 2018 and 2019 amounted to 10,083 and 10,433 respectively.

28

(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 lease
payments

Minimum lease payments
Transition
date
Apr.1, 2017

2018

2019

Transition
date
Apr.1, 2017

2018

2019

Not later than 1 year

15

50

44

15

50

37

Later than 1 year and not later
than 5 years

19

134

132

18

133

124

Later than 5 years

―

―

―

―

―

―

34

184

176

33

183

161

Financial charges

1

1

15

Present value of minimum lease
payments

33

183

161

Total

(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
Transition date
April 1, 2017

2018

2019

Not later than 1 year

1,156

1,310

1,185

Later than 1 year and not later
than 5 years

1,943

2,411

2,314

Later than 5 years

426

784

670

Total

3,525

4,505

4,169

The lease expenses under operating lease recognized in fiscal year 2018 and 2019 are as following:
In millions of Yen

total of minimum lease payments

29

2018

2019

3,474

4,037

Trade payables and other payables comprise the following:
In millions of Yen
Transition date
Apr.1, 2017

2018

2019

Trade payables

26,34728,156

29,114

Non-trade payables

7,113

6,868

9,790

33,46035,02438,904Total

In millions of Yen
Transition date
Apr.1, 2017
Short-term borrowings
Total

2018

2019

6,564

3,361

11,799

6,564

3,361

11,799The average interest rate for loans from banks in transition date, fiscal year 2018 and 2019 were 0.21％, 0.25％ and0.33％ respectively.

Other liabilities comprise the following:
In millions of Yen
Transition date
Apr.1, 2017

2018

2019

Accrued expenses

10,665

12,046

12,243

Accrued payroll and bonus

9,431

10,731

10,667

Others

5,037

6,733

6,986

25,13329,51029,89624,89929,29429,678

234

216

218

25,13329,51029,896

Total
Thereof Current
Thereof Non-current
Total

30

(１) Post-employment Benefits①

defined benefit plan

The Company and most of its consolidated subsidiaries have defined benefit plans, defined contribution plans and otherplans 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
plan is 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 fundwill 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 divergenceindicator for the asset mix, and the proportion of the temporary asset allocations will be updated promptly when thedivergence occurs. Makita determined the mix of equity securities and debt securities after taking into consideration of the
expected long-term rate of 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 some subsidiaries 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
Transition date
Apr.1, 2017

2018

2019

Present value of defined benefit
obligation

39,677)39,422)39,583)Present value of Plan asset

44,89845,94545,893

5,221

6,523

6,310

Retirement benefit assets

8,382

9,729

9,541

Retirement benefit liabilities

3,161)

3,206)

3,231)

Total
Amount recognized inconsolidated statement offinancial position31

(b) Defined benefit obligations
Changes in the present value of defined obligations are as follows:
In millions of Yen
2018

2019

Defined benefit obligations at beginning of year

39,67739,422Service cost

1,650

1,716

312

266

246

184)

294

496

32)

37)

Past service cost

1,401)―

Benefits paid

1,638)

1,919)

314

177)

39,42239,583

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

fromchangesinfromchangesinActuarial(gains)losses arising from others

Exchange differences
operationsontranslationofforeignDefined benefit obligations at ending of year

The weighted average duration of the defined benefit obligations was 13.7 years at April 1, 2017, 13.0 years at March 31,2018 and 12.5 years at March 31, 2019.

(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

2018

2019

44,89845,945

328

280

1,350

1,226

741

215

1,443)

1,724)

71

49)

45,94545,893

The group plans to contribute 1,183 Million in the year ending March 31, 2020.

32

The details of plan asset are as followings:
In millions of Yen
Transition date
Apr.1, 2017Market price in an
active market

2018

2019

Market price in an active
marketMarket price in an active
marketquotedunquoted

5,399

―

9,007

―

7,752

―

1,314

―

1,433

―

1,330

―

Joint investment trust(domestic)

―

1,557

―

1,324

―

880

Joint investment trust(overseas)

―

3,525

―

2,427

―

2,467

Joint investment trust(domestic)―

10,731―

11,069―11,545

Joint investment trust(overseas)

―

7,279

―

5,362

―

5,757

Life Insurance general account

―

6,973

―

7,522

―

7,844

Alternative investment

―

8,120

―

7,801

―

8,318

Total

6,713

38,185

10,44035,505

9,082

36,811

Cash and cash equivalents

quotedquotedquotedquotedEquity 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).

33

(d) Significant actuarial assumptions and related sensitivity analysis
Significant actuarial assumptions are as follows:
Transition date
Apr.1, 2017

2018

2019

0.8％

0.7％

0.6%

Discount rate(e) Sensitivity analysis on defined benefit obligations

The sensitivity analysis on defined benefit obligation is as follows:
In millions of Yen
2018

2019

0.25％increase

1,158)

1,130)

0.25％decrease

1,219

1,188

Discount rateDefined contribution plans
Expenses related to the defined contribution plan recognized in profit or loss were 355 million yen and 378 million

yen for the fiscal year ended March 31, 2018 and March 31, 2019.
(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, 2018 and 2019 were 69,623 million yen and
75,007 million yen, respectively.

34

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.

(１) The 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 price2018
Number of shares

2019

Weighted average
Weighted average
Number of shares
exercise priceexercise price

Beginning balance of outstanding

27,6401

29,1801

Granted

10,220

1

9,180

1

Exercised

8,680)

1--Ending balance of outstanding

29,1801

38,3601

Ending balance of exercisable

―

―

―

―

The weighted average share price on the exercise date for the fiscal year 2018 is 4,135 Yen.
The weighted average remaining contractual life for stock option outstanding of fiscal year 2018 and 2019 is 48.4 years and47.9 years, respectively.

35

Fair value and assumption of the stock option granted
The weighted average fair value of the stock option granted during the period is assessed by the Black-Shoals valuation
Model.
In millions of Yen
2018

2019

Third issue in 2017

Forth issue in 2018

Share price on granted date

4,320Yen

4,900Yen

Expected Volatility

40.15％

32.23%

Expected remaining period

9.0Year

8.5Year

Expected dividends

50Yen

61Yen

Risk free rate

0.01％

0.04％

Share-based payment expenses
Share-based payment expenses recognized in selling, general and administration for fiscal year 2018 and 2019 is 41million
and 40million, respectively.

36

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

Others

Total

3,163

1,689

4,852

Additions

3,619

103

3,722

Decrease(provision used)

2,788)

162)

2,950)

718)

585)

1,303)

24

65)

41)

3,300

980

4,280

Additions

3,717

43

3,760

Decrease(provision used)

2,601)

47)

2,648)

Decrease(provision reversed)

913)

20)

933)

Exchangedifferencesontranslation of foreign operations

53)

73)

126)

3,450

883

4,333

Transition date
Apr.1, 2017

2018

2019

Thereof Current

3,412

2,928

3,040

Thereof Non-current

1,440

1,352

1,293

Balance as of April 1, 2017

Decrease(provision reversed)
Exchangedifferencesontranslation of foreign operations
Balance as of March 31, 2018

Balance as of March 31, 2019

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.
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.
The provision is generally expected to result in cash outflows during the next one year.

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.

37

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
Number of authorized shares

2018

2019

Ordinary Shares

Ordinary Shares

992,000,000

992,000,000

280,017,520

280,017,520――

280,017,520

280,017,520

8,556,948

8,549,592

7,356)

871

8,549,592

8,550,463

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 bereversed by the resolution of the general meeting of the shareholders.

38(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 fairvalue 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, 2017
Other comprehensive
incomeTransfer to retained
earnings
March 31, 2018
Other comprehensive
incomeTransfer to retained
earnings
March 31, 201918,557――

18,557

1,098)

188

9,636

8,726

―

188)

―

188)

17,459―9,636

27,095

7,889)

87)

12,488)20,464)

287)

87

―

200)

9,283

―

2,852)

6,431

39



Payment of dividends

Fiscal year ended on March 31, 2018
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 June
28, 2017

Common stock

11,13082

March 31, 2017

June 29, 2017

Common stock

2,715

10

September 30,
2017

November 27,
2017

Board of directors on
October 30, 2017

The common stock has been split to 2 shares from April 1, 2017. The dividend based on Record date on March 31, 2017has been calculated on the stock split.
Fiscal year 2019
Date of Resolution
General meeting of
Shareholders on June27, 2018
Board of directors on
October 30, 2018

Type of stocks

Amount of dividendin millions of Yen

Dividend per
share
(Yen)

Record date

Effective dateCommon stock

13,84551

March 31, 2018

June 28, 2018

Common stock

2,715

10

September 30,
2018

November 28,
2018

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

Fiscal year ended on March 31, 2018
Date of Resolution

Type ofstocks

Source ofdividends

Amount ofdividendin millions ofYen

Dividend per
share
(Yen)

General meeting of
Shareholders on
June 27, 2018

Commonstock

Retainedearnings

13,84551

Record date

Effective date

March 31, 2018

June 28, 2018

Record date

Effective date

March 31, 2019

June 27, 2019

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

40

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

Transition date
(April 1, 2017)

2018

2019

68,39980,32880,511

268

264

278

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,
the contract 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 variableconsideration is subsequently resolved, the variable consideration should be included in the transaction price only if themagnitude of a revenue 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.

41

In millions of Yen
2018

2019

Materials and purchasing

284,654

298,110Inventories (increase)/decrease(28,931)(23,484)

Employee benefits

69,66475,047Advertising

8,363

9,383

Freight expenses

8,637

9,388

Research and development

10,083

10,433

Depreciation and amortization

10,783

11,271Others33,814

22,125

Total

397,067

412,27342

(１) Financial income comprise the following:
In millions of Yen
2018

2019

Financial assets measured at amortized cost

1,629

1,587

Financial assets measured through profit or
loss

780

417

497

643

Financial assets measured at amortized cost00

Financial assets measured through profit or
loss

274

1

―

32

3,180

2,680

Interest Income

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

Valuation gain
Financial assets measured through profit or
loss
Total
(２) Financial expenses
Financial expenses comprise the following
In millions of Yen
2018

2019

43

49

0

1

268

―

3,235

1,016

3,546

1,066

Interest expenses
Financial liabilities measured at amortized
cost
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

43

(１) Deferred tax assets and deferred tax liabilities
The allocation of deferred tax assets and liabilities to balance sheet line items at 31 March 2018 is shown in the following
table:In millions of Yen
April 1 2017

Recognized throughRecognized throughotherprofit or loss
comprehensive
incomeMarch 31,2018

Deferred tax asset
Property, plant and equipment

2,822

211

―

3,033

Inventories

8,214

1,174

―

9,388

47

26)

―

21

Accrued expenses

1,613

141

―

1,754

Valuation on debt securities

2,914

22

―

2,936

Employee benefit obligation

165

180)

179

164

1,581

129

―

1,710

331

175

―

506

17,687

1,646

179

19,512

Undistributed foreign earnings

7,261)

487)―

7,748)

Property, plant and equipment

732)

16

―

716)

Employee benefit asset

2,353)

189)

224)

2,766)

Equity securities valued throughother comprehensive income

7,969)―

475

7,494)

941)

186)

―

1,127)

Total deferred tax liabilities

19,256)846)

251

19,851)Net Amount

1,569)

800

430

339)

Tax loss carry forward

Accrued Bonuses
OthersTotal of Deferred tax asset
Deferred tax liabilities

Others44

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 throughRecognized throughotherMarch 31,2019
April 1,2018
profit or loss
comprehensive
incomeDeferred tax asset
Allowances
Property,equipment

plant

and

3,033

543)

―

2,490

9,388

323)

―

9,065

21

15)

―

6

Accrued expenses

1,754

342)

―

1,412

Valuation on debt securities

2,936

18)

―

2,918

Retirement benefit obligation

164

9)

39

194

1,710

10)

―

1,700

506

506)

―

―

19,512

1,766)

39

17,785

7,748)

225―

7,523)

716)

210)

―

926)

Inventories
Tax loss carry forward

Accrued Bonuses
OthersTotal of Deferred tax asset
Deferred tax liabilities
Undistributed
earnings
Property,plant
equipment

foreignandRetirement benefit asset

2,766)

96

66)

2,736)

Equitysecurities
valuedthrough other comprehensive
income7,494)―

3,413

4,081)

Others1,127)

714

―

413)

Total of deferred tax liabilities

19,851)

825

3,347

15,679)

339)

941)

3,386

2,106

Net amountDeferred tax assets and deferred tax liabilities on consolidated statement of financial position
In millions of Yen
Transition date
(April 1, 2017)

2018

2019

Deferred tax assets

9,169

10,049

9,342

Deferred tax liabilities

10,738)

10,388)

7,236)

Total

1,569)

339)

2,106

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

Transaction date

2018

2019

8,253

10,132

9,459

9,716

10,344

8,703

45

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

Transition Date
(April 1, 2017)

2018

2019

No later than 1 year

95

29

17

Later than 1 year and not later than 2 years

37

23

7

Later than 2 years and not later than 3 years

23

66

74

Later than 3 years and not later than 4 years

69

15

69

Later than 5 years

1,505

1,481

1,006

No limited

7,987

8,730

7,530

9,716

10,344

8,703

Total

The aggregate amounts of taxable temporary difference associated with investment in subsidiaries and associates for which
deferred liabilities were not recognized at March 31, 2017, 2018 and 2019 were 155,926million yen、142,206 million yen
and 142,378million yen. The group did not recognize deferred tax liabilities because it was able to control the timing of thetemporary difference.
(２) income tax expenses①Taxes on income comprise the following:
In millions of Yen
2018

2019

25,48722,409

1,071)

1,289

10)

30

Sub-total

1,081)

1,319

Total

24,40623,728Current tax expense
Deferred tax expense
thereof relating to temporary
differences
Thereof Tax rate change

46

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:

2018

2019

30.4％

30.2％

0.5

0.3

Increase/Decrease of unrecognized deferred
tax assets

1.0

0.1

Tax spring

0.1)

0.1)

Change in tax rates

3.3)

4.2)

Undistributed foreign earnings

3.5

3.7

Others

1.4)

0.3)

30.6％

29.7％

Effective statutory tax rate
(Reconciliation)
Items that are not counted as a deduction
permanently such as entertainment expenses

Effective tax rate47

(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

2018

2019

Yen Million

54,94355,750

Number271,465,951

271,467,574

Yen

202.39205.3720182019(２) The Basis for calculating Diluted earnings per share

Net profit attributable to the owners of the parent company

Yen Million

54,94355,750Adjustments

Yen Million--

Net profit used to calculate diluted earnings per share

Yen Million

54,94355,750Weighted average number of ordinary shares during the period

Number271,465,951

271,467,574

Increase in ordinary shares by stock-option

Number

27,87034,910Weighted average number of ordinary shares after dilution

Number271,493,821

271,502,484

Yen

202.37205.34

Diluted earnings per share48

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

2018

2019

1,573)

11,302)

475

3,413

1,098)

7,889)

Before Tax

233

60)

Deferred Taxes

45)

27)

After Tax

188

87)

Sub-total

910)

7,976)

9,853

12,623)--After Tax

9,853

12,623)Sub-total

9,853

12,623)

8,943

20,599)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

49

(１)Classification of Financial Instruments
The carrying amount of other financial assets is as follows:
In millions of Yen
Transition date
(April 1, 2017)

2018

2019

Cash and cash equivalents

34,33943,022

25,974

Debt securities

4,100

4,908

2,311

Deposit

461

440

9,508

Loans to third party

575

474

374

39,475

48,844

38,16739,37540,81531,03239,37540,81531,032

14,7883,814

11,992

274

125

203

15,062

3,939

12,19593,912

93,59881,394

Thereof Current Assets

50,11248,03737,828Thereof Non-current Assets

43,80045,561

43,566

93,912

93,59881,394At amortized cost

Sub-Total
At fair value through othercomprehensive income
Equity securities
Sub-Total
At fair value through Profit
or loss
Debt securities
Derivatives
Sub-Total
Total

Total

50

The carrying amount of other financial liabilities is as follows:
In millions of Yen
Transition date
(April 1, 2017)

2018

2019

33

183

161

269

379

315

302

562

476

Thereof Current Liabilities

284

429

220

Thereof Non-current Liabilities

18

133

256

Total

302

562

476

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:
Transition date (April 1, 2017)
In millions of Yen
Company name

Fair value

Sharp corporation

16,846OMRON Corporation

3,370

Mitsubishi UFJ Financial Group, Inc.

1,815

Suzuki Corporation

1,511

Sumitomo Real Estate Co., Ltd.

1,322

IDA Engineering Co., Ltd.

1,037

Mabuchi Motor Co., Ltd.

1,011

NSK Ltd.

1,009

Others11,454
Total

39,37551

Fiscal year March 31, 2019
In millions of Yen
Company name

Fair value

Sharp Corporation

11,398OMRON Corporation

4,319

Toyota Motor Corporation

3,248

Suzuki Corporation

1,874

Mitsubishi UFJ Financial Group, Inc.

1,808

Sumitomo Real Estate Co., Ltd.

1,802

SEINO Holdings Co., Ltd.

1,402

IDA Engineering Co., Ltd.

1,350

Fuji Machine Mfg. Co., Ltd.

1,114

Others12,500Total

40,815

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

31,032

 Dividend Income
In millions of Yen
2018

2019

Investments derecognized during the period―

7

Investments held at the end of the period

497

636

497

643

Total

52



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
2018

2019

Fair value―

683

Cumulative gains/losses―

467

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 in fiscal year 2019 is 287) millions.
(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:
Transition date
(April 1,2017)
Capital amount in millions of
Yen
Capital adequacy ratio (％)

2018

2019

504,239554,046

572,748

84.1

84.6

84.2

53

 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:
Transition date
(April 1, 2017)

2018

2019

U.S. Dollar

4,460

8,070

3,556

Euro

158)

40

258)


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
Transition date
(April 1, 2017)

Currency

2018

2019

Profit before tax After tax

Profit before tax After tax

Profit before tax

After tax

U.S. Dollar

45)

31)

81)

57)

36)

25)

Euro

2

1

0)

0)

3

2


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
Transition date
(April 1, 2017)

2018

2019

267)

276)

208)

Other comprehensive income(After tax)

54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
are issued 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
Transition date
(April 1, 2017)

2018

2019

Not due

64,11674,48676,276

Less than 30 days

2,487

3,405

2,315

Over 30days less than 60days

874

871

526

Over 60days less than 90days

114

452

462

Over 90days

808

1,114

932

68,39980,32880,511

Total

55



Allowances for doubtful receivables
The changes of the allowances for doubtful receivables are as following:
In millions of Yen
2018

2019

1,137

1,340

Increase during the year

483

179

Decrease during the year(purpose use)

264)

13)

Decrease during the year (reversal)

41)

423)

Exchange difference on translation of foreign
operations

25

22)

1,340

1,061

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.
Transition date (April 1, 2017)

In millions of Yen
Book value

Cashflow oncontract

Within 1year

Over 1 year within
Over 5 years
5 years

Non-derivative financial liabilities
Trade liabilities and other liabilities

33,46033,46033,460

―

―

Loan

6,564

6,571

6,571

―

―

33

34

15

19

―

269

269

269

―

―

Lease liabilities
Derivative financial liabilities
Currency related derivatives

56

Financial year ended March 31, 2018

In millions of Yen
Cash flow oncontract

Book valueOver 1 year within
5 years

Within 1year

Over 5 years

Non-derivative financial liabilities
Trade liabilities and other liabilities

35,02435,02435,024

―

―

Loan

3,361

3,363

3,363

―

―

183

184

50

134

―

379

379

379

―

―

Lease liabilities
Derivative financial liabilities
Currency related derivatives

Financial year ended March 31, 2019

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

38,90438,90438,904――

Loan

11,79911,91011,910

―

―

161

176

44

132

―

315

315

315

―

―

Lease liabilities
Derivative financial liabilities
Currency related derivatives(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 observablefor the 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.

57

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.



Financial instruments measured at amortized cost
The carrying amount and fair value hierarchy of financial asset measured at amortized cost on transition date,previous fiscal year ending on March 31,2018 and current fiscal year ending on March 31, 2019 are as following:Transition date（April 1, 2017）
In millions of Yen
Book value

Debt securities

Fair value

4,100

Level 1

Level 2

Level 3

total

2,100

1,997

-

4,097

March 31, 2018
In millions of Yen
Book value

Debt securities

Fair value

4,908

Level 1

Level 2

Level 3

total

2,000

2,906

-

4,906

March 31, 2019
In millions of Yen
Book value

Debt securities

Fair value

2,311

58

Level 1

Level 2

Level 3

total

1,003

1,304

-

2,307



Fair value of the financial assets and liabilities measured at fair value
Transition date (April 1, 2017)
In millions of Yen

Level 1

Level 2

Level 3

Total

38,185―

1,190

39,375

―

274

―

274

Debt securities

2,938

11,458392

14,788

Total

41,123

11,732

1,582

54,437

―

269

―

269

―

269

―

269

Financial Assets
Financial assets measured at
fair
value
throughothercomprehensive income
StocksFinancial assets measured atfair value through profit or loss
Derivative assets

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

59

Fiscal year ending on March 31, 2018
In millions of Yen

Level 1

Level 2

Level 3

Total

Financial Assets
Financial assets measured at
fair
value
throughothercomprehensive income
Stocks39,494―

1,321

40,815

―

125

―

125

Debt securities

3,511

241

62

3,814

Total

43,005366

1,383

44,754

―

379

―

379

―

379

―

379

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, 2018
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

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 MMF、FFF and derivatives. MMF and FFF are aimed at securing stableearnings by investing mainly in domestic and foreign bonds and commercial paper.
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 2018

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

150

６

Fiscal year 2019

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

97６(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
2018

2019

Short-term benefits

354

346

Compensation and bonus

135

140

Share-based payments

41

40

Total

530

526

61

The changes in liabilities related to financing activities are as follows
Fiscal year 2018

In millions of Yen
Change withcashflow
fluctuation

April 1,2017
Short-term
Borrowings
Lease
obligation
Total

Change with cashflow fluctuation
Exchangedifference of
foreign operations

Lease obligation

March 31, 2018

6,564

3,667)

464

―

3,361

33

20)

7)

177

183

6,597

3,687)

457

177

3,544

Fiscal year 2019
In millions of Yen
April 1,2017
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

266)

―

11,799

183

36)

7

7

161

3,544

8,668

259)

7

11,96062

Principle subsidiaries consist of the followings. Voting rights on March 31, 2019 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(75.3)

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

Manufacture and sale of717,495 power tools

99.9

Makita Gulf FZE

United Arab Emirates
Dubai

22,391 Sales of power tools

100.0

Other companies

34

63

There were no significant subsequent events.

64

The Group present consolidated financial statements in accordance with IFRS from the current consolidated fiscal year
ended March 31, 2019. The most recent consolidated financial statements prepared on the general accepted accounting
principles (hereinafter US GAAP) were for the fiscal year ended on March 31, 2018, the transition date of IFRS is April 1,
2017.
The accounting policies adopted to prepare the financial statement by IFRS are described in Note4 the significant accounting
principles, and applied to the financial statements on the transition date, the fiscal year ended on March 31, 2018 and March
31, 2019.

IFRS 1 exemptions
For the company that first applies to IFRS, in general, IFRS1, First-time Adoption of International Financial ReportingStandards requires all the standards of IFRS should be adopted rretrospectively. However, IFRS provide limited exemptions
from these requirements in specified areas and also prohibits retrospective application of IFRSs in some areas, the effect ofthese exemptions was adjusted by retained earnings and other equity components at the transition date.
Exemptions the group adopted are listed as followings:
・Business combination
Under IFRS１, for the business combination occurred before the transition date, the company can choose to adopt
IFRS3 “Business combination” (hereinafter IFRS3) either retrospectively or prospectively. The group has chosen not toadopt IFRS3 retrospectively for the business combination occurred before transition date. Accordingly, goodwill before
transition date was accounted for kept by US GAAP. Goodwill is tested for impairment test at the transition date,regardless of any indications of impairment.
・Cumulative translation differences for foreign operations
Under IFRS１, the cumulative translation differences for all foreign operations are deemed to be zero at thetransition date or recalculated retrospectively up until the date the subsidiary or associate was established or acquired.
The group selected to reset the cumulative translation differences to zero at the transition date.
・Designation of previously recognized Financial instruments
Under IFRS1, an entity may designate financial instruments recognized before the transition date in accordance withIFRS9 on the basis of the facts and circumstances that exist at the transition date. The group designated financial
instruments in accordance with IFRS9 on the basis of the facts and circumstances that existed at the transition date.

Mandatory exception IFRS1
IFRS１prohibits retrospective application of IFRS for Estimate, derecognize of financial assets and liabilities, Noncontrolling interests, and impairment of financial assets. The group has prospectively applied IFRS for these items fromthe transition date.

Reconciliation
The reconciliations required in first-time adoption of IFRS are listed as follows:
Items that do not affect retained earnings and comprehensive income are included in the “Reclassification” column, items
that affect retained earnings and comprehensive income are included in the “Recognition and measurement” column.

65

Reconciliations of Equity as of the transition date (April 1, 2017)
In millions of Yen
Accounts under US GAAPUS GAAP

Recognition
andReclassification
measurement
difference

IFRS

Note

ASSETS

Accounts under IFRSASSETS

CURRENT ASSETSCURRENT ASSETS

Cash and cash equivalents

142,181――

142,181

Deposit

34,32934,329)――

Short-term investment

23,441

23,441)――

Notes receivables

1,199

1,199)――

Account receivables

67,08667,086)――

Allowance for bad debt

1,137)

1,137

―

―

―

67,262―

67,262Trade
receivables
receivables

167,398―

125

167,523

Inventories―

50,112―50,112

E

Deferred tax assets

4,723

4,723)――E

Other current assets

13,349183)

6,484)

6,682

D

Total of current assets

452,569

12,450)6,359)

433,760

Inventories

Cash and cash equivalents

andOther financial assets

Other current assets
Total current assets
Non-current assets

Tangible assets
Land

22,35822,358)――

Buildings and structures

94,927

94,927)――

Machinery and equipment

91,49391,493)――

Construction in progress

5,531

5,531)――

Accumulated depreciation

119,802)

119,802―――

94,507981

95,488Investment

34,00434,004)――

Goodwill

721

721)

―

―

3,641

3,641)

―

―

―

3,735

2,902

6,637

A

Goodwill and intangible assets―

42,982818

43,800E

Other financial assets

―

8,385

3)

8,382

B

Employee benefits assets

650

4,723

3,796

9,169

D,E

Deferred tax assets

11,157

8,703)

137)

2,317

Other non-current assets

144,680

12,756

8,357

165,793

Total of non-current assets

597,249

306

1,998

599,553

Total of tangible assets

Property, plant and equipment

Investments and other assets

Other intangible assets(Net)

Deferred tax assets
Other assets

Total assets

66

Total assetsotherAccounts under US GAAPUS GAAP

Recognition
Reclassificatio
andnmeasurement
difference

IFRS

Note

LIABILITIES AND EQUITY

Accounts under IFRS

Liabilities

Current liabilities

Current liabilities

Short-term borrowings

6,579

15)

―

6,564

Borrowings

26,347

7,113―

33,460Trade payables and other payables

Other payable

7,122

7,122)――

Accrued expenses

10,537

10,537)――

Accrued bonus

9,431

9,431)

―

―

―

284

―

284

Income tax payables

6,944

320

―

7,264

Deferred tax liabilities

3,134

3,134)

―

―

―

3,412

―

3,412

Provision

8,178

16,273448

24,899Other current liabilities

78,272

2,837)

448

75,883Notes
payableaccounts payable

andOther current liabilities
Total current liabilities

E

Other financial liabilities
Income tac payables

E

Total current liabilities

LONG-TERM LIABILITIES

Non-current liabilities

Long-term indebtedness

18

18)

―

―

Accrued retirement
termination benefits

3,161

―

―

3,161

―

18

―

18

―

1,440

―

1,440

Tax deferred liabilities

8,313

3,143

718)

10,738Other liabilities

1,674

1,440)―

234

13,166

3,143

718)

15,591

91,438306

270)

91,474andTotal long-term liabilities
Total liabilities

Employees benefit obligation
E

Other financial liabilities
Provision

E

Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities

EQUITY

EquityMAKITA CORPORATIONSHAREHOLDERS’ EQUITY
Common stock

23,805――23,805

Capital stock

Additional paid-in capital

45,501――45,501

Additional paid-in capital

5,669

5,669)――

Other retained earnings

456,546

29,516)969

427,999

Treasury stock

11,623)――

11,623)

17,728)34,986

1,299

18,557502,170

199)

2,268

504,239

3,641

199

―

3,840

Total equity

505,811―2,268

508,079

Total equity

Total equity and liabilities

597,249

306

1,998

599,553

Total liabilities and equity

Retained earnings
Legal reserve

Accumulatedcomprehensive(loss)

otherincomeTotal
MakitaCorporation
shareholders’ equity
Non-controlling interest

67

A,B,C,D

Retained earnings
Treasury stock

B,C

Other components of equity

Equity attributable to the owner of the parentC

Non-controlling interest

Reconciliations of Equity of previous consolidated fiscal year ending on March 31, 2018
In millions of Yen
Accounts under US GAAPUS GAAP

Recognition
andReclassification
measurement
difference

IFRS

Note

ASSETS

Accounts under IFRSASSETS

CURRENT ASSETSCURRENT ASSETS

Cash and cash equivalents

147,320――

147,320

Deposit

43,013(43,013)――

Short-term investment

14,782(14,782)――

Notes receivables

1,343(1,343)――

Account receivables

79,092(79,092――

Allowance for bad debt

(1,340)

1,340

―

―

―

78,988―78,988Trade receivables and other receivables

196,217―237

196,454

Inventories―

48,037―48,037

E

Deferred tax assets

16,150(43)(7,444)

8,663

D

Other current assets

496,577(9,908)(7,207)479,462

Inventories

Cash and cash equivalents

Other financial assets

Other current assets

Total of current assets

Total current assets
Non-current assets

Tangible assets

22,626(22,626)

―

―

Land

98,648(98,648)――

Buildings and structures

98,868(98,868)――

Machinery and equipment

6,027(6,027)――

Construction in progress(126,305)

126,305――

Accumulated depreciation―

99,864949

100,813

Total of tangible assets

Property, plant and equipment
33,815(33,815)――

Investment

721

(721)

―

―

Goodwill

3,944(3,944

―

―

―

4,033

2,958

6,991

A

Goodwill and intangible assets―

44,621940

45,561

E

Other financial assets

―

9,564

165

9,729

B

Employee benefits assets

Deferred tax assets

3,975

―

6,074

10,049D

Deferred tax assets

Other assets

12,135(9,755)

(144)

2,236

Other non-current assets

154,454

9,983

10,942

175,379

Total of non-current assets

651,03175

3,735

654,841

Total assets

Investments and other assets

Other intangible assets(Net)

Total assets

68Accounts under US GAAPUS GAAP

Recognition
Reclassificatio
andnmeasurement
difference

IFRS

Note

LIABILITIES AND EQUITY

Accounts under IFRS

Liabilities

Current liabilities

Current liabilities

Short-term borrowings

3,411

(50)

―

3,361

Borrowings

28,156

6,868―

35,024

Trade payables and other payables

Other payable

7,131(7,131)――

Accrued expenses

11,952(11,952)――

Accrued payroll

10,731(10,731)

―

―

―

429

―

429

Income tax payables

9,720

351

―

10,071

Income tax payables

Deferred tax liabilities

―

2,928

―

2,928

Provision

Other current liabilities

9,497

19,363434

29,294

Other current liabilities

80,59875

434

81,107Notes
payableaccounts payable

andTotal current liabilities

E

Other financial liabilities

Total current liabilities

LONG-TERM LIABILITIES

Non-current liabilities

Long-term indebtedness

3,206

―

―

3,206

―

133

―

133

―

1,352

―

1,352

Provision

Tax deferred liabilities

9,391

―

997

10,388Deferred tax liabilities

Other liabilities

1,703(1,485)(2)

216

Total long-term liabilities

14,300―995

15,295

Total non-current liabilities

Total liabilities

94,89875

1,429

96,402

Total liabilities

Accrued retirement
termination benefits

andEmployees benefit obligation
E

Other financial liabilities

Other non-current liabilities

EQUITY

EquityMAKITA
CORPORATIONSHAREHOLDERS’ EQUITY:
Common stock

23,805――23,805

Capital stock

Additional paid-in capital

45,531――45,531

Additional paid-in capital

Legal reserve

5,669(5,669)――Retained earnings

497,456(29,044)820

469,232

Treasury stock(11,617)――(11,617)(8,905)34,514

1,486

27,095551,939

(199)

2,306

554,046

4,194

199

―

4,393

556,133―

2,306

558,439

Total equity

651,03175

3,735

654,841

Total liabilities and equity

Accumulatedcomprehensive(loss)

otherincomeTotal
MakitaCorporation
shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity

69

A,B,C,D

Retained earnings
Treasury stock

B,C

Other components of equity

Equity attributable to the owner of the parentC

Non-controlling interest

Reconciliations of consolidated statements of profit or loss for previous fiscal year ending on March 31, 2018
In millions of Yen
Accounts under US GAAPUS GAAP

Recognition
Reclassificatio
andnmeasurement
difference

IFRS

Note

Accounts under IFRSNET SALES

477,298――477,298

Revenues

Cost of sales

302,173)

159

622

301,392)

GROSS PROFIT

175,125

159

622

175,906

Selling, general, administrativeand others

95,363)563)

251

95,675)OPERATING INCOME

79,762404)

873

80,231

―

3,218

38)

3,180

F

Financial income―

3,302)

244)

3,546)

F

Financial expenses

2,919

2,919)――B

Cost of sales
Gross profit

A,B

Selling, general administrative and others
OPERATING INCOME

OTHER INCOME (EXPENSE)

Interest and dividend income
Interest expense

43)

43

―

―

Exchange gains (losses) on
foreign currency transactions,net

3,235)

3,235

―

―

Realized gains (losses) on
securities, net

299

299)

―

―

Impairment loss on securities

24)

24

―

―

79,678404)

591

79,865Current

24,943)404

948)

25,487)

Deferred

536

―

545

1,081

24,407)404

403)

24,406)55,271―

188

55,459INCOMEBEFOREINCOME TAXESPROFIT BEFORE INCOME TAXES

Provision for income taxes

Net Income

D

Income tax expenses
ProfitProfit attributable to:

Net income attributable
Makita cooperationto

Net income attributablenon-controlling interest

to54,755―

188

54,943

Owners of parent company

516

―

―

516

Non-controlling interests

70

Reconciliation of other comprehensive income statements for previous fiscal year ending on March 31, 2018
In millions of Yen
Accounts under US GAAPNET INCOME

US GAAP

Recognition and
Reclassificatiomeasurementndifference

55,271

―

188

IFRS
55,459OTHERCOMPREHENSIVEINCOME (LOSS)－(after tax)

Note

Accounts under IFRSNET INCOME
OTHER COMPREHENSIVE INCOME (LOSS) －(net of tax)
Items that will not be reclassified to profit or loss

Unrealized gain(loss) on securities
Pension liability adjustment

Financial instruments at fair value measured
through other comprehensive income(1,364)―266(1,098)

544

―

(356)

188

Premeasurements of defined benefit plans

(820)

―

(90)

(910)

Total of items that will not be reclassified to
profit or loss
Items that will be reclassified to profit or loss

Foreign currency translation
adjustment

Total other comprehensive
income (loss)
COMPREHENSIVE(LOSS)

INCOME

9,860

―

(7)

9,853

Translation difference on foreign operations

9,860

―

(7)

9,853

Total of items that will be reclassified to profit or
loss

9,040

―

(97)

8,943

Total other comprehensive income (loss)-net ofincome tax

64,311―

91

64,402

Total comprehensive income
Attributable to:

COMPREHENSIVE INCOME(LOSS) ATTRIBUTABLE TO
MAKITA CORPORATION
Comprehensive income (loss)
attributable to the noncontrolling interest

63,578―91

63,669

733

―

―

733

Owners of the parent

Non-controlling interests

Notes to reconciliation
A．Intangible assets
Under US GAAP, development cost in R&D expenses was recognized as expenses, Under IFRS, the development
cost that meet the capitalization requirements were recognized as intangible assets and amortized over its expected
useful lives on a straight-line method.
As above recognition difference, the development cost capitalized in intangible on transition date and the previous
consolidated fiscal year 2018 were 2,902Millions and 2,958Millions respectively, after the deduction of deferred tax
of 876Million and 893Million, the remaining 2,026Millions and 2,065Millions are transferred to retained earnings
respectively.
B．Employee benefits
Under US GAAP, service cost, interest expenses and expected return on plan assets were recognized in profit orloss. In addition, the actuarial differences and past service cost under the plan which was not recognized as
expenses in the current period should be recognized as other comprehensive income after tax adjustment andamortized on a straight-line basis over the average remaining service period of employees.
Under IFRS, the actuarial gains and losses are recognized in other comprehensive income as incurred and
immediately reclassified to retained earnings. Current service costs and Past service costs are recognized in profit
or loss when incurred. In addition, the remeasurement of defined benefit obligation and asset will be first recognizedin other comprehensive income and transferred to retained earnings from other components of equity whenoccurred.
As above recognition difference, actuarial difference 8,869 million (loss) and past service liabilities 2,455 Million(profit) were transferred to retained earnings at the transition date.

71

C．Exchange difference on foreign operations
As an exemption elected under IFRS1, the cumulative translation differences for all foreign operations werereclassified to retained earnings on transition date.
As above recognition difference, the exchange difference amounted to 28,572millions in other comprehensive loss
on transition were all transferred to retained earnings.
D．Income taxes
Under US GAAP, the tax effects from the elimination of unrealized gains on intergroup transactions were calculatedby the tax rate of sales side. Under IFRS, it should be calculated by the tax rate of purchasing side.
As a result, on the transition date and the previous consolidated fiscal year ended at March 31, 2018, other current
assets decreased by 6,484million yen and 7,444million yen, deferred tax asset increased by 5,730million yen and
6,420million yen, retained earnings decreased by 754milion yen and 1,024million yen respectively.
E．Reclassification on consolidated financial statements
Reclassifications are made to comply with the requirements of IFRS. The reclassifications are as follows:
Financial assets and financial liabilities are disclosed separately based on the requirements of

①

IFRS.
Deferred tax asset, Deferred tax liabilities classified as current items under US GAAP are②

classified as non-current items under IFRS.
Some line items are aggregated or separated.

③

F．Reclassification on consolidated statements of profit or loss
Reclassifications are made to comply with the requirements of IFRS. The reclassifications are as follows:①

Financial income and financial expense are listed separately under IFRS.

Reconciliation of consolidated cashflows for the year ended March 31, 2018
There are no significant differences between the consolidated statement of cash flows under US GAAP and under
IFRS.

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(TRANSLATION)
Independent Auditor’s Report on the Financial Statements
andInternal Control Over Financial Reporting
June 27, 2019
To the Board of Directors of Makita Corporation:

KPMG AZSA LLC
Yasuyuki Morimoto (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Masaki Kawaguchi (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant

Financial Statement Audit

We have audited the accompanying consolidated financial statements of Makita Corporation and its consolidated subsidiaries
provided in the “Financial Information” section in the company’s Annual Report, which comprise the consolidated balance
sheet as at March 31, 2019 and the consolidated statement of income, statement of comprehensive income, statement ofchanges in equity and statement of cash flows for the year then ended, and notes to consolidated financial statements andschedule to the consolidated financial statements , in accordance with Article 193-2(1) of the Financial Instruments andExchange Law of Japan.
With article financial instruments and exchange law of japan

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith International Financial Reporting Standards, and for such internal control as management determines is necessary toenable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud
or error.

Auditor’s Responsibility

Our responsibility is to independently express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require that we
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.

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An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, weconsideres internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, while the objective of the financial statement audit
is not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Makita
Corporation and its consolidated subsidiaries as at March 31, 2019, and their financial performance and cash flows for theyear then ended in accordance with accounting principles generally accepted in the United States of America.

Internal Control Audit

We also have audited the accompanying internal control report of Makita Corporation as at March 31, 2019, in accordancewith Article 193-2(2) of the Financial Instruments and Exchange Law of Japan.

Management’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the preparation andfair presentation of the internal control report in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan. Internal control over financial reporting may not completely prevent or detect financial
statement misstatements.

Auditor’s Responsibility

Our responsibility is to independently express an opinion on the internal control report based on our internal control audit. We
conducted our internal control audit in accordance with auditing standards for internal control over financial reporting
generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the internal control report is free from material misstatement.

An internal control audit involves performing procedures to obtain audit evidence about the assessment of internal control
over financial reporting in the internal control report. The procedures selected depend on the auditor’s judgement, including

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significance of effect on the reliability of financial reporting.

Also, an internal control audit includes evaluating theappropriateness of the scope, procedures and result of the assessment determined and presented by management, and theoverall internal control report presentation.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

OpinionIn our opinion, the internal control report, in which Makita Corporation states that internal control over financial reporting was
effective as at March 31, 2019, presents fairly, in all material respects, the assessment of internal control over financial
reporting in accordance with assessment standards for internal control over financial reporting generally accepted in Japan.

Other Matter

Our firm and engagement partners have no interest in the Company which should be disclosed pursuant to the provisions of
the Certified Public Accountants Law of Japan.

Notes to the reader of audit report:
The Independent Auditor’s Report herein is the English translation of the Independent Auditor’s Report as required by the
Financial Instruments and Exchange Law of Japan.

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