Consolidated Financial Statements

Millions of yen
Note(1) Consolidated Financial Statements

Liabilities
Millions of yen
Note

As of Dec. 31, 2022

As of Dec. 31, 2023

AssetsCurrent assets

Current liabilities
Bonds and loans payable

15, 19¥100,895¥61,209

Trade and other payables

14, 19176,151

175,844

Other financial liabilities

12, 1914,431

16,542

7,980

17,450Cash and cash equivalents

6, 19¥73,846¥90,251

Income tax payable

Trade and other receivables

7, 19

209,009

215,970

Provisions

Other financial assets

19

6,950

2,896

Inventories

8283,501

262,456

Subtotal

50,59351,368Subtotal

623,899

622,941

Liabilities for disposal groups classified as held
for sale—

1,778

623,899624,71935

Total current assets
Non-current assets
Property, plant and equipment

9, 11

436,307451,621

Goodwill

10, 11

26,412

29,704

Intangible assets

10, 1145,91950,332

Investments accounted for using equity method

13

4,462

4,486

Other financial assets

19

34,30333,056

Net defined benefit assets

17

38,89953,474

Deferred tax assets

18

12,953

17,357

Other non-current assets

2,048

1,983

Total non-current assets

601,303

642,013¥1,225,202¥1,266,732

Total assets

16

Other current liabilities

Other current assets

sale

As of Dec. 31, 2023

Liabilities and Equity(i) Consolidated Statement of Financial Position

Assets for disposal groups classified as held for

As of Dec. 31, 2022

35

Total current liabilities

2,235

52,15256,271

352,908

329,551—

1,538

352,908

331,089

Non-current liabilities
Bonds and loans payable

15, 19210,907

184,166

Other financial liabilities

12, 1948,191

52,139Net defined benefit liabilities

17

21,33323,027

Provisions

16

1,654

1,431

Deferred tax liabilities

18

4,690

12,219Other non-current liabilities

21,656

21,231

Total non-current liabilities

308,431294,213661,339625,30242,658

Total liabilities
EquityCapital stock20

42,658

Capital surplus

20

39,70539,702Retained earnings

20

478,379

522,716

Treasury stock

20

(61)

(43)

Other components of equity

20(14,481)

19,081

546,200

624,114

Total equity attributable to owners of the parent
Non-controlling interests

29

Total equity
Total liabilities and equity

－ 1 －

1,299

－ 2 －

17,663

17,316563,863

641,430¥1,225,202¥1,266,732

(ii) Consolidated Statement of Income(iii) Consolidated Statement of Comprehensive Income

Sales revenue

Millions of yen
Note Jan. 1 to Dec. 31, 2022 Jan. 1 to Dec. 31, 2023

NoteJan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

5, 22

¥1,098,664¥1,177,399(845,442)(850,898)

Cost of sales
Gross profit
23

Selling, general and administrative expenses

Millions of yen

Business profit

Profit for the year

¥12,456¥38,506

Other comprehensive income

253,222

326,501(231,259)(248,831)

21,96377,670Financial assets measured at fair value through other comprehensive income

21(1,239)3,941

Remeasurements of defined benefit plan21

(1,253)

8,600

Other income

24

3,093

2,609

Other expenses

11, 24(10,068)(15,789)

Items that will not be reclassified to profit or loss

Items that may be reclassified subsequently to profit or loss

14,98864,490Cash flow hedges

21

154

(31)

Financial income

25

11,51911,933Currency translation differences of foreign operations

21

44,83634,549Financial expenses

25(4,041)(13,705)

Other comprehensive income, net of tax

42,49847,059

Share of (profit) loss of entities accounted for using equity method

13

73

27

Total comprehensive income for the year

¥54,954¥85,565

22,53962,74518(10,083)(24,239)¥12,456¥38,506

49,752

83,038Operating profit

Profit before tax
Income tax expenses
Profit for the year

Total comprehensive income for the year attributable to:
Owners of the parent company
Non-controlling interests

29

Total comprehensive income for the year

Profit attributable to:9,415

Owners of the parent company
29

Non-controlling interests
Profit for the year

37,048

3,041

1,458

¥12,456¥38,506¥35.80¥140.86

Earnings per share
Basic earnings per share (yen)

26

－ 3 －

－ 4 －

5,202

2,527

¥54,954¥85,565

(iv) Consolidated Statement of Changes in Equity
January 1 to December 31, 2022

Millions of yen

January 1 to December 31, 2023

Millions of yen
Equity attributable to owners of the parent company

Equity attributable to owners of the parent company

Other components of equity

Other components of equity

Currency

Currencytranslationtranslation

Note

Balance as of January 1, 2022
Hyperinflation adjustment
Restated balance
Profit for the year
Other comprehensive income
Total comprehensive income
Purchase of treasury stock
Disposal of treasury stock
Dividends
Share-based payment transactions

differences ofCash flow

Capital stock

Capital surplus

Retained earnings

Treasury stock

foreign operations

hedges¥42,658¥39,715¥481,455
1,811

¥(85)

¥(74,238)
6,328¥(126)

483,266(85)(67,910)(126)33
42,65839,715

—

—

20
20
28

(0)

34

(10)

9,415

—

42,766

153

42,766153(3)
0(13,150)

Transfer to retained earnings

27

10

Other
Total transactions with owners
Balance as of December 31, 2022

Cash flow

Capital surplus

Retained earnings

Treasury stock

foreign operations

hedges¥42,658¥39,705¥478,379¥(61)¥(25,144)¥27

Other comprehensive income

33,445(31)

33,445(31)

37,04821

Total comprehensive income—

Purchase of treasury stock

20

Disposal of treasury stock20

Dividends

28

Share-based payment transactions

34

—
(0)

—
0

(5,260)(7)

2112,428

7Transfer to capital surplus(10)37,048(3)Transfer to retained earnings(1,057)

Transfer to capital surplus

Balance as of January 1, 2023

differences ofCapital stock

Profit for the year

9,415
21

Note

(7)

Transfer to other components of equity

(10)

(85)

—

(10)

(14,302)24——¥42,658¥39,705¥478,379¥(61)¥(25,144)

27

for disposal groups classified as held forBalance as of December 31, 2023

Other components of equity

(3)

128

—

(3)

7,289

18

1,900

—

¥42,658¥39,702¥522,716¥(43)¥10,201

¥(4)

Other
Total transactions with owners

Equity attributable to owners of the parent company

1,900

35

sale

Financial assets
Equity attributable to owners of the parent company

measured at fair

Other components of equity

value throughNote

Balance as of January 1, 2022
Hyperinflation adjustment

other

Remeasurements

comprehensiveof defined benefit

income

plan

Total

Total

¥12,161¥—¥(62,203)¥501,540¥12,003¥513,543

6,328

8,139

2,035

10,17433

Restated balance

12,161—

Profit for the year
Other comprehensive income

21

Total comprehensive income

Financial assets(1,240)(1,240)(1,342)(1,342)

measured at fairNon-controllinginterests

Note

Balance as of January 1, 2023

(55,875)

509,679

14,038523,717

—

9,415

3,041

12,456

Profit for the year

42,498Other comprehensive income

40,33740,33740,33749,752

2,161
5,202

Other components

value throughTotal equity

21

of equity for

otherRemeasurements

disposal groups

comprehensiveof defined benefit

classified as held

incomeplan

for sale

Total

Total

¥10,636¥—¥—¥(14,481)¥546,200¥17,663¥563,863

3,942

8,634

3,942

8,634

—

Non-controlling—

37,048

1,458

38,50645,9901,069

47,05945,99083,0382,527

85,56554,954

Total comprehensive income
20

—

(3)

Purchase of treasury stock

20

(3)

(3)

Purchase of treasury stock

Disposal of treasury stock

20

—

0

0

Disposal of treasury stock

20

—

0

Dividends

28—(13,150)Dividends

28—(5,260)Share-based payment transactions

34

—

17

17

Share-based payment transactions

34

1,057

—

—

Transfer to retained earnings

Transfer to capital surplus

—

—

—

Transfer to capital surplus

Other

—

(95)

Transfer to retained earnings

Total transactions with owners
Balance as of December 31, 2022

(285)

1,342

(14,727)

(95)

(285)

1,342

1,057

(13,231)(1,577)(14,808)¥10,636¥—¥(14,481)¥546,200¥17,663¥563,863－ 5 －(3,794)

Total equity

45,990—(1,577)

interests(3)0(2,870)(8,130)—14

14(12,428)

—

—

—

—

—

(1,900)——(8,634)

Transfer to other components of equity
for disposal groups classified as held for

35

—

—

sale
—

125

(4)

121

Total transactions with owners(3,794)(8,634)(1,900)(12,428)(5,124)(2,874)(7,998)

Balance as of December 31, 2023

¥10,784¥—(1,900)¥19,081¥624,114¥17,316¥641,430

Other

－ 6 －

Notes to Consolidated Financial Statements(v) Consolidated Statement of Cash Flows

Millions of yen
Note Jan. 1 to Dec. 31, 2022 Jan. 1 to Dec. 31, 2023

Cash flows from operating activities
Profit before tax¥22,539¥62,745

Depreciation and amortization

75,34878,5594,137

11,399Interest and dividend income(2,907)(3,538)Interest expenses

3,637

6,417

Impairment loss

11

Share of (profit) loss of entities accounted for using equity method
Loss (gain) on sales and retirement of non-current assets
Decrease (increase) in inventories
Decrease (increase) in trade and other receivables

(73)

(27)

1,714

841

(51,758)

26,586(875)

545

Increase (decrease) in trade and other payables

10,205(2,938)Other, net(16,955)

12,583

Subtotal

45,012

193,172

Interest received

1,944

2,774

850

851

Dividend income received
Interest expense paid

(3,454)(6,274)

Income taxes paid

(16,483)(20,723)

Net cash provided by (used in) operating activities

27,869169,800(67,324)(63,295)

Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets

555

1,126

(7,591)(8,997)Purchase of investment securities

(245)

(244)

Proceeds from sales of investment securities

483

7,060

(2,330)—

Payment for transfer of businessNet decrease (increase) in short-term loans receivable

10

6

Other, net(2,255)2,114

Net cash provided by (used in) investing activities(78,697)(62,230)(42,516)

1. Reporting Company
Sumitomo Rubber Industries, Ltd. (hereinafter the “Company”) is based in Japan. The consolidated financial statements presented
herein comprise the operating results for the fiscal year ended December 31, 2023 recorded by the Sumitomo Rubber Group andthe Company’s affiliates. For a description of the Group’s primary business activities, please refer to Note 5. “Segment Information.”

2. Basis for Preparation(1) Compliance with IFRSIn accordance with Article 93 of the Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial
Statements (Ordinance of the Ministry of Finance No. 28 in 1976), the Group’s consolidated financial statements have been
prepared in conformity with International Financial Reporting Standards (IFRS), as the Company meets the requirements
concerning a “Designated International Accounting Standards Specified Company” prescribed in Article 1-2.
The consolidated financial statements presented herein were approved by Satoru Yamamoto, Representative Director andPresident of the Company, on March 28, 2024.
(2) Basis for Measurements
As stated in Note 3. “Material Accounting Policies,” the consolidated financial statements have been prepared based on historicalcost, except for specific financial instruments that are measured at fair value and financial statements prepared by a subsidiary inTurkey and consolidated via the adoption of hyperinflationary economy accounting.
(3) Presentation Currency and Unit
The Company uses Japanese yen as the primary functional currency for its operations and as the presentation currency used in
preparing its consolidated financial statements. Figures are rounded to the nearest million yen.
(4) Changes in Accounting Policies(Application of amendments to IAS 12 Income Taxes)
The Group has applied the amendments to IAS 12 Income Taxes published in May 2023 from the fiscal year under review. The
amendments clarify that IAS 12 applies to corporate income taxes arising from tax law enacted or substantively enacted to
implement the OECD's BEPS Pillar Two GloBE (global minimum taxation) rules, and establishes a temporary exception that
requires companies not to recognize or disclose deferred income tax assets and liabilities arising from the global minimum taxation
rules. Given that the amendments have been required to be applied retrospectively immediately after their announcement, theGroup has applied the exceptions retrospectively from the fiscal year under review, not recognizing or disclosing deferred tax assets
and liabilities related to corporate income taxes arising from the global minimum taxation rules.
Additionally, from the fiscal year under review, the Group has applied the amendments to IAS 12 Income Taxes (Deferred Tax
related to Assets and Liabilities arising from a Single Transaction).
The application of this standard has no significant impact on the Company's consolidated financial statements.

Cash flows from financing activities
Net increase (decrease) in short-term loans payable27

17,584

Proceeds from long-term debt and newly issued bonds

27

75,234

6,237

Repayments of long-term debt and redemption of bonds

27(23,096)(34,305)

Repayments of lease liabilities

27(13,438)(16,847)

Cash dividends paid

28

(13,148)(5,264)(1,577)(2,870)Cash dividends paid to non-controlling interests
Other, net
Net cash provided by (used in) financing activities

(3)

(3)

41,556(95,568)

Effect of exchange rate changes on cash and cash equivalents

8,025

5,336

Net increase (decrease) in cash and cash equivalents(1,247)

17,338Cash and cash equivalents at the beginning of current period
Cash and cash equivalents included in assets for disposal groups classified
as held for sale
Cash and cash equivalents at the end of current period

－ 7 －

6

75,09373,846

35

—

(933)

6

¥73,846¥90,251－ 8 －3. Material Accounting Policies(3) Foreign Currencies Translation

Unless otherwise noted, the accounting policies described below have been consistently applied throughout the entirety of eachfiscal year presented in the consolidated financial statements.

(i) Foreign Currency Denominated Transactions
The financial statements of Sumitomo Rubber Group subsidiaries have been prepared based on functional currencies, that is, theprimary currencies of the respective business economies in which each subsidiary conducts business operations.
Transactions denominated in other foreign currencies have been translated into the functional currencies of the relevant
subsidiaries using exchange rates at the date of the transactions or rates that approximate the exchange rates at the dates of thetransactions.
Monetary assets and liabilities denominated in foreign currencies as of each fiscal year-end have been translated into thefunctional currencies using the exchange rates at the fiscal year-end. Exchange differences resulting from translation andsettlements are recognized as profit or loss. However, financial assets measured through other comprehensive income andexchange differences resulting from cash flow hedging are recognized as other comprehensive income.

(1) Basis for Consolidation(i) Subsidiaries
A subsidiary is defined as a company under the control of the Sumitomo Rubber Group. The term “control” refers to the Group’s
exposure or entitlement to variable returns due to its involvement in the management of said company, the returns of which theGroup is able to impact through the exercise of its power. The financial statements of subsidiaries are included in the scope of
consolidation from the date that control over said company is established to the date that such control is relinquished.
All intragroup balances and transactions within the Group as well as unrealized profit and loss resulting from transactions within
the Group are eliminated in preparation of the consolidated financial statements.
A subsidiary’s comprehensive income is allocated to owners of the parent and non-controlling interests even when that portion
attributable to non-controlling interests is negative.
To disclose the most accurate information, the operating results of subsidiaries whose fiscal year-end differs from that of theparent company are subject to provisional closing. This is undertaken at the closing date of the consolidated financial results, withthe results of the provisional closing included therein.
Changes in equity held by the Group in subsidiaries under its control are treated as capital transactions. The difference between
adjustments for non-controlling interests and the fair value of such interests is classified as equity attributable to owners of theparent and directly recognized as capital.
(ii) Affiliates
An affiliate is defined as a company over which the Group exerts neither sole nor joint control but nevertheless is able to exert
significant influence with regard to financial and management decisions. Investments in affiliates are accounted for using the equity
method from the date on which the Group gains significant influence until the date on which it ceases to hold that influence.
(2) Business Combinations
Business combinations are accounted for using the “Acquisition Method.” Identifiable assets, identifiable liabilities and contingent
liabilities acquired through business combinations are measured at fair value as of the date of acquisition. Acquisition-related costs
incurred through business combinations are accounted for as expenses in the period incurred. Non-controlling interests are
identified separately from equity held by the Group. The Group recognizes its non-controlling interests in an acquiree based on a)fair value or b) the proportion of the non-controlling interest’s share in the net value of identifiable assets and liabilities of theacquiree on a transaction by transaction basis.
Goodwill is measured when the total of a) the price of business combination, b) the value of non-controlling interests acquiredand c) the fair value of equity capital in the investee held by the acquiring company prior to the new acquisition surpasses d) the
net value of the investee’s identifiable assets and liabilities as of the date of acquisition. Goodwill thus is measured as the excessof the total of a), b) and c) over d).
In cases where the total of a), b) and c) falls short of the value of d) due to a bargain purchase, the difference is recognized as
profit or loss.

(ii) Foreign Operations
The assets and liabilities of foreign operations have been translated into Japanese yen using the exchange rates at the fiscal yearend. Income and expenses recorded by such foreign operations have been translated into Japanese yen using the averageexchange rate during the fiscal year, except for cases in which significant exchange rate movements occurred during the fiscal year
or cases in which hyperinflation in given economic territories affected local currencies subject to said translation. Exchange
differences resulting from the translation of financial statements of foreign operations are recognized in other comprehensive
income (or loss). The exchange differences are included in other components of equity as “currency translation differences offoreign operations.”
The translation differences of foreign operations that have been disposed of by the Company are recognized as net profit orloss in the period in which the disposal took place.
Financial statements prepared by a subsidiary operating under a hyperinflationary economy are included in consolidated
financial statements after being translated into Japanese yen based on the spot exchange rate at the fiscal year-end.
(4) Cash and Cash Equivalents
Cash and cash equivalents consist of a) cash on hand, b) readily available deposits and c) short-term highly liquid investments withoriginal maturities of three months or less that entail insignificant price fluctuation risk.
(5) Financial Instruments(i) Financial Assets Other than Derivatives
i. Classification
The Group classifies financial assets other than derivatives into the following categories: (a) those measured at amortized cost;(b) those measured at fair value through other comprehensive income; and (c) those measured at fair value through profit orloss.
(a) Financial assets measured at amortized cost
Financial assets are measured at amortized cost when the following conditions are met:
• Contained within a business model with the objective of holding financial assets in order to collect contractual cash flows• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the outstanding principal(b) Financial assets measured at fair value through other comprehensive income:(b. 1) Debt equivalents
Financial assets are classified as debt equivalents when the following conditions are met:
• Contained within a business model whose objective is achieved by both collecting contractual cash flows and selling
financial assets• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the outstanding principal(b. 2) Equity equivalents
Excluding the financial assets classified as (b. 1) above, the Group holds investments that are equity equivalents (excluding
assets held for trading) that would otherwise meet the requirements of (a) above. Once any such investment is recognized
as an equity equivalent, the Group’s decision to present subsequent changes in fair value in other comprehensive income
becomes irrevocable.
(c) Financial assets measured at fair value through profit or loss
Financial assets that do not meet the criteria of (a) or (b) above are measured at fair value through profit or loss. The
Sumitomo Rubber Group has not classified any of its investments in debt equivalents in this category as it aims to promoteaccounting consistency.
ii. Initial Recognition and Measurement
The Sumitomo Rubber Group recognizes trade and other receivables as of their accrual date. As for all other financial assets,
the Sumitomo Rubber Group undertakes the initial recognition as of the transaction date on which the Group becomes asignatory on contracts for such assets. The value of all financial assets, except for those classified as financial assets measured
at fair value through profit or loss as well as operating receivables that include significant financing components, reflects initial
measurements based on the total of fair value and transaction costs. The value of operating receivables that do not include
significant financing components reflects initial measurements based on the transaction price.
iii. Subsequent Measurement
To remeasure the value of financial assets after initial recognition, the Group applies the following methods by asset category.
(a) Financial assets measured at amortized cost
The Group undertakes subsequent measurement using the effective interest method.
(b) Financial assets measured at fair value through other comprehensive income(b. 1) Debt equivalents
Changes in the fair value of financial assets in this category, excluding gains and losses attributable to impairment andforeign exchange, are recognized as other comprehensive income until the Group derecognizes said assets. After－ 9 －－ 10 －

derecognition, previously recognized other comprehensive income is reclassified to profit or loss.
(b. 2) Equity equivalents
Changes in the fair value of financial assets in this category are recognized as other comprehensive income. In cases where
the Group derecognizes said assets or the fair value of such assets falls significantly, previously recognized othercomprehensive income is directly reclassified to retained earnings. In addition, dividends derived from these financial assets
are recognized as profit.
(c) Financial assets measured at fair value through profit or loss
Following initial recognition, the value of financial assets in this category is measured at fair value. Changes in the fair value
are recognized as profit or loss.
iv. Impairment of Financial Assets
The Sumitomo Rubber Group recognizes an allowance for doubtful accounts to counter expected credit loss in relation tofinancial assets measured at amortized cost.
Determination of a significant increase in credit risk
At every fiscal year-end, the Group evaluates whether there has been a significant increase in the credit risk of financial assets
after initial recognition by comparing the default risk of such assets at the account closing date and at the date of initialrecognition.
In addition, the Group undertakes the aforementioned evaluation based on changes in default risk following the initialrecognition. To determine whether there has been a change in the default risk of financial assets, the Group takes the following
factors into consideration.
• Significant changes in ratings by external credit rating agencies• Downward revisions in internal credit ratings• Deterioration in the business performance of borrowers• Information about lapses in maturity dates
Measurement of expected credit loss
Expected credit loss refers to the present value of differences between contractual cash flows that are due to the Group inaccordance with the contract; and the cash flows that the Group expects to receive. The allowance for doubtful accounts
associated with financial assets is determined at an amount equal to the present value of the expected credit loss over the
lifetime of such assets if the credit risk has increased significantly since initial recognition or at an amount equal to the expectedcredit loss over the 12-month period if the credit risk of such assets has not increased significantly.
However, notwithstanding the above, the allowance for doubtful accounts associated with operating receivables that include
no significant financing components is determined at an amount equal to lifetime expected credit loss.
Allowance for doubtful accounts in relation to financial assets is recognized as profit or loss. In cases where the allowancefor doubtful accounts decreases, the reversal of such allowance is recognized as profit or loss.
v. Derecognition of Financial Assets
Financial assets are derecognized if the Group’s contractual rights to the cash flows expire or if the Group transfers such rights
or otherwise transfers substantially all the risks and rewards of ownership of the financial assets.
If there is no reasonable expectation for the partial or full collection of the Group’s claims associated with a financial asset,
the Group directly deducts the value from the carrying amount of total financial assets.
(ii) Financial Liabilities Other than Derivatives
i. Classification
The Group classifies financial liabilities other than derivatives as those measured at amortized cost.
ii. Initial Recognition and Measurement
The Group undertakes the initial recognition of debt securities issued by the Group at the date of issuance. All other financial
liabilities are subject to initial recognition undertaken at the transaction date, that is, the date on which the Group became asignatory to contracts associated with such liabilities. All financial liabilities are measured at fair value less transaction cost.
iii. Subsequent Measurement
To remeasure the value of financial liabilities, the Group uses amortized cost based on the effective interest method.
iv. Derecognition of Financial Liabilities
Financial liabilities are derecognized when they have been extinguished, that is, when the obligation specified in the contract
is discharged, cancelled or expired.
(iii) Offset of Financial Assets and Liabilities
Financial assets and liabilities are offset only when the Group currently has a legally enforceable right to offset the transactions andintends either to settle on a net basis or to simultaneously realize the financial assets and settle the financial liabilities. The outcomeof such offset is included in the consolidated statement of financial position.
(iv) Derivatives and Hedge Accounting
The Group utilizes such derivatives as forward exchange contracts and interest rate swaps as hedges against foreign exchange
risk and interest rate risk. These derivatives are initially measured at fair value as of the contract date. The Group undertakes
subsequent remeasurement using fair value.
When derivatives are designated as eligible hedging instruments, accounting treatment methods for changes in the fair valueof such derivatives are determined by hedging objectives and designations. When they are not designated as such, the changes
in the fair value of such derivatives are recognized as profit or loss.
i. Qualifying Criteria for Hedge Accounting
When a derivative transaction is initiated, the Group documents the relationship between hedging instruments and hedged
items as well as its risk management goals and strategies for various hedging transactions, with the aim of evaluating whether－ 11 －

the hedge relationship meets hedge accounting requirements. Moreover, from the inception of hedging, the performance of
derivatives (used for hedge transactions to offset changes in the fair value of or cash flows from hedged items) is constantly
evaluated and documented to determine whether they meet all the applicable hedge effectiveness requirements. The evaluationof hedge effectiveness is undertaken at the earlier of the closing date of each fiscal year or whenever a significant change incircumstances may affect hedge effectiveness requirements.
ii. Accounting Treatment of Qualifying Hedge Relationships
Derivatives that meet the strict criteria for hedge accounting are treated as follows.
Fair value hedge
Changes in the fair value of hedging instruments are recognized as profit or loss. Changes in the fair value of hedged items areadjusted in the carrying amount of such items and recognized as profit or loss.
Cash flow hedges
The effective portion of gain or loss on hedging instruments is recognized as other comprehensive income, while the ineffective
portion is recognized immediately as profit or loss in the consolidated statement of income.
If a hedged forecast transaction subsequently results in the recognition of non-financial assets or non-financial liabilities,
the Group directly transfers cash flow hedge reserves to the initial cost or other carrying amount of such assets or liabilities.
Cash flow hedge reserves, other than those derived from the aforementioned cash flow hedges, are reclassified to profit orloss in the same period or periods during which the hedged expected future cash flow affects profit or loss.
However, if the initial amount is negative and the partial or full recovery of such amount may not be expected in the future,
the estimated loss is immediately reclassified to profit or loss.
Cash flow hedge reserves are retained until cash flows are generated even when the Group decides to discontinue hedge
accounting, provided that the future generation of cash flows from hedged accounts is expected. However, if the future
generation of such cash flows cannot be expected, cash flow hedge reserves are immediately reclassified to profit or loss.
(v) Fair Value of Financial Instruments
To determine the fair value of financial instruments being traded in active markets as of the reporting dates for each fiscal year, theGroup refers to quoted market prices. The fair value of financial instruments without active markets is calculated using appropriate
valuation models.
(6) Inventories
Inventories are stated at the lower of acquisition cost or net realizable value. Historical cost is calculated mainly based on the grossaverage method and includes purchase price, processing cost and all other expenses incurred in bringing such inventories to theirpresent location and state. Net realizable value is calculated by deducting the estimated cost of completion as well as relevant
variable selling expenses from selling prices estimated in the course of regular business operations.
(7) Property, Plant and Equipment
All property, plant and equipment is stated at acquisition cost less accumulated depreciation and accumulated impairment loss.
Acquisition cost includes any costs directly attributable to the acquisition of the assets, their dismantlement, removal and restoration
cost, as well as borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets.
Subsequent expenditures are included in the carrying amount of the asset or recognized as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item canbe measured reliably. The carrying amount of the replaced part is derecognized. Other expenses for maintenance and repair are
recognized as profit or loss as incurred.
The depreciation of assets other than land and construction in progress is calculated using the straight-line method over theirestimated useful lives.
The estimated useful lives of primary assets by category are as follows:• Building and structures:
2 to 60 years• Machinery, equipment and vehicles:
2 to 20 years• Tools, furniture and fixtures:
1 to 20 years
The depreciation methods, residual values and estimated useful lives are reviewed at the end of each fiscal year, and if any
changes are made, those changes are applied prospectively as a change in accounting estimates.
(8) Intangible Assets(i) Goodwill
Goodwill resulting from the acquisition of subsidiaries is stated as an intangible asset.
Matters regarding the measurement of goodwill as of the initial recognition are presented in “(2) Business Combinations.”
Goodwill is measured at the amount of acquisition cost less accumulated impairment loss. Goodwill is not amortized and is subject
to impairment testing. Matters regarding the impairment of such assets are presented in “(10) Impairment of Non-Financial Assets.”
The Group undertakes the initial recognition of intangible assets acquired through business combination and recognized as
separate from goodwill at fair value as of the date of acquisition. Except for those with indefinite useful lives, such assets areamortized using the straight-line method over their estimated useful lives.
(ii) Other Intangible Assets
Other intangible assets acquired on an individual basis are stated at acquisition cost less accumulated amortization and impairment
loss if their useful lives are definite. Such assets are amortized using the straight-line method over their estimated useful lives. The
value of intangible assets with indefinite useful lives is stated at acquisition cost less accumulated impairment loss.
The estimated useful lives of major intangible assets are as follows:• Customer-related assets:
5 to 20 years• Software:
3 to 5 years
The amortization methods, residual value and estimated useful lives are reviewed at the end of every fiscal year, and if any changes
are made, those changes are applied prospectively as a change in accounting estimates.

－ 12 －

(9) Leases
The Group decides whether a contract is a lease or includes a lease based on the definition of leases in IFRS 16. With regard
to all leases except for those for periods of 12 months or less and those with low-value underlying assets, the Group recognizes
right-of-use assets that grant rights to underlying assets and lease liabilities that include the obligation to pay the lease fees.
At the start of a lease, the Group recognizes the right-of-use assets at the discounted present value of the total lease payments
adjusted for direct acquisition costs and recognizes lease liabilities at the discounted present value of the total lease payments.
Ordinarily, the Group uses the incremental borrowing rate as the discount rate. Right-of-use assets are depreciated using thestraight-line method over the lease term.
Lease payments exclude the interest rates related to lease liabilities and are treated as a decrease in lease liabilities. Financial
expenses are presented separately from depreciation related to right-of-use assets in the consolidated statement of income.
Moreover, lease payments for leases with periods of 12 months or less and those with low-value underlying assets are recognized
as expenses in the consolidated statement of income using the straight-line method over the lease term.

expenditures expected to be required to settle the obligation after applying a discount rate (pre-tax rate) that reflects current market
assessments and risks specific to the liability. Increases due to passage of time are recognized as financial expenses.

(10) Impairment of Non-Financial Assets
Property, plant and equipment and intangible assets are reviewed for impairment whenever there is an indication that the carrying
amount of such assets may not be recoverable due to unforeseen events or changes in circumstance. The carrying amount of said
assets in excess of the recoverable amount is recognized as impairment loss. In addition, the recoverable amount is the higher offair value less selling cost or value in use.
The recoverable amount is calculated using assumptions formulated with reference to such important factors as future cash
flows based on a management-approved business plan and the weighted average cost of capital.
Although these assumptions have been determined based on management’s best estimation and judgment, the above factors
may possibly be affected by, for example, future economic uncertainties. If the revision of these assumptions becomes necessary,
the resulting impact on consolidated financial statements may be significant.
When assets are reviewed for impairment, they are grouped into minimum units (cash-generating units) in which individual
cash flows can be identified.
Intangible assets with indefinite useful lives and intangible assets that are not yet available for use are not subject to amortization.
The recoverable amount of such assets is estimated annually and is subject to impairment testing.
Goodwill is also subject to annual impairment testing, with its carrying amount representing acquisition costs less accumulated
impairment loss. To perform impairment testing, the Group allocates goodwill to individual cash-generating units or cash-generating
unit groups that are expected to bring benefits by creating synergies attributable to business combination.
As for property, plant and equipment and intangible assets (excluding goodwill) for which impairment has been recognizedpreviously, the Group evaluates the possibility of reversal of impairment at the end of each reporting period.

(i) Common shares
In terms of common shares, capital stock and capital surplus are stated at the issuance price.

(11) Non-Current Assets (or Disposal Group) Held for Sale
Of assets and asset groups whose value is expected to be recovered through sale and not through ongoing use, those that can besold immediately in present condition are classified as assets held for sale when plans call for completing the sale within one year
and the Group’s management is committed to executing the sale. Assets classified as such are measured at the lower of carrying
amount or fair value less selling cost.
(12) Employee Benefits(i) Short-Term Employee Benefits
Short-term employee benefits are not subject to discount and are recognized as expenses whenever relevant services have been
provided. Whenever a reliable estimation can be undertaken, bonuses and the cost of paid leave are recognized as liabilities basedon the estimated cost in accordance with the applicable schemes to which the Group has legal or constructive obligations.
(ii) Postretirement Benefit Plans
i. Defined Benefit Plans
The Company and some of its subsidiaries have adopted defined benefit plans. Assets and liabilities recognized in relation to
said plans are classified by individual plan, with their value being determined by deducting the fair value of plan assets from thepresent value of the defined benefit obligation at the end of reporting period. Defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit method. With the determination of the discount period based on theresidual term until the future payment date in each fiscal year, the discount rate applied is determined by reference to market
yields on high-quality corporate bonds at the end of the corresponding reporting period.
Actuarial differences resulting from adjustments based on performance and changes in actuarial assumptions are
immediately reclassified to retained earnings after recognizing them in other comprehensive income for the period in whichsuch differences were recorded.
Prior service costs are recognized as profit or loss for the period in which such costs were incurred.
ii. Defined Contribution Plans
The Company and some of its subsidiaries have adopted defined contribution plans. Upon payment, each defined contribution
is recognized as employee benefit cost since the retirement benefit cost of such plans entails no additional obligation. Suchcontribution is the sole expense associated with these plans.
(iii) Other Long-Term Employee Benefits
Liabilities due to long-term employee benefits (other than retirement benefits) are calculated by estimating the future amount for
benefits that employees will have earned as consideration for their services in the current and prior fiscal years and discounting
such amount in order to determine the present values.
(13) Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events; settlement is
expected to result in an outflow of resources embodying economic benefits; and the amount of obligation can be reliably estimated.
In cases where the effect of the time value of money is material, the amount of a provision is measured at the present value of－ 13 －(i) Provision for Loss on Voluntary Recall of ProductsThis item represents a reasonable estimate of loss to be incurred in subsequent fiscal years as a direct result of product recalls
and related expenses.
(ii) Asset Retirement Obligation
This item represents estimated expenses for returning leased offices and buildings to their original condition. The amount is
expected to be paid after the passage of one year or later and is affected by future business plans and other factors.
(14) Equity(ii) Treasury Stock
Treasury stock is evaluated at acquisition cost and deducted from equity. Proceeds or losses are not recognized at the time of thepurchase, sale or retirement. However, differences between the carrying amount and proceeds from sales are recognized as capitalsurplus.
(15) Revenue Recognition
Excluding interest and dividend revenue based on IFRS 9 “Financial Instruments,” the Group’s revenue recognition entails thefollowing five steps:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligation in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligation in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Sumitomo Rubber Group is engaged in the manufacture and sale of various products for the Tire Business, Sports Businessand Industrial and Other Products Business. Standards for revenue recognition for these main businesses are as follows. In addition,
as the Sumitomo Rubber Group receives payment within one year of completing delivery of products or services to customers, theagreed upon price does not include significant financing components.
Tire Business
The Tire Business provides customers in Japan and overseas with various tires for passenger cars, trucks, buses, motorcycles andmore. The main brands are Dunlop and Falken. When the products are transferred to the customers, the Group acknowledges thatit has fulfilled its contractual obligations and recognizes the revenue.
Sports Business
The Sports Business sells sports goods to customers in Japan and overseas and provides services related to golf tournaments,
golf and tennis schools, fitness clubs, and other similar businesses.
Regarding the sale of sports goods, the Group recognizes revenue when products are transferred to the customer, at which
point the Group has fulfilled its performance obligations.
Regarding golf tournament operations, the Group bears responsibility for providing tournament operation services to thetournament sponsors for the contracted period. Because these performance obligations are fulfilled when the services are provided,
the Group recognizes revenue at that time.
Regarding golf and tennis schools, the Group bears responsibility for providing lesson-related services to the members for thecontracted period. Because these performance obligations are fulfilled when the services are provided, the Group recognizes
revenue at that time. Regarding fitness clubs, the Group bears responsibility for providing services related to the use of its facilities
to its members for the contracted period. Because these performance obligations are fulfilled when the services are provided, theGroup recognizes revenue at that time.
Industrial and Other Products Business
The Industrial and Other Products Business provides customers in Japan and overseas with highly functional rubber products,
household goods, infrastructure-related products, and so on. When the products are transferred to customers, the Groupacknowledges that it has fulfilled its performance obligations and recognizes the revenue.
(16) Share-Based Payment Transactions
The Company has adopted a share-based compensation system, a form of equity-settled compensation that grants restricted
shares to directors (excluding outside directors).
The value of said compensation to be paid by the Company in exchange for services provided by recipients is measured using
the fair value of Company share as of the date of payment and, upon this measurement, is recognized as expenses and included
in profit or loss. The same amount is also recognized as an increase in capital stock.
(17) Government Grants
Recognition of eligibility for the receipt of government grants may be secured if conditions for the receipt of grants have been met
and reasonable guarantee for the receipt could be obtained. Grants for the acquisition of assets are recognized as revenues withregularity over the useful lives of the related assets, with unearned grant income being included in liabilities as deferred income.
With regard to grants for other business expenses, the amount of these grants is subtracted from relevant expenses for each fiscal
year in which said business expenses are recognized.

－ 14 －

(18) Income Taxes
Income tax expenses consist of current income taxes and deferred taxes. As such they are recognized as loss or profit, with the
exception of taxes on items recognized as other comprehensive income or taxes directly included in equity.
Income tax expenses are calculated using the statutory tax rates and tax laws enforced or substantially enforced at the end of
the fiscal year in countries where taxable income is generated from business activities undertaken by the Company and its
subsidiaries.
Deferred tax assets and liabilities are recognized using the asset and liability method on the basis of temporary differences
arising between the tax bases of said assets or liabilities and their carrying amount as presented in the consolidated financial
statements.
Like deductible temporary differences and tax loss carryforwards, deferred tax assets that can be utilized to reduce future tax
burden are recognized to the extent said assets are recoverable based on highly probable taxable income. Deferred tax liabilities,
on the other hand, are recognized for taxable temporary differences.
However, deferred tax assets and liabilities are not recognized for the following temporary differences.
• The initial recognition of goodwill• The initial recognition of assets or liabilities in relation to transactions (excluding business combinations) that affect neither
accounting profit or loss nor taxable income (tax loss carryforwards)• Taxable temporary differences arising from investments in subsidiaries or affiliates where the timing of the reversal of thetemporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in theforeseeable future
The carrying amount of deferred tax assets is reviewed annually. Such amount is reduced proportionately with the utilization ofdeferred tax assets, which may be partial or full depending on the sufficiency of taxable income. An unrecognized deferred tax
asset is reviewed every fiscal year and is recognized to the extent that it has become probable that future taxable profit will beavailable to allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured using the statutory tax rates and tax laws that will be enforced or substantiallyenforced by the end of the accounting period and applied to the period in which deferred tax assets are realized or deferred tax
liabilities are settled.
Deferred tax assets and liabilities are offset if the Company and its subsidiaries have a legally enforceable right to offset acurrent tax asset against a current tax liability and if the same taxation authority levies income taxes either on the same taxable
entity or on different taxable entities that intend to settle current tax assets and liabilities on a net basis.
(19) Dividends Paid
Dividends paid to owners of the parent comprise year-end and interim dividends, each of which requires the approval of a general
meeting of shareholders or the Board of Directors. These dividends are recognized as liabilities for the period in which such approval
was furnished.
(20) Earnings per Share
Basic earnings per share is calculated by dividing profit attributable to owners of the parent by the weighted-average number ofoutstanding common shares adjusted by number of treasury shares.

(21) Segment Information
An operating segment is the basic source of business activities that generate revenues and incur expenses, including throughtransactions with other operating segments. Discrete financial information is available for each of these segments and reviewed
regularly by the Board of Directors, which the Group has positioned as the highest body in charge of management decision making.
As such, the Board of Directors is responsible for making decisions about the allocation of resources and assessing performanceof each operating segment.

4. Important Accounting Estimates and Judgment
The preparation of the consolidated financial statements of the Group requires the establishment of accounting estimates andassumptions in order to disclose the amount of assets and liabilities as well as contingent liabilities as of the date of the closure of
the fiscal year, and to record revenues and expenses as of the same date. The Group establishes accounting estimates based onassumptions deemed most reasonable in light of historical records or each circumstance it is facing. However, actual results may
differ from such estimates and assumptions as they involve uncertainties.
On a regular basis, the Group reviews its accounting estimates as well as the assumptions that provide a basis for such
estimates. The impact of a revision to accounting estimates is recognized as part of operating results for the fiscal year in whichsuch revision takes place and subsequent fiscal years.
Of the items subject to the estimates, judgments and assumptions, the following have a significant impact on the amounts
stated in the consolidated financial statements for the fiscal year under review and subsequent fiscal years:• Impairment of intangible assets (Note 10. “Goodwill and Other Intangible Assets” and Note 11. “Impairment Loss”)• Accounting treatment and valuation of provisions (Note 16. “Provisions”)• Measurement of defined benefit obligation (Note 17. “Employee Benefits”)• Recoverability of deferred tax assets (Note 18. “Income Taxes”)• Measurement of fair value of financial instruments (Note 19. “Financial Instruments”)

5. Segment Information(1) Overview of the Reportable Segments
The reportable segments of the Sumitomo Rubber Group are the units for which separate financial information is available andperiodically reviewed by the Board of Directors, the highest decision-making body in charge of allocating management resourcesand evaluating business performance.
The Group has three divisions based on operations in Tires, Sports, and Industrial and Other Products. Each division
formulates comprehensive strategies for both domestic and overseas markets and develops business activities. Therefore, theCompany identifies “Tires,” “Sports” and “Industrial and other Products” as reportable segments. The main products, service andcontent of operations of these reportable segments are described below.
Reportable segments
Tires
SportsIndustrial and Other
Products

Main products, services and content of operations
Tires and tubes (for automobiles, construction machinery, industrial vehicles, racing and rally cars, motorcycles, etc.)
Automotive business (instant mobility systems, tire deflation warning systems, etc.)
Sports goods (golf clubs, golf balls and other golf-related goods, as well as tennis-related goods, etc.)
Operation of golf tournaments
Management of golf and tennis schools
Fitness club operations, etc.
Highly functional rubber products (vibration-control dampers, rubber parts for office equipment, rubber parts for medical
applications, etc.)
Daily life products (rubber gloves for food preparation and work, portable ramps for wheelchairs, etc.)
Infrastructure (marine fenders, various flooring materials for factories and sports facilities, etc.)(2) Reportable Segment Sales, Profit or Loss, and Other Material Items
Accounting treatment methods adopted by reportable segments are the same as those described in Note 3. “Material Accounting
Policies (21) Segment Information.”Intersegment sales and transfers are stated at wholesale prices based on current market values.
Figures for reportable segment profit or loss are based on business profit.
Information on reportable segments for the previous fiscal year and the fiscal year under review is as follows.

－ 15 －－ 16 －

(i) January 1, 2022 to December 31, 2022
Millions of yen

Tires

Sales to external customers
Intersegment sales and transfers
Total

Reportable segments
Industrial andSportsOther products¥939,941 ¥116,597
1,384

149

¥941,325 ¥116,746

Total¥42,126 ¥1,098,664

Adjustments(Note 2)

Consolidated
financialstatements¥—¥1,098,664

2,723(2,723)—¥43,316 ¥1,101,387¥(2,723)¥1,098,664¥29¥21,963

1,190(3) Products and Services Information
Revenue by products and services are not presented since the segmentation of products and services is the same as that forreportable segments.
(4) Geographic Information
The regional breakdown of sales to external customers and non-current assets by country and region is as follows.
(i) Sales to External Customers
Millions of yen
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

Japan

¥313,300¥347,394

Other income and expenses(6,975)

North America

247,142

263,463

Operating profit

14,988Europe183,921204,942

Asia

194,027

200,550

Other

160,274

161,050¥1,098,664¥1,177,399

As of Dec. 31, 2022

As of Dec. 31, 2023

Segment income (business profit) (Note 1)¥12,311¥8,943¥680¥21,934

Other important items
Depreciation and amortization

66,880

5,662

2,806

75,348—75,348

Impairment loss

3,435

154

548

4,137

—

4,137

Capital expenditures

70,028

2,921

1,780

74,729—74,729Notes: 1. Segment income (business profit) is calculated by deducting the total of cost of sales and selling, general and administrative expenses from sales
revenue.
2. Adjustments for segment income include the elimination of intersegment transactions.

(ii) January 1, 2023 to December 31, 2023

Tires

Intersegment sales and transfers
Total
Segment income (business profit) (Note 1)

Note: Breakdown is based on product destination.

(ii) Non-Current Assets
Millions of yen

JapanMillions of yen

Sales to external customers

Total

Reportable segments
Industrial andSportsOther products¥1,006,381 ¥126,647
1,449

152

¥1,007,830 ¥126,799¥63,572¥12,482

Total¥44,371 ¥1,177,399

Adjustments(Note 2)

Consolidated
financialstatements¥—¥1,177,399

2,889(2,889)—¥45,659 ¥1,180,288¥(2,889)¥1,177,399¥13¥77,670

1,288¥1,603¥77,657

Other income and expenses(13,180)

Operating profit

64,490¥215,196¥218,618

North America

47,94856,858Europe59,71456,776

Asia

117,450

121,908

Other
Total

Impairment loss
Capital expenditures

70,273

5,691

2,595

78,559—96—

11,303

11,399—11,39966,660

2,479

1,312

70,451—70,451(5) Information on Major Customers
The Group had no transactions with a single external customer amounting to 10% or more of total external revenue.

78,559Notes: 1. Segment income (business profit) is calculated by deducting the total of cost of sales and selling, general and administrative expenses from sales
revenue.
2. Adjustments for segment income include the elimination of intersegment transactions.

－ 17 －

79,480¥533,640

Note: Breakdown is based on the location of assets. The above figures exclude investments accounted for using equity method and other financial assets, aswell as net defined benefit assets and deferred tax assets.

Other important items
Depreciation and amortization

70,378¥510,686－ 18 －

6. Cash and Cash Equivalents

9. Property, Plant and Equipment

The breakdown of cash and cash equivalents is as follows.
Millions of yen

Cash and deposits
Time deposits with a maturity of over three months
Total

As of Dec. 31, 2022

As of Dec. 31, 2023

¥77,446¥91,754(3,600)(1,503)¥73,846¥90,251

Note: The value of cash and cash equivalents is identical in the consolidated statement of financial position and the consolidated statement of cash flows.

(1) Acquisition Cost, Changes in Accumulated Depreciation, Accumulated Impairment Loss and Carrying AmountThe acquisition cost of property, plant and equipment, changes in accumulated depreciation and accumulated impairment loss onsuch assets and their carrying amount are as follows.
(i) Acquisition Cost
Millions of yen

Balance as of January 1, 2022

Land

Buildings andstructures

Machinery,equipment
and vehicles

Tools,
furniture andfixtures¥41,822¥254,784¥652,113¥143,208

Construction Right-of-use
in progress
assets¥29,410

Total¥118,408¥1,239,745

7. Trade and Other Receivables

Hyperinflation adjustment

—

7,588

19,027

2,206

—

—

28,821The breakdown of trade and other receivables is as follows.

Individual acquisitions

—

858

497

973

64,802

14,38381,513
1,226

Millions of yen

Acquisition through business

As of Dec. 31, 2022

As of Dec. 31, 2023

Trade notes¥7,955¥6,476

Transfer from construction in progress

Electronically recorded monetary claims

17,214

18,693

DisposalAccounts receivable

177,440

182,901

Foreign currency translation

6,400

7,900

¥209,009¥215,970

Accrued accounts receivable
Total

combination

adjustments
Other

The breakdown of inventories is as follows.
Millions of yen——

11,752(45,111)

—

—

(133)

(2,272)(10,630)(7,340)(91)(15,666)(36,132)

983

10,09830,450

7,468

1,908

3,959

54,866109(3,705)(4,133)

(263)

(113)

(85)

¥718,997¥158,182

Hyperinflation adjustment

—

4,951

13,376

1,616

—

—

19,943

Individual acquisitions

36

629

422

1,014

58,89817,07578,074—

8,503

45,562

12,232(66,297)

—

—

(559)

(6,848)(7,987)

(513)

(395)

(611)

(16,913)(1,158)(3,895)(12,091)(9,298)(422)(7,423)(34,287)

795

5,129

16,079

5,429

2,709

5,518

35,659(968)(2,187)(4,376)

Transfer from construction in progress

Finished products¥182,588¥178,721

Transfer to assets for disposal groups

Work-in-progress

11,177

11,053classified as held for sale

89,736

72,682

Disposal¥283,501¥262,456

Note: The write-down of inventories recognized as expenses totaled 1,122 million yen and 2,358 million yen as of December 31, 2022 and December 31,
2023, respectively.

—

27,653¥276,499

As of Dec. 31, 2023

Total

—

5,706

(76)

As of Dec. 31, 2022

Raw materials and supplies——¥43,822

Balance as of December 31, 2022

8. Inventories

1,226

Foreign currency translation
adjustments
Other
Balance as of December 31, 2023

(1,342)

13

140

(32)

¥41,594¥284,981¥774,498¥168,630

Land

Buildings andstructures

Machinery,equipment
and vehicles

Tools,
furniture andfixtures¥(4,710)¥(158,862)¥(515,060) ¥(112,917)¥51,027 ¥117,379 ¥1,365,906¥44,552 ¥129,751 ¥1,444,006(ii) Accumulated Depreciation and Accumulated Impairment Loss
Millions of yen

Balance as of January 1, 2022

Right-of-use
assetsTotal¥(665) ¥(57,736)¥(849,950)

Hyperinflation adjustment

—

(754)

(8,567)

(824)

—

—

(10,145)

Depreciation—(7,532)(35,108)(11,856)—(14,924)(69,420)

(972)

(720)

(398)

(64)

(64)

(23)

(2,241)

Disposal

28

1,970

9,921

6,740

5

14,07732,741

Foreign currency translation adjustments(68)(5,325)(22,587)(5,985)(55)(2,425)(36,445)

Other

—

236

(357)

75

—

5,907

5,861

Impairment loss

Balance as of December 31, 2022¥(5,722)¥(170,987) ¥(572,156) ¥(124,831)¥(779) ¥(55,124) ¥(929,599)

Hyperinflation adjustment

—

(602)

(7,149)

(709)

—

—

(8,460)Depreciation—(7,829)(36,049)(12,213)—(15,921)(72,012)(539)(4,666)(2,489)

(121)

(380)

(25)

(8,220)16,913

Impairment loss
Transfer to assets for disposal groups

559

6,848

7,987

513

395

611

Disposal

773

3,778

11,156

8,699

337

7,276

32,019Foreign currency translation adjustments(134)(3,915)(14,603)(4,634)(55)(3,129)(26,470)

—

(11)

(205)

34

—

3,626

3,444

classified as held for sale

Other
Balance as of December 31, 2023

－ 19 －

Constructionin progress¥(5,063) ¥(177,384) ¥(613,508) ¥(133,262)－ 20 －¥(482) ¥(62,686) ¥(992,385)

10. Goodwill and Other Intangible Assets(iii) Carrying AmountMillions of yen

Balance as of January 1, 2022

Land

Buildings andstructures

Machinery,equipment
and vehicles¥37,112¥95,922¥137,053

Tools,
furniture andfixtures

Constructionin progress

use assets

Total¥30,291¥28,745¥60,672¥389,795

Right-of-

Balance as of December 31, 2022

¥38,100¥105,512¥146,841¥33,351¥50,248¥62,255¥436,307

Balance as of December 31, 2023

¥36,531¥107,597¥160,990¥35,368¥44,070¥67,065¥451,621

Notes: 1. No material borrowings are included in acquisition cost of property, plant and equipment.
2. Depreciation of property, plant and equipment is included in “cost of sales” and “selling, general and administrative expenses” presented in the
consolidated statement of income.

(2) Right-of-Use Assets
The breakdown of right-of-use assets is as follows.

(1) Acquisition Cost, Changes in Accumulated Amortization, Accumulated Impairment Loss and Carrying AmountThe acquisition cost of goodwill and other intangible assets, changes in accumulated amortization and accumulated impairment
loss on such assets and their carrying amount are as follows.
(i) Acquisition Cost
Millions of yen
Customer-

Balance as of January 1, 2022
Hyperinflation adjustment
Individual acquisitions
DisposalMillions of yen
As of Dec. 31, 2022

As of Dec. 31, 2023

¥50,510¥54,785

Machinery, equipment and vehicles

4,822

5,243

Tools, furniture and fixtures

1,088

957

Buildings and structures

Land
Total

5,835

6,080

¥62,255¥67,065(3) Impairment Loss
Based on management accounting categories, the Group’s assets subject to review for impairment are generally grouped intominimum units in which individual cash flows can be identified.
However, important assets in the following categories are grouped by property when the Group schedules the disposal of rental
assets, idle assets that are not expected to be used, and assets earmarked for disposal or subject to business termination based
upon decisions made by such bodies as the Board of Directors or Management Committee. The breakdown of impairment loss
recorded in the fiscal years ended December 31, 2022 and December 31, 2023 is as follows.

Foreign currency translation adjustments
Other
Balance as of December 31, 2022

Idle assets
AssetsTire businessearmarked for

Industrial and Other
Products

disposalBusiness assets

As of Dec. 31, 2022

Goodwill

related assets

rightsSoftware

OthersassetsTotal¥19,942¥19,772¥26,618¥2,293¥494¥111,518

—

—

—

198

—

—

198

1,081

485

3

7,561

27

141

9,298

—

—

(105)

(4,575)

(77)

(236)

(4,993)

2,348

1,049

93

792

97

1

4,380

—

—

—

238

(105)

—

133

¥45,828¥21,476¥19,763¥30,832¥2,235¥400¥120,534

Hyperinflation adjustment

—

—

—

143

—

—

143

Individual acquisitions

77

45

—

9,311

97

3

9,533

—

—

—

(168)

—

—

(168)

Transfer to assets for disposal groups
classified as held for sale
Disposal
Foreign currency translation adjustments
Other
Balance as of December 31, 2023

—

—

(9)

(2,892)

(28)

(60)

(2,989)

4,643

2,589

397

565

56

1

8,251

—

—

—

16

(1)

(44)

(29)

¥50,548¥24,110¥20,151¥37,807¥2,359¥300¥135,275

As of Dec. 31, 2023
¥111

¥0

1,325

—

—

8,124

Tire business

651

96

Sports Business

154—¥2,241¥8,220Total－ 21 －

Right-of-use¥42,399

Millions of yen

Segment
Tire business

Use

Trademark－ 22 －

(ii) Accumulated Amortization and Accumulated Impairment Loss
Millions of yen

Balance as of January 1, 2022

Customer-TrademarkGoodwill related assets

rightsSoftware

OthersRight-of-use
assetsTotal¥(42,437)

Material amounts of the cash-generating unit or group containing the aforementioned goodwill and intangible assets with indefinite
useful lives are related to Micheldever Group Ltd. and Dunlop (the entire group of cash-generating units in the tire segment). Their
carrying amounts are as follows.

¥(16,112)¥(8,309)¥(1,527)¥(14,563)¥(1,564)¥(362)

Hyperinflation adjustment

—

—

—

(144)

—

—

(144)

Amortization—(1,115)(268)(4,385)

(86)

(74)

(5,928)Micheldever Group Ltd.

(1,709)

(187)

—

—

0

—

(1,896)

Dunlop (the entire group of cash-generating units in the tire segment)

—

—

105

4,572

41

236

4,954

(1,595)

(453)

(2)

(576)

(71)

(1)

(2,698)

—

—

—

(140)

86

—

(54)
¥(48,203)

Impairment loss
Disposal
Foreign currency translation adjustments
Other
Balance as of December 31, 2022¥(19,416)¥(10,064)¥(1,692)¥(15,236)¥(1,594)¥(201)

Hyperinflation adjustment

—

—

—

(99)

—

—

(99)

Amortization—(1,231)—(5,143)

(37)

(63)

(6,474)

Impairment loss

—

—

—

(38)

—

—

(38)

—

—

—

168

—

—

168

—

—

9

2,798

18

60

2,885

(1,428)(1,465)

(2)

(448)

(48)

(1)

(3,392)

—

—

—

(96)

9

1

(86)

¥(20,844)¥(12,760)¥(1,685)¥(18,094)¥(1,652)¥(204)¥(55,239)

Transfer to assets for disposal groups
classified as held for sale
Disposal
Foreign currency translation adjustments
Other
Balance as of December 31, 2023(iii) Carrying AmountMillions of yen
Customer-

Balance as of January 1, 2022

Trademark

Right-of-use

Goodwill

related assets

rightsSoftware

OthersassetsTotal¥26,287¥11,633¥18,245¥12,055

¥729

¥132

¥69,081

Balance as of December 31, 2022

¥26,412¥11,412¥18,071¥15,596

¥641

¥199

¥72,331

Balance as of December 31, 2023

¥29,704¥11,350¥18,466¥19,713¥707¥96¥80,036

Notes: 1. No material borrowings are included in acquisition cost of intangible assets.
2. Amortization of intangible assets is included in “cost of sales” and “selling, general and administrative expenses” presented in the consolidated
statement of income.
3. Research and development costs recognized as expenses for the fiscal years ended December 31, 2022 and 2023, totaled 27,259 million yen and
27,340 million yen, respectively.

(2) Right-of-Use Assets
The breakdown of right-of-use assets is as follows.
Millions of yen

Software

As of Dec. 31, 2022

As of Dec. 31, 2023

¥199

¥96

(3) Intangible Assets with Indefinite Useful Lives
Of the aforementioned intangible assets excluding goodwill, those intangible assets with indefinite useful lives for the fiscal years
ended December 31, 2022 and 2023 totaled 18,227 million yen and 18,622 million yen, respectively. Trademark rights acquired
through business combinations constitute the majority of said assets, and, because they will exist for as long as the business lasts,
their useful lives cannot be determined.
(4) Impairment Test of Goodwill and Intangible Assets with Indefinite Useful Lives
The carrying amount of goodwill and intangible assets with indefinite useful lives allocated to each cash-generating unit or group
thereof is as follows.
Millions of yen
As of Dec. 31, 2022
Intangible
assets withindefinite
Goodwill
useful lives

As of Dec. 31, 2023
Intangible
assets withindefinite
Goodwill
useful lives

Tires¥23,501¥18,227¥26,793¥18,622

Sports

2,911

—

2,911

—

Industrial and Other Products
Total－ 23 －————¥26,412¥18,227¥29,704¥18,622

Millions of yen
As of Dec. 31, 2023
Intangible
assets withindefinite
Goodwill
useful lives

As of Dec. 31, 2022
Intangible
assets withindefinite
Goodwill
useful lives¥20,052¥3,056¥22,875¥3,451

2,905

13,862

3,280

13,862Micheldever Group Ltd.
The recoverable amount of Micheldever Group Ltd.’s goodwill and intangible assets with indefinite useful lives is calculated basedon fair value, excluding disposal costs. Said value is the present value of future cash flows calculated under the business plan fora period of up to 4 years (5 years in the previous fiscal year), a management-approved formula that incorporates past experienceand external input, with the discount rate set at the pre-tax weighted average cost of capital (WACC). This is classified as “Level 3”
within the fair value hierarchy.
In the fiscal year ended December 31, 2023, the pre-tax WACC was 11.5% (11.8% in the previous fiscal year). For the growthrate used in estimates of the continued value beyond the period of the plan, the Group uses 2.0% (2.0% in the previous fiscal year)
in consideration of the United Kingdom’s long-term growth rate forecasts.
In the fiscal year ended December 31, 2023, the recoverable amount exceeded the carrying amount of Micheldever Group Ltd.
and its subsidiaries by 4,361 million yen, but if the pre-tax WACC were to increase by 0.8% or the growth rate decrease by 1.0%,
the recoverable amount and carrying amount would be equal. Impairment losses may be recorded if there are changes in key
assumptions used to calculate the recoverable amount (fair value less selling cost), such as the outcomes of sales promotion
activities, store facility acquisitions, and other future undertakings aimed at sales expansion, as well as WACC. While future cash
flows used to measure fair value are estimated based on business plans approved by management, key assumptions such as theoutcomes of sales promotion activities, store facility acquisitions, and other future undertakings aimed at sales expansion involve
uncertainties. Accordingly, estimates of future cash flows may be materially affected by management judgment.
Dunlop (the entire group of cash-generating units in the tire segment)
The synergy and brand benefits that arise from the acquisition of goodwill and intangible assets with indefinite useful lives, whicharose from the acquisition of Dunlop International 1902 Ltd. and its subsidiaries, will be generated from the entire group of cashgenerating units in the tire segment. Therefore, in the impairment test, said goodwill and intangible assets with indefinite useful
lives are allocated to the entirety of the aforementioned group of cash-generating units.
The recoverable value of said cash-generating units is calculated based on value in use. Value in use is the present value of
future cash flows calculated under the business plan for a period of up to 4 years (5 years in the previous fiscal year), a
management-approved formula that incorporates past experience and external input, with the discount rate set at the pre-tax WACC.
In the fiscal year ended December 31, 2023, the pre-tax WACC was 11.4% (10.1% in the previous fiscal year). For the growthrate used in estimates of the continued value beyond the period of the plan, the Group uses 2.1% (1.9% in the previous fiscal year)
in consideration of each country’s long-term growth rate forecasts.
The value in use is higher than the carrying amount of said cash-generating units. Even if there are fluctuations within areasonable range regarding the growth rates and the pre-tax WACC used to calculate value in use, the value in use is unlikely tofall below the carrying amount.
(5) Impairment Loss
In the fiscal year ended December 31, 2022, the Group recorded impairment losses associated with goodwill from the operationsof Micheldever Group Ltd. and the medical-grade rubber products business of LAG. More details on impairment losses are provided
in Note 11. “Impairment Loss.”
In the fiscal year ended December 31, 2023, the Group did not recognize an impairment loss of goodwill or intangible assets
with indefinite useful lives.

11. Impairment Loss
Fiscal Year Ended December 31, 2022
In the fiscal year ended December 31, 2022, the Group recorded an impairment loss of 4,137 million yen in other expenses in the
consolidated statement of income. The main content of the impairment loss classified by asset type is as follows.
Millions of yen

Segment
Tire BusinessIndustrial and Other
Businesses

Cash-Generating Unit
Micheldever Group Ltd.
Assets earmarked for disposal(Akashi City, Hyogo Prefecture)
LAG

Type
Goodwill

Amount¥1,348Property, plant and equipment

1,270

Goodwill
Intangible assets

361

Total

¥548

187

With regard to Micheldever Group Ltd., the Group wrote down the carrying amount of assets listed above to the recoverable value
as the latter fell short of the former due to a rise in the WACC, the revision of the business plan and other factors. The amount of
the decrease was recorded as other expenses in the consolidated statement of income. The recoverable value is 49,162 million
yen and is calculated using the fair value (classified as “Level 3” within the fair value hierarchy). In this calculation, the Group uses

－ 24 －

12. Leases

a pre-tax WACC of 11.8% and a growth rate of 2.0% to estimate the continuing value beyond the period of the plan.
As part of assets earmarked for disposal in accordance with decisions made by the Board of Directors, the Management Meetingor other bodies, the carrying amount of the assets (Akashi City, Hyogo Prefecture) listed above was written down to the recoverable
value in light of the recent decline in the market value of such asset groups. The recoverable value is calculated using the fair value(classified as “Level 3” within the fair value hierarchy) based on planned sales price and other factors. The amount of the decrease
was recorded as other expenses in the consolidated statement of income.
As for LAG’s medical-grade rubber products business, the Group revised its business plan due to a delay in attaining profitability
in tandem with a delay in the marketing plan. As a result, the Group determined that a longer period was required to recover theentire investment and wrote down the carrying amount of relevant assets to the recoverable value. The amount of the decrease
was recorded as other expenses in the consolidated statement of income. The recoverable value is 11,122 million yen and is
calculated using value in use. In this calculation, the Group uses a pre-tax WACC of 13.2% and a growth rate of 1.0% to estimate
the continuing value beyond the period of the plan.
Fiscal Year Ended December 31, 2023
In the fiscal year ended December 31, 2023, the Group recorded an impairment loss of 11,399 million yen in other expenses in the
consolidated statement of income. The main content of the impairment loss classified by asset type is as follows.

(1) Profit and Loss Related to Right-of-Use Assets
Profit and loss related to right-of-use assets are as follows.
Millions of yen
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

Depreciation of right-of-use assets
Land
Buildings and structures
Machinery, equipment and vehicles
Tools, furniture and fixtures
SoftwareTotal depreciation
Interest paid related to lease liabilities
Expenses related to short-term leases
Expenses related to low-value-asset leases
Total lease expenses¥490
11,5862,334
514
74¥14,998¥1,191
2,981
456¥19,626¥488
12,5782,382
473
63¥15,984¥1,5992,560
453¥20,596

Cash outflow related to leases¥18,066¥21,459

Millions of yen

Segment

Cash-Generating Unit

Industrial and Other
Businesses

LAG/LSI

Type
Property, plant and equipment

Amount¥8,124

Other

3,179

Total

¥11,303

As part of business restructuring, the Company transferred all shares it holds in subsidiary LAG to NCM Investments VII B.V., asubsidiary of private equity fund Nimbus Investment Fund V Coöperatief U.A. operated by Nimbus, an investment fund company
headquartered in the Netherlands. The transfer was completed on January 31, 2024 after the resolution and conclusion of a sharetransfer agreement for the share transfer at the Board of Directors meeting held on December 20, 2023. As a result of this sharetransfer, LSI, a wholly owned subsidiary of LAG that manufactures medical rubber products in Slovenia, will also no longer be a
subsidiary of the Company.
Accordingly, the carrying amount of the manufacturing equipment, etc. of LAG and LSI was written down to the recoverable
value calculated using the fair value (classified as “Level 3” within the fair value hierarchy) based on the planned sale price andother factors. An impairment loss of 11,303 million yen was recorded in “Other expenses.”Please note that the Group does not have lease contracts with variable lease payments.
(2) Extension and Termination Options
Because each Group company bears responsibility for managing its own leases, the conditions of leases are negotiated separately
and can differ greatly.
Extension and termination options are often included in leases related to the Group's real estate and facilities. These conditions
are used to maximize flexibility in operation from the perspective of contract management.
Most options are extension options that span one year or the same period as the underlying contract or options for earlytermination following advanced written notification from one party of six months to one year.
These options are used as needed for the lease contract party to utilize real estate and facilities for business.
(3) Change in Right-of-Use Assets
Change in right-of-use assets is detailed in Note 9. “Property, Plant and Equipment” and Note 10. “Goodwill and Other Intangible
Assets.”(4) Breakdown of Carrying Amount of Right-of-Use Assets
A breakdown of the carrying amount of right-of-use assets is detailed in Note 9. “Property, Plant and Equipment” and Note 10.
“Goodwill and Other Intangible Assets.”(5) Analysis of Lease Liability Maturation Periods
An analysis of lease liability maturation periods is detailed in Note 19. “Financial Instruments (2) Financial Risk Management (ii)
Liquidity Risk.”－ 25 －－ 26 －

13. Investments Accounted for Using Equity Method

16. Provisions

The carrying amount of investments in individually insignificant affiliates is as follows.
Millions of yen
As of Dec. 31, 2022

As of Dec. 31, 2023

¥4,462¥4,486

Carrying amountMillions of yen
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥73

¥27

The Group’s share of profit
The Group’s share of other comprehensive income
The Group’s share of comprehensive income

—

—

¥73

¥27

14. Trade and Other Payables
The breakdown of trade and other payables is as follows.
Millions of yen
As of Dec. 31, 2022

As of Dec. 31, 2023

Notes payable—trade

¥995

¥796

Electronically recorded monetary obligations

6,792

8,188

Accounts payable—trade103,331

101,169

Accounts payable—other49,386

48,623

Refund liabilities

15,647

17,068

Total¥176,151¥175,844

15. Bonds and Loans Payable
The breakdown of bonds and loans payable is as follows.
Millions of yen

¥866

¥818

Other

433

1,417

Total

¥1,299¥2,235

Non-current liabilities
Provision for loss on voluntary recall of products

¥231

—

Asset retirement obligation

1,418

1,423

Other

5

8

Total

¥1,654¥1,431(2) Changes in Provisions
The changes in provisions are as follows.
Millions of yen
Jan. 1 to Dec. 31, 2023

Beginning balance

Provision forloss onvoluntary
recall of
products

Assetretirement
obligation

OthersTotal¥1,097¥1,418¥438¥2,953

Increase during the year
Decrease resulting from settlement

345

27

1,194

1,566

(582)

(35)

(160)

(777)

Decrease due to reversal

(42)

—

(80)

(122)

Increase due to passage of time

—

10

—

10

Currency translation differences of foreign operations

—

3

33

36

¥818

¥1,423¥1,425¥3,666

Average interest
rate (%)

Maturity¥64,099¥26,212

7.06—

Note: Descriptions of each item are presented in Note 3. “Material Accounting Policies” (13) “Provisions.”

—

9,997

—

36,79625,0000.23—

17. Employee Benefits

100,895

61,209——(1) Outline of Retirement Benefit Plans
The Company and its subsidiaries have a corporate pension plan and a retirement lump-sum plan in place as defined benefit plans.
In addition, the Company and some of its subsidiaries maintain defined contribution plans. Of those plans, the corporate pension
plan is a defined benefit plan designed to share the burden of risk among the Company and its domestic subsidiaries under theCompany’s control. The amount of defined benefit costs borne by each company enrolling in the plan is determined based on theassessment of that company’s service costs for individual employees during a fiscal year. Net interest expenses are also borne byeach company enrolling in a plan; based on the assessment of retirement benefit obligation for individual employees, each company
is allocated a portion of the value of total plan assets, subject to discount rates.
Some consolidated subsidiaries maintain a defined benefit contribution plan. And the Company has established a retirement
benefit trust for defined benefit plans. Moreover, additional retirement benefits are paid to some retiring employees.

Bonds payable (maturities of 1 year or less)Long-term debt (maturities of 1 year or less)
Subtotal
Non-current liabilities
Bonds payable (maturities of over 1 year)

34,86824,891—2027–2032

Long-term debt (maturities of over 1 year)

176,039

159,275

0.47

2025–2032

Subtotal

210,907

184,166

—

—

Total

¥311,802¥245,375——

Notes: 1. Average interest rates are stated at the weighted average interest rates as of December 31, 2021, for the balance of loans outstanding.
2. The summary of issuance conditions for bonds payable is as follows.
Millions of yen

24th series of
unsecured bonds
25th series of
unsecured bonds
26th series of
unsecured bonds

Provision for loss on voluntary recall of products

As of Dec. 31, 2023

Short-term loans payable

Sumitomo Rubber
Industries, Ltd.
Sumitomo Rubber
Industries, Ltd.
Sumitomo Rubber
Industries, Ltd.

As of Dec. 31, 2023

As of Dec. 31, 2022

Current liabilities

Issuance

As ofDec. 31, 2022

Jun. 25, 2014

¥9,992¥9,9970.76

NoneJun. 20, 2017

9,979

9,983

0.34

None

Sep. 30, 2022

14,897

14,9080.65

None¥34,868¥34,888—¥—¥9,997—34,86824,891—

SeriesMillions of yen
As of Dec. 31, 2022

Current liabilities

The financial information of investments in individually insignificant affiliates is as follows.

Company name(1) Breakdown of Provisions
The breakdown of provisions is as follows.

Total
Bonds payable with maturities of 1 year or less
Bonds payable with maturities over 1 year

－ 27 －

As of Interest rate
Dec. 31, 2023(%)

Collateral

MaturityJun. 25,
2024
Jun. 18,
2027
Sep. 30,
2032

Ending balance(2) Defined Benefit Plans(i) The value of defined benefit plans presented in the consolidated statement of financial position is as follows.
Millions of yen
As of Dec. 31, 2022

As of Dec. 31, 2023

Present value of defined benefit obligation¥113,803¥115,537

Fair value of plan assets(131,369)(145,984)¥(17,566)¥(30,447)

Net defined benefit liabilities¥21,333¥23,027

Net defined benefit assets

38,89953,474

Total
Value of assets and liabilities presented in consolidated statement offinancial position－ 28 －

(ii) The following amount is recognized as expenses presented in the consolidated statement of income.

(vii) The sensitivity analysis of defined benefit obligation against changes in assumed weighted average is as follows.
Millions of yen

Service costs for the year
Net interest expense
Total

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥2,626¥3,530(588)

57¥2,038¥3,587Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023(iii) Changes in defined benefit obligation are as follows.
Millions of yen

Beginning balance¥132,654¥113,803

Service costs for the year

2,626

3,530

Interest expense

1,433

3,723

Remeasurements due to:
Actuarial differences attributable to changes in demographic assumptions

(600)

(24)

Actuarial differences attributable to changes in financial assumptions(21,268)

1,135

Actuarial differences attributable to adjustment of investment performance(1,027)(179)

Wages paid

(9,338)(8,259)Others

9,323

1,808

¥113,803¥115,537

Ending balance(iv) Changes in the fair value of plan assets are as follows.

Millions of yen

0.25% increase in discount rate

As of Dec. 31, 2022

As of Dec. 31, 2023¥(2,614)¥(2,602)

0.25% decrease in discount rate
¥2,750¥2,716
The abovementioned sensitivity analysis was performed by changing one assumption, with all other assumptions remaining fixed.
In actual circumstances, however, multiple interrelated assumptions may change simultaneously. In calculating the sensitivity ofthe defined benefit obligation to changes in significant actuarial assumptions, the Group applies the same method as the method
it uses to calculate defined benefit liabilities recognized in the consolidated statement of financial position: measuring the present
value of defined benefit obligation as of the closing date of reporting period using the projected unit credit method.
(viii) Impact of defined benefit plans on future cash flows
i. The Group adopted a policy of satisfying legal requirements pertaining to funds as well as rules for securing funds that affectcontributions in the future, thereby ensuring its responsiveness to structural risk associated with benefit liabilities.
ii. Contributions in the fiscal year ending December 31, 2024 is estimated to be 1,970 million yen.
iii. The weighted-average duration of defined benefit obligation is 10.0 years and 9.8 years, respectively, for the fiscal years
ended December 31, 2022 and 2023.
(3) Defined Contribution Plans
Costs recognized in relation with defined contribution plans are as follows.
Millions of yen
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥1,840¥1,945Retirement benefit costs
The above figure includes expenses recognized in relation to public pension systems.

Millions of yen

Beginning balance
Interest income

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥150,695¥131,369

2,021

3,666

(24,685)

13,758Remeasurements due to:
Income from plan assets (excluding interest income)Contributions by employer

2,196

2,157

Benefits paid

(7,706)(6,523)

OthersEnding balance

8,848

1,557

¥131,369¥145,984(4) Other Expenses in Relation to Employee Benefits
Expenses associated with employee benefits other than retirement benefits include the following item.
Millions of yen

Employee benefit costs(v) The fair value of plan assets by component is as follows.
Millions of yen
Traded at quoted market
prices in active markets

As of Dec. 31, 2022
Not traded at quoted market
prices in active markets

Traded at quoted market
prices in active markets

As of Dec. 31, 2023
Not traded at quoted market
prices in active markets

Domestic stocks¥27,458¥—¥37,993¥—

Overseas stocks

11,298—13,446—

Domestic bonds

11,581—

11,535—

Overseas bonds

59,303—60,200——11,832—

11,908General account of life insurance
Others
Total

8,545

1,352

8,896

2,006

¥118,185¥13,184¥132,070¥13,914(vi) Primary actuarial assumptions are as follows.
Discount rate

As of Dec. 31, 2022

As of Dec. 31, 2023

3.42%

3.40%

Other than the above, actuarial assumptions include an assumed wage increase rate, a mortality rate and an employee turnoverrate.

－ 29 －－ 30 －

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥184,286¥192,979

18. Income Taxes

Millions of yen(1) Deferred Taxes
The breakdown of deferred tax assets and liabilities is as follows.
Millions of yen

Deferred tax assets
Tax loss carryforwards
Financial liabilities measured
at fair value through profit or
loss
Financial liabilities measured
at fair value through othercomprehensive income
Inventories
Property, plant and equipment
Intangible assets
Net defined benefit liability
Accrued expenses, provisions
and repaid liabilities
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured atfair value through othercomprehensive income
Property, plant and equipment
Inventories
Intangible assets
Undistributed profit ofoverseas subsidiaries
Net defined benefit assets
Other
Total deferred tax liabilities
Net deferred tax assets(liabilities)

As ofJan. 1, 2022

Adjustment due toapplication of
IAS 12

As ofJan. 1, 2022
after adjustment

Recognizedthrough profit orloss (Note)

Recognizedthrough othercomprehensive
incomeAs ofDec. 31, 2022

¥2,350¥—¥2,350¥7,517¥—¥9,867

4,716

—

4,716

368

—

5,084

3

—

3

—

(3)

0

5,811
5,883
995
3,901

—
11,825149—

5,811
17,708
1,144
3,901

2,254
1,686
(257)
214

—
—
—
(515)

8,065
19,394
887
3,600

8,831

—

8,831

509

—

9,340

3,216

—

3,216

(432)

116

2,900

¥35,706¥11,974¥47,680¥11,859¥(402)¥59,137¥(5,237)¥—¥(5,237)¥—¥200¥(5,037)(7,004)(880)(4,048)(11,825)—(149)(18,829)(880)(4,197)(2,725)
(661)
(316)

—
—
—

(21,554)(1,541)(4,513)(10,517)—(10,517)574—(9,943)(8,851)(621)——(8,851)
(621)

(150)
204

1,132
—

(7,869)(417)¥(37,158)¥(11,974)¥(49,132)¥(3,074)¥1,332¥(50,874)¥(1,452)—¥(1,452)¥8,785¥930¥8,263

Note: Exchange differences are included in amounts recognized through profit or loss.

Deferred tax assets
Tax loss carryforwards
Financial liabilities measured at fair value
through profit or loss
Financial liabilities measured at fair value
through other comprehensive income
Inventories
Property, plant and equipment
Intangible assets
Net defined benefit liability
Accrued expenses, provisions and repaid
liabilities
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Property, plant and equipment
Inventories
Intangible assets
Undistributed profit of overseas
subsidiaries
Net defined benefit assets
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

As ofJan. 1, 2023

Recognized throughprofit or loss (Note)

Recognized throughother comprehensive
incomeAs ofDec. 31, 2023

¥9,867¥(4,037)¥—¥5,830

5,084

2,044

—

7,128

0

—

0

0

8,065
19,394
887
3,600

5,318
1,483
138
102

—
—
—
173

13,383
20,877
1,025
3,875

9,340

966

—

10,306

2,900

872

(169)

3,603

¥59,137¥6,886¥4¥66,027¥(5,037)¥—¥129¥(4,908)(21,554)(1,541)(4,513)(4,256)
1,162
(709)

—
—
—

(25,810)(379)(5,222)(9,943)(1,655)—(11,598)(7,869)
(417)

80
(446)

(4,303)(17)(12,092)(880)¥(50,874)¥(5,824)¥(4,191)¥(60,889)¥8,263¥1,062¥(4,187)¥5,138

Note: Exchange differences are included in amounts recognized through profit or loss.

The Group evaluates the recoverability of deferred tax assets on an annual basis. The recognition of such assets takes into accountsignificant uncertainties with regard to the recoverability of deferred tax assets held by the Group.
Deductible temporary differences and tax loss carryforwards for which deferred tax assets are not recognized were as follows.
Millions of yen
As of Dec. 31, 2022

As of Dec. 31, 2023

Tax loss carryforwards (Note)¥38,603¥50,300

Deductible temporary differences

14,737

12,783¥53,340¥63,083

As of Dec. 31, 2022

As of Dec. 31, 2023

Total
Note: The expiration of tax loss carryforwards for which deferred tax assets were not recognized was as follows.

Millions of yen

1st year

¥960

¥59

2nd year

542

1,214

3rd year

1,898

2,642

4th year

3,910

3,368

5th year onwards

31,29343,017¥38,603¥50,300

Total

The Company recognized no deferred tax liability in respect to temporary differences where the timing of a reversal, under theGroup’s control, is improbable in the foreseeable future. The aggregate amounts of temporary differences associated withinvestments in subsidiaries and affiliates for which deferred tax liability was not recognized were 66,912 million yen and 92,652
million yen as of December 31, 2022 and December 31, 2023, respectively.

－ 31 －－ 32 －

19. Financial Instruments(2) Income Tax Expenses
The breakdown of income tax expenses is as follows.
Millions of yen
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

Current tax expenses¥17,767¥26,965

Deferred tax expenses(7,684)(2,726)

Total¥10,083¥24,239
Current tax expenses include the benefits arising from previously unrecognized tax loss, tax credits and temporary differences ofprior periods. The resulting declines in current tax expenses in the fiscal years ended December 31, 2022 and 2023 were 217
million yen and 683 million yen, respectively.
Deferred tax expenses include the benefits arising from previously unrecognized tax loss, tax credits and temporary differencesof prior periods. In the fiscal years ended December 31, 2022 and December 31, 2023, these factors caused no such reduction in
the amount of deferred tax expenses.
Primary factors contributing to differences between the applicable tax rate and the average effective tax rate are as follows.
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

30.6%

30.6%

Changes in unrecognized deferred tax assets

10.6%

6.5%

Foreign withholding taxes

12.4%

3.1%

Undistributed profit of overseas subsidiaries(2.5%)

2.6%

Dividend income

2.1%

1.4%

Non-deductible expenses for tax purposes

1.5%

0.5%

Foreign taxes

4.4%

—%

Impairment loss on goodwill

1.4%

—%

(12.2%)(1.3%)—%(2.3%)Tax exemption for overseas subsidiaries(4.0%)(3.4%)

Other

0.4%

0.9%

Average effective tax rate

44.7%

38.6%

Applicable tax rate
Adjustments

Differences in tax rates applied to consolidated subsidiaries
Tax credits for research and development costs(1) Capital Management
Aiming to secure the soundness and efficiency of its business operations and realize sustainable growth, the Group has positioned
the establishment and maintenance of a stable financial position as its basic capital management policy. Guided by this policy, theGroup utilizes cash flows from operating activities, such as funds provided by the development and sale of competitive products,
to execute investments for business expansion, provide shareholder returns through the payment of dividends, secure loans andrepay debt.
(2) Financial Risk Management
The Group’s business activities can be affected by changes in the operating environment and financial markets. Therefore, financial
instruments held or underwritten by the Group in the course of its business activities may be exposed to specific risks. These risks
include 1) credit risk; 2) liquidity risk; and 3) market risk (foreign exchange risk, stock price risk and interest rate risk).
(i) Credit Risk
The Group is exposed to the risk of being unable to recover financial assets that are held by a partner if that partner defaults on
debt (hereinafter “credit risk”). For operating receivables and other receivables, the Group has a system in place to assess theability of each counterpart to fulfill their payments on time and to promptly detect whether the financial position of a counterpart isdeteriorating. The Group also mitigates credit risk from operating receivables by having marketing departments at each businessdivision monitor the status of their key business partners on a regular basis, in line with in-house rules on credit management.
Derivative financial instruments provided by financial institutions are utilized to mitigate operational risk. As the Group executes
financial instrument transactions only through highly-rated financial institutions, the Group considers the credit risk associated withsuch transactions to be insignificant in the fiscal year under review.
Operating receivables are attributable to a large number of customers across vast regions. The Group identified no specificcustomer that accounted for significant credit risk exposure. Accordingly, the excessive concentration of credit risk has not been
detected.
Regarding trade and other receivables, the Group conducts exhaustive analysis of the credit status of its customers that
includes examining their historical default rates as well as credit reports issued by external institutions. The Group estimates
expected credit loss related to financial counterparties for 12 months or the full duration, records impairment loss on trade andother receivables, and sets aside an allowance for doubtful accounts.
The maximum credit risk exposure attributable to financial assets held by the Group, excluding the valuation of guarantees andcollateral acquired, is the carrying amount of such assets presented in the consolidated financial statements after impairment.

In Japan, a corporation tax corresponding to the global minimum tax was created under the fiscal year 2023 tax reform, and thetax reform act (“Act for Partial Amendment to the Income Tax Act, etc.” (Act No. 3 of 2023) (hereinafter referred to as the “revised
corporation tax act”) which includes related provisions, was enacted on March 28, 2023. The revised corporation tax act introduces
the Income Inclusion Rule (IIR) among the BEPS global minimum tax rules, and from business years starting on or after January
1, 2025, the tax burden of subsidiaries of parent companies located in Japan will be levied as additional tax on the parent companies
located in Japan up to the minimum tax rate (15%).
Our Group will be subject to additional taxation in the United Arab Emirates and other countries, but this will not have a significant
impact on our consolidated financial statements.

－ 33 －－ 34 －

i. Credit Risk Exposure
Maturity analysis of trade and other receivables is as follows.

ii. Analysis of Changes in Allowance for Doubtful Accounts
Changes in allowance for doubtful accounts in relation to trade and other receivables are as follows.
January 1 to December 31, 2022

As of December 31, 2022

Millions of yen

Millions of yen

Financial assets whose
allowance for doubtful
accounts is measured at thesame amount as 12-month
expected credit losses

Before maturity

Financial assets whose allowance for doubtful accounts ismeasured at the same amount as lifetime expected credit
lossesFinancial assets whose
allowance for doubtful
Financial assets whose
accounts has always beencredit risk has significantly
measured at the same
increased since initialamount as lifetime expected
recognition
credit losses

12-month expected credit
lossesTotal¥5,756¥—¥165,582¥171,338

Due within 30 days——

29,112

29,112

Due after 30 days but within 60 days

—

—

5,429

5,429

Due after 60 days but within 90 days

—

—

1,170

1,170

More than 90 days

—

—

4,765

4,765

¥5,756¥—¥206,058¥211,814

Total

Beginning balance¥—¥(2,466)¥(2,466)

Increase

—

—

(724)

(724)

Decrease resulting from settlement

—

—

87

87

Decrease due to reversal

—

—

498

498

Other
Ending balance

—

—

(200)

(200)

¥—

¥—

¥(2,805)¥(2,805)

January 1 to December 31, 2023
Millions of yen

Millions of yen

Financial assets whose
allowance for doubtful
accounts is measured at thesame amount as 12-month
expected credit losses

Financial assets whose allowance for doubtful accounts ismeasured at the same amount as lifetime expected credit
lossesFinancial assets whose
allowance for doubtful
Financial assets whose
accounts has always beencredit risk has significantly
measured at the same
increased since initialamount as lifetime expected
recognition
credit losses

12-month expected credit
lossesBeginning balance
Total¥7,762¥—¥185,865¥193,627

Due within 30 days——

17,566

17,566

Due after 30 days but within 60 days

—

—

2,044

2,044

Due after 60 days but within 90 days

—

—

1,510

1,510

More than 90 days

—

—

4,709

4,709

¥7,762¥—¥211,694¥219,456

Total

Total

¥—

As of December 31, 2023

Before maturity

Lifetime expected credit losses
Financial assets whose
allowance for doubtful
Financial assets whose
accounts has always beencredit risk has significantly
measured at the same
increased since initialamount as lifetime expected
recognition
credit losses

Lifetime expected credit losses
Financial assets whose
allowance for doubtful
Financial assets whose
accounts has always beencredit risk has significantly
measured at the same
increased since initialamount as lifetime expected
recognition
credit losses

Total

¥—

¥—

¥(2,805)¥(2,805)

Increase——(1,252)(1,252)

Decrease resulting from settlement

—

—

76

76

Decrease due to reversal

—

—

540

540

Other
Ending balance

—

—

(45)

(45)

¥—

¥—

¥(3,486)¥(3,486)(ii) Liquidity Risk
The Group uses short-term borrowings mainly to raise operating funds while utilizing long-term debt and corporate bonds for such
purposes as funding capital expenditure. Along with trade notes and accounts payable, these liabilities can be difficult to repay,
thus exposing the Group to liquidity risk. To counter such risk, the Group maintains and updates appropriate fundraising plans
based on the projections of the amounts necessary to settle these liabilities. The Group also manages such risk by, for example,
maintaining liquidity on hand.
The maturity analysis of corporate bonds, borrowings, lease liabilities and derivative liabilities is as follows.
As of December 31, 2022

Bonds and loans payable

Book balanceContractvalue

Within 1
year

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Over 4 years
to 5 years

Millions of yen
Over 5years¥311,802¥316,885¥102,894¥35,613¥23,049¥26,445

Lease obligations

60,95865,22014,86910,787

8,535

6,478

5,094

19,457

Derivative liabilities

1,664

2,211

1,051

1,160

—

—

—

—

¥374,424¥384,316¥118,814¥47,560¥31,584¥32,923

Book balanceContractvalue

Within 1
year

Over 1 year
to 2 years

Over 2 years
to 3 years

Over 3 years
to 4 years

Total¥22,376 ¥106,508¥27,470 ¥125,965

As of December 31, 2023
Millions of yen

Bonds and loans payable

Over 4
years to 5
years

Over 5years¥23,119 ¥24,102¥81,872¥245,375¥248,382¥63,239¥22,063¥33,987

Lease obligations

65,55771,561

15,504

11,952

9,280

7,124

5,408

Derivative liabilities

3,118

3,270

3,270

—

—

—

—

—

¥314,050¥323,213¥82,013¥34,015¥43,267¥30,243 ¥29,510¥104,165

Total

22,293(iii) Market Risk
i. Foreign Exchange Risk
Engaging in global operations, the Company and its subsidiaries produce and sell a number of products to customers overseas.

－ 35 －－ 36 －

Accordingly, the Group is exposed to the risk of foreign currency exchange fluctuations (hereinafter “foreign exchange risk”)
associated with the exchange of foreign currency denominated operating receivables, acquired through transactions
undertaken using currencies other than functional currencies, into functional currencies at exchange rates as of the closing
date of reporting periods.
In addition, foreign currency-denominated operating payables associated with the import of some raw materials and otherliabilities denominated in foreign currencies are exposed to foreign exchange risk. However, the value of these liabilities isalways within the scope of the balance of operating receivables denominated in the same currency. Therefore, foreign exchange
risk associated with these liabilities can be offset by foreign exchange risk resulting from foreign currency-denominatedoperating receivables.
The primary foreign exchange risk the Group is now exposed to is attributable to fluctuations in the market prices of the
U.S. dollar and euro. The Company and some of its subsidiaries assess the balance of foreign currency-denominated operatingreceivables and payables by currency and month, thereby avoiding foreign exchange risk associated with the net amount ofsuch items mainly through the execution of forward exchange contracts. Depending on conditions in foreign exchange markets,
the Group may execute forward exchange contracts whose value matches the expected net amount of foreign currency
denominated operating receivables and payables arising from future import- or export-related transactions. As a general rule,
the Group uses currency swap transactions to control fluctuation risks associated with foreign exchange in relation to foreign
currency denominated assets and liabilities other than operating receivables and payables.
The Group utilizes derivative transactions for risk avoidance purpose only and, therefore, does not engage in derivativetransactions for speculative purposes.

The Group calculates the fair value of derivatives based on prices provided by financial institutions with which the Group has signed
derivative contracts. This is classified as “Level 2” within the fair value hierarchy.
Other financial assets, etc.
Liquid assets that can be settled in a short period are presented at their carrying amounts, which reasonably approximate fair value.
In addition, the Group calculates the fair value of marketable securities based on market prices. This is classified as “Level 1” within
the fair value hierarchy.
To determine the fair value of financial instruments other than those mentioned above, the Group uses appropriate methods suchas discounted cash flow analysis. This is classified as “Level 2” within the fair value hierarchy.
Furthermore, the fair value of unlisted stocks, etc. is primarily evaluated using the book value per share method, etc., and isclassified as “Level 3” within the fair value hierarchy.
For details on the fair value hierarchy, please see (iii) fair value hierarchy.

Sensitivity analysis of foreign exchange
The Group’s prevailing exposure to foreign exchange risk—in connection mainly with the U.S. dollar and euro—is periodicallysubjected to a sensitivity analysis conducted as follows. Having estimated the impact of a 1% appreciation of the yen on
receivables and payables denominated in foreign currencies and held at the end of the fiscal year, possible changes in profit(net of tax) for the period are presented below. In addition, this analysis assumes that all the other variables remain unchanged.
The sensitivity analysis excludes payables and receivables that are hedged against foreign exchange risk through forward
exchange contracts or interest rate currency swaps that essentially offset the impact of fluctuations in the value of the yen.
Millions of yen
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

U.S. dollar

¥36

¥67

Euro

94

179

Income, net of tax

ii. Stock Price Risk
The Group owns shares in companies that have business relations with the Group for the purpose of securing and strengthening
financial transactions, business transactions and mutual business development. This exposes the Group to stock pricefluctuation risk. With the aim of raising asset efficiency and optimizing these holdings, the Group periodically assesses their fairvalue as well as the financial position of issuers, constantly reviewing the pros and cons of holding the assets.
iii. Interest Rate Risk
Interest rate risk is defined as risk attributable to fluctuations in the fair value of financial instruments or cash flows derived fromthese instruments due to changes in market interest rates. The Group’s exposure to interest rate risk is mainly associated withborrowings, corporate bonds and other liabilities as well as such receivables as interest-bearing deposits. Changes in market
interest rates necessarily affect interest income, thus exposing future cash flows to interest rate risk.
To counter such risk, the Group strives to control any increase in future interest payments that may result from interest rate
hikes and, to this end, raises funds through the issuance of corporate bonds with fixed interest rates. In principle, long-term
debt with floating interest rates is coupled with interest rate swap contracts with financial institutions so that interest rates
associated with fundraising can be virtually fixed through the receipt of interest in floating rates and the payment of interest atfixed rates. In this way, the Group maintains stable cash flows.
Sensitivity analysis of borrowings with floating interest rates
The Group’s exposure to interest rate risk is periodically subjected to a sensitivity analysis conducted as follows. Assuming that
all other variables remain unchanged, the impact of a 1% increase in the interest rate is estimated on profit (net of tax) as
presented in the consolidated statement of income. The sensitivity analysis excludes borrowings coupled with interest rate
swaps or interest rate currency swaps aimed at virtually fixing interest rates.
Millions of yen

Income, net of tax

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023¥(688)¥(425)(3) Fair Value of Financial Instruments(i) Methods for Measuring Fair ValueThe Group determines the fair value of financial assets and liabilities using the methods described below. As for financial
instruments, the Group estimates their fair value based on market prices when market prices are available. As for financial
instruments whose market prices are not available, the Group estimates their value using appropriate valuation methods.
Corporate bonds and debt
To determine the fair value of corporate bonds and debt, the Group discounts the total principal and interest, utilizing expectedinterest rates for similar bonds or debt. This is classified as “Level 2” within the fair value hierarchy.
Derivatives－ 37 －－ 38 －

(ii) Carrying Amount and Fair Value of Financial Instruments
The carrying amount and fair value of financial instruments are as follows.

As of December 31, 2023
Millions of yen
As of Dec. 31, 2022
Carrying
amountAs of Dec. 31, 2023
Carrying

Fairb value

amountFair value

Financial assets measured at fair value through profit or loss

Millions of yen

Name of stock
Toyota Motor Corporation

Fair value¥8,280Hwa Fong Rubber Ind. Co., Ltd.

1,931

Autobacs Seven Co., Ltd.

1,482

Derivatives

¥635

¥635

¥445

¥445

Yellow Hat Ltd.

1,101

Loans

1,041

1,041

1,041

1,041

The Sumitomo Warehouse Co., Ltd.

1,020

—

—

142

142

24,685

24,68523,23823,238Other financial assets
Financial assets measured at fair value through other comprehensive income
Equity equivalents
Financial assets measured at amortized cost
Cash and cash equivalents

73,846

73,84690,251

90,251

Trade and other receivables

209,009

209,009

215,970

215,970

Other financial assets

13,131

13,131

11,086

11,086

1,761

1,761

—

—

1,585

1,585

3,105

3,105

Trade and other payables

176,151

176,151

175,844

175,844

Bonds and debts

311,802

307,595

245,375

239,385

Financial assets classified as hedging instruments
Derivatives
Financial liabilities measured at fair value through profit or loss
Derivatives
Financial liabilities measured at amortized cost

Financial liabilities classified as hedging instruments
Derivatives

¥79

¥79

¥13

¥13

Financial assets measured at fair value through profit or loss, financial assets measured at fair value through other comprehensive
income, and financial assets classified as hedging instruments are included in “Other financial assets” in the consolidated statementof financial position.
Financial liabilities measured at fair value through profit or loss and financial liabilities classified as hedging instruments areincluded in “Other financial liabilities” in the consolidated statement of financial position.

Note 2: Non-marketable stockholdings measured at fair value through other comprehensive income
Non-marketable stockholdings are mainly venture companies that the Group has partnered with as part of thecommercialization of sensing cores, and transportation companies that the Group has transactions with for transportingtires and selling tires for repair.
ii. Dividend income recognized from financial assets measured at fair value through other comprehensive income
Millions of yen
As of Dec. 31, 2022

Investments derecognized
during the period

As of Dec. 31, 2023

Investments held at the endof the reporting period

Investments derecognized
during the period

Investments held at the endof the reporting period

¥834

¥172

¥679

¥16

iii. Financial assets measured at fair value through other comprehensive income disposed of during the period
The fair value at the time of sale, the cumulative amount of gain or loss, and the amount transferred to retained earnings of thefinancial assets measured at fair value through other comprehensive income that were disposed of during the period are as follows.
Millions of yen
As of Dec. 31, 2022

Fair value at time of sale¥502

As of Dec. 31, 2023

Cumulative gain(parentheses denotes loss)

Fair value at time of sale¥407

i. Breakdown of stockholdings measured at fair value through other comprehensive income and their fair value
Millions of yen

Non-marketable (Note 2)

As of Dec. 31, 2022

As of Dec. 31, 2023

¥22,450¥20,985

2,235

2,253

Note 1: Marketable stockholdings measured at fair value through other comprehensive income
The Group’s main marketable stockholdings measured at fair value through other comprehensive income for each fiscal
year are as follows:
As of December 31, 2022
Millions of yen

Name of stock
Toyota Motor Corporation

Fair value¥5,793

Suzuki Motor Corporation

1,954

Hwa Fong Rubber Ind. Co., Ltd.

1,785

Autobacs Seven Co., Ltd.

1,372

Yellow Hat Ltd.

1,119

－ 39 －¥5,461

In addition, accumulated gains (losses) (after tax) transferred from other components of equity to retained earnings totaled 285
million yen and 3,794 million yen as of December 31, 2022 and 2023, respectively.

Financial Assets Measured at Fair Value through Other Comprehensive Income
The Group designates its long-term stockholdings aimed at securing a greater earnings base through the maintenance andexpansion of transactions with investees, as financial assets measured at fair value through other comprehensive income.

Marketable (Note 1)¥7,118Cumulative gain(parentheses denotes loss)－ 40 －

(iii) Fair Value Hierarchy
The following analysis of fair value measurements is applied periodically to financial assets and liabilities recognized in the
consolidated statement of financial position.
The inputs used to measure fair value are categorized into three different levels of the fair value hierarchy, defined as follows.
Level 1: Quoted prices available for the same assets or liabilities in active markets
Level 2: Prices available for assets or liabilities based on directly or indirectly observable input, excluding quoted prices for thoseclassified as Level 1
Level 3: Other input available for assets or liabilities without observable market data
As of December 31, 2022
Millions of yen
Level 1

Level 2

Level 3

Total

Assets(4) Derivatives
The Group designates such derivatives as forward exchange contracts and interest rate swaps as hedges against foreign exchange
risk and interest rate risk.
When a derivative transaction is initiated, the Group documents the relationship between hedging instruments and hedged
items as well as its risk management goals and strategies for various hedging transactions, with the aim of evaluating whether its
hedge relationship meets hedge accounting requirements. Moreover, since the inception of hedging, the performance of derivatives
used for hedge transactions to offset changes in the fair value of or cash flows from hedged items is constantly evaluated anddocumented to determine whether they meet all the applicable hedge effectiveness requirements. The evaluation of hedge
effectiveness is undertaken at the earlier of the closing date of each fiscal year or whenever a significant change in circumstances
may affect hedge effectiveness requirements.
(i) Derivatives to Which Hedging Is Applied
As of December 31, 2022 and December 31, 2023, derivatives designated as hedging instruments are as follows.
As of December 31, 2022

Notional amount ofhedging instruments

AssetsLiabilities

Millions of yen
Hedging instruments included in
the consolidated statement offinancial position as:¥9,978¥1,761¥—Other financial assets¥16,000¥—¥79

Other financial liabilities

Financial assets measured at fair value through profit or loss

Carrying amount of hedging instruments

Derivatives

¥—

¥635

¥—

¥635

Loans

—

1,041

—

1,041

Other financial assets

—

—

—

—

22,450—2,235

24,685

—

1,761

—

1,761

Financial assets measured at fair value through other comprehensive income
Equity equivalents
Financial assets classified as hedging instruments
Derivatives
Total assets¥22,450¥3,437¥2,235 ¥28,122

Cash flow hedges
Foreign exchange and interest rate risks
Interest rate and currency swaps
Interest rate risk
Interest rate swaps
As of December 31, 2023

Notional amount ofhedging instruments

AssetsLiabilities

Millions of yen
Hedging instruments included in
the consolidated statement offinancial position as:¥6,000¥—¥13

Other financial liabilities

Liabilities

Carrying amount of hedging instruments

Financial liabilities measured at fair value through profit or loss
Derivatives¥—¥1,585¥—¥1,585

Financial liabilities classified as hedging instruments
Derivatives
Total liabilities

—

79

—

79

¥—

¥1,664¥—¥1,664

Level 1

Level 2

Level 3As of December 31, 2023
Millions of yen
Total

Cash flow hedges
Interest rate risk
Interest rate swaps(ii) Derivatives to Which Hedging Is Not Applied
As of December 31, 2022 and December 31, 2023, derivatives that have not been designated as hedging instruments are as
follows.

AssetsMillions of yen

Financial assets measured at fair value through profit or loss

As of Dec. 31, 2022
Contract value (notional amount)

Fair value

Contract value (notional amount)

Fair value

USD¥5,573¥156¥6,737¥195

GBP

10,841

168

13,561

74

AUD

1,738

43

2,259

(19)

—

EUR

9,851

165

4,965

7

¥2,395 ¥24,866

TRY

247

2

173

4

ZAR

3,397

22

2,758

25

CHF

1,749

21

—

—

CNY

1,968

41

3,267

110

USD

9,688

(614)

7,141

(264)

CNY

14,290(309)

21,923(165)

Derivatives

¥—

¥445

¥—

¥445

Loans

—

1,041

—

1,041

Other financial assets

—

—

142

142

20,985—

2,253

23,238Financial assets measured at fair value through other comprehensive income
Equity equivalents
Financial assets classified as hedging instruments
Derivatives
Total assets——¥20,985¥1,486—

Liabilities
Financial liabilities measured at fair value through profit or loss
Derivatives¥—¥3,105¥—¥3,105

Financial liabilities classified as hedging instruments
Derivatives
Total liabilities

—

13

—

13

¥—

¥3,118¥—¥3,118

As of December 31, 2022 and December 31, 2023, the Group did not record significant changes arising from the purchase, sale,issuance or settlement of financial instruments classified as Level 3. No financial instruments have been transferred between levels
during these periods. The fair value of financial instruments classified as Level 3 is measured by the specific department charged
with determining valuation methods in accordance with valuation policies and procedures established for fair value measurements
and authorized by personnel bearing proper responsibilities. Moreover, results of fair value measurements are reviewed bypersonnel in higher positions.
As for the measurement of the fair value of stock classified as Level 3, the Group may adopt alternative assumptions that canbe considered rational instead of unobservable input. In such case, resulting changes in the fair value of such items are deemed
insignificant.

－ 41 －

As of Dec. 31, 2023

Forward exchange contracts
Sold

BoughtCurrency swaps
JPY receipts/GBP payments

6,400

(45)

7,227

(1,095)

JPY receipts/CHF payments

2,875

(469)

3,365

(1,006)

JPY receipts/Euro payments

2,829

(131)

3,142

(526)

¥71,446¥(950)¥76,518¥(2,660)

Total－ 42 －

20. Capital Stock and Other Equity Items

21. Other Comprehensive Income(1) Capital Stock—Authorized and Issued
Authorized

As of Jan. 1, 2022
Changes during the year
As of Dec. 31, 2022
Changes during the year
As of Dec. 31, 2023

IssuedCapital stock

Capital surplus(Shares)(Shares)(Millions of yen)

(Millions of yen)

800,000,000

263,043,057¥42,658¥39,715

—

—

—

(10)

800,000,000

263,043,057¥42,658¥39,705

—

—

—

(3)

800,000,000

263,043,057¥42,658¥39,702

Note: All shares issued by the Company carry no par value and contain no restrictions on shareholder rights. Purchasers paid full price for such shares.

A breakdown of other comprehensive income recognized in each fiscal year, including related adjustments resulting inreclassification to profit or loss and the tax effects of each component (including non-controlling interests), is as follows.
January 1 to December 31, 2022
Millions of yen
Amount arising Reclassification
during the year
adjustments

Items that will not be reclassified subsequently to profit or loss:
Financial assets measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans

Before taxes

Tax effects

After taxes¥(1,436)¥—¥(1,436)¥197¥(1,239)(1,870)—(1,870)617(1,253)

Items that may be reclassified subsequently to profit or loss:(2) Treasury Stock
As of Jan. 1, 2022
Changes during the year (Note 1)
As of Dec. 31, 2022
Changes during the year (Note 2)
As of Dec. 31, 2023

Treasury stock (Shares)

Value (Millions of yen)

47,604¥85(12,763)(24)

34,841¥61(9,576)(18)

25,265¥43

Notes: 1.Changes during the year as of December 31, 2022 are attributable to an increase of 2,390 shares from the purchase of shareholdings of less than
one unit, a decrease of 15,000 shares in treasury stock (disposed of in a form of restricted shares granted to directors as part of share-based
compensation), and a decrease of 153 shares from the transfer of shareholdings of less than one unit.
2. Changes during the year as of December 31, 2023 are attributable to an increase of 2,468 shares from the purchase of shareholdings of less than
one unit, a decrease of 12,000 shares in treasury stock (disposed of in a form of restricted shares granted to directors as part of share-based
compensation), and a decrease of 44 shares from the transfer of shareholdings of less than one unit.

(3) Capital Stock and Capital Surplus
In accordance with Japan’s Corporation Law, stock companies are obliged to set aside at least 50% of proceeds from orcontributions associated with the issuance of shares as capital stock, with the residual amount being allocated to additional paidin capital as part of capital surplus. Said law also allows companies to include additional paid-in capital in capital stock upon
obtaining the approval of their general meetings of shareholders.
(4) Retained Earnings
In accordance with the Corporation Law, stock companies are obliged to set aside 10% of any appropriation to shareholders fromretained earnings as additional paid-in capital or legal reserve, until said reserves reach 25% of stated capital. The legal reservecan be appropriated to eliminate a deficit. The reversal of such reserve requires a resolution of the general meeting of shareholders.
In accordance with the Corporation Law, distributable surplus is calculated based on retained earnings as presented in the
Company’s statutory financial statements prepared in accordance with Japanese GAAP.
In addition, the Company distributes its retained earnings in compliance with restrictions imposed by said law on determining
the amounts available for distribution.
(5) Other Components of Equity(i) Remeasurements of Defined Benefit Plans
A reassessment of the defined benefit obligation that identifies the differences between actuarial assumptions at the beginning of
the fiscal year and actual returns, in addition to an assessment of gain on plan assets at fair value (excluding interest income).
(ii) Net Gain or Loss on Financial Assets Measured at Fair Value through Other Comprehensive Income
Differences between the fair value and the acquisition prices of financial assets, whose value is measured at fair value throughother comprehensive income, included in other components of equity until derecognition.
(iii) Currency Translation Differences of Foreign Operations
Translation differences attributable to the consolidation of the results of foreign operations whose financial statements are preparedusing foreign currencies.
(iv) Cash Flow Hedges
Changes in gain or loss on the valuation of derivatives designated as eligible hedging instruments recorded in the statement ofcomprehensive income before the date on which hedge accounting was closed.

Cash flow hedges

217

4

221

(67)

154

44,653—44,653

183

44,836¥41,564¥4¥41,568¥930¥42,498

Amount arising Reclassification
during the year
adjustments

Before taxes

Tax effects

After taxes

Currency translation differences of foreign operations
Other comprehensive income
January 1 to December 31, 2023

Millions of yen

Items that will not be reclassified subsequently to profit or loss:
Financial assets measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans¥3,812¥—¥3,812¥129¥3,941

12,730—12,730(4,130)8,600

Items that may be reclassified subsequently to profit or loss:
18

¥(62)

(44)

13

(31)

34,748—34,748(199)

34,549¥51,308¥(62)¥51,246¥(4,187)¥47,059

Cash flow hedges
Currency translation differences of foreign operations
Other comprehensive income

22. Sales Revenue(1) Breakdown of Revenue by Main Regional Markets and Reporting Segments
January 1 to December 31, 2022
Millions of yen
Reportable segment
Industrial and
Tires

SportsOther Products

Total

Japan

¥246,647¥40,818¥25,835¥313,300

North America

214,638

32,290214

247,142Europe160,229

17,3896,303

183,921

Asia

163,760

21,346

8,921

194,027

Others154,667

4,754

853

160,274¥939,941¥116,597¥42,126¥1,098,664

Total

Note: The above sales revenue amounts are based on the location of the customer and exclude transactions between segments.

January 1 to December 31, 2023
Millions of yen(v) Other Components of Equity for Disposal Groups Classified as Held for Sale
Cumulative amount of income or expenses recognized in other comprehensive income for assets or disposal groups classified asheld for sale in accordance with IFRS 5.

Reportable segment
Industrial and
Tires

SportsOther Products

Total

Japan

¥275,837¥43,354¥28,203¥347,394

North America

228,157

35,189117

263,463

Europe178,925

18,556

7,461

204,942

Asia

168,689

24,045

7,816

200,550

Others154,773

5,503

774

161,050¥1,006,381¥126,647¥44,371¥1,177,399

Total

Note: The above sales revenue amounts are based on the location of the customer and exclude transactions between segments.

－ 43 －－ 44 －

Tire Business
The Tire Business provides customers in Japan and overseas with various tires for passenger cars, trucks, buses, motorcycles andmore. The main brands are Dunlop and Falken. When the products are transferred to the customers, the Group acknowledges thatit has fulfilled its contractual obligations and recognizes the revenue.
Because payment is received within one year of completing delivery to customers, the agreed upon price does not include
significant financing components.
Sports Business
The Sports Business sells sports goods to customers in Japan and overseas and provides services related to golf tournaments,
golf and tennis schools, fitness clubs, and other similar businesses.
Regarding the sale of sports goods, the Group recognizes revenue when products are transferred to the customer, at which
point the Group has fulfilled its performance obligations.
Regarding golf tournament operations, the Group bears responsibility for providing tournament operation services to thetournament sponsors for the contracted period. Because these performance obligations are fulfilled when the services are provided,
the Group recognizes revenue at that time.
Regarding golf and tennis schools, the Group bears responsibility for providing lesson-related services to the members for thecontracted period. Because these performance obligations are fulfilled when the services are provided, the Group recognizes
revenue at that time. Regarding fitness clubs, the Group bears responsibility for providing services related to the use of its facilities
to its members for the contracted period. Because these performance obligations are fulfilled when the services are provided, theGroup recognizes revenue at that time.
Because payment is received within one year of completing delivery to customers, the agreed upon price does not include
significant financing components.
Industrial and Other Products Business
The Industrial and Other Products Business provides customers in Japan and overseas with highly functional rubber products,
household goods, infrastructure-related products, and so on. When the products are transferred to customers, the Groupacknowledges that it has fulfilled its performance obligations and recognizes the revenue.
Because payment is received within one year of completing delivery to customers, the agreed upon price does not include
significant financing components.
In each of the Tire, Sports, and Industrial and Other Products businesses, the Group decides on the sales price of products andservices at the start of the transaction with each customer. The Group pays incentive bonuses and commission fees related to thenumber of sales made over a certain duration from a few months to one year. This variable cost affects the estimated sales pricebased on the conditions of the contract. The liabilities related to this adjustment are included in “Trade and other payables.”In each of the Tire, Sports and Industrial and Other Products businesses, the Group does not provide product warranties beyond
repairing defects that existed in the product at the time of sale. Product warranties are therefore not treated as an independent
performance obligation and part of the sales price is not allocated to product warranties.
In the Tire Business, because the Group expects product returns of winter tires, which are mainly sold in Japan, the Groupestimates the proportion that will be returned in the near future and revises its revenue downward.
(2) Outstanding Contracts
The Group’s outstanding contracts are receivables (“Trade notes,” “Electronically recorded monetary claims” and “Accounts
receivable”) originating mainly from contracts with customers. The value of outstanding contracts is included in Note 7. “Trade andOther Receivables.”During the fiscal year ended December 31, 2021, the amount of profit recognized in connection with contracts classified asliabilities at the beginning of the fiscal year was insignificant. Also, the Company has not recognized any profit originating from its
performance obligations that had been partially or entirely fulfilled in the past fiscal years.
(3) Trade Prices Allocated to Remaining Performance Obligations
The Group does not engage in material trade in which the period of the individual contract exceeds one year.
In addition, no material amounts are excluded from sales prices originating in contracts with customers.
Furthermore, the Group applies the practical expedient outlined in Article 121 of IFRS 15 and does not disclose information
related to remaining performance obligations with an original estimated remaining duration of one year or less.
(4) Assets Recognized from the Cost of Acquiring or Fulfilling Contracts with Customers
The Group does not have costs related to fulfilling contracts or additional costs needed to acquire contracts that must be recognized
as assets.

24. Other Income and Expenses
The breakdown of other income and expenses is as follows.
(1) Other Income
Millions of yen

Gain on sales of goods¥1,058¥1,235470

300

Gains on sales of non-current assets

227

437

Others

1,338

637¥3,093¥2,609Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

Impairment loss

¥4,137¥11,399

Loss on sales and retirement of non-current assets

1,941

1,278

Total
(2) Other Expenses

Millions of yen

Loss on voluntary recall of products
OthersTotal¥29,202¥31,226

Transportation, storage and packaging costs

49,09948,360

Personnel costs

78,11482,198Others

74,84487,047¥231,259¥248,831

Total－ 45 －

345

3,550

2,767

¥10,068¥15,789

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥2,057¥2,687

850851

The breakdown of financial income and expenses is as follows.
(1) Financial Income
Millions of yen

Interest income
Financial assets measured at amortized cost
Dividend income
Financial assets measured at fair value through other comprehensive income
Foreign exchange gains

4,842

—

Gains on net monetary position

3,770

8,395

¥11,519¥11,933

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

Financial liabilities measured at amortized cost

¥1,929¥3,931

Lease liabilities

1,191

1,599

Total
(2) Financial Expenses

Millions of yen

Interest expense

Other
Foreign exchange losses
Losses on valuation of derivatives
Total

Millions of yen

Advertising and sales promotion costs

440

25. Financial Income and Expenses

The breakdown of selling, general and administrative expenses is as follows.
Jan. 1 to Dec. 31, 2023

Jan. 1 to Dec. 31, 2023

Insurance income

23. Selling, General and Administrative Expenses

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2022

－ 46 －

517

887

—

4,962

404

2,326

¥4,041¥13,705

26. Earnings per Share

27. Cash Flows(1) Basic Earnings per Share
Basic earnings per share is as follows.

Fluctuations in Liabilities Related to Financing Activities
Fluctuations in liabilities related to financing activities are as follows.
Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥35.80¥140.86

Basic earnings per share (yen)January 1 to December 31, 2022

(2) Calculating Basic Earnings per Share
The basis for the calculation of basic earnings per share is as follows.
Profit for the period attributable to owners of the parent (millions of yen)
Weighted average number of common shares outstanding during theperiod (thousands of shares)

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥9,415¥37,048

263,005

Diluted earnings per share is not presented because there were no potentially dilutive shares.

263,015

Millions of yen
Fluctuations not resulting in cash flows
Currencytranslation
Fluctuations
differences offrom foreignforeignexchange
operations
rates
Other Dec. 31, 2022

Jan. 1, 2022

Fluctuations
resulting in
cash flows

New leases

Short-term borrowings¥44,808¥17,584¥—¥(1,416)¥3,123¥—¥64,099

Long-term borrowings

173,876

37,138—(2,546)

3,037

1,330

212,835

Corporate bonds

19,961

15,000

—

—

—

(93)

34,868

Lease liabilities

58,139(13,438)

14,524

1,764

—

(31)

60,958

Total¥296,784¥56,284¥14,524¥(2,198)¥6,160¥1,206¥372,760

January 1 to December 31, 2023
Millions of yen
Fluctuations not resulting in cash flows
Currencytranslation
Fluctuations
differences offrom foreignforeignexchange
operations
rates
Other Dec. 31, 2023

Jan. 1, 2023

Fluctuations
resulting in
cash flows

New leases

Short-term borrowings¥64,099¥(42,516)¥—¥(4,513)¥9,142¥—¥26,212Long-term borrowings

212,835(28,068)—(3,409)4,569(1,652)

184,275

Corporate bonds

34,868

—

—

—

—

20

34,888

Lease liabilities

60,958(16,847)

17,078

1,869

—

2,499

65,557

Total¥372,760¥(87,431)¥17,078¥(6,053)¥13,711¥867¥310,932

28. Dividends
Interim and year-end dividends paid to common shareholders are as follows.
January 1 to December 31, 2022
(1) Dividends paid
Resolution date

Type of stock

Total dividends paid
(Millions of yen)

Resource

Dividends
per share(Yen)

Record date

Effective from:

Mar. 24, 2022 (GMOS)*

Common stock

7,890

Retained earnings

30.00

Dec. 31, 2021

Mar. 25, 2022

Aug. 8, 2022 (BOD)**

Common stock

5,260

Retained earnings

20.00

Jun. 30, 2022

Sep. 6, 2022

(2) Dividends That Have Become Effective from the Fiscal Year Subsequent to Their Record Date
Resolution dateMar. 28, 2023 (GMOS)*

Type of stock

Common stock

Total dividends paid
(Millions of yen)

Resource

Dividends
per share(Yen)

Record date

Effective from:

3,945

Retained earnings

15.00

Dec. 31, 2022

Mar. 29, 2023

Total dividends paid
(Millions of yen)

Resource

Dividends
per share(Yen)* General Meeting of Shareholders**Board of Directors

January 1 to December 31, 2023
(1) Dividends paid
Resolution date

Type of stock

Record date

Effective from:

Mar. 28, 2023 (GMOS)*

Common stock

3,945

Retained earnings

15.00

Dec. 31, 2022

Mar. 29, 2023

Aug. 7, 2023 (BOD)**

Common stock

1,315

Retained earnings

5.00

Jun. 30, 2023

Sep. 5, 2023

(2) Dividends That Have Become Effective from the Fiscal Year Subsequent to Their Record Date
Resolution dateMar. 28, 2024 (GMOS)*

Type of stock

Common stock

Total dividends paid
(Millions of yen)

Resource

Dividends
per share(Yen)

Record date

Effective from:13,940Retained earnings

53.00

Dec. 31, 2023

Mar. 29, 2024

* General Meeting of Shareholders**Board of Directors－ 47 －－ 48 －

29. Main Subsidiaries
Information on Main Subsidiaries
The Group’s main subsidiaries are as follows.
As of Dec. 31, 2022
As of Dec. 31, 2023
Voting right Equity right Voting right Equity rightratio (%)
ratio (%)
ratio (%)
ratio (%)

Name

Location

Main businesses

Dunlop Tire Hokkaido Ltd. (Note 2)

Japan

Tires

100.0

100.0

100.0

100.0

Dunlop Motorcycle Corporation (Note 2)

Japan

Tires

100.0

100.0

100.0

100.0

Dunlop Retread Service Co., Ltd.

Japan

Tires

100.0

100.0

100.0

100.0

Dunlop Sports Marketing Co. Ltd.

Japan

Sports

100.0

100.0

100.0

100.0

Dunlop Golf Club Corp.

Japan

Sports

100.0

100.0

100.0

100.0

Sumigomu Sangyo Co., Ltd.

Japan

Industrial products

100.0

100.0

100.0

100.0

Dunlop Home Products Co., Ltd.

Japan

Industrial products

100.0

100.0

100.0

100.0

Indonesia

Tires and sports

72.5

72.5

72.5

72.5

PT Sumi Rubber Indonesia
Sumitomo Rubber (Changshu) Co., Ltd.

China

Tires

Sumitomo Rubber (Hunan) Co., Ltd.

China

Tires

Sumitomo Rubber (China) Co., Ltd.

China

Tires

100.0
(100.0)100.0(100.0)
100.0

100.0
100.0
100.0

100.0
(100.0)100.0(100.0)
100.0

100.0
100.0

Tires

100.0

100.0

100.0

100.0

Sumitomo Rubber do Brasil Ltda.

Brazil

Tires

100.0

100.0

100.0

100.0

South Africa

Tires

100.0

100.0

100.0

100.0

Turkey

Tires

80.0

80.0

80.0

80.0

100.0
(100.0)100.0(100.0)100.0(100.0)100.0(100.0)Sumitomo Rubber USA, LLC

U.S.A.

Tires

Sumitomo Rubber North America, Inc.

U.S.A.

Tires

Falken Tyre Europe GmbHGermany

Tires

100.0

100.0

100.0

100.0

Sumitomo Rubber Middle East FZE

U.A.E.

Tires

100.0

100.0

100.0

100.0

Sumitomo Rubber Australia Pty Ltd.

Australia

Tires

100.0

100.0

100.0

100.0

U.K.

Tires

100.0

100.0

100.0

100.0

Singapore

Tires

100.0

100.0

100.0

100.0

100.0
100.0

Industrial products

100.0

100.0

100.0

100.0

Lonstroff Medical Elastomer d.o.o. (Note 3)

Slovenia

Industrial products

100.0(100.0)

100.0

100.0
(100.0)100.0

Notes: 1. Voting right ratio in parentheses signifies the percentage of indirect holdings.
2. From January 1, 2024, some functions of Dunlop Tire Hokkaido Ltd. and 10 other domestic tire sales subsidiaries, as well as Sumitomo Rubber
Industries, Ltd.'s Domestic Replace Tire Sales HQ, have been integrated into Dunlop Tyre Japan, Ltd. through company reorganization.
3. As the Group will lose control of LAG and LSI, a wholly owned subsidiary of LAG, in the next fiscal year, the assets and liabilities of LAG and LSI
were classified as disposal groups classified as held for sale as of December 31, 2023. The transfer of LAG's shares was completed on January 31,
2024, and as a result, LSI will no longer be a subsidiary of the Company. For details, please refer to Note 35 of the consolidated financial statements.

30. Related Parties(1) Related Party Transactions
January 1 to December 31, 2022
Omitted. No significant transaction was undertaken, excepting transactions that were offset in the consolidated financial statements.
January 1 to December 31, 2023
Omitted. No significant transaction was undertaken, excepting transactions that were offset in the consolidated financial statements.

(2) Remuneration of Key Managerial Personnel
Millions of yen

Thailand

Sumitomo Rubber AKO Lastik Sanayi ve Ticaret A.Ş.

Switzerland

100.0

Sumitomo Rubber (Thailand) Co., Ltd.

Sumitomo Rubber South Africa (Pty) Limited

Lonstroff AG (Note 3)

100.0
100.0

Fixed remuneration

Jan. 1 to Dec. 31, 2022

Jan. 1 to Dec. 31, 2023

¥458

¥436

Performance-based remuneration

93

39

Medium- to long-term incentives

17

14

¥568

¥489

Total

31. Contingent Liabilities
Improper Inspections of Marine Fenders
January 1 to December 31, 2022
It was discovered in the 130th business term that product inspection methods used for a portion of the Group’s marine fenders(shock-absorbing rubber materials designed to protect vessels and piers from damage arising from collision at berthing) had
deviated from industry guidelines. Also, data gleaned in the course of inspections was found to have been improperly modified.
The Group established an emergency response committee to address these issues and confirmed the safety of similar productsthat were already shipped while providing customers and other stakeholders with briefings. Moreover, a special investigationcommittee, which includes external lawyers, was set up to carry out in-house investigations. A report was then submitted by thelatter committee on November 5, 2021 regarding the root causes of the issues and measures aimed at preventing recurrences,with the Group publicizing this report on November 9, 2021. Depending on future developments in these issues, the Group’s
financial position and business results could be affected by, for example, the recording of compensation to be paid to customers
and other losses. However, as the Group finds it difficult to reasonably estimate the monetary impact of these issues, its assessmentof such impact has not been incorporated into the consolidated financial statements.

ThailandSports

100.0

100.0

100.0

100.0

January 1 to December 31, 2023
It was discovered in the 130th business term that product inspection methods used for a portion of the Group’s marine fenders(shock-absorbing rubber materials designed to protect vessels and piers from damage arising from collision at berthing) had
deviated from industry guidelines. Also, data gleaned in the course of inspections was found to have been improperly modified.
The Group established an emergency response committee to address these issues and confirmed the safety of similar productsthat were already shipped while providing customers and other stakeholders with briefings. Moreover, a special investigationcommittee, which includes external lawyers, was set up to carry out in-house investigations. A report was then submitted by thelatter committee on November 5, 2021 regarding the root causes of the issues and measures aimed at preventing recurrences,with the Group publicizing this report on November 9, 2021. We are currently working on safety verification for the case andnegotiating compensation methods with customers and other relevant parties. The estimated amount of compensation costs forsome cases that meet the requirements of provisions has been included as provisions (provision for losses related to voluntary
recall of products) in the fiscal year ended December 31, 2023, but depending on future developments, the Group’s financial
position and business results could be affected by, for example, the recording of additional losses such as those from compensation
to be paid to customers and other relevant parties.

South Korea

Sports

50.0

50.0

50.0

50.0

32. Commitment

U.K.

Sports

100.0

100.0

100.0

100.0

Hong Kong Sumirubber, Ltd.

Hong Kong

Industrial products

100.0

100.0

100.0

100.0

Regarding the acquisition of property, plant and equipment, the Group’s commitment for outlays amounted to 9,388 million yen and
7,948 million yen as of December 31, 2022 and December 31, 2023, respectively. Regarding the acquisition of intangible assets,
the Group’s commitment for outlays amounted to 1,349 million yen and 1,464 million yen as of December 31, 2022 and December
31, 2023, respectively.

Sumirubber Malaysia Sdn. Bhd.

Malaysia

Industrial products

100.0

100.0

100.0

100.0

33. Adjustment for Hyperinflation

Zhongshan Sumirubber Precision Rubber Ltd.

China

Industrial products

100.0

100.0

100.0

100.0

Sumirubber Vietnam, Ltd.

VietnamIndustrial products

100.0

100.0

100.0

100.0

Micheldever Group Ltd.
SUMITOMO RUBBER SINGAPORE PTE. LTD.
Srixon Sports Europe Ltd.

U.K.

Sports

100.0

100.0

100.0

100.0

Cleveland Golf Canada Corp.

CanadaSports

100.0

100.0

100.0

100.0

Roger Cleveland Golf Company, Inc.

U.S.A.

Sports

100.0

100.0

100.0

100.0

Dunlop Srixon Sports Manufacturing (Thailand) Co.,Ltd.
Dunlop Sports Korea Co., Ltd.
Dunlop International 1902 Limited－ 49 －

Over the three years of the period ended December 31, 2022, the accumulated inflation ratio surpassed 100% in Turkey. Becauseof this, the Group has judged that its subsidiary based in the country, which uses Turkish lira as its functional currency, is now
operating under a hyperinflationary economy. Accordingly, the Group has adjusted the financial statements prepared by said
subsidiary for inclusion in the consolidated financial statements using a measurement unit deemed appropriate as of the end of thereporting period. This accounting treatment was implemented in accordance with requirements stipulated by IAS 29 “Financial－ 50 －

Reporting in Hyperinflationary Economies.”
In the course of the aforementioned adjustment, the Group used a conversion coefficient calculated based on the national
consumer price index announced by the Turkish Statistical Institute.
The consumer price index and conversion coefficient determined for the closure date of each fiscal period are as below.

Millions of yen
As of Dec. 31, 2022

As of Dec. 31, 2023

Cash and cash equivalents

¥—

¥933

Trade and other receivables

—

171
589

Assets for disposal groups classified as held for sale

Date

Consumer price index

Conversion coefficient

December 31,2013

229

812

Inventories—

December 31,2014

248

750

Other

—

85

December 31,2015

270

690

Total assets¥—¥1,778December 31,2016

293

635

December 31,2017

327

568

December 31,2018

394

472

Trade and other payables

¥—

¥633

December 31,2019

441

422

Deferred tax liabilities—

243

December 31,2020

505

368

Net defined benefit liabilities

—

138

Other

—

524

¥—

¥1,538December 31,2021

687

271

December 31,2022

1,128

165

Liabilities for disposal groups classified as held for sale

Total liabilities

December 31,2023
1,859
100
For said subsidiary operating under a hyperinflationary economy, the Group adjusted property, plant and equipment and other noncurrency items whose value is stated at the acquisition price, applying a conversion coefficient based on the acquisition date. On
the other hand, the Group did not adjust currency and non-currency items whose value is stated at the present price as the valueof these items are considered to be stated at the measurement unit as of the end of the reporting period.
The financial statements of the subsidiary are translated into Japanese yen based on the spot exchange rate at the fiscal
year-end and included into consolidated financial statements.
As a result, the Group’s business profit for the fiscal year ended December 31, 2023 decreased 2,145 million yen due toincreases in depreciation and other items. At the same time, profit for the period attributable to owners of the parent increased
1,856 million yen thanks mainly to gains on net monetary position, while total assets as of December 31, 2023 grew 20,120 million
yen.

The disposal groups classified as held for sale are measured using the fair value after the deduction of selling costs, given that thefair value after the deduction of selling costs is lower than the carrying amount. Furthermore, the fair value is determined based on
the scheduled sale price in the stock transfer agreement. This fair value measurement is classified as “Level 3” fair value.
Accordingly, in the fiscal year ended December 31, 2023, a carrying amount of 11,303 million yen in manufacturing equipment
owned by LAG and LSI was recorded as an impairment loss under "Other expenses" in the consolidated statement of income.

36. Subsequent Events
None.
(2) Other
Quarterly Information for the Fiscal Year under Review

Millions of yen

Cumulative Period

34. Share-Based Compensation(1) Overview of the share-based compensation system
In the fiscal year ended December 31, 2022, the Company introduced a share-based compensation that involves the granting ofrestricted shares, with the objective of providing directors (excluding outside directors) with incentives for sustainable improvement
in corporate value. This move is also aimed at ensuring that directors and shareholders share the same value to a greater degree.
This compensation system provides recipients with monetary receivables and have them pay all such receivables ascontributed assets so that the Company may issue or dispose of its common stock.
Under this system, restricted stock allotment agreements have been signed between the Company and recipients to enable
the issuance or disposal of its common stock. Provisions stipulated by these agreements include the following clauses: (1)Recipients shall not transfer, arrange security interests for, or otherwise dispose of said stock until they finish their term of office orstep aside from their positions for justifiable reasons, such as reaching retirement age. (2) If certain events occur, the Company
shall acquire allotted common stock free of charge.

Sales revenue

Jan. 1 to Dec. 31, 2022

April 28, 2023

Number of shares allotted

15,000 shares

12,000 shares

As of Dec. 31, 2023

¥561,161¥850,702¥1,177,399

8,899

18,91846,45862,745

Quarterly income attributable to owners of the parent

4,006

8,196

27,20537,048

Quarterly income per share (yen)¥15.23¥31.16¥103.43¥140.86

Accounting Period

Quarterly income per share (yen)Fair value per share as of the date of allotment¥1,100¥1,139Note: The fair value of the allotted stock is calculated based on the closing price of Company stock announced at the Tokyo
Stock Exchange a business day prior to the date of the relevant resolution being passed by the Board of Directors.
(3) The amount recognized as expenses in the consolidated financial statements
The amount of stock compensation expenses recognized by the Group totaled 17 million yen and 14 million yen as of December
31, 2022 and December 31, 2023, respectively. This amount is included in “Selling, general and administrative expenses.”

35. Disposal Groups Classified as Held for Sale
As part of business restructuring, the Company transferred all shares it holds in subsidiary LAG to NCM Investments VII B.V., asubsidiary of private equity fund Nimbus Investment Fund V Coöperatief U.A. operated by Nimbus, an investment fund company
headquartered in the Netherlands. The transfer was completed on January 31, 2024 after the resolution and conclusion of a sharetransfer agreement for the share transfer at the Board of Directors meeting held on December 20, 2023. As a result of this sharetransfer, LSI, a wholly owned subsidiary of LAG that manufactures medical rubber products in Slovenia, will also no longer be a
subsidiary of the Company.
As the Group will lose control of LAG and LSI in the fiscal year ending December 31, 2024, the assets and liabilities of LAG and
LSI were classified as disposal groups classified as held for sale as of December 31, 2023. The reportable segment to which thedisposal groups classified as held for sale belongs is "Industrial and Other Products."
The breakdown of the disposal groups classified as held for sale is as follows.

－ 51 －

Q3¥276,761

Jan. 1 to Dec. 31, 2023

April 22, 2022

Q2

Quarterly income before tax adjustment(2) Number of shares allotted during the period and their fair value
Date of allotment

Q1－ 52 －

Q1

Q2

Q3¥15.23¥15.93¥72.27Q4¥37.43