Canon Marketing Japan Inc.

Canon Marketing Japan Inc.
16-6, Konan 2-chome, Minato-ku, Tokyo 108-8011, Japan

Canon Marketing Japan Group Website
Investor Relations

https://cweb.canon.jp/eng/ir/

Consolidated Financial Statements FY2022
Year Ended December 31, 2022
With Independent Auditor's ReportData

Consolidated Balance Sheet
Canon Marketing Japan Inc. and Consolidated Subsidiaries
December 31, 2022
(Millions of yen)
2022

ASSETS(Millions of yen)
2022

2021

¥ 47,376¥ 46,323

LIABILITIES AND EQUITYCURRENT ASSETS:   Cash and cash equivalents (Notes 6 and 23)



2021

CURRENT LIABILITIES:¥ 84,632¥ 68,029   Notes and accounts payable-trade110,432

—

46

53

—

107,368   Accrued income taxes (Note 16)

7,453

6,955

   Inventories (Note 8)

38,521

35,236   Consumption taxes payable

5,426

6,089

   Short-term loans receivable (Note 23)

180,013

180,004  Accrued expenses

16,62816,127

6,154

5,469

  Accrued bonuses

3,440

4,148

   Notes accounts receivable-trade and contract assets (Notes 4, 7, 17, and 23)   Notes and accounts receivable-trade (Notes 4, 7, and 23)   Other current assets   Allowance for doubtful receivables   Total current assets   Current portion of long-term lease obligations (Notes 11 and 23)

(44)

(24)

   Accrued directors’ bonuses

119

98

419,708

396,082   Accrued product warranties

243

292

   Accrued loss on contracts (Note 8)

115

309

PROPERTY, PLANT AND EQUIPMENT:  Land28,36028,360   Other current liabilities (Note 17)27,216

26,715   Buildings and structures

80,18974,946   Total current liabilities

108,062

107,109   Machinery and vehicles

167

167

LONG-TERM LIABILITIES:   Furniture and fixtures

15,22516,092   Long-term lease obligations (Notes 11 and 23)

74

81  Rental assets

35,91336,735   Allowance for long-term continuous service rewards

749

899

  Lease assets

40

40   Accrued pension and severance cost (Note 12)

32,14240,914   Construction in progress

897

2,393

   Other long-term liabilities (Note 11)

2,341

2,738

   Total

160,791

158,733   Total long-term liabilities

35,30644,632  Accumulated depreciation(75,514)(73,579)    Net property, plant and equipment

85,277

85,154INTANGIBLE ASSETS:COMMITMENTS AND CONTINGENT LIABILITIES (Notes 13 and 22)
EQUITY:

5,365

6,227

   Goodwill (Note 27)327—  Common stock:   Facility utilization rights

303

303

73,30373,303   Other intangible assets

01   Authorized, 299,500,000 shares; issued, 131,079,972 shares as of December 31,
2022 and 2021.

   Total intangible assets

5,995

6,531

  Capital surplus

82,827

82,82429—

233,355

208,825(2,093)(2,092)

5,203

7,873

    Deferred gain (loss) on derivatives under hedge accounting

(15)

23

   Foreign currency-translation adjustments

294

126

6,668

3,068

399,571373,950801727

400,372

374,677¥ 543,740¥ 526,418  Software   Stock acquisition rights (Note 19)

INVESTMENTS AND OTHER ASSETS:
13,312

17,353   Long-term loans receivable

1636   Prepaid pension and severance costs (Note 12)

393

421

   Lease deposits (Note 11)

2,768

2,962

   Deferred tax assets (Notes 5 and 16)

12,904

14,975   Other investments and other assets

3,555

2,999

   Allowance for doubtful receivables

(188)

(95)

    Total investments and other assets

32,76038,651¥ 543,740¥ 526,418   Investments in securities (Notes 9 and 23)    Total assets (Note 27)

SHAREHOLDERS’ EQUITY (Notes 14 and 15):  Retained earnings   Treasury stock, at cost; 1,404,790 shares in 2022 and 1,403,572 shares in 2021  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):    Unrealized gain (loss) on available-for-sale securities    Defined retirement benefit plans   Total
NON-CONTROLLING INTERESTS   Total equity    Total liabilities and equity• See accompanying notes to consolidated financial statements.

1

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

2

Data

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Canon Marketing Japan Inc. and Consolidated Subsidiaries
Year Ended December 31, 2022

Canon Marketing Japan Inc. and Consolidated Subsidiaries
Year Ended December 31, 2022

(Millions of yen)NET SALES (Notes 17 and 27)
COST OF SALES (Notes 8 and 18):
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 18 ,19 and 20):
Operating income (Note 27)(Millions of yen)

2022

2021

¥ 588,132¥ 552,086

388,843

361,810OTHER COMPREHENSIVE INCOME (LOSS) (Note 26):

199,289

190,276

Unrealized gain (loss) on available-for-sale securities

149,342

150,577

Deferred gain (loss) on derivatives under hedge accounting

(38)

52

49,947

39,699Foreign currency-translation adjustments

194

136

Defined retirement benefit plans

3,600

4,312

1,083

8,144

¥ 36,710¥ 37,640¥ 36,612¥ 37,547

98

93

OTHER INCOME (EXPENSES):

NET INCOME

Interest income

300

275

   Total other comprehensive income

Dividend income

210

283

COMPREHENSIVE INCOME

Interest expense

(12)

(12)

Insurance income

459

506

Foreign exchange gains

29—

Owners of the parent

Foreign exchange losses—(6)

Non-controlling interests

Gain on investments in partnership—

278

Loss on investments in partnership

(29)

—

Gain on sales of long-lived assets (Note 21)3

6Insurance income due to disaster (Note 21)—

203

Gain on sales of investments in securities (Note 9)

730

1,255

Loss on sales of investments in securities (Note 9)

(18)

—

Gain on sales of shares of subsidiaries and associates—

896

Loss on sales of shares of subsidiaries and associates

—

(40)

(124)

(124)

Loss on disaster (Note 21)

—

(169)

Loss on impairment of investments in securities (Note 9)

(58)

(18)

Other, net

8663   Total other income (expenses)

1,576

3,396

Net income before income taxes

51,52343,095Current

14,244

12,971

Deferred

1,652

628

15,896

13,59935,62729,49675

76

35,552

29,420¥ 35,627¥ 29,496

Loss on sales and disposal of long-lived assets (Note 21)

2022

2021

¥ 35,627¥ 29,496(2,673)

3,644

COMPREHENSIVE INCOME ATTRIBUTABLE TO:• See accompanying notes to consolidated financial statements.

INCOME TAXES (Note 16):   Total income taxes
Net income
NET INCOME ATTRIBUTABLE TO:
Non-controlling interests
Owners of the parent
Net income


(Yen)

PER SHARE DATA (Note 25):
Net income attributable to owners of the parent  -Basic¥ 274.16¥ 226.88  -Diluted

274.10226.83

90.00

75.00

Cash dividends applicable to the year
• See accompanying notes to consolidated financial statements.

3

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

4

Data

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Canon Marketing Japan Inc. and Consolidated Subsidiaries
Year Ended December 31, 2022

Canon Marketing Japan Inc. and Consolidated Subsidiaries
Year Ended December 31, 2022
(Thousands of shares / Millions of yen)(Millions of yen)

Shareholders’ equity
Common stock

StockacquisitionrightsRetainedearnings

SharesAmountCapitalsurplus131,080¥ 73,303¥ 82,815  —¥ 188,482 Net income attributable to owners of the parent

—

—

—

—

 Cash dividends

—

—

—

—

 Purchase of treasury stock

—

—

—

 Disposition of treasury stock—— Net income attributable to non-controlling interests— Cash dividends paid to non-controlling interests— Net change in the year

Balance at January 1, 2021

Balance at January 1, 2022

2021

¥ 51,523¥ 43,095

9,593

10,246

CASH FLOWS FROM OPERATING ACTIVITIES:Treasury stock
Amount

Net income before income taxes(1,413)¥   (2,104)

Depreciation and amortization

29,420——

Amortization of goodwill (Note 27)30—(9,077)——

Increase (decrease) in allowance for doubtful receivables

111

(243)

—

—

(1)

(2)

Increase (decrease) in accrued pension and severance costs(3,480)

(544)

9

—

—

9

14

Decrease (increase) in prepaid pension and severance costs

(46)

(45)

—

—

—

—

—

—

Increase (decrease) in accrued bonuses(716)(1,486)

—

—

—

—

—

—

Loss (gain) on sales and disposal of property, plant and equipment, net

108

112

—

—

—

—

—

—

—

Loss (gain) on sales of investments in securities(712)(1,255)

Shares131,080

73,30382,824—

208,825(1,405)(2,092)

Loss on impairment of investments in securities58

18 Net income attributable to owners of the parent

—

—

—

—

35,552——

Loss (gain) on sales of shares of subsidiaries and associates

—

(856)

 Cash dividends

—

—

—

—

(11,022)——

Loss (gain) on investments in partnership

29

(278)

 Purchase of treasury stock

—

—

—

—

—

(1)

(4)

Decrease (increase) in notes and accounts receivable(2,895)(1,988) Disposition of treasury stock

—

—

3

—

—

2

3

Decrease (increase) in inventories(3,280)(7,467) Net income attributable to non-controlling interests

—

—

—

—

—

—

—

986

2,222

 Cash dividends paid to non-controlling interests

—

—

—

—

—

—

—

—

—

—

¥ 29

—

—

—

(13,820)(13,104) Net change in the year

131,080¥ 73,303¥ 82,827¥ 29¥ 233,355(1,404)¥ (2,093)

236

4,330

37,72532,757(8,890)(14,587)

24

18

Payments for purchases of intangible assets(894)(2,242)

Payments for purchases of investments in securities(676)(1,089)Balance at December 31, 2022
(Millions of yen)

Deferred
Unrealized
gain (loss) on
gain (loss) on
derivatives
available-forunder hedge
sale securities
accounting

Increase (decrease) in notes and accounts payable-trade
Income taxes paid
Other, net    Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:Payments for purchases of property, plant and equipment

Accumulated other comprehensive income (loss)
Foreigncurrencytranslation
adjustments

Definedretirement
benefit plans

Total

Noncontrollinginterests

Proceeds from sales of property, plant and equipment
Total equity¥ 4,231¥ (29)¥   5¥ (1,244)¥ 345,459¥ 656¥ 346,115

Proceeds from sales of investments in securities

1,330

1,893

 Net income attributable to owners of the parent

—

—

—

—

29,420—29,420

Payments for purchases of shares of a subsidiary

(210)

—

 Cash dividends

—

—

—

—

(9,077)—(9,077)

Proceeds from sales of shares of a subsidiary—847 Purchase of treasury stock

—

—

—

—

(2)

—

(2)

Decrease (increase) in short-term loans receivable, net

113 Disposition of treasury stock

—

—

—

—

23

—

23

Other, net

(802)

(737)

 Net income attributable to non-controlling interests

—

—

—

—

—

76

76

    Net cash used in investing activities(10,107)(15,894) Cash dividends paid to non-controlling interests

—

—

—

—

—

(22)

(22)

CASH FLOWS FROM FINANCING ACTIVITIES: Net change in the year

3,642

52

121

4,312

8,127

17

8,144

Repayments of finance lease obligations

(56)

(62)

Balance at January 1, 2022

7,873

23

126

3,068

373,950727

374,677

Payments for purchases of treasury stock

(4)

(3)

 Net income attributable to owners of the parent

—

—

—

—

35,552—35,552

Dividends paid

(11,020)(9,073) Cash dividends

—

—

—

—

(11,022)—(11,022)

Dividends paid to non-controlling interests

(24)

(22)

 Purchase of treasury stock

—

—

—

—

(4)

—

(4)

Other, net

(156)

—

 Disposition of treasury stock

—

—

—

—

6

—

6

(11,260)(9,160) Net income attributable to non-controlling interests

—

—

—

—

—

75

75

 Cash dividends paid to non-controlling interests

—

—

—

—

—

(24)

(24)

Balance at January 1, 2021

 Net change in the year
Balance at December 31, 2022
• See accompanying notes to consolidated financial statements.

5

2022

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022(2,670)

(38)

168

3,600

1,089

23

1,112

¥ 5,203¥ (15)¥ 294¥ 6,668¥ 399,571¥ 801¥ 400,372    Net cash used in financing activities

245

195

Net increase in cash and cash equivalents

16,603

7,898

Cash and cash equivalents at beginning of year

68,02960,131

Cash and cash equivalents at end of year (Note 6)¥ 84,632¥ 68,029

Effect of exchange rate changes on cash and cash equivalents• See accompanying notes to consolidated financial statements.

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

6

Data

Notes to Consolidated Financial Statements
Canon Marketing Japan Inc. and Consolidated Subsidiaries
Year Ended December 31, 2022

1

Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements of Canon Marketing Japan Inc. (the “Company”) and its consolidated
subsidiaries (the “Group”) are prepared on the basis of accounting principles generally accepted in Japan, which are different
in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Japanese Financial Instruments
and Exchange Act. Certain accounts and items presented in the original consolidated financial statements in Japanese havebeen reclassified in order to present them in a form that is more familiar to readers outside of Japan.
Japanese yen figures less than a million yen are rounded to the nearest million yen.
In addition, certain changes have been made to the presentation of the consolidated financial statements of the previous
fiscal year to conform to those of the current fiscal year.

2

Summary of Significant Accounting Policies(a) Principles of Consolidation
	The accompanying consolidated financial statements for the fiscal year ended December 31, 2022, include the accountsof the Company and all of its 15 (14 in 2021) subsidiaries. All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within theGroup has also been eliminated. The Company does not have any associated companies accounted for using either
equity method or cost method. All consolidated subsidiaries have the same balance sheet date as the consolidated balance sheet date.
QB5 Inc. has been included in the scope of consolidation from the current fiscal year due to the acquisition of its shares.

(f)

Leases(1) Finance lease transactions — Lessees’ accounting		Leases that meet the criteria for finance lease including transfer of ownership are recorded as assets. Such lease­transactions mainly involve servers used in the Company’s IT system and software.
(2) Accounting method for depreciation of lease assets — Lessees’ accounting		Lease assets under finance lease contracts are depreciated by the straight-line method over their respective lease­contract term with zero residual value.

(g) Long-Lived Assets
	The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount ofan asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued
use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount bywhich the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash
flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

(h) Intangible Assets
	Software for sales is amortized by the amount by comparing the larger of the amortization calculated based on the estimated sales quantity or the estimated revenue, or the amortization calculated based on the straight-line method using
the estimated effective duration of sales up to three years. Internal-use software is depreciated by the straight-line
method based on the length of in-house durability of 5 years.

(b) Cash Equivalents
	The Company and its consolidated subsidiaries consider all highly liquid investments, including time deposits and certificates of deposit, all of which mature or become due within three months of the date of acquisition, to be cash
equivalents.

(i)

Goodwill is, in principle, amortized on a straight-line basis over five years.

(j)
(c)

Inventories	Merchandise and service parts are valued at cost determined by the monthly moving-average method. The carrying
amount in the consolidated balance sheet represents the amount after write-downs due to decreased profitability.
	Work in process is valued at cost determined by the specific identification method.
	Supplies are valued at cost determined by the last-purchase price method. The carrying amount in the consolidated balance sheet represents the amount after write-downs due to decreased profitability.

Method and period for amortization of goodwill

Investments in Securities

	Investments in securities consist of debt and equity securities. Held-to-maturity debt securities are stated at amortizedcost. Available-for-sale marketable securities are stated at fair value, with unrealized gain or loss, net of the applicabletaxes, reported as a separate component of equity, and costs of securities sold are determined by the moving-averagemethod. Available-for-sale securities whose fair value is not readily determinable are stated at cost determined by the­moving-average method.

(k) Accrued Bonuses
The estimated payment for current year’s portion of employees’ bonus is recorded based on the projected payments.

(d) Allowance for Doubtful Receivables
	To cover possible losses on collection, allowance for specific receivables from customers experiencing financial difficulties
is estimated on an individual basis. For all other receivables, allowance is calculated based on past experiences of credit
losses.

(l)(e) Property, Plant and Equipment, Excluding Lease Assets(m) Accrued Product Warranties

	Property, plant and equipment, excluding lease assets, are stated at cost. Depreciation is computed by the declining-balance method for property and equipment, with the exception of items that are depreciated by the straight-line method,at rates based on the estimated useful lives of the respective assets. Items depreciated by the straight-line method arerental assets, certain assets of consolidated subsidiaries, buildings purchased on or after April 1, 1998 with the exceptionof building improvements, and building improvements and structures purchased on or after April 1, 2016.

	Costs arising from a one-year free warranty contract for consumer products are recorded based on the past experiencesof free repairs. Also, at certain subsidiaries, the future payment for free program maintenance and repairs are estimatedand accrued for based on the historical figures.

Accrued Directors’ Bonuses
The estimated payment for current year’s portion of directors’ bonus is recorded based on the projected payments.

	The useful lives are as follows:	Buildings and structures, from 3 years to 75 years; furniture and fixtures, from 2 years to 20 years; and rental assets,
3 years.

7

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

8

Data
Notes to Consolidated Financial Statements(n) Accrued Loss on Contracts(t)

Per Share Amounts

	To cover possible future losses on contracts in progress at the end of the current year, if the occurrence of loss is probable and the loss amount can be reasonably estimated as of the end of the year, the amount of losses expected to be
incurred in the following year and thereafter is recorded.

	Basic earnings (net income attributable to owners of the parent) per share are computed based on the weighted-average number of shares of common stock outstanding during each year. The computation of diluted earnings per sharereflects the maximum possible dilution from exercise of option.
	Shareholders’ equity per share is computed based on the number of shares of common stock outstanding at year end.

(o) Allowance for Long-Term Continuous Service Rewards
	The estimated payment is recorded in order to cover payment of rewards to employees in accordance with internal regulations on long-term continuous service.

	Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to
the respective years, including dividends to be paid after the end of the respective years.

(u) Standards for Recognizing Significant Revenues and Expenses(p) Accounting Method for Retirement Benefits(1) Method of attributing estimated amounts of retirement benefits to periods
		In calculating retirement benefit obligations, the estimated amount of retirement benefits attributed to periods up to
the current year is primarily determined using the benefit formula basis.
(2) Amortization of unrecognized actuarial gains and losses and prior service cost		Unrecognized prior service cost is amortized by the straight-line method over the average remaining service periodof the eligible employees for past service when occurred. Unrecognized actuarial gains and losses are amortizedfrom the year following the year in which they arose by the straight-line method over the average remaining service
period of the eligible employees.
(3) Application of simplified method at smaller-sized companies
		Certain consolidated subsidiaries apply the simplified method for calculating accrued pension and severance costs
and net periodic benefit costs. Under this method, the payments for voluntary early retirement of all eligible employees at the end of the year are recognized as retirement benefit obligations.

(q) Income Taxes
	The provision for income taxes is computed based on the pretax income included in the consolidated statement ofincome. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.

(r)

Translation of Foreign Currency Accounts

	All short-term and long-term receivables and payables denominated in foreign currencies are translated into Japanese
yen at the current exchange rates in effect at the consolidated balance sheet date except for foreign currency-denominated payables covered by exchange contracts for hedge purpose. The foreign exchange gains and losses on translation
are recognized in the accompanying consolidated statement of income.

	The key performance obligations in the Group’s main businesses related to revenue from contracts with customers andthe usual point in time at which these obligations are satisfied (the usual point in time at which revenue is recognized)
are as follows.
	The Group sells and provides services for products. It also sells products and provides services in the IT solutions andindustrial equipment and healthcare fields. For sales of products that do not require customer acceptance inspections,
the Group is generally entitled to receive consideration for the transaction from the customer when the product is delivered, as legal ownership of the product, physical possession, significant risks associated with ownership of the product,and economic value are transferred to the customer. Therefore, revenue is recognized when the product has been delivered to the customer because the performance obligation is deemed to be satisfied when control over the product istransferred to the customer at that point in time. For sales of products that require customer acceptance inspections, theGroup is entitled to receive consideration for the transaction from the customer when the product is inspected as legal
ownership of the product, physical possession, significant risks associated with ownership of the product, and economic
value are transferred to the customer. Accordingly, revenue is recognized when the product has been inspected andaccepted to the customer because the performance obligation is deemed to be satisfied when control over the productis transferred to the customer at that point in time. Services for products are mainly maintenance contracts for businessequipment, which are either routine or recurring services. Therefore, revenue is recognized on a straight-line basis overa specific period depending on the nature of the contract with the customer because the performance obligation isdeemed to be satisfied over time as the services are provided to the customer in accordance with the contract. For­contracts where the Group is entitled to receive consideration from the customer for the portion of the performanceobligation satisfied according to the volume of product used, revenue is recognized based on the amount obtained bymultiplying the unit price stipulated in the contract by the volume of product used, which is based on the judgementthat the customer shall receive benefits in proportion to the volume of product used. Consideration for transactions isgenerally settled within a short period from the time the performance obligation is satisfied, and the amount of thepromised consideration does not include a significant financial component. Furthermore, for certain sales of products
and provision of services for certain products, consideration for transactions is received in advance.
	Each reporting segment has unique revenue recognition methods, as outlined below. As the Enterprise and Area segments provide similar products and services, their revenues are stated in the aggregate.

Consumers segment(s)Translation of Subsidiaries’ Financial Statements Prepared in Foreign Currency

	The consolidated balance sheet accounts of the foreign subsidiaries are translated into Japanese yen at the current
exchange rates in effect at the consolidated balance sheet date, except for the components of equity, excluding­non-controlling interests, which are translated at their historical exchange rates.
	Revenue and expense accounts in foreign currency are translated at the average exchange rates prevailing during
the year.

	Transaction prices for the sale of products include rebates and other forms of variable consideration that are contingent
upon the achievement of predetermined targets and are mainly related to products generally sold to retailers. Rebates
and other variable consideration are deducted from the transaction price and rebates are estimated using the expectedvalue method based on past performance and other factors.

Enterprise and Area segments
	Maintenance and operation services and outsourcing of IT solutions are services provided to customers consistently overthe period of the contract. Therefore, revenue is recognized on a straight-line basis over a certain period depending on
the nature of the contract with the customer, based on the judgment that the performance obligation is satisfied overtime. For contracts in which the Group is entitled to receive consideration from the customer for the portion of the­performance obligation satisfied according to the labor hours or the work performed, revenue is recognized basedon the volume obtained by multiplying the unit price stipulated in the contract by the labor hours or the work performed for the service because the customers receive benefits in proportion to the labor hours or the work performed
for the service.

9

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

10

Data
Notes to Consolidated Financial Statements

	For System Integration (SI) services that involve contract software development, revenue is recognized over the period ofdevelopment in proportion to the progress toward completion when it can be reasonably estimated, as the results aretransferred to the customer in accordance with the development progress. To estimate the progress toward completion,
the input method based on costs incurred (cost-to-cost method) is used to recognize revenue because the costs incurred
are proportional to the progress toward completion. In cases where the progress toward completion cannot be reasonably estimated, revenue is recognized based on the cost recovery method for those items for which the costs incurred inproportion to the progress completed can be recovered.

	Professional segment
	For SI services involving the contract development of systems for the healthcare and other sectors, please refer to therelevant information on performance obligation for the Enterprise and Area segments.

(v)

Research and Development Costs
Research and development costs are charged to income as incurred.

(w) Stock-Based Compensation
	The Company measures stock-based compensation cost at the grant date, based on the fair value of the award, andrecognizes the cost on a straight-line basis over the requisite service period, which is the vesting period.

(x)

Key Hedge Accounting Methods(1) Hedge accounting method		Accounts payable denominated in foreign currencies for which foreign exchange forward contracts are used tohedge the foreign currency fluctuations is translated at the contracted rate if the forward contracts qualify forhedge accounting.
(2) Hedging instrument and hedged item		

Hedging instrument—Forward exchange contracts

		

Hedged item—Foreign currency-denominated payables(3) Hedging policy		The Company hedges the risk of changes in foreign currency-denominated payables’ Japanese Yen equivalent cash
flow attributable to changes in the related foreign currency exchange rates.
(4) Hedging effectiveness		The Company does not assess hedge effectiveness at year-end because hedging instrument and hedged item havethe same currency, amount, and due date in accordance with the Company’s hedging policy.

(y)

Other Significant Matters for Preparing Consolidated Financial Statements(1) Application of consolidated taxation system

		The Company and certain consolidated subsidiaries have adopted the consolidated taxation system.

(2)	Application of tax effect accounting for the transition from the consolidated taxation system to the group tax
sharing system		The Company plans to shift from the current consolidated taxation system to group tax sharing system. With
regard to differences under the group tax sharing system established by the Act on Partial Revision of the Income
Tax Act (Act No. 8, 2020) and differences under the single tax return filing system reexamined together with transition to the group tax sharing system, the Company and certain consolidated subsidiaries calculate the amountsof deferred tax assets and deferred tax liabilities based on the Income Tax Act before the revision, not applying
Paragraph 44 of ASBJ Guidance No. 28, “Implementation Guidance on Tax Effect Accounting”, February 16, 2018,as permitted by Paragraph 3 of the Practical Issues Task Force (PITF) No. 39, “Practical Solution on the Treatment of
Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System”,
March 31, 2020.
		From the beginning of the following fiscal year, the Group plans to apply “Practical Solution on the Accounting andDisclosure Under the Group Tax Sharing System” (ASBJ PITF No. 42, August 12, 2021), which stipulates the accounting treatment and disclosure of corporate tax, local corporate tax, and tax effect accounting when applying thegroup tax sharing system.

(z)

New Accounting Pronouncements(Accounting Standard for Fair Value Measurement, etc.)

	“Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, June17, 2021)(1) Overview
		The guidance stipulates the treatment of calculation of fair value of investment trusts and notes thereto, and treatment of notes to fair value of investments in partnerships, etc., in which the net amount equivalent to the equity
interest is recorded on the balance sheet.
(2) Scheduled date of application
		The guidance is scheduled to be applied at the beginning of the fiscal year ending December 31, 2023.

(3) Effect of applying the accounting standard, etc.
		The effect of applying the accounting standard was under review at the time of preparation of the consolidated
financial statements.

(Accounting Standard for Corporate Income Taxes, Local Inhabitant Taxes, and Enterprise Taxes, etc.)
	“Accounting Standard for Current Income Taxes” (ASBJ Statement No. 27, October 28, 2022)“Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, October 28, 2022)“Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28, October 28, 2022)(1) Overview
		The guidance stipulates the treatment of the tax effect of the sale of shares of subsidiaries when the Group’s cor­porate tax system is applied and the classification of the income taxes to be recorded when other comprehensive
income is taxed(2) Scheduled date of application
		The guidance is scheduled to be applied at the beginning of the fiscal year ending December 31, 2025.

(3) Effect of applying the accounting standard, etc.
		The effect of applying the accounting standard was under review at the time of preparation of the consolidated
financial statements.

11

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

12

Data
Notes to Consolidated Financial Statements

3

Changes in Accounting Policies

7

The Group adopted ASBJ Statement No. 30, “Accounting Standard for Fair Value Measurement”, July 4, 2019, ASBJ
Statement No. 9, “Accounting Standard for Measurement of Inventories”, July 4, 2019 and other standards in which theportion related to fair value (the “Standard of Fair value”) was revised from January 1, 2022, prospectively. The Standardof Fair value is similar to IFRS 13 and Topic 860 of US GAAP and established the measurement method and input hierarchyof fair value. Related disclosure was made in Note 23.

Notes with maturities at year-end were treated as having been settled on the maturity date, although the consolidated­balance sheet date fell on a holiday of financial institutions. The amounts of notes that matured at the year-end wereas follows:

Notes receivable-trade
Electronically recorded monetary claims-operating

8
Changes in Presentation

¥ 227

¥ 207

698

534

The components of Inventories as of December 31, 2022 and 2021, were as follows:

The Company applied the “Accounting Standard for Revenue Recognition” (ASBJ Standard No. 29, March 31, 2020) fromJanuary 1, 2022. Due to the application of this standard, “notes and accounts receivable-trade”, which is included under“current assets” in the consolidated balance sheet of the previous fiscal year, has been disclosed under “notes accounts
receivable-trade and contract assets” as of December 31, 2022. In accordance with the transitional treatment prescribed in
Paragraph 89-4 of the “Accounting Standard for Revenue Recognition”, reclassifications have not been made for the previous fiscal year as a result of this change in presentation. In addition, in accordance with the transitional treatment prescribedin Paragraph 89-4 of the “Accounting Standard for Revenue Recognition”, information on the previous fiscal year has notbeen included under “Revenue Recognition”.

(Millions of yen)
2022

2021

Merchandise¥ 33,410¥ 30,656

Service parts

4,487

3,922

Work in process

100

146

Supplies

524

512¥ 38,521¥ 35,236

Total

Write-downs of inventories, net of the amount of the reversal, for the years ended December 31, 2022 and 2021, were
¥ 1,140 million and ¥ 1,199 million, respectively. Accrued loss on contracts included in cost of sales for the years ended
December 31, 2022 and 2021, were ¥ (150) million and ¥ 309 million, respectively.

Significant Accounting Estimates
The Group records the deferred tax assets amounts for all of future temporary differences for which the timing of realizationis reasonably estimated. This is because stable taxable income has been achieved for the years ended December 31, 2022
and 2021, and the Group forecasts that the subsequent business environment is unlikely to significantly change in the near
future. Deferred tax assets as of December 31, 2022 and 2021, were ¥ 12,904 million and ¥ 14,975 million, respectively.
The Group considers the estimated future taxable income and business environment to be appropriate as they are determined based on the best estimate and judgement by management. However, they may be affected by changes in futurebusiness and economic environment as well as revision and promulgation of related laws and regulations. If management
estimate and judgement about future taxable income and business environment needs to be revised, the amount to be­recognized in the consolidated financial statements for the following years may be affected.

9

Investments in Securities
Investments in securities classified as available-for-sale as of December 31, 2022 and 2021, were as follows:(Millions of yen)
2022

Marketable equity securities

Cash and Cash Equivalents¥ 15,687

769

668

1,656

998

¥ 13,312¥ 17,353

Unlisted equity securities
Total

2021

¥ 10,887

Investments in investment partnerships

6

2021

Inventories(Changes due to the application of “Accounting Standard for Revenue Recognition”, etc.)

5(Millions of yen)2022

In addition, the note “matters concerning fair value of financial instruments and breakdown by input level” has been
included under Note 23 “Financial Instruments”. However, in accordance with the transitional treatment set forth in the“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, July 4, 2019), information on
the previous fiscal year has not been included.

4

Notes Maturing at the Year-End

Cash and cash equivalents as of December 31, 2022 and 2021, consisted of the following:(Millions of yen)
2022

Cash and deposits
Certificates of deposit due within three months
Cash and cash equivalents

13

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

2021¥ 84,132¥ 67,529

500

500¥ 84,632¥ 68,029

The carrying amounts and aggregate fair values of marketable equity securities as of December 31, 2022 and 2021, wereas follows:

2022
Cost

¥ 4,007(Millions of yen)

2021

Unrealized gains

Unrealized losses¥ 7,087¥ (207)

Fair value

Cost¥ 10,887¥ 4,359

Unrealized gains

Unrealized losses¥ 11,531¥ (203)

Fair value¥ 15,687

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

14

Data
Notes to Consolidated Financial Statements

Available-for-sale securities which did not have a quoted price as of December 31, 2022 and 2021, were as follows:

12(Millions of yen)
2022

Unlisted equity securities2021¥   769¥   668

1,656

998

¥ 2,425¥ 1,666

Investments in investment partnerships
Total

Employees’ Retirement and Severance Benefits
1.

	The Company has a defined contribution pension plan, a pension plan with a market-based variable accumulation rate(quasi-cash balance plan), and a lump-sum severance payment plan. Some of its consolidated subsidiaries have defined
benefit corporate pension plans, and lump-sum severance payment plans.

2.
The proceeds, realized gains and realized losses of the available-for-sale securities which were sold during the years ended
December 31, 2022 and 2021, were as follows:
2022
Proceeds

Marketable equity securities

Realized losses¥ 1,302¥ 730—¥ 1,302

Others
Total

Defined benefit plans(1) Reconciliation of retirement benefit obligations at the beginning and end of year, excluding the simplified method in (3)(Millions of yen)

(Millions of yen)
2022

2021

¥ 210,250¥ 213,121

Service costs

5,685

5,820

—

Interest costs

1,067

1,095

—

—

Actuarial (gains) losses(20,684)(861)¥ 1,255—

Benefit paid

(10,908)(8,925)¥ 185,410¥ 210,2502021

Realized gains

Overview of retirement benefit plans adopted

Retirement benefit obligations at beginning of year

Proceeds

Realized gains

Realized losses¥ (18)¥ 1,552¥ 1,255

—

—

—

¥ 730

¥ (18)¥ 1,552

Retirement benefit obligations at end of year
Impairment loss on listed equity securities for the year ended December 31, 2022 was ¥ 55 million. Impairment loss on
unlisted equity securities for the years ended December 31, 2022 and 2021 were ¥ 3 million and ¥ 18 million, respectively.

(2) Reconciliation of plan assets at the beginning and end of year, excluding the simplified method in (3)10Asset Retirement Obligations
The Group recognizes restoration obligations under real estate rental agreements of buildings and other real estates as asset
retirement obligations.
Instead of recognizing liabilities, the Group reasonably estimates the uncollectible amount of lease deposits related to thereal estate rental agreements, and accounts for the portion of such estimated amount attributable to the current year as
an expense.

11

2021

Plan assets at beginning of year

¥ 170,501¥ 166,498

Expected return on plan assets

4,256

4,156

(14,240)

4,443

Actuarial gains (losses)
Contributions from the employer

2,892

2,990

Benefit paid

(8,951)(7,586)¥ 154,458¥ 170,501

The outstanding balances of lease deposits considered uncollectible as of December 31, 2022 and 2021, were ¥ 3,538 million and ¥ 3,508 million, respectively.

Plan assets at end of year

Lease Obligations and Deposits(3)	Reconciliation of retirement benefit obligations at the beginning and end of year for which the simplified method
was applied

Lease obligations and deposits included in other long-term liabilities as of December 31, 2022, were as follows:
Category

Current portion of lease obligations (see Note 23)
Lease obligations, excluding current portion (see Note 23)

Balance at
beginning of year
(Millions of yen)

Balance at
end of year
(Millions of yen)¥     53



Averageinterest rate(%)

Payment due¥     46

—

—

81

74

—

2024–2027

2,596

2,219

0.00%

—

¥ 2,730¥ 2,339——

Other interest-bearing liabilities
Guarantee deposits received
Total

15

(Millions of yen)
2022

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022(Millions of yen)
2022

2021

¥ 743

¥ 845

Net periodic benefit costs

136

99

Benefit paid

(35)

(23)

Contributions to plans

(46)

(46)

Decrease resulting from exclusion of subsidiaries in consolidation

—

(132)

¥ 798

¥ 743

Accrued pension and severance costs at beginning of year

Accrued pension and severance costs at end of year Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

16

Data
Notes to Consolidated Financial Statements(4)	Reconciliation of retirement benefit obligations and plan assets at year-end and accrued and prepaid pension and severance costs in consolidated balance sheets

2021¥ 167,366¥ 190,935(154,839)(170,872)

12,527

20,063

19,222

20,430Net liabilities and assets in consolidated balance sheets¥    31,749¥    40,493

Accrued pension and severance costs¥    32,142¥    40,914

Prepaid pension and severance costs

(393)

(421)

¥    31,749¥    40,493

Plan assets
Unfunded retirement benefit obligations

Net liabilities and assets in consolidated balance sheets(i)(Millions of yen)
2022

Funded retirement benefit obligations(7) Plan assets
Main components of plan assets
Ratios for main components of plan assets were as follows:
2022

2021

Bonds

14%

22%

Stocks4

4

Pooled funds

54

52

Life insurance company general accounts

14

16

Other

14

6

Total

100%

100%

Note: T he composition of pooled funds was 45% in bonds and 55% in stocks as of December 31, 2022, and 44% in bonds and 56% in stocks as of December 31, 2021.

(ii)

Note: Plans for which the simplified method was applied were included.

Method for setting long-term expected rates of return	The long-term expected rate of return on plan assets is determined by considering current and projected plan asset allocations and current and anticipated long-term rates of return from diverse plan assets.

(5) Retirement benefit costs
Retirement benefit costs for the years ended December 31, 2022 and 2021, consisted of the following:(8) Actuarial assumptions

(Millions of yen)
2022

Service costs¥ 5,685¥ 5,820

Interest costs

1,067

1,095

Expected return on plan assets(4,256)(4,156)

Amortization of actuarial (gains) losses

(939)

1,250

Amortization of prior service costs

(282)

(302)

Net periodic benefit costs using the simplified method

136

99

¥ 1,411¥ 3,806

Retirement benefit costs of defined benefit plans

The principal actuarial assumptions for the years ended December 31, 2022 and 2021, were as follows:

2021
2022


2022

2021

Unrecognizedactuarial
gains and losses

Total

Unrecognizedprior service
costs

Unrecognizedactuarial
gains and losses

Total¥ (1,207)¥ (3,235)¥ (4,442)¥ (1,509)¥ 3,319¥ 1,810282(5,505)(5,223)302(6,554)(6,252)¥   (925)¥ (8,740)¥ (9,665)¥ (1,207)¥ (3,235)¥ (4,442)

Net change
At end of year

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

Long-term expected rates of return on plan assets

2.0–2.5%

2.0–2.5%

Estimated rates of salary increases

1.9–2.6%

1.9–2.6%

Defined contribution plan	The required contributions of the Company and consolidated subsidiaries to defined contribution plans, including
employees’ pension fund plan in the multiemployer plan which is accounted for in the same manner as the defined­contribution plan, totaled ¥ 1,889 million and ¥ 1,922 million for the years ended December 31, 2022 and 2021,
respectively.

13

Contingent Liabilities (Guarantee Obligations)
The Company provides the following guarantee obligations.


Unrecognizedprior service
costs

At beginning of year

17

(Millions of yen)

0.24–0.60%

3.

(6) Defined retirement benefit plans before income tax effect adjustment
	Changes in unrecognized prior service costs and unrecognized actuarial gains and losses for the years ended December
31, 2022 and 2021, were as follows:

2021

0.87–1.54%

Discount rates(Millions of yen)
2022

Guarantees for employees’ housing loans

2021

¥4

¥4

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

18

Data
Notes to Consolidated Financial Statements

14

Shareholders’ Equity

16

The Companies Act of Japan went into effect on May 1, 2006, replacing the Commercial Code. This applies to events ortransactions of companies in Japan occurring on or after May 1, 2006, and for the years ending on or after May 1, 2006.

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
resulted in a statutory income tax rate of approximately 31% for the years ended December 31, 2022 and 2021.

The Companies Act stipulates that the amounts actually paid in or contributed in-kind for newly issued stock shall berecorded as common stock. However, it also allows 50% or less of such amounts to be recorded as additional paid-in capital.

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and­liabilities at December 31, 2022 and 2021, were as follows:

Under the Companies Act, a company that meets certain criteria can establish in its Articles of Incorporation so that dividends can be paid to its existing shareholders by resolution of the Board of Directors, without requiring the approval of a resolution at a General Meeting of Shareholders. The Company has met said criteria and amended its Articles of Incorporation
at the annual General Meeting of Shareholders for the fiscal year ended December 31, 2006. The Companies Act provides
that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus other than the capital reserveand retained earnings other than the legal reserve be transferred to the capital reserve and the legal reserve, respectively, up
to the sum of the capital reserve and the legal reserve equals 25% of the common stock account. However, such appropriation cannot be made if the aggregate amount of the legal reserve exceeds 25% of common stock (i.e., the aggregate
amount of the Company’s legal reserve has already reached 25% of its common stock).

15

Income Taxes

Common Stock and Dividends
1.	The following table shows the movement of number of common stock for the years ended December 31,
2022 and 2021:

Decreaseor saleAs of December
31, 2021(Thousands of shares)
Increase orpurchase

Decreaseor saleAs of December
31, 2022

(Millions of yen)
2022

2021

DEFERRED TAX ASSETS:¥ 10,071¥ 12,732

1,163

1,399

Accrued business tax and business office tax

815

765

Asset retirement obligations

758

691

Excess depreciation of long-lived assets

624

758

Recording of estimated future variable consideration

559

733

Loss on disposal and devaluation of inventories

555

506

Excess amortization of software

509

688

Loss on impairment of investments in securities

264

568

Allowance for long-term continuous service rewards

233

279

Loss on valuation of golf club membership

96

98

Accrued pension and severance costs
Accrued bonuses

As of January
1, 2021

Increase orpurchase

Issued stock

131,080——

131,080——

131,080

Accrued product warranties

75

90

Treasury stock

1,413

1

9

1,405

1

2

1,404

Lump-sum depreciable assets

55

54

Tax loss carryforwards

43

57

Loss on impairment of long-lived assets

3131Note a: T he increase in treasury stock of 1 thousand shares and 1 thousand shares for the years ended December 31, 2022 and 2021, respectively, was due to the purchase of
fractional stock.
Note b: T he decrease in treasury stock of 2 thousand shares and 9 thousand shares for the fiscal year ended December 31, 2022, and 2021, respectively, was due to disposal for
performance-linked stock incentives.

2.

Matters regarding dividends

The Company distributes semiannual interim dividends by resolution of the Board of Directors and annual dividend by resolution of the General Meeting of Shareholders.
Semiannual interim dividends are paid to the common shareholders of the Company as of semiannual period-end andannual dividends are paid to the common shareholders of the Company as of year-end.
Resolution date, total dividends, and dividend per share for the years ended December 31, 2022 and 2021, were as follows:
2022
Resolution date

Resolution date

Total dividends(Millions of yen)

1,264

1,257

Gross deferred tax assets

17,11520,706   Less: valuation allowance

(472)

(803)

¥ 16,643¥ 19,903¥ 2,332¥ 3,526

1,280

1,280

127

122

Total deferred tax liabilities¥ 3,739¥ 4,928

Net deferred tax assets¥ 12,904¥ 14,975

Total deferred tax assets
DEFERRED TAX LIABILITIES:
Unrealized gain (loss) on available-for-sale securities
Deferred capital gain

2021

Total dividends Dividends per share(Millions of yen)
(yen)

Other

Dividends per share(yen)

Annual dividends

March 29, 2022

¥ 5,835¥ 45

March 26, 2021

¥ 5,187¥ 40

Interim dividends

July 25, 2022

¥ 5,187¥ 40

July 27, 2021

¥ 3,890

¥ 30

Other

Annual dividends of ¥ 6,484 million (¥ 50 dividend per share) was resolved by the General Meeting of Shareholders held on
March 29, 2023.
Total dividend per share was ¥ 90 and ¥ 75 for the years ended December 31, 2022 and 2021, respectively.

19

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

20

Data
Notes to Consolidated Financial Statements

17(d) Transaction price allocated to the remaining performance obligation

Revenue	The revenue expected to be recognized in the future related to performance obligations that are unsatisfied as ofDecember 31, 2022, were as follows:

The Group adopted a revised Standard for Revenue Recognition from January 1, 2022, prospectively. The revised Standard
for Revenue Recognition requires the disclosure of the following additional information.



1.

2022

Information on the disaggregation of revenue based on contracts with customers

Within 1 year(a) Disaggregation of revenue	As stated in Note 27, the Group has four reportable segments (Consumers, Enterprise, Area, and Professional). The revenue disaggregated and the reconciliation of the disaggregated revenue with the four reportable segments for the fiscal
year ended December 31, 2022, was as follows:Consumers

Enterprise

Area(Millions of yen)
Professional

Other

Total

¥

0

¥ 62,493¥   9,945¥ 9,601—¥ 82,039 Maintenance and operation
service / outsourcing

2

32,91010,071407¥ 3,53146,921 IT products and system sales

29,25733,34245,0998

1,108

108,814

Other

107,316

56,827

148,674

30,361

13

343,191

Revenue from contracts
with customers¥ 136,575¥ 185,572¥ 213,789¥ 40,377¥ 4,652¥ 580,965

Other revenue¥0¥   5,936¥   1,231——¥   7,167

Total¥ 136,575¥ 191,508¥ 215,020¥ 40,377¥ 4,652¥ 588,132

Note: ” Other” is a business segment that is not included in the reportable segments of the Company and includes the shared service business.

(b) Basic information for understanding revenues from contracts with customers
	The basic information for understanding revenues is listed under (u) Standards for Recognizing Significant Revenues andExpenses in 2. Summary of Significant Accounting Policies.

(c)Contract balances
The receivables from contracts with customers and contact liabilities as of December 31, 2022, were as follows:(Millions of yen)
January 1, 2022

December 31, 2022

¥ 95,369¥ 97,272

Contract assets:

11,038

11,940Contract liabilities included in other current liabilities:

17,055

17,639Receivables from contracts with customers:

Note: F or the fiscal year ended December 31, 2022, the balance of Notes receivable-trade was ¥ 86,219 and the balance of Accounts receivable-trade was ¥ 11,053, respectively.
		Contract assets refer to the Group’s right to consideration for goods and services, primarily in terms of outsourced software development, for which the Group has fulfilledpart of or all of its performance obligations at the year-end but has not yet billed to customers.
		Contract assets are recognized as receivables based on contracts with customers when the Group’s right to consideration becomes unconditional.
		Contract liabilities refer to, primarily, advances received from customers as payments for products and, in cases where the Group provides services on an ongoing basis,
advances paid to the Group for services not yet performed.
		Contract liabilities are reversed following the recognition of revenues.
		The amounts of revenue recognized for the year ended December 31, 2022, that was included in the contract liability balance at beginning of year was ¥ 10,469 million.
The amounts of revenue recognized for the fiscal year ended December 31, 2022, from performance obligations satisfied or partially satisfied in previous years wereimmaterial.

21

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022¥ 7,761

Between 1 year and 2 years

3,232

Between 2 and 3 years

1,736

Between 3 and 4 years

1,075

Between 4 and 5 years

425

Later than 5 years

62

Total

Overall sales of IT solutions
SI services(Millions of yen)

¥ 14,291

Note 1: A mong the Group’s maintenance contracts for business devices, the contracts where revenues are recognized based on the amount calculated by multiplying the unit
price stipulated in the contract by the volume of product used, are not included in the above table.
Note 2: The Group applies the convenience method of practice in noting the transaction price allocated to the remaining performance obligations and does not include in thenotes contracts with an initially expected contract term of one year or less.

18

Research and Development Costs
Total research and development costs included in selling, general and administrative expenses and cost of sales for the years
ended December 31, 2022 and 2021, were ¥ 712 million and ¥ 402 million, respectively.

19

Stock-Based Compensation
The Company’s stock option plan which replaced former performance-linked stock incentives plan was approved by theGeneral Meeting of Shareholders held on March 29, 2022. Based on the approval of the board of Directors, the Company
granted stock options to its directors and executive officers. In accordance with the provisions of the stock acquisition rights
agreement between the Company and a holder of the stock acquisition rights, the number of granted stock acquisitionrights that may be exercised by such holders is adjusted (range from 0% to 100% of granted) based on the level of consolidated net income before taxes for the fiscal year that stock acquisition rights was granted and the holder of the stock acquisition rights shall be entitled to exercise the number of exercisable stock acquisition rights only in a lump sum within a periodof 10 days (or the next business day, if the tenth day is a holiday) from the day immediately following the day when theycease to hold any position as a director or an executive officer of the Company. The grant date was April 28, 2022. The
number and category of grantees of stock options are 4 directors (excluding outside directors) and 7 executive officers, fora total of 11. These option awards have a 30 year exercisable period from April 29, 2022, and exercise price per share is ¥ 1.
The grant-date fair value per share of the stock options granted for the fiscal year ended December 31, 2022, was ¥ 2,606.
The work period for stock option grantees is from March 29, 2022, to March 29, 2023.
The compensation cost recognized for these stock options for the year ended December 31, 2022, was ¥ 29 million, and it
was included in selling, general and administrative expenses in the consolidated statement of income.

The fair value of the option award was estimated on the date of grant using the Black-Sholes option pricing model thatincorporates the assumptions presented below:
For the year ended
December 31, 2022

Expected term of option (in years)[3.1 years / 37 months]

Expected volatility

29.34%

Dividend yield

2.65%

Risk-free interest rate

(0.04)% Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

22

Data
Notes to Consolidated Financial Statements

A summary of option activity under the stock option plans as of and for the year ended December 31, 2022, waspresented below:
Weighted-average
exercise Price(Yen)

Shares

The components of “Loss on sales and disposal of long-lived assets” for the years ended December 31, 2022 and 2021,
were as follows:
The components of “Loss on sales of long-lived assets”

Fair value
at the grant date
(Yen)



(Millions of yen)

Granted

20,000¥1¥ 2,606

Forfeited

5,100

—

—

Buildings and structures¥0—

Exercised———

Furniture and fixtures8¥1

14,900

¥1

—

Total

¥8

¥1

Outstanding as of December 31, 2022

2022

2021

Granted shares outstanding as of December 31, 2022, consist of vested shares of 11,175 and unvested shares of 3,725.
The total fair values of shares vested for the year ended December 31, 2022, was ¥ 29 million.

The components of “Loss on disposal of long-lived assets”

The number of forfeited shares due to non-vesting of rights is estimated in consideration of vesting conditions andother factors.

20


2022

Selling, General and Administrative Expenses
The primary components of “Selling, general and administrative expenses” for the years ended December 31, 2022 and
2021, were as follows:(Millions of yen)
2022

2021

¥ 68,454¥ 71,462

2,753

3,537

Accrued directors’ bonuses

118

98

Provision of allowance for long-term continuous service rewards

312

357

Salaries and allowances
Accrued bonuses

2,743

5,053

Accrued product warranties

234

288

Provision (reversal) of allowance for doubtful receivables

150

(48)

Net periodic retirement benefit costs

Buildings and structures

¥ 18

¥ 35

33

24

Rental assets

50

57

Software

15

6

Other

0

1

Total

¥ 116

¥ 123

For the fiscal year ended December 31, 2021, loss on disaster of ¥ 169 million was recorded as cost of restoration of assets
associated with damage from typhoons, etc. In addition, insurance claim income received from the associated insurance
claim of ¥ 203 million was recorded as insurance income due to disaster.

22

Lease Transactions
Operating lease transactions
Lessees’ accounting	The following table shows future minimum lease payments at December 31, 2022 and 2021, for non-cancelable
operating leases:

Other Income (Expenses)
The components of “Gain on sales of long-lived assets” for the years ended December 31, 2022 and 2021, were as follows:

2022

2021

Due within one year

¥1

¥4

Furniture and fixtures1

2

Rental assets

0

—

Total



(Millions of yen)

Machinery and vehicles

Software2021

Furniture and fixtures1.

21(Millions of yen)

1

0

¥3

¥6

Due after one year
Total

2.

(Millions of yen)
2022

2021

¥ 2,539¥ 2,223

6,155

6,256

¥ 8,694¥ 8,479

Lessors’ accounting	The following table shows future minimum lease income at December 31, 2022 and 2021, for non-cancelable
operating leases:
2021

Due within one year

¥ 2,987¥ 1,892

Due after one year

8,907

8,998

¥ 11,894¥ 10,890

Total

23

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022(Millions of yen)2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

24

Data
Notes to Consolidated Financial Statements

23(1) Financial Instruments Measured at Fair Value on the Consolidated Balance Sheet

Financial Instruments

1.

Information on financial instruments
Category(1) Policies for financial instruments(Millions of yen)

Fair Value
Level 1

Level 2

Level 3

Total

Investments in securities

	The Group limits its asset management to financial instruments characterized as low default risk and believes that
financing should mainly be conducted through the use of Group finances, if necessary. The Company enters into
­derivative transactions to hedge against foreign exchange fluctuation risks and not for speculative purposes.

Available-for-sale securities(2) Types and risks of financial instruments and systems to control those risks  Stocks¥ 10,887——¥ 10,887

Total assets¥ 10,887——¥ 10,887

—

¥ 21

—

¥     21

—

¥ 21

—

¥     21

Derivative transactions	Operating receivables, consisting of notes and accounts receivable-trade, are exposed to credit risks of customers. The
Group strives to mitigate these risks by strict credit control utilizing credit information provided by external credit agencies, as well as by credit insurance and other risk-hedging means.
	Short-term loans receivable are mainly loans to the parent company by the Company, rendered in compliance with theinternal regulations for investment and management of funds.
	Investments in securities consist of held-to-maturity debt securities and equity securities issued by business counterparties of the Group, and are exposed to market price fluctuation risk. Regarding this risk, the Group periodically monitors
the fair values of the securities and the financial condition of their issuers, i.e., business counterparties. In addition, forsecurities other than held-to-maturity debt securities, the Group continuously reviews the status of security holdings,
taking market conditions and relationships with business counterparties into consideration.
	Trade payables, consisting of notes and accounts payable-trade, are mainly those due within six months.
	Derivative transactions consist of forward exchange contracts to hedge against the risks of fluctuations in foreign currency-denominated trade payables. Hedge accounting methods are described in “(x) Key Hedge Accounting Methods”
of Note 2 Summary of Significant Accounting Policies.

Forward exchange contracts
Total liabilities
Note: Description of the valuation methods and inputs used to measure fair value measurements

Investments in securities
	The fair values of investments in securities are measured at the quoted market price of the stock exchange for listed
stocks. The fair values of listed stocks are classified into Level 1 as they are traded on the active market.

Derivative Transactions
	The fair values of forward exchange contracts are determined based on the quoted prices obtained from counterparty­financial institutions and, accordingly, are classified into Level 2.

As of December 31, 2021
2.

Fair values of financial instrumentsT he book values of financial instruments in the consolidated balance sheets as of December 31, 2022 and 2021, their fairvalues, and the differences between the two are as follows:	Cash and cash equivalents, notes and accounts receivable-trade, short-term loans receivable, and notes and accounts
payable-trade are not included in the table above as they are cash and settled within a short period of time and, accordingly, the book values approximate their fair values.


As of December 31, 2022

Book value

The Group adopted ASBJ Statement No. 30, “Accounting Standard for Fair Value Measurement”, July 4, 2019, ASBJ
Statement No. 9, “Accounting Standard for Measurement of Inventories”, July 4, 2019 and other standards which wasrevised the portion related to fair value (the “Standard of Fair value”) from January 1, 2022, prospectively (See Note 3).
Cash and cash equivalents, notes and accounts receivable-trade, short-term loans receivable, and notes and accounts­payable-trade are not included in the table above as they are cash and settled within a short period of time and, accordingly,
the book values approximate their fair values.
Book value(1) Investments in securities¥ 10,887(Millions of yen)
Fair value(Millions of yen)

Fair value

Difference(1) Investments in securities¥ 15,687¥ 15,687—

Asset total¥ 15,687¥ 15,687—(2) Derivative transactions (Note)¥     33¥     33—

Note: Assets and liabilities arising from derivative transactions are indicated in net amounts.

Note a: The redemption schedule of monetary claims as of December 31, 2022 and 2021, were as follows:

Difference¥ 10,887—

Asset total¥ 10,887¥ 10,887—(2) Derivative transactions (Note 1)¥    (21)¥    (21)—(Millions of yen)

2022

Cash and cash equivalents

2021

Due within 1 year

1 year to 5 years¥ 84,632—¥ 68,029———

107,368—

Due within 1 year

1 year to 5 years

Note 1: Assets and liabilities arising from derivative transactions are indicated in net amounts, whereas items that amount to a net liability are shown in parentheses.

Notes and accounts receivable-trade
Notes receivable-trade

11,053———

The fair value measurements of financial instruments are classified into the following three levels based on the observability
and significance of the inputs used to measure fair value measurements.

Accounts receivable-trade87,438———

Short-term loans receivable

180,013—

180,004—¥ 363,136—¥ 355,401—

Level 1: Fair value measurement is determined based on quoted prices (unadjusted) in active markets for identical assets
or liabilities.

Total

Level 2: Fair value measurement is determined using directly or indirectly observable inputs other than Level 1 inputs.
Level 3: Fair value measurement is determined using significant unobservable inputs.
When multiple inputs with a significant impact are used to determine the fair value, the fair value of the financial instrument
is classified into the lowest level in the fair value measurement among the levels to which these inputs belong.

25

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

26

Data
Notes to Consolidated Financial Statements

Note b : The repayment schedule of lease obligations as of December 31, 2022 and 2021, were as follows:25(Millions of yen)

2022

Lease obligations

2021

Due within
1 year

1 year to
2 years

2 years to
3 years

3 years to
4 years

4 years to
5 years

Due within
1 year

1 year to
2 years

2 years to
3 years

3 years to
4 years

4 years to
5 years

¥ 46

¥ 32

¥ 23

¥ 14

¥5

¥ 53

¥ 37

¥ 23

¥ 15

¥6

Per Share Data
A reconciliation of the numerators and denominators of basic and diluted income attributable to owners of the parent per
share computation for the years ended December 31, 2022 and 2021, was as follows:

Net income attributable to owners of the parent

24(Millions of yen)
2022

2021

¥ 35,552¥ 29,420

Related Party Information
Transaction conditions and policies for deciding transaction conditions with the parent company (Canon Inc.)(a)	Purchases of products are decided based on price negotiations each year, after considering market prices and theCompany’s proposals regarding desired prices.

Average common shares outstanding(c)	Loans of capital, interest rates on loans are decided rationally after considering market interest rates. Furthermore, collateral is not accepted.

Transaction with the parent company for the fiscal year ended December 31, 2022, and related balance as of December 31,
2022, were as follows:
Name ofcompany

Address

Investments
in capital(Millionsof yen)ParentOhta-ku,Canon Inc.
¥ 174,761
companyTokyo

Business contents
or occupation

Development andmanu­facturing in
the office, ­imaging
system, and i­ndustrial
equipment areas

Percentage
possession ofRelationshipvoting rights with related party(Ownership) (%)(Ownership)
Direct 58.5%
Indirect 0.0%

Contents of transactions

Transaction
amount(Millionsof yen)Accounts

Balance at
end of year
(Millionsof yen)Purchases of
products¥ 158,803

Accounts
payable-trade¥ 17,385

Operating Sales of officeequipment andManufacturing transactions
consumables,of products soldand otherby Canon MJ
inventories
Nonoperating
Loans of capitaltransactions

¥

4,755

Accounts receivable¥
trade and others

1,309

Diluted common shares outstanding

Short-term loans
receivable

2021

129,67331

28

129,707

129,701

Note: T he effect of diluted securities of 31 thousand shares for the fiscal year ended December 31, 2022, was due to the grants of performance-linked stock incentives andstock option and the effect of diluted securities of 28 thousand shares for the fiscal year ended December 31, 2021, was due to the grants of performance-linked
stock incentives.

A reconciliation of the numerators and denominators of shareholders’ equity per share as of December 31, 2022 and 2021,
was as follows:(Millions of yen)
2022

2021

¥ 400,372¥ 374,677

Less – non-controlling interests

(801)

(727)

Less – Stock acquisition rights

(29)

—

¥ 399,542¥ 373,950

129,676

129,675

Total equity at end of year

Shareholders’ equity
Shares outstanding at year-end (thousands of shares)

—

2022

129,676

Effect of diluted securities(b)	Sales of office equipment, consumables, and other inventories are subject to similar conditions as general transactions.

Category(Thousands of shares)¥ 180,000

Computed per share data were as follows:(Yen)

Transaction with the parent company for the fiscal year ended December 31, 2021, and related balance as of December 31,
2021, were as follows:
Category

Parentcompany

Name ofcompany

Canon Inc.

Address

Ohta-ku,Tokyo

Investments incapital(Millionsof yen)¥ 174,761

Business contents
or occupation

Development andmanu­facturing in
the office, ­imaging
system, and ­industrial
equipment areas

Percentage
possession of
voting rights(Ownership) (%)(Ownership)
Direct 58.5%
Indirect 0.0%

Relationshipwith related party

Manufacturingof products soldby Canon MJ

Contents of transactions

Transaction
amount(Millionsof yen)Accounts

Balance at
end of year
(Millionsof yen)Purchases of
products¥ 148,759

Accounts
payable-trade¥ 16,154

Operatingtransactions

Nonoperatingtransactions

Sales of officeequipment andAccounts receivable¥   4,074
consumables, andtrade and others
other inventories
Loans of capital—

Short-term loans
receivable

2022

2021

¥   274.16¥   226.88

Net income attributable to owners of the parent per share
Basic
DilutedShareholders’ equity per share274.10226.833,081.07

2,883.74¥   1,204¥ 180,000

Note: T ransaction amounts do not include consumption tax or other taxes, however, the account balances include consumption tax.

27

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

28

Data
Notes to Consolidated Financial Statements

26

Other Comprehensive Income

27

The following table shows amounts arising during the year, reclassification adjustments, pre-tax amount, tax effect, andnet-of-tax amount for each component of other comprehensive income for the years ended December 31, 2022 and 2021:
(Millions of yen)
2022

2021

Unrealized gain (loss) on available-for-sale securities:¥ (3,207)¥ 6,537(656)(1,255)  Pre-tax amount(3,863)5,282  Tax effect

1,190(1,638)  Net-of-tax amount(2,673)

3,644

(54)

75

  Pre-tax amount

(54)

75

  Tax effect

16

(23)

  Net-of-tax amount

(38)

52

Amount arising during the year
Reclassification adjustments

Segment Information
1.

Segment information(1) Description of reportable segments	Reportable segments are constituent units of the Group for which separate financial information is available and they
are subject to periodic reviews by the Board of Directors to determine the allocation of management resources andassess their respective operating results.

(Major business areas and main Group companies in each reportable segment)
Reportable segment
Consumers

Deferred gain (loss) on derivatives under hedge accounting:Amount arising during the year

Foreign currency-translation adjustments:

Enterprise

Major business areas and Group companies
Sells products such as digital cameras and inkjet printers primarily to individual customers.
Sells Canon input and output devices and provides solutions that contribute to solving businessproblems in each industry primarily for large corporations, quasi-major and upper medium-sizedenterprises.
[Major Group company]
Canon IT Solutions Inc.

Area

Sells Canon input and output devices and provides solutions that help customers solve businessproblems primarily for small and medium-sized enterprises in Japan.
[Major Group company]
Canon System & Support Inc.

Amount arising during the year

194

129

Reclassification adjustments—

7  Pre-tax amount

194

136

• Production Printing  Tax effect——  Net-of-tax amount

194

136

Provides high-speed continuous feed printers and high-speed cut sheet printers to the printing
industry.

Amount arising during the year

6,444

5,304

Reclassification adjustments(1,221)

948  Pre-tax amount

5,223

6,252

  Tax effect(1,623)(1,940)  Net-of-tax amount

3,600

4,312

¥   1,083¥ 8,144

Provides solutions for customers in each area.

[Major Group company]

Defined retirement benefit plans:

Total other comprehensive income

Canon Production Printing Systems Inc.
• Industrial Equipment
Professional

Provides products such as semiconductor manufacturing systems and inspection and measurement devices mainly to semiconductor manufacturers and other electronics device
manufacturers.
• Healthcare
Provides IT solutions, system development, network construction, and hardware mainly for the
medical and healthcare field.
[Major Group company]
Canon ITS Medical Inc.

29

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

30

Data
Notes to Consolidated Financial Statements(2) Methods of measurement for sales, segment income (loss), assets, and other items for reportable segments

2.

Related information	Accounting methods for reportable segments are the same as the accounting methods described in the notes on“Summary of Significant Accounting Policies”. Segment income (loss) is measured based on the amount of operating
income. Intersegment sales and transfers are based on market prices.

As of December 31, 2022 and 2021
(1) Information by product and service	Disclosure of information by product and service is omitted since the segment information contains the same
information.

(3)	Information by reportable segment as of and for the years ended December 31, 2022 and 2021, were as follows:
As of and for the year ended December 31, 2022

(2) Information by geographical area

Reportable segment
Consumers

Enterprise

Area

Professional

Other(Note a)¥ 40,377¥ 4,652 ¥ 588,132(Millions of yen)

Adjustments(Note b)

Total

Consolidated(Note c)Net sales:
External customers¥ 136,575 ¥ 191,508 ¥ 215,020
11,2227,630— ¥ 588,132

11,541

1,293

Total

¥ 136,613 ¥ 202,730 ¥ 226,561¥ 41,670¥ 12,282 ¥ 619,856¥ (31,724) ¥ 588,132

Segment income (loss)¥ 13,940 ¥ 17,073 ¥ 15,564¥ 5,240¥  (1,750) ¥ 50,067¥    (120) ¥ 49,947

Intersegment38

31,724¥ (31,724)—

47,480109,103

70,912

20,253

3,436

251,184

292,556

543,740 Depreciation and amortization

685

6,422

1,710

294

18

9,129

464

9,593

Amortization of goodwill

—

—

—

—

30

30

—

30

 Changes in the amount of­property, plant and equipment
and intangible assets

349

7,286

1,166

124

3

8,928

137

9,065

Segment assets
Other items:(a) Sales		Disclosure of information on sales by geographical area is omitted since sales to domestic external customers
account for more than 90% of consolidated net sales.

(b) Property, plant and equipment
		Disclosure of information on property, plant and equipment by geographical area is omitted since the amount ofdomestic property, plant and equipment accounts for more than 90% of total property, plant and equipment
recorded in the consolidated balance sheets.

(3) Information by major customers
	Disclosure of information by major customers is omitted since no customer accounts for 10% or more of consolidated
net sales.

(4) Information on remaining balance of goodwill by reportable segment
As of December 31, 2022
As of and for the year ended December 31, 2021


Reportable segment
Consumers

Enterprise

Area

Professional

Other(Note a)¥ 30,059¥ 3,352 ¥ 552,086(Millions of yen)

Adjustments(Note b)

Total

Consolidated(Note c)Net sales:
External customers
Intersegment

Balance at year-end¥ 129,433 ¥ 180,043 ¥ 209,199
38

10,552

11,627

1,477

7,887

31,581

Adjustments

Amountrecorded on
consolidated
financialstatements

ConsumerEnterprise

—

—

Area

Professional

—

—

Other

Total

¥ 327

¥ 327

—

¥ 327

— ¥ 552,086¥ (31,581)

—

Total

¥ 129,471 ¥ 190,595 ¥ 220,826¥ 31,536¥ 11,239 ¥ 583,667¥ (31,581) ¥ 552,086

Segment income (loss)¥ 13,573 ¥ 13,856 ¥ 12,046¥ 2,488¥ (2,267) ¥ 39,696¥

3 ¥ 39,699

45,914110,215

67,622

20,1582,220

246,129

280,289

526,418

Depreciation and amortization

468

7,177

1,923

296

28

9,892

354

10,246

Amortization of goodwill

—

—

—

—

—

—

—

—

 Changes in the amount of­property, plant and equipment
and intangible assets

858

9,493

2,023

136

56

12,56668

12,634

Segment assets(Millions of yen)

Reportable Segments

Other items:

Note a: “Other” is a business segment that is not included in the reportable segments of the Company. The Other segment includes the shared service business.
Note b: Adjustments are as follows:		(1) Adjustment of segment income (loss) eliminates intersegment transactions.
		(2) A djustment of segment assets is for corporate assets that do not belong to reportable segments. The corporate assets are comprised of surplus funds, such as cash
and investment in securities, assets related to head office land, buildings, and head office administrative units.
		(3) Adjustment of depreciation and amortization is for head office building expenses that do not belong to reportable segments.
		(4) A djustment of increase of property, plant and equipment and intangible assets consists of capital investments in head office buildings that do not belong to reportable segments.
Note c: Total segment income (loss) after adjustments for reportable and other business segments equals operating income in the consolidated statement of income.

31

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

32

Data

Independent Auditor’s Report

33

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

34

Data
Independent Auditor’s Report

35

Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

 Canon Marketing Japan Inc. Consolidated Financial Statements FY2022

36