KURITA WATER INDUSTRIES LTD.
MD&A and Consolidated Financial Statements
For the year ended March 31, 2023

Contents
Management's Discussion and Analysis 

1Business Risks 

9Consolidated Statement of Financial Position 

13Consolidated Statement of Profit or Loss 

15

Consolidated Statement of Comprehensive Income 

16Consolidated Statement of Changes in Equity 

17Consolidated Statement of Cash Flows 

21

Notes to Consolidated Financial Statements 

22

Independent Auditor's Report 88

Management’s Discussion and Analysis
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Business Results
During the fiscal year ended March 31, 2023, uncertainty in the global economy increased, reflecting a
disruption in supply chains and sharp rises in prices of raw materials and energy chiefly due to theprolonged war in Ukraine and the resurgence in COVID-19 cases. However, the global economy
continued to recover moderately.
Looking at the market conditions surrounding the Kurita Group (the Group), production activities in the
manufacturing industry in Japan were weak in certain sectors, chiefly due to semiconductor shortages andsupply shortages of raw materials in the first half. Meanwhile, there were ongoing signs of a recovery incapital investment. Overseas, there were signs of a recovery in the U.S. economy and the economies in
Europe and Asian countries other than China. Meanwhile, in China, the economy slowed due to thelingering effects of lockdowns and movement restrictions to block the spread of COVID-19.
In this environment, in the final year of the medium-term management plan Maximize Value Proposition
2022 (MVP-22), the Group aimed to establish a firm earnings foundation based on the value we provide tocustomers and society, expanding the Creating Shared Value (CSV) business to help customers reduce
environmental impact, including water conservation, the reduction of CO2 emissions, and waste reduction,and proposing total solutions to help address productivity improvements and other customer issues. To lay
the foundation for growth, the Group horizontally applied best practices in the service contract-typebusiness, a current strategic focus, and also sought to expand its services lineup in this business to meeta wider range of diverse customer needs. To improve the cost structure, the Group worked to develop aframework to optimize supply chains and took steps to deal with increasing raw materials and distribution
costs.
As a result, total consolidated orders for the Group in the fiscal year ended March 31, 2023 increased
18.7% year on year to ¥374,268 million, and net sales rose 19.6% to ¥344,608 million. Business profit
increased 17.1% to ¥38,589 million, operating profit was ¥29,058 million, down 18.7% year on year, profit
before tax was ¥30,151 million, rising 0.2%, and profit attributable to owners of parent amounted to¥20,134 million, up 9.0%.
During the fiscal year, the Group posted other income of ¥1,564 million and other expenses of ¥11,095
million. Other income declined ¥4,555 million, reflecting a one-time profit (a gain on sale of fixed assets)from the sale of real estate in the previous fiscal year. Other expenses included a goodwill impairment
loss of ¥7,646 million related to Kurita America, Inc. (Water Treatment Chemicals business). The goodwill
impairment loss arose because the recoverable amount at Kurita America Inc. was less than theaccounting book value, which reflects the company’s downward revision of its business plan in light ofchanges in the water treatment chemicals market following the outbreak of COVID-19, disruptions tologistics, and rising prices. Another factor was the rise in the discount rate used to calculate therecoverable amount, in line with policy interest rate hikes in the U.S. aiming to curb inflation, which
resulted in the recoverable amount falling below the accounting book value.
In the fiscal year ended March 31, 2023, the Kurita Water Industries Ltd. (the Company) underwrote a
capital increase at Kurita America Holdings Inc. to help it acquire additional shares in U.S.-based
subsidiary Pentagon Technologies Group, Inc. (Water Treatment Facilities business) and make it a wholly
owned subsidiary, and completed the payment. The Company posted in finance income a gain onderivatives transactions from a foreign exchange contract it entered into after deciding to underwrite thecapital increase. Meanwhile, finance costs posted in the same period of the previous fiscal year that
resulted from the subsequent measurement of liabilities related to a forward contract concluded with the
non-controlling shareholders of Pentagon Technologies Group were eliminated. These factors contributed
to the increases in profit before tax and profit attributable to owners of parent.

- 1 -Orders

Net Sales

Business Profit(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

400,000

400,000

40,000300,000

300,000

30,000200,000

200,000

20,000100,000

100,000

10,000

0

0
2022

2023

0
2022

2023

2022

Return on Equity

Profit Attributable to Owners of
ParentOperating Profit(Millions of Yen)(%)

(Millions of Yen)

40,0002023

9.0

25,00030,00020,0006.0

15,00020,00010,00010,000

3.0

5,000

0

0.0

0
2022

2023

2022

2022

2023

2023

2. Business Segment Information(1) Water Treatment Chemicals
In Japan, orders and net sales increased year on year, chiefly reflecting price hikes and a focus on
proposals for service contract-type projects that help customers reduce environmental impact and costs,
despite the effects of supply shortages of semiconductors and other raw materials on capacity utilization
at certain customers’ plants. Overseas, both orders and net sales increased, reflecting sales priceincreases in response to sharp rises in raw materials prices and logistics costs and an increase in yendenominated results at overseas subsidiaries due to the weaker yen, as well as the results of thedevelopment of high value-added services, including the CSV business. As a result, total Group orders for
the Water Treatment Chemicals segment were ¥136,863 million, up 15.6% year on year, while net salesrose 15.7%, to ¥136,139 million.
In terms of profits, business profit amounted to ¥16,286 million, an increase of 19.8% year on year chiefly
due to higher net sales, which more than offset a rise in expenses chiefly due to increases in raw
materials prices and distribution costs. Operating profit stood at ¥7,606 million, down 47.8% year on year,
reflecting the goodwill impairment loss of ¥7,646 million at Kurita America Inc.
OrdersNet Sales(Millions of Yen)

(Millions of Yen)

150,000

150,000

100,000

100,000

50,00050,000

0

0
2022

2023

2022

- 2 -

2023

Business Profit

Operating Profit(Millions of Yen)

(Millions of Yen)
15,00020,00015,00010,00010,000
5,000

5,000
0

0
2022

2023

2022

2023

(2) Water Treatment Facilities
In Japan, orders for water treatment facilities for the electronics industry took a significant downturn after
the Group posted orders for large projects in the previous fiscal year, but orders were still at a high level.
Net sales rose significantly, chiefly due to the posting of sales from the order backlog. Orders and net
sales for maintenance services for the industry both increased, reflecting the expansion of facilities andthe posting of orders for and sales from repairs, including the replacement of consumables, against a
backdrop of firm capacity utilization at customer plants. Orders for water treatment facilities for generalindustries were up year on year following cancellations of orders for large projects in the previous fiscal
year, but net sales declined. Orders and net sales of maintenance services for this industry both increased
because of a recovery in maintenance demand. Both orders for and net sales from water treatment
facilities for the electric power industry decreased. Orders for soil remediation services decreased, but net
sales increased, reflecting demand for small and medium-sized projects. Overseas, both orders and net
sales increased due to an increase in yen-denominated results at overseas subsidiaries associated withthe weaker yen, and the posting of orders and sales of large water treatment facilities projects in theelectronics industry in East Asia.
Total net sales in the ultrapure water supply business in Japan and overseas increased due in part to thecontribution of a contract that began in the fiscal year under review.
As a result, total Group orders for the Water Treatment Facilities segment were ¥237,404 million, up
20.6% year on year. Net sales increased 22.2%, to ¥208,468 million.
In terms of profits, business profit amounted to ¥22,378 million, an increase of 15.4% year on year, andoperating profit rose to ¥21,526 million, up 1.7% year on year, chiefly due to an increase in net sales,
which more than offset a rise in expenses related to the procurement of raw materials and parts.

OrdersNet Sales(Millions of Yen)

(Millions of Yen)

250,000

250,000

200,000

200,000

150,000

150,000

100,000

100,000

50,00050,000

0

0
2022

2023

2022

Business Profit

Operating Profit(Millions of Yen)

(Millions of Yen)

25,00025,00020,00020,00015,00015,00010,00010,000

5,000

5,000

0

2023

0
2022

2023

2022

- 3 -

2023

3. Regional Segment Information

Overseas Sales by Region(Millions of Yen)In the fiscal year ended March 31, 2023, overseas sales increased
30.9% year on year to ¥168,611 million, supported by growth in boththe Water Treatment Chemicals and Water Treatment Facilities
businesses. Overseas sales accounted for 48.9% of consolidated net
sales, up from 44.7% in the previous fiscal year.
By region, sales increased 29.9% to ¥60,198 million in the Americas,
35.9% to ¥78,883 million in Asia, and 20.7% to ¥29,530 million in
EMEA.

200,000
150,000
100,000
50,000
0
2022
Asia

2023

North and South America

EMEA

4. Financial Position(1) Assets
Current assets totaled ¥196,416 million, an increase of ¥18,020 million from the end of the fiscal year
ended March 31, 2022. This was mainly due to an increase of ¥11,407 million in trade and otherreceivables and increases in cash and cash equivalents and inventories of ¥4,737 million and ¥3,715
million, respectively.
Non-current assets totaled ¥305,121 million, an increase of ¥13,536 million from the end of the previous
fiscal year. Property, plant and equipment increased ¥17,703 million chiefly due to the acquisition of new
facilities in the ultrapure water supply business (Water Treatment Facilities business). Other financial
assets decreased ¥7,578 million while deferred tax assets increased ¥3,913 million owing mainly to thesale of a part of shares owned for cross-shareholding purposes.
As a result, total assets were ¥501,538 million, an increase of ¥31,557 million from the end of the previous
fiscal year.

Current Assets

Non-current Assets(Millions of Yen)

(Millions of Yen)

200,000

320,000

150,000

240,000

100,000

160,000

50,00080,000

0
2022

2023

Total Assets and Return on
Assets600,000

6.0

400,000

4.0

200,000

2.0

0

0
2022

2023

0.0
2022

2023

Total Assets (Millions of Yen)
Return on Assets (%)(2) Liabilities
Current liabilities totaled ¥109,468 million at the end of the period, a decrease of ¥4,459 million from theend of the previous fiscal year. This is chiefly attributable to a decrease of ¥19,610 million in otherfinancial liabilities mainly due to the implementation of the forward contract concluded with the noncontrolling shareholders of U.S.-based Pentagon Technologies Group, Inc. and a decrease in trade andother payables of ¥6,502 million, which were partially offset by an increase of ¥20,818 million in bonds
and borrowings chiefly due to the issuance of commercial paper and new borrowings.
Non-current liabilities totaled ¥96,310 million, an increase of ¥18,119 million from the end of the previous
fiscal year. This principally reflected an increase in bonds and borrowings of ¥17,805 million, mainly due
to the issuance of the second series of unsecured bonds (¥10,000 million) and new borrowings.
As a result, total liabilities were ¥205,778 million, an increase of ¥13,659 million from the end of theprevious fiscal year.

- 4 -(3) Shareholders’ Equity
Total equity stood at ¥295,759 million, an increase of ¥17,897 million
from the end of the previous fiscal year.
This principally reflected an increase of ¥17,566 million in retained
earnings primarily due to the recording of profit attributable to owners ofparent.

Equity Attributable to Ownersof Parent and Equity Ratio
300,000

90.0

200,000

60.0

100,000

30.0

0

0.0
2022

2023

Equity Attributable to Owners of Parent(Millions of Yen)
Equity Ratio (%)

5. Cash Flows
Consolidated net cash and cash equivalents at the end of the fiscal year ended March 31, 2023 totaled¥50,468 million, an increase of ¥4,737 million from the end of the previous fiscal year ended March 31,
2022.
(1) Cash Flows from Operating Activities
Net cash provided by operating activities during the fiscal year ended March 31, 2023 totaled ¥48,631
million, an increase of ¥19,894 million from the previous fiscal year. Inflows from profit before tax of¥30,151 million and depreciation, amortization and impairment losses of ¥37,276 million were partly offset
by income taxes paid of ¥17,094 million and an increase in trade and other receivables of ¥10,172 million.
(2) Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥46,274 million, an increase of ¥6,345 million from the same
period of the previous fiscal year. Outflows chiefly from purchases of property, plant and equipment of¥53,384 million were partly offset by inflows mainly from proceeds from sale of investment securities of¥8,854 million.
(3) Cash Flows from Financing Activities
Net cash provided by financing activities totaled ¥1,101 million, an increase of ¥9,028 million from theprevious fiscal year. Inflows chiefly from a net increase in short-term borrowings and commercial paper of¥18,722 million, proceeds from long-term borrowings of ¥9,988 million, and proceeds from the issuance ofbonds of ¥9,955 million were partly offset by the purchase of shares of subsidiaries not resulting inchange in scope of consolidation of ¥23,272 million and dividends paid of ¥8,699 million.

6. Commitment LineThe Group’s basic policy is to secure the liquidity needed for business operations and maintain a stablefinancing structure. In general, the Group uses its own funds to meet short-term working capital needs
and for capital investments and other investments in growth fields, while also procuring funds throughbond markets or bank loans as required. At the end of the fiscal year, the Group had concluded acommitment line agreement with two financial institutions, with no executed borrowings and an unused
available balance of ¥20,000 million.

- 5 -7. Research and Development

R&D Expenses(Millions of Yen)

The Group is prioritizing the development of new products andtechnologies to support the provision of innovative solutions that help
resolve issues faced by society and increase the corporate value andcompetitiveness of customers. The Group is also focusing on
developing sensing technology, data analytics technology, andoptimization and control technology needed for the digitaltransformation of business models, while also conducting research into
the development of mathematical modeling for water treatment
technology and understanding water treatment process mechanisms
and limitations to support product development.

7,500

5,000

2,500

0
2022

2023

Water Treatment Facilities
Water Treatment Chemicals

The Group will continue to refine the water-related technology it has developed over many years, aiming
to realize its corporate vision of being “A Creator of unique value to the solution of water andenvironment,” contributing to the realization of a sustainable society. The Group’s main development
centers in Japan, Germany, Singapore, and North America are working together to proactively develop
products and technologies that meet the wide-ranging needs of society and industry.
R&D activities are performed mainly by the Innovation Division of Kurita Water Industries Ltd. There areapproximately 214 R&D staff across the Group, representing 2.7% of all employees. Total R&D expenses
in the fiscal year ended March 31, 2023 were ¥6,344 million, equivalent to 1.8% of net sales.
(1) Water Treatment Chemicals
The Group is pushing ahead with the development of water treatment chemicals that help customers savewater, reduce CO2 emissions, cut waste, improve productivity, and mitigate environmental impact. The
Group is also developing technology to analyze the effectiveness of water treatment chemicals andautomatically control optimal dosing with sensing and data analytics technologies. Total R&D expenses
related to this segment were ¥1,828 million in the fiscal year ended March 31, 2023.
<Major Accomplishments for the Fiscal Year>・ The Group developed a chemical that prevents the increase of moisture inside coal, a raw material
for steel, caused by rainfall at the raw materials yards of steel plants. The Group added this chemical
to the steel raw material yard monitoring solution it developed last year, which detects and predicts
the moisture content of raw material stockpiles and uses a highly impermeable dust suppressant tolimit stoppages on raw material conveying lines and prevent higher fuel usage due to increased
moisture in steel raw materials.
・ The Group developed a type of sensor that can measure microscopic air bubbles in water, which
affect production efficiency in the papermaking process of paper and pulp plants, as well as a sensor
that detects the agglomeration state of the base slurry used in papermaking, which affects productquality. By clarifying the correlation between the water quality data obtained via these sensors andcustomer operating status, the Group aims to offer services that help boost productivity and reduce
environmental impact by controlling the proper injection of chemicals.
・ Anticipating the upcoming tightening of phosphorus and heavy metals emission regulations in theEU, the Group developed a non-phosphorus, non-metal anticorrosive agent for cooling water used incarbon steel heat exchangers. In the fiscal year ending March 31, 2024, the Group will evaluate theperformance of the agent in an actual cooling water system in the EU, seeking to expand this market
while extending applications to regions outside the EU.
(2) Water Treatment Facilities
The Group is developing technologies that meet the needs of recycling-oriented societies, such astechnology for wastewater reclamation and reuse, waste reduction and recycling, and generating
renewable energy. The Group is working to develop wastewater treatment systems as well as energysaving, labor-saving, and optimization technologies for the operation and management of ultrapure waterproduction systems that contribute to greater productivity in the semiconductor and other electronics
sectors. Total R&D expenses for the segment were ¥4,515 million.

- 6 -<Major Accomplishments for the Fiscal Year>・ For an existing, technologically mature ultrapure water facility (which combines RO membrane andion exchange treatment), the Group significantly reduced CO2 emissions and operating costs bylowering the pressure of the RO membranes, and adjusted the amount of water produced to matchcustomer usage. As a result, the Group was able to develop a variable flow deionized waterproduction system and operating techniques that can conserve water and lower power costs
stemming from the unnecessary movement of water.
・ As support and labor-saving technologies for inspection patrols, monitoring of abnormalities, andother operator tasks at large-scale water treatment facilities, the Group developed a sensing systemthat detects vibrations of rotating equipment, an abnormality assessment model, and a situation
diagnosis support system for use when an excess in the monitoring threshold sets off an alarm. Also,
as automatic control and simulation technologies tailored to the operating status of water treatment
facilities, the Group developed an AI-based optimal aeration control technology that draws on raw
water load and biotreatment performance data in the process of aerobic biotreatment.

8. Capital Expenditures
The Group is committed to making the necessary investments to pursue technological innovation, expand
production capacity, and address intensifying competition. In the fiscal year ended March 31, 2023, capital
expenditures totaled ¥46,628 million, a decrease of ¥19,765 million year on year, including the amountrecorded for right-of-use assets.
The Group carried out capital expenditures in the Water Treatment Chemicals business totaling ¥6,374
million, down ¥4,468 million year on year, mainly reflecting the construction of a new plant in China andthe expansion and upgrade of existing facilities.
The Group undertook capital expenditures in the Water Treatment Facilities business totaling ¥40,254
million, down ¥15,297 million year on year, primarily for the installation and expansion of facilities in theultrapure water supply business and the tool cleaning business.

In the one-year period following the fiscal year ended March 31, 2023, the Group plans to undertake atotal of ¥35.7 billion in capital expenditures for new construction, expansion, and renovation. Significant
fluctuations in the economy and in customers’ capital investment trends tend to have an especially large
impact on the purchase of equipment for the ultrapure water supply business. As such, the Group may
adjust its capital expenditure plan if conditions deviate from current assumptions.

Capital Expenditures

Depreciation and Amortization(Millions of Yen)

(Millions of Yen)
30,00080,00060,00020,00040,00010,00020,000
0

0
2022

2022

2023

2023

Water Treatment Facilities
Water Treatment Chemicals

Water Treatment Facilities
Water Treatment Chemicals- 7 -9. Dividend Policy
Kurita’s basic policy is to continue paying stable dividends to shareholders.
Specifically, Kurita has set a consolidated dividend payout ratio target of 30%–50%. Kurita will work tocontinue raising the dividend, making decisions based on payout ratios for the most recent five years to
respond flexibly to yearly fluctuations in business performance.
Kurita’s basic policy is to pay dividends from surplus twice a year, an interim and a year-end dividend.
The decision-making body for paying dividends from surplus is the General Meeting of Shareholders for
year-end dividends and the Board of Directors for interim dividends.
Regarding dividends paid from surplus for the fiscal year ended March 31, 2023, in consideration of futurebusiness growth and with shareholder support, it was decided to pay a total dividend of ¥78 per share,including an interim dividend of ¥39 per share. As a result, the dividend payout ratio was 39.9% (43.5% on
a consolidated basis) for the fiscal year.
Regarding retained earnings, Kurita will prioritize the use of retained earnings for businesses withprospects for growth while maintaining rigorous investment discipline. If Kurita determines that a surplus
has accumulated, it will consider the repurchase of shares, taking the share price level into account, as
well as seek to improve capital efficiency and increase returns to shareholders.

Basic Earnings per ShareDividends per Share andDividend Payout Ratio(Yen)
200.0080.0

80.0

150.0060.0

60.0

100.00

40.0

40.0

50.00

20.0

20.0

0.0

0.00
2022

0.0
2022

2023

2023

Dividends per Share (Yen)Dividend Payout Ratio (%)- 8 -Business Risks
Kurita Water Industries Ltd. and Consolidated Subsidiaries

The Executive General Manager of the Corporate Control and Administration Division is designated as theofficer in charge of monitoring risks and promoting risk management for the Group. The officer seeks toregularly analyze and assess risks facing the Company and its Group companies, and to continue
monitoring risks to prevent problems from materializing. The Executive General Manager of the
Sustainability Division is in charge of risks related to sustainability, including climate change.
The following are summaries of major foreseeable risks present in the business environments in which theGroup operates.
Forward-looking statements herein are based on judgments made by management as of March 31, 2023.

1. Economic and Market Conditions
The Group’s businesses are affected by economic conditions in Japan and in other countries and regions
where it operates. Demand fluctuates due to in trends in factory utilization rates and capital investment inboth the Electronics Industry and General Industry, which may affect the Group’s financial results. In theelectronics market, demand fluctuates due to changes in business conditions at customers with which theGroup has long-term ultrapure water supply contracts. Such fluctuations in demand could affect theGroup’s financial results. Furthermore, rising US-China trade friction may lead to stricter export controls,
tariff sanctions and other rules, which could impact the business operations of the Group’s customers,
leading to an indirect impact on the Group’s financial results. The Group’s financial results may also beaffected by the response to climate change, including moves by customers to shrink or exit from fossil
fuel-related businesses, a shift to alternative fuels and water resources, and the introduction of or an
increase in carbon taxes on CO2 emissions generated by the Group’s facilities or products. The Group
provides solutions for issues related to water and the environment to customers in a wide range ofindustries. In addition, the Group is transitioning to a service business as part of efforts to generate stableearnings. The Company also manages the operations of affiliated companies. Specifically, the Company
verifies earnings and progress with the implementation of strategies and measures at affiliated companies
on a monthly and quarterly basis, monitors internal audits, financial reporting and other matters related tointernal controls, and makes decisions on important matters at affiliated companies, in line with theCompany’s Internal Decision Approval and Review Rules. In addition, increasing competition with rivals in
the Group’s business domains could lead to declines in the price of products and services, which could
lower the Group’s profitability. However, as noted in 3., the Group is working to secure competitive
advantages.

2. Impact on Materials and Parts Procurement from Soaring Prices for Raw
Materials, Parts and Materials and Energy, and Supply Chain Disruption
The Group procures raw materials and parts from outside the Group for the manufacture of products andthe construction of facilities. The Group also procures external services to support various businessprocesses. The Group conducts these procurement activities with respect for human rights, in accordancewith the Kurita Group Code of Conduct, and also complies with laws and regulations and takes into
account economic, social and environmental factors, as set out in the Kurita Group Procurement Policy.
The prices of raw materials, parts and services fluctuate based on changes in market conditions, and thismay affect the Group’s financial results. Meanwhile, further outbreaks of COVID-19 and Russia’s invasionof Ukraine could again lead to a spike in prices for raw materials for water treatment chemicals and forparts and materials used in water treatment facilities, as well as higher logistics costs amid another surge
in energy prices and renewed supply chain disruption. In response, the Group plans to raise prices topass on higher costs and work to secure inventories.

- 9 -3. Development of New Technologies, Products and Services and Transformationof Business Processes
The Group operates CSV businesses that help to significantly cut CO2 emissions, save water and reduce
industrial waste compared with previous approaches and also develops new technologies, products andservices to improve and expand its range of total solutions, which leverage chemicals, facilities andmaintenance technologies, products and services. In addition, the Group has established a Digital
Strategy Division to actively drive the Group’s digital transformation (DX) by introducing IoT and AI into
new products and services and by digitizing business processes. However, the success of newtechnology and product development efforts and business transformation cannot be guaranteed. The
Group may not be able to offer new technologies or superior products, services, or solution models thatmeet the needs of its customers in a timely fashion. The Group may also fail to keep pace with rapid
technological innovation, changing customer needs and advances in digital technologies. Failure todevelop superior new products, services or solution models, delays to DX initiatives, or slow progress withmeasures to reduce greenhouse gas emissions from customers’ operations could limit future growth andprofitability or otherwise affect the Group’s financial results.

4. Overseas Business Development
The Group is working to expand its business outside Japan. In contrast to the Japanese market,
conducting business in overseas markets involves a number of inherent risks, including the risk of
unexpected changes to local laws and regulations, the risk of political and economic instability, and therisk of conflict or terrorist incidents. If such risks materialized, the Group’s financial results could be
affected. In regions where the Group operates, the Group obtains information about the local security
situation and other conditions from the Ministry of Foreign Affairs or consultants, and uses local legal
counsel, certified public accountants and other experts to verify the legal and regulatory framework inlocal markets. The Group also uses a guidebook for overseas deployments to provide safety training andadvice to employees being sent overseas, provides medical and emergency support services to
employees based overseas and publishes safety information as part of efforts to ensure the safety of all
officers and employees. In addition, the Group is potentially exposed to an impact from tighter regulations
and sanctions related to Russia’s invasion of Ukraine and the situation in Taiwan or the Korean Peninsula,
as well as any associated deterioration in the economy.

5. Large-Scale Natural Disasters
A large-scale natural disaster or other similar event that directly or indirectly disrupts the Group’s businessexecution could affect the Group’s business activities, financial results and financial condition. The Grouphas established the Kurita Group Business Continuity Management (BCM) Policy to prepare forearthquakes, typhoons, severe rainstorms or other large-scale natural disasters. In line with the policy, theGroup develops business continuity plans, conducts water damage risk assessments of Group facilities,
offices and officer and employee residences and implements response measures, establishes safety
verification systems, reinforces buildings against earthquakes, builds stockpiles of disaster prevention
supplies and conducts disaster response drills for officers and employees.

6. Exchange Rate Fluctuations
The ratio of overseas sales to total consolidated sales in the Group is 48.9%, reflecting overseas
acquisitions and other factors.
The local currency-denominated financial statements of each overseas subsidiary are reflected in the
consolidated financial statements after conversion to Japanese yen. Therefore, exchange rate fluctuations
may affect the Group’s business results and financial condition. To hedge against exchange rate risk, theGroup may use forward exchange contracts, currency swap contracts and other types of derivatives.

- 10 -

7. Risk of Unprofitable Projects
The installation of water treatment facilities may lead to additional costs if the Group fails to meet
contractual obligations to customers for raw water and other criteria, or due to defects with products orservices arising from faults with design or engineering work, or as a result of accidents. The Group may
also face requests for compensation for damages incurred by customers as a result of these issues. The
Group rigorously carries out design and engineering work in accordance with design and engineering
procedures, and prior to the issue of project budget documents, establishes an engineering review
meeting to verify various aspects of project design, including quality, cost, delivery, safety andenvironmental criteria. In addition, the Company holds monthly business process review meetings fromwhen the order is received until the project is delivered to confirm engineering progress and manage theprofitability of each project component, allowing total project costs to be estimated using the latest
information. Overseas Group companies follow similar procedures, and the Company also provides themwith design and engineering management support for large projects. In this way, the Group aims toprevent any problems before they occur by sharing information about project issues and other areas.

8. Impairment Loss on Fixed Assets(1) Impairment Loss on Goodwill and Intangible Assets
The Group has acquired companies to obtain a foundation for overseas business and to gain access tocompetitive technologies and business models. As a result, the current balance of goodwill is ¥60,413
million (12.0% of consolidated total assets). Goodwill is not amortized, and is tested for impairment
annually, or whenever there are signs of possible impairment. If, because of changes in the businessenvironment, an acquisition does not yield expected benefits, or if there is a difference between theestimated future cash flows obtained by the impairment test and actual cash flows, impairment losses on
goodwill or other impairment losses may occur. Recoverable amounts are estimated based on value in
use in impairment tests, and value in use is calculated using a discount rate for future cash flow
referencing the weighted average cost of capital (WACC) for each cash-generating unit. Future cash flow
forecasts have a five-year horizon and are formulated based on historical trends and external data. The
forecasts form the basis of business plans approved by management. Forecasts for periods longer than
five years are calculated based on average long-term growth rates, taking into account conditions inmarkets for each cash-generating unit. Five-year cash flow estimates, longer-term growth rates anddiscount rates are used by the Group as key assumptions, and any change in these assumptions could
have an impact on the Group’s financial results and financial condition. The Company has established an
Investment Committee to strengthen the Group’s investment and lending screening functions. The
committee is chaired by the Deputy Executive General Manager of the Corporate Control and
Administration Division. The committee conducts pre-screening of investment and lending projects to be
discussed by the Board of Directors or the Executive Committee, focusing on business plans, investment
amounts, adequacy of risk assessments, profitability, competitive advantages, legality and other criteria.
The results of the screening and key points for discussion are presented to the Board of Directors and the
Executive Committee, ensuring corporate acquisitions are only conducted after careful consideration anddiscussion by the Company. In addition, all acquired companies are subject to business management
procedures for affiliated companies explained in 1. above.
(2) Impairment Loss on Property, Plant and Equipment
The Group’s ultrapure water supply business and other businesses install equipment at customers’ plants.
In cases where a customer withdraws from a business or suspends operations at a plant, impairment
losses on fixed assets may occur, which may affect the Group’s financial results and financial condition.
When making investment decisions on installing equipment at customer plants, the Group carefully
considers factors such as the customer’s business conditions, customer contract terms and return on
investment.

- 11 -

9. Information System Security
The Group’s use of information systems and the importance of those systems in the Group’s business are
increasing. If a computer virus or other factor were to obstruct the functions of the Group’s information
systems, the Group’s business activities, financial results and financial condition could be negatively
affected. In accordance with the Kurita Group Information System Management Policy, the Group isstrengthening measures against computer viruses by installing antivirus software and providing
information security education and awareness training to officers and employees, including training about
targeted email attacks. In addition, the Group has established a team to implement an emergency
response to minimize opportunity losses in the event of a security incident.

10. Laws and ComplianceIn the event that the Group’s officers or employees fail to comply with laws or regulations or are
responsible for conduct that contravenes social ethics, the Group may face restrictions on its businessactivities, fines, damage to public trust or other issues, which could affect the Group’s financial results andfinancial condition. The Group has established a Sustainability Committee, chaired by the Executive
General Manager of the Sustainability Division. This committee is tasked with rigorously ensuring all theGroup’s activities are underpinned by socially ethical behavior, rather than conducting complianceactivities simply to meet legal requirements.

11. Product and Service Quality and Water Treatment Facility Operational Errors
The supply or discharge of water that falls short of required standards due to human error or otheroperational issues at customers’ or the Group’s water treatment facilities may lead to claims for damage
compensation or a loss of public trust. The Group’s financial results may be affected if its obligations
exceed the scope of liability insurance coverage, or if there is a loss of public trust. As explained in 7.
above, the Group has created a quality management system and continuously implements improvements
to increase customer satisfaction.

12. Intellectual Property
Given the wide scope of the Group’s business, there is potential for the Group’s intellectual property rights
to be infringed and potential for the Group to infringe rights held by third parties. While such actions could
affect the Group’s financial results, the Group recognizes the importance of intellectual property andcontinually seeks to register its own intellectual property while avoiding infringements of rights held by
third parties, both in Japan and overseas.

- 12 -

Consolidated Statement of Financial Position
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Notes
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Investments accounted for using equity method
Other financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets- 13 -

Millions of yen
2022
2023

Thousands of
U.S. dollars
2023

89, 25, 34
10, 34
11¥45,730
108,892
3,075
13,132
7,564
178,396¥50,468
120,299
3,357
16,847
5,444
196,416$376,626
897,753
25,052
125,723
40,626
1,465,791

12
20
13
13
15
10, 34
16

161,034
19,042
62,992
18,092
1,191
23,0116,071
150
291,585

178,737
21,92860,413
17,104
1,283
15,433
9,984
235
305,1211,333,858
163,641
450,843
127,641
9,574
115,171
74,507
1,753
2,277,022

6¥469,981¥501,538$3,742,820

NotesLiabilities and equity
Liabilities
Current liabilities
Trade and other payables
Bonds and borrowings
Lease liabilities
Other financial liabilities
Income taxes payable
Provisions
Other current liabilities
Total current liabilities

17, 25, 34
18, 3420, 3419, 34, 38

EquityShare capital
Capital surplus
Treasury shares
Other components of equity
Retained earnings
Equity attributable to owners of parent
Non-controlling interests
Total equity¥51,465
28,998
4,294
3
6,018
2,301
16,387
109,468$384,067
216,402
32,04422
44,91017,171
122,291
816,925

18, 3420, 3419, 3421
22
16

30,953
14,862
1,757
18,144
2,335
2,646
7,491
78,191
192,119

48,75818,016
1,666
17,321
2,613
2,362
5,570
96,310205,778

363,865
134,447
12,432
129,261
19,50017,626
41,567
718,731
1,535,656

23
23, 3823
23
23

13,450(3,076)(10,694)
12,161
260,073
271,914
5,948
277,862

13,450(608)(10,638)
14,132
277,639
293,975
1,784
295,759

100,373(4,537)(79,388)
105,4622,071,932
2,193,843
13,3132,207,156¥469,981¥501,538$3,742,820

38

Total liabilities and equity- 14 -

Thousands of
U.S. dollars
2023¥57,967
8,180
4,683
19,613
8,663
1,529
13,289113,927

22

Non-current liabilities
Bonds and borrowings
Lease liabilities
Other financial liabilities
Retirement benefit liability
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities

Millions of yen
2022
2023

Consolidated Statement of Profit or Loss
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Notes
6, 25

Net sales
Cost of sales
Gross profit

Millions of yen
2022
2023
¥288,207¥344,608(183,928)(224,911)
104,278
119,696

Thousands of
U.S. dollars
2023$2,571,701(1,678,440)
893,253

Selling, general and administrative expenses
Other income
Other expenses
Operating profit

26
27
28
6

(71,334)
6,119(3,329)35,734(81,106)
1,564(11,095)
29,058(605,268)
11,671(82,798)
216,850

Finance income
Finance costs
Share of profit (loss) of investments accounted forusing equity method
Profit before tax

29
29

601
(6,176)

1,990(1,077)

14,850(8,037)

15

(80)

179

1,335

30,07930,151225,007

Income tax expense
Profit16(10,454)¥19,624(9,473)¥20,677(70,694)$154,305¥18,471
1,153¥19,624¥20,134543¥20,677$150,253
4,052$154,305

Profit attributable to
Owners of parent
Non-controlling interests
ProfitYen
Notes
Earnings per share
Basic earnings per share
Diluted earnings per share31- 15 -

2022

2023¥164.38—¥179.14—

U.S. dollars
2023
$1.34
—

Consolidated Statement of Comprehensive Income
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Notes
ProfitOther comprehensive income
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets measured
at fair value through other comprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Cash flow hedges
Share of other comprehensive income of investments
accounted for using equity method
Total of items that may be reclassified to profit or loss
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income- 16 -

Millions of yen
2022
2023
¥19,624¥20,677

Thousands of
U.S. dollars
2023$154,305

30

520

674

5,029

30
30

417
938

830
1,505

6,194
11,231

30
30
30

8,692
131

5,245
182

39,141
1,358

30

121

2

14

30
30

8,944
9,883
¥29,507

5,429
6,935
¥27,61240,51451,753$206,059¥27,501
2,005¥29,507¥26,176
1,436¥27,612$195,343
10,716$206,059

Consolidated Statement of Changes in Equity
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Millions of yen
Equity attributable to owners of parent
Other components of equity
Financial assets

Notes

Balance as of April 1, 2021
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2022
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2023

Sharecapital¥13,450

Capitalsurplus¥(2,212)

Treasuryshares¥(10,787)

—

—

—
(5)

57

98

23
24
33

Exchangemeasured at
differences onfair valuetranslation ofthrough otherCash flow comprehensive
foreignhedgesoperations
income¥(4,469)¥(91)¥13,060

7,962
7,962

131
131

520
520

(1,115)
7(4,954)—¥13,450193(864)¥(3,076)

—

—

—
(2)

33

76

58

38

(19,793)38

22,051

23
24

93¥(10,694)—¥3,493—¥40(4,954)¥8,627

4,354
4,354

182
182

674
674

1,830

(5,070)—¥13,450132
2,467¥(608)- 17 -

55¥(10,638)

1,830¥9,678—¥222(5,070)¥4,231Millions of yen
Equity attributable to owners of parent
Other components of equity

Remeasurementsof defined
benefit plans

¥—
415
415

(415)
(415)
¥—
830
830

Total
¥8,500
—
9,030
9,030
—
—

Retainedearnings¥244,138
18,471
18,471(7,865)

Total¥253,089
18,471
9,030
27,501(5)(7,865)

Noncontrollinginterests¥4,748
1,153
852
2,005
(943)

Total
¥257,837
19,624
9,883
29,507(5)(8,809)

—

155

23

179

—

(1,115)(268)(1,384)

—

—

357

357

(5,369)

5,369

—

—
(5,369)¥12,161
—
6,041
6,041
—
—

(41)
(2,536)¥260,073
20,134152(8,677)¥271,914
20,134
6,041
26,176(2)(8,429)26(805)¥5,948
543
893
1,436
(280)

179
(9,483)¥277,862
20,677
6,935
27,612(2)(8,709)

—

135

(31)

103

1,830

(17,962)(5,289)(23,251)—

22,05122,051—

20,134(8,429)(830)(5,901)

5,901

—

(830)
¥—

—
(4,070)¥14,132(39)(2,567)¥277,639

92(4,115)¥293,975—(5,600)¥1,784- 18 -

92(9,715)¥295,759

Notes

Balance as of April 1, 2021
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2022

23
24
33

7

ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2023

23
24
33
38
38

Thousands of U.S. dollars
Equity attributable to owners of parent
Other components of equity
Financial assets

Sharecapital$100,373

Capitalsurplus$(22,955)

Treasuryshares$(79,805)

—

—

—
(14)

33

567

432

38

(147,708)

38

164,559

Notes

Balance as of March 31, 2022
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2023

23
24

Exchangemeasured at
differences onfair valuetranslation ofthrough otherCash flow comprehensive
foreignhedgesoperations
income$26,067$298$64,380

32,49232,492

1,358
1,358

5,029
5,029

13,656(37,835)—$100,373

985
18,410$(4,537)- 19 -

410$(79,388)

13,656$72,223—$1,656(37,835)$31,574

Thousands of U.S. dollars
Equity attributable to owners of parent
Other components of equity

Remeasurementsof defined
benefit plans

$—
6,194
6,194

(6,194)(6,194)$—

Total$90,753—
45,08245,082——Retainedearnings$1,940,843
150,253

Total$2,029,208
150,253
45,082150,253
195,343(14)(62,902)(62,902)

Noncontrollinginterests$44,388
4,052
6,664
10,716

Total$2,073,597
154,305
51,753206,059(14)(2,089)(64,992)

—

1,007

(231)

768

13,656(134,044)(39,470)(173,514)—

164,559

164,559

—

—

—
(291)
686
(30,373)(19,156)(30,708)$105,462 $2,071,932 $2,193,843

686(41,791)(72,500)$13,313 $2,207,156(44,037)

44,037- 20 -

Notes

Balance as of March 31, 2022
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2023

23
24
33
38
38

Consolidated Statement of Cash Flows
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Note
Cash flows from operating activities
Profit before tax
Depreciation, amortization and impairment losses
Share of loss (profit) of investments accounted for using
equity method
Loss (gain) on sale of fixed assets
Decrease (increase) in inventories
Decrease (increase) in trade and other receivables
Increase (decrease) in trade and other payables
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of investment securities
Payments for acquisition of subsidiaries (after deduction of
cash and cash equivalents included in acquired assets)
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings andcommercial papers
Proceeds from issuance of bonds
Proceeds from long-term borrowings
Repayments of long-term borrowings
Repayments of lease liabilities
Dividends paid
Purchase of shares of subsidiaries not resulting in change inscope of consolidation
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 21 -

Thousands of
U.S. dollars
2023

Millions of yen
2022
2023
¥30,079
24,440¥30,151
37,276$225,007
278,17980(179)(1,335)(4,073)(1,918)(6,713)
1,459(1,857)41,497
177
601
(232)
(13,308)
28,73776(3,109)(10,172)
7,965
3,365
65,373
301
442
(392)
(17,094)
48,631

567(23,201)(75,910)59,44025,111
487,858
2,246
3,298(2,925)(127,567)
362,917(2,348)2,175(55,096)
8,743(2,038)
9,197(4,871)
4,902(53,384)
265(1,601)
8,854(36,350)
36,582(398,388)
1,977(11,947)
66,074(2,401)

—

—

1,839
(39,929)(439)(46,274)(3,276)(345,328)

7,577

18,722

139,716

24

—
58
(485)
(5,005)(8,797)

9,955
9,988
(499)
(5,170)(8,699)74,291
74,537(3,723)(38,582)(64,917)38(1,440)(23,272)(173,671)

2

165(7,927)

76
1,101

567
8,216

2,622
(16,497)
62,228¥45,730

1,278
4,737
45,730¥50,468

9,537
35,350341,268$376,626

2

2

27

32

18
2, 18

8
8

Notes to Consolidated Financial Statements
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Reporting entity
Kurita Water Industries Ltd. (the “Company”) is a stock company located in Japan, which lists its shareson the Tokyo Stock Exchange. The registered addresses of its head office and major offices are disclosed
on its official website (https://www.kurita.co.jp/english/).
The Company’s consolidated financial statements consist of the Company and its consolidated
subsidiaries (together, the “Group”).
The major businesses of the Group are the Water Treatment Chemicals business and the Water
Treatment Facilities business. Details regarding these businesses are provided in Note 6. “Segment
information.”

2. Basis of preparation(1) Compliance with IFRSThe consolidated financial statements of the Group are prepared in compliance with International
Financial Reporting Standards (IFRS), pursuant to the provisions of Article 93 of the Regulation on
Terminology, Forms, and Preparation Method of Consolidated Financial Statements (Ministry of Finance
Order No. 28 of 1976), as the Group meets the requirements for a “specified company complying withdesignated international accounting standards” set forth in Article 1-2 of the said regulation.
The consolidated financial statements of the Group were approved by Hirohiko Ejiri, Director, President
and Representative Executive Officer, on June 29, 2023.
(2) Basis for measurement
As stated in Note 3. “Significant accounting policies,” the consolidated financial statements of the Group
have been prepared based on acquisition cost, with the exception of specified financial instruments, etc.,
measured at fair value.
(3) Functional currency and presentation currency
The consolidated financial statements of the Group are presented in Japanese yen, which is the functional
currency of the Company. Amounts are presented in millions of yen, with fractional amounts less than one
million yen rounded down to the nearest million yen.
The translation of yen amounts as of or for the year ended March 31, 2023 into U.S. dollars is included
solely for the convenience of readers and has been made, as a matter of arithmetical computation only, atthe rate of ¥134 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2023.
The translation should not be construed as a representation that yen amounts have been, could havebeen or could in the future be converted into U.S. dollars at the above or any other rate.
(4) Changes in presentation(Consolidated statement of cash flows)“Impairment losses,” which were included in “Other” under “Cash flows from operating activities” for the
fiscal year ended March 31, 2022, are included in “Depreciation and amortization” and presented as“Depreciation, amortization and impairment losses” for the fiscal year ended March 31, 2023, since they
have become significant in terms of amount. To reflect this change in presentation, the consolidated
statement of cash flows for the fiscal year ended March 31, 2022 has been reclassified.
As a result, “Impairment losses” of ¥1,028 million, which were included in “Other” of ¥(828) million under“Cash flows from operating activities” in the consolidated statement of cash flows for the fiscal year ended
March 31, 2022, are included in “Depreciation, amortization and impairment losses,” and “Other” isreclassified as ¥(1,857) million.

- 22 -

“Proceeds from long-term borrowings,” which were included in “Other” under “Cash flows from financing
activities” for the fiscal year ended March 31, 2022, are presented separately for the fiscal year ended
March 31, 2023, since they have become significant in terms of amount. To reflect this change inpresentation, the consolidated statement of cash flows for the fiscal year ended March 31, 2022 has been
reclassified.
As a result, “Other” of ¥224 million under “Cash flows from financing activities” in the consolidated
statement of cash flows for the fiscal year ended March 31, 2022 are reclassified as “Proceeds from longterm borrowings” of ¥58 million and “Other” of ¥165 million.

3. Significant accounting policies
The consolidated financial statements of the Group are prepared based on the financial statements of theCompany, its consolidated subsidiaries and its associates using unified accounting policies.
(1) Basis for consolidation
The Group’s consolidated financial statements include the financial statements of the Company and its
subsidiaries, and equity equivalents in its associates.
1) Subsidiaries
A subsidiary is a company that is controlled by the Group. When the Group is exposed, or has rights, tovariable returns from its involvement with the company and has the current ability to affect those returns
through its power over the company, the Group considers that it controls the company.
The financial statements of a subsidiary are included in the consolidated financial statements from thedate the Group gains control until the date when it ceases to control the subsidiary.
If accounting policies adopted by a subsidiary differ from that adopted by the Group, appropriate
adjustments are made to the financial statements of the subsidiary, as necessary.
Intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
entities of the Group and profits or losses resulting from intragroup transactions that are recognized in
assets, are eliminated in full in preparing the consolidated financial statements.
The comprehensive income of subsidiaries is attributed to owners of parent and non-controlling interests,
even if the balance of non-controlling interests is negative.
When the Group has disposed of part of the ownership interests in the subsidiary; and it still continues tocontrol a subsidiary, such transaction is accounted for as an equity transaction.
Differences between the adjustment of non-controlling interests and the fair value of the consideration arerecognized directly in equity as equity attributable to owners of parent.
If the Group loses control of a subsidiary, the gain or loss associated with the loss of control is recognizedin profit or loss.
When the end of the reporting period of a subsidiary is different from that of the Company, the subsidiary’s
additional financial information as of the same date of that of the Company, which is prepared forconsolidation purposes, is used for the consolidation.
2) Associates
An associate is a company over which the Group has significant influence. When the Group has thepower to participate in the financial and operating policy decisions of an investee but it is not control orjoint control of those policies, the Group considers that it has significant influence over the company.
Investment in an associate is accounted for using the equity method from the date the Group comes tohave significant influence until the date when it loses significant influence.
When applying the equity method, if an associate uses accounting policies other than those adopted in
the consolidated financial statements, appropriate adjustments are made to the associate’s financial
statements in preparing the consolidated financial statements to ensure conformity with the accounting
policies of the Group.

- 23 -

The consolidated financial statements include investments in associates whose end of the reporting
period is different from that of the Company since it is impracticable to unify their reporting periods withthat of the Company due to reasons such as their relationships with other shareholders. Adjustments are
made for the effects of significant transactions or events that occur during the period resulting from thedifference in the reporting period. The date of the end of the reporting period of these associates
accounted for using the equity method is December 31.
Profits resulting from transactions with an associate accounted for using the equity method that arerecognized in assets, are deducted from investment in associates to the extent of the Group's ownershipinterests in the associate. Losses resulting from transactions with an associate that are recognized in
assets are deducted from investment in associates in the same manner unless the losses indicate an
impairment that requires recognition in the consolidated financial statements.
(2) Business combinations
The Group accounts for each business combination by applying the acquisition method.
The consideration transferred in a business combination is measured at fair value, which is calculated as
the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities assumed
and the equity instruments issued by the Group in exchange for control of the acquiree. If theconsideration transferred exceeds the net of the amounts of the identifiable assets acquired and theliabilities assumed measured at their acquisition-date fair values, the Group recognizes the excess as
goodwill in the consolidated statement of financial position. Conversely, if the consideration is less than
the net of the fair values, the difference is immediately recognized as income in the consolidated
statement of profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period inwhich the business combination occurs, provisional amounts are used for the accounting, and theprovisional amounts recognized are adjusted during a measurement period of within one year from theacquisition date.
Acquisition-related costs incurred are recognized as expenses.
The additional acquisition of non-controlling interests after control of an acquiree is obtained is accounted
for as an equity transaction and no goodwill is recognized from such transaction.
(3) Foreign currency translation
The consolidated financial statements of the Group are presented in Japanese yen, which is the functional
currency of the Company. Each company in the Group determines its own functional currency, and thetransactions of each company are measured in its functional currency.
Foreign currency transactions are translated into the functional currency at the average exchange rateduring the period unless the exchange rate fluctuates significantly during such period. Foreign currency
monetary assets and liabilities are translated using the closing rate as of each reporting period. Exchange
differences arising from such translations and settlements are recognized in profit or loss. However,exchange differences arising from financial assets measured at fair value through other comprehensive
income and cash flow hedges are recognized in other comprehensive income.
For foreign operations, assets and liabilities are translated into Japanese yen at the closing rate at the endof each reporting period, and income and expenses are translated into Japanese yen at the averageexchange rate during the period unless the exchange rate fluctuates significantly during such period. All
resulting exchange differences are recognized in other comprehensive income. On the disposal of aforeign operation, the cumulative amount of the exchange differences related to such foreign operation
are reclassified from equity to profit or loss in the period of the disposal.
(4) Financial instruments
1) Financial assets(i) Initial recognition and measurement
The Group classifies financial assets as fair value through profit or loss, fair value through othercomprehensive income, or measured at amortized cost. This classification is determined at initialrecognition of the assets. The Group recognizes a financial asset at the date when the Group becomesparty to the contract of the financial instruments.

- 24 -

A financial asset is classified as financial assets measured at amortized cost if both of the following
conditions are met; otherwise, it is classified as financial assets measured at fair value:・ The financial asset is held within a business model whose objective is to hold 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 of principal and interest on the principal amount outstanding.
With regard to financial assets measured at fair value, with the exception of equity instruments held for
trading which must be measured at fair value through profit or loss, each equity instrument is designatedto be measured at fair value through profit or loss, or to be measured at fair value through othercomprehensive income, and such designation is applied on a continuous basis.
All financial assets, unless classified as measured at fair value through profit or loss, are measured attheir fair value plus transaction costs that are directly attributable to the financial assets.
(ii) Classification and subsequent measurement
After initial recognition, financial assets are measured based on their classification as follows:(a) Financial assets measured at amortized cost
Financial assets measured at amortized cost are measured at amortized cost using the effective
interest method.
(b) Other financial assets
Financial assets other than those measured at amortized cost are measured at fair value.
Subsequent changes in the fair value of financial assets measured at fair value are recognized as
profit or loss.
However, for investments in equity instruments that are designated to be measured at fair value throughother comprehensive income, subsequent changes in their fair value are recognized in othercomprehensive income, and if they are derecognized or their fair value has declined significantly, theamount previously recognized in other comprehensive income is reclassified to retained earnings.
Dividends from that investment are recognized in profit or loss.
(iii) Derecognition
A financial asset is derecognized when the rights to receive benefits from the financial asset expire or thefinancial asset is transferred or substantially all of the risks and rewards of ownership of the financial asset
are transferred.
2) Impairment of financial assets
Under IFRS 9 “Financial Instruments” (hereinafter “IFRS 9”), the Group estimates expected credit losses
for financial assets that are subject to the impairment requirements of IFRS 9 at each reporting date andrecognizes an allowance for doubtful accounts for such expected credit losses.
After initial recognition, expected credit losses are measured at the reporting date for each category offinancial assets as follows:Stage 1 Financial assets for which credit risk has not increased significantly since initial recognition:
12-month expected credit losses
Stage 2 Financial assets for which credit risk has increased significantly since initial recognition but
no credit impairment has been identified:
Lifetime expected credit losses
Stage 3 Credit-impaired financial assets:
Lifetime expected credit losses
The Group directly reduces the carrying amount of a financial asset when its future recovery cannot berealistically expected and all collateral on the financial asset is enforced or transferred to the Group.

- 25 -

The Group determines whether the credit risk on a financial asset has increased significantly since initialrecognition, primarily based on information regarding past due dates. In addition, the Group determinesthat a financial asset is credit-impaired if at least one of the following events occurs:・ Significant financial difficulty for the issuer or obligor;
・ A breach of contract, such as a default or delinquency in interest or principal payment;
・ The creditor, for economic or legal reasons relating to the debtor’s financial difficulty, granting to thedebtor a concession that the creditor would not otherwise consider;・ It has become probable that the debtor will enter bankruptcy or other financial reorganization;
・ The disappearance of an active market for that financial asset because of financial difficulties; or・ Substantial discounts on a purchased or originated financial asset that reflects the incurred credit
losses.
The Group evaluates stage 1 financial instruments on a collective basis and stage 2 and 3 financial
instruments on an individual basis.
12-month and lifetime expected credit losses are measured using reasonable and supportable information
about past events, current conditions and forecasts of future economic conditions that is available without
undue cost or effort at the end of the reporting period.
When an event that has an adverse impact on the estimated future cash flows of credit-impaired financial
assets that were purchased or originated has occurred, that is, there is evidence that their credit is
impaired, at initial recognition, for such purchased or originated credit-impaired financial assets, thecumulative changes in expected credit losses over their remaining life subsequent to initial recognition arerecognized as an allowance for doubtful accounts at the reporting date.
3) Financial liabilities(i) Initial recognition and measurement
The Group classifies financial liabilities as fair value through profit or loss or measured at amortized cost.
This classification is determined at initial recognition of the financial liabilities.
All financial liabilities are initially measured at fair value, while financial liabilities measured at amortizedcost are measured at their fair value minus transaction costs that are directly attributable to the financial
liabilities.
(ii) Classification and subsequent measurement
After initial recognition, financial liabilities are measured based on their classification as follows:(a) Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss are subsequently measured at fairvalue after initial recognition, and any gain or loss arising from remeasurements is recognized as
profit or loss.
(b) Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost are measured at amortized cost using the effective
interest method after initial recognition. Amortization using the effective interest method and any
gain or loss on derecognition are recognized as profit or loss in the consolidated statement of profit
or loss.
(iii) Derecognition
A financial liability is derecognized when the obligation is discharged or cancelled or expires.
4) Offsetting financial instruments
A financial asset and a financial liability are offset and the net amounts are presented in the consolidated
statement of financial position only when the Group currently has a legally enforceable right to set off therecognized amounts and intends either to settle on a net basis, or to realize the asset and settle theliability simultaneously.

- 26 -

5) Derivatives and hedge accounting
The Group uses derivatives, such as foreign exchange contracts and currency swap contracts, to hedge
currency risks and interest rate risks. Derivatives are classified into financial assets measured at fair value
through profit or loss and financial liabilities measured at fair value through profit or loss. Derivatives thatmeet the requirements for hedge accounting are designated as hedging instruments and hedge
accounting is applied.
For the adoption of hedge accounting, the Group formally designates and documents the hedging
relationship and the risk management objectives and strategies at the inception of the hedge. The
documentation includes the details of the hedging instruments, the hedged items, the nature of the risks
being hedged and the method of assessing hedge effectiveness. The Group assesses the hedging
relationship on an ongoing basis with respect to whether the hedging relationship will be effective in the
future.
The Group applies cash flow hedges to interest rate-related derivative transactions that meet therequirements for hedge accounting.
The portion of the changes in fair value of hedging instruments of cash flow hedges that is determined to
be an effective hedge is recognized in other comprehensive income, and is accumulated as othercomponents of equity until the hedged transaction is executed and recognized in profit or loss. The
ineffective portion is recognized as profit or loss.
The amount that has been accumulated in other components of equity related to hedging instruments is
reclassified to profit or loss when a hedged transaction affects profit or loss.
If a hedged transaction results in the recognition of non-financial assets or liabilities, the amounts thathave been accumulated in other components of equity are accounted for as an adjustment to the initialcost of the non-financial assets or liabilities.
When forecast transactions are no longer expected to occur, hedge accounting is discontinued, and any
cumulative gains and losses that have been accumulated in other components of equity are reclassified to
profit or loss. Even if hedge accounting is discontinued, when hedged future cash flows are expected tooccur, the amount that has been accumulated as other components of equity by the time of
discontinuation of hedge accounting continues to be recognized in other components of equity until such
future cash flows occur.
The Group does not apply fair value hedges or hedges of net investments in foreign operations.
6) Fair value of financial instruments
For fair value of financial instruments that are traded in active markets as of each fiscal year-end, quoted
market prices or dealer prices are referred to.
Fair value of financial instruments for which there is no active market is calculated using appropriate
valuation techniques.
(5) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits withdrawable at any time and short-term,
highly liquid investments with a maturity of three months or less from the acquisition date that are readily
convertible to cash and which are subject to an insignificant risk of change in value.
(6) Inventories
The cost of inventories includes all costs of purchase, costs of conversion and all other costs incurred inbringing the inventories to their present location and condition.
Inventories are measured at the lower of cost and net realizable value. The cost is principally assigned byusing the moving average method. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and estimated costs necessary to sell.

- 27 -

(7) Property, plant and equipment
The cost model is applied to property, plant and equipment and they are measured at cost lessaccumulated depreciation and accumulated impairment losses.
The cost includes any costs directly attributable to the acquisition of the asset, as well as costs of
dismantling, removal, and restoration.
Except for assets that are not subject to depreciation, such as land, each asset is depreciated over its
estimated useful life using the straight-line method (however, some assets, such as equipment for
research and development, are depreciated using the diminishing balance method).
The estimated useful lives of major asset items are as follows:・ Buildings and structures: 2 – 60 years;
・ Machinery, equipment and vehicles: 2 – 15 years
Estimated useful lives and depreciation methods, etc., are reviewed at each fiscal year-end, and if any
changes occur, they are amended prospectively as changes in accounting estimates.
(8) Goodwill and intangible assets
1) Goodwill
The Group measures goodwill as the amount of the consideration transferred that is measured at theacquisition-date fair value, including the recognized amount of non-controlling interests in an acquiree,less the net of the acquisition-date amounts (usually fair value) of identifiable assets acquired andliabilities assumed.
Goodwill is not amortized. Goodwill is allocated to cash-generating units identified based on the region inwhich the business is conducted and the type of business and is tested for impairment annually or
whenever there is any indication of impairment.
Impairment losses on goodwill are recognized in the consolidated statement of profit or loss, and they are
not reversed in subsequent periods.
Goodwill is presented at the amount of acquisition cost less accumulated impairment losses.
2) Intangible assets
The cost model is applied to intangible assets, and such assets are measured at cost less accumulated
amortization and accumulated impairment losses.
A separately acquired intangible asset is measured initially at cost. The cost of an intangible asset
acquired in a business combination is measured at fair value at the acquisition date.
Expenditure on internally generated intangible assets, with the exception of an intangible asset arisingfrom development that meets the recognition criteria, is recognized as expense when it is incurred.
An intangible asset with finite useful life is amortized over its estimated useful life using the straight-line
method.
Estimated useful lives and amortization methods for intangible assets with finite useful lives are reviewed
at each fiscal year-end, and if any changes occur, they are amended prospectively as changes inaccounting estimates.
The estimated useful lives of major intangible assets with finite useful lives are as follows:
・ Software: 5 years;
・ Customer-related assets: 5 – 21 years
An intangible asset with indefinite useful life and an intangible asset not yet available for use are notamortized and are instead tested for impairment annually or whenever there is any indication of
impairment for each individual asset or each cash-generating unit.

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(9) Leases
For lease transactions as a lessee, at the commencement date of the lease, the Group measures a rightof-use asset at cost and a lease liability at the present value of the lease payments that are not paid atthat date.
A right-of-use asset is depreciated over the shorter of its useful life or its lease term using the straight-line
method.
The Group determines the lease term as the non-cancellable period of the lease, together with periods
covered by an extension option that is reasonably certain to be exercised or a cancellation option that isreasonably certain not to be exercised.
Lease payments are apportioned to finance costs and repayments of lease liabilities using the effective
interest method, and finance costs are recognized in the consolidated statement of profit or loss.
However, for short-term leases with a lease term of 12 months or less and leases for which the underlying
assets are of low value, right-of-use assets and lease liabilities are not recognized, and the total lease
payments are recognized as an expense on either a straight-line basis over the lease term or anothersystematic basis.
(10) Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is any indication of impairment foreach asset. If there is any indication that an asset may be impaired or if the asset is required to test for
impairment at least annually, the Group estimates the recoverable amount of the asset. If it is not possible
to estimate the recoverable amount of the individual asset, the Group estimates the recoverable amountof the cash-generating unit to which the asset belongs.
The recoverable amount of an asset or cash-generating unit is measured at the higher of its fair value lesscosts of disposal or its value in use. When the carrying amount of the asset or cash-generating unit
exceeds its recoverable amount, impairment losses for the asset are recognized and the carrying amountis reduced to its recoverable amount.
Value in use is determined as estimated future cash flows that are discounted to the present value, using
a pre-tax discount rate that reflects the current market assessments of the time value of money, the risks
specific to the asset and other factors. In calculating fair value less costs of disposal, an appropriate
valuation model is used, supported by available indicators of fair value.
For an asset other than goodwill, the Group assesses whether there is any indication that an impairment
loss recognized in the prior periods for the asset may no longer exist or may have decreased, such as any
changes in the assumptions used to calculate the recoverable amount of the asset. If any such indication
exists, the Group estimates the recoverable amount of the asset or cash-generating unit. When therecoverable amount exceeds the carrying amount of the asset or cash-generating unit, impairment losses
are reversed up to the lower of the calculated recoverable amount and the carrying amount lessdepreciation and amortization, in the case where no impairment losses have been recognized in the priorperiods.
(11) Employee benefits
1) Post-employment benefits
The Group implements defined benefit plans and defined contribution plans as its employees’ postemployment benefit program.
The Group determines the present value of its defined benefit obligations and the related current service
cost and prior service cost using the projected unit credit method.
The discount rate is determined by reference to market yields at the end of the reporting period on highquality corporate bonds corresponding to the discount period, which is determined based on the period up
to the expected benefit payment date in each future reporting period.

- 29 -

Remeasurements of defined benefit liability (asset) are recognized collectively as other comprehensive
income in the period of their occurrence, and are immediately reclassified from other components ofequity to retained earnings.
Prior service cost is amortized over the average period until benefits are vested using the straight-line
method, while if the benefit has already been vested immediately after the introduction or change of thedefined benefit plan, the prior service cost is recognized as profit or loss in the period in which it wasincurred.
Contributions for retirement benefits under defined contribution plans are recognized as expenses at thetime of contribution.
2) Short-term employee benefits
The Group recognizes the undiscounted amount of short-term employee benefits as an expense when an
employee has rendered related service.
For bonus plans and paid absences, the Group recognizes the amount estimated to be paid under theapplicable plan as liabilities when the Group has legal or constructive obligations to make such payments
and reliable estimates of the obligations can be made.
(12) Share-based payment
The Group has introduced a performance-linked stock compensation program and a performance andshare price-linked monetary compensation program.
The consideration for services received under the performance-linked stock compensation program ismeasured by reference to the fair value of the Company's shares on the grant date or is measured at thefair value of the incurred liabilities, and is recognized as an expense over the corresponding period, while
the same amount is recognized as an increase in capital surplus or liabilities.
The consideration for services received under the performance and share price-linked monetarycompensation program is measured by reference to the fair value of the Company's shares at the end of
the reporting period, and is recognized as an expense over the corresponding period, while the sameamount is recognized as an increase in liabilities. Fair value of the relevant liabilities is remeasured at theend of the reporting period and the settlement date, and any changes in fair value are recognized as profit
or loss.
The details of the programs are provided in (Overview of non-performance-linked stock compensation
program, performance-linked stock compensation program and performance and share price-linked
monetary compensation program) in Note 33. “Share-based payments.”(13) Provisions
The Group recognizes a provision when the Group has a present obligation (legal or constructive) as aresult of a past event, it is highly probable that the Group will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Where the effect of the time value of money is material, the provision is measured at the present value ofthe expenditures expected to be required to settle the obligation. For calculation of the present value, apre-tax discount rate that reflects the current market assessment of the time value of money and risks
specific to the liability is used.
(14) Revenue
1) Revenue from contracts with customers
For revenue from contracts with customers, the Group identifies the contract with a customer, identifies
the performance obligations in the contract at contract inception, determines the transaction price,
allocates the transaction price to the performance obligations in the contract, and recognizes the revenue
when the Group satisfies a performance obligation.
A performance obligation is satisfied when control of the goods or services associated with an identified
performance obligation is transferred to the customer.

- 30 -

Revenue from contracts with customers is classified into the following:・ Revenue from sales of products and construction contracting
For product sales contracts with customers, revenue is recognized when the product is delivered tothe customer.
The consideration under the product sales contract is collected within a reasonable period after thetime of delivery of the product to the customer and includes no significant financial component.
For construction contracts, control of assets is transferred to the customer over a certain period of timesince the Company's performance does not create an asset with an alternative use and the Company
has an enforceable right to payment for performance completed to date. Therefore, sales arerecognized over the period of the construction contract, based on the degree of progress towardsatisfaction of performance obligations as measured at the end of each reporting date. To measureprogress, the input method is applied, using the ratio of the incurred cost against the estimated total
cost for each contract.
Consumption taxes, value-added taxes, etc., are deducted from the transaction price when the Groupis found to act as an agent of the taxation authority in the transaction, taking into comprehensive
consideration the laws and regulations as well as the actual situation regarding transactions in eachcountry. An amount substantially equivalent to the discount from the sales price under the contract witha customer is deducted from transaction price.
The Group has no significant obligations to return goods or to refund.
・ Technology revenue
Technology revenue is recognized on an accrual basis in accordance with the substance of therelevant contractual arrangements. The Group earns revenue under the contracts that allow third
parties to manufacture and sell its products and use its technologies.
2) Interest revenue
Interest revenue is calculated by using the effective interest method.
For the financial assets described in (4) Financial instruments 2) Impairment of financial assets, interest
revenue is recognized by using the effective interest method as follows, for each category of financial
assets:Stage 1 and stage 2 financial assets:
Carrying amount before deducting allowance for doubtful accounts × effective interest rate
Stage 3 financial assets:
Carrying amount after deducting allowance for doubtful accounts × effective interest rate
Purchased or originated credit-impaired financial assets:
Carrying amount after deducting allowance for doubtful accounts × credit-adjusted effective interest rate3) Dividends
Dividends are recognized when the shareholders' rights to receive payment are established.

- 31 -

(15) Government grants
Government grants are recognized at fair value when there is reasonable assurance that the Group willcomply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in profit or loss on a systematic basis over the periods in which theGroup recognizes as expense the related costs for which the grants are intended to compensate.
Government grants related to assets are deducted from the carrying value of the assets.
(16) Income taxes
Income tax expense in the consolidated statement of profit or loss is presented as the aggregate amountof current tax and deferred tax.
Income taxes are recognized as profit or loss, except for the tax arising from items that are recognized inother comprehensive income or directly in equity, and the tax arising from business combinations.
Current taxes are measured at the amount expected to be paid to or recovered from the taxation
authorities.
The amount of these taxes is calculated using the tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period.
Deferred taxes are recognized related to the temporary differences between the carrying amount of anasset and a liability at the end of the period for accounting purposes and its tax base.
A deferred tax asset is recognized for deductible temporary differences, unused tax credits and unused
tax losses to the extent that it is probable that taxable profits will be available against which they can beutilized. A deferred tax liability is recognized, in principle, for all taxable temporary differences.
However, deferred tax assets or liabilities are not recognized for the following temporary differences
deferred taxes arises from:・ The initial recognition of goodwill;
・ The initial recognition of an asset or a liability in a transaction which is not a business combination
and affects neither accounting profit nor taxable profit (tax loss) at the time of the transaction;
・ For deductible temporary differences arising from investments in subsidiaries and associates andinterests in joint arrangements when it is probable that the temporary differences will not reverse in
the foreseeable future or it is not probable that taxable profits will be available against which thetemporary differences can be utilized; or・ For taxable temporary differences associated with investments in subsidiaries and associates andinterests in joint arrangements when the timing of the reversal of temporary differences can becontrolled and it is probable that the temporary differences will not reverse in the foreseeable future.
At the end of each reporting period, the Group reassesses unrecognized deferred tax assets andrecognizes a previously unrecognized deferred tax asset to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled, based on tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to set off
current tax assets against current tax liabilities and related income taxes are levied by the same taxation
authority on the same taxable entity.
The income tax expense for each quarter is calculated based on an estimated yearly effective tax rate.

- 32 -

(17) Equity
1) Ordinary shares
For ordinary shares issued by the Company, the total issue price of the shares is recorded in share capitaland capital surplus, and transaction costs, net of related tax effects, are deducted from capital surplus.
2) Treasury shares
Treasury shares are measured at cost and deducted from equity. No gain or loss is recognized in profit orloss on the purchase, sale or cancellation of treasury shares. The difference between the carrying amountand the consideration received from the sale is recognized in equity.
(18) Earnings per share
Basic earnings per share are calculated by dividing profit or loss attributable to common shareholders of
the parent by the weighted average number of common shares outstanding, after adjusting for treasury
shares, during the period.
(19) Liabilities pertaining to forward contracts concluded with non-controlling shareholders
For forward contracts for shares in subsidiaries which the Group has concluded with non-controllingshareholders, the present value of the expected transfer price is initially recognized as other financial
liabilities, and the same amount is deducted from capital surplus. After initial recognition, the present value
is measured at amortized cost using the effective interest method, in principle, and the amount ofsubsequent changes is recognized in profit or loss.

4. Significant accounting estimates and judgments
In preparing the consolidated financial statements of the Group, management is required to makejudgments, estimates and assumptions that affect the application of accounting policies and the disclosureof reported amounts of income, expenses, assets and liabilities. However, actual results may differ fromthese estimates.
The estimates and their underlying assumptions are reviewed on a continuous basis. The impact of thesereviews on estimates and assumptions are recognized in the period in which the estimates orassumptions are reviewed, the reporting period, and subsequent reporting periods.
In the application of the accounting policies, estimates and judgments that may have a particularly
significant effect on the amounts recognized in the consolidated financial statements of the Group are as
follows:
・ Valuation of goodwill（Note 3. “Significant accounting policies (8) Goodwill and intangible assets”）
Careful judgments are made with external experts for estimates of future cash flows based on thebusiness plan, growth rates and discount rates to be used in the impairment test for goodwill.
However, these judgments are subject to future uncertainties.
In the event of an increase in the discount rate or a decrease in the growth rate, an impairment loss
may be incurred.
・ Estimates of the total cost of transactions that recognize revenue over a certain period of time
（Note 3. “Significant accounting policies (14) Revenue”）
The Group uses estimated total costs to measure the degree of the construction’s progress, which isused for recognizing revenues over a certain period of time. However, these estimates are subject tofuture uncertainties due to technical or physical factors and changes in the environment surrounding
the contracts.

- 33 -

In addition, other estimates and judgments that are considered important are as follows:・ Estimates of fair value of intangible assets acquired in a business combination（Note 3. “Significant accounting policies (2) Business combinations”）
・ Impairment of non-financial assets（Note 3. “Significant accounting policies (10) Impairment of non-financial assets”）
・ Useful lives of intangible assets（Note 3. “Significant accounting policies (8) Goodwill and intangible assets”）
・ Recoverability of deferred tax assets（Note 3. “Significant accounting policies (16) Income taxes”）
・ Estimates of the extension option and cancellation option in lease agreements（Note 3. “Significant accounting policies (9) Leases”）
・ Provisions（Note 3. “Significant accounting policies (13) Provisions”）
・ Measurement of defined benefit obligations（Note 3. “Significant accounting policies (11) Employee benefits”）
・ Fair value of financial instruments（Note 3. “Significant accounting policies (4) Financial instruments”）

5. New standards not yet appliedWith respect to the standards or interpretations newly issued or amended by the date of the approval of
the consolidated financial statements, the Group has not applied them early as of March 31, 2023.
The impact of the application is not stated herein, due to its immateriality.

- 34 -

6. Segment information(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial
information is available. These segments are subject to periodic review to enable the Company’s Board of
Directors to decide how to allocate resources and assess performance.
The Group plans comprehensive strategies for the products and services that it handles in Japan andoverseas and conducts business accordingly. The Group’s operations are therefore classified into tworeportable segments, the Water Treatment Chemicals business and the Water Treatment Facilities
business.
The Water Treatment Chemicals business manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities business manufacturesand sells water treatment equipment and facilities, provides ultrapure water, chemical cleaning, toolcleaning, soil and groundwater remediation services, and provides maintenance services that encompass
operation, maintenance, and management of water treatment facilities.
(2) Information on reportable segments
The accounting policies for reportable segments are the same as the accounting policies for the Group,
which are provided in Note 3. “Significant accounting policies.” Intersegment sales are based on prevailingmarket prices.
Fiscal year ended March 31, 2022
Millions of yen

2022
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method
Profit before tax
Segment assets

Reportable segments
Water
Water
Treatment
Treatment
Chemicals
Facilities¥117,672
518
118,191
14,560¥170,534
561
171,095
21,169

Total¥288,207
1,080
289,287
35,729Adjustments(Notes)¥—(1,080)(1,080)4

Consolidated¥288,207—
288,20735,734601(6,176)(80)¥30,079¥148,267¥274,119¥422,386¥47,595¥469,981

Other items
Depreciation and amortization¥5,935¥17,477¥23,412¥—¥23,412
Impairment losses
380
647
1,028
—
1,028
Investments accounted for using equity
988
163
1,152
39
1,191
methodCapital expenditures
11,45457,016
68,471—
68,471
Notes 1. Adjustments to segment profit include the elimination of inter-segment transactions, etc.
2. Segment profit presents the amount of operating profit.
3. Adjustments to segment assets include the elimination of inter-segment transactions, etc., and consist mainlyof corporate assets unallocated to reportable segments.
4. Capital expenditures include an increase in right-of-use assets.
5. Capital expenditures do not include assets acquired through business acquisitions.
6. Net sales of the Water Treatment Facilities business include the amount of revenue recorded for transactions
in which revenue is recognized over a certain period of time by the Company of ¥51,440 million.

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Fiscal year ended March 31, 2023
Millions of yen

2023
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method
Profit before tax
Segment assets
Other items
Depreciation and amortization
Impairment losses
Investments accounted for using equity
methodCapital expenditures2023
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method
Profit before tax
Segment assets

Reportable segments
Water
Water
Treatment
Treatment
Chemicals
Facilities¥136,139
553
136,692
7,606¥208,468
882
209,350
21,526

Total¥344,608
1,435
346,043
29,132Adjustments(Notes)¥—(1,435)(1,435)(73)

Consolidated¥344,608—
344,608
29,0581,990(1,077)
179¥30,151¥144,467¥303,233¥447,701¥53,836¥501,538¥6,7307,660¥22,884—¥29,614
7,660

¥—
—

¥29,614
7,660

1,085

149

1,234

49

1,283

6,773

41,46848,241—

48,241Thousands of U.S. dollars
Reportable segments
Water
Water
Treatment
Treatment
Adjustments
Chemicals
Facilities
Total(Notes)Consolidated$1,015,962
4,126
1,020,089
56,761$1,555,731
6,582
1,562,313
160,641$2,571,701
10,7082,582,410
217,402$—(10,708)(10,708)(544)$2,571,701—
2,571,701
216,850
14,850(8,037)
1,335$225,007$1,078,111$2,262,932$3,341,052$401,761$3,742,820

Other items
Depreciation and amortization$50,223$170,776$221,000$—$221,000
Impairment losses
57,164—
57,164—
57,164
Investments accounted for using equity
8,097
1,111
9,208
365
9,574
methodCapital expenditures
50,544309,462
360,007—360,007
Notes 1. Adjustments to segment profit include the elimination of inter-segment transactions, etc.
2. Segment profit presents the amount of operating profit.
3. Adjustments to segment assets include the elimination of inter-segment transactions, etc., and consist mainlyof corporate assets unallocated to reportable segments.
4. Capital expenditures include an increase in right-of-use assets.
5. Impairment losses consist mainly of impairment losses on goodwill of ¥7,646 million ($57,059 thousand).
Details are provided in Note 13. “Goodwill and intangible assets.”
6. Net sales of the Water Treatment Facilities business include the amount of revenue recorded for transactions
in which revenue is recognized over a certain period of time by the Company of ¥59,098 million ($441,029
thousand).

- 36 -

(3) Information about products and services
This information is omitted since the classification of products and services herein follows the sameclassification as used for reportable segments.
(4) Information about geographical areas
Non-current assets and net sales to external customers by geographical areas are as follows:
1) Non-current assets
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Japan
¥159,264¥175,610$1,310,522
Asia
19,45020,330151,716
Americas61,74060,749453,350
EMEA
20,855
21,679161,783
Total¥261,311¥278,370$2,077,388
Note Non-current assets are allocated based on the location of assets, and financial instruments or deferred tax assets are notincluded. EMEA refers to the European, Middle Eastern and African regions.

2) Net sales
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Japan
¥159,365¥175,995$1,313,395
Asia
58,03278,883588,679
Americas46,35160,198449,238
EMEA
24,45729,530220,373
Total¥288,207¥344,608$2,571,701
Note Net sales are allocated to a country or areas based on the locations of customers. EMEA refers to the European, Middle
Eastern and African regions.

(5) Information about major customers
This information is omitted since there is no single external customer that accounts for 10% or more of the net sales
in the consolidated statement of profit or loss.

- 37 -

7. Business combinations and Acquisition of non-controlling interests
Fiscal year ended March 31, 2022
(Business combinations of entities or businesses under common control)(1) Outline of the transaction
1) Company names and businesses at the time of business combination(i) Surviving company
Name:
Kurita Water Industries Ltd.
Business: Manufacture and sale of water treatment chemicals and water treatment facilities,
maintenance of water treatment facilities, ultrapure water supply, and soil and groundwater
remediation(ii) Merged company
Name:
Kurita Engineering Co., Ltd. (hereinafter “Kurita Engineering”)
Business: Plant cleaning and maintenance, manufacture and sale of cleaning and wastewater
treatment chemicals, facilities and equipment, and rental of temporary machinery
2) Date of business combination
April 1, 2021
3) Legal form of business combination
Kurita Engineering has been dissolved through an absorption-type merger in which the Company is thesurviving company.
4) Name of the company after business combination
Kurita Water Industries Ltd.
5) Main reason of integration
Kurita Engineering was established in 1959 when the chemical cleaning division was separated from theCompany, and has been developing its business focusing on chemical cleaning for large plants in Japanas a leading company in plant facilities cleaning services. In the social and industrial infrastructure
markets such as electric power, iron and steel, petroleum refining, and petrochemicals, which are themain markets for Kurita Engineering and the Company, there are growing needs to reduce environmental
impact and improve productivity, including decarbonization measures against global climate change.
This merger will enable the Company to flexibly invest its management resources, such as financial andhuman resources, into Kurita Engineering's solid technological and customer base so that the Company
can accurately identify these needs and provide optimal solutions. We will aim to expand the scope of ourplant facilities cleaning business and achieve sustainable growth by establishing a system to respondpromptly to social demands and customer needs in the future social and industrial infrastructure markets.
(2) Outline of accounting
The business combination under common control is a business combination in which all companies orbusinesses involved are ultimately controlled by the same company before and after the businesscombination. The control is not temporary. The Group continues to perform accounting treatment basedon carrying the amount for all business combination transactions under common control.
Fiscal year ended March 31, 2023
Not applicable.

- 38 -

8. Cash and cash equivalents
The breakdown of cash and cash equivalents is as follows:
Millions of yen
2022
2023
¥43,974¥48,322
1,756
2,145¥45,730¥50,468

Cash and deposits
Short-term investments
Total

Thousands of
U.S. dollars
2023$360,611
16,007$376,626

The balance of cash and cash equivalents in the consolidated statement of financial position matches thatin the consolidated statement of cash flows.

9. Trade and other receivables
The breakdown of trade and other receivables is as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Notes and accounts receivable - trade¥75,290¥78,585$586,455
Accounts receivable - other
778
714
5,328
Contract asset
31,90040,356
301,164
Lease receivables
1,260
1,064
7,940
Allowance for doubtful accounts
(338)
(421)
(3,141)
Total¥108,892¥120,299$897,753
Notes 1. In the consolidated statement of financial position, trade and other receivables are presented in the amountafter deduction of allowance for doubtful accounts.
2. With the exception of lease receivables, trade and other receivables are classified as financial assets
measured at amortized cost.

10. Other financial assets(1) Breakdown of other financial assets
The breakdown of other financial assets is as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Shares¥17,078¥8,872$66,208
Insurance funds
2,410
2,814
21,000
Leasehold deposits
1,897
1,756
13,104
Time deposits
2,757
2,838
21,179
Other
1,943
2,509
18,723
Total¥26,086¥18,791$140,231
Current assets¥3,075¥3,357$25,052
Non-current assets
23,011
15,433
115,171
Notes 1. In the consolidated statement of financial position, other financial assets are presented in the amount after
deduction of allowance for doubtful accounts.
2. Insurance funds, shares, and time deposits and leasehold deposits are classified as financial assets measured
at fair value through profit or loss, financial assets measured at fair value through other comprehensive income
and financial assets measured at amortized cost, respectively. Other consists primarily of financial assets
measured at amortized cost.

- 39 -

(2) Financial assets measured at fair value through other comprehensive income
Major equity instruments and their fair values, of financial assets measured at fair value through othercomprehensive income, are as follows:
Thousands ofMillions of yen
U.S. dollars
Name of shares
2022
2023
2023
Shin-Etsu Chemical Co., Ltd.
¥3,359¥3,821$28,514
ONO PHARMACEUTICAL CO., LTD.
4,227
1,905
14,216NIPPON SHOKUBAI CO.,LTD.
994
985
7,350
Otsuka Holdings Co., Ltd.
846
840
6,268
Daikin Industries, Ltd.
5,550
—
—
Note Shares are held primarily for business relationship purposes, and are therefore designated as financial assets measured
at fair value through other comprehensive income.

The Group sells (derecognizes) financial assets measured at fair value through other comprehensive
income in order to ensure the efficient and effective use of the assets it holds.
Fair values at the time of sales and cumulative gain or loss on disposal recognized as othercomprehensive income in equity are as follows:
Millions of yen
2022
2023
¥9,212¥8,856

Thousands of
U.S. dollars
2023$66,089

Millions of yen
2022
2023
¥6,640¥8,132
1,029
1,598
5,462
7,116
¥13,132¥16,847

Thousands of
U.S. dollars
2023$60,686
11,925
53,104$125,723

Fair value
Cumulative gain or loss on disposal recognized as other comprehensive
7,259
7,138
53,268income in equity
Note Cumulative gain or loss on disposal recognized as other comprehensive income in equity are reclassified to retained
earnings when the assets are sold or when their fair value declines significantly.

11. Inventories
The breakdown of inventories is as follows:

Finished goods
Work in process
Raw materials and supplies
Total- 40 -

12. Property, plant and equipment
Changes in carrying amount, acquisition cost, accumulated depreciation and impairment losses ofproperty, plant and equipment are as follows:
1) Carrying amountMillions of yen
Buildings
andstructures¥19,039
276

Machineryandvehicles¥60,805
1,260

Land¥11,537
—

559

129

—

(2,041)(476)(248)
25,806(12,265)
(131)
(177)
19,603365

Constructionin progress¥21,666
61,006Other¥4,554515

Total¥117,603
63,058

—

26

715

—
(400)
(4,301)————(48,346)(1,631)
(19)
(49)
2,568

(15,939)(1,027)(4,777)
(368)

571

13

255

156

1,364

16
¥43,298278(3,821)
(9)
(138)
8,578

21
¥69,817
1,193(15,663)(2)(162)
35,911—¥6,849
18
—
—
(143)
—

(0)
¥34,581
36,649——(5)(45,947)366¥6,488811(2,045)
(0)
(69)
1,394

404
¥161,034
38,951(21,530)
(12)
(519)
(63)

225

433

18

87

81

847

6
¥48,417(0)¥91,526

24¥6,766(0)¥25,366

0¥6,66030¥178,737

Buildings
andstructures$323,119
2,074(28,514)(67)(1,029)64,014

Machineryandvehicles$521,0228,902(116,888)(14)(1,208)267,992

Other
Balance as of March 31, 2022
$48,417
Individual acquisition
6,052
Depreciation (Note)(15,261)
Impairment losses(0)
Sale or disposal(514)
Reclassification to other account
10,402
Exchange differences ontranslation of foreign
1,679
3,231
134
649
604
operations
Other
44
(0)
179
(0)
0
Balance as of March 31, 2023
$361,320$683,029$50,492$189,298$49,701
Note Depreciation of property, plant and equipment is included in cost of sales and selling, general andadministrative expenses in the consolidated statement of profit or loss.

Total$1,201,746
290,679(160,671)(89)(3,873)(470)

Balance as of April 1, 2021
Individual acquisition
Acquisition through businesscombination
Depreciation (Note)
Impairment losses
Sale or disposal
Reclassification to other accountExchange differences ontranslation of foreign
operations
Other
Balance as of March 31, 2022
Individual acquisition
Depreciation (Note)
Impairment losses
Sale or disposal
Reclassification to other accountExchange differences ontranslation of foreign
operations
Other
Balance as of March 31, 2023

Thousands of U.S. dollars- 41 -

Land$51,111134——(1,067)—

Constructionin progress$258,067
273,500——(37)(342,888)

6,320
223
$1,333,858

2) Acquisition cost
Millions of yen

Balance as of April 1, 2021
Balance as of March 31, 2022
Balance as of March 31, 2023

Buildings
andstructures¥49,605¥74,439¥81,697

Machineryandvehicles¥177,839¥198,432¥234,576

Balance as of March 31, 2023

Buildings
andstructures$609,679

Machineryandvehicles$1,750,567

Land¥12,036¥7,678¥7,081

Constructionin progress¥21,666¥34,581¥25,366

Other¥18,440¥21,089¥22,419

Total¥279,588¥336,221¥371,140

Other$167,305

Total$2,769,701

Other¥13,885¥14,601¥15,758

Total¥161,984¥175,187¥192,402

Other$117,597

Total$1,435,835

Thousands of U.S. dollars
Land$52,843

Constructionin progress$189,298

3) Accumulated depreciation and impairment losses
Millions of yen

Balance as of April 1, 2021
Balance as of March 31, 2022
Balance as of March 31, 2023

Buildings
andstructures¥30,565¥31,141¥33,279

Machineryandvehicles¥117,034¥128,615¥143,049

Balance as of March 31, 2023

Buildings
andstructures$248,350

Machineryandvehicles$1,067,529

Land
¥498
¥829
¥314

Constructionin progress
¥—
¥—
¥—

Thousands of U.S. dollars- 42 -

Land$2,343

Constructionin progress$—

13. Goodwill and intangible assets(1) Table of changes
Changes in carrying amount, acquisition cost, accumulated amortization and impairment losses of
goodwill and intangible fixed assets are as follows:
1) Carrying amount

Balance as of April 1, 2021
Individual acquisition
Acquisition through business combination
Amortization (Note)
Impairment losses
Sale or disposal
Exchange differences on translation offoreign operations
Other changes
Balance as of March 31, 2022
Individual acquisition
Amortization (Note)
Impairment losses
Sale or disposal
Exchange differences on translation offoreign operations
Other changes
Balance as of March 31, 2023

Goodwill¥55,596
—
2,320
—
—
—

Millions of yen
Customerrelated
Softwareassets¥4,542¥8,716
2,005
16
0
661
(1,444)(1,048)
(1)
—
(2)
—

Other
¥4,061
15
0
(828)
—
(0)

Total
¥72,916
2,037
2,982(3,321)
(1)
(2)

5,075

23

729

209

6,037

—
¥62,992——(7,646)—331¥5,454
1,810(1,671)
(0)
(21)

66
¥9,142—(1,199)——37¥3,494
4
(934)
—
—

435
¥81,084
1,814(3,805)(7,647)
(21)

5,067

20

712

206

6,007

—
¥60,41352¥5,644(7)¥8,64741¥2,812

87¥77,517

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$40,701$68,223$26,074
13,507—29(12,470)(8,947)(6,970)
(0)
—
—
(156)
—
—

Goodwill
Total
Balance as of March 31, 2022
$470,089$605,104
Individual acquisition—
13,537
Amortization (Note)—(28,395)
Impairment losses(57,059)(57,067)
Sale or disposal—(156)
Exchange differences on translation of
37,813
149
5,313
1,537
44,828
foreign operations
Other changes
—
388
(52)
305
649
Balance as of March 31, 2023
$450,843$42,119$64,529$20,985$578,485
Note Amortization of intangible assets is included in cost of sales and selling, general and administrative expenses
in the consolidated statement of profit or loss.

- 43 -

2) Acquisition cost

Balance as of April 1, 2021
Balance as of March 31, 2022
Balance as of March 31, 2023

Balance as of March 31, 2023

Millions of yen
Customerrelated
assets¥12,472¥14,272¥15,136

Goodwill¥58,071¥65,467¥70,425

Software¥15,384¥17,741¥19,340

Other¥6,896¥7,263¥7,610

Total¥92,825¥104,744¥112,513

Goodwill$525,559

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$144,328$112,955$56,791

Total$839,649

Millions of yen
Customerrelated
assets¥3,756¥5,129¥6,4883) Accumulated amortization and impairment losses

Balance as of April 1, 2021
Balance as of March 31, 2022
Balance as of March 31, 2023

Balance as of March 31, 2023

Goodwill¥2,475¥2,475¥10,012

Software¥10,841¥12,286¥13,696

Other¥2,835¥3,768¥4,797

Total¥19,908¥23,660¥34,995

Goodwill$74,716

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$102,208$48,417$35,798

Total$261,156(2) Impairment tests for goodwill
The carrying amount of the goodwill allocated to each cash-generating unit is as follows:
Millions of yen
2022
2023
¥46,396¥42,358
14,30915,237
4,908
4,996
4,853
5,294
22,325
16,830¥16,595¥18,054
5,784
6,259
2,006
2,188
8,804
9,605
¥62,992¥60,413

Reportable segments
Water Treatment Chemicals
Kurita Europe GmbHHansu Co., Ltd.
Avista Technologies, Inc.
Kurita America, Inc.
Water Treatment Facilities
Kurita America, Inc.
Kurita Fracta Holdings, Inc.
Pentagon Technologies Group, Inc.
Total

- 44 -

Thousands of
U.S. dollars
2023$316,104
113,708
37,28339,507
125,597$134,731
46,70816,32871,679$450,843

Impairment tests for major goodwill are performed as follows:
1) Kurita Europe GmbH (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 10.1%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 1.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 6.8% and 1.0%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
2) Hansu Co., Ltd. (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 13.5%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 0.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 11.4% and 0.0%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
3) Avista Technologies, Inc. (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 10.8%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit.
The forecast period of future cash flows is five years, based on a business plan that was created reflecting
past experience and external information and approved by management. For periods after five years, agrowth rate of 2.0% is used, which was determined by taking into account the conditions of the market inwhich the cash-generating unit is operating. Accordingly, the recoverable amount exceeds the carrying
amount, and therefore, no impairment loss was recognized for the fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 9.5% and 2.2%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.

- 45 -

4) Kurita America, Inc. (Water Treatment Chemicals business and Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 10.8%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit.
The forecast period of future cash flows is five years, based on a business plan that was created reflecting
past experience and external information and approved by management. For periods after five years, agrowth rate of 2.0% is used, which was determined by taking into account the conditions of the market inwhich the cash-generating unit is operating.
The business plan above was created based on external information regarding the future of the industry
and other factors. In addition, we expect to see further growth over the next five years in high-value-added
products and services that create common value with society, including CSV business that we arepromoting throughout the Group, as well as cost reduction measures included in cost of sales and otheritems. On the other hand, the estimates were revised downward after carefully considering the past
results achieved, including the fiscal year ended March 31, 2023, which was affected by fluctuations in thewater treatment chemicals market after the spread of COVID-19, logistics disruptions, and price hikes.
Furthermore, in line with the U.S. policy rate hike, the discount rate used to calculate the recoverable
amount was increased, which resulted in the recoverable amount being lower than the carrying amount.
As a result, impairment losses of ¥7,646 million ($57,059 thousand) (Water Treatment Chemicals
business) were recorded for the fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 9.5% and 2.2%, respectively.
5) Kurita Fracta Holdings, Inc. (Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 19.1%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 2.5% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amounts exceed each of their carrying amounts, and therefore, no impairment loss wasrecognized for the fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 17.9% and 2.5%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
6) Pentagon Technologies Group, Inc. (Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 10.3%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 2.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2023.
For the fiscal year ended March 31, 2022, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 10.7% and 2.2%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.

- 46 -

14. Impairment losses for non-financial assets
Business assets are grouped mainly by segment and idle assets are grouped by individual property.
Fiscal year ended March 31, 2022
For the fiscal year ended March 31, 2022, impairment losses of ¥1,028 million (¥1,027 million for property,
plant and equipment, ¥1 million for intangible assets) were recorded in “Other expenses,” as a result of
the closure of the Yamaguchi Plant accompanying the reorganization of manufacturing bases in thedomestic Water Treatment Facilities business and the decision to suspend the operation of the plant ofKurita Water Industries (Jiangyin) Co. (Water Treatment Chemicals business) due to a review of the
production structures for water treatment chemicals in China.
The breakdown of impairment losses by segment is provided in Note 6. “Segment information.”
Fiscal year ended March 31, 2023
For the fiscal year ended March 31, 2023, impairment losses of ¥7,646 million ($57,059 thousand) wererecognized mainly on goodwill. Details are provided in Note 13. “Goodwill and intangible assets.”

15. Investments accounted for using equity method(1) Material associates
Not applicable.
(2) Individually immaterial associates(i) The carrying amount of investments in individually immaterial associates is as follows:
Millions of yen
2022
2023
¥1,191¥1,283

Total carrying amountThousands of
U.S. dollars
2023$9,574(ii) The aggregate amount of the Group’s share of profit and comprehensive income of individually
immaterial associates is as follows:
Millions of yen
2022
2023
Share of:
ProfitOther comprehensive income
Comprehensive income

¥(80)
121
¥41

- 47 -

¥179
2
¥181

Thousands of
U.S. dollars
2023$1,33514$1,35016. Income taxes(1) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities, classified by primary cause, are as follows:
Fiscal year ended March 31, 2022
Millions of yen

2022

Deferred tax assets
Depreciation
Net defined benefit liability
Accrued bonuses to employees
Accrued paid absences
The carryforward of unused tax losses
Unrealized gain on the sale of fixed assets
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Tax effects related to retained earnings offoreign subsidiaries
Other
Total deferred tax liabilities
Net

Recognized inothercomprehensive
incomeApril 1, 2021

Recognizedthrough
profit or loss

¥2,624
4,991
832
672
1,145
311
3,583
14,161

¥347
311
41
68
(109)
(8)
182
834

¥—
(105)
—
—
—
—
(57)
(163)

¥—
—
—
—
—
—
—
—

¥2,972
5,196
873
740
1,036
302
3,708
14,831

5,805—(1,983)

—

3,822

2,166

535

—

—

2,701

5,358
13,330
¥831

(782)
(246)
¥1,080—(1,983)¥1,819306
306¥(306)

4,883
11,406¥3,425

March 31,
2022

Other

Fiscal year ended March 31, 2023
Millions of yen

2023

Deferred tax assets
Depreciation
Net defined benefit liability
Accrued bonuses to employees
Accrued paid absences
The carryforward of unused tax losses
Unrealized gain on the sale of fixed assets
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Tax effects related to retained earnings offoreign subsidiaries
Other
Total deferred tax liabilities
Net

Recognized inothercomprehensive
incomeApril 1, 2022

Recognizedthrough
profit or loss

¥2,972
5,196
873
740
1,036
302
3,708
14,831¥1,083
245
13
(21)
1,395
(6)
810
3,520

¥—
(332)
—
—
—
—
(79)
(412)

¥—
—
—
—
—
—
—
—

¥4,055
5,109
886
719
2,432
296
4,439
17,9393,822—(1,938)

—

1,883

2,701

412

—

—

3,113

4,883
11,406¥3,425220
632¥2,888—(1,938)¥1,526217
217¥(217)

5,320
10,317¥7,621- 48 -March 31,
2023

Other

Thousands of U.S. dollars

2023

Deferred tax assets
Depreciation
Net defined benefit liability
Accrued bonuses to employees
Accrued paid absences
The carryforward of unused tax losses
Unrealized gain on the sale of fixed assets
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Tax effects related to retained earnings offoreign subsidiaries
Other
Total deferred tax liabilities
Net

Recognized inothercomprehensive
incomeApril 1, 2022

Recognizedthrough
profit or loss

$22,179
38,776
6,514
5,522
7,731
2,253
27,671
110,679$8,082
1,828
97
(156)
10,410(44)
6,044
26,268$—(2,477)
—
—
—
—
(589)
(3,074)

$—
—
—
—
—
—
—
—

$30,261
38,1266,611
5,365
18,1492,208
33,126
133,873

28,522—(14,462)—

14,052

20,156

3,074

—

—

23,23136,44085,119$25,559

1,641
4,716
$21,552—(14,462)$11,388

1,619
1,619
$(1,619)

39,701
76,992$56,873

March 31,
2023

Other

(2) Unrecognized deferred tax assets
The following are deductible temporary differences, the carryforward of unused tax losses (breakdown by
expiration) and unused tax credits (breakdown by expiration) for which no deferred tax assets arerecognized in the consolidated statement of financial position. Amounts hereunder are presented on a tax
amount basis.
Millions of yen
2022
2023
¥8,185¥13,085

Deductible temporary differences
The carryforward of unused tax losses
Less than 1 year
1 year or more and less than 5 years
5 years or more
Total
The carryforward of unused tax credits
Less than 1 year
1 year or more and less than 5 years
5 years or more
Total

Thousands of
U.S. dollars
2023$97,649

¥—
36
2,956
¥2,992

¥29
62
1,313
¥1,405

$216
462
9,798
$10,485

¥—
—
—
¥—

¥—
—
—
¥—

$—
—
—
$—

(3) Unrecognized deferred tax liabilities
The total amount of temporary differences related to investments in subsidiaries, etc., that are notrecognized as deferred tax liabilities as of March 31, 2022 and 2023 are ¥35,265 million and ¥43,549
million ($324,992 thousand), respectively. When the Group is capable of controlling the timing of thereversal of temporary differences and the temporary differences will not reverse within the foreseeable
future, no deferred tax liability related to such temporary differences is recognized.

- 49 -

(4) Income taxes recognized through profit or loss
The breakdown of income taxes recognized through profit or loss is as follows:
Millions of yen
2022
2023
¥11,535¥12,361

Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Changes in unrecognized deferred tax assets
Other
Total deferred tax expense
Total(1,080)—0(1,080)¥10,454(2,895)—
7(2,888)¥9,473Thousands of
U.S. dollars
2023$92,246(21,604)—
52(21,552)$70,694(5) Reconciliation of the effective tax rate
Below is a breakdown of the principal items that caused a difference between the statutory effective tax
rate and the average effective tax rate. The Company is primarily subject to corporate tax, inhabitants’ tax
and enterprise tax. The statutory effective tax rate calculated based on these taxes is 30.6%. Foreignsubsidiaries are subject to income taxes, etc., in their respective countries of domicile.
Domestic statutory effective tax rate
Items permanently not tax deductible, such as entertainment expenses
Items permanently not taxable, such as dividend income
Increase (decrease) in unrecognized deferred tax assets
Tax credits
Difference in tax rates applied to foreign subsidiaries
Other
Average effective tax rate

2022
30.6%
0.7%
(0.0%)
4.4%(2.5%)(1.4%)
3.0%
34.8%

2023
30.6%
8.8%
(0.0%)(6.7%)(3.1%)(2.5%)
4.3%
31.4%

17. Trade and other payables
The breakdown of trade and other payables is as follows:
Millions of yen
2022
2023
Notes and accounts payable - trade¥25,288¥30,346
Accounts payable - other
26,357
11,267
Contract liabilities
6,320
9,850
Total
¥57,967¥51,465
Note Trade and other payables are classified as financial liabilities measured at amortized cost.

- 50 -

Thousands of
U.S. dollars
2023$226,462
84,08273,507$384,067

18. Bonds and borrowings
The breakdown of bonds and borrowings is as follows:
Thousands ofMillions of yen
U.S. dollars
Average
2022
2023
2023
interest rate
Due date
Short-term borrowings¥2,739¥10,666$79,597
1.88%
Current portion of long-term borrowings
440
2,331
17,395
1.02%
Commercial papers
5,000
16,000
119,402
0.00%
Long-term borrowings
1,040
8,859
66,1110.88%
2024-2027
Bonds
29,91339,899297,7530.18%
2025, 2027
Total
¥39,133¥77,756$580,268
Current liabilities¥8,180¥28,998$216,402
Non-current liabilities
30,95348,758363,865
Total¥39,133¥77,756$580,268
Notes 1. The average interest rate is calculated using interest rates and balances as of March 31, 2023.
2. Bonds and borrowings are classified as financial liabilities measured at amortized cost.
3. The borrowings have no financial covenants that have a significant effect on the financial activities of theGroup.
4. For the fiscal year ended March 31, 2023, the total amount of borrowings of ¥10,000 million ($74,626
thousand) was arranged (due date: December 29, 2027, in equal payment).

The terms and conditions of the issuance of bonds are summarized as follows:

Name
The Company
The Company

Issue
First series of
unsecured bonds
Second series of
unsecured bonds

Issue date
December
10, 2020
May 26,2022

Millions of yen
2022
2023
¥30,000¥30,000—¥10,000

Thousands of
U.S. dollars Interest
Redemption
2023
Collateral
rate
periodDecember$223,8800.15%
None10, 2025
May 26,$74,626
0.29%
None
2027

19. Other financial liabilities
The breakdown of other financial liabilities is as follows:
Millions of yen
2022
2023
¥797
¥815

Thousands of
U.S. dollars
2023$6,082Long-term guarantee deposits
Liabilities pertaining to forward contracts concluded
19,613——
with non-controlling shareholders
Contingent consideration
781
651
4,858
Other
177
203
1,514
Total
¥21,371¥1,670$12,462
Current liabilities¥19,613¥3$22
Non-current liabilities
1,757
1,666
12,432
Total¥21,371¥1,670$12,462
Notes 1. Long-term guarantee deposits and liabilities pertaining to forward contracts concluded with non-controllingshareholders are classified as financial liabilities measured at amortized cost.
2. Contingent consideration is classified as financial liabilities measured at fair value through profit or loss.

- 51 -

20. Leases
Lease as lessee
The Group mainly leases buildings and structures, machinery, equipment and vehicles and land. Leaseterms mainly range from one year to 30 years, while the average interest rate that is applied to leaseliabilities is 2.2%. There are no significant purchase options, escalation clauses, or restrictions imposed
under lease agreements (including restrictions on dividends, additional borrowings and additional leases).
In domestic businesses in particular, lease agreements for buildings mostly allow the lessee to repeatedly
exercise an extension option and also include an early cancellation option only if cancellation is noticed inwriting to the counterparty no later than six months in advance. Only those lease payments corresponding
to the period during which the exercise of such options was reasonably expected with certainty areincluded in the measurement of lease liabilities.
1) Right-of-use assets
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Buildings and structures¥8,339¥11,418$85,208
Machinery and vehicles
1,506
1,723
12,858
Land
8,508
8,218
61,328
Other
687
567
4,231
Total
¥19,042¥21,928$163,641
Note The increases in right-of-use assets for the fiscal years ended March 31, 2022 and 2023 were ¥3,375 million and ¥7,687
million ($57,365 thousand), respectively.

2) Expenses from lease
Millions of yen
2022
2023
Depreciation of right-of-use assets
Buildings and structures
Machinery and vehicles
Land
Other
Total depreciation of right-of-use assets
Interest expenses on lease liabilities
Short-term lease expense
Lease expense of low-value assets
Total expenses¥2,804
697
413
236
4,151
300
975
173
¥5,600¥2,916
708
418
235
4,278
372
1,021
229
¥5,901Thousands of
U.S. dollars
2023$21,761
5,283
3,119
1,753
31,925
2,776
7,619
1,708
$44,0373) Maturity analysis of lease liabilities
The maturity analysis of lease liabilities is described in Note 34. “Financial instruments (3) Liquidity risk.”
4) Total cash outflow for leases
The total amount of lease-related cash outflows for the fiscal years ended March 31, 2022 and 2023 was¥5,453 million and ¥5,797 million ($43,261 thousand), respectively.

- 52 -

21. Employee benefits(1) Overview of the retirement benefit plan adopted by the GroupThe Company and certain consolidated subsidiaries adopt funded and unfunded defined benefit plans anddefined contribution plans in order to provide retirement benefits to employees. Nearly all employees arecovered by these plans.
While these retirement benefit plans are exposed to risks, including general investment risks, interest raterisks and inflation risks, none are considered to be material.
The funded defined benefit plan is operated by pension funds that are legally separate from the Group.
The board of directors of the pension funds and the organization entrusted with management of thepension funds are required by law to act in the best interests of the plan members, while bearing the
responsibility for managing plan assets in accordance with given policies.
(2) Defined benefit plan
1) Reconciliation of defined benefit obligations and plan assets
The relationship between defined benefit obligations and plan assets and net defined benefit liability(asset) presented in the consolidated statement of financial position is as follows:

Present value of funded defined benefit obligations
Fair value of plan assets
Sub-total
Present value of unfunded defined benefit obligations
Net defined benefit liability (asset)

Millions of yen
2022
2023
¥681
¥669
(646)
(714)
35
(45)
18,10817,318¥18,144¥17,273

Amount presented in the consolidated statement of financial position
Retirement benefit liabilities
Retirement benefit assets
Net defined benefit liability (asset)¥18,144—¥18,144- 53 -¥17,321(48)¥17,273

Thousands of
U.S. dollars
2023$4,992(5,328)(335)
129,238$128,902$129,261(358)$128,902

2) Reconciliation of the present value of defined benefit obligations
Changes in present value of defined benefit obligations are as follows:

Balance as of April 1, 2021
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2022
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2023

Balance as of March 31, 2022
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2023

In Japan¥15,779
1,001
56
(717)

Millions of yen
Outside Japan
¥2,814
209
55
(144)

Total
¥18,593
1,210
112
(861)

(174)

(26)

(201)

(84)

(291)

(376)

—
12
¥15,873
1,009
71
(851)

159
141
¥2,917
139
71
(160)

159
153
¥18,790
1,148
143(1,012)

21

(8)

13

(720)

(384)

(1,105)—(34)¥15,368155(111)¥2,618155(145)¥17,987

Thousands of U.S. dollars
In Japan
Outside Japan
Total$118,455$21,768$140,223
7,529
1,037
8,567
529
529
1,067
(6,350)(1,194)(7,552)
156

(59)

97

(5,373)(2,865)(8,246)—(253)$114,686

1,156
(828)
$19,537

1,156(1,082)$134,231

The weighted average duration of defined benefit obligations of the Company and principal consolidated
subsidiaries was 12 years in Japan and 22 years overseas in the fiscal year ended March 31, 2022, and11 years in Japan and 19 years overseas in the fiscal year ended March 31, 2023.

- 54 -

3) Reconciliation of the fair value of plan assets
Changes in fair value of plan assets are as follows:

Balance as of April 1, 2021
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2022
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2023

Balance as of March 31, 2022
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2023

Millions of yen
Outside Japan
¥566
13
(40)
85
6
15
(1)
¥646
21
(45)
88
65
11
(73)
¥714
Thousands of
U.S. dollars
Outside Japan
$4,820
156
(335)
656
485
82
(544)
$5,328

Information of changes in plan assets in Japan is omitted, as there is nothing applicable.
For the defined contribution plans, in the fiscal year ending March 31, 2024, the Group is scheduled tocontribute ¥71 million ($529 thousand).
4) Fair values of plan assets by asset category
Fair values of plan assets by principal asset category are as follows:
Market price in an active market
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
¥646
¥714
$5,328¥646¥714$5,328Cash and cash equivalents
Total- 55 -

5) Actuarial assumptions
The significant actuarial assumptions used to calculate the present value of defined benefit obligations of
the Company and its main domestic consolidated subsidiaries are as follows:
2022
0.50%

Discount rate

2023
0.90%

A sensitivity analysis (effects on defined benefit obligations) of significant actuarial assumptions of theCompany and its main domestic consolidated subsidiaries is as follows:
Millions of yen
2022
2023
Discount rate
0.5% increase
0.5% decrease¥(771)
841

Thousands of
U.S. dollars
2023¥(702)
764$(5,238)5,701(3) Employee benefits expense
The employee benefits expense included in cost of sales and selling, general and administrative
expenses in the consolidated statement of profit or loss is as follows:
Millions of yen
2022
2023
¥55,227¥60,245
2,751
3,079
9,226
11,092¥67,205¥74,417

Wages, salaries, bonuses, etc.
Retirement benefit expenses
Other employee benefits expenses
Total

Thousands of
U.S. dollars
2023$449,589
22,977
82,776$555,350

The amounts recognized as expense for the defined contribution plan were ¥1,317 million and ¥1,728
million ($12,895 thousand) in the fiscal years ended March 31, 2022 and 2023, respectively.

22. Provisions
An explanation for each provision is as follows:
1) Provision for loss on construction contracts
The Group recognizes a provision for losses that are expected to occur in or after the following fiscal year,with respect to contracted constructions for which a loss is expected to occur and the amount of such loss
can be reasonably estimated. Related expenses are expected to be incurred prior to completion of theconstruction, and additional expenses may arise in the case of an increase in estimated costs.
2) Provision for product warranties
To provide for warranty expenses that are expected to occur during the Company’s warranty period forsome delivered products or services, the Group recognizes a provision based on the actual amount of
warranty expenses paid in past fiscal years, taking into account the prospect of future warranty expenses.

- 56 -

3) Asset retirement obligations
To provide for the Group’s obligation to restore rental offices, buildings, etc., held by the Group, the Group
recognizes asset retirement obligations. Related expenses are expected to be paid after the usage period
has elapsed, and will be affected by future business plans, etc.
4) Provision for business restructuring
The Group recognizes a provision for losses that are expected to occur in the future, due to partial
closures and relocations, etc., of the Group’s overseas bases. While these expenses are expected to be
paid in the fiscal year ending March 31, 2023, additional expenses may be incurred if there is an increasein the estimated cost.
The breakdown of and changes in the provisions are as follows:
Fiscal year ended March 31, 2023
Millions of yen

Balance as of April 1, 2022
Increase during the period
Decrease during the period(due to intended use)(reversal)
Other
Balance as of March 31, 2023
Current liabilities
Non-current liabilities

Provision
for loss on
construction
contracts¥7788

Provisionfor productwarranties¥1,157878

Assetretirement
obligations¥2,341
241

(15)
—
—
¥780
¥780
—

(964)
(20)
12
¥1,063¥1,063—(50)—
48¥2,581¥—
2,581

Provision forbusiness
restructuring
¥357
—
(284)
(84)
11
¥—
¥—
—

Other
¥—
515

Total
¥3,864
2,423

(29)
—
3
¥489
¥457
32

(1,344)(105)
75¥4,915¥2,301
2,613

Thousands of U.S. dollars

Balance as of April 1, 2022
Increase during the period
Decrease during the period(due to intended use)(reversal)
Other
Balance as of March 31, 2023
Current liabilities
Non-current liabilities

Provision
for loss on
construction
contracts
$52
5,880

Provisionfor productwarranties$8,634
6,552

Asset
retirement
obligations$17,470
1,798

Provision forbusiness
restructuring$2,664
—

Other
$—
3,843

Total
$28,835
18,082(111)——$5,820$5,820—(7,194)(149)
89$7,932$7,932
—

(373)
—
358
$19,261$—
19,261(2,119)
(626)
82
$—
$—
—

(216)
—
22
$3,649$3,410238(10,029)(783)
559$36,679$17,171
19,500- 57 -

23. Share capital and other equity items(1) Share capital and capital surplus
The Japanese Companies Act (hereinafter the “Companies Act”) provides that 50% or more of the amount
paid or granted for share issue can be incorporated into share capital, while the remaining amount can beincorporated into capital reserves, which is included in capital surplus. The Companies Act also provides
that capital reserves can be incorporated into share capital by a resolution of a general meeting ofshareholders.
1) Number of authorized shares
The total number of authorized shares as of March 31, 2022 and 2023 remained at 531,000 thousand
shares of common stock.
2) Number of shares outstanding
ThousandsharesNumber ofcommonsharesApril 1, 2021
116,200
Increase (decrease)—
March 31, 2022
116,200
Increase (decrease)—
March 31, 2023
116,200
Note All of the shares issued by the Company are no-par common stock without any limitation on the rights of theshares, and the outstanding shares have been paid in full.

(2) Retained earnings
The Companies Act provides that 10% of the amount to be paid as dividends from surplus shall be
accumulated as capital reserves or retained earnings reserves until the total amount of capital reserves
and retained earnings reserves reaches 25% of capital stock. The accumulated retained earnings
reserves can be used to eliminate losses carried forward. In addition, the retained earnings reserves canbe reversed by a resolution of a general meeting of shareholders.
(3) Treasury shares
ThousandsharesNumber ofsharesoutstanding
3,859
(39)
3,819
(20)
3,799

April 1, 2021
Increase (decrease)
March 31, 2022
Increase (decrease)
March 31, 2023

- 58 -

Millions of yen

Thousands of
U.S. dollars

Amount¥10,787(93)¥10,694$79,805(55)(410)¥10,638$79,38824. Dividends(1) Amount of dividends paid
Fiscal year ended March 31, 2022
Millions of yen
Yen
Type of
Total amount
Dividend
Resolution
sharesof dividend
per share
Record date
Effective dateJune 29, 2021
CommonOrdinary General Meeting of Shareholders
share¥3,828¥34
March 31, 2021 June 30, 2021
October 29, 2021
CommonSeptember 30,
November 29,
Board of Directors’ meetingshare¥4,054
¥36
2021
2021
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2021 includes dividends of ¥9 million paid for 274 thousand shares of the Company(entrusted for performance-linked stock compensation for Directors) held by the trust account of Custody Bankof Japan, Ltd.
The total amount of dividends determined by a resolution of the Board of Directors meeting held on October 29,
2021 includes dividends of ¥8 million paid for 244 thousand shares of the Company (entrusted for
performance-linked stock compensation for Directors) held by the trust account of Custody Bank of Japan, Ltd.

Fiscal year ended March 31, 2023
Resolution
June 29, 2022
Ordinary General Meeting of Shareholders
October 31, 2022
Board of Directors’ meeting

Type ofsharesCommonshare
Commonshare

Millions of yen
Total amountof dividend

Yen
Dividend
per share¥4,054¥36¥4,393¥39

Thousands of
U.S. dollars
Total amountof dividendRecord date

Effective date

March 31, 2022
September 30,
2022

June 30, 2022
November 28,
2022

U.S. dollar
Type of
Dividend
Resolution
sharesper share
Record date
Effective dateJune 29, 2022
CommonOrdinary General Meeting of Shareholders
share$30,253$0.27 March 31, 2022 June 30, 2022
October 31, 2022
CommonSeptember 30,
November 28,
Board of Directors’ meetingshare$32,783$0.29 2022
2022
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2022 includes dividends of ¥8 million ($59 thousand) paid for 244 thousand shares of theCompany (entrusted for performance-linked stock compensation for Directors) held by the trust account of
Custody Bank of Japan, Ltd.
The total amount of dividends determined by a resolution of the Board of Directors meeting held on October 31,
2022 includes dividends of ¥9 million ($67 thousand) paid for 244 thousand shares of the Company (entrusted
for performance-linked stock compensation for Directors) held by the trust account of Custody Bank of Japan,Ltd.

- 59 -

(2) Dividends whose effective date falls in the fiscal year ending March 31, 2024

Resolution
June 29, 2023
Ordinary General Meeting of Shareholders

Type ofsharesCommonshare

Millions of yen
Total amountof dividend

Yen
Dividend
per share

Record date

Effective date

¥39

March 31, 2023

June 30, 2023

¥4,393Thousands of
U.S. dollars
Total amountof dividend

U.S. dollar
Type of
Dividend
Resolution
sharesper share
Record date
Effective dateJune 29, 2023
CommonOrdinary General Meeting of Shareholders
share$32,783$0.29 March 31, 2023 June 30, 2023
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2023 includes dividends of ¥9 million ($67 thousand) paid for 244 thousand shares of theCompany (entrusted for performance-linked stock compensation for Directors) held by the trust account of
Custody Bank of Japan, Ltd.

25. Net sales(1) Breakdown of net sales recognized from contracts with customers
Fiscal year ended March 31, 2022

2022
Japan
Asia
Americas
EMEA
Total
Notes 1.
2.

Millions of yen
Reportable segments
Water
Water
Treatment
Treatment
Chemicals
Facilities
Consolidated¥42,826¥116,538¥159,365
26,78331,24958,032
23,60522,74546,351
24,457—24,457¥117,672¥170,534¥288,207
The above amounts are presented after deduction of inter-segment transactions.
Net sales are broken down into countries or regions based on customer location. EMEA refers to theEuropean, Middle Eastern and African regions.

Fiscal year ended March 31, 2023
Millions of yen
Reportable segments
Water
Water
Treatment
Treatment
Chemicals
Facilities
Consolidated¥43,535¥132,460¥175,995
30,59948,28478,88332,47527,72260,19829,529—29,530¥136,139¥208,468¥344,608

2023
Japan
Asia
Americas
EMEA
Total

- 60 -

2023
Japan
Asia
Americas
EMEA
Total
Notes 1.
2.

Thousands of U.S. dollars
Reportable segments
Water
Water
Treatment
Treatment
Chemicals
Facilities
Consolidated$324,888$988,507$1,313,395
228,350
360,328
588,679
242,350
206,880449,238
220,365—
220,373$1,015,962$1,555,731$2,571,701
The above amounts are presented after deduction of inter-segment transactions.
Net sales are broken down into countries or regions based on customer location. EMEA refers to theEuropean, Middle Eastern and African regions.

(2) Contract balances
The balance of receivables from contracts with customers, contract assets and contract liabilities is asfollows:
Fiscal year ended March 31, 2022
Millions of yen
2021
2022
¥64,031¥75,290
32,34731,900
4,886
6,320

2022
Receivables from contracts with customers
Contract assets
Contract liabilities

Fiscal year ended March 31, 2023
Millions of yen
2022
2023
¥75,290¥78,585
31,90040,356
6,320
9,850

2023
Receivables from contracts with customers
Contract assets
Contract liabilities

Thousands of
U.S. dollars
2023$586,455
301,164
73,507In the consolidated statement of financial position, receivables from contracts with customers and contract
assets are included in trade and other receivables, while contract liabilities are included in trade and otherpayables.
Revenues that were included in the balance of contract liabilities at the beginning of the fiscal years ended
March 31, 2022 and 2023 were ¥4,886 million and ¥6,320 million ($47,164 thousand), respectively.
Among the revenue for the fiscal years ended March 31, 2022 and 2023, the amount of revenue fromperformance obligations satisfied in past fiscal years is immaterial.
Significant changes in the balances of contract assets and contract liabilities are as follows:
Millions of yen

Increase due to recognition of net sales
Decrease due to transfer to receivables
Increase due to receipt of cash
Decrease due to recognition of net sales

2022
Contract
Contract
assetsliabilities¥79,662¥—(80,201)——
12,689—(11,549)- 61 -

2023
Contract
Contract
assetsliabilities¥109,804¥—(100,816)——
18,654—(15,148)

Thousands of
U.S. dollars
2023
Contract
Contract
assetsliabilities$819,432$—(752,358)——
139,208—(113,044)

(3) Performance obligations
For sales of products, when products have been delivered, the Company determines that performanceobligations have been satisfied and recognizes their sales.
For construction contracting, sales are recognized over the period of the construction contract, as
performance obligations are satisfied according to the construction’s progress. To measure progress, theinput method is applied, using the ratio of the incurred cost against the estimated total cost for eachcontract.
Considerations are received within a reasonable period from the time of satisfaction of performanceobligations. For these contracts, the expedient provided for in IFRS 15 “Revenue from Contracts with
Customers” is applied, and no adjustments related to financing components are performed.
Sales are measured at the consideration promised in the contract.
There are no significant contracts with customers regarding a return of products.
Furthermore, in connection with construction contracts, etc., the Company provides product warranty,
such as the free repair of defects identified within a certain period of time. Such warranty intends toprovide customers with a warranty to ensure that the products, etc., of the Company function as intended,in accordance with the specifications agreed upon with the customers. Future expenditures are estimatedby taking into account actual product warranty expenses in the past, and are recognized as a provision for
product warranties.
The total amount of transaction price allocated to remaining performance obligations was ¥89,001 million
at March 31, 2022, while the total amount of transaction price allocated to remaining performanceobligations at March 31, 2023 was ¥118,762 million ($886,283 thousand). For these transactions, revenue
will be recognized on a step-by-step basis within approximately three years to come, commensurate withthe progress in the contract performance.

26. Selling, general and administrative expenses
The breakdown of selling, general and administrative expenses is as follows:
Millions of yen
2022
2023
¥5,386¥6,34438,36543,177
8,064
8,184
19,516
23,401¥71,334¥81,106

Research and development expenses
Employee benefits expense
Depreciation and amortization
Other
Total

Thousands of
U.S. dollars
2023$47,343
322,216
61,074
174,634$605,268

27. Other income
The breakdown of the items and amounts included in other income is as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Gain on sale of fixed assets¥4,079
¥36
$268
Other
2,040
1,527
11,395
Total¥6,119¥1,564$11,671
Notes 1. Among gain on sale of fixed assets for the fiscal year ended March 31, 2022, ¥2,894 million is due to the saleof the land of former Head Office (in Shinjuku) and ¥1,079 million is due to the sale of the land and building of
Osaka Office.

- 62 -

28. Other expenses
The breakdown of the items and amounts included in other expenses is as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Loss on sales and retirement of property, plant and equipment¥93¥383$2,858
Impairment losses
1,028
7,660
57,164
Other
2,207
3,051
22,768
Total¥3,329¥11,095$82,798
Notes 1. Impairment losses for the fiscal year ended March 31, 2022 were mainly incurred due to the closure of the
Yamaguchi Plant accompanying the reorganization of manufacturing bases in the domestic Water Treatment
Facilities business and the decision to suspend the operation of the plant of Kurita Water Industries (Jiangyin)
Co. (Water Treatment Chemicals business) due to a review of the production structures for water treatment
chemicals in China.
2. Among the impairment losses for the fiscal year ended March 31, 2023, ¥7,646 million ($57,059 thousand) isfrom an impairment of goodwill related to Kurita America, Inc. (Water Treatment Chemicals business). Details
are provided in Note 13. “Goodwill and intangible assets.”

29. Finance income and Finance costs(1) Finance income
The breakdown of finance income is as follows:
Millions of yen
2022
2023

Thousands of
U.S. dollars
2023

Dividend income
Dividend income from financial assets held at end of period
¥272
¥249
$1,858Dividend income from financial assets derecognized during the period
120
104
776
Interest income
190
298
2,223
Other
18
1,339
9,992
Total
¥601
¥1,990$14,850
Notes 1. Dividend income relates to financial assets measured at fair value through other comprehensive income.
2. Interest income relates to financial assets measured at amortized cost.
3. Among other for the fiscal year ended March 31, 2023, ¥1,090 million ($8,134 thousand) is from revenue fromforeign exchange contracts which were arranged after the Company decided to underwrite the capital increaseof Kurita America Holdings, Inc.

(2) Finance costs
The breakdown of finance costs is as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Interest expense
¥209
¥427
$3,186
Loss on valuation and realization of fair value30
1397
Foreign exchange loss
22
80
597
Other
5,913
555
4,141
Total
¥6,176¥1,077$8,037
Notes 1. Interest expense mainly relates to financial liabilities measured at amortized cost.
2. Other consists mainly of costs related to the subsequent measurement of the fair value of liabilities pertaining
to forward contracts concluded with non-controlling shareholders of Pentagon Technologies Group, Inc.
(United States), which amounted to ¥5,496 million and ¥146 million ($1,089 thousand) for the fiscal year ended
March 31, 2022 and 2023, respectively.

- 63 -

30. Other comprehensive income
The amount arising during the period, reclassification adjustments to profit or loss and the impact of tax
effects for each item of other comprehensive income are as follows:
Fiscal year ended March 31, 2022
Millions of yen

2022
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects¥(1,462)¥—¥(1,462)¥1,983

¥520

523

—

523

(105)

417

(939)

—

(939)

1,877

938

8,692

—

8,692

—

8,692

(223)

412

189

(57)

131

94

26

121

—

121

8,563

439

9,002

(57)

8,944

¥7,624¥439¥8,063¥1,819¥9,883Fiscal year ended March 31, 2023
Millions of yen

2023
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects¥(1,264)¥—¥(1,264)¥1,939

¥674

1,163

—

1,163

(332)

830

(101)

—

(101)

1,606

1,505

5,245

—

5,245

—

5,245

41

221

262

(80)

182

2

—

2

—

2

5,289

221

5,510

(80)

5,429

¥5,187¥221¥5,408¥1,526¥6,935- 64 -

Thousands of U.S. dollars

2023
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects$(9,432)$—$(9,432)$14,470$5,029

8,679

—

8,679

(2,477)

6,194

(753)

—

(753)

11,985

11,231

39,141—

39,141—

39,141

305

1,649

1,955

(597)

1,358

14

—

14

—

14

39,4701,649

41,119(597)

40,514$38,708$1,649$40,358$11,388$51,753

Millions of yen
2022
2023
¥18,471¥20,134——¥18,471¥20,134

Thousands of
U.S. dollars
2023$150,253—$150,253

31. Earnings per share
The calculation bases for basic earnings per share are as follows:

Profit attributable to owners of parent
Profit not attributable to ordinary shareholders of parent
Profit used for calculation of basic earnings per share

Average number of common shares during the period (shares)
112,368,155
112,394,378
112,394,378
Notes 1. Diluted earnings per share are not stated because there are no dilutive shares.
2. The Company’s own shares posted as treasury shares remaining in trust are included in the treasury sharesthat are deducted in the calculation of the average number of shares outstanding for calculation for basic net
income per share. The numbers of average shares of the treasury shares that are deducted for the fiscal years
ended March 31, 2022 and 2023 are 253 thousand shares and 244 thousand shares, respectively.

- 65 -

32. Cash flow information(1) Changes in liabilities arising from financing activities
The changes in liabilities arising from financing activities are as follows:

Bonds andlong-term
borrowings¥31,652(427)

Balance as of April 1, 2021
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2022
Changes arising from cash flows
Non-cash changes
New lease agreements
Exchange differences
Other
Balance as of March 31, 2023

Balance as of March 31, 2022
Changes arising from cash flows
Non-cash changes
New lease agreements
Exchange differences
Other
Balance as of March 31, 2023

Millions of yen
Short-termborrowings
andcommercial
Lease
papersliabilities¥—¥19,701
7,577(5,005)

Total¥51,353
2,144

—
—
145
23
¥31,394
19,445——161—¥7,73918,722

31
4,410
456
(47)
¥19,546(5,170)

31
4,410
763
(23)
¥58,680
32,997—218
31¥51,090—204—¥26,666

5,081
392
2,459
¥22,310

5,081
816
2,491
¥100,067

Bonds andlong-term
borrowings$234,283
145,111

Thousands of U.S. dollars
Short-termborrowings
andcommercial
Lease
papersliabilities$57,753$145,865
139,716(38,582)

Total$437,910
246,246

—
1,626
231
$381,268—
1,522—$199,000

37,917
6,089
18,589$746,768

37,9172,925
18,350$166,492(2) Payments for acquisition of subsidiaries
The relationship between the consideration paid for the acquisition of subsidiaries and the income andexpenditure for it is as follows:

Consideration paid in cash
Cash and cash equivalents included in the assets of the acquireeat the time of acquiring control
Payments for acquisition of subsidiaries- 66 -

Millions of yen
2022
2023
¥2,666¥—

Thousands of
U.S. dollars
2023
$—

(264)

—

—

¥2,401¥—$—

33. Share-based payments(Overview of non-performance-linked stock compensation program, performance-linked stockcompensation program, and performance and share price-linked monetary compensation program)
The Company reviewed its officer compensation program in conjunction with its transition to a company
with a nominating committee, etc., on June 29, 2023.
For the fiscal year ended March 31, 2023, the Company has introduced a performance-linked stockcompensation program that covers Directors (excluding External Directors; hereinafter the same shallapply in the description for the fiscal year ended March 31, 2023) and Corporate Officers as well as fulltime directors of certain domestic subsidiaries and associates, and a performance and share price-linked
monetary compensation program that covers certain officers of overseas subsidiaries and associates.
For the period after June 29, 2023, the Company has introduced a non-performance-linked stockcompensation program that covers Directors (excluding External Directors and Directors who are Audit
Committee Members; hereinafter the same shall apply in the description for the period after June 29,2023), a performance-linked stock compensation program that covers Executive Officers, Corporate
Officers and full-time directors of certain domestic subsidiaries and associates, and a performance andshare price-linked monetary compensation program that covers certain officers of overseas subsidiaries
and associates.
1. Performance-linked stock compensation program for Directors and for Corporate Officers and certain
full-time directors of domestic subsidiaries and associates for the fiscal year ended March 31, 2023
(1) Overview of the program
1) For Directors
Under the performance-linked stock compensation program for Directors, points are granted to eligible
individuals based on their position and performance, and upon their retirement from the post of Director,
the Company’s shares are delivered at a number equivalent to their accumulated points granted, andmoney is delivered at an amount equivalent to the conversion amount of the Company's shares into cash.
For the introduction of the program, a stock delivery trust (hereinafter the “Trust”) system for officers has
been applied, which is established through the monetary contributions of the Company. The program wasresolved with a trust period of five years at the 80th Ordinary General Meeting of Shareholders held on
June 29, 2016 and was introduced accordingly. As the term of the Trust is expiring, at a meeting of theBoard of Directors held on May 28, 2021, the Company decided to extend the term for three years.
2) For Corporate Officers and full-time directors of certain domestic subsidiaries and associates
Under the performance-linked stock compensation program for Corporate Officers and full-time directorsof certain domestic subsidiaries and associates, points are granted to eligible individuals based on theirposition and performance, and upon their retirement, the Company’s shares are delivered at a number
equivalent to their accumulated points granted, and money is delivered at an amount equivalent to theconversion amount of the Company's shares into cash, to the Corporate Officers and full-time directors ofcertain domestic subsidiaries and associates who will retire (hereinafter collectively the “Retirees”). The
program employs a system in which the Retirees pay to the Company monetary compensation
receivables (contributed properties in kind related to the payment for the Company’s common shares)
granted by the company from which they retire and the Company delivers the Company’s shares to the
Retirees through a disposal of treasury shares or issuance of new shares. The program for Corporate
Officers was resolved at the Board of Directors meeting held on February 27, 2018, and the program forfull-time directors of certain domestic subsidiaries and associates was resolved at the Ordinary General
Meeting of Shareholders of each company held in and after 2018, both of which were introduced
accordingly.

- 67 -

(2) Upper limits of the total number of shares scheduled to be acquired by Directors and the number ofshares scheduled to be acquired by Corporate Officers and full-time directors of certain domestic
subsidiaries and associates.
1) For Directors: 339,800 shares
2) For Corporate Officers and full-time directors of certain domestic subsidiaries and associates
In principle, points up to the equivalent of 2,215 shares annually are granted to each person.
(3) Scope of persons entitled to acquire beneficiary and other rights under the program
Directors as well as Corporate Officers and full-time directors of certain domestic subsidiaries andassociates
2. Performance and share price-linked monetary compensation program for certain officers of overseas
subsidiaries and associates(1) Overview of the program
Under the performance and share price-linked monetary compensation program for officers of certain
overseas subsidiaries and associates, points are granted to eligible individuals based on theirperformance, and three years after the end of the period subject to performance evaluation, money isdelivered at an amount equivalent to the conversion amount of the number of the Company's sharesequivalent to the number of points granted into cash.
(2) Scope of persons entitled to acquire beneficiary and other rights under the program
Certain officers of overseas subsidiaries and associates
3. Non-performance-linked stock compensation program for Directors as well as performance-linked
stock compensation program for Executive Officers, Corporate Officers and certain full-time directorsof domestic subsidiaries and associates for the period after June 29, 2023
(1) Overview of the program
1) For Directors
Under the non-performance-linked stock compensation program for Directors, points are granted toeligible individuals based on their position, and the Company’s restricted shares are delivered at a number
equivalent to their points granted each year. For the introduction of the program, an RS trust (hereinafter
the “Trust”) system for officers shall be applied, which is established through the monetary contributions of
the Company. The program shall be resolved at the Compensation Committee and shall be introduced
accordingly.
2) For Executive Officers, Corporate Officers and full-time directors of certain domestic subsidiaries andassociates
Under the performance-linked stock compensation program for Executive Officers, Corporate Officers andfull-time directors of certain domestic subsidiaries and associates, points are granted to eligible individuals
based on their position and performance, and the Company’s restricted shares are delivered at a number
equivalent to their points granted each year. In the same manner as for Directors, the Trust system shallbe applied for the program. In addition, the program for full-time directors of certain domestic subsidiaries
and associates shall be resolved at the Ordinary General Meeting of Shareholders of each company held
in and after June 29, 2023, and shall be introduced accordingly.
(2) Upper limits of the total amount scheduled to be acquired by Directors, Executive Officers, Corporate
Officers and full-time directors of certain domestic subsidiaries and associates¥1,103 million ($8,231 thousand)- 68 -

(3) Scope of persons entitled to acquire beneficiary and other rights under the program
Directors, Executive Officers, Corporate Officers and full-time directors of certain domestic subsidiaries
and associates(Total amount of expenses under the performance-linked stock compensation program and theperformance and share price-linked monetary compensation program)
The part involving delivery of shares is accounted for as an equity-settled share-based paymenttransaction, while the part involving payment of cash is accounted for as a cash-settled share-based
payment transaction.
For the fiscal years ended March 31, 2022 and 2023, the expenses recorded in connection with thisprogram were ¥280 million and ¥629 million ($4,694 thousand), respectively.
(Liabilities arising from the performance-linked stock compensation program and the performance andshare price-linked monetary compensation program)
Liabilities arising from the part associated with the cash-settled share-based payment transaction arerecognized as liabilities arising from stock compensation, under other non-current liabilities.
The carrying amount of the liabilities arising from the program was ¥473 million and ¥486 million ($3,626
thousand) as of March 31, 2022 and 2023, respectively.
(Changes in number of points and their weighted average fair value)
Changes in the number of points and their weighted average fair value for the fiscal years ended March
31, 2022 and 2023 are as follows:
As the fair value as of the grant date of points is deemed to approximate the price of the Company’s
shares, it is measured mainly using the price of the Company’s shares as of the grant date. No
adjustments are made in consideration of prospective dividends.

Beginning balance of unexercised points
Increase due to grant of points
Decrease due to exercise of points
Ending balance of unexercised points
Ending balance of exercisable points

Yen
2022
151,742 point
58,513 point(48,197) point
162,058 point
162,058 point

2023
162,058 point
57,484 point(49,962) point
169,580 point
169,580 point

U.S. dollars
2023
162,058 point
57,484 point(49,962) point
169,580 point
169,580 point

Weighted average fair value as of the grant dates¥5,120¥4,760$35,522- 69 -

34. Financial instruments(1) Capital management
The Group’s basic policy is to secure the liquidity needed for business operations and maintain a stablefinancing structure.
Short-term working capital, capital investment and other investments in growth fields depend chiefly on
the Group’s own funds, but the Group anticipates procurement in the bond market and through bank loans
as required.
Temporary surplus funds are invested in highly safe financial assets, while derivatives are used only to
avoid the risks described below. In addition, it is our policy not to engage in speculative transactions.
2022
57.9%

Ratio of equity attributable to owners of parent

2023
58.6%

(2) Credit risk management
1) Content and management of risk
Notes and accounts receivable-trade, which are trade receivables of the Group, are exposed tocustomer’s credit risk.
Regarding such risk, in accordance with internal regulations, the Group conducts credit investigations of
its principal business partners, and manages the due dates and outstanding balances of each business
partner. In addition, efforts are made to quickly identify and mitigate any concerns regarding collection thatare mainly due to worsening financial positions.
Furthermore, regarding the use of derivatives, the Group deals with only financial institutions with highcredit standing, in order to reduce credit risk.
The carrying amount of financial assets presented in the consolidated statement of financial position is the
maximum exposure to credit risk of the Group’s financial assets.
For trade and other receivables, the Group always measures the allowance for doubtful accounts at thesame amount as the lifetime expected credit losses (simplified approach).
For financial assets measured at amortized cost other than the above, in order to recognize and measure
the allowance for doubtful accounts, financial assets are categorized into the following stages based on
the existence of a significant increase in credit risk and the existence of a credit impairment (generalapproach).
Stage 1: Financial assets for which credit risk has not increased significantly since initial recognition
Stage 2: Financial assets for which credit risk has increased significantly since initial recognition but
no credit impairment has been identified
Stage 3: Credit-impaired financial assets- 70 -

2) Quantitative and qualitative information on allowance for doubtful accounts and financial assets
coveredChanges in the total carrying amount of held financial assets are as follows:

Balance as of March 31, 2022
Balance as of March 31, 2023

Balance as of March 31, 2023

Financialassets undera simplified
approach¥109,230¥120,720

Millions of yen
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets¥5,595¥401¥111¥5,926
¥296
¥158

Total
¥115,339¥127,101

Financialassets undera simplified
approach$900,895

Thousands of U.S. dollars
Financial assets under a general approach
Stage 1
Stage 2
Stage 3Financial
Financialassetsrecognizedassets witha significant
at the sameamount asincrease in
Creditthe 12-monthcredit risk
impairedsince initialfinancialexpected
credit losses
recognition
assets$44,223$2,208$1,179Total$948,514- 71 -

Changes in the allowance for doubtful accounts are as follows:

Balance as of April 1, 2021
Increase during the period
Decrease during the period
Balance as of March 31, 2022
Increase during the period
Decrease during the period
Balance as of March 31, 2023

Balance as of March 31, 2022
Increase during the period
Decrease during the period
Balance as of March 31, 2023

Financialassets undera simplified
approach
¥393
46
(101)
¥338
93
(10)
¥421

Millions of yen
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets
¥—
¥498
¥87
—
155
20
—
(268)
—
¥—
¥386
¥107
—
42
49
—
(132)
—
¥—
¥296
¥157

Total
¥979
222
(369)
¥832
185
(142)
¥875

Financialassets undera simplified
approach$2,522694(74)$3,141Thousands of U.S. dollars
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets witha significant
at the sameamount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets$—$2,880
$798
—
313
365
—
(985)
—
$—
$2,208$1,171

Total$6,2081,380(1,059)$6,529- 72 -

Aging analyses for the financial assets as of fiscal years ended March 31, 2022 and 2023 are as follows:
The amounts expected to be recovered by insurance coverage and collateral obtained are included.
Fiscal year ended March 31, 2022

2022
Trade and other receivables
Other financial assets

Total¥109,230
6,108

Millions of yen
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
¥103,634¥2,937¥2,659
5,427
39
642

Total
¥120,720
6,380

Millions of yen
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
¥114,718¥3,218¥2,783
5,938
17
424

Total
$900,895
47,611Thousands of U.S. dollars
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
$856,104$24,014$20,768
44,313126
3,164

Fiscal year ended March 31, 2023

2023
Trade and other receivables
Other financial assets

2023
Trade and other receivables
Other financial assets- 73 -

(3) Liquidity risk
Liquidity risk refers to a risk that the Group is unable to repay financial liabilities, such as bonds andborrowing, on the due date.
The Group procures necessary funds mainly in the bond market and through bank loans. However,financial liabilities, such as bonds and borrowing, are exposed to liquidity risk. Such liquidity risk is
primarily managed by having the Finance Division formulate and update a cash flow management plan ina timely manner, based on reports from each department, concluding a commitment line agreement with afinancial institution and taking other measures.
The balance of financial liabilities by due date is as follows:
Fiscal year ended March 31, 2022

2022
Non-derivative financial
liabilities
Trade and otherpayablesCommercial papers
Bonds
Short-termborrowings
Long-term
borrowings
Lease liabilities
Liabilities undercontingent
considerationagreements
Liabilities pertaining toforward contracts
concluded with noncontrollingshareholders
Total

2022
Derivative liabilities
Currency swaps
Total

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year¥57,967¥57,967¥57,967

¥—

¥—

¥—

¥—

¥—

5,000
29,9135,000
30,182

5,000
45

—
45

—
45

—
30,045

—
—

—
—

2,739

2,763

2,763

—

—

—

—

—

1,481

1,597

482

338

267

258

250

—

19,546

21,595

4,920

3,041

1,946

1,281

1,128

9,277

781

956

—

410

273

273

—

—

19,613

19,746

19,746

—

—

—

—

—

¥137,043¥139,809¥90,925¥3,836¥2,532¥31,859¥1,378¥9,277

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5
years

¥0
¥0

¥75
¥75

¥—
¥—

Book
balance

Contractual
cash flows

Up to
1 year

¥171
¥171

¥171
¥171

¥31
¥31

- 74 -

¥31
¥31

¥31
¥31

Fiscal year ended March 31, 2023

2023
Non-derivative financial
liabilities
Trade and otherpayablesCommercial papers
Bonds
Short-termborrowings
Long-term
borrowings
Lease liabilities
Liabilities undercontingent
considerationagreements
Total

2023
Derivative liabilities
Currency swaps
Foreign exchange
contracts
Total

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year¥51,465¥51,465¥51,465

¥—

¥—

¥—

¥—

¥—

16,00039,89916,00040,26816,00074—74—
30,074—29—
10,014——

10,666

10,76010,760

—

—

—

—

—

11,19011,446

2,427

2,336

2,314

2,292

2,009

65

22,31025,480

4,718

3,623

2,716

2,355

1,546

10,519

651

728

—

—

728

—

—

—

¥152,184¥156,148¥85,445¥6,034¥35,835¥4,677¥13,570¥10,585

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year

¥199

¥199

¥67

¥66

¥0

¥65

¥—

¥—

3

3

3

—

—

—

—

—

¥203

¥203

¥70

¥66

¥0

¥65

¥—

¥—

- 75 -

2023
Non-derivative financial
liabilities
Trade and otherpayablesCommercial papers
Bonds
Short-termborrowings
Long-term
borrowings
Lease liabilities
Liabilities undercontingent
considerationagreements
Total

2023
Derivative liabilities
Currency swaps
Foreign exchange
contracts
Total

Book Contractual
balance cash flows

Thousands of U.S. dollars
Over
Over
Over
1 year
2 years
3 years
Up toand up to and up to and up to
1 year
2 years
3 years
4 years$384,067$384,067$384,067

$—

$—

$—

$—

$—

119,402297,753

119,402
300,507

119,402
552

—
552

—
224,432—
216—
74,731——

79,59780,29880,298

—

—

—

—

—

83,50785,417

18,111

17,432

17,268

17,104

14,992

485

166,492

190,149

35,20827,037

20,26817,574

11,53778,500

4,858

5,432

—

—

5,432

—

—

—

$1,135,701 $1,165,283$637,649$45,029$267,425$34,902$101,268$78,992

Thousands of U.S. dollars
Over
Over
Over
1 year
2 years
3 years
Up toand up to and up to and up to
1 year
2 years
3 years
4 yearsOver
4 years
and up to
5 years

Over 5years

Book Contractual
balance cash flowsOver
4 years
and up to
5 years

Over 5years$1,485$1,485

$500

$492

$0

$485

$—

$—

22

22

22

—

—

—

—

—

$1,514$1,514

$522

$492

$0

$485

$—

$—

The cash flows included in this maturity analysis are not expected to be generated significantly earlier orat significantly different amounts.
The total amount of overdraft and commitment line and the balance of executed loans are as follows:
Millions of yen
2022
2023
¥66,673¥69,558
1,199
8,846¥65,473¥60,712

Total amount of overdraft and commitment line
Balance of executed loans
Balance of unexecuted loans- 76 -

Thousands of
U.S. dollars
2023$519,089
66,014$453,074

(4) Market risk
1) Foreign exchange risk
Since the Group operates its business globally, its transactions denominated in currencies other than thefunctional currency are exposed to foreign exchange risks. In principle, the Group uses forward foreignexchange contracts to hedge exchange rate fluctuation risks, which are identified by currency and month.
Sensitivity analysis of exchange rate fluctuation risks
With regard to the financial instruments held by the Group at the end of the fiscal year, the effect of the
U.S. dollar and the renminbi becoming stronger against the yen by 1 yen, on profit before tax in the
consolidated statement of profit or loss is as follows. This analysis assumes that all other variables remain
constant.
Millions of yen
2022
2023
¥(21)
¥(29)
(37)
(1)

U.S. dollar
Renminbi

Thousands of
U.S. dollars
2023$(216)(7)2) Market price risk
The Group holds equity instruments with quoted market prices for policy investment aims, such as thesmooth implementation of business alliances. With regard to equity instruments with quoted market
prices, since their market prices are determined based on market principles, the value of such financial
instruments may decline depending on trends in the market economy. For such equity instruments withquoted market prices, their quoted market prices, the financial conditions of the issuers (business partnercompanies) and other relevant factors are regularly monitored, and the holding status of those
instruments is also continuously reviewed, taking into account relationships with business partnercompanies.
Sensitivity analysis of quoted market prices
With regard to the equity instruments with quoted market prices held by the Group at the end of the fiscal
year, the effect of a 1% decline in the quoted market prices at the end of the fiscal year on othercomprehensive income (before tax effects) in the consolidated statement of comprehensive income is asfollows. In this analysis, the amount of the effect is calculated by multiplying the values of the equity
instruments at the end of the fiscal year by 1%.
Millions of yen
2022
2023
¥(164)¥(83)

Other comprehensive income (before tax effects)- 77 -

Thousands of
U.S. dollars
2023$(619)

(5) Fair value
1) Fair value of financial instruments
The fair values of financial liabilities measured at amortized cost and their carrying amounts in the
consolidated statement of financial position are as follows:
Financial instruments whose carrying amounts are reasonable approximations of fair values andimmaterial financial instruments are not included in the table below.
2023
Carrying
Fair
amountvalue

Thousands of
U.S. dollars
2023
Carrying
Fair
amountvalue¥11,124
39,899$83,014297,753

Millions of yen
2022
Carrying
Fair
amountvalue
Financial liabilities
Borrowings
Bonds¥1,28529,913¥1,29029,814¥11,154
39,842$83,238
297,3282) Fair value measurement method
The fair values of financial assets and financial liabilities are calculated as follows:(Derivatives)
Derivatives include foreign exchange contracts and currency swaps.
Foreign exchange contracts and currency swaps, whose fair values are calculated based on forward
exchange rate or quoted prices obtained from financial institutions and other available information, arecategorized within Level 2.
(Shares, etc.)
Shares, etc., include shares for which an active market exists, investment trusts and unlisted shares.
Shares with active markets are evaluated by prices quoted at the stock exchange, and are categorized
within Level 1. Investment trusts are evaluated by prices quoted at the stock exchange or prices provided
by correspondent financial institutions, etc., and are categorized within Level 1. Unlisted shares, whose
fair values are calculated by valuation techniques, such as the comparable peer company multiples
method, using unobservable inputs, such as valuation multiples, are categorized within Level 3.
(Borrowings)
Since short-term borrowings are settled in a short period of time, their fair values approximate theircarrying amounts.
Long-term borrowings, whose fair values are calculated by discounting the sum of the principal andinterest using the interest rate that would be applied if new borrowings were made with similar terms, arecategorized within Level 2.
However, since floating interest rate long-term borrowings reflect market interest rates in a short period oftime and credit standings after execution do not vary significantly, their fair values approximate theircarrying amounts.
(Bonds)Bonds, whose fair values are calculated by discounting the sum of the principal and interest using theinterest rate that takes into account the remaining period and credit risk of the relevant bonds, arecategorized within Level 2.

- 78 -

(Liabilities pertaining to forward contracts concluded with non-controlling shareholders)
For forward contracts for shares in subsidiaries which the Group has concluded with non-controllingshareholders, the present value of the expected transfer price is initially recognized as other financial
liabilities, and after initial recognition, in principle, the present value is measured at amortized cost using
the effective interest method and the amount of subsequent changes is recognized in profit or loss. Fairvalues of liabilities pertaining to forward contracts concluded with non-controlling shareholders arecalculated by discounting future cash flows, and their fair values approximate their carrying amounts.
(Other (financial liabilities))
Fair values of other (financial liabilities) are evaluated at the amount calculated by the discounted cash
flow method using unobservable inputs, and are therefore categorized within Level 3.
(Financial instruments other than the above mentioned)
Since financial instruments other than the above mentioned are mainly settled in a short period of time,
their fair values approximate their carrying amounts.
3) Fair value hierarchy
The following is an analysis of financial instruments recorded at fair value by valuation methods. Based on
the inputs used to measure fair values, the fair value levels are classified as follows:
Level 1: Fair value measured using (unadjusted) quoted market prices in active markets for identicalassets or liabilities.
Level 2: Fair value measured using directly or indirectly observable inputs other than Level 1 inputs.
Level 3: Fair value measured using significant unobservable inputs.
Transfers between levels of the fair value hierarchy are recognized on the date of occurrence of the eventor change in circumstances that causes the transfer. No transfer was made between levels for the fiscal
years ended March 31, 2022 and 2023.

- 79 -

Financial instruments measured at fair value
Fiscal year ended March 31, 2022
2022
Derivative assets
Financial assets measured at fair value
through other comprehensive income:
Shares, etc.
Derivative liabilities
Other (financial liabilities)

Level 1¥—

16,433——

Millions of yen
Level 2
Level 3
¥2
¥—

—
171
—

4,059
—
781

Total
¥2

20,492
171
781

Fiscal year ended March 31, 2023
2023
Financial assets measured at fair value
through other comprehensive income:
Shares, etc.
Derivative liabilities
Other (financial liabilities)

Level 1

2023
Financial assets measured at fair value
through other comprehensive income:
Shares, etc.
Derivative liabilities
Other (financial liabilities)

Level 1

¥8,375——$62,500——

Millions of yen
Level 2
Level 3¥—203—

¥4,537—
651

Thousands of U.S. dollars
Level 2
Level 3

$—
1,514
—

$33,858
—
4,858

Total

¥12,912
203
651

Total

$96,358
1,514
4,858

For financial instruments categorized within Level 3, external evaluation specialists or appropriate persons
in charge of evaluation conduct an evaluation and analysis of the results in accordance with theevaluation policy and procedures approved by the Manager of the Corporate Planning and Control
Division. The evaluation results have been reviewed and approved by the Manager of the Corporate
Planning and Control Division.
Fair values of unlisted shares categorized within Level 3 are measured by the comparable peer company
multiples method and net asset-based valuation model, etc. Since this valuation model employs
unobservable inputs, such as the price book-value ratio, unlisted shares are categorized within Level 3.

- 80 -

Reconciliation from the beginning balance to the ending balance of financial instruments categorized
within Level 3
Millions of yen
2022
Beginning balance
Total gains and losses
Profit or loss
Other comprehensive income
Purchase
Issuance
Sale
Other
Ending balance
Changes in unrealized gains andlosses for the period recognizedin profit or loss for assets andliabilities held at the end of thereporting period

2023

Financialassets¥5,765
105
(24)
129
890
—
(2,698)(3)¥4,059Financialliabilities
¥193
—
—
—
—
781
—
(193)
¥781

Financialassets¥4,059
(119)
(0)
(119)
569
—
(18)
46
¥4,537

Financialliabilities
¥781
(231)
(231)
—
—
—
—
101
¥651

¥76

¥—

¥(0)

¥(231)

Thousands of U.S. dollars
2023
Financial
Financialassetsliabilities$30,291$5,828(888)(1,723)(0)(1,723)
(888)
—
4,246
—
—
—
(134)
—
343
753
$33,858$4,858$(0)$(1,723)

The gains and losses included in profit or loss are for financial assets and financial liabilities measured atfair value through profit or loss as of the fiscal year-end. Such profit or loss is included in finance income
and finance costs in the consolidated statement of profit or loss.
The gains and losses included in other comprehensive income are for financial assets measured at fairvalue through other comprehensive income as of the fiscal year-end. Such gains and losses are included
in net change in the fair value of financial assets measured at fair value through other comprehensive
income in the consolidated statement of comprehensive income.

- 81 -

(6) Derivatives and hedging activities
Derivative transactions consist of forward foreign exchange contracts for the purpose of hedging
exchange rate fluctuation risks related to foreign currency-denominated trade receivables and payables
and currency swap transactions for the purpose of hedging exchange rate fluctuation risks related toforeign currency-denominated loans.
In applying hedge accounting, in order to ensure that there is an economic relationship in which changes
in fair value or cash flows of the hedged item caused by the risk being hedged are offset by changes infair value or cash flows of the hedging instrument, the existence of such economic relationship between
the hedged item and hedging instrument is confirmed. This confirmation is achieved through a qualitative
assessment of whether the significant terms and conditions of the hedged item match or closely conformto those of the hedging instrument and through a quantitative assessment of whether changes in thevalues of the hedged item and hedging instrument offset each other due to the same risk. In addition, an
appropriate hedge ratio has been set in light of the economic relationship between the hedged item andhedging instrument and the risk management strategy.
Any hedge ineffectiveness is recognized in profit or loss. The amount recognized in profit or loss for thehedge ineffectiveness and the portion excluded from the assessment of hedge effectiveness in theprevious fiscal year and this fiscal year is immaterial. The amount reclassified from other components ofequity in the consolidated statement of financial position to profit or loss in the previous and this fiscal year
because forecasted transactions are no longer expected to occur is also immaterial.
The notional principal and average price of main hedging instruments are as follows:
Fiscal year ended March 31, 2022
2022
Cash flow hedges
Currency swaps(Receive Yen, Pay Euros)
Total

Notional principal andaverage priceNotional principal
Forward rate (Yen)

Up to 1 year

Millions of yen
Over 1 year

¥1,376134.29¥1,376¥4,649130.98¥4,649Up to 1 year

Millions of yen
Over 1 year

¥1,376134.29¥1,376¥3,273129.63¥3,273

Total¥6,026—¥6,026

Fiscal year ended March 31, 2023
2023
Cash flow hedges
Currency swaps(Receive Yen, Pay Euros)
Total

2023
Cash flow hedges
Currency swaps(Receive Yen, Pay Euros)
Total

Notional principal andaverage priceNotional principal
Forward rate (Yen)

Notional principal andaverage priceNotional principal
Forward rate (U.S. dollars)- 82 -

Total¥4,649—¥4,649Thousands of U.S. dollars
Up to 1 year
Over 1 year
Total
$10,268
1.00$10,268$24,425
0.97$24,425$34,694—$34,694

The carrying amounts of hedging instruments to which hedge accounting is applied by type of hedge areas follows:
Thousands of
U.S. dollars
2023

Millions of yen
2022
AssetsLiabilities

2023
AssetsLiabilities

AssetsLiabilities

Account in consolidated
statement of financial position
and in consolidated statement of
profit or loss of transfer
adjustments

Cash flow hedges
Foreign exchange risk

¥—
¥ 172
¥—
¥ 199
$ — $ 1,485
Note
Note Other financial assets in current and non-current assets, other financial liabilities in current and non-current
liabilities, finance income and finance costs.

The balance of cash flow hedge reserve related to cash flow hedges is as follows:
Millions of yen
2022
2023
Cash flow hedges
Foreign exchange risk

¥40

¥222

Thousands of
U.S. dollars
2023$1,656The contract amount and the carrying amount of derivatives to which hedge accounting is not applied are
as follows:
Fiscal year ended March 31, 2022
Account inconsolidated
statement offinancial position

Millions of yen
Contract
amount, etc.

2022
Over 1 year
AssetsLiabilities
Currency swaps
¥68
¥68
¥0
¥—
Note
(Receive Yen, Pay South Korean won)Note Other financial assets in current and non-current assets and other financial liabilities in current and non-current
liabilities.

Fiscal year ended March 31, 2023
Millions of yen
2023
Currency swaps(Receive Yen, Pay South Korean won)Contract
amount, etc.

Over 1 year¥—¥—

Assets¥—Thousands of U.S. dollars
Contract
amount, etc.

Liabilities¥—

Account inconsolidated
statement offinancial position

Note
Account inconsolidated
statement offinancial position

2023
Over 1 year
AssetsLiabilities
Currency swaps
$—
$—
$—
$—
Note
(Receive Yen, Pay South Korean won)Note Other financial assets in current and non-current assets and other financial liabilities in current and non-current
liabilities.

- 83 -

35. Subsidiaries and associates
The Group’s consolidated subsidiaries as of March 31, 2023 are as follows:
Location

Main business

Ownership
ratio ofvoting rights

Kurita Europe GmbH

Mannheim, Germany

Water Treatment Chemicals

100.0%

Kurita Water Industries (Dalian) Co., Ltd.

Liaoning, China

Water Treatment Chemicals

90.1%

Kurita Water Industries (Suzhou) Ltd.

Jiangsu, China

Water Treatment Facilities

100.0%

Hansu Technical Service Ltd.

Gyeonggi-do, Korea

Water Treatment Facilities

100.0%

Hansu Co., Ltd.

Seoul, Korea

Water Treatment Chemicals

100.0%

Pentagon Technologies Group, Inc.

California, U.S.A.

Water Treatment Facilities

100.0%

Kurita America, Inc.

Minnesota, U.S.A.

Water Treatment Chemicals andWater Treatment Facilities

100.0%

Kuritaz Co., Ltd.

Toshima-ku, Tokyo

Water Treatment Facilities

100.0%

Kuritec Service Co., Ltd.

Chuo-ku, Osaka

Water Treatment Facilities

100.0%

Kurita Chemical Manufacturing Ltd.

Gokamachi,
Sashima-gun, Ibaraki

Water Treatment Chemicals

100.0%

Company name

59 other companies

The Group’s associates accounted for using the equity method as of March 31, 2023 are as follows:
Company name
Angang Kurita (Anshan) Water Treatment
Co., Ltd.

Location
Liaoning, China

Main business
Water Treatment Chemicals

Ownership
ratio ofvoting rights
40.0%

Another company
Notes 1.
2.

The main business column refers to segment names.
Kurita Europe GmbH, Hansu Technical Service Ltd. and Kurita Chemical Manufacturing Ltd. are thespecified subsidiary companies.

36. Related parties(1) Transactions with related parties
For the fiscal years ended March 31, 2022 and 2023, information on transactions with related parties has
been omitted due to the absence of significant transactions.
(2) Compensation for key management personnel
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Short-term employee benefits
¥428
¥380
$2,835
Share-based payment
83
137
1,022
Note Compensation for key management personnel is compensation for Directors (including External Directors) and
Audit & Supervisory Board Members (including external members of the Audit & Supervisory Board) of theCompany.

- 84 -

37. Commitments
The total contract amount regarding commitments for asset purchases, etc., is as follows:
Thousands ofMillions of yen
U.S. dollars
2022
2023
2023
Acquisition of property, plant and equipment¥19,606¥12,310$91,865
Note Commitments as of March 31, 2023 consist primarily of those associated with the acquisition of a certain facility
in the ultrapure water supply business.

38. Additional information(Additional acquisition of shares of a subsidiary)
The Group acquired an additional 49% of shares outstanding of Pentagon Technologies Group, Inc., byexecuting a forward contract on a share transfer that was concluded between Kurita America Holdings,
Inc. and non-controlling shareholders of Pentagon Technologies Group, Inc. on June 30, 2022, which
made Pentagon Technologies Group, Inc. a wholly owned subsidiary.
The additional acquisition amount was $161 million (¥22,127 million), and was recorded in “Purchase ofshares of subsidiaries not resulting in change in scope of consolidation” under “Cash flows from financing
activities” in the consolidated statement of cash flows. Accordingly, financial liabilities of ¥19,613 million($146,365 thousand) recorded as liabilities pertaining to forward contracts concluded with non-controllingshareholders at the end of the fiscal year ended March 31, 2022 was eliminated, non-controlling interests
decreased by ¥4,615 million ($34,440 thousand), and capital surplus increased by ¥2,743 million ($20,470
thousand).

- 85 -

39. Subsequent events(Acquiring subsidiaries through acquisition of shares)
The Company has resolved at the Board of Directors meeting held on April 27, 2023 to acquire, throughKurita Europe GmbH, its consolidated subsidiary, all the shares outstanding of Arcade Engineering GmbH(hereinafter “Arcade Germany”), Arcade Industrie SAS (hereinafter “Arcade France”), and Arcade
Engineering AG (hereinafter “Arcade Switzerland”), which are manufacturing and sales companies ofwater treatment facilities in Europe, and to make them subsidiaries. On May 2, 2023, Kurita EuropeGmbH concluded share transfer agreements. As a result of the acquisition of shares in Arcade Germany
and Arcade Switzerland, the Company will also acquire shares of Arcade Engineering (Asia) Pte. Ltd.
(hereinafter “Arcade Asia”), a subsidiary of the two companies.
(1) Company name, location, name of representative, amount of capital and business of the acquiree
1)2)Company name of the acquiree
Location
Name of representative
Amount of share capitalBusiness
Company name of the acquiree
Location
Name of representative
Amount of share capitalBusiness

3)

Company name of the acquiree
Location
Name of representative
Amount of share capitalBusiness

4)

Company name of the acquiree
Location
Name of representative
Amount of share capitalBusiness: Arcade Engineering GmbH
: Meißner Str. 151a, 01445 Radebeul, Germany: Dr. Claudia Kaiser: €25,000: Design/engineering, construction management, and theprovision of consulting services on water treatment facilities: Arcade Industrie SAS: Aire de la Thur - 68840 Pulversheim, France: Ms. Claudine Muller: €40,000: Design/engineering and manufacture of electric equipment
for water treatment facilities: Arcade Engineering AG: Hegenheimermattweg 65, 4123 Allschwil, Switzerland: Mr. Felix Grisch: Swiss₣100,000: Design/engineering of, and provision of consulting services
on water treatment facilities: Arcade Engineering (Asia) Pte. Ltd.
: 280 Woodlands Industrial Park E5 #10-16, Singapore: Mr. Frederic Schindler: S$100,000: Design/engineering, construction management, and theprovision of consulting services on water treatment facilities(2) Purpose of the acquisition of shares
To expand business globally in the electronics industry, a key market, the Group will leverage theacquisition to acquire local manufacturing bases and a supply chain for its water treatment facilities
business, targeting the electronics industry in Europe. The Group will build a business foundation forresponding promptly to the growth in demand for water treatment facilities for the electronics industry,
which partly reflects the European Chips Act, thus driving business expansion to the electronics industryin Europe. Further, the Group will combine its products, technologies, and business models, including
Kurita Europe GmbH and Kurita (Singapore) Pte. Ltd., a subsidiary of the Company, with the solution
capabilities of Arcade Germany, Arcade France, Arcade Switzerland, and Arcade Asia, in its efforts toenhance solutions which contribute greatly to saving water, cutting CO2 emissions, and reducing waste.
(3) Timing of the acquisition of shares
July 3, 2023 (scheduled)- 86 -

(4) Number of shares to acquire, acquisition cost, ratio of ownership interest after the acquisition
1) Arcade Engineering GmbH
Number of shares to acquire
Acquisition cost
Ratio of ownership interest after the acquisition
2) Arcade Industrie SAS
Number of shares to acquire
Acquisition cost
Ratio of ownership interest after the acquisition
3) Arcade Engineering AG
Number of shares to acquire
Acquisition cost
Ratio of ownership interest after the acquisition
4) Arcade Engineering (Asia) Pte. Ltd.
Number of shares to acquire
Acquisition cost
Ratio of ownership interest after the acquisition: 3 shares: €16,500,000: 100%: 2,000 shares: €2,500,000: 100%: 200 shares: €6,000,000: 100%:100,000 shares: — (The acquisition cost is included in theacquisition cost of 1) and 3) above.): 100%(5) Method of financing and payment
Cash on hand********************************************************************************************************************- 87 -

Independent Auditor’s Report

Grant Thornton
INDEPENDENT AUDITOR'S REPORTTo the Board of Directors of Kurita Water Industries Ltd.
OpinionWe have audited the consolidated financial statements of Kurita Water
Industries Ltd. ("the Company") and its consolidated subsidiaries (collectively
referred to as "the Group"), which comprise the consolidated statement offinancial position as at March 31, 2023, and the consolidated statement of
profit or loss, comprehensive income, statement of changes in equity andstatement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the Groupas at March 31, 2023, and its consolidated financial performance and its
consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards (IFRSs).
Convenience Translation
The United States dollar amounts in the accompanying consolidated financial
statements with respect to the year ended March 31, 2023 are presented
solely for the convenience. Our audit also included the translation of Japanese
yen amounts into United States dollar amounts and, in our opinion, suchtranslation has been made on the basis described in Note 2 to the consolidated
financial statements.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally
accepted in J apan. Our responsibilities under those standards are further
described in the Auditor's Responsibilities for the Audit of the Consolidated
Gront Thornton To屯o LLC ;, a member firm of Grant Thornton lntcrnot;onol ltd ("GTIじ） ． GTIL ond the member firms
ore not o worldw;de portnersh;p. Se,-.,;ces ore del;vcred ;ndependent18 b8 tho mcmbor firms. GTIL docs not prov;dese,v;ces to dents. G Tll ond ;is member fams ore not ogents of, ond do not obl;gotc, one onother and ore not 1;oble
for one another's acts or om;ss;ons- 88 -

www.grantthornton.jp

Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Japan, and we have fulfilled ourother ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, wereof most significance in our audit of the consolidated financial statements ofthe current period. These matters were addressed in the context of our auditof the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of goodwill related to Water Treatment Chemicals business in Kurita
America, Inc.
Auditor's Response
Description of Key Audit Matter
As described in Note 13, "Goodwill andintangible assets, (2) Impairment tests
for goodwill" of the Notes toConsolidated Financial Statements, theGroup recorded ¥16,830 million of
goodwill related to the Water
Treatment Chemicals business of
Kurita America, Inc. (hereinafter
Kurita America) in the Consolidated
Statement of Financial Position, and¥7,646 million of goodwill impairment
losses was recorded in other expenses in
the Consolidated Statement of Profit or
Loss. The Group also discloses theassumptions used in the goodwill
impairment test as described in Note13, "Goodwill and intangible assets, (2)Impairment tests for Goodwill."- 89 -In reviewing valuation of goodwill
related to Kurita America's Water
Treatment Chemicals business, weevaluated the design and operation of
the Group's internal controls over the
futureofdevelopment
plans,
underlying impairment tests, thecalculation of value in use and themeasurement of impairment losses.
We primarily performed the following
procedures
reviewtotheappropriateness of the significant
goodwill impairment tests. We directed
the auditors of Kurita America toperform some of the following
procedures and evaluated whether
sufficient and appropriate audit

perfo rmin g the impairment test,
the Group calculates the recoverable
amounto f cash- generating
units,
includin g goodwill, based on its value in
use. If the recoverable amount is lessthan the carrying amount as a result of
the imp airment test, the Group
reco gni zes an impairment loss andwrites down t he carryin g amoun t t o t herecoverable amount.
Inthrough
inspections of the result s andcommunications with the auditors.

evidence

●

The

Group

has

been

conductin g

ac quisitions

p rimarily
overseas and recorded goodwill of
60,413 million yen (12.0% of total
asset s) i n the Consolidated Statemen tof F inancial Pos ition for the current
fiscal year. In the previous fiscal year,
Kurita America, in p ar ticular, was
st ron gly affected by a decline in privat e
demand fo llow ing the closures ofcommercial fa cilities due to the sp readof the COVID-19, delays in productcorp orat e- 90 -

Valuati on exp er ts of our network

firm

en ga ged

werevaluation

methods

to verifyinthecalcula tion of value in use.
•

With resp ect to fut ure cash flows,

the accuracy of
estimatesofthe underlyin gbusiness p lans by comparin g thebud get and actual results in pr ior
years.
we

The value i n use i s calculated as t hep resent value of the future cash flows
exp ected t o be genera ted by the cash·
generatin g units, including goodwill.
The future cash fl ows are based on a
five- year business plan from thefo llowin g fiscal year approved bymana gement. The business growthp otential fo r subsequent p eriods isestimated and determ ined based on the
lon g-term avera ge growth rate of t hemarke t to which the cash- generatin gunits belon g, and other fac tors.

obta ined

was

●

●

evaluated

Re garding

forecasts bymarket and industry for p roducts
re fl ect ed in the calcula tion of value
in use, discussions were held withandmana gemen tbusinessmana gers, and external data thatserved as the basis for thei r
marketgrowth rates wereobtai nedandcomp aredandconsidered.
sales

Sales forecas ts for CSV businessreflect ed in the calculation of value

in

use

were

mana gement

discussed
and

with

businessmana gers, and compared with theperformance of Kurita
Amer i ca and t he same business ofo ther subsidiaries of the Group.
his torical●

Re gardin g

to reducecos ts, includin g t he cost of sales
reflected in the calculation of value
measuresshipments due to supply chaind isruptions, and rising raw material
prices and lo gistics costs due to
inflation. In this environment, theGroup downwardl y revised its businessp lan, which is the basis for estimating
future cash flows to be used for the
impairment test, from the previous
fiscal year in light of the achievement o f
results from the past, includ ing thecurrent fi scal year, due to changes in
the United S tates market after the
expansion o f the COVID· 19 in the
Water Treatmen t Chemicals business
in Kurita America, as well as imp actsfrom lo gistics disruptions, rising pricesof raw materials and materials, andsoaring energy costs. In this situation,
the polic y interest rate was raised tocontrol inflation in the United S tates,
and the d iscount rate used to calculate
the value in use fo r impairment test
increased to 10.8% (9.5% in the same
period of the previous fiscal year). As aresult, s ince the recoverable amoun t
was lower than the carrying amount o f
the cash- generating u nits, includ in g
goodwill, the Group reduced thecarrying amount of goodwill in Kurita
America's Water Treatment Chemicals
business to its recoverable amount at
the end o f the fiscal year.
The business plan used for goodwill
impairment tests related to Kurita
America's Water Treatment Chemicals- 91 -

m use, the feasibility of thesemeasures was d iscussed withmana gement
andbusinessmana gers, and the latest progress
was examined.
•

For the d iscount rate and lon g·term average growth rate used todetermine value in use, we
en gaged the valuation experts ofour network firm to evaluate theresults o f our review usmg
available external data.

business

includesmana gement 's

outlook fo r future conditions, such as

sales forecas ts based on the growth rat eo f the product markets to which Kurita

America belon gs, sales

fo recasts for
CSV business promoted by the Group,

which is based on the assumption tha t

the businesses will grow further overthe next five years, and impact ofmeasures to reduce costs included in thecost of sales, etc. Managemen t's
j udgment with respect to these fo rward·
look ing has a significant impact on the
expected future cash flows to begenerated by the cash- generating units,
includin g goodwill.
In addition, for the selection of data

the d iscount rate used to
calculate value in use and the long·term
average econom ic growth rate in the
U nited States market used to esti mate
the long-term avera ge growth rate, etc.,
ex per t knowledge of valuation andmana gement j ud gment are re quired.
such asGiven the complexity of the goodwill

impairment tests based on changes in
the circumstances of Kurita Amer ica
from the previous fiscal year and theuncertainty associated with changes in
the operating environment regarding
estimates of future cash flows reflected
the above impacts, long-term avera ge
growth rate, and discount rate, whichre quired mana gement's j ud gment, we
identified the valuation of goodwill- 92 -

related

to Kurita America's Water
Treatment Chem icals bus iness as a key
audit matter.

Es timate of the total cost of transactions in Kur ita Water Industries Ltd.

recogni zes revenue over a certain period o f time
Descr iption o f Key Aud it Matter

As disclosed

in Note 3. Significant
accounting po li cies (14) Revenue to theconsolidated financ ial statements, theGroup recognizes revenue over the terrnof thecontract
for construction
contracts as perfo rmance obligations
are satisfied as construction progresses
and applies the input method, whichuses the ratio o f costs incurred toestimated total costs on a contract -by­contract basis to measure progress.
in Note 6. Segment(2)
information
Informationonreportable segments to the consolidated
financ ial statements, the amount ofrevenue recorded fo r t ransactions mwhich revenue is recognized over acertain period of time by the Com pany
is ¥59,098 million, which accounts fo r asign ificant percenta ge of conso lidated
net sales of ¥344,608 m ill ion.
significant

recogn izing

assumption

revenue overathe ade quacy of theestima tesof thetotal cost oftransactions in the Company thatrecogn i ze revenue over a certain per iodof time, we p rimarily p erformed thefollowing audit procedures:•

matters●

cer tain- 93 -

We conducted a discussion withmanagement regarding imp ortantwhen

period of time is an estimate of total
cost. Estimates of total cos t may beaffected by changes in the content ofAuditor's Response

In reviewing

As d i sclosed

A

that

●

in establishing internal
controls related to estimating total
cost, includ ing timely revisions of
es timates, as well as assessin g thedesign and op eration of suchinternal controls.
In order to ver ify whether theestimate of t he total cost fo r the
initial budget is properly made, forthe construction of new orders
extracted by a certain s tandard, we
conduc ted an interview with theperson in charge of managing theofsales/expenditures
theconstruction, etc., and com paredwith other construction on theinitial cost ratio.
In order to verify that the revisioncontracts that occur due to changes inof the estimate of the total cost is

the environment surrounding contracts

conducted

with customers.

app rop riate

total cost, the Comp any has establishedand op erates internal controls for thedesigndepartments,

theComp any p er fo rms a business p rocessreview on a monthly basis to review theexecution of the initial budget andrevises its estimates of total costs asnecessary.
Due to the uncertainty associated withtechnologicalchan gessurroundinginp hysical

or

the
the

factors,

environment
contract,thep otential imp act andinvolvement of management j udgment,
we identified estimate o f the total costof transactions in the Comp any thatsignificant

recognize revenue over a certain periodof time as a key audit matter.

- 94 -

bycertaincomp aring

theledgersbusinessp rocessandthereviews,

an interview with thep ersons in charge of managing thesales/exp endituresoftheconstru ction, etc., and compared
the actual progress with thep rogress on the p rogress chart.

revision o f the total cost. In particular,
involvingtheconstruction
conducted

allocation of the initial budget and the
work

for

incurred cost, we reviewed theunit. In order to properly estimate theconstruction

andestimate of the total cost with the

management, etc. fo r each construction

totimelymanner,criteria

exp enditure management and progress

resp ectaconstruction extracted by

The Comp any imp lements income and

with

in

•

We examined the estimates of thetotal cost at the end of the current

fiscal year in comp arison with theestimates at the end of the p revious

fiscal year and the reasons for thechange as well as verified theaccuracy of the estimates of thetotal cost by a comp arative review

between the estimates and theactual results.

Other Information
The other information comprises the information included in the Group's
disclosure documents accompanying audited consolidated financial
statements, but does not include the consolidated financial statements andour auditor's report thereon. Management is responsible for the otherinformation. The Audit Committee is responsible for overseeing the
Executive officers and Directors' execution of duties relating to the designand operating effectiveness of the controls over the Group's otherinformation reporting process.
Our opinion on the consolidated financial statements does not cover theother information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read theother information and, in doing so, consider

whether the other information is materially inconsistent with theconsolidated financial statements or our knowledge obtained in the audit orotherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is amaterial misstatement of this other information, we are required to reportthat fact. We have nothing to report in this regard.
Responsibilities of Management and the Audit Committee for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of theconsolidated financial statements in accordance with IFRSs, and for suchinternal control as management determines is necessary to enable thepreparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In

preparingtheconsolidated

financialstatements,

managementisresponsible for assessing the Group's ability to continue as a going concern,- 95 -

including whether the use of the disclosing, as applicable, matters related togoing concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Group or to cease operations, or
has no realistic alternative but to do so.
The Audit Committee are responsible for overseeing the Executive officers
and Directors' execution of duties relating to the design and operating
effectiveness of the controls over the Group's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with auditing
standards generally accepted in Japan will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error andare considered material if, individually or in the aggregate, they could

reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.

As part of an audit in accordance with auditing standards generally acceptedin Japan, we exercise profe ssional judgment and maintain professional

skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence thatis sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher thanfo r one resulting from error, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of internal

control.
•Obtain an understanding of internal control relevant to the audit in orderto design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the- 96 -

Group's internal control.
•

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made bymanagement.

•

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

•

Evaluate whether the presentation and disclosures of the consolidated
financialstatements

presentation,arestructureinandaccordancewithcontent

theof

IFRSs,

theconsolidated

overallfinancialstatements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
•

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

We communicate with the Audit Committee regarding, among other matters,
the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify
during our audit.
We also provide the Audit Committee with a statement that we have compliedwithrelevant

ethicalrequirements

regarding

independence,

and

to

communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
related safeguards.

- 97 -

From t he matters communicated with the Audit Committee, we determine

those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit
matters. We descr ibe these matters in our au ditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremelyrare c ircumstances, we determ ine that a ma tter should not be commun icat ed
in our report because the adverse conse quences of doing so would reasonably
be exp ec ted to outweig h the publi c int erest benefits o f such commun ication.
In terest Required to Be D isclosed by t he Cer tified Pub lic Accoun tan ts Act of

Jap anOur firm and its designated engagement partners do not have any int erestin the Group which is required to be disclosed pursuant to the provisions of
the Certified Publi c Accountants Act of Japan.
Tets�h山／疇Desig nated Engagement Partner
Certified Public Accountant

幻必

Makio Wada

Designated Engagement Partner
Certified Public Accountant

平遭畠

巴oiビとt:naK
Desig nated En gag ement Partner
Certified Public Accountant

Grant Thornton Ta iyo LLC

Tokyo,Ja pan

29, September , 2023

- 98 -