KANEMATSU CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018

~CONSOLIDATED FINANCIAL STATEMENTS~

PAGES

Consolidated Statement of Financial Position ..………………………………………………………………………………

1

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ..………………………………

3

Consolidated Statement of Changes in Equity ..………………………………………………………………………………

5

Consolidated Statement of Cash Flows ………………………………………………………………………………………

7~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~
1. Reporting Entity ..…………………………………………………………………………………………………………

9

2. Basis of Preparing Consolidated Financial Statements ..…………………………………………………………………

9

3. Significant Accounting Policies ..…………………………………………………………………………………………

10

4. Standards and Interpretations issued but not yet adopted ………………………………………………………………

18

5. Business Combinations …………………………………………………………………………………………………

18

6. Segment Information ..……………………………………………………………………………………………………

20

7. Trade and Other Receivables ..……………………………………………………………………………………………

23

8. Inventories ………………………………………………………………………………………………………………

24

9. Property, Plant and Equipment …………………………………………………………………………………………

25

10. Goodwill and Intangible Assets .…………………………………………………………………………………………

27

11. Interests in Associates and Joint Ventures .………………………………………………………………………………

31

12. Other Investments ..………………………………………………………………………………………………………

31

13. Other Current Assets and Other Non-current Assets .……………………………………………………………………

32

14. Trade and Other Payables ..………………………………………………………………………………………………

32

15. Bonds and Borrowings ...…………………………………………………………………………………………………

32

16. Provisions ...………………………………………………………………………………………………………………

33

17. Other Current Liabilities and Other Non-current Liabilities .……………………………………………………………

34

18. Equity .……………………………………………………………………………………………………………………

34

19. Revenue ..…………………………………………………………………………………………………………………

36

20. Selling, General and Administrative Expenses ..…………………………………………………………………………

36

21. Gain or Loss on Sale or Disposal of Property, Plant and Equipment and Intangible Assets .……………………………

36

22. Impairment Loss …………………………………………………………………………………………………………

37

23. Exchange Differences ……………………………………………………………………………………………………

38

24. Finance Income and Finance Costs ………………………………………………………………………………………

38

25. Earnings Per Share Attributable to Owners of the Parent ..………………………………………………………………

39

26. Other Components of Equity and Other Comprehensive Income .………………………………………………………

40

27. Cash Flow Information ..…………………………………………………………………………………………………

41

28. Employee Benefits .………………………………………………………………………………………………………

43

29. Current and Deferred Income Tax .………………………………………………………………………………………

47

30. Financial Instruments .……………………………………………………………………………………………………

50

31. Leases .……………………………………………………………………………………………………………………

73

32. Pledged Assets ...…………………………………………………………………………………………………………

74

33. Contingent Liabilities .……………………………………………………………………………………………………

75

34. Significant Subsidiaries .…………………………………………………………………………………………………

76

35. Related Parties ...…………………………………………………………………………………………………………

80

36. Subsequent Events .………………………………………………………………………………………………………

80

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
Consolidated Statement of Financial Position
JPY
2018

USD (Note 2)
2017

2018

(Assets)
Ⅰ. Current assets
1. Cash and cash equivalents (Note 27)

77,731

77,566731,662

2. Trade and other receivables (Note 7)
3. Inventories (Note 8)

220,583
93,957

191,193
80,662

2,076,278
884,392

4. Other financial assets (Note 30)
5. Other current assets (Note 13)

2,433
19,955

3,705
18,20022,906
187,834

Total current assets

414,662

371,329

3,903,073

1. Property, plant and equipment (Note 9)21,90026,858206,142

2. Goodwill (Note 10)
3. Intangible assets (Note 10)
4. Investments accounted for using the equity method(Note 11)
5. Trade and other receivables (Note 7)

6,571
20,377

6,304
20,93561,859191,808

5,169

4,885

48,662

1,582

1,169

14,9006. Other investments (Note 12)
7. Other financial assets (Note 30)

37,9694,479

34,112
5,295

357,390
42,168

8. Deferred tax assets (Note 29)

3,696
3,478

5,018
3,807

34,79332,740Ⅱ. Non-current assets

9. Other non-current assets (Note 13)
Total non-current assets
Total assets

105,226

108,388990,463

519,889479,717

4,893,536(Notes) Presentation of fiscal year and amounts (Japanese Yen and U.S. dollars)
1. “2018” refers to the Company’s consolidated fiscal year ended March 31, 2018 and the other fiscal year is referred to in
the corresponding manner.
2. “JPY” means millions of Japanese Yen and “USD” means thousands of U.S. dollars.

1

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
JPY
2018

USD (Note 2)
2017

2018

(Liabilities)
Ⅰ. Current liabilities
1. Trade and other payables (Note 14)
2. Bonds and borrowings (Note 15)

188,791
61,210165,01164,643

1,777,026
576,151

3. Other financial liabilities (Note 30)
4. Income taxes payable

7,009
3,773

5,255
4,226

65,97935,521

5. Provisions (Note 16)
6. Other current liabilities (Note 17)156
23,37128
26,291

1,475
219,989

Total current liabilities

284,313265,455

2,676,140

1. Bonds and borrowings (Note 15)

76,116

69,201

716,460

2. Other financial liabilities (Note 30)
3. Retirement benefit liabilities (Note 28)

2,853
6,340

6,118
6,641

26,85759,685

4. Provisions (Note 16)
5. Deferred tax liabilities (Note 29)

1,639
641

1,397
424

15,434
6,042

933

614

8,784

Ⅱ. Non-current liabilities

6. Other non-current liabilities (Note 17)

88,52584,398833,263

Total liabilities

Total non-current liabilities

372,838

349,8543,509,402(Equity)
1. Share capital (Note 18)

27,781

27,781

261,494

2. Capital surplus (Note 18)

26,81026,797

252,361

3. Retained earnings (Note 18)

48,55934,579457,074

4. Treasury stock (Note 18)

(193)

(217)

(1,826)

1,275

2,349

12,00912,684

9,455

119,397

5. Other components of equity (Note 26)
1) Exchange differences on translation of foreign
operations
2) Financial assets measured at fair value through othercomprehensive income3) Cash flow hedges

(905)

(388)

(8,521)

Total other components of equity

13,055

11,416

122,884

116,012100,357

1,091,988

Total equity attributable to owners of the Parent

31,03729,506292,146

Total equity

6. Non-controlling interests

147,050

129,863

1,384,133

Total liabilities and equity

519,889479,717

4,893,536

The accompanying notes are an integral part of these consolidated financial statements
2

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(a) Consolidated Statement of Income
JPY2018
Ⅰ. Revenue (Notes 6 & 19)
Ⅱ. Cost of sales
Gross profit
Ⅲ. Selling, general and administrative expenses (Note 20)
Ⅳ. Other income (expenses)
1. Gain (loss) on sale or disposal of property, plant andequipment and intangible assets, net (Note 21)
2. Impairment loss on property, plant and equipment andintangible assets (Note 22)
3. Other income

USD (Note 2)
2017

2018

714,790(608,419)

675,579(575,440)

6,728,075(5,726,835)

106,371(78,420)

100,139(76,163)1,001,239(738,145)

(250)

384

(2,361)(2,148)(866)(20,226)

1,560

1,400

14,685(950)(2,261)(8,949)(1,790)(1,343)(16,851)

26,16022,633

246,243

1. Interest income (Note 24)

363

421

3,425

2. Dividend income (Note 24)

1,073
10

1,116
－

10,104
94

1,447

1,537

13,623(2,414)(730)(2,304)(2,000)(22,723)(6,871)

Total finance costs
Ⅶ. Share of profit (loss) of investments accounted forusing the equity method (Note 11)(3,144)(4,304)(29,594)

1,579(1,990)14,864

Profit before tax
Income tax expense (Note 29)

26,043(6,384)

17,875(7,589)245,135(60,097)

Profit for the year

19,658

10,286

185,038

Non-controlling interests

16,317
3,341

8,049
2,237

153,588
31,450Total

19,658

10,286

185,038

4. Other expenses
Total other income (expenses)
Operating profit (Note 6)
Ⅴ. Finance income

3. Other finance income (Notes 24 & 30)
Total finance income
Ⅵ. Finance costs
1. Interest expenses (Note 24)
2. Other finance costs (Notes 24 & 30)

Profit for the year attributable to:
Owners of the Parent

Yen

U.S. dollars

Earnings per share attributable to owners of the Parent:
Basic earnings per share (Note 25)

193.79

95.64

1.82

Diluted earnings per share (Note 25)

193.79

95.64

1.82

3

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(b) Consolidated Statement of Comprehensive Income
JPY2018
Ⅰ. Profit for the year

USD (Note 2)
2017

2018

19,658

10,286

185,038

3,402

2,671

32,022

307

(284)

2,899

0

24

4

3,710

2,412

34,925(1,427)(829)(13,432)

(485)

984

(4,570)

(57)

109

(543)

Ⅱ. Other comprehensive income
Items that will not be reclassified to profit or loss:
1. Financial assets measured at fair value through othercomprehensive income (Note 26)
2. Remeasurement of defined benefit pension plans(Note 26)
3. Share of other comprehensive income of investments
accounted for using the equity method (Note 26)
Total items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss:
1. Exchange differences on translation of foreign operations(Note 26)
2. Cash flow hedges (Notes 26 & 30)
3. Share of other comprehensive income of investments
accounted for using the equity method (Note 26)(1,970)265(18,545)

Other comprehensive income for the year, net of tax

Total items that may be reclassified to profit or loss

1,740

2,678

16,380Total comprehensive income for the year

21,398

12,965

201,418

Total comprehensive income for the year attributable to:
Owners of the Parent

18,354

10,720172,766

Non-controlling interests

3,044

2,244

28,652

Total

21,398

12,965

201,418

The accompanying notes are an integral part of these consolidated financial statements
4

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
Consolidated Statement of Changes in Equity
JPY
2018

USD (Note 2)
2017

2018

EquityⅠ. Share capital (Note 18)
Balance at the beginning of the year
Balance at the end of the year
Ⅱ. Capital surplus (Note 18)
Balance at the beginning of the year
Disposition of treasury stock
Equity transactions with non-controlling interests
Other changes
Balance at the end of the year
Ⅲ. Retained earnings (Note 18)

27,781

27,781

261,494

27,781

27,781

261,494

26,797
13

26,463
3

252,234
128

(0)
－

4
326

(1)
－

26,81026,797

252,361

Balance at the beginning of the year

34,57929,103

325,487

Dividends
Profit for the year attributable to owners of the Parent(2,736)
16,317(2,314)
8,049(25,756)
153,588

398

(259)

3,755

48,55934,579457,074

Balance at the beginning of the year

11,416

8,486

107,462

Exchange differences on translation of foreign operations
Financial assets measured at fair value through othercomprehensive income(1,073)(562)(10,107)

3,351

2,613

31,550Cash flow hedges
Remeasurement of defined benefit pension plans

(516)
275

1,004
(384)

(4,861)
2,596

Reclassification to retained earnings

(398)

259

(3,755)

13,055

11,416

122,884

(217)

(235)

(2,051)

Disposition of treasury stock

(6)
30

(5)
22

(61)
285

Balance at the end of the year

(193)

(217)

(1,826)116,012100,357

1,091,988

Reclassification from other components of equity
Balance at the end of the year
Ⅳ. Other components of equity (Note 26)

Balance at the end of the year
Ⅴ. Treasury stock (Note 18)
Balance at the beginning of the year
Acquisition of treasury stock

Total equity attributable to owners of the Parent

5

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
JPY
2018

USD (Note 2)
2017

2018

Ⅵ. Non-controlling interests
Balance at the beginning of the year

29,50629,107

277,733

Dividends to non-controlling interests
Equity transactions with non-controlling interests(1,511)(1)－(1,324)(36)(14,227)(12)－

Other changes
Profit for the year attributable to non-controlling interests
Other components of equity
Exchange differences on translation of foreign
operations
Financial assets measured at fair value through othercomprehensive income
Cash flow hedges

3,341

(484)
2,237

(297)

6

(2,798)

(378)

(178)

(3,567)

50

82

475

(0)

1

(9)

31,450

32

100

303

31,03729,506292,146

147,050

129,863

1,384,133

Owners of the Parent

18,354

10,720172,766

Non-controlling interests

3,044

2,244

28,652

21,398

12,965

201,418

Remeasurement of defined benefit pension plans
Balance at the end of the year
Total equity
Comprehensive income for the year attributable to:Total comprehensive income for the year

The accompanying notes are an integral part of these consolidated financial statements
6

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
Consolidated Statement of Cash Flows
JPY
2018

USD (Note 2)
2017

2018

Ⅰ. Cash flows from operating activities
Profit for the year
Depreciation and amortization
Impairment loss on property, plant and equipment andintangible assets
Finance income and costs
Share of (profit) loss of investments accounted for using theequity method(Gain) loss on sale or disposal of property, plant andequipment and intangible assets, net
Income tax expense

19,6583,145

10,2862,885

185,038
29,612

2,148

866

20,226

1,696

2,767

15,972(1,579)1,990(14,864)

250

(384)

2,361

6,384

7,589

60,097(Increase) decrease in trade and other receivables(Increase) decrease in inventories(33,261)(13,729)(10,613)200(313,078)(129,229)

Increase (decrease) in trade and other payables
Increase (decrease) in retirement benefits liabilities

23,798
(297)

6,861
(120)

224,007(2,801)Other(1,395)(1,437)(13,132)

Sub total

6,821

20,89064,210

358

436

3,375

Dividends received
Interest paid

2,159
(2,381)

1,503(2,291)

20,328(22,415)

Income taxes paid

(6,523)(8,686)(61,407)434

11,8524,090(2,136)
1,365(4,188)3,424(20,107)12,850

Payments for intangible assets
Purchases of other investments

(544)
(117)

(605)
(986)

(5,126)(1,104)

Proceeds from sale of other investments
Proceeds from sale of other financial assets

292
1,010

733
－

2,756
9,507

Proceeds from (payments for) acquisition of subsidiaries(Notes 5 & 27)(362)(12,786)(3,417)

Proceeds from (payments for) sale of subsidiaries (Note 27)
Proceeds from transfer of business

(22)
1,452

(6)
－

(209)
13,676

Increase in loans receivable
Proceeds from collection of loans receivable(1,522)
1,378(1,835)
1,952(14,334)
12,979

309

(392)

2,912

1,103

(14,691)

10,383

Interest received

Net cash provided by (used in) operating activities
Ⅱ. Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment

Other
Net cash provided by (used in) investing activities

7

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
JPY
2018

USD (Note 2)
2017

2018

Ⅲ. Cash flows from financing activities
Increase (decrease) in short-term borrowings, net (Note 27)
Proceeds from long-term borrowings (Note 27)

2,510
15,508

7,044
18,786

23,627
145,973

Repayment of long-term borrowings (Note 27)
Proceeds from issuance of bonds (Note 27)(24,229)
9,928(28,857)－(228,068)
93,450

Dividends paid
Payments for acquisition of subsidiaries’ interests from non-controlling interests
Dividends paid to non-controlling interests(2,730)(2,308)(25,705)

－

(30)

－

(1,542)(285)(1,277)(262)(14,521)(2,689)Net cash provided by (used in) financing activities(842)(6,904)(7,934)

Ⅳ. Increase (decrease) in cash and cash equivalents, net

694(9,743)

6,539

Ⅴ. Cash and cash equivalents at the beginning of the year

77,56687,466730,108

Ⅵ. Effect of exchange rate changes on cash and cash
equivalents

(529)

(156)

(4,985)

Ⅶ. Cash and cash equivalents at the end of the year (Note 27)

77,731

77,566731,662

Other (Note 27)

The accompanying notes are an integral part of these consolidated financial statements
8

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
1. Reporting Entity
Kanematsu Corporation (the “Company”) is a company located in Japan. The addresses of the Company’s registered headquarters
and main offices are available on its corporate website (http://www.kanematsu.co.jp/en/). The consolidated financial statements of
the Company as of and for the year ended March 31, 2018 comprise the Company and its subsidiaries (collectively, the“Consolidated Group”), and the Consolidated Group’s interests in associates. The Consolidated Group operates its businesses as anintegrated trading company by providing a broad array of products and services through the organic integration of domestic andinternational business networks; expertise acquired in various fields; and the functions of a trading company, includingcommodities trading, information gathering, market exploration, business development and organization, risk management, anddistribution. Detailed information on the business operations for each reportable segment are provided in Note 6 Segment
Information.

2. Basis of Preparing Consolidated Financial Statements(1) Statement of compliance with IFRSThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(“IFRSs”) pursuant to the provision of Article 93 of the Ordinance on Terminology, Forms, and Preparation Methods ofConsolidated Financial Statements (Ordinance of the Ministry of Finance No. 28 of 1976) as all the requirements of the“Specified Company for Designated IFRSs” set forth in Article 1-2 of said Ordinance have been fulfilled.
The consolidated financial statements were authorized by Kaoru Tanigawa, President and CEO, on June 22, 2018.

(2) Basis of measurement
The consolidated financial statements have been prepared on a historical cost basis except for:・financial assets and liabilities measured at fair value through profit or loss, which are measured at fair value;・financial assets measured at fair value through other comprehensive income, which are measured at fair value; and・defined benefit assets or liabilities, which are measured at the present value of the defined benefit obligations less the fair valueof plan assets.

(3) Functional currency and presentation currency
The consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency. All financial
information presented in Japanese yen has been rounded down to the nearest million.
The U.S. dollar amounts appearing in the consolidated financial statements and the notes thereto represent the arithmeticalresults of translating yen to dollars at the rate of ¥106.24 to U.S.$1.00, the approximate exchange rate prevailing on March 31,
2018. The translation of such dollar amounts is solely for convenience of the readers outside Japan and should not be construed
as a representation that the Japanese yen amounts have been, or could be readily converted, realized or settled in dollars at theabove, or any other rate.

(4) Use of estimates and judgments
The preparation of the consolidated financial statements in accordance with IFRSs requires management to make judgments,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results could differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. The effect of a change in an accounting estimate
is recognized in the period of the change and future periods. The following notes include information on critical judgments inthe application of accounting policies that have a significant effect on the amounts recognized in the consolidated financial
statements:
・Note 3. Significant Accounting Policies: (1) Basis of consolidation
・Note 3. Significant Accounting Policies: (11) Revenue
The following notes include information on uncertainties of assumptions and estimates that have a significant risk to causematerial revisions in the next fiscal year:
・Note 22. Impairment Loss・Note 28. Employee Benefits
・Note 29. Current and Deferred Income Tax
・Note 30. Financial Instruments: (6) Fair value of financial instruments

9

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018

When measuring the fair value of an asset or a liability, the Consolidated Group uses observable market data as much as it isavailable. Fair values are categorized into the following three hierarchy levels based on the inputs to the valuation techniques:・Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Consolidated Group can access at
the measurement date・Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly
・Level 3: unobservable inputs
The following notes include detailed information on assumptions made when measuring the fair value:・Note 22. Impairment Loss・Note 30. Financial Instruments: (6) Fair value of financial instruments

3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all the periods presented in these consolidated financial
statements, and have been applied consistently by the Consolidated Group.

(1) Basis of consolidation
1) Subsidiaries
Subsidiaries are entities which are controlled by the Consolidated Group. The Consolidated Group controls an entity when it is
exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns
through its power over the entity. When the Consolidated Group holds more than half of the voting rights of another entity,
such entity is included in the subsidiaries of the Consolidated Group as it is determined that control exists, unless it can beclearly demonstrated that such ownership does not constitute control. In addition, even when the Consolidated Group holds
only half or less of the voting rights of another entity, such entity is included in the subsidiaries of the Consolidated Group if it
is determined through agreements with other investors that the Consolidated Group has control over such entity’s financial andoperating policies and thus has the ability to affect returns from such entity.
The financial statements of subsidiaries are included in the consolidated financial statements of the Consolidated Group fromthe date the Consolidated Group obtains control of the subsidiaries until the date it loses such control of the subsidiaries. Whenthe accounting policies adopted by the subsidiaries are different from those adopted by the Consolidated Group and thedifference is considered material, the financial statements of the subsidiaries are adjusted as necessary.
Changes in the Consolidated Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions. The Company recognizes directly in equity any difference between the amounts by which the non-controllinginterests are adjusted and the fair value of the consideration paid or received, and attribute it to the owners of the Company.
If the Consolidated Group loses control of a subsidiary, the Consolidated Group derecognizes the assets and liabilities of theformer subsidiary, and any non-controlling interests and other components of equity related to the former subsidiary. Any
gains or losses arising from such loss of control are recognized in profit or loss. If the Consolidated Group retains any interestin the former subsidiary after the control is lost, such interest is measured at fair value at the date that control is lost.
2) Associates and joint ventures
Associates are those entities over which the Consolidated Group has significant influence, where significant influence isdefined as the power to participate in the financial and operating policy decisions of the entities but is not control or joint
control of those entities. If the Consolidated Group holds between 20 percent and 50 percent of the voting rights of each thoseentities, it is presumed that the Consolidated Group has significant influence over each of those entities.
Even if the Consolidated Group holds less than 20 percent of the voting rights of another entity, such entity is included in theassociates of the Consolidated Group as long as it is determined that the Consolidated Group has significant influence over theentity through the dispatch of the board members, the shareholders’ agreement or the like.
Joint ventures are those entities with respect to which multiple parties, including the Consolidated Group, have joint control
over the economic activities by contract and unanimous consent of all of such parties is required when deciding on the relevant
activities, whereby the Consolidated Group has rights to the net assets of the arrangement.
Except for those that are classified as assets held for sale in accordance with IFRS 5 Non-current Assets Held for Sale andDiscontinued Operations, investments in associates and joint ventures (“equity method investee”) are measured at the carrying
amount following the application of the equity method (including goodwill recognized at the time of acquisition) less any
accumulated impairment losses.

10

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
The consolidated financial statements include the Consolidated Group’s share of profit or loss and other comprehensive
income of the associates and joint ventures from the date the Consolidated Group obtains significant influence or joint control
until the date it loses such significant influence or joint control. When the accounting policies adopted by the equity method
investees are different from those adopted by the Consolidated Group, the financial statements of the equity method investees
are adjusted as necessary.
3) Business combinations
Business combinations are accounted for using the acquisition method. The Consolidated Group recognizes goodwill as thesum of the fair value of the consideration transferred, the amounts of any non-controlling interests in the acquiree and the fairvalue of the acquirer’s previously held equity interest in the acquiree measured at the acquisition date; less the net of theacquisition-date amounts of the identifiable assets acquired and the liabilities assumed (generally measured at fair value).
When such difference results in a negative balance, it is immediately recognized in profit or loss. Non-controlling interests aremeasured either at fair value or at the non-controlling interests’ proportionate share in the recognized amounts of theacquiree’s identifiable net assets. The measurement method to be applied at the acquisition date is determined on a transactionby-transaction basis. Acquisition-related costs, which are costs that the Consolidated Group incurs to effect a businesscombination (excluding costs to issue debt or equity securities), are accounted for as expenses in the periods in which the costs
are incurred, and thus not included in the cost of goodwill. In a business combination achieved in stages, the Consolidated
Group remeasures its previously held equity interest in the acquiree at its acquisition-date fair value and recognizes any gains
or losses arising from such remeasurement in profit or loss. Changes in the value of the Consolidated Group’s equity interestin the acquiree that had been recognized in other comprehensive income prior to the acquisition date are recognized in profit orloss, or other comprehensive income, on the same basis as would be required if the Consolidated Group had disposed of thepreviously held equity interest.
4) Transactions eliminated in consolidation
Intragroup balances and transactions, as well as any unrealized gains and losses arising from intragroup transactions, areeliminated when preparing the consolidated financial statements.

(2) Foreign currency translation
1) Translation of foreign currency transactions
Foreign currency transactions are translated into functional currencies of individual companies using the exchange rates at thedates of such transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign
currencies are translated into functional currencies using the exchange rate at the end of each reporting period. Exchange
differences on monetary items are recognized in profit or loss in the period in which they arise. Non-monetary items that aremeasured on a historical cost basis in a foreign currency are translated into the functional currency using the exchange rate at
the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated into thefunctional currency using the exchange rates at the date when the fair value was measured.
With respect to the exchange differences of a non-monetary item, when a gain or loss on a non-monetary item is recognized inother comprehensive income, the Consolidated Group recognizes any exchange component of that gain or loss in othercomprehensive income. Conversely, when a gain or loss on a non-monetary items is recognized in profit or loss, theConsolidated Group recognizes any exchange component of that gain or loss in profit or loss.
2) Translation of foreign operations
The assets and liabilities of foreign operations, including any goodwill and fair value adjustments arising on the acquisition offoreign operations, are translated using the exchange rate at the end of the reporting period. In addition, income and expenses
of foreign operations are translated using the average exchange rate for the reporting period unless exchange rates fluctuatesignificantly.
Exchange differences arising from the translation are recognized in other comprehensive income and the cumulative amountsof the exchange differences are included in other components of equity. When the Consolidated Group’s foreign operations aredisposed of, the cumulative amounts of the exchange differences related to foreign operations are reclassified to profit or loss
when the gain or loss on disposal is recognized. Based on the application of the exemption clauses under IFRS 1, theConsolidated Group has reclassified the cumulative exchange differences that existed at the transition date to retained
earnings.

(3) Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand; demand deposits; and short-term, highly liquid investments with amaturity of three months or less from the date of acquisition that are readily convertible to known amount of cash and which
are subject to an insignificant risk of changes in value.

(4) Inventories
Inventories are measured at the lower of cost determined by the moving-average method and net realizable value.

11

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(5) Property, plant and equipment
The Consolidated Group uses the cost model to measure an item of property, plant and equipment after initial recognition andcarries it at its cost less any accumulated depreciation and any accumulated impairment losses. The cost of property, plant andequipment include the cost directly attributable to the acquisition of the asset.
Property, plant and equipment are depreciated using the straight-line method over the estimated useful life of each component
thereof. The ranges of principal estimated useful lives are presented as follows:
Buildings and structures:
3 to 50 years
Machinery, vehicles, tools, furniture & fixtures: 2 to 20 years
Leased assets are fully depreciated over the shorter of the lease term and their estimated useful lives if there is no reasonablecertainty that the Consolidated Group will obtain ownership by the end of the lease term.
The depreciation method, useful life and residual value of an asset are reviewed at least at the end of each reporting period andamended as necessary.

(6) Goodwill and intangible assets
1) Goodwill
Goodwill is carried at cost less any accumulated impairment losses.
2) Intangible assets
The Consolidated Group uses the cost model to measure an intangible asset after initial recognition and carries it at its cost lessany accumulated amortization and any accumulated impairment losses.
A separately acquired intangible asset is initially recognized and measured at cost. The cost of an intangible asset acquired in abusiness combination is its fair value at the acquisition date. With respect to an internally generated intangible asset that does
not qualify for asset recognition, expenditures on such an internally generated intangible asset are recognized as expenses
when they are incurred. Conversely, the cost of an internally generated intangible asset that qualifies for asset recognition is
the sum of expenditures incurred from the date when it first meets the recognition criteria.
An intangible asset with a finite useful life is amortized using the straight-line method over its estimated useful life. The
Consolidated Group’s intangible assets with finite useful lives are comprised mainly of software whose estimated useful life is
5 years.
The amortization method, useful life and residual value of an intangible asset with a finite useful life are reviewed at the end ofeach reporting period and amended as necessary.
Certain intangible assets with indefinite useful lives such as carrier shop operating rights are not amortized, but instead tested
for impairment based on the cash-generating unit at least once a year and whenever there is an indication that they may be
impaired.

(7) Impairment of non-financial assets
The Consolidated Group assesses at the end of each reporting period whether there is any indication that an asset may be
impaired. If any such indication exists, it estimates the recoverable amount of the asset or the cash-generating unit to which theasset belongs. Goodwill and an intangible asset with an indefinite useful life are tested for impairment annually and whenever
there is an indication that such assets may be impaired. If the carrying amount of an individual asset or the cash-generating unit
exceeds its recoverable amount, the carrying amount of the asset is reduced to its recoverable amount and that reduction isrecognized as an impairment loss.
The Consolidated Group assesses at the end of each reporting period whether there is any indication that an impairment loss
recognized in prior fiscal years for an asset other than goodwill may no longer exist or may have decreased. If any such
indication exists, the Consolidated Group will estimate the recoverable amount of that asset. If the recoverable amount exceeds
the carrying amount of that asset or the cash-generating unit to which the asset belongs, the carrying amount is increased to its
recoverable amount, which is, however, limited up to the carrying amount that would have been determined (net ofamortization or depreciation) had no impairment loss been recognized for the asset in prior fiscal years; and that increase isrecognized as a reversal of an impairment loss. An impairment loss recognized for goodwill is not reversed in a subsequent
period.
In addition, because goodwill that forms part of the carrying amount of an investment in an equity method investee is notseparately recognized, it is not tested for impairment separately. If it is indicated that the investment in an equity method
investee may be impaired, the entire carrying amount of the investment is tested for impairment as a single asset, by comparing
its recoverable amount with its carrying amount.
12

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(8) Financial instruments
The Consolidated Group has early adopted IFRS 9 Financial Instruments (as amended in July 2014).
1) Financial assets
The Consolidated Group classifies financial assets at initial recognition as financial assets measured at fair value through profit
or loss, financial assets measured at fair value through other comprehensive income or financial assets measured at amortizedcost. The Consolidated Group initially recognizes financial assets measured at amortized cost on the date that they arise andthe other financial assets on the transaction date.
The Consolidated Group derecognizes a financial asset when, and only when (a) the contractual rights to cash flows from thefinancial asset expire, or (b) it transfers the contractual rights to cash flows and substantially all the risks and rewards ofownership of the financial asset.
(ⅰ) Financial assets measured at amortized cost
A financial asset that meets both of the following conditions is classified as a financial asset measured at amortized cost:
・The financial asset is held within a business model whose objective is to hold financial assets in order to collectcontractual cash flow and,・The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding.
The Consolidated Group initially recognizes and measures a financial asset measured at amortized cost at its fair value
plus any transaction costs directly attributable to the acquisition of the financial asset. The Consolidated Group
subsequently measures it at amortized cost using the effective interest method.
(ⅱ) Financial assets measured at fair value through other comprehensive income
A financial asset that meets both of the following conditions is classified as a financial asset measured at fair value
through other comprehensive income:・The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flow
and selling financial assets and,・The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments ofprincipal and interest on the principal amount outstanding.
The Consolidated Group initially recognizes and measures a financial asset measured at fair value through othercomprehensive income at its fair value plus any transaction costs directly attributable to the acquisition of the financial
asset. The Consolidated Group subsequently measures it at fair value and recognizes the subsequent changes in fair value
as other comprehensive income. When the financial asset is derecognized, the cumulative gain or loss is reclassified to
profit or loss.
(ⅲ) Equity instruments measured at fair value through other comprehensive income
With regard to a financial asset that has not been classified as either a financial asset measured at amortized cost or afinancial asset measured at fair value through other comprehensive income, and classified as a financial asset measured atfair value through profit or loss, IFRS 9 permits an entity to make an irrevocable election to present in othercomprehensive income changes in fair value of an investment in an equity instrument that is not held for trading. The
Consolidated Group makes this election on an instrument-by-instrument basis.
The Consolidated Group initially recognizes and measures an equity instrument measured at fair value through othercomprehensive income at its fair value plus any transaction costs directly attributable to the acquisition of the financial
asset. The Consolidated Group subsequently measures it at fair value and recognizes the subsequent changes in fair value
as other comprehensive income. When the equity instrument is derecognized, or its fair value substantially decreases, theConsolidated Group reclassifies the cumulative amount of other comprehensive income to retained earnings and not to
profit or loss. Dividends are recognized in profit or loss.
(ⅳ) Financial assets measured at fair value through profit or loss
A financial asset other than those classified as (ⅰ), (ⅱ) and (ⅲ) above is classified as a financial asset measured at fairvalue through profit or loss.
The Consolidated Group initially recognizes and measures a financial asset measured at fair value through profit or loss at
its fair value and expenses the transaction costs as incurred that are directly attributable to the acquisition of the financial
asset. The Consolidated Group subsequently measures it at fair value and recognizes the subsequent changes in fair value
in profit or loss.

13

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20182) Impairment of financial assets
The Consolidated Group assesses impairment of financial assets measured at amortized cost and financial assets measured atfair value through other compressive income based on the expected credit loss approach.
If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, theConsolidated Group measures the loss allowance for that financial instrument at an amount equal to the 12-month expectedcredit losses, i.e., the expected credit losses that result from default events on that financial instrument that are possible within
the 12-months after the reporting date. Conversely, if, at the reporting date, the credit risk on that financial instrument has
increased significantly since initial recognition, the Consolidated Group measures the loss allowance for that financial
instrument at an amount equal to the lifetime expected credit losses, i.e., the expected credit losses that result from all possible
default events over the expected life of that financial instrument.
However, the Consolidated Group always measures the loss allowance for trade receivables that do not contain a significant
financing component at an amount equal to the lifetime expected credit losses despite the above requirement.
Detailed information on the assessment of significant increases in credit risk and the measurement of expected credit losses isprovided in Note 30. Financial Instruments: (3) Credit risk management.
3) Financial liabilities
The Consolidated Group classifies financial liabilities at initial recognition as financial liabilities measured at fair value
through profit or loss or financial liabilities measured at amortized cost. The Consolidated Group initially recognizes financial
liabilities measured at amortized cost on the date that they arise and the other financial liabilities on the transaction date.
The Consolidated Group derecognizes financial liabilities when they are extinguished, i.e., when obligations specified under acontract is discharged, cancelled or expires.
(ⅰ) Financial liabilities measured at amortized cost
The Consolidated Group classified financial liabilities, other than financial liabilities measured at fair value through profit
or loss, as financial liabilities measured at amortized cost. The Consolidated Group initially recognizes and measures afinancial liability measured at amortized cost at its fair value less any transaction costs directly attributable to incurring of
the liability, and subsequently measures it at amortized cost using the effective interest method.
(ⅱ) Financial liabilities measured at fair value through profit or loss
The Consolidated Group initially recognizes and measures a financial liability measured at fair value through profit orloss at its fair value, and subsequently measures it at fair value and recognizes subsequent changes in fair value in profit
or loss.
4) Derivatives and hedge accounting
In order to hedge the foreign currency fluctuation risk, interest rate fluctuation risk and commodity price fluctuation risk, theConsolidated Group enters into derivative transactions, such as forward exchange transactions, interest rate swap transactions
and commodity futures and forwards transactions.
When initiating a hedge, the Consolidated Group designates and documents the risk management purposes and strategies
regarding the hedge relationship and initiation of such hedge. Such documentation includes the designation of the hedging
instrument, the hedged item or transaction, the nature of the risk being hedged and methods of assessing the hedging
instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to thehedged risk. Although such hedging is expected to be highly effective in offsetting changes in fair value or cash flows
attributable to the hedged risk, it is assessed on an ongoing basis whether it was actually highly effective throughout thereporting periods for which such hedging was designated.
The Consolidated Group initially recognizes and measures derivatives at fair value and subsequently measures them at fairvalue and accounts for subsequent changes in fair value as follows:(ⅰ) Fair value hedge
The Consolidated Group recognizes the changes in fair value of a derivative used as a hedging instrument in profit or loss,
and the changes in fair value of a hedged item attributable to the hedged risk in profit or loss by adjusting the carrying
amount of the hedged item.

14

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅱ) Cash flow hedge
Of the changes in fair value of a derivative used as a hedging instrument, the portion determined to be effective isrecognized in other comprehensive income and the cumulative amount is included in other components of equity.
Conversely, the portion determined to be ineffective is recognized in profit or loss. The amounts accumulated in othercomponents of equity are reclassified from other components of equity to profit or loss in the same period that thetransaction of the hedged item affects profit or loss; provided, however, that if hedging of a forecast transaction
subsequently results in the recognition of a non-financial asset or liability, the amounts accumulated in other componentsof equity are then accounted for as an adjustment to the initial carrying amount of the non-financial asset or liability.
When the hedging instrument expires or is sold, terminated or exercised; or when the hedge no longer meets the criteria
for the hedge accounting, the Consolidated Group discontinues the hedge accounting prospectively. If the forecast
transaction is no longer expected to occur, the amounts accumulated in other components of equity are reclassified
immediately from other components of equity to profit or loss.
(ⅲ) Derivatives not designated as hedging instruments
The Consolidated Group recognizes the changes in fair value of derivatives not designated as hedging instruments in
profit or loss.
5) Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount of such offset is presented in the consolidated statementsof financial position only when the Consolidated Group has a legally enforceable right to offset the recognized amounts andintends either to settle them on a net basis or realize the assets and settle the liabilities simultaneously.

(9) Provisions
The Consolidated Group recognizes a provision when, only when (a) the Consolidated Group has a present obligation (legal orconstructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation.
Where the effect of the time value of money is material, the Consolidated Group recognizes the provision by discounting it
using a current pre-tax discount rate that reflects the risks specific to the liability.

(10) Equity
When the Consolidated Group repurchases the shares of treasury stock, it is measured at cost and is presented as a deduction
from equity. Transaction costs directly attributable to the repurchase of the shares of treasury stock are deducted from capitalsurplus. When the Consolidated Group sells the shares of treasury stock, the consideration received is recognized as anincrease in equity.

(11) Revenue
Revenue is measured at fair value of the consideration received or receivable, net of returned goods, discounts and rebates. If
there are multiple identifiable components in a single transaction, such transaction is separated into components, and revenue
is recognized per such component. Conversely, when the actual economic state cannot be expressed without treating multiple
transactions as one unit, revenue is recognized by treating such multiple transactions as one unit. The recognition standards
and presentation method with respect to revenue are presented as follows:
1) Revenue recognition criteria(ⅰ) Sale of goods
Revenue from the sale of goods is recognized when all of the following conditions have been satisfied:・the Consolidated Group has transferred to the buyer the significant risks and rewards of ownership of the goods;
・the Consolidated Group retains neither continuing managerial involvement to the degree usually associated withownership nor effective control over the goods sold;・the amount of revenue can be measured reliably;
・it is possible that the economic benefits associated with the transaction will flow to the Consolidated Group; and,・the costs incurred or to be incurred in respect to the transaction can be measured reliably.

15

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅱ) Rendering of services
If results of revenue from the rendering of services can be reliably estimated, such revenue will be recognized inaccordance with such transaction’s degree of progress as of the fiscal year end. If all of the following conditions are
satisfied, it is determined that results of a transaction can be reliably estimated:・the amount of revenue can be measured reliably;
・it is probable that the economic benefits associated with the transaction will flow to the Consolidated Group;・the stage of completion of the transaction at the end of the reporting period can be measured reliably; and,・the costs incurred for the transaction and the costs to complete the transaction can be measured reliably.
When the outcome of the transaction involving the rendering of services cannot be estimated reliably, the Consolidated
Group recognizes revenue only to the extent of the expenses recognized that are recoverable.
2) Method of presenting revenue
When the Consolidated Group is acting as a principal in a transaction, revenue is presented in the gross amount received froma customer. Conversely, when the Consolidated Group is acting as an agent for a third party in a transaction, revenue ispresented in the amount of commission, which is the gross amount received by a customer less the amount collected on behalfof the third party.
The following features are considered when determining whether the Consolidated Group is acting as a principal or as anagent in a transaction:・whether the Consolidated Group has the primary responsibility for providing goods or services to the customer or for
fulfilling the order;・whether the Consolidated Group has inventory risk before or after receiving the customer order, during shipping or on return;・whether the Consolidated Group has latitude in establishing prices, either directly or indirectly;
・whether the Consolidated Group bears the customer’s credit risk for the amounts receivable from the customer; and,・whether the amounts the Consolidated Group earns are predetermined, being either a fixed fee per transaction or a statedpercentage of the amounts billed to the customer.

(12) Finance income and finance costs
Finance income comprises interest income, dividend income, gain on sale of financial instruments and gain arising fromchanges in fair value of financial instruments. Interest income is recognized at the time of receipt by using the effective
interest method. Dividend income is recognized on the date when the Consolidated Group’s right to receive payment isestablished. Finance costs comprise interest expenses, loss on sale of financial instruments and loss arising from changes in thefair value of financial instruments.

(13) Employee benefits
1) Post-retirement benefits(ⅰ) Defined benefit plans
Defined benefit plans are retirement benefit plans other than defined contribution plans. Defined benefit obligations arecalculated separately for each plan by estimating the future amounts of benefits that employees will have earned in returnfor their services provided in the current and prior periods, and discounting such amounts in order to determine thepresent value. The fair value of any plan assets is deducted from the present value of the defined benefit obligations. The
discount rate is determined by reference to the market yields on highly rated corporate bonds at the fiscal year-end thathave maturity terms that are approximately the same as those of the Consolidated Group’s defined benefit obligations anduse the same currencies as those used for future benefits payments.
When the retirement benefit plans are amended, the change in defined benefit obligations related to past service by
employees is immediately recognized in profit or loss.
The Consolidated Group recognizes the changes in the net defined benefit liability (asset) due to remeasurements in othercomprehensive income and immediately reclassifies them to retained earnings.
(ⅱ) Defined contribution plans
Defined contribution plans are retirement benefit plans under which an employer pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further contributions. The obligations already paid or to be
paid as contributions under the defined contribution plans are recognized as expenses in the period in which theemployees render the related services.

16

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
2) Other long-term employee benefits
The Consolidated Group recognizes obligations for long-term employee benefits other than post-employment benefits as aliability by estimating the amounts as of the reporting date that will be paid to the employees in return for their services
without discounting that amounts unless it is material.
3) Short-term employee benefits
The Consolidated Group recognizes short-term employee benefits as a liability and an expense by estimating the amounts thatwill be paid to the employees in return for their services without discounting those amounts. The Consolidated Group
recognizes bonuses to be paid pursuant to the bonus system as a liability when it has present legal or constructive obligations
to pay as a result of past employee service, and when the amounts of the obligations can be estimated reliably.

(14) Income taxes
Income tax expenses comprises current tax expense and deferred tax expense. The Consolidated Group recognizes them in
profit or loss, except when they arise from items that are recognized in other comprehensive income or directly equity, andfrom business combinations.
Current tax expense is measured by the expected taxes receivable from or taxes payable to tax authorities, and the tax rates or
tax laws that are used to calculate the tax amount are those that have been enacted or substantially enacted by the end of the
fiscal year.
The Consolidated Group recognizes deferred tax assets and deferred tax liabilities for temporary differences between the
carrying amount of an asset and liability in the statements of financial position and its tax base, the unused tax losses carriedforward and unused tax credits carried forward. The amounts of deferred tax assets and deferred tax liabilities are calculated
by applying the expected tax rate or tax law applicable as of the period in which assets are realized or liabilities are settled inaccordance with a statutory tax rate or a substantially enacted statutory tax rate and the tax law as of the fiscal year-end. The
Consolidated Group does not recognize deferred tax assets and deferred tax liabilities in the following cases:
・when taxable temporary differences arise from the initial recognition of goodwill;・when they arise from the initial recognition of an asset or a liability in a transaction which is not a business combination; andon the transaction date, affects neither accounting profit nor taxable profit (tax loss); or,・with respect to taxable temporary differences associated with investments in subsidiaries and associates, when theConsolidated Group is able to control the timing of the reversal of the temporary differences; and it is probable that thetemporary differences will not reverse in the foreseeable future.
Deferred tax assets and deferred tax liabilities are offset only when the Consolidated Group has a legally enforceable right to
set off the current tax assets against current tax liabilities, and, such deferred tax assets and liabilities relate to income taxes
levied on the same taxation entity. However, even in the case of different taxable entities, the Consolidated Group can set off if
the tax taxable entities intend either to settle current tax liabilities and assets on a net bases, or to realize the assets and settle
the liabilities simultaneously. Deferred tax assets are recognized for deductible temporary differences, the unused tax losses
carried forward and unused tax credits carried forward to the extent that it is probable that they can be used against futuretaxable profit. The carrying amounts of deferred tax assets are reassessed at each fiscal year-end, and such carrying amountwill be reduced to the extent it is no longer probable that related tax benefits from such assets will be realized. Unrecognizeddeferred tax assets are also reassessed at the end of each reporting period and are recognized to the extent that it is probablethat future taxable profit will be available to recover the deferred tax assets.
The Company and its wholly owned domestic subsidiaries apply the consolidated tax payment system, by which the Company
and its wholly owned domestic subsidiaries are allowed to file a tax return and pay the corporation tax as a consolidated tax
filing group.

17

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(15) Leases
The Consolidated Group determines whether an agreement is, or contains, a lease based on the substance of the agreement at
inception of the lease. The substance of an agreement is assessed based on (a) whether fulfillment of the arrangement isdependent on the use of a specified asset or assets; and (b) whether the agreement conveys a right to use the asset.
1) Finance lease
A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. The
Consolidated Group initially recognizes a leased asset at the lower of the fair value of the leased asset and the present value ofthe minimum lease payments, and subsequently accounts for the lease asset based on the applicable accounting policies.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The
finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on theremaining balance of the liability.
2) Operating lease
An operating lease is a lease other than a finance lease. The Consolidated Group recognizes lease payments under an operatinglease as an expense on a straight-line basis mainly over the lease term. When the Consolidated Group is the lessor of assets
under an operating lease, it presents the assets subject to the operating lease in its consolidated statements of financial position.

4. Standards and Interpretations issued but not yet adopted
The following are the major standards and interpretations that have been newly issued or amended prior to the date of authorization
for issuance of the consolidated financial statements. The Consolidated Group has not yet adopted these standards for the fiscal
year ended March 31, 2018. While the point of revenue recognition will change in accordance with the review of the recognition of
performance obligation, the Consolidated Group assessed the effect of application of IFRS 15 would be negligible. The effect ofapplication of IFRS 16 on the Consolidated Group is currently under assessment and cannot be estimated as of the filing date.
Fiscal year in which the
Mandatory application
Consolidated Group will Summary of new or amended standard
Standard
Title(from fiscal years
apply the standard
beginning on or after)
Amendment of accounting treatment
Fiscal year ending
Revenue from Contracts
for and disclosure on revenue
January 1, 2018
IFRS 15
March 31, 2019with Customers
recognition
IFRS 16 Leases

January 1, 2019

Fiscal year ending

Amendment of accounting treatment

March 31, 2020

for lease contracts

5. Business Combinations
The major business combination that occurred during the fiscal year ended March 31, 2017 was described as follows:(1) Contents of the business combination
Name of the acquired company
Contents of business
Date of the business combination
Legal form of the business combination

Company name after the combination
Percentage of the voting rights acquired

Diamondtelecom, Inc.
Information communication business involved with sales of mobile communication
devices and systems
April 1, 2016
Acquisition of the shares of Diamondtelecom, Inc. by Kanematsu Telecom
Investment Co., Ltd., a wholly owned subsidiary of the Company. (Kanematsu
Telecom Investment Co., Ltd. absorbed the acquired company as of April 1, 2016
and changed its company name to Diamondtelecom, Inc.)
Diamondtelecom, Inc.
100.0%

18

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(2) Purpose of the business combination
The mobile business of the Consolidated Group is driven mainly by Kanematsu Communications Limited (“Kanematsu
Communications”), a wholly owned subsidiary of the Company. With its large market share in the mobile phone sales
distribution industry, the mobile business is one of the core businesses as well as one of the focus areas under the Consolidated
Group’s medium-term vision, VISION-130.
Diamondtelecom, Inc. (“Diamond Telecom”) has been engaging in the mobile phone sales business for more than 20 years
since its foundation in 1994 as a wholly owned subsidiary of Mitsubishi Electric Corporation, and owns a dominant number ofcarrier-certified shops throughout Japan.
As a result of the acquisition of Diamond Telecom, the Consolidated Group’s total sales volume combining the sales of the twocompanies will reach the industry’s top class, and we expect that this will significantly enhance our presence in the mobile
phone sales distribution industry.
We also believe that the integration of Diamond Telecom will enable us to create synergies in the Consolidated Group as theKanematsu Communications’ network of carrier-certified shops will be complemented and strengthened by the addition of
Diamond Telecom’s network and achieve a national network of blue-chip shops, service sophistication through shared humanresources and know-how and the enhancement of management efficiency for both companies.

(3) Acquisition costs and the detail
JPY
Acquisition costs (cash consideration)

17,400(4) Acquisition-related costs and its line item
Acquisition-related costs for the business combination were ¥168 million, and they were recognized in selling, general andadministrative expenses in the consolidated statement of income of the fiscal year ended March 31, 2016.

(5) Assets and liabilities on the day of the business combination
JPY
Fair value of the consideration paid

17,400Cash and cash equivalents

4,613

Trade receivables
Inventories

12,828
1,212

Other current assets
Property, plant and equipment

351
736

Goodwill (Note)
Intangible assets

1,635
13,930

Other non-current assets
Current liabilities

764(17,746)

Non-current liabilities

(925)

Total
17,400(Note) Goodwill consists primarily of future economic benefits and synergies with the Consolidated Group’s existing
businesses.
The total amount of goodwill that is expected to be deductible for tax purposes is ¥12,918 million.

(6) Effects on cash flows through business combination
JPY
Payments for acquisition costs (cash consideration)
Cash and cash equivalents on the acquisition date

(17,400)
4,613

Payments for acquisition of subsidiaries(12,786)(7) Period of the performance of the acquired company in the consolidated financial statements
The performance of Diamond Telecom from April 1, 2016 to March 31, 2017 is included in the consolidated financial
statements.

19

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(8) Earnings since the acquisition date
JPY
Revenue

27,800

Profit161

There is no pro forma information presented since the business combination occurred at the beginning of the period.
There were no major business combinations that occurred during the fiscal year ended March 31, 2018.

6. Segment Information(1) Overview of Reportable Segments
The reportable segments of the Consolidated Group are components of the Consolidated Group for which discrete financial
information is available and are reviewed by the Board of Directors of the Company normally and regularly assesses its
business performance and examines the allocation of management resources.
The Consolidated Group offers a broad array of merchandise and services, using expertise in each business field and trading
function from Japan and its international network. Trading functions include commercial trade, information gathering, market
development, business development and arrangement, risk management and logistics.
The Consolidated Group therefore consists of merchandise and service segments based on its business units: “Electronics &Devices”, “Foods & Grain”, “Steel, Materials & Plant”, and “Motor Vehicles & Aerospace”.
The principal merchandise and services handled by each segment are presented as follows:(Electronics & Devices)
The Electronics & Devices segment provides a wide range of products including electronic parts and components,
semiconductor and LCD manufacturing equipment, materials and indirect materials related to electronics, coupled with
development and proposal services. This segment also conducts retail sales of electric cells, LED, etc. and deals with mobile
communications terminals, mobile internet systems, and information and telecommunication equipment and security equipment
and services.
(Foods & Grain)
The Foods & Grain segment integrates the handling of a broad array of food and foodstuffs, with operations ranging fromsourcing raw materials reliably to providing food and foodstuffs, including high value-added products. Merchandise in thissegment includes cooked foods, processed fruits, processed agricultural products, beverage ingredients, animal and fisheryproducts, wheat, rice, soybeans, feedstuff and pet foods.
(Steel, Materials & Plant)
The Steel, Materials & Plant segment operates the domestic and international trade of general steel products including steel
plates, bars and wire rods, pipes, and stainless products, carries out overseas projects such as plant and infrastructuredevelopment, and sells machine tools and industrial machinery. Additionally, this segment operates the domestic andinternational trade of crude oil, petroleum products, LPG, functional chemicals and food products, pharmaceuticals andpharmaceutical intermediates, and other products. It also develops environmental materials such as heat shield paints and newtechnologies, and operates businesses related to emissions rights.
(Motor Vehicles & Aerospace)
The Motor Vehicles & Aerospace segment primarily operates international trade of aircrafts and aircraft parts, satellite- andaerospace-related products, automobiles, motorcycles and related parts, industrial vehicles, construction machinery, etc., andalso provides products with added value based on demand or use.

20

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(2) Information on reportable segments
The accounting methods for the reportable operating segments are largely consistent with those stated in Note 3. Significant
Accounting Policies. Inter-segment revenue and transfers are based on the transaction prices to external customers.
Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)(JPY)

Electronics &Devices

Reportable segment
Steel,
Motor
Foods &
Materials & Vehicles &
Grain
Plant
Aerospace

Total

Others(Note 1)

Adjustment(Note 2)

Consolidated

Revenue
External
Inter-segment

263,310277

231,260
4

153,07580

54,453
11702,099374

12,691
62－(436)

714,790－

Total revenue
Segment profit (loss)

263,587
17,556231,265
2,149

153,155
3,930

54,464
2,541

702,743
26,17912,753
(20)

(436)
2

714,790
26,160

1,205

562

838

425

3,032

135

(21)

3,145

361

62

19

33

476

1,102

0

1,579

194,788

118,829

121,456

42,898477,972

9,112

32,803519,889

873

1,337

83

326

2,620

2,552

(3)

5,169

1,359

600

486

384

2,831

120

153

3,105

Other profit or loss:
Depreciation and amortization
Share of profit (loss) of investments
accounted for using the equity method
Segment assets
Other assets:
Investments accounted for using theequity method
Capital expenditures

Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)(USD)

Electronics &Devices

Reportable segment
Steel,
Motor
Foods &
Materials & Vehicles &
Grain
Plant
Aerospace

Total

Others(Note 1)

Adjustment(Note 2)

Consolidated

Revenue
External
Inter-segment

2,478,449
2,611

2,176,775
46

1,440,842
760

512,548105

6,608,613
3,523

119,461586－(4,109)6,728,075－

Total revenue
Segment profit (loss)

2,481,060
165,256

2,176,821
20,233

1,441,602
37,001

512,653
23,927

6,612,136
246,416

120,047(195)(4,109)22

6,728,075
246,243

11,346

5,299

7,890

4,005

28,540

1,271

(199)

29,611Other profit or loss:
Depreciation and amortization
Share of profit (loss) of investments
accounted for using the equity method
Segment assets

3,399

591

180

316

4,486

10,374

3

14,864

1,833,473

1,118,501

1,143,230

403,787

4,498,992

85,772308,772

4,893,536

Other assets:
Investments accounted for using theequity method
Capital expenditures

8,220

12,588790

3,069

24,66724,024(29)

48,662

12,800

5,655

4,581

3,619

26,654

1,134

1,447

29,235(Notes) 1. The “Others” column is a business segment that is not included in the reportable segments and includes the logistics andinsurance service business and the geotech business.
2. Adjustments are presented as follows:(1) Adjustment for segment profit (loss) of ¥2 million ($22 thousand) includes inter-segment elimination of ¥2 million($22 thousand).
(2) Adjustment for segment assets of ¥32,803 million ($308,772 thousand) includes inter-segment elimination of¥(15,610) million ($(146,936) thousand) and corporate assets of ¥48,414 million ($455,709 thousand) that are notallocated to any reportable segment. The corporate assets consist mainly of cash and bank deposits associated withfinancing activities and assets such as investment securities.
(3) Adjustment for depreciation and amortization of ¥(21) million ($(199) thousand) includes inter-segment elimination of¥(21) million ($(199) thousand).
(4) Adjustment for Share of profit (loss) of investments accounted for using the equity method of ¥0 million ($3thousand)includes inter-segment elimination of ¥0 million ($3 thousand).
(5) Adjustment for investments accounted for using the equity method of ¥(3) million ($(29)thousand) includes intersegment elimination of ¥(3) million ($(29) thousand).
(6) Adjustment for capital expenditures of ¥153 million ($1,447 thousand) includes inter-segment elimination of ¥(0)
million ($(3) thousand) and corporate assets of ¥153 million ($1,449 thousand) that are not allocated to any reportablesegment. The corporate assets consist mainly of lease equipment related to the information system of the subsidiary.

21

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)(JPY)

Electronics &Devices

Reportable segment
Steel,
Motor
Foods &
Materials & Vehicles &
Grain
Plant
Aerospace

Total

Others(Note 1)

Adjustment(Note 2)

Consolidated

Revenue
External
Inter-segment

254,280359

227,764
4

131,20154

50,4190663,664
419

11,914
62－(481)

675,579－

Total revenue
Segment profit (loss)

254,640
14,348

227,7692,489

131,256
2,820

50,4192,223

664,084
21,881

11,977
756

(481)
(5)

675,579
22,633

1,202

601

620

333

2,758

142

(15)

2,885

(2,494)

103

13

31

(2,346)355－(1,990)173,258

106,057

111,957

36,738428,012

10,293

41,412479,717

531

1,354

71

308

2,266

2,233

385

4,885

1,548

376

164

2,537

4,627

129

213

4,970

Other profit or loss:
Depreciation and amortization
Share of profit (loss) of investments
accounted for using the equity method
Segment assets
Other assets:
Investments accounted for using theequity method
Capital expenditures(Notes) 1. The “Others” column is a business segment that is not included in the reportable segments and includes the logistics andinsurance service business and the geotech business.
2. Adjustments are presented as follows:(1) Adjustment for segment profit (loss) of ¥(5) million includes inter-segment elimination of ¥(5) million.
(2) Adjustment for segment assets of ¥41,412 million includes inter-segment elimination of ¥(13,794) million andcorporate assets of ¥55,206 million that are not allocated to any reportable segment. The corporate assets consist
mainly of cash and bank deposits associated with financing activities and assets such as investment securities.
(3) Adjustment for depreciation and amortization of ¥(15) million includes inter-segment elimination of ¥(15) million.
(4) Adjustment for investments accounted for using the equity method of ¥385 million includes inter-segment eliminationof ¥(2) million and corporate assets of ¥387 million that are not allocated to any reportable segment.
(5) Adjustment for capital expenditures of ¥213 million includes inter-segment elimination of ¥(22) million and corporate
assets of ¥235 million that are not allocated to any reportable segment. The corporate assets consist mainly of leaseequipment related to the information system of the subsidiary.
Adjustments from segment profit (operating profit) to profit before tax presented in the consolidated statements of income arepresented as follows:
JPY
USD
2018
Segment profit
Finance income and finance costs
Share of profit (loss) of investments accounted
for using the equity method
Profit before tax

2017

2018

26,160(1,696)

22,633(2,767)

246,243(15,972)

1,579(1,990)14,864

26,043

17,875245,135(3) Information on products and services
This disclosure is omitted because the classification of products and services is the same as that of reportable segments.

22

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(4) Geographic information
1) External revenue
JPY
2018

USD
2017

2018

Japan
Asia

592,687
51,411

575,263
46,6205,578,759
483,920

North America
Europe48,665
17,39736,748
12,771

458,076
163,760

Others

4,627

4,176

43,560714,790

675,579

6,728,075

Total

Revenue is classified by country or region based on the locations of customers.
2) Non-current assets (excluding financial assets and deferred tax assets)
JPY
2018

USD
2017

2018

Japan

42,172

48,204

396,955

Asia
North America

991
6,548

990
4,946

9,329
61,637

EuropeOthers

2,580
35

3,731
33

24,293336

52,32857,906

492,550

Total(5) Information on major customers
There is no customer whose transaction volume is equal to or more than 10% of the Consolidated Group’s revenue for the
fiscal years ended March 31, 2018 and March 31, 2017.

7. Trade and Other Receivables
The breakdown of trade and other receivables is presented as follows:
JPY
2018
Notes and accounts receivable2017
186,705

2,030,362

3,425
5,021

3,078
4,718

32,24247,267

Less: loss allowance
Current assets(1,985)(2,139)(18,693)

222,166

192,363

2,091,178

220,583

191,193

2,076,278

1,582

1,169

14,900222,166

192,363

2,091,178

Non-current assets
Total

2018

215,705

Loans receivable
Other
Total

USD

Information on changes in loss allowance is provided in Note 30. Financial Instruments: (3) Credit risk management.

23

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
8. Inventories
The breakdown of inventories is presented as follows:
JPY
2018
Merchandise and finished goods
Raw materials and supplies
Work in progress
Total

USD
2017

2018

91,334
2,045

77,856
1,972

859,701
19,251

577

833

5,440

93,95780,662

884,392

The amounts of inventories that were recognized as expense during the fiscal year ended March 31, 2018 and March 31, 2017 are¥592,212 million ($5,574,288 thousand) and ¥558,429 million, respectively.
The amount of write-downs on inventories that was recognized as expense during the fiscal year ended March 31, 2018 is ¥365
million ($3,444 thousand), and the amount of reversal of write-downs on inventories that was recognized as income during the
fiscal year ended March 31, 2017 is ¥164 million.

24

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
9. Property, Plant and Equipment
Changes in costs, accumulated depreciation and accumulated impairment losses of property, plant and equipment are presented asfollows:[Costs](JPY)

16,476467
501
11(1,037)(36)

Machinery,
vehicles, tools,
furniture andfixtures25,9593,616
230
57(1,952)(83)(2)

Buildings andstructures
As of April 1, 2016
Acquisitions
Acquisitions through business combinations
Transfers from construction in progress
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2017
Acquisitions
Acquisitions through business combinations
Transfers from construction in progress
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2018

Construction inprogress

Land

Total

12,545－－－(1,954)
(18)

484
211
4
(68)
(0)
(1)

55,466
4,295
736－(4,946)
(139)

(8)

－

－

(11)

60
16,439822
180(2,427)(6)

155
27,9741,331
4478(2,676)(289)－
10,5722－
25(2,365)
(6)

(41)
588
336
－
(591)
(0)
(13)

175
55,5752,493
6(6)(7,470)
(316)

(12)

(18)

－

－

(31)

500
15,40021
26,825

75
8,303

(16)
301

580
50,831[Accumulated depreciation and accumulated impairment losses](JPY)(9,551)
(355)
(37)
290
6

Machinery,
vehicles, tools,
furniture andfixtures(18,605)(1,611)
(4)
1,117
103

0

Buildings andstructures
As of April 1, 2016
Depreciation
Impairment losses
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2017
Depreciation
Impairment losses
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2018

Construction inprogress

Land

Total

(425)
－
(132)
519
－

－
－
－
－
－

(28,582)(1,966)
(173)
1,928
109

6

－

－

7

(16)
(9,663)
(630)
(69)
2,047
4

(22)
(19,016)(1,787)
(1)
1,369
91

－
(37)
－
(2,074)
963
－

－
－
－
－
－
－

(39)
(28,717)(2,417)(2,146)
4,380
96

10

15

－

－

26

(112)
(8,413)

35(19,293)(75)(1,224)－－(152)(28,930)25

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
[Carrying amount](JPY)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

As of March 31, 2017

6,776

8,958

10,534588

26,858

As of March 31, 2018

6,986

7,532

7,079

301

21,900

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures154,743

263,317

99,514

5,541

523,114

7,746

12,537
40

19
－

3,166
－

23,46918

Construction inprogress

Land

Total

[Costs](USD)

As of March 31, 2017
Acquisitions
Acquisitions through business combinations
Transfers from construction in progress
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2018

Construction inprogress

Land

Total

59

759

4,502

243

(5,569)(64)(22,848)(25,196)(22,261)(9)(70,314)(62)(2,723)

(65)

(129)

(2,979)

(115)

(178)

－

－

(293)

4,714

201

710

(159)

5,467

144,956

252,501

78,1602,842

478,459[Accumulated depreciation and accumulated impairment losses](USD)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

As of March 31, 2017

(90,957)(178,995)

Depreciation(5,933)(658)

Impairment losses

Construction inprogress

Land

Total

(354)

－

(270,306)(16,823)－－(22,755)(12)(19,531)－(20,202)

19,26812,887

9,073－

41,228Exchange differences

41

864

－

－

905

Increases (decreases) due to a change in thescope of consolidation

100

149

－

－

249

Other

(1,055)

330

(710)

－

(1,436)

As of March 31, 2018

(79,194)(181,600)(11,523)－(272,317)

Disposals[Carrying amount](USD)

As of March 31, 2018

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

65,76370,901

Land
66,637

Construction inprogress
2,842

Total
206,142

The amounts of expenditures relating to property, plant and equipment under construction are presented in the table above as“Construction in progress”.
Depreciation for property, plant and equipment are included in “Cost of sales” and “Selling, general and administrative expenses”
in the consolidated statement of income.

26

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
10. Goodwill and Intangible Assets(1) Goodwill
1) Costs, accumulated impairment losses and carrying amount
Changes in costs, accumulated impairment losses and carrying amount of goodwill are presented as follows:[Costs]
JPY
2018

USD
2017

2018

7,203

5,387

Acquisitions through business combinations

495

1,842

4,662

Exchange differences

(121)

(25)

(1,140)

Balance at the end of the year

7,578

7,203

71,330

Balance at the beginning of the year

67,808[Accumulated impairment losses]
JPY
2018

USD
2017

2018

Balance at the beginning of the year

(899)

(756)

(8,464)

Impairment losses

(107)
－

(143)
－

(1,007)－(1,006)(899)(9,471)

Exchange differences
Balance at the end of the year
[Carrying amount]

JPY
2018
Carrying amount

USD
2017

6,571

2018
6,304

61,8592) Impairment test
The Consolidated Group’s cash-generating units to which goodwill has been allocated are tested for impairment annually, andwhenever there is an indication that the Consolidated Groups may be impaired. The carrying amount of significant goodwill
allocated to the Consolidated Group’s cash-generating units was as follows:
JPY
2018

USD
2017

2018

Electronics & Devices segment
Electronics business of the domestic subsidiaries
Mobile business of the domestic subsidiaries

1,763
2,123

1,763
1,635

16,597
19,986

Foods & Grain segment
Pet-related businesses of the domestic subsidiaries

319

426

3,003

Steel, Materials & Plant segment
Oilfield tubing business of the foreign subsidiaries

2,151

2,271

20,25027

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
The recoverable amounts of the Consolidated Group’s cash-generating units to which significant goodwill has been allocatedwere calculated based on its value in use founded on the five-year forecast that was approved by management.
The five-year forecast of cash flows is based on future plans reflecting past performance. In addition, the main assumption
used to determine such forecast was the growth rates of gross profits through such terms, such growth rates being consistent
with the forecasts of the nominal GDP growth rates or the like of the countries in which such Consolidated Group’s cashgenerating units are situated. The ultimate growth rates are determined by considering the average long-term growth rates ofthe markets or countries to which the Consolidated Group’s cash-generating units belong.
The pre-tax discount rates which were used in calculating the value in use of the Consolidated Group’s cash-generating units
to which significant goodwill has been allocated were as follows:
2018
2017
Electronics & Devices segment
Electronics business of the domestic subsidiaries

2.8%

3.3%

Mobile business of the domestic subsidiaries

6.6%

7.2%

5.6%

5.7%

13.4%

13.0%

Foods & Grain segment
Pet-related businesses of the domestic subsidiaries
Steel, Materials & Plant segment
Oilfield tubing business of the foreign subsidiaries

With respect to goodwill that has been allocated to the Consolidated Group’s cash-generating units, the recoverable amount ofsuch goodwill largely exceeds its carrying amount. Thus, even if major assumptions are changed to a reasonable extent, it isunlikely that such changes in major assumptions will reduce the recoverable amounts of the Consolidated Group’s cashgenerating units below the carrying amount.

(2) Intangible assets
Changes in costs, accumulated amortization and accumulated impairment losses of intangible assets are presented as follows:[Costs](JPY)
Carrier shop
operating rights

Software
As of April 1, 2016
Acquisitions
Acquisitions through businesscombinations

Other

Total

8,636

3,291

4,492

16,421

609

－

4

614

68

13,849－13,917

(728)

－

(55)

(784)

Exchange differences

(3)

－

(18)

(21)

Other

13

－

4

18

8,596

17,1404,427

30,164

322

－

63

386

0

－

1

1

Disposals

(313)

－

(14)

(328)

Exchange differences

(18)

－

(180)

(198)

Disposals

As of March 31, 2017
Acquisitions
Acquisitions through businesscombinations

Other

(19)

－

(1)

(20)

As of March 31, 2018

8,568

17,140

4,295

30,00428

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
[Accumulated amortization and accumulated impairment losses](JPY)
Carrier shop
operating rights

Software
As of April 1, 2016

Other

Total

(6,771)(234)(1,331)(8,337)

Amortization

(568)

－

(331)

(899)

Impairment losses

(688)

－

(4)

(692)

Disposals

654

－

55

709

3

－

0

3

Exchange differences

(12)

－

(0)

(12)

(7,383)(234)(1,611)(9,228)

(465)

－

(314)

(780)

Impairment losses

(1)

－

(1)

(2)

Disposals

279

－

0

279

Exchange differences

15

－

61

77

Other

25

－

1

27

(7,528)(234)(1,863)(9,626)Other
As of March 31, 2017
Amortization

As of March 31, 2018
[Carrying amount](JPY)
Carrier shop
operating rights

Software

Other

Total

As of March 31, 2017

1,213

16,906

2,816

20,935

As of March 31, 2018

1,039

16,906

2,432

20,37729

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
[Costs](USD)
Carrier shop
operating rights

Software

Other

Total

As of March 31, 2017

80,915

161,341

41,673283,929

Acquisitions

3,040

－

597

3,636

1

－

10

11

Acquisitions through businesscombinations(2,955)－(138)(3,093)

Exchange differences

(173)

－

(1,698)(1,871)

Other

(180)

－

(10)

(190)

As of March 31, 2018

80,649161,341

40,434282,424

Disposals[Accumulated amortization and accumulated impairment losses](USD)
Carrier shop
operating rights

Software

Other

Total

As of March 31, 2017

(69,494)(2,207)(15,166)(86,867)

Amortization(4,383)－(2,959)(7,342)

(12)

－

(13)

(25)

Impairment losses

2,632

－

3

2,635

Exchange differences

145

－

580

725

Other

244

－

13

257

(70,867)(2,207)(17,542)(90,615)

Disposals

As of March 31, 2018
[Carrying amount](USD)
Carrier shop
operating rights

Software
As of March 31, 2018

9,782

159,134

Other
22,892

Total
191,808

The carrier shop operating rights were recognized as intangible assets upon acquisition of the mobile business by the
consolidated subsidiary of the Company. As the rights are expected to exist fundamentally as long as the business continues,
they are determined to be classified as intangible assets with indefinite useful lives.
The recoverable amounts of the Consolidated Group’s cash-generating units including the carrier shop operating rights were
calculated based on its five-year forecast’s value in use that was approved by management. The five-year forecast of cash flows
is based on the future plans anticipated based on past performance. In addition, the main assumption used to determine suchforecast was the growth rates of gross profits through such terms, such growth rates being consistent with the forecasts of thenominal GDP growth rates or the like of the countries in which such Consolidated Group’s cash-generating units are situated.
The ultimate growth rates are determined by considering the average long-term growth rates of the markets or countries towhich the Consolidated Group’s cash-generating units belong.
There were no material internally-generated intangible assets as of March 31, 2018 and March 31, 2017.
Amortization expenses are included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated
statement of income.

30

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
The discount rates before tax used to determine the value in use of the Consolidated Group’s cash-generating units arepresented as follows:
2018

2017

Electronics & Devices segment
Mobile business of the domestic subsidiaries

6.5%

7.0%

With respect to the carrier shop operating rights, the recoverable amounts of the Consolidated Group’s cash-generating units
largely exceed their carrying amounts. Thus, even if major assumptions are changed to a reasonable extent, it is unlikely thatsuch changes in major assumptions will reduce the recoverable amounts of the Consolidated Group’s cash-generating units
below the carrying amount.

11. Interests in Associates and Joint Ventures
There are no associates or joint ventures that are material to the Consolidated Group.
The aggregate amounts of interests in individually immaterial associates and joint ventures that are accounted for using the equity
method are presented as follows:[Aggregate carrying amount]
JPY
2018

USD
2017

2018

Associates

5,057

4,497

47,604

Joint ventures

112

387

1,058

[Profit or loss from continuing business]
JPY
2018

USD
2017

2018

Associates

814(1,990)

7,670

Joint ventures

764

(21)

7,193

[Other comprehensive income]
JPY
2018
Associates

USD
2017

(57)
－

Joint ventures

2018
134
－

(539)
－

[Total comprehensive income]
JPY
2018

USD
2017

2018

Associates

757(1,855)

7,131

Joint ventures

764

(21)

7,193

12. Other Investments
The breakdown of other investments is presented as follows:
JPY
2018

USD
2017

2018

Financial assets measured at fair value through profit or loss

4,168

5,054

39,237

Financial assets measured at fair value through othercomprehensive income

32,80528,063308,791

Financial assets measured at amortized cost
Total

31

994

994

9,362

37,96934,112357,390

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
13. Other Current Assets and Other Non-current Assets
The breakdown of other current assets and other non-current assets is presented as follows:
JPY
2018

USD

2017

2018

Advance payments
Prepaid expenses

11,001
4,766

10,567
4,299

103,549
44,864

Other

7,666

7,141

72,161

23,43322,008220,574

19,955
3,478

18,2003,807

187,834
32,74023,43322,008220,574

Total
Current assets
Non-current assets
Total

14. Trade and Other Payables
The breakdown of trade and other payables is presented as follows:
JPY

USD

2018

2017

2018

Notes and accounts payable
Import bills payable

141,292
36,468120,673
32,992

1,329,936
343,263

Accounts payable - commission

11,03011,345

103,827

Total
Current liabilities
Non-current liabilities
Total

188,791

165,011

1,777,026

188,791－

165,011－

1,777,026－

188,791

165,011

1,777,026

15. Bonds and Borrowings
The breakdown of bonds and borrowings is presented as follows:
2018
Current portion of bonds

4,987

46,949－Averageinterest rate
(Note)－

Short-term borrowings

42,653

401,486

40,402

1.17%－

Current portion of long-termborrowings

13,568

127,716

24,2401.04%－

Bonds (excluding the current portion)

14,910140,349

9,945

－

－

Long-term borrowings (excluding thecurrent portion)

61,205576,11159,255

1.19%

July 2019 to October 2029

Total

137,326

1,292,610

133,844

Current liabilities

61,210576,151

64,643

Non-current liabilities

76,116

716,460

69,201

JPY

USD

2017
JPY

Maturity date－Total
137,326
1,292,610
133,844(Note) The “average interest rate” is presented as the weighted average interest rate against the borrowings outstanding at the end of
the fiscal year. For the purpose of avoiding the interest rate fluctuation risk for borrowings hedged by derivative transactions,such as interest rate swaps, the average interest rate is calculated using the interest rate after hedging. The interest rate forbonds is presented in the “Details of bonds” below.

32

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
[Details of bonds]
IssuerBond Name

Issue dateKanematsu
Corporation

Unsecured Straight
Bonds No 1
(3-year bonds)

Kanematsu
Corporation
Kanematsu
Corporation

2018

2017

Coupon rate

Collateral

Maturity
date

JPY

USD

JPY

March 10,
2016

4,987

46,9494,974

0.40% per annum

None

March 8,2019

Unsecured Straight
Bonds No 2(5-year bonds)

March 10,
2016

4,978

46,861

4,971

0.64% per annum

None

March 10,2021

Unsecured Straight
Bonds No 3(5-year bonds)

December
14, 2017

4,965

46,740－0.42% per annum

None

December
14, 2022

None

December13, 2024

Unsecured Straight
December－ 0.57% per annum
Bonds No 4
4,966
46,74814, 2017(7-year bonds)(Note) The maturity schedule of bonds after the end of the current fiscal year is presented as follows:

Kanematsu
Corporation

Within one year

CorporatebondsOver one year and Over two years and Over three years and Over four years andOver five years
within two years within three years within four years
within five years

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

USD

4,987

46,949

－

－

4,978

46,861

－

－

4,965

46,7404,966

46,748

16. Provisions
Changes in provisions are presented as follows:(JPY)
Asset retirement
obligations

Other

Total

As of April 1, 2017

981

444

1,426

Provisions made

344

117

462

Provisions used

(61)

(5)

(67)

Provisions reversed

－

(55)

(55)

Unwinding of discount

46

－

46

Foreign exchange translation differences

－

(14)

(14)

1,310

485

1,796

As of March 31, 2018

(USD)
Asset retirement
obligations

Other

Total

As of April 1, 2017

9,240

4,183

13,423

Provisions made

3,244

1,105

4,349

Provisions used

(580)

(54)

(633)

Provisions reversed

－

(526)

(526)

Unwinding of discount

434

－

434

Foreign exchange translation differences

－

(137)

(137)

12,338

4,571

16,909As of March 31, 201833

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
The current and non-current portions of provisions are presented as follows:
JPY
2018
Current liabilities
Non-current liabilities
Total

USD
2017

2018

156
1,639

28
1,397

1,475
15,434

1,796

1,426

16,909Asset retirement obligations are obligations for restoring offices and shops in accordance with provisions of the property leasing
contracts. While these expenditures will be made after at least one year has passed, the amounts may be affected by the futurebusiness plan and other factors.

17. Other Current Liabilities and Other Non-current Liabilities
The breakdown of other current liabilities and other non-current liabilities is presented as follows:
JPY
2018

USD

2017

2018

Advances received
Accrued expenses

8,392
3,337

11,854
3,343

78,992
31,414

Unearned revenue
Other

3,029
9,545

2,918
8,788

28,51589,852

24,304

26,905

228,773

23,371

26,291

219,989

Total
Current liabilities
Non-current liabilities
Total

933

614

8,784

24,304

26,905

228,773

18. Equity(1) Capital management
The Consolidated Group has a basic policy of increasing shareholders’ equity (See Note 1) up to a certain level andstrengthening its financial base to enhance its enterprise value through building new businesses and increasing revenues while
maintaining a sound financial position.
The Company also sets the maximum ratio of risk assets (See Note 2) and examines the appropriateness of scale ofshareholders' equity in terms of it being a risk buffer to potential loss that could result from a deterionation in the companies'
respective businesses, so that it could manage shareholders' equity more minutely.
The key indices which the Consolidated Group uses for management of shareholders' equity are as follows, and these indices
are periodically reported to and monitored by management.
・ Ratio of risk assets
・ Net DER(See Note3)(Note 1) Shareholders’ equity is defined as equity attributable to owners of the Parent.
(Note 2) Ratio of risk assets is defined as a ratio of the amount of maximum potential loss to shareholders' equity. The amountof maximum potential loss is the amount of all assets and off balance sheet transactions on the consolidated financial
statements multiplied by the original risk weight set by our consolidated group according to the potential risk of loss.
(Note 3) Net DER is defined as a ratio of net interest-bearing debt to shareholders’ equity, while net interest-bearing debt is thetotal amount of interest-bearing debt less cash and cash equivalents.

The figures of net DER as of March 31, 2018 and March 31, 2017 are presented as follows:(Unit: times)
2018
Net DER

2017
0.5

0.6

The Consolidated Group is not subjected to any externally imposed capital requirements (except for general requirements, suchas those in the Companies Act).

34

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(2) Number of shares authorized to be issued, issued shares and shares of treasury stock(Unit: share)
2018
Shares authorized to be issued(No-par common stock)2017
200,000,000

200,000,000

84,500,202

84,500,202－－

84,500,202

84,500,202

Issued shares(No-par common stock)
Balance at the beginning of the year
Changes during the period
Balance at the end of the year
Shares of treasury stock

390,123506,359(No-par common stock)(Notes) 1. The number of shares of treasury stock includes treasury stock held by the associates of the Company.
2. The Company consolidated its common shares at a ratio of five shares to one share on the effective date of October 1,
2017. Assuming that the company consolidated its shares on April 1, 2016, the number of shares after share consolidation
is provided.

(3) Surplus
1) Capital surplus
Capital surplus mainly consists of legal capital surplus.
2) Retained earnings
Retained earnings consist of legal retained earnings and other retained earnings.
The Companies Act of Japan provides that an amount equal to 10% of distribution of surplus for each fiscal year must be
appropriated as legal capital surplus or legal retained earnings until the total aggregate amount of legal capital surplus andlegal retained earnings equals 25% of share capital.
Under the Companies Act, the amounts available for distribution are calculated based on the amounts of capital surplus andretained earnings, exclusive of legal capital surplus and legal retained earnings, all of which are recorded in accordance withthe accounting principles generally accepted in Japan.

(4) Dividends
1) Amounts of dividends paid
Resolution

Type of stock

May 22, 2017
Board of Directors Common stock
meeting
Oct. 31, 2017
Board of Directors Common stock
meeting

Resolution

Type of stock

May 23, 2016
Board of Directors Common stock
meeting

Source ofdividends
Retainedearnings
Retainedearnings

Source ofdividends
Retainedearnings

Total amounts ofdividends

Dividends
per share

JPY

USD

Yen

1,263

11,895

3.00

1,474

13,877

3.50

Record date

Effective date

0.028

Mar. 31, 2017

Jun. 5, 2017

0.033

Sep. 30, 2017

Dec. 1, 2017

Record date

Effective dateMar. 31, 2016

Jun. 6, 2016

U.S.$

Total amounts ofdividends

Dividends
per share

JPY

Yen
1,053

Nov. 2, 2016

2.50

Retained
Board of Directors Common stock
1,263
3.00
Sep. 30, 2016
Dec. 2, 2016
earnings
meeting*The dividends per share resolved by the board of directors meeting on October 31, 2017, with record date on September 30,
2017 are provided as the amounts before share consolidation as of October 1, 2017.

35

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
2) Dividends with record date in the current fiscal year, and effective date in the following fiscal year
Total amounts of
Dividends
Source ofdividends
per share
Resolution
Type of stock
Record datedividends
JPY
USD
Yen
U.S.$
May 21, 2018
Board of Directors Common stock
meeting

Retainedearnings

2,569

24,186

30.50

0.287

Mar. 31, 2018

Effective dateJun. 4, 201819. Revenue
The breakdown of revenue is presented as follows:
JPY2018
Revenue from the sale of goods
Revenue from rendering of services and others
Total

USD
2017

2018

694,337
20,453

653,529
22,0506,535,553
192,522714,790

675,579

6,728,075

20. Selling, General and Administrative Expenses
The breakdown of selling, general and administrative expenses is presented as follows:
JPY
2018

USD
2017

2018

Depreciation and amortization

2,027

1,822

19,086

Personnel expenses
Outsourcing service charges

43,444
7,264

42,834
6,827

408,925
68,378Rent expenses
Other

6,742
18,941

6,320
18,35863,465
178,291

78,42076,163

738,145

Total

21. Gain or Loss on Sale or Disposal of Property, Plant and Equipment and Intangible Assets
The breakdown of gain or loss on sale or disposal of property, plant and equipment and intangible assets is presented as follows:
JPY
USD
2018
Gain on sale of property, plant and equipment

2017

2018

43

543

413

43

543

413

(68)

(1)

(642)

(68)

(1)

(642)

Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets

(192)
(34)

(83)
(73)

(1,809)(324)

Total loss on disposal of property, plant and equipment
and intangible assets

(226)

(157)

(2,133)

(250)

384

(2,361)

Total gain on sale of property, plant and equipment andintangible assets
Loss on sale of property, plant and equipment
Total loss on sale of property, plant and equipment andintangible assets

Gain (loss) on sale or disposal of property, plant andequipment and intangible assets, net

36

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
22. Impairment Loss
(1) Breakdown of impairment loss by each class of assets
The breakdown of impairment losses by class of assets is presented as follows. Impairment losses for property, plant andequipment and intangible assets are included in “Impairment loss on property, plant and equipment and intangible assets” , andimpairment losses for goodwill are included in “Other expenses” in the consolidated statement of income.
JPY
USD
2018
Property, plant and equipment

2018
(173)

(20,202)

(107)
(2)

(143)
(692)

(1,007)(25)(2,255)(1,009)(21,233)

Goodwill
Intangible assets
Total

2017

(2,146)(2) Breakdown by reportable segment
The breakdown of impairment losses by reportable segment is presented as follows:
JPY
2018

USD
2017

2018

Electronics & Devices

(2)

(721)

(25)

Foods & Grain
Steel, Materials & Plant

(107)
(5)

(143)
(13)

(1,007)(49)

Other/Adjustment and elimination(2,141)(132)(20,153)

Total(2,255)(1,009)(21,233)

For the fiscal year ended March 31, 2017, an impairment loss of ¥132 million was recognized as a result of reducing thecarrying amount of land owned in Japan, which the Company determined to sell, to the recoverable amount of ¥589 million.
The recoverable amount was based on fair value less costs of disposal and the fair value was estimated mainly based on the realestate appraisal. The asset belonged to the Other segment.
Regarding the pet-related business of the domestic subsidiary, an impairment loss of ¥143 million was recognized as a result of
reducing the carrying amount of goodwill to the recoverable amount of ¥1,027 million because future cash flows anticipated tobe generated was judged to be lower than originally assumed. The recoverable amount was based on the value in use and it wasestimated by discounting future cash flows at a pre-tax rate of 4.61%. The asset belonged to the Foods & Grain segment.
Regarding intangible assets, an impairment loss of ¥656 million was recognized as the enterprise system, which had been inprocess of development but was abandoned, was evaluated to have a zero recoverable amount. The recoverable amount was
based on the value in use. The asset belonged to the Electronic & Devices segment.
For the fiscal year ended March 31, 2018, an impairment loss of ¥1,161 million ($10,928 thousand) was recognized as a resultof reducing the carrying amount of idle land owned in Japan to the recoverable amount of ¥602 million ($5,666 thousand). An
impairment loss of ¥975 million ($9,184 thousand) was also recognized as a result of reducing the carrying amount of assets fortransfer of golf business to the recoverable amount of ¥1,566 million ($14,747 thousand). The recoverable amount is based onfair value less costs of disposal and the fair value is estimated mainly based on sale value. The asset belongs to the Other
segment.
Regarding the pet-related business of the domestic subsidiary, an impairment loss of ¥107 million ($1,007 thousand) was
recognized as a result of reducing the carrying amount of goodwill to the recoverable amount of ¥359 million ($3,379
thousand) because future cash flows anticipated to be generated was judged to be lower than originally assumed. The
recoverable amount is based on the value in use and it was estimated by discounting future cash flows at a pre-tax rate of
6.55%. The asset belongs to the Foods & Grain segment.
While fair values are categorized into three levels depending on inputs to valuation techniques used, all the fair values above
are categorized within Level 3 of the fair value hierarchy with its details described in Note 2. Basis of Preparing Consolidated
Financial Statements, (4) Use of estimates and judgments.

37

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201823. Exchange Differences
Exchange differences recognized in profit or loss for the fiscal years ended March 31, 2018 and March 31, 2017 were ¥521
million ($4,913 thousand) and ¥(812) million, respectively and are included in “Other income” and “Other expenses” in the
consolidated statement of income. In addition, each amount includes gains or losses arising from currency-related derivativetransactions that were entered into for the purpose of hedging the foreign currency risk. Gains and losses arising from translating
assets and liabilities denominated in a currency other than the functional currency or from settling such items are included in
profit or loss as they arise.

24. Finance Income and Finance Costs
The breakdown of finance income and finance costs is presented as follows:
JPY
2018

USD
2017

2018

Interest income
Financial assets measured at amortized cost

352

399

3,316

Financial assets measured at fair value through profit or loss

11

22

109

Total interest income

363

421

3,425

268

209

2,525

805

906

7,580

1,073

1,116

10,104

Other finance income

10

－

94

Total other finance income

10

－

94

Total finance income

1,447

1,537

13,623(2,144)(2,033)(20,184)

(269)

(270)

(2,539)(2,414)(2,304)(22,723)

Dividend income
Financial assets measured at fair value through profit or loss
Financial assets measured at fair value through othercomprehensive income
Total dividend income
Other finance income (Note)

Interest expenses
Financial liabilities measured at amortized cost
Derivatives
Total interest expenses
Other finance costs (Note)
Other finance costs(730)(2,000)(6,871)

Total other finance costs(730)(2,000)(6,871)

Total finance costs(3,144)(4,304)(29,594)(Note) The amounts of other finance income and other finance costs are those related to financial assets measured at fair value
through profit or loss and the details are presented in Note 30. Financial Instruments: (6) -3) - (ⅱ) Recurring fair value
measurements categorized within Level 3 of the fair value hierarchy.

38

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201825. Earnings Per Share Attributable to Owners of the Parent(1) Basic earnings per share
Yen
2018
Basic earnings per share

U.S. dollar
2017

193.79

2018
95.64

1.82

Diluted earnings per share is the same as basic earnings per share as there are no shares with a dilutive effect.

(2) Bases for calculation of basic earnings per share
JPY
2018

USD
2017

2018

Profit attributable to owners of the Parent
Amount not attributable to common shareholders of the Parent

16,317－

8,049－

153,588－

Profit used to calculate basic earnings per share

16,317

8,049

153,588

Thousand shares
2018
Weighted average number of common shares

2017
84,202

84,164(Note) The Company consolidated its common shares at a ratio of five shares to one share on the effective date of October 1,
2017. Assuming that the company consolidated its shares on April 1, 2016, earnings per share attributable to owners of
the parent is provided.

39

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
26. Other Components of Equity and Other Comprehensive Income
Changes in other components of equity are presented as follows:
JPY
2018

USD
2017

2018

Exchange differences on translation of foreign operations
Balance at the beginning of the year

2,349

2,912

22,116

Changes during the period(1,073)(562)(10,107)

Balance at the end of the year

1,275

2,349

12,009Financial assets measured at fair value through othercomprehensive income
Balance at the beginning of the year

9,455

6,967

89,005

Changes during the period
Reclassification to retained earnings

3,351
(123)

2,613
(125)

31,550(1,159)Balance at the end of the year

119,397

12,684

9,455

Cash flow hedges
Balance at the beginning of the year(388)

(1,393)(3,660)Changes during the period

(516)

1,004

(4,861)

Balance at the end of the year

(905)

(388)

(8,521)－Remeasurements of defined benefit pension plans
Balance at the beginning of the year
Changes during the period

－

－

275

(384)

2,596

Reclassification to retained earnings

(275)

384

(2,596)－－－

Balance at the beginning of the year
Changes during the period

11,416
2,037

8,486
2,671

107,462
19,178

Reclassification to retained earnings

(398)

259

(3,755)

13,055

11,416

122,884

Balance at the end of the year
Other components of equity

Balance at the end of the year

40

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
The breakdown for the amounts of reclassification adjustments and deferred tax in other comprehensive income is presented asfollows:
JPY
USD
2018

2017

2018

Financial assets measured at fair value through othercomprehensive income
Amount arising during the year

4,980

3,690

46,875

Amount before deferred tax

4,980

3,690

46,875

Deferred tax(1,577)(1,019)(14,853)

Financial assets measured at fair value through othercomprehensive income

3,402

2,671

32,022

Amount arising during the year

322

(323)

3,037

Amount before deferred tax

322

(323)

3,037

Remeasurements of defined benefit pension plans

Deferred tax

(14)

39

(138)

Remeasurements of defined benefit pension plans

307

(284)

2,899

(826)

Reclassification adjustments(1,427)－(2)(13,432)－

Exchange differences on translation of foreign operations(1,427)(829)(13,432)

Reclassification adjustments

(751)
49

467
918

(7,073)468

Amount before deferred tax

(701)

1,386

(6,605)

Deferred tax

216

(401)

2,035

Cash flow hedges

(485)

984

(4,570)Exchange differences on translation of foreign operations
Amount arising during the year

Cash flow hedges
Amount arising during the year

Share of other comprehensive income of investments
accounted for using the equity method
Amount arising during the year

(25)

113

(238)

Reclassification adjustments

(31)

21

(301)

Share of other comprehensive income of investments
accounted for using the equity method

(57)

134

(539)

1,740

2,678

16,380Total other comprehensive income

27. Cash Flow Information(1) Cash and cash equivalents
The breakdown of cash and cash equivalents and its reconciliation to the amounts presented in the consolidated statement offinancial position are as follows:
JPY
USD
2018

2017

2018

Cash and bank deposits except for time deposits with originalterm of more than three months

77,731

77,230731,662

Short-term investments with original maturity of three months
or less－

336－

Cash and cash equivalentsin the consolidated statement of financial position

77,731

77,566731,662

Cash and cash equivalentsin the consolidated statement of cash flows

77,731

77,566731,66241

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(2) Net payment for acquisition of subsidiaries
The breakdown of the main assets and liabilities of newly acquired subsidiaries at the time control thereof was acquired, andthe reconciliation between consideration paid and net payment for the acquisition are presented as follows:
JPY
USD
2018

2017

2018

Breakdown of assets at the acquisition dateCurrent assets (including cash and cash equivalents)
Non-current assets
Breakdown of liabilities at the acquisition dateCurrent liabilities
Non-current liabilities

1,274
300

19,005
17,066

11,997
2,826

(242)

(17,746)(2,282)

(232)

(925)

(2,188)JPY
2018
Consideration paid

USD
2017

2018

(1,099)(17,400)(10,354)

Cash and cash equivalents included in the assets at the time
control thereof was acquired

737

4,613

6,937

Net proceeds from (payment for) acquisition of subsidiaries(362)(12,786)(3,417)(3) Net proceeds from sale of subsidiaries and transfer of business
The breakdown of the main assets and liabilities upon loss of control in the subsidiaries or other businesses over which control
was lost as a result of the sale, and the relationship between consideration received and net proceeds from the sale are presented
as follows:
JPY
USD
2018
Breakdown of assets upon loss of control
Current assets (including cash and cash equivalents)
Non-current assets
Breakdown of liabilities upon loss of control
Current liabilities
Non-current liabilities

2017

2018

505

143

4,758

1,600

61

15,063

(360)
(105)

(85)
(9)

(3,392)
(989)

JPY
2018

USD
2017

2018

Consideration received

1,638

66

15,421

Cash and cash equivalents included in the assets at the time
control thereof was lost

(207)

(72)

(1,954)

Net proceeds from (payment for) sale of subsidiaries
Net proceeds from transfer of business

(22)
1,452

(6)
－

(209)
13,676(4) Changes in liabilities for financing activities
Changes in liabilities for financing activities are as follows:
(JPN)
2017
Borrowings

Cash flows

123,899(6,211)

Bonds
Lease obligations

9,945
1,285

9,928
(240)

Total

135,130

3,476

Non-cash movements
Exchange differences－

117,4280

24
125

19,898
1,170

(258)

150

138,497

(259)
－

42

2018

OthersKANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(USD)
2017
Borrowings
Bonds

Cash flows

1,166,219
93,617(58,468)
93,450

Lease obligations

12,099Total

1,271,935

Non-cash movements
Exchange differences

2018

Others－(2,438)－231

1,105,313
187,298(2,261)

1

1,184

11,02132,720(2,437)1,415

1,303,632(5) Significant non-cash transactions
There were no significant non-cash transactions for the fiscal years ended March 31, 2018 and March 31, 2017.

28. Employee Benefits(1) Post-employment benefits
1) Outline of retirement benefit plans adopted by the Consolidated GroupThe Company has a defined benefit pension plan and lump-sum retirement benefit plan covering substantially all employees
other than directors and executive officers. The benefit amounts for the defined benefit pension plan are determined based on
the period of employees’ enrollment in the plan, contribution granted to employees and other factors. The Company has a
responsibility to manage pension assets faithfully and has an obligation to make contributions for the employees enrolled in
the plan in compliance with applicable laws and regulations.
The pension plan that the Company maintains is a contract-type defined benefit pension plan.
Matters such as asset management performance, status of the plan and accounting treatment are reported to the Management
Committee by the Finance Department and the Personnel & General Affairs Department, which are in charge of operation of
the pension plan. These departments hold a meeting on a timely manner to discuss the matters such as a revision to the plan
and a change in the asset investment policy.
Most of the subsidiaries have unfunded retirement benefit plans and/or funded pension plans. Employees, other than directors,
are entitled to, under most circumstances, upon mandatory retirement at normal retirement age or earlier termination of
employment, a lump-sum retirement benefit based on compensation at the time of retirement, years of service and otherfactors. Certain subsidiaries have adopted the defined contribution retirement benefit plan.

43

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
2) Defined benefit plan(ⅰ) Net defined benefit liability (asset)
Reconciliation of the beginning and ending balances of net defined benefit liability (asset) and the components for theyears ended March 31, 2018 and March 31, 2017 are presented as follows:(JPY)
Present valueof the defined
benefit obligation

Fair value of plan
assets

Effect of the asset
ceiling

Net defined benefit
liability (asset)

As of March 31, 2016

19,082(13,309)－

5,772

Current service cost

1,350

－

－

1,350

Net interest

54

(40)

－

14

Remeasurements

123

(61)

261

323

Foreign exchange translation differences

(8)

0

－

(7)

Employer contributions to the plan

－

(877)

－

(877)

(1,625)

976

－

(649)

706

－

－

706

(56)

6

－

(50)

As of March 31, 201719,625(13,305)

261

6,581

Current service cost

1,439

－

－

1,439

Net interest

69

(59)

－

9

Remeasurements

98

(159)

(261)

(322)

Foreign currency translation difference

(30)

8

－

(22)

Employer contributions to the plan

－

(959)

－

(959)

(1,569)

1,024

－

(544)

Effect of business combinations anddisposals

21

－

－

21

Other

5

8

－

13

19,659(13,442)－

6,217

Benefits paid
Effect of business combinations anddisposals
Other

Benefits paid

As of March 31, 2018

44

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(USD)
Present valueof the defined
benefit obligation

Fair value of plan
assets

Effect of the asset
ceiling

Net defined benefit
liability (asset)

As of March 31, 2017

184,732(125,240)

2,461

61,953Current service cost

13,548－－13,548Net interest

650

(556)

－

94

Remeasurements

930(1,506)(2,461)(3,037)

Foreign currency translation difference

(288)

77

－

(211)

－

(9,028)－(9,028)(14,774)

9,645－(5,129)

199

－

－

199

50

82

－

132

185,046(126,526)－

58,520

Employer contributions to the plan
Benefits paid
Effect of business combinations anddisposals
Other
As of March 31, 2018

Remeasurements of the defined benefit obligation for the fiscal years ended March 31, 2018 and March 31, 2017 are thedifferences arising primarily from changes in financial assumptions.
(ⅱ) Reconciliation of ending balances of defined benefit obligation/plan assets and net defined benefit liability/asset presented
on the consolidated statements of financial position
JPY
USD
2018

2017

2018

Defined benefit obligations of funded plan
Plan assets

16,046(13,442)

15,379(13,305)

151,038(126,526)

Net defined benefit liability of funded plan

2,604

2,073

24,512

Defined benefit obligations of unfunded plan

3,613

4,246

34,008Net liability or asset presented on the consolidated statementsof financial position (Before the effect of the asset ceiling)

6,217

6,320

58,520The measurement date used to determine the main benefit obligations is March 31 of each year.
The Company’s funding policy is based on a number of factors including the tax deductibility of contributions, funded
status, actuarial calculations and other considerations. Contributions are intended to provide not only for benefits
attributable to service to date, but also for those expected to be earned in the future. In addition, the Company may
contribute cash to an employee retirement benefit trust for any funding deficits in benefit obligations at the fiscal year
end.
The Company’s investment policy is designed to increase the value of plan assets within acceptable risk levels to ensure
payments of pension benefits to eligible participants, including future participants. Taking into account the return and risk
on plan assets thereon, the Consolidated Group formulates a strategic asset mix which aims at an optimal portfolio on along-term basis and supervise asset management by selecting investment management companies and monitoring asset
allocations. The strategic asset mix is subject to review in response to changes in expected market conditions or funded
status. The strategic asset mix is not based on limitations but guidelines, and therefore, the actual allocation may
temporarily exceed or fall below the guidelines. The Company’s target allocation is 10% equity securities, 44% debt
securities, 36% life insurance company general accounts and 10% others.
The Company holds a meeting regularly with the asset management institutions and discusses important issues regarding
pension assets investment.

45

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅲ) Plan assets
The composition of the plan assets as of March 31, 2018.
Plan assets with a quoted market price in an Plan assets without a quoted market price in
active market
an active market
JPY

USD

JPY

USD

Equity securities

1,382

13,011

(12)

(120)

Debt securities

4,242

39,935445

4,191Life insurance company general accounts

－

－

5,965

56,152

Other

96

905

1,323

12,454

5,721

53,851

7,721

72,677Total

The composition of the plan assets as of March 31, 2017.
Plan assets with a quoted market price in an Plan assets without a quoted market price in
active market
an active market
JPY

JPY

Equity securities

1,253

0

Debt securities

4,484

482

Life insurance company general accounts

－

6,168

Other

180

734

5,918

7,386

Total
(ⅳ) Significant actuarial assumptions

2018

2017

Discount rate

0.4%

0.5%

The assumptions used for the actuarial calculation include the expected rate of salary increase, the mortality rate and theretirement rate other than the above.
(ⅴ) Sensitivity analysis of defined benefit obligations
JPY
2018
Increase in the defined benefit obligation with a 50-basis-point
decrease in the discount rate
Decrease in the defined benefit obligation with a 50-basispoint increase in the discount rate

USD
2017

2018

735

845

6,919

(969)

(994)

(9,127)This analysis is based on the premise that the actuarial assumptions other than the discount rate do not fluctuate and that
only the discount rate fluctuates. This method of analysis is based on assumptions, and it is possible that the actual
calculation could be influenced by fluctuations in other variables. Even if the discount rate falls below 0%, the calculationis performed assuming the lower limit of the discount rate is 0%.
(ⅵ) Information on maturity profile of the defined benefit obligation
The weighted average duration of the defined benefit obligation for both of the fiscal years ended March 31, 2018 andMarch 31, 2017 was 10.9 years.
(ⅶ) Expected contribution to the plan for the year ending March 31, 2019
The amount of contribution to be made by the Consolidated Group to plan assets for the year ending March 31, 2019 isestimated to be ¥1,059 million ($9,977 thousand).

46

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
3) Defined contribution plan
Expenses recognized for the defined contribution plan for the years ended March 31, 2018 and March 31, 2017 were ¥172
million ($1,623 thousand) and ¥232 million, respectively.

(2) Employee benefit expenses
Employee benefit expenses recognized for the years ended March 31, 2018 and March 31, 2017 were ¥1,744 million ($16,423
thousand) and ¥1,683 million, respectively. Employee benefit expenses are included in “Cost of sales” and “Selling, generaland administration expenses” in the consolidated statement of income.

29. Current and Deferred Income Tax(1) Deferred taxes
1) Breakdown of deferred tax assets and deferred tax liabilities
The breakdown of main deferred tax assets and deferred tax liabilities by component is as follows:
JPY
2018

2017

USD
2018

Deferred tax assets
Retirement benefits liabilities
Loss allowance

1,643
2,770

1,872
588

15,46526,076Inventories
Impairment loss

463
776

477
500

4,360
7,311

Other investments
Golf club memberships

649
112

819
195

6,118
1,059

Tax losses carried forward
Cash flow hedges

2,188
383

3,904
173

20,6003,609

Goodwill
Other

1,872
4,323

2,658
4,359

17,627
40,696

Total deferred tax assets
Offset against deferred tax liabilities
Total deferred tax assets, net

15,183

15,549142,921(11,487)(10,530)(108,128)

3,696

5,018

34,793

(423)

(74)

(3,991)(5,682)(4,096)(53,489)(5,287)(5,292)(49,774)(734)(1,491)(6,916)(12,129)
11,487(10,954)
10,530(114,170)
108,128

Deferred tax liabilities
Retained earnings in subsidiaries
Financial assets measured at fair value through othercomprehensive income
Intangible assets
Other
Total deferred tax liabilities
Offset against deferred tax assets
Total deferred tax liabilities, net

(641)

(424)

(6,042)

Net deferred tax assets

3,054

4,594

28,75147

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
2) Details of changes in deferred tax assets and deferred tax liabilities
Details of changes in deferred tax assets and deferred tax liabilities are presented as follows:
JPY
2018

USD

2017

2018

Beginning balance of net deferred tax assets

4,594

8,786

43,244

Deferred tax expense(330)(2,589)(3,114)(1,376)70(1,381)(17)(12,956)
662

97

(203)

915

3,054

4,594

28,751

Income tax on other comprehensive income
Acquisition through business combinations
Other
Ending balance of net deferred tax assets3) Deductible temporary differences and unused tax losses carried forward for which deferred tax assets were not recognized
The breakdown of deductible temporary differences and unused tax losses carried forward (by expiry date), for which deferred
tax assets were not recognized in the consolidated statement of financial position are presented as follows:
JPY
USD
2018

2017

2018

Deductible temporary differences

9,982

19,466

93,966

Tax losses carried forward
Within one year to expiry

19,444170

183,025

24,637
3,257

28,172
13,350231,908
30,665

Between one and five years to expiry
Between five and ten years to expiry
Over ten years to expiry

223

251

2,105

Total tax losses carried forward

47,563

41,944

447,702

4) Temporary differences associated with investments in subsidiaries for which deferred tax liabilities were not recognized
The total amounts of temporary differences associated with investments in subsidiaries for which deferred tax liabilities were
not recognized as of March 31, 2018 and March 31, 2017 are ¥24,562 million ($231,203 thousand) and ¥20,136 million,
respectively. Because the Consolidated Group is able to control the timing of the reversal of such temporary differences, and it
is probable that such temporary differences will not be reversed within the foreseeable future, it did not recognize deferred tax
liabilities with respect to such temporary differences.

(2) Income taxes
1) Breakdown of income taxes
The breakdown of income taxes is presented as follows:
JPY
2018
Current tax expense (Note 1)
Deferred tax expense (Note 2)
Origination and reversal of temporary differences
Reassessment of recoverability of deferred tax assets
Total deferred tax expense

USD
2017

2018

(6,053)(4,999)(56,983)(2,473)2,143(1,754)(834)(23,286)
20,172(330)(2,589)(3,114)

Total income taxes(6,384)(7,589)(60,097)(Notes) 1. The amounts of the benefits arising from previously unrecognized tax losses or temporary differences of a prior periodthat were used to reduce current tax expenses for the years ended March 31, 2018 and March 31, 2017 were ¥685 million($6,448 thousand) and ¥22 million, respectively, and these benefits were included in the current tax expenses.
2. Major causes for deferred tax expense by type are loss allowance of ¥2,181 million ($20,538 thousand) and tax losses
carried forward of ¥(1,715) million ($(16,151) thousand) for the fiscal year ended March 31, 2018, and tax losses carriedforward of ¥(1,724) million and goodwill of ¥(797) million for the fiscal year ended March 31, 2017.

48

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
2) Reconciliation of statutory effective income tax rate in Japan
Reconciliations between the statutory effective tax rate in Japan and the average effective tax rate of the Consolidated Group
were as follows:
2018
Statutory effective tax rate
(Adjustments)

2017
30.8%

30.8%

Permanent differences—additions
such as entertainment expenses

0.6%

2.9%

Effect of reassessment of recoverability of deferred tax assets
Effect of tax rate differences(8.2)%
1.0%

4.7%
2.1%

Share of profit (loss) of investments accounted for using the equity method
Other(0.8)%
1.2%

3.3%(1.4)%

24.5%

42.5%

Average effective tax rate

The statutory effective tax rate for the fiscal year ended March 31, 2018 is calculated to be 30.8% based on the Corporation
Tax, Inhabitant Tax and Business Tax in Japan.

49

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201830. Financial Instruments(1) Classification of financial instruments
The breakdown of financial instruments for each classification is presented as follows:
JPY
2018

USD
2017

2018

Financial assets
Cash and cash equivalents

77,731

77,566731,662

222,166
994

192,363994

2,091,178
9,362

6,531

6,635

61,477

229,692

199,993

2,162,017

4,168
382

5,054
2,365

39,237
3,598

4,550

7,420

42,835

Financial assets measured at amortized cost
Trade and other receivables
Other investments
Other financial assets
Total financial assets measured at amortized cost
Financial assets measured at fair value through profit or loss
Other investments
Other financial assets
Total financial assets measured at fair value through profit
or loss
Financial assets measured at fair value through othercomprehensive income
Other investments

32,80528,063308,791

Total financial assets measured at fair value through othercomprehensive income

32,80528,063308,791

Total financial assets

344,781

313,043

3,245,305

Trade and other payables
Bonds and borrowings

188,791
137,326

165,011
133,844

1,777,026
1,292,610

Other financial liabilities

7,456

9,477

70,183

333,574

308,334

3,139,820

Other financial liabilities

2,406

1,896

22,653

Total financial liabilities measured at fair value throughprofit or loss

2,406

1,896

22,653

Total financial liabilities

335,981

310,230

3,162,472

Financial liabilities
Financial liabilities measured at amortized cost

Total financial liabilities measured at amortized cost
Financial liabilities measured at fair value through profit orloss(2) Basic policies for risk management of financial instruments
The Consolidated Group is an integrated trading company engaged in a wide range of business activities on a global basis. Its
headquarters includes business sections that handle merchandising, trading, product manufacturing, services, project planningand management, investments and financing activities, both domestically and internationally. Such businesses are inherently
exposed to various risks. The Consolidated Group defines and classifies risks per risk item and manages each of them inaccordance with its nature.

50

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(3) Credit risk management
1) Credit risks of financial assets owned by the Company (risk exposure and the occurrence of the relevant risk)
The Consolidated Group extends credit to a large number of customers in Japan and abroad in diverse business transactions,
resulting in a number of financial assets such as trade receivables, loans and other financial assets. These financial assets
provide credit accommodation to the various customers; therefore, the Consolidated Group is mainly exposed to the credit
risks related to those customers.
Moreover, other investments include debt instruments that are the investments in the customers, which expose theConsolidated Group to the credit risk arising from deterioration in the financial position of issuers.
Each department manages credit exposure to each customer by assigning credit ratings on a customer-by-customer basis andsetting credit exposure limits within the framework of the Consolidated Group’s credit risk control.
2) Responses to the risk owned by the Company (purpose, policy and procedure of the risk management and method used tomeasure such risks)
The Consolidated Group manages its credit risk to the customers by defining risk management methods and management
systems for specific risks in accordance with the regulations on risk management. Based on such regulations, the Consolidated
Group mitigates credit risk through periodical monitoring of the customer’s credit status and undertaking the maturity control
and account balance control, while detecting promptly any doubtful accounts caused by deterioration in the financial
conditions of customers and other factors. Expected credit losses are recognized and measured through transactions andfinancial information related to customers available in the course of such credit risk management, while taking
macroeconomic conditions such as the number of bankruptcies into consideration.
With regard to loans, the Consolidated Group determines there has been a significant increase in credit risk of the financial
assets since initial recognition in cases where the cash collection of the financial assets was delayed (as well as the case of
request for a grace period) after the trade date. However, even when a late payment or request for grace period occurs, theConsolidated Group does not determine that there has been a significant increase in credit risk if such late payment or request
for grace period would be attributable to temporary cash shortage, the risk of default would be low and objective data such asexternal credit ratings would reveal their ability to fulfill the obligation of contractual cash flow in the near future.
However, the Consolidated Group determines that the credit of the financial assets are impaired, when late payment or request
for grace period do not arise from temporary cash shortage but significant financial difficulty of the debtor and therecoverability of the modified financial assets is significantly doubtful.
The Consolidated Group determines there has been a significant increase in the credit risk of debt instruments since initialrecognition when an “investment grade” at the initial recognition deteriorates to the level below investment grade. For such
purpose, rating information provided by major rating agencies is used.
When guaranteeing the debts of its customers, the Consolidated Group establishes the guarantee limit amounts based upon thefinancial position and business condition of the customers. The guarantee limit amounts are periodically reviewed andmaintained at appropriate levels.
When entering into derivative transactions, the Consolidated Group only deals with major financial institutions with highcredit ratings assigned by independent rating agencies so as to minimize the credit risks. In addition, the Consolidated Group
periodically reviews credit limits in accordance with the internal regulations.
The Consolidated Group considers trade receivables, loans receivable, and debt instruments as default when all or part of thosefinancial instruments are not recovered or the recoverability of those financial instruments is determined to be extremely
difficult.
(ⅰ) Measurement of expected credit losses on trade receivables
As trade receivables do not contain a significant financing component, the Consolidated Group measures loss allowanceat an amount equal to the lifetime expected credit losses until the trade receivables are recovered. As performing tradereceivables comprise a number of customers, the Consolidated Group measures expected credit loss collectively bygrouping those receivables and considering historical credit loss experience. When those receivables are affected by amaterial economic change, the provision rate calculated based upon the historical credit loss experience is adjusted toreflect current and future economic prospect.
Even when a late payment or request for grace period has occurred, the Consolidated Group does not regard them as past
due receivables if such late payment or request for grace period would be attributable to temporary cash shortage as therisk of default would be low, and the debtors are evaluated to have a strong ability to fulfill the obligation of contractual
cash flow in the near future.

51

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅱ) Measurement of expected credit losses on other receivables
When credit risk related to loans has not increased significantly since the initial recognition at the end of the reporting
period, the Consolidated Group calculates the amount of loss allowance of the financial instruments by estimating the 12months expected credit losses collectively based upon historical credit loss experience. When those receivables areaffected by a material economic change, the provision rate calculated based upon the historical credit loss experience isadjusted to reflect current and future economic prospect.
However, when there has been a significant increase in credit risk since initial recognition as of the end of the fiscal year,
the Consolidated Group estimates the lifetime credit losses on the financial instruments individually and measures theamount of loss allowance based upon historical credit loss experience and future recoverable amount.
(ⅲ) Measurement of the expected credit losses on the other investments (debt securities)
When credit risk related to debt securities has not increased significantly since initial recognition at the end of thereporting period, the Consolidated Group calculates the amount of loss allowance of the financial instruments by
estimating the 12-months expected credit losses. However, when there has been a significant increase in credit risk sinceinitial recognition as of the end of the fiscal year, the Consolidated Group estimates the lifetime credit losses on thefinancial instruments and measures the amount of loss allowance of the financial instruments. When estimating suchexpected credit losses, the Consolidated Group uses the default rate published by major rating agencies.
The Consolidated Group directly writes off the gross carrying amounts of the credit-impaired financial assets when all orpart of the financial assets are evaluated to be uncollectible and determined that it is appropriate to be written off as aresult of credit check.
3) Quantitative and qualitative information on the amounts arising from expected credit losses(ⅰ) Trade and other receivables(JPY)
Lifetime expected credit losses

Loss allowance

Collective assessment

Credit-impaired financial assets

As of April 1, 2016

7

2,375

1. Reclassification to credit-impaired financial assets

(0)

63

2. Incurrence or collection

0

(138)

3. Direct write-off

－

(166)

4. Changes due to foreign exchange

－

1

(4)

－

As of March 31, 2017

3

2,135

1. Reclassification to credit-impaired financial assets－

37

2. Incurrence or collection

0

(106)

3. Direct write-off

－

(80)

4. Changes due to foreign exchange

－

(3)

(0)

－

3

1,981

5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience

5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience
As of March 31, 201852

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(JPY)
Lifetime expected credit losses

Gross carrying amountCollective assessment

As of April 1, 2016

163,646

2,737

(63)

63

28,502

(219)

－

(166)

1. Financial assets reclassified to credit-impaired financial
assets
2. Incurrence or collection

Credit-impaired financial assets

3. Direct write-off－

1

192,085

2,416

(42)

42

29,869(134)

3. Direct write-off

－

(80)

4. Changes due to foreign exchange－(3)221,9122,239

4. Changes due to foreign exchange
As of March 31, 2017
1. Financial assets reclassified to credit-impaired financial
assets
2. Incurrence or collection

As of March 31, 2018

(USD)
Lifetime expected credit losses

Loss allowance

Collective assessment

Credit-impaired financial assets

As of March 31, 201735

20,099

1. Reclassification to credit-impaired financial assets－

349

2. Incurrence or collection

5(1,000)3. Direct write-off

－

(762)

4. Changes due to foreign exchange

－

(31)

5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience(2)－

As of March 31, 201837

18,656(USD)

Lifetime expected credit losses

Gross carrying amountCollective assessment

As of March 31, 2017

Credit-impaired financial assets

1,808,037

22,746(399)

399

281,150(1,268)

3. Direct write-off

－

(762)

4. Changes due to foreign exchange

－

(31)

2,088,788

21,083

1. Financial assets reclassified to credit-impaired financial
assets
2. Incurrence or collection

As of March 31, 2018

53

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅱ) Other investments (debt instrument securities)(JPY)
Expected credit losses
Loss allowance

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets0－－

1. Changes in financial instruments recognizedat the beginning of the period

－

－

－

(a) Reclassified to lifetime expected credit
losses－－－(b) Reclassified to credit-impaired financial
assets－－－(c) Individual financial assets reclassified
from credit-impaired financial assets

－

－

－

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

4. Increase (decrease) due to changes in default
rate

5

－

－

5

－

－

－

－

－

－

－

－

－

－

－

－

－

－

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

(0)

－

－

5

－

－

As of April 1, 2016

As of March 31, 2017
1. Changes in financial instruments recognizedat the beginning of the period(a) Reclassified to lifetime expected credit
losses(b) Reclassified to credit-impaired financial
assets(c) Individual financial assets reclassified
from credit-impaired financial assets

4. Increase (decrease) due to changes in default
rate
As of March 31, 2018

54

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(JPY)
Expected credit losses
Gross carrying amount

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets

1,000

－

－

1. Changes in financial instruments recognizedat the beginning of the period

－

－

－

(a) Reclassified to lifetime expected credit
losses－－－(b) Reclassified to credit-impaired financial
assets－－－(c) Individual financial assets reclassified
from credit-impaired financial assets

－

－

－

As of April 1, 2016

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

4. Other changes

－

－

－

As of March 31, 2017

1,000

－

－

1. Changes in financial instruments recognizedat the beginning of the period

－

－

－

(a) Reclassified to lifetime expected credit
losses－－－(b) Reclassified to credit-impaired financial
assets－－－(c) Individual financial assets reclassified
from credit-impaired financial assets

－

－

－

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

4. Other changes

－

－

－

As of March 31, 2018

1,000

－

－

55

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(USD)
Expected credit losses
Loss allowance

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets53－－

1. Changes in financial instruments recognizedat the beginning of the period

－

－

－

(a) Reclassified to lifetime expected credit
losses－－－(b) Reclassified to credit-impaired financial
assets－－－(c) Individual financial assets reclassified
from credit-impaired financial assets

－

－

－

As of March 31, 2017

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

(2)

－

－

51

－

－

4. Increase (decrease) due to changes in default
rate
As of March 31, 2018

(USD)
Expected credit losses
Gross carrying amount

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets

9,413

－

－

－

－

－

－

－

－

－

－

－

－

－

－

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

4. Other changes

－

－

－

As of March 31, 2018

9,413

－

－

As of March 31, 2017
1. Changes in financial instruments recognizedat the beginning of the period(a) Reclassified to lifetime expected credit
losses(b) Reclassified to credit-impaired financial
assets(c) Individual financial assets reclassified
from credit-impaired financial assets(ⅲ) There is no contractual, uncollected balance for financial assets written off during the fiscal year ended March 31, 2018,
for which collecting efforts are still being made.

56

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
4) Credit risk exposure(ⅰ) Trade and other receivables
As of March 31, 2018
Balance of receivables (gross)

Lifetime expected credit losses

Provision rate based on historicalcredit loss experience

JPY

USD

Performing receivables

221,9122,088,788

0.00%

3

37

Past due receivables

2,239

21,08388.49%

1,981

18,656

224,152

2,109,871

－

1,985

18,693

Total

JPY

USD

Past due receivables include loans receivable of ¥1,760 million ($16,569 thousand), for which a loss allowance of ¥1,502
million ($14,141 thousand) has been already recognized.
As of March 31, 2017
Balance of receivables (gross)

Lifetime expected credit losses

Provision rate based on historicalcredit loss experience

JPY

JPY

Performing receivables

192,085

0.00%

3

Past due receivables

2,416

88.37%

2,135

194,502

－

2,139

Total

Past due receivables include loans receivable of ¥1,876 million, for which a loss allowance of ¥1,595 million has been
already recognized.
(ⅱ) Other investments (Debt instrument securities)
As of Mach 31, 2018
Gross carrying amount
Debt instrument securities
External rating

Lifetime
JPY

12 months
USD

JPY

USD

AAA-AA
A

－
－

－
－

－
－

－
－

BBB-BB
B

－
－

－
－

1,000
－

9,413
－

－

－

1,000

9,413

Total
As of March 31, 2017

Gross carrying amount
Debt instrument securities
External rating

Lifetime

12 months

JPY

JPY

AAA-AAA－－－－

BBB-BB
B

－
－

1,000
－

－

1,000

Total

57

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20185) Maximum exposure to credit risks
The Consolidated Group’s maximum exposure to credit risks is as follows:
The Consolidated Group’s maximum credit risk exposure (gross) represents the amount of the maximum exposure withrespect to credit risks without taking into account any collateral held or other credit enhancement. The Consolidated Group’s
maximum credit risk exposure (net) represents the amount of the maximum exposure with respect to credit risks reflecting the
mitigation effect of the collateral held or other credit enhancement.
As of March 31, 2018
Gross
carrying amount

Cash andcash equivalents

Maximum
credit risk exposure(gross)
JPY
USD

Loss
allowance
JPY

USD

Total collaterals pledged
and credit enhancements
JPY

USD

Maximum
credit risk
exposure (net)
JPY
USD

JPY

USD

77,731

731,662－－

77,731

731,662－－

77,731

731,662

224,152

2,109,871(1,985)(18,693)

222,166

2,091,178(126)(1,186)

222,0402,089,992

6,913

65,075

－

－

6,913

65,075

－

－

6,913

65,075

Financial assets
measured
at amortized cost
Trade andother receivables
Other financial
assetsOther investments

1,000

9,413

(5)

(51)

994

9,362

－

－

994

9,362

Total

309,798

2,916,021(1,991)(18,744)

307,806

2,897,277(126)(1,186)

307,680

2,896,091

The amount of loss allowance for credit-impaired financial assets is reduced by ¥126 million ($1,186 thousand) throughcollateral pledged and credit enhancements.
As of March 31, 2017
Gross
carrying amountLossallowance

JPY

JPY

Cash and cash equivalents

Total collaterals
Maximum
credit risk exposure pledged and credit
enhancements(gross)JPY

JPY

Maximum
credit risk
exposure (net)
JPY

77,566－

77,566－

77,566

194,502(2,139)192,363(141)

192,221

6,635

－

6,635

－

6,635

Financial assets measured atamortized cost
Trade and other receivables
Other financial assets
Other investments
Total

1,000

(5)

994

－

994

279,704(2,144)

277,560(141)

277,418

The amount of loss allowance for credit-impaired financial assets is reduced by ¥141 million through collateral pledged andcredit enhancements.

(4) Liquidity risk management
The Consolidated Group raises funds through borrowings from financial institutions or issuance of bonds. Accordingly, in theevent of a disruption to the financial system or financial/capital markets, or a major downgrade of the Consolidated Group’s
credit rating by a rating agency, the Consolidated Group’s fundraising becomes constrained and consequently there is apossibility that the Consolidated Group will not be able to carry out the payment on the date of payment.
The Consolidated Group has sufficient levels of cash and cash equivalents and maintains a long-term (unused) commitmentline agreement with a major financial institution in the amount of ¥10.0 billion ($94,127 thousand) to ensure liquidity andstability of funds. The Consolidated Group makes efforts to maintain good relationships with each financial institution.

58

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
1) Non-derivative financial liabilities
The breakdown of non-derivative financial liabilities by due date is presented as follows:
As of March 31, 2018
Between one andOver
Within one year
five years
five years
JPY

USD

188,791

1,777,026

－

－

－

Bonds

5,100

48,007

10,25496,519Borrowings

Trade and other payables

JPY

USD

JPY

Total

USD

JPY

USD

－

188,791

1,777,026

5,048

47,521

20,403

192,047

57,122537,675

61,419578,121

1,283

12,085

119,826

1,127,880

Lease obligations

428

4,032

778

7,324

113

1,066

1,319

12,422

Deposits received

3,728

35,098

－

－

0

3

3,729

35,101

951

8,955

－

－

1,498

14,101

2,449

23,056

106

1,004

－

－

－

－

106

1,004

256,229

2,411,796

72,451

681,964

7,944

74,776336,625

3,168,537

Guarantee deposits received
Other
Total
As of March 31, 2017

Within one year

Between one andfive years

Overfive years

JPY

JPY

JPY

Trade and other payables

Total
JPY

165,011－－

165,01152

10,112－

10,16465,69755,088

6,052

126,838

Lease obligations

436

939

62

1,437

Deposits received

2,707

－

2,916

5,624

Guarantee deposits received

984

－

1,464

2,449

Other

118

－

－

118

235,008

66,14010,495

311,645

Bonds
Borrowings

Total

The Consolidated Group has guarantee obligations of ¥1,830 million ($17,226 thousand) and ¥1,881 million as of March 31,2018 and March 31, 2017 respectively2) Derivative liabilities
The breakdown of derivative liabilities by due date is presented as follows:
As of March 31, 2018
Between one andWithin one year
five years
JPY

USD

JPY

USD

Cash inflows

44,421

418,1212,496

23,499Cash outflows

45,983432,831

2,585

24,337

Sub total

1,562

14,71089

Interest rate-related derivatives

215

2,026

Commodity-related derivatives

128

Total

1,906

Over
five years
JPY

Total

USD

JPY

USD

581

5,475

47,499447,095

627

5,906

49,196

463,074

838

45

431

1,697

15,979

400

3,768

－

－

615

5,794

1,208

－

－

－

－

128

1,208

17,944

489

4,606

45

431

2,441

22,981

Currency-related derivatives

59

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
As of March 31, 2017
Between one andfive years
JPY

Within one year
JPY
Currency-related derivatives
Cash inflows
Cash outflows
Sub totalInterest rate-related derivatives
Commodity-related derivatives
Total

33,36164

34,098737

Over
five years
JPY

Total
JPY
33,425

67

－
－

3

－

740

268

593

15

876

317

－

－

317

1,323

596

15

1,934

34,165(5) Market risk management
Since the Consolidated Group operates a broad array of businesses around the world, it is directly and indirectly affected bypolitical developments and economic conditions in countries where it has a presence, including changes in supply and demandsituations. Operations of the Consolidated Group are exposed to risks stemming from fluctuations in foreign exchange rate,interest rate, commodity price and share price.
In many cases, the foreign currency risk, interest rate risk and risk of price fluctuations associated with goods traded incidental
to business transactions are transferred to trade partners, etc. in the form of transaction terms. In addition, the Consolidated
Group has established a system under which a limit (position limit) and a loss limit are set for foreign exchange, funds (interest
rates), products and their derivatives, taking into account the scale of the risk and the income of each internal unit andcompany, so that it can quickly reduce its position when the predetermined limit is exceeded.
Also, the price fluctuation risk of these positions is mitigated by using derivatives as a hedge.
1) Foreign currency risk(ⅰ) Nature of foreign currency risk and its management policy
The Consolidated Group is engaged in foreign currency transactions in various currencies and terms incidental to its
export and import trading. The Consolidated Group not only transfers the risk of currency fluctuations to customers inaccordance with transaction terms but also participates in derivatives transactions such as forward contracts to reduce therisk.
The Company also has local subsidiaries and business corporations overseas. Account balances at these companies areconverted into yen at the exchange rates prevailing at the end of the reporting period, for the purposes of preparing
consolidated financial statements. As a result, net assets may change through exchange difference of foreign operations
associated with exchange rate fluctuations.
In principle, the Consolidated Group enters into forward exchange contracts to hedge against the exchange rate currency
fluctuation risk of foreign currency-denominated receivables and payables that are controlled by currency and by contract
month. The Consolidated Group also enters into forward exchange contracts to hedge against foreign currencydenominated receivables and payables that are highly probable to arise from export/import-related forecast transactions.
(ⅱ) Sensitivity analysis of foreign currency risk
In regards to financial instruments held by the Consolidated Group as of the end of the consolidated year, the following
chart shows the amounts affecting profit before tax and other comprehensive income (before tax effect adjustments), as
reported in the consolidated financial statements, that would result from 1% appreciation of Japanese Yen against U.S.
dollars.
Such analysis is based on the assumption that other factors are held constant.
In addition, such analysis does not include the affected amounts based on translations (into Japanese yen) of financial
instruments denominated in functional currency, income and expenses denominated in foreign currency and assets andliabilities of foreign operations.

60

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
JPY
2018
Profit before tax
U.S. dollar
Other comprehensive income
U.S. dollar

USD
2018

2017
(4)

(26)

(44)

(246)

(230)

(2,323)

2) Interest rate risk(ⅰ) Nature of interest rate risk and its management policy
The Consolidated Group raises most funds needed for operating and financing activities in the form of borrowings fromfinancial institutions at variable interest rates, with the exception of certain loans. Since these borrowings and fundmanagement are exposed to an interest rate risk, interest expenses for the Consolidated Group may increase with a rise ininterest rates.
The Company and certain consolidated subsidiaries enter into interest rate swap contracts to avoid the interest rate
fluctuation risk stemming from the borrowings.
(ⅱ) Sensitivity analysis of interest rate risk
In regards to financial instruments held by the Consolidated Group at the end of the reporting period, the following tableshows the amounts affecting profit before tax assuming that the interest rate increases by 1%.
Under the analysis, the amounts affecting profit before tax are calculated by multiplying the net balance of floating ratefinancial instruments as of March 31, 2018 and 2017 by 1%, without considering future changes in the net balance,
currency exchange fluctuations and dispersing effects for floating rate borrowings derived from the difference in timing ofrefinancing and resetting of the interest rate, and based on the assumption that all the other variables are held constant.
JPY
USD
2018
2017
2018
Profit before tax
(779)
(758)
(7,340)3) Commodity price risk(ⅰ) Nature of commodity price risk and its management policy
In its mainstay commodity trading business in Japan and overseas, the Consolidated Group deals with grains andpetroleum products as well as electronic parts and information, communications and technology (ICT) products. Grains
and petroleum products will be influenced by market conditions, while electronic parts and ICT products are exposed to
the risk of frequent price erosion caused by competition and obsolescence resulting from technological innovation. Whenthe positions in these commodities increase, the Consolidated Group will be exposed to the commodity price fluctuation
risk stemming from rapid movements in commodities prices or a decline in demand.
The Consolidate Group strives to reduce our exposure to price volatility by hedge-selling commodities, matching thequantity and timing of buying and selling, and utilizing commodity-related derivatives for hedging purposes.
(ⅱ) Sensitivity analysis of commodity price risk
In regards to commodity-related derivatives held by the Consolidated Group at the end of the reporting period, thefollowing table shows the amounts affecting profit before tax and other comprehensive income (before the tax effect)assuming that the commodity price decreases by 1%.
The analysis is performed based on the assumption that all the other variables are held constant.
JPY
2018
2017
Profit before tax
(67)
(88)
Foods
Fuels
Other comprehensive income
Foods
Fuels

USD
2018

(47)

(68)

(634)
(449)

(19)
(2)

(19)
0

(185)
(23)

(2)
－

0
－

(23)
－

4) Share price risk(ⅰ) Nature of share price risk and its management policy
The Consolidated Group holds marketable securities, which are exposed to the market price fluctuation risk.
The Consolidated Group attempts to reduce share price risk by periodically reviewing its shares held by the Consolidated
Group and selling those shares that it holds without strong rationale.

61

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅱ) Sensitivity analysis of share price risk
In regards to listed shares held by the Consolidated Group at the end of the reporting period, the following table shows theamounts affecting other comprehensive income (before the tax effect) assuming that the share price decreases by 1%.
The analysis is performed based on the assumption that all the other variables are held constant.
JPY
USD
2018
Other comprehensive income

2017
(186)

2018
(160)

(1,758)(6) Fair value of financial instruments
1) Fair value measurement
Fair values of financial instruments are presented as follows:
Fair values are categorized into three levels of the fair value hierarchy depending on inputs to valuation techniques; details aredescribed in Note 2. Basis of Preparing Consolidated Financial Statements: (4) Use of estimates and judgments.
2) Financial instruments measured at amortized cost
2018
Type

2017

Carrying amount
JPY

Carrying
amountFair value

USD

JPY

USD

Fair value
JPY

Financial assets
Trade and other receivables

1,582

14,9001,582

14,900

1,169

1,169

994

9,362

994

9,362

994

994

Guarantee deposits

3,867

36,3993,867

36,399

3,679

3,679

Other financial assets

612

5,769

612

5,769

616

616

Total

7,057

66,4307,057

66,430

6,459

6,459

76,116

716,460

76,269717,894

69,201

69,289Long-term lease obligations

788

7,419

788

7,419

899

899

Long-term deposits received

0

3

0

3

2,916

2,916

Other investments (Debt instrument
securities)

Financial liabilities
Bonds and borrowings

Long-term guarantee deposits received

1,498

14,101

1,498

14,101

1,464

1,464

Total

78,403

737,983

78,555

739,41774,481

74,569The carrying amounts of trade and other receivables, other financial assets, trade and other payables, bonds and borrowings
and other financial liabilities, all of which are categorized into current assets or current liabilities of financial instruments
measured at amortized cost, approximate their fair values; therefore, those amounts are not included in the table above.
The fair values stated above are calculated as follows:(ⅰ) Trade and other receivables
The fair value of trade and other receivables is the present value of future cash flows discounted by an interest rate thatreflects time to maturity and credit risk.
(ⅱ) Other investments (Debt instrument securities)
The fair value of other investments is the present value of future cash flows discounted by an interest rate applicable tosimilar financial assets.
(ⅲ) Guarantee deposits
The fair value of guarantee deposits is the present value of future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.
(ⅳ) Other financial assets
The fair value of other financial assets is the present value of future cash flows discounted by an interest rate that reflects
time to maturity and credit risk.

62

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅴ) Bonds and borrowings
The fair value of bonds is determined based on their market price.
The fair value of borrowings is the present value of the sum of principal and interest payments discounted using anassumed interest rate on equivalent incremental borrowings.
(ⅵ) Long-term lease obligations
The fair value of long-term lease obligations is the present value of future cash flows discounted by an interest rate thatreflects time to maturity and credit risk.
(ⅶ) Long-term deposits received
The fair value of the long-term deposits received is the present value of future cash flows discounted by an interest ratethat reflects time to maturity and credit risk.
(ⅷ) Long-term guarantee deposits received
The fair value of long-term guarantee deposits received is the present value of future cash flows discounted by an interest
rate that reflects time to maturity and credit risk.
Financial assets and liabilities measured at amortized cost are categorized within Level 2 of the fair value hierarchy.
3) Financial instruments measured at fair value(ⅰ) Analysis of fair value by hierarchy level
The following tables provide the breakdown by hierarchy level of financial assets and liabilities that are measured at fairvalue on a recurring basis. No financial assets and liabilities are measured at fair value on a non-recurring basis. There
were no material transfers between different levels for the fiscal years ended March 31, 2018 and March 31, 2017.
As of March 31, 2018
Level 1JPY

Level 2USD

JPY

Level 3

USD

Total

JPY

USD

JPY

USD

AssetsOther investments
Financial assets measured
at fair value through profit
or loss
－

－

－

－

4,168

39,237

4,168

39,237

18,672

175,754－－

14,133133,038

32,805

308,791

Foreign exchange

－

－

286

2,693

－

－

286

2,693

Interest rate

－

－

－

－

－

－

－

－

Commodity

96

905

－

－

－

－

96

905

Foreign exchange－－(1,697)(15,979)－－(1,697)(15,979)

Interest rate

－

－

(580)

(5,466)

－

－

(580)

(5,466)

Commodity(128)(1,208)

－

－

－

－

(128)

(1,208)

Total

18,639175,451(1,992)(18,752)

18,302

172,275

34,950328,973

Stock
Financial assets measured
at fair value through othercomprehensive income
Stock
Other financial assets
Derivative transactions:

Liabilities
Other financial liabilities
Derivative transactions:

63

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
As of March 31, 2017
Level 1

Level 2

Level 3

Total

JPY

JPY

JPY

JPY

AssetsOther investments
Financial assets measured at fairvalue through profit or loss
－

－

5,054

5,054

16,014－

12,04928,063

－

－

1,033

1,033

Foreign exchange

－

1,048

－

1,048

Interest rate

－

－

－

－

Commodity

280

3

－

283

Foreign exchange

－

(740)

－

(740)

Interest rate

－

(838)

－

(838)

Commodity

(317)

－

－

(317)

15,976(526)

18,13733,587

Stock
Financial assets measured at fairvalue through other comprehensive
incomeStockOther financial assets
Financial assets measured at fairvalue through profit or loss
Convertible bonds
Derivative transactions:

Liabilities
Other financial liabilities
Derivative transactions:

Total

64

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
The methods of determining the fair value of the above instruments are described as follows:(a) Other investments and convertible bonds
The fair value of listed shares is the quoted price in an active market, and is categorized within fair value hierarchy
Level 1.
The fair value of unlisted shares is calculated using valuation methods including discounted future cash flows, market
prices of comparable companies, net asset value, and other valuation methods, and is categorized within fair value
hierarchy Level 3. Measuring the fair value of unlisted shares involves the use of unobservable inputs such as discountrate and valuation multiples, as well as any necessary adjustments including discounts for a lack of liquidity.
The fair value of convertible bonds is calculated using valuation methods including discounted future cash flows and net
asset value, and is categorized within fair value hierarchy Level 3.
The Company determines the policies and procedures for measuring the fair value of unlisted shares and convertible
bonds, and reviews the approach to measuring fair value on a recurring basis including the valuation model, by obtaining
the information on business operations and business plans associated with each equity issuer and confirming the datafrom comparable public companies.
(b) Derivative financial assets and liabilities
Currency-related derivatives
The fair value of forward exchange transactions is calculated based on the forward exchange rate at the end of the fiscal
year.
Interest rate-related derivatives
The fair value of interest-rate swaps is the present value of future cash flows discounted by an interest rate that reflects
time to settlement, as well as market conditions.
Commodity-related derivatives
The fair value of commodity futures transactions is calculated using final prices on commodities exchanges as of the
fiscal year-end. The fair value of commodity swap transactions is calculated based on the index prices publicly
announced at the end of the fiscal year.
Commodity futures transactions are categorized within Level 1 of fair value hierarchy. All other derivative financial
assets and liabilities are categorized within Level 2 of the fair value hierarchy.

65

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅱ) Recurring fair value measurements categorized within Level 3 of the fair value hierarchy
The changes in financial assets and liabilities that are measured at fair value on a recurring basis and are categorized
within Level 3 of the fair value hierarchy are presented as follows. There were no material transfers between different
levels for the years ended March 31, 2018 and March 31, 2017.
2018

2017

FVPL

FVOCI

Other
financialassets
FVPL

JPY

USD

JPY

USD

JPY

USD

JPY

USD

JPY

JPY

JPY

JPY

5,054

47,577

12,049113,413

1,033

9,729

18,137

170,719

5,637

10,836－

16,474(730)(6,871)

－

－

10

94

(720)

(6,777)(2,000)－－(2,000)

－

－

2,106

19,827

－

－

2,106

19,827

－

1,025

－

1,025

Purchase

－

－

61

576

－

－

61

576

－

223

33

257

Sale

－

－

(117)

(1,110)(1,010)(9,507)(1,127)(10,616)

－

(36)

－

(36)

(158)

(1,492)

－

－

－

－

(158)

(1,492)

(79)

－

－

(79)

－

－

0

1

－

－

0

1

－

－

－

－

2

24

35

330

(33)

(317)

3

38

1,497

－

1,000

(2,497)

4,168

39,237

14,133133,038－－

18,302

172,275

5,054

12,0491,033

18,137

Other investments
FVPL

Other financial assets

FVOCI

Other investments

Total

FVPL

Total

Balance at the
beginning of theyear
Total gains orlossesProfit or loss
(Note 1)
Other
comprehensive
income (Note 2)

Foreign currencytranslationdifference
Increase (decrease)
due to changes inscope ofconsolidation
Other
Balance at the endof the year

FVPL: Financial assets measured at fair value through profit or loss.
FVOCI: Financial assets measured at fair value through other comprehensive income.
(Notes) 1. The gains or losses are included in “Other finance income” or “Other finance costs” in the consolidated statement ofincome. Of those gains or losses recognized in profit or loss, the amounts arising from financial instruments that were
held at the period end are ¥(730) million ($(6,871) thousand) for the fiscal year ended March 31, 2018 and ¥(2,000)
million for the fiscal year ended March 31, 2017.
2. The gains or losses are included in “Financial assets measured at fair value through other comprehensive income” in the
consolidated statement of comprehensive income.

66

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(ⅲ) Quantitative Information about the financial instruments categorized within fair value hierarchy Level 3
The following tables present quantitative information on the material assets categorized within Level 3 of the fair value
hierarchy, which were measured at fair value on a recurring basis.
As of March 31, 2018
Category
Financial assets measured at fairvalue through profit or loss
Financial assets measured at fairvalue through profit or loss

Fair value
JPY

Significant
Weighted average
unobservable inputs
of input values

Valuation technique

USD

2,668

25,118Discounted cash flow
methodDiscount rate

3.3 %

1,500

14,119Net asset value method－－

13,119123,491

Market multiple method

P/B ratio
Illiquidity discount

1.3 times
30.0 %

1,014

9,547

Net asset value method－－

Significant unobservable
inputs

Weighted
averageof input values

Financial assets measured at fairvalue through othercomprehensive income
Financial assets measured at fairvalue through othercomprehensive income
As of March 31, 2017
Category
Financial assets measured at fair value
through profit or loss
Financial assets measured at fair value
through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at fair value
through other comprehensive income

Fair value
JPY

Valuation technique

3,590

Discounted cash flow
methodDiscount rate

3.7%

2,497

Net asset value method－－

10,984Market multiple method

P/B ratio

1.1 times

Illiquidity discount

30.0%

1,064

Net asset value method－－

The significant unobservable inputs used in measuring the fair value of unlisted shares are the discount rate, illiquidity
discount and P/B ratio (price-to-book ratio). A substantial increase (or decrease) in the discount rate or illiquidity discountcauses the fair value to substantially fall (or rise), while a substantial increase (or decrease) in the P/B ratio causes the fairvalue to substantially rise (or fall).

67

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(7) Financial assets measured at fair value through other comprehensive income
With respect to investments in equity instruments held for the purpose of maintaining and strengthening relationships withbusiness partners, the Consolidated Group has designated such investments as financial assets to be measured at fair value
through other comprehensive income in view of the holding purpose.
1) Fair value of major items of investment
The following tables present the fair value of major items of investment in equity instruments designated as financial assets
measured at fair value through other comprehensive income.
As of March 31, 2018
AmountName of issuer

JPY

USD

MARUDAI FOOD CO., LTD.

3,078

Tokio Marine Holdings, Inc.

2,837

26,704

Nissin Seifun Group Inc.

1,919

18,065nms Holdings Corporation

1,910

17,983

BOT Lease Co., Ltd.

1,701

16,019Sotsu Corporation

1,687

15,885SHIN KURUSHIMA DOCKYARD CO., LTD.

1,299

12,234DAIO PAPER CORPORATION

1,152

10,851The Norinchukin Bank

1,011

9,517

F.C.C. Co., Ltd.
Other

28,975924

8,698

15,283

143,859

As of March 31, 2017
AmountName of issuer

JPY

MARUDAI FOOD CO., LTD.

2,921

Tokio Marine Holdings, Inc.

2,815

Nissin Seifun Group Inc.

1,511

BOT Lease Co., Ltd.

1,414

SHIN KURUSHIMA DOCKYARD CO., LTD.

1,304

Sotsu Corporation

1,190

DAIO PAPER CORPORATION

1,093

The Norinchukin Bank

1,061

F.C.C. Co., Ltd.

686

Alpha Group Inc.

634

Other

13,4272) Dividend income
JPY2018
Investments derecognized during the year
Investments held at the end of the year
Total

68

USD
2017

2018

0
804

3
902

8
7,572

805

906

7,580

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
3) Financial assets measured at fair value through other comprehensive income that were derecognized during the fiscal year
The Consolidated Group periodically reviews its held shares and sells those shares that it holds without a strong rationale withgains or losses on sale recognized in other comprehensive income. The following table presents the fair value on the date ofsale and cumulative gains or losses on sale.
JPY
USD
2018

2017

2018

Fair value on the date of sale

242

647

2,287

Cumulative gains (losses) on sale

130

132

1,224

4) Reclassification to retained earnings
The Consolidated Group reclassifies to retained earnings cumulative gains or losses arising from changes in the fair value offinancial assets measured at fair value through other comprehensive income in either of the following cases: when an
investment is disposed of, or when there is a significant decline in the fair value. Such cumulative gains or losses in othercomprehensive income that were reclassified to retained earnings for the years ended March 31, 2018 and March 31, 2017
were ¥123 million ($1,159 thousand) and ¥125 million, respectively.

(8) Hedge Accounting(Cash Flow Hedge)
A cash flow hedge is a hedge of the exposure to variability in future cash flows arising from a forecast transaction orrecognized assets or liabilities. While a hedge is designated as cash flow hedge as long as the hedge is effective, the changes in
the fair value of qualifying hedging instrument should be recorded as other comprehensive income in the Consolidated
Statement of Comprehensive Income. The Consolidated Group continues such accounting treatment until variability in future
cash flows arising from unrecognized forecast transactions or recognized assets or liabilities designated as hedged items arerecorded in profit or loss. Moreover, portions determined to be ineffective for hedging accounting are recognized in profit orloss.
The Consolidated Group designates the following instruments as cash flow hedges: forward exchange contracts to fix cash
flows from foreign currency denominated receivables and payables, foreign currency denominated firm commitments andforeign currency denominated forecast transactions, interest rate swaps to fix variable interest rate on floating rate financial
liabilities, and commodity futures to fix cash flows from forecast transactions of commodity trade.
When applying hedge accounting, the Consolidated Group confirms that there are economic relationships between the hedged
items and hedging instruments through qualitative assessments, which show whether the critical terms of the hedging
instruments and the hedged items match exactly or are closely aligned, and quantitative assessments, which show fluctuationsof the value of hedged items and hedging instruments by the same risk offset each other, in order to confirm there are
economic relationships that variability in fair value or cash flows of the hedged items that are attributable to the hedged risk
shall be offset by the changes in fair value or cash flows of the hedging instruments. The Consolidated Group also establishes
appropriate hedge ratios considering an economic relationship between hedging instruments and hedged items as well as risk
management strategy.
The amounts recognized in profit or loss for the ineffective portion of the hedge are not material both for the fiscal years ended
March 31, 2018 and March 31, 2017. In addition, the amounts reclassified from valuation differences on cash flow hedges toprofit or loss are immaterial because the forecast transactions are no longer expected to occur.
Following are the carrying amounts of the hedging instruments as of March 31, 2018 and March 31, 2017. The fair value offinancial assets related to hedging instruments is included in “Other financial assets” while the fair value of financial liabilities
related to hedging instruments is included in “Other financial liabilities (current)” or “Other financial liabilities (non-current)”
in the consolidated statements of financial position.

69

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
As of March 31, 2018
Carrying amount
Derivative assets
Derivative liabilities
JPY
USD
JPY
USD

Notional amount
JPY

USD

Foreign currency risk
Forward exchange contracts

30,823

290,128

67

637

720

6,784

Interest rate risk
Interest rate swap contracts

23,500221,197

－

－

580

5,466

686

6,466

8

82

38

366

Commodity price risk
Commodity futures contracts
As of March 31, 2017
Carrying amount
Derivative assets
Derivative liabilities
JPY
JPY

Notional amount
JPY
Foreign currency risk
Forward exchange contracts

30,026503

250Interest rate risk
Interest rate swap contracts

28,600

－

838

435

16

4

Commodity price risk
Commodity futures contracts

The longest terms of hedging cash flow fluctuation risks by “Forward exchange contracts”, “Interest rate swap contracts” and“Commodity price risk” are about 6 years 6 months, 4 years 6 months and 1 year, respectively.
The following tables present the carrying amount of cash flow hedge reserve as of March 31, 2018 and March 31, 2017.
As of March 31, 2018
Cash flow hedge reservefor discontinuing hedge accounting(before tax)
JPY
USD

Cash flow hedge reservefor continuing hedges(before tax)
JPY
USD
Foreign currency risk
Forward exchange contracts(653)(6,147)－－

Interest rate risk
Interest rate swap contracts(580)(5,466)－－

Commodity price risk
Commodity futures contracts

(30)

(284)

(3)

(29)

As of March 31, 2017
Cash flow hedge reservefor discontinuing hedge
accounting(before tax)
JPY

Cash flow hedge reservefor continuing hedges(before tax)
JPY
Foreign currency risk
Forward exchange contracts

253－

Interest rate risk
Interest rate swap contracts

(838)

－

Commodity price risk
Commodity futures contracts

11

8

The following tables present the carrying amounts of transactions that affected the consolidated statements of comprehensive
income as a result of applying hedge accounting for the fiscal years ended March 31, 2018 and March 31, 2017.

70

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)
Change in value of hedging
Reclassification from cash
instruments recognized inflow hedge reserve to profit
other comprehensive income
or loss
JPY

USD

JPY

USD

Line item for which profit
or loss was affected byreclassification

Foreign currency risk
Forward exchange contracts(706)(6,647)(199)(1,882)Other income

(11)

(113)

269

2,539

Interest expenses

(33)

(313)

(20)

(189)

Cost of sales

Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts

Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)
Change in value of hedging Reclassification from cash
instruments recognized in flow hedge reserve to profit
other comprehensive income
or loss
JPY

JPYLine item for which profit orloss was affected byreclassification

Foreign currency risk
Forward exchange contracts

352

607

Other expenses

96

270

Interest expenses

19

40

Cost of sales

Interest rate risk
Interest rate swap contracts
Commodity price risk
Commodity futures contracts(9) Transfer of financial assets
The Consolidated Group liquidates certain trade receivables by discounting notes or the like. However, with respect to someliquidated receivables, the Consolidated Group may be obligated to make payments as recourse for non-payment by the debtor.
The Consolidated Group continues to recognize such liquidated receivables as they do not meet the criteria for derecognition offinancial assets.
The Consolidated Group recognized such liquidated assets as “Trade and other receivables” in the amount of ¥5,273million($49,639 thousand) and ¥7,509 million as of March 31, 2018 and March 31, 2017, respectively. In addition, liabilities relating
to the deposit amounts which arose upon the transfer of such assets were accounted for as “Bonds and borrowings” in theamount of ¥5,273 million ($49,639 thousand) and ¥7,509 million as of March 31, 2018 and March 31, 2017, respectively. Suchliabilities are settled when payments for such liquidated assets are made, and the Consolidated Group may not use suchliquidated assets until such settlement occurs.

71

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018(10) Offsetting financial assets and financial liabilities
The following tables present the financial assets and financial liabilities recognized for the same counterparties including
financial instruments that were not offset even though they were covered by an enforceable master netting arrangement orsimilar agreement because they did not meet some or all of the offsetting criteria as of March 31, 2018 and March 31, 2017.
JPY
USD
2018
Amounts of financial assets presented in the consolidated
statement of financial position
Foreign exchangeInterest rate
Commodity
Amounts that were not offset even though they were coveredby an enforceable master netting arrangement or similar
agreement because they did not meet some or all of the

2017

2018

382

1,332

3,598

286
－

1,048
－

2,693
－

96

283

905

(247)

(695)

(2,326)

135

636

1,272

offsetting criteria
Net amounts

JPY
2018
Amounts of financial liabilities presented in the consolidated
statements of financial position
Foreign exchangeInterest rate
Commodity
Amounts that were not offset even though they were coveredby an enforceable master netting arrangement or similar
agreement because they did not meet some or all of theoffsetting criteria
Financial collateral pledged
Net amounts

USD
2017

2018

2,406

1,896

22,653

1,697
580

740
838

15,979
5,466

128

317

1,208

(247)

(695)

(2,326)

(56)

(276)

(529)

2,103

924

19,798Certain financial assets and financial liabilities have not been offset because they do not meet some or all of the criteria for
offsetting financial assets and financial liabilities. The rights to offset such financial assets and financial liabilities become
enforceable only under particular circumstances, such as when the other party fails to discharge an obligation due to its
bankruptcy or other such reasons.

72

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
31. Leases(1) Lessee
1) Finance leases
The Consolidated Group leases computer-related equipment for the enterprise system (tools, furniture and fixtures) and otherassets for finance leases.
The carrying amounts of the leased assets, net of accumulated depreciation and accumulated impairment losses, as of March
31, 2018 and March 31, 2017 are as follows:
JPY
USD
2018

2017

2018

Machinery, equipment, vehicle, tools and fixtures

770

1,002

7,254

Other

287

145

2,709

1,058

1,148

9,963

Total

The future minimum lease payments for finance leases as of March 31, 2018 and March 31, 2017 are as follows:
Present value of
Future minimum lease payments
future minimum lease payments
JPY
2018

USD
2017

2018

JPY
2018

USD
2017

2018

Within one year

428

436

4,032

382

387

3,602

Between one and five years

778

939

7,324

690

845

6,499

Over five years

113

62

1,066

97

52

920

1,170

1,285

11,021

Total

1,319

1,437

12,422Less future finance costs

(148)

(152)

(1,401)

Present value of future minimum lease
payments

1,170

1,285

11,021

The future minimum lease payments receivable under the non-cancellable subleases as of March 31, 2018 and March 31, 2017are ¥8 million ($81 thousand) and ¥12 million, respectively.
2) Operating leases
The Consolidated Group leases office buildings, system equipment and other assets as cancellable or non-cancellable
operating leases. The future minimum lease payments for non-cancellable operating leases as of March 31, 2018 and March
31, 2017 are as follows:
JPY
USD
2018

2017

Within one year
Between one and five years

141
387

Over five years
Total

2018
1,334
3,643

145

34
43
－

674

77

6,348

1,371

The total lease payments recognized as expenses under the cancellable or non-cancellable operating leases for the fiscal year
ended March 31, 2018 and March 31, 2017 are ¥7,442 million ($70,052 thousand) and ¥6,980 million, respectively.
The future minimum lease payments receivable under the non-cancellable subleases as of March 31, 2018 and March 31, 2017are ¥316 million ($2,976 thousand) and ¥37 million, respectively.

73

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(2) Lessor
1) Finance leases
The Consolidated Group leases out machinery, equipment and other assets that are classified as finance leases. The future
minimum lease payments receivable for finance leases as of March 31, 2018 and March 31, 2017 are as follows:
Future minimum lease payments receivable
Present value ofand unguaranteed residual value
future minimum lease payments receivable
JPY
2018

USD
2017

JPY

2018

2018

USD
2017

2018

Within one year

6

5

63

4

3

41

Between one and five years

26

22

246

16

15

160

Over five years

13

13

124

8

9

79

29

28

280

45

42

433

Unguaranteed residual value

Total

－

－

－

Less future finance income

(16)

(14)

(153)

Present value of future minimum lease
payments receivable

29

28

280

32. Pledged Assets(1) Pledged assets and associated secured obligations
Details of pledged assets and associated secured obligations are as follows:
JPY
2018

USD
2017

2018

Pledged assets:
Other financial assets (non-current)

20

47

188

Property, plant and equipment

643

658

6,057

Total

663

706

6,245

1,130
747

1,101
732

10,640
7,040

1,878

1,833

17,680

Associated secured obligations:Short-term borrowings (current)Long-term borrowings (non-current)
Total

Trust receipts issued under customary import financing arrangements give banks a security interest in the goods imported orsales proceeds resulting from the sales of the goods. However, due to the large volume of transactions, it is impracticable todetermine the aggregate amounts of assets covered by outstanding trust receipts and those transactions were not included in theabove amounts.

74

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(2) Assets pledged in lieu of guarantee money
The breakdown of assets pledged in lieu of guarantee money or the like is as follows:
JPY
2018
Assets pledged in lieu of guarantee money or guarantee funds
Other financial assets (current)

USD
2017

49

Other financial assets (non-current)
Other investments
Total

2018
36
－

469

30
3,216

3,118

282
30,278

3,296

3,155

31,02933. Contingent Liabilities
The Consolidated Group is contingently liable for guarantees on bank borrowings and trade payables owed by entities that do notbelong to the Consolidated Group.
The Group may become responsible for the amounts that are unpayable by the borrower and for losses attached to the unpayableamounts.
JPY
USD
2018
Debt guarantees for equity method investees
Debt guarantees for third parties

2017

2018

156

537

1,476

1,673

1,344

15,750

Total
1,830
1,881
17,226(Notes) 1. The above amounts include those for quasi-guarantee acts.
2. Debt guarantees for third parties include the debt guarantees covered by the insurance agreements that is limited to¥1,609 million ($15,152 thousand) for the fiscal year ended March 31, 2018 and ¥1,276 million for the fiscal year ended
March 31, 2017, respectively.

75

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201834. Significant Subsidiaries(1) Significant subsidiaries of the Company are as follows:
Trade nameLocation

Details of major operations

Percentage of voting
rights (%)
2018
2017

[Electronics & Devices]
Kanematsu Electronics Ltd.

Chuo-ku, Tokyo, Japan

Nippon Office Systems Ltd.

Koto-ku, Tokyo, Japan

System integration of ICT and

58.32

58.32

communications equipment(0.40)(0.40)

100.00(100.00)

100.00(100.00)

100.00100.00Development of software for and sales andmaintenance of computers and computer
peripherals, etc.

Kanematsu Communications Ltd. Shibuya-ku, Tokyo, Japan
Kanematsu Granks, Corp.

Shinjuku-ku, Tokyo, Japan

Kanematsu BD Communications
Ltd.

Kurume-shi, Fukuoka,
Japan

Kanematsu Sustech Corp.

Chuo-ku, Tokyo, Japan

Sales of mobile communications devices;
Mobile internet systems and services
Mobile contents delivery and mobile-100.00100.00related solution business(100.00)(100.00)

Sales of mobile communication device

100.00(100.00)

100.00(100.00)

52.96

52.96

100.00100.00

Sales and maintenance of parts for car

100.00100.00audio systems(20.00)(20.00)Development, manufacture, and sales ofcontrol modules for lithium ion batteries

70.00

70.00

Manufacture and sales of homeconstruction materials; Ground inspection
services and improvement work; Sales of
security systems
Import, export, storage, sales, andKanematsu Advanced Materials
Corp.

Chuo-ku, Tokyo, Japan

processing of materials and components
for vehicle equipment, industrial
electronics, and communication devices

Tanashin (Europe) GmbH
Kanekoh Electronics (Shanghai)Co., Ltd.
Kanematsu Industrial andTrading (Dalian F.T.Z.) Co., Ltd.

Duesseldorf, Germany
Shanghai, China

Dalian, Chinaof electronic components[Foods & Grain]
Kanematsu Shintoa Foods Corp.

Minato-ku, Tokyo, Japan

Kanematsu Agritec Co., Ltd.

Matsudo-shi, Chiba, Japan

Kanematsu Soytech Corp.

Chuo-ku, Osaka, Japan

North Pet Co., Ltd.

KG Agri Products, Inc.

Manufacture of materials for electronic
precision parts and import, export and sales

Food wholesaling and cold storage
Manufacture and sales of feed andfertilizer
Sales of soybeans, millet, and grain

Kuriyama-cho, Yubari-gun,

Manufacture of pet snacks (jerky, dried

Hokkaido, Japan

meat, biscuits)

Ohio, U.S.A.

Seed development; Contract farming;
Sorting, processing, and sales of food100.00100.00(100.00)(100.00)

100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00100.00(15.00)(15.00)59.90(10.00)59.90(10.00)soybeans
Kai Enterprises, Inc.

Washington, U.S.A.

Sales of hay and roughage

P.T. Kanemory Food Service

Serang, Indonesia

Manufacture of processed foods for central
kitchen and home-meal replacement76

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018

Trade nameLocation

Details of major operations

Percentage of voting
rights (%)
2018
2017

[Steel, Materials & Plants]
Kanematsu Trading Corp.

Chuo-ku, Tokyo, Japan

Sales of steel and construction materials

100.00100.00

Kyowa Steel Co., Ltd.

Kasai-shi, Hyogo, Japan

Cutting and processing of steel sheet; Sales 100.00
of construction materials(100.00)

100.00(100.00)

Kanematsu Chemicals Corp.

Chuo-ku, Tokyo, Japan

Kanematsu Wellness Corp.

Chuo-ku, Tokyo, Japan

Kanematsu Petroleum Corp.

Chiyoda-ku, Tokyo, Japan

Kanematsu Yuso Co., Ltd.

Sales of petrochemicals and automobile-100.00100.00

Sales of health foods and provision of

100.00100.00medical information(100.00)(100.00)

Sales of petroleum products and LPG

100.00100.00Chiyoda-ku, Tokyo, Japan

Delivery and storage of petroleum products
and LPG

100.00100.00Kanematsu KGK Corp.

Nerima-ku, Tokyo, Japan

Sales of machine tools and industrial
machinery

97.89

97.89

Benoit Holding Company

Illinois, U.S.A.

Holding company

85.18(85.18)85.18(85.18)

Benoit Premium Threading, LLC

Louisiana, U.S.A.

Steel Service

related chemicals

Oil well casing fabrication; Manufacture

54.00

54.00

and sales of oil well-related parts(54.00)(54.00)

51.00

51.00

(51.00)(51.00)

Sales of machine tools

100.00(100.00)

100.00(100.00)

Sales of aircraft, defense, and aerospacerelated products

100.00100.00Warsaw, Poland

Sales of automobiles

93.59

93.59

Aries Power Equipment Ltd.

Warsaw, Poland

Sales of engines, generators, and othergeneral-purpose machinery

60.00

60.00

KG Aircraft Rotables Co., Ltd.

Dublin, Ireland

96.67

96.67

[Others]
Aso Kanko Kaihatsu Co., Ltd.

Minato-ku, Tokyo, Japan－

100.00100.00

Shintoa Corp.

Chiyoda-ku, Tokyo, Japan

Beverage-vending machine operations;
Imports, exports, and sales of aircraft

100.00100.00100.00100.00Oklahoma, U.S.A.

Sales of steel materials for oil excavation

Illinois, U.S.A.

Kanematsu Aerospace Corp.

Minato-ku, Tokyo, Japan

Aries Motor Ltd.

Oilfield Tubular, Inc.
KGK International Corp.
[Motor Vehicles & Aerospace]

Replacement and maintenance of aircraft
rotable components; Leasing

engines and feedstuffs
Kanematsu Logistics &Insurance Ltd.

Chuo-ku, Tokyo, Japan

Insurance agency; Consigned freight
forwarding business

77

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018

Trade nameLocation

Details of major operations

Percentage of voting
rights (%)
2018
2017

[Overseas local subsidiaries]
Kanematsu USA Inc.

Illinois, U.S.A.

Export, import and sales of merchandise

100.00100.00Kanematsu (Hong Kong) Ltd.

Hong Kong, China

Export, import and sales of merchandise

100.00100.00100.00(100.00)

100.00(100.00)

100.00100.00(100.00)(100.00)

49.00

49.00

Kanematsu (China) Co., Ltd.

Shanghai, China

Export, import and sales of merchandise

Kanematsu (Thailand) Ltd.

Bangkok, Thailand

Export, import and sales of merchandise

Watana Inter-Trade Co., Ltd.

Bangkok, Thailand

Export, import and sales of merchandise(49.00)(49.00)100.00(100.00)

Kanematsu (Singapore) Pte. Ltd.

Singapore, Singapore

Export, import and sales of merchandise

100.00(100.00)

Kanematsu Taiwan Corp.

Taipei, Taiwan

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Kanematsu Europe Plc

London, U.K.

Export, import and sales of merchandise

100.00(100.00)

100.00(100.00)

Kanematsu GmbH

Duesseldorf, Germany

Export, import and sales of merchandise

100.00100.00Kanematsu Australia Ltd.

Sydney, Australia

Export, import and sales of merchandise

100.00100.00Kanematsu New Zealand Ltd.
Auckland, New Zealand
Export, import and sales of merchandise
100.00100.00(Note) The figures in the parentheses in “Percentage of voting rights” indicate the indirect ownership ratio included in the total.

78

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2018
(2) Non-controlling interests
The subsidiary with non-controlling interests that is significant for the Consolidated Group is Kanematsu Electronics Ltd. Its
condensed financial information is presented as follows. The amounts presented below are before the elimination of intracompany transactions.
[Condensed statement of financial position]
JPY
2018

USD
2017

2018

Current assets

58,88155,788554,236

Current liabilities

15,81016,866

148,816

Current assets (net)Non-current assets

43,071
5,621

38,922
5,875

405,419
52,911

Non-current liabilities

2,561

2,687

24,110Non-current assets (net)

3,059

3,187

28,801Equity46,131

42,109434,220

Cumulative amounts of non-controlling interests

19,294

17,620181,613[Condensed statements of income and comprehensive income]
JPY
2018

USD
2017

2018

Revenue

62,22264,175585,677

Profit for the year
Other comprehensive income

6,590
32

5,499
280

62,037308

Total comprehensive income

6,623

5,780

62,345

Profit for the year attributable to non-controlling interests

2,746

2,303

25,848Dividends paid to non-controlling interests

1,133

954

10,669[Condensed statement of cash flows]
JPY
2018

USD
2017

2018

Cash flows from operating activities

5,822

6,223

54,802

Cash flows from investing activities
Cash flows from financing activities(220)(2,731)

1,435(2,308)(2,079)(25,714)

Increase (decrease) in cash and cash equivalents, net

2,869

5,350

27,009(3) Transaction with non-controlling interests
There was no transaction with significant non-controlling interests for the fiscal year ended March 31, 2018 and March 31,
2017.

79

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201835. Related Parties(1) Related party transactions
For the fiscal year ended March 31, 2018
Type

Name

Detail of related party
relationshipTransaction amount

Outstanding amount

JPY

USD

Purchase of merchandise

1,397

13,154136

1,288

Kantatsu Co., Ltd.

Purchase of merchandise

895

8,430

1,223

11,515

Associate

Shangdong Lufeng
Foods Shanhai Corp.

Purchase of merchandise

1,138

10,7181

17

Associate

Growth D Ltd.

Purchase of merchandise

1,041

9,808

－

－

Sage Hill

AssociateNorthwest, Inc.

JPY

USD

Associate(including subsidiaries of
the associate)(Notes) 1. The related party transaction amounts are determined through negotiation with consideration given to the prevailingmarket prices.
2. As described in Note 33 Contingent Liabilities, debt guarantees are provided to the equity method investees.
3. Growth D Ltd. was excluded from scope of consolidation due to sale of shares for the fiscal year ended March 31, 2018.
For the fiscal year ended March 31, 2017
Type
Associate(including subsidiaries of

Name

Detail of related party
relationshipTransaction amount

Outstanding amount

JPY

JPY

Kantatsu Co., Ltd.

Purchase of merchandise

6,570

804

Growth D Ltd.

Purchase of merchandise

3,245

535

Purchase of merchandise

1,011

111

the associate)
Associate
Associate

Sage Hill
Northwest, Inc.

(Notes) 1. The related party transaction amounts are determined through negotiation with consideration given to the prevailingmarket prices.
2. As described in Note 33 Contingent Liabilities, debt guarantees are provided to the equity method investees.

(2) Remuneration to management executives
The amount of remuneration to the Company’s directors for the fiscal years ended March 31, 2018 and March 31, 2017 is ¥307
million ($2,895 thousand) and ¥277 million, respectively. The remuneration to the directors consists of base salary anddirectors’ bonus. The remuneration to the auditors consists of base salary.

36. Subsequent Events
Not applicable.

80