KANEMATSU CORPORATIONCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019

~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 ………………………………………………………………………………………

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

11

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

11

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

13

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

21

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

21

6. Revenue ..…………………………………………………………………………………………………………………

23

7. Segment Information ..……………………………………………………………………………………………………

25

8. Trade and Other Receivables ..……………………………………………………………………………………………

28

9. Inventories ………………………………………………………………………………………………………………

29

10. Property, Plant and Equipment …………………………………………………………………………………………

30

11. Goodwill and Intangible Assets .…………………………………………………………………………………………

32

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

36

13. Other Investments ..………………………………………………………………………………………………………

36

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

37

15. Trade and Other Payables ..………………………………………………………………………………………………

37

16. Bonds and Borrowings ...…………………………………………………………………………………………………

37

17. Provisions ...………………………………………………………………………………………………………………

38

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

39

19. Equity .……………………………………………………………………………………………………………………

40

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

42

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

42

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

43

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

44

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

44

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

45

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

46

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

47

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

49

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

53

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

56

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

79

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

80

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

81

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

82

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

86

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

87

37. Share-based Pavments .…………………………………………………………………………………………………

87

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
Consolidated Statement of Financial Position
JPY
2019

USD (Note 2)
2018

2019

(Assets)
Ⅰ. Current assets
1. Cash and cash equivalents (Note 27)
2. Trade and other receivables (Note 8)

88,941
227,300

77,731
220,583

801,350
2,047,939

3. Inventories (Note 9)
4. Other financial assets (Note 30)

96,232
3,546

93,9572,433

867,041
31,957

5. Other current assets (Note 14)

28,42019,955

256,067

Total current assets

444,443414,662

4,004,353

1. Property, plant and equipment (Note 10)

22,09021,900199,034

2. Goodwill (Note 11)
3. Intangible assets (Note 11)

8,810
23,051

6,571
20,377

79,382
207,692

4. Investments accounted for using the equity method(Note 12)

6,867

5,169

61,872

5. Trade and other receivables (Note 8)
6. Other investments (Note 13)

1,449
32,416

1,582
37,96913,056
292,063

7. Other financial assets (Note 30)
8. Deferred tax assets (Note 29)

4,216
2,609

4,479
3,696

37,991
23,512

9. Other non-current assets (Note 14)

3,504

3,478

31,578105,016

105,226

946,179

549,459

519,889

4,950,532

Ⅱ. Non-current assets

Total non-current assets
Total assets(Notes) Presentation of fiscal year and amounts (Japanese Yen and U.S. dollars)
1. “2019” refers to the Company’s consolidated fiscal year ended March 31, 2019 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, 2019
JPY
2019

USD (Note 2)
2018

2019

(Liabilities)
Ⅰ. Current liabilities
1. Trade and other payables (Note 15)
2. Bonds and borrowings (Note 16)

196,054
74,316

188,791
61,2101,766,417
669,574

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

6,093
3,469

7,009
3,773

54,89831,257

5. Provisions (Note 17)
6. Other current liabilities (Note 18)

189
32,321

156
23,371

1,703
291,211

Total current liabilities

312,443284,3132,815,061

1. Bonds and borrowings (Note 16)

65,18876,116587,339

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

2,636
6,555

2,853
6,340

23,75659,0604. Provisions (Note 17)
5. Deferred tax liabilities (Note 29)

1,368
1,362

1,639
641

12,332
12,273

6. Other non-current liabilities (Note 18)

1,205

933

10,865

Ⅱ. Non-current liabilities

Total non-current liabilities
Total liabilities(Equity)
1. Share capital (Note 19)

78,31788,525705,625

390,760

372,838

3,520,686

27,781

27,781

250,303

2. Capital surplus (Note 19)
3. Retained earnings (Note 19)

26,88260,74826,81048,559242,210547,331

4. Treasury stock (Note 19)
5. Other components of equity (Note 26)(1,318)(193)(11,882)

1) Exchange differences on translation of foreign
operations

1,865

1,275

16,8092) Financial assets measured at fair value through othercomprehensive income

9,580

12,68486,323

3) Cash flow hedges

(293)

(905)

(2,642)

11,153

13,055

100,490

Total equity attributable to owners of the Parent

Total other components of equity

125,246

116,012

1,128,452

6. Non-controlling interests

33,451

31,037

301,395

Total equity

158,698

147,050

1,429,847

Total liabilities and equity

549,459

519,889

4,950,532

2

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(a) Consolidated Statement of Income
JPY2019
Ⅰ. Revenue (Notes 6 & 7)

USD (Note 2)
2018

2019

Ⅱ. Cost of sales

723,849(613,834)

714,790(608,419)

6,521,752(5,530,537)

Gross profit

110,014106,371991,215

Ⅲ. Selling, general and administrative expenses (Note 20)
Ⅳ. Other income (expenses)(80,393)(78,420)(724,331)

1. Gain (loss) on sale or disposal of property, plant andequipment and intangible assets, net (Note 21)

(238)

(250)

(2,147)

2. Impairment loss on property, plant and equipment andintangible assets (Note 22)(111)(2,148)(1,002)

2,669(1,592)

1,560
(950)

24,050(14,344)

3. Other income
4. Other expenses
Total other income (expenses)
Operating profit (Note 7)
Ⅴ. Finance income

727(1,790)6,558

30,34926,160273,441

1. Interest income (Note 24)

371

363

3,351

2. Dividend income (Note 24)

1,189
－

1,073
10

10,720
－

1,561

1,447

14,071(2,662)(2,414)(23,985)

(434)

(730)

(3,916)(3,096)(3,144)(27,901)

363

1,579

3,277

29,17726,043262,888

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)
Total finance costs
Ⅶ. Share of profit (loss) of investments accounted forusing the equity method (Note 12)
Profit before tax
Income tax expense (Note 29)(8,728)(6,384)(78,640)

Profit for the year

20,44919,658184,248

Non-controlling interests

16,605
3,844

16,317
3,341

149,61334,636

Total

20,44919,658184,248

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)
Diluted earnings per share (Note 25)

198.22
198.153

193.79193.791.79
1.79

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(b) Consolidated Statement of Comprehensive Income
JPY2019
Ⅰ. Profit for the year

USD (Note 2)
2018

2019

20,44919,658184,248(3,031)

3,402(27,312)

199

307

1,795

(23)

0

(210)

(2,855)

3,710(25,727)948(1,427)

8,547

584

(485)

5,266

(19)

(57)

(172)

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)

1,514(1,970)13,642Other comprehensive income for the year, net of tax

Total items that may be reclassified to profit or loss

(1,341)

1,740(12,085)

Total comprehensive income for the year

19,10821,398172,163

Non-controlling interests

15,003
4,104

18,354
3,044

135,183
36,980

Total

19,10821,398172,163

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

4

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
Consolidated Statement of Changes in Equity(JPY)
Equity attributable to owners of the Parent
Other components of equity

Share capital Capital surplus

As of April 1, 201727,781

26,797

Profit for the year

Retainedearnings

34,579Treasury
stock

(217)

Cash flow
hedges

2,349

9,455

(388)

(1,073)

3,351

(516)

(1,073)

3,351

(516)

－

－

－

16,317

Other comprehensive income
Total comprehensive income for the year

Financial
Exchange
assetsdifferences on measured attranslation offair value
foreignthrough otheroperations comprehensive
income－－Dividends (Note 19)

16,317－(2,736)

Dividends to non-controlling interests
Acquisition of treasury stock(6)

Disposition of treasury stock

13

Equity transactions with non-controlling(0)interests
Total transactions with owners－

13

Reclassification from other components of
27,781

26,810

Cumulative effects of changes in accounting

year

23

48,559

(123)
(193)

1,275

12,684

(905)

(193)

1,275

12,684(905)

589(2,940)612

589(2,940)

612

－

－

－

(61)

policies (Note 2)
Restated balance at the beginning of the financial(2,736)398

equity to retained earnings (Note 26)
As of March 31, 201830

27,781

26,810

Profit for the year

48,49816,605

Other comprehensive income
Total comprehensive income for the year－－

Dividends (Note 19)

16,605－(4,655)

Dividends to non-controlling interests
Acquisition of treasury stock(1,128)

Disposition of treasury stock8

Equity transactions with non-controlling(0)interests
Share-based payment transaction (Note 37)
Total transactions with owners

64
－

72

Reclassification from other components of(4,655)(1,124)300

equity to retained earnings (Note 26)
As of March 31, 20194

27,781

26,882

5

60,748(163)(1,318)

1,865

9,580

(293)

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(JPY)
Equity attributable to owners of the Parent
Other components of equity
Total equity
Total other attributable toof definedowners of thecomponents of
Parentbenefit pension
equityplans

Remeasurement

As of April 1, 2017

Noncontrollinginterests

Total equity

11,416

100,357

29,506

129,863－

16,317

3,341

19,658

275

2,037

2,037

(297)

1,740

275

2,037

18,354

3,044

21,398Dividends (Note 19)－(2,736)

Dividends to non-controlling interests－－

Acquisition of treasury stock

－

(6)

(6)

Disposition of treasury stock

－

43

43

－

(0)

(1)

(1)

－

－

(2,698)(1,512)(4,211)

(275)

(398)

－

－

13,055116,012－(61)

13,055

115,951

31,037

146,989－

16,605

3,844

20,449137(1,601)(1,601)260(1,341)137(1,601)

15,003

4,104

19,108Dividends (Note 19)－(4,655)

Dividends to non-controlling interests－－

Acquisition of treasury stock－(1,128)(1,128)

Disposition of treasury stock

－

12

12

－

(0)

－

64

－

－

(5,708)

(137)

(300)

－

－

11,153

125,246－

Profit for the year
Other comprehensive income
Total comprehensive income for the year

Equity transactions with non-controllinginterests
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2018
Cumulative effects of changes in accounting
policies (Note 2)
Restated balance at the beginning of the financial
year－

Profit for the year
Other comprehensive income
Total comprehensive income for the year

Equity transactions with non-controllinginterests
Share-based payment transaction (Note 37)
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 20196

(2,736)(1,511)(1,511)－
31,037147,050(61)(4,655)(1,689)(0)(1,689)(1)64(1,690)(7,398)－33,451

158,698

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(USD)
Equity attributable to owners of the Parent
Other components of equity

Share capital Capital surplus

As of March 31, 2018250,303

241,561

Cumulative effects of changes in accounting

year

437,513

Treasury
stock

250,303

241,561

Profit for the year

Cash flow
hedges(1,748)

11,495

114,287(8,156)436,961(1,748)

11,495

114,287(8,156)

5,314(26,494)

5,515

5,314

(26,494)

5,515

－

－

－

149,613

Other comprehensive income
Total comprehensive income for the year

Financial
Exchange
assetsdifferences on measured attranslation offair value
foreignthrough otheroperations comprehensive
income(552)

policies (Note 2)
Restated balance at the beginning of the financial

Retainedearnings－－

Dividends (Note 19)

149,613－(41,948)

Dividends to non-controlling interests
Acquisition of treasury stock(10,172)

Disposition of treasury stock79

Equity transactions with non-controlling(6)

interests
Share-based payment transaction (Note 37)
Total transactions with owners

577
－

649

Reclassification from other components of(41,948)(10,135)

2,705

equity to retained earnings (Note 26)
As of March 31, 201937

250,303242,2107547,331(1,470)(11,882)

16,80986,323(2,642)KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(USD)
Equity attributable to owners of the Parent
Other components of equity
Total equity
attributable toof definedowners of thecomponents of
Parentbenefit pension
equityplans

Remeasurement

As of March 31, 2018

Total other

Noncontrollinginterests

Total equity

279,643

1,324,897

117,625

1,045,255

－

(552)

117,625

1,044,702

279,643

1,324,345－

149,61334,636

184,248

1,235(14,430)(14,430)

2,345(12,085)

1,235(14,430)

135,183

36,980172,163

Dividends (Note 19)－(41,948)

Dividends to non-controlling interests－－

Acquisition of treasury stock－(10,172)(10,172)

Disposition of treasury stock

－

116

116

－

(6)

－

577

－

－

(51,433)(1,235)(2,705)－－

100,490

1,128,452－

Cumulative effects of changes in accounting
policies (Note 2)
Restated balance at the beginning of the financial
year－

Profit for the year
Other comprehensive income
Total comprehensive income for the year

Equity transactions with non-controllinginterests
Share-based payment transaction (Note 37)
Total transactions with owners
Reclassification from other components ofequity to retained earnings (Note 26)
As of March 31, 2019

8

(552)

(41,948)(15,224)(4)(15,224)(10)
577(15,228)(66,662)－

301,395

1,429,847

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
Consolidated Statement of Cash Flows
JPY
2019

USD (Note 2)
2018

2019

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 and20,4493,274

19,6583,145

184,248
29,505

111

2,148

1,002

1,535

1,696

13,830(363)(1,579)(3,277)

238

250

2,147

equipment and intangible assets, net
Income tax expense

8,728

6,384

78,640(Increase) decrease in trade and other receivables(Increase) decrease in inventories(6,295)(1,132)(33,261)(13,729)(56,718)(10,204)

Increase (decrease) in trade and other payables
Increase (decrease) in retirement benefits liabilities(2,067)(285)

23,798(297)(18,624)(2,569)Other (Note 6)

7,632(1,395)

68,771

Subtotal

31,826

6,821

286,750

Interest received

375

358

3,380

Dividends received
Interest paid

1,579
(2,639)2,159(2,381)

14,228(23,779)

Income taxes paid

(6,442)(6,523)(58,046)

24,698434

222,533

Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment(3,128)443(2,136)1,365(28,191)
3,992

Payments for intangible assets
Purchases of other investments(419)(3,109)

(544)
(117)

(3,783)(28,020)

Proceeds from sale of other investments
Purchases of other financial assets

1,490
(0)

292
－

13,429
(1)

15

1,010

135

(1,729)(362)(15,583)

Net cash provided by (used in) operating activities
Ⅱ. Cash flows from investing activities

Proceeds from sale of other financial assets
Proceeds from (payments for) acquisition of subsidiaries(Notes 5 & 27)
Proceeds from (payments for) sale of subsidiaries (Note 27)
Proceeds from transfer of business
Increase in loans receivable
Proceeds from collection of loans receivable
Other
Net cash provided by (used in) investing activities

9

－

(22)

－

－

－

(62)

1,452
(1,522)

(567)

296
(369)

1,378
309

2,676
(3,329)(6,575)

1,103(59,242)KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESCONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
JPY
2019

USD (Note 2)
2018

2019

Ⅲ. Cash flows from financing activities
Increase (decrease) in short-term borrowings, net (Note 27)
Proceeds from long-term borrowings (Note 27)
Repayment of long-term borrowings (Note 27)
Proceeds from issuance of bonds (Note 27)
Redemption of Bonds (Note 27)

5,708

2,510

51,434

13,871(14,035)－

15,508(24,229)

124,983(126,457)－(5,000)

9,928－

Dividends paid
Payments for purchase of treasury stock(4,643)(1,130)(2,730)(7)(41,840)(10,182)

Dividends paid to non-controlling interests(1,709)(220)(1,542)(277)(15,402)(1,986)

Net cash provided by (used in) financing activities(7,158)(842)(64,499)

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

10,964694

98,792

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

77,731

77,566700,349

245

(529)

2,209

88,94177,731

801,350

Other (Note 27)

Ⅵ. Effect of exchange rate changes on cash and cash
equivalents
Ⅶ. Cash and cash equivalents at the end of the year (Note 27)

10(45,049)

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
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, 2019 comprise the Company and its subsidiaries (collectively, the“Consolidated Group”), and the Consolidated Group’s interests in associates and joint ventures. The Consolidated Group operates
its businesses as an integrated trading company by providing a broad array of products and services through the organic integrationof domestic and international business networks; expertise acquired in various fields; and the functions of a trading company,
including commodities trading, information gathering, market exploration, business development and organization, risk
management, and distribution. Detailed information on the business operations for each reportable segment are provided in Note 7
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 the board of directors meeting on June 21, 2019.

(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;・defined benefit assets or liabilities, which are measured at the present value of the defined benefit obligations less the fair valueof plan assets; and・Impairment of non-financial assets, which are measured at value in use or fair value.

(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 ¥110.99 to U.S.$1.00, the approximate exchange rate prevailing on March 31,
2019. 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

11

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019

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(5) Changes in Presentation Methods(Consolidated statements of cash flows)“Purchase of treasury stock,” which was included “Other” in “Cash flows from financing activities” in the previous fiscal year,
is presented separately in the fiscal year under review because it become material due to the significance of its amount.
Accordingly, (¥285) million presented in “Other” in “Cash flows from financing activities” in the consolidated statements ofcash flows in the previous fiscal year has been reclassified into “Purchase of treasury stock” of (¥7) million and “Other” of(¥277) million.

(6) Changes in accounting policies
Significant accounting policies applied to the consolidated financial statements of the Consolidated Group are the same as theaccounting policies applied to the consolidated financial statements for the previous fiscal year, except for the following.
(IFRS 15 “Revenue from Contracts with Customers”)
The Consolidated Group has adopted IFRS 15 “Revenue from Contracts with Customers” from the current fiscal year. On
transition of the IFRS 15, the Consolidated Group has adopted this standard retrospectively by recognising the cumulative
effect of initially application of this standard .
Information on critical judgments in the application of accounting policies that have a significant effect on the amounts
recognized in the consolidated financial statements is provided in “Note 3. Significant Accounting Policies.”
In conjunction with the application of this standard, the Company applied the standard by identifying contracts with customers
and performance obligations and determining the transaction prices based on the five-step approach and comparing revenue
recognized based on this approach with revenue recognized based on the prior and existing accounting standards. A difference
has occurred in the time of recognizing the satisfaction of the performance obligations in some transactions. It also results inreversing a provision (non-current) of ¥209 million and recognizing other current assets of ¥1 million, other non-current assetsof ¥4 million, other current liabilities of ¥46 million, and other non-current liabilities of ¥228 million at the beginning of thecurrent fiscal year in the consolidated statement of financial position in comparison with the case where the prior and existingaccounting standards were applied, retained earnings have decreased by ¥61 million.
Revenue, cost of sales, and other expenses decreased by ¥103 million, ¥118 million, and ¥25 million, respectively, comparedwith those if the prior accounting standard was applied, in the consolidated statement of income or loss in the current fiscal
year. In addition, in the consolidated statements of financial position at the end of the current fiscal year, trade and otherreceivables (current), other current assets, other non-current assets, other current liabilities and other non-current liabilities
increased by ¥35 million, ¥2 million, ¥5 million, ¥54 million and ¥216 million, respectively, while inventories and provisions(non-current) decreased by ¥23 million and ¥230 million, respectively.

12

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
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.
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.

13

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20193) 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.

(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.

14

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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.
15

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(8) Financial instruments
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) Debt instruments
Debt instruments that meet 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 fairvalue as other comprehensive income. When the financial asset is derecognized, the cumulative gain or loss isreclassified to profit or loss.
(b) Equity instruments
With regard to a financial asset that has classified as a financial asset measured at fair value through profit or loss, IFRS
9 permits an entity to make an irrevocable election to present in other comprehensive 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 fairvalue as other comprehensive income. When the equity instrument is derecognized, or its fair value substantiallydecreases, the Consolidated 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 unless the dividend clearly represents a
recovery of part of the cost of the investment.
(ⅲ) 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.

16

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20192) 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, contract assets and leasereceivables at an amount equal to the lifetime expected credit losses despite the above requirement.
If there is any objective evidence that financial assets are credit-impaired, such as a borrower’s significant financial difficulty,
a breach of contract of default or delinquency by the borrower, etc., the Consolidated Group measured interest income to net
carrying amount after deducting loss allowance following the effective interest method.
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. In addition, such hedging is assessed on an ongoing basis whether it was actually effective throughout thereporting periods 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.

17

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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. The amounts
accumulated in other components of equity remain in equity when hedge accounting is discontinued and are recognized in
profit or loss when the forecast transaction is recognized in profit or loss. However, if the forecast transaction is no longer
expected to occur, the amounts accumulated in other components of equity are reclassified immediately from othercomponents 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
1) Recognition of revenue
The Consolidated Group recognizes revenue from contracts with customers based on the following five-step approach.
Step 1: Identifying the contracts with customers
Step 2: Identifying the performance obligations in the contracts
Step 3: Determining the transaction price
Step 4: Allocating the transaction price to the performance obligations in the contracts
Step 5: Recognizing revenue when (or as) an entity satisfies the performance obligations
The Consolidated Group’s principal business is mainly to sell goods in its four segments of Electronics & Devices, Foods &Grain, Steel, Materials & Plant, and Motor Vehicles & Aerospace. It recognizes revenue from the sale of these goods at thetime when promised assets are delivered that is, because customers obtain control of the goods and the performanceobligations are satisfied at the time of delivery. In the provision of services, the Consolidated Group recognizes revenue inaccordance with the performance obligations that will be satisfied over time according to the progress of individual contracts.
The Consolidated Group also measures revenue at an amount obtained by deducting discounts, rebates and returned goods
from the promised consideration in the contract with the customer. If there is more than one identifiable performanceobligation in a single contract, the contract is divided into each performance obligations, and revenue is recognized for eachperformance obligation. In addition, if an economic reality is not presented unless multiple contracts are considered as one, theConsolidated Group recognizes revenue by combining the multiple contracts.

18

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
If the Consolidated Group receives the consideration from the customer before satisfying the performance obligations, theConsolidated Group recognizes it as a contract liability.
2) Presentation of revenue
If the Consolidated Group conducts a transaction as a principal, the Consolidated Group presents revenue at the total amountof consideration received from the customer. If the Consolidated Group conducts a transaction as an agent for a third party, theConsolidated Group presents revenue at the net amount of the commission.
When the Consolidated Group determines whether it conducts a transaction as a principal or as an agent for a third party, theConsolidated Group takes the following indicators into account.
・Whether the other party is primarily responsible for fulfilling the premise.
・Whether the Consolidated Group has inventory risk both during shipping and upon return around the time when the customer
places an order for the goods.
・Whether the benefits that the Consolidated Group can obtain from the goods or services of the other party are limited becauseof the fact that the Consolidated Group does not have discretion in establishing the price for the goods or services of the otherparty.

(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.
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.

19

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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.

(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.

(16) Share-based payments
The Consolidated Group introduces a performance-linked stock compensation plan as an incentive plan for its Directors andExecutive Officers. The equity-settled share-based payment plan measures at the fair value on the date of grant, recognizing it
as an expense from the date of grant through the vesting period and recognizing the same amount as an increase in capitalsurplus.

20

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
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 this standard for the fiscal year
ended March 31, 2019.
Mandatory application
Fiscal year in which theStandard
Title(from fiscal years
Consolidated Group will Summary of new or amended standard
beginning on or after)
apply the standard
Fiscal year ending
Amendment of accounting treatment
IFRS 16 Leases
January 1, 2019
March 31, 2020
for lease contracts
Under IFRS 16 (hereinafter referred to as the "Standard"), the Consolidated Group will recognize a right-of-use assets representing
its right to use the underlying leased asset and a Lease liabilities representing its obligation to make lease payments for almost alllease contracts.
The adoption of the Standard is expected to increase of assets and liabilities for leases previously classified as operating leases
under IAS 17 "Leases". Operating lease payments that were expensed in the consolidated statement of income as incurred will berecorded as depreciation expense for right-of-use assets and interest cost for Lease liabilities, and reclassified from a reducation in
cash flows from operating activities to a reduction in cash flows from financing activities in the consolidated statement of cash
flows.
The Consolidated Group expects that right-of-use assets and Lease liabilities will increase approximately ¥17 billion each on theinitial application date (April 1, 2019). The effect of the consolidated statement of income of the fiscal year ending March 31, 2020
would be negligible.

5. Business Combinations
No major business combinations took place in the previous fiscal year (from April 1, 2017 to March 31, 2018).
The major business combination that took place in the fiscal year under review (April 1, 2018 to March 31, 2019) was 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

G-Printec, Inc.
Development, manufacture and sale of card printers and related devices
December 3, 2018
Acquisition of shares with cash as consideration
G-Printec, Inc.
Percentage share of voting rights owned immediately before the acquisition date
40.0%
Percentage share of voting rights additionally acquired on the acquisition date 60.0%
Percentage share of voting rights after acquisition 100.0%(2) Purpose of the business combination
The card printer business, one of the key businesses in the Electronics & Devices segment, has been focusing on the distributionof card printers for many years. We position G-Printec, Inc. as an important strategic function to further enhance the added
value of the card printer business, and we have decided that the acquisition of the printer design and development functions of
G-Printec, Inc. will contribute to the enhancement of the corporate value of the Consolidated Group, because it will enable us tomutually generate synergistic effects by meeting even more diversified customer needs.

(3) Acquisition costs and the detail
JPY
Fair value on the acquisition date of shares of the acquired company held
immediately before the acquisition date
Fair value of shares of the acquired company additionally acquired on theacquisition date
Acquisition cost

1,440
2,160
3,600

(4) Acquisiton-related costs and its line item
Gain from remeasurement relating to business combinations of ¥610 million is recorded in “Other income” in the consolidated
statements of income as a result of re-measuring the fair value on the acquisition date of equity interest in the acquired company
held immediately before the acquisition date.

21

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(5) Assets and liabilities on the day of the business combination
JPY
3,600

Fair values of the consideration paid
Cash and cash equivalents

439

Trade receivables

845

Inventories

301

Other current assets

91

Property, plant and equipment

124

Intangible assets

2,856

Other non-current assets

25

Current liabilities(1,740)Non-current liabilities(1,831)

Goodwill (Note)

2,485

Total
3,600
(Note) The details of goodwill are mainly excess earning power and synergy effects with the existing businesses. The amount of
goodwill recognized does not include the amount that is expected to be deductible for tax purposes.

(6) Impacts on cash flows through business combination
Payments of acquisition costs (cash consideration)

JPY(2,160)Cash and cash equivalents on the acquisition date

439

Payments for acquisition of subsidiaries(1,720)(7) Impacts on the operating results of the Consolidated GroupOperating results at the acquired company from the date of acquisition to March 31, 2019 are as follows:
JPY
Revenue
1,628Profit287
Pro-forma information (unaudited information) concerning consolidated operating results in the fiscal year under review in thecase that the business combination is assumed to be conducted at the beginning of the period is revenue of ¥726,220 million andprofit attributable to owners of the Parent of ¥16,760 million.

22

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
6. Revenue(1) Disaggregation of revenue
As disclosed in Note 7 Segment information, the Consolidated Group has four reportable segments: Electronics & Devices,
Foods & Grain, Steel, Materials & Plant and Motor Vehicles & Aerospace. In addition, the Consolidated Group disaggregatesrevenue in Electronics & Devices recognized from contracts with customers into three categories: ICT solutions, Mobile andOthers. Similary, revenue in Steel, Materials & Plant is disaggregated into Energy and Others. The reconciliations of thedisaggregated revenue with the group’s sales components are as follows.
The accounting methods for the revenue are consistent with those stated in Note 3. Significant Accounting Policies.
JPY
USD
2019

2018

2019

Electronics & Devices
ICT solution
MobileOthersFoods & Grain

65,56160,556590,695

135,094

131,9101,217,182

64,530244,859

70,550231,260

581,4082,206,136

Steel, Materials & Plant
Energy73,19996,432659,511

OthersMotor Vehicles & Aerospace

66,234
61,93856,64054,204

596,761
558,056

711,417

701,555

6,409,748

11,96012,691

107,763

723,378

714,247

6,517,512

Total reportable segment
OthersTotal revenue arising from contracts with customers
Revenue arising from other sources

470

543

4,241

Total

723,849

714,790

6,521,752(Notes)Revenue arising from other sources includes revenue recognized in accordance with IAS 17 "Lease".

23

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(2)Contract balances
Information on contract assets and liabilities arising from contracts with customers are as follows:
JPY
2019
Contract assets
Contract liabilities

7
11,273USD
The date of intial
application(April 1, 2018)
168
4,504

2019
67
101,571

Contract assets primarily relate to the consolidated group’s rights to receive consideration for performance obligations that havebeen completed, but not yet billed for, as of the reporting date. Contract assets are reclassified as receivables when theConsolidated Group’s right to payment becomes unconditional.
Contract liabilities mainly relate to consideration received from customers before the Consolidated Group delivers goods or
products to customers, based on receivables management and other considerations. The balance may fluctuate temporarily at
the timing of the contract. The Consolidated Group recognized revenue on all of the balance of contract liabillities as of April
1, 2018 during the fiscal year ended March 31, 2019. There are no significant amounts of revenue recognized during the year
ended March 31, 2019 from performance obligations satisfied in the prior fiscal year. The increase of contract liabilities is
included in a reduction of other from operating activities in the Consolidated Statement of Cash Flows.

(3)Transaction price allocated to the remaining performance obligations
Regarding performance obligation satisfy over time in maintenance and warranty with service, the Consolidated Group
recognize as a contract liability received consideration and the revenue has been allocated according to maintenance period orsatisfaction of performance obligation. In addition, the Consolidated Group recognize as a contract liability that alreadyreceived a part of consideration upon delivery of goods.
Transaction price allocated to the remaining performance obligations are as follows. It`s not included expected transactions
term within one years.
JPY

USD

2019

2019

Within one year

10,517

94,762

Over one years

11,387

102,599

21,905

197,361

Total(Notes)The transaction for remaining performance transaction by over one year is mainly sales of goods as of year ended March
31 ,2019. The performance obligation expect to satisfy within three years.

(4)Assets recognized from the costs of obtaining or fulfilling contracts with customers
There are no assets recognized from the costs of obtaining or fulfilling contracts with customers as of the year ended March 31,
2019. In addition, if the amortization period of the assets that the group otherwise would have recognized is one year or less,the group applies the practical expedient of recognizing the incremental costs of obtaining the contract as an expense whenincurred.

24

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
7. 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 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 operates businesses related to environmental and 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.

25

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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, 2019 (from April 1, 2018 to March 31, 2019)(JPY)
Electronics &Devices
Revenue
External
Inter-segment
Total revenue
Segment profit (loss)
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

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

Total

Others(Note 1)

Adjustment(Note 2)－

Consolidated

265,530282

244,8591

139,436
66

62,06324

711,888374

11,960103(478)

723,849－

265,812244,860

139,50262,087712,262

12,064(478)

723,849

18,533

3,951

4,437

2,549

29,472850

26

30,349

1,345

579

864

390

3,179

116

(21)

3,274

(78)

53

28

32

35

327

－

363

197,389

124,172

133,762

48,296503,621

9,520

36,318549,459

－

1,407

2,521

350

4,279

2,591

(3)

6,867

1,377

335

1,101

701

3,516

251

415

4,183

Fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019)(USD)
Reportable segment

Revenue
External
Inter-segment
Total revenue
Segment profit (loss)
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

Others(Note 1)

Adjustment(Note 2)

6,413,989
3,372

107,763935(4,307)

6,521,752－

559,399

6,417,361

108,698(4,307)

6,521,752

22,968265,538

7,665

238

273,441

7,786

3,520

28,647

1,048

(190)

29,505

485

254

293

324

2,953

－

3,277

1,778,447

1,118,775

1,205,172

435,1424,537,536

85,776327,220

4,950,532－

12,68322,715

3,160

38,55823,346(32)

61,872

12,409

3,026

9,925

6,324

31,684

2,264

3,740

37,688

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

2,392,379
2,543

2,206,136
14

1,256,294
595

559,180
2202,394,922

2,206,150

1,256,889

166,988

35,60039,98312,124

5,218

(708)

Total

－

Consolidated(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 ¥26 million ($238 thousand) includes inter-segment elimination of ¥26 million($238 thousand).
(2) Adjustment for segment assets of ¥36,318 million ($327,220 thousand) includes inter-segment elimination of¥(10,141) million ($(91,373) thousand) and corporate assets of ¥46,459 million ($418,593 thousand) that are notallocated to any reportable segment. The corporate assets consist mainly of cash and bank deposits associated withfinancing activities and assets such as investment securities.
(3) Adjustment for depreciation and amortization of ¥(21) million ($(190) thousand) includes inter-segment elimination of¥(21) million ($(190) thousand).
(4) Adjustment for investments accounted for using the equity method of ¥(3) million ($(32) thousand) includes intersegment elimination of ¥(3) million ($(32) thousand).
(5) Adjustment for capital expenditures of ¥415 million ($3,740 thousand) includes corporate assets of ¥415 million($3,740 thousand) that are not allocated to any reportable segment. The corporate assets consist mainly of leaseequipment related to the information system of the subsidiary.

26

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)(JPY)
Reportable segment
Others(Note 1)

Adjustment(Note 2)702,099374

12,691
62(436)

714,790－

54,464702,473

12,753(436)

714,790

2,541

26,179(20)

226,160

838

425

3,032

135

(21)

3,145

Electronics &Devices

Foods &
Grain

Steel,
Materials &
Plant

Motor
Vehicles &Aerospace

263,310277

231,260
4

153,07580

54,453
11

263,587

231,265

153,155

17,556

2,149

3,930

1,205

562

Total

Consolidated

Revenue
External
Inter-segment
Total revenue
Segment profit (loss)－

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

361

62

19

33

476

1,102

0

1,579

194,788

118,829

121,456

42,898477,972

9,112

32,803519,889

Other assets:
Investments accounted for using theequity method
Capital expenditures

873

1,337

83

326

2,620

2,552

(3)

5,169

1,359

600

486

384

2,831

120

153

3,105

(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 includes inter-segment elimination of ¥2 million.
(2) Adjustment for segment assets of ¥32,803 million includes inter-segment elimination of ¥(15,610) million andcorporate assets of ¥48,414 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 ¥(21) million includes inter-segment elimination of ¥(21) million.
(4) Adjustment for Share of profit (loss) of investments accounted for using the equity method of ¥0 million includes inter-segment elimination of ¥0 million.
(5) Adjustment for investments accounted for using the equity method of ¥(3) million includes inter-segment eliminationof ¥(3) million.
(6) Adjustment for capital expenditures of ¥153 million includes inter-segment elimination of ¥(0) million and corporate
assets of ¥153 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
2019

2018

2019

Segment profit

30,34926,160273,441

Finance income and finance costs
Share of profit (loss) of investments accounted(1,535)(1,696)(13,830)

363

1,579

3,277

29,17726,043262,888

for using the equity method
Profit before tax(3) Information on products and services
The information on products and services is disclosed in Note 6. Revenue.

27

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(4) Geographic information
1) External revenue
JPY
2019

USD
2018

2019

Japan
Asia

597,774
51,157

592,687
51,411

5,385,845
460,922

North America
Europe53,70816,492

48,665
17,397

483,902148,592

Others

4,716

4,627

42,492

723,849

714,790

6,521,752

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
2019

USD
2018

2019

Japan

47,292

42,172

426,100

Asia
North America

1,172
6,750

991
6,548

10,56760,824

EuropeOthers

2,216
24

2,580
35

19,971
223

57,45752,328517,685

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, 2019 and March 31, 2018.

8. Trade and Other Receivables
The breakdown of trade and other receivables is presented as follows:
JPY
2019
Notes and accounts receivable
Loans receivable
Other
Less: loss allowance
Total
Current assets
Non-current assets
Total

USD
2018

2019

222,551

215,705

2,005,148

3,195
4,830

3,425
5,021

28,79043,518(1,827)(1,985)(16,462)

228,749

222,166

2,060,995

227,300

220,583

2,047,939

1,449

1,582

13,056

228,749

222,166

2,060,995

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

28

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
9. Inventories
The breakdown of inventories is presented as follows:
JPY
2019
Merchandise and finished goods
Raw materials and supplies
Work in progress
Total

USD
2018

2019

93,2992,335

91,334
2,045

840,614
21,046

597

577

5,381

96,232

93,957

867,041

The amounts of inventory write downs that were recognized as expense during the fiscal year ended March 31, 2019 and March
31, 2018 are ¥597,766 million ($5,385,767 thousand) and ¥592,212 million, respectively.
The amounts of inventory write downs that were recognized as expense during the fiscal years ended March 31, 2019 and March
31, 2018 are ¥276 million ($2,490 thousand) and ¥365 million, respectively.

29

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201910. Property, Plant and Equipment
Changes in costs, accumulated depreciation and accumulated impairment losses of property, plant and equipment are presented asfollows:[Costs](JPY)

As of April 1, 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
Acquisitions
Acquisitions through business combinations
Transfers from construction in progress
Disposals
Exchange differences
Other
As of March 31, 2019

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures16,439822
180(2,427)(6)

27,9741,331
4478(2,676)(289)

10,5722－
25(2,365)
(6)

588
336
－
(591)
(0)
(13)

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

(12)

(18)

－

－

(31)

500
15,400
514
25
108
(546)
(33)
99
15,567

21
26,825
2,179
101
214
(2,021)
149(174)
27,274

75
8,303
－
－
－
－
(1)
－
8,301

(16)
301
522
2
(293)
(1)
12
0
544

580
50,8313,216
129
28(2,569)126(75)
51,688Construction inprogress

Land

Total

[Accumulated depreciation and accumulated impairment losses](JPY)

As of April 1, 2017
Depreciation
Impairment losses
Disposals
Exchange differences
Increases (decreases) due to a change in thescope of consolidation
Other
As of March 31, 2018
Depreciation
Impairment losses
Disposals
Exchange differences
Other
As of March 31, 2019

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures(9,663)
(630)
(69)
2,047
4

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

(37)
－
(2,074)
963
－

－
－
－
－
－

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

10

15

－

－

26

(112)
(8,413)
(759)
(58)
390
6
4
(8,830)35(19,293)(1,793)
(20)
1,573
(31)
22
(19,543)(75)(1,224)－－－－－(1,224)

－
－
－
－
－
－
－
－

(152)
(28,930)(2,552)
(78)
1,963
(25)
26
(29,597)30

Construction inprogress

Land

Total

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
[Carrying amount](JPY)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

As of March 31, 2018

6,986

7,532

7,079

301

21,900

As of March 31, 2019

6,737

7,731

7,077

544

22,090Construction inprogress

Land

Total

[Costs](USD)

As of March 31, 2018

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

Construction inprogress

Land

Total

138,753

241,694

74,8152,720

457,982

Acquisitions
Acquisitions through business combinations

4,638
233

19,636
918

－
－

4,709
20

28,983
1,171

Transfers from construction in progress
Disposals

974(4,925)

1,929(18,213)－－(2,643)(16)

259(23,155)

Exchange differences
Other

(304)
896

1,350
(1,576)

(16)
－

111
2

1,141
(678)

As of March 31, 2019

140,264

245,738

74,7994,903

465,703[Accumulated depreciation and accumulated impairment losses](USD)
Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures

As of March 31, 2018(75,804)(173,828)

Depreciation
Impairment losses(6,839)(523)(16,163)(183)

Disposals
Exchange differences

3,515
54

14,177(288)

Other
As of March 31, 2019

Construction inprogress

Land(11,030)－(260,662)(23,001)
(705)

－

－

－
－

－
－
－
－
－

38

203

－
－

(79,558)(176,082)(11,030)

Buildings andstructures

Machinery,
vehicles, tools,
furniture andfixtures60,70669,656

Total

17,692(234)
241(266,670)[Carrying amount](USD)

As of March 31, 2019Land
63,769Construction inprogress
4,903

Total
199,034

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.

31

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
11. 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
2019
Balance at the beginning of the year

7,578

Acquisitions through business combinations
Exchange differences
Balance at the end of the year

USD
2018

2019
7,203

68,277

2,485

495

22,396

96

(121)

871

10,1607,578

91,544[Accumulated impairment losses]
JPY2019
Balance at the beginning of the year
Impairment losses
Balance at the end of the year

USD
2018

2019

(1,006)(899)(9,065)

(343)

(107)

(3,096)(1,349)(1,006)(12,162)[Carrying amount]
JPY
2019
Carrying amount

USD
2018

8,810

2019
6,571

79,3822) 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
USD
2019

2018

2019

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

4,248
2,098

1,763
2,123

38,282
18,909Foods & Grain segment
Pet-related businesses of the domestic subsidiaries

－

319

－

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

2,247

2,151

20,25032

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
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:
2019
2018
Electronics & Devices segment
Electronics business of the domestic subsidiaries

6.2%

2.8%

Mobile business of the domestic subsidiaries

8.9%

6.6%

7.0%

5.6%

11.8%

13.4%

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 exceeds its carrying amount. Thus, even if major assumptions are changed to a reasonable extent, it is unlikelythat such changes in major assumptions will reduce the recoverable amounts of the Consolidated Group’s cash-generating
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, 2017

Other

Total

8,596

17,1404,427

30,164

322

－

63

386

0

－

1

1

Disposals

(313)

－

(14)

(328)

Exchange differences

(18)

－

(180)

(198)

Other

(19)

－

(1)

(20)

8,568

17,140

4,295

30,004

418

－

17

435

52

－

2,804

2,856

(204)

－

(21)

(226)

Exchange differences

14

－

144

158

Other

54

－

(104)

(49)

8,904

17,1407,134

33,179Acquisitions
Acquisitions through businesscombinations

As of March 31, 2018
Acquisitions
Acquisitions through businesscombinations
Disposals

As of March 31, 201933

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
[Accumulated amortization and accumulated impairment losses](JPY)
Carrier shop
operating rights

Software
As of April 1, 2017

Other

Total

(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)

Amortization

(396)

－

(368)

(765)

Impairment losses

(32)

－

－

(32)

Disposals

200

－

4

205

Exchange differences

(12)

－

(52)

(64)

Amortization

As of March 31, 2018

Other
As of March 31, 2019

25

－

131

156

(7,744)(234)(2,148)(10,128)[Carrying amount](JPY)
Carrier shop
operating rights

Software

Other

Total

As of March 31, 2018

1,039

16,906

2,432

20,377

As of March 31, 2019

1,159

16,906

4,986

23,05134

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
[Costs](USD)
Carrier shop
operating rights

Software

Other

Total

As of March 31, 201877,198

154,436

38,704

270,337

Acquisitions

3,771

－

156

3,928

475

－

25,26425,739(1,846)－(195)(2,041)

Exchange differences

132

－

1,298

1,430

Other

495

－

(942)

(448)

80,225

154,436

64,284

298,945

Acquisitions through businesscombinations
Disposals

As of March 31, 2019

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

Software

Other

Total

As of March 31, 2018

(67,834)(2,113)(16,790)(86,737)

Amortization(3,574)－(3,323)(6,897)

Impairment losses

(297)

－

－

(297)

Disposals

1,809

－

41

1,850

Exchange differences

(115)

－

(470)

(585)

Other

230

－

1,182

1,412

(69,780)(2,113)(19,360)(91,253)

As of March 31, 2019
[Carrying amount](USD)
Carrier shop
operating rights

Software
As of March 31, 2019

10,445

152,322

Other
44,925

Total
207,692

The carrier shop operating rights were recognized as intangible assets upon acquisition of the mobile business by the
consolidated subsidiary of the Company. Fundamentally the rights are expected to exist 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 is consistent with the forecasts of thenominal GDP growth rates or similar 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, 2019 and March 31, 2018.
Amortization expenses are included in “Cost of sales” and “Selling, general and administrative expenses” in the consolidated
statement of income.

35

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
The discount rates before tax used to determine the value in use of the Consolidated Group’s cash-generating units arepresented as follows:
2019

2018

Electronics & Devices segment
Mobile business of the domestic subsidiaries

8.3%

6.5%

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

12. 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
2019

USD
2018

2019

Associates

6,749

5,057

60,807

Joint ventures

118

112

1,065

[Profit or loss from continuing business]
JPY
2019

USD
2018

2019

Associates

304

814

2,740

Joint ventures

59

764

537

[Other comprehensive income]
JPY
2019
Associates

USD
2018

(42)
－

Joint ventures

2019
(57)
－

(381)
－

[Total comprehensive income]
JPY
2019

USD
2018

2019

Associates

261

757

2,358

Joint ventures

59

764

537

13. Other Investments
The breakdown of other investments is presented as follows:
JPY
2019

USD
2018

2019

Financial assets measured at fair value through profit or loss

3,962

4,168

35,706

Financial assets measured at fair value through othercomprehensive income

28,45332,805

256,357

Financial assets measured at amortized cost
Total

36

－

994

－

32,41637,969292,063

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201914. Other Current Assets and Other Non-current Assets
The breakdown of other current assets and other non-current assets is presented as follows:
JPY
2019

USD

2018

Advance payments
Prepaid expenses

19,666
4,809

Contract assets
Other

7
7,441

2019
11,001
4,766－

177,193
43,336

7,666

67
67,04931,92523,433

287,645

Current assets

28,42019,955

256,067

Non-current assets

3,504

3,478

31,57831,92523,433

287,645

Total

Total

15. Trade and Other Payables
The breakdown of trade and other payables is presented as follows:
JPY
2019

USD
2018

2019

Notes and accounts payable

142,951

141,292

1,287,965

Import bills payable
Accounts payable - commission

42,443
10,66036,468
11,030382,405
96,047

196,054

188,791

1,766,417

196,054－

188,791－

1,766,417－

196,054

188,791

1,766,417

Total
Current liabilities
Non-current liabilities
Total

16. Bonds and Borrowings
The breakdown of bonds and borrowings is presented as follows:
2019
－

－

4,987

Averageinterest rate
(Note)－

48,463436,649

42,653

1.48%－

25,852

232,925

13,5681.18%－

14,930134,518

14,910－－50,258452,820

61,2051.00%

JPY
Current portion of bonds
Short-term borrowings
Current portion of long-termborrowings
Bonds (excluding the current portion)
Long-term borrowings (excluding thecurrent portion)
Total

USD

2018
JPY

139,504

1,256,913

137,326

Current liabilities

74,316

669,574

61,210Non-current liabilities

65,188587,339

76,116

Maturity date－

September 2020 to October
2029

Total
139,504
1,256,913
137,326(Note) The “average interest rate” is presented as the weighted average interest rate against the borrowings outstanding at the end of
the fiscal year. The interest rate for bonds is presented in the “Details of bonds” below.

37

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
[Details of bonds]
IssuerBond Name

Issue dateKanematsu

Unsecured Straight
Bonds No 1

March 10,

Corporation

Unsecured Straight
Bonds No 2(5-year bonds)
Unsecured Straight

Kanematsu
Corporation

Bonds No 3(5-year bonds)

2018

JPY

USD

JPY

Coupon rate

Collateral

March 8,－4,987

0.40% per annum

None

March 10,
2016

4,985

44,922

4,9780.64% per annum

None

March 10,2021

December
14, 2017

4,972

44,8054,965

0.42% per annum

None

December
14, 20222019

Unsecured Straight

Kanematsu

DecemberBonds No 4
4,971
44,792
4,966 0.57% per annum
14, 2017(7-year bonds)(Note) The maturity schedule of bonds after the end of the current fiscal year is presented as follows:

Corporation

Within one year
USD

JPY

USD

JPY

USD

－

－

4,985

44,922

－

－

bonds

DecemberNone

13, 2024

Over 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
Corporate

Maturity
date

－

2016

(3-year bonds)

Kanematsu
Corporation

2019

JPY

USD

JPY

USD

4,972

44,805

－

－

JPY

USD

4,971 44,792

17. Provisions
Changes in provisions are presented as follows:(JPY)
Asset retirement
obligations
Balance as of April 1, 2018

Other

Total

1,310

485

1,796

－

(209)

(209)

1,310

276

1,587

Provisions made

124

27

151

Provisions used

Adjustment for IFRS15
Restated balance as of April 1, 2018

(115)

(53)

(168)

Provisions reversed

－

(39)

(39)

Unwinding of discount

19

－

19

Foreign exchange translation differences

－

7

7

1,338

218

1,557

Balance as of March 31, 201938

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(USD)
Asset retirement
obligations
Balance as of April 1, 2018
Adjustment for IFRS15
Restated balance as of April 1, 2018

Other

Total

11,810

4,375

16,185－(1,880)(1,880)11,8102,495

14,305

Provisions made

1,118

245

1,364

Provisions used

(1,036)(484)(1,520)

Provisions reversed

－

(351)

(351)

Unwinding of discount

172

－

172

Foreign exchange translation differences
Balance as of March 31, 2019

－

66

66

12,064

1,971

14,035The current and non-current portions of provisions are presented as follows:
JPY
2019
Current liabilities
Non-current liabilities
Total

USD
2018

2019

189

156

1,703

1,368

1,639

12,332

1,557

1,796

14,035

Asset 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.

18. Other Current Liabilities and Other Non-current Liabilities
The breakdown of other current liabilities and other non-current liabilities is presented as follows:
JPY
2019

USD

2018

2019

Advances received
Contract liabilities

7,940
11,273

8,392－

71,544
101,571

Accrued expenses
Unearned revenue

3,464
74

3,337
3,029

31,216667

Other

10,774

9,545

97,07733,52724,304

302,076

32,321

23,371

291,211

Total
Current liabilities
Non-current liabilities
Total

39

1,205

933

10,86533,52724,304

302,076

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201919. 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 sets the maximum ratio of risk assets (See Note 2) and examines the appropriateness of scale of shareholders'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 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, 2019 and March 31, 2018 are presented as follows:(Unit: times)
2019
Net DER

2018
0.4

0.5

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

(2) Number of shares authorized to be issued, issued shares and shares of treasury stock(Unit: share)
2019
Shares authorized to be issued(No-par common stock)2018
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
1,068,136
390,123(No-par common stock)(Notes) 1. Shares of treasury stock in the current fiscal year includes 100,000 shares of the Company held by the associate and711,500 shares of the Company held by the stock issuance trust for officers.
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.

40

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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 21, 2018
Board of Directors Common stock
meeting
Oct. 31, 2018
Board of Directors Common stock
meeting

Resolution

Type of stock

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

Source ofdividends

Total amounts ofdividends

Dividends
per share

Record date

Effective date

JPY

USD

Yen

Retainedearnings

2,569

23,151

30.50

0.275

Mar. 31, 2018

Jun. 4, 2018

Retainedearnings

2,106

18,976

25.00

0.225

Sep. 30, 2018

Dec. 3, 2018

Source ofdividends
Retainedearnings
Retainedearnings

Total amounts ofdividends

Dividends
per share

JPY

Yen

U.S.$

Record date

Effective date

1,263

3.00

Mar. 31, 2017

Jun. 5, 2017

1,474

3.50

Sep. 30, 2017

Dec. 1, 2017

meeting(Notes) 1. The dividends per share resolved by the board of directors meeting on May 22 and October 31, 2017, with record date on
March 31 and September 30, 2017 are provided as the amounts before share consolidation as of October 1, 2017.
2. The total amount of dividends resolved by the board of directors meeting on October 31, 2018 includes ¥17 million($160 thousand) of the dividends to the shares of the Company held by the stock issuance trust for officers.

41

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20192) 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.$

Effective date

May 20, 2019
Retained
Board of Directors Common stock
2,948
26,56635.00
0.315 Mar. 31, 2019
Jun. 3, 2019
earnings
meeting*The total amount of dividends resolved by the board of directors meeting on May 20, 2019 includes ¥24 million ($224
thousand) of the dividends to the shares of the Company held by the stock issuance trust for officers.

20. Selling, General and Administrative Expenses
The breakdown of selling, general and administrative expenses is presented as follows:
JPY
2019

USD
2018

2019

Depreciation and amortization
Personnel expenses

2,174
44,9442,027
43,444

19,594404,943

Outsourcing service charges
Rent expenses

7,670
6,512

7,264
6,742

69,10858,677Other

19,091

18,941

172,009

80,39378,420724,331Total

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
2019

2018

2019

Gain on sale of property, plant and equipment

32

43

295

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

32

43

295

Loss on sale of property, plant and equipment

(8)

(68)

(73)

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

(8)

(68)

(73)

(241)
(21)

(192)
(34)

(2,178)
(190)

(262)

(226)

(2,368)

(238)

(250)

(2,147)

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

42

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
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
2019

2018

2019

Property, plant and equipment(78)(2,146)(705)

Goodwill
Intangible assets

(343)
(32)

(107)
(2)

(3,096)
(297)

(454)

(2,255)(4,098)Total(2) Breakdown by reportable segment
The breakdown of impairment losses by reportable segment is presented as follows:
JPY
2019

USD
2018

2019

Electronics & Devices

(77)

(2)

(701)

Foods & Grain
Steel, Materials & Plant

(107)
(5)

Other/Adjustment and elimination

(377)
－
－

(2,141)(3,397)
－
－

Total

(454)

(2,255)(4,098)For the fiscal year ended March 31, 2018, an impairment loss of ¥1,161 million was recognized as a result of reducing thecarrying amount of idle land owned in Japan to the recoverable amount of ¥602 million. An impairment loss of ¥975 million
was also recognized as a result of reducing the carrying amount of assets for transfer of golf business to the recoverable amountof ¥1,566 million. The recoverable amount is based on fair 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 was recognized as a result of
reducing the carrying amount of goodwill to the recoverable amount of ¥359 million because future cash flows anticipated tobe generated was judged to be lower than originally assumed. The recoverable amount is based on the value in use and it wasestimated by discounting future cash flows at a pre-tax rate of 6.55%. The asset belongs to the Foods & Grain segment.
For the fiscal year ended March 31, 2019, the pet-related business of the domestic subsidiary recognized, an impairment loss of¥319 million ($2,875 thousand) as a result of reducing the carrying amount of goodwill to the recoverable amount of ¥950
million ($8,563 thousand) because future cash flows is anticipated to be lower than its originally value. The recoverable amountis based on the value in use and it was estimated by discounting future cash flows at a pre-tax rate of 7.01%. 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.

43

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201923. Exchange Differences
Exchange differences recognized in profit or loss for the fiscal years ended March 31, 2019 and March 31, 2018 were ¥646
million ($5,828 thousand) and ¥521 million, respectively and are included in “Other income” in the consolidated statement ofincome. In addition, each amount includes gains or losses arising from currency-related derivative transactions that were enteredinto 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 theyarise.

24. Finance Income and Finance Costs
The breakdown of finance income and finance costs is presented as follows:
JPY
2019
Interest income
Financial assets measured at amortized cost

USD
2018

2019

371
－

352

Financial assets measured at fair value through profit or loss

11

3,351
－

Total interest income

371

363

3,351

227

268

2,046

962

805

8,674

1,189

1,073

10,720

Other finance income

－

10

－

Total other finance income

－

10

－

Total finance income

1,561

1,447

14,071(2,446)(2,144)(22,044)

(215)

(269)

(1,941)(2,662)(2,414)(23,985)

Other finance costs

(434)

(730)

(3,916)

Total other finance costs

(434)

(730)

(3,916)

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)

Total finance costs(3,096)(3,144)(27,901)(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.

44

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201925. Earnings Per Share Attributable to Owners of the Parent(1) Basic earnings per share
Yen
2019
Basic earnings per share
Diluted earnings per share

U.S. dollar
2018198.22
198.152019
193.79193.791.79
1.79

The amount of diluted earnings per share is calculated by deeming the shares authorized to be issued subject to conditions
which are expected to be provided under the performance-linked stock compensation plan as potential shares.

(2) Bases for calculation of basic earnings per share
JPY
2019

USD
2018

2019

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

16,605－

16,317－

149,613－

Profit used to calculate basic earnings per share
Profit used to calculate diluted earnings per share

16,605
16,605

16,317
16,317

149,613
149,613

Thousand shares
2019
Weighted average number of common shares2018
83,773

Increase due to performance-linked stock compensation plan
Weighted average number of common shares adjusted for
dilution

31

84,202－

83,80484,202(Notes) 1. 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 ownersof the parent is provided.
2. In the calculation of the basic earnings per share, the shares of the Company owned by the stock issuance trust for
officers below are included in the treasury stock which is deducted in the calculation of average number of shares
during the fiscal year.
Previous consolidated fiscal year
ー shares
Consolidated fiscal year under review
437,846 shares

45

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201926. Other Components of Equity and Other Comprehensive Income
Changes in other components of equity are presented as follows:
JPY
2019
Exchange differences on translation of foreign operations
Balance at the beginning of the year

USD
2018

2019

1,275

2,349

11,495

Changes during the period589(1,073)

5,314

Balance at the end of the year

1,865

1,275

16,809Balance at the beginning of the year
Changes during the period

12,684(2,940)

9,455
3,351

114,287(26,494)

Reclassification to retained earnings

(163)

(123)

(1,470)

Balance at the end of the year

9,580

12,68486,323

Balance at the beginning of the year
Changes during the period

(905)
612

(388)
(516)

(8,156)
5,515

Balance at the end of the year

(293)

(905)

(2,642)

－

－

－

137
(137)

275
(275)

1,235
(1,235)

Financial assets measured at fair value through othercomprehensive income

Cash flow hedges

Remeasurements of defined benefit pension plans
Balance at the beginning of the year
Changes during the period
Reclassification to retained earnings
Balance at the end of the year

－

－

－

Other components of equity
Balance at the beginning of the year

13,055

11,416

117,625

Changes during the period
Reclassification to retained earnings(1,601)
(300)

2,037
(398)

(14,430)(2,705)

Balance at the end of the year

11,153

13,055

100,49046

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
The breakdown for the amounts of reclassification adjustments and deferred tax in other comprehensive income is presented asfollows:
JPY
USD
2019

2018

2019

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

(4,440)

4,980(40,004)

Amount before deferred tax
Deferred tax(4,440)

4,980(40,004)

1,408(1,577)

12,692(3,031)

3,402(27,312)Amount arising during the year

263

322

2,372

Amount before deferred tax
Deferred tax

263
(64)

322
(14)

2,372
(578)

Remeasurements of defined benefit pension plans

199

307

1,795

948
－

(1,427)
－

8,547
－

948

(1,427)

8,547

104
737

(751)
49

946
6,646

Deferred tax

842
(258)

(701)
216

7,592
(2,325)

Cash flow hedges

584

(485)

5,266

(70)
27

(25)
(31)

(632)
250

(42)

(57)

(381)

(1,341)

1,740(12,085)

Financial assets measured at fair value through othercomprehensive income
Remeasurements of defined benefit pension plans

Exchange differences on translation of foreign operations
Amount arising during the year
Reclassification adjustments
Exchange differences on translation of foreign operations
Cash flow hedges
Amount arising during the year
Reclassification adjustments
Amount before deferred tax

Share of other comprehensive income of investments
accounted for using the equity method
Amount arising during the year
Reclassification adjustments
Share of other comprehensive income of investments
accounted for using the equity method
Total 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
2019

2018

2019

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

88,94177,731

801,350

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

88,94177,731

801,350

88,94177,731

801,350

Cash and cash equivalentsin the consolidated statement of financial position
Cash and cash equivalentsin the consolidated statement of cash flows

47

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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
2019

2018

2019

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

1,700
3,012

1,274
145

15,322
27,143

Breakdown of liabilities at the acquisition dateCurrent liabilities(1,749)(242)(15,766)

Non-current liabilities
Goodwill(1,831)
2,480

(232)
154

(16,500)
22,353

Fair value of consideration paid

(3,612)(1,099)(32,551)

Fair value of holding shares of the aquired companies

1,440

－

12,974

443

737

3,994

(1,729)(362)(15,583)

Cash and cash equivalents of the aquiree
Net proceeds from (payment for) acquisition of subsidiaries(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
2019
Breakdown of assets upon loss of control
Current assets (including cash and cash equivalents)

2018
505

－
－

Non-current assets
Breakdown of liabilities upon loss of control
Current liabilities
Non-current liabilities

2019
－
－

1,600
(360)
(105)

－
－
JPY

－
USD

2019
Consideration received
Cash and cash equivalents included in the assets at the time

－

2018

2019

－

1,638

－

－

(207)

－

Net proceeds from (payment for) sale of subsidiaries

－

(22)

－

Net proceeds from transfer of business

－

1,452

－

control thereof was lost(4) Changes in liabilities for financing activities
Changes in liabilities for financing activities are as follows:
Fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019)(JPN)
April 1, 2018

Cash flows

Non-cash movements
Increase and decrease
Exchangefrom acquisition ofdifferences
subsidiaries
101
1,500
－
－

Borrowings

117,428

5,545

Bonds
Lease

19,898(5,000)

1,170

(214)

0

138,497

331

101

obligations
Total

48

March 31, 2019

Others－124,574

32

14,930

－

85

1,041

1,500

117

140,546

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(USD)
April 1, 2018

Cash flows

Non-cash movements
Increase and decrease
Exchangefrom acquisition ofdifferences
subsidiaries
911
13,515－－

Borrowings
Bonds

1,058,009
179,282

49,960(45,049)

Lease
obligations

10,550(1,928)0

Total

1,247,841

2,982

911

March 31, 2019

Others286

1,122,394
134,518

－

761

9,382

13,515

1,046

1,266,295－

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

Cash flows

Non-cash movements
Increase and decrease
Exchangefrom acquisition ofdifferences
subsidiaries
－
(259)
－
－

Borrowings
Bonds

123,899
9,945(6,211)
9,928

Lease
obligations

1,285

(240)

0

Total

135,130

3,476

(258)

March 31, 2018

Others24

117,428
19,898

－

125

1,170

－

150

138,497－(5) Significant non-cash transactions
There were no significant non-cash transactions for the fiscal years ended March 31, 2019 and March 31, 2018.

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.

49

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20192) 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, 2019 and March 31, 2018 are presented as follows:(JPY)
Present value
Fair value of plan
Effect of the asset
Net defined benefitof the defined
assetsceiling
liability (asset)
benefit obligation
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 exchange translation differences

(30)

8

－

(22)

Employer contributions to the plan

－

(959)

－

(959)

(1,569)

1,024

－

(544)

21

－

－

21

5

8

－

13

As of March 31, 2018

19,659(13,442)－

6,217

Current service cost

1,425

－

－

1,425

62

(60)

－

2

(248)

(14)

－

(263)

Foreign currency translation difference

3

(7)

－

(4)

Employer contributions to the plan－

(1,013)－(1,013)(1,469)

1,047

－

(422)

492

－

－

492

111

9

－

120

20,036(13,481)－

6,555

Benefits paid
Effect of business combinations anddisposals
Other

Net interest
Remeasurements

Benefits paid
Effect of business combinations anddisposals
Other
As of March 31, 201950

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(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, 2018

177,127(121,112)－

56,016

Current service cost

12,844－－

12,844

563

(543)

－

19

(2,241)(132)－(2,372)Foreign currency translation difference

30

(71)

－

(41)

Employer contributions to the plan－

(9,130)－(9,130)(13,241)9,438－(3,804)

4,439

－

－

4,439

1,001

88

－

1,089

180,522(121,462)－

59,060Net interest
Remeasurements

Benefits paid
Effect of business combinations anddisposals
Other
As of March 31, 2019

Remeasurements of the defined benefit obligation for the fiscal years ended March 31, 2019 and March 31, 2018 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
2019

2018

2019

Defined benefit obligations of funded plan

15,726

16,046

141,696

Plan assets(13,481)(13,442)(121,462)

Net defined benefit liability of funded plan

2,245

2,604

20,235

Defined benefit obligations of unfunded plan

4,309

3,613

38,826Net liability or asset presented on the consolidated statementsof financial position (Before the effect of the asset ceiling)

6,555

6,217

59,060The 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.

51

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(ⅲ) Plan assets
The composition of the plan assets as of March 31, 2019.
Plan assets with a quoted market pricein an active market
JPY

Plan assets without a quoted market pricein an active market

USD

JPY

USD

Equity securities

1,383

12,463－－

Debt securities

201

1,819

4,839

43,605

Life insurance company general accounts

－

－

6,047

54,489

Other

58

528

949

8,557

1,643

14,811

11,837

106,651

Total

The composition of the plan assets as of March 31, 2018.
Plan assets with a quoted market pricein an active market

Plan assets without a quoted market pricein an active market

JPY

JPY

Equity securities

1,382

(12)

Debt securities

4,242

445

Life insurance company general accounts

－

5,965

Other

96

1,323

5,721

7,721

Total
(ⅳ) Significant actuarial assumptions

2019

2018

Discount rate

0.4%

0.4%

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
2019
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-basis-point
increase in the discount rate

USD
2018

2019

617

735

5,559

(926)

(969)

(8,346)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 the years ended March 31, 2019 and March 31, 2018
were 10.6 year and 10.9 year, respectively.
(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 for the year ending March 31, 2019 isestimated to be ¥1,003 million ($9,041 thousand).

52

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20193) Defined contribution plan
Expenses recognized for the defined contribution plan for the years ended March 31, 2019 and March 31, 2018 were ¥3,368
million ($30,349 thousand) and ¥172 million, respectively.

(2) Employee benefit expenses
Employee benefit expenses recognized for the years ended March 31, 2019 and March 31, 2018 were ¥4,868 million ($43,866
thousand) and ¥1,744 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
2019

USD

2018

2019

Deferred tax assets
Retirement benefits liabilities
Loss allowance

1,864
540

1,643
2,770

16,801
4,867

Inventories
Impairment loss

482
802

463
776

4,345
7,233

Other investments
Golf club memberships

484
111

649
112

4,362
1,004

Tax losses carried forward
Cash flow hedges

2,279
20

2,188
383

20,539188

Goodwill
Other

1,775
4,732

1,872
4,323

15,99542,636

Total deferred tax assets

13,093

15,183

117,971(10,484)(11,487)(94,460)

2,609

3,696

23,512

(450)

(423)

(4,058)(4,273)(5,682)(38,508)(6,216)(5,287)(56,010)

(905)

(734)

(8,157)

Total deferred tax liabilities(11,846)(12,129)(106,733)

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

10,484

11,487

94,460Total deferred tax liabilities, net(1,362)(641)(12,273)

Net deferred tax assets

1,247

3,054

11,23853

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20192) 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
2019

USD

2018

2019

Beginning balance of net deferred tax assets

3,054

4,594

27,521

Deferred tax expense(2,782)(330)(25,072)

Income tax on other comprehensive income
Acquisition through business combinations

1,086
(88)

(1,376)
70

9,789
(799)

(22)

97

(201)

1,247

3,054

11,238

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
2019
Deductible temporary differences
Tax losses carried forward
Within one year to expiry
Between one and five years to expiry
Between five and ten years to expiry
Over ten years to expiry
Total tax losses carried forward

2018

2019

8,172

9,982

73,629580

19,444

5,229

23,304
10,587

24,637
3,257

209,974
95,387

62

223

567

34,53547,563

311,157

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, 2019 and March 31, 2018 are ¥28,397 million ($255,854 thousand) and ¥24,562 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
2019
Current tax expense (Note 1)
Deferred tax expense (Note 2)

USD
2018

2019

(5,945)(6,053)(53,567)

Origination and reversal of temporary differences
Reassessment of recoverability of deferred tax assets(2,771)(11)(2,473)
2,143(24,972)(100)

Total deferred tax expense(2,782)(330)(25,072)

Total income taxes(8,728)(6,384)(78,640)(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, 2019 and March 31, 2018 were ¥12 million($108 thousand) and ¥685 million, respectively, and these benefits were included in the current tax expenses.
2. Major causes for deferred tax expense by type are loss allowance of ¥(2,230) million ($(20,093) thousand) and goodwillof ¥(790) million ($(7,125) thousand) for the fiscal year ended March 31, 2019, and loss allowance of ¥2,181 million andtax losses forward of ¥(1,715) million for the fiscal year ended March 31, 2018.

54

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20192) 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:
2019
2018
Statutory effective tax rate
(Adjustments)

30.6%

30.8%

Permanent differences—additions
such as entertainment expenses

1.2%

0.6%

Effect of reassessment of recoverability of deferred tax assets
Effect of tax rate differences

0.0%(0.1%)(8.2%)
1.0%

Share of profit (loss) of investments accounted for using the equity method
Other(0.2%)(1.7%)(0.8%)
1.2%

29.9%

24.5%

Average effective tax rate

The statutory effective tax rate for the fiscal year ended March 31, 2019 and March 31, 2018 are calculated to be 30.6% and30.8% based on the Corporation Tax, Inhabitant Tax and Business Tax in Japan.

55

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
30. Financial Instruments(1) Classification of financial instruments
The breakdown of financial instruments for each classification is presented as follows:
JPY
2019

USD
2018

2019

Financial assets
88,94177,731

801,350

228,749－

222,166994

2,060,995
－

7,188

6,531

64,766

235,938

229,692

2,125,761

3,962
575

4,168
382

35,706
5,181

4,538

4,550

40,887

Cash and cash equivalents
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

28,45332,805

256,357

Total financial assets measured at fair value through othercomprehensive income

28,45332,805

256,357

Total financial assets

357,871344,7813,224,355

Trade and other payables
Bonds and borrowings

196,054
139,504

188,791
137,326

1,766,417
1,256,913

Other financial liabilities

7,225

7,456

65,096

342,784

333,574

3,088,426

Other financial liabilities

1,504

2,406

13,557

Total financial liabilities measured at fair value throughprofit or loss

1,504

2,406

13,557

Total financial liabilities

344,289

335,981

3,101,983

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.

56

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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.
Moreover, the Consolidated Group directly writes off the gross carrying amounts of the credit-impaired financial assets when
all or part of the financial assets are evaluated to be uncollectible and determined that it is appropriate to be written off as aresult of credit check.

57

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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. With regard to past due
receivables, the Consolidated Group estimates the lifetime credit losses on the financial instruments individually andmeasures the amount of loss allowance based upon historical credit loss experience and future recoverable amount.
Moreover, as performing trade receivables comprise a number of customers, the Consolidated Group measures expectedcredit loss collectively by grouping those receivables and considering historical credit loss experience. When thosereceivables are affected by a material economic change, the provision rate calculated based upon the historical credit loss
experience is adjusted to reflect 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.
(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.
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, 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)

－

As of March 31, 2018

3

1,981

1. Reclassification to credit-impaired financial assets－

75

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

2. Incurrence or collection

0

(62)

3. Direct write-off

－

(185)

4. Changes due to foreign exchange

－

2

10

－

15

1,811

5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience
As of March 31, 201958

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(JPY)
Lifetime expected credit losses

Gross carrying amountCollective assessment

As of April 1, 2017

Credit-impaired financial assets

192,085

2,416

(42)

42

29,869(134)

3. Direct write-off

－

(80)

4. Changes due to foreign exchange－(3)221,912

2,239

(75)

75

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

As of March 31, 2018
1. Financial assets reclassified to credit-impaired financial
assets
2. Incurrence or collection

6,681

(74)

3. Direct write-off

－

(185)

4. Changes due to foreign exchange－

2228,519

2,057

As of March 31, 2019

(USD)
Lifetime expected credit losses

Loss allowance

Collective assessment

Credit-impaired financial assets

As of March 31, 201836

17,857

1. Reclassification to credit-impaired financial assets－

676

2. Incurrence or collection

4

(564)

3. Direct write-off－(1,667)

4. Changes due to foreign exchange－

23

5. Increase (decrease) resulting from changes in the provision
rate based on historical credit loss experience97－

As of March 31, 2019

136

16,325(USD)

Lifetime expected credit losses

Gross carrying amountCollective assessment

As of March 31, 2018
1. Financial assets reclassified to credit-impaired financial
assets
2. Incurrence or collection
3. Direct write-off
4. Changes due to foreign exchange
As of March 31, 201959

Credit-impaired financial assets

1,999,395

20,181(676)

676

60,198(673)－(1,667)－23

2,058,917

18,540KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(ⅱ) Other investments (debt instrument securities)(JPY)
Expected credit losses
Loss allowance

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets

5

－

－

－

－

－

－

－

－

－

－

－

－

－

－

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

(0)

－

－

5

－

－

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

(5)

－

－

3. Direct write-off

－

－

－

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

－

－

－

－

－

－

As of April 1, 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

As of March 31, 201960

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(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

－

－

－

2. Incurrence or collection

－

－

－

3. Direct write-off

－

－

－

4. Other changes

－

－

－

As of March 31, 2018

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

－

－

－

(1,000)

－

－

－

－

－

4. Other changes

－

－

－

As of March 31, 2019

－

－

－

As of April 1, 2017

2. Incurrence or collection
3. Direct write-off

61

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(USD)
Expected credit losses
Loss allowance

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets45－－

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

(45)

－

－

3. Direct write-off

－

－

－

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

－

－

－

－

－

－

As of March 31, 2018

As of March 31, 2019

(USD)
Expected credit losses
Gross carrying amount

Lifetime
12 months

Individual assessment

Credit-impaired financial
assets

9,010

－

－

－

－

－

－

－

－

－

－

－

－

－

－

(9,010)

－

－

－

－

－

4. Other changes

－

－

－

As of March 31, 2019

－

－

－

As of March 31, 2018
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(ⅲ) There is no contractual, uncollected balance for financial assets written off during the fiscal year ended March 31, 2019,
for which collecting efforts are still being made.

62

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20194) Credit risk exposure(ⅰ) Trade and other receivables
As of March 31, 2019
Balance of receivables (gross)

Provision rate based on historicalcredit loss experience

Lifetime expected credit losses

JPY

USD

Performing receivables

228,519

2,058,917

0.01%

15

136

Past due receivables

2,057

18,54088.05%

1,811

16,325

230,576

2,077,457

－

1,827

16,462

Total

JPY

USD

Past due receivables include loans receivable of ¥1,724 million ($15,541 thousand), for which a loss allowance of ¥1,479
million ($13,326 thousand) has been already recognized.
As of March 31, 2018
Balance of receivables (gross)
JPY

Provision rate based on historicalcredit loss experience

Lifetime expected credit losses
JPY

Performing receivables

221,9120.00%

3

Past due receivables

2,239

88.49%

1,981

224,152

－

1,985

Total

Past due receivables include loans receivable of ¥1,760 million, for which a loss allowance of ¥1,502 million has been
already recognized.
(ⅱ) Other investments (Debt instrument securities)
As of March 31, 2018
Gross carrying amount
Debt instrument securities
External rating

Lifetime

12 months

JPY

JPY

AAA-AAA－－－－

BBB-BB
B

－
－

1,000
－

－

1,000

Total
There were no debt instrument securities for the fiscal year ended March 31, 2019.
.

63

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20195) 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, 2019
Gross
carrying amount

Cash andcash equivalents

Maximum
credit risk exposure(gross)
JPY
USD

Loss
allowance
JPY

USD

Maximum
credit risk
exposure (net)
JPY
USD

Total collaterals pledged
and credit enhancements

JPY

USD

JPY

USD

88,941

801,350－－

88,941

801,350－－

88,941

801,350

230,576

2,077,457(1,827)(16,462)

228,749

2,060,995(173)(1,562)

228,576

2,059,433

7,188

64,766

－

－

7,188

64,766

－

－

7,188

64,766

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

－

－

－

－

－

－

－

－

－

－

326,7072,943,572(1,827)(16,462)

324,880

2,927,111(173)(1,562)

324,706

2,925,549

The amount of loss allowance for credit-impaired financial assets is reduced by ¥173 million ($1,562 thousand) throughcollateral pledged and credit enhancements.
As of March 31, 2018
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

77,731－77,731－77,731

224,152(1,985)

222,166(126)

222,040

Other financial assets

6,913

－

6,913

－

6,913

Other investments

1,000

(5)

994

－

994

309,798(1,991)

307,806(126)

307,680

Financial assets measured atamortized cost
Trade and other receivables

Total

The amount of loss allowance for credit-impaired financial assets is reduced by ¥126 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 ($90,098 thousand) to ensure liquidity andstability of funds. The Consolidated Group makes efforts to maintain good relationships with each financial institution.

64

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20191) Non-derivative financial liabilities
The breakdown of non-derivative financial liabilities by due date is presented as follows:
As of March 31, 2019
Between one andOver
Within one year
five years
five years
JPY
Trade and other payables

USD

JPY

196,054 1,766,417

Bonds

USD
－

JPY

－

Total

USD
－

JPY

USD

196,054 1,766,417

－

81

736

10,201

91,9105,020

45,23015,30275,238677,889

48,886440,458

2,466

22,219126,591 1,140,566

Lease obligations

410

3,699

674

6,076

69

630

1,154

10,405

Deposits received

3,506

31,593

－

－

0

3

3,506

31,596

Borrowings

137,876

Guarantee deposits received

938

8,456

17

160

1,608

14,4892,564

23,105

Other

112

1,014

－

－

－

－

112

1,014

276,343 2,489,804

59,779538,604

9,164

82,570Total

345,287 3,110,978

As of March 31, 2018
Within one year

Between one andfive years

Overfive years

JPY

JPY

JPY

Trade and other payables

Total
JPY

188,791－－

188,791

Bonds

5,100

10,254

5,048

20,403

Borrowings

57,122

61,4191,283

119,826

Lease obligations

428

778

113

1,319

Deposits received

3,728

－

0

3,729

Guarantee deposits received

951

－

1,498

2,449

Other

106

－

－

106

256,22972,451

7,944

336,625

Total

The Consolidated Group has guarantee obligations of ¥1,165 million ($10,501 thousand) and ¥1,830 million as of March 31,
2019 and March 31, 2018 respectively2) Derivative liabilities
The breakdown of derivative liabilities by due date is presented as follows:
As of March 31, 2019
Between one andWithin one year
five years
JPY

USD

Over
five years

JPY

USD

JPY

Cash inflows

35,357

318,562

58

531

－

Cash outflows

35,849323,002

60

543

－

Sub total

492

4,440

1

12

Interest rate-related derivatives

194

1,753

207

Total

USD

JPY

USD

－

35,416

319,093－

35,910323,545

－

－

494

4,452

1,871

－

－

402

3,624

Currency-related derivatives

Commodity-related derivatives

579

5,218

－

－

－

－

579

5,218

Total

1,266

11,411

209

1,883

－

－

1,475

13,29465

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
As of March 31, 2018
Within one year

Between one andfive years

Overfive years

Total

JPY

JPY

JPY

JPY

Currency-related derivatives
Cash inflows

44,421

2,496

581

47,499Cash outflows

45,9832,585

627

49,196

1,562

89

45

1,697

Interest rate-related derivatives

215

400

－

615

Commodity-related derivatives

128

－

－

128

1,906

489

45

2,441

Sub total

Total(5) Market risk management
In many cases, the foreign currency risk, interest rate risk and risk of price fluctuations associated with goods traded incidental
to business transactions are hedged in with the transaction terms with trade partners, etc. In addition, the Consolidated Grouphas established a system under which a limit (position limit) and a loss limit are set for foreign exchange, interest rates (funds),
products and their derivatives, taking into account the scale of the risk and the income of each internal unit and company, sothat it can quickly reduce its position when the predetermined limit is exceeded. Also, the price fluctuation risk of these
positions are mitigated by using derivatives as a hedge.The positions are reported to management meeting regularly. When thepredetermined limit is exceeded, the Consolidated Group mitigates these positions after the analysis of the reason without
delay.
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 participates in derivatives transactions such as forward contracts to
reduce the risk of currency fluctuation.
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, equity attributable to owners of the Parent 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.

66

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
JPY
2019

USD
2019

2018

Profit before tax
U.S. dollar
Other comprehensive income
U.S. dollar

10

(4)

94

(181)

(246)

(1,637)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, 2019 and 2018 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
2019
2018
2019
Profit before tax
(883)
(779)
(7,964)
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, meatproducts and petroleum products which are influenced by market conditions. When the 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
2019
2018
Profit before tax
(74)
(67)
Foods
(59)
(47)
Fuels
Other comprehensive income
Foods
Fuels

USD
2019
(667)
(540)

(14)
(1)

(19)
(2)

(127)
(9)

(1)
－

(2)
－

(9)
－

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.

67

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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
2019
2018
2019
Other comprehensive income
(164)
(186)
(1,481)(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
2019
Type

2018

Carrying amount
JPY

Carrying
amountFair value

USD

JPY

USD

Fair value
JPY

Financial assets
Trade and other receivables
Other investments (Debt instrument
securities)
Guarantee deposits

1,449

13,056

1,449

13,056

1,582

1,582

－

－

－

－

994

994

3,592

32,372

3,592

32,372

3,867

3,867

Other financial assets

623

5,619

623

5,619

612

612

Total

5,665

51,047

5,665

51,047

7,057

7,057

65,188587,339

65,393589,184

76,11676,269Long-term lease obligations

670

6,041

670

6,041

788

788

Long-term deposits received

0

3

0

3

0

0

Long-term guarantee deposits received

1,625

14,6491,625

14,649

1,498

1,498

Total

67,485608,031

67,690609,876

78,40378,555

Financial liabilities
Bonds and borrowings

The 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.

68

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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, 2019 and March 31, 2018.
As of March 31, 2019
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
Stock

－

－

－

－

3,962

35,706

3,962

35,706

16,590149,477－－

11,862

106,880

28,453

256,357

Foreign exchange

－

－

530

4,782

－

－

530

4,782

Interest rate

－

－

－

－

－

－

－

－

Commodity

44

400

－

－

－

－

44

400

Foreign exchange

－

－

(494)

(4,452)

－

－

(494)

(4,452)

Interest rate

－

－

(431)

(3,887)

－

－

(431)

(3,887)

Commodity(579)(5,218)

－

－

－

－

(579)

(5,218)

Total

16,055

144,658(394)(3,557)

15,825

142,586

31,486283,687

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

Liabilities
Other financial liabilities
Derivative transactions:69

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
As of March 31, 2018
Level 1

Level 2

Level 3

Total

JPY

JPY

JPY

JPY

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

－

－

4,168

4,168

18,672－

14,13332,805

Foreign exchange

－

286

－

286

Interest rate

－

－

－

－

Commodity

96

－

－

96

Foreign exchange－(1,697)－(1,697)

Interest rate

－

(580)

－

(580)

Financial assets measured at fairvalue through other comprehensive
incomeStockOther financial assets
Derivative transactions:

Liabilities
Other financial liabilities
Derivative transactions:

Commodity
Total

(128)

－

－

(128)

18,639(1,992)

18,302

34,95070

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
The methods of determining the fair value of the above instruments are described as follows:(a) Other investments
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 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.

71

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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, 2019 and March 31, 2018.
2019

2018

Other investments
FVPL

Total

FVOCI

Other investments

Otherfinancialassets

FVPL

FVOCI

FVPL

Total

JPY

USD

JPY

USD

JPY

USD

JPY

JPY

JPY

JPY

4,168

37,55814,133

127,344

18,302

164,902

5,054

12,0491,033

18,137(434)(3,916)

－

－

(434)

(3,916)

(730)

－

10

(720)

－

－

(2,161)(19,478)(2,161)(19,478)

－

2,106

－

2,106

Purchase

110

1,000

156

1,407

267

2,407

－

61

－

61

Sale

－

－

(264)

(2,383)(264)(2,383)－(117)(1,010)(1,127)

118

1,064

0

6

118

1,070

(158)

－

－

(158)

－

－

－

－

－

－

－

0

－

0

－

－

(1)

(15)

(1)

(15)

2

35

(33)

3

3,962

35,706

11,862

106,880

15,825

142,586

4,168

14,133－18,302

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 ¥(434) million ($(3,916) thousand) for the fiscal year ended March 31, 2019 and ¥(730) million
for the fiscal year ended March 31, 2018.
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.

72

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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, 2019
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

2,351

21,191

Discounted cash flow
methodDiscount rate

3.1%

1,610

14,515

Net asset value method－－

10,863

97,882Market multiple method

P/B ratio
Illiquidity discount

998

8,998

Net asset value method－

Financial assets measured at fairvalue through othercomprehensive income

1.1times
30.0%

Financial assets measured at fairvalue through othercomprehensive income－

As of March 31, 2018
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 techniqueSignificant unobservable
inputs

Weighted
averageof input values

2,668

Discounted cash flow
methodDiscount rate

3.3%

1,500

Net asset value method－－

13,119Market multiple method

1,014

Net asset value method

P/B ratio

1.3times

Illiquidity discount

30.0%

－

－

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).

73

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
(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, 2019
AmountName of issuer

JPY

USD

Tokio Marine Holdings, Inc.

3,209

28,913Nisshin Seifun Group Inc.

2,311

20,826MARUDAI FOOD CO., LTD.

2,258

20,345

SOTSU CORPORATION

1,299

11,706

BOT Lease Co., Ltd.

1,148

10,351SHIN KURUSHIMA DOCKYARD CO., LTD.

1,049

9,454

Daio Paper Corporation

1,042

9,397

nms Holdings Corporation

974

8,782

The Norinchukin Bank

937

8,446

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

723

6,521

13,498

121,615

As of March 31, 2018
AmountName of issuer

JPY

MARUDAI FOOD CO., LTD.

3,078

Tokio Marine Holdings, Inc.

2,837

Nisshin Seifun Group Inc.

1,919

nms Holdings Corporation

1,910

BOT Lease Co., Ltd.

1,701

SOTSU CORPORATION

1,687

SHIN KURUSHIMA DOCKYARD CO., LTD.

1,299

Daio Paper Corporation

1,152

The Norinchukin Bank

1,011

F.C.C. Co., Ltd.

924

Other

15,283

2) Dividend income
JPY
2019
Investments derecognized during the year
Investments held at the end of the year
Total

74

USD
2018

2019

0
962

0
804

0
8,674

962

805

8,674

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 20193) 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
2019

2018

2019

Fair value on the date of sale

267

242

2,406

Cumulative gains (losses) on sale

257

130

2,324

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, 2019 and March 31, 2018
were ¥163 million ($1,470 thousand) and ¥123 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, 2019 and March 31, 2018. 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, 2019 and March 31, 2018. 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” in the consolidated statements of financial position.

75

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
As of March 31, 2019
Carrying amount
Derivative assets
Derivative liabilities
JPY
USD
JPY
USD

Notional amount
JPY

USD

Forward exchange contracts
Interest rate risk

31,429283,177

220

1,985

164

1,478

Interest rate swap contracts
Commodity price risk

21,100190,107

－

－

431

3,887

281

2,535

2

26

27

244

Foreign currency risk

Commodity futures contracts
As of March 31, 2018

Carrying amount
Derivative assets
Derivative liabilities
JPY
JPY

Notional amount
JPY
Foreign currency risk
Forward exchange contracts

30,82367720

Interest rate risk
Interest rate swap contracts

23,500－580

Commodity price risk
Commodity futures contracts

686

8

38

The longest terms of hedging cash flow fluctuation risks by “Forward exchange contracts”, “Interest rate swap contracts” and“Commodity price risk” are about 5 years 6 months, 3 years 6 months and 6 months, respectively.
The following tables present the carrying amount of cash flow hedge reserve as of March 31, 2019 and March 31, 2018.
As of March 31, 2019
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
Interest rate risk

56

506

－

－

Interest rate swap contracts
Commodity price risk

(431)

(3,887)

－

－

(24)

(218)

(24)

(224)

Commodity futures contracts
As of March 31, 2018

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

(653)

－

Interest rate risk
Interest rate swap contracts

(580)

－

Commodity price risk
Commodity futures contracts

(30)

(3)

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, 2019 and March 31, 2018.
76

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
Fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019)
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

220

1,985

488

4,405

Other income

(66)

(596)

215

1,941

Interest expenses

(49)

(443)

33

300

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

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

JPY

Cost of sales

Line item for which profit orloss was affected byreclassification

Foreign currency risk
Forward exchange contracts(706)(199) Other expenses

(11)

269

(33)

(20) Cost of sales

Interest rate risk
Interest rate swap contracts

Interest expenses

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 ¥5,028 million($45,305 thousand) and ¥5,273 million as of March 31, 2019 and March 31, 2018, 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 ¥5,028 million ($45,305 thousand) and ¥5,273 million as of March 31, 2019 and March 31, 2018, 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.

77

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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, 2019 and March 31, 2018.
JPY
USD
2019
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

2018

2019

575

382

5,181

530
－

286
－

4,782
－

44

96

400

(265)

(247)

(2,393)

309

135

2,788

offsetting criteria
Net amounts

JPY
2019
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
2018

2019

1,504

2,406

13,557

494
431

1,697
580

4,452
3,887

579

128

5,218

(265)

(247)

(2,393)

(534)

(56)

(4,819)

704

2,103

6,345

Certain 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.

78

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019
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, 2019 and March 31, 2018 are as follows:
JPY
USD
2019

2018

2019

Machinery, equipment, vehicle, tools and fixtures

694

770

6,257

Other

250

287

2,255

944

1,058

8,512

Total

The future minimum lease payments for finance leases as of March 31, 2019 and March 31, 2018 are as follows:
Present value of
Future minimum lease payments
future minimum lease payments
JPY
2019

USD
2018

2019

JPY
2019

USD
2018

2019

Within one year

410

428

3,699

370

382

3,341

Between one and five years

674

778

6,076

609

690

5,492

Over five years

69

113

630

60

97

549

1,041

1,170

9,382

Total

1,154

1,319

10,405Less future finance costs

(113)

(148)

(1,023)Present value of future minimum lease
payments

1,041

1,170

9,382

The future minimum lease payments receivable under the non-cancellable subleases as of March 31, 2019 and March 31, 2018are ¥4 million ($39 thousand) and ¥8 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, 2019 and March
31, 2018 are as follows:
JPY
USD
2019

2018

2019

Within one year
Between one and five years

1,222
3,062

141
387

11,017
27,594

Over five years

1,196

145

10,7805,481

674

49,390Total

The total lease payments recognized as expenses under the cancellable or non-cancellable operating leases for the fiscal year
ended March 31, 2019 and March 31, 2018 are ¥7,209 million ($64,953 thousand) and ¥7,442 million, respectively.
The future minimum lease payments receivable under the non-cancellable subleases as of March 31, 2019 and March 31, 2018are ¥303 million ($2,738 thousand) and ¥316 million, respectively.

79

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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, 2019 and March 31, 2018 are as follows:
Future minimum lease payments receivable
Present value ofand unguaranteed residual value
future minimum lease payments receivable
JPY
2019

USD
2018

JPY

2019

2019

USD
2018

2019

Within one year

8

6

74

5

4

50

Between one and five years

29

26

270

20

16

184

Over five years

15

13

142

11

8

102

53

45

485

37

29

337

Unguaranteed residual value

－

－

－

Less future finance income

(16)

(16)

(149)

Present value of future minimum lease
payments receivable

37

29

337

Total

32. Pledged Assets(1) Pledged assets and associated secured obligations
Details of pledged assets and associated secured obligations are as follows:
JPY
2019

USD
2018

2019

Pledged assets:
Other financial assets (non-current)

20

20

180

Property, plant and equipment

632

643

5,694

Total

652

663

5,875

Associated secured obligations:Short-term borrowings (current)

1,162

1,130

10,474

645

747

5,819

1,808

1,878

16,293Long-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.

80

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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
2019
Assets pledged in lieu of guarantee money or guarantee funds
Other financial assets (current)
Other financial assets (non-current)
Other investments
Total

USD
2018

2019

51

49

465

60
3,605

30
3,216

541
32,488

3,717

3,296

33,494

33. 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
2019
Debt guarantees for equity method investees
Debt guarantees for third parties

2018

2019

138

156

1,245

1,027

1,673

9,257

Total
1,165
1,830
10,501(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¥1,011 million ($9,117 thousand) for the fiscal year ended March 31, 2019 and ¥1,609 million for the fiscal year ended
March 31, 2018, respectively.

81

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201934. Significant Subsidiaries(1) Significant subsidiaries of the Company are as follows:
Trade nameLocation

Details of major operations

Percentage of voting
rights (%)
2019

2018

System integration of ICT andcommunications equipment

58.32(0.40)

58.32(0.40)Development of software for and sales andmaintenance of computers and computer

100.00100.00(100.00)(100.00)[Electronics & Devices]
Kanematsu Electronics Ltd.

Chuo-ku, Tokyo, Japan

Nippon Office Systems Ltd.

Koto-ku, Tokyo, Japan

peripherals, etc.
Kanematsu Communications
Ltd.

Shibuya-ku, Tokyo, Japan

Sales of mobile communications devices;
Mobile internet systems and services

100.00100.00Kanematsu Granks, Corp.

Shinjuku-ku, Tokyo, Japan

Mobile contents delivery and mobilerelated solution business100.00(100.00)

100.00(100.00)

Kanematsu BD Communications

Kurume-shi, Fukuoka,

Ltd.

Japan

100.00100.00(100.00)(100.00)

52.97

52.96

100.00100.00100.0040.00

100.00100.00

Sales and maintenance of parts for car

100.00100.00audio systems(20.00)(20.00)

70.00

70.00

100.00(100.00)

100.00(100.00)

100.00(100.00)

100.00(100.00)

100.00100.00100.00100.00100.00100.00

Sales of mobile communication device
Manufacture and sales of home-

Kanematsu Sustech Corp.

Chuo-ku, Tokyo, Japan

construction materials; Ground inspection
services and improvement work; Sales of
security systems

Kanematsu Advanced Materials
Corp.

G-Printec, Inc.

Kanematsu Futuretech Solutions
Corporation

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

Chuo-ku, Tokyo, Japan

Saiwai-ku, Kawasaki-shi,
Kanagawa, Japan

Chuo-ku, Tokyo, Japan

Duesseldorf, Germany
Shanghai, China

Dalian, China

Import, export, storage, sales andprocessing of materials and components
for vehicle equipment, industrial
electronics, and communication devices
Development, manufacturing and sales ofcard printer and related device
Import, export, development, design,
manufacturing, sales and EMS of
semiconductor, electronic components andmodular products

Development, manufacture and sales ofcontrol modules for lithium ion batteries
Manufacture of materials for electronic
precision parts and import, export andsales of electronic components
Import, export, storage, sales andKanematsu Advanced Materials
USA, Inc.

Texas, USAprocessing of materials and components
for vehicle equipment, industrial
electronics, and communication devices[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

Food wholesaling and cold storage
Manufacture and sales of feed andfertilizer
Sales of soybeans, millet and grain82

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019

Trade nameLocation

Details of major operations

Percentage of voting
rights (%)
2019

2018

North Pet Co., Ltd.

Kuriyama-cho, Yubari-gun,
Hokkaido, Japan

Manufacture of pet snacks (jerky, dried
meat, biscuits)

100.00100.00KG Agri Products, Inc.

Ohio, U.S.A.

Seed development, contract farming,sorting and sales of edible soybean

100.00100.00Kai Enterprises, Inc.

Washington, U.S.A.

Sales of hay and roughage

P.T. Kanemory Food Service

Serang, Indonesia[Steel, Materials & Plants]
Kanematsu Trading Corp.

Chuo-ku, Tokyo, Japan

Kyowa Steel Co., Ltd.

Kasai-shi, Hyogo, Japan

100.00100.00(15.00)(15.00)

Manufacture of processed foods for central

59.00

59.00

kitchen and home-meal replacement(10.00)(10.00)

Sales of steel and construction materials

100.00100.00Cutting and processing of steel sheet;

100.00100.00

Sales of construction materials(100.00)(100.00)

100.00100.00

Sales of petrochemicals and automobile-

Kanematsu Chemicals Corp.

Chuo-ku, Tokyo, Japan

Kanematsu Wellness Corp.

Chuo-ku, Tokyo, Japan

Sales of health foods and provision of
medical information

100.00(100.00)

100.00(100.00)

Kanematsu Petroleum Corp.

Chiyoda-ku, Tokyo, Japan

Sales of petroleum products and LPG

100.00100.00Kanematsu Yuso Co., Ltd.

Chiyoda-ku, Tokyo, Japan

Delivery and storage of petroleum
products and LPG

100.00100.00Kanematsu KGK Corp.

Nerima-ku, Tokyo, Japan

97.89

97.89

Benoit Holding Company

Illinois, U.S.A.

Benoit Premium Threading, LLC

Louisiana, U.S.A.

Steel Service
Oilfield Tubular, Inc.
KGK International Corp.

related chemicals

Sales of machine tools and industrial
machinery
Holding company

85.18

85.18

(85.18)(85.18)

Oil well casing fabrication; Manufacture

54.00

54.00

and sales of oil well-related parts(54.00)(54.00)Oklahoma, U.S.A.

Sales of steel materials for oil excavation

51.00(51.00)51.00(51.00)Illinois, U.S.A.

Sales of machine tools

100.00(100.00)

100.00(100.00)

Kanematsu Aerospace Corp.

Minato-ku, Tokyo, Japan

Sales of aircraft, defense, and aerospacerelated products

100.00100.00Aries Motor Ltd.

Warsaw, Poland

Sales of automobiles

93.59

93.59

Aries Power Equipment Ltd.

Warsaw, Poland

60.00

60.00

KG Aircraft Rotables Co., Ltd.

Dublin, Ireland

96.67

96.67

100.00100.00100.00100.00[Motor Vehicles & Aerospace]

Sales of engines, generators, and othergeneral-purpose machinery
Replacement and maintenance of aircraft
rotable components; Leasing[Others]
Shintoa Corp.

Chiyoda-ku, Tokyo, Japan

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

Kanematsu Logistics &Insurance Ltd.

Chuo-ku, Tokyo, Japan

Insurance agency; Consigned freight
forwarding business

83

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019

Trade nameLocation

Details of major operations

Percentage of voting
rights (%)
2019

2018

[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

100.00100.00100.00100.00(100.00)(100.00)

100.00100.00(100.00)(100.00)
49.00(49.00)100.00(100.00)

Kanematsu (China) Co., Ltd.
Kanematsu (Thailand) Ltd.
Watana Inter-Trade Co., Ltd.

Shanghai, China
Bangkok, Thailand

Export, import and sales of merchandise
Export, import and sales of merchandise

Bangkok, Thailand

Export, import and sales of merchandise

49.00(49.00)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

Kanematsu Europe Plc

London, U.K.

Export, import and sales of merchandise

Kanematsu GmbH

Duesseldorf, Germany

Kanematsu Australia Ltd.

Sydney, Australia(Notes) 1

100.00100.00(100.00)(100.00)

100.00100.00(100.00)(100.00)

Export, import and sales of merchandise

100.00100.00

Export, import and sales of merchandise

100.00100.00Kanematsu New Zealand Ltd.
Auckland, New Zealand
Export, import and sales of merchandise
100.00100.00(Notes) 1. It is treated as a subsidiary because the Consolidated Group has a substantial control of the finance and management
policy over the company through the dispatch of the majority of board members.
2. The figures in the parentheses in “Percentage of voting rights” indicate the indirect ownership ratio included in the total.

84

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 2019(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
2019

USD
2018

2019

Current assets

63,38758,881

571,112Current liabilities

17,17915,810154,785

Current assets (net)Non-current assets

46,2085,243

43,071
5,621

416,327
47,240Non-current liabilities

2,028

2,561

18,275

Non-current assets (net)

3,214

3,059

28,965Equity49,423

46,131

445,292

Cumulative amounts of non-controlling interests

20,672

19,294

186,260[Condensed statements of income and comprehensive income]
JPY
2019

USD
2018

2019

Revenue

67,39462,222607,211

Profit for the year
Other comprehensive income

6,770
(462)

6,590
32

61,002(4,166)

Total comprehensive income

6,308

6,623

56,836

Profit for the year attributable to non-controlling interests

2,826

2,746

25,470

Dividends paid to non-controlling interests

1,431

1,133

12,900[Condensed statement of cash flows]
JPY
2019

USD
2018

2019

Cash flows from operating activities

7,719

5,822

69,553

Cash flows from investing activities
Cash flows from financing activities(542)(3,442)(220)(2,731)(4,885)(31,018)

Increase (decrease) in cash and cash equivalents, net

3,734

2,869

33,651(3) Transaction with non-controlling interests
There was no transaction with significant non-controlling interests for the fiscal year ended March 31, 2019 and March 31,
2018.

85

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201935. Related Parties(1) Related party transactions
For the fiscal year ended March 31, 2019
TypeTransaction amount

Detail of related party
relationship

Name

Outstanding amount

JPY

USD

JPY

USD

Associate(including subsidiaries of
the associate)

Kantatsu Co., Ltd.

Purchase of merchandise

9,904

89,241

2,758

24,849

Associate

Ogura Industrial Corp.

Sales of merchandise

3,225

29,063631

5,686

Sales of merchandise

84

763

1,576

14,201

1,456

13,123128

1,155

HOKUSHIN CO.,

Associate

LTD.
Sage Hill
Northwest, Inc.

Associate

Purchase of merchandise(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. As the Consolidated Group conducts a transaction as a party involved, transaction amount of HOKUSHIN CO., LTD. ispresented in the net amount of the commission.
For the fiscal year ended March 31, 2018
Type

Detail of related party
relationship

Name

Transaction amount

Outstanding amount

JPY

JPY

Sage Hill
Northwest, Inc.

Purchase of merchandise

1,397

136

Kantatsu Co., Ltd.

Purchase of merchandise

895

1,223

Associate

Shangdong Lufeng
Foods Shanhai Corp.

Purchase of merchandise

1,138

1

Associate

Growth D Ltd.

Purchase of merchandise

1,041

－

Associate
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.

(2) Remuneration to management executives
The remuneration to the Company’s directors and auditors consists of base salary, directors’ bonus and share-based payments.
The amount of remuneration to the Company’s directors and audit & supervisory board members are as follows:
JPY
2019

USD
2018

2019

Base salary and directors’ bonus
Share-based payments

342
29

307
－

3,088
268

Total

372

307

3,356

86

KANEMATSU CORPORATION AND CONSOLIDATED SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the fiscal year ended March 31, 201936. Subsequent Events
Not applicable.

37. Share-based Payments(1) Performance-Linked Stock Compensation Plan
The Company implemented a Performance-Linked Stock Compensation Plan for Directors and Exective Officers. The aim of
adoption of the Plan is to further clarify the linkage between compensation of Directors and Exective Officers and the corporate
performance and stock value of the Company, and to encourage them to contribute to mid- to long-term improvement in thecorporate performance and expansion of corporate value because they will share the benefits and risks of stock pricefluctuations with the shareholders. The vesting condition is that after granted date they will work continuously until achieving
certain performance goals and vesting. The stocks will be granted to Directors and Exective Officers in the final year of the
med-term management plan (from April 1, 2018 to March 31, 2024), or the fiscal year that achieved the medium-term businessplan.

(2) Granted stocks and granted prices of shares
The fair value of the gtanted date was estimated using the Black-Scholes model considering expected dividend based on past
dividend results. The number of stocks granted during the period are as follows. The weighted average share price on the
granted date was ¥1,583 in the year ended March 31, 2019.
2019
Number of shares－

As of beginning of the year
Granted

40,704

Exercised－

Forfeited－

As of end of the year

40,704－

Exercisable balance as of end of the year(3) Stock compensation expenses
Performance-Linked Stock compensation Plan is equity-settled share-based payment transaction. Expenses are recorded ¥64
million during the fiscal year ended March 31, 2019.

87