INTERNET RESEARCH INSTITUTE LTD

Interim Financial Reporting(Unaudited)
30 June 2020

INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Note
ASSET
CURRENT ASSETS
Cash and cash equivalents
Trade receivables
Contract assets
Related parties
Income tax receivables
Other current assets
TOTAL CURRENT ASSETSNON-CURRENT ASSETS
Right-of-use assets
Investments accounted for using the equity
methodOther financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other non-current assets
TOTAL NON-CURRENT ASSETSTOTAL ASSETSLIABILITIES AND EQUITYCURRENT LIABILITIES
Trade payable
Borrowings
Accruals and other payables
Contract liabilities
Short-term lease liabilities
Related parties
Current provisions
Income taxes payables
TOTAL CURRENT LIABILITIESNON-CURRENT LIABILITIESLong-term lease liabilities
Asset Retirement Obligations
TOTAL NON-CURRENT LIABILITIESTOTAL LIABILITIESEQUITY
Share capital
Capital surplus
Accumulated other comprehensive income
Exchange differences on translation fromfunctional currency to presentation currency
Retained earnings
Non- controlling interests
TOTAL EQUITYTOTAL LIABILITIES AND EQUITY*Re-Classified

4
7

5

4
7

30 June(Unaudited)2019

USD (In thousands)
30 June31 December(Unaudited)
2020
2019

10,973
703
41
21
-;748
12,486

8,127
83
146
17
-;871
9,244

7,251
360
332
17
32
844
8,836

7,009

5,510

5,997

16,36014,661

13,894

1,225
667
293
61
9
25,624
38,110

1,097
541
233
356
7
22,40531,649

1,228
597
265
92
9
22,08230,9182,638(*)233
1,999
807
1,201
(*)96
-;746
7,720

173
70
1,470
4,419
1,240
31
120
-;7,523

487
230
1,740
2,784
1,221
46
119
-;6,627

5,708
237
5,945
13,665

4,470
355
4,825
12,348

5,055
412
5,467
12,094-;14,845
269
1,991-;14,845
2,084-;14,845
1,707

1,959

1,693

7,340
24,445-;24,445
38,110(580)
18,308993
19,301
31,6491,039
19,284(460)
18,82430,918INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Note
Revenue
Operating costs and expenses:
Cost of sales
Selling, general and administrative
Research and Development expenses
Other incomes
Total operating costs and expenses
Operating profit
Other expenses (Impairment)
Finance income
Finance expense
Finance income (expense), net
Share of profit(loss) of investments accounted
for using the equity method
Gain on change in share of investments
accounted for using equity method
Loss on sale of the investment in subsidiaries
Profit (Loss) before income taxes
Income tax expense

USD (In thousands)
Year ended
Six month period
31 December
ended 30 June (Unaudited)
2019
2020
2019
9,402

3,166

12,120(3,333)(6,411)(900)
183(10,461)(1,059)(16)-;(58)(58)(986)(5,159)(895)
106(6,934)(3,768)
-;3
(173)
(170)

(4,538)(11,569)(1,743)
216(17,634)(5,514)
(18)
88
(108)
(20)

5

40

1,179

(2,791)

5

1,423

468

1,849

-;330
(879)

(40)
(2,331)
290-;(6,494)
(489)

(549)

(2,041)

Profit (Loss) for the period attributable to:
Owners of the parent(549)(1,619)(6,850)Non-Controlling interest
Profit (Loss) for the year-;(549)(422)(2,041)(133)(6,983)

(4)

(1)

1

504

155

270

(8)

112

(72)

2

(125)

10

(81)

93

44

413
(136)

234
(1,807)253(6,730)(136)(1,385)(6,597)

-;-

(422)

(133)

(136)

(1,807)(6,730)(0.012)(0.012)(0.035)(0.035)(0.147)(0.147)

Profit (Loss) for the year

Other comprehensive income, net of tax:
Items that may be reclassified to profit or loss
Share of other comprehensive income ofinvestments accounted for using equity method
Differences from translation of financial
statements from functional currency topresentation currency
Differences from translation of financial
statements from functional currency topresentation currency
Change in fair value of available-for-salefinancial assets
Share of other comprehensive income (loss) ofinvestments accounted for using equity method
Total other comprehensive income, net of tax
Comprehensive income for the year

55

(6,983)Attribution of the total loss for the year:
Owners of the parent
Non-Controlling interest
Total Loss for the year
Earnings per share attributable to owners of theparentBasic (USD)
Diluted (USD)INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

USD (In thousands)
Equity attributable to owners of the parent

Accumulated
othercomprehensive
income (loss)

Total equity

Share
capitalCapitalsurplus-;-14,845

10,624352

1,495

27,316-;--;-(2,735)-;--;-(2,735)-;-

14,845

7,889

352

1,495

24,581

Profit for the period

-;-

-;-

Other comprehensive loss, net of tax
Total comprehensive income (loss) for the period-;-;-;-

Note

Balance as of 1 January,2019
Adjustment on adoption of new accounting
standards
Balance as of 1 January,2019 (restated)

Balance as of 30 June,2019(Unaudited)

2

Retainedearnings

Exchangedifferencesontranslation
fromfunctional
currency topresentation
currency

-;-

-;-

-;-;-

(549)
-;(549)

(83)
(83)

496
496

(549)
413
(136)

14,845

7,340

269

1,991

24,445INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY
USD (In thousands)
Equity attributable to owners of the parent

Note

Balance as of 1 January,2020

SharecapitalCapitalsurplusRetainedearnings

Accumulat
ed othercomprehensive income(loss)

NonControllinginterest

Exchangedifferences ontranslationfrom functional
currency topresentation
currency

(460)

1,693

-;-

14,845

1,039

1,707

Loss for the period

-;-

-;-

(1,619)-;-Other comprehensive loss, net of tax
Total comprehensive income (loss)
for the period

-;-

-;-

(32)

-;-

-;-

-;(1,619)

(32)

(422)
-;(422)-;-

Total equity

18,824266(2,041)234

266(1,807)

-;-

1,836

Transaction with owners and other
-;-

1,836

Issuance of preferred shares bysubsidiaries
Change in interest in subsidiaries

-;-

-;-

-;-

-;-

-;-

409

39

-;-

448

Balance as of 30 June,2020(Unaudited)-;-

14,845

(580)

2,084

993

1,959

19,301-;-INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

USD (In thousands)
Equity attributable to owners of the parent
Exchangedifferences ontranslation
fromfunctional
currency topresentation
currency

Total equity

Share
capitalCapitalsurplusRetainedearnings

Accumulated
othercomprehensive
income (loss)

NonControllinginterest-;-

14,845

10,624

352

-;-

1,495

27,316-;--;-(2,735)

-;-

-;-

-;-

(2,735)-;-

14,845

7,889

352

1,495

24,581

Loss for the year
Other comprehensive loss, net of tax

-;-;-

-;-;-

(6,850)
-;-

-;55

(133)
-;-

-;198

(6,982)
252

Change in interest in subsidiaries-;-;--;14,845-;1,039

1,300
1,707

(327)
(460)

-;1,693973
18,824

Note

Balance as of 31 December,2018
Adjustment on adoption of new
accounting standards
Balance as of 1 January,2019 (restated)

Balance as of 31 December,2019

INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUSD (In thousands)
Six months ended 30
June (Unaudited)
Note
Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Impairment loss of right-of-use assets
Loss on sale of the investment in subsidiaries
Share of profit of investments accounted forusing equity method
Gain on change in share of investments
accounted for using the equity method
Finance income and finance expense, net
Change in assets and liabilities
Trade receivables
Contract assets
Trade payable
Accruals and other payables
Contract liabilities
Current provisions
OthersDividends received
Interest received
Interest paid
Income taxes received (paid)
Net cash provided by operating activities(6,494)
1,301
345
-;-

5

(40)

(1,179)2,791

5(1,423)(468)(1,849)

58

49

22

(629)
226
2,417
74
(2,153)-;-;102-;(58)
313
(206)

289
186
(326)
308
1,606
(60)
(110)
104
-;(49)(350)(1,648)

(299)
(61)
319
(267)
(199)
297
(343)
206
4
(108)
270
(4,065)

(2)
(80)
(9)
-;-

(2)

-;-

(12)
(282)
(7)

8
7

7
2

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Capital fund from translation differences
Cash and cash equivalents at end of year

7

2019

(2,331)
643
-;40

4

Cash flows from financing activities:
Repayments of short-term financing liabilities
Payments for borrowings
Repayments of long-term financing liabilities
Borrowings from related parties
Repayments of obligations under finance leases
Proceeds from share issuance to non-controllingshareholders
Net cash provided by financing activities

2020

330
577
-;-;-

4

Cash flows from investing activities:
Acquisitions of property, plant and equipment
Acquisitions of intangible assets
Acquisition of Investment Securities
Proceeds from sales of assets classified as
investments accounted for using equity method
Acquisition of subsidiary, net of cash acquired
Loans to related parties
Acquisition of subsidiary, net of cash payments
Proceeds from sales of shares of subsidiaries
Proceeds from sales of investment securities
Acquisition of other financial assets
Net cash used in investing activities

2019

31 December

1,017

142
(74)
-;-;-;(1)(24)-;-;(68)96
18-;1,061-;-142-;-;-;-;(7)
(166)

228
-;-;6
(521)

-;(193)-;-;(609)

230-;-;-;(1,110)

-;-

2,284

973

(287)

1,482

93

(517)
11,282
208
10,973

895
7,251
(19)
8,127

(4,138)
11,282
107
7,251

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 1 – GNERAL INFORMATION, REORGANIZATION AND BASIS OF PRESENTATION
1.1 General Information
Internet Research Institute Ltd (hereinafter - the Company) was incorporated and registered in
Israel as a private company on August 8, 2017. The Company listed shares of its common stockon the Tel-Aviv Stock Exchange on August 9, 2018. The Company wholly holds in Internet
Research Institute, Inc. (hereinafter – IRI Japan), a private company that was incorporated inJapan on December 9, 1996. IRI Japan registered address is in Tokyo, Japan.
The Company’s operations, via IRI Japan and its subsidiaries (hereinafter – the Group), are focusedon Internet technologies (and, in particular, IoT), cyber security and AI (see the definitions of theseterms above), and include consultation, research, investments, and production of conferences andevents in these fields.
Upon its incorporation in Israel, the Company was wholly owned by Dr. Hiroshi Fujiwara. After theCompany’s incorporation, Dr. Fujiwara set up a company that was wholly owned by him, which wasincorporated under Japanese law (the “New IRI Japan”) the entire issued capital of which wastransferred by Dr. Fujiwara to the Company immediately following its incorporation. Just prior to
the date of the incorporation, a merger transaction (under Japanese law, hereinafter: the “Merger”)
was effected, in which the following actions were performed at the same time: (i) Dr. Fujiwaratransferred 34,786 shares of the Company (out of the 34,787 shares existing in the issued capital of
the Company) to the New IRI Japan; (ii) the operations of (the original) IRI Japan were merged
into the New IRI Japan; and (iii) the New IRI Japan transferred the shares of the Company to theshareholders of (the original) IRI Japan at a ratio of 1:2 (i.e., two shares of the Company for eachshare of the original IRI Japan). For the purpose of the merger, 756 ordinary A shares of (theoriginal) IRI Japan were converted for ordinary shares of (the original) IRI Japan, at a ratio of 1:1.
As a result of the above, after the completion of the above mentioned merger, the shareholders of
the Company were the persons who were the shareholders of (the original) IRI Japan.
Pursuant to the law that is applicable in Japan, on the date of the merger, the New IRI Japan, as therecipient corporation in the merger, accepted all of the assets and liabilities of the original IRI Japan
as such had been on the date of the merger. Therefore, in this financial statements, the term “IRIJapan” shall refer to the original IRI Japan and to the New IRI Japan, without distinction.
After completing the foregoing merger, the Company allotted bonus shares to its shareholders, sothat an additional 999 shares were allotted for each share of the Company.
1.2 Turning the company into a private company:
In accordance with the Companies Law, 1999, the Securities Law, 1968 and the Securities
Regulations, 2000 (Tender Offer Regulations), on July 12, 2020, IRI Acquisition Ltd. applied arequest to purchase all the company's shares held by the public, in such a way that after the purchasethe company will become a privately owned company of IRI Acquisition Ltd.
The tender offer is valid until September 10, 2020 and as of the date of approval of the financial
statements, the offer has not yet been fully accepted.
1.3 Covid-19 implications:
The outbreak of the COVID-19 virus (hereafter, the "Corona virus") in the world in the first half of2020 and its spread, as of the reporting date of this consolidated financial statements, causes great
uncertainty in Israeli and Japanese markets, causing a significant upheaval in the global economy.
In dealing with the outbreak of the Corona virus and attempting to curb its spread, widespread
regulatory measures that significantly restrict people's mobility and public gathering are being
taken in wide areas of the world, as well as in Israel and Japan.
As of the date of issuance of the financial reporting, a number of conferences that were expected totake place in Japan as part of Nano-opt Media Inc.(“NOM”)'s activities in planning, organizing,producing and conducting conferences, exhibitions, seminars and other business events, including8

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the Interop Conference which is NOM's main conference, were canceled due to the spread of Corona
virus and the relevant authorities’ guidelines in this regard.
As a result, a material negative effect on NOM’s revenues occurred in the first half of 2020 and it
resulted that NOM’s revenues significantly decreased in the period as shown in Note 9. However,
the impact on NOM's cash flow is smaller than the effect on its revenue, since advances paid forattending the conferences will not be refunded by NOM and clients will be credited with invitations
to conferences next year, and because of the cost reduction due to the event cancelation.
In addition, given the uncertainty regarding the continued spread of the virus and the resulting
regulatory restrictions, the Company's management estimates that there may be another significant
impact on NOM's results in the current year, depending on the situation's duration, which theCompany's management cannot estimate at this time.
According to the Company's management, BBT's operations were not significantly affected by theCorona virus.
In light of the above, the Board of Directors and the Company's management have approved astreamlining plan (hereinafter, the "Management Plan"), as follows:
1. Given the fact that IoT has operating losses (see Note 8), the Company will not continue financing
IoT's activities from the Group's resources and will take actions to achieve external financing suchas equity investment or loan to IoT.
2. Make efforts to reduce costs in the Group companies.
3. Partial realization of the Company's investment in BBT.
4. Apply for a special long-term loan by NOM, due to the impact of Corona virus, which is capped to
80 millon JPY (which is equivalent to 739 thousand USD) from a Japanese government-controlledbank - Japan Finance Corporation (JFC). The loan funded by JFC is awarded to companies whose
operations have been significantly damaged by the Corona virus impact. Company's management
believes that the Company meets the loan criteria.
In the Company's management opinion, based on the management plan as stated above, theCompany is able to meet its liabilities and the expected cash flow will enable the Company to finance
its activities for the next twelve months ended 31 August 2021.
1.4 Terms
In this financial statements:
The Company, IRI Israel –Internet Research Institute Ltd.
The Group – the Company and its subsidiaries and its affiliates.
IRI Japan – Internet Research Institute, Inc., a private company that is wholly owned by theCompany, and that was incorporated in Japan.
NOM – Nano-Opt Media, Inc., a private company that is wholly owned by IRI Japan, which wasincorporated in Japan.
IOT – IoT square, Inc., a private company , which was incorporated in Japan. IRI Japan holds 70%of the issued and paid up share capital of IOT.
FAEV – Fintech A-Eye Ventures, Inc., a private company that is wholly owned by IRI Japan, which
was incorporated in Japan.
BBT – BroadBand Tower, Inc., a public company incorporated in Japan, the shares of which arelisted for trading on the Tokyo Stock Exchange, in which IRI Japan holds 18% of the issued and paid
up share capital.
MIC – Mobile Internet Capital, Inc., a private company which was incorporated in Japan. Which IRI
Japan holds 30% of the issued and paid up share capital.
Stake holders and controlling interests – As defined in TASE ordinance9INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Related Parties – As defined in IAS 24
The controlling shareholder - Dr. Hiroshi Fujiwara.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
A.1

Basis of preparation

1) The consolidated condensed financial information of the Group as of June 30, 2020 and for theinterim period of 6 months ended on the same date (hereinafter - the interim financial information)
was prepared in accordance with International Accounting Standard No. 34 "Interim Financial
Reporting" (hereinafter - IAS 34), and includes the additional disclosure required in accordancewith Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970. The interim
financial information does not include all the information and disclosures required in annual
financial statements. The interim financial information should be read in conjunction with theannual financial statements for 2019 and the accompanying notes, which comply with theInternational Financial Reporting Standards, which are standards and interpretations published by
the International Accounting Standards Board (hereinafter - IFRS) and include the additional
disclosure required in accordance with the Securities (Annual Financial Statements) Regulations,2010.
The unaudited interim financial statements that have been consolidated in the financial statements
were approved by Mr. Hiroshi Fujiwara, Chairman of the Board and CEO, Mr. Miray Koruda, CFO,
and Mr. Elhanan Harel, Director, on August 26, 2020.
The Group's revenues and the results of its operations for the period of the 6 months ended June30, 2020, do not necessarily indicate the revenues and results that can be expected in the year
ending December 31, 2020.
According to Regulation 38D of the Periodic and Immediate Reports Regulations, the Company has
included separate financial statements in accordance with the Israel Securities Regulations(Periodic and Immediate Reports), from 1970.
A.2 Estimates
Preparation of interim financial statements requires the Group's management to exercise discretion,
and also requires the use of accounting estimates and assumptions, which affect theimplementation of the Group's accounting policies and the amounts of assets, liabilities, income
and expenses reported. Actual results may differ from these estimates.
B. The main accounting policies and method of calculation, which were applied in the preparationof the interim financial information, are consistent with those used in the preparation of the Group'sannual financial statements for 2019.

10

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 3 – FAIR VALUE MEASUREMENTS
Fair value hierarchy
The Group referred to the levels of the fair value hierarchy for financial instruments measured atfair value on the interim condensed consolidated financial statements based on the following
inputs:– Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
– Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices
for identical or similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable, and inputs that are derived principally from or corroborated byobservable market data by correlation or other means.
– Level 3 inputs are derived from valuation techniques in which one or more significant inputs orvalue drivers are unobservable, which reflect the reporting entity’s own assumptions that market
participants would use in establishing a price.
Transfers between levels of the fair value hierarchy are recognized as if they have occurred at the
beginning of the reporting period.
(1) Fair value measurements by fair value hierarchy
Assets measured at fair values on a recurring basis in the Interim Consolidated Statement of
Financial Position as of 30 June 2020, 30 June 2019 and 31 December 2019 are as follows:
Level 1
USD (In
thousands)

Level 2
USD (In
thousands)

As at 30 June 2020
(Unaudited)
AssetsFinancial assets at Fair value
through profit and loss –equity
securities
Financial assets at FVOCI

-;-

-;-

Total
As at 30 June 2019
(Unaudited)
AssetsFinancial assets at Fair value
through profit and loss –equity
securities
Financial assets at FVOCI

-;-

-;-

As at 31 December 2019
AssetsFinancial assets at Fair value
through profit and loss –equity
securities
Financial assets at FVOCI

-;-

-;-

Level 3
USD (In
thousands)

Total
USD (In
thousands)

88

88

114

114

202

202

89

89

246

246

335

335

87

87

252

252

339

339

(2) Reconciliations from the opening balance to the closing balance of financial instruments
categorized within Level 3 are as follows:11

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Financial assets at
level 3
USD (In thousands)
The six month period ended 30 June, 2020 (unaudited)
Balance at 31 December 2019
Decrease due to sales
Fair value gain/(loss) on valuation
Translation differences
Balance at 30 June 2020 (unaudited)

339
(15)
(124)
3
202

The six month period ended 30 June, 2019 (unaudited)
Balance at 31 December 2018
Increase due to acquisition of IoTFair value gain/(loss) on valuation
Translation differences
Balance at 30 June 2019 (unaudited)

304
40
(35)
26
335

The year ended 31, December, 2019 (audited)
Balance at 31 December 2018
Purchases (**)
Fair value gain/(loss) on valuation
Translation differences
Balance at 31 December 2019

304
21
10
4
339

As at 30 June 2020, 30 June 2019 and 31 December 2019 financial assets at FVOCI comprise of
equity instruments.
NOTE 4– Revenue from contracts with customers
4.1 Disaggregation of revenue from contracts with customers
Details regarding disaggregated revenue included at segments reporting note (see Note 9).
4.2 Assets and liabilities related to contracts with customers
The Group has recognized the following revenue-related contract assets and liabilities.
USD thousand

Contract assets (1)Contract liabilities (2)31
December,
2019
332
2,784

12

30 June,2019

30 June,
2020

41

146

807

4,419

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(1) Contract assets consist of “Costs to fulfil a contract” which is attributed to the host or thecustomer’s event in information services business.
(2) Contract liabilities consist of “Unsatisfied performance obligations” which is related to
information services business. The obligations will be satisfied within a year.
Amount of USD 683 thousand Out of the balance of USD 2,784 thousand of liabilities in respect of contracts
with customers as of December 31, 2019, was completed in full during the six months ended June 30, 2020
and accordingly the Company recognized it as income.
NOTE 5– INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
1.

Name ofCompany

General Information
Set out below are the associates of the Group as at 30 June 2020, 30 June 2019 and 31 December
2019. The entities listed below have share capital consisting solely of ordinary shares, which areheld directly by the Group. The country of incorporation or registration is also their principal placeof business, and the proportion of ownership interest is the same as the proportion of voting rights
held.
% of ownership interest
30 June31 December(Unaudited)
Nature ofPlace ofrelationshipbusiness
Main Business
2019
2020
2019

BroadBand
Tower, Inc.

・Computer plat form
・AI solutions business・Media solutions
business

20%

18%

19%

Associate (1)

Tokyo
Japan

MobileInternet
Capital, Inc.

Investment
management

30%

30%

30%

Associate (2)

Tokyo
Japan

Carrying amount of each investment as at 30 June 2020, 30 June 2019 and 31 December 2019 and dividend
received from each affiliate are as follows.
Carrying amount30 June31 December(Unaudited)
Name of Company

2019

Dividend received

2020

2019

Six months ended
30 June(Unaudited)
2019

2020

31
December
2019

USD (In thousands)
BroadBand Tower, Inc.

14,072

Mobile Internet Capital,
Inc.

2,288
16,36012,058

11,573

102

104

206

2,603

2,319

-;-

-;-

-;-

14,661

13,892

102

104

206

Quoted fair value of BroadBand Tower, Inc. as at 30 June, 2020, 30 June, 2019 and 31 December,
2019, are USD 21,056 thousand, USD 25,452 thousand and USD 26,905 thousand, respectively.
(1) BroadBand Tower, Inc. is a trailblazer in the specialty Internet data center business, as a service evolved
from ICT for modern businesses, through its advanced technological capabilities, experienced staff, andhigh-grade facilities and services. BroadBand Tower, Inc. has subsidiaries and affiliates, and they
provide planning, construction, and providing dedicated platform services (video, voice, data delivery)and support of VNO setup/operation services to cable television operators.
13

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As shown in the table above, during the six-month period ended 30 June 2020, the Company’sownership interest ratio has decreased mainly due to sale of a part of shares owned by the Company.
Impact from the change in ownership interest at BBT recorded as a gain on change in share ofinvestments accounted for using the equity method in statement of income, due to the following
contributions:-

Gain on sale on owner dilution in the holding percentage of BBT;
Reclassification of a portion of BBT's accumulated OCI following such sale or dilution, and ;The company's share in equity movement in BBT not resulting from its comprehensive income.

As of 30 June 2020, the Company holds 18% of the voting rights, two directors of the Company are also
designated as directors of this entity and they participate in all significant financial and operating
decisions of the entity. The Group has therefore determined that it has significant influence over thisentity.
(2) Mobile Internet Capital, Inc. is a venture capital investing in ICT related venture companies.
The Company holds 30% of the voting rights, therefore the Company has determined that it has
significant influence over this entity.
2.

The summary financial statement of BroadBand Tower, Inc. adjusted to IFRS is asfollows:

Current assets
Non-current assets
Total assets

USD (In thousands)
Six months ended 30 June
31 December(Unaudited)
2019
2020
2019
102,927
81,48881,075295,458
290,480
297,139
398,385
371,968
378,214

Current liabilities
Non-current liabilities
Total liabilities

64,797
230,434
295,231

66,220201,374
267,595

66,401
215,842
282,243

Total Net assets

103,154

104,374

95,971

Group’s share in %Carrying amount20%
14,07218%
12,05819%
11,573* Reclassified

Revenue
ExpenseProfit (loss) fromcontinuing operations
Profit from discontinued
operations *Profit (Loss)
Profit (Loss) attributableto:Owners of the parent of thecompany
Non-controlling interests

USD (In thousands)
Six months ended 30 June
31 December(Unaudited)
2019
2020
2019
64,74175,744
131,001
63,43771,437
144,872
1,304

4,306

(13,871)

-;-

-;-

-;-

1,304

4,306

(13,871)

434

4,912

(14,778)

870
14

(606)

906

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Total comprehensive
income (loss) attributableto:Owners of the parent of thecompany
Non-controlling interests

366

406

1,307

1,670

4712

(12,565)

(22)

5,672

(14,276)

1,692

(960)

1,712

Individually immaterial associates*
USD (In thousands)
Six months ended 30 June
31 December(Unaudited)
2019
2020
2019
Aggregate carrying amountof individually immaterial
associates
The investments in Mobile
Internet Capital Inc.
Profit from continuing
operations
Other comprehensive
incomeTotal comprehensive
income

7,627

8,679

7,730

2,288

2,603

2,319

(103)

884

63

(87)

4

(93)

(190)

888

(30)

1. Share of profit and of other comprehensive income (loss) of investments accounted forusing the equity method(a) Share of profit of investments accounted for using equity method
Six months ended 30 June
31 December(Unaudited)
2019
2020
2019
USD (In thousands)
Profit (loss) attributable toowners of BBT

434

4,912

(14,778)

Group’s share in BBT %Share of profit (loss)of BBT

20%
72

18%
914

19%
(2,810)

Profit attributable to ownersof MICGroup’s share in MIC %Share of profit (loss) of MIC
Share of profit ofinvestments accounted
for using the equity
method

(103)

884

63

30%
(32)

30%
265

30%
19

40

1,179

(2,791)(b) Share of other comprehensive income (loss) of investments accounted for using equity method15

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended 30 June
31 December(Unaudited)
2019
2020
2019
USD (In thousands)
Other comprehensive
income (loss) attributable toowners of BBTGroup’s share in BBT %Share of othercomprehensive income(loss) of BBT, net of tax*
Other comprehensive
income (loss) attributable toowners of MIC
Group’s share in MIC %Share of Other
comprehensive income(loss) of MIC, net of tax*
Share of othercomprehensive income(loss) of investments
accounted for using theequity method


(539)
19.7%

784
17.9%

471
19%

(68)

91

63

(87)
30%

4
30%

(93)
30%

(17)

1

(18)

(85)

92

45

Deducting deferred taxes imputed to other comprehensive income in respect of investments inaffiliated companies.

NOTE 6 – SEASONAL OPERATIONS
Due to the seasonal nature of the NOM segment, higher revenues and operating profits are usually
expected in the three month period ended 30 June than other quarterly periods. This is mainly due
to the fact that the Interop Tokyo, Email Security Expo & Conference as a biggest event operated by
NANO OPT Media Inc. which is held in June every year. In the fiscal year ended 31 December 2019,54% of revenues in the three month period ended 30 June was recorded in the NOM segment.
Meanwhile, as discussed in Note 1.2, in the six month period ended 30 June 2020, the offline
Interop Tokyo, Email Security Expo & Conference was cancelled due to the spread of Corona virus
and the relevant authorities’ guidelines.

16

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 7 – RELATED PARTY TRANSACTIONS
For the purposes of this Interim Financial Information, parties are considered to be related to theGroup if the party has the ability, directly or indirectly, to exercise significant influence over theGroup in making financial and operating decisions. Related parties may be individuals (being
members of key management personnel, significant shareholders and/or their close family
members) or other entities and include entities which are under the significant influence of relatedparties of the Group where those parties are individuals. Parties are also considered to be related ifthey are subject to common control.
The directors are of the view that the following individuals and companies were related parties that
had transactions or balances with the Group for the six-month periods ended 30 June 2019 and2020, and the year ended 31 December 2019.
(a) BALANCES classified as related parties
USD thousand
30-June (Unaudited)
31 December
2019
2020
2019
Current assets
Booked in the company and IRI Japan:-Prepaid expense to Internet Association Japan-;1-;-Trade Receivable to Broad band Tower, Inc.
-;8-;10
-Trade Receivable to Unimo, Inc.
10
10
(10)
-Allowance for Doubtful accounts to Unimo, Inc.
(10)
(10)
Booked in NANO OPT Media, Inc.:-Other receivable to Unimo, Inc.
-Allowance for Doubtful accounts to Unimo, Inc.
-Prepaid expense to Astro-Aerospace Ltd.
-Trade Receivable to Japan CableCast, Inc.

21
(21)
-;2

21
(21)
-;-;-

21
(21)
-;-;-

8
11
21

-;8
17

8
9
17

Total

-;-

-;-

-;-

Current liabilities
Booked in the company and IRI Japan:-Account payable to BroadBand Tower, Inc.
-Other payable for Hiroshi Fujiwara-Other payable for key role personals-Advance payment from BroadBand Tower, Inc.

1
15
63
-;-

-;15
13
-;-

4
15

Booked in NANO OPT Media, Inc.:-Account payable to BroadBand Tower, Inc.

1

1

3

15
1

-;2

3
4

-;-

-;-

-;-

96

31

46

Booked in IoT Square, Inc.:-Trade Receivable to Broad band Tower, Inc.
-Prepaid expense to Broad band Tower, Inc.
Total
Non-current assets
Booked in the company:

Booked in IoT Square, Inc.:-Trade Payable to Broad band Tower, Inc.
-Account payable for Broad band Tower, Inc.
-Short-term borrowings from Directors of the IoT Square,
Inc.
Total
(*) less than thousand USD.
17

17

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
All of the above transactions with related parties were conducted in the ordinary course of thebusiness of the Group based on the terms mutually agreed between the relevant parties.

(b)Transactions with related parties
USD thousand
31
December
201930-June (Unaudited)
2019

2020

Booked in the company and IRI Japan:
Transaction with Other Related Parties-Outsourcing cost to BroadBand Tower, Inc.
-Sales to BroadBand Tower, Inc.
-Purchse of common shares of IoT Square, Inc. from
BroadBand Tower, Inc.
-Sales to IoT Square, Inc.
-Sales to Internet Association Japan-Revisions of contract amount in relation to sales
transactions with Internet Association Japan-Payment of membership fee to Internet Association
Japan

(5)
-;70

(6)
23

(11)
-;-

-;-

71

-;-;(49)

-;-;-

-;-;-

-;-

(50)

(1)

(2)

(2)

Booked in NANO OPT Media, Inc.
Transaction with Other Related Parties-Sales to BroadBand Tower, Inc.
-Sales to Japan CableCast, Inc.
-Consulting fee to Astro Aerospace-Outsourcing cost to BroadBand Tower, Inc.

11
1
-;-;-

-;-;-;-;-

11
1
-;-;-

Booked in IoT Square, Inc.:
Transaction with Other Related Parties-Sales to BroadBand Tower, Inc.

-;107

-;109

-;108

228

-;

-;

9
(60)
310

9
-;134

9
(63)
74

-Short-term borrowings from Directors of the IoT Square,
Inc.
-Sales to Remote Sensing Technology Center of Japan-Outsourcing cost to BroadBand Tower, Inc.
Total

(c)

Key management compensation

The compensation paid or payable to key management for employee services is shown below:
USD thousand
30-June (Unaudited)
2019
Executive compensation

153

2020
112

Total

153

112

18

31 December
2019
236
236

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 8 – BUSINESS COMBINATIONOn 31 March 2020, the Company acquired a 51% controlling interest of the authorized and issued shares ofDigit Inc. ("Digit"), which provides analytics services to enterprises in Japan in the HR field especially inbusiness behavior assessment, mental health management and organization and strategic consulting. On
30 June 2020, the Company sold its entire shareholding in Digit, resulting in an insignificant loss on
disposal. Digit's results were consolidated in the consolidated statement of income from its acquisition datethrough its disposal.
NOTE 9 – SEGMENT REPORTING
Operating segments were determined based on the reports reviewed by the Chief Executive Officer (CEO)
who is responsible for allocating resources and assessing performance of the operating segments, who is theChief Operating Decision Maker (“CODM”).
An operating segment of the Group is a component for which discrete financial information is available. No
operating segments have been aggregated to form the reportable segments.
The CEO considers the business from two areas of activities, as follows;(a) Information technology, which includes two operating segments:(i) IRI Japan- it mainly provides consultancy services, research services and the reviewing ofmarket trends in the field of internet technologies for companies, organizations andgovernment institutions in Japan.
(ii) BBT- it mainly provides data center services, cloud services, storage solutions, AI (artificial
intelligence) solutions, dedicated platform services and support of VNO setup/operation
services to cable television operators. In addition, BBT deals in renewable energy and is theowner of a number of solar power stations. Revenue from a single external customers wereapproximately 14,668 thousands USD for six month ended 30 June 2019, 7,336 thousands
USD for the three month ended 30 June 2019, 16,299 thousands USD for six month ended
30 June 2020, 7,746 thousands USD for the three month ended 30 June 2020 respectively.
(iii) IoT- it mainly provides IOT solutions and consultation services in the field of data security,and the design and production of films and production services.
(b) Information service business(i) NOM – it mainly provides planning, organization, production and management ofconferences, exhibitions, seminars and other business events in the fields of internet
technology, hi-tech, cyber security, etc.
(c) Other
Other comprise of Digit and the investments in MIC. It is a general partner in an investment
fund that mainly invests in startups in the technology and services industry, which focus on next
generation ICT (information and communications technology) companies and in related areas.
Each segment is divided to services and equipment relating to revenues and cost of revenues.
The reportable operating segments include the following measures: Revenues, Operating profit(loss), and Interest expenses and incomes, Tax, Depreciation and Assets.

19

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended 30 June 2019
Unaudited
USD thousand
Technology Information
IRI
BBT
I0T
Segment revenues
Operating profit(loss)
Share of profit(loss) ofinvestments
accounted forusing the equity
methodGain on change inshare ofinvestments
accounted forusing equity
methodProfit (loss) before
income tax
Income tax expenses(benefit)
Profit (loss) for
the year

NOM

Other

Sub total

Adjustments

Total

38

64,741

595

8,783

-

74,157(64,755)

9,402(1,421)

1,940(1,614)

1,946

-

851

(1,910)(1,059)

72

-

-

-

(32)

40

-

40

1,423

-

-

-

-

1,423

-

1,423

40

2,273

(1,630)

1,922

(32)

2,573

(2,243)

330

(61)

(969)

-

(809)

(9)

(1,848)

969

(879)

(21)

1,304

(1,630)

1,113

(40)

725

(1,275)(549)

Six months ended 30 June 2020
Unaudited
USD thousand
Technology Information
IRI
BBT
I0T

NOM

Other

Adjustments

Total

Segment revenues

175

75,738

159

2,700

23

78,795(75,629)

3,166

Inter-segment
revenues

-;-

6

136

-;-

-;-

142

(142)

-;-

Segment revenues

175

75,744

295

2,700

23

78,937(75,771)

3,166(1,059)5,819(1,505)(1,022)

(182)

2,051

(5,819)(3,768)

(40)

-;-

-;-

-;-

-;-

(40)

-;-

(40)

914

19

-;-

-;-

264

1,197

(19)

1,178

468

-;-

-;-

-;-

-;-

468

-;-

468

(304)

5,272

(1,535)(1,047)83

2,469(4,800)(2,331)

33

(966)

-;-

256

-;-

(677)

967

290

(271)

4,306

(1,535)

(791)

81

1,792

(3,833)(2,041)

Operating profit(loss)
Loss theinvestment in
subsidiaries
Share of profit(loss) ofinvestments
accounted forusing the equity
methodGain on change inshare ofinvestments
accounted forusing equity
methodProfit (loss) before
income tax
Income tax expenses(benefit)
Profit (loss) for
the year20

Sub totalINTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Year ended 31 December 2019
USD thousand
Technology Information
IRI
BBT
IoT
Segment revenues
Operating profit(loss)
Share of profit(loss) ofinvestments
accounted forusing the equity
methodGain on change inshare ofinvestments
accounted forusing equity
methodProfit (loss) before
income tax
Income tax expenses(benefit)
Profit (loss) for
the year
Other segment
items
Finance income
Finance expense
Depreciation andamortization
Capitalexpenditure

NOM

Other

Sub total

Adjustments

139

130,001

1,154

10,841-;-

143,135(131,015)

12,120(3,314)(11,224)(3,022)823-;-(16,737)(11,224)(5,514)(2,810)

(0)

-;-

-;-

19

(2,791)0(2,791)

1,849

-;-

-;-

-;-

-;-

1,849

-;-

1,849

(6,886)(11,630)(3,067)774

19(20,790)

14,296(6,494)8(2,241)

(6)

(481)

(10)

(2,730)

2,241

(489)

(6,878)(13,871)(3,073)293

9(23,520)

16,537(6,983)

123

1,672

-;-

-;-

-;-

1,795

(1,708)(87)(2,716)(1,060)(2,078)(11,395)

(45)
(160)

(49)
(81)

-;-;-

(4,888)(12,696)

4,781(11,395)(108)(1,301)

7

35,139

5

282

-;-

35,433(35,159)

292

123

1,672

-;-

-;-

-;-

1,795

(1,624)(87)

30 June 2019 (Unaudited)
USD thousand
Technology Information
Segment
assetsIRI25,457

BBT

IOT

398,391

1,391

NOM

Other

11,253

2,288

Adjustments(400,670)

Total
38,11030 June 2020 (Unaudited)
USD thousand
Technology Information
Segment
assets

IRI

BBT

IOT

18,284

371,968

1,360

NOM

Other

9,836

2,604

Adjustments(372,403)

Total
31,64931 December 2019
USD thousand
Technology Information
Segment
assets

Total

IRI

BBT

18,748378,214

*IOT
986

NOM

Other

9,288

21

2,319

Adjustments(378,637)

Total
30,918INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 10 – PRINCIPAL SUBSIDIARIES

General information
The table below includes subsidiary in which the Group’s percentage of ownership changed during such
period:Name
IoT Square, Inc.

% of ownership interest
30 June31 December(Unaudited)
2019
2020
2020

Main business
Refer to Note 9

100%

71%

77%

IoT has become a subsidiary of the Company on 4 January 2019.
During the year ended 31 December, 2019, IoT issued new common shares through a third-party
allotment. As a results, the Group’s ownership interest in IoT decreased from 100% to 77% andrecorded 1,300 thousands USD of Capital surplus and 327 thousand USD of Non-Controlling interest,
respectively.
In addition, during the six month period ended 30 June 2020, IoT additionally issued new commonshares through a third-party allotment. As a results, the Group’s ownership interest in IoT decreased
from 77% to 71% and recorded 409 thousands USD of Capital surplus and 39 thousand USD of NonControlling interest, respectively.
On April 10, 2020, an investment agreement has been signed between SBI Holdings ("SBI"), a Japanesefinancial services company that deals, inter alia, in the card field, and IoT as a subsidiary of the Group.
Based on the agreement, SBI invested a total sum of JPY 200 million (which is equivalent to 2,337
thousan USD) in consideration to 5,000 A Preferred shares newly issued by IoT. Considering the term
and conditions of the A Preferred shares, the Group determined to classify it into “Equity instruments”
and recorded as “Non-controlling interests” in the interim condensed consolidated financial position.
The A preferred shares can be convertied to ordinary shares at any time when SBI exercises theconversion right. If the whole A preferred shares are converted to ordinary shares as of 30 June 2020,
the Group ownerhship interest ratio decreased to 51%.

NOTE 11– RECONCILIATION of BBT's FINANCIAL STATEMENTS FROM J-GAAP TO IFRSOn August 6, 2017, the Company submitted an application to the Securities Authority for approvalof relief in attaching the reports of the affiliateBBT, whose securities are listed for trading on theTokyo Stock Exchange in Japan, mainly approval to attach to the Company's reports BBT's
financial statements prepared according to the accepted accounting principles in Japan (J-GAAP),
as published for the public in Japan, translated into to English, together with a reconciliation notesetting out the relevant differences in the BBT financial statements between the J-GAAP and the
IFRS.
Below is transition from Japanese GAAP to IFRS at BBT as of and for the year ended 31 December
2019 and six month ended 30 June 2020 and 2019. Since BBT’s financial information underJapanese GAAP is denominated in JPY, the reconciliation below is presented in thousands of JPY.

22

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of financial position
JPY (In thousands)
As of 30 June 2019
Presentation
under
J-GAAP

Note

Current assets
Cash and cash
equivalents
Notes and accounts
receivable-trade
Inventories
Current assetsOthers
Allowance for
doubtful accounts
Total current
assetsNon-current
assetsProperty, plant andequipment

J

J

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

Presentation
under IFRS

IFRS

8,723,112-;-

8,723,112

1,859,664(9,314)1,850,350

191,938-;-

191,938

519,249(204,257)

314,992(9,314)

9,314-

11,284,649(204,257)

11,080,392

H

6,567,117

86,237

6,653,354

-;-

G

-;-

17,499,059

17,499,059

Intangible assets
Goodwill

B

2,076,346
639,454

38,08818,787

2,114,434
658,241

Investment securities

E,J

2,121,319(2,087,387)

33,932

-;-

E

-;-

2,485,119

2,485,119-;-

251,249

251,249

1,478,306-;-

1,478,306

236,766

189,169

425,935

159,983

47,286207,269

13,279,291

18,527,607

31,806,898

24,563,940

18,323,350

42,887,290

E-;-

Lease and guarantee
deposits
Deferred tax assets
Non-current assetsOthers
Total non-current
assetsTotal assets

C

23

Current assets
Cash and cash
equivalents
Notes andaccounts
receivable-trade
Inventories
Current assets –Others-;Total current
assetsNon-current
assetsProperty, plantand equipment
Right-of-use
assetsIntangible assets
Goodwill
Investments
accounted forusing the equity
methodFinancial assets atfair value throughothercomprehensive
incomeFinancial assets atfair value throughprofit or loss
Other financial
assets at
amortised cost
Deferred tax assets
Other non-current
assetsTotal noncurrent assets
Total assets

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
As of 30 June 2019
Presentation
under
J-GAAP

Note

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

IFRS

Current
liabilities

Current liabilities
Accounts payabletrade
Short-termborrowings
Lease obligationscurrent

478,367-;-

478,367

1,919,726-;-

1,919,726

36,1003,013,219

3,049,319

Accounts payableother

460,090-;-460,090

Income taxes payable

106,287-;-

106,287F-

460,068

460,068

D,F

940,338(438,604)

501,734

3,940,908

3,034,683

6,975,591-;Current liabilitiesOthers
Total current
liabilities

G

Non-current
liabilities
Lease obligations

G

292,233

15,503,699

15,795,932

I

6,506,708(76,987)

6,429,721

1,542,272-;-

1,542,272

C

502,571

71,867574,438F-

104,997

104,997

Non-current
liabilities – Others

289,487

70,049359,536

Total non-current
liabilities

9,133,271

15,673,625

24,806,896

Total liabilities

13,074,179

18,708,308

31,782,487

Long-term
borrowings
Asset retirement
obligations
Deferred tax
liabilities-;-

EquityShareholders’equityCapital stock
Capital surplus
Retained earnings
Treasury shares
Total
shareholders’equityOther
comprehensive
incomePresentation
under IFRS

K

3,032,125
3,512,474
1,853,811(87,662)-;10,545(558,920)-;-

3,032,125
3,523,019
1,294,891(87,662)

8,310,748(548,375)

7,762,373

24

Trade payable
Short-termborrowings
Short-term leaseliabilities
Accruals,
provisions andother payables
Income taxes
payableContract
liabilities
Other current
liabilities
Total current
liabilities
Non-current
liabilities
Long-term leaseliabilities
Long-term
borrowings
Asset retirement
obligations
Deferred tax
liabilities
Contract
liabilities-noncurrent
Other noncurrent liabilities
Total noncurrent
liabilities
Total liabilities
EquityShareholders’equityCapital stock
Capital surplus
Retained earnings
Treasury shares
Total
shareholders’equityOther
comprehensive
incomeINTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
As of 30 June 2019
Presentation
under
J-GAAP
Valuationdifferences ofavailable-for-saleinvestments
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeNote

E

Stock compensation
Non-controllinginterests
Total equity
Total liabilities
and equity

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

Presentation
under IFRS

IFRS

(10,339)(39,888)(50,227)(25,338)-;-(25,338)(35,677)(39,888)(75,565)

3,493(3,493)-;-

3,211,197

206,798

3,417,995

11,489,761(384,958)

11,104,803

24,563,940

18,323,350

42,887,290

Valuationdifferences offinancial assets at
amortised cost
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeStockcompensation
Non-controllinginterests
Total equity
Total liabilities
and equity

JPY(in thousand)As of 31 December 2019
Presentation
under

Note

J-GAAP
Current assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Inventories
Current assets –OthersAllowance for
doubtful accounts
Total current
assetsNon-current
assetsProperty, plant andequipment-;Intangible assets
Goodwill
Investment securities

J

J

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

Presentation
under IFRS

IFRS

5,914,296-;-

5,914,296

2,121,401(5,499)2,115,902

306,760-;-

306,760

607,364(146,158)

461,206(5,499)

5,499

-;-

8,944,322(146,158)

8,798,164

H

8,458,443(428,990)

8,029,453

GB-;2,395,199
605,672

15,694,574
7,386
75,37015,694,574
2,402,585
681,042E,J

2,378,706(2,362,464)

16,24225

Current assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Inventories
Current assets –OthersAllowance for
doubtful accounts
Total current
assetsNon-current
assetsProperty, plant andequipment
Right-of-use assets
Intangible assets
Goodwill
Investments
accounted for using
the equity method

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
As of 31 December 2019
Presentation
under
J-GAAP

Note

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

IFRS

-;-

E

-;-

3,119,187

3,119,187

-;-

E

-;-

197,910

197,910Deferred tax assets

C

101,282

298,922400,204

1,335,438-;-

1,335,438

163,956

204,543

368,499

15,438,696

16,806,438

32,245,134

24,383,018

16,660,280

41,043,298

Lease and guarantee
deposits
Non-current assets –OthersTotal non-current
assetsTotal assets

Presentation
under IFRSFinancial assets atfair value throughcomprehensive
incomeFinancial assets atfair value throughprofit or loss
Deferred tax assets- non current
Lease andguarantee deposits
Non-current assets– Others
Total noncurrent assets
Total assets

JPY(in thousand)As of 31 December 2019
Presentation
under

Note

J-GAAP

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

IFRS

Current
liabilities

Current liabilities
Accounts payabletrade
Short-termborrowings

983,528-;-

983,528

1,820,736-;-

1,820,736

12,6303,018,192

3,030,822

Accounts payableother

322,018-;-

322,018

Income taxes payable

108,662-;-

108,662

Lease obligations - current

G

-;-

F

-;-

559,154559,154

OthersD,F

922,730(541,848)

380,882

4,170,304

3,035,498

7,205,802

Total current
liabilities
Non-current
liabilities
Lease obligations
Long-term
borrowings
Asset retirement
obligations

Presentation
under IFRS

G

29,714

14,489,683

14,519,397

I

5,893,430(68,328)

5,825,102

1,704,982-;-

1,704,982

26

Trade payable
Short-termborrowings
Obligation underfinance leases –current
Accruals,
provisions andother payables
Income taxes
payableContract liabilities
Other current
liabilities
Total current
liabilities
Non-current
liabilities
Obligation underfinance leases
Long-term
borrowings
Asset retirement
obligations

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY(in thousand)As of 31 December 2019
Presentation
under

Note

J-GAAP

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

Presentation
under IFRSIFRSDeferred tax
liabilities

C592,369

113,140

705,509

-;-

F

-;-

306,589

306,589

323,973

37,318361,291

Total non-current
liabilities

8,544,468

14,878,402

23,422,870

Total liabilities

12,714,772

17,913,900

30,628,672

Non-current
liabilities - Others

EquityShareholders’equityCapital stock
Capital surplus
Retained earnings
Treasury shares
Total
shareholders’equityOther
comprehensive
incomeValuation differencesof available-for-saleinvestments
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeNon-controllinginterests
Total equity
Total liabilities
and equity

KE

3,322,421
3,809,480
1,226,728(87,662)-;12,777(1,646,907)-;-

3,322,421
3,822,257(420,179)(87,662)

8,270,967(1,634,130)

6,636,837

-;-

-;-

-;-

(5,235)62,93557,700(22,598)-;-(22,598)(27,833)

62,93535,102

3,425,112

317,575

3,742,687

11,668,246(1,253,620)

10,414,626

24,383,018

16,660,280

41,043,298

27

Deferred tax
liabilities - noncurrent
Contract liabilities- non current
Other non-current
liabilities
Total noncurrent
liabilities
Total liabilities
EquityShareholders’equityCapital stock
Capital surplus
Retained earnings
Treasury shares
Total
shareholders’equityOther
comprehensive
incomeValuationdifferences ofavailable-for-saleinvestments
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeNon-controllinginterests
Total equity
Total liabilities
and equity

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JPY(in thousand)As of 30 June 2020
Presentation
under

Note

J-GAAP
Current assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Inventories
Current assets Others
Allowance for
doubtful accounts
Total current
assetsNon-current
assetsProperty, plant andequipment-;Intangible assets
Goodwill

J

J

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

Presentation
under IFRS

IFRS

6,420,007-;-

6,420,007

1,712,252(5,408)

1,706,844

241,822-;-

241,822464,186(54,150)410,036(5,408)

5,408

-;-

8,832,859(54,150)

8,778,709

H

8,183,915(473,158)

7,710,757

GB-;2,295,122
581,920

14,641,178
6,386
99,122

14,641,178
2,301,508
681,042

Investment securities

E,J

2,494,132(2,475,840)

18,292

-;-

E

-;-

3,231,607

3,231,607

-;-

E

-;-

335,771335,771

Deferred tax assets

C

84,480278,022362,502

1,331,685-;-

1,331,685

141,086

537,970679,056

15,112,340

16,181,058

31,293,398

23,945,199

16,126,908

40,072,107

Lease and guarantee
deposits
Non-current assets Others
Total non-current
assetsTotal assets

28

Current assets
Cash and cash
equivalents
Notes and accounts
receivable - trade
Inventories
Current assets –OthersAllowance for
doubtful accounts
Total current
assetsNon-current
assetsProperty, plant andequipment
Right-of-use assets
Intangible assets
Goodwill
Investments
accounted for using
the equity method
Financial assets atfair value throughcomprehensive
incomeFinancial assets atfair value throughprofit or loss
Deferred tax assets- non current
Lease andguarantee deposits
Non-current assets– Others
Total noncurrent assets
Total assets

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY(in thousand)As of 30 June 2020
Presentation
under

Note

J-GAAP

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

IFRS

Current
liabilities

Current liabilities
Accounts payabletrade
Short-termborrowings

575,718-;-

575,718

1,837,736-;-

1,837,736

12,274

3,002,100

3,014,374

Accounts payableother

185,017-;-

185,017

Income taxes payable

140,308-;-

140,308

Lease obligations - current

G

-;-

F

-;-

758,547

758,547

OthersD,F

1,196,033(573,813)

622,220

3,947,086

3,186,834

7,133,920

Total current
liabilities
Non-current
liabilities
Lease obligations
Long-term
borrowings
Asset retirement
obligations

Presentation
under IFRS

G

23,55813,127,841

13,151,399

I

5,168,972(59,395)

5,109,577

1,693,071-;-

1,693,071

Trade payable
Short-termborrowings
Obligation underfinance leases –current
Accruals,
provisions andother payables
Income taxes
payableContract liabilities
Other current
liabilities
Total current
liabilities
Non-current
liabilities
Obligation underfinance leases
Long-term
borrowings
Asset retirement
obligations
Deferred tax
liabilities - noncurrent
Contract liabilities- non current
Other non-current
liabilities
Total noncurrent
liabilities

Deferred tax
liabilities

C552,206

147,127

699,333

-;-

F

-;-

664,727

664,727

335,21340,766375,979

Total non-current
liabilities

7,773,020

13,921,066

21,694,086

Total liabilities

11,720,106

17,107,900

28,828,006

Total liabilities
EquityShareholders’equityCapital stock
Capital surplus
Retained earnings
Treasury shares
Total
shareholders’equityNon-current
liabilities - Others

EquityShareholders’equityCapital stock
Capital surplus
Retained earnings
Treasury shares
Total
shareholders’equityK

3,331,331
3,827,201
1,473,602(87,670)-;12,968(1,421,689)-;-

3,331,331
3,840,169
51,913(87,670)

8,544,464(1,408,721)

7,135,743

29

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY(in thousand)As of 30 June 2020
Presentation
under

Note

J-GAAP

Reported
underJapanese
GAAP

Other
comprehensive
incomeValuation differencesof available-for-saleinvestments

E

Foreign currencytranslation
adjustment
Total othercomprehensive
incomeNon-controllinginterests
Total equity
Total liabilities
and equity

Effect oftransition to
IFRS

Presentation
under IFRS

IFRS

-;-

-;-

-;-

(11,779)

156,878

145,099(25,126)-;-(25,126)(36,905)

156,878

119,973

3,717,534

270,851

3,988,385

12,225,093(980,992)

11,244,101

23,945,199

16,126,908

40,072,107

Other
comprehensive
incomeValuationdifferences ofavailable-for-saleinvestments
Foreign currencytranslation
adjustment
Total othercomprehensive
incomeNon-controllinginterests
Total equity
Total liabilities
and equity

Consolidated statement of income
JPY (In thousands)
For the 6 month ended 30 June 2019
Presentation
under
J-GAAPNet revenue
Cost of revenue
Gross profit
Selling, general andadministrative
expenses

Note
F
F,G

Reported
underJapanese
GAAP
7,260,724(5,540,731)
1,719,993

Effect oftransition to
IFRS

Presentation
under IFRS

IFRS

(137,428)
621,117483,689

7,123,296(4,919,614)
2,203,682

Revenue
Cost of sales
Gross profit(1,917,169)(82,719)(1,998,887)

Selling, general andadministrative
expenses-;-;-

27,295(17,662)

27,295(17,662)(197,176)

410,603

213,428

J

47,922(47,922)

-;-

-;-;-

B,D,
G

-;-;Operating profit(loss)
Non-operating
incomeNon-operating
expenses-;-;-J(58,710)58,710

-;-

J
J

-;-;-

141,346(104,733)

141,346(104,733)

-;-

J

-;-

4

4

(207,964)

458,009250,045-;-(35,214)35,214-;--;-

Ordinary(loss)

JJ

profitExtraordinary loss

J

30

Other income
Other expense
Operating profit(loss)

Finance income
Finance expense
Share of profit ofinvestments
accounted for using
the equity method

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
For the 6 month ended 30 June 2019
Presentation
under
J-GAAP
Profit (loss)
before income
taxes
Income taxes
Profit (loss) after
income taxes
Minority interest

Note

C

Profit(loss)
attributabletoowners of parent
Profit (loss) after
income taxes
Other comprehensive
income, net of tax:
Valuationdifference on
available-for-saleinvestment
Foreign currencytranslation
adjustment
Total othercomprehensive
income (loss), netof taxComprehensive
income (loss)
Comprehensive
incomeattributable to
Owners of parent
Non-controllinginterests

E

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

Presentation
under IFRSIFRSProfit (loss)
before income
taxes
Income taxes expense
Profit (loss) for
the year(243,178)

493,223

250,045(43,381)(63,198)(106,579)(286,559)

430,024

143,466(56,236)(39,497)(95,733)

Minority interest(342,795)

390,527

47,733

Profit(loss)
attributabletoowner of parent(286,559)

430,024

143,466(34,277)

80,00245,726(5,506)-;-(5,506)(39,783)

80,00240,220(326,342)

510,027

183,685(355,653)

353,226(2,427)29,311

156,800

186,112

Profit (loss) for
the year
Other comprehensive
income, net of tax:
Change in fairvalue of availablefor-sale financial
assetsForeign currencytranslation
adjustment
Total othercomprehensive
income (loss), netof taxComprehensive
income (loss)
Comprehensive
incomeattributable to
Owners of parent
Non-controllinginterests

JPY (In thousands)
For the 6 month ended 30 June 2020
Presentation
under
J-GAAPNet revenue
Cost of revenue
Gross profit
Selling, general andadministrative
expenses
-;-;-

Note
F
F,G
B,D,
G
J
J

Reported
underJapanese
GAAP8,683,041(6,564,698)
2,118,343

Effect oftransition to
IFRS

IFRS

Presentation
under IFRS

(482,905)
705,215
222,3108,200,136(5,859,483)
2,340,653

Revenue
Cost of sales
Gross profit(1,730,399)

13,414(1,716,985)

Selling, general andadministrative
expenses-;-;-

13,599(7,269)13,599(7,269)31

Other income
Other expenseINTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
For the 6 month ended 30 June 2020
Presentation
under
J-GAAP
Operating profit(loss)
Non-operating
incomeNon-operating
expenses-;-;-;-

Note

Profit (loss)
before income
taxes
Income taxes
Profit (loss) after
income taxes
Minority interest

Presentation
under IFRSIFRSOperating(loss)

242,054629,998

J

44,039(44,039)

-;-

-;-

J

(37,034)

37,034

-;-

-;-

J
J

-;-;-

23,752(85,008)

23,752(85,008)

J

-;-

2,050

2,050

394,949

175,843

570,792

-;-

660

(660)

-;-

-;-

(57,138)

57,138-;--;-338,471

232,321570,792(79,313)(25,279)(104,592)

259,158

207,042466,200

47,42918,17665,605306,587

225,218

531,805

259,158

207,042466,200(44,996)

91,42546,429(2,528)-;-(2,528)(47,524)

91,42543,901

211,634

298,467

510,101

296,793317,238

614,031(85,159)(18,771)(103,930)

J

C

Profit (loss)
Attributable toowners of parent
Profit (loss) after
income taxes
Other comprehensive
income, net of tax:
Valuationdifference on
available-for-saleinvestment
Foreign currencytranslation
adjustment
Total othercomprehensive
income (loss), netof taxComprehensive
income (loss)
Comprehensive
incomeattributable to
Owners of parent
Non-controllinginterests

Effect oftransition to
IFRS

387,944

Ordinary
profit(loss)
Extraordinary
incomeExtraordinary loss

Reported
underJapanese
GAAP

E

32

profitFinance income
Finance expense
Share of profit ofinvestments
accounted for using
the equity method

Profit (loss)
before income
taxes
Income taxes expense
Profit (loss) for
the year
Minority interest
Profit(loss)
attributabletoowner of parent
Profit (loss) for
the year
Other comprehensive
income, net of tax:
Change in fairvalue of availablefor-sale financial
assetsForeign currencytranslation
adjustment
Total othercomprehensive
income (loss), netof taxComprehensive
income (loss)
Comprehensive
incomeattributable to
Owners of parent
Non-controllinginterests

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A) Acquisition of TSS LINK,Inc.
Pursuant to the share exchange agreement executed on 21 December 2018, the Company completed ashare exchange on 31 January 2019, whereby the Company became a wholly owning parent company
resulting from share exchange, and TSS LINK, Inc. (“TSS”) became a wholly owned subsidiary resulting
from share exchange, with the aim of enhancing its computer platform business to increase
competitiveness. As a result of the above, the Company acquired 100% voting rights in TSS and made it aconsolidated subsidiary.

Acquired assets and liabilities
The recognized assets and liabilities of TSS, which are generally measured at fair value at the date ofacquisition, in accordance with IFRS, are as follows:(In thousands of yen)
Fair Valuerecognizedon acquisition
AssetsCurrent asset
Non-current asset
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Total identifiable net assets at fair value
Total consideration

140,069
178,955
319,024(49,837)(52,490)(102,327)
216,697
216,697

Detail of purchase consideration is as follow.

Cash paid
Loss on step acquisition
Ordinary shares issued
Total purchase consideration(In thousands of yen)
10,203(3,785)210,279
216,697

As of end of June 2019, the difference between the net book value and the acquisition price was recorded as
goodwill, but due to the confirmation of accounting, intangible assets were recorded at 171,425 thousand
yen and deferred tax liabilities of 52,490 thousand yen. On the other hand, goodwill decreased by 118,934
thousand yen. From the date of acquisition, TSS had contributed JPY 179,365 thousand to the revenue of
BBT and had increased profit from continuing operations of BBT by JPY 30,278 thousand, for the 12 month
ended 31 December 2019. Also, TSS had contributed JPY 66,978 thousand to the revenue of BBT and had
increased profit from continuing operations of BBT by JPY 12,839 thousand, for the 6 month ended 30 June
2020. If the business combination had taken place on 1 January 2019, consolidated pro-forma revenue andloss from continuing operations of BBT would have been JPY 14,291,218 thousand and JPY 1,654,887
thousand for the 12 month ended 31 December 2019.

33

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
B) Goodwill and intangibles
As allowed under Japanese GAAP, goodwill is amortized for a period of less than 20 years. Under IFRS,
goodwill is not amortized and the impairment test is performed at least annually, or more frequently uponoccurrence of a trigger event.
As a result, JPY 658,241 thousand, JPY 681,042 thousand and JPY 681,042 thousand of goodwill isrecorded under IFRS as at 30 June 2019, 31 December 2019 and 30 June 2020, respectively. Goodwill
arising from OCN acquisition is included as at 31 December 2019 and 30 June 2020.
Reconciliation of goodwill between Japanese GAAP and IFRS at 30 June 2019, 31 December 2019 and 30
June 2020 are as follow.

Goodwill under Japanese GAAP
Reversal of amortization expenseof goodwill under Japanese
GAAP
GAAP adjustment from Japanese
GAAP to IFRS as of 10 October
related to JCC
Goodwill under IFRS

30 June 2019
639,455

31 December 2019605,672

JPY (In thousands)
30 June 2020
581,920

79,36747,504

118,724(60,581)

27,866(19,602)658,241

681,042

681,042

The Company tests whether goodwill has suffered any impairment on an annual basis at every 31
December under IFRS. The recoverable amount of a cash generating unit (CGU) is determined based on
the value-in-use calculations which require the use of the assumptions. The calculations use cash flow
projections based on the financial budget covering a five-year period for JCC and a three-year period for
OCN. Cash flows beyond each covering period are extrapolated using the estimated growth rates statedbelow. These growth rates are consistent with forecasts included in the industry reports specific to theindustry in which each CGU operates.
When the recoverable amount of the CGU which includes goodwill is lower than the carrying amount ofsuch CGU, an impairment loss is recognized.

Budgeted operating profit
margin (%)
Long-term growth rate(%)
Pre-tax discount rate (%)

JCCYear ended
31 December
2019
2.9%

OCN
Year ended
31 December
2019
5.7%

0%

0%

6.69%

7.33%

The Company’s management has determined the values assigned to each of the above key assumptions asfollows:
Assumption
Budgeted operating profit
margin (%)
Long-term growth rate(%)
Pre-tax discount rate (%)

Approach used to determining values
Based on past performance and management’s expectations forthe future.
This is the weighted average growth rate used to extrapolate cash
flows beyond the budgeted period. The rates are consistent with
forecasts included in the industry report.
Reflect specific risks relating to the relevant CGU.

The Company tests whether goodwill has suffered any impairment on an annual basis at every 31
December under IFRS. The Company did not perform the impairment test, because there was no
indication of potential impairment as at 31 December 2019.

34

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Due to the expansion of Corona virus, the number of cancellations of cable TV viewing contracts has notincreased particularly. As a result, the decrease in revenue of JCC and OCN is insignificant, and no
additional cost for Corona virus measures has been incurred. Therefore, the expansion of Corona virus has
no particular impact on the profitability of JCC and OCN, and there is no indication of potential
impairment at 30 June 2020.
C) Deferred tax assets and deferred tax liabilities
Japanese GAAP provides detailed guidance on assessing the recoverability of deferred tax assets. An
entity is classified into 5 categories by its profitability and the extent of the recoverability of deferred tax
assets and the length of estimated future periods to assess the recoverability of deferred tax assets are
determined by such categories, and the scheduling of estimated future taxable income and the amounts
thereof is taken into account in recording deferred tax assets by assessing the recoverability of assets interms of the sufficiency of taxable income based on profitability, existence of tax planning and sufficiencyof taxable temporary differences.
Under IFRS, the recoverability of deferred tax assets is assessed as they are recognized in terms of whether
it is probable that taxable profits will be available against which the assets can be utilized. Deferred taxes
recognized for other temporary differences arising from adjustments related to IFRS are also adjusted.
As a result, JPY 189,169 thousand, JPY 298,922 thousand and JPY 278,022 thousand of deferred tax
assets are adjusted as the 1) differences of the treatment of recoverability of deferred taxes underJapanese GAAP and IFRS, 2) recorded from the adjustment accounting entries from Japanese GAAP to
IFRS and 3) off set the deferred tax assets with the liabilities, as at 30 June 2019, 31 December 2019 and
30 June 2020, respectively.
D) Unused paid absences
Under Japanese GAAP, no provision is made for employees’ unused rights to paid absences. Under IFRS,
they are recognized in other current liabilities.
For the 6 month ended 30 June 2019 and 2020, the expense relating to the unused paid absence at JPY
50,057(expense) thousand and JPY 27,292(expense) thousand are included as the adjustment fromJapanese GAAP to IFRS, respectively. In addition, others in the current liability as at 30 June 2019, 31
December 2019 and 30 June 2020 are increased by JPY 103,824 thousand, JPY 48,799 thousand and JPY
76,090 thousand, respectively, due to the adjustment from Japanese GAAP to IFRS.

35

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
E) Fair value measurement
Under Japanese GAAP, if a financial asset does not have a quoted market value, then where an entity isable to reasonably calculate a price which can be considered to be a quasi-quoted price, such price may be
used for that financial asset as a market value. The “reasonably calculated price” represents, a pricecalculated using reasonable estimates of management.
Under IFRS, the Company referred to the levels of the fair value hierarchy for financial instruments
measured at fair value on the reconciliation based on the following inputs:– Level 1 inputs are quoted prices in active markets for identical assets or liabilities.
– Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices thatare observable, and inputs that are derived principally from or corroborated by observable market data bycorrelation or other means.
– Level 3 inputs are derived from valuation techniques in which one or more significant inputs or value
drivers are unobservable, which reflect the reporting entity’s own assumptions that market participants
would use in establishing a price.
(1) Fair value measurements by fair value hierarchy
Assets measured at fair values on a recurring basis in the reconciliation as of 30 June 2019, 31 December
2019 and 30 June 2020 are as follows:

As at 30 June 2019
AssetsFinancial assets at fair value
through other comprehensive
incomeFinancial assets at fair value
through profit or loss
Total

As at 31 December 2019
AssetsFinancial assets at fair value
through other comprehensive
incomeFinancial assets at fair value
through profit or loss
Total

As at 30 June 2020
AssetsFinancial assets at fair value
through other comprehensive
incomeFinancial assets at fair value
through profit or loss
Total

JPY (In thousands)
Level 3
Total

Level 1

Level 2-;--;-

2,485,119

2,485,119

-;-

-;-

251,249

251,249-;--;-

2,736,368

2,736,368

Level 1

Level 2-;--;-

3,119,187

3,119,187

-;-

-;-

197,910

197,910-;--;-

3,317,097

3,317,097

Level 1

Level 2-;--;-3,231,607

3,231,607

-;-

-;-

335,771335,771-;--;-

3,567,378

3,567,378

36

JPY (In thousands)
Level 3Total

JPY (In thousands)
Level 3Total

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The table below presents the changes in level 3 instruments for the relevant periods:
Level 3
JPY (In thousands)
Balance at 1 January 2019
Additions of financial assets
Disposal of financial assets
Fair value gain/(loss) through othercomprehensive income
Fair value gain/(loss) through profit orloss
OthersBalance at 30 June 2019

2,498,769
396,333(222,000)

Balance at 1 January 2019
Additions of financial assets
Disposal of financial assets
Fair value gain/(loss) through othercomprehensive income
Fair value gain/(loss) through profit orloss
OthersBalance at 31 December 2019

2,498,769
686,740(222,000)
193,133

Balance at 1 January 2020
Additions of financial assets
Disposal of financial assets
Fair value gain/(loss) through othercomprehensive income
Fair value gain/(loss) through profit orloss
OthersBalance at 30 June 2020

3,317,097
187,460-;-(51,703)
120,724(5,755)2,736,368

158,1122,343
3,317,097

62,78437-;3,567,378

There were no transfers between levels 1, 2 and 3 during the relevant periods.
F) Revenue recognition
BBT derives more than 90% of its revenues from recurring revenue streams, consisting primarily of 1)
Computer platform business; 2) IoT/AI solution business; 3) Media solution business.
1) Computer platform business
Main component in the computer platform business is data center business, consisting primarily of 1)
colocation, which includes the licensing of cabinet space and power; (2) interconnection offerings; (3)managed infrastructure solutions. The remainder of the revenues are from non-recurring revenue
streams, such as installation revenues, professional services and equipment sales. Under the revenue
accounting guidance under IFRS15, revenues are recognized when control of these products and services
is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to inexchange for the products and services. Revenues from recurring revenue streams are generally billed
monthly and recognized ratably over the term of the contract, generally one to three years for data centercustomers. Non-recurring installation fees, although generally paid upfront upon installation, aredeferred and recognized ratably over the average customer relationship periods. Professional service feesand equipment sales are recognized in the period when the services were provided.
2) IoT/AI solution business
IoT/AI solution business mainly supports contact centers and help desks operators through natural
language analysis technology. Under the revenue accounting guidance under IFRS15, revenues arerecognized when control of these services is transferred to its customers, in an amount that reflects the37

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
consideration it expects to be entitled to in exchange for the services. Revenue from the services arerecognized in the period when the services were provided.
3) Media solution businessMedia solution business provides the telecommunications network business for cable television operatorsand program suppliers throughout Japan. The remainder of the revenues are from non-recurring revenue
streams, such as installation revenues, professional services and equipment sales. Under the revenue
accounting guidance under IFRS15, revenues are recognized when control of these products and services
is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to inexchange for the products and services. Revenues from recurring revenue streams are generally billed
monthly and recognized ratably over the term of the contract, generally one to three years for cable
television operators and program suppliers. Non-recurring installation fees are recognized in the period
when the services were provided.
Under Japanese GAAP, revenue is recognized when each good is accepted by the Company’s customer orfor the contractual period when each service is provided. The revenue from initial installation services atthe datacenter business is recognized at the time of installation.
However, under IFRS 15, which has been adopted from 1 January 2018, the Company recognize revenue
when (or as) the entity satisfies a performance obligation by transferring a promised good or service (i.e.
an asset) to a customer. An asset is transferred when (or as) the customer obtains control of that asset.
The Company has concluded that the current methods of revenue recognition and measurement underJapanese GAAP are in accordance with both IFRS 15 and former IAS18, with the exception of installation
services. Under both IFRS 15 and former IAS18, the initial installation services is recognized over theperiod of the expected period of the customer relationship.
As a result of the adjustment at revenue recognition, the revenue for the 6 month ended 30 June 2019
decreased by JPY 84,721 thousand and the revenue for the 6 month ended 30 June 2020 decreased by
JPY 482,905 thousand. Also the cost of sales for the 6 month ended 30 June 2019 decreased by JPY
37,278 thousand and the cost of sales for the 6 month ended 30 June 2020 decreased by JPY 432,305
thousand.
The Company has provided the services to various customers. In the computer platform business of BBT,Yahoo Japan Corporation is the largest customer for more than 10 percent of total segment revenue under
J-GAAP at JPY 1,624,095 thousand and JPY 1,764,604 thousand for the 6 month ended 30 June 2019 and2020, respectively.
G) Lease
BBT has adopted IFRS 16 Leases from the fiscal year beginning 1 January 2019. The Group has applied themodified retrospective method permitted by IFRS 16 and recognized the cumulative amount of the impact
as of 1 January 2019 upon adoption of the standard. As a result, the Group has not restated the amounts inthe comparative reporting period prior to adoption of IFRS 16.
IFRS 16 sets out the principal for the recognition, measurement, presentation and disclosure of lease
contracts for lessees and lessors. Under IFRS 16, lessees no longer make a distinction between finance andoperating leases as required under IAS 17, and apply a single accounting model. At the commencement dateof a lease, lessees recognize a liability to make lease payments (i.e., the lease liability) and an asset
representing the right to use the underlying asset during the lease term (i.e., the right-of-use assets).
Subsequently, lessees are required to recognize separately the interest expense on the lease liability and thedepreciation expense on the right-of-use assets. The right-of-use assets are depreciated on a straight-line
basis over the shorter of the estimated useful life of the assets or the lease term. Lessors accounting under
IFRS 16 remains substantially unchanged from IAS 17.
Upon the adoption of IFRS 16, the Group recognized lease liabilities for its leases previously classified as
operating lease under IAS 17. The lease liabilities were measured at the present value of the remaining lease
payments, discounted at the incremental borrowing rate as of 1 January 2019. The weighted averageincremental borrowing rate used for the lease liabilities as of 1 January 2019 was 0.51%.
BBT applied the following practical expedients permitted by IFRS 16 when applying IFRS 16:- Accounted operating leases with less than 12 months of lease term remaining as of 1 January 2019
for as short-term leases and low value leases.
38

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- Used hindsight when determining the lease term of contract including extension options and/or
termination options.
- By class of underlying asset, not to separate non-lease components from lease components, andinstead accounts for each lease component and any associated non-lease components as a single lease
component.
BBT elected not to apply IFRS 16 to the agreements that were not identified as containing a lease component
applying IAS 17 and IFRS 4 Determining whether an Arrangement contains a Lease.
JPY(in thousands)
Commitments for operating lease as of 31 December 2018 as disclosed in the Group’s
18,057,304
consolidated financial statements
Discounted using the group’s incremental borrowing rate of o.51%(713,862)
Add: finance lease liabilities recognized as at 31 December 2018296,975(Less): short term leases and low value leases recognized on straight-line basis as(26,239)
expenseAdd: adjustments as a result of different treatment of extension and termination options
17,726
Lease liabilities recognized at 1 January 201917,631,904
Current lease liabilities
3,019,815
Non-current lease liabilities
14,612,089
As a result of above, the Group recognized JPY 15,678,935 thousand for the right-of-use assets, the amountof impairment was JPY 1,476,841 thousand, and JPY 17,334,928 thousand for the lease liabilities, in theannual condensed consolidated financial position as of 1 January 2019. As at 30 June 2019, 31 December
2019 and 30 June 2020, the Group’s right-of-use assets consist almost entirely of Buildings.
Due to the adoption of IFRS 16, cost of revenue and rent expense which included operating lease expenses
decreased by JPY 1,347,231 thousand and 205,064 thousand, respectively for the period ended 30 June
2020. The depreciation and amortization expenses which included the depreciation expenses of right-ofuse assets, and finance costs which included interest expenses for lease liabilities increased by JPY 1,248,951
thousand and JPY 47,793 thousand, respectively for the period ended 30 June 2020.
The accounting policies applied by the Group in accordance with the IFRS 16 as of 1 January 2019 are as
follows:
The Group, as a lessee, mainly leases properties. Lease contracts are normally entered into the fixed termfrom 1 years to 15 years.
Leases are recognized as right-of-use assets and the corresponding liabilities when the lease assets become
available for use by the Group. Each lease payment is apportioned between repayments of the lease liability
and finance costs. The finance costs are accounted for as expenses over the lease term and calculated basedon constant periodic rate of interest on the remaining balance of the lease liability. The right-of-use assets
are depreciated over the shorter of the estimated useful life of the asset or the lease term.
The assets and liabilities arising from leases are measured at the present value ofthe lease at thecommencement date. The lease liability includes the net present value of the following lease payments:- fixed payments less any lease incentives- the exercise price of a purchase option if the lessee is reasonably certain to exercise that option- payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an
option to terminate the lease
Lease payments are determined using the Group’s incremental borrowing rate, since the implicit rate in thelease can not be readily determined.
The right-of-use assets is measured at cost shall comprise:- the amount of the initial measurement of the lease liability- any lease payments made at or before the commencement date, less any lease incentives received- any initial direct cost
- cost of restoring the underlying asset to the original condition
39

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The lease payments associated with short-term lease and leases of low-value assets are recognized as
expenses on a straight-line basis.
A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less. A leaseof low-value asset, for example, comprises low value assets such as office furniture and fixture.
The Group’s property leases include extension options and termination options.
Extension option shall be included in the lease term only if the lessee is reasonably certain to exercise that
option.
H) Impairment of plant, property and equipment
Under Japanese GAAP, an impairment loss is recognized when there is an indicator of impairment and (1)The undiscounted value of total future cash flows is below the asset’s carrying amount; then (2) The
recoverable amount of an asset is below its carrying amount. There are two steps for recognition of an
impairment loss.
Under IFRS, an impairment loss is recognized when there is an indication of impairment and when therecoverable amount of an asset is below its carrying amount. Step 1 under Japanese GAAP is not required
under IFRS.
I) Loan covenants
To raise funds flexibly for investment demand in the new data center established in August 2018, BBT hassigned a commitment-type syndicated loan agreement of 4.0 billion in total with five banks including ourcounterparties arranged by Sumitomo Mitsui Banking Corporation in March 2018 and the agreement was
updated in December 2018. This agreement includes financial conditions as follows.
1) At the end of the fiscal year ended 30 June 2018 and every subsequent fiscal year-end, the total amountof net assets on the consolidated balance sheet shall not be less than the higher of either: an amountequivalent to 80% of total net assets on the consolidated balance sheet at the end of the fiscal year ended
30 June 2017; or an amount equivalent to 80% of total net assets on the consolidated balance sheet at theend of the most recent fiscal year.
2) The ordinary loss recorded in the consolidated statement of income at the end of the fiscal year ended
31 December 2020 and every subsequent fiscal year-end thereafter shall not be recorded for the second
consecutive year.
3) At the second quarter end of the fiscal year ended 31 December 2020, an ordinary loss on the
consolidated statement of income shall not be recorded.
The Company has complied with these covenants throughout the reporting period.
J) Reclassificationa) Allowance for doubtful accounts
Under Japanese GAAP, the allowance for doubtful accounts is separately presented on the balance sheet.
Under IFRS, allowances for doubtful accounts are offset against the applicable accounts (i.e. accounts
receivable).
As a result, JPY 9,314 thousand, JPY 5,499 thousand and JPY 5,408 thousand included in the account of
the allowance for doubtful accounts are transferred to Notes and accounts receivables – trade as at 30 June
2019, 31 December 2019 and 30 June 2020, respectively.
b) Investment securities
Under Japanese GAAP, investments accounted for using the equity method are presented as a part ofinvestment securities with the investment securities, however, under IFRS, it’s independently presented as
the investment accounted for using the equity method.
As a result, the investment accounted for using the equity method of JPY 16,262 thousand, JPY 16,242
thousand and JPY 18,292 thousand included in the account of the investment securities are independently
presented as at 30 June 2019, 31 December 2019 and 30 June 2020, respectively.
c) Non-operating income & expense and Extraordinary income & loss
Under Japanese GAAP, non-operating income and expense are presented below operating profit. These
accounts consist of financial income and expense, foreign exchange gain (loss), profit (loss) under equity
method investment and others. In addition, exceptional items are required to be presented as
40

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS“Extraordinary income and loss” on the face of the income statement. The definition of “special” is broader
compared to IFRS and includes some extraordinary items.
Under IFRS, financial income, financial expense and profit (loss) under equity method investment is usuallyshown below operating profit. The term exceptional items is not used or defined, however, separate
disclosure is required (either on the face of the comprehensive income statement or in the notes) when it isnecessary to allow an entity to explain its performance for the period as a result of the size, nature orincidence of certain items of income and expense. It is prohibited to present any items as “Extraordinary”
under IFRS.
K) Retained earnings
Reconciliation of retained earnings under Japanese GAAP and IFRS is below-

Reported under Japanese
GAAP
Reversal of amortization of
goodwill
Amortization of customer
relationship asset
Deferred taxes
Unused paid absences
Impairment of Property,
Plant & Equipment (include
effect of application of IFRS
16)
Revenue recognition
Impairment of investment
securities
Non-controlling interests
Adjustment for applicationof Effective interest method
Effect of application of
IFRS 9Provision for unfavorable
contract
Employee benefit
obligation
OthersReported under IFRS

30 June 2019
JPY (in thousand)

31 December 2019
JPY (in thousand)

30 June 2020
JPY (in thousand)

1,853,811

1,226,728

1,473,602

79,368

101,470

118,724(7,389)-;--;-205,955(83,637)

364,404(28,612)336,878(55,903)(901,274)(2,335,102)(2,082,369)(44,204)(120,951)(171,550)(11,828)(11,828)(11,828)(95,096)(141,474)(133,735)

77,65469,98662,047397,460

452,202

463,033(44,100)-;--;-(34,722)-;--;-(97,107)
1,294,891

2,998(420,179)

53,01451,91341