INTERNET RESEARCH INSTITUTE LTD

Interim Financial Reporting(Unaudited)
30 June, 2018

INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED FINANCIAL POSITION
USD (In thousands)
Note

30 June30 June31 December

2017

2018

2017

ASSET
CURRENT ASSETS
Cash and cash equivalents

11,466

7,731

8,949

Trade receivables

2

798

450

10

Contract asset

2

-;-

102

-;-

Related parties

8

294

170

1

52

16

153

-;-

-;-

94

Income tax receivables
Other current financial assets

2

Other current assets

2

828

1,595

802

13,43810,06410,009

2

116

808

777

2,6

18,435

21,475

17,878

81

642

262

13

17

11

318

51

524

18,96322,993

19,45232,40133,057

29,461

2,472

2,682

180

38

-;-

-;-

TOTAL CURRENT ASSETSNON-CURRENT ASSETS
Other financial assets
Investments accounted for using theequity method
Property, plant and equipment
Intangible assets
Deferred tax assets

2

TOTAL NON-CURRENT ASSETSTOTAL ASSETSLIABILITIES AND EQUITYCURRENT LIABILITIES
Trade payable

2

Borrowings
Accruals and other payables

2

1,242

1,571

4,446

Contract liabilities

2

-;-

255

-;-

Obligations under finance leases

2

11

13

12

Related parties

8

Income taxes payables
TOTAL CURRENT LIABILITIES

1

36

38

272

415

-;-

4,036

4,972

4,676

NON-CURRENT LIABILITIES
14

2

8

Borrowings

Obligations under finance leases

2,4

7

-;-

-;-

Asset Retirement Obligations

30

203

196

TOTAL NON-CURRENT LIABILITIES

51

205

204

4,087

5,177

4,880

TOTAL LIABILITIESEQUITY
Share capital

3

5,081

-;-

-;-

Capital surplus

3

4,253

9,604

9,604

Retained earnings
Accumulated other comprehensive
incomeOther reserve
Exchange differences on translation fromfunctional currency to presentation
currency
TOTAL EQUITY

2

17,67816,812

13,752

2

26

178

373

270

-;-

-;-

1,006

1,286

852

28,31427,88024,581

32,40133,057

29,461

2

TOTAL LIABILITIES AND EQUITY

2INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
For the six months ended 30 June, 2017 and 2018

Note
Revenue
2,5Operating costs and expenses:
Cost of sales
2
Selling, general and2administrative
Research and Development expenses
Other incomes
Other expenses
Total operating costs and expenses
Operating profit
Finance income
Finance expense
Finance income (expense), net
Share of profit ofinvestments accounted for6
using the equity method
Gain on change in share ofinvestments accounted for6
using equity method

USD (In thousands)
Six month period
ended 30 June (Unaudited)
2017
2018

Year ended
31 December
2017

7,228

8,568

9,121

(2,518)(2,826)(3,100)(3,289)(5,526)(8,942)(56)
4-;(5,859)
1,369
1
(1)
0

(34)
6
(6)
(8,386)
182
0
(0)
(0)

(130)
7
(30)
(12,195)(3,074)
2
(1)
1

1,260

3,003

1,457

115

41

123

2,744
(641)
2,103

3,226
(727)
2,499

(1,493)(330)(1,823)

2,103

2,499

(1,823)

(215)

(17)

133

(8)

-;-

(9)

(223)

(17)

124

732

435

578

-;-

18

-;-

-;-

258

-;-

Total other comprehensive income, net of tax
Comprehensive income for the year

509
2,612

694
3,193

702
(1,121)

Earnings per share attributable to owners of the parent
Basic (USD)
Diluted (USD)

0.072
0.072

0.072
0.072

(0.057)(0.057)

Profit(loss) before income taxes
Income tax expense
Profit(loss) for the year

2

Profit(loss) for the period attributable to:
Owners of the parent
Profit(loss) for the year
Other comprehensive income, net of tax:
Items that may be reclassified to profit or loss
Share of othercomprehensive income(loss) of investments
accounted for using equity
methodChange in fair value ofavailable-for-sale financial
assets

Items that will not be classified to profit or loss
Differences fromtranslation of financial
statements from functional
currency to presentation
currency
Change in fair value ofavailable-for-sale financial
assetsShare of othercomprehensive income ofinvestments accounted forusing equity method3

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 31 December,2016
Profit for the year
Other comprehensive loss, net of tax
Total comprehensive income (loss) for theperiodTransaction with owners and other
Issuance of subscription rights to shares
Total transaction with owners and other
Balance as of 30 June,2017(Unaudited)SharecapitalCapitalsurplusRetainedearnings

Accumulated
othercomprehensive
income (loss)

Exchangedifferences ontranslationfrom functional
currency topresentation
currency

Other
reserve

Total
equity837-;-

15,575

249

270

274

17,205

-;-;-

-;-;-

2,103
-;-

-;(223)

-;-;-

-;732

2,103
509

-;-

-;-

2,103

(223)

-;-

732

2,612

4,244

4,253

-;-

-;-

-;-

-;-

8,497

4,244

4,253

-;-

-;-

-;-

-;-

8,497

5,081

4,253

17,678

26

270

1,006

28,3144

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

Note

Share
capitalCapital surplus

Retainedearnings

Accumulated
othercomprehensive
income (loss)

Other
reserve

Exchangedifferences ontranslation
fromfunctional
currency topresentation
currency

Total equity

-;-

9,604

13,752

373

-;-

852

24,581

-;-

-;-

561

(454)

-;-

(1)

106

-;-

9,604

14,313

(81)

-;-

851

24,687

Profit for the period

-;-

-;-

2,499

-;-

-;-

-;-

2,499

Other comprehensive income net of tax

-;-

-;-

-;-

259

-;-

435

694

-;-

-;-

2,499

259

-;-

435

3,193

-;-

9,604

16,812

178

-;-

1,286

27,880

Balance as of 31 December,2017
Adjustment on adoption of2
new accounting standards
Balance as of 1 January,2018 (Unaudited)

Total comprehensive income for the period
Balance as of 30 June,2018(Unaudited)5

INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

NoteBalance as of 31 December,2016
Loss for the year
Other comprehensive income , netof taxTotal comprehensive income (loss) for theperiodTransaction with owners and other
Issuance of common shares
Share based expenses related toissuance of common shares
Decrease by merger
Lapse of subscription rights tosharesTotal transaction with owners and other
Balance as of 31 December,2017

SharecapitalCapitalsurplusRetainedearnings

USD (In thousands)
Equity attributable to owners of the parent
Exchange
Accumulateddifferences on
other
Other
translation fromcomprehensive
reservefunctional currency
incometo presentation
currency
274
249
270

Total equity

837

-;-

15,575-;--;-(1,823)

-;-

-;-

-;-

(1,823)

-;-

-;-

-;-

124

-;-

578

702

-;-

-;-

(1,823)

124

-;-

578

(1,121)

4,244

4,244

-;-

-;-

-;-

-;-

8,488

-;-

9

-;-

-;-

-;-

-;-

9

(5,081)

5,081

-;-

-;-

-;-

-;-

-;-

-;-

270

-;-

-;-

(270)

-;-

-;-

(837)

9,604

-;-

-;-

(270)

-;-

8,497

-;-

9,604

13,752

373

-;-

852

24,581

6

17,205INTERNET RESEARCH INSTITUTE LTD
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSUSD (In thousands)
Six months ended 30 June (Unaudited)
Note

2017

2018

31 December
2017

Cash flows from operating activities:
Profit(loss) before income taxes
Depreciation and amortization
Share of profit of investments accounted for using
equity method
Gain on change in share of investments accounted forusing the equity method

2,744

3,226

(1,493)

17

51

35

6

(1,260)(3,003)(1,457)

6

(115)

(41)

(123)
(1)

Finance income and finance expense, net

00Share-based compensation expenses

9

-;-

9

IPO related costs with regards to issuance cost

-;-

169

175

Trade receivables

(734)

(497)

(0)

Contract assets

-;-

99

-;-

Trade payable

2,389

2,546

109

Accruals and other payables(1,672)

(583)

1,687

Change in assets and liabilities

Contract liabilities-;-(2,532)

-;-

(570)

(9)

(406)

Dividends received

100

103

1,101

Interest received

1

0

7

(1)

(0)

(1)

OthersInterest paid
Income taxes paid(refund)

(15)

142

(303)

893

(329)

(661)

Acquisitions of property, plant and equipment

(6)

(429)

(51)

Acquisitions of intangible assets

(8)

(7)

(8)

-;-

-;-

288

Net cash provided by operating activities
Cash flows from investing activities:

Proceeds from collection of loan to related parties

8

Payments for guarantee deposits

-;-

-;-

(757)

Acquisition of other financial assets

(1)

(1)

(2)

Proceeds from collection of guarantee deposits

-;-

97

-;-

Net cash used in investing activities

(15)

(340)

(530)

Repayments of long-term financing liabilities

(20)

-;-

(62)

Proceeds from issuance of common shares

8,488

-;-

8,488

Payment for IPO related cost

-;-

(741)

(350)

Repayments of obligations under finance leases

(6)

(6)

(12)

8,462

(747)

8,064

Net change in cash and cash equivalents

9,340(1,416)

6,873

Cash and cash equivalents at beginning of year

2,095

8,949

2,095

Cash flows from financing activities:

Net cash provided by financing activities

Capital fund from translation differences
Cash and cash equivalents at end of year

7

31

198

(19)

11,466

7,731

8,949

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 (the “Company”) was established as a limited company in Israel
under the Israel Companies Ordinance on 8 August 2017. The Company listed shares of its common
stock on the Tel-Aviv Stock Exchange on August 9, 2018.
The Company wholly owns Internet Research Institute, Inc. (collectively “IRI Japan” at pre/postmerger or “New IRI Japan”) which was established as a limited company in Japan under theJapanese Companies Ordinance on 5 October 2017 and named IRI Inc. at the time of establishment.
IRI Japan has been playing a key role in the development of Internet technologies and services inJapan and it became a wholly subsidiary of the Company as a result of triangular merger discussed
in Note 2.2 to the annual consolidated financial statements for the year ended 31 December, 2017.
The registered address of the company is Abba Hiller Rd. 16, Ramat Gan, Israel 5250608. The
Company provides an Internet related research and development services and acts as an investment
holding company as well. The Company and its subsidiaries (the “Group”) are principally engaged
in Internet service (the “Listing Business”) in Japan.

1.2 Non-inclusion of separate financial information
Under regulation 4 of the Periodic and Immediate Reports regulations, the Company did notinclude separate financial statements under regulation 9c and 38d of the Israel Securities
Regulations (Periodic and Immediate Reports), 1970.
The reason that the Company did not include separate financial information is in light of thenegligible effect that the Company's condensed financial statements have on the condensed
consolidated financial statements.
1.3

Basis of Preparation
The unaudited interim condensed consolidated financial statements have been prepared inaccordance with IAS 34 Interim Financial Reporting.
The unaudited interim condensed consolidated financial statements do not include all theinformation and disclosures required in the annual consolidated financial statements and should
be read in conjunction with the Group’s annual consolidated financial statements as of 31 December,
2017.
The unaudited interim condensed consolidated financial statements were approved by Hiroshi
Fujiwara, Chairman and Chief Executive Officer and Mirei Kuroda, Chief Financial Officer on 29
August 2018.
The preparation of the unaudited interim condensed consolidated financial statements requires
management to make estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent amounts at the date of the unaudited interim condensed
consolidated financial statements as well as the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The significant estimates andassumptions are reviewed by management on a regular basis. The effects of a change in estimatesand assumptions are recognized in the period of the change or in the period of the change and future
periods.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies applied in the preparation of the consolidated financial
statements are set out below. These policies have been consistently applied throughout the year
ended 31 December 2017, unless otherwise stated.
The consolidated financial statements of the Group (“the financial statements”) have been preparedin accordance with International Financial Reporting Standards (“IFRS”) issued by theInternational Accounting Standard Board (the “IASB”). The preparation of the financial statements
in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
8

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
management to exercise its judgement in the process of applying the accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the Financial Statements are identical to those disclosed in Note 4 to the annual
consolidated financial statements for the year ended 31 December 2017.
The adoption of new and revised IFRS issued by IASB that are mandatorily effective for an
accounting period that begins on or after 1 January 2018 had no impact on the Group’s unaudited
interim condensed consolidated financial statements as of and for the six-month periods ended 30
June 2017 and 2018 and annual consolidated financial statements as of 31 December 2017, except
for the following standards.
2.1

IFRS15 Revenue from Contracts with Customers
The IASB issued IFRS 15 Revenue from Contracts with Customers for recognizing revenue. IFRS 15
establishes a five-step model that will apply to all revenue arising from contracts with customers,
regardless of the type of transaction or industry, with limited exceptions.
The Group has concluded that the current methods of revenue recognition and measurement overeach business are in accordance with IFRS 15, with the exception of the following business.
The Group has adopted IFRS 15 from the fiscal year 2018. The Group has used the modified
retrospective method which is to record cumulative amount of the impact at the beginning balanceof the retained earnings upon adoption.
Information service businessAs discussed in Note 9 Segment Reporting, the Group provides “Information service business” thatprovides planning, organization, production and management of conferences, exhibitions,seminars and other business in the fields of internet technology, hi-tech, cyber security etc.
The business is mainly comprised of a) Host event business and b) Private event support service asfollows.
a) Host event business
The business is to plan, hold, operate and manage conferences, exhibitions and seminars(hereafter “host event”) by the Group as an organizer entirely, and it is the performanceobligation.
Under the previous standard, the Group recognized the revenue of the business at a time when
the host event has been totally completed.
On the other hand, under IFRS 15, the definition of “Satisfaction of performance obligation” isclarified, and the performance obligation is categorized as “Performance obligations satisfied
over time” or “Performance obligations satisfied at a point in time”. Furthermore, IFRS 15
defines as “if an entity does not satisfy a performance obligations over time, the performanceobligation is satisfied at a point in time”.
The customer of the business are mainly exhibitors and sponsors of the host events, and theyreceive the benefit of the business provided by the Group over the event period. Therefore, theGroup determines that its performance obligation is evenly satisfied over time and assessedthat a straight-line method over event period is the best method to measure the progress
towards complete satisfaction of the performance obligation.
Accordingly, the new standard resulted in a change to the timing of revenue recognition,
whereby revenue is recognized over the event period on a straight-line method rather than theprevious method, which was at a time when the event has been totally completed.
Even though the timing of revenue recognition is changed by adoption of IFRS 15, there were
no host events that its event period crossed the finance closing date as of 1 January and 30 June,
2018, respectively. Accordingly, there is no effect on the opening balance of retained earnings
and the revenue for the six-month ended 30 June, 2018.
b) Private event support service
The service is to provide support service for the private event held by the customer who is anorganizer of the event. The support service are mainly providing the promotion activities and9INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the reception of the private event etc. behalf of the customer, and the content of the service
depends on each contract.
Under the previous standard, the Group recognized the revenue of the service at a time when
the service was fully completed (at the end of contract period).
On the other hand, under IFRS 15, the definition of “Satisfaction of performance obligation” isclarified as discussed above, the Group examined each contract and determined that some
contracts meet the criteria of “Performance obligations satisfied over time” by considering its
terms and conditions.
In terms of the contracts, the Group determined that they recognize its revenue only to theextent of the costs incurred, by considering the nature of the service that outcome of its
performance obligation will be clear in the late stage of the services on around relevant event
date.
Accordingly, the new standard resulted in a change to the revenue recognition method, whereby
revenue is recognized over the event period on a cost method rather than the previous method,which was at a time when the service has been totally completed.
As a result, compared to the previous method, the amount of revenue recognized by the Group
increased by 132 thousand USD for the six-month ended 30 June, 2018.
In addition to the above, under IFRS 15, a definition of a “Contract costs” is clarified. In termsof information services business as discussed above, the Group determined that certain costs
attributed to the host or the customers’ events which will be held in nearly future, meet thecriteria of “Costs to fulfil a contract” under IFRS 15.
Accordingly, the new standard resulted in a change to accounting treatment over certain costs,
whereby certain costs are capitalized and amortized until the end of the service rather than theprevious method, which those costs were recorded as expenses in the income statements as
incurred.
As a result, compared to the previous method, the amount of cost of sales recorded by the Group
increased by 50 thousand USD, and selling, general and administrative increased by 78
thousand USD for the six-month ended 30 June, 2018, respectively.
As a result of those changes as discussed above, the opening balance of retained earnings isadjusted as follows.
USD (In thousands)
January 1 2018
Private event support service

10

Costs to fulfil a contract
Total

97
107

The adjustments made to line items presented on the financial statements due to the change
from IAS 18 Revenue and other standards applied previously (collectively, the IAS 18 andother) to IFRS 15 are as follows. Reclassifications are made to reflect the terms used under
IFRS 15. Certain amounts previously presented in trade and other receivables related to
private event support service are reclassified into contract assets, and certain amounts
previously presented in other current assets related to prepaid expenses arising frominformation service business are reclassified into contract assets. Furthermore, certain
amounts previously presented in accruals and other payables regarding the advance received
associated with host event business are reclassified into contract liabilities.

10

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

USD (In thousands)

Contract assets
Other current assets
Investments accounted for using
the equity method (*)
Deferred tax assets
Accruals and other payables
Contract liabilities
Retained earnings
Exchange differences ontranslation from functional
currency to presentation currency

1 January,2018(under IAS18
and others)-;802

1 January,2018
Reclassification

Remeasurement(under IFRS 15)

33
(33)

163
-;-

196
769

17,878-;--;-17,878524
4,446-;13,752-;(2,696)
2,696
-;-

(57)
-;-;107

467
1,750
2,696
13,859

852

-;-

(1)

851

USD (In thousands)

Contract assets
Other current assets
Investments accounted for using
the equity method (*)
Deferred tax assets
Accruals and other payables
Contract liabilities
Retained earnings
Exchange differences ontranslation from functional
currency to presentation currency

30 June,2018(under IAS18
and others)-;1,67230 June,2018
Reclassification

Remeasurement(under IFRS 15)

77
(77)

25
-;-

102
1,595

21,475-;--;-

21,475110
1,971-;16,704-;(255)
255
-;-

(59)
(145)
-;108

51
1,571
255
16,812

1,285

-;-

1

1,286

(*) Even though each affiliate has also applied IFRS 15 from 1 January 2018, there is no effect on their
opening retained earnings and the profit (loss) as of and for the six-month period ended 30 June 2018.
Accordingly, there is no effect on the investments accounted for using the equity method by adoption of
IFRS 15 as well.

11

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
USD (In thousands)
2018(under IAS 18 )Reclassification

Remeasurement

2018(under IFRS 15)

Revenue
Operating costs and expenses:
Cost of sales
Selling, general and administrative
Research and Development expenses
Other incomes
Other expenses

8,436

-;-

132

8,568

(2,776)(5,448)(34)
6(6)-;-;-;-;-;-

(50)
(78)
-;-;-;-(2,826)(5,526)(34)
6(6)

Total operating costs and expenses(8,258)

-;-

(128)

(8,386)

178

-;-

4

182

Finance income
Finance expense

0
(0)

-;-;-

-;-;-

0
(0)

Finance income (expense), net

(0)

-;-

-;-

(0)

Share of profit of investments accounted
for using the equity method

3,003

-;-

-;-

3,003

Gain on change in share of investments
accounted for using equity method

41

-;-

-;-

41

Profit before income taxes

3,222

-;-

4

3,226

Income tax expense

(725)

-;-

(2)

(727)

Profit for the year

2,497

-;-

2

2,499

Profit for the period attributable to:
Owners of the parent

2,497

-;-

2

2,499

Earnings per share attributable to owners of the parent
Basic (USD)
Diluted (USD)

0.072
0.072

-;-;-

(*) -;(*) -;-

0.072
0.072

Operating profit(*) less than thousand US dollars.

12

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2.2

IFRS 9 Financial Instruments
The IASB issued the final version of IFRS 9 Financial Instruments which sets out the requirements
for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell
non-financial items to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS
9 is the new standard for the financial reporting of financial instruments that is principles-based
and brings together the classification and measurement, impairment and hedge accounting phasesof the IASB's project. IFRS 9 is built on a single classification and measurement approach forfinancial assets that reflects the business model in which they are managed and their cash flow
characteristics including new impairment requirements that are based on a more forward-looking
expected credit loss model that will result in more timely recognition of loan losses and is a single
model that is applicable to all financial instruments subject to impairment accounting. The Group
has applied the following accounting policies in accordance with IFRS 9 commencing on 1 January,
2018.
(1) Classification of financial assets
Based on the Group’s business model for managing the financial assets and the characteristics ofcontractual cash flow of the financial assets, the Group classifies the financial assets by following
categories. Gains and losses arising from assets measured at fair value are either recorded in profit
or loss or other comprehensive income, depending on the Group’s intention. Financial assets withembedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
i. Financial assets as amortized cost
Financial assets measured at amortized cost are debt instruments held for collection of contractual
cash flows and those cash flows represent solely payments of principal and interest.
ii. Financial assets at fair value through other comprehensive income
Financial assets measured at fair value through other comprehensive income are debt instruments
whose contractual cash flows represent solely payments of principal and interest on the principal
amount outstanding and which are held within a business model both to collect contractual cash
flows and sell and equity instruments which the Group has made an irrevocable election at the timeof initial recognition to account for the equity investment at fair value through other comprehensive
income.
iii. Financial assets at fair value through profit or loss
Subsequent to initial recognition, financial assets are measured at fair value. A gain or loss on debt
instruments which is not part of a hedging relationship is recognized in profit or loss.
(2) Measurement of financial assets
Initial measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of afinancial asset not at fair value through other comprehensive income, transaction costs that are
directly attributable to the acquisition of the financial asset. Transaction costs of financial assets
carried at fair value through profit or loss are expensed in profit or loss.
Subsequent measurement
Debt instruments:
i. Amortized cost

13

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Financial assets at amortized cost are measured at amortized cost using the effective interest
method, and related interest income is included in finance income. When the asset is derecognized
or impaired, a gain or loss on a debt investment is recognized in profit or loss.
ii. Fair value through other comprehensive income (FVOCI)
Subsequent to initial recognition, financial assets are measured at fair value and gains or losses
arising from changes in the fair value are recorded in other comprehensive income, except for therecognition of interest revenue, foreign exchange gains or losses and expected credit losses which
are recognized in profit or loss.
iii. Fair value through profit or loss
Subsequent to initial recognition, financial assets are measured at fair value. A gain or loss on debt
instruments which is not part of a hedging relationship is recognized in profit or loss.
Equity instruments:
Where the Group has irrevocably elected to designate equity instruments as financial assets
measured at fair value through other comprehensive income, movements in the carrying amountby fair value measurement are recognized as other comprehensive income.
There is no subsequent reclassification of cumulative gains or losses previously recognized in othercomprehensive income to profit or loss. Where the Group has not elected to designate equity
instruments as financial assets measured at fair value through other comprehensive income,movements in the carrying amount by fair value measurement are recognized in profit or loss.
Dividends from equity investments are recognized in profit or loss as “Finance income” when theGroup’s right to receive payments is established.

(3) Impairment of financial assets
The Group assesses the expected credit losses associated with its assets carried at amortized costand FVOCI. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For trade receivables only, the Group applies the simplified approach permitted by IFRS9, which
requires expected lifetime losses to be recognized from initial recognition of the receivables.
The Group has applied IFRS 9 retrospectively and has determined not to restate the comparative
information for the period beginning 1 January, 2017. As a result, the comparative information isprepared based on the Group’s pervious accounting policies. On 1 January, 2018, the Group has
assessed which business models to apply to its financial assets and liabilities and classified suchfinancial assets and liabilities in to appropriate classification under IFRS 9. The impacts of theseclassifications are as follows.

14

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance as of 1 January,2018 under IFRS 9

Impact by adoption of IFRS9Balance atJanuary 1,
2018 under
IAS 39 andothersFinancialassets/liabilitie
s at fair value
through profit
or loss

Financialassets/liabilities
at FVOCI

Financialassets/liabilities
at amortized cost

Total financial
assets/liabilities

Fair value
measurement
at January 1,
2018

ProvisionatJanuary 1,
2018

10
10

-;-;-

-;-;-

10
10

10
10

-;-;-

-;-;-

-;-;-

94

-;-

-;-

94

94

-;-

-;-

-;-

94

-;-

-;-

94

94

-;-

-;-

-;-

Available-for-salefor equity securities

15

-;-

15

-;-

15

-;-

-;-

-;-

Other financial
assets at amortized
cost, mainly officesecurity deposits

762

-;-

-;-

762

762

-;-

-;-

-;-

777

-;-

15

762

777

-;-

-;-

-;-

180
1,592

-;-;-

-;-;-

180
1,592

180
1,592

-;-;-

-;-;-

-;-;-

Amounts due torelated parties

38

-;-

-;-

38

38

-;-

-;-

-;-

Obligations underfinance lease

12

-;-

-;-

12

12

-;-

-;-

-;-

1,822

-;-

-;-

1,822

1,822

-;-

-;-

-;-

8

-;-

-;-

8

8

-;-

-;-

-;-

8

-;-

-;-

8

8

-;-

-;-

-;-

Financial assets :Trade receivables
Trade receivables
Total

Total
impacts

Other current financial
assets
Office security
deposits
Total
Other financial assets, noncurrent

Total
Financial liabilities :Current
Trade payables
Other payables

Total
Non-current
Obligations underfinance lease
Total

15

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Following are the impacts on accumulated deficit and accumulated other comprehensive income byclassification and measurement of financial assets at 1 January, 2018.
USD (In thousands)
Retainedearnings
Balance of retained earnings and accumulated OCI as of 1
January,2018 under IAS 39

Financialassets at
FVOCI

13,752373(1) Reclassification from available-for-sale financial
assets to financial assets at FVOCI

27

(27)

(2) Impact of IFRS 9 adoption by associate companies

427

(427)

Adjustment to shareholders’ equity from adoption of IFRS
9

454

(454)

Balance of retained earnings and accumulated OCI as of 1
January, 2018 under IFRS 9

14,206(81)(1) Reclassification from available-for-sale financial assets to financial assets at FVOCIThe investments in private equity securities of 15 thousand USD as of 1 January, 2018, wasreclassified from available-for-sale financial assets to financial assets at FVOCI as the cash flows
from these investments did not represent solely payments of principal and interest on the principal
amount outstanding and as the Group has determined to measure such investments at FVOCI. Also,
related cumulative impairment loss and its tax effects of 27 thousand USD was reclassified fromretained earnings to accumulated other comprehensive income.
(2) Impact of IFRS 9 adoption by associate companies
Broad Band Tower, Inc. (“BBT”) and Mobile Internet Capital, Inc. (“MIC”) as affiliates of the Group
have financial assets and liabilities. As a result of adoption of IFRS 9 by each affiliate in accordancewith the Group’s accounting policies discussed above, the following impacts were identified.
1. BBT
Please refer to Note 11.
2. MICAs discussed in Note 6, MIC is a venture capital investing in ICT related venture companies, andthe investing are executed by three private funds in which MIC involves as a general partner.
Some of investments held by three private funds are classified as “invests in equity instruments”
under IFRS 9, and the Group made election to present other comprehensive income subsequentchanges in the fair value of the investments.
In connection with this, as of 1 January, 2018, MIC reclassified related cumulative impairment loss
and its tax effects of 57 thousand USD from retained earnings to accumulated other comprehensive
income at their financial statements. Except for this adjustment, the Group determined that there
is no impact in MIC.
As a result of the adjustments in each affiliate, related cumulative loss profit investments accounted
for using equity method and its tax effects of 654 thousand USD was reclassified from retained
earnings to accumulated other comprehensive income through applying the equity method by theGroup.

16

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.3

The group does not early adopt standards, interpretations and amendments which
are issued but not yet effective.
IFRS 16 Leases
IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC4 Determining whether
an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating theSubstance of Transactions Involving the Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption ispermitted. IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee
recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability
representing its obligation to make lease payments. There are recognition exemptions for shortterm leases and leases of low-value items.
IFRS 16 is effective for annual periods beginning on or after 1 January 2019, although early adoption
is permitted if IFRS 16 is also applied. The Group does not intend to early adopt the standard as itplans to apply from 1 January 2019. Also, the Group plans to use the modified retrospective method
which is to record cumulative amount of the impact at the beginning balance of the retained
earnings upon adoption.
As of and for the period ended 30 June 2018, the Group is yet to assess the full impact of thestandard. However, the Group tentatively assessed that the new standard will result in a change tothe accounting treatment over the office lease transaction only in IRI Japan and NOM.
Under the previous standard, the lease transaction is classified as “Operating lease” and relevant
rent fees are recognized as operating expenses over the lease period. On the other hand, under IFRS
16, the Group will recognize a right-of-use asset and corresponding liability. The liability will bemeasured at the present value of the remaining lease payments. Each lease payment will beallocated between the liability and finance cost, and the finance cost will be charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balanceof the liability for each period. The associated right-of-use asset will be measured at the amountequal to the lease liability and amortized over the estimated lease term on a straight-line basis.
As a result of the change, the Group estimated the tentative impact as increase of right-of-use assetsof 4,907 thousand USD, increase of lease liabilities of USD 5,069 thousand USD and decrease ofretained earnings of 134 thousand USD (net of tax) in the balance sheet on 1 January, 2019.
In terms of impact of adoption of the new standard by each affiliate, especially BBT group will havea material impact by considering the nature of the services provided by them such as data center
business and dedicated platform services. However, the Group is yet to assess the impact andaccordingly, the Group has not yet estimated the impact attributed to each affiliate at this reporting.

17

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 3 – ISSUED CAPITAL AND RESERVES
Issuance of common stock
At the annual extraordinary general meeting of shareholders held on 12 January 2017 and 17 May
2017, the Company resolved to issue common stock to a director of the company and generalinvestors and to authorize the board of directors to determine the subscription requirements. The
details of the common stock are as follows:
Issuance of common stock on 12 January 2017
Candidates and numbers of
One director, one employee and three general investors.
candidates
Total number of common stock
650,000 sharesissuedAmount of proceeds for common
105 yen per share equals 0.92 USD per sharestock (*)
Payment period
From 23 January 2017 to 31 January 2017
The share capital and capital Under the Companies act of Japan, at least 50% of the proceeds ofreserve to be increase
certain issuances of share capital shall be credited to share capital. The
remaining proceeds shall be credited to share premium.
Purpose of issuing common stock For a part of the Company’s capital policy
Issuance of common stock on 17 May 2017
Candidates and numbers ofMedia Do Co., Ltd.
candidates
Total number of common stock
7,000,000 sharesissuedAmount of proceeds for common
125 yen per share equals 0.11 USD per share
stock
Payment date
31 May 2017
Under the Companies act of Japan, at least 50% of the proceeds of
The share capital and capital
certain issuances of share capital shall be credited to share capital. The
reserve to be increase
remaining proceeds shall be credited to share premium.
Purpose of issuing common stock For capital and business alliance(*) The fair value of the Company's share on 12 January 2017 is estimated at 125 yen per share
which is based on the issue-price of 17 May 2017 of 125 yen per share, therefore, the share-based
compensation expenses of 9,000 USD have been charged in the second quarter of 2017.

18

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 4 – 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
Financial assets of the group that measured at FV composed of financial assets at FVOCI inamount of USD 33 thousands as of June 30, 2018, (and of financial assets available for sale for
equity securities in amount of 15 thousands as of June 30 and December 31, 2017) that measured
at level 3.
(2) Reconciliations from the opening balance to the closing balance of financial instruments
categorized within Level 3 are as follows:
Financial assets
at level 3
USD (In
thousands)
The six month period ended 30 JUNE, 2018 (unaudited)
Balance at 31 December 2017
Fair value gain/(loss) on valuation
Translation differences
Balance at 30 June 2018 (unaudited)

15
18
(0)
33

The six month period ended 30 JUNE, 2017 (unaudited)
Balance at 31 December 2016
Fair value gain/(loss) on valuation
Translation differences
Balance at 30 JUNE 2017 (unaudited)

23
(9)
1
15

The year ended 31, December, 2017 (audited)
Balance at 31 December 2016
Fair value gain/(loss) on valuation
Translation differences
Balance at 31 December 2017(*) less than thousand US dollars.

23(8)(*)-;15

As at 30 June 2018, 30 June 2017 and 31 December 2017, financial assets at FVOCI and financial assets foravailable for sale comprise of equity instruments.

19

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 5– Revenue from contracts with customers
The Group’s operations and main revenue streams are those described in the last annual financial
statements. The Group’s revenue is derived from contracts with customers. The nature and effect of initiallyapplying IFRS 15 on the Group’s interim financial statements are disclosed in Note 2. Also, details regarding
disaggregated revenue included at segments reporting note (see Note 9).
The full amount of USD 2,696 thousand recognized in contract liabilities at the beginning of the period has
been recognized as revenue for the six months ended 30 June 2018.

20

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 6– 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 2018, 30 June 2017 and 31 December
2018. 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
2017
2018
2017

BroadBand
Tower, Inc.

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

22%

22%

22%

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 2018, 30 June 2017 and 31 December 2018 and dividend
received from each affiliate are as follows.
Carrying amount30 June31
December(Unaudited)
Name of Company

2017

Dividend received

2018

2017

Six months
ended 30 June
(Unaudited)
2017

2018

31
December
2017

USD (In thousands)
BroadBand Tower, Inc.

17,163

15,94916,330

100

103

1,101

Mobile Internet Capital,
Inc.

1,272

5,526

1,548

-;-

-;-

-;-

18,435

21,475

17,878

Quoted fair value of BroadBand Tower, Inc. as at 30 June, 2018, 30 June, 2017 and 31 December,
2017, are USD 17,140 thousand, USD 25,388 thousand and USD 18,857 thousand, respectively.
(1)

BroadBand Tower, Inc. is a trailblazer in the specialty Internet data center business, BroadBand
Tower supports IoT, as a service evolved from ICT for modern businesses, through its advanced
technological capabilities, experienced staff, and high-grade facilities and services. BroadBand Tower,
Inc. has subsidiaries and affiliates, and they provide planning, construction, and providing dedicatedplatform services (video, voice, data delivery) and support of VNO setup/operation services to cable
television operators.
The Company holds 22% 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 theentity. The Company has therefore determined that it has significant influence over this entity.

(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.
21

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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)
2017
2018
2017
78,134
91,684
93,16851,53485,73482,494
129,668
177,418
175,662

Current liabilities
Non-current liabilities
Total liabilities

30,131
20,20750,33840,00444,19484,19844,34840,616
84,964

Total Net assets

79,33093,22090,698Group’s share in %Carrying amount22%
17,16322%
15,94922%
16,330

Revenue
ExpenseProfit (loss) fromcontinuing operations
Profit fromdiscontinued
operations *Profit (Loss)
Profit (Loss)
attributable to:
Owners of the parentof the company
Non-controllinginterests
Other comprehensive
income (loss)
Total comprehensive
income (loss)
Total comprehensive
income (loss)
attributable to:
Owners of the parentof the company
Non-controllinginterests

USD (In thousands)
Six months ended 30 June
31 December(Unaudited)
2017
2018
2017
35,34754,51378,12543,89957,63286,385(8,552)
14,823(3,119)(8,260)14,857-;-

6,271(3,119)

6,597

5,258

(2,981)

5,269

1,013

(138)

1,328

(987)

239

184

5,284

(2,880)

6,781

4,269

(2,732)

5,451

1,015

(148)

1,330

* Discontinued operations for the six months ended 30 June 2017 and for the year ended 31 December 2017is relating to the partial sale of BBT’s shareholding in its subsidiary BBF, Inc. and lost its control on 30 June
2017.

22

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Individually immaterial associates*
Six months ended 30 June
31 December(Unaudited)
2017
2018
2017
USD (In thousands)
Aggregate carrying
amount of individually
immaterial associates
The investments in
Mobile Internet Capital
Inc.
Profit from continuing
operations
Other comprehensive
incomeTotal comprehensive
income4,240

18,421

5,160

1,272

5,526

1,548

343

12,199

992

5

1,044

304

348

13,243

1,296(*) As shown in the table above, during the six month period ended 30 June, 2018 the amount of theinvestments in MIC has significantly increased compared to the previous period.
It caused by the fact that MIC gained an outstanding performance in the period by three IPOs fromtheir operating funds, one of which investments is a smash success by HEROZ, Inc. After their IPO in
April, the MIC’s fund sold off all their holdings in HEROZ through the stock exchange. The total gainon sale of securities that MIC recognized amounts to 18 million USD before tax effect, while no successfee was paid in the previous financial year. As a result, IRI assumed profit of investments accounted forusing the equity method from MIC in its H1 financial statements as approximately USD 4M.
MIC is a fund management company described above, and it will not continuously secure the good
performance like MIC’s the result in this period. In fact, the success fee still gross amount before any
payment of performance incentives to fund managers, dividend distribution, and so on. Therefore, theGroup determined that the reporting good results is a temporary, and accordingly MIC is still
determined as individually immaterial associate.
3. 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)
2017
2018
2017
USD (In thousands)
Profit (loss) attributable toowners of BBTGroup’s share in BBT %Share of profit (loss)of BBT
Profit attributable to ownersof MICGroup’s share in MIC %Share of profit of MIC
Share of profit ofinvestments accounted
for using the equity
method

5,258
22%
1,157

(2,981)
22%
(656)

5,269
22%
1,159

343
30%
103

12,199
30%
3,659

992
30%
298

1,260

3,003

1,457

(b) Share of other comprehensive income (loss) of investments accounted for using equity method
Six months ended 30 June
(Unaudited)23

31 DecemberINTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2017
Other comprehensive
income (loss) attributable toowners of BBTGroup’s share in BBT %Share of othercomprehensive income(loss) of BBT
Other comprehensive
income (loss) attributable toowners of MIC
Group’s share in MIC %Share of Other
comprehensive income(loss) of MIC
Share of othercomprehensive income(loss) of investments
accounted for using theequity method

2018
USD (In thousands)

2017

(987)
22%

254
22%

184
22%

(217)

56

41

5
30%

1,044
30%

304
30%

2

313

92

(215)

369

133

NOTE 7 – SEASONAL OPERATIONS
Due to the seasonal nature of the NOM segment, higher revenues and operating profits are usually
expected in the six-month period ended 30 June than other half of the year. This is mainly due tothe 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
2017, 64% of revenues in the six-period ended 30 June was recorded in the NOM segment.

24

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 8 – 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 2017 and2018, and the year ended 31 December 2017. Please note that the scope of related parties has beenchanged due to the change in reporting entity with regards to the triangle merger.

Mirei Kuroda
Elchanan Harel

Relationship with theCompany/Group
Director of the Company, Chairman of
the board of directors and CEO, andRepresentative director of IRI Japan,
President and CEO
Director of the Company, andDirector of IRI Japan, COO
CFO of the Group
Director of the Company

Kazuto Sasaki

Director of IRI Japan

Osamu Nakamura

Independent Director of IRI Japan

Yasushi Fujita

Independent Director of IRI Japan

Hidehiko Suzuki

Corporate Auditor of IRI JapanIRI Japan
NANO Opt Media, Inc.
BroadBand Tower, Inc.
Unimo, Inc.
IoT Square, Inc.
Remote Sensing Technology
Center of Japan
Internet Association Japan
Astro Aerospace

Subsidiary
Subsidiary
Affiliate
Company owned by director
Subsidiary of BroadBand Tower, Inc.

From 20 November, 2017
From 20 November, 2017
From 1 January, 2016 to 19
November, 2017
From 1 January, 2016 to 19
November, 2017
From 1 June, 2017 to 19
November, 2017
From 1 January, 2016 to 19
November, 2017
From 20 November, 2017
From 1 January, 2016
From 1 January, 2016
From 1 January, 2016
From 2 October, 2017

Company owned by director

From 1 January, 2016

Company owned by director
Company owned by director

From 1 January, 2016
From 1 January, 2016

Name of related parties
Hiroshi Fujiwara
Mieko Nakagawa

Period subject to relatedparties
From 1 January, 2016
From 1 January, 2016(a) BALANCES classified as related parties
USD thousand
30 June (Unaudited)
2017
2018

31 December
2017

Current assets
Booked in the company and IRI Japan:-Loan to Hiroshi Fujiwara-Interest Receivable to Hiroshi Fujiwara-Trade Receivable to IoT Square, Inc.
-Trade Receivable to Internet Association Japan-Prepaid expense to Internet Association Japan-Trade Receivable to Unimo, Inc.
-Allowance for Doubtful accounts to Unimo, Inc.

288
6-;-;-;10(10)-;-;-;50(*)-;10(10)-;-;1-;-;10(10)Booked in NANO OPT Media, Inc.:-Other receivable to Unimo, Inc.

20

21

20

25

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-Allowance for Doubtful accounts to Unimo, Inc.
-Prepaid expense to Astro Aerospace
Total
Current liabilities
Booked in the company and IRI Japan:-Account payable to BroadBand Tower, Inc.
-Account payable for Hiroshi Fujiwara
Total

(20)
-;294

(21)
120
170

(20)
-;1

1
-;1

1
35
36

1
37
38

(*) less than thousand USD.
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 thousandSix month period ended 30
June (Unaudited)
2017
2018

Booked in the company and IRI
Japan:
Transaction with Management
Executives-Loan to Hiroshi Fujiwara-Interest Income from Loan to Hiroshi
Fujiwara-Account payable for Hiroshi Fujiwara
Transaction with Other Related
Parties-Outsourcing cost to BroadBand Tower, Inc.
-Sales to BroadBand Tower, Inc.
-Sales to IoT Square, Inc.
-Sales to Internet Association Japan-Payment of membership fee to Internet
Association Japan
Booked in NANO OPT Media, Inc.
Transaction with Other Related
Parties-Sales to BroadBand Tower, Inc.
-Sales to Remote Sensing Technology
Center of Japan-Sales to Internet Association Japan-Consulting fee to Astro Aerospace-Outsourcing cost to BroadBand Tower, Inc.
-Payment of membership fee to Internet
Association Japan
Total

Year ended
31 December
2017

-;-

-;-

288

2

-;-

2

-;-

-;-

37

(6)
123
-;-;-

(6)
-;14
46

(21)
143
3
-;-

-;-

(1)

-;-

11

10

18

-;-

-;-

9

-;-;-;-

-;61
-;-

10
-;(9)

-;-

-;-

-;-(*)

130

124

480

(*) less than thousand USD.
Loan as at 30 June 2017 was for ordinary purpose. These loans were unsecured, interest-bearing at
0.6%-3% per annum and repayable on demand. As at 30 June 2017, there was no impairment for
the amount due from a director as the amount have not past due and they have no history of default
in payment. On November 9, 2017, the Group collected all outstanding loans from Hiroshi Fujiwara.
Other transactions were conducted in the ordinary course of the business of the Group based on theterms mutually agreed between the relevant parties.
26

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(c)

Key management compensation

As discussed in the above, until the change in reporting entity occurred on 20 November 2017, key
management personal includes 5 directors and 1 corporate auditors of IRI Japan. After the date,
key management has been changed to 3 directors and 1 CFO of the Company. The compensation
paid or payable to key management for employee services is shown below:

Executive compensation
Share-based payment
Total

(d)

USD thousandSix month period ended 30 June
(Unaudited)
2017
2018
93
85
5
-;98
85

Year ended
31 December
2017
265
5
270

Guarantees by directors and shareholders

As at 30 June 2017, USD 42 thousands of the Group's banking facilities were secured by personal
guarantee provided by the director of the Company, Hiroshi Fujiwara. The guarantee was related tothe borrowings from the banking facilities in Nano-opt Media and it is limited to the outstanding of
the borrowings. Nano-opt Media completed early repayment for all outstanding of their borrowings
on 15 November 2017 and it resulted that the personal guarantee provided by Hiroshi Fujiwara wascancelled as well.

27

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 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 the Chief Operating Decision Maker (“CODM”).
An operating segment of the Group is a component for which discrete financial information isavailable. 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- it mainly provides consultancy services, research services and the reviewing of market
trends in the field of internet technologies for companies, organizations and government
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.
(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 the investments in MIC. It is a general partner in an investment fund thatmainly 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.

28

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six months ended 30 June, 2017
Unaudited

USD thousand
Technology Information
IRI

BBT

NOM

Other

Sub total

Adjustments

Total

Segment revenue fromexternal customers

213

35,347

7,015-

42,575(35,347)

7,228

Operating profit (loss)

(370)

733

1,739

-

2,102

(733)

1,369

Share of profit (loss) ofinvestments accounted
for using the equity
method

1,157(2,392)-103(1,132)

2,392

1,260

115

-

-

-

115

-

115

902

(2,609)

1,739

103

135

2,609

2,744

(21)

(5,943)(620)-(6,584)

5,943

(641)

881

(8,552)

1,119

103

(6,449)

8,552

2,103

-

14,823--

14,823(14,823)

-

881

6,271

1,119

103

8,374

(6,271)

2,103

Gain on change in shareof investments
accounted for using
equity method
Profit (loss) before income
tax
Income tax expenses(benefit)
Profit (loss) from continued
operations
Profit (loss) fromdiscontinued operation
Profit for the year

Six months ended 30 June, 2018
Unaudited

USD thousand
Technology Information
IRI

BBT

NOM

Other

Sub total

Adjustments

Total

Segment revenue fromexternal customers

166

54,513

8,402-

63,081(54,513)

8,568

Operating profit (loss)(2,266)(4,155)2,448-(3,973)

4,155

182

Share of profit (loss) ofinvestments accounted
for using the equity
method

(656)

454

-

3,659

3,457

(454)

3,003

41

-

-

-

41

-

41

(2,881)(3,666)

2,448

3,659

(440)

3,666

3,226

(127)

547

(854)

-

(181)

(547)

(727)

(2,754)(3,119)

1,594

3,659

(620)

3,119

2,499

Gain on change in shareof investments
accounted for using
equity method
Profit (loss) before income
tax
Income tax expenses(benefit)
Profit (loss) for the year

29

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Year ended 31 December 2017

USD thousand
Technology Information
BBT

NOM

Other

Sub total

Adjustments

278

78,125

8,843-

87,246(78,125)

9,121(3,817)

2,746

743

-

(328)

(2,746)(3,074)

1,159(1,650)

-

298

(193)

1,650

1,457

123

-

-

-

123

-

123

Profit (loss) before income tax(2,533)

1,424

742

298

(69)

(1,424)(1,493)

Income tax expenses (benefit)-(9,684)(330)-(10,014)

9,684

(330)

(2,533)(8,260)412

298(10,083)

8,260(1,823)-

14,857--

14,857(14,857)-(2,533)

6,597

412

298

4,775

(6,597)(1,823)Finance income

2

1,615

-

-

1,617

(1,615)2

Finance expense-(1,286)(1)-(1,287)

1,286

(1)

Depreciation and amortization-(4,021)(35)-(4,056)

4,021

(35)

Capital expenditure-

11,865247-

12,112(11,865)

247

IRI
Segment revenue fromexternal customers
Operating profit (loss)

Total

Share of profit (loss) ofinvestments accounted forusing the equity method
Gain on change in share ofinvestments accounted forusing equity method

Profit (loss) from continued
operations
Profit (loss) from discontinued
operation
Profit for the year
Other segment items

30 June, 2017 (Unaudited)

USD thousand
Technology Information
Segment assets

IRI

BBT

25,936

129,668

NOM

Other

5,193

1,272

Adjustments(129,668)

Total
32,40130 June, 2018 (Unaudited)

USD thousand
Technology Information
IRI
Segment assets

20,745

BBT
177,418

NOM

Other

6,786

5,526

Adjustments(177,418)

Total
33,05731 December, 2017

USD thousand
Technology Information
IRI
Segment assets

23,779BBT
175,661

NOM

Other

4,134

1,548

30

Adjustments(175,661)

Total
29,461INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNOTE 10 – SUBSEQUENT EVENTS
Initial public offering by issuance of new shares

In August 2018, the Company completed a first initial public offering ("IPO") and listing of its
shares for trade on the Tel Aviv Stock Exchange Ltd. ("TASE"). On August 9, 2018, the trading in
the Company's shares was commenced on TASE. The Company issued 11,715,800 ordinary shares forprice of NIS 1.73 per share. As a result, the Company raised NIS 20,268 thousands. Net amounts received
at the Company's bank account at subsequent events.
NOTE 11 – RECONCILIATION of BBT's FINANCIAL STATEMENTS FROM J-GAAP TO IFRSBelow is transition from Japanese GAAP to IFRS at BBT as of and for the year ended 30 June 2017 and 2018.
Since BBT’s financial information under Japanese GAAP is denominated in JPY, the reconciliation below ispresented in thousands of JPY.
Consolidated statement of financial position
JPY (In thousands)
As of 30 June 2017
Presentation under
J-GAAP
Current assets
Cash and cash

equivalents
Notes and accounts
receivable-tradeMarketable securities
Inventories
Current assets-Others
Allowance for doubtful
accounts
Total current assets

Reported
Note
underJapanese GAAP
L

Effect of transition
to IFRS

Presentation under
IFRS

IFRS

Current assets
Cash and cash

5,363,865

1,599,986

6,963,851

1,222,822(2,369)1,220,453

Trade receivables

L

1,599,986
178,366
381,169(1,599,986)-;-;--;178,366
381,169-;Inventories
Other current assets

L(2,369)

2,369

-;-

8,743,839-;-

8,743,839

L

Non-current assets
Property, plant andequipment
Intangible assets

I

Investment securities-;-

2,188,394

59,532

2,247,926

75,448-;-75,448G, L

1,830,363(455,136)

1,375,227

L-;-

1,375,454

1,375,454

676,487-;-

676,487

16,458-;-16,4584,787,150

979,850

5,767,000

13,530,989

979,850

14,510,839

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

equivalents-;Total current assets
Non-current assets
Property, plant andequipment
Other intangible assets
Investment securities atfair value
Investments accounted
for using the equity
methodLease and guarantee
deposits
Other non-current
assetsTotal non-current
assetsTotal assets

JPY (In thousands)
Presentation under
J-GAAP
Current liabilities
Accounts payable-trade
Short-term borrowings

Note

Reported
underJapanese GAAPAs of 30 June 2017
Effect oftransition to
IFRS
IFRS

466,128
1,384,668

-;-;-

31

466,128
1,384,668

Presentation under
IFRS
Current liabilities
Trade payable
Short-term borrowings

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

Note

Lease obligations
Accounts payable-other
Income taxes payable
Advances received
Current liabilities-Others
Total current
liabilities

H

Reported
underJapanese GAAPAs of 30 June 2017
Effect oftransition to
IFRS
IFRS

Presentation under
IFRS

23,116-;-23,116

180,026-;-

180,026

741,152
246,564
208,581-;121,706-;-

741,152
368,270
208,581

3,250,236

121,706

3,371,942

Non-current liabilities
Long-term borrowings
Lease obligations

1,175,000-;-

1,175,000

304,121-;-304,121479,436-;-

479,436

Asset retirement
obligations
Deferred tax liabilities
-;-

D
H

114,997-;-

42,85578,514

157,852
78,514

-;-

E

-;-

66,431

66,431

Total non-current
liabilities

2,073,554

187,800

2,261,354

Total liabilities

5,323,790

309,506

5,633,296

EquityShareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’equityM2,370,701
2,768,077
3,234,001(259,690)-;-;573,656-;-

2,370,701
2,768,078
3,807,657(259,690)

8,113,090

573,656

8,686,747

720

97,103

97,823(52,870)(415)(53,285)(52,149)

96,68844,53813,345-;-

13,345

132,915-;-

132,915

8,207,199

670,3448,877,543

13,530,989

979,850

14,510,839

Other comprehensive
incomeValuation differences ofavailable-for-saleinvestments
Foreign currencytranslation adjustment
Total othercomprehensive
incomeStock compensation
Non-controlling interests
Total equity
Total liabilities andequityG

Obligation underfinance leases-current
Accruals and otherpayablesIncome taxes payable
Deferred revenue
Other current liabilities
Total current
liabilities
Non-current
liabilities
Long-term borrowings
Obligation underfinance lease
Asset retirement
obligations
Deferred tax liabilities
Deferred revenue
Other non-current
liabilities
Total non-current
liabilities
Total liabilities
EquityShareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’equityOther
comprehensive
incomeValuation differences ofavailable-for-saleinvestments
Foreign currencytranslation adjustment
Total othercomprehensive
incomeStock compensation
Non-controllinginterests
Total equity
Total liabilities andequityJPY (In thousands)
As of 30 June 201832

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Presentation under
J-GAAP

Note

Reported
underJapanese GAAP

Effect of transition
to IFRS

Presentation under
IFRS

IFRS

Current assets
Cash and cash equivalents

L

6,627,920-;-

6,627,920

Notes and accounts
receivable-trade

G, L

1,476,944(6,702)

1,470,242

-;-

C,G

-;-

740,741

740,741

223,559
1,068,836-;20,329

223,559
1,089,165(6,702)

6,702

-;-

9,390,558

761,069

10,151,627

Inventories
Current assets-Others
Allowance for doubtful
accounts
Total current assets
Non-current assets
Property, plant andequipment
Intangible assets
Goodwill

L

Current assets
Cash and cash
equivalents
Notes and accounts
receivable-trade
Financial assets at fairvalue through othercomprehensive incomecurrent
Inventories
Other current liabilities-;Total current assets
Non-current assets
Property, plant andequipment
Intangible assets
Goodwill
Investments accounted
for using the equity
methodFinancial assets at fairvalue through othercomprehensive income
Financial assets at fairvalue through profit or
loss
Financial assets at
amortised cost

I,J

4,112,432(10,084)

4,102,348

B

1,547,985
615,207

6,330(11,164)

1,554,315
604,043

Investment securities

C, K

1,597,125(1,564,014)

33,111

-;-

G, L

-;-

1,518,260

1,518,260-;-

160,894

160,894-;-

220,952

220,952

G

845,693-;-845,693D-;-

248,263248,263

Other financial assets at
amortised cost
Deferred tax assets

126,979

77,855

204,834

Other non-current assets

8,845,423

647,292

9,492,715

18,235,982

1,408,360

19,644,342

G, L-;-;Lease and guarantee
deposits-;Non-current assetsOthers
Total non-current
assetsG, L

Total assets

Total non-current
assetsTotal assets

JPY (In thousands)
Presentation under
J-GAAP
Current liabilities
Accounts payable-trade
Short-term borrowings

Note

418,587
1,763,532-;-;-

418,587
1,763,532

Lease obligations-current

26,228-;-26,228

Accounts payable-other

1,293,727-;-

1,293,727

116,088-;--;429,929

116,088429,929

Income taxes payable
-;-

G
G

Reported
underJapanese GAAPAs of 30 June 2018
Effect oftransition to
IFRS
IFRS

H

33

Presentation under
IFRS
Current liabilities
Trade payable
Short-term borrowings
Obligation underfinance leases-current
Accruals, provisions andother payables
Income taxes payable
Contract liabilities

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
Presentation under
J-GAAP
Current liabilities-Others
Total current
liabilities

Note
L

Reported
underJapanese GAAP729,101
4,347,263

As of 30 June 2018
Effect oftransition to
IFRS
IFRS
(347,762)
381,339
82,167

4,429,430

Non-current liabilities
Lease obligations

283,776-;-

283,776

3,195,600(26,775)

3,168,825

636,001-;-

636,001

Long-term borrowings
Asset retirement
obligations
Deferred tax liabilitiesnon-current

G, K

D

488,745

32,731

521,476

-;-

H

-;-

86,25486,254E

102,152

94,830196,982

4,706,274

187,040

4,893,314

9,053,538

269,206

9,322,744

Non-current liabilities Others
Total non-current
liabilities
Total liabilities
EquityShareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’equity2,383,721
2,798,278
2,133,962(259,690)-;-;1,113,403-;-

2,383,721
2,798,278
3,247,365(259,690)

7,056,272

1,113,403

8,169,675-;-(63,949)(63,949)(58,957)-;-(58,957)(58,958)(63,948)(122,906)

11,997

14,414

26,411

Non-controlling interests

2,173,132

75,2852,248,417

Total equity
Total liabilities andequity9,182,444

1,139,154

10,321,598

18,235,982

1,408,360

19,644,342

M

Other comprehensive
incomeValuation differences ofavailable-for-saleinvestments
Foreign currencytranslation adjustment
Total othercomprehensive
incomeStock compensation

G

34

Presentation under
IFRS
Other current liabilities
Total current
liabilities
Non-current
liabilities
Obligation underfinance leaseLong-term borrowings
Asset retirement
obligations
Deferred tax liabilities
Contract liabilities-noncurrent
Other non-current
liabilities
Total non-current
liabilities
Total liabilities
EquityShareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’equityOther
comprehensive
incomeValuation differences offinancial assets at
amortised cost
Foreign currencytranslation adjustment
Total othercomprehensive
incomeStock compensation
Non-controllinginterests
Total equity
Total liabilities andequityINTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of income
JPY (In thousands)
Presentation
under
J-GAAPNet revenue
Cost of revenue
Gross profit

Note
H
H, I

Reported
underJapanese
GAAP
38,987,492(32,382,949)
6,604,542

For the year ended 30 June 2017
Reclassificat
Effect ofion intotransition to
IFRS
Discontinue
IFRS
d Operations(14,693,129)(16,859,693)
7,434,670
14,668,345
12,004,795(5,709,809)(4,854,898)
1,724,861(24,784)

Presentation
under IFRSRevenue
Cost of sales
Gross profit
Selling, generalandadministrative
expenses
Other income
Other expense
OperatingprofitSelling, general andadministrative
expenses

B, E(5,758,024)

215,284

3,723,434(1,819,306)

-;-;-

L
L

-;-;-

1,493,413(14,094)(1,445,757)
798

47,655(13,296)

846,518

1,669,819(2,576,423)(60,086)

78,551(78,551)

-;-

-;-

-;-

(157,764)

157,764

-;-

-;-

-;-

Operating profit
L

Non-operating
incomeNon-operating
expenses
-;-;-

L

-;-;-

31,699(173,419)

(161)
9,553

31,538(163,866)

-;-

C, L

-;-

248,440(607,841)(359,401)

767,304

1,855,752(3,174,872)(551,815)-;-

1,542,833(1,542,833)

-;-

-;-

-;-

(326,536)

326,536

-;-

-;-

-;-

1,983,601

639,456(3,174,872)(551,815)(1,339,315)(359,472)

1,026,353(672,435)

Profit after
income taxes

644,286

279,984(2,148,519)(1,224,250)

Minority interest(217,194)(83,703)-;-(300,898)

L
L

Ordinary profit
Extraordinary
incomeExtraordinary loss

L
L

Profit before
income taxes
Income taxes

D

-;-

A

-;-

-;-

Profitattributable toowners of parent

L427,092

196,280

644,286

279,984(2,148,519)(1,224,250)

-;-

-;-

2,148,519

2,148,519

Profit after
income taxes
Reclassificationof loss fromdiscontinued
operations
Other
comprehensive

2,148,519-;-

35

2,148,519

623,372

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

Loss before
income taxes
Income taxes
expenseLoss for theyear
Minority interest
Gain fromdiscontinued
operations, net oftaxes
Profitattributable toowner of parent
Loss for theyear
Reclassificationof loss fromdiscontinued
operations
Other
comprehensiveINTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
Presentation
under
J-GAAPFor the year ended 30 June 2017
Reclassificat
Effect ofion intotransition to
IFRS
Discontinue
IFRS
d Operations

Reported
underJapanese
GAAP

Note

Presentation
under IFRS

income (loss), net oftax:
Valuationdifference on
available-for-saleinvestment

G

Foreign currencytranslation
adjustment
Share of othercomprehensive
income of entities
accounted forusing equity
methodTotal othercomprehensive
income, net oftax
Comprehensive
incomeComprehensive
incomeattributable to
Owners ofparentNon-controllinginterests

17,949(88,055)-;-(70,106)

50,378(415)-;-

49,963

245

-;-

-;-

245

68,572(88,470)-;-(19,898)

712,858

191,514-;-904,372

495,457

107,811-;-603,268

217,40383,703-;-

301,104

income (loss), netof tax:Change in fairvalue ofavailable-forsale financial
assetsForeigncurrencytranslation
adjustment
Share of othercomprehensive
income ofinvestments
using the equity
methodTotal othercomprehensive
loss, net of tax
Comprehensive
incomeComprehensive
incomeattributable to
Owners ofparentNoncontrollinginterests

JPY (In thousands)
For the year ended 30 June 2018
Presentation under
J-GAAPNet revenue
Cost of revenue
Gross profit
Selling, general andadministrative
expenses
-;-;-

Note
H
H, I

Effect oftransition to
IFRS

IFRS

(18,504)(424,034)(442,538)

10,713,025(8,276,920)
2,436,104

Revenue
Cost of sales
Gross profit
Selling, general andadministrative
expensesPresentation
under IFRS

B, E

(2,958,854)

64,723(2,894,131)

L
L

-;-;-

306,788(74,780)

306,788(74,780)

Other income
Other expense(80,212)(145,807)(226,019)

Operating loss

175,503(175,503)-;-

Operating loss
Non-operating income

Reported
underJapanese
GAAP
10,731,529(7,852,886)
2,878,642

L

36

-;-

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JPY (In thousands)
For the year ended 30 June 2018
Presentation under
J-GAAP
Non-operating
expenses-;-;-

Reported
underJapanese
GAAP

Effect oftransition to
IFRS

L(116,137)

116,137

-;-

C, L
L
L

-;-;-

176,525(28,999)

176,525(28,999)-;-

133,066

133,066(20,846)

75,41954,571-;-

738,020(738,020)

-;-

-;-

(487,616)

487,616-;--;-

229,557(174,986)

54,571(581,008)

222,341(358,667)

Profit before
income taxes
Income taxes expense(351,451)

47,355(304,096)

Loss for the year

21,357(41,450)(20,093)

Minority interest(330,093)

5,904(324,189)

Loss attributable toowner of parent(351,451)

47,355(304,096)

Loss for the year

Note

-;-

Ordinary profit
Extraordinary income
Extraordinary loss
Profit before
income taxes
Income taxes
Loss after income
taxes
Minority interest
Loss attributable toowners of parent
Loss after income
taxes
Other comprehensive
income, net of tax:
Valuation difference
on available-for-saleinvestment
Foreign currencytranslation
adjustment
Share of othercomprehensive
income of entities
accounted for using
equity method
Total othercomprehensive
income, net of tax
Comprehensive
incomeComprehensive
income attributabletoOwners of parent
Non-controllinginterests

L
L

D

L

G

Presentation
under IFRS

IFRS

-;-

172,831(8,481)

414

(571)

-;-

(571)

(9,053)

173,246

164,194(360,505)

220,602(139,903)(339,147)

179,152(159,995)(21,357)

41,45020,09337

172,831(8,067)-;Finance income
Finance expense
Share of profit ofinvestments accounted
for using the equity
methodOther comprehensive
income, net of tax:
Change in fair valueof available-for-salefinancial assets
Foreign currencytranslation
adjustment
Share of othercomprehensive
income ofinvestments using
the equity method
Total othercomprehensive
loss, net of tax
Comprehensive
incomeComprehensive
income attributabletoOwners of parent
Non-controllinginterests

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Acquisition of JapanCableCast Inc.
On 10 October 2017, BBT acquired 50.4% of the voting shares of JapanCableCast Inc. (“JCC”), an unlistedcompany based in Tokyo, Japan, specializing in providing dedicated platform services (video, voice, datadelivery) and support of VNO setup/operation services to cable television operators. As a result of theacquisition, BBT obtained control, and JCC became consolidated subsidiaries of BBT. Before thistransaction, JCC was treated as the investment accounted for using the equity method. BBT acquired JCC
for the purpose of tightening the relationship with cable television industry in which the growth was
expected as a critical social infrastructure in the era of the market change by accelerating next generation
broadcasting and video delivery services such as a diffusion of 4K/8K high definition television services.
The valuation of the fair values of the assets acquired and the liabilities assumed was completed in thisquarter and remained unchanged as compared the preliminary assessment at the time of acquisition.
Assets acquired and liabilities assumed
The identifiable assets and liabilities of JCC, which are measured at fair value as of the date of acquisition
except for limited exceptions in accordance with IFRS, were as follows:
JPY (In thousands)
Fair value
AssetsCash and cash equivalents
Trade receivables
Inventories
OthersProperty and equipment
Customer related asset
Other intangible assets
Other non-current asset
Total assets
Liabilities
Trade payables
Other financial liabilities, current
Other financial liabilities, non-current
Deferred tax liabilities
Other liabilities
Total liabilities
Total identifiable net assets at fair value
Non-controlling interests
Goodwill
Total consideration

2,858,439
350,253
70,48566,001
947,108
1,332,000
140,267
217,593
5,982,146(173,460)(461,710)(1,141,620)(188,631)(704,319)(2,669,740)
3,312,406(1,646,683)
604,0442,269,767

All consideration was paid in cash. The fair value of the trade receivables was JPY 350,253 thousand. The
gross contractual amounts of the trade receivables were not materially different from the fair value
determined as part of the purchase price allocation.
Goodwill of JPY 604,044 thousand represented the value of expected synergies arising from the acquisition
and was allocated entirely to the BBT segment. None of the goodwill recognized was expected to be
deductible for income tax purposes.
From the date of acquisition, JCC had contributed JPY 2,653,402 thousand to the revenue of BBT and had
increased profit from continuing operations of BBT by JPY 151,452 thousand. If the business combination
had taken place on 1 July 2017, revenue for BBT would have been JPY 11,539,210 thousand and the loss
from continuing operations for BBT would have been JPY (206,884) thousand for the year ended 30 June
2018.
A) Presentation of discontinued operations

Under Japanese GAAP, there is no specific requirements for the presentation of discontinued operations
and reclassification of assets and liabilities as assets and liabilities held for sale.
Under IFRS, an operation which meets certain criteria is classified as a discontinued operation and its
results should be presented separately from continuing operations. The reclassification as discontinued
operations for the period ended 30 June 2017 is relating to the partial sale of the Company’s shareholding38

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
in its subsidiary BBF, Inc. on 30 June 2017.
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.
No goodwill is recorded as at 30 June 2017 under both Japanese GAAP and IFRS due to the partial sale of
the Company’s shareholding in its subsidiary BBF, Inc, and JPY 604,044 thousand of goodwill is recorded
under IFRS as at 30 June 2018. Goodwill as at 30 June 2018 is caused from the acquisition of JCC on 10
October 2017. Reconciliation of goodwill between Japanese GAAP and IFRS as at 30 June is as follow.

Goodwill under Japanese GAAP
Reversal of amortization expense of
goodwill under Japanese GAAPGAAP adjustment from Japanese
GAAP to IFRS as of 10 October
related to JCC
Goodwill under IFRSJPY (In thousands)
30 June 2018615,207
32,379(43,543)
604,043

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 30 June 2018.
C) Discontinuing the use of the equity method
Under Japanese GAAP, an entity shall discontinue the use of the equity method from the date when its
investment ceases to be an associate, and the entity measures the retained interest in the former associate
at its costs in the consolidated financial statements.
Under IFRS, when an entity shall discontinue the use of the equity method, any investment retained in theformer associate is re-measured at its fair value with any gain or loss recognized in profit or loss.
The Company sold a partial share of its 13.5% investment in BBF, Inc. on 14 December 2017. As a result,
the Company’s ratio of voting rights was dropped to 10.0% and was accounted for as available for sales forequity securities. The Company recorded gain as a result of discontinuation of equity method which resultin financial income in the amount of JPY 133,337 thousand for the year ended 30 June 2018 under IFRS.
Following this transaction, JPY 740,741 thousand of BBF shares, which is measured at fair value, isclassified to financial assets at fair value through other comprehensive income-current.
On 2 July 2018, the transfer of remaining 10.0% investment in BBF, Inc. was completed.
D) 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, nil and JPY 248,263 thousand of deferred tax assets are 1) adjusted as the differences of thetreatment of recoverability of deferred taxes under Japanese GAAP and IFRS, 2) recorded from theadjustment accounting entries from Japanese GAAP to IFRS and 3) reclassified from the tax assets atcurrent assets to non-current assets, also off set the deferred tax assets with the liabilities, as at 30 June2017 and 2018, respectively.
E) 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. Additionally, obligations associated with special leave andremuneration that are granted based on specified years of service and which do not require recognition
under Japanese GAAP are recognized and included in other non-current liabilities under IFRS.
39

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 30 2017 and 2018, the expense relating to the unused paid absence at JPY
1,925 thousand and JPY 4,834 thousand are included as the adjustment from Japanese GAAP to IFRS,
respectively. In addition, other non-current liabilities is increased by JPY 66,432 thousand and JPY
77,023 thousand, respectively, due to the adjustment from Japanese GAAP to IFRS.

40INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
F) IFRS 9 Financial Instruments
As discussed in Note 2.2, the Company has applied IFRS 9 retrospectively and has determined not to restate the comparative information for the period beginning 1 January
2017. As a result, the comparative information is prepared based on the Company’s pervious accounting policies. On 1 January 2018, the Company has assessed whichbusiness models to apply to its financial assets and liabilities and classified such financial assets and liabilities in to appropriate classification under IFRS 9. The impacts ofthese classifications are as follows.
JPY (In thousands)
Balance as of 1 January 2018 under IFRS 9
Balance at 1
January
2018 under
IAS 39Financialassets/lia
bilities atfair value
through
profitor loss

1,478,475

Impact by adoption of IFRS9

Total
financialassets/li
abilities

Fair
value
measurement
at 1
January
2018

Provision at
1
January2018

Total
impacts

1,478,475

1,478,475

-;-

-;-

-;-

1,040,741-;-

1,040,741

-;-

-;-

-;-

72,041

1,102,057

225,776

1,399,874

-;-

-;-

-;-

876,474-;--;-

876,474

876,474

-;-

-;-

-;-

2,276,348

72,041

1,102,057

1,102,250

2,276,348

-;-

-;-

-;-

Financialassets/liab
ilities
at FVOCI

Financialassets/liab
ilities
atamortized
cost

-;-

-;-

1,040,741-;-

1,399,874

Financial assets
Trade and other receivables
Notes and accounts receivable - trade
Other financial assets, current
Available-for-sales for equity securities
Other financial assets, non-current
Available-for-sales for equity securities
Other financial assets at amortised cost
（Lease and guarantee deposits）
Total

41

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JPY (In thousands)
Impact by adoption of IFRS9Balance as of 1 January 2018 under IFRS 9
Balance at 1
January
2018 under
IAS 39Financialassets/liabi
lities at fairvaluethrough
profitor loss

495,988

Other financial liabilities, current
Financial liabilities measured atamortized cost
Short-term borrowings
Other financial liabilities non-current
Financial liabilities measured at amortizedcostLong-term borrowings

Total
financialassets/li
abilities

Fair
value
measurement
at 1
January
2018

Provision at
1
January2018

Total
impacts

495,988495,988

-;-

-;-

-;-

-;-

1,899,980

1,899,980

-;-

-;-

-;-

-;-

2,728,610

2,728,610

-;-

-;-

-;-

Financialassets/liab
ilities
at FVOCI

Financialassets/liab
ilities
atamortized
cost

-;-

-;-

1,899,980-;-

2,728,610-;-

Financial liabilities
Trade and other payables
Financial liabilities measured at amortized
cost
Trade payable42

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Following are the impacts on accumulated earnings and accumulated other comprehensive income byclassification and measurement of financial assets at 1 January 2018.
JPY (In thousands)
Financial assets
Retained earnings
at FVOCI
Balance of accumulated earnings and accumulated
OCI as of 1 January 2018 under IAS 39

3,297,080

222,364

Reclassification from available-for-sale financial
assets to financial assets at FVOCI

326,657(326,657)

Adjustment to shareholders’ equity from adoption of
IFRS 9326,657(326,657)

Balance of accumulated earnings and accumulated
OCI as of 1 January 2018 under IFRS 9

3,623,737(104,293)

G) 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 2017 and 2018 are as
follows:

As at 30 June 2017
AssetsFinancial assets available forsale for equity securities

As at 30 June 2018
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-;--;-

Level 1

Level 2-;-740,741

1,518,260

2,259,001

-;-

-;-

160,894

160,894

740,741

1,679,154

2,419,895

43

1,375,227

1,375,227

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 July 2016
Additions of financial assets
Disposal of financial assets
Fair value gain/(loss) on valuation –carried to other comprehensive income
Impairment losses
Balance at 30 June 2017

1,406,213
409,987(253,548)

Balance at 1 July 2017
Additions of financial assets
Disposal of financial assets
Transfer to investment in subsidiary
Fair value gain/(loss) on valuation
carried to other comprehensive income
Balance at 30 June 2018

1,375,227
1,173,566(773,039)(195,850)(63,237)(124,186)
1,375,227

99,2501,679,154

There were no transfers between levels 1, 2 and 3 during the relevant periods.
H) Revenue recognition
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 year ended 30 June 2017 and2018 at JPY 12,970 thousand and JPY 18,504 thousand, respectively, decrease, and also the cost of sales
for the year ended 30 June 2017 and 2018 decreased by JPY 65,955thousand and JPY 76,761 thousand,respectively.
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 JPY3,140,973 thousand and JPY3,166,179 thousand for the year ended 30 June 2017 and 2018,
respectively.
I) 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.
J) Subsequent event - Transfer of facilities of solar power plant in Hofu City, Yamaguchi
Prefecture.
At the board of directors meeting held on 8 August 2018, a resolution was adopted to sell facilities of solar
power plant in Hofu City, Yamaguchi Prefecture. Transfer Considerations amounted JPY 600,000
thousand.

44

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
K) Loan covenants
Under the terms of the major borrowing, the Company is required to comply with certain financial
covenants, and the Company has complied with these covenants throughout the reporting period.
L) Reclassificationa) Presentation of cash and cash equivalents
Under Japanese GAAP, cash and deposits and short-term marketable securities are separately presented
on the balance sheet in accordance with the nature of the financial instrument. However, under IFRS, allof the financial instruments which meet the definition of cash and cash equivalents, are presented as cash
and cash equivalents.
As a result, JPY 1,599,986 thousand included in the account of the marketable securities under Japanese
GAAP is transferred into the cash and cash equivalent as at 30 June 2017, and no same adjustment ismade as at 30 June 2018 since the Company does not have marketable securities under Japanese GAAP.
b) Deferred tax assets and liabilities
Under Japanese GAAP, deferred tax assets and liabilities are presented as current or non-current on thebalance sheet determined based on the manner of generation. Under IFRS, all deferred taxes arepresented as non-current assets/liabilities on the balance sheet.
As a result, nil and JPY 27,244 thousand of the deferred tax liabilities presented as Current liabilities –Others under Japanese GAAP is transferred to Deferred tax liabilities (Non-current), as at 30 June 2017and 2018, respectively.
c) 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 2,369 and JPY 6,702 thousand included in the account of the allowance for doubtful
accounts are transferred to Notes and accounts receivables – trade as at 30 June 2017 and 2018, respectively.
d) 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 1,375,454 and JPY 33,111 thousand
included in the account of the investment securities are independently presented as at 30 June 2017 and2018, respectively.
e) 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“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.
M) Retained earnings
Reconciliation of retained earnings under Japanese GAAP and IFRS is below30 June 2017
Reported under Japanese
GAAP
Reversal of amortization of
goodwill

JPY (In thousands)
30 June 2018

3,234,001

2,133,962

550,854

32,37945

INTERNET RESEARCH INSTITUTE LTDNOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Changes in a parent’s ownershipinterest which result in a loss ofcontrol
Deferred taxes
Unused paid absences
Impairment of Property, Plant &Equipment
Revenue recognition
Impairment of investment
securities
Non-controlling interests
Adjustment of BBF disposal
Discontinuing the use of the equity
methodAdjustment for application of
Effective interest method
Effect of application of IFRS 9
OthersReported under IFRS

607,841-;-

35,695(117,262)

365,745(77,022)59,532(24,394)(248,842)(130,276)(11,827)(11,827)(185,592)(99,050)(79,551)-;-

688,617-;-

83,442-;-

340,136(73,846)
3,247,365(17,693)
3,807,657

46-;-