DAIICHIKOSHO

CO.,

LTD.

FY2008, the year ended March 31, 2009

Flash Report on the Consolidated Results for the Year Ended March 31, 2009
May 15, 2009

Company Name: DAIICHIKOSHO CO., LTD.
Code Number: 7458
(URL http://www.dkkaraoke.co.jp)
Stock Exchange Listing: JASDAQ
Representative: Yasutaka Wada, President
Contact: Shigeki Kobayashi, General Manager, Accounting Department
Phone: (03) 3280-2151
Date of the Ordinary General Meeting of Shareholders: June 28, 2009
Start Date for Dividend Payment: June 29, 2009
Scheduled Date to Submit the Securities Report: June 29, 2009
(Amounts below one million yen are truncated.)

1. Consolidated Performance for the Year Ended March 2009 (from April 1, 2008, to March 31, 2009)(1) Consolidated operating results(Percentage figures indicate increase/decrease from a year earlier.)
Year ended March 2009
Year ended March 2008

Net sales¥ Million
125,083
126,844

%
(1.4)
1.8

Net income
Year ended March 2009
Year ended March 2008

¥ Million
10,885
5,869

Operating income¥ Million%
16,6591.7
16,374
24.1

Ordinary income¥ Million%
17,4606.3
16,43227.0

Net income per share

Fully diluted net income
per share
¥
―
―

%
85.5
22.2

¥
158.7684.35

Return on equity

Ordinary income to total
assets%%Year ended March 2009
14.5
14.0
Year ended March 2008
8.4
12.9
(Reference) Equity in net income of unconsolidated subsidiaries and affiliates:
Year ended March 2009: (¥13 million)
Year ended March 2008: (¥307 million)

Operating income to net
sales
%
13.3
12.9

(2) Consolidated financial position
Total assets¥ Million
Year ended March 2009
124,295
Year ended March 2008
124,721(Reference) Shareholders’ equity
Year ended March 2009: ¥78,640 million
Year ended March 2008: ¥71,862 million

Net assets¥ Million
79,331
72,3991

Equity ratio
%
63.3
57.6

Net assets per share¥
1,165.60
1,036.52

DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated cash flows

Year ended March 2009
Year ended March 2008

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities¥ Million
27,49025,419¥ Million(17,110)(18,448)¥ Million(8,997)(10,516)

Cash and cash
equivalents at theend of the year
¥ Million
29,58428,3002. Dividend(Reference dated)Year ended March 2008
Year ended March 2009
Year ending March2010 (forecast)First Quarter———

Second Quarter
Yen
0.00
0.00
15.00

Aggregate amount ofdividend (annual)¥ Million
1,733
3,036
—

Dividend per share
Third Quarter———

Year-end
Yen
25.00
45.00
20.00

Payout ratio (consolidated)

Annual
Yen
25.00
45.00
35.00

Ratio of dividends to net
assets (consolidated)
%
2.5
4.1
—

%
Year ended March 2008
29.6
Year ended March 200928.3
Year ending March
27.1
2010 (forecast)(Note) Breakdown of the year-end dividend for the year ended March 2009: Special dividend 10.00 yen

3. Forecast Consolidated Performance for FY2009, the Year Ending March 31, 2010 (from April 1,
2009, to March 31, 2010)(Percentage figures indicate increase/decrease from a year earlier: The percentages for full-year forecasts mean theincrease/decrease from the end of the previous year, and the half-year forecast percentages represent theincrease/decrease from the end of the previous interim term.)
Net sales
Operating income
Ordinary income¥ Million%¥ Million%¥ Million%
Six months ending
62,2000.5
7,000(11.0)
7,400(10.8)
September 30, 2009
Year ending March 31,
125,400
0.3
15,300(8.2)
16,000(8.4)
2010 (full year)

Six months ending
September 30, 2009
Year ending March 31,
2010 (full year)

Net income¥ Million%
4,000(20.9)
8,700

Net income per share¥
59.29(20.1)

128.95

4. Other(1) Change in important subsidiaries during the term under review (Change in specific subsidiaries causing a change
in the scope of consolidation): No(2) Change in accounting principals, procedure and presentation methods for preparation of consolidated financial
statements (Items set forth in “Changes in important matters in preparing the consolidated financial
statements”)
1) Changes following a revision of accounting standards: Yes
2) Other changes: Yes(3) Number of common shares issued
1) Number of shares issued (including treasury stock)

2

DAIICHIKOSHO

CO.,

LTD.

Year ended March 2009: 69,600,596 sharesYear ended March 2008: 69,600,596 shares
2) Number of shares of treasury stockYear ended March 2009: 2,132,586 sharesYear ended March 2008: 270,292 shares(Reference) Outline of Nonconsolidated Financial Results
1. Nonconsolidated Performance for the Year Ended March 2009 (from April 1, 2008, to March 31,
2009)(1) Nonconsolidated operating results
Net sales¥ Million

Year ended March 2009
Year ended March 2008

82,88285,523(Percentage figures indicate increase/decrease from a year earlier.)
Operating income
Ordinary income¥ Million¥ Million
%
%
%
(3.1)
9,892
(2.8)
11,411
2.2
2.6
10,17429.0
11,16234.2

Net income
Year ended March 2009
Year ended March 2008

¥ Million
6,949
2,806

Fully diluted net income
per share¥—―

Net income per share
%
147.7
21.4

¥
101.3640.33(2) Nonconsolidated financial position
Total assets¥ Million
Year ended March 2009
78,837
Year ended March 2008
76,554(Reference) Shareholders’ equity:Year ended March 2009: ¥56,297 million
Year ended March 2008: ¥53,269 million

Net assets¥ Million
56,29753,269Equity ratio
%
71.4
69.6

Net assets per shareYen
834.43768.34* Explanation for the appropriate use of performance forecasts and other special notes:
These projected performance figures are based on information available to the Company’s management at the timeof preparing this report. There are many uncertain factors inherent in forecasting, and there might be cases in which
actual results differ from forecast values.

3

DAIICHIKOSHO

CO.,

LTD.

(Attachment)

2. Corporate GroupThe Daiichikosho Group (“DKG”) consists of Daiichikosho Co., Ltd. (“DK” or “the Company”), 42
consolidated subsidiaries and 3 affiliates. The major group companies engage in the commercial
karaoke business, the karaoke cabin and restaurant business, and the music software business.
Business segment

Business line

Commercial
karaoke business

Sales and rental of commercial-use
karaoke equipment, supply of soundsource and video content forcommunication karaoke and supply ofcontent services via the special “DAM
Station” information terminal

Karaoke cabin
and restaurant
business

Operation of karaoke cabins andrestaurants

Music software
business

Production and sales of music andvideo software products

Other business

Satellite broadcasting, supply ofcontent services via mobile phone andreal estate lease and rental business,
etc.

Domestic

Overseas

Daiichikosho Co., Ltd.,
Hokkaido Daiichikosho Co., Ltd.,
Tohoku Daiichikosho Co., Ltd.,
Taito Daiichikosho Co., Ltd.,
Niigata Daiichikosho Co., Ltd.,
Tokai Daiichikosho Co., Ltd.,
Daiichikosho Kinki Co., Ltd.,
Kyushu Daiichikosho Co., Ltd.,and 18 other subsidiaries

DK KOREA
Co., Ltd.,
Daiichikosho(Shanghai), Ltd.,and 2 othersubsidiaries

Daiichikosho Co., Ltd.,
Nippon Crown Co., Ltd.,
Tokuma Japan Communications Co.,Ltd.,First Distribution Co., Ltd.,
Union Eiga Co., Ltd.,and 4 other subsidiaries
Daiichikosho Co., Ltd.,DK Finance Co., Ltd.,and Maruhagi Yoshu Kogyo Co., Ltd.

4BIG ECHO(SHANGHAI)
Co., Ltd.,And 1 othersubsidiary

D.K. Enterprises(Guam), Inc.

DAIICHIKOSHO

CO.,

LTD.

The following diagram schematically shows the relationships of the respective group companies and businesses.

(Intermediary services related to
installment sales and loans for
DK and group companies)
DK Finance Co., Ltd.
(Production and sales of music
software products)
Nippon Crown Co., Ltd.
Tokuma Japan Communications
Co., Ltd.
First Distribution Co., Ltd.
Tri-M, Inc.
DK Music Publishing Co., Ltd.
Union Eiga Co., Ltd.
Crown Music Enterprise Co.
Zoom Republic(Operation of karaoke cabins andrestaurants)
BIG ECHO (SHANGHAI) Co., Ltd.
BIG ECHO (SHXG) CO., LTD.

(Operation and management ofrecreation facilities)
D.K. Enterprises (Guam), Inc.

(Equity method affiliate)
Spice Records Co., Ltd.
Breezeway Corp.
Bono Music(Production and sale of fruitwines)
Maruhagi Yoshu Kogyo Co., Ltd.

Sales and rentals of merchandise and products

DK KOREA Co., Ltd.
Daiichikosho (Shanghai), Ltd.
DAIICHI KOSHO (SHANGHAI)
TRADE CO., LTD.
Daiichi Kosho (Singapore), Pte
Ltd.1

Overseas users(Domestic sales subsidiaries)
Hokkaido Daiichikosho Co., Ltd.
Tohoku Daiichikosho Co., Ltd.
Niigata Daiichikosho Co., Ltd.
Kyushu Daiichikosho Co., Ltd.
Taito Daiichikosho Co., Ltd.
Tokai Daiichikosho Co., Ltd.
Daiichikosho Kinki Co., Ltd.
18 other companies

DAIICHIKOSHO CO., LTD. (Reporting company)

Domestic users(Overseas subsidiaries)

Operation of karaoke cabins and restaurants

Provision of services

Note: 1.BIG ECHO (SHSG) CO., LTD. has been excluded from the scope of consolidation because its liquidation wascompleted in December 2008.
2. Daiichi Kosho (Singapore), Pte Ltd.1 was dissolved in April 2009.

5

DAIICHIKOSHO

CO.,

LTD.

4. Consolidated Financial Statements(1) Consolidated Balance Sheets(Millions of yen)

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Inventories
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Karaoke equipment for rental
Accumulated depreciation
Karaoke equipment for rental, net
Kraoke cabin and restaurant facilities
Accumulated depreciation
Kraoke cabin and restaurant facilities, net
Land
Lease assets
Accumulated depreciation
Lease assets, net
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Lease and guarantee deposits
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

6

FY2007(As of March 31, 2008)

FY2008(As of March 31, 2009)

28,789
9,017
4,577
1,274
4,191
(436)
47,41430,003
8,925
4,778
1,221
3,841
(446)
48,321

14,548(8,498)6,049
27,977(19,907)
8,069
29,517(15,887)
13,62917,485
－
－
－
138
8,240
(6,402)
1,837
47,211
6,324

14,565(8,492)
6,073
27,985(20,448)
7,537
30,077(16,506)
13,571
18,463
35
(14)
21
525
7,981
(6,495)
1,485
47,677
7,026

4,598
865
3,572
12,9993,036(1,302)
23,77177,307
124,721

2,738
620
3,037
13,332
2,520(979)
21,26975,973
124,295

DAIICHIKOSHO

CO.,

LTD.

(Millions of yen)

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Accounts payable-other
Income taxes payable
Provision for bonuses
Unrealized profit on installment sales
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directors' retirement benefits
Negative goodwill
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders' equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Revaluation reserve for land
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets

7

FY2007(As of March 31, 2008)

FY2008(As of March 31, 2009)

4,552
12,152
6,419
3,689
1,098
286
3,230
31,4284,214
11,018
6,861
1,397
1,167
－
3,329
27,988

14,469
150
2,772
1,849
391
1,259
20,89352,322

10,178
150
2,891
2,105
335
1,314
16,97544,964

12,35020,36240,149(266)
72,595

12,35020,362
49,207(2,094)79,825

47
(845)
64
(733)
537
72,399124,721

(317)
(777)
(90)
(1,184)690
79,331
124,295

DAIICHIKOSHO

CO.,

LTD.

(2) Consolidated Statements of Income(Millions of yen)

Net sales
Cost of sales
Gross profit before adjustment for unrealized profit on
installment sales
Reversal of unrealized income on installment sales
Provision of unrealized income on installment sales
Reversal of unrealized income on installment sales deferred
net
Gross profit
Selling, general and administrative expenses
Advertising expenses
Promotion expenses
Packing and freight expenses
Provision of allowance for doubtful accounts
Directors' compensations
Provision for directors' retirement benefits
Salaries and bonuses
Provision for bonuses
Retirement benefit expenses
Rent expenses
Depreciation
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Interest income on installment sales
Commission fee
Cooperative monetary aid received
Amortization of negative goodwill
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on valuation of inventories
Provision of allowance for doubtful accounts
Equity in losses of affiliates
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income

8

FY2007(From April 1, 2007, to
March 31, 2008)

FY2008(From April 1, 2008, to
March 31, 2009)

126,844
72,715125,083
72,072

54,12853,010

50
69

－
－

(18)

－

54,10953,010

3,871
2,995
1,234
－
1,699
432
14,136
891
503
1,594
1,004
9,371
37,735
16,374

3,478
1,841
1,142
53
1,614
346
14,337
917
553
1,607
793
9,665
36,35016,659

117
165
134
331
74
781
1,605

241
－
－
373
55
939
1,609

413
472
－
307
－
354
1,547
16,432

328
－
10
13
248
207
808
17,460DAIICHIKOSHO

CO.,

LTD.

(Millions of yen)

Extraordinary income
Gain on sales of noncurrent assets
Reversal of allowance for doubtful accounts
Reversal of provision for directors' retirement benefits
Indemnity of cancellation of leases
Reversal of loss on cancellation of a new business
Other
Total extraordinary income
Extraordinary loss
Loss on disposal of noncurrent assets
Impairment loss
Loss on sales of stocks of subsidiaries and affiliates
Loss on valuation of investment securities
Loss on cancellation of a new business
Loss on irregularities
Other
Total extraordinary losses
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Minority interests in income
Net income

9

FY2007(From April 1, 2007, to
March 31, 2008)

FY2008(From April 1, 2008, to
March 31, 2009)

76
243
112
85
－
－
518

16
－
－
119
116
16
269

556
211
62
4,484
410
681
－
6,405
10,545
5,336
(813)
4,523
152
5,869

484
367
－
1,376
－
－
53
2,281
15,449
3,807
597
4,405
158
10,885DAIICHIKOSHO

CO.,

LTD.

(3) Consolidated Statement of Changes in Net Assets(Millions of yen)

Shareholders' equity
Capital stock
Balance at the end of previous period
Changes of items during the period
Balance at the end of current period
Capital surplus
Balance at the end of previous period
Changes of items during the period
Retirement of treasury stock
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the end of previous period
Effect of changes in accounting policies applied toforeign subsidiaries
Changes of items during the period
Dividends from surplus
Net income
Change of scope of equity method
Reversal of revaluation reserve for land
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the end of previous period
Changes of items during the period
Purchase of treasury stock
Retirement of treasury stock
Total changes of items during the period
Balance at the end of current period
Total shareholders' equity
Balance at the end of previous period
Effect of changes in accounting policies applied toforeign subsidiaries
Changes of items during the period
Dividends from surplus
Net income
Purchase of treasury stock
Retirement of treasury stock
Change of scope of equity method
Reversal of revaluation reserve for land
Total changes of items during the period
Balance at the end of current period

10

FY2007(From April 1, 2007, to
March 31, 2008)

FY2008(From April 1, 2008, to
March 31, 2009)

12,35012,35012,35012,35024,003

20,362(3,640)(3,640)20,362－－
20,36235,67140,149－(9)(1,391)
5,869
－
－
4,477
40,149(1,733)
10,885
(15)
(67)
9,068
49,207(3,641)

(266)

(265)
3,640
3,375
(266)

(1,828)－(1,828)(2,094)

68,384

72,595－(9)(1,391)
5,869
(265)
－
－
－
4,211
72,595(1,733)
10,885(1,828)
－
(15)
(67)
7,239
79,825DAIICHIKOSHO

CO.,

LTD.

(Millions of yen)

Valuation and translation adjustments
Valuation difference on available-for-sale securities
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Deferred gains or losses on hedges
Changes of items during the period
Revaluation reserve for land
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total valuation and translation adjustments
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Subscription rights to shares
Changes of items during the period
Minority interests
Balance at the end of previous period
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the end of previous period
Effect of changes in accounting policies applied to foreignsubsidiaries
Changes of items during the period
Dividends from surplus
Net income
Purchase of treasury stock
Change of scope of equity method
Reversal of revaluation reserve for land
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period

11

FY2007(From April 1, 2007, to
March 31, 2008)

FY2008(From April 1, 2008, to
March 31, 2009)

123

47

(75)
(75)
47

(364)
(364)
(317)

(845)

(845)

－
－
(845)

67
67
(777)

229

64

(164)
(164)
64

(155)
(155)
(90)

(493)

(733)

(239)
(239)
(733)

(451)
(451)
(1,184)

897

537

(360)
(360)
537

153
153
690

68,78872,399－(9)(1,391)
5,869
(265)
－
－
(600)
3,611
72,399(1,733)
10,885(1,828)
(15)
(67)
(298)
6,941
79,331DAIICHIKOSHO

CO.,

LTD.

(4) Consolidated Statements of Cash Flows(Millions of yen)

Net cash provided by (used in) operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of negative goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for directors' retirement
benefits
Interest and dividends income
Loss (gain) on sales of stocks of subsidiaries and affiliates
Gain or loss on investments in investment businessassociations
Interest expenses
Loss (gain) on disposal of noncurrent assets
Loss (gain) on valuation of investment securities
Loss on irregularities
Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories
Transfer of cost of sales on karaoke equipment for rental
Increase (decrease) in notes and accounts payable-trade
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Irregularities paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Increase in time and saving deposits
Proceeds from decrease in time and saving deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for acquisition of video licenses
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of investments in subsidiaries
Payments of loans receivableCollection of loans receivable
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits
Other, net
Net cash provided by (used in) investing activities

12

FY2007(From April 1, 2007, to
March 31, 2008)

FY2008(From April 1, 2008, to
March 31, 2009)

10,545
14,169
211
(74)
(626)

15,44914,012
367
(55)
(306)

(588)

256

(359)
62

(327)
－

(8)

(4)

413
479
4,484
681

328
467
1,376
－

558

14

516
680
(94)
127
31,177
366
(411)
(681)
(5,032)
25,419

(209)
493
(324)
2,019
33,557325(321)－(6,071)
27,490(241)
238(12,848)
156(4,351)(1,304)
(200)
450
(413)
(319)
707
(1,017)641
56(18,448)(303)
373(11,272)
175(4,360)(1,170)
(31)
136
－
(710)
631
(1,302)
589
133(17,110)DAIICHIKOSHO

CO.,

LTD.

(Millions of yen)

Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Cash dividends paid
Purchase of treasury stock
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

13

FY2007(From April 1, 2007, to
March 31, 2008)

FY2008(From April 1, 2008, to
March 31, 2009)(2,975)
6,510(12,382)(1,392)(265)(10)(10,516)(72)(3,618)31,91828,300(974)
6,250(10,700)(1,733)(1,828)(10)(8,997)(98)
1,283
28,30029,584DAIICHIKOSHO

CO.,

LTD.

Summary of Significant Accounting Policies(1) Valuation basis and method for important assets① Marketable securities and investments in securities
Other securities primarily designated as available-for-sale securities for which the fair values are readily
determinable:
Carried at fair value as of the balance-sheet date with changes in net unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. The cost of securities sold is determined by themoving-average method.
Other securities primarily designated as available-for-sale securities for which the fair values are notreadily determinable:
Carried at cost determined by the moving-average method.
With regard to investments in the Investment Business Limited Liability Partnership and similarorganizations (which are regarded as “securities” in accordance with Article 2, Paragraph 2, of Financial
Instruments and Exchange Act), initial investments in such associations are recognized as receivables fromassociations and the amount assumed to be held by the Company for fluctuations due to the financial
situation of the associations after such investment is recognized as receivables and payables related to such
associations.

② Derivatives
Carried at fair value.
③ Inventories
Principally stated at cost determined by the moving-average method. (balance sheet values are calculated by
the method to reduce the book value to reflect declined profitability.)(Change in accounting method)
Effective the current consolidated fiscal year, the “Accounting Standard for Measurement of Inventories” (ASBJ
Statement No. 9, July 5, 2006) has been applied. Although this change decreased operating income by ¥635 million
as compared with the amounts calculated using the former method, there is no effect on ordinary income or income
before income taxes and minority interests.
The impact on segment information is stated at the relevant points in the Segment Information.

(2) Depreciation method of major depreciable assets① Tangible fixed assets (excluding lease assets)
Depreciation is principally computed by the declining-balance method at rates based on the estimated useful
lives of the assets as shown below. However, the straight-line method is adopted for buildings (excluding
building improvements) acquired on and after April 1, 1998.
Buildings and structures: 3–50 years
Karaoke equipment for rental: 5–6 years
Karaoke cabin and restaurant facilities: 3–19 years(Additional Information)
DK reviewed the depreciation period for machinery and equipment following the tax system revision in 2008 andchanged the depreciation method for machinery and equipment to the method of shortening the depreciation period
for certain assets. The effect of this change on the consolidated financial statements is immaterial.

② Intangible assets
Amortization of intangible assets is computed by the straight-line method.
③ Lease assets
Lease assets are depreciated by the straight-line method with the useful being the lease period with a remaining
value being zero.
Finance lease transactions that do not transfer ownership of leased property whose lease inceptions predate
March 31, 2008 are accounted for as rental transactions.

14

DAIICHIKOSHO

CO.,

LTD.

(3) Accounting standard for important reserves① Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount of possible losses from uncollectible receivables
based on the actual rate of losses from bad debt for ordinary receivables, and on the estimated recoverability forspecific doubtful receivables.
② Reserve for bonuses
The reserve for bonuses of DK and its domestic consolidated subsidiaries is provided at an estimated amountbased on the internal payment prediction standard.
③ Reserve for employees’ retirement benefits
The reserve for employees’ retirement benefits of DK and its domestic consolidated subsidiaries is provided at
an amount recognized to have accrued as of the balance-sheet date, based on the projected benefit obligations
and plan assets as of March 31, 2009.
Actuarial differences are amortized on a pro rata basis by the straight-line method over a certain period (10years), which is shorter than the average remaining service years for employees at the time of their recognition,from the following fiscal year of recognition.
④ Reserve for directors’ retirement allowances
The reserve for directors’ retirement allowances of DK and its domestic consolidated subsidiaries is provided at
amounts that would be required to be paid in accordance with their respective internal rules concerning directors’
retirement allowances if all eligible directors and statutory auditors were to resign their positions as of therespective balance-sheet dates.
(4) Translation of important assets and liabilities denominated in foreign currencies into yen
Monetary receivables and payables denominated in foreign currencies are translated into yen at the spot exchange
rate in effect at the consolidated balance-sheet date. The resulting exchange differences are charged or credited toincome. The balance sheet accounts of the overseas subsidiaries are translated into yen at the spot exchange rate ineffect at their respective balance-sheet dates, and the revenue and expense accounts are translated into yen at the
average rate during the fiscal year. The resulting translation differences have been included in “Foreign currencytranslation adjustments” in Net Assets.
(5) Hedge accounting
DK hedges against risks of interest rate fluctuations for its variable-rate borrowings using interest rate swaps. The
preferential treatment is applied to these interest rate swaps.
(6) Other important matters in preparing the consolidated financial statements① Accounting for consumption taxes
Consumption taxes are accounted for using the tax exclusion method.
5. Valuation for assets and liabilities of consolidated subsidiaries
Assets and liabilities of consolidated subsidiaries are carried at fair value.

6. Amortization of negative goodwill
Negative goodwill is equally amortized over 5 or 15 years on a straight-line basis.

7. Cash and Cash Equivalents in the Consolidated Statements of Cash Flows
Cash and cash equivalents in the consolidated statements of cash flows included cash on hand, demand deposits andshort-term investments due within three months from the acquired date, which are easily convertible into cash withlittle risk of value fluctuation.

Change in Important Matters Essential for the Preparation of the Consolidated Financial Statements(Accounting Standard for Lease Transactions)
Previously, finance lease transactions without ownership-transfer were accounted for as operating leases. DK has
adopted the “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13, issued by the First Session ofBusiness Accounting Council on June 17, 1993; latest revision, March 30, 2007) and the “Guidance on AccountingStandard for Lease Transactions” (ASBJ Guidance No. 16, issued by the Accounting System Committee of theJapanese Institute of Certified Public Accountants on January 18, 1994; latest revision, March 30, 2007), and isaccounting for those finance lease transactions as sales transactions from the current consolidated fiscal year.
Finance lease transactions that do not transfer ownership of leased property whose lease inceptions predate the first
applicable consolidated fiscal year are continuously accounted for as rental transactions.
The effect of this change on the consolidated financial statements is immaterial.

15

DAIICHIKOSHO

CO.,

LTD.

(Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated
Financial Statements)
Effective the current consolidated fiscal year, DK adopted the “Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” (ASBJ PITF No. 18, May 17,2006) and made necessary adjustments in its consolidated accounting.
The effect of this change on the consolidated financial statements is immaterial.
(Classification of Promotion Expenses)
Promotion expenses for increasing promotion effect, which were formerly recorded as promotion expenses andincluded in selling, general and administrative expenses, are partially recorded as a deduction from net sales,effective the fiscal year ended March 31, 2009.
After reviewing the contents of the promotion expenses for dealerships against the background of recently
intensifying price competition, DK changed the method of recording promotion expenses to the method in which
promotion expenses that are generally classified as sales discount because of its nature of transaction and tend
notably to comprise a substantial part of the sales price are directly deducted from net sales, instead of the former
method in which such promotion expenses were included in selling, general and administrative expenses.
Although, as a result of this change, net sales, gross profit, and selling, general and administrative expenses for the
fiscal year ended March 31, 2009, decreased ¥1,306 million, respectively, as compared with the amounts calculatedusing the former method, there is no effect on operating income, ordinary income, or income before income taxes
and minority interests.

16

DAIICHIKOSHO

CO.,

LTD.

(Segment Information)
1. Business segments
FY2007 (From April 1, 2007, to March 31, 2008)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income
Assets, depreciation
and amortization,
impairment loss andcapital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure

Commercial
karaokeKaraokecabin and
restaurantMusic
software

66,069270

38,235―66,34054,96911,370(Millions of yen)
Eliminations Consolidated
and corporate

Other

Total

11,739166

10,800808

126,844
1,245―(1,245)

126,844―

38,23532,933
5,301

11,905
11,009896

11,6089,871
1,737

128,089
108,782
19,306(1,245)
1,687(2,932)

126,844
110,470
16,37460,903
8,154

34,145
2,830

7,795
43

5,313
1,533

108,159
12,562

16,562
66

124,721
12,629

—

175
7,861

—
13

36
1,024

211
17,333—

211
17,3988,433

65

FY2008 (From April 1, 2008, to March 31, 2009)
Item
Sales and operating
incomeSales
Sales to third parties
Intersegment sales
and transfers
Total
Operating expenses
Operating income (loss)
Assets, depreciation
and amortization,
impairment loss andcapital expenditure
AssetsDepreciation andamortization
Impairment loss
Capital expenditure

Commercial
karaokeKaraokecabin and
restaurantMusic
software61,031
275

40,574(Millions of yen)
Eliminations Consolidated
and corporate

Other

Total

10,665834

125,083
1,344—

125,083—

12,811234(1,344)—61,30750,725
10,581

40,57435,024
5,549

13,045
11,1291,916

11,5009,908
1,591

126,427
106,788
19,639(1,344)
1,634(2,979)125,083
108,423
16,65955,221
8,124

36,287
2,983

8,854
39

6,064
1,422

106,427
12,57017,86835

124,295
12,606

—

349
4,674

—

17
1,089

367
15,291—156

367
15,448

9,465

62

17

DAIICHIKOSHO

CO.,

LTD.

Notes:
1. Segmentation method
According to DKG’s sales tabulation categories.
2. Major products and/or services of each business segment
Business segment
Commercial karaoke businessKaraoke cabin and restaurant
business
Music software business
Other business

Major products and/or services
Sales and rental of commercial-use karaoke equipment, supply of sound source andvideo content for communication karaoke, and supply of content services via thespecial “DAM Station” information terminal
Operation of karaoke cabins and restaurants
Production and sales of music and video software products
Satellite broadcasting business, supply of content services via mobile phones and realestate lease and rental business, etc.

3. Amounts and major items included in “Eliminations and corporate”
Amounts of unabsorbed operating
expenses included in“Eliminations and corporate”
Amounts of assets of the overall
Company included in“Eliminations and corporate”

FY2007¥2,932

FY2008¥2,979¥17,036¥18,288(Millions of yen)
Major items
Expenses required for operations byadministrative departments such as the General
Affairs Dept.
Surplus funds of the Company (cash and bankdeposits), long-term investment funds(investments in securities) andmanagement-related assets

2. Geographical segments(FY2007 and FY2008)
As sales and assets in Japan account for more than 90% of the sum of sales and the sum of assets, respectively, in eachregion of the respective geographical segments, the segment information by geographical region is omitted.

3. Overseas sales(FY2007 and FY2008)
As sales overseas account for less than 10% of consolidated net sales for fiscal 2007 and 2008, overseas sales-related
information is omitted.

18