Consolidated Financial Statements of
JALUX Inc. and Consolidated Subsidiaries
JALUX Inc.
Year ended March 31, 2021
with Independent Auditor’s ReportIndependent auditor’s report
To the Board of Directors of JALUX Inc.:
OpinionWe have audited the accompanying consolidated financial statements of JALUX Inc. (“the Company”)
and its consolidated subsidiaries (collectively referred to as “the Group”), which comprise theconsolidated balance sheets as at March 31, 2021 and 2020, the consolidated statements of operations,comprehensive income, changes in net assets and cash flows for the years then ended, and notes,
comprising a summary of significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2021 and 2020, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Appropriateness of the Company’s judgment on the recoverability of deferred tax assets related
to tax loss carryforwards of JALUX Airport Inc.
The key audit matter

How the matter was addressed in our audit

Deferred tax assets were recorded at\1,108,770 thousand in the consolidatedbalance sheets of the Company and its
consolidated subsidiaries as of March 31,
2021. As described in Note 15, “Income
Taxes,” to the consolidated financial

The primary procedures we performed to assess
whether the Company’s judgment on the recoverabilityof deferred tax assets related to tax loss carryforwardsof JALUX Airport Inc. was appropriate included thefollowing:statements, the amount of gross deferred tax
assets before being offset against deferred tax
liabilities and net of valuation allowanceamounted to \1,701,908 thousand. This
amount includes the tax loss carryforwards
for JALUX Airport Inc., a domestic
consolidated subsidiary of the Company,
which constitutes the deferred tax assets. As
described in Note 2, “Significant Accounting
Estimates,” to the consolidated financial
statements, deferred tax assets related to the
tax loss carryforwards amounted to \709,001
thousand based on future taxable income
estimates.
A deferred tax asset is recognized for the
carryforward of unused tax losses anddeductible temporary differences to theextent that it is probable that taxable profit
will be available against which the deductible
temporary differences can be utilized.
Due to the spread of the novel coronavirus
disease (“COVID-19”), the number of airline
flights decreased, international travel wasbanned worldwide, and domestic travel was
restricted, which resulted in the decrease in
the number of airport users. JALUX Airport
Inc. has faced a significant downturn inbusiness, resulting in a large amount of tax
loss carryforwards. The future taxable
income estimates which were used todetermine the recoverability of the deferred
tax assets were based on the business plan
prepared by management. The forecast of
future operating revenues included in thebusiness plan took into account the increasein domestic and international passenger
numbers due to the containment of COVID19 as a key assumption. Therefore, theestimate involved a high degree of
uncertainty.
We, therefore, determined that ourassessment of the appropriateness of theCompany’s judgment on the recoverability ofdeferred tax assets related to tax loss
carryforwards of JALUX Airport Inc. was
one of the most significant in our audit of theconsolidated financial statements for the(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant to
the future taxable income estimates used in thedetermination of the recoverability of deferred tax
assets.
(2) Assessment of the reasonableness of the futuretaxable income estimates
In order to assess the reasonableness of the key
assumptions adopted in the future taxable income
estimates, which were important for management’s
judgment on the recoverability of deferred tax assets,
among others, we:inspected materials related to the business plan,
which formed the basis for estimating the futuretaxable income, as well as inquired ofmanagement about the basis for preparing thebusiness plan;compared the increase in domestic andinternational passenger numbers due to thecontainment of COVID-19, which was taken into
account in the forecast of the future operating
revenues included in the business plan, with theforecast of the recovery of domestic andinternational passenger numbers published bythird party organizations and airlines; andverified the results of the analysis, which was
conducted by management, of the correlation
between the data of the operating revenues of
JALUX Airport Inc. and the data of the passenger
numbers published by airlines.

current fiscal year, and accordingly, a key
audit matter.
Appropriateness of the Company’s judgment as to whether an impairment loss should berecognized on fixed assets used in the airport shop business
The key audit matter

How the matter was addressed in our audit

Property and equipment and intangible assets
were recorded at \4,472,842 thousand and\593,302 thousand, respectively, in the
consolidated balance sheets of the Company
and its consolidated subsidiaries as of March
31, 2021. Included therein were \843,046
thousand of fixed assets related to the airport
shop business, which was included in theretail business segment, as described in Note
2, “Significant Accounting Estimates,”accounting for 2% of total assets in the
consolidated financial statements.

The primary procedures we performed to assess theappropriateness of management’s judgment as to therecognition of an impairment loss on fixed assets usedin the airport shop business included the following:

If there is any indication of impairment forthese fixed assets, the Company needs todetermine the necessity of recognizing
impairment losses by comparing the total
undiscounted future cash flows from theasset groups with their carrying value. As aresult of the determination, if the recognitionof impairment losses is deemed necessary,the carrying value is reduced to therecoverable value. At the same time, thereduction of carrying value is recognized as
impairment losses.
Due to the spread of the novel COVID-19,
the number of airline flights decreased,international travel was banned worldwide,and domestic travel was restricted, which
resulted in the decrease in the number of
airport users. The airport shop business has
faced a significant downturn in business. The
Company groups the airport shop businessbased on each airport as a basic unit. If there
is any indication of impairment on an airport,
the Company determines the necessity ofrecognizing impairment losses for the current
consolidated fiscal year. In the impairment
testing, future cash flows were estimatedbased on the business plan per airport(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant to
the estimates of future cash flows used in thedetermination of the recognition of impairment losses
on fixed assets.
(2) Assessment of the reasonableness of theestimates of future cash flows
In order to assess the reasonableness of key
assumptions adopted in estimating future cash flows,
among others, we:inspected materials related to the business plan per
airport, which formed the basis for estimating thefuture cash flows, as well as inquired ofmanagement about the basis for preparing thebusiness plan;compared the increase in domestic andinternational passenger numbers due to thecontainment of COVID-19, which was taken into
account in the forecast of the future operating
revenues included in the business plan, with theforecast of the recovery of domestic andinternational passenger numbers published bythird party organizations and airlines; andverified the results of the analysis, which was
conducted by management, of the correlation
between the data of the operating revenues of the
airport shop business and the data of the passenger
numbers published by airlines.

prepared by management. The forecast of
future operating revenues included in thebusiness plan took into account the increaseof domestic and international passenger
numbers due to the containment of COVID19 as a key assumption. Therefore, theestimate involved a high degree of
uncertainty.
We, therefore, determined that ourassessment of the appropriateness of theCompany’s judgment as to whether an
impairment loss should be recognized on
fixed assets used in the airport shop business
was one of the most significant in our auditof the consolidated financial statements forthis fiscal year, and accordingly, a key audit
matter.

Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors
for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Corporate auditors and the board of corporate auditorsare responsible for overseeing the directors’
performance of their duties with regard to the design, implementation and maintenance of the Group’s
financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.
Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.
We communicate with corporate auditors and the board of corporate auditors regarding, among othermatters, the planned scope and timing of the audit, significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we havecomplied with relevant ethical requirements regarding independence, and communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we
determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our reportbecause the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year
ended March 31, 2021 are presented solely for convenience. Our audit also included the translation of
yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis
described in Note 6 to the consolidated financial statements.

Interest required to be disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

Daisuke Yamada
Designated Engagement Partner
Certified Public Accountant

Nobuo Shibata
Designated Engagement Partner
Certified Public Accountant

KPMG AZSA LLC
Tokyo Office, Japan
August 31, 2021

JALUX Inc. and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31,
2021
2020
(Thousands of yen)

AssetsCurrent assets:
Cash and time deposits (Notes 19 and 23)
Trade notes and accounts receivable (Notes 19 and 25)
Inventories (Note 7)
Accounts receivable - other (Note 19)
OthersAllowance for doubtful accounts
Total current assets
Property and equipment (Notes 8, 14, 17 and 22):
Buildings and structures
Machinery and vehicles
Land
Construction in process
OthersProperty and equipment, net

2021(Thousands of
U.S. dollars)(Note 6)

¥ 8,466,348
10,902,123
15,627,297
3,018,935
2,783,191(9,610)40,788,286¥ 6,175,441
22,106,818
15,921,436
2,733,013
1,832,571(3,813)
48,765,467$ 76,273
98,217140,786
27,19825,074(87)
367,462

1,986,040
1,161,622
845,7452,732
476,700
4,472,842

2,098,428
1,372,708
861,962
53,703880,033
5,266,836

17,892
10,465
7,619
25
4,295
40,296565,184
28,117593,302643,650
30,158673,808

5,092
253
5,345

2,714,608
4,933
2,233,883
1,108,770
220,290
153,958(14,851)
6,421,592¥ 52,276,023

3,152,371
19,1552,334,474
471,658
1,730
170,395(11,157)
6,138,628¥ 60,844,741

24,45644
20,125
9,989
1,985
1,387
(134)
57,852$ 470,955

Intangible assets:
Software (Note 14)
OthersTotal intangible assets
Investments and other assets:
Investment securities (Notes 9, 19 and 20)
Long-term loans receivable
Long-term guarantee deposit (Note 19)
Deferred tax assets (Note 15)
Asset for retirement benefits (Note 11)
OthersAllowance for doubtful accounts
Total investments and other assets
Total assets

2March 31,
2021
2020
(Thousands of yen)

Liabilities and net assets
Current liabilities:
Trade notes and accounts payable (Notes 19 and 25)
Short-term borrowings and current portion of long-term
debt (Notes 10 and 19)
Commercial papers (Notes 10 and 19)
Accrued income taxes
Accrued expenses (Note 19)
Others (Note 10)
Total current liabilities

2021(Thousands of
U.S. dollars)(Note 6)

¥ 6,862,235¥ 10,668,290$ 61,822

3,049,764
6,997,817
106,075
2,949,903
3,193,574
23,159,370

7,796,865
5,999,788
167,263
4,670,758
2,401,342
31,704,308

27,47563,043956
26,576
28,771
208,643

Long-term liabilities:
Long-term debt (Notes 10 and 19)
Liability for retirement benefits (Note 11)
Deferred tax liabilities (Note 15)
OthersTotal long-term liabilities
Total liabilities

3,838,750
21,566
7,339
563,487
4,431,143
27,590,513

502,806
28,724
7,767
554,523
1,093,822
32,798,130

34,583
194
66
5,076
39,920248,563

Net assets (Note 12):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Common stock in treasury
Total shareholders’ equity

2,558,550
688,723
20,718,198(135,376)
23,830,095

2,558,550
688,723
23,717,113(135,373)
26,829,013

23,0506,205
186,650(1,220)214,686

15,62995,776(539,203)
63,167(364,629)

780(10,630)(369,650)(111,618)(491,119)141
863(4,858)569(3,285)1,220,043
24,685,509¥ 52,276,023

1,708,717
28,046,611¥ 60,844,741

10,991
222,392$ 470,955

Accumulated other comprehensive income:Net unrealized gain (loss) on other securities, net oftaxes (Note 20)
Deferred gain or loss on hedges, net of taxes (Note 21)
Translation adjustments
Retirement benefits liability adjustments (Note 11)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

The accompanying notes are an integral part of these statements.

3

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Operations
Years ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)(Note 6)
Operating revenues (Notes 24 and 25)
Operating expenses (Notes 24 and 25):
Cost of sales
Selling, general and administrative expenses
Operating income (loss)
Non-operating income (expenses):
Interest income (Note 24)
Interest expense (Note 24)
Equity in earnings (losses) of affiliates (Note 24)
Others, net (Note 13)
Net profit (loss) before income taxes
Income taxes (Note 15):
Current
RefundDeferred
Net profit (loss)¥ 80,346,673 ¥ 144,688,049$ 723,844

67,828,173
15,433,996
83,262,169(2,915,495)

118,847,293
21,870,919
140,718,213
3,969,836

611,065
139,045
750,110(26,266)

3,328(107,814)(469,893)(121,377)(695,756)(3,611,252)

3,085(98,223)
687,274(6,958)585,177
4,555,014

30(971)(4,233)(1,093)(6,268)(32,534)

165,802(278,892)(769,824)(882,913)(2,728,338)

983,705
150,836
1,134,542
3,420,471

1,494(2,513)(6,935)(7,954)(24,580)(361,987)¥ (2,366,350)

339,386¥ 3,081,085(3,261)$ (21,318)–

Net profit (loss) attributable to:Non-controlling interests
Owners of the Company

The accompanying notes are an integral part of these statements.

4

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
Years ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)(Note 6)
Net profit (loss)
Other comprehensive income:Net unrealized holding gain (loss) on other securities,
net of taxes
Deferred gain or loss on hedges, net of taxes
Translation adjustments
Retirement benefits liability adjustments, net of taxes
Share of other comprehensive income of companies
accounted for by the equity method
Total other comprehensive income (Note 16)
Comprehensive income
Comprehensive income attributable to:
Owners of the Company
Non-controlling interests¥ (2,728,338)¥ 3,420,471$ (24,580)

14,220106,407(145,550)
174,786(13,737)
7,301(53,771)(60,734)

128
959(1,311)
1,575(30,059)
119,804¥ (2,608,533)

72,996(47,944)¥ 3,372,526

(271)
1,079
$ (23,500)¥ (2,239,860)¥ (368,673)¥ 3,031,740¥ 340,786$ (20,179)$ (3,321)

The accompanying notes are an integral part of these statements.

5

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets

Balance at March 31, 2019
Cash dividends (Note 12)(¥65 per share)
Net income for the year
ended March 31, 2020
Purchase of common
stock in treasury(Thousands of yen)
Net unrealized
holding
gain (loss) on Deferred gainotheror loss
securities,
on hedges,
net of taxes
net of taxes(Note 20)
(Note 21)

Number ofshares ofcommonstock

Commonstock

CapitalsurplusRetainedearnings

Commonstock intreasury

12,775,000¥ 2,558,550¥ 688,723¥ 21,458,367¥ (135,155)

Total
net assets¥ (392,253)¥ (50,884)¥ 1,922,592¥ 26,051,302(822,339)

3,081,085

3,081,085(217)

12,775,000¥ 2,558,550¥ 688,723¥ 23,717,113¥ (135,373)(217)(18,515)

7,301

22,603(60,734)(213,875)(263,220)¥ 780¥ (10,630)¥ (369,650)¥ (111,618)¥ 1,708,717¥ 28,046,611(632,564)(632,564)(2,366,350)(2,366,350)(2)

OthersBalance at March 31, 2021

¥ (17,932)

Noncontrollinginterests(822,339)

OthersBalance at March 31, 2020
Cash dividends (Note 12)(¥50 per share)
Net loss for the year ended
March 31, 2021
Purchase of common
stock in treasury¥ 19,295

Translation
adjustments

Retirement
benefits
liability
adjustments(Note 11)

12,775,000¥ 2,558,550¥ 688,723¥ 20,718,198¥ (135,376)(2)
14,849106,407(169,553)

174,786(488,673)(362,183)¥ 15,629¥ 95,776¥ (539,203)¥ 63,167¥ 1,220,043¥ 24,685,509

Translation
adjustments

Retirement
benefits
liability
adjustments(Note 11)

Noncontrollinginterests

Total
net assets$ (3,330)$ (1,006)$ 15,394(Thousands of U.S. dollars) (Note 6)

Number ofshares ofcommonstock

Balance at March 31, 2020

12,775,000

Commonstock$ 23,050

Capitalsurplus$ 6,205

Cash dividends (Note 12)($0.45 per share)
Net loss for the year ended
March 31, 2021
Purchase of common
stock in treasury

Retainedearnings$ 213,668

Commonstock intreasury$ (1,220)$7$ (96)(5,699)(21,318)(21,318)(0)

12,775,000$ 23,050$ 6,205$ 252,672(5,699)OthersBalance at March 31, 2021

Net unrealized
holding
gain (loss) on Deferred gainotheror loss
securities,
on hedges,
net of taxes
net of taxes(Note 20)
(Note 21)$ 186,650$ (1,220)

(0)
134

959

(1,528)

1,575(4,402)(3,263)

$ 141

$ 863

$ (4,858)$ 569$ 10,991$ 222,392

The accompanying notes are an integral part of these statements.

6

JALUX Inc. and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
Years ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)(Note 6)
Operating activities
Net profit (loss) before income taxes
Depreciation and amortization
Increase (decrease) in provision for allowance for doubtful accounts
Decrease (increase) in asset for retirement benefits
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense
Exchange loss (gain), net
Equity in earnings (losses) of affiliates
Subsidy income
Loss (gain) on sales of, and loss on disposal of property and equipment
Impairment losses on fixed assets
Loss (gain) on sales of subsidiary securities (Note 23)
Loss (gain) on sales of affiliates securities
Loss (gain) on sales of investments in securities
Decrease (increase) in notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable
Decrease (increase) in advance payment
Increase (decrease) in advance received
Increase (decrease) in accrued expenses
Decrease (increase) in bad debts on receivables¥ (3,611,252)
987,778
9,725(24,541)(6,323)(101,211)
107,814(18,201)
469,893(956,819)
49,914
325,228––(99)
10,960,328
233,748(3,724,658)(891,503)
319,086(1,721,081)(3,657)484,476¥ 4,555,014
1,006,851(21,274)(26,434)
9,749(30,093)
98,223
21,333(687,274)–
26,29380,82232,191
48,601(3,360)(259,272)(1,863,574)
2,159,747(398,928)(79,327)(1,079,097)
3,513(567,720)$ (32,534)

Income taxes refund (paid)

2,888,643
152,783(104,017)
956,819(68,561)

3,025,982
408,885(99,284)–(1,847,106)

26,024
1,376
(937)
8,620
(618)

Net cash provided by (used in) operating activities

3,825,667

1,488,476

34,465(425,089)(1,956,365)

388(192,918)82(50,310)
99
–
–

6,450
(321,119)580(216,673)
17,437(33,000)
462,081(3,830)3(1,738)
1
(453)
1
–
–

–
(2,030)21,343(125,290)
195,828(229,414)–
13,612(437,053)
52,270

Others, net
SubtotalInterest and dividends received
Interest paid
Subsidy received

8,899
88
(221)
(57)
(912)
971
(164)
4,233
(8,620)
450
2,930
–
–
(1)
98,742
2,106(33,555)(8,032)
2,875(15,505)
(33)
4,365

Investing activities
Purchases of property and equipment
Proceeds from sales of property and equipment
Purchases of intangible assets
Proceeds from sales of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Purchases of affiliates securities
Proceeds from sales of affiliates securities
Payments from changes in ownership interests in subsidiaries that result inchange in scope of consolidation (Note 23)
Payments of long-term loans receivableCollection of long-term loans
Increase in long-term guarantee deposit
Decrease in long-term guarantee deposit

–
(18)
192
(1,129)1,764

7

Others, net(14,386)(103,163)(130)

Net cash provided by (used in) investing activities
Financing activities(592,282)(2,744,356)(5,336)(5,223,070)
998,029
4,780,000(824,588)–(632,823)–(14,586)

428,230
2,999,791–(876,537)
54,106(821,984)(340,000)(25,067)(47,055)
8,991
43,063(7,429)–(5,701)–(131)(917,039)(25,133)

1,418,538(34,279)(8,262)

2,291,212
6,171,679¥ 8,462,892

128,378
6,043,301¥ 6,171,679

20,64255,601$ 76,242

Increase (decrease) in short-term borrowings, net
Increase (decrease) in commercial papers, net
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from share issuance to non-controlling shareholders
Dividends paid to stockholders
Dividends paid to minority stockholders
Others, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year (Note 23)(226)

The accompanying notes are an integral part of these statements.

8

JALUX Inc. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
March 31, 2021

1.

Summary of Significant Accounting Policiesa.

Basis of preparation
JALUX Inc. (the “Company”) and its consolidated domestic subsidiaries maintain theiraccounting records and prepare their financial statements in accordance with accounting
principles generally accepted in Japan, which are different in certain respects from theapplication and disclosure requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been compiled from theconsolidated financial statements filed with the Financial Services Agency as requiredby the Financial Instruments and Exchange Law of Japan, and certain modifications andinclusion of certain additional financial information are made for the convenience ofreaders outside Japan.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts of lessthan one thousand yen have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements (both in yen and U.S. dollars) do notnecessarily match with the sum of the individual amounts.

b.

Principles of consolidation and accounting for investments in unconsolidated subsidiaries
and affiliates
The consolidated financial statements include the accounts of the Company andsignificant companies controlled directly or indirectly by the Company. Companies overwhich the Company exercises significant influence in terms of their operating andfinancial policies have been included in the consolidated financial statements on an
equity basis.
The balance sheet date of 13 of the consolidated subsidiaries is December 31. Any
significant differences in intercompany accounts and transactions arising from intervening
intercompany transactions during the period from January 1 to March 31 have beenadjusted, if necessary, for the corresponding years.
All significant intercompany accounts and transactions and unrealized gain or loss onintercompany accounts and transactions have been eliminated.

c.

Securities
Securities except for investments in unconsolidated subsidiaries and affiliates areclassified as trading securities, held-to-maturity securities or other securities. Trading
securities are carried at fair value. Held-to-maturity securities are carried at amortizedcost. Marketable securities classified as other securities are carried at fair value with any
unrealized gain or loss reported as a separate component of net assets, net of taxes. Nonmarketable securities classified as other securities are carried at cost. Cost of securities
sold is determined principally by the gross average method.
9

1.

Summary of Significant Accounting Policies (continued)d.

Derivatives
Derivatives are stated at fair value.
Gain or loss on derivatives designated as hedging instruments is deferred until the gainor loss on the underlying hedged items is recognized. Foreign receivables and payables
are translated at the applicable forward foreign exchange rates if certain conditions are
met. In addition, the related interest differential paid or received under interest rate swaps
utilized as hedging instruments is recognized over the terms of the swap agreements as an
adjustment of interest expense on the hedged items if certain conditions are met.

e.

Inventories
Inventories are stated at the lower of cost or net selling value, cost being determined asfollows:
Merchandise:
The Company
Subsidiaries––

Real estate held for salef.

by the moving average method
principally by the weighted average method– by the specific identification method
Real estates under lease are depreciated by applying themethod of tangible fixed assets.

Property and equipment
For the Company and the domestic consolidated subsidiaries, depreciation of the shops
at airports and the buildings for rent is computed principally by the straight-line methodand depreciation of other property and equipment is computed principally by the
declining-balance method. The foreign consolidated subsidiaries principally adopt thestraight-line method. The estimated useful lives of the assets are as follows:
Buildings and structures: 8 to 47 years
Machinery and vehicles: 4 to 10 yearsg.

Software
Computer software intended for internal use is amortized over 5 years by the straightline method based on its estimated useful life.

h.

Leased assets
Leased assets arising from transactions under finance lease agreements which do nottransfer the ownership to the lessee are depreciated to residual value of zero by thestraight-line method over the terms of the agreements.

10

1.

Summary of Significant Accounting Policies (continued)i.

Allowance for doubtful accounts
The allowance for doubtful accounts on specific receivables is provided based on theestimate of the unrecoverable amounts. The allowance for doubtful accounts on otherreceivables is provided based on the historical rate of losses on receivables.

j.

Retirement benefits
The retirement benefit obligation for employees is attributed to each period by thebenefit formula method over the estimated years of service of the eligible employees.
Actuarial gains and losses are amortized by the straight-line method beginning thefollowing fiscal year over a period of 5 years.
Certain consolidated subsidiaries have adopted the simplified method in the calculationof their retirement benefit obligation and retirement benefit expense.

k.

Cash equivalents
The Company and its consolidated subsidiaries define cash equivalents as highly liquid,
short-term investments with an original maturity of three months or less.

l.

Income tax
The provision for income taxes is based on income for financial statement purposes.
Income taxes comprise corporation tax, enterprise tax and prefectural and municipal
inhabitants’ taxes. The assets and liabilities approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes.

11

2.

Significant Accounting Estimatesa. Recoverability of deferred tax assets① The amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Deferred tax assets¥709,001 thousand ($6,387 thousand)② Information that contributes to understanding the details of the significant accounting
estimates for the identified items
JALUX Airport Inc., which is included in the Retail business segment, has tax loss
carryforwards which is assessed to be recoverable within the expiration period based on
business plans of JALUX Airport Inc. As a result, deferred tax assets related to the tax loss
carryforwards were recorded.
A deferred tax asset is recognized for the carryforward of unused tax losses and deductible
temporary differences to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences can be utilized.
Business plans used to assess the recoverability of JALUX Airport Inc.’s deferred tax assets
were considered with the increase in domestic and international passenger numbers due tocontainment of COVID-19 as the main assumption.
Regarding impacts on business environment of the Company and its consolidated
subsidiaries (the “Group”) due to the spread of COVID-19, the number of domestic
passengers is assumed to recover from the second quarter of the following fiscal year, while
continuing to be affected by COVID-19 for the full fiscal year.
On the other hand, the number of international passengers is assumed to be gradually
recovering from the second half of the following fiscal year, though the environment willremain severe.
There is high uncertainty on these major assumptions due to the trend of spread of COVID19 and possibility of a significant impact on future taxable income estimates.

12

2.

Significant Accounting Estimates (continued)

b. Evaluation of inventories① The amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Cost of sales ¥477,623 thousand ($4,303 thousand)② Information that contributes to understanding the details of the significant accounting
estimates for the identified items
JALUX AMERICAS, Inc., which is included in the Aviation & airport business segment,
has the inventories of aircraft parts that have been purchased more than two years ago, forwhich the net selling value has been re-evaluated . As a result, the net selling value became
lower than the carrying value, and a loss on valuation of inventories was recorded.
The carrying value of the inventories after the re-evaluation is ¥110,357 thousand ($994
thousand).
The valuation method for inventories of JALUX AMERICAS, Inc. is mainly the cost method
based on the specific identification method (balance sheet value is calculated by the methodof devaluing carrying value based on the decline in profitability).
In evaluating the recoverable value, the decline in profitability of products is examined basedon the net selling value.
The calculation of the net selling value of the inventories was considered with pasttransaction records and the latest prices estimated by external institutions as the main
assumptions.
There is high uncertainty on these assumptions due to the actual demand or worsening market
conditions in the future and possibility of a significant impact on the valuation of inventories.

13

2.

Significant Accounting Estimates (continued)

c. Necessity of recognizing impairment losses on fixed assets(1) Airport shops① The amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Impairment losses on fixed assets¥32,986 thousand ($297 thousand)② Information that contributes to understanding the details of the significant accounting
estimates for the identified items
Regarding the airport shop business, which is included in the Retail business segment, due
to the continuous operating losses at some airports, the Company determined that there wereindications of impairment and reviewed the necessity of recognizing impairment losses.
As a result of the review, for some airports, it was determined that the undiscounted future
cash flows would be less than the carrying value of fixed assets of ¥32,986 thousand ($297
thousand) (property and equipment: ¥32,984 thousand ($297 thousand); intangible assets: ¥1
thousand ($0 thousand)); therefore, impairment losses were recorded.
The carrying value of fixed assets for the airport shop business after recording the impairment
losses is ¥843,046 thousand ($7,595 thousand) (property and equipment: ¥840,298 thousand($7,570 thousand); intangible assets: ¥2,748 thousand ($25 thousand)).
The Group bases its grouping for assessing the impairment losses on fixed assets on thesmallest identifiable groups of assets which generate cash inflows and which are largely
independent of the cash inflows from other assets or groups of assets.
The airport shop business is categorized based on the airport as a basic unit.
If there is any indication of impairment, the Company determines the necessity ofrecognizing impairment losses by comparing the total undiscounted future cash flows fromthe asset groups with their carrying value.
As a result of the determination, if the total amount of undiscounted future cash flows is lessthan the carrying value and it is necessary to recognize impairment losses, the carrying value
is reduced to the recoverable value (the higher of the net selling price and its value in use).
At the same time, the reduction of carrying value is recognized as impairment losses.
Estimates of future cash flows for the airport shop business are based on future businessplans and considered with the increase in domestic and international passenger numbers due
to containment of COVID-19 as the main assumption.
Regarding impacts on the Group's business environment due to the spread of COVID-19, thenumber of domestic passengers is assumed to recover from the second quarter of thefollowing fiscal year, while continuing to be affected by COVID-19 for the full fiscal year.
On the other hand, the number of international passengers is assumed to be gradually
recovering from the second half of the following fiscal year, though the environment willremain severe.
There is high uncertainty on these major assumptions due to the trend of spread of COVID19 and possibility of a significant impact on future cash flow estimates.

14

2.

Significant Accounting Estimates (continued)(2) The overseas serviced apartment① The amount recorded in the consolidated financial statements for the current consolidated
fiscal year
Impairment losses on fixed assets-② Information that contributes to understanding the details of the significant accounting
estimates for the identified items
Regarding the overseas serviced apartment, which is included in the Life service businesssegment, due to the continuous operating losses, the Company determined that there wereindications of impairment and reviewed the necessity of recognizing impairment losses.
As a result of the review, it was determined that the undiscounted future cash flows would
be higher than the carrying value of fixed assets of ¥1,084,129 thousand ($9,767 thousand)(property and equipment: ¥1,084,129 thousand ($9,767 thousand)); therefore, no impairment
loss was recorded.
The Group bases its grouping for assessing the impairment losses on fixed assets on thesmallest identifiable groups of assets which generate cash inflows and which are largely
independent of the cash inflows from other assets or groups of assets.
The overseas serviced apartment business is categorized based on the business as a basic unit.
If there is any indication of impairment, the Company determines the necessity ofrecognizing impairment losses by comparing the total undiscounted future cash flows fromthe asset group with its carrying value.
As a result of the determination, if the total amount of undiscounted future cash flows is lessthan the carrying value and it is necessary to recognize impairment losses, the carrying value
is reduced to the recoverable value (the higher of the net selling price and its value in use).
At the same time, the reduction of carrying value is recognized as impairment losses.
Estimates of future cash flows for the overseas serviced apartment business are based on
future business plans and considered with the future operation rate (occupancy rate) as themain assumption.
There is high uncertainty on these major assumptions due to the cancellation, trends ofcompetitors, striking deterioration of market environment, etc. and possibility of a significant
impact on future cash flow estimates.

15

3.

Unapplied Accounting Standards(Standards and guidance not yet adopted)
The following standard and guidance were issued but not yet adopted.
- “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31,
2020)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ
Guidance No. 30, March 26, 2021)(1) Overview
The above standard and guidance provide comprehensive principles for revenue
recognition.
(2) Effective date
They are effective from the beginning of the fiscal year ending March 31, 2022.
(3) Effects of the application of the standard and guidance
Regarding the application of “Accounting Standard for Revenue Recognition”, etc., inreference to transitional measures stated in the proviso to Paragraph 84 of the AccountingStandard for Revenue Recognition, retained earnings at the beginning of the fiscal year
ending March 31, 2022 shall be adjusted by cumulative impact when the new accounting
policy shall be applied before the beginning of the fiscal year. The effects of these newstandard and guidance on retained earnings at the beginning of the fiscal year are
immaterial.
4.

Changes in Presentation Method(Adoption of “Accounting Standard for Disclosure of Accounting Estimates”)
The Company and its subsidiaries adopted ASBJ Statement No. 31 “Accounting Standard
for Disclosure of Accounting Estimates” (March 31, 2020) to the consolidated financial
statements for the current consolidated fiscal year, and therefore significant accounting
estimates are disclosed in the notes to the consolidated financial statements.
The notes do not include information for the prior consolidated fiscal year in accordance withthe transitional provision set out in Paragraph 11 of the Accounting Standard for Disclosureof Accounting Estimates.
5.

Additional Information(Accounting procedures associated with the consolidated taxation system)
The Company and its certain domestic consolidated subsidiaries have applied for the
consolidated taxation system approval during the current consolidated fiscal year and thesystem will be adopted from the following consolidated fiscal year. Therefore, accounting
procedures in the current consolidated fiscal year are based on the application of the system
in accordance with “Practical Solution on Tentative Treatment of Tax Effect Accounting
Under Consolidated Taxation System (Part 1)” (ASBJ - PITF No. 5, January 16, 2015) and“Practical Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated
Taxation System (Part 2)” (ASBJ - PITF No. 7, January 16, 2015).

16

6.

U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenience of the reader. The rate of¥111.00 = $1.00, the approximate exchange rate prevailing on March 31, 2021, has beenused. The inclusion of such amounts is not intended to imply that yen has been or could bereadily converted, realized or settled in U.S. dollars at that or any other rate.
7.

Inventories

Inventories at March 31, 2021 and 2020 were as follows:
March 31,
2021
2020
(Thousands of yen)
Merchandise and finished products
Real estate held for sale
Raw materials and supplies¥ 15,161,964 ¥ 15,590,646
416,085
268,468
49,24762,321¥ 15,627,297 ¥ 15,921,436

2021(Thousands of
U.S. dollars)$ 136,594
3,749
444$ 140,786

Revaluation loss included in “Cost of sales” amounted to ¥668,944 thousand ($6,027 thousand),“Others, net” in “Non-operating income (expenses)” amounted to ¥26,960 thousand ($243
thousand) and “Cost of sales” amounted to ¥46,644 thousand for the years ended March 31,
2021 and 2020.
8.

Property and Equipment

The following table sets forth the acquisition costs and related accumulated depreciation ofcertain property and equipment at March 31, 2021 and 2020:
March 31,2020
2021
(Thousands of yen)
Buildings and structures
Machinery and vehicles
Others
Accumulated depreciation

9.

¥ 3,580,681
2,181,202
1,611,514
7,373,398(3,749,035)¥ 3,624,363¥ 3,489,430
2,177,701
1,896,565
7,563,698(3,212,528)¥ 4,351,170

2021(Thousands of
U.S. dollars)$ 32,258
19,65014,51866,427(33,775)$ 32,652

Investments and Other Assets

Investments in unconsolidated subsidiaries and affiliates included in “Investment securities”
as of March 31, 2021 and 2020 amounted to ¥1,932,507 thousand ($17,410 thousand) and¥2,486,974 thousand, respectively.

17

10.

Short-Term Borrowings and Long-Term Debt

Short-term borrowings and long-term debt at March 31, 2021 and 2020 consisted of thefollowing:
March 31,
2021
2020
(Thousands of yen)
Short-term borrowings:
Short-term borrowings without
collateral, with weighted-averageinterest rate of 1.14%
Commercial papers
Long-term debt:
Long-term debt without collateral, due
2021 to 2026, with weighted-averageinterest rate of 0.79%
Lease obligations
Less current portion

2021(Thousands of
U.S. dollars)¥2,031,226¥7,367,908
6,997,817
5,999,788¥ 9,029,044 ¥ 13,367,697$18,299
63,043$ 81,343¥4,857,287
18,326
4,875,613(1,028,346)¥ 3,847,267$43,759
165
43,924(9,264)$ 34,660¥931,763
30,333962,096(443,486)¥ 518,610

The aggregate annual maturities of long-term debt subsequent to March 31, 2021 aresummarized as follows:Year ending March 31,
2022
2023
2024
2025
2026

(Thousands ofyen)(Thousands of
U.S. dollars)¥ 1,018,537
864,687
1,774,062
800,000
400,000¥ 4,857,287$ 9,176
7,790
15,9837,207
3,604$ 43,759

The aggregate annual maturities of lease obligations subsequent to March 31, 2021 aresummarized as follows:Year ending March 31,
2022
2023
2024
2025

(Thousands ofyen)(Thousands of
U.S. dollars)¥ 9,808
5,918
2,081
517
¥ 18,326

$ 88
53
19
5
$ 165

18

10.

Short-Term Borrowings and Long-Term Debt(continued)

The Company has entered into loan commitment agreements with banks in order to source
funds for its smooth operations.
The outstanding balances of loan commitments as of March 31, 2021 and 2020 were as
follows:
March 31,
2021
2020
(Thousands of yen)
Total commitment available
Less amount utilized
Balance available¥8,700,000–¥8,700,000¥6,000,000–¥6,000,000

2021(Thousands of
U.S. dollars)$78,378–$78,37819

11.

Retirement Benefit Plan

The Company and certain consolidated subsidiaries have either funded or unfunded defined
benefit plans and defined contribution plans. The defined benefit plans cover substantiallyall employees who are entitled to lump-sum or annuity payments, the amounts of which are
determined by reference to their basic rates of pay, length of service, and the conditions underwhich termination occur. Certain consolidated subsidiaries have adopted the simplified
method in the calculation of their retirement benefit obligation.
Plan excluding that calculated by the simplified method
The changes in the retirement benefit obligation during the years ended March 31, 2021 and2020 were as follows:
March 31,
2021
2020
(Thousands of yen)
Balance at the beginning of the year
Service cost
Interest cost
Adjustment for actuarial assumptions
Retirement benefit paid
Balance at the end of the year

¥ 2,532,092
127,854
20,763
5,439(216,832)¥ 2,469,316¥ 2,484,034
123,333
20,36916,018(111,663)¥ 2,532,092

2021(Thousands of
U.S. dollars)$ 22,812
1,152
187
49
(1,953)$ 22,246

The changes in plan assets during the years ended March 31, 2021 and 2020 were as follows:
March 31,
2021
2020
(Thousands of yen)
Balance at the beginning of the year
Expected return on plan assets
Adjustment for actuarial assumptions
Contributions by the Company
Retirement benefit paid
Balance at the end of the year

¥2,533,822
63,345
199,457
109,813(216,832)¥2,689,606¥2,559,937
63,998(84,588)
106,138(111,663)¥2,533,822

2021(Thousands of
U.S. dollars)$22,827
571
1,797
989
(1,953)$24,23120

11.

Retirement Benefit Plan (continued)

The following table sets forth the funded status of the plans and the amounts recognized in
the consolidated balance sheet as of March 31, 2021 and 2020 for the Company’s defined
benefit plans:
March 31,
2021
2020
(Thousands of yen)
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net asset for retirement benefits in thebalance sheet
Liability for retirement benefits
Asset for retirement benefits
Net asset for retirement benefits in thebalance sheet

2021(Thousands of
U.S. dollars)¥ 2,469,316(2,689,606)(220,290)–¥ 2,532,092(2,533,822)(1,730)–$ 22,246(24,231)(1,985)–(220,290)–(220,290)(1,730)–(1,730)(1,985)–(1,985)¥ (220,290)¥ (1,730)$ (1,985)

The components of retirement benefit expenses for the years ended March 31, 2021 and 2020
were as follows:
March 31,
2021
2020
(Thousands of yen)
Service cost
Interest cost
Expected return on plan assets
Amortization of adjustment for actuarial
assumptions
Retirement benefit expense

2021(Thousands of
U.S. dollars)¥ 127,854
20,763(63,345)¥ 123,333
20,369(63,998)$ 1,152187(571)

57,907¥ 143,179

13,068¥ 92,773

522$ 1,290

The components of retirement benefits liability adjustments included in other comprehensive
income (before tax effect) for the years ended March 31, 2021 and 2020 were as follows:
March 31,
2021
2020
(Thousands of yen)
Adjustment for actuarial assumptions
Total¥ (251,926)¥ (251,926)¥ 87,538¥ 87,538

2021(Thousands of
U.S. dollars)$ (2,270)$ (2,270)

21

11.

Retirement Benefit Plan (continued)

The components of retirement benefits liability adjustments included in accumulated othercomprehensive income (before tax effect) for the years ended March 31, 2021 and 2020 wereas follows:
March 31,
2021
2020
(Thousands of yen)
Unrecognized adjustment for actuarial
assumptions
Total¥ (91,045)¥ (91,045)¥ 160,880¥ 160,880

2021(Thousands of
U.S. dollars)$ (820)$ (820)The fair values of plan assets, by major category, as a percentage of total plan assets as ofMarch 31, 2021 and 2020 were as follows:
March 31,
Bonds
StocksGeneral account assets
Others
Total

2021

2020

20.4%
25.3
52.2
2.1
100.0%

21.2%
19.8
57.0
2.0
100.0%The expected return on assets has been estimated based on the anticipated allocation to each
asset class and the expected long-term returns on assets held in each category.
The assumptions used in accounting for the above plans were as follows:
March 31,
Discount rate
Expected rates of return on plan assets
Salary increase rate

2021

2020

0.8%
2.5%
1.0%～4.5%

0.8%
2.5%
1.0%～4.7%

22

11.

Retirement Benefit Plan (continued)

Plan calculated by the simplified method
The changes in the retirement benefit obligation for consolidated subsidiaries adopting thesimplified method during the years ended March 31, 2021 and 2020 were as follows:
March 31,2020
2021
(Thousands of yen)
Balance at the beginning of the year
Retirement benefit expense
Retirement benefit paid
Contribution to pension plans
Translation adjustment
Decrease resulting from change in scopeof consolidation
Balance at the end of the year

2021
(Thousands of
U.S. dollars)¥ 28,724
14,114(6,533)(13,920)(819)¥ 43,928
26,133(4,402)(12,140)
2,193

$ 259
127
(59)
(125)
(7)

–

(26,988)–¥ 21,566¥ 28,724$ 194

The following table sets forth the funded status of the plans and the amounts recognized in
the consolidated balance sheet as of March 31, 2021 and 2020 for consolidated subsidiaries
adopting the simplified method:
March 31,
2021
2020
(Thousands of yen)
Funded retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Net liability for retirement benefits in thebalance sheet
Liability for retirement benefits
Net liability for retirement benefits in thebalance sheet

2021(Thousands of
U.S. dollars)¥ 135,708(135,155)552
21,013¥ 131,922(125,065)
6,856
21,867$ 1,223(1,218)5
189

21,566
21,56628,72428,724194
194¥ 21,566¥ 28,724$ 194

Retirement benefit expenses for the simplified method of ¥14,114 thousand ($127 thousand)and ¥26,133 thousand were accounted for the years ended March 31, 2021 and 2020,
respectively.
Defined contribution plans
Contributions made to defined contribution plans for the years ended March 31, 2021 and2020 were ¥148,026 thousand ($1,334 thousand) and ¥145,711 thousand, respectively.

23

12.

Net Assets

Under Japanese laws and regulations, the entire amount of the issue price of shares is required
to be accounted for as common stock, although a company may, by resolution of its Boardof Directors, account for an amount not exceeding one-half of the issue price of the newshares as additional paid-in capital.
Under the Japanese Corporate Law, in cases where dividend distribution of surplus is made,the smaller of an amount equal to 10% of the dividend and excess, if any, of 25% of common
stock over the total of additional paid-in capital and legal earnings reserve must be set aside
as additional paid-in capital or legal earnings reserve. Additional paid-in capital is included
in capital surplus and legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets.
Legal earnings reserve and additional paid-in capital may be used to eliminate or reduce a
deficit or may be capitalized by a resolution of the shareholders’ meeting. All additional
paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends. The maximum
amount that the Company can distribute as dividends is calculated based on its
unconsolidated financial statements in accordance with Japanese laws and regulations.
The total number and periodic changes in the number of shares of stock in issue, and the total
number and periodic changes in the number of shares of common stock in treasury for theyears ended March 31, 2021 and 2020 were as follows:Year ended March 31, 2021
At
March 31,
2020
Number of shares of stock in issue:
Common stock
Number of shares of common stock
in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2021

12,775––

12,775

131

0

–

131

The increase in common stock in treasury of 0 thousand shares resulted from the Company’spurchase of 0 thousand odd-lot shares of less than one unit at the request of the stockholders.

24

12.

Net Assets (continued)
Year ended March 31, 2020
At
March 31,
2019

Number of shares of stock in issue:
Common stock
Number of shares of common stock
in treasury:
Common stock

Increase
Decrease(Thousands of shares)

At
March 31,2020

12,775––

12,775

131

0

–

131

The increase in common stock in treasury of 0 thousand shares resulted from the Company’spurchase of 0 thousand odd-lot shares of less than one unit at the request of the stockholders.
Dividends
Dividends paid
Resolution

Type ofsharesGeneral meeting of Common
stockholders held stockon June 16, 202013.

Total dividends(Thousands of (Thousands ofyen)
U.S. dollars)¥632,564$5,699Cut-off
date

Dividends per share(Yen) (U.S. dollars)
¥50.0

$0.45

Effective
date

March 31, June 17,
2020
2020

Other Income (Expenses)

The components of “Others, net” in “Non-operating income (expenses)” in the period ended
March 31, 2021 and 2020 were as follows:
Years ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Dividends received
Exchange gain (loss), net
Gain on sales of property and equipment
Gain on sales of subsidiary securities
Loss on sales of subsidiary securities
Loss on sales of affiliates securities
Gain on sales of investments in securities
Subsidy income
Commission paid
Loss on sales and disposal of property and equipment
Impairment losses on fixed assets
Loss due to temporary store closures
Others, net¥ 97,882(17,381)
–
–
–
–

99
956,819(22,166)(49,914)(325,228)(726,376)(35,112)¥ (121,377)¥ 27,007
64,000807
9,630(41,822)(48,601)
3,360

$ 882
(157)

–

8,620

(12,559)(27,100)(80,822)

(200)
(450)
(2,930)(6,544)(316)$ (1,093)–

99,141¥ (6,958)

–
–
–
–

1

25

14.

Impairment of Fixed Assets

For the year ended March 31, 2021, the Company and a consolidated subsidiary recognizedimpairment losses on fixed assets of ¥325,228 thousand ($2,930 thousand), and for the year
ended March 31, 2020 the Company recognized impairment losses on fixed asset of ¥80,822
thousand, which consisted of the following:
Location

Use

Classification

Obihiro-shi, Hokkaido
Kushiro-shi, Hokkaido
Hakodate-shi, Hokkaido
Matsuyama-shi, Ehime
Omura-shi, Nagasaki
Chiyoda-ku, Tokyo

Airport shops
Airport shops
Airport shops
Airport shops
Airport shops
Souvenir andsweets shops
Business assets

Furniture and otherFurniture and other
Buildings and other
Buildings and other
Buildings and otherFurniture and other

Singapore
Minato-ku, Tokyo

Business assets

Izumisano-shi, Osaka
Airport shops
U.S.A. (Santa Anita)
Business assets
Omitama-shi, Ibaraki
Airport shops
U.S.A. (Las Vegas)
Business assets
Kitakyusyu-shi, Fukuoka Airport shops
Izumo-shi, Shimane
Airport shops

Machinery andvehiclesSoftware, Buildings
and other
Buildings and other
Buildings
Buildings
Buildings
Buildings and otherFurniture

Years ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)–¥ 21,156––
19,305––
14,319––13,446
–
–
8,754
–
–

3,838

–

¥ 209,694–$ 1,889

76,32531,859
5,502
941
718
110
74

–
–
–
–
–
–
–

688
287
50
8
6
1
1

The Company and its consolidated subsidiaries base their grouping for assessing theimpairment losses on fixed assets on the smallest identifiable groups of assets which generatecash inflows and which are largely independent of the cash inflows from other assets orgroups of assets.
Impairment losses on business assets including airport shops and souvenir and sweets shops
were recognized due to the significant decrease in expected future cash flows on the strategy
plan for the years ended March 31, 2021 and 2020.
The recoverable amount of each group of assets was measured by their usage value or net
realizable value and the non-recoverable amount was estimated by deducting future cash
flows for the years ended March 31, 2021 and 2020. Net realizable value was estimated by
the expected sales amount.

26

15.

Income Taxes

The significant components of deferred tax assets and liabilities at March 31, 2021 and 2020
were as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Deferred tax assets:
Accrued bonuses
Allowance for doubtful accounts
Liability for retirement benefits
Impairment losses on fixed assets
Accrued enterprise tax
Elimination of unrecognized gain on
intercompany accounts and transactions
Loss on revaluation of inventories
Loss on revaluation of investments insecurities
Tax loss carryforwards(*)
Deferred gain or loss on hedges

Asset retirement obligation
Others¥ 103,929
6,642
3,063
58,822
9,638¥ 224,127
4,204
53,57430,84619,156

$ 936
60
28
530
87

54,24264,80686,08914,828

489
584

106
1,192,440

1
10,74336,959171,256
1,701,908

1,637
355,976
4,691
38,110153,606
986,849

333
1,543
15,333––

Valuation allowance for tax loss
carryforwards(*)
Valuation allowance for deductible
temporary differences
Valuation allowance
Total deferred tax assets(201,328)(160,820)(1,814)(65,694)(267,023)
1,434,884(24,244)(185,064)
801,784(592)(2,406)
12,927

Deferred tax liabilities:
Accumulated retained earnings ofconsolidated subsidiaries
Asset for retirement benefits
Cost of asset retirement obligation
Deferred gain or loss on hedges
OthersTotal deferred tax liabilities
Net deferred tax assets(121,270)(67,452)(15,423)(42,269)(87,037)(333,454)¥ 1,101,430(201,396)(49,791)(20,363)(1,093)
(608)
(139)
(381)
(784)
(3,004)$ 9,923–(66,342)(337,893)¥ 463,890

27

15.

Income Taxes (continued)(*)Tax loss carryforwards and its deferred tax assets by expiration period(March 31 ,2021)(Thousands of yen)
2022
2023
2024
2025
2026
2027 andTotal
beyondTaxlosscarryforward
s (a)
796
14,43023,362
36,245
23,154 1,094,452 1,192,440
Valuation
allowance(796) (14,430) (23,362) (36,245) (23,154) (103,340)(201,328)
Net deferred
tax assets
–
–
–
–
–
991,111 (b)991,111(March 31, 2021)
2022
Tax
loss
carryforwards (a)Valuation
allowance
Net deferred
tax assets

2023

2024

(Thousands of U.S. dollars)
2026
2027 andTotal
beyond

2025

7

130

210

327

209

9,860

10,743

(7)

(130)

(210)

(327)

(209)

(931)

(1,814)

–

–

–

–

–

8,929

(b)8,929(a) Tax loss carryforwards shown in the above table is after multiplying the statutory tax rate.
(b) Deferred tax assets amounting to ¥991,111 thousand ($8,929 thousand) were recognized
for tax loss carryforwards of ¥1,192,440 thousand ($10,743 thousand) (amount multipliedby the statutory tax rate). The deferred tax assets amounting to ¥991,111 thousand ($8,929
thousand) were recognized for a part of tax loss carryforwards of ¥741,160 thousand ($6,677
thousand) by the consolidated subsidiary JALUX Airport Inc. and all of tax loss
carryforwards of ¥29,858 thousand ($269 thousand) by the consolidated subsidiary JALDFS Co., Ltd., ¥81,727 thousand ($736 thousand) by the consolidated subsidiary JAPANAirport Delica Inc., ¥122,260 thousand ($1,101 thousand) by the consolidated subsidiary
JALUX AMERICAS, Inc., ¥48,264 thousand ($435 thousand) by the consolidated
subsidiary JALUX SINGAPORE PTE. LTD..
The tax loss carryforwards by JALUX Airport Inc. for which the deferred tax asset wasrecognized arose in relation to loss before income taxes of ¥410,060 thousand ($3,694
thousand) and ¥1,692,397 thousand ($15,247 thousand) recorded for the year ended March
31, 2020 and 2021. No valuation allowance is recognized for the tax loss carryforwards since
the amount was determined to be recoverable based on the expected future taxable income.
The tax loss carryforwards by JAL-DFS Co., Ltd. for which the deferred tax asset wasrecognized arose in relation to loss before income taxes of ¥808,090 thousand ($7,280
thousand) recorded for the year ended March 31, 2021. No valuation allowance is recognized
for the tax loss carryforwards since the amount was determined to be recoverable based on
the expected future taxable income.
The tax loss carryforwards by JAPAN Airport Delica Inc. for which the deferred tax asset
was recognized arose in relation to loss before income taxes of ¥338,621 thousand ($3,051
thousand) recorded for the year ended March 31, 2021. No valuation allowance is recognized
for the tax loss carryforwards since the amount was determined to be recoverable based on
the expected future taxable income.
28

15.

Income Taxes (continued)

The tax loss carryforwards by JALUX AMERICAS, Inc. for which the deferred tax asset
was recognized arose in relation to loss before income taxes of ¥768,424 thousand ($6,923
thousand) recorded for the year ended December 31, 2020. No valuation allowance isrecognized for the tax loss carryforwards since the amount was determined to be recoverable
based on the expected future taxable income.
The tax loss carryforwards by JALUX SINGAPORE PTE. LTD. for which the deferred tax
asset was recognized arose in relation to depreciation based on local corporation tax law
recorded for the year ended December 31, 2019 and 2018. No valuation allowance isrecognized for the tax loss carryforwards since the amount was determined to be recoverable
based on the expected future taxable income.
(March 31, 2020)
2021
Tax
loss
carryforwards (c)Valuation
allowance
Net deferred
tax assets(Thousands of yen)2026 andTotal
beyond

2022

2023

2024

2025

839

15,22529,17538,241

24,429248,064

355,976(839)(15,225)(29,175)(38,241)(24,429)(52,909)(160,820)

–

–

–

–

–

195,155(d)195,155(c) Tax loss carryforwards shown in the above table is after multiplying the statutory tax rate.
(d) Deferred tax assets amounting to ¥195,155 thousand were recognized for tax loss
carryforwards of ¥355,976 thousand (amount multiplied by the statutory tax rate). The
deferred tax assets amounting to ¥195,155 thousand were recognized for tax loss
carryforwards of ¥144,074 thousand by the consolidated subsidiary JALUX Airport Inc. and¥51,080 thousand by the consolidated subsidiary JALUX SINGAPORE PTE. LTD.. The tax
loss carryforwards by JALUX Airport Inc. for which the deferred tax asset was recognizedarose in relation to loss before income taxes of ¥410,060 thousand recorded for the year
ended March 31, 2020. No valuation allowance is recognized for the tax loss carryforwards
since the amount was determined to be recoverable based on the expected future taxable
income. The tax loss carryforwards by JALUX SINGAPORE PTE. LTD. for which thedeferred tax asset was recognized arose in relation to depreciation based on local corporation
tax law recorded for the year ended December 31, 2019 and 2018. No valuation allowanceis recognized for the tax loss carryforwards since the amount was determined to be
recoverable based on the expected future taxable income.

29

15.

Income Taxes (continued)

The differences between the statutory tax rate and the effective tax rate for the years ended
March 31, 2021 and 2020 were as follows:
Years ended March 31,
2021
2020
Effective statutory tax rate
(Reconciliations)
Disallowed expenses, including entertainment
expenses
Inhabitants’ per capita taxes
Equity in earnings of affiliates
Different tax rates applied to consolidated
subsidiaries
Changes in valuation allowance
OthersActual tax rate

30.62%

This note has been omitted,
due to net loss before taxes
for the current consolidated
financial year.

0.92
0.42
(4.62)(1.31)(0.26)(0.86)
24.91%

30

16.

Other Comprehensive Income

The following table presents reclassification adjustments and tax effects allocated to eachcomponent of other comprehensive income for the years ended March 31, 2021 and 2020:
March 31,
2021
2020
(Thousands of yen)
Net unrealized holding gain (loss) on othersecurities:
Amount arising during the year
Reclassification adjustments for gains and losses
included in profit attributable to owners of thecompany
Amount before tax effectTax effectNet unrealized holding gain (loss) on othersecurities, net of taxes
Deferred gain or loss on hedges:
Amount arising during the year
Amount before tax effectTax effect
Deferred gain or loss on hedges, net of taxes
Translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses
included in profit attributable to owners of thecompany
Translation adjustments
Retirement benefit liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses
included in profit attributable to owners of thecompany
Amount before tax effectTax effect
Retirement benefits liability adjustments, net oftaxes
Share of other comprehensive income ofcompanies accounted for using the equity method:Amount arising during the year
Total other comprehensive income

2021(Thousands of
U.S. dollars)¥ 20,493¥ (15,826)

$ 185

–

(3,360)–20,493(6,273)
14,220(19,186)
5,448(13,737)

185
(57)
128

153,369
153,369(46,961)
106,407

10,524
10,524(3,222)
7,301

1,382
1,382
(423)
959

(145,550)(41,547)(1,311)–(12,224)–(145,550)(53,771)(1,311)

194,018(100,607)

1,748

57,907

13,068522

251,926(77,139)
174,786(87,538)
26,804(60,734)

2,270
(695)
1,575

(30,059)¥ 119,804

72,996¥ (47,944)(271)$ 1,07931

17.

LeasesAs lessee under financing leases
As the impact of financing leases is immaterial, the note is not required to be disclosed.
As lessee under operating leases
Future rental expenses under operating leases outstanding at March 31, 2021 and 2020 are
summarized as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 1,691,077
6,663,720¥ 8,354,797¥ 1,878,958
4,128,164¥ 6,007,123$ 15,235
60,034$ 75,268

As lessor under financing leases
As the impact of financing leases is immaterial, the note is not required to be disclosed.
As lessor under operating leases
Future rental revenues under operating leases outstanding at March 31, 2021 and 2020 are
summarized as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)Within 1 year
Over 1 year

¥ 1,377,563
6,170,189¥ 7,547,753¥ 1,345,643
3,046,739¥ 4,392,383$ 12,410
55,587$ 67,99832

18.

Amounts Per Share

Net income (loss) per share is computed based on the weighted average number of shares ofcommon stock outstanding during each year. Diluted net income per share is computed basedon the weighted average number of shares of common stock outstanding during each year
after giving effect to the potentially dilutive securities to be issued upon the exercise ofsubscription rights as stock options.

2021
Net income (loss) per share of common
stock:
Basic

Year ended March 31,
2020
2021
(Yen)
(U.S. dollars)¥ (187.16)¥ 243.69$ (1.686)

Diluted net income per share is not stated for 2020 because there were no potential shares ofcommon stock outstanding and for 2021 due to net loss.
The following table sets forth the basis of the computation of net income per share ofcommon stock for the years ended March 31, 2021 and 2020:
Year ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Net income (loss)¥ (2,366,350)
Net income (loss) available to stockholdersof shares of common stock¥ (2,366,350)¥ 3,081,085$ (21,318)¥ 3,081,085$ (21,318)

Year ended March 31,
2021
2020
(Thousands of shares)
Weighted-average number of shares ofcommon stock outstanding

12,643

12,643

Net assets per share are computed based on the number of shares of common stock
outstanding at each balance sheet date.
March 31,
2020

2021
(Yen)
¥ 1,855.93¥ 2,083.12

2021(U.S. dollars)$ 16.720

33

19.

Financial Instruments

Policy for financial instruments
The Company and its consolidated subsidiaries (the “Group”) manage temporary cash
surpluses mainly through short-term deposits. Furthermore, the Group raises short-term
capital through bank borrowings and the issuance of commercial papers.
Types of financial instruments and related risk
Notes and accounts receivable are exposed to credit risk in relation to customers. In addition,
the Company is exposed to foreign currency exchange risk arising from receivables
denominated in foreign currencies. In principle, the foreign currency exchange risks derivingfrom the trade receivables denominated in foreign currencies are hedged by forward foreignexchange contracts.
Marketable securities and investment securities are composed of stocks and investment in an
investment partnership. Those securities are exposed to market risk and a risk of fluctuationsin the amounts corresponding to equity of an investment partnership.
Long-term guarantee deposits are composed of mainly deposits for rental spaces of the
airport buildings. Those deposits are exposed to credit risk in relation to counterparties.
All notes and accounts payable have payment due dates within one year. Although theCompany is exposed to foreign currency exchange risk arising from those payables
denominated in foreign currencies, foreign exchange contracts are arranged to reduce therisk.
Short-term borrowings and commercial papers are raised mainly in connection with businessactivities, and long-term debt is taken out principally for the purpose of making capital
investments. Long-term debt with certain variable interest rates is exposed to interest rate
fluctuation risk.
Risk management for financial instrumentsa.

Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arisingfrom receivables and long-term guarantee deposit, each related division monitors credit
worthiness of its main customers periodically, and monitors due dates and outstandingbalances by individual customer. In addition, the Group is making efforts to identify
and mitigate risks of bad debts from customers who are having financial difficulties.
The Group believes that the credit risk of derivatives is insignificant as it enters into
derivative transactions only with financial institutions which have the high credit rating.

34

19.
b.

Financial Instruments (continued)
Monitoring of market risks (the risks arising from fluctuations in foreign exchange rates,interest rates and others)
For accounts receivable and payable denominated in foreign currencies, the Company
enters into forward foreign exchange contracts to hedge such risk.
For marketable securities and investment securities, the Group periodically reviews thefair values of such financial instruments and the financial position of the issuers. In
addition, the Group continuously evaluates whether securities should be maintained
taking into account their fair values and relationships with the issuers.
In conducting derivative transactions, the division in charge of each derivativetransaction follows the internal policies, which set forth the delegation of authority andmaximum upper limit on positions.

c.

Monitoring of liquidity risk (the risk that the Group may not be able to meet its
obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flowplans on a timely basis to manage liquidity risk.

35

19.

Financial Instruments (continued)

Estimated Fair Value of Financial Instruments
The carrying value of financial instruments and estimated fair value in the consolidatedbalance sheet as of March 31, 2021 and 2020 are shown in the following table. The following
table does not include financial instruments for which it is extremely difficult to determine
the fair value.
The fair value of financial instruments is based on their quoted market price, if available.
When there is no quoted market price available, fair value is reasonably estimated. Sincevarious assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value.

Carrying
value

March 31, 2021
Estimated
fair value
Difference(Thousands of yen)

AssetsCash and time deposits
Trade notes and accounts receivable
Accounts receivable - other
Investment securities
Total assets¥ 8,466,348
10,902,123
3,018,935
279,251¥ 22,666,658¥ 8,466,348
10,902,123
3,018,935
279,251¥ 22,666,658¥

Liabilities
Trade notes and accounts payable
Short-term borrowings (*1)
Commercial papers
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥ 6,862,235
2,031,226
6,997,817
2,949,903
4,857,287¥ 23,698,471¥ 135,089¥ 6,862,235
2,031,226
6,997,817
2,949,903
4,855,923¥ 23,697,107¥ 135,089

¥

–
–
–
–
–

¥

–
–
–
–
(1,364)¥ (1,364)¥–

March 31, 2021
Carrying
Estimatedvalue
fair value
Difference(Thousands of U.S. dollars)
AssetsCash and time deposits
Trade notes and accounts receivable
Accounts receivable - other
Investment securities
Total assets$ 76,273
98,217
27,1982,516$ 204,204$ 76,273
98,217
27,1982,516$ 204,204

Liabilities
Trade notes and accounts payable
Short-term borrowings (*1)
Commercial papers
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

$ 61,822
18,29963,043
26,57643,759$ 213,500$ 1,217$ 61,822
18,29963,043
26,57643,747$ 213,487$ 1,217

$

$

–
–
–
–
–

$

–
–
–
–
(12)
$ (12)
$ –
36

19.

Financial Instruments (continued)
March 31, 2020
Carrying
Estimatedvalue
fair value
Difference(Thousands of yen)

AssetsCash and time deposits
Trade notes and accounts receivable
Accounts receivable - other
Investment securities
Total assets¥ 6,175,441
22,106,818
2,733,013
262,364¥ 31,277,637¥ 6,175,441
22,106,818
2,733,013
262,364¥ 31,277,637¥

Liabilities
Trade notes and accounts payable
Short-term borrowings (*1)
Commercial papers
Accrued expenses
Long-term debt (*1)
Total liabilities
Derivatives (*2)

¥10,668,290 ¥10,668,290
7,367,908
7,367,908
5,999,788
5,999,788
4,670,758
4,670,758
931,763936,108¥ 29,638,509 ¥ 29,642,854¥ (13,097)¥ (13,097)

¥

¥

–
–
–
–
–

–
–
–
–
4,345
¥ 4,345¥–*1. Long-term debt includes the current portion of long-term debt.
*2. The value of assets and liabilities arising from derivatives is shown at net value, andwith the amount in parentheses representing net liability position.
Methods to determine the estimated fair value of financial instruments and other mattersrelated to securities and derivative transactionsa.

Cash and time deposits, trade notes and accounts receivable and other notes andaccounts receivable
Since these items are settled in a short period of time, their carrying value approximatesfair value.

b.

Investment securities
The fair value of stocks is based on quoted market prices. The fair value of investment
trusts and debt securities is based on either quoted market prices or prices provided by
the financial institutions trading in these securities.

c.

Trade notes and accounts payable, short-term borrowings, commercial papers andaccrued expenses
Since these items are settled in a short period of time, their carrying value approximatesfair value.

d.

Long-term debt
The fair value of long-term debt is based on the present value of the total of principal
and interest discounted by the interest rate to be applied if similar new debt agreements
were entered into.

37

19.
e.

Financial Instruments (continued)
Derivative transactions
Refer to Note 21 Derivative Transactions of the notes to the consolidated financial
statements.

Financial instruments for which it is extremely difficult to determine the fair value
March 31,
2021
2020
(Thousands of yen)
Unlisted stocks
Long-term guarantee deposit

Investment in an investment partnership¥ 2,339,472
2,233,883
95,885¥ 2,890,007
2,334,474–

2021(Thousands of
U.S. dollars)$ 21,076
20,125864

Because no quoted market price is available and it is extremely difficult to determine the fairvalue, the above financial instruments are not included in the above table.
Redemption schedule for receivables and marketable securities with maturities
March 31, 2021
Due after
Due after
Due inone yearfive years
one yearthroughthroughDue afteror less
five years
ten yearsten years(Thousands of yen)
Cash and time deposits
Trade notes and accounts
receivable
Accounts receivable - other
Investment securities withmaturities:
Bonds
OthersTotal¥ 8,466,348

¥ –

¥ –

¥

10,902,123
3,018,935

–
–

–
–

–
–

–
–
¥ 22,387,407

–
–
¥ –

–
–
¥ –

–
–
–

¥

–

38

19.

Financial Instruments (continued)

Due inone yearor less
Cash and time deposits
Trade notes and accounts
receivable
Accounts receivable - other
Investment securities withmaturities:
Bonds
OthersTotal

Due after
ten years$ 76,273$ –$ –98,217
27,198

–
–

–
–

–
–

–
–
$ 201,688

–
–
$ –

–
–
$ –

–
–
–

Due inone yearor less
Cash and time deposits
Trade notes and accounts
receivable
Accounts receivable - other
Investment securities withmaturities:
Bonds
OthersTotal

March 31, 2021
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of U.S. dollars)

March 31, 2020
Due after
Due after
one yearfive years
throughthroughfive years
ten years(Thousands of yen)

$

$

–

Due after
ten years¥ 6,175,441

¥ –

¥ –

¥

22,106,818
2,733,013

–
–

–
–

–
–

–
–
¥ 31,015,273

–
–
¥ –

–
–
¥ –

–
–
–

¥

–

39

20.

Securities

The components of unrealized gain or loss on marketable securities classified as othersecurities at March 31, 2021 and 2020 are summarized as follows:
March 31, 2021
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of yen)
Unrealized gain:
StocksBonds:
OthersOthers
Unrealized loss:
StocksBonds:
OthersOthersTotal¥ 275,635¥ 252,287¥ 23,348––
275,635––
252,287––
23,348¥ 3,615¥ 3,763¥ (147)––3,615¥ 279,251

–
–
3,763
¥ 256,050

–
–
(147)
¥ 23,200

March 31, 2021
Carrying
Acquisition
Unrealized
value
costs
gain (loss)(Thousands of U.S. dollars)
Unrealized gain:
StocksBonds:
OthersOthers
Unrealized loss:
StocksBonds:
OthersOthersTotal$ 2,483$ 2,273

$ 210

–
–
2,483

–
–
2,273

–
–
210

$ 33

$ 34

$ (1)

–
–
33
$ 2,516––34$ 2,307

–
–
(1)
$ 209

40

20.

Securities (continued)

Carrying
value
Unrealized gain:
StocksBonds:
OthersOthers
Unrealized loss:
StocksBonds:
OthersOthersTotal

March 31, 2020
Acquisition
Unrealized
costs
gain (loss)(Thousands of yen)

¥ 258,688¥ 251,307¥ 7,380––
258,688––
251,307––
7,380¥ 3,676¥ 4,433¥ (756)––3,676¥ 262,364

–
–
4,433
¥ 255,740

–
–
(756)
¥ 6,623

Non-marketable securities and investment in an investment partnership classified as othersecurities at March 31, 2021 and 2020 amounted to ¥502,849 thousand ($4,530thousand)and ¥403,032 thousand, respectively.

Proceeds from sales of securities classified as other securities and the aggregate gain and loss
for the years ended March 31, 2021 and 2020 were as follows.
March 31,
2021
2020
(Thousands of yen)
Sales proceeds:
StocksOther
Aggregate gain:
StocksOther
Aggregate loss:
StocksOther

2021(Thousands of
U.S. dollars)

¥ 100
–
¥ 100

¥ 17,510–¥ 17,510

$ 1
–
$ 1

¥ 99
–
¥ 99

¥ 3,360–¥ 3,360

$ 1
–
$ 1

¥ –
–
¥ –

¥ –
–
¥ –

$ –
–
$ –

41

21.

Derivative Transactions

The Company utilizes forward foreign exchange contracts to reduce the foreign currency
exchange risk arising from the receivables and payables denominated in foreign currencies.
The notional amounts and the estimated fair value of the forward foreign exchange contracts
outstanding at March 31, 2021 and 2020 for which hedged accounting has not been applied,
are summarized as follows:

Maturing within one year
Sell:
THB
Total

Maturing within one year
Sell:
THB
Total

Maturing within one year
Sell:
THB
Total

March 31, 2021
Fair value
Notional amount(Thousands of yen)
¥ 57,055¥ 57,055¥ (2,957)¥ (2,957)

March 31, 2021
Fair value
Notional amount(Thousands of U.S. dollars)
$
$

514
514

$
$

(27)
(27)

March 31, 2020
Notional amount
Fair value(Thousands of yen)
¥ 51,603¥ 51,603¥ 2,225¥ 2,225

The notional amounts and the estimated fair value of the forward foreign exchange contracts
outstanding at March 31, 2021 and 2020, for which hedged accounting has been applied, aresummarized as follows:

Maturing within one year
Sell:
USD
Others
Buy:
USD
EUR
THB
GBP
OthersTotal

March 31, 2021
Notional amount
Fair value(Thousands of yen)
¥ 173,654251¥ (9,509)(5)

3,405,924
204,654
24,57853,355
15,684¥ 3,878,103

137,975
8,320(1,354)
1,789
829¥ 138,046

42

21.

Derivative Transactions (continued)

Maturing within one year
Sell:
USD
Others
Buy:
USD
EUR
THB
GBP
Others
Total

Maturing within one year
Sell:
USD
EUR
Buy:
USD
EUR
THB
GBP
Total

March 31, 2021
Notional amount
Fair value(Thousands of U.S. dollars)$ 1,564
2$ (86)(0)30,684
1,844
221
481
141
$ 34,938

1,243
75
(12)
16
7
$ 1,244

March 31, 2020
Notional amount
Fair value(Thousands of yen)
¥ 270,058
41,899¥ (4,480)(629)

4,503,845
1,078,324
181,310
134,134¥ 6,209,572

409(13,165)8,476(5,932)¥ (15,322)

Foreign receivables and payables are translated at the applicable forward foreign exchange
rates if certain conditions are met. The notional amounts of the forward foreign exchange
contracts accounted for as part of accounts receivable or payable outstanding at March 31,
2021 and 2020 are summarized as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Sell:
USD
Buy:
USD
EUR
THB
OthersTotal¥ 38,388¥ 101,824$ 346

978,865
48,112
33,11722,679¥ 1,121,162

3,403,238
171,360
42,276
3,357¥ 3,722,058

8,819
433
298
204
$ 10,101

The notional amounts of derivatives are not necessarily indicative of the actual market risk
involved in derivative transactions.
43

22.

Investment and Rental Properties

The Company and a certain consolidated subsidiary own buildings and lands for lease mainlyin Thailand and other areas.
The carrying value in the consolidated balance sheet and the corresponding fair value of
those properties for the year ended March 31, 2021 are as follows:

March 31, 2021
¥ 1,495,802

March 31, 2021
$ 13,476

Carrying ValueNet change
March 31, 2020
(Thousands of yen)
¥ (91,926)¥ 1,587,728

Carrying ValueNet change
March 31, 2020
(Thousands of U.S. dollars)$ (828)$ 14,304

Fair Value
March 31, 2021
¥ 1,514,057
Fair Value
March 31, 2021
$ 13,640

The components of net change in the carrying value include decreases mainly due todepreciation of Buildings and structures in the amount of ¥42,590 thousand ($384 thousand).
The carrying value in the consolidated balance sheet and the corresponding fair value of
those properties for the year ended March 31, 2020 were as follows:

March 31, 2020
¥ 1,587,728

Carrying ValueNet change
March 31, 2019
(Thousands of yen)
¥ 624,398¥ 963,329

Fair Value
March 31, 2020
¥ 1,606,988

The components of net change in the carrying value include decreases mainly due todepreciation of Buildings and structures in the amount of ¥43,671 thousand and increases
mainly due to acquisitions of real estate in the amount of ¥608,570 thousand.
The carrying value represents the acquisition cost less accumulated depreciation andcumulative impairment loss. The fair value is mainly estimated in accordance with appraisal
standards for valuing real estate. However, if no material change has occurred in certain
values or indices, the fair values are determined by adjusting such appraised values andindices.

44

23.

Cash Flow Information

The components of cash and cash equivalents are summarized as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Cash and time deposits
Time deposits with maturities of more than
three months¥ 8,466,348¥ 6,175,441$ 76,273(3,455)(3,761)¥ 8,462,892 ¥ 6,171,679(31)$ 76,242

The following is the summary of assets and liabilities lost through the sales of shares of
JALUX TASECO DUTY FREE CO., LTD. and Taniyama Siam Co., Ltd. that result in achange in scope of consolidation for the year ended March 31, 2020, related selling price andnet payments due to the sales:(Thousands ofyen)
Current assets
Fixed assets
Current liabilities
Long-term liabilities
Non-controlling interests
Translation adjustments
Investment account after sales of subsidiary securities
Loss on sales of subsidiary securities

Selling priceCash and cash equivalents
Net payments due to the sales¥552,444
219,276(156,457)(46,032)(268,768)(18,257)(230,956)(32,191)
19,057(248,471)¥(229,414)

45

24.

Segment Information

The reportable segments of the Company and its consolidated subsidiaries are components
for which discrete financial information is available and whose operating results are regularly
reviewed by the Board of Directors to make decisions about resource allocation and to assess
performance.
The Aviation & airport business segment includes aircraft components and aviation-related
business. The Life service business segment includes insurance, real estate business andprinting. The Retail business segment includes cabin service supply, mail-order sales, airport
shops and gift item business. The Food & beverage business segment includes agriculture
and marine products, processed foods and wine sales business.
The accounting policies of the segments are substantially same as those described in thesignificant accounting policies in Note 1. Segment performance is evaluated based on
ordinary income or loss after the allocation of corporate expenses. Intersegment sales arerecorded at the same price used in transactions with third parties.
Ordinary income is calculated by subtracting nonoperating items from operating income.

46

24.

Segment Information (continued)

The information on the reportable segments information of the Company and its consolidated
subsidiaries for the years ended March 31, 2021 and 2020 was summarized as follows:

Aviation &airportbusiness
Sales, profits and assets
by reportable segment:
Sales to outside parties ¥28,638,728
Inter-segment sales
and transfers
1,747
Total
28,640,476
Segment profits (losses) ¥ (618,769)
Segment assets¥18,559,351
Other items:
Depreciation andamortization
Interest income
Interest expense
Equity in earnings ofaffiliates
Investment in affiliates
accounted for using
the equity method
Capital expenditures
Operating income(losses) previously
disclosed as segment
profits (losses)

Other items:
Depreciation andamortization
Interest income
Interest expense
Equity in earnings ofaffiliates
Investment in affiliates
accounted for using
the equity method
Capital expenditures
Operating income(losses) previously
disclosed as segment
profits (losses)

Consolidated¥¥ 80,346,673¥20,292,483¥17,507,055

70,97013,979,376¥ 902,768¥ 8,045,511

4,444
20,296,927¥ (2,289,559)¥11,781,039

350,518
427,680
17,857,574
80,774,354¥ (533,843) ¥ (2,539,404)¥ 9,099,301 ¥ 47,485,204(427,680)–(427,680)
80,346,673¥ 112,570 ¥ (2,426,833)¥ 4,790,818 ¥ 52,276,023

235,156
16
65,289¥¥¥108,546
1,244
31,576¥¥¥

507,802
2,045
18,541¥¥¥

63,483
2
28,426¥¥¥914,988
3,310
143,833¥¥¥

72,789 ¥18 ¥(36,019) ¥987,778
3,328
107,814¥ (162,202)¥

27,071¥(2,983)¥–¥(138,114)¥ (331,778) ¥(469,893)¥ 1,217,377¥
31,052¥¥

422,344
15,167¥¥

231,572
441,479¥¥–
117,180¥¥

1,871,294
645,424¥¥ 1,307,443¥¥¥

205,342¥ (2,554,393)¥ 1,871,294¥
604,880¥ (125,308) ¥ (1,166,916)

Year ended March 31, 2021
Reportable segments
Food &
Life service
RetailbeveragebusinessbusinessTotalbusiness(Thousands of U.S. dollars)$258,007$ 125,301$182,815$157,721

16
258,022$ (5,574)$167,201639
125,940$ 8,133$ 72,48240
182,855$ (20,627)$ 106,135

$
$
$

2,119
0
588

$
$
$

978
11
284

$
$
$

$ (1,461)$

244$ 10,967
$
280

$
$

3,805
137

$

$ 11,779

1,850¥ 80,346,673

Adjustments
andeliminations¥13,908,406

Aviation &airportbusiness
Sales, profits and assets
by reportable segment:
Sales to outside parties
Inter-segment sales
and transfers
Total
Segment profits (losses)
Segment assets

Year ended March 31, 2021
Reportable segments
Food &
Life service
Retailbeveragebusinessbusinessbusiness
Total(Thousands of yen)

040,543¥¥¥ (1,748,579) ¥ (2,915,495)

Adjustments
andeliminations

Consolidated

723,844$–$ 723,844

3,158
160,879$ (4,809)$ 81,976

3,853
727,697$ (22,878)$ 427,795(3,853)(3,853)$ 1,014$ 43,161–
723,844$ (21,863)$ 470,955

4,575
18
167

$
$
$

572
0
256

$
$
$

$
$
$

$
$
$

$

(27)

$

–

$ (1,244)$ (2,989)$ (4,233)

$
$

2,086
3,977

$
$

–
1,056

$ 16,859$ 5,449

$
$

0
365

$ 16,859$ 5,815$ (1,129)$ (10,513)$ (15,753)$ (26,266)$ (23,013)

$

–

8,243
30
1,296

656
0
(324)

47

8,899
30
971

24.

Segment Information (continued)

Adjustments and eliminations for segment profits and losses include ¥1,267 thousand ($11thousand) of elimination of inter-segment profit and ¥111,303 thousand ($1,003 thousand)of difference between the allocated amount of corporate expenses and actual amount, andcorporate profits or losses which are not allocable to the reportable segments.
Adjustments and eliminations for segment assets include minus ¥73,337 thousand ($661
thousand) of elimination of accounts inter-segment receivable and ¥4,864,156 thousand($43,821 thousand) of corporate assets which are not allocable to the reportable segments.
Corporate assets consist primarily of assets belonging to the administrative part of theCompany.
Adjustments and eliminations for capital expenditures consist primarily of investments in thehead office software.
Segment profit or loss is reconciled to ordinary loss. Nonoperating items amounted to¥488,662 thousand ($4,402 thousand) result in an adjustment of ordinary income or loss tooperating loss reported in the consolidated statements of operations.
Depreciation and amortization include depreciation costs recorded as other expenses and“Loss due to temporary store closures.”

48

24.

Segment Information (continued)

Aviation &airportbusiness
Sales, profits and assets
by reportable segment:
Sales to outside parties ¥48,818,157
Inter-segment sales
and transfers
1,578
Total
48,819,735
Segment profits¥ 1,437,022
Segment assets¥28,665,834
Other items:
Depreciation andamortization
Interest income
Interest expense
Equity in earnings ofaffiliates
Investment in affiliates
accounted for using
the equity method
Capital expenditures
Operating income
previously disclosed
as segment profits

Year ended March 31, 2020
Reportable segments
Food &
Life service
Retailbeveragebusinessbusinessbusiness
Total(Thousands of yen)

Adjustments
andeliminations

Consolidated¥144,688,049¥12,972,856¥57,619,780¥25,277,255¥144,688,049¥–

122,396
13,095,252¥ 759,392¥ 6,439,690

5,904
57,625,685¥ 1,900,979¥13,485,527

1,296,821
26,574,077¥ 347,858¥ 9,772,564

1,426,701
146,114,751¥ 4,445,254¥ 58,363,617(1,426,701)–(1,426,701) 144,688,049¥ 292,754 ¥ 4,738,009¥ 2,481,124 ¥ 60,844,741¥¥¥

232,43372
106,641¥¥¥

115,833
1,506
45,505¥¥¥

501,4392,130
11,108¥¥¥81,786
82
40,784¥¥¥

931,494
3,791
204,038¥
75,357 ¥¥(706) ¥¥ (105,815) ¥¥679,133¥

25,628¥68,279¥–¥773,041¥(85,767) ¥¥ 1,449,089¥ 386,654¥¥

389,918
636,963¥ 254,872¥ 1,060,237¥¥–
38,314¥ 2,093,881¥ 2,122,170¥¥

331,031102,750¥¥

2,424,912
2,224,921¥ 1,449,865¥ 1,283,000¥ 2,308,205¥

846,603¥ 5,887,674¥ (1,917,838) ¥3,969,836

Adjustments and eliminations for segment profits and losses include ¥3,755 thousand ofelimination of inter-segment profit and ¥288,999 thousand of difference between the
allocated amount of corporate expenses and actual amount, and corporate profits or losses
which are not allocable to the reportable segments.
Adjustments and eliminations for segment assets include minus ¥85,950 thousand ofelimination of accounts inter-segment receivable and ¥2,567,074 thousand of corporate
assets which are not allocable to the reportable segments. Corporate assets consist primarilyof investments in securities and assets belonging to the administrative part of the Company.
Adjustments and eliminations for capital expenditures consist primarily of investments in thehead office software.
Segment profit is reconciled to ordinary income. Nonoperating items amounted to ¥768,172
thousand result in an adjustment of ordinary income to operating income reported in the
consolidated statements of operations.

49

1,006,851
3,085
98,223
687,274

24.

Segment Information (continued)

For the years ended March 31, 2021 and 2020, net sales to outside parties in Japan represent
more than 90% of consolidated operating revenues. As a result, net sales to outside parties
by country or area grouped according to geographical classification are not required to bedisclosed.
Property, plant and equipment by geographical country or area at March 31, 2021 and 2020
were summarized as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)Japan¥ 2,230,668¥ 2,430,983$ 20,096

Thailand

1,156,139

1,312,092

10,416Singapore

713,800

1,080,466

6,431

372,233¥ 4,472,842

443,293¥ 5,266,836

3,353$ 40,296

Other foreign countries

Net sales to major customers for the fiscal years ended March 31, 2021 and 2020 were as
follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Mitsubishi Heavy Industries Aero Engines, Ltd.

¥ 12,886,544 ¥ 19,429,560 $

116,095(Aviation & airport business)
Kawasaki Heavy Industries, Ltd.

–

16,508,279–(Aviation & airport business)

Impairment losses on fixed assets by reportable segment for the years ended March 31, 2021
and 2020 were summarized as follows:
March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Aviation & airport businessLife service business
Retail business
Food & beverage business
Reportable segments total
Adjustments and eliminations¥ 209,694–
115,533–
325,228–¥ 325,228¥––
80,822–80,822–¥ 80,822

$

1,889
–
1,041
–
2,930
–
$ 2,93050

25.

Related Party Transactions

The significant transactions between the Company and Japan Airline Co., Ltd., for the years
ended March 31, 2021 and 2020 were summarized as follows:Year ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment
Purchases of merchandise¥ 1,289,065
315,174¥ 5,037,635
491,224

March 31,2020
2021
(Thousands of yen)Accounts receivable
Accounts payable¥ 77,436
37,989$ 11,613
2,839

2021
(Thousands of
U.S. dollars)¥ 544,048
90,167$ 698
342

The significant transactions between certain consolidated subsidiaries of the Company andJapan Airlines Co., Ltd. for the years ended March 31, 2021 and 2020 were summarized asfollows:
Year ended March 31,
2020
2021
2021
(Thousands of yen)(Thousands of
U.S. dollars)
Sales of flight equipment¥ 171,589¥ 360,739

March 31,
2021
2020
(Thousands of yen)Accounts receivable26.

¥ 1,146$ 1,546

2021(Thousands of
U.S. dollars)¥ 8,353$ 10

Contingent liabilities

As the Company is the guarantors of indebtedness to unconsolidated subsidiaries andaffiliates, contingent liabilities for the years ended March 31, 2021 and 2020 weresummarized as follows:Year ended March 31,
2021
2020
2021
(Thousands of yen)(Thousands of
U.S. dollars)
MC-Jalux Airport Services Co.,Ltd.

¥–¥ 111,530$–51