Financial
Statements
2021
Benesse Holdings, Inc.
and Subsidiaries
Consolidated Financial Statements
for the Year Ended March 31, 2021,
and Independent Auditor’s ReportConsolidated Balance Sheet
Benesse Holdings, Inc. and Subsidiaries
March 31, 2021

Millions of Yen
2021
2020

ASSETS
CURRENT ASSETS:
Cash and time deposits (Notes 4 and 5)
Marketable securities (Notes 4, 5 and 6)
Trade receivables (Note 5):
Accounts
Other
Due from affiliates
Inventories (Note 7)
Other current assets
Allowance for doubtful receivables (Note 5)
Total current assets
PROPERTY AND EQUIPMENT:Land
Buildings and leasehold improvements (Note 8)
Equipment, fixtures and other
Lease assets (Note 8)
Total
Accumulated depreciation
Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 6)
Investments in associated companies (Note 5)
Goodwill and other intangible assets (Notes 8 and 10)
Software (Note 8)
Asset for retirement benefits (Note 12)
Deferred tax assets (Note 18)
Other assets
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

-1-

Thousands of
U.S. Dollars(Note 1)2021

¥ 151,013
5,951¥ 152,508
2,905$ 1,360,477
53,61329,092
57,18317
31,534
12,321(1,417)
285,694

30,21048,758930,085
9,978(1,099 )273,354

262,090515,162153
284,090111,001(12,766)
2,573,820

35,08091,18434,726109,982
270,972(113,955)
157,01735,12091,617
34,201
99,587
260,525(110,136 )
150,389

316,036
821,477
312,847
990,829
2,441,189(1,026,621)
1,414,568

14,4902,179
13,12025,071
5,033
5,174
34,20499,271¥ 541,982

14,342
2,070
12,022
23,812
3,238
4,106
34,093
93,683¥ 517,426

130,541
19,631
118,198
225,865
45,342
46,613308,143894,333$ 4,882,721

Millions of Yen
2021
2020

LIABILITIES AND EQUITYCURRENT LIABILITIES:Current portion of long-term debt (Notes 5 and 11)
Trade payables (Note 5):
Accounts
Other
Due to affiliates
Advances received
Income taxes payable (Note 5)
Other current liabilities
Total current liabilities¥

LONG-TERM LIABILITIES:Long-term debt, less current portion (Notes 5 and 11)
Lease obligations (Notes 5 and 9)
Guarantee deposits received from nursing home residents
Liability for retirement benefits (Note 12)
Deferred tax liabilities (Note 18)
Other long-term liabilities
Total long-term liabilities

Thousands of
U.S. Dollars(Note 1)
2021

249

¥ 13,943$

2,243

13,961
26,515910
106,846
2,359
25,039
175,879

15,68524,761872
95,701
6,017
20,554
177,533

125,775
238,874
8,198
962,577
21,252
225,576
1,584,495

38,257
95,61137,4708,156
681
10,891
191,066

20,15686,424
38,668
7,914
641
10,750164,553

344,658
861,360
337,568
73,477
6,135
98,117
1,721,315

13,74029,632
105
151,435

13,70029,593
105
153,130

123,784
266,955946
1,364,279(21,362)(21,362 )(192,450)

1,166(5,852)
1,016
169,880
5,157
175,037¥ 541,982

467(6,456 )(34 )169,143
6,197
175,340¥ 517,426

10,505(52,721)9,153
1,530,451
46,4601,576,911$ 4,882,721

COMMITMENTS AND CONTINGENT LIABILITIES(Notes 5, 9 and 17)
EQUITY (Notes 13 and 19):
Common stock—authorized, 405,282,040 shares in 2021
and 2020; issued, 102,541,528 shares in 2021 and102,513,199 shares in 2020
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock—at cost—6,158,118 shares in 2021 and
6,157,838 shares in 2020
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans (Note 12)
Total
Noncontrolling interests
Total equity
TOTAL

-2-

Consolidated Statement of Income
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2021

Millions of Yen
2021
2020
NET SALES

Thousands of
U.S. Dollars(Note 1)2021

¥ 427,532¥ 448,577$ 3,851,640

COST OF SALES (Notes 12 and 16)

241,346

249,980

2,174,289

Gross profit

186,186

198,597

1,677,351

173,096

177,3311,559,423

13,09021,266

117,928145
344(5,445)
58
546
119
1,581

146
340
(4,925 )
213
184
132
174
3,302
(3,572 )(425 )

1,306
3,099(49,054)
523
4,919
1,072
14,243SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 12, 15 and 16)
Operating income
OTHER INCOME (EXPENSES):
Dividend income
Rent income
Interest expense—net (Note 11)
Foreign exchange gain
Gain on investments—net
Equity in net earnings of associated companies
Subsidy income
Gain on sale of investment in subsidiaries and an affiliate—net
Loss on impairment of long-lived assets (Note 8)
Restructuring expenses of foreign consolidated subsidiary
Loss on temporary closure
Other—net(530)(1,554)(722)(1,075)(606 )(4,775)(14,000)(6,505)(9,684)

INCOME BEFORE INCOME TAXES

6,557

16,22959,072

INCOME TAXES (Note 18):
Current
RefundDeferred

5,558(1,267)(1,599)9,024(187 )

50,072(11,415)(14,405)

2,692

8,837

24,252

3,865

7,392

34,820

742

1,103

6,685

Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

¥

3,123

¥

6,289

Yen
2021

2020

$

28,135

U.S. Dollars
2021

PER SHARE OF COMMON STOCK (Notes 2.t and 22):
Basic net income¥ 32.40¥ 65.28$ 0.29Diluted net income
65.27
Cash dividends applicable to the year
50.00
50.00
0.45
Diluted net income per share for the year ended March 31, 2021 is not disclosed because there are no
potentially dilutive shares outstanding.
See notes to consolidated financial statements.
-3-Consolidated Statement of Comprehensive Income
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2021

Millions of Yen
2021
2020

Thousands of
U.S. Dollars(Note 1)2021

NET INCOME¥ 3,865¥7,392$ 34,820

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 12 and 20):
Unrealized gain (loss) on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income (loss) in associates

686
591
1,043
15

(918 )(708 )
233
(2 )

6,180
5,324
9,397
135

Total other comprehensive income (loss)

2,335(1,395 )21,036COMPREHENSIVE INCOME¥ 6,200¥5,997$ 55,856

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.

¥ 5,478722¥4,9081,089$ 49,351
6,505

-4-

Consolidated Statement of Changes in Equity
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2021
Thousands

Millions of Yen
Accumulated Other
Comprehensive Income (Loss)

Number of
Shares ofCommonStock
Outstanding
BALANCE, APRIL 1, 2019

96,327

Unrealized
Gain onForeignDefined
Stock
Available- Currency Retirement
Common Capital Acquisition Retained Treasury for-Sale Translation Benefit
Stock
Surplus
Rights Earnings Stock Securities Adjustments
Plans
Total
¥ 13,662 ¥ 29,555¥ 105 ¥ 152,165 ¥ (21,360) ¥ 1,372

Cumulative effects of changes inaccounting policies¥ (267) ¥ 169,484(507)

Restated balance
Issuance of new shares (Note 13)¥ (5,748 )

13,662

29,555

38

38

30

105

151,658

Noncontrolling
Interests¥ 5,616 ¥ 175,100(507)(21,360)

1,372(5,748 )(267)

168,977

Total
Equity

(507)
5,616

76

174,59376

Net income attributable to owners of theparent

6,289

6,289

6,289

Cash dividends, ¥50.0 per share(4,817)(4,817)(4,817)Purchases of treasury stock

(2)

(2)

Net change in the year
BALANCE, MARCH 31, 2020
Issuance of new shares (Note 13)

96,355

13,70029,593

28

40

40

105

153,130(21,362)(2)(2)(905 )(708 )

233(1,380)

581

(799)

467

(6,456 )(34)

169,143

6,197

175,34080

80

Net income attributable to owners of theparent

3,123

3,123

3,123

Cash dividends, ¥50.0 per share(4,818)(4,818)(4,818)

Capital increase of consolidated
subsidiaries

(1)

(1)

Net change in the year
BALANCE, MARCH 31, 2021

699
96,383¥ 13,740 ¥ 29,632¥ 105 ¥ 151,435 ¥ (21,362) ¥ 1,166

604

1,050

2,353

¥ (5,852 ) ¥ 1,016 ¥ 169,880(1)(1,040)1,313¥ 5,157 ¥ 175,037

Thousands of U.S. Dollars (Note 1)
Accumulated Other
Comprehensive Income (Loss)

CapitalSurplus

Stock
Acquisition
Rights$123,423 $266,604$946

CommonStock

BALANCE, MARCH 31, 2020
Issuance of new shares (Note 13)361

Unrealized
Foreign
Gain onCurrency
DefinedAvailableTranslation
Retirement
Treasury for-Sale
Securities Adjustments Benefit Plans
Stock

Retained
Earnings$1,379,549 $(192,450)$ 4,207$(58,162)

Total

Noncontrolling
Interests

Total
Equity$ (306) $1,523,811$55,829 $1,579,640

722

722

361

Net income attributable to owners of theparent28,13528,13528,135

Cash dividends, $0.45 per share(43,405)(43,405)(43,405)

Capital increase of consolidated
subsidiaries

(10)

(10)
6,298

5,441

9,459

21,198$1,364,279 $(192,450) $10,505$(52,721)$9,153$1,530,451

Net change in the year

BALANCE, MARCH 31, 2021

$123,784 $266,955$946

See notes to consolidated financial statements.

-5-

(10)
(9,369)11,829$46,460 $1,576,911

Consolidated Statement of Cash Flows
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2021

Millions of Yen
2021
2020
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Depreciation and amortization
Loss on impairment of long-lived assets
Other noncash income and expenses—net
Gain on sale of investment in subsidiaries and an affiliate
Changes in assets and liabilities, net of effects:
Increase in allowance for doubtful receivables
and other reserves
Decrease in trade accounts receivable(Increase) decrease in inventories
Increase in trade accounts payable
Increase in advances received
Increase in asset for retirement benefits
Other—net
Subtotal¥Interest and dividends received
Interest paid
Income taxes—paid
Income taxes—refund
Net cash provided by operating activities
INVESTING ACTIVITIES:
Increase in time deposits—net
Purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of property and equipment
Purchases of software
Purchases of investment securities
Proceeds from sales of investment securities
Acquisition of additional interests of a consolidated subsidiary
Proceeds from sale of interests in subsidiaries previously consolidated
Cash decrease due to acquisition of controlling interests in a company
Other—net

6,557

¥

16,229Thousands of
U.S. Dollars(Note 1)2021$

59,072

19,025530
5,438

19,9953,572
5,536(3,302 )

171,396
4,775
48,991688
958(1,463)
246
11,155(1,796)(1,807)39,531

165
2,252
775
438
5,170
(539 )
220
50,511

6,198
8,631(13,180)
2,216
100,495(16,180)(16,279)
356,135623(5,880)(9,358)928

695(5,437 )(6,556 )
2,766

5,613
(52,973)(84,306)
8,360

25,844

41,979232,829(346)(2,001)
2,905(5,374)(9,440)(813)
1,172(2,988)(498 )(2,008 )21,883(5,956 )(8,442 )(5,980 )737(3,117)(18,027)
26,171(48,414)(85,045)(7,324)
10,559(26,919)(1,181)(1,632)

3,866(268 )(1,909 )(10,640)(14,703)(19,698)

1,425(177,459)

8,000(14,003)
10,000(4,821)(3,379)(542)

15,000(19,186 )(4,820 )(3,084 )(572 )

72,072(126,153)
90,090(43,432)(30,441)(4,884)(4,745)(12,662 )(42,748)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS(247)(519 )(2,225)NET INCREASE IN CASH AND CASH EQUIVALENTS

1,154

30,223

10,397

142,881

112,658

1,287,216

Net cash (used in) provided by investing activities
FINANCING ACTIVITIES:
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of bonds
Dividends paid
Repayments of lease obligations
Other—net
Net cash used in financing activities

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR (Note 4)¥-6-

144,035¥

142,881$

1,297,613(Continued)

Consolidated Statement of Cash Flows
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2021

Millions of Yen
2021
2020
ADDITIONAL CASH FLOW INFORMATION:
Proceeds from sale of interests in subsidiaries previously consolidated:
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Accumulated other comprehensive income (loss)
Transfer expenses
Gain on sale of investment in subsidiaries and an affiliate
Selling priceTransfer expenses
Cash and cash equivalents of subsidiaries
Proceeds from sale of interests in subsidiaries previously consolidated
NONCASH INVESTING AND FINANCING ACTIVITIES:Assets and obligations from finance lease transactions
recognized in the consolidated balance sheet:
Lease assets
Lease obligations¥

11,481
12,583

¥

1,739
603
(688 )(146 )
(3 )
109
3,332
4,946
(109 )(971 )

¥

3,866

¥

9,553
10,283Thousands of
U.S. Dollars(Note 1)
2021$

103,432
113,360

See notes to consolidated financial statements.

-7-(Concluded)

Notes to Consolidated Financial Statements
Benesse Holdings, Inc. and Subsidiaries
Year Ended March 31, 2021
Note 1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Benesse Holdings, Inc. (the “Company”) have been
prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act andits related accounting regulations, and in accordance with accounting principles generally accepted in Japan, which
are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards (“IFRS”). The foreign subsidiaries prepare their financial statements in accordance with either
IFRS or accounting principles generally accepted in the United States of America (“U.S. GAAP”).
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which is morefamiliar to readers outside Japan. In addition, certain reclassifications have been made in the 2020 consolidated
financial statements to conform to the classifications used in 2021.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥111 to $1, theapproximate rate of exchange at March 31, 2021. Such translations should not be construed as representations that
the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
Note 2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.
Consolidation—The consolidated financial statements include the accounts of the Company and its 37 (37in 2020) subsidiaries (collectively, the “Companies”). Berlitz Corporation, a wholly owned subsidiary of the Company
located in the United States of America, consolidates all of its subsidiaries, and is counted as one company, thefinancial statements of which are prepared in accordance with U.S. GAAP.
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able toexercise control over operations are fully consolidated, and those companies over which the Companies have theability to exercise significant influence are accounted for by the equity method.
Investments in nine associated companies are accounted for by applying the equity method.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profits included in assets resulting from transactions within the Companies are also eliminated.
b.
Business Combinations—Business combinations are accounted for using the purchase method.
Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the periods
in which the costs are incurred. If the initial accounting for a business combination is incomplete by the end of thereporting period in which the business combination occurs, an acquirer shall report in its financial statements
provisional amounts for the items for which the accounting is incomplete. During the measurement period, whichshall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts
recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed asof the acquisition date and that would have affected the measurement of the amounts recognized as of that date.
Such adjustments shall be recognized as if the accounting for the business combination had been completed at theacquisition date. The acquirer recognizes any bargain purchase gain in profit or loss immediately on the acquisition
date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been
identified after a review of the procedures used in the purchase price allocation. A parent’s ownership interest in a
subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amountof noncontrolling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while
the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration
received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus
as long as the parent retains control over its subsidiary.
c.
Cash Equivalents—Cash equivalents in the consolidated statement of cash flows are defined as low-risk,
highly liquid, short-term (maturity within three months of acquisition date) investments that are readily convertible tocash.
d.
Inventories—Inventories are primarily stated at the lower of cost, determined by the average cost method, or
net selling value. Inventories of foreign subsidiaries are primarily stated at the lower of cost or market, or net selling
value.
e.
Marketable and Investment Securities—Marketable and investment securities are classified and accounted
for, depending on management’s intent, as follows: (1) trading securities, which are held for the purpose of earning
capital gains in the near term are reported at fair value, and the related unrealized gains and losses are included inearnings; (2) held-to-maturity debt securities, for which there is a positive intent and ability to hold to maturity arereported at amortized cost; and (3) available-for-sale securities, which are not classified as either of the-8-

aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes,
reported in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge toincome.
f.
Property and Equipment—Property and equipment are stated at cost. Depreciation of property andequipment of the Company and its domestic subsidiaries is computed by the declining-balance method over theestimated useful lives of the assets, while the straight-line method is applied to buildings acquired on or after April 1,
1998, building improvements and structures acquired on or after April 1, 2016, lease assets of the Company and its
domestic subsidiaries, and all property and equipment of foreign subsidiaries. The range of useful lives in the
Company and its domestic subsidiaries is principally from 2 to 50 years for buildings. The useful lives for leaseassets of the Company and its domestic subsidiaries are the terms of the respective leases.
Under certain conditions such as exchanges of fixed assets of similar kinds and sales and purchases resulting
from expropriation, Japanese tax laws permit companies to defer the profit arising from such transactions by
reducing the cost of the assets acquired. As of March 31, 2021 and 2020, such deferred profit amounted to¥2,617 million ($23,577 thousand) and ¥2,176 million, respectively.
g.
Long-Lived Assets—Long-lived assets of the Company and its domestic subsidiaries are reviewed for
impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group
may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would be measured as the amount by which thecarrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows fromthe continued use and eventual disposition of the asset or the net selling price at disposition.
h.
Goodwill and Other Intangible Assets—The differences between the cost and net equity at acquisition(“consolidation goodwill”) and customer-related assets in domestic subsidiaries are amortized on a straight-line
basis over 5 to 20 years for goodwill and mainly over 20 years for customer-related assets. Immaterial consolidation
goodwill that was incurred in the current period was charged to income.
Prior to April 1, 2008, in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill andOther Intangible Assets,” goodwill and other intangible assets of Berlitz Corporation that were determined to havean indefinite life were not amortized, but rather tested for impairment on an annual basis and between annual tests if
an event occurred or circumstances arose that would more likely than not reduce the fair value below its carrying
amount, which were reflected in the Company’s consolidated financial statements without any adjustments.
Effective April 1, 2008, goodwill and other intangible assets are adjusted to be amortized on a straight-line basis
primarily over 20 years due to the adoption of Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task
Force (“PITF”) No. 18, “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
the Consolidated Financial Statements.” See Note 10 for details on goodwill and other intangible assets.
i.
Software—Software used internally is amortized by the straight-line method over its estimated useful life
(primarily 5 years and 10 years) within the Company.
j.
Leases—Finance lease transactions are capitalized to recognize lease assets and lease obligations in thebalance sheet. Lease obligations relating to finance leases are primarily used for capital expenditures.
On January 13, 2016, the International Accounting Standards Board (IASB) issued IFRS 16, “Leases,” requiring
recognition of substantially all lease assets and leases liabilities on the balance sheet. Certain foreign subsidiaries
that apply IFRS applied this accounting standard effective April 1, 2019. These subsidiaries recognized thecumulative effect of applying IFRS 16 as an adjustment to the beginning balance of retained earnings as of April 1,
2019 in accordance with the transitional measure.
k.
Retirement and Pension Plans—The Company and certain of its domestic subsidiaries have severance
lump-sum payment plans for employees. The Company and its certain domestic subsidiaries have a contributory
funded defined benefit pension plan and lump-sum payment plans for employees, directors, Audit & Supervisory
Board members and Company officers. The pension plans, which were established under the Japanese Welfare
Pension Insurance Law, cover a substitutional portion of the governmental pension program by the Company onbehalf of the government and a corporate portion established at the discretion of the Company. The pension fund isadministered by a board of trustees composed of management and employee representatives as required bygovernment regulations.
Effective April 1, 2004, the Company and its certain domestic subsidiaries introduced a cash-balance plan as partof the former pension plan to reduce the Company’s future risk due to unexpected low returns from the pension
fund.
A certain foreign subsidiary (Berlitz Corporation) has a Supplemental Executive Retirement Plan (“SERP”) for the
benefit of its Chairman of the Board, certain designated executives and their designated beneficiaries.
In addition, certain subsidiaries have defined contribution plans.
The Company accounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date. The projected benefit obligations of certain domestic subsidiaries are attributed to-9-periods on a benefit formula basis, and those of foreign subsidiaries are attributed to periods using the projected
unit credit method. Actuarial gains and losses of certain domestic subsidiaries that are yet to be recognized in profit
or loss are recognized within equity (accumulated other comprehensive income) after adjusting for tax effects, andare recognized in profit or loss over 8 years no longer than the expected average remaining service period of theemployees. Foreign subsidiaries only recognize actuarial gains and losses that are greater than 10% of the larger ofthe beginning balances of the projected benefit obligation or the market-related value (which may equal fair value) of
the plan assets and they are amortized on a straight-line basis primarily over 13 years within the average remaining
service period. Past service costs are amortized on a straight-line basis primarily over 8 years within the averageremaining service period.
Retirement benefits to directors, Audit & Supervisory Board members and Company officers of certain domestic
subsidiaries are recorded as a liability at the amount that would be required if all directors, Audit & Supervisory
Board members and Company officers retired at each consolidated balance sheet date.
l.
Asset Retirement Obligations—An asset retirement obligation is recorded for a legal obligation imposed
either by law or contract that results from the acquisition, construction, development and normal operation of atangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement
obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and isrecorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred,
the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon
initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing
the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is
subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, theliability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of theoriginal estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability
and the capitalized amount of the related asset retirement cost.
m.
Stock Options—Compensation expense for employee stock options are recognized based on the fair value
at the date of grant and over the vesting period as consideration for receiving goods or services in accordance withASBJ Statement No. 8, “Accounting Standard for Share-based Payment.” Stock options granted to nonemployees
are accounted for based on the fair value of either the stock option or the goods or services received. In the balance
sheet, the stock option is presented as a stock acquisition right as a separate component of equity until exercised.
n.

Research and Development Costs—Research and development costs are charged to income as incurred.

o.
Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidatedbalance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated
statement of income to the extent that they are not hedged by forward exchange contracts.
p.
Foreign Currency Financial Statements—The consolidated balance sheet accounts of the foreignsubsidiaries are translated into Japanese yen at the current exchange rate as of the consolidated balance sheet
date except for equity, which is translated at the historical rate. Differences arising from such translation are shown
as “Foreign currency translation adjustments” in a separate component of equity. Revenue and expense accounts offoreign subsidiaries are translated into yen at the average exchange rate.
q.
Derivative Financial Instruments and Hedge Activities—The Company uses derivative financial
instruments to manage its exposures to fluctuations in foreign currency exchange and interest rates. Foreignexchange forward contracts, and interest rates and currency swaps are utilized by the Company to reduce foreign
currency exchange and interest rate risks. The Company does not enter into derivatives for trading or speculative
purposes.
The Company records foreign exchange forward contracts at fair value, and the unrealized gains/losses arerecognized in the consolidated statement of income.
The interest rate and currency swaps used to hedge long-term debt denominated in a foreign currency with avariable interest rate, which qualifies for hedge accounting and meets specific matching criteria, is not measured atmarket value. Rather, the long-term debt is recorded at a yen amount under the swap agreement and interest
expense is calculated and recorded using a fixed interest rate.
r.
Bonuses to Directors and Company Officers—Bonuses to directors and Company officers are accrued at
the end of the year to which such bonuses are attributable.
s.
Revenue Recognition—The accounting standards for primary revenue in a certain domestic subsidiary(Benesse Corporation) are as follows.
Correspondence course business:
Completed-contract method (Revenue is recorded in the month of course completion.)
Scholastic ability testing business:
Completed-contract method (Revenue is recorded when the test results are sent out.)- 10 -

A certain foreign subsidiary (Berlitz Corporation) that applies U.S. GAAP applied the following new accounting
standard, effective April 1, 2019.
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue fromContracts with Customers” (ASC606).
The core principal of the standard is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitledin exchange for those goods or services.
t.
Income Taxes—The provision for income taxes is computed based on the pretax income included in the
consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences between the carrying amounts and thetax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates tothe temporary differences.
The Company and certain domestic subsidiaries file a tax return under the consolidated taxation system, whichallows companies to base tax payments on the combined profits or losses of the parent company and its wholly
owned domestic subsidiaries.
With regard to differences under the group tax sharing system established by “Act on Partial Revision of the
Income Tax Act (Act No. 8, 2020)” and differences under the single tax return filing system reexamined together
with transition to the group tax sharing system, the Company calculates the amounts of deferred tax assets anddeferred tax liabilities based on the Income Tax Act before the revision, not applying ASBJ Guidance No. 28,“Implementation Guidance on Tax Effect Accounting,” issued on February 16, 2018, as permitted by the PITF
No. 39, “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System,” issued on March 31, 2020.
u.
Per Share Information—Basic net income per share is computed by dividing net income attributable tocommon shareholders by the weighted-average number of common shares outstanding for the period.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised orconverted into common stock.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends
applicable to the respective fiscal years, including dividends to be paid after the end of the year.
v.
New Accounting Pronouncements
Accounting Standard for Revenue Recognition—On March 30, 2018, the ASBJ issued ASBJ Statement No. 29,“Accounting Standard for Revenue Recognition” and ASBJ Guidance No. 30, “Implementation Guidance on
Accounting Standard for Revenue Recognition,” and revised the standard and guidance on March 31, 2020 andMarch 26, 2021, respectively. The core principle of the standard and guidance is that an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects theconsideration to which the entity expects to be entitled in exchange for those goods or services. An entity should
recognize revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The accounting standard and guidance are effective for annual periods beginning on or after April 1, 2021. Earlier
application is permitted for annual periods beginning on or after April 1, 2018.
The Company expects to apply the accounting standard and guidance for annual periods beginning on or after
April 1, 2021, and is in the process of measuring the effects of applying the accounting standard and guidance infuture applicable periods.
Accounting Standard for Fair Value Measurement
Implementation Guidance on Accounting Standard for Fair Value Measurement
Accounting Standard for Measurement of Inventories
Accounting Standard for Financial Instruments
Implementation Guidance on Disclosures about Fair Value of Financial Instruments—On July 4, 2019, the
ASBJ issued ASBJ Statement No. 30, “Accounting Standard for Fair Value Measurement” and ASBJ Guidance
No. 31, “Implementation Guidance on Accounting Standard for Fair Value Measurement,” and revised related ASBJ
Statements and ASBJ Guidance (the “New Accounting Standards”). Under the New Accounting Standards,
nonmarketable available-for-sale equity securities are stated at cost, while under the current accounting standards,
nonmarketable available-for-sale securities are stated at cost. The New Accounting Standards are effective for theannual periods beginning on or after April 1, 2021. Earlier application is permitted for annual periods beginning on orafter April 1, 2020, or annual periods ending on or after March 31, 2020. The New Accounting Standards shall beapplied prospectively, however, under certain circumstances, it is permitted to be applied retrospectively.
The Company expects to apply the New Accounting Standards for annual periods beginning on or after April 1,
2021, and is in the process of measuring the effects of applying the New Accounting Standards in future applicable
periods.

- 11 -

ASU 2016-02 “Leases”—On February 25, 2016, the FASB issued ASU 2016-02, “Leases,” requiring recognition ofsubstantially all lease assets and leases liabilities on the balance sheet.
Certain foreign subsidiaries that apply U.S. GAAP expect to apply this accounting standard from the beginning ofannual periods beginning on April 1, 2022, and are in the process of measuring the effects of applying theaccounting standard in future applicable periods.
Note 3.

SIGNIFICANT ACCOUNTING ESTIMATES

Valuation of goodwill and customer-related assets
Goodwill and other intangible assets of ¥13,120 million ($118,198 thousand) recorded in the consolidated balance
sheet as of March 31, 2021 include goodwill of ¥5,061 million ($45,595 thousand) and customer-related assets of¥2,504 million ($22,559 thousand) relating to the acquisition of shares of EDUCOM Corporation owned by Classi
Corporation, one of the Company’s consolidated subsidiary. Classi Corporation acquired 65.2% of EDUCOM
Corporation’s issued shares on January 8, 2019 and the remaining 34.8% on February 26, 2021.
The Company identified indications of impairment as of March 31, 2021 mainly because relatively large amountsof the acquisition cost were allocated to the goodwill and other intangible assets. By regarding the entire EDUCOM
business as one asset group, the Company made a comparison between the carrying amounts and the estimatedtotal of undiscounted future cash flows based on the medium-term management plan starting on the year ending
March 31, 2022, which was approved by the management of both Classi Corporation and EDUCOM Corporation.
As a result, the undiscounted future cash flows exceeded the carrying amounts and accordingly, the Company
decided not to recognize impairment loss.
The estimate of undiscounted future cash flows is determined using the number of schools that would newly
implement a school support system, market share, the percentage of existing customers that continue theircontracts and other items as major assumptions on the premise of more use of ICT at schools along withdigitalization of education.
If any revision is required for the assumptions used for these estimates due to a deterioration in businessenvironment caused by changes in trends of competitors or other events, the Company may recognize impairment
loss in the year ending March 31, 2022.
Recoverability of deferred tax assets
Deferred tax assets of ¥5,174 million ($46,613 thousand) were recorded in the consolidated balance sheet as ofMarch 31, 2021.
The Companies record deferred tax assets which are expected to be recoverable by using future taxable incomethat excludes tax deductions resulting from the reversal of those deductible temporary differences based on future
profitability and tax planning in accordance with the schedule for reversal of taxable/deductible temporary
differences. The Companies recognize deferred tax assets only when it is recoverable that taxable income will beavailable against which the deductible temporary differences can be utilized, based on the medium-term
management plan approved by the management of the Companies and by taking into consideration the impact ofbusiness environment on the performance of the Companies. As a result, deferred tax assets which were
determined not to be recoverable in future were reversed as valuation allowance.
The main assumptions about future taxable income in the medium-term management plan include as follows.
The cumulative total number of enrollment at Shinkenzemi and Kodomo Challenge businesses, major businessesof Benesse Corporation, one of the Company’s consolidated subsidiary, on the premise of an increase in interests inonline learnings due to COVID-19.
The number of nursing homes and elderly homes in a residential care services business, a major business ofBenesse Style Care Co., Ltd., one of the Company’s consolidated subsidiary, on the premise of growth in needs fornursing care services due to aging population.
If any revision is required for the assumptions used for these estimates due to a deterioration in businessenvironment caused by changes in trends of customers and competitors or other events, the Company may reverse
deferred tax assets that are not expected to be recoverable in the year ending March 31, 2022.

- 12 -

Note 4.

CASH AND CASH EQUIVALENTS
Cash and cash equivalents at March 31, 2021 and 2020 consisted of the following:

Cash and time deposits
Marketable securities
Time deposits and short-term investments
which mature or become due after morethan three months from acquisition date
Investment fund and otherCash and cash equivalents
Note 5.

Millions of Yen
2021
2020
¥ 151,013¥ 152,508
5,951
2,905

Thousands of
U.S. Dollars
2021$ 1,360,477
53,613(12,920)(9)¥ 144,035(116,396)(81)$ 1,297,613(12,521 )(11 )¥ 142,881

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1)Group Policy for Financial Instruments
The Companies focus on liquidity and safety in regard to investments of surplus funds, after considering theirapplication and timing. Particularly, derivative transactions are utilized mainly to hedge various risks andefficiently invest in funds. The Companies consider derivative transactions with high leverage to be high-risk
transactions, and do not enter into such transactions. In addition, the Companies have set overdraft limits inorder to finance operating capital with efficiency and stability in case of an unexpected contingency.

(2)

Nature and Extent of Risks Arising from Financial Instruments
Trade receivables are exposed to credit risks of counterparties. Monetary receivables in foreign currencies are
exposed to the market risk of fluctuation in foreign currency exchange rates. The Companies enter into foreignexchange forward contracts in order to earn returns and manage exposure to market risk from changes inforeign currency exchange rates of dividend income from foreign subsidiaries. Foreign exchange forward
contracts are exposed to credit risks of counterparties and the market risk of fluctuation in foreign currency
exchange rates. Marketable and investment securities mainly comprise equity securities, investment
partnerships and trust fund investments with certain holding limits, and negotiable certificates of deposit andgovernment and corporate bonds. These securities are exposed to issuer credit risk and fluctuation risks offoreign exchange, interest rates and market price.
Trade payables and income taxes payable are payable within one year. Short-term bank loans and long-term
debt are primarily used for future business investments in the Company. Long-term debt with variable interestis exposed to fluctuation risk of interest rates.

(3)

Risk Management for Financial Instruments
Credit risk management
The Companies manage credit risks of trade receivables as defined in the “Management Regulations for
Receivables,” based on which the general manager of each department manages each receivable by type withregard to the counterparty, due date, the amount and the balance in order to recognize or mitigate any
concerns over their collection at an early stage.
The Finance Department of the Companies manages the credit risk of security issuers by regularly monitoring
the fair values, rating and credit standing in accordance with “Fund Management Regulations.”
Because the counterparties to these derivatives are limited to major international financial institutions, theCompany does not anticipate any losses arising from credit risk.
Market risk management
For fluctuation risks of foreign currency exchange rates, interest rates and market prices relating to marketable
and investment securities, the Companies’ Finance Department obtains and monitors the price information ofmarketable and investment securities from financial institutions on a steady basis for securities with market
prices, and periodically for those without market prices. With respect to securities transactions, the Companies’
Finance Department executes transactions in accordance with the provisions of the “Fund Management
Regulations,” which regulate the authorization and transaction limit amounts, in order to monitor operating
status on a regular basis. The results of the monitoring by the Companies’ Finance Department are reported to
the CEO weekly and to the Board of Directors each time significant circumstances occur.
Fluctuation risks of foreign currency exchange rates relating to receivables in foreign currencies are hedged
by foreign exchange forward contracts. In addition, a portion of short-term bank loans and long-term debt isfinanced by fixed interest to prevent fluctuation risk of the corresponding interest rates.
For fluctuation risks of foreign currency exchange rates relating to derivative transactions that are foreignexchange forward contracts, the authorization and credit limits amount are defined in “Derivative Transaction
Regulations.” The Companies’ Finance Department also monitors foreign exchange forward contracts in termsof the balance and gain or loss on valuation, and reports to the CEO weekly and to the Board of Directors
quarterly. The results of the monitoring by the Companies’ Finance Department are also reported to the Board- 13 -

of Directors each time significant circumstances occur.
Liquidity risk management
The Companies’ Finance Department monitors liquidity risk by preparing an annual cash management plan
based on reports from each department, and a monthly cash management plan through confirmation of daily
cash receipts and payments. Subsidiaries perform similar procedures in accordance with the Company’s
procedures.
(4)

Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are notavailable, other rational valuation techniques are used instead. Such techniques include variable factors andthe results of valuation may differ depending on prerequisites. The contract amounts of derivatives, which are
shown in the following table, do not represent the amounts exchanged by the parties and do not measure theCompanies’ exposure to market risk.
The table below shows the carrying amounts of financial instruments recorded in the consolidated balance
sheets as of March 31, 2021 and 2020, and their fair values, as well as the differences between the carrying
amounts and the fair values. Financial instruments whose fair values are deemed extremely difficult to assess
are not included.
(a)Fair value of financial instruments
Millions of Yen
Carrying
AmountFair Value

March 31, 2021
Cash and time deposits
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Marketable and investment securities¥ 151,013
86,292(1,413)84,87911,424¥ 151,013

Total¥ 247,316¥ 247,316

Trade payables
Income taxes payable
Long-term debt
Lease obligations

¥

¥

Total
Derivatives- 14 -

41,3862,359
38,50698,756

Unrealized
Gain (Loss)

84,87911,424

41,3862,359
38,381
101,096¥ (125)2,340¥ 181,007¥ 183,222¥ 2,215¥¥(128 )(128 )

March 31, 2020
Cash and time deposits
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Marketable and investment securities¥ 152,508
78,977(1,099 )77,8788,421¥ 152,508

Total¥ 238,807¥ 238,807

Trade payables
Income taxes payable
Long-term debt
Lease obligations

¥

¥

Total

¥ 170,946¥ 176,087

Derivatives

¥

(6 )

¥

Carrying
AmountThousands of U.S. Dollars
Unrealized
Fair Value
Gain (Loss)

77,878
8,421

41,318
6,017
34,09989,512

41,318
6,017
34,117
94,63518
5,123¥ 5,141(6 )March 31, 2021
Cash and time deposits
Trade receivables
Allowance for doubtful receivables
Net trade receivables
Marketable and investment securities$ 1,360,477
777,405(12,730)
764,675
102,920$ 1,360,477

Total$ 2,228,072$ 2,228,072

Trade payables
Income taxes payable
Long-term debt
Lease obligations

$

$

Total

$ 1,630,694

372,847
21,252346,901
889,694¥

764,675
102,920

372,847
21,252345,775
910,775$ (1,126)
21,081$ 1,650,649$ 19,955

Derivatives$(1,153 )$(1,153 )Notes: 1. Trade receivables are stated net of each allowance for doubtful receivables.
2. Long-term debt and lease obligations are stated at the carrying amount, including current
portion.
3. Derivatives are stated net of assets and liabilities. The figures in parentheses indicate net
liabilities.
Cash and Time Deposits and Trade Receivables
The carrying values of cash and time deposits and trade receivables approximate fair value because of
their short maturities.
Marketable and Investment Securities
While the fair values of equity securities are measured at the quoted market price of the stock exchange,
the fair values of government and corporate bonds and trust fund investments and others are measured at
the quoted market price of the stock exchange and also by the prices obtained from financial institutions.
Fair value information for marketable and investment securities by classification is included in Note 6.
Trade Payables and Income Taxes Payable
The carrying values of trade payables and income taxes payable approximate fair value because of theirshort maturities.
Long-Term Debt and Lease Obligations
The fair values of long-term debt and lease obligations are determined by discounting the cash flows
related to the bonds and debt at the Companies’ assumed rate when a new similar bonds are issued andthe assumed corporate borrowing rate, respectively.

- 15 -

Derivatives
Fair value information for derivatives is included in Note 17.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Millions of Yen
2021
2020

(5)

Thousands of
U.S. Dollars
2021

Investments in equity instruments that do nothave a quoted market price in an active market
Investments in partnerships
Investments in associated companies¥ 6,821
2,196
2,179

¥ 6,725
2,101
2,070

$ 61,450
19,784
19,631

Total¥ 11,196¥10,896$100,865

Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Due in1 Yearor Less
March 31, 2021
Time deposits
Trade receivables
Marketable and investment securities—
Available-for-sale securities with fundinvestments and other:Government and corporate bonds
Trust fund investments and other

Millions of Yen
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

Due after
10 Years¥ 148,308
86,292

Total marketable and investment securities
March 31, 2020
Time deposits
Trade receivables
Marketable and investment securities—
Available-for-sale securities with fundinvestments and other:Government and corporate bonds
Trust fund investments and other

¥

2,990
3,000

¥

735
1,037

¥ 100

¥

5,990

¥ 1,772¥ 100¥ 150,789
78,977

Total marketable and investment securities

¥

2,900

¥ 1,417
939

¥ 100

¥

2,900

¥ 2,356¥ 100

Due in1 Yearor Less
March 31, 2021
Time deposits
Trade receivables

Thousands of U.S. Dollars
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

Due after
10 Years$ 1,336,108
777,405

Marketable and investment securities—
Available-for-sale securities with fundinvestments and other:Government and corporate bonds
Trust fund investments and otherTotal marketable and investment securities$

26,93727,027

$

6,622
9,342

$ 901

$

53,964$ 15,964$ 901

Please see Note 11 for annual maturities of long-term debt and Note 9 for obligations under finance leases.

- 16 -

Note 6.

MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2021 and 2020, consisted of the following:Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020
Current:
Government and corporate bonds
Trust fund investments and other

¥

2,951
3,000

¥

2,905

$

26,58627,027

Total

¥

5,951

¥

2,905

$

53,613

¥

3,498

¥

3,020

$

31,514Non-current:
Marketable equity securities
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in partnerships
Government and corporate bonds
Trust fund investments and other
Total

6,821
2,196
881
1,094

6,726
2,101
1,510
985

61,45019,784
7,937
9,856¥ 14,490¥ 14,342$ 130,541

The costs and aggregate fair values of marketable and investment securities at March 31, 2021 and 2020, were as
follows:

March 31, 2021
Securities classified as:
Available-for-sale:
Equity securities
Government and corporate bonds
Trust fund investments and other¥

March 31, 2020
Securities classified as:
Available-for-sale:
Equity securities
Government and corporate bonds
Trust fund investments and other

¥

Cost

Millions of Yen
Unrealized
Unrealized
Gains
Losses

2,456
3,778
4,055

¥ 1,048
82
39

Cost

Millions of Yen
Unrealized
Unrealized
Gains
Losses

Fair
Value

¥

¥

2,746
4,414
1,055

Cost
March 31, 2021
Securities classified as:
Available-for-sale:
Equity securities
Government and corporate bonds
Trust fund investments and other$

22,12634,03636,532- 17 -

¥

469
29

(6 )
(28)

¥ (195 )
(28 )
(70 )

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses

$

9,442
739
351

$

(54)
(252)

Fair
Value

¥

3,498
3,832
4,094

3,020
4,415
985

Fair
Value

$ 31,514
34,52336,883

The proceeds and realized gains and losses of the available-for-sale securities that were sold during the years
ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020
¥ 621
¥ 316

Proceeds from sales

Thousands of
U.S. Dollars
2021$ 5,595

Gross realized gains
Gross realized losses

¥ 323

¥ 45
(62 )

$ 2,910

Net realized gain (loss)¥ 323¥ (17 )

$ 2,910The impairment losses on available-for-sale equity securities for the years ended March 31, 2021 and 2020 were
¥27 million ($243 thousand) and ¥29 million, respectively.
Note 7.

INVENTORIESInventories at March 31, 2021 and 2020, consisted of the following:

Finished products
Work in process
Raw materials and supplies

Millions of Yen
2021
2020
¥ 26,066¥ 23,773
3,592
4,427
1,876
1,885

Thousands of
U.S. Dollars
2021$ 234,829
32,36016,901

Total¥ 31,534$ 284,090- 18 -¥ 30,085

Note 8.

LONG-LIVED ASSETSThe Company and its subsidiaries reviewed their long-lived assets for impairment as of March 31, 2021
and 2020. As a result, the Company recognized impairment losses, which were as follows:

Use

Millionsof YenType

Thousandsof U.S.
Dollars

Recoverable Amounts

Year ended March 31, 2021
Language training businessTechnology-related
assets―Other

Business related touniversity entrance
examinations
English education business

Software and others

Cram school business
Cram and prep school
business
Residential care services
business¥283

127
Buildings and structuresand others
Buildings and structuresand others
Buildings and structuresand others
Buildings and structuresand others
Total

91
14
9
6
¥530

Nil (The estimated amountbased on discounting$2,550anticipated future cash flows)
The assessed value of fixed
assets1,144
The assessed value of fixed
820
assets
The assessed value of fixed
126
assets
The assessed value of fixed81
assets
The assessed value of fixed
54
assets$4,775

Year ended March 31, 2020
Language training business

Goodwill¥1,586English language classes
for children business
Cram and prep school
business
Correspondence course
business in Indonesia
Photo studio business
Cram school business

Buildings andstructures, goodwill,
software and others
Buildings and structuresand others
Software

1,561
317
52

Buildings and structuresand others
Buildings and structuresand others
Total

48
8
¥3,572- 19 -

Nil (The estimated amountbased on discounting
anticipated future cash flows)
Nil (The estimated amountbased on discounting
anticipated future cash flows)
The assessed value of fixed
assets
The assessed value of fixed
assets
The assessed value of fixed
assets
The assessed value of fixed
assetsNote 9.

LEASES

LesseeA foreign subsidiary leases certain equipment, office space and other assets under noncancelable
operating leases. The Company and a domestic subsidiary have lease contracts for certain land, buildings
and other assets under noncancelable operating leases.
Obligations under finance leases and future minimum payments under noncancelable operating leases
were as follows:
Millions of Yen

Thousands of U.S. Dollars

2021

2021

Due within one year

Finance
Leases¥ 3,145

Operating
Leases¥12,132

Finance
Leases$ 28,334

Operating
Leases$109,298

Due after one year

95,611

54,429861,360

490,351

Total¥98,756¥66,561$889,694$599,649- 20 -

Note 10.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets at March 31, 2021 and 2020, consisted of the following:
Millions of Yen
2021
2020
¥ 9,865¥ 8,274

Consolidation goodwill
Goodwill associated with domestic consolidated
subsidiaries
Others
Total
Note 11.

Thousands of
U.S. Dollars
2021$ 88,874

312
2,943

356
3,392

2,811
26,513¥ 13,120¥ 12,022$ 118,198

Millions of Yen
2021
2020

Thousands of
U.S. Dollars
2021

SHORT-TERM BANK LOANS AND LONG-TERM DEBT

Long-term debt at March 31, 2021 and 2020, consisted of the following:

Bonds payable with interest rates
ranging from 0.16% to 0.42% in 2021
Unsecured¥ 10,032

Loans from banks with interest rates
ranging from 0.130% to 2.160% in 2021
and 0.030% to 0.300% in 2020:
Collateralized
Unsecured
Total
Less current portion

147
28,32738,506(249)

Long-term debt, less current portion¥ 38,257$¥

90,379200
33,89934,099(13,943 )

1,324
255,198
346,901(2,243)¥ 20,156$ 344,658

Annual maturities of long-term debt, excluding finances leases (see Note 9), at March 31, 2021, were as follows:Year Ending
Thousands ofMarch 31
Millions of Yen
U.S. Dollars
2022
¥
249
$
2,243
2023
5,082
45,7842024
5,068
45,658
2025
53
478
2026
5,042
45,4232027 and thereafter
23,012
207,315
Total¥ 38,506$ 346,901

The carrying amounts of assets pledged as collateral for above collateralized long-term debt at March 31, 2021,
were as follows:
Thousands ofMillions of Yen
U.S. Dollars
Buildings, and leasehold improvements
¥ 110
$ 991
Land
334
3,009
Total

¥ 444

- 21 -$ 4,000

Note 12.

RETIREMENT AND PENSION PLANS

Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on the rate of pay at the time of termination, years of service and certain other factors. Such retirement
benefits are made in the form of a lump-sum severance payment from certain domestic subsidiaries and annuity
payments from a welfare annuity fund. Employees are entitled to larger payments if the termination is involuntary or
by retirement at the mandatory retirement age.
(1)

The changes in defined benefit obligation for the years ended March 31, 2021 and 2020, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2021
2020
2021
Balance at beginning of year
¥ 23,424¥ 24,256$ 211,027
Current service cost
1,381
1,435
12,441
Interest cost
118
141
1,063
Actuarial gains(817)(564 )(7,360)Benefits paid
(962)
(1,115 )(8,667)
Foreign currency translation difference
for a foreign subsidiary
(182)
(65 )
(1,639)Decrease resulting from exclusion ofsubsidiaries from consolidation(662 )
Other
Balance at end of year

(2)

(2 )

54

¥ 22,968¥ 23,424$ 206,919

The changes in plan assets for the years ended March 31, 2021 and 2020, were as follows:

Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contributions from the employer
Benefits paid
Decrease resulting from exclusion ofsubsidiaries from consolidation
OthersBalance at end of year(3)

6Millions of Yen
2021
2020
¥ 18,642¥ 19,110
372
384
601
(376 )
698
731
(569)
(579 )

Thousands of
U.S. Dollars
2021$ 167,946
3,351
5,415
6,288
(5,126)14(627 )(1 )126¥ 19,758¥ 18,642$ 178,000

Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets was as follows:
Thousands ofMillions of Yen
U.S. Dollars
2021
2020
2021
Funded defined benefit obligation¥ 14,725¥ 15,404$ 132,658
Plan assets(19,758)(18,642 )(178,000)
Total(5,033)(3,238 )(45,342)
Unfunded defined benefit obligation
8,243
8,020
74,261
Net liability arising from defined benefit obligation

¥

3,210

¥

4,782

Millions of Yen
2021
2020
¥ 8,243¥ 8,020(5,033)(3,238 )Liability for retirement benefits
Asset for retirement benefits$

28,919Thousands of
U.S. Dollars
2021$ 74,261(45,342)

Net liability arising from defined benefit obligation¥ 3,210¥ 4,782$ 28,919
Berlitz Corporation has a SERP for the benefit of its Chairman of the Board, certain designated executives andtheir designated beneficiaries. Liability for retirement benefits above includes ¥171 million ($1,541 thousand)and ¥184 million for SERP for the years ended March 31, 2021 and 2020, respectively, which is disclosed inother current liabilities in the consolidated balance sheets.

- 22 -

(4)The components of net periodic benefit costs for the years ended March 31, 2021 and 2020, were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2021
2020
2021
Service cost
¥ 2,038¥ 2,076$ 18,360Interest cost
118
141
1,063
Expected return on plan assets(372)(384 )(3,351)
Recognized actuarial losses
34
110
307
Amortization of prior service cost
38
38
342
Net periodic benefit costs¥ 1,856¥ 1,981$ 16,721
Service cost includes ¥657 million ($5,919 thousand) and ¥641 million of estimated prepaid retirement
payment for employees in accordance with the prepaid retirement allowance plan of Benesse Corporation forthe years ended March 31, 2021 and 2020, respectively.
The Companies have also paid additional retirement benefits to employees for the years ended March 31,
2021 and 2020. These payments, which are not included in net periodic benefit costs above, are included in¥831 million ($7,486 thousand) and ¥134 million of other expenses for the years ended March 31, 2021 and2020, respectively.

(5)

Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement
benefit plans for the years ended March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

(6)

Prior service cost
Actuarial gains (amount before income tax effect)

¥

38
1,452

¥

38
293

$

Total

¥ 1,490¥331$ 13,423

Unrecognized prior service cost(amount before income tax effect)
Unrecognized actuarial gains (losses)(amount before income tax effect)¥ (148 )

¥

1,603

Total

b.

342
13,081

Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans as of March 31, 2021 and 2020, were as follows:
Millions of Yen
2021
2020

(7)
a.

Thousands of
U.S. Dollars
2021¥1,455¥

Thousands of
U.S. Dollars
2021(185 )$ (1,333 )

150

14,441(35 )$ 13,108

Plan assets
Components of plan assets
Plan assets as of March 31, 2021 and 2020, consisted of the following:
Debt investments
Equity investments
General accountCash and cash equivalents
Others

2021
33%
11
18
4
34

2020
33%
8
18
11
30

Total

100 %

100 %

Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return, which are
expected currently and in the future from the various components of the plan assets.

- 23 -

(8)Assumptions used for the years ended March 31, 2021 and 2020, were set forth as follows:
2021
2020
Discount rate
The Company and domestic
Primarily 0.4%
Primarily 0.3%
consolidated subsidiaries
Foreign consolidated
Primarily 1.9%
Primarily 2.8%
subsidiaries
Expected rate of return
The Company and domestic
Primarily 2.0%
Primarily 2.0%
on plan assets
consolidated subsidiaries
Expected rate of salary
The Company and domestic
Primarily 5.6%
Primarily 6.4%
increases
consolidated subsidiaries
Foreign consolidated
Primarily 2.0%
Primarily 2.0%
subsidiaries

Retirement Benefits for Directors, Audit & Supervisory Board Members and Company Officers
The liability for retirement benefits at March 31, 2021 and 2020, for directors, Audit & Supervisory Board members
and Company officers at certain domestic subsidiaries was ¥84 million ($757 thousand) and ¥78 million,
respectively. The retirement benefits for directors and Audit & Supervisory Board members are paid subject to theapproval of the shareholders.
Note 13.

EQUITYJapanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions
in the Companies Act that affect financial and accounting matters are summarized below:a.
Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain
criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory
Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two-year
term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at
any time during the fiscal year if the Company has prescribed so in its articles of incorporation. The Company meets
all the above criteria, and accordingly, the Board of Directors may declare dividends (except for dividends-in-kind) at
any time during the fiscal year.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the Company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available
for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than
¥3 million.
b.
Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on theequity account charged upon the payment of such dividends until the aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional
paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common
stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among
the accounts within equity under certain conditions upon resolution of the shareholders.
With the issuance of shares under the restricted stock compensation plan, common stock and capital surplus eachincreased by ¥40 million ($361 thousand) and ¥38 million as of March 31, 2021 and 2020, respectively.
c.
Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available
for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stockacquisition rights are presented as a separate component of equity. The Companies Act also provides thatcompanies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisitionrights are presented as a separate component of equity or deducted directly from stock acquisition rights.

- 24 -

Note 14.

SEGMENT INFORMATION

Under ASBJ Statement No. 17, “Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation,” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for Disclosures about Segments of anEnterprise and Related Information,” an entity is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments or aggregations of operating segments thatmeet specified criteria. Operating segments are components of an entity about which separate financial information
is available and for which such information is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. Generally, segment information is required to be reported
on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate
resources to operating segments.
(1)
Description of Reportable Segments
The reportable segments of the Benesse Group (the “Group”) are subject to regular review in order for the Board of
Directors to decide on the allocation of management resources and evaluate results, and to obtain financial data
separated from the constituents of each company.
The Group concentrates investment of management resources in the four fields of Domestic Education, Global
Kodomo Challenge, Nursing Care and Childcare and Berlitz in order to achieve long-term growth for the Group as awhole.
Accordingly, the Group is made up of segments grouped by products and services based on these fourbusinesses, and has designated the Domestic Education, Global Kodomo Challenge, Nursing Care and Childcare
and Berlitz as its reportable segments.
In the Domestic Education Business, the Group engages in the correspondence course business targeting primaryschool students to high school students, school and teacher support business, cram and prep school business,children’s English language class business and other businesses.
In the Global Kodomo Challenge Business, the Group engages in the correspondence course business in Japan,
China, Taiwan and Indonesia, targeting mainly infants.
In the Nursing Care and Childcare Business, the Group engages in the residential care services business(operation of nursing homes and elderly homes), home helper services business, training courses for nursing carepersonnel, a staff placement and personnel dispatch company specializing in medical and nursing care personnel,
the daycare and afterschool childcare operations business and other businesses.
In the Berlitz business, the Group engages in the language instruction business; the ELS business, which provides
educational services including language training to those who want to study abroad; the global leadership training
business and other businesses.
(2)
Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets and Other Items for Each
Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”(3)

Information about Sales, Profit (Loss), Assets and Other Items
Millions of Yen
2021

Sales:
Sales to external customers
Intersegment sales ortransfers
Total

Domestic
Education
Business

Reportable Segment
GlobalNursing
KodomoCare and
Challenge
Childcare
Berlitz
Business
Business
Business

Reportable
Segment
Total

OthersTotal¥ 205,790¥ 55,175¥ 123,808¥ 26,401¥ 411,174¥ 16,358¥ 427,532

59

24

44

625

752

18,722

19,474¥ 205,849¥ 55,199¥ 123,852¥ 27,026¥ 411,926¥ 35,080¥ 447,006¥ (19,474 ) ¥ 427,532

¥

1,613
48,805¥ 10,394
192,063¥ (6,715 ) ¥ 17,328
19,730458,971¥

350
19,769¥ 17,678
478,740

¥

1,473
1,553

13,864
5,373
337

820
1,110

28,677
16,654
1,557

550
727

29,227
17,381
1,557

6
3,016

283

530
10,177

Segment profit (loss)¥ 12,036
Segment assets
198,373
Other:
Increase in property andequipment and intangible
assets12,520Depreciation
8,618
Amortization of goodwill
1,220
Loss on impairment oflong-lived assets
241
Goodwill at March 31, 2021
7,161
Investment in equity method
affiliates
131

82

213

- 25 -

2,046

Reconciliations

Consolidated¥ 427,532¥ (19,474)(4,588) ¥ 13,090
63,242541,98217(52)

29,244
17,3291,557

530
10,177530
10,177

2,259

2,259

Millions of Yen
2020

Sales:
Sales to external customers
Intersegment sales ortransfers
Total

Domestic
Education
Business

Reportable Segment
GlobalNursing
KodomoCare and
Challenge
Childcare
Berlitz
Business
Business
Business

Reportable
Segment
Total

OthersTotal¥ 200,394¥ 56,555¥ 122,868¥ 45,020¥ 424,837¥ 23,740¥ 448,577

97

33

46

2,196

2,372

18,813

21,185¥ 200,491¥ 56,588¥ 122,914¥ 47,216¥ 427,209¥ 42,553¥ 469,762¥ (21,185 ) ¥ 448,577

¥

2,654
45,691¥ 11,375
182,944¥ (3,153 ) ¥ 24,918
22,906
432,589¥864
18,989¥ 25,782
451,578¥ (4,516 ) ¥ 21,266
65,848517,426

1,191
1,593

9,465
5,158
534

Segment profit (loss)¥ 14,042
Segment assets
181,048
Other:
Increase in property andequipment and intangible
assets10,443
Depreciation
8,776
Amortization of goodwill
1,177
Loss on impairment oflong-lived assets
1,886
Goodwill at March 31, 2020
5,276
Investment in equity method
affiliates
123

52

Reconciliations

Consolidated¥ 448,577¥ (21,185 )

959
1,594
252

22,05817,121
1,963

759
814

22,817
17,935
1,963

1,586

3,524
8,630

48

3,572
8,630

3,572
8,630

196

1,946

2,142

2,142

3,354
73

(157 )(13 )

22,66017,922
1,963

Thousands of U.S. Dollars
2021

Domestic
Education
Business

Reportable Segment
NursingGlobalCare
KodomoandChallenge
Childcare
Berlitz
Business
Business
Business

Reportable
Segment
Total

Others

Total

Reconciliations

Consolidated

Sales:
Sales to externalcustomers
Intersegment sales ortransfers$ 1,853,964 $ 497,072 $ 1,115,387 $ 237,847 $ 3,704,270 $ 147,370 $ 3,851,640

Total$ 1,854,495 $ 497,288 $ 1,115,784 $ 243,477 $ 3,711,044 $ 316,037 $ 4,027,081 $ (175,441) $ 3,851,640

531

216

397

5,630

6,774

168,667$ 3,851,640

175,441 $ (175,441)

Segment profit (loss)$ 108,432 $ 14,532 $ 93,640 $ (60,496) $ 156,108 $
3,153 $ 159,261 $ (41,333) $ 117,928
Segment assets
1,787,144
439,685 1,730,297
177,748
4,134,874
178,099 4,312,973
569,748 4,882,721
Other:
Increase in property andequipment andintangible assets
112,793
13,270124,901
7,387
258,351
4,955
263,306
153
263,459
Depreciation
77,64013,991
48,405
10,000150,0366,550
156,586(469)
156,117
Amortization of goodwill
10,991
3,036
14,027
14,027
14,027
Loss on impairment oflong-lived assets
2,171
54
2,550
4,775
4,775
4,775
Goodwill at March 31, 2021
64,514
27,171
91,68591,68591,685Investment in equity
method affiliates
1,180
739
1,919
18,432
20,351
20,351- 26 -

Note: The details of reconciliations are as follows:

Sales
Intersegment eliminations
Total¥ (19,474 )¥ (21,185 )$ (175,441 )Profit (Loss)
Intersegment eliminations
Corporate expenses

Millions of Yen
2021
2020
¥
303
¥ (126 )(4,891)(4,390 )Thousands of
U.S. Dollars
2021
$
2,730
(44,063 )Total
Notes:1.
2.

¥ (4,588 )¥ (4,516 )$ (41,333 )Corporate expenses are mainly expenses of the Company that are not attributable to thereportable segments.
Segment profit (loss) is adjusted with operating income in the consolidated statement ofincome.
Millions of Yen
2021
2020
¥ (15,042 )¥ (12,139 )
78,284
77,987

AssetsIntersegment eliminations
Corporate assets
Total
Note:

Total
Note:

Millions of Yen
2021
2020
¥
(330)
¥ (304 )347
147

Thousands of
U.S. Dollars
2021$ (2,973 )
3,126

¥
17
¥ (157 )Capital investment in the Company is not attributable to reportable segments.
Millions of Yen
2021
2020
¥ (291 )¥ (259 )239
246

Depreciation
Intersegment eliminations
Corporate expenses
Total
Note:

Thousands of
U.S. Dollars
2021$ (135,514 )
705,262¥ 63,242¥ 65,848$ 569,748
Corporate assets consist mainly of marketable securities of the Company that are not attributable
to the reportable segments.

Increase in Property and Equipment andIntangible Assets
Intersegment eliminations
Corporate assets(4)

Thousands of
U.S. Dollars
2021$ (175,441 )Millions of Yen
2021
2020
¥ (19,474 )¥ (21,185 )$153

Thousands of
U.S. Dollars
2021$ (2,622 )
2,153¥ (52 )¥ (13 )$ (469 )Corporate expenses are expenses related to the Company that are not attributable to thereportable segments.

Information about Geographical Areas
Sales

Japan
¥ 377,453

Millions of Yen
2021
Others¥ 50,079

Total¥ 427,532

Japan¥ 380,782

Millions of Yen
2020
Others¥ 67,795

Total¥ 448,577- 27 -

Thousands of U.S. Dollars
2021
Japan
OthersTotal$ 3,400,478$ 451,162$ 3,851,640
Note: Sales are classified by country or region based on the location of customers.
Note 15.

ADVERTISING COSTS

Advertising costs charged to income were ¥33,212 million ($299,207 thousand) and ¥34,039 million for the years
ended March 31, 2021 and 2020, respectively.
Note 16.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs charged to income were ¥1,610 million ($14,505 thousand) and ¥1,566 million forthe years ended March 31, 2021 and 2020, respectively.
Note 17.

DERIVATIVESThe Company enters into foreign currency exchange contracts to hedge foreign currency exchange risk associatedwith certain assets denominated in foreign currencies.
It is the Company’s policy to use derivatives only for the purpose of reducing market risks associated with assets.
The Company does not hold or issue derivatives for trading purposes.
Derivatives are subject to market risk and credit risk. Market risk is the exposure created by potential fluctuations
in market conditions, including foreign currency exchange rates. Credit risk is the possibility that a loss may result
from a counterparty’s failure to perform according to the terms and conditions of the contract.
Because the counterparties to these derivatives are limited to major international financial institutions, theCompany does not anticipate any losses arising from credit risk.
The execution and control of derivatives are managed by the Companies’ Finance Department applying internal
control policies that regulate the authorization and credit limit amounts. Each derivative transaction is reported to the
CEO weekly and reported to the Board of Directors quarterly, and is also reported to the Board of Directors eachtime significant circumstances occur. Prior to entering into derivative contracts, foreign subsidiaries confer withindependent advisers to assess the reasonableness of the contracts and obtain the Board of Directors’ approval,
and each derivative transaction is periodically reported to the Board of Directors.
Derivative Transactions to Which Hedge Accounting Is Not Applied at March 31, 2021 and 2020

Foreign currency forward contracts—
Selling—U.S. dollars

Foreign currency forward contracts—
Selling—U.S. dollars

Foreign currency forward contracts—
Selling—U.S. dollars

Contract
AmountMillions of Yen
2021
Contract
Amount Due
Fair
after One YearValue

¥ 12,348¥(128 )

Contract
AmountMillions of Yen
2020
Contract
Amount Due
Fair
after One YearValue

¥ 5,375¥ (6 )

Contract
AmountThousands of U.S. Dollars
2021
Contract
Amount Due
Fair
after One Year
Value

$111,243$(1,153 )- 28 -

Unrealized
Gain (Loss)¥(128 )

Unrealized
Gain (Loss)¥ (6 )

Unrealized
Gain (Loss)$(1,153 )Derivative Transactions to Which Hedge Accounting Is Applied at March 31, 2020

Interest rate and currency swap

Hedged Item
Long-term debt

Millions of Yen
2020
Contract
Contract
Amount Due
Amountafter One Year¥ 9,806¥ 9,806

The above interest rate and currency swap used to hedge long-term debt denominated in a foreign currency with avariable interest rate, which qualifies for hedge accounting and meets specific matching criteria, is not measured atmarket value. Rather, the long-term debt is recorded at a yen amount under the swap agreement and interest
expense is calculated and recorded using a fixed interest rate.
The fair value of these interest rates and currency swaps is included in long-term debt as described in Note 5.

- 29 -

Note 18.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in theaggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for the years ended March 31,
2021 and 2020.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March
31, 2021 and 2020, are as follows:
Thousands ofMillions of Yen
U.S. Dollars
2021
2020
2021
Deferred tax assets:
Tax loss carryforwards¥ 8,268¥ 8,302$ 74,486
Depreciation
5,689
5,056
51,252
Provision for employees’ bonuses
2,465
2,274
22,207
Accrued expenses
1,933
1,575
17,414
Liability for retirement benefits
1,810
1,636
16,306Long-term payables—other
822
877
7,405
Loss on valuation of investment securities
699
767
6,297
Loss on impairment of long-lived assets
628
687
5,658
Payables—other
614
264
5,532
Foreign tax credit carryforwards
600
645
5,406
Asset retirement obligations
588
496
5,297
Deferred consumption taxes
522
406
4,703
Social insurance premium
375
353
3,378
Inventories
360
371
3,243
Trade receivables—accounts
356
360
3,207
Deferred revenue
331
361
2,982
Prepaid expenses
299
270
2,694
Enterprise tax
291
477
2,622
Unrealized profit on fixed assets
268
259
2,415
Advances received
255
320
2,297
666
6,910
Other
767
Total of tax loss carryforwards and temporary differences
27,94026,422
251,711
Less valuation allowance for tax loss carryforwards(7,598)(8,209 )(68,450)
Less valuation allowance for temporary differences(11,615)(11,063 )(104,639)
Total valuation allowance(19,213)(19,272 )(173,089)
Total
8,727
7,150
78,622
Offset with deferred tax liabilities
3,553
3,044
32,009Net deferred tax assets¥ 5,174¥ 4,106$ 46,613
Deferred tax liabilities:
Prepaid pension expenses¥ 1,517¥983$ 13,666
Intangible assets
859
1,019
7,738
Undistributed earnings of foreign subsidiaries
and associated companies
666
750
6,000
Unrealized gain on available-for-sale securities
509
298
4,585
Inventories
258
270
2,323
Other
425
365
3,832
Total
4,234
3,685
38,144
Offset with deferred tax assets
3,553
3,044
32,009Net deferred tax liabilities
¥
681
¥
641
$
6,135

- 30 -

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets
as of March 31, 2021 and 2020, were as follows:
Millions of Yen
After
After
After
After
1 Year
2 Years
3 Years
4 Years
1 Yearthroughthroughthroughthrough
After
March 31, 2021
or Less
2 Years
3 Years
4 Years
5 Years
5 Years
Total
Deferred tax assets
relating to tax loss
carryforwards
¥ 146
¥ 64
¥ 942
¥ 275
¥ 966
¥ 5,875¥ 8,268
Less valuation
allowances for tax
loss carryforwards
141
64
941
257
500
5,695
7,598
Net deferred tax assets
relating to tax loss
carryforwards
5
1
18
466
180
670

March 31, 2020
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

March 31, 2021
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

Millions of Yen
After
After
3 Years
4 Years
throughthrough
4 Years
5 Years

After
5 Years

¥ 83

¥ 971

296

¥ 6,693

83

971

275

6,641

8,209

21

52

93

1 Yearor LessAfter
1 Yearthrough
2 Years

Thousands of U.S. Dollars
After
After
After
2 Years
3 Years
4 Years
throughthroughthrough
3 Years
4 Years
5 Years

After
5 Years$ 1,315$577$8,486$ 2,477$ 8,703$ 52,928

577

8,477

2,315

4,505

51,30668,450

9

162

4,198

1,622

6,036

1 Yearor LessAfter
1 Yearthrough
2 YearsAfter
2 Years
through
3 Years

¥ 63

¥ 196

43

196

20

1,270
45

¥

Total
¥

8,302

Total
$

74,486

For the tax loss carryforwards of ¥8,268 million ($74,486 thousand) and ¥8,302 million (amount multiplied byeffective statutory tax rate), deferred tax assets of ¥670 million ($6,036 thousand) and ¥93 million have beenrecorded as of March 31, 2021 and 2020, respectively. Net deferred tax assets relating to tax loss carryforwards
were determined to be recoverable as future taxable income is anticipated, and therefore valuation allowance has
not been recognized.

- 31 -

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2021 and 2020, andthe actual effective tax rate reflected in the accompanying consolidated statement of income was as follows:
Normal effective statutory tax rate
Expense not deductible for income tax purposes
Difference in burden of income taxes with the foreign consolidated
subsidiaries
Per capita inhabitants’ taxes
Amortization of goodwill
Foreign withholdings tax
Share of loss (profit) of entities accounted for using the equity method
Equity in net earnings of affiliated companies
Foreign tax credit
Revenue exempt from income tax purposes
Change in the valuation allowance
Income taxes—refund
Impairment loss on goodwill
Adjustment of gain on sales of investments in subsidiaries and an affiliate
Other

2021
30.6 %
12.9

2020
30.6 %
3.3

10.0
7.2
7.1
4.1
(0.6)
(1.3)
(2.1)
(3.4)
(5.5)
(17.5)

2.2
2.9
3.6
1.8
(0.2)

Actual effective tax rate

41.1 %

Note 19.

(0.6)
(1.5)
6.6
4.3
1.5

(0.4)
54.5 %STOCK OPTION PLAN

The stock options that existed as of March 31, 2021, are as follows:
Stock
Option2015 Stock
Option2016 Stock
OptionPersons
Granted3 directors
17 selected
employees
3 directors

Numberof Options
Granted
1,477
1,873
975

Date of Grant
August 3, 2015
September 12,
2016

ExercisePrice¥ 3,513¥ 2,639

Exercise Period
From August 4, 2017
to August 3, 2022
From September 13, 2018
to September 12, 2023

The stock option activity is as follows:
2015 Stock2016 Stock
OptionOption(Shares)Year Ended March 31, 2021
Non-vested
March 31, 2020—Outstanding
GrantedCanceled
VestedMarch 31, 2021—Outstanding
VestedMarch 31, 2020—Outstanding
VestedExercised
Canceled
March 31, 2021—Outstanding

2,079

975

2,079

975

Exercise price¥3,513($32 )¥2,639($24 )

¥377
($3 )

¥277
($2 )

Average stock price at exercise
Fair value price at grant date

- 32 -

Note 20.

OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the years ended March 31, 2021 and 2020, were as
follows:
Thousands of
U.S. Dollars
2021

Millions of Yen
2021
2020
Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income (loss) in associates:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Total other comprehensive income (loss)
Note 21.

¥ 1,401
(508)
893
(207)

¥ (1,133)(115)(1,248)330$ 12,622(4,577)
8,045(1,865)

¥

686

¥

(918)

$

6,180

¥

176
428
604
(13)

¥

(300)
(408)
(708)

$

1,585
3,856
5,441
(117)

¥

591

¥

(708)

$

5,324

¥ 1,425
65
1,490
(447)

¥

187
144
331
(98)

$ 12,838
586
13,424(4,027)¥ 1,043

¥

233

$

9,397

¥

28
(5)
23
(8)

¥

2
(4)
(2)

$

252
(45)
207
(72)

¥

15

¥

(2)

$

135

¥ 2,335¥ (1,395)$ 21,036

BUSINESS COMBINATIONSTransaction under Common Control and Others
On February 26, 2021, Classi Corporation, a consolidated subsidiary of the Company, acquired additional shares of
EDUCOM Corporation. As a result, EDUCOM Corporation became a wholly owned subsidiary of Classi Corporation.
a.

Outline of transaction(1) Name of consolidated subsidiary and its business outline
Name of consolidated subsidiary: EDUCOM Corporation
Business outline:
Development and sales of school support systems for public elementary andjunior high schools(2) Date of additional acquisition of the consolidated subsidiary’s share
Deemed date of acquisition: March 31, 2021
(3) Percentage of additional voting rights acquired
Percentage of voting rights held before additional acquisition: 65.2%
Percentage of additional voting rights acquired: 34.8%
Percentage of voting rights held after additional acquisition: 100.0%(4) Legal form of business combination
Share acquisition by cash(5) Name of the company after the combination
No change- 33 -

(6) Other information of the deal
The Company paid cash to acquire all of the shares of EDUCOM Corporation held by non-controllinginterests, which was mutually agreed between shareholders, thereby making it into a wholly owned
subsidiary. This move was made to improve the Group management efficiency and strengthen
governance.
b. Overview of accounting treatment applied
The share acquisition was accounted for as a transaction with non-controlling interests under the classificationof transactions under common control in accordance with ASBJ Statement No. 21 of January 16, 2019, and
ASBJ Guidance No. 10 of January 16, 2019. This transaction is deemed as an integral part of the acquisition of
EDUCOM Corporation made by Classi Corporation in 2019, and goodwill recognized for additionally acquired
equity interests after acquiring control was determined as if the goodwill had been recognized at the time ofacquisition of control. In addition, cash flows related to the additional acquisition is recorded as acquisition of
additional interests of a consolidated subsidiary under cash flows from investing activities.
c. Matters related to additional acquisition of the subsidiary’s shares(1) Acquisition cost of the acquired company and breakdown
Millions of Yen¥ 2,9882,988

Consideration for acquisition–CashAcquisition cost(2)

Thousands of
U.S. Dollars$ 26,919
26,919Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period of amortization(a) Amount of goodwill incurred ¥1,745 million ($15,721 thousand)(b) Reasons for goodwill incurred
The Company recorded goodwill due to the difference between the additional acquisition cost of
EDUCOM Corporation, and the decreasing amount of non-controlling interests.
(c) Method and period of amortization
Amortized equally over 20 years from the date the Company obtained control- 34 -

Note 22.

NET INCOME PER SHARE

Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March
31, 2021 and 2020, is as follows. Diluted EPS for the year ended March 31, 2021, is not disclosed because there
are no potentially dilutive shares outstanding.
Millionsof YenNet Income
Attributableto Owners of
the Parent
Year Ended March 31, 2021
Basic EPS—Net income available tocommon shareholders
Year Ended March 31, 2020
Basic EPS—Net income available tocommon shareholders
Effect of dilutive securities—Warrants
Diluted EPS—Net income forcomputation
Note 23.

Thousandsof Shares

Yen

WeightedAverage
SharesU.S. Dollars

EPS

¥

3,123

96,374¥ 32.40¥

6,289

96,346
5¥ 65.28¥6,289

96,351¥ 65.27$ 0.29SUBSEQUENT EVENTS

a. Business Combination by Acquisition
On June 1, 2021, the Company acquired all issued shares of Proto Medical Care Co. Ltd. (head office: Chiyoda-ku,
Tokyo; “Proto Medical Care”). As a result, Proto Medical Care and its subsidiaries MARUFUJI (head office: Ota-ku,
Tokyo) and SILVER HEART (head office: Kuki City, Saitama Prefecture) became consolidated subsidiaries of theCompany.
(1) Outline of the business combination(a) Name of the acquired company and its business outline
Name of the acquired company: Proto Medical Care Co. Ltd.
Business outline:
Recruitment and temporary staffing in the medical, nursing care, and welfare
fields and related businesses(b) Major reason for the business combination
Proto Medical Care’s corporate goal is “CHANGING COMPANY～A company that continues to change for the
future～.” It operates “Heart Page,” one of the largest directory of nursing care service providers, “Kaigo
Kyujin Navi,” a recruitment and outplacement website for nursing, medical and welfare facilities with theindustry’s leading number of job postings, “Oasis Navi,” a search site for private nursing homes and carehomes, and “Nurse Agent,” a recruitment site for nurses. Proto Medical Care also provides temporary
placement services for caregivers and nurses, and rental services for nursing care equipment.
In November 2020, the Company announced a medium-term management plan titled “Evolve Core
Businesses and Expand into New Fields.” Under the plan, the Company positions expansion of its recruitment
business in the nursing care field as one of its important growth strategies in the nursing care business. By
making Proto Medical Care a consolidated subsidiary, the Company will increase the speed of its expansion
in the nursing care field. As a leader in the field, the Company will play an even greater role in addressing thesocial issue of supporting seniors to live by their own values.
(c) Date of business combination
June 1, 2021 (Deemed date of acquisition: June 30, 2021)(d) Legal form of business combination
Share acquisition by cash(e) Name of the company after the combination
No change(f) Ratio of voting rights acquired100%- 35 -

(g) Basis for determining the acquirer
The Company acquired 100% of voting rights of Proto Medical Care by cash.
(2) Acquisition cost of the acquired company and related details of each class of consideration

Consideration for acquisition–CashAcquisition cost

Millions of Yen

Thousands of
U.S. Dollars¥ 4,250
4,250$ 38,288
38,288Millions of Yen

Thousands of
U.S. Dollars(3) Major acquisition-related costs

Advisory fees and others

¥

44

$

396

(4) Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period of amortization
Not yet determined at this time.
(5) The assets acquired and the liabilities assumed at the acquisition date
Not yet determined at this time.
b. Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2021, was approved at the Company’s shareholders’meeting held on June 26, 2021:

Year-end cash dividends, ¥25 ($0.23) per share- 36 -

Millions of Yen

Thousands of
U.S. Dollars¥ 2,410$ 21,712

Independent Auditor’s Report
To the Board of Directors of Benesse Holdings, Inc.: