Consolidated Financial Statements
andNon-Consolidated Financial Statements
OYO Corporation
and Consolidated Subsidiaries
Year ended December 31, 2021
with Independent Auditor’s Report

5.【Financial information】
1. Basis of preparation of the consolidated financial statements and non-consolidated financial statements.
(1) The consolidated financial statements of the Company are prepared in accordance with the “Regulations Concerning
the Terminology, Forms and Preparation Methods of Consolidated Financial Statements” (the Ministry of FinanceOrdinance No. 28, 1976).
In the current fiscal year (from January 1, 2021 to December 31, 2021), the consolidated financial statements have been
prepared in accordance with the revised Regulations for the Consolidated Financial Statements due to the proviso to
Article 3, Paragraph 1 of the Supplementary Provisions of the Cabinet Office Ordinance for Partial Revision of theRegulations on Terminology, Forms, and Preparation Methods of Financial Statements, etc. (“Revised Cabinet Office
Ordinance”, the Cabinet Office Ordinance No. 46, June 12, 2020).
(2) The non-consolidated financial statements of the Company are prepared in accordance with the “Regulations Concerning
the Terminology, Forms and Preparation Methods of Financial Statements, etc.” (“Regulations for Non-Consolidated
Financial Statements”, the Ministry of Finance Ordinance No. 59, 1963). In the current fiscal year (from January 1, 2021
to December 31, 2021), the non-consolidated financial statements have been prepared in accordance with the revised
Regulations for Non-Consolidated Financial Statements due to the proviso to Article 3, Paragraph 1 of the Revised
Cabinet Office Ordinance. The Company is eligible to submit special financial statements, and prepares its financial
statements in compliance with the provisions of Article 127 of the Regulations for Non-Consolidated Financial
Statements.
2. Audit certification
The consolidated financial statements for the current fiscal year (from January 1, 2021 to December 31, 2021 ) and nonconsolidated financial statements for the current fiscal year (from January 1, 2021 to December 31, 2021 ) were audited by
Ernst & Young ShinNihon LLC, in accordance with Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act.
3. Ensuring appropriateness of the consolidated financial statements
The Company is committed to ensuring the appropriateness of the consolidated financial statements. In particular, theCompany joined the Financial Accounting Standards Foundation to develop a more comprehensive understanding ofaccounting standards and enhance its systems appropriately to respond to changes in accounting standards.

1

1. 【Consolidated Financial Statements】(1)【Consolidated financial statements】①【Consolidated balance sheets】
Prior fiscal year
(As of December 31,
2020)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Accounts receivable-completed operations
Lease receivables and investment assets
Short-term investment securities
Costs on uncompleted services
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Accumulated impairment loss
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Accumulated impairment loss
Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Accumulated impairment loss
Tools, furniture and fixtures, net
Land
Lease assets
Accumulated depreciation
Lease assets, net
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Software in progress
Goodwill
Other
Total intangible assets

29,9701,517*121,415
3,822
922
713
776
841
1,999
*3
597
(26)
62,54929,8511,534*122,647
3,858
1,649
924
1,035
2,594
*3
699
(26)
64,76813,654(9,171)
(2)
4,480
6,943
(5,650)
(220)
1,072
1,656
(1,544)
(6)
105
*4
5,886
531
(312)
219
32
11,797

13,936(9,489)
(7)
4,439
7,419
(6,037)
(236)
1,145
1,723
(1,593)
(15)
113
*4
5,825
409
(218)
190
177
11,892

851
25
83
66
1,026

800
165
35
1,001

*1,2

2

(Millions of yen)
Current fiscal year
(As of December 31,
2021)

*1,2

(Millions of yen)
Current fiscal year
(As of December 31,
2021)

Prior fiscal year
(As of December 31,
2020)
Investments and other assets*5

Investment securities

5,627

*5

4,723

Long-term loans receivable23

26

Net defined benefit asset

1,766

1,913

Deferred tax assets

49

81

Real estate for investment

534

534

(232)

(241)

Accumulated depreciation

301

Real estate for investment, net
*3

Other

1,275

292
*3

1,440

Allowance for doubtful accounts

(370)

(478)

Total investments and other assets

8,671

7,998

21,496

20,892

84,04585,661

Total noncurrent assets
Total assets

3Prior fiscal year
(As of December 31,
2020)(Millions of yen)
Current fiscal year
(As of December 31,
2021)

Liabilities
Current liabilities
Notes and accounts payable-trade*2

Accounts payable-operating

1,662

1,652

Short-term loans payable

93

171

1,420

1,372

Provision for product warranties

106

121

Provision for stock benefits

325-

Income taxes payable

718

673

Advances received on uncompleted contracts

397

346

Provision for bonuses

142

147

Provision for loss on orders received

182

3

Other

5,014

4,973

Total current liabilities

10,63810,001

Lease obligations

2,637

2,653

Net defined benefit liability

1,845

1,857

Provision for stock benefits

49

224

Lease obligations

573

*2

539

Noncurrent liabilities

576

Deferred tax liabilities*4

Deferred tax liabilities for land revaluation
Other
Total noncurrent liabilities
Total liabilities

4

280

653
*4

262

195

202

5,584

5,855

16,22315,856

Prior fiscal year
(As of December 31,
2020)(Millions of yen)
Current fiscal year
(As of December 31,
2021)

Net assets
Shareholders’ equity
Capital stock

16,174

16,174

Capital surplus

15,077

13,863Retained earnings

40,13642,204

Treasury stock(1,820)(2,049)Total shareholders’ equity

69,567

70,192

Accumulated other comprehensive income

1,303

Valuation difference on available-for-sale securities*4

Revaluation reserve for land

(2,902)

1,120*4(2,942)Foreign currency translation adjustment

(621)

864

Remeasurements of defined benefit plans

193

161

(2,027)

(795)

282

407

67,82269,804

84,04585,661

Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

5

②【Consolidated statements of income and consolidated statements of comprehensive income】【Consolidated statements of income】
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
49,608Net sales*2,*3

Cost of sales

33,972(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)*1
51,675*2,*3

34,573

15,635

17,102

Directors’ compensations

786

798

Salaries and allowances

5,144

5,525

Provision for bonuses

55

51

Provision for stock benefits

73

80

Legal welfare expenses

809

845

Retirement benefit expenses

163

183

Traveling and transportation expenses

290

289

Rent expenses

473

501

Gross profit
Selling, general and administrative expenses

357

Depreciation*4

Research and development expenses

1,427

378
*4

1,454

Amortization of goodwill

125

16

Provision of allowance for doubtful accounts

125

2

Other

3,280

3,308

Total selling, general and administrative expenses

13,112

13,435

2,522

3,666

Interest income

106

32

Dividends income87

92

Equity in earnings of affiliates

29

55

Grant income

178

142

Insurance and dividends income

84

78

Rent of real estate

53

51

Reversal of allowance for doubtful accounts

43

60

Other

95

61

Total non-operating income

680

574

Operating income
Non-operating income6Prior fiscal year
(From January 1, 2020
to December 31, 2020)(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)

Interest expenses

11

9Foreign exchange losses

99Provision of allowance for doubtful accounts

7

3

Rent cost of real estate

14

13

Loss on retirement of noncurrent assets

5

12Loss on cancellation of leases

-

11

Other

6

2

Total non-operating expenses

55

61

3,147

4,179

*5

*5

Non-operating expenses

Ordinary income
Extraordinary income
Gain on sales of noncurrent assets

25

97

Gain on sales of investment securities

7

23

Total extraordinary income

33

120

1

-

Extraordinary loss
Loss on sales of investment securities*6

Impairment loss

350

*6

138

Total extraordinary loss

352

138

Profit before income taxes

2,828

4,161

Income taxes-current

1,084

1,170

Income taxes-deferred

48

107

Total income taxes

1,133

1,277

Profit

1,694

2,883

Profit (Loss) attributable to non-controlling interests

(86)

17

Profit attributable to owners of parent

1,781

2,866

7

【Consolidated statements of comprehensive income】
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
1,694(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)
2,883

Valuation difference on available-for-sale securities

(456)

(182)

Foreign currency translation adjustment

(737)

1,501

18

(31)

ProfitOther comprehensive income

Remeasurements of defined benefit plans*1

Total other comprehensive income (loss)
Comprehensive income(1,175)

*1

1,287

519

4,171

Comprehensive income attributable to owners of parent

612

4,138

Comprehensive income (loss) attributable to noncontrolling interests

(93)

32

(Breakdown)

8

③【Consolidated statements of changes in net assets】
Prior fiscal year (From January 1, 2020 to December 31, 2020)(Millions of yen)
Capitalstock
Balance at the beginning of theYear
Changes during the year

16,174

Shareholders’ equity
CapitalRetained
Treasury
surplusearnings
stock

15,07739,096(1,826)

Shareholders’equity total

68,521Dividends from surplus

(846)

(846)

Profit attributable to ownersof parent
Purchase of treasury stock

1,781

1,781

Disposal of treasury stock
Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Change in ownershipinterest of parent due totransactions with noncontrolling interests
Net changes in items otherthan shareholders’ equity
Total changes during the year
Balance at the end of year

(0)

(0)

6

6
-

105

105
-

-

-

1,039

6

1,046

16,174

15,077

40,136(1,820)69,567(Millions of yen)

Accumulated other comprehensive income

Balance at the beginning of theYear
Changes during the year

Valuationdifference on
available-forsale securities

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment

1,760(2,797)107

Remeasurements ofdefinedbenefit plans

175

Total
accumulated
othercomprehensiv
e income

Noncontrollinginterests

Total net
assets(753)

389

68,157

Dividends from surplus(846)

Profit attributable toowners of parent
Purchase of treasury stock

1,781

Disposal of treasury stock

6

Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Change in ownershipinterest of parent due totransactions with noncontrolling interests
Net changes in items otherthan shareholders’ equity
Total changes during the year-

Balance at the end of year

(0)

105
-

(456)

(105)

(729)

18

(1,273)(107)(1,380)

(456)

(105)

(729)

18

(1,273)

(107)

(334)

1,303

(2,902)

(621)

193

(2,027)282

67,8229

Current fiscal year (From January 1, 2021 to December 31, 2021 )(Millions of yen)
Capitalstock
Balance at the beginning of theYear
Changes during the year

16,174

Shareholders’ equity
CapitalRetained
Treasury
surplusearnings
stock

Shareholders’equity total(1,820)69,567

15,077

40,136

Dividends from surplus

(838)

(838)

Profit attributable toowners of parent
Purchase of treasury stock

2,866

2,866

Disposal of treasury stock

22

Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Change in ownershipinterest of parent due totransactions with noncontrolling interests
Net changes in items otherthan shareholders’ equity
Total changes during the year

(1,128)

Balance at the end of year

16,174(2,096)(2,096)

739
1,128

761
-

39

39

(108)

(0)

(108)

(1,214)
13,863

2,067
42,204(228)(2,049)625
70,192(Millions of yen)
Accumulated other comprehensive income

Balance at the beginning of theyear
Changes during the year

Valuationdifference on
available-forsale securities

1,303

Revaluation
reserve forland

Foreigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets(2,902)

(621)

193

(2,027)282

67,822(838)
2,866

Dividends from surplus
Profit attributable toowners of parent
Purchase of treasury stock(2,096)761-

Disposal of treasury stock
Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Change in ownershipinterest of parent due totransactions with noncontrolling interests
Net changes in items otherthan shareholders’ equity
Total changes during the year
Balance at the end of year

39
(108)

(182)

(39)

1,486

(31)

1,232

124

1,357

(182)
1,120

(39)
(2,942)

1,486
864

(31)
161

1,232
(795)

124
407

1,982
69,80410

④ 【Consolidated statements of cash flows】
Prior fiscal year
(From January 1, 2020
to December 31, 2020)(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)

Profit before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in provision for bonuses
Interest and dividend income
Interest expenses
Equity in (earnings) losses of affiliates
Loss (gain) on sale of investment securities
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in inventories
Decrease (increase) in costs on uncompleted services
Increase (decrease) in notes and accounts payable trade
Increase (decrease) in advances received on
uncompleted contracts
Other
Subtotal

2,828
1,192
350
125
1
(193)
11
(29)
(6)
1,643
(426)
39
(216)
(77)

4,161
1,118
138
16
4
(125)
9
(55)
(23)
(516)
(636)
(87)
(59)

706
5,948

(569)
3,376

Interest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investment activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of short-term investment securities
Proceeds from sales of short-term investment securities
Purchase of property, plant and equipment and intangible
assetsProceeds from sales of property, plant and equipment
and intangible assets
Purchase of investment securities
Proceeds from sale of investment securities
Contingent consideration payments of shares of subsidiaries
Collection of loans receivable
Other
Net cash provided by (used in) investing activities

234
(11)
(1,246)
4,925

144
(9)
(1,204)2,307(5,344)
5,467
(300)
300
(893)

(5,486)
5,472
23(1,101)

385

212

(13)
47
(28)
1
362
(15)

(94)
58
(29)
4
51
(888)

Cash flows from operating activities

11Prior fiscal year
(From January 1, 2020
to December 31, 2020)
Cash flows from financing activities
Proceeds from short-term loans payable
Repayments of short-term loans payable
Repayments of lease obligations
Proceeds from sales of treasury stock
Purchase of treasury stock
Cash dividends paid
Dividends paid to non-controlling interests
Other

(7)
(112)
6
(0)
(846)
(18)
(979)
(210)
3,719
20,565*1
24,285

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year

12

(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)

163
(101)
(114)
0
(1,604)
(838)
(9)
(0)
(2,504)399(685)
24,285*1
23,599

【Notes】(Significant accounting policies to the consolidated financial statements)
1. Scope of consolidation(1) Number of consolidated subsidiaries: 25
Names of major consolidated subsidiaries:
OYO CORPORATION U.S.A.
KINEMETRICS, INC.
GEOMETRICS, INC.
GEOPHYSICAL SURVEY SYSTEMS, INC.
ROBERTSON GEOLOGGING LTD.
NCS SUBSEA,INC.
FONG CONSULT PTE.LTD.
FC INSPECTION PTE.LTD.
NS ENVIRONMENTAL SCIENCE CONSULTANT CORPORATIONOYO RESOURCES MANAGEMENT CORPORATIONTOUHOKU BORING CO., LTD.
OCEAN ENGINEERING CORPORATION
KOEI CONSULTANT CO., LTD.
OYO SEISMIC INSTRUMENTATION CORPORATIONOYO GEO-MONITORING SERVICE CORPORATIONNANKYU GEO TECHNICS CORPORATIONOYO GEOTECHNICAL SERVICE CORPORATIONKCS CO., LTD.
OYO RMS CORPORATION(Note) OYO INTERNATIONAL CORPORATION, which was a consolidated subsidiary, was eliminated through an absorptiontype merger with the Company as the surviving company on April 1, 2021, and has therefore been excluded fromthe scope of consolidation from the current fiscal year.
(2) Names of major non-consolidated subsidiaries
Major non-consolidated subsidiary:
SIGMA KOGYO CO., LTD.
(Reason for excluding from the scope of consolidation)
This unconsolidated subsidiary is small; and the total assets, net sales, net income and loss (amount corresponding toeach company’s equity), and retained earnings (amount corresponding to each company’s equity) of the subsidiary haveno significant impact on the consolidated financial statements.
2. Application of the equity method(1) Number of affiliates accounted for under the equity method: 5Names of major affiliates
IRIS INSTRUMENTS SAS
ENGINEERING & RISK SERVICES CORPORATION(2) Non-consolidated subsidiaries and affiliates not accounted for under the equity method
Name of major non-consolidated subsidiaries:
SIGMA KOGYO CO., LTD.
The Company excluded this non-consolidated subsidiary because it had little impact on the consolidated financial
statements and had no impact overall, considering net income and loss for the year (amount corresponding to eachcompany’s equity) and retained earnings (amount corresponding to each company’s equity).
3. Fiscal year-end, etc. of consolidated subsidiaries
The year-end closing date for consolidated subsidiaries is the same as the consolidated year-end closing date.

13

4. Accounting policies(1) Valuation standards and methods for significant assets(a) Securities
Available-for-sale securities
Securities with fair market value
Stated at fair value based on the quoted market price as of the year-end closing date with any changes in unrealized
gains or losses, net of the applicable income taxes, included directly in net assets. Cost of securities sold isdetermined by the moving average method.
Securities without fair market value
Stated at cost determined by the moving average method.
(b) Derivatives
Stated at fair value.
(c) Inventory assets
Merchandise/products/raw materials/work in process
Stated at cost using the weighted-average method (balance sheet amounts are determined by writing down thebook values based on decrease in profitability). The lower of cost or market method, cost being determined by the
first-in-first-out method, is used by major consolidated subsidiaries.
(2) Depreciation method of significant depreciable assets(a) Property, plant and equipment (excluding lease assets) and real estate for investment
For buildings (excluding structures attached to buildings) of the Company and its domestic consolidated subsidiaries,
the straight-line method is used; and for other property, plant equipment, the declining balance method is used. For
overseas subsidiaries, the straight-line method is used.
Major useful lives are as follows:
Buildings and structures:
2 - 50 years
Machinery, equipment and vehicles: 2 - 15 years(b) Intangible assets (excluding lease assets)
Straight-line method
Software for internal use is amortized over the expected available period (5 - 10 years).
(c) Lease assets
The straight-line method is adopted mainly with a residual value of zero and the lease period deemed equal to theservice life of the asset.
(3) Accounting for significant allowances and provisions(a) Allowance for doubtful accounts
To prepare for expected losses from bad debts, the Company and its domestic consolidated subsidiaries estimate
uncollectible amounts for normal receivables based on the historical experience and for certain specific receivables
such as doubtful accounts receivables, based on the individual probability of recovery. Overseas consolidated
subsidiaries estimate uncollectible amounts for certain receivables, such as doubtful accounts receivables, based on
the individual probability of recovery.
(b) Provision for bonuses
At the Company and its consolidated subsidiaries, to prepare for payment of bonuses to employees, a provision forbonuses is provided based on the expected amount of payment.
(c) Provision for loss on orders received
At the Company and its domestic consolidated subsidiaries, to prepare for future losses on contracts for orders
received,
a provision for losses on orders received is provided based on the future losses anticipated at the end of the current
fiscal year and the amount of foreseeable losses that can reasonably be estimated.
(d) Provision for product warranties
At the Company and its certain consolidated overseas subsidiaries, to prepare for estimated warranty costs, aprovision for product warranties is provided based on historical experience of free-of-charge repairs of products.
(e) Provision for stock benefits
In order to provide for grants of shares of the Company to directors and employees of the Group in accordance withthe director stock benefit regulations and stock benefit regulations, a provision for stock benefits is provided based on
the estimated stock benefit obligations as of the end of the current fiscal year.

14(4) Accounting method for retirement benefits(a) Method of attributing the estimated retirement benefits to periods
In calculating retirement benefit obligations, the benefit formula method of attributing estimated retirement benefits
to periods has been applied until the end of the current fiscal year.
(b) Amortization method of actuarial gain or loss and past service cost
Actuarial gain or loss is amortized in the fiscal year following the year in which the gain or loss is incurred by thestraight-line method over periods (5 years) which are shorter than the average remaining service periods of theemployees. Past service cost is amortized by the straight-line method over periods (5 years) which are shorter than the
average remaining service periods of the employees.
(5) Accounting for significant revenues and expenses
The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and the “Implementation
Guidance on Accounting Standard for Revenue Recognition” (Implementation Guidance No. 30, March 26, 2021) havebeen applied.
The following summarizes the major performance obligations of the Group’s principal businesses and the time at whichrevenue is recognized. For any businesses, the Company allocates the transaction price to performance obligations basedon the independent sales price calculated using an adjusted market valuation approach, an approach that adds margins to
expected costs, and other factors. Consideration for the transaction does not include a significant financing component as
it is primarily received by within one year after satisfaction of performance obligations. In addition, there are no material
variable consideration for which amount of consideration could change.
Details of major performance obligations in major businesses and the time at which revenue is recognized are as follows.
(a) Revenue Recognition for Geo-engineering Services Contracts
In Geo-engineering Service Contracts, the Company conducts data collection/analysis/design/consulting, such asmachine boring, road facilities inspection (tunnels, etc.), slope observation, landslide countermeasure design, analysis ofwater quality, soil and odor, marine surveys such as offshore boring associated with the installation of offshore windfarms.
The Company has identified these services that it provides in this area as performance obligations.
Geo-engineering Services are based on a method in which revenue is recognized over time as the Company satisfies theperformance obligations to transfer the goods or services to the customer, as the Company recognizes the certainty ofthe outcome with respect to the portion of progress and control over the goods or services is transferred to thecustomer over a period of time.
The method used to estimate the degree of progress related to the satisfaction of performance obligations is primarily
based on the cost-based input method.
In addition, if the Company is unable to reasonably estimate the degree of progress related to the satisfaction of
performance obligations, the Company applies the cost-recovery method.
(b) Revenue Recognition for Merchandise Sales (Mainly Measuring Instrument Sales)
In merchandise sales, the Company manufactures, sells, and provides maintenance services for geophysical survey
equipment such as seismic observation and monitoring equipment and non-destructive inspection equipment, as well as
monitoring systems using equipment. The Company has identified the operations that it provides with respect to these
operations as performance obligations.
Of merchandise sales, domestic sales are recognized at the time of delivery because control over the goods is transferredto the customer at the time of delivery.
In addition, revenue from overseas sales is recognized at a point in time when performance obligations are satisfied.
(c) Revenue recognition for license sales
In license sales, the Company sells licenses for land information systems, operational management systems, various
analysis software, and other products, and conducts consignment sales of systems. The Group has identified theoperations it provides as performance obligations.
Revenue from license sales is recognized over a certain period of time when the nature of the license, such as cloudservices, represents access rights, and revenue is recognized upon delivery, if the nature of the license, such as softwaredelivery, is a right of use.
15

(6) Significant hedge accounting method(a) Hedge accounting method
Deferral hedge accounting is adopted.
(b) Hedging instruments and hedged items
Hedging instruments: forward-exchange contracts
Hedged items: accounts payable-trade(c) Hedging policy
In order to reduce risks of exchange rate fluctuations, hedges are used to cover liabilities.
(d) Method of assessing hedge effectivenessAn assessment of hedge effectiveness is omitted because the relationship between the hedging instruments andhedged items is direct.
(7) Amortization of goodwill
Goodwill is amortized by the straight-line method over 10 years.
(8)Cash and cash equivalents in the consolidated statements of cash flows
Cash and cash equivalents on the consolidated statement of cash flows included cash on hand, bank deposits that could be
withdrawn at any time, and low-risk short-term investments easily convertible to cash maturing within three months fromthe date of acquisition.
(9) Other significant items regarding preparation of the consolidated financial statements
Accounting for consumption tax
All amounts exclude consumption tax.

(Significant Accounting Estimates)(Revenue Recognition by estimating the degree of progress related to the satisfaction of performance obligations of Geoengineering Services Contracts of the Company)(1)Amount recorded in the consolidated financial statements for the current fiscal year
Net sales 13,601 million yen(Note)The above amount includes the Geo-engineering Service Contracts for which the degree of progress related to thesatisfaction of performance obligations of the Geo-engineering Service Contracts can be reasonably estimated, and for which
the full performance obligation has not been satisfied as of the end of the current fiscal year.

(2)Other information to help users of the consolidated financial statements understand the contents of accounting estimates(a)Calculation methods for amount recorded in the consolidated financial statements for the current fiscal year
Net sales related to Geo-engineering Service Contracts is calculated in a manner that recognizes revenue over time as
performance obligations are satisfied.
The method used to estimate the degree of progress related to the satisfaction of performance obligations is primarily basedon the cost-based input method, which is the ratio of incurred costs to total estimated costs.
In addition, if the Company is unable to reasonably estimate the degree of progress related to the satisfaction of
performance obligations, revenue is recognized to the extent related costs incurred.

(b)Major assumptions used in the calculation of amount in the consolidated financial statements for the current fiscal year
Estimates of the total costs of Geo-engineering Services are calculated by accumulating detailed information with objective
prices, such as quotes obtained from subcontractors and internally approved standard unit prices; however, estimates of thetotal costs of Geo-engineering Services are key assumptions because they involve judgments based on expert knowledge
and experience in Geo-engineering Services.

16

(c)Effect on the consolidated financial statements for the following fiscal year
Geo-engineering Services are highly individual in nature and carried out in accordance with fundamental specifications andwork details instructed by customers.
In some cases, the contract content of Geo-engineering Services is changed from the original contract based on theagreement with the customer during the work period, or changes in the estimated person-hours and subcontract cost due tothe facts that become known after the work starts. In such cases, due to changes in the estimate of the total cost of thework, changes in the degree of progress related to the satisfaction of the performance obligations may affect amount ofrevenue recognized in the consolidated financial statements for the following fiscal year.
(Change in accounting policies)(Application of Accounting Standard for Revenue Recognition)
The Company adopted the “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 29, March 31, 2020) and the “Implementation Guidance on Accounting Standard for Revenue Recognition”(Implementation Guidance No. 30, March 26, 2021) from the beginning of the current fiscal year, and will recognize revenue
at amount when the control of promised goods or services is transferred to customers, which is expected to be received in
exchange for those goods or services.
This has resulted primarily in the following changes in revenue recognition.

(1) Revenue Recognition for Geo-engineering Services Contracts
Previously, the percentage-of-completion method was used for construction (Geo-engineering Service) for which the outcome
was deemed certain for a portion of progress, and the completed-contract method was used for construction (Geoengineering Service) for which the degree of progress could be estimated. However, for all construction works, as theperformance obligations are satisfied, the method of recognizing revenue over time has been introduced.
In addition, the Company uses the cost-based input method primarily to estimate the degree of progress related to thesatisfaction of performance obligations.
For Geo-engineering Service Contracts for which progress cannot be estimated, revenue is recognized using a cost recovery
method.

(2) Revenue Recognition for Merchandise Sales (Mainly Measuring Instrument Sales)
Previously, for domestic transactions, revenue was recognized at the time of shipment, but it is now recognized at the time ofdelivery, when control over the goods is transferred to the customer.
With respect to the application of the revenue recognition accounting standards, the transitional treatment stipulated in theprovisions of paragraph 84 of the Accounting Standard for Revenue Recognition is applied. The cumulative effect of theretrospective application of the new accounting policy prior to the beginning of the current fiscal year is reflected in the
beginning balance of “Retained earnings” for the current fiscal year, and a new accounting policy is applied from the
beginning of the current fiscal year.
However, the new accounting policy has not been applied retrospectively to contracts for which the method set forth inparagraph 86 of the Accounting Standard for Revenue Recognition has been applied and substantially all revenue amounts
have been recognized in accordance with previous treatment prior to the beginning of the current fiscal year.
As a result, “Net sales” and “Cost of sales” decreased by 112 million yen and 97 million yen, respectively, and “Gross profit,”“Operating income,” “Ordinary income” and “Profit before income taxes” each decreased by 15 million yen for the current
fiscal year. The impact on the beginning balance of “Retained earnings” for the current fiscal year is immaterial.
In accordance with the transitional treatment set forth in paragraph 89-3 of the Revenue Recognition Accounting Standard,notes on revenue recognition for the prior fiscal year are omitted.

17

(Unapplied accounting standards)
・ Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)
・Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, June 17, 2021)
・Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019)
・Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019)
・Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(1) Summary
In order to improve the comparability with the provisions of international accounting standards, “Accounting Standard for Fair
Value Measurement” and “Implementation Guidance on Accounting Standard for Fair Value Measurement” (“AccountingStandards for Fair Value Measurement”) have been established. These standards were developed and provided guidance on
how to calculate fair value. Accounting Standards for Fair Value Measurement are applied to the fair value of the following
items:
・Financial instruments in the “Accounting Standard for Financial Instruments”
・Inventories held for trading purposes in “Accounting Standard for Valuation of Inventories”
In addition, the “Guidance on Disclosures about Fair Value of Financial Instruments” was revised to provide notes on the
breakdown of fair value of financial instruments by level.
(2) Expected date of application
The accounting standards will be applied from the beginning of the fiscal year ending December 31, 2022.
(3) Effect of application
The impact of applying the accounting standards on the consolidated financial statements is currently being evaluated.
(Change in presentation)(Application of “Accounting Standard for Disclosure of Accounting Estimates”)
The “Accounting Standard for the Disclosure of Accounting Estimates” (ASBJ Statement No. 31, March 31, 2020) has been
applied to the consolidated financial statements as of the end of the current fiscal year, and significant accounting estimateshave been disclosed in the consolidated financial statements.
However, notes for the prior fiscal year are omitted in accordance with the transitional treatment provided in the proviso ofparagraph 11 of the Accounting Standard for the Disclosure of Accounting Estimates.
(Consolidated statements of income)“Reversal of allowance for doubtful accounts”, which was previously included in “Other” under “Non-operating income” in theprior fiscal year, has been presented separately from the current fiscal year because it exceeded 10/100 of the total amount. In
order to reflect this change in presentation, the Company reclassified the consolidated statement of income for the prior fiscal
year.
As a result, “Other” in “Non-operating income” in the amount of 139 million yen in the consolidated statement of income forthe prior fiscal year was reclassified as 43 million yen in “Reversal of allowance for doubtful accounts”, and 95 million yen in“Other.”(Consolidated statements of cash flows)
In the prior fiscal year, “Refund of income taxes” in “Cash flows from operating activities” were presented separately.
However, as the amount was immaterial for the current fiscal year, it was included in “Income taxes paid” from the current
fiscal year. To reflect this change in presentation, the consolidated financial statements for the prior fiscal year werereclassified.
As a result, “Income taxes paid” in the amount of (1,299) million yen and “Refund of income taxes” in the amount of 53
million yen in “Cash flows from operating activities” in the consolidated statements of cash flows for the prior fiscal year wasreclassified as (1,246) million yen in “Income taxes paid.”

18

(Additional information)(Board Benefit Trust)
The Company has introduced the “Board Benefit Trust (BBT)” as directors’ remuneration from June 2, 2014 based on the
resolution at the General Meeting of Shareholders held on March 26, 2014. Based on the resolution at the General Meeting of
Shareholders held on March 27, 2018 and March 26, 2021, it was determined to continue the scheme and partially revise it.
Also, the Company introduced the Stock Granting Trust (J-ESOP) on the same day to enhance the motivation and morale ofemployees towards improved stock price and business performance, by elevating linkages between the stock price andbusiness performance of the Company and treatment of the employees, and also to promote achievement of the target in the
mid-term business plan and further increase the corporate value of the Company. It is partially revised and continued.
(Hereinafter, the “System.”)(1) Outline of transaction
In introducing the System, the Company established anew the “Director stock benefit regulations” (Hereinafter, “Director
benefit regulations”) and “Stock benefit regulations” (Hereinafter, “Benefit regulations”).
The Company has entrusted funds to a trust bank to enable the prior purchase of the Company stock to be granted in the
future based on the established director stock benefit regulations and benefit regulations (Hereinafter, “the Trust”).
The Board Benefit Trust (BBT) is a program in which points are awarded to directors based on the director benefit
regulations, and stock is granted to the directors according to the points accumulated. Also, the Stock Granting Trust (JESOP) is a program in which points are awarded based on the Benefit regulations according to the business performanceof the Company and each subsidiary for each fiscal year, and stock is granted to the employees based on the number ofpoints accumulated.
(2) Shares of the Company held by the Trust
Shares of the Company held by the Trust are included in treasury stock in the net assets section of the consolidated balance
sheets based on their book value (excluding associated expenses). The book value and the corresponding number of sharesof the Company totaled 515 million yen and 345,086 shares, respectively, as of the end of the prior fiscal year, and 738
million yen and 544,944 shares, respectively, as of the end of the current fiscal year.
(Assumption of the impact of the COVID-19 in development of accounting estimates)
With regard to COVID-19, the economy resumed due to the lifting of restrictions, mainly in the U.S. and Europe, where
vaccination progressed, but the number of cases due to a new variant, the Omicron variant, has been increasing since then.
In Japan as well, the state of emergency declaration was lifted at the end of September 2021, and signs of recovery ineconomic activity began to appear. Since then, however, the number of cases stocks due to new variants has expanded, andthe pandemic is now in its sixth wave.
In light of these circumstances, the Company has made accounting estimates such as recoverability of deferred tax assets andimpairment of noncurrent assets based on the assumption that the impact of the COVID-19 on the global economy and theJapanese economy may continue until the second half of 2022. As the impact of the COVID-19 on economic activity is highly
uncertain, changes in the above assumptions could affect the Company’s financial position and results of operations in future
periods.
(Consolidated balance sheets)※1. Amounts of “Notes receivable-trade,” ”Accounts receivable-trade” and “Accounts receivable-completed operations” arisingfrom contracts with customers are as follows:
Current fiscal year
(As of December 31, 2021)
Notes receivable-trade

120 million yen

Accounts receivable-trade

1,413 million yen

Accounts receivable-completed
operations

4,611 million yen

19※2. Treatment of trade notes maturing at the end of the fiscal year
Trade notes maturing at the end of the fiscal year are settled on the clearance date. The following notes are outstanding at
the end of the fiscal year, as the maturity date fell on a business holiday for financial institutions.
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

Notes receivable-trade

3 million yen

8 million yen

Notes payable-trade

9 million yen

8million yen※3. Pledged assets and secured liabilities

Current assets' Other
Investments and other assets' Other
Total

Prior fiscal year
(As of December 31, 2020)
1 million yen
155 million yen
156 million yen

Current fiscal year
(As of December 31, 2021)― million yen
187 million yen
187 million yen(Prior fiscal year)
Within the limit of the letter of credit (2,277 million yen), the Company provides the restricted deposits of its US consolidated
subsidiaries in the amount of 156 million yen as securities under the asset-based loan system of the United States of America.
(Current fiscal year)
Within the limit of the letter of credit (2,530 million yen), the Company provides the restricted deposits of its US consolidated
subsidiaries in the amount of 172 million yen as securities under the asset-based loan system of the United States of America.
Furthermore, within the issuance of the letter of credit from the subsidiary of its US consolidated subsidiaries to outside theU.S., the Company also provides the restricted deposits of its US consolidated subsidiaries in the amount of 15 million yen as
securities.
※4. Revaluation of land
Land for business operations was revalued in accordance with the Land Revaluation Law (Law No. 34 issued on March 31,
1998) and a revaluation reserve for land was recorded under net assets.
Revaluation method
Land value is calculated on the basis of taxable amounts for land value tax along with reasonable adjustments, inaccordance with Article 2, Item 4 of the Enforcement Ordinance relating to the Land Revaluation Law (Cabinet Order No.
119 issued on March 31, 1998). Also, part of the value of land is calculated on the basis of the approved values of
noncurrent assets, stated in Article 2, Item 3, with reasonable adjustments.
Revaluation date: December 31, 2001
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

The difference between the fair value of the landat the end of the period of the revaluation andthe book value after the revaluation:(251) million yen(256) million yen

The difference related to real estate for rent outof this:(47) million yen(57) million yen

Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

786 million yen

836 million yen※5. Non-consolidated subsidiaries and affiliates

Investment securities (stock)

The amounts of investment in joint ventures included above were 771 million yen in the prior fiscal year and 821 million
yen in the current fiscal year.
20

(Consolidated statements of income)※1 Revenue from contracts with customers
In “Net sales,” revenues from contracts with customers and other revenues are not distinguished.
Amounts of “Revenue from Contracts with Customers” is presented in the “Notes to Consolidated Financial Statements(Revenue Recognition) (1) Disaggregation of Revenue from Contracts with Customers.”※ 2. Loss on valuation of inventories
Inventories at the end of the year were stated after a reduction of book value due to a decline in profitability and theloss on valuation of inventories included in cost of sales was as follows:
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
147 million yen

Current fiscal year
(From January 1, 2021
to December 31, 2021)
64 million yen※3. Provision for loss on orders received included in cost of sales
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
Cost of sales
21 million yen

Current fiscal year
(From January 1, 2021
to December 31, 2021)
6 million yen

Cost of sales※4. Research and development expenses included in general and administrative expenses and manufacturing costs

General and administrative
expenses

Prior fiscal year
(From January 1, 2020
to December 31, 2020)

Current fiscal year
(From January 1, 2021
to December 31, 2021)

1,427 million yen

1,454 million yen※5 .The components of gain on sales of noncurrent assets are as follows
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
25 million yen

Land

Current fiscal year
(From January 1, 2021
to December 31, 2021)
97 million yen※ 6. Impairment loss
Prior fiscal year (January 1, 2020 to December 31, 2020)
The Group recognized impairment loss on the following assets.
Location

Use

Type

Impairment loss

Texas, U.S.A.

For research
projects

Machinery and equipment

217 million yen

Intangible assets (Other)

62 million yen

California, U.S.A.

For equipment
manufacturing
and sales

Software, etc.

57 million yen

Singapore

For research
projects

Vehicles, etc.

12 million yen

21

The Group groups business assets in accordance with its management accounting categories, which are organized so that
income and expenses can be continuously monitored, while idle assets not directly used in business operations are groupedindividually.
For the assets indicated above, because of the decline of profitability due to the deterioration in the market, the book value
was reduced to the recoverable amount and the write-down of 280 million yen (2,626 thousand US dollars), 57 million yen(539 thousand US dollars), and 12 million yen (161 thousand Singapore dollars) were recognized as impairment losses. For
Machinery, etc., in Texas, U.S.A., the recoverable amount is calculated based on the net selling price, which is the appraisedvalue by professionals. For vehicles, etc., in Singapore, the recoverable amount is calculated based on the net selling price,and the recoverable amount is the net selling price minus the expected disposal cost. For intangible assets (Other) in Texas,
U.S.A., software, etc., in California, the recoverable amounts are measured as value in use, and the future cash flows are
discounted at 17.0% and 14.5%, respectively.
Current fiscal year (From January 1, 2021 to December 31, 2021 )The Group recognized impairment loss on the following assets.
Location

Use

Type

Impairment loss

Singapore

For research
projects

Vehicles, etc.

14 million yen

Other

Goodwill

100 million yen

Intangible assets (Other)

23 million yen

The Group groups business assets in accordance with its management accounting categories, which are organized so that
income and expenses can be continuously monitored, while idle assets not directly used in business operations are groupedindividually.
Goodwill arising from the acquisition of shares of FONG CONSULT PTE.LTD., a consolidated subsidiary, was written down to
the recoverable amount because estimated cash flows were less than initially projected and the difference, amounting to 138
million yen (1,696 thousand Singapore dollars), was recognized as an impairment loss under extraordinary loss.
The recoverable amount is estimated at value in use, which is the amount calculated based on future cash flow discounted at
a rate of 11.5%.

22

(Consolidated statements of comprehensive income)※1. Reclassification adjustments and tax effects related to each component of other comprehensive income
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
Valuation difference on available-for-salesecurities:
Amount arising during the current fiscal
Year
Reclassification adjustment
Amount before tax effectTax effect
Valuation difference on available-forsale securities
Foreign currency translation adjustment:
Amount arising during the current fiscal
year
Reclassification adjustment
Amount before tax effectTax effectForeign currency translation
adjustment:
Remeasurements of defined benefit plans:
Amount arising during the current fiscal
Year
Reclassification adjustment
Amount before tax effectTax effectRemeasurements of defined benefit
plans
Total other comprehensive income

Current fiscal year
(From January 1, 2021
to December 31, 2021)(651) million yen(239) million yen(6) million yen(658) million yen
201 million yen(456) million yen(23) million yen(262) million yen
80 million yen(182) million yen(737) million yen

1,516 million yen- million yen(737) million yen- million yen(737) million yen- million yen
1,516 million yen(15) million yen
1,501 million yen

133 million yen

46 million yen(107) million yen
26 million yen(8) million yen
18 million yen(92) million yen(45) million yen
14 million yen(31) million yen(1,175) million yen

1,287 million yen

23

(Consolidated statements of changes in net assets)
Prior fiscal year (From January 1, 2020 to December 31, 2020)
1. Type and number of shares issued and type and number of treasury stock
Number of shares at
Increase in number
January 1, 2020of shares during
the current fiscal
year
Issued shares

Decrease in numberof shares during
the current fiscal
year

Number of shares at
December 31, 2020

Common stock

27,582,573--

27,582,573

Total

27,582,573--

27,582,573

Common stock(Notes)1,2

1,468,641

256

4,396

1,464,501

Total

1,468,641

256

4,396

1,464,501

Treasury stock(Notes) 1 The number of common stock of treasury stock at the beginning of the current fiscal year and at the end of the current
fiscal year includes 349,482 shares and 345,086 shares of the Company held by Custody Bank of Japan, Ltd.(Trust
Account), respectively.
2 Outline of reasons for the change
Breakdown of increase in the number is as follows:
Increase due to purchase of less than standard unit
Breakdown of decrease in the number is as follows.
Decrease due to demand for sale by Custody Bank of Japan, Ltd. (Trust Account)
2. Subscription rights to shares and treasury stock subscription shares
Not applicable.
3. Dividends(1) Dividends paid
Resolution

Type of shares

Total dividends(Millions of yen)

Dividend pershare (Yen)

256 shares
4,396 shares

Record date

Effective date

March 27, 2020
General meeting ofshareholders

Common stock

423

16.00

December 31, 2019

March 30, 2020

August 12, 2020
Board meeting

Common stock

423

16.00

June 30, 2020

September 23,
2020(Notes) 1 The total amount of dividends resolved by the General Meeting of Shareholders of March 27, 2020 includes 5 million
yen of dividends distributed to treasury stock held by Trust & Custody Services Bank, Ltd. (Trust Account) (currently
renamed; Custody Bank of Japan, Ltd. (Trust Account)).
2 The total amount of dividends resolved by the Board of Directors of August 12, 2020 includes 5 million yen of dividends
distributed to treasury stock held by Custody Bank of Japan, Ltd. (Trust Account).
(2) Dividends for which the settlement date was within the current fiscal year but the effective date in the following fiscal
year
Total dividend
Type of
Source ofDividend per
Resolution(Millions ofRecord date
Effective datesharesdividends
share (Yen)yen)
March 26, 2021
GeneralCommonRetained
December 31,
March 29,423
16.00
meeting ofstock
earnings
2020
2021
shareholders(Note) The total amount of dividends resolved by the Board of Directors of March 26, 2021 includes 5 million yen of dividends
distributed to treasury stock held by Custody Bank of Japan, Ltd. (Trust Account).
24Current fiscal year (From January 1, 2021 to December 31, 2021 )1. Type and number of shares issued and type and number of treasury stock
Number of shares at
January 1, 2021

Increase in number ofshares during thecurrent fiscal year

Decrease in numberof shares during
the current fiscal
year

Number of shares at
December 31, 2021

27,582,573-

918,200

26,664,373

27,582,573-

918,200

26,664,373

1,464,501

1,507,550

1,482,476

1,489,575

1,464,501

1,507,550

1,482,476

1,489,575

Issued shares
Common stock(Notes)1
Total
Treasury stock
Common stock(Notes)2,3
Total(Notes) 1 As a result of a resolution of the Board of Directors’ meeting held on February 12, 2021, 918,200 shares of treasury
stock were cancelled based on Article 178 of the Companies Act on February 26, 2021.
2 The number of shares of common treasury stock at the beginning of the current fiscal year and at the end of the current
fiscal year includes 345,086 shares and 544,944 shares of the Company held by Custody Bank of Japan, Ltd. (Trust
Account).
3 Outline of reasons for the change
Breakdown of increase in the number is as follows.
Increase due to purchase under Board meeting Resolution
1,123,000 shares
Increase due to purchase by Custody Bank of Japan, Ltd.(Trust Account)
382,000 shares
Increase due to purchase of less than standard unit
2,550 shares
Breakdown of decrease in the number is as follows.
Decrease due to cancellation of treasury stock
918,200 shares
Decrease due to contribution to Custody Bank of Japan, Ltd.(Trust Account)
382,000 shares
Decrease due to demand for sale by Custody Bank of Japan, Ltd. (Trust Account))
182,142 shares
Decrease due to demand for sale of less than standard unit
134 shares
2. Subscription rights to shares and treasury stock subscription shares
Not applicable.
3. Dividends(1) Dividends paid
Resolution

Type of shares

March 26, 2021
General meetingof shareholders

Common stock

August 11, 2021
Board meeting

Common stock

Total dividends(Millions of yen)

Dividend pershare (Yen)Record date

Effective date

423

16.00

December 31,
2020

March 29, 2021

414

16.00

June 30, 2021

September 21,
2021(Notes) 1 The total amount of dividends resolved by the General Meeting of Shareholders of March 26, 2021 includes 5 million
yen of dividends distributed to treasury stock held by Custody Bank of Japan, Ltd. (Trust Account) .
2 The total amount of dividends resolved by the Board of Directors of August 11, 2021 includes 8 million yen of dividends
distributed to treasury stock held by Custody Bank of Japan, Ltd. (Trust Account).

25

(2) Dividends for which the settlement date was within the current fiscal year but the effective date in the following fiscal year
Total dividend
Type of
Source ofDividend per
Resolution(Millions ofRecord date
Effective datesharesdividends
share (Yen)yen)
March 25, 2022
771 Retained
30.00 December 31, March 28,
CommonGeneral meeting of
earnings
2021
2022
stock
shareholders(Note) The total amount of dividends resolved by the General Meeting of Shareholders of March 25, 2022 includes 16 million yenof dividends distributed to treasury stock held by Custody Bank of Japan, Ltd. (Trust Account).

26

(Consolidated statements of cash flows)※1. The relationship between the year-end balance of cash and cash equivalents and amounts in the consolidated balance sheets
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
Cash and deposits
29,970 million yen
29,851 million yen
Short-term investment securities

922 million yen

1,649 million yen

Total

30,892 million yen

31,501 million yen

Time deposits with maturities ofmore than 3 months(5,684) million yen(6,251) million yen

Stock and debt securities withredemption period exceeding
3 months(922) million yen(1,649) million yen

Cash and cash equivalents

24,285 million yen

23,599 million yen

2. Significant noncash transactions(1) The amount of assets and liabilities related to finance lease transactions
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

46 million yen

89 million yen

Amount of assets and liabilities related tofinance lease transactions(Lease transactions)1. Finance lease transactions (lessee)
Lease transactions which stipulate the transfer of ownership of leased assets to the lessee(a) Lease assets
Property, plant and equipment
Primarily consists of equipment for analysis and measurement (Tools, furniture and fixtures) for geo-engineering andconsultation services.
(b) Depreciation method for lease assets
Described in Significant accounting policies “4. Accounting policies, item (2) Depreciation method of significant depreciable
assets.”
2. Operating lease transactions
Unearned lease payments for noncancellable operating lease transactions(Millions of yen)
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

Due in 1 year or less

125

152

Due after 1 year

307

206

Total

433

358

27

3. Sublease transactions in the consolidated balance sheets are recorded inclusive of tax on interest(1) Lease receivables and investment assets(Millions of yen)
Prior fiscal year
(As of December 31, 2020)
Current assets

3,822

Current fiscal year
(As of December 31, 2021)
3,858(2) Lease obligations(Millions of yen)
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

Current liabilities

1,324

1,289

Noncurrent liabilities

2,494

2,534

(Financial instruments)
1. Accounting policies(1) Policy for financial instruments
The Group funds business investments and short-term operations with its own resources, in principle. The Group invests
surpluses in highly rated financial instruments. The Group enters into derivative transactions to hedge future risks ofexchange rate fluctuations, but does not engage in speculative trading.
(2) Types of financial instruments and related risks
Operating receivables, such as notes and accounts receivable-trade and accounts receivable-completed operations, areexposed to credit risks in relation to customers; and trade receivables denominated in foreign currencies are exposed to
exchange rate fluctuation risks. The Company uses derivative transactions (currency swaps and forward-exchange
contracts) to hedge part of its operating receivables.
Short-term investment securities and investment securities are mainly highly-rated bonds, investment trusts and stock of
the companies with which the Group has business relationships; and these are exposed to market-price fluctuation risks.
Operating payables, such as notes and accounts payable-trade and accounts payable-operating, are mostly payable within
one year or less. Trade payables denominated in foreign currencies are exposed to exchange fluctuation risks. The
Company uses derivative transactions (currency swaps and forward-exchange contracts) to hedge part of its operating
payables.
Derivative transactions are currency swaps and forward-exchange contracts for foreign currency in order to avoid exchange
rate fluctuations. Regarding the hedging instruments, hedged items and hedging policy and method of measuring hedge
effectiveness, refer to the information described in “4. Accounting policies, (6) Significant hedge accounting method”.
(3) Risk management for financial instruments(a) Credit risk (risks related to customers’ contract delinquency) management
In accordance with the Company’s business management policy, the Company regularly monitors its customers' financial
situations and controls record dates and outstanding balances per customer for operating receivables. The Company
applies a similar management system to its consolidated subsidiaries.
For short-term investment securities and investment securities, the Company selects highly rated financial instruments,
in accordance with its securities policy. Accordingly, the credit risk is insignificant.
For derivative transactions, the Company limits counterparties to highly rated financial institutions. Accordingly, thecredit risk is minimal.

28

(b) Market risk (exchange rate/interest rate fluctuations) management
The Company hedges against the exchange fluctuations utilizing currency swaps and forward-exchange contracts for partof its operating payables and receivables denominated in foreign currencies.
For short-term investment securities and investment securities, the Company regularly monitors market conditions andthe fair values of its securities. The Company also intermittently reviews its status of its shareholdings, considering its
relationships with the companies.
For enforcement and management of derivative transactions, the Company follows the Company’s rules with regard todecision-making authority and the maximum limit for transactions, and the fund management division conducts thetransactions with the approval of the person in charge of decision-making.
The Company applies a similar management system to its consolidated subsidiaries.
(c) Liquidity risk (risk of not being able to complete payment before due date) management
The responsible division of the Company creates and reviews fund management plans on a timely basis and manages theliquidity risk by keeping funds on hand.
The Company applies a similar management system to its consolidated subsidiaries.
(4) Supplementary explanation on fair values of financial instruments
Fair value of financial instruments is defined as the market-based price and the price reasonably calculated when there isno market price available. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in a different fair value. In addition, the notional amounts of derivatives in the note
“Derivative transactions” are not necessarily indicative of the market risk regarding the derivative transactions.

29

2. Fair value of financial instruments
The book values on the consolidated balance sheets, fair value and the difference between them are shown in the following
table. The following table does not include items for which the calculation of fair value is not readily determinable (See Note
2 below).
Prior fiscal year (As of December 31, 2020)(1) Cash and deposits(2) Notes and accounts receivable-trade(3) Accounts receivable-completed operations(4) Short-term investment securities andinvestment securities
Available-for-sale securities

29,9701,517
21,415

Fair value(Millions ofyen)
29,9701,517
21,415

5,524

5,524

-

Total assets(1) Notes and accounts payable-trade(2) Accounts payable-operating(3) Income taxes payable
Total liabilities

58,427
573
1,662
718
2,954

58,427
573
1,662
718
2,954

-

Book value on consolidatedbalance sheets (Millions of yen)

Difference(Millions ofyen)-

Current fiscal year (As of December 31, 2021)

29,851
1,534
22,647

Fair value(Millions ofyen)
29,851
1,534
22,647

5,238
59,272
539
1,652
673
2,865

5,238
59,272
539
1,652
673
2,865

Book value on consolidatedbalance sheets (Millions of yen)
(1) Cash and deposits(2) Notes and accounts receivable-trade(3) Accounts receivable-completed operations(4) Short-term investment securities andinvestment securities
Available-for-sale securities
Total assets(1) Notes and accounts payable-trade(2) Accounts payable-operating(3) Income taxes payable
Total liabilities

Difference(Millions ofyen)-(Notes) 1. Method of calculating the fair value of financial instruments and matters related to securities and derivativetransactions
Assets(1) Cash and deposits, (2) Notes and accounts receivable-trade, (3) Accounts receivable-completed operations
As these instruments are settled within a short term and their fair values and book values are nearly equal,
their book values are assumed as their fair values.
(4) Short-term investment securities and investment securities
The fair value of stocks is determined by their price on stock exchanges and the fair value of bonds andinvestment trusts is determined by the prices indicated by the dealers or financial institutions. For information
on securities classified by holding purpose, please refer to the note “Securities”.
Liabilities(1) Notes and accounts payable-trade, (2) Accounts payable-operating, (3) Income taxes payable
Since these instruments are settled within a short term and their fair value and book value are nearly equal,
their book value is assumed as their fair value.

30

2. The book value on the consolidated balance sheet of the financial instruments for which fair value is extremely
difficult to determine(Millions of yen)Classifications

December 31, 2020

Investments in a limited partnership
Unlisted bonds
Unlisted stocks
Stocks of subsidiaries and affiliates

December 31, 2021
0
22
216
786

0
297
836

These instruments do not have market prices and it is extremely difficult to determine fair value. Accordingly,
they were not included in “(4) Short-term investment securities and investment securities”.
3. Redemption schedule of receivables and securities with maturities
Prior fiscal year (As of December 31, 2020)

29,956
1,517
21,415-Due after 5
years through10 years(Millions of
yen)
-

22
900
0
53,811

750
81
831

-

Due after 1
year through5 years(Millions ofyen)

Due after 5
years
through 10
years(Millions ofyen)

Due within
1 year(Millions of yen)
Cash and deposits
Notes and accounts receivable-trade
Accounts receivable-completed operations
Short-term investment securities and investment
securities
Available-for-sale securities with maturities
1. Bonds(1) Government bonds/local authority bonds, etc.
(2) Corporate bonds(3) Others
2. Others
Total

Due after 1
year through 5
years (Millionsof yen)Due after
10 years(Millions of
yen)
-

-

Current fiscal year (As of December 31, 2021)
Due within
1 year(Millions ofyen)Cash and deposits
Notes and accounts receivable-trade
Accounts receivable-completed operations
Short-term investment securities and investment
securities
Available-for-sale securities with maturities
1. Bonds(1) Government bonds/local authority bonds, etc.
(2) Corporate bonds(3) Others
2. Others
Total

31

Due after
10 years(Millions ofyen)

29,8391,534
22,647

-

-

-

1,650
0
55,671

82
82

-

-

4. Repayment schedule of lease obligations due after the balance sheet date.
Prior fiscal year (As of December 31, 2020)

Leaseobligations

Within one
year(Millions ofyen)

Due after 1
year butwithin 2
years(Millions ofyen)

Due after 2
years butwithin 3
years(Millions ofyen)

Due after 3
years butwithin 4
years(Millions ofyen)

Due after 4
years butwithin 5
years(Millions ofyen)

Due after 5
years(Millions of
yen)

1,420

1,053

732

501

281

68

Current fiscal year (As of December 31, 2021)

Lease
obligations

Within one
year(Millions ofyen)

Due after 1
year butwithin 2
years(Millions ofyen)

Due after 2
years butwithin 3
years(Millions ofyen)

Due after 3
years butwithin 4
years(Millions ofyen)

Due after 4
years butwithin 5
years(Millions ofyen)

Due after 5
years(Millions of
yen)

1,372

1,050

783

551

251

17

32

(Securities)
1. Available-for-sale securities
Prior fiscal year (As of December 31, 2020)
TypeBook value on the consolidatedbalance sheets (Millions of
yen)
3,649

Acquisition cost
(Millions of
yen)
1,766

Difference(Millionsof yen)1,882(1) Stocks(2) Bonds
Investments with(a) Government bonds/local
book values on theauthority bonds, etc.
consolidated balance(b) Corporate bonds
sheets exceeding(c) Others
450
450
0
acquisition cost(3) Others
Sub total
4,099
2,216
1,882
(1) Stocks
Investments with
(2) Bonds
book values on the(a) Government bonds/local
consolidated balanceauthority bonds, etc.
sheets not exceeding(b) Corporate bonds
acquisition cost(c) Others
1,198
1,200
(1)
(3) Others
226
248
(22)
Sub total
1,424
1,448
(23)
Total
5,524
3,664
1,859
(Note) Unlisted stocks and unlisted bonds (book value on the consolidated balance sheet: 239 million yen) do not have market
prices, and it is extremely difficult to determine the fair values. Accordingly, these securities are not included in theabove table, “Available-for-sale securities”.
Current fiscal year (As of December 31, 2021)
Type

Book value on the
consolidatedbalance sheets(Millions of yen)
3,362

Acquisition cost
(Millions of yen)

Difference (Millions ofyen)(1) Stocks
1,744
1,618
(2) Bonds(a) Government
bonds/local
authority bonds, etc.
(b) Corporate bonds(c) Others
200
200
0
(3) Others
Sub total
3,562
1,944
1,618
Investments with
(1) Stocks
book values on(2) Bonds
the(a) Government
consolidated
bonds/local
balanceauthority bonds, etc.
sheets not(b) Corporate bonds
exceeding(c) Others
1,449
1,450
(0)
acquisition cost(3) Others
227
248
(21)
Sub total
1,676
1,698
(21)
Total
5,238
3,642
1,596
(Note)Unlisted stocks (book value on the consolidated balance sheet: 297 million yen) do not have market prices, and it isextremely difficult to determine the fair values. Accordingly, these securities are not included in the above table,“Available-for-sale securities”.
Investments withbook values ontheconsolidatedbalancesheets exceedingacquisition cost33

2. Available-for-sale securities soldPrior fiscal year (From January 1, 2020 to December 31, 2020)
Sales price
Type(Millions of yen)
(1) Stocks
8(2) Bonds(a) Government
bonds/local authority
bonds, etc.
(b) Corporate bonds(c) Others(3) Others
37
Total

Total gains on sales(Millions of yen)

46

Current fiscal year (From January 1, 2021 to December 31, 2021 )Sales priceTotal gains on sales
Type(Millions of yen)
(Millions of yen)
(1) Stocks
58(2) Bonds(a) Government
bonds/local authority
bonds, etc.
(b) Corporate bonds(c) Others(3) Others
Total
58

34

Total losses on sales(Millions of yen)
0

1

-

-

7

0

7

1

Total losses on sales(Millions of yen)
23

-

-

-

23

-

(Retirement benefits)
1. Description of retirement benefit plans provided by the Company
The Company and certain domestic consolidated subsidiaries have established a contract-type defined pension plan (CashBalance Plan) and retirement lump-sum payment plan as a defined benefit-type program.
The other domestic subsidiaries and overseas subsidiaries adopt a defined contribution program such as the Smaller Enterprise
Retirement Allowance Mutual Aid System.
Defined contribution pension plans have been established by the Company and certain consolidated subsidiaries.
In some cases, an additional retirement allowance, which is not included in the retirement benefit obligation,mathematically calculated in accordance with retirement benefit accounting, may be paid out at retirement of theemployees.
Also, with respect to defined benefit pension plan and lump-sum retirement allowance plan operated by certain domestic
consolidated subsidiaries, the net defined benefit liability and retirement benefit expenses are calculated by acompendium method.
2. Defined benefit plan
(1) Changes in the retirement benefit obligations at beginning of the year and end of the year
(Excluding plans for which a compendium method is applied stated in (3))
Prior fiscal year
(From January 1, 2020
to December 31, 2020)(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)

6,106
276
15
(93)
(403)
5,902

5,902
276
20
96
(382)
5,912

Retirement benefit obligations at beginning of the year
Service cost
Interest cost
Actuarial gain or loss
Retirement benefits paid
Retirement benefit obligations at end of the year
(2) Changes in plan assets at beginning of the year and end of the year
(Excluding plans for which a compendium method is applied stated in (3))(Millions of yen)
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
5,793
5,799
Plan assets at beginning of the year
115
115
Expected return on plan assets
Actuarial gain or loss
40
142
Contribution by the Company
133
139
Retirement benefits paid
(283)
(257)
Plan assets at end of the year
5,799
5,941
(3) Changes in net defined benefit liability calculated using a compendium method at beginning of the year and end of
the year (net)(Millions of yen)
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
Net defined benefit liability at beginning of the year (net)
(16)
(23)
Retirement benefits expenses
24
27
Retirement benefits paid
(22)
(17)
Contribution to the system(9)(14)
Net defined benefit liability at end of the year (net)
(23)
(28)

35

(4) Reconciliation of retirement benefit obligations and plan assets at end of the year and net defined benefit liability and net
defined benefit asset provided on the consolidated balance sheets(Millions of yen)
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
Funded projected benefit obligations
4,197
4,205
Plan assets(5,963)(6,119)(1,766)(1,913)
Unfunded projected benefit obligations
1,845
1,857
Net liability/asset for projected benefit obligations in the
78(56)
consolidated balance sheets
Net defined benefit liability
1,845
1,857
Net defined benefit asset(1,766)(1,913)Net liability/asset for projected benefit obligations in the
78(56)
consolidated balance sheets(Note) Including plans for which a compendium method is adopted.
(5) Retirement benefit expenses

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain or loss
Other
Retirement benefit expenses calculated by compendium
methodRetirement benefit expenses related to defined benefit plans

Prior fiscal year
(From January 1, 2020
to December 31, 2020)
276
15
(115)
(107)
5

(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)
276
20
(115)
(92)
2

24

27

99

118

(6) Remeasurements of defined benefit plans included in other comprehensive income
The breakdown of remeasurements of defined benefit plans (before tax effect) is as follows.
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
(107)
(107)

Actuarial gain or loss
Total

(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)
(92)
(92)

(7) Remeasurements of defined benefit plans included in accumulated other comprehensive income
The breakdown of accumulated remeasurements of defined benefit plans (before tax effect) is as follows.
(Millions of yen)
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
Unrecognized actuarial gain or loss
(279)
(233)
Total
(279)
(233)

36

(8) Matters related to plan assets(a) Major breakdown of plan assets
Ratios of asset classes to total plan assets by major classification are as follows.
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
58 %
22 %
2%
18 %
100 %

Bonds
StocksGeneral accounts
Others
Total

Current fiscal year
(From January 1, 2021
to December 31, 2021)
56 %
24 %
3%
17 %
100 %

(b) Method of determining long-term expected rates of return on plan assets
In order to determine the long-term expected rates of return on plan assets, the Company considers the present andanticipated allocation of plan assets and the present and expected long-term rates of return on plan assets in the futurefrom various assets that constitute the plan assets.
(9) Actuarial assumptions
Major actuarial assumptions
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
0.05 % ～0.6 %2.0 %Discount rates
Long-term expected rates of return on plan assets

Current fiscal year
(From January 1, 2021
to December 31, 2021)
0.3%～0.6%
2.0%

3. Defined contribution pension plans
Required contributions by the Company and its consolidated subsidiaries to defined contribution pension plans were 337
million yen for the prior fiscal year and 354 million yen for the current fiscal year.

37

(Tax effect accounting)
1. Significant components of deferred tax assets and liabilities
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

Net operating loss carryforwards

141 million yen

100 million yen

Net defined benefit liability

484 million yen

523 million yen

Allowance for doubtful accounts

153 million yen

103 million yen

Provision for bonuses

52 million yen

54 million yen

Enterprise tax payable

60 million yen

66 million yen

Loss on valuation of securities

12 million yen

12 million yen

Loss on valuation of inventories

189 million yen

242 million yen

Revaluation reserve for land

1,082 million yen

1,082 million yen

Others

1,083 million yen

1,172 million yen

Deferred tax assets: Sub total

3,261 million yen

3,358 million yen

Valuation allowance for net(133) million yen(76) million yen(2,100) million yen(2,261) million yen

Valuation allowance (Note1)(2,233) million yen(2,338) million yen

Deferred tax assets: Total

1,027 million yen

1,020 million yen

Balance of investments(valuation difference of noncurrent assets)(221) million yen(230) million yen

Revaluation reserve for land(280) million yen(262) million yen

Valuation differences on assets received
by merger(133) million yen(133) million yen

Valuation difference on available-for-salesecurities(556) million yen(476) million yen

Retained earnings of overseas subsidiaries(116) million yen(134) million yen

Net defined benefit assets(454) million yen(535) million yen

Other(73) million yen(83) million yen

Deferred tax liabilities: Total(1,836) million yen(1,856) million yen

Net deferred tax liabilities(808) million yen(835) million yen

Deferred tax assets

operating loss carry forwards (Note2)
Valuation allowance for deductible
temporary differences

Deferred tax liabilities

38

(Note) 1. Net operating loss carryforwards and related deferred tax assets expire as follows:

Prior fiscal year (As of December 31, 2020)
WithinDue after
1 year
1 yearbut
within 2
years
Net operating loss
11
4
carryforwards (a)Valuation allowance
(11)
(4)

Due after
2 yearsbut
within3 years

Due after
3 yearsbut
within4 years

Due after
4 yearsbut
within5 years

Due after
5 years

2

3

24

95

Due after
3 yearsbut
within4 years

Due after
4 yearsbut
within5 years

Due after
5 years

3

3

87

(3)

(3)

(64)

-

-

23

Total

141 million
yen
(2)
(3)
(24)
(87) (133) million
yen
Deferred tax assets
8 8 million yen(b)(a) Net operating loss carryforwards is the amount obtained by multiplying by the statutory tax rate.
(b) Valuation allowance is not recognized for the portion of net operating loss carryforwards deemed recoverable
based on estimated future taxable income.
Current fiscal year (As of December 31, 2021)
Due after
WithinDue after
2 years
1year
1 yearbut
but
withinwithin 2
3 years
years
Net operating loss
3
1
0
carryforwards (a)Valuation allowance
(3)
(1)
0
Deferred tax assets

-

-

-

Total

100 million
yen(76) million yen

23 million yen(b)(a) Net operating loss carryforwards is the amount obtained by multiplying by the statutory tax rate.
(b) Valuation allowance is not recognized for the portion of net operating loss carryforwards deemed recoverable
based on estimated future taxable income.

39

2. The reconciliation between the effective tax rate reflected in the consolidated statements of income and the statutory tax
rate is as follows:
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

30.6 %-%

Statutory effective tax rate in Japan(Reconciliation)
Permanently non-deductible entertainmentand other expenses

0.6 %

-%

Permanently non-taxable dividends andother income(1.3) %

Per-capita inhabitant tax

3.4 %

-%

Equity in earnings of affiliates(0.3) %-%

Valuation allowance

6.5 %

-%

Effect of tax deduction(3.0) %-%

Amortization of goodwill

1.4 %

-%

Others2.2 %-%Effective tax rates

40.1 %-%-%(Note) The reconciliation between the effective tax rate reflected in the consolidated statement of income and the statutory
tax rate for the current fiscal year was omitted as the difference is less than 5% of the statutory tax rate.

40

(Business Combinations, etc.)(Absorption-type merger of a consolidated subsidiary)
On April 1, 2021, the Company merged with OYO INTERNATIONAL CORPORATION, a wholly owned subsidiary, in accordancewith a resolution of the Board of Directors’ meeting held on December 17, 2020.
1. Outline of transaction(1)Name and description of business of the company involved in the combination
Company name OYO INTERNATIONAL CORPORATION
Overseas construction consulting services (Earthquake disaster prevention, Groundwater development, Infrastructuredevelopment, etc.)(2)Date of business combination
April 1, 2021
(3)Legal form of business combination
OYO INTERNATIONAL CORPORATION was dissolved through an absorption-type merger with the Company as the surviving
entity.
(4)Consideration for Merger
There was no monetary consideration, etc. for shares and other in the Merger because the Company owned all of issued sharesof OYO INTERNATIONAL CORPORATION.
(5)Status of assets and liabilities assumed
The Company has assumed all of the assets, liabilities and the rights and obligations of OYO INTERNATIONAL CORPORATION in
the merger Effective date.
(6)Other
By absorbing and merging OYO INTERNATIONAL CORPORATION, the Company expects to integrate management andstreamline its overseas business development.
2. Summary of accounting treatment to be implemented
In accordance with the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, January 16, 2019) and the“Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, January 16, 2019), the transaction is accounted for as a transaction under common control.
(Asset retirement obligations)
The Company recognizes the obligations of properly restoration at the end of a tenancy agreement as asset retirement
obligations.
For asset retirement obligations at the end of the current fiscal year, instead of calculating liabilities, the Company reasonably
estimated the amount of deposits unlikely to be returned at the end of the tenancy agreements and has included this portion in
the current fiscal year as an expense.
(Rental real estate)
The Company and certain of its consolidated subsidiaries own apartment buildings (including land) in Ibaraki Prefecture andother regions.
Income or loss from rental of these properties during the prior fiscal year totaled 34 million yen (Rental income has principally
been included in non-operating income and rental expenses in non-operating expenses).
Income or loss from rental of these properties during the current fiscal year totaled 32 million yen (Rental income has principally
been included in non-operating income and rental expenses in non-operating expenses).
The book value for this rental real estate as stated in the consolidated balance sheets, the amount of increase/decrease during
the current fiscal year and fair value were as follows:41

(Millions of yen)Book value in the
consolidated balance
sheetsPrior fiscal year
(From January 1, 2020
to December 31, 2020)

Current fiscal year
(From January 1, 2021
to December 31, 2021)

Balance at the beginning of
the fiscal year

581

571

Increase/decrease during
the fiscal year

(9)

(92)

Balance at the end of the
fiscal year

571

479

550

459

Fair value at the end of the year

(Notes) 1. The book value in the consolidated balance sheets represented acquisition cost less accumulated depreciation.
2. The amount of decrease during the prior fiscal year was mainly due to depreciation (9 million yen). The amountsof decrease during the current fiscal year were mainly due to sales (82 million yen) and depreciation (9 millionyen).
3. Each fair value at the end of the current fiscal year was calculated by the Company on the basis of the real estateappraisal standards by outside estate surveyors for main properties and on the indexes that were considered tobe reflecting the market price such as land assessments for other properties.
(Revenue Recognition)(1) Disaggregation of revenue from contracts with customers
The Group consists of four reportable segments: “Infrastructure Maintenance, Management, and Renovation,” “Natural Disaster
Prevention and Mitigation,” “Environment,” and “Natural Resources and Energy.”
Revenue of the Group is divided into and recognized within four categories; “Government,” “Local government,” and “Private andother” for each customer classification in Japan, and “Overseas”" for sales outside Japan.
The relationship between revenues from goods or services broken down by classification of customers in Japan and overseas sales
and the four reportable segments is as follows:(Millions of yen)
Revenue from contracts with customers

50,275

Other revenue

1,400
Total

51,675(Millions of yen)Japan

Government

Infrastructure
Maintenance,
Management,
andRenovation
4,192

Local

3,186

2,487

2,808

2

-

8,484

6,189

3,168

4,674

6,717

(762)

19,987

Overseas

4,019

2,506

4

4,053

-

10,583

Total

17,587

12,425

9,995

11,029(762)

50,275Natural Disaster
Prevention and
Mitigation

Environment

NaturalResourcesand Energy

4,263

2,507

257

-

11,220Internal
elimination

Total

government
Private and
other

42

(2) Information to understand revenues
As the same information has been described in “Significant accounting policies, 4. Accounting policies, (5) Accounting forsignificant revenues and expenses,” this note has been omitted.
(3) Information to understand the amount of revenues for the current and following fiscal year.
(a)Balance of Contract Assets and Contract Liabilities
The beginning and ending balances of trade receivables, contract assets and contract liabilities recorded from contracts withcustomers of the Company and its consolidated subsidiaries for the current fiscal year are as follows:
In the consolidated balance sheets, trade receivables are included in “Notes and accounts receivable-trade” and “Accounts
receivable-completed operations”, contract assets are included in “Accounts receivable-completed operations,” and contract
liabilities are included in “Advances received on uncompleted contracts” and “Other.”(Millions of yen)
Current fiscal year
(From January 1, 2021 to December 31, 2021)
Balance at the beginning
Balance at the end of theof the fiscal year
fiscal year
Accounts receivable-trade
Contract assets
Contract liabilities

5,622

6,145

17,84918,036569

653

The change in contract assets was primarily due to revenue recognition (increase in contract assets) and reclassification to
trade receivables (decrease in contract assets).
The change in contract liabilities was primarily due to advances received (an increase in contract liabilities) and revenue
recognition (decrease in contract liabilities).
Of the revenue recognized during the current fiscal year, the amount, which was included in contract liabilities as of the
beginning of the current fiscal year, was 587 million yen and the amount related to performance obligations satisfied in priorperiods was not material.

(b)Transaction price allocated to the remaining performance obligations
Outstanding performance obligations as of the end of the fiscal year are as follows:

Due in 1 year or less

The current fiscal year

Due after 1 year

18,911

6,594

43(Millions of yen)Total
25,506

(Segment information)【Segment information】
1. Outline of reportable segments
The reportable segments of the Company are, among the Group's business units, those for which separate financial
information can be obtained and that are regularly reviewed by the Board in order to decide the distribution of resources
and to assess business performance.
An outline of the segments is as follows.
<Infrastructure Maintenance, Management, and Renovation>
This segment mainly provides solution services to support the renovation and maintenance of social infrastructure. The
main services include services related to surveying, diagnostics, and maintenance of social infrastructure managed bynational and local governments, construction of maintenance and management systems, surveying and design services formaintenance for resilient infrastructure, development and sales of non-destructive inspection products and construction,
installation, and renovation of monitoring systems.
<Natural Disaster Prevention and Mitigation>
This segment mainly provides solution services and systems that reinforce society and businesses against natural disasters(earthquakes/tsunami, volcanic disasters, heavy rainfall, landslides, and others). The main services include surveying anddesign for restoration of affected areas following natural disasters, damage simulations involving earthquakes, tsunami, fires,and others that are related to disaster prevention for national and local governments, surveys, damage projection, andcountermeasure consulting for natural disaster risk related to business continuation plans for corporations, construction,
installation, and renovation of monitoring services related to natural disasters such as seismometer networks and forest firemonitoring.
<Environment>This segment provides solution services and systems to support conservation of the social environment and to reduce theburden on the earth’s environment. The main services are consulting for surveys and measures to protect the social
environment concerning waste treatment, soil and groundwater contamination and asbestos, surveying and consulting forthe natural environment, such as measures against global warming and conservation of biodiversity, and construction,
installation, and renovation of environment monitoring systems.
<Natural Resources and Energy>
This segment provides solution services to support development, conservation, and resource and energy efficiency. The main
component is advanced geological survey consulting for constructing power plants, development and surveying of methane
hydrate, support of renewable energy such as geothermal and earth thermal energy, development and sales of resource
analysis, and 3D subsea exploration services and systems.
2. Calculation method of net sales, income and loss, assets and other items
The accounting method for reportable business segments is the same as is described in "Significant accounting policies."
Income for reportable segments is based on operating income. Segment assets are not disclosed since they are not subject
to a determination of management resource allocation or evaluation of business results. Inter-segment sales or transfers are
based on actual market prices.
(Application of Accounting Standard for Revenue Recognition)
As stated in “Changes in Accounting Policies,” the Company has applied the revenue recognition accounting standards fromthe beginning of the current fiscal year, and changed the accounting method for revenue recognition. As a result, the methodof measuring income or loss in business segments has been changed in the same manner.
As a result of this change, compared with the previous method, in the current fiscal year, “Net sales” decreased by 12 million
yen, while “Segment income” increased by 1 million yen in “Infrastructure Maintenance, Management, and Renovation,” “Netsales” decreased by 35 million yen and “Segment income” decreased by 6 million yen in “Natural Disaster Prevention and
Mitigation,” “Net sales” increased by 26 million yen, while, ”Segment income” decreased by 4 million yen in “Environment,
and “Net sales” decreased by 92 million yen and “Segment income” decreased by 5 million yen in “Natural Resources andEnergy.”44

3. Information on net sales, income or loss, assets and other items per reportable segment
Prior fiscal year (From January 1, 2020 to December 31, 2020)(Millions of yen)
Reportable segments
Adjustment(Note 1)

Book value on
consolidated
financialstatements(Note 2)49,608-49,608

28

714

(714)

-

9,387

8,329

50,322(714)

49,608

860

962

(335)

2,495

27

2,522

417

216

231

327

1,192

-

1,192

Amortization of goodwill

13

-

-

111

125

-

125

Equity in earnings (loss)of affiliates

(0)

-

-

30

29

-

29

Infrastructure
Maintenance,
Management,
andRenovation

NaturalDisasterPrevention
andMitigation

Environment

NaturalResourcesandEnergySales to third parties

18,734

13,225

9,347

8,301

Inter-segment sales ortransfer

599

45

40

Total

19,333

13,271

Segment income (loss)

1,007

Depreciation andamortization

Total

Net sales

Other items(Notes) 1. An adjustment of 27 million yen in the segment income (loss) was due to the elimination of inter-segment revenues.
2. Segment income (loss) was adjusted by the amount of operating income (loss) as stated on the consolidated
statements of income.
3. Segment assets are not disclosed since they are not subject to a determination of management resource allocation or
evaluation of business results. However, depreciation is allocated to each business segment based on areasonable distribution basis.

45

Current fiscal year (From January 1, 2021 to December 31, 2021 )(Millions of yen)
Reportable segments
Adjustment(Note 1)

Book value on
consolidated
financialstatements(Note 2)

51,675-51,675

12

762

(762)

-

9,995

11,02952,438(762)

51,675

540

981

1,118

3,667

(0)

3,666

427

222

231

238

1,119

(0)

1,118

Amortization of goodwill

16

-

-

-

16

-

16

Equity in earnings ofaffiliates

14

-

-

41

55

-

55

Infrastructure
Maintenance,
Management,
andRenovation

NaturalDisasterPrevention
andMitigation

Sales to third parties

18,359Inter-segment sales ortransfer

Environment

NaturalResourcesandEnergyTotal

12,366

9,932

11,017

628

58

62

Total

18,98812,425

Segment income

1,026

Depreciation andamortization

Net sales

Other items(Notes) 1. An adjustment of (0) million yen in the segment income was due to the elimination of inter-segment revenues.
2. Segment income was adjusted by the amount of operating income as stated on the consolidated statements ofincome.
3. Segment assets are not disclosed since they are not subject to a determination of management resource allocation or
evaluation of business results. However, depreciation is allocated to each business segment based on a reasonabledistribution basis.

46

【Related information】
Prior fiscal year (From January 1, 2020 to December 31, 2020)
1. Breakdown by product and service
Details are omitted because identical information is disclosed in the segment information section.
2. Breakdown by area
(1) Net sales(Millions of yen)Japan

United States

OthersTotal

41,3043,078
5,225(Note) Net sales are based on the location of customers and are classified by geographic proximity.

49,608(2) Property, plant and equipment
The information is omitted because the amount of property, plant and equipment located in Japan exceeds 90% of theamount of property, plant and equipment on the consolidated balance sheet.
3. Breakdown by customer(Millions of yen)
Name of the customer

Net sales

Ministry of Land,
Infrastructure,
Transport and Tourism

Relevant segment
6,672

Infrastructure Maintenance, Management, and Renovation;
Natural Disaster Prevention and Mitigation; Environment;
and Natural Resources and Energy

Current fiscal year (From January 1, 2021 to December 31, 2021 )1. Breakdown by product and service
Details are omitted because identical information is disclosed in the segment information section.
2. Breakdown by area
(1) Net sales(Millions of yen)Japan

the United States
41,092Others

4,664

Total
5,919

51,675(Note) Net sales are based on the location of customers and are classified by geographic proximity.
(2) Property, plant and equipment(Millions of yen)Japan

the United States
10,664

Others

1,107

Total
120

3. Breakdown by customer
Name of the customer
Ministry of Land,
Infrastructure,
Transport and Tourism

Net sales

Relevant segment
6,976

Infrastructure Maintenance, Management, and Renovation;
Natural Disaster Prevention and Mitigation; Environment;
and Natural Resources and Energy

47

11,892

【Information about impairment loss of noncurrent assets per reportable segment】
Prior fiscal year (From January 1, 2020 to December 31, 2020)(Millions of yen)

Impairment loss

Infrastructure
Maintenance,
Management,
and Renovation
12

Natural Disaster
Prevention and
Mitigation

Natural Resources
and Energy

Environment--

Eliminations
or
corporate

338

Total

-

350

Current fiscal year (From January 1, 2021 to December 31, 2021 )(Millions of yen)

Impairment loss

Infrastructure
Maintenance,
Management,
and Renovation

Natural Disaster
Prevention and
Mitigation

138-

Natural Resources
and Energy

Environment-

Eliminations
or
corporate

-

Total

-

138

【Information about amortization of goodwill and unamortized balance per reportable segment】
Prior fiscal year (From January 1, 2020 to December 31, 2020)(Millions of yen)Amortization
during the year
Balance at theend of the year

Infrastructure
Maintenance,
Management,
and Renovation

Natural Disaster
Prevention and
Mitigation

13

-

-

111

-

125

83

-

-

-

-

83

Natural Resources
and Energy

Environment

Current fiscal year (From January 1, 2021 to December 31, 2021 ) (Millions of yen)
Infrastructure
Natural Disaster
Maintenance,
Natural Resources
Prevention andEnvironment
Management,
and Energy
Mitigation
and Renovation
Amortization
16
during the year
Balance at theend of the year
【Information about gain on negative goodwill per reportable segment】
Not applicable.

【Related-party information】
Related-party transactions
Current fiscal year (From January 1, 2021 to December 31, 2021 )48

Eliminations
or
corporate

Total

Eliminations
or
corporate

Total

-

16

-

-

Transactions between the filing party of these consolidated financial statements and related parties

Type

Name

Major
shareholder

FukadaGeological
Institute, apublicfoundation

Location

Bunkyo-ku,
TokyoCommonstocks orequitycontributions

Business
descriptionPercentageof ownership-Research
projects

9.88

(%)

Relationshipwith relatedparties-

AmountTransaction(Millions of yen)Account
name

1,199

-

Purchase oftreasurystock

Balance at theend of year
(Millions ofyen)-(Notes) 1. The shares of treasury stocks were purchased in accordance with a resolution of the Board of Directors’ meeting dated
February 12, 2021 through Tokyo Stock Exchange Off-Auction Own Share Repurchase Trading (ToSTNeT-3). The transaction
prices are based on the closing price on February 12, 2021.
2. Due to the above transactions, Fukada Geological Institute, a public foundation, is no longer a related party.
(Per share information)

Net assets per share

Prior fiscal year
(From January 1, 2020
to December 31, 2020)
2,585.94 yen

Current fiscal year
(From January 1, 2021
to December 31, 2021)
2,756.63 yen

68.20 yen

112.92 yen

Earnings per share(Notes) 1. Fully diluted net income per share is not stated as no residual securities exist.
2. With respect to the remaining shares of the Company held by the trust, which are recorded as treasury stock inshareholders’ equity, the shares included in treasury stock are deducted in determining the average number ofshares during the period in the calculation of net income per share. Also, the shares included in treasury stock are
deducted from the total number of outstanding shares at the end of the fiscal year in the calculation of net assets
per share.
The number of outstanding shares of treasury stock at the end of the fiscal year that were deducted in thecalculation of net assets per share was 345,086 shares in the prior fiscal year and 544,944 shares in the current
fiscal year. The average number of shares of the treasury stock during the period that were deducted in thecalculation of net income per share was 347,844 shares in the prior fiscal year and 434,624 shares in the current
fiscal year..
3. The basis for the calculation of net income per share is as follows:

Earnings per share
Profit attributable to owners of parent (Millions ofyen)
Net income not attributable to common shareholders(Millions of yen)
Profit attributable to owners of parent related tocommon stock (Millions of yen)
Average number of shares outstanding (share)(Significant subsequent events)
Not applicable.

49

Prior fiscal year
(From January 1, 2020
to December 31, 2020)

Current fiscal year
(From January 1, 2021
to December 31, 2021)

1,781

2,866

-

-

1,781

2,866

26,115,389

25,384,765

⑤【Consolidated supplementary schedules】【Schedule of corporate bonds 】
Not applicable.
【Schedule of borrowings】
Classification

Balance at January 1,
2021(Millions of yen)
93-

Balance at December
31, 2021(Millions of yen)
171-

Average interest
rate
(%)
3.95
-

Period ofrepayment

Short-term loans payable
Long-term loans due forrepayment
within one year
Lease obligations due for
1,420
1,372
1.89
repayment within one year
Long term loans (excluding thosedue for repayment within one
year)
Lease obligations (excluding those2023-2029
2,637
2,653
1.86
due for repayment within one
year)
Other interest-bearing liabilities
4,150
4,197
Total
(Notes) 1. The average interest rate is calculated on the basis of year-end interest rate and balance.
2. The following table shows the aggregate amounts of scheduled repayment of lease obligations (excluding the ones
due for repayment within one year) for 5 years subsequent to December 31, 2021.
Due after 1 year
Due after 2 years
Due after 3 years
Due after 4 years
but within 2
but within 3
but within 4
but within 5
years (Millions
years (Millions
years (Millions
years (Millionsof yen)of yen)of yen)of yen)
1,050
783
551
251
Lease obligations【Schedule of asset retirement obligations】
Disclosure is omitted because the amount of asset retirement obligations is immaterial.
(2)【Other】
Quarterly information for the current fiscal year
Cumulative

1st quarter2nd quarter3rd quarter

Current fiscal year

Net sales (Millions of yen)

13,32824,232

37,662

51,675

Profit before income taxes (Millionsof yen)

2,097

2,430

3,220

4,161

Quarterly (current) profit
attributable to owners of parent(Millions of yen)

1,442

1,694

2,218

2,866

Earnings per share (Yen)

56.57

66.62

87.28

112.92Each quarter
Quarterly earnings per share(Yen)

1st quarter2nd quarter

56.57

9.92

50

3rd quarter
20.64

4th quarter
25.63

2. 【Non-consolidated financial statements】(1) 【Non-consolidated financial statements】① 【Non-consolidated balance sheets】
Prior fiscal year
(As of December 31,
2020)
AssetsCurrent assets
Cash and deposits
Notes receivable-trade
Accounts receivable-completed operations
Accounts receivable-trade
Short-term investment securities
Costs on uncompleted services
Merchandise and finished goods
Work in process
Raw materials and supplies
Prepaid expenses
Other
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Lease assets
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Software in progress
Other
Total intangible assets
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Long-term loans receivable
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

51(Millions of yen)
Current fiscal year
(As of December 31,
2021)

15,030*1
86
17,375
225
900
542
298
104
271
146
282
35,26314,062*1
62
18,128
199
1,649
334
80
278
175
160
35,131

3,145
71
586
5
31
4,034
45
18
7,939

3,046
67
549
2
42
3,951
30
116
7,809

820
5
8
833

724
85
8
818

4,840
12,786
60
2,204
(42)
19,84828,622
63,886

3,886
12,786
32
2,515
(203)
19,016
27,64362,775

Prior fiscal year
(As of December 31,
2020)
Liabilities
Current liabilities
Accounts payable-operating
Accounts payable-trade
Accounts payable-other
Income taxes payable
Accrued expenses
Advances received on uncompleted contracts
Deposits payable
Provision for bonuses
Provision for loss on orders received
Provision for product warranties
Provision for stock benefits
Other
Total current liabilities
Noncurrent liabilities
Provision for retirement benefits
Provision for stock benefits
Deferred tax liabilities
Deferred tax liabilities for land revaluation
Other
Total noncurrent liabilities
Total liabilities

52(Millions of yen)
Current fiscal year
(As of December 31,
2021)

1,372
46
2,686
377
369
201
316
107
182
14
325
76
6,075

1,193
33
2,501
400
359
202
368
112
3
18
36
5,228

1,803
49
232
280
72
2,437
8,512

1,781
224
264
262
73
2,607
7,836

Prior fiscal year
(As of December 31,
2020)
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Total capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
General reserve
Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Revaluation reserve for land
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

53(Millions of yen)
Current fiscal year
(As of December 31,
2021)

16,174

16,174

4,043
10,422
14,465

4,043
9,316
13,359488

488

23,307
4,358
28,153(1,820)56,97323,307
5,480
29,275(2,049)56,7601,303(2,902)(1,599)55,37363,886

1,120(2,942)(1,821)54,93862,775

②【Non-consolidated statements of income】

Prior fiscal year
(From January 1, 2020
to December 31, 2020)

28,591
20,129
8,462
*1
6,924
1,537

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest and dividends income
Insurance and dividends income
Rent of real estate
Other
Total non-operating income
Non-operating expenses
Interest expenses
Provision of allowance for doubtful accounts
Rent cost of real estate
Loss on cancellation of leases
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of noncurrent assets
Gain on sales of affiliate's stocks
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary loss
Loss on valuation of affiliates’ stock
Loss on sales of investment securities

Income taxes-current
Income taxes-deferred
Total income taxes
Profit54

29,417
20,202
9,214
*1
7,350
1,864

*2

456
77
*2
76
*2
69
681

*2

0
7
24
2
36
2,183

0
3
23
11
1
40
2,476

*3

*3

25
25

63
0
64
2,144
554
62
616
1,527

Total extraordinary loss
Profit before income taxes(Millions of yen)
Current fiscal year
(From January 1, 2021
to December 31, 2021)

478
71
*2
73
*2
30
652

97
10
23
10
141

2,618
602
95
697
1,920

【Breakdown of cost of sales】
A. Cost of sales for geo-engineering services

Classification
Materials cost

Notes

Prior fiscal year
(From January 1, 2020
to December 31, 2020)
Amount(Millions ofRatio (%)
yen)
908
4.6

Current fiscal year
(From January 1, 2021
to December 31, 2021)
Amount(Millions ofRatio (%)
yen)
521
2.7

Labor cost

6,084

31.3

6,379

32.9

Subcontract cost

9,393

48.3

9,309

48.2

3,124

16.2

19,334100.0

Overhead cost
Transportation expenses

912

899

Report preparation cost50

56

Depreciation

360

372

Other

1,743

Total cost for geo-engineering services

3,067

15.8

19,454

100.0

1,795

249

-

19,703

19,334

Costs on uncompleted services at the endof the year

376-

Cost of sales for geo-engineering services

19,327

19,334

21

6

-

20

19,34819,320Costs on uncompleted services at beginningof the year
Total

Provision for loss on orders received
Reversal of provision for loss on orders received
Cost of sales for geo-engineering services
during the year

(Notes) 1. Method of cost accounting is Job order cost accounting.
※ 2. As discussed in "Notes (Change in accounting policies)" below, the Company adopted the Accounting Standard for
Revenue Recognition from the beginning of the current fiscal year. Consequently, “Costs on uncompleted services at
beginning of the year” for the current fiscal year decreased by 376 million yen.

55

B. Cost of sales for measuring instruments

Classification

Note

Finished goods at beginning of the year

Prior fiscal year
(From January 1, 2020
to December 31, 2020)
Amount(Millions ofRatio (%)
yen)
303

Current fiscal year
(From January 1, 2021
to December 31, 2021)
Amount(Millions ofRatio (%)
yen)
298

420

Cost of purchased goods during the year

518

Cost of products manufactured during
the yearMaterials cost

335

53.5

308

53.3

Labor cost

197

31.6

183

31.7

Overhead cost

93

14.9

86

15.0

Total manufacturing costs

626

100.0

578

100.0

Work in process at the beginning of the
year

75

104

701

683

103

72

Total
Transfer to other accounts

※2

104

Work in process at the end of the year

494

80

530

1,218

1,347

138

131

Finished goods at the end of the year

298

334

Cost of sales for measuring instruments
during the year

780

881

Total
Transfer to other accounts※3(Notes) 1. Method of cost accounting is group process costing※ 2. Transfer to other accounts
Research and development expenses(Selling, general and administrative expenses)※ 3. Transfer to other accounts
Transfer to cost of geo-engineering services

Prior fiscal year
45 million yen

Current fiscal year
13 million yen

Prior fiscal year
138 million yen

Current fiscal year
72 million yen

C. Reconciliation of cost of sales for geo-engineering services, cost of sales for measuring instruments and cost of sales
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
AmountAmountClassification
Note(Millions of yen)
(Millions of yen)
Cost of sales for geo19,348
19,320engineering services
Cost of sales for measuring
780
881
instruments
20,12920,202
Cost of sales56

③【Non-consolidated statements of changes in net assets】

Prior fiscal year (From January 1, 2020 to December 31, 2020)(Millions of yen)
Shareholders’ equity
Total
retained
Other retained earnings

earnings

Retained

Balance at the beginning of theyear
Changes during the year

Legal

Other

Total

Legal

earnings

Capitalstock

capitalcapitalcapitalretained

Generalbrought

surplussurplussurplusearnings

reserveforward16,174

4,043

10,422

14,465488

23,307

3,572

27,367

(846)
1,527

(846)
1,527

105

105

786
4,358

786
28,153

Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Net changes in items otherthan shareholders’ equity
Total changes during the year
Balance at the end of year

16,174

4,043

10,422

14,465488

23,307(Millions of yen)
Shareholders’ equity

Treasurystock
Balance at the beginning of theyear
Changes during the year

(1,826)

Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Net changes in items otherthan shareholders’ equity
Total changes during the year
Balance at the end of year

(0)
6

6
(1,820)

Valuation and translation adjustments

Shareholders’equity total

56,180Total
valuation
andValuationdifferenceonavailablefor-salesecurities

Revaluation
reservefor landadjustments

1,752(2,797)(1,044)translation

Total net
assets55,136

(846)
1,527
(0)
6
-

(846)
1,527
(0)
6
-

105

105

792
56,973

57

(449)

(105)

(555)

(555)

(449)
1,303

(105)
(2,902)(555)(1,599)237
55,373Current fiscal year (From January 1, 2021 to December 31, 2021 )(Millions of yen)
Shareholders’ equity
Other retained earnings

Balance at the beginning of theyear
Changes during the year

Legal

Other

Total

Legal

Capitalcapitalcapitalcapitalretained

Generalstock

surplussurplussurplusearnings

reserve

16,174

4,043

10,422

14,465488

23,307Retainedearnings
brought
forwardDividends from surplus
Net income

Total
retainedearnings

4,358

28,153

(838)
1,920

(838)
1,920

39

39

1,122
5,480

1,122
29,275Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Net changes in items otherthan shareholders’ equity
Total changes during the year
Balance at the end of year22
(1,128)16,174

4,043(1,105)9,316

22(1,128)(1,105)
13,359488

23,307(Millions of yen)
Shareholders’ equity

Valuation and translation adjustments
Total

Shareholders’equity total

Valuationdifferenceonavailablefor-salesecurities

Revaluation
reservefor landadjustments(1,820)56,973

1,303(2,902)(1,599)(2,096)
739
1,128

(838)
1,920
(2,096)
761
-

(838)
1,920
(2,096)
761
-

39

39

Treasurystock
Balance at the beginning of theyear
Changes during the year
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury
stock
Reversal of revaluation
reserve for land
Net changes in items otherthan shareholders’ equity
Total changes during the year
Balance at the end of year

(228)
(2,049)(212)
56,76058

valuationandtranslation

Total net
assets

55,373

(182)

(39)

(222)

(222)

(182)
1,120

(39)
(2,942)(222)(1,821)(434)
54,938

【Notes】(Significant accounting policies)
1. Valuation method and standards for securities(a) Stocks of subsidiaries and affiliates
Stated at cost determined by the moving average method.
(b) Available-for-sale securities
Securities with fair market value
Stated at fair value based on the quoted market price as of the year-end closing date with any changes in unrealized gains
or losses, net of the applicable income taxes, included directly in net assets. Cost of securities sold is determined by themoving average method.
Securities without fair market value
Stated at cost determined by the moving average method.
2. Valuation method and standards for derivatives
Stated at fair value.
3. Valuation method and standards for inventories(a) Merchandise/products/raw materials/work in process
Stated at cost using weighted-average method (balance sheet amounts are determined by writing down the book values
based on decrease in profitability).
(b) Supplies
Last cost method (balance sheet amounts are determined by writing down the book values based on decreased
profitability).
4. Depreciation method of noncurrent assets(a) Property, plant and equipment (excluding lease assets) and real estate for investment
The straight-line method is used for buildings (except structures attached to buildings), and the declining balance method
is used for other property, plant and equipment.
Major useful lives are defined as follows:
Buildings:
2 – 50 years
Machinery and equipment: 2 – 7 years(b) Intangible assets (excluding lease assets)
Straight-line method
Software for internal use is amortized over the expected available period (5 -10 years).
(c) Lease assets
The straight-line method is adopted mainly with a residual value of zero and the lease period deemed equal to the service
life of the asset.
(d) Long-term prepaid expenses
Straight-line method
5. Accounting standards for provisions(a) Allowance for doubtful accounts
To prepare for expected losses from bad debts, the Company estimates uncollectible amounts for normal receivables basedon the historical experience and for certain specific receivables, such as doubtful accounts receivables, based on theindividual probability of recovery.
(b) Provision for bonuses
To prepare for the payment of bonuses to employees, a provision for bonuses is provided based on the expected amount of
payment.
(c) Provision for retirement benefits
To prepare for payment of employees’ retirement allowances, a provision is provided based on the anticipated projected
benefit obligation and pension assets at the end of the current fiscal year.
Actuarial gain or loss is amortized in the fiscal year following the year in which the gain or loss is incurred by the straightline method over periods (5 years) which are shorter than the average remaining period of the employees.

59(d) Provision for loss on orders received
To prepare for future losses on contracts for orders received, a provision for loss on orders received is provided based on
the future losses anticipated at the end of the current fiscal year and the amount of foreseeable losses that can reasonably
be estimated.
(e) Provision for product warranties
To prepare for estimated warranty costs, a provision for product warranties is provided based on historical experience of
free-of-charge repairs of products.
(f) Provision for stock benefits
In order to provide for grant of shares of the company to employees according to the stock benefits regulations, it isprovided based on the estimated stock benefit obligations as of the end of the current fiscal year.
6. Accounting standards for revenue and expenses
The "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and the “Implementation
Guidance on Accounting Standard for Revenue Recognition” (Implementation Guidance No. 30, March 26, 2021) have been
applied.
The following summarizes the major performance obligations of the Group’s principal businesses and the time at whichrevenue is recognized. For any businesses, the Company allocates the transaction price to performance obligations based on
the independent sales price calculated using an adjusted market valuation approach, an approach that adds margins to
expected costs, and other factors. Consideration for the transaction does not include a significant financing component as itis primarily received by within one year after satisfaction of performance obligations. In addition, there is no material
variable consideration for which the amount of consideration could change.
Details of major performance obligations in major businesses and the time at which revenue is recognized are as follows.
(1) Revenue Recognition for Geo-engineering Services Contracts
In Geo-engineering Service Contracts, the Company conducts machine boring, road facilities inspection (tunnels, etc.), slope
observation, landslide countermeasure design, analysis of water quality, soil and odor, marine surveys such as offshore
boring associated with the installation of offshore wind power plant, data collection, analysis, design, consulting. The
Company has identified these services provided by the Company in this area as performance obligations.
Geo-engineering Services are based on a method in which revenue is recognized over time as the Company satisfies theperformance obligations to transfer the goods or services to the customer, as the Company recognizes certainty of outcome
with respect to the portion of progress and transfers control over the goods or services to the customer over a period oftime.
The method used to estimate the degree of progress related to the satisfaction of performance obligations is primarily basedon the cost-based input method.
In addition, if the Company is unable to reasonably estimate the degree of progress related to the satisfaction of
performance obligations, the Company applies the cost-recovery method.
(2) Revenue Recognition for Merchandise Sales (Mainly Measuring Instrument Sales)
In merchandise sales, the Company manufactures, sells, and provides maintenance services for geophysical survey
equipment such as seismic observation and monitoring equipment and non-destructive inspection equipment, as well as
monitoring systems using equipment. The Company has identified the operations provided by the Company with respect tothese operations as performance obligations.
Of merchandise sales, domestic sales are recognized at the time of delivery because control over the goods is transferred tothe customer at the time of delivery.
In addition, revenue from overseas sales is recognized at a point in time when performance obligations are satisfied.

60

(3) Revenue recognition for license sales
In license sales, the Company sells licenses for land information systems, operational management systems, various analysis
software, and other products, and conducts consignment sales of systems. The Group has identified the operations it
provides as performance obligations.
Revenue from license sales is recognized over a certain period of time when the nature of the license, such as cloud services,
represents access rights, and revenue is recognized upon delivery, if the nature of the license, such as software delivery, is aright of use.

7. Hedge accounting method(a) Hedge accounting method
Deferral hedge accounting is adopted.
(b) Hedging instruments and hedged items
Hedging instruments: forward-exchange contracts
Hedged items: accounts payable-trade(c) Hedging policy
In order to reduce risks of exchange rate fluctuations, hedges are used to cover liabilities.
(d) Method of assessing hedge effectivenessAn assessment of hedge effectiveness is omitted because the relationship between the hedging instruments and hedged
items is direct.
8. Other significant accounting policies
Accounting of consumption tax
All figures exclude consumption tax.

61

(Significant Accounting Estimates)(Revenue Recognition by estimating the degree of progress related to the satisfaction of performance obligations of Geoengineering Services Contracts)(1)Amount recorded in financial statements for the current fiscal year
Net sales 13,635 million yen(Note)The above amount includes the Geo-engineering Service Contracts for which the degree of progress related to thesatisfaction of performance obligations of the Geo-engineering Service Contracts can be reasonably estimated, and for which
the full performance obligation has not been satisfied as of the end of the current fiscal year.
(2)Other information that helps users of the financial statements understand the contents of accounting estimates
As the same information has been described in “5. Financial information, 1. Consolidated Financial Statements,(1)Consolidated financial statements, Notes (Significant Accounting Estimates) (Revenue Recognition by estimating thedegree of progress related to the satisfaction of performance obligations of Geo-engineering Services Contracts of theCompany)(2)Other information to help users of the consolidated financial statements understand the contents of accounting
estimates”, this note has been omitted.

(Change in accounting policies)(Application of Accounting Standard for Revenue Recognition)
The Company adopted the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and the“Implementation Guidance on Accounting Standard for Revenue Recognition” (Implementation Guidance No. 30, March 26,2021) from the beginning of the current fiscal year, and will recognize revenue at amount when the control of promised goods
or services is transferred to customers, which is expected to be received in exchange for those goods or services.
This has resulted primarily in the following changes in revenue recognition.

(1) Revenue Recognition for Geo-engineering Services Contracts
Previously, the percentage-of-completion method was used for construction (Geo-engineering Service) for which thecertainty of outcomes was recognized for the portion of progress, and the completed-contract method was used forconstruction (Geo-engineering Service) for which the degree of progress cannot be estimated. However, for all construction
works, as the performance obligations are satisfied, the method of recognizing revenue over time has been introduced.
In addition, the Company uses the cost-based input method primarily to estimate the degree of progress related to thesatisfaction of performance obligations.
For Geo-engineering Service Contracts for which progress cannot be estimated, revenue is recognized using a cost recovery
method.

(2) Revenue Recognition for Merchandise Sales (Mainly Measuring Instrument Sales)
Previously, domestic transactions were principally subject to shipment standards, but at the time of delivery, revenue isrecognized as control over the goods is transferred to the customer.
With respect to the application of the revenue recognition accounting standards, the transitional treatment stipulated in theprovisions of paragraph 84 of the Accounting Standard for Revenue Recognition is applied. The cumulative effect ofretrospective application of a new accounting policy prior to the beginning of the current fiscal year is adjusted to Retained
earnings at the beginning of the current fiscal year, and a new accounting policy is applied from the beginning of current the
fiscal year. However, the new accounting policy has not been applied retrospectively to contracts for which the method set
forth in paragraph 86 of the Accounting Standard for Revenue Recognition has been applied and substantially all revenue
amounts have been recognized in accordance with previous treatment prior to the beginning of the current fiscal year.
As a result, Net sales and Cost of sales decreased by 129 million yen and 114 million yen, respectively, and Gross profit,
Operating income, Ordinary income and Profit before income taxes decreased by 15 million yen for the current fiscal year. The
impact to the balance of Retained earnings on Balance at the beginning of the current fiscal year is immaterial.

62

(Change in presentation)(Application of "Accounting Standard for Disclosure of Accounting Estimates")
The "Accounting Standard for the Disclosure of Accounting Estimates" (ASBJ Statement No. 31, March 31, 2020) has been applied
to the financial statements as of the end of the current fiscal year, and significant accounting estimates have been noted in thefinancial statements.
However, the note regarding to the prior fiscal year has been omitted in accordance with the transitional treatment provided in
the proviso of paragraph 11 of the Accounting Standard for the Disclosure of Accounting Estimates.
(Additional information)
As the same information has been described in “5. Financial information, 1. Consolidated Financial Statements,(1)Consolidated financial statements, Notes (Business Combinations, etc.)”, this note has been omitted.
(Non-consolidated balance sheet)※１.Trade notes maturing at the end of the fiscal year are settled on the clearance date. The following outstanding notes
maturing at the end of the fiscal year were included in the corresponding accounts as the maturity date fell on a businessholiday for financial institutions.

Notes receivable-trade

Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

1 million yen

8 million yen

2. Guarantee obligation
A consolidated subsidiary’s loans payable is guaranteed as follows.
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

93 million yen

171 million yen

FONG CONSULT PTE. LTD.
(Non-consolidated statements of income)※ 1. Among selling expenses and general and administrative expenses, major cost items, amounts and their approximate ratios
are as follows.
Prior fiscal year
Current fiscal year
(From January 1, 2020
(From January 1, 2021
to December 31, 2020)
to December 31, 2021)
Salaries and allowances
3,178 million yen
3,523 million yen

Provision for bonuses
Retirement benefit expenses
Depreciation
Approximate ratio
Selling expenses
General and administrative expenses

63

44 million yen
95 million yen
234 million yen

40 million yen
106 million yen
240 million yen

57 %
43 %

58 %
42 %

※ 2. Income or loss related to transactions with subsidiaries and affiliates
Prior fiscal year
(From January 1, 2020
to December 31, 2020)
Dividends income
362 million yen
Other non-operating income
including real estate rent

Current fiscal year
(From January 1, 2021
to December 31, 2021)
380 million yen

45 million yen

42 million yen※ 3. The components of gain on sales of noncurrent assets are as follows.
Prior fiscal year
(From January 1, 2020
to December 31, 2020)Land
25 million yen

Current fiscal year
(From January 1, 2021
to December 31, 2021)
97 million yen(Securities)
Prior fiscal year (As of December 31, 2020)
Stocks of subsidiaries or affiliates (12,736 million yen of subsidiary stocks and 49 million yen of affiliate stocks on the balance
sheets) do not have market prices, and it is extremely difficult to determine fair value. Accordingly, their fair values were notdisclosed.
Current fiscal year (As of December 31, 2021)
Stocks of subsidiaries or affiliates (12,737 million yen of subsidiary stocks and 49 million yen of affiliate stocks on the balance
sheets) do not have market prices, and it is extremely difficult to determine fair value. Accordingly, their fair values were notdisclosed.
(Tax effect accounting)
1. Significant components of deferred tax assets and liabilities

Deferred tax assets
Provision for bonuses
Enterprise tax payable
Loss on valuation of securities
Provision for retirement benefits
Revaluation reserve for land
Valuation differences on assets received bymerger
Other
Deferred tax assets : Sub total
Valuation provision
Deferred tax assets: Total
Deferred tax liabilities
Valuation difference on available-for-salesecurities
Prepaid
pension cost
Revaluation reserve for land
Valuation differences on assets received bymerger
Other
Deferred tax liabilities: Total
Net deferred tax liabilities

Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

37 million yen
36 million yen
12 million yen
471 million yen
1,082 million yen
51 million yen

39 million yen
47 million yen
12 million yen
500 million yen
1,082 million yen
49 million yen

542 million yen
2,234 million yen(1,345) million yen
889 million yen

449 million yen
2,182 million yen(1,326) million yen
856 million yen(556) million yen(371) million yen(280) million yen(133) million yen(476) million yen(451) million yen(262) million yen(133) million yen(60) million yen(1,402) million yen(513) million yen
64(60) million yen(1,384) million yen(527) million yen

2. The reconciliation between the effective tax rate reflected in the non-consolidated statements of income and the statutory
tax rate is as follows:
Prior fiscal year
(As of December 31, 2020)

Current fiscal year
(As of December 31, 2021)

Statutory effective tax rate in Japan(Reconciliation)
Permanently non-deductive entertainment andother expenses

30.6 %

30.6 %

0.1 %

0.3 %

Dividends and other income permanently
included in gross profit(5.4) %

(4.7) %

Per-capita inhabitants tax
Valuation provision
Tax deduction
Effect on merger of a consolidated subsidiary
Other
Effective tax rate

3.5 %
0.9 %
(1.1) %
0.2 %
28.8 %

2.9 %(0.8) %
(0.8) %
(1.2) %
0.4 %
26.7 %(Business combinations)
As the same information has been described in “5. Financial information, 1. Consolidated Financial Statements, (1)Consolidated
financial statements, Notes (Business Combinations, etc.)”, this note has been omitted.

(Significant subsequent events)
Not applicable.

65

④【Non-consolidated supplementary schedules】【Schedule of tangible non-current assets】

Type of assets

Balance at
December31, 2021(Millions ofyen)

Accumulated
depreciationor
amortization
for thecurrent fiscal
year (Millionsof yen)Balance atJanuary 1,
2021(Millions ofyen)

Increase in thecurrent fiscal
year (Millionsof yen)Decrease in thecurrent fiscal
year (Millionsof yen)Depreciation /amortization
for the current
fiscal year
(Millions of
yen)

3,145
71
586

64
4
176

0
0

163
8
213

3,046
67
549

6,945
709
2,815

5
31

29

0
0

2
17

2
42

85
305

4,034
[(2,692)]
45
18
7,939

-

82
[57]
18
101

Property, plant andequipment
Buildings
Structures
Machinery andequipment
VehiclesTools, furniture andfixtures
Land

3,951
[(2,750)]
30
116
7,809

-

-

Lease assets
3
1830
Construction in progress
116
Total Property, plant
394
423
10,892and equipment
Intangible assets
Software
820
100
197
724
1,131
Software in progress
5
85
5
85
Other
8
0
8
Total intangible assets
833
186
5
197
818
1,131
(Note) From current fiscal year, figures in square brackets in the "Balance at January 1, 2021," " Decrease in the current
fiscal year" and "Balance at December 31, 2021" columns indicate amounts outstanding as a revaluation reserve
for land (before tax).
【Schedule of provisions】
Classification
Allowance for doubtful
accounts
Provision for bonuses
Provision for loss on orders
received
Provision for productwarranties
Provision for stock benefits

Balance atJanuary 1, 2021
(Millions of yen)
42

Increase in thecurrent fiscal year
(Millions of yen)
165

Decrease in thecurrent fiscal year
(Millions of yen)
3

Balance at
December 31, 2021
(Millions of yen)
203

107
182

112
6

107
185

112
3

14

18

14

18

374

179

329

224

(2)【Details of major assets and liabilities】
Statement has been omitted since consolidated financial statements are prepared.

66

(3)【Other】① Events arising after the balance sheet date

Not applicable.
② Lawsuits

Not applicable.

67Independent Auditor’s Report

The Board of Directors
OYO Corporation
OpinionWe have audited the accompanying consolidated financial statements of OYO Corporation andits consolidated subsidiaries (the Group), which comprise the consolidated balance sheet as at
December 31, 2021, and the consolidated statements of income, comprehensive income, changes
in net assets, and cash flows for the year then ended, and notes to the consolidated financial
statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at December 31, 2021, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognized over time as performance obligations are satisfied for Geo-engineering Services in
OYO Corporation
Description of Key Audit Matter

Auditor’s Response

As described in Significant accounting policies tothe consolidated financial statements, 4. Accounting
policies, (5) Accounting for significant revenues
and expenses, the Company and its consolidated
subsidiaries apply a method of recognizing
revenue over time as performance obligations are
satisfied for Geo-engineering Services.
The cost-based input method is primarily used as
the method for estimating progress towards
satisfaction of a performance obligation.

We mainly performed the following audit
procedures in considering the adequacy of
estimates of the total cost of Geo-engineering
Services using the method of recognizing revenue
over time as performance obligations are satisfied for
Geo-engineering Services in OYO Corporation.
(1) Evaluation of internal controls
We evaluated the Company’s followinginternal controls related to estimates of thetotal cost of Geo-engineering Services.

In addition, as described in Significant accounting
・ Control to ensure reliability of profit plans
estimates in the notes to the consolidated financial
by requiring that profit plans (plan tostatements, among the Geo-engineering Services
manage profits of each contract) upon which
contracts in which progress towards theestimates of the total cost of Geosatisfaction of performance obligations under suchengineering Services are based are prepared
contracts can be reasonably estimated, OYO
by personnel in charge with specialized
Corporation’s Net sales related to Geo-engineeringknowledge, and that necessary approvals
Services
Contracts
whereinperformance
have been obtained for the profit plansobligations were not completely satisfied as of the・ System to confirm that each of the elements
end of the current fiscal year were 13,601 millionof the total cost of Geo-engineering Services
yen, accounting for 26% of Net sales of 51,675
is accumulated and calculated in detailmillion yen for the current fiscal year.
based on objective prices such as third party
Among revenue recognized using the method of
quotations and internally approved standard
recognizing revenue over time as performance
unit prices
obligations are satisfied, revenue from Geo・ System for revising estimates of the total
engineering Services contracts for which progresscost of Geo-engineering Services in a timely
towards the satisfaction of performance
manner in accordance with factors such as
obligations under such contracts can be reasonably
the status of implementation of the Geoestimated is measured based on the progressengineering Services and actual costs
towards the satisfaction of the performance
incurred, or changes in specifications as
obligation, and such progress is determined based
instructed by customers
on the ratio of actual costs incurred to the estimated・ System through which the personnel in
total costs of Geo-engineering Services up to thecharge of profit management, who are
end of the fiscal year.
responsible for the reliability of costs, canGeo-engineering Services are highly individual inmonitor both the management of profit andnature and carried out in accordance withloss on Geo-engineering Services andfundamental specifications and work details
progress towards completion in a timely andinstructed by customers. Estimates of the total cost
appropriate mannerof Geo-engineering Services require judgment
based on specialized knowledge of and experience (2) Evaluation of the adequacy of estimates of thetotal cost of Geo-engineering Services
in Geo-engineering Services, and involve
uncertainty.
We identified Geo-engineering Services
involving a relatively high degree of uncertainty
Further, the content of Geo-engineering Services
over estimates of the total cost of GeoContracts may potentially be modified based onengineering Services in light of factors such as
agreement with the customer throughout the work
Net sales of Geo-engineering Services and theperiod and there may be changes in work-hour
status of implementation, and performed theestimates and fluctuations in components such as
following procedures.
subcontract costs due to certain facts coming tolight after the start of implementation, thus making
・ We agreed estimates of the total cost of Geotimely and appropriate revisions of the total cost ofengineering Services to the profit plan uponGeo-engineering Services highly complex.
which the estimates are based, andconsidered whether the total cost of GeoBased on the above, we determined the estimatesengineering Services was calculated byof the total cost of Geo-engineering Services inaccumulating each of the elements of thecalculating Net sales and progress towards thetotal cost and whether the profit plansatisfaction of performance obligations are of mostincludes unclear reconciling items.
significance for the fiscal year ended December 31,
2021 and, accordingly, that this is a key audit
・ We inspected supporting documents thatmatter.
could confirm whether there were changes
to the content of the Geo-engineering
Services, considered whether the impact ofchanges in work-hour estimates andfluctuations in subcontract costs werereflected in estimates of the total cost of
Geo-engineering Services in a timely
manner, and made inquiries of relevant
personnel as necessary.

・ We evaluated the process for estimating thetotal cost of Geo-engineering Services bycomparing advance estimates of the total
cost of Geo-engineering Services with theactual amounts or revised estimates.

Responsibilities of Management, the Corporate Auditor and the Board of Corporate Auditors
for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and forsuch internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing theGroup’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.

・ Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent theunderlying transactions and events in a manner that achieves fair presentation in accordancewith accounting principles generally accepted in Japan.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding,among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that
we have complied with the ethical requirements regarding independence that are relevant to our
audit of the financial statements in Japan, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with the Corporate Auditor and the Board of Corporate Auditors,
we determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters. We describe these mattersin our auditor’s report unless law or regulation precludes public disclosure about the matter orwhen, in extremely rare circumstances, we determine that a matter should not be communicatedin our report because the adverse consequences of doing so would reasonably be expected tooutweigh the public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
March 25, 2022
/s/Kyoji Ito
Designated Engagement Partner
Certified Public Accountant/s/Kenji Fujita
Designated Engagement Partner
Certified Public Accountant_____________________________________________________________________________(Notes) 1. The above is a digitization of the text contained in the original copy of the Independent
Auditor’s Report, which is in custody of the Company.
2. XBRL data is not included in the scope of the audit

Independent Auditor’s Report

The Board of Directors
OYO Corporation
OpinionWe have audited the accompanying non-consolidated financial statements of OYO Corporation,
which comprise the non-consolidated balance sheet as at December 31, 2021, and the nonconsolidated statements of income and changes in net assets for the year then ended, and notes tothe non-consolidated financial statements.
In our opinion, the accompanying non-consolidated financial statements present fairly, in allmaterial respects, the non-consolidated financial position of OYO Corporation as at December 31,
2021, and its non-consolidated financial performance for the year then ended in accordance withaccounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Non-consolidated Financial Statements section of our report. We are independentof the entity in accordance with the ethical requirements that are relevant to our audit of the nonconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the non-consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the non-consolidated financial statements as a whole, andin forming the auditor’s opinion thereon, and we do not provide a separate opinion on thesematters.
Revenue recognized over time as performance obligations are satisfied for Geo-engineering
Services
Description is omitted because it is the same as the description of key audit matter stated in theauditor’s report of the consolidated financial statements.
Responsibilities of Management, the Corporate Auditor and the Board of Corporate Auditors
for the Non-consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these non-consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and forsuch internal control as management determines is necessary to enable the preparation of nonconsolidated financial statements that are free from material misstatement, whether due to fraud
or error.

In preparing the non-consolidated financial statements, management is responsible for assessing
the entity’s ability to continue as a going concern and disclosing, as required by accounting
principles generally accepted in Japan, matters related to going concern.
The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing theentity’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Non-consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the non-consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these non-consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the non-consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the non-consolidated financial statements is not expressing an opinion on the effectiveness ofthe entity’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the entity’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the non-consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the entity to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the non-consolidated financial
statements, including the disclosures, and whether the non-consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation inaccordance with accounting principles generally accepted in Japan.
We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding,among other matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our audit.
We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that
we have complied with the ethical requirements regarding independence that are relevant to our
audit of the financial statements in Japan, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.

From the matters communicated with the Corporate Auditor and the Board of Corporate Auditors,
we determine those matters that were of most significance in the audit of the non-consolidated
financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about thematter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the entity which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Ernst & Young ShinNihon LLC
Tokyo, Japan
March 25, 2022
/s/Kyoji Ito
Designated Engagement Partner
Certified Public Accountant/s/Kenji Fujita
Designated Engagement Partner
Certified Public Accountant_____________________________________________________________________________(Notes) 1. The above is a digitization of the text contained in the original copy of the Independent
Auditor’s Report, which is in custody of the Company.
2. XBRL data is not included in the scope of the audit