Management’s Discussion and Analysis

財務情報

Consolidated Statements of Income and Comprehensive IncomeLong-Term Trends

Comparing FY2022/3 and FY2023/3

Both sales and profits are trending upward in the Entertainment Contents Business, supported by growth in the number of platformers andincreasingly diverse business models. We forecast continued growth going forward.
The Pachislot and Pachinko Machines Business is recovering in both sales and profits due to the market environment, which has improved
with a softening of regulations, and also due to increased business efficiency driven mainly by cost improvements.

(FY2023/3)

Main Causes of the Decline in Earnings

389.6 billion

49.4 billion

Net sales: ¥Ordinary income: ¥Ordinary income margin:

Billions of yen

389.6
49.4

Improvement in Profitability

Declining Earnings within Existing Businesses
amid Market Contraction

Earning Growth in Consumer Area

Sammy Unit Sales / Pachislot and Pachinko Market Size

Billions of yen

12.7%
12.7%

Consumer Area Net Sales

Thousands of units / Billions of yen

187.9

515.7

Q1

410.5

Net sales

’18

’19

’20

’21

’22

’20

’23

(FY)

Pachislot and Pachinko Machines Business
Operating Income

Entertainment Contents Business Operating Income
Billions of yen

Billions of yen

20.9

38.7

20.0
14.8

’17

’18

’19

’20

’21

’22

’23

’18

(FY)

’19

’20

’21

’22

’23

(FY)

Billions of yen

389.6
321.4

46.7
19.0

92

320.9

389.6

21.4%

282.8

19.9%

Pachislot and Pachinko Machines Business

75.8

94.2

24.3%

Resort Business

8.6

11.5

33.7%

Other and eliminations

0.6

1.1

83.3%

Cost of sales

193.0

231.5

19.9%

Gross profit

127.8

158.0

23.6%

Selling, general and administrative(SG&A) expenses

95.8

111.2

16.1%

Operating income

32.0

46.7

45.9%

Entertainment Contents Business

33.9

38.7

14.2%

Pachislot and Pachinko Machines Business

9.3

20.0

115.1%

Resort Business

–2.5

–1.1

–

Other and eliminations

–8.7

–10.9

–

10.0%

12.0%

2.0pt

Non-operating income

5.9

4.9

–16.9%

Non-operating expenses

4.6

2.2

–52.2%

Ordinary income

33.3

49.4

48.3%

Extraordinary income

5.2

0–100.0%Extraordinary losses

0.6

2.4

300.0%

Income before income taxes

37.9

47.0

24.0%

Total income taxes

0.9

1.1

22.2%

Profit attributable to owners of parent

37.0

45.9

24.1%

40

59

–

Net income per share (Yen)

158.85208.07–

Net assets per share (Yen)

1,311.72 1,498.75–

Cash dividends per share (Yen)
’13

’14

Net sales

Operating income

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FY)

Full year

2023 YoY Change

235.9    Operating income margin

Long-Term Trends in Net Sales and Operating Income

Through Q3

Billions of yen

Entertainment Contents BusinessNet sales

Entertainment Contents BusinessProfitability Improvement

Source: Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023” (Research of Japanese Market)

Through Q2

Ordinary income margin

2022

’23

Q1

FY2023/3

Summary of Consolidated Financial Statements

Pachislot machine unit sales
Pachinko machine unit sales (SEGA SAMMY unit sales)
Pachislot machine market size
Pachinko machine market size
(Settlement dates from July to June: Market size)’16

Ordinary income

9485

Full year

Operating income (Entertainment Contents Business)
The Consumer area contributed to a year-on-year increase in operating income.

Integrated Report 2023

SEGA SAMMY HOLDINGS

103

140

Through Q3

FY2022/3

125.5

279.4

243.4

Through Q2

Operating income (Pachislot and Pachinko Machines Business)
In particular, sales of pachislot machines (No. 6.5 model) were firm,
resulting in significant year-on-year growth in profits.
Total income taxes
Income taxes decreased due to the recognition of deferred tax
assets at a U.S. subsidiary, a decrease in taxable income from net
loss carried forward, and a tax credit related to research anddevelopment at a U.K. subsidiary.

Change in Segment Operating Income
Billions of yen

Pachislot andPachinko
Machines
Business+10.7

ResortBusiness+1.4

Other andeliminations

–2.2

46.7

+4.8

32.0

Entertainment
Contents Business

FY2022/3

FY2023/3
Consolidated: +¥14.7 billion

93

Consolidated Financial Position

Consolidated Cash Flows

Long-Term Trends

Long-Term Trends

From the fiscal year ended March 2013, total assets started trending
upwards due to an increase in goodwill accompanying acquisitionsin the Entertainment Contents Business, the Group’s initiatives in
preparation for participation in the Integrated Resort (IR) business,
and an increase in investment securities accompanying new investment in growth areas, etc. In recent years, however, total assets haveagain been trending downward, reflecting a decrease in cash anddeposits accompanying relocation of the head office, a decrease in
securities, and the redemption of bonds.
Despite earnings volatility stemming from the presence orabsence of hit products, which is the nature of the Group’s businesses, the equity ratio remained steady and the Group continued
to invest in growth areas and pay stable dividends.

Total Assets and Equity Ratio
Billions of yen / %

528.5

501.5
66%

59%

’13

’14

Total assets

’15

’16

’17

’18

’19

’20

’21

’22

’23

With the exception of certain fiscal periods, the Group has continued to record net cash outflows in investing activities due to M&As
in growth areas and strategic investments to raise production
capacity. Since the fiscal year ended March 2013, the Group has
been investing in organizational restructuring, including making
three listed subsidiaries into wholly owned subsidiaries, as well as
investing actively in growth areas such as the Consumer area.
Through a cash management system, the Group uses internal
capital efficiently. Also, the Group uses a range of methods to support liquidity and meet investment needs flexibly, including borrowings and bond issuance.

(FYE)

’15

’16

’17

’18

’19

’20

’21

’22

435.4

292.6

435.4

142.8

+66.1

+38.7

Breakdown of Cash Flows’23 (FY)

Billions of yen

Cash Flows from Operating Activities
Income before income taxes
Depreciation and amortization
Increase in trade notes and accounts receivable
Increase in inventories

Net cash provided byoperating activities+44.7

Increase in contract liabilities

Net cash used ininvesting activities

152.4

+ +

’14

–2.3

179.5
Net cash used infinancing activities+27.4

Others

47.0
10.6
–13.4
–22.4
15.5
7.4

Integrated Report 2023

SEGA SAMMY HOLDINGS

Cash and cash equivalents at the end of the fiscal year ended
March 2023 were ¥179,509 million, up ¥27,049 million from theprevious fiscal year-end.

Liabilities and Net Assets Billions of yen

Billions of yen–0.2 0.1 0.1–2.3

Cash flows from operating activities
Cash flows from investing activities
Free cash flows

Consolidated Cash Flows
287.7

44.742.3

FY2023/3 Cash Flows

Assets Billions of yen

74.1 13.1 60.3

Billions of yen’13

Equity ratio

Comparing FY2022/3 and FY2023/3

2022

Cash Flows

Cash Flows from Investing Activities–15.3

Purchase of property, plant and equipment
Purchase of intangible assets
Others

–4.9
–5.8
8.4

Cash Flows from Financing Activities

10.0
–10.1
–4.9
–8.8
–1.5

Proceeds from long-term debt

2023

73.9 13.2 60.4

353.8

501.5

331.3

170.2

501.5

Repayment of long-term loans
Cash andcash equivalents

Cash andcash equivalents

2022*

2023

Acquisition of treasury stocks
Payment of dividends
Others*T he balance of cash and cash equivalents as of end of March 2022 includes the effect offoreign exchange rate changes on cash and cash equivalents.

Total investments
and other assets

Total intangible
assets–¥0.2 billion+¥0.1 billion

Total property,
plant and equipment

Total current
assetsTotal liabilities+¥0.1 billion +¥66.1 billion +¥38.7 billion +¥27.4 billion
Cash and deposits, tradenotes and accounts
receivable, and inventory
assets each increased

94

Total net assets

Although total shareholders’ equity fell due to cash
dividends paid and thepurchase of treasury stock,
the Company recorded
profit attributable to ownersof parent. This, among
other factors, caused anincrease in total net assets.

Accounts payable andcontract liabilities
increased.

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities+¥44.7 billion–¥2.3 billion–¥15.3 billion

Net cash provided by operating activities for the fiscal
year ended March 2023 was ¥44,704 million yen(¥39,607 million for the fiscal year ended March 2022).
This was mainly due to the recording of income before
income taxes of ¥47,069 million and depreciation of¥10,669 million, and an increase in contract liabilities of¥15,545 million, which outweighed an increase ininventories of ¥22,481 million and an increase in tradereceivables of ¥13,493 million.

Net cash used for investing activities was ¥2,351 million(compared with an outflow of ¥8,794 million in theprevious fiscal year). This was mainly due to outflows of¥4,944 million for the purchase of property, plant andequipment and ¥5,875 million for the purchase ofintangible assets, despite an inflow of ¥3,510 million
from distributions from investment partnerships.

Net cash used for financing activities was ¥15,358
million (compared with an outflow of ¥35,970 million in
the previous fiscal year). This was mainly due to outflows of ¥10,191 million for the repayment of long-term
debt, ¥8,865 million for cash dividends paid, and ¥4,987
million for the purchase of treasury stock despite an
inflow of ¥10,000 million from long-term debt.

95

Non-Financial Assets

Basic Data
2100
130

Human Capital
Consolidated Employee Numbers

Market Sizes and Number of Pachinko and Pachislot Players
1,710

1,660

At the end of the fiscal year ended March 2023, the consolidated number of employees was 8,219, up 459 from the previous fiscal year-end, as
the Company actively augmented development resources, mainly in the Consumer area of the Entertainment Contents Business.
Consolidated Employee Numbers

Employee Numbers by Segment

PeoplePeople8,798＊1
7,008

7,472

7,888

7,606 7,639 7,726

7,993

7,535 7,760

8,219
＊2

640

5,328

’14

’15

’16

’17

’18

’19

’20

’21

’22

’23

(FYE)

474
699

6,168

1,567

1,449

’19

’20

5,369

445

664

5,630

419

628

-1000
0

1,670
1,260

1,110

970

1,150

1,070

940

900

950

890

710

720

51.5

51.8

51.8

51.2

48.7

49.0

46.7

46.5

47.4

48.5

49.2

49.3

50.4

51.2

52.3

40.6

41.1

34.8

33.6

30.1

28.8

28.2

25.9

25.4

25.6

25.0

24.5

23.2

22.7

21.4

20.7

20.0

14.6

14.6

’05

’06

’07

’08

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

’21

Pachinko and pachislot machine market (Trillions of yen)

Other leisure market (Trillions of yen)

Pachinko and pachislot players (ten thousands)(CY)

Source: White Paper on Leisure Industry 2022, Japan Productivity Center

25000
510

6,035

1,022

1,047

1,108

’21

’22

’23

Pachislot and Pachinko Machines BusinessResort BusinessCorporate

448

1,720

(FYE)

Entertainment Contents Business*1 Total employees in the Entertainment Contents Business increased due to the conversion of fixed-term to permanent labor contracts (about 440 people).
*2 Increase in seconded employees due to cross-group organizational restructuring centered on management functions.

0

Numbers of Pachinko Halls and Installed Pachislot and Pachinko Machines per Pachinko Hall
418.7

427.7

435.3

443.3

451.0

458.8

411.9

356.2

371.9

378.0

387.8

395.4

349.8

365.0

405.0

12,937

12,652

12,47912,323

12,14911,893

11,627

11,31010,986

10,596

10,060

9,639

9,035

8,458

7,665

’08

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’19

’20

’21

’22

Number of pachinko halls (Halls)(FY)

Number of installed pachinko and pachislot machines per pachinko hall (Machines)

Source: National Police Agency

Integrated Report 2023

SEGA SAMMY HOLDINGS

’13

458

707

1,580

1,450

Pachislot Machines: Number of Installed Machines, Unit Sales, and Annual TurnoverIntellectual Property

0.63

0.57

0.70

1,448

1,347

1,390

0.85

0.86

0.87

0.75

0.58

0.52

0.36

0.27

0.34

0.31

0.46

1,687
1,691
1,661
1,643
1,602
1,392
1,233
968
887

1,665

1,637

1,572

1,475

R&D Expenses and Content Production Expenses
We are actively investing in R&D and content production to reinforce and enhance its intellectual property—the source of the Group’s competitiveness. In recent years, we have stepped up our focus on investing in the Consumer area to expand the product and service lineup over the
medium term. In the fiscal year ended March 2023, R&D and content production expenses were ¥80.4 billion, up ¥11.5 billion year on year.

913

766

1,549
1,474
1,326
1,259

979

604

Reference

Recognition of R&D Expenses and Content Production Expenses by Product and Service
Entertainment Contents Business (CS/full games)Entertainment Contents Business (AM)

Recorded as inventory assets or intangible fixed assets during
development and as costs after launch. Amortized at 25% in
the first month, following which the remaining amount is amortized on a straight-line basis over 23 months (total amortization
period is 24 months).

Recorded as inventory assets during development and as costs
after launch. Amortized on straight-line basis at 15% for each of
the first two months of the launch and at 7% for each of thefollowing 10 months (total amortization period is 12 months).

Entertainment Contents Business (CS/F2P)

Not recorded as assets but as costs on an accrual basis (outsourced processing costs are recorded at the time of receipt
and inspection)

Amortized at a fixed rate for 24 months or 36 months from thelaunch month.

Consumer area

* Since CS/full games can be expected to be sold over a longer period of time compared to the past due to prolonged product lifecycles, the amortization rules have been revised to the above starting withnew games released in the fiscal year ending March 2024.

’08

’09

’10

’11

’12

Number of installed pachislot machines (Thousands of machines)

’13

’14

’15

’16

Pachislot machine unit sales (Thousands of machines)

’17

452
’18

562

’19

487

’20

673

’21

Pachislot machine annual turnover (Times)

0.51

1,358
698

’22
(FY)

Sources: National Police Agency and Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023” (Research of Japanese Market)

Pachinko Machines: Number of Installed Machines, Unit Sales, and Annual Turnover
1.09

1.06

0.92

0.84

0.82

0.69

0.68

0.65

0.54

0.51

0.52

0.38

0.42

0.48

0.48

3,339
3,332
3,158
3,163
3,076
3,042
3,009
2,954
2,9003,107
2,918
2,833
2,749
2,637
2,603
2,557
2,494
2,432
2,338
2,205
2,065
2,019
1,886
1,542
1,408
1,377
1,131
1,056
1,011
963

’08

’09

’10

’11

’12

Number of installed pachinko machines (Thousands of machines)

’13

’14

’15

’16

Pachinko machine unit sales (Thousands of machines)

’17

’18

’19

’20

Pachinko machine annual turnover (Times)

’21

’22
(FY)

Sources: National Police Agency and Yano Research Institute Ltd. “Pachinko Manufacturer Trends 2023” (Research of Japanese Market)

96

97

150

30.4%
19.7%

28.0% 28.7%

33.8%
23.6%

94
79

76

89

24.1%21.6% 29.3%

24

5

6

27

21

15

92

7

8

9

10

86

75

73

27

21

17.4%19.8%

90

80

75

33.3%

27.4%

54

0

Company Profile / Stock Information

Results of Pachislot Machine Prototype Testing

13

11

12

20.9%

81

29.5% 32.1%
18.9%
95

72

67

1

22

11
2

16

3

24

17

4

5

17

14

6

7

8

FY2022/3
Pachislot machine prototypes issued

17.2% 15.7% 17.1%
99
89
82

22.2% 23.5% 25.3%

19.7%

88

81

78

75

68

11.4%

76

51

30

20

29.6%

14
9

16

14
10

11

12

26

23

19

16
1

2

18

3

4

FY2023/3

Number of pachislot machines approved

15

10
5

6

FY2024/3

Pachislot machine approval rate

Company Profile
Company name

SEGA SAMMY HOLDINGS INC.

Address

Sumitomo Fudosan Osaki Garden Tower, 1-1-1 Nishi-Shinagawa, Shinagawa-ku,
Tokyo 141-0033, Japan

URL

https://www.segasammy.co.jp/en/

Established

October 1, 2004

Capital¥29,953 million (As of March 31, 2023)

Principal business

Management of SEGA SAMMY Group as the holding company

Source: Security Communications Association

Stock Information (As of March 31, 2023)

Results of Pachinko Machine Prototype Testing
31.7%

41.9%
25.6% 27.0% 25.0%

31.9% 37.0%
91

78
63

68

63

20

5

6

7

81

8

79

72
57

29

26

17
9

10

24.6% 26.2% 25.8% 26.3% 27.0% 20.5%
93

62

17

35.1% 30.4% 30.4%

30

20

12

1

24

17
2

3

89

17
4

24

17
5

6

24

20
7

8

17
9

10

21

11

12

18
1

21

9
2

3

21
4

21

10
5

Pachinko machine approval rate

Video Game Contents Market Size

212.4

93.8

7.1
21.1
27.6

5.9
19.5
25.1

9.4
26.7

10.1
27.2

30.6

36.8

37.2

48.8

52.0

17.1

17.3

8.4
22.2

31.1
12.3

37.8

45.3

13.8

16.2

’16

’17

Asia

N. America

Europe

’15
Japan

’18

’19

12.9
33.2

51.0

47.6

17.4

18.7

19.8
41.1

15.2
33.3

16.0
34.4

36.6

39.2

49.7

51.6

54.5

58.3

61.2

65.7

71.3

65.6

66.6

67.7

68.9

70.0

19.8

21.8

19.1

19.1

19.7

20.0

20.3

’20

’21

’22

OthersTotal shares issued and outstanding

241,229,476
60,659

’23

’24

’25

’26

(Forecast)(Forecast)(Forecast)(Forecast)

Major Shareholders (As of March 31, 2023)
Name of shareholder

6

Source: Security Communications Association

14.5
34.1

800,000,000

Number of shareholders

FY2024/3$ billion

Number of shares authorized for issue

62

53

FY2023/3

Number of pachinko machines approved

92

69

68

15

14

24.4% 16.1% 22.8%
86

84
65

FY2022/3
Pachinko machine prototypes issued

23.1% 25.0% 26.5% 17.0%

83

83

76

65

56

19

11

69

16.9%

30.4%

Shares held

Shares ratio

HS Company

36,008,000

14.92%The Master Trust Bank of Japan, Ltd. (Trust account)

27,345,000

11.33%SEGA SAMMY HOLDINGS INC.

20,476,041

8.48%

FSC Co., Ltd.

13,682,840

5.67%

Custody Bank of Japan, Ltd. (Trust account)

13,173,200

5.46%

Hajime Satomi

7,202,938

2.98%

STATE STREET BANK AND TRUST COMPANY 505001

5,684,392

2.35%

KOREA SECURITIES DEPOSITORY­– SAMSUNG

5,649,300

2.34%

Haruki Satomi

3,905,461

1.61%

THE BANK OF NEW YORK MELLON 140044

2,888,091

1.19%

Integrated Report 2023

SEGA SAMMY HOLDINGS

20

26.4%

(CY)

Source: Created based on Newzoo Global Games Market Data July 2023

Breakdown of Shareholders

Domestic Amusement Machine Sales and Revenues from
Amusement Facilities Operations

Treasury stock

Number of Amusement Facilities and Amusement Machine
Units Installed

Financial institutions

Treasury stock

Financial institutions

16.3%

19.6%

8.5%

18.3%

Japanese
individuals andother

Securities
companies

Japanese
individuals andother

Securities
companies

Billions of yen

362,099 354,463 349,835 340,383 342,211
433.8

462.0

485.9

540.8

156.9

157.4

152.9

161.7

164.7

2015

2016

2017

2018

2019

Amusement machine sales

418.7
107.3
2020

Revenues from amusement center operations

Source: Japan Amusement Industry Association

98

520.1

4,542

449.2

4,381

4,193

4,022

3,931

334,239 340,454
3,882

3,894

16.6%

152.0
2021

(FY)

2016

2017

2018

Number of amusement facilities
Source: National Police Agency

2019

2020

2021

2022

Number of amusement machine units installed(CY)

Foreigninstitutions andindividuals

25.0%

As of March 31,
2022

1.7%
Other companies

20.9%

17.9%
Foreigninstitutions andindividuals

As of March 31,
2023

2.4%
Other companies

23.1%

29.8%
99

Consolidated Financial Statements
SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
As of March 31, 2022 and 2023
Millions of yen

2022

Assets2022

2023

Liabilities

Current assets

Current liabilities¥152,459¥179,509¥ 24,455¥ 30,556

Notes, accounts receivable—trade, and contract assets (Note 7 (1))

38,95253,370

Short-term borrowings

10,00017,000

Merchandise and finished goods

9,336

18,503

Accrued expenses

20,36019,865Work in process

42,14550,689

Income taxes payable

2,069

4,776

Raw materials and supplies

16,044

20,269Contract liabilities

10,25725,852

Income taxes receivable

11,814

15,620

Provision for bonuses

8,383

9,689

Other

17,36016,205

Provision for directors’ bonuses

1,189

1,187

(323)

(304)

Provision for point card certificates

115

187

287,789

353,862

Cash and deposits

Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant, and equipment

Notes and accounts payable—trade

199

—

Other

9,954

11,216

Total current liabilities

86,986

120,332

Asset retirement obligations

77,630Noncurrent liabilities(47,823)(49,664)

Bonds payable

10,00010,000

Buildings and structures, net

28,75527,966Long-term borrowings

32,00025,000Machinery, equipment, and vehicles

8,836

8,505

Lease obligations

4,013

5,352

Accumulated depreciation(7,518)(7,190)Net defined benefit liability

4,395

3,877

Machinery, equipment, and vehicles, net

1,318

1,314

Deferred tax liabilities

7,049

7,232

Asset retirement obligations(6,347)(6,632)

Provision for dismantling of fixed assets

SEGA SAMMY HOLDINGS

Amusement machines and facilities
Accumulated depreciation
Amusement machines and facilities, net
Land (Note 7 (4))

701

599

18,522

18,581

469

754

2,560

2,607

420

420

Other

2,009

1,874

Total noncurrent liabilities

55,86949,886

142,855

170,218

29,953657

534

46,75549,343

Accumulated depreciation(36,352)(37,857)

Other, net

10,403

11,485

Shareholders’ equity

60,35860,482

Capital stock

29,953

Capital surplus

117,689

72,213

Goodwill

3,460

2,592

Retained earnings

224,684

261,840

Other

9,722

10,654

Treasury stock(77,886)(37,251)

Total intangible assets

13,183

13,247

Total shareholders’ equity

294,440

326,755

2,270

2,626

Construction in progress
Other

Total property, plant, and equipment
Intangible assets

Investments and other assets

Total liabilities

Net assets

Accumulated other comprehensive income
40,69939,538Long-term loans receivable

428

247

Lease and guarantee deposits

7,164

6,924

Revaluation reserve for land (Note 7 (4))

Investment securities (Note 7 (3))

Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

(33)

382

(1,109)(1,109)Net defined benefit assets

2,984

5,362

Foreign currency translation adjustment

41

3,730

Deferred tax assets

13,446

16,499Remeasurements of defined benefit plans(3,199)(1,531)

Other

9,826

5,785

Total accumulated other comprehensive income(2,028)

4,099

Allowance for doubtful accounts

(387)

(383)

Share acquisition rights

176

468

Total investments and other assets

74,16173,973

Non-controlling interests

49

24

147,703147,703¥435,492¥501,566

Total noncurrent assets
Total assets
See accompanying notes.

Integrated Report 2023

76,578

Accumulated depreciation

Buildings and structures

100

Millions of yen

2023

Total net assets
Total liabilities and net assets

292,637

331,347¥435,492¥501,566

See accompanying notes.

101Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Changes in Net Assets

SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023

SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023
Millions of yen

2022

2023

Net sales (Note 8 (1))¥320,949¥389,635

Cost of sales (Notes 8 (2) and (3))

193,081

231,568

Gross profit

127,868

158,067

95,825111,278

32,042

46,789Interest income

112

433

Dividends income

498

516

Gain on investments in partnership

3,052

1,929

Foreign exchange gains

1,337

1,354

(301)

(321)

Selling, general and administrative expenses
Operating income
Other income (expenses)

Interest expenses(2,778)(520)

Commission fee

(102)

(146)

Loss on investments in partnership

(479)

(563)
(285)

Equity in losses of affiliates

(469)
1,988

3

Gain on sales of investment securities

2,516

—

Gain on sales of stocks of subsidiaries and affiliates

698—

Loss on sales of noncurrent assets (Note 8 (5))

(50)

(0)

Impairment loss (Note 8 (6))

(430)

(446)

0

(81)

(113)

—

—

(1,783)

401

191

Loss on valuation of investment securities
Loss on COVID-19
Loss on business restructuring (Note 8 (7))
Other, net
Subtotal

5,878

279

Income (loss) before income taxes

37,92147,069

Income taxes—current

1,989

4,137

Income taxes—deferred(1,086)(3,000)

903

1,136

37,01845,93237,02745,938(8)(6)

Valuation difference on available-for-sale securities

334

345

Deferred gains or losses on hedges

(14)

—

Foreign currency translation adjustment

3,526

2,873

Remeasurements of defined benefit plans, net of tax(2,844)

1,677

Share of other comprehensive income of entities accounted for using equity method

1,203

1,227

Total other comprehensive income (Note 8 (8))

2,206

6,124

39,22452,057

Total income taxes
Profit(Breakdown)
Profit attributable to owners of parent
Profit attributable to non-controlling interests

Millions of yen
Shareholders’ equity

Balances as of April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2022

Capital stock

Capital surplus

Retained earnings

Treasury stock¥29,953¥118,048¥(53,561)

29,953

118,048¥200,551(2,067)
198,484(9,411)37,027(1,317)
(97)

(186)
(82)
—
¥29,953(358)¥117,689¥294,991(2,067)
292,924(9,411)37,027—(25,036)621—(1,317)(284)(82)

26,200¥224,684(24,325)¥(77,886)

1,515¥294,440
Millions of yen

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Balances as of April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2022

Revaluation
reserve for land

Foreigncurrencytranslation
adjustment

Remeasurementsof defined benefit
plans¥(725)¥(1,109)¥(3,867)¥ (459)

1,930

(725)

(1,109)(3,867)(459)¥(4,231)—(4,231)340
340¥2,270692
692¥ (33)—¥(1,109)

3,909
3,909
¥
41

(2,739)(2,739)¥(3,199)

2,203
2,203
¥(2,028)

Deferred
gains or losses
on hedges¥1,930Total accumulated
othercomprehensive
incomeMillions of yen

Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
See accompanying notes.

(25,036)711(90)

Other comprehensive income

Comprehensive income attributable to non-controlling interests(53,561)

Total shareholders’equityIntegrated Report 2023

SEGA SAMMY HOLDINGS

Loss on retirement of noncurrent assets
Gain on sales of noncurrent assets (Note 8 (4))

Prior fiscal year (from April 1, 2021 to March 31, 2022)

52,06639,230
¥

(5)

¥

(9)

Share acquisitionrightsBalances as of April 1, 2021
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2022

Non-controllinginterests

¥ —

¥ 496

—

496

Total net assets¥291,256(2,067)289,189(9,411)37,027—(25,036)621—(1,317)
(284)

176
176
¥176

(447)
(447)
¥ 49

(82)
1,932
3,448
¥292,637

See accompanying notes.

102

103

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Net Assets

SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023

Current fiscal year (from April 1, 2022 to March 31, 2023)

Millions of yen

Millions of yen

Shareholders’ equity

Balances as of April 1, 2022
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2023

Capital stock

Capital surplus

Retained earnings

Treasury stock¥29,953¥117,689¥224,684¥(77,886)

29,953

117,689

224,684(77,886)(8,873)45,93890(4,987)142
45,48031(45,480)(27)—¥29,953(45,475)¥ 72,213

Total shareholders’equity¥294,440—
294,440(8,873)45,93890(4,987)
174
—
—
—
(27)

37,155¥261,840

40,635¥(37,251)

32,315¥326,755
Millions of yen

Accumulated other comprehensive income

Balances as of April 1, 2022
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2023

Deferred
gains or losses
on hedges

Revaluation
reserve for land

¥2,270¥ (33)¥(1,109)

2,270

(33)

(1,109)¥Remeasurementsof defined benefit
plans

41

¥(3,199)

41(3,199)Total accumulated
othercomprehensive
income¥(2,028)—(2,028)

Income (loss) before income taxes
Depreciation and amortization
Impairment loss
Loss (gain) on sales of noncurrent assets
Loss on retirement of noncurrent assets

415
415
¥382

—
¥(1,109)

Share acquisitionrightsNon-controllinginterests

¥176

¥ 49

176

49

3,688
3,688
¥3,7301,667
1,667¥(1,531)

6,128
6,128
¥ 4,099¥ 47,069

11,406

10,669430446(1,937)

(4)

469

285

(2,489)—0

81

Loss (gain) on investments in partnership(2,573)(1,365)

Amortization of goodwill

2,311

2,178

Increase (decrease) in allowance for doubtful accounts

(25)

(41)

Increase (decrease) in provision for directors’ bonuses

437

(15)

Increase (decrease) in net defined benefit liability

96

(170)

Increase (decrease) in provision for bonuses

(116)

1,223

Interest and dividends income

(610)

(950)

Interest expenses

301

321

Foreign exchange losses (gains)(1,112)

1,152

Equity in (earnings) losses of affiliates

2,778

520

338

(13,493)(15,354)(22,481)

Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities

Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade

6,495

5,908

Increase (decrease) in contract liabilities

10,201

15,545

Increase (decrease) in guarantee deposits received(1,589)(76)

Other, net(4,240)1,806

Subtotal

43,13848,611

664

987

(300)

(291)

Interest expenses paid

356
356
¥2,626¥ 37,921

Net cash provided by (used in) operating activities

Interest and dividends income received

Millions of yen

Balances as of April 1, 2022
Cumulative effects of changes in accounting policies
Restated balance
Changes in items during the period
Dividends from surplus
Profit attributable to owners of parent
Effect of changes in accounting period of consolidated subsidiaries
Purchase of treasury stock
Disposal of treasury stock
Cancellation of treasury stock
Change in scope of consolidation
Change in scope of equity method
Change in ownership interest of parent due to transactions
with non-controlling interests
Net changes in items other than shareholders’ equity
Total changes in items during the period
Balances as of March 31, 2023

Foreigncurrencytranslation
adjustment

2023

Extra retirement payments(2,236)—

Income taxes paid

(5,078)(6,743)

Income taxes refund
Net cash provided by (used in) operating activities

3,419

2,140

¥ 39,607¥ 44,704

Integrated Report 2023

SEGA SAMMY HOLDINGS

Valuationdifference on
available-for-salesecurities

2022

See accompanying notes.

Total net assets¥292,637—
292,637(8,873)45,93890(4,987)
174
—
—
—

292
292
¥468

(25)
(25)
¥ 24

(27)
6,395
38,710¥331,347

See accompanying notes.

104

105

Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows

SEGA SAMMY HOLDINGS INC. and Consolidated Subsidiaries
Years ended March 31, 2022 and 2023
Millions of yen

2023

2022

Net cash provided by (used in) investing activities
Payments into time deposits¥ (5,000)¥—

Proceeds from withdrawal of time deposits

5,000

—

Purchase of short-term investment securities(20,000)—

Proceeds from redemption of securities

20,717—Purchase of trust beneficiary rights(1,309)—Proceeds from sales of trust beneficiary rights

1,167

382

Purchase of property, plant, and equipment(5,983)(4,944)

Proceeds from sales of property, plant, and equipment

2,141

7

Purchase of intangible assets(4,569)(5,875)

0

—
(669)

Proceeds from sales of intangible assets
Purchase of investment securities(196)

Proceeds from sales of investment securities

2,565

1

Payments for investment in partnerships(821)(1,226)

Proceeds from distribution of investment in partnerships

3,510

—

(448)

Proceeds from purchase of shares of subsidiaries resulting in change in scope of consolidation

—

31

212

—
(155)

Payments of loans receivable(769)(1,907)

Collection of loans receivable

2,381

2,586

(2) Number of non-consolidated subsidiaries: 11

—

1,200

(238)

(26)

Non-consolidated subsidiaries are excluded from the scope of
consolidation because the combined amount of each of assets, net
sales and net income corresponding to the percentage of equity
interest held by the Company, and the combined amount of retained
earnings corresponding to the percentage of equity interest held by
the Company, do not have a significant effect on the consolidated
financial statements.

Reduction of investments in trusts
Payments for lease deposits

514

767

Other, net(2,300)4,413

Net cash provided by (used in) investing activities(8,794)(2,351)

Collection of lease deposits

Proceeds from long-term borrowings—

10,000

Repayment of long-term borrowings—(10,191)(25,036)(4,987)Purchase of treasury stock of subsidiaries

(98)

—

Purchase of shares of subsidiaries not resulting in change in scope of consolidation

—

(50)

(9,410)(8,865)(93)—

Purchase of treasury stock

Cash dividends paid
Cash dividends paid to non-controlling interests
Other, net(1,331)(1,263)

Net cash provided by (used in) financing activities(35,970)(15,358)

3,029

162

Effect of exchange rate change on cash and cash equivalents(2,128)27,156

154,540

152,459

Increase in cash and cash equivalents from newly consolidated subsidiaries

47—

Increase (decrease) in cash and cash equivalents resulting from change in accounting periodof consolidated subsidiaries

—

(107)

¥152,459¥179,509

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at start of period

Cash and cash equivalents at end of period (Note 10 (1))
See accompanying notes.

financial statements of the Company prepared in accordance withJapanese GAAP and filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial Instruments
and Exchange Law of Japan. Certain supplementary information
included in the statutory Japanese-language consolidated financial
statements is not presented in the accompanying consolidated
financial statements. Each amount of the accompanying consolidated
financial statements is rounded down to the nearest one million yen.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made in order to present them ina form which is more familiar to readers outside of Japan. Certain
reclassifications have been made to the 2022 consolidated financial
statements to conform to the classifications used in 2023. Thesechanges had no impact on previously reported results of operations
or shareholders’ equity.

2 Summary of Significant Accounting Policies(4,903)

Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Purchase of shares of subsidiaries and affiliates

Net cash provided by (used in) financing activities

106

The accompanying consolidated financial statements of SEGASAMMY HOLDINGS INC. (the “Company”) and its consolidated
subsidiaries have been prepared in accordance with the provisions
set forth in the Financial Instruments and Exchange Law of Japan andits related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which
are different in certain respects as to application and disclosure
requirements from International Financial Reporting Standards (“IFRS”).
The accounts of the Company’s overseas subsidiaries are basedon their accounting records maintained in conformity with generally
accepted accounting principles prevailing in the respective countriesof domicile. However, necessary adjustments are made upon consolidation for 2022 and 2023. The accompanying consolidated
financial statements have been restructured and translated into
English (with certain expanded disclosure) from the consolidated

1. Scope of consolidation

3. Accounting policies(1) Number of consolidated subsidiaries: 61(1) Valuation and accounting treatment for important assets

2. Application of the equity method(1) Number of non-consolidated subsidiaries accounted forunder the equity method: —(2) Number of affiliated companies accounted for under theequity method: 8(3) Number of non-consolidated subsidiaries and affiliatedcompanies which are not accounted for under the equity
method: 13
Some of the Company’s non-consolidated subsidiaries and affiliates
are not accounted for under the equity method because the combined
amount of net income corresponding to the percentage of equity
interest held by the Company, and the combined amount of retained
earnings corresponding to the percentage of equity interest held by
the Company do not have a significant effect on the consolidated
financial statements even if they are excluded from the scope ofthe equity method and have no significance as a whole.

1) Held-to-maturity debt securities
Held-to-maturity debt securities are stated at the amortized cost
method (the straight-line method)2) Available-for-sale securitiesThose other than securities without available fair market value:
Fair value method (The difference between acquisition cost andfair value is accounted for as the valuation difference on availablefor-sale securities in net assets, with cost of sales determined by
the moving-average method.)With respect to compound financial instruments whose fair value
cannot be categorized and measured for each embedded derivative,the entire compound financial instrument is appraised by fair value.
Unrealized gains or losses are reported as profit or loss for the current
fiscal year.
Securities without available fair market value:
Securities without quoted market prices are carried at cost, which isdetermined by the moving-average method.
The net amount of equity included in the Company’s financial
statements (from limited liability investment partnerships and similar
investments, regarded as marketable securities under Article 2-2 ofthe Financial Investment and Exchange Law of Japan) is calculated
based on the relevant financial statements for the partnership available
as of the reporting date stipulated in the partnership agreement.
3) Derivatives
Derivatives are stated at fair market value.

Integrated Report 2023

SEGA SAMMY HOLDINGS

2,596

Purchase of shares of subsidiaries resulting in change in scope of consolidation

1 Basis of Presenting Consolidated Financial Statements

107Notes to Consolidated Financial Statements

4) Inventories
Inventories are stated at cost, cost being determined mainly by thegross-average method (or at the net realizable value (NRV) calculated
by writing down the book value to reflect a decrease in the NRV).
Work in process is also stated at cost, cost being determined by
the specific identification method (or at the NRV calculated by writing
down the book value to reflect a decrease in the NRV).

(2) Depreciation and amortization for important assets(3) Accounting for deferred assets
Bond issue cost: All expenses are expensed when incurred.

(4) Accounting for allowances and provisions
1) Allowance for doubtful accounts
Allowance for doubtful accounts is provided in the amountsufficient to cover possible losses based on a historical write-off ofgeneral receivables.
Receivables with default possibility and bankrupt receivables arecalculated based on an individual assessment of the possibilityof collection.
2) Provision for bonuses
The estimated amount of bonuses was recorded to meet the paymentof employee bonuses, an amount corresponding to the current
fiscal year.
3) Provision for directors’ bonuses
The estimated amount of bonuses was recorded to meet the payment
of Directors and Audit & Supervisory Board Members’ bonuses,
an amount corresponding to the current fiscal year.
4) Provision for point card certificates
To provide for use of points granted to customers, the estimated future
usage amount as of the end of the current fiscal year is recorded.

108(5) Accounting method for retirement benefits
1) Attribution method for projected retirement benefits:
In calculating retirement benefits obligations, benefit-formula
attribution is adopted for the purpose of attributing projected retirement benefits to the period up to the end of the fiscal year ended
March 31, 2023.
2) Treatment of actuarial gains and losses and prior service costs:
Prior service costs are amortized equally over a certain number ofyears (10 years in principle) within the average remaining years ofservice for the employees at the time of accrual, or are charged toincome collectively at the time of accrual. Actuarial gains and losses
are amortized by the straight-line method over a certain number ofyears (10 years in principle) within average remaining years ofservice for the employees at the time of accrual in each fiscal year,
commencing from the following fiscal year after the accrual for each
employee or are charged to income collectively in the following fiscal
year after the accrual.

(6) Accounting for significant hedge
1) Hedge accounting
The Group adopts deferred hedge accounting. However, special
treatment is used for qualifying interest rate swap transactions.
Moreover, allocation hedge accounting is applied to qualifying
currency swap transactions and forward exchange contracts.
2) Hedging instruments and hedged items
Hedging instrument: Currency swaps, interest rate swaps, and forward
exchange contracts
Hedged item: Interest on borrowings, receivables and payables
denominated in foreign currencies
3) Hedge policy
Derivative instruments are used to mitigate risks associated withforeign exchange and interest rate fluctuations.
As a rule, hedging is only used for items in which actual demand exists,
and not for speculative purposes.
4) Evaluation of hedge effectivenessHedge effectiveness is evaluated through comparative analysis of the
cumulative fluctuations in the market between the hedged item andthe hedging instrument. Evaluation of hedge effectiveness at fiscal
year-end is omitted for currency swap transactions, as material conditions for the notional principal of hedging instruments and those forhedged items are the same and these transactions are deemed tooffset the market fluctuations.
Evaluation of hedge effectiveness at fiscal year-end is omitted also
for interest rate swap transactions applied to special treatment.

(7) Accounting policy for recognition of significant revenues
and expenses
Accounting policy for recognition of significant revenues is as follows.
Compensation for individual performance obligations was received

within roughly two months after their fulfillment and did not include
significant financial elements.
(i) Digital content
With regard to revenue from the granting of game distribution rights
in the Entertainment Contents Business, the Group provides gamecontent primarily to platform operators along with distribution rights,
and the Group’s performance obligation is to provide game content.
The Group determines that the performance obligation is satisfied by
the provision of game content to the platform operators, and if thecontract is one in which usage fees are collected based upon thesales of the platform operator, the revenue is recognized when thesales of the platform operators are recorded, and in other cases, it isrecognized when the game content is provided.
With regard to revenue from sales from game downloads in theEntertainment Contents Business, the Group’s performance obligation
is to provide game content to customers. The Group determines thatthe performance obligation is satisfied by the provision of the gamecontent to the customer and recognizes the revenue when the gamecontent is provided.
With regard to revenue from sales of F2P items in the Entertainment
Contents Business, and Pachislot and Pachinko Machines Business,
the Group’s performance obligation is to provide the services specified
for each item to the customer. Depending on the nature of the item,
the Group determines that the performance obligation is satisfied
when the item is used by the customer or over the course of theestimated usage period calculated based on past usage data forsimilar items, whereupon the revenue is recognized.
With regard to the annual update service for amusement machines
in the Entertainment Contents Business, the Group’s performanceobligation is to consistently provide updates to content throughout
the contract period. Therefore, the Group determines that the performance obligation is satisfied over the course of the contract period,
with the revenue recognized over the period of the contract.
(ii) Sales of products and merchandise
Revenue from the sales of products and merchandise in theEntertainment Contents Business and Pachislot and Pachinko
Machines Business is primarily from sales through manufacture orwholesale. The Group’s performance obligation is to deliver finishedproducts or merchandise in accordance with a sales contract or the
like with the customer. The Group determines that the performanceobligation is satisfied when it delivers the finished products ormerchandise and the customer assumes control over said finishedproducts or merchandise, with the revenue recognized at the point ofdelivery. With regard to revenue from sales from consignment typesales of certain merchandise, if after the role (as the principal or
agent) in the provision of goods or services is determined, the Groupis involved in the sale of the merchandise as an agent, the revenue isrecognized using the net amount after deducting the amount paid tothe supplier from the amount received from the customer.
(iii) Resort facility sales
Revenues of resort facilities in the Resort Business is from the operationof hotels and golf courses, with the Group’s performance obligation
to provide accommodation, eating and drinking, and space to playon the golf course at each facility. The Group determines that theperformance obligation is satisfied and the revenue is recognized
upon the completion of the provision of the various services tothe customers.

(8) Amortization method and period of goodwill
If the duration of the effect of goodwill can be rationally estimated,
amortization is made over the estimated number of years by thestraight-line method. In other cases, amortization is made over a
five-year-period by the straight-line method.

(9) Cash and cash equivalents in the consolidated statementsof cash flows

Integrated Report 2023

SEGA SAMMY HOLDINGS

1) Property, plant and equipment (excluding lease assets)
Depreciation is calculated primarily using the straight-line method.
Range of useful life for the assets is as follows:
Buildings and structures: 2–50 years
Machinery, equipment and vehicles: 2–12 years
Amusement machines and facilities: 2–5 years
2) Intangible assets (excluding lease assets)
Amortization is calculated using the straight-line method. The software
used in the Company is amortized by the straight-line method basedon the useful lives within the Company (within five years).
3) Lease assets
Finance leases which transfer ownership:
Depreciation method for such assets is the same as that whichapplies to property, plant and equipment owned by the Company.
Finance leases which do not transfer ownership:
Depreciated by using the straight-line method assuming the useful life
equals to the lease period with a residual value of zero.
4) Right-of-use assets
The lease period or the useful life of the asset, whichever is shorter, isused as the useful life, and the residual value is calculated as zero.

5) Provision for dismantling of fixed assets
To provide for expenses for dismantling unused decrepit buildings,
estimated future expenses are recorded.

In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investmentswith maturities not exceeding three months at the time of purchaseare considered to be cash and cash equivalents.

(10) Application of the group tax-sharing system
The Company applies the group tax-sharing system.

3 Significant Accounting Estimates(1) Valuation for inventories, etc., in the Entertainment
Contents Business(i) Carrying amounts in the consolidated financial statements in thecurrent fiscal year

Millions of yen

Work in process“Other” under intangible assets

2022

2023

¥39,098¥47,043

5,801

6,410

(ii) Calculation method of the carrying amount in the consolidated
financial statements in the current fiscal year
Work in process and software, etc., amounts posted on account of
production of game contents, etc., in the Entertainment Contents
Business are stated at acquisition cost and are expensed or amortizedsystematically considering the forecasted sales volume and expected
service period. However, if the future recoverable amount is less thanthe carrying amount of work in process and software, etc., the carrying
amount is reduced to the recoverable amount and the resulting
decrease in the carrying amount is recorded in the cost of sales forthe current fiscal year.

109

Notes to Consolidated Financial Statements(iii) Key assumptions used in the calculation of carrying amount in the
consolidated financial statements in the current fiscal year
The future recoverable amount is estimated based on the forecasted
sales for the following fiscal years.
(iv) I mpact on the consolidated financial statements in the following
fiscal year
In case of possible discrepancy between the forecasts and actual
results due to the timing of release of new products from rival
companies in the same market and the nature of hit businesses,
there may be an impact on profit and loss.

(2) Valuation of raw materials in the Pachislot and Pachinko
Machines Business(i) Carrying amount in the consolidated financial statements in thecurrent fiscal year

Millions of yen

Raw materials

2022

2023

¥10,594¥16,136(3) Valuation of shares of affiliates with regard to PARADISESEGASAMMY Co., Ltd.
(i) C arrying amount in the consolidated financial statements inthe current fiscal year

Millions of yen

Shares of subsidiaries
and affiliates

110

2022

2023

¥18,542¥17,867

4 Changes in Accounting Policies(1) Application of Implementation Guidance on AccountingStandard for Fair Value Measurement
The Company has applied the “Implementation Guidance on
Accounting Standard for Fair Value Measurement” (ASBJ Guidance
No. 31, June 17, 2021; hereinafter “Fair Value Measurement Guidance”)
since the start of the current consolidated fiscal year. The new
accounting policies stipulated by the Fair Value Measurement Guidance
are applied to current and future accounts in accordance with thetransitional treatment provided in Paragraph 27-2 of the Fair Value
Measurement Guidance. This has had no impact on the consolidated
financial statements for the current fiscal year. The notes on investment
trusts in the fair value information by level within the fair value hierarchyin the notes on financial instruments are not shown for the previous

5

consolidated fiscal year, in accordance with Paragraph 27-3 of the
Fair Value Measurement Guidance.

(2) Application of “Leases” (U.S. GAAP Topic 842)
Subsidiaries that apply U.S. GAAP have applied “Leases” (U.S. GAAP
Topic 842) since the start of the current consolidated fiscal year. This
standard calls for the lessee to record all leases as assets and liabilities
on the balance sheet, in principle. The application of U.S. GAAP
Topic 842 is in accordance with the transitional treatment, and theCompany employs the method of recognizing the cumulative effectof the change in accounting policies on the starting date of its
application. This has had only a minor impact on the consolidated
financial statements for the current fiscal year.

Unapplied New Accounting Standards

The Company and its domestic consolidated subsidiaries• Accounting Standard for Current Income Taxes(ASBJ Statement No. 27, October 28, 2022)• Accounting Standard for Presentation of Comprehensive Income(ASBJ Statement No. 25, October 28, 2022)• Guidance on Accounting Standard for Tax Effect Accounting(ASBJ Guidance No. 28, October 28, 2022)(1) Overview
These standards cover handling of categories for recording income
taxes on other comprehensive income and tax effects related to saleof stock in subsidiaries and other instruments when applying group
corporate income taxation.

• Practical Solution on the Accounting for and Disclosure of the Issuanceand Holding of Electronically Recorded Transferable Rights thatMust be Indicated on Securities, etc. (ASBJ Practical Solution
No. 43, August 26, 2022)(1) Overview
This standard sets out accounting and disclosure of issuance or
holding by a joint stock company of electronically recorded transferable rights that must be indicated on securities, etc., as described in
Article 1, paragraph 4, item 17 of the Cabinet Office Order on Financial
Instruments Business, etc. (Cabinet Office Order No. 52 of 2007).

Integrated Report 2023

SEGA SAMMY HOLDINGS(ii) Calculation method of the carrying amount in the consolidated
financial statements in the current fiscal year
Raw materials are posted using the acquisition cost, but in the eventthat anticipated future raw material usage falls below stock, the surplus
is posted to cost of sales.
(iii) Key assumptions used in the calculation of carrying amount in the
consolidated financial statements in the current fiscal year
Raw material usage forecasts are estimated based on the projectedvolume of Pachinko and Pachislot machines sales for the following
fiscal years.
(iv) Impact on the consolidated financial statements in the following
fiscal year
In case of possible discrepancy between the forecasts and actual
results due to the timing of release of new products from rival
companies in the same market and the nature of hit businesses, there
may be an impact on profit and loss.

(ii) C alculation method of the carrying amount in the consolidated
financial statements in the current fiscal year
PARADISE SEGASAMMY Co., Ltd. (PSS) is an affiliate of the Company
accounted for using the equity method. Investments into PSS aretreated under equity method accounting.
PSS applies International Financial Reporting Standards (IFRS), andif there is any indication of impairment in its cash generating units, it
performs an impairment test. For the cash generating units including
goodwill, PSS performs an impairment test on an annual basis, inaddition to when there is any indication of impairment. As a result of
its impairment tests, in the event that the recoverable amount is lessthan its carrying amount the book value in the PSS financial statements
is reduced to the recoverable amount is less than its carrying amount,
this exerts an impact on the amount of shares of affiliates of theCompany through equity method accounting.
PSS has posted ¥125,811 million in noncurrent assets, including
goodwill of ¥7,771 million.
(iii) Key assumptions used in the calculation of carrying amount in
the consolidated financial statements in the current fiscal year
PSS performs an impairment test on its cash generating units including
goodwill, and its cash generating units that show any indication of
impairment, and makes calculations for recoverable amount basedon value in use or on fair value less cost of disposal.
Key assumptions that utilize measurements of value in use are madebased on the business plans, etc., which are fundamental to calculations of future cash flows, as well as growth rates and discount rates.
Business plans, etc., have been made based on the number of casino
visitors and the drop amount (the amount of chips purchased attables), premised on demand recovering gradually through the following
fiscal year. When establishing growth rates for after the target periodof the business plans, etc., figures that reflect consideration of businessgrowth are used. In addition, the discount rate is calculated using
weighted average cost of capital as a basis and by reflecting the risk
associated with businesses, which is determined based on external
and internal information.
Fair value less cost of disposal mainly uses the real estate appraisal
value (under depreciated replacement cost approach) of external
experts who take into consideration the repurchase cost of the relevant
asset and related depreciation factors.
(iv) Impact on the consolidated financial statements in the following
fiscal year
Estimates of future cash flows are made based on best estimatesfrom management. However, in the event of trends in the number ofusers which cause estimates to vary from actual results, there may be
an impact on profit and loss.

(2) Scheduled date of application(2) Scheduled date of application

The accounting standard will apply from the beginning of the fiscal
year ending March 31, 2024.

The guidance will apply from the beginning of the fiscal year ending
March 31, 2025.

(3) Effects of application of the accounting standard(3) Effects of application of the accounting standard

The effects of the application are under assessment at the time of
preparing these consolidated financial statements.

The effects of the application are under assessment at the time of
preparing these consolidated financial statements.

111

Notes to Consolidated Financial Statements

6(5) Overdraft account and commitment line contract

Changes in Methods of Presentation(1) Consolidated Balance Sheet(2) Consolidated Statement of Cash Flows“Contract liabilities,” which had been included in “Other” undercurrent liabilities in the previous consolidated fiscal year, are separately
presented beginning with this consolidated fiscal year, since theyaccount for more than 5% of total liabilities and net assets. The consolidated financial statements for the previous consolidated fiscal
year have been restated to reflect this change in presentation methods.
As a result, ¥20,211 million presented as “Other” under current liabilities
on the Consolidated Balance Sheet for the previous consolidated
fiscal year has been restated as ¥10,257 million of “Contract liabilities”
and ¥9,954 million of “Other.”“Increase (decrease) in contract liabilities,” which had been included
in “Other, net” under cash flows from operating activities in the previous
consolidated fiscal year, is separately presented beginning with thisconsolidated fiscal year, since it has increased in importance. The
consolidated financial statements for the previous consolidated fiscal
year have been restated to reflect this change in presentation methods.
As a result, ¥5,960 million presented as “Other, net” under cash flows
from operating activities on the Consolidated Statement of Cash
Flows for the previous consolidated fiscal year has been restated as¥10,201 million of “Increase (decrease) in contract liabilities” and¥(4,240 million) of “Other, net.”

The Company and its consolidated subsidiaries entered into overdraft account contracts and commitment line contracts with banks for the purposeof efficient procurement of operating capital.
The balance of unexecuted borrowings based on these contracts are as follows.
Millions of yen

Total amount of limit of overdraft account and commitment line contract

2022

2023

¥239,068¥294,654——

239,068

294,654

Balance of borrowings
Balance of unrealized borrowings

8 Notes to Consolidated Statements of Income and Comprehensive Income(1) Revenue from contracts with customers

7 Notes to Consolidated Balance Sheets

Net sales combine revenue from contracts with customers and revenue from other sources. The amount of revenue from contracts with customers
is provided in “Note 22 Revenue recognition 1. Disaggregation of revenue from contracts with customers” of the consolidated financial statements.

(1) Receivables from contracts with customers and contract assets(2) The book value devaluation of inventories held for normal sales purpose based on decline in profitability

Cost of sales

2022

2023

¥6,636¥9,871(2) Assets pledged as collateral
Assets pledged as collateral are as follows:(3) Research and development expenses included in selling, general and administrative expenses and manufacturing cost
Millions of yen

Shares of subsidiaries and affiliates
Total

2023

2022

2023

Note 1 ¥18,542

Note 2 ¥17,867¥47,127¥51,410

18,542

17,867(3) Investment securities to non-consolidated subsidiaries and affiliated companies
Millions of yen

Investment securities (Shares)
Investment securities (Capital Contributions)(4) Revaluation reserve for land
Consolidated subsidiary SEGA CORPORATION has revalued landfor business, pursuant to the Act on Revaluation of Land (Law No. 34,
March 31, 1998) and Amendments to the Law Concerning Revaluationof Land (Law No. 19, March 31, 2001).
Accordingly, SEGA CORPORATION has recorded an item for therevaluation reserve for land under net assets.

Millions of yen

2022

Notes: 1. For a loan of ¥70,107 million (KR₩725,000 million) from financial institutions to the equity method affiliate PARADISE SEGASAMMY Co., Ltd. at the end of the previous
fiscal year, the shares of this company are pledged as collateral.
2. For a loan of ¥73,007 million (KR₩725,000 million) from financial institutions to the equity method affiliate PARADISE SEGASAMMY Co., Ltd. at the end of the current
fiscal year, the shares of this company are pledged as collateral.

112

Millions of yen

2022

2023

¥20,866¥19,432

978824

Revaluation method
SEGA CORPORATION computed the value of land based on themethodology regarding rational adjustments to valuation of fixed
assets stipulated in Article 2-3, and appraisals by licensed real estateappraisers prescribed in Article 2-5 of the Enforcement Ordinance
No. 119 (March 31, 1998) pertaining to the Law Concerning Revaluationof Land.
Date of revaluation: March 31, 2002.
Difference between the fair value at the end of the fiscal year andthe book value after revaluation of revalued land: ¥(425) million

Integrated Report 2023

SEGA SAMMY HOLDINGSThe amount of receivables from contracts with customers and the amount of contract assets, included in “Notes, accounts receivable—trade, andcontract assets” on the consolidated balance sheets, are provided in “Note 22 Revenue recognition 3. (1) Receivables from contracts with customers;
the balances of contract assets and contract liabilities” of the notes to consolidated financial statements.

(4) Gain on sales of noncurrent assets
Millions of yen

2022

2023

Machinery, equipment, and vehicles¥    2¥3

Other property, plant, and equipment

1,985

0

Total

1,988

3

(5) Loss on sales of noncurrent assets
Millions of yen

2022

2023

¥14

¥—

Machinery, equipment, and vehicles

0—

Amusement machines and facilities

33

0

Other property, plant, and equipment

2

0

Total

50

0

Buildings and structures

113

Notes to Consolidated Financial Statements(6) Impairment loss(8) Reclassification adjustments and the related tax effects concerning other comprehensive income

Prior fiscal year (From April 1, 2021 to March 31, 2022)

Millions of yen
Millions of yen

Use

Location

Type

Assets for business

Shinagawa-ku, Tokyo and 2 other locations

Buildings and structures

Amount

¥ 11

2022

2023

¥  620¥  43326—
433

Valuation difference on available-for-sale securities
The amount arising during the period

Amusement machines and facilities

11

Other property, plant, and equipment

320

Before adjustments to tax effects

647

Other intangible assets

86

The amount of tax effects

(312)

(87)

Total

430

Valuation difference on available-for-sale securities

334

345

Reclassification adjustments

Deferred gains or losses on hedges
Based on business segments, assets or asset groups whose cash
flows can be estimated separately are grouped independently. Of
these, the book values of assets or asset groups whose market
values declined significantly or that are projected to consistently
generate negative cash flows arising from operating activities are

reduced to their recoverable values. The amount of this reduction isrecorded as an impairment loss under other expenses.
Recoverable values are calculated based on memorandum values, as
no future cash flows are expected.

Before adjustments to tax effects
The amount of tax effects
Deferred gains or losses on hedges

Millions of yen

—
—

(22)

—

7

—

(14)

—

Location

Type

Assets for businessState of Nevada in the U.S. and 2 other locations Buildings and structures

Amount¥141

Amusement machines and facilities

2

Other property, plant, and equipment

297

Other intangible assets
Total

5
446

reduced to their recoverable values. The amount of this reduction isrecorded as an impairment loss under other expenses.
Recoverable values are calculated based on memorandum values, as
no future cash flows are expected.

The amount arising during the period

3,524

2,873

Reclassification adjustments
Before adjustments to tax effects
The amount of tax effects
Foreign currency translation adjustment

—
2,873

—

—

3,526

2,873

(2,920)1,760

Remeasurements of defined benefit plans, net of tax
The amount arising during the period
Reclassification adjustments
Before adjustments to tax effects
The amount of tax effects
Remeasurements of defined benefit plans, net of tax

165

(34)

(2,754)

1,726

(89)

(49)

(2,844)

1,677

1,203

1,277

Share of other comprehensive income of entities accounted for using equity method
The amount arising during the period
Reclassification adjustments

This loss is primarily related to the game contents for which development was suspended in connection to the restructuring of the European business.

2
3,526

Integrated Report 2023

SEGA SAMMY HOLDINGS

Use(7) Loss on business restructuring

114

6
(28)

Foreign currency translation adjustment

Current fiscal year (From April 1, 2022 to March 31, 2023)

Based on business segments, assets or asset groups whose cash
flows can be estimated separately are grouped independently. Of
these, the book values of assets or asset groups whose market
values declined significantly or that are projected to consistently
generate negative cash flows arising from operating activities are

The amount arising during the period
Reclassification adjustments

Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income

—

—

1,203

1,227

¥2,206¥6,124115

Notes to Consolidated Financial Statements

Current fiscal year (From April 1, 2022 to March 31, 2023)

9 Notes to Consolidated Statements of Changes in Net Assets

1. Number of outstanding common stock

Prior fiscal year (From April 1, 2021 to March 31, 2022)

Shares

1. Number of outstanding common stock

Type of stock
SharesType of stock

As of April 1, 2021

Increase

Decrease

As of March 31, 2022

266,229,476——

266,229,476

Common stock

2. Number of outstanding treasury stock
SharesClass of shares

As of April 1, 2021

Increase

Decrease

As of March 31, 2022

31,142,581

12,578,815

413,466

43,307,930

Common stock

Decrease
Decrease due to sales of odd-lot stock:
Decrease due to stock compensation withrestriction on transfer:

166 shares
413,300 shares

Breakdown

Decrease

As of March 31,
2022

Balance at
March 31, 2022
Millions of yen

—

—

—

¥176

—

—

—

176

Type of stock

As of April 1,
2021

Increase———

The Company Subscription rights to shares as stock options
Total

4. Dividends

241,229,476(Outline of causes of change)
The causes of the decrease are as follows:
Decrease due to cancellation of treasury stock:

25,000,000 shares

2. Number of outstanding treasury stock
SharesClass of shares

As of April 1, 2022

Increase

Decrease

As of March 31, 2023

43,307,930

2,246,395

25,078,284

20,476,041(Outline of causes of change)
Increase
Increase due to market purchases pursuant toBoard of Directors resolutions:
Increase due to purchase of odd-lot stock:

2,240,700 shares
5,695 shares

Decrease
Decrease due to sales of odd-lot stock:
84 shares
Decrease due to stock compensation with restriction on transfer:
78,200 shares
Decrease due to cancellation of treasury stock 25,000,000 shares

Number of stocks (Shares)
Company nameBreakdownType of stock

As of April 1,
2022

Increase

—

—

—

—

—

The Company Subscription rights to shares as stock options
Total

Decrease

As of March 31,
2023

Balance at
March 31, 2023
Millions of yen

—

—

¥468

—

—

468

4. Dividends(1) Dividends(1) Dividends

Resolution

Class of shares

Board of Directors’ Meeting held on
May 13, 2021

Common stock

Total dividend(Millions of yen)

Dividend pershare (Yen)¥4,701¥20

Common stock

4,709

20

Record date

Effective date

March 31, 2021
September 30, 2021

Resolution

Class of shares

Resource of dividend

Total dividend(Millions of yen)

Dividend pershare (Yen)

Board of Directors’ Meeting held on
May 13, 2022

Common stock

Retained earnings¥4,458¥20

Total dividend(Millions of yen)

Dividend pershare (Yen)Common stock¥4,458

Common stock

4,415

Resolution

Class of shares

June 4, 2021

Board of Directors’ Meeting held on
May 13, 2022

December 1, 2021

Board of Directors’ Meeting held on
October 31, 2022

(2) Of the dividends in which the record date is in the fiscal year ended March 31, 2022 but the effective date is in the following
fiscal year116

As of March 31, 2023

25,000,000

3. Subscription rights to shares
Number of stocks (Shares)

Board of Directors’ Meeting held on
November 8, 2021

Decrease—

Common stock

3. Subscription rights to sharesCompany name

Increase

266,229,476

Integrated Report 2023

SEGA SAMMY HOLDINGS(Outline of causes of change)
Increase
Increase due to market purchases pursuant toBoard of Directors resolutions:
12,560,300 shares
Increase due to purchase of odd-lot stock:
7,215 shares
Increase due to free acquisition upon retirement of individuals subject
to stock compensation with restriction on transfer:
11,300 shares

As of April 1, 2022

Common stock

Record date

Effective date

March 31, 2022

June 2, 2022

Record date

Effective date¥20

March 31, 2022

June 2, 2022

20

September 30, 2022

December 1, 2022

(2) Of the dividends in which the record date is in the fiscal year ended March 31, 2022 but the effective date is in the following
fiscal year
Resolution

Class of shares

Resource of dividend

Total dividend(Millions of yen)

Dividend pershare (Yen)

Board of Directors’ Meeting held on
May 12, 2023

Common stock

Retained earnings¥8,609¥39

Record date

Effective date

March 31, 2023

June 2, 2023

117

Notes to Consolidated Financial Statements(3) A summary of assumed amounts of lease payments, reversal of allowance for impairment loss on leased assets, depreciation,interest expenses and impairment loss for the years ended March 31, 2022 and 2023, with respect to the finance leases
accounted for in the same manner as operating leases, is as follows:

10 Notes to Consolidated Statements of Cash Flows(1) Reconciliation of cash and cash equivalents at end of year and the amount recorded on the consolidated balance sheets

Millions of yen

Millions of yen

2022

2023

Cash and deposits¥152,459¥179,509

Cash and cash equivalents

152,459

179,509

2022

2023

Lease payments

¥151

¥151

Reversal of allowance for impairment loss on leased assets

115

113

Depreciation

124

124

9

5

Interest expenses

11 Information for Certain Leases
1. Finance leases that do not transfer ownership prior to the initial year of application of the Accounting Standard
for Lease Transactions(1) A summary of assumed amounts of acquisition cost, accumulated depreciation, accumulated impairment loss and net bookvalue for the years ended March 31, 2023 and 2022, with respect to the finance leases accounted for in the same manner as
operating leases, is as follows:(4) Method of calculating depreciation equivalent(5) Method of calculating interest expenses equivalent

The straight-line method is applied under the assumptions that theuseful life equals the lease period and the residual value is zero.

Interest expenses equivalent are calculated as the difference
between total lease charges and acquisition cost equivalent of leased
items and are allocated to each fiscal year using the interest method.

2. Finance lease transactions

Prior fiscal year (As of March 31, 2022)
Millions of yen
Accumulated
depreciation

Accumulated
impairment loss

Net book value

Buildings¥2,103¥968¥1,135

¥—

Total

2,103

968

1,135

—

(2) The methods of depreciation for lease assets

Leased assets primarily consist of offices and other related facilities(“machinery, equipment, and vehicles”; “other property, plant, andequipment”; and “other intangible assets”).

• Leased assets in finance leases that transfer ownership:
Depreciated using the same method applied to property, plant, andequipment owned by the Company.
• Leased assets in finance leases that do not transfer ownership:
Depreciated using the straight-line method based on the assumptionthat useful life equals the lease period, with a residual value of zero.

3. Lease transactions under IFRSCurrent fiscal year (As of March 31, 2023)
Millions of yen
Accumulated
impairment loss

Net book value(1) Details of leased assets (right-of-use assets)(2) Depreciation method of right-of-use assets

Leased assets (right-of-use assets) primarily consists of items related
to leased offices of certain overseas consolidated subsidiaries.

The lease period or the useful life of the assets, whichever is shorter,is used as the useful life, and the residual value is calculated as zero.

Acquisition cost

Accumulated
depreciation

Buildings¥2,103¥968¥1,135¥—

4. Operating lease transactions

Total

2,103

968

1,135

—

Future lease payments for operating lease transactions which cannot be canceled as of March 31, 2022 and 2023 are as follows:Integrated Report 2023

SEGA SAMMY HOLDINGS

Acquisition cost

(1) Details of lease assets

Millions of yen(2) Future lease payments and accumulated impairment loss on leased assets
Future lease payments as of March 31, 2022 and 2023
Millions of yen

2022

2023

Due within one year

¥151

¥151

Due after one year

164

12

Total

315

164

2022

2023

Due within one year

¥ 4,316¥ 3,992

Due after one year

11,670

6,468

Total

15,987

10,460Notes: 1. Major factors for the increase or decrease in operating lease transactions includes the payment of lease payables for offices leased for the Group’s headquarters andthe extension of lease periods (upon contract renewal) for leased offices in certain headquarters.
2. Subsidiaries that apply U.S. GAAP have applied “Leases” (U.S. GAAP Topic 842) since the start of the current consolidated fiscal year. As a result, the subsidiary's leaseobligations will be included in the consolidated balance sheet. Therefore, it is not included in future lease payments for the current consolidated fiscal year.

Accumulated impairment loss on leased assets as of March 31, 2021 and 2022
Millions of yen

Accumulated impairment loss on leased assets

118

2022

2023

¥233

¥120

119

Notes to Consolidated Financial Statements

2. Matters related to market values, etc., of financial instruments

12 Financial Instruments
1. Outline of financial instruments(1) Policy for financial instruments
The Group has signed an agreement concerning commitment lines
with financial institutions to secure medium- to long-term funds liquidity
with the Company as a holding company. This is intended to serve asa safety net for the entire Group. In addition, the Group raises necessary
funds for each business based on the financial plan through bankborrowings or bond issues, while operating a Cash Management
System for the purpose of making efficient use of Group funds. Most
funds are invested primarily in low-risk and high-liquidity financial
assets (some are invested in compound financial instruments) suchas bonds, to further efficient funds management. Derivatives are notused for speculative purposes, but mainly used to manage exposure
to financial risks as described below.

(2) Details of financial instruments and their risks(3) Risk management system for financial instruments
1) Management of credit risk (risk related to contractual nonperformanceby business partners)
For operating receivables, (in accordance with the credit management
and other rules of each company that serve as the responsible

120

department) regularly monitors the status of major business partners,
managing due dates, and balances for each business partner whileworking to detect in advance to mitigate any concerns about collection
due to deteriorating financial positions and other factors.
As major debentures generally have high ratings, the credit risk is minimal.
In principle, the Group enters into derivative transactions only with its
financial institutions.
The maximum amount of credit risk as of the end of the current fiscal
year is represented as the amounts recorded in the consolidatedbalance sheets for financial assets exposed to credit risks.
2) Management of market risk (risk of fluctuations in foreignexchange or interest rates)
For certain borrowings with variable interest rates for consolidated
subsidiaries and affiliates accounted for by the equity method, theGroup uses interest rate swap transactions, etc., to control the risk offluctuating interest rates on loans.
Fair value and the financial condition of issuers (business partners) ofsecurities and investment securities are periodically ascertained andreported to the Board of Directors meetings of each company. The
holding status of principal stocks held are reviewed on an ongoingbasis, in consideration of the relationship with business partners. In
regards to certain compound financial instruments, etc., the Group
periodically ascertains their fair value and reviews the holding status
on an ongoing basis.
Derivatives transactions are executed and managed mainly by thefinancial department or the accounting department upon obtaining
internal approval in compliance with the derivative transactions
management and other rules of each company. Furthermore, reportson the status of the derivative transactions is presented to the Boardof Directors at each company as appropriate.
3) Management of liquidity risk related to fund procurement (risk ofinability to make payments on due date)
Operating payables and borrowings are exposed to liquidity risk.
At the Group, liquidity risk is managed by having each company set
an adequate fund balance and update its financial plan monthly tomaintain a fund balance exceeding the predetermined balance ateach company and by having the Company confirm the cash
management of each company.

Prior fiscal year (As of March 31, 2022)
Millions of yen
Consolidated balance
sheet amount

Fair value

Valuation gains(losses)¥34,958¥34,958

¥

106

106

2,936

2,936

—

813

690

(122)

Total assets

38,81538,692(122)—(1) Notes and accounts receivable—trade—(2) Short-term investment securities and investment securities:
1) Held-to-maturity debt securities
2) Available-for-sale securities
3) Stocks of affiliates

0(1) Notes and accounts payable—trade24,45524,455(2) Short-term borrowings

10,00010,000—(3) Long-term borrowings

32,00031,95544(4) Bonds payable

10,0009,929

70

Total liabilities

76,45576,341

114

Derivative transactions
1) Derivative transactions to which hedge accounting is not applied

—

—

—

2) Derivative transactions to which hedge accounting is applied

(33)

(33)

—

(33)

(33)

—

Total derivative transactions

Notes: 1. Notes are omitted for cash and deposits because they are settled over short timespans and their fair values approximate their book values.
2. Notes concerning securities are as described in the “Note 13 Investment Securities.” Notes concerning derivatives are as described in the “Note 14 Derivative Transactions.”
3. Securities without available fair market value
Millions of yen
Category

2022

Investments in unlisted stocks, etc.

¥ 3,849

Investments in investment limited partnerships, etc.

11,962

Stocks of non-consolidated subsidiaries
Stocks of affiliates
Investments in capital of subsidiaries and affiliates

Integrated Report 2023

SEGA SAMMY HOLDINGS

Notes and accounts receivable trade, which are operating receivables,
are exposed to customer credit risks. Additionally, operating receivables
denominated in foreign currencies are exposed to exchange rate
fluctuation risks. Securities and investment securities are composed
mainly of bonds and stocks related to business alliances with business
partners. The latter are exposed to market price fluctuation risk.
Of notes and accounts payable—trade (which are operating payables)
are denominated in foreign currencies and are exposed to exchange
rate fluctuation risks. With respect to a portion thereof, the Grouphedges risks using forward exchange contracts. Borrowings andbonds are primarily sought to procure funds necessary for operating
capital and capital expenditures. All of these are procured at fixedinterest rates.
Derivative transactions are forward exchange contracts to hedge
exchange rate fluctuation risk associated with operating payables
denominated in foreign currencies, and interest rate swap transactions to hedge interest rate fluctuation risk associated withborrowings of consolidated subsidiaries and affiliates accounted forby the equity method.
Additionally, further information on hedge accounting (including
hedging instruments and hedged items, hedge policy, and evaluationof hedge effectiveness) is provided in the aforementioned “(Significant
matters forming the basis for preparing consolidated financial
statements) 4. Accounting Policies (6) Accounting method forsignificant hedge”.

Consolidated balance sheet amounts, fair values, and their differences are as follows:809
19,243
978The above items are not included in “(2) Short-term investment securities and investment securities,” since no market price exists, future cash flows cannot be
estimated, and determining their fair values is deemed extremely difficult.
4. Statement of investments in partnerships and similar business organizations for which amounts corresponding to equity are recorded in net amounts on theConsolidated Balance Sheet is omitted. The amount of such investments recorded on the Consolidated Balance Sheet is ¥12,940 million.

(4) Supplementary remarks on the fair value, etc., offinancial instruments
Since calculations of the fair value of financial instruments incorporate
factors that vary, the fair value may vary depending on the assumptions
made. Additionally, contract amounts concerning derivative transactions
presented in the “(Derivatives)” section do not represent the market
risk of the derivative transactions.

121Notes to Consolidated Financial Statements

Current fiscal year (As of March 31, 2023)

Current fiscal year (As of March 31, 2023)
Millions of yen

Millions of yen
Consolidated balance
sheet amount

Fair value

Valuation gains(losses)¥52,673¥52,673¥ —(1) Notes and accounts receivable—trade

104

104

(0)

4,654

4,654

—

—

—

—

Total assets

57,43257,432(0)(1) Notes and accounts payable—trade30,55630,556—

1) Held-to-maturity debt securities
2) Available-for-sale securities
3) Stocks of affiliates(2) Short-term borrowings

17,00017,000—(3) Long-term borrowings

25,00024,91584(4) Bonds payable

10,0009,814

185

Total liabilities

82,55682,287269

Derivative transactions

Five to ten years

Over ten years¥179,509

¥ —

¥—

¥—

52,673———

Held-to-maturity debt securities (Bonds)*

—

100

—

—

Available-for-sale securities with maturities (Negotiable certificates of deposit)

—

—

—

—

Available-for-sale securities with maturities (Other)*

—

—

—

—

232,182

100——

Cash and deposits
Notes and accounts receivable—trade

Total

*R
 eceivables with early settlement provisions, etc., are presented in the scheduled redemption amount based on the assumption that they are held to maturity with early settlement provisions,etc., not applied.

Note 2: Repayment amounts of bonds payable, long-term borrowings, lease obligations, and other interest-bearing debts after the consolidated balance sheet date
Prior fiscal year (As of March 31, 2022)
Millions of yen
Category

1) Derivative transactions to which hedge accounting is not applied2) Derivative transactions to which hedge accounting is applied

Two to three years

Three to four years

¥

¥

¥

—

—

Short-term borrowings¥10,000

382

382

—

Long-term borrowings—

17,000

382

382

—

Bonds payable—

Millions of yen

Lease obligations——

Four to five years¥ —15,000

—

—

—

—

—

—

—

10,000Accounts payable–facilities

846
18,586
824

1,123

949

709

540

407

1,407

30

24

18

16

16

40

Within one year

One to two years

Two to three years

Three to four years

Four to five years

—

¥ —

¥ —

¥17,000¥—

Long-term borrowings—

15,000——10,000¥——Bonds payable

—

—

—

—

—

10,000

1,377

1,184

993

861

795

1,518

29

22

20

20

20

34

Other interest-bearing debt:
Accounts payable–facilities

3. Fair value information by level within the fair value hierarchy

Note 1: Redemption schedule of monetary receivables and securities with maturity after the consolidated balance sheet date
Prior fiscal year (As of March 31, 2022)
Millions of yen

Notes and accounts receivable—trade¥

Over five years

Short-term borrowings

Lease obligations
The above items are not included in “(2) Short-term investment securities and investment securities.”
4. Investments in partnerships and similar business organizations for which amounts corresponding to equity are recorded in net amounts on the Consolidated Balance
Sheet and are not included under (2) Short-term Investment Securities and Investment Securities. The amount of such investments recorded on the Consolidated
Balance Sheet is ¥10,808 million.

Cash and deposits—

Millions of yen
Category

9,984

Investments in capital of subsidiaries and affiliates¥

Other interest-bearing debt:¥ 4,538

Stocks of non-consolidated subsidiaries

Over five years—

Current fiscal year (As of March 31, 2023)

2023

Investments in investment limited partnerships, etc.

Within one year

One to five years

Five to ten years

Over ten years¥152,459

¥ —

¥—

¥—

34,958————

Short-term investment securities and investment securities:
Held-to-maturity debt securities (Bonds)*

—

100

—

Available-for-sale securities with maturities (Negotiable certificates of deposit)

—

—

—

—

Available-for-sale securities with maturities (Other)*

—

—

—

—

187,418

100

—

—

Total

One to two years—

Notes: 1. Notes are omitted for cash and deposits because they are settled over short timespans and their fair values approximate their book values.
2. Notes concerning securities are as described in the “Note 13 Investment Securities.” Notes concerning derivatives are as described in the “Note 14 Derivative Transactions.”
3. Securities without available fair market value

Category

Within one year

Integrated Report 2023

SEGA SAMMY HOLDINGS

Total derivative transactions

Stocks of affiliates

One to five years

Short-term investment securities and investment securities:(2) Short-term investment securities and investment securities:

Investments in unlisted stocks, etc.

Within one year

The fair value of financial instruments is classified into the following three levels according to the observability and materiality of inputs used tomeasure fair value.
Level 1 fair value: Fair value measured using (unadjusted) quoted prices in active markets for the same assets or liabilities
Level 2 fair value: Fair value measured using directly or indirectly observable inputs other than Level 1 inputs
Level 3 fair value: Fair value measured using material unobservable inputs
If multiple inputs are used (that are material to the fair value measurement), the fair value is categorized in the lowest priority input level in the fairvalue measurement.

* Receivables with early settlement provisions, etc., are presented in the scheduled redemption amount based on the assumption that they are held to maturity with early settlement provisions,etc., not applied.

122

123

Notes to Consolidated Financial Statements(1) Financial assets and financial liabilities measured at fair value(2) Financial assets and financial liabilities not to be measured at fair value

Prior fiscal year (As of March 31, 2022)

Prior fiscal year (as of March 31, 2022)
Millions of yen

Category

Consolidatedbalance sheet
amountLevel 1

Level 2

Level 3

Total

Short-term investment securities and investment securities

Category

Notes and accounts receivable—trade

Available-for-sale securities
StocksMillions of yen

Fair value

Consolidatedbalance sheet
amountLevel 1

Level 2

Level 3

Total

¥34,958¥ —¥34,958¥—¥34,958

Fair value

Short-term investment securities and investment securities¥1,958¥1,958¥ —¥—¥1,958

Held-to-maturity debt securities

Debt securities

537

—

537

—

537

Bonds receivable

106

—

106

—

106

Other

439

—

439

—

439

Stocks of affiliates

813

690

—

—

690

2,936

1,958

977

—

2,936

Total assets

35,878690

35,065—35,756

Notes and accounts payable—trade24,455—24,455—24,455Currency-related

—

—

—

—

—

Short-term borrowings

10,000—10,000—10,000Interest rate-related

(33)

—

(33)

—

(33)

Long-term borrowings

32,000—31,955—31,955

(33)

—

(33)

—

(33)

Bonds payable

Total assets
Derivative transaction*

Total derivative transaction

Total liabilities* Net receivables and payables resulting from derivative transactions are presented on a net basis. Items for total net obligations are indicated in parentheses.

Current fiscal year (As of March 31, 2023)

10,000

—

9,929

—

9,929

76,455—76,341—

76,341

Current fiscal year (as of March 31, 2023)

Category

Consolidatedbalance sheet
amountMillions of yen

Fair value
Level 1

Level 2

Level 3

Total

Short-term investment securities and investment securities

Category

Notes and accounts receivable—trade

Available-for-sale securities

Consolidatedbalance sheet
amountLevel 1

Level 2

Level 3

Total

¥52,673¥—¥52,673¥—¥52,673

104

Fair value

Short-term investment securities and investment securities¥4,082¥4,082¥ —¥—¥4,082

Debt securities

290

—

290

—

290

Bonds receivable

104

—

104

—

Other

280

—

280

—

280

Stocks of affiliates

—

—

—

—

—

4,654

4,082

571

—

4,654

Total assets

52,778—52,778—52,778Notes and accounts payable—trade30,556—30,556—30,556

—

—

—

—

—

Short-term borrowings

17,000—17,000—17,00025,000—24,915—24,915

StocksTotal assets
Derivative transaction*
Currency-relatedInterest rate-related
Total derivative transaction

Held-to-maturity debt securities

382

—

382

—

382

Long-term borrowings

382

—

382

—

382

Bonds payable* Net receivables and payables resulting from derivative transactions are presented on a net basis. Items for total net obligations are indicated in parentheses.

Total liabilities

10,000

—

9,814

—

9,814

82,556—82,287—82,287

Integrated Report 2023

SEGA SAMMY HOLDINGS

Millions of yen

Note: A description of the valuation techniques and inputs used in fair value measurement
Short-term investment securities and investment securities:
Listed stocks, debt securities, and bonds receivable are valued based on quoted prices. Since listed stocks are traded in active markets, their fair value is assigned to Level 1. The fairvalue of debt securities and bonds receivable held by the Group are assigned to Level 2 because they are infrequently traded in markets and are not considered to have quoted prices in
active markets.
Derivative transactions:
The fair value of interest rate swaps and forward exchange contracts is measured using the present discounted value method based on observable inputs, such as interest rates andexchange rates, and is assigned to Level 2.
Notes and accounts receivable—trade:
The fair value of these items is measured using the present discounted value method based on the amount of receivables, time to maturity, and an interest rate reflecting credit risk foreach grouping of receivables in a specified period and is assigned to Level 2.
Notes and accounts payable—trade:
The fair value of these items is measured using the present discounted value method based on future cash flows, time to maturity, and an interest rate reflecting credit risk, for eachgrouping of payables in a specified period, and is assigned to Level 2.
Short-term borrowings and long-term borrowings:
The fair values of short-term borrowings and long-term borrowings are measured using the present discounted value method based on the sum of principal and interest, time to maturity,
and an interest rate reflecting credit risk, and are assigned to Level 2.
Bonds payable:
The fair value of bonds payable issued by the Company is measured using the present discounted value method based on the sum of principal and interest, time to maturity, and aninterest rate reflecting credit risk, and is assigned to Level 2.

124

125

Notes to Consolidated Financial Statements

13 Investment Securities

2. Available-for-sale securities

1. Held-to-maturity debt securities(1) Securities whose consolidated balance sheet amount exceeds the acquisition cost

Prior fiscal year (As of March 31, 2022)

Prior fiscal year (As of March 31, 2022)

Millions of yen(1) Securities whose market value exceeds the consolidated balance sheet amountMillions of yen

Category

1) Shares

Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)¥1,313¥286¥1,027———

Consolidated balance
sheet amount

Fair value

Valuation gains(losses)

1) Government / municipal bonds

¥ —

¥ —

¥—

3) Other

439

400

39

2) Corporate bonds

Total

1,753

686

1,066

Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)¥  644¥  701

¥(56)

537

549

(11)

Category

106

106

0

3) Other

—

—

—

Total

106

106

0

2) Debt securities(2) Securities whose consolidated balance sheet amount is equal to or lower than the acquisition cost
Millions of yen(2) Securities whose market value is equal to or lower than the consolidated balance sheet amountMillions of yen

Category

1) Shares

Fair value

Valuation gains(losses)

1) Government / municipal bonds

¥—

¥—

¥—

3) Other———2) Corporate bonds

—

—

—

Total

1,182

1,250

(67)

3) Other

—

—

—

Total

—

—

—

2) Debt securities

SEGA SAMMY HOLDINGS

Current fiscal year (As of March 31, 2023)(1) Securities whose consolidated balance sheet amount exceeds the acquisition cost
Current fiscal year (As of March 31, 2023)

Millions of yen(1) Securities whose market value exceeds the consolidated balance sheet amountMillions of yen

Category

1) Shares

Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)¥3,899¥963¥2,935—

Consolidated balance
sheet amount

Fair value

Valuation gains(losses)2) Debt securities——

1) Government / municipal bonds

¥—

¥—

¥—

3) Other———2) Corporate bonds

—

—

—

Total

3,899

963

2,935

3) Other

—

—

—

Total

—

—

—

Consolidated balance
sheet amount

Acquisition cost

Valuation gains(losses)

¥183

¥241

¥ (58)

Category(2) Securities whose consolidated balance sheet amount is equal to or lower than the acquisition cost
Millions of yen(2) Securities whose market value is equal to or lower than the consolidated balance sheet amountMillions of yen

Category

1) Shares

Consolidated balance
sheet amount

Fair value

Valuation gains(losses)2) Debt securities

290

339

(49)

1) Government / municipal bonds

¥ —

¥ —

¥—

3) Other

280

400

(119)

2) Corporate bonds

Total

755

982

(226)

Amount of proceeds

Total gains on sales

Total losses on sales¥26

Category

Integrated Report 2023

Consolidated balance
sheet amount

Category

104

104

(0)

3) Other

—

—

—

Total

104

104

(0)

3. Available-for-sale securities sold during the fiscal year
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Category

1) Shares

126¥2,565¥2,5162) Debt securities

—

—

—

3) Other

—

—

—

Total

2,565

2,516

26

127

Notes to Consolidated Financial Statements

Current fiscal year (As of March 31, 2023)

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Amount of proceeds

Total gains on sales

Total losses on sales

1) Shares

Category

¥1

¥—

¥—

2) Debt securities

—

—

—

3) Other

—

—

—

Total

1

—

—

Millions of yen
Hedge accounting method

Classification

Primary method (Note) Interest rate swaps:
Floating rate into fixed rate
Total

Major hedged items

Long-term borrowings

Contract value

Contract value due
after one year

Fair value¥31,720¥—¥382

31,720—382

Note: Primary method represents interest rate swaps transactions to long-term borrowings that are used by entities accounted for using the equity method. Contract amount andfair value are multiplied by the equity interest held by the Company.

4. Impairment loss on securities
Prior fiscal year (From April 1, 2021 to March 31, 2022)
The Group recognized impairment loss on available-for-sale securities in the amount of ¥0 million.

15 Retirement Benefits

Current fiscal year (From April 1, 2022 to March 31, 2023)
The Group recognized impairment loss on available-for-sale securities in the amount of ¥81 million.

1. Overview of retirement benefit plans
The Company and some of its consolidated subsidiaries have adopted a defined benefit corporate pension plan, a lump-sum retirement benefit
plan, or a defined contribution pension plan to provide retirement benefits to the employees. In addition, the Company and certain consolidated
subsidiaries have introduced selective defined contribution pension plans.
Under the lump-sum retirement benefit plan held by certain consolidated subsidiaries, net defined benefit liability and retirement benefit expenses
are determined using a simplified method.

14 Derivative Transactions(1) Currency-related derivatives

Integrated Report 2023

SEGA SAMMY HOLDINGS

1. Derivative transactions to which hedge accounting is not applied
Prior fiscal year (As of March 31, 2022)
Not applicable
Current fiscal year (As of March 31, 2023)
Not applicable(2) Compound financial instruments
With respect to compound financial instruments whose fair values cannot be categorized and measured for each embedded derivative, the certain
compound financial instruments are appraised by fair value and are included in “2. Available-for-sale securities” in “Note 13 Investment Securities.”

2. Derivative transactions to which hedge accounting is applied(1) Currency-related derivatives
Prior fiscal year (As of March 31, 2022)
Not applicable
Current fiscal year (As of March 31, 2023)
Not applicable(2) Interest rate-related derivatives
Prior fiscal year (As of March 31, 2022)
Millions of yen
Hedge accounting method

Classification

Primary method (Note) Interest rate swaps:
Floating rate into fixed rate
Total

Major hedged items

Long-term borrowings

Contract value

Contract value due
after one year

Fair value¥30,460¥30,460¥(33)

30,46030,460(33)

Note: Primary method represents interest rate swaps transactions to long-term borrowings that are used by entities accounted for using the equity method. Contract amount andfair value are multiplied by the equity interest held by the Company.

128

129

Notes to Consolidated Financial Statements

2. Defined benefit pension plan

(5) Breakdown of retirement benefit expenses(1) Reconciliation of the difference between the amounts of projected benefit obligations(excluding pension plan using the simplified method)

Millions of yen
Millions of yen

2022

2023

Service costs–benefits earned during the year

¥1,920¥2,149Interest cost on projected benefit obligations

102

174

Expected return on plan assets

(604)

(658)
(34)

2022

2023

¥29,669¥33,552

Service costs–benefits earned during the year

1,920

2,149

Amortization of actuarial difference

165

Interest cost on projected benefit obligations

102

174

Amortization of prior service cost——

Actuarial differences accrued

2,277(5,479)110

102

Retirement benefit paid

(483)

(460)

Other

—

2,359

Retirement benefit expenses of defined benefit pension plan

Projected benefit obligations at the beginning of the period

Prior service costs accrued
Other
Projected benefit obligations at the end of the period

66

121

33,55232,418Retirement benefit expenses using the simplified method

14

2

1,709

1,735

(6) Remeasurements of defined benefit plans, net of tax
Items included in the remeasurements of defined benefit plans are as follows (before tax effect deduction).

(2) Reconciliation of the difference between the amounts of plan assets

Millions of yen
Millions of yen

Expected return on plan assets

2023

Prior service costs¥—¥(2,359)¥30,238¥32,947

Actuarial difference(2,754)

4,086

604

658

Total

(2,754)

1,726

Actuarial differences accrued(642)(1,358)Contribution of employer

3,147

2,893

(7) Remeasurements of defined benefit plans

Retirement benefit paid

(400)

(375)

Items included in the remeasurements of defined benefit plans are as follows (before tax effect deduction).

Other
Plan assets at the end of the period——

32,94734,766

Millions of yen¥—¥(2,359)(3,311)

775

Total

(3,311)(1,584)

2022

2023

Debt securities

46%

27%

Share of stock

16

17

Cash and deposits

27

44

General account

6

7

Millions of yen

Other

1

3

Total

100

100

2022

2023

¥734

¥806

(8) Matters concerning plan assets

Retirement benefit expenses

110

102

Retirement benefit paid

(17)

(48)

1) Breakdown of plan assets
Ratio of main classes of plan assets

Other

2023

Unrecognized prior service costs

Millions of yen

Net defined benefit liability at the end of the period2022

Unrecognized actuarial difference(3) Reconciliation of the difference between the amounts of net defined benefit liability under pension plans using the simplified method

Net defined benefit liability at the beginning of the period

2023

2022

(22)

2

806

862

(4) Reconciliation of the difference between the amount of projected benefit obligations and plan assets and net defined benefit
liability and net defined benefit asset recorded in the consolidated balance sheet

2022

2023

Funded projected benefit obligations¥ 31,483¥ 30,355

Plan assets(32,947)(34,766)(1,463)(4,411)

Unfunded projected benefit obligations

2,875

2,926

Net amount of liabilities and assets recorded in the consolidated balance sheet

1,411(1,485)Net defined benefit liability

4,395

3,877

Net defined benefit asset(2,984)(5,362)

Net amount of liabilities and assets recorded in the consolidated balance sheet

1,411(1,485)Integrated Report 2023

SEGA SAMMY HOLDINGS

Plan assets at the beginning of the period

20222) Long-term expected rate of return on plan assets
In determining long-term expected rate of return on plan assets, the Company and its consolidated subsidiaries consider the current and projectedasset allocations as well as current and future long-term rate of returns for the various assets which make up the plan assets.

Note: Retirement benefit scheme applying the simplified method is included.

130

131

Notes to Consolidated Financial Statements(9) Matters concerning basis for the actuarial calculation(2) The following table summarizes the scale and movement of stock options

Basis for the actuarial calculation

SharesDiscount rateLong-term expected rate of return on plan assets
Salary increase ratio (Note)

2022

2023

0.1–0.8%

0.2–0.9%

2.0%

2.0%

Principally, salary increase index byages as of March 31, 2021 is used.

Principally, salary increase index byages as of March 31, 2021 is used.

Note: Some consolidated subsidiaries do not use the salary increase ratio for the calculation of retirement benefits obligations.

Company name

The Company

Date of the resolution

August 2, 2021

Not exercisable stock options
Stock options outstanding at April 1, 2021—

Stock options granted

2,884,500

Forfeitures

32,500Conversion to exercisable stock options—

Stock options outstanding at March 31, 2022

3. Defined contribution pension plans
The required contribution amounts to the defined contribution plan of the Company and its consolidated subsidiaries were ¥1,106 million in the priorfiscal year and ¥1,432 million in the current fiscal year.

16 Stock Option Plan

2,852,000

Exercisable stock options
Stock options outstanding at April 1, 2021—

Conversion from not exercisable stock options—

Stock options exercised—

Forfeitures—

Stock options outstanding at March 31, 2022—

1. Account title and the amount of stock options recorded as expenses
Millions of yen

132

¥176

¥292

Yen

Company name

The Company

Date of the resolution

August 2, 2021

Exercise price2. Contents, scale and movement of stock options¥1,500

Average market price of the stock at the timeof exercise

Prior fiscal year (From April 1, 2021 to March 31, 2022)(1) The following table summarizes the contents of stock options.
Company name

The Company

Date of the resolution

August 2, 2021

Position and number of grantees (persons)2023

The Company’s employees: 168
The Company’s subsidiaries’ directors: 12
The Company’s subsidiaries’ executive
officers: 25
The Company’s subsidiaries’
employees: 1,411

Class and number of stock (shares)

Common stock 2,844,500

Date of issue

September 1, 2021

Condition of settlement of rights

Continue to work from September 1, 2021
to June 30, 2024—

Fair value of the stock option
at the date of grant300

Integrated Report 2023

SEGA SAMMY HOLDINGS

Selling, general, and administrative expenses—other2022

The following table summarizes the price information of stock options

Current fiscal year (From April 1, 2022 to March 31, 2023)(1) The following table summarizes the contents of stock options.
Company nameDate of the resolution

The Company
August 2, 2021

Position and number of grantees (persons)Company employees: 168
Subsidiary directors: 12
Subsidiary executive officers: 25
Subsidiary employees: 1,411

Class and number of stock (shares)

Common stock 2,884,500

Date of issue

September 1, 2021
Continue to work from
September 1, 2021 to June 30, 2024

Period in which grantees provide service
in return for stock options

September 1, 2021 to June 30, 2024

Condition of settlement of rights

Period subscription rights are to be exercised

July 1, 2024 to June 30, 2026

Period in which grantees provide service
in return for stock options

September 1, 2021 to June 30, 2024

Period subscription rights are to be exercised

July 1, 2024 to June 30, 2026

133

Notes to Consolidated Financial Statements(2) The following table summarizes the scale and movement of stock options.
SharesCompany name

The Company

Date of the resolution

August 2, 2021

17 Stock Compensation with Restriction on Transfer
1. Details of stock compensation with restriction on transfer
Continuous service-based shares withrestriction on transfer in 2021

Continuous service-based shares withrestriction on transfer in 2022

Categories and number of grantees (persons)Company directors
Company executive officers
Subsidiary directors
Subsidiary executive officers

Company directors
Company executive officers
Subsidiary directors
Subsidiary executive officers

Class and number of shares granted (shares)

Common stock: 28,500

Common stock: 78,200

Grant dateAugust 5, 2021

August 19, 2022—

Conditions for canceling restriction on transfer(Notes) 1, 2

(Notes) 1, 2

Conversion from not exercisable stock options—

Period of restriction on transfer

From August 5, 2021 to August 4, 2024

From August 19, 2022 to August 18, 2025

Stock options exercised—

Forfeitures—

Stock options outstanding at March 31, 2023—

Not exercisable stock options
Stock options outstanding at April 1, 2022

2,852,000

Stock options granted—

Forfeitures

56,500Conversion to exercisable stock options—

Stock options outstanding at March 31, 2023

2,795,500

Exercisable stock options
Stock options outstanding at April 1, 2022

—
—
15
14

Performance-based shares withrestriction on transfer in 2021
Categories and number of grantees (persons)Company directors
Company executive officers
Subsidiary directors
Subsidiary executive officers

The following table summarizes the price information of stock options.
The Company

Class and number of shares granted (shares)

Common stock: 384,800

Date of the resolution

August 2, 2021

Grant dateAugust 5, 2021

Conditions for canceling restriction on transfer(Notes) 1, 3

Period of restriction on transfer

From August 5, 2021, until the closureof the Company’s first Ordinary General
Meeting of Shareholders to arrive after
the end date of the medium-term plan

¥1,500

Average market price of the stockat the time of exercise—

Fair value of the stock option
at the date of grant300

3. Estimation of fair value of the stock options
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Method for estimating fair value per share of stock options granted by the reporting company(1) Valuation techniques applied
Black-Scholes equation(2) Major basic figures and estimation methods
Stock price variability (Note 1)
Estimated remaining period (Note 2)
Estimated dividends (Note 3)
Risk-free interest rate (Note 4)

31.535%
3.83 years¥30 per share(0.130)%Notes: 1. Calculated based on actual stock prices from November 2017 to August 2021.
2. Due to the absence of sufficient cumulative data and the difficulty of forming reasonable estimates, this estimate assumes that the options will be exercised at
the midpoint of the exercise period.
3. Based on actual dividends for the fiscal year ended March 31, 2021.
4. This is the national government bond yield corresponding to the estimated remaining period.

Integrated Report 2023

SEGA SAMMY HOLDINGS

Yen

4
8
19
21

Company name
Exercise price

4
9
18
22

Notes: 1. If grantees resign as directors and executive officers of the Company or Company subsidiaries (limited to those in which the Company holds at least 50% of all shares;
such subsidiaries and the Company shall hereinafter be referred to as “Group companies”) on or before the day preceding the day of the Company’s first Ordinary
General Meeting of Shareholders arriving after the start of the period of restriction on transfer (or, if the grantees are Company executive officers or Group company
officers, etc., on or before the day preceding the Company’s first fiscal year-end date arriving after the start of the period of restriction on transfer). The Company shallacquire, by right, the allotted shares gratis (except in cases in which the reasons for such resignation are deemed valid by the Company Board of Directors, such as the
expiration of term of office - except for “performance-based shares with restriction on transfer”), the attainment of the mandatory retirement age and death. The
Company shall also acquire, by right, the allotted shares gratis for which the restriction on transfer is not canceled under the provisions of 2 and 3 below as of the
expiration of the period of restriction on transfer.
2. Subject to the condition that grantees including Group company officers continue to serve as Group company directors or executive officers until the day preceding the
day of the Company’s first Ordinary General Meeting of Shareholders arriving after the start of the period of restriction on transfer (or, if the grantees are Company
executive officers or Group company officers, etc., until the day preceding the Company’s first fiscal year-end date arriving after the start of the period of restriction ontransfer), as of the expiration of the period of restriction on transfer, the restriction will be canceled for all allotted shares. However, should such directors resign as
directors and executive officers of Group companies before the expiration of the period of restriction on transfer for reasons deemed valid by the Company Board of
Directors (for example, expiration of term of office, attainment of mandatory retirement age or death), the number of allotted shares for which the restriction on transfer
is canceled and the timing of such cancellation are to be reasonably adjusted on an as-needed basis.
3. Subject to the condition that grantees continue to serve as Group company directors or executive officers until the day preceding the day of the Company’s first Ordinary
General Meeting of Shareholders arriving after the start of the period of restriction on transfer (or, if the grantees are Company executive officers or Group company
officers, etc., until the day preceding the Company’s first fiscal year-end date arriving after the start of the period of restriction on transfer), the number of shares forwhich the restriction on transfer will be canceled and the timing of such cancellation are to be reasonably adjusted on an as-needed basis in accordance with the lengthof their service in such roles during the medium-term plan period (at the restriction cancellation rate) which is linked to performance goal achievements in the mediumterm plan. However, should such directors resign as directors and executive officers of Group companies before the expiration of the period of restriction on transfer forreasons deemed valid by the Company Board of Directors (for example, attaining mandatory retirement age and death or reassignment to other positions during the
medium-term plan period), the number of shares for which the restriction on transfer is canceled shall be reasonably adjusted within the performance condition.

Current fiscal year (From April 1, 2022 to March 31, 2023)
Not applicable

4. Estimation of number of exercisable stock options
As it is difficult to reasonably estimate the number of stock options that will be forfeited in the future, the number here reflects only stock options
that have actually been forfeited.

134

135

Notes to Consolidated Financial Statements

2. Volume and changes in stock compensation with restriction on transfer

18 Income Taxes(i) Expensed amount and account title
Millions of yen

2022
Selling, general, and administrative expenses—other

2023
¥198

1. Significant components of deferred tax assets and liabilities
Millions of yen

¥393

2023

2022

Deferred tax assets:(ii) Number of shares
SharesContinuous service-based shares withrestriction on transfer in 2021

Continuous service-based shares withrestriction on transfer in 2022

26,800——78,200

408

329

—

Impairment loss

543

493

—

—

Other

17,76920,71226,80078,200Loss carried forward

36,01926,866

Subtotal deferred tax assets

79,99474,981

Valuation allowance for tax loss carried forward (Note 2)(32,685)(20,307)

Valuation allowance for deductible temporary difference(20,685)(23,015)

Subtotal valuation allowance (Note 1)(53,371)(43,322)

Offset to deferred tax liabilities(13,175)(15,159)

13,446

16,499(1,336)(1,530)—

SEGA SAMMY HOLDINGS

375,200

Total deferred tax assets—
14,700Restriction canceled

Deferred tax liabilities:—

Valuation difference on available-for-sale securities

360,500(12,309)(14,383)

Subtotal deferred tax liabilities(13,645)(15,913)

Offset to deferred tax assets

13,17515,159Other(iii) Per share priceYenContinuous service-based shares withrestriction on transfer in 2021

Continuous service-based shares withrestriction on transfer in 2022

¥1,502¥2,228Performance-based shares withrestriction on transfer in 2021
¥1,502

(469)

(754)

12,977

15,745

Total deferred tax liabilities
Net deferred tax assets

Integrated Report 2023

Exclusion of loss on valuation of investment securities from deductible expenses

GrantedFair value per share at grant date

3,039
1,692

Before cancellation of restriction

Fair value per share at grant date

2,828

19,019Performance-based shares withrestriction on transfer in 2021

Restriction valid

Exclusion of provision for bonuses from deductible expenses

1,766

Restriction canceled

Acquired for free

263
2,564

17,136

Acquired for free

At end of prior period

¥

349
3,173

Excess of maximum depreciation and amortization

GrantedRestriction valid¥

Net defined benefit liability

Before cancellation of restriction
At end of prior period

Exclusion of provision of allowance for doubtful accounts from deductible expenses
Exclusion of loss on valuation of inventories from deductible expenses

Notes: 1. The valuation allowance fell by ¥10,048 million. The major factors for this decrease were due to decreases in valuation allowance of ¥12,378 million for tax loss carryforwards
and an increase in valuation allowance for a deductible temporary difference of ¥2,330 million.
2. Amount of tax loss carried forward and their deferred tax assets by carryforward period are as follows.

Prior fiscal year (As of March 31, 2022)
Millions of yen

Note: To prevent arbitrary price decisions, we use the closing price of the Company’s common stock on the Tokyo Stock Exchange on the business day immediately before
the date of the Board of Directors resolution regarding the granting of shares with restriction on transfer.

Withinone year

One totwo years

Two tothree years

Three tofour years

Four tofive years

Overfive years

Total

Tax loss carried forward (a)¥ 5,063¥ 2,394¥ 1,789¥ 1,185¥ 752¥ 24,833¥ 36,019

Valuation allowance(4,230)(2,369)(1,768)(1,179)(750)(22,387)(32,685)

Deferred tax assets

832

25

20

5

2

2,445

(b) 3,333(a) The amount of tax loss carried forward is the amount under the normal effective statutory tax rate.
(b) Regarding the amount of tax loss carried forward of ¥36,019 million (amount given by the normal effective statutory tax rate), deferred tax assets of ¥3,333 million wererecorded. The Company deemed that a partial amount of tax loss carried forward can be recovered mainly in the following fiscal year due to the estimated amount of
taxable income.

136

137

Notes to Consolidated Financial Statements

Current fiscal year (As of March 31, 2023)

21 Rental Property and Other Real Estate
Millions of yen
Withinone year

One totwo years

Two tothree years

Three tofour years

Four tofive years

Overfive years

Total¥2,369¥ 1,718¥ 1,143¥ 747—¥ 20,887¥ 26,866

Valuation allowance(886)(1,441)(1,058)(722)—(16,197)(20,307)

Deferred tax assets

1,483

276

85

24

—

4,689

(b) 6,559

Tax loss carried forward (a)Prior fiscal year (As of March 31, 2022)
The information is omitted due to the immateriality of the total amountof the rental property and other real estate.

Current fiscal year (As of March 31, 2023)
The information is omitted due to the immateriality of the total amountof the rental property and other real estate.

22 Revenue Recognition(a) The amount of tax loss carried forward is the amount given by the normal effective statutory tax rate.
(b) Regarding the amount of tax loss carried forward of ¥26,866 million (the amount under the normal effective statutory tax rate), deferred tax assets of ¥6,559 million wererecorded. The Company deemed that a partial amount of tax loss carried forward can be recovered mainly in the following fiscal year based on estimates of taxable income.

1. Disaggregation of revenue from contracts with customers

2. Breakdown of major causes of the significant difference between the statutory tax rate and the effective tax
rate for financial statement purposes, if any, by item, for the fiscal years ended March 31, 2022 and 2023

The Group operates an Entertainment Contents Business, Pachislot and Pachinko Machines Business, and a Resort Business. Main goods orservices primarily handled by these businesses are digital content, products and merchandise, and resort facilities. Shown below are the sales ofgoods or services by each business:

Normal effective statutory tax rate

2022

2023

30.6%

30.6%

Prior fiscal year (from April 1, 2021 to March 31, 2022)
Millions of yen(Adjustment)
Changes in valuation allowance
Permanently non-deductible expenses including entertainment expenses(30.0)(21.3)

1.9

1.2

Reporting segment

1.0

0.7

Tax rate difference between the Company and consolidated subsidiaries

(1.4)

(0.4)

Digital content sales

Tax credit for experimental and research expenses(12.1)(11.8)

Product and merchandise sales

Tax loss carried forward

12.6

7.9

Resort facility sales

Impact of consolidation adjustments

(3.2)

(2.6)

Other sales

Other

2.9

(1.9)

Revenue from contracts with customers

Effective tax rate after tax effect accounting

2.4

2.4

Sales to external customers

3. Accounting for corporation tax and local corporation tax and tax effect accounting

Pachislot
Pachinko
Machines¥129,773¥ 3,799

74,673

ResortSubtotal

Other

Total

—

¥133,572¥ —¥133,572

70,156—

144,829—

144,829

—

—

8,663

8,663

—

8,663

31,491

1,912—

33,403480

33,884

235,937

75,868

8,663

320,469480

320,949

235,937

75,868

8,663

320,469480

320,949

Current fiscal year (from April 1, 2022 to March 31, 2023)

The Company and some of its domestic consolidated subsidiaries have adopted the group tax sharing system from the fiscal year ended
March 31, 2023. In addition, corporation tax and local corporation tax, as well as their tax effects, are accounted for and disclosed under Practical
Solution on the Accounting and Disclosure under the Group Tax Sharing System (PITF No.42, August 12, 2021).
Entertainment
Contents

Pachislot
Pachinko
Machines¥145,132¥ 4,153

95,320—

Other sales

ResortSubtotal

Other

Total

—

¥149,285¥ —¥149,285

87,254—

182,575—

182,575—

11,540

11,540—

11,54042,4282,845—

45,274960

46,234

Revenue from contracts with customers

282,881

94,253

11,540388,675960

389,635

Sales to external customers

282,881

94,253

11,540388,675960

389,635

19 Business Combination
This information is omitted due to immateriality

Resort facility sales

Prior fiscal year (As of March 31, 2022)
The information is omitted due to the immateriality of the total amountof the asset retirement obligations.

138

Millions of yen
Reporting segment

Digital content sales
Product and merchandise sales

20 Asset Retirement Obligations¥

Integrated Report 2023

SEGA SAMMY HOLDINGS

Amortization of goodwill

Entertainment
Contents¥

Current fiscal year (As of March 31, 2023)
The information is omitted due to the immateriality of the total amountof the asset retirement obligations.

139

Notes to Consolidated Financial Statements

2. Basic information for understanding revenue fromcontracts with customers(1) Information on contracts, performance obligations, andwhen performance obligations are satisfied
Information on contracts, performance obligations, and when
performance obligations are satisfied is as presented in “Note 2
Summary of Significant Accounting Policies 3. Accounting Policies(7) Accounting policy for recognition of significant revenues
and expenses.”(2) Information on calculating allocation amounts for
performance obligations
When selling sets of multiple pieces of game content as part of granting
game distribution rights or download sales in the Entertainment

Contents Business, the provision of each piece of content is identified
as a separate performance obligation, and the transaction price isallocated to each performance obligation. For bundled sales within
the Entertainment Contents Business of amusement machines andannual content update services, the amusement machine sales andannual content update services are identified as separate performance obligations and the transaction prices are allocated to eachperformance obligation.
In cases such as these, stand-alone selling prices on the transaction day (in the contract of the individual goods or services that serveas the basis for each performance obligation are calculated) thetransaction prices are allocated based on the ratio of said stand-alone
selling prices.

Contract assets consist mainly of rights not yet claimed on revenues
recognized as such, based on measurement of progress for development under contract. Contract assets are transferred to accounts
receivable - trade when rights to payment become unconditional.
Contract liabilities consist mainly of prepayments received from
customers before the delivery of products or provision of services
and balances of points awarded to customers for which performanceobligations have not yet been fulfilled as of the end of the period.
Contract liabilities are derecognized upon recognition of revenues.
Of the revenue recognized in the current fiscal year, the amountincluded in the contract liability balance at the beginning of the period
is ¥9,368 million. The primary reason for the increase in contract
liabilities is an increase in prepayments received before deliveryof products.

(2) Transaction price allocated to remaining performance obligations
The total transaction price allocated to the remaining performance obligations and the time frame in which the Company expects to recognize theamount as revenue are as follows:
Millions of yen

Within one year

¥24,227

Over 1 year but within 2 years

3. Information for understanding revenue amounts of the current fiscal year and the following fiscal years

1,047Over 2 years

577

Total

25,852

Prior fiscal year (from April 1, 2021 to March 31, 2022)(1) Receivables from contracts with customers; the balances of contract assets and contract liabilities
The breakdown of receivables from contracts with customers, contract assets, and contract liabilities is as follows:

Beginning balance forthe prior year

Ending balance forthe prior year

¥38,176¥34,958

—

3,993

9,333

10,257

Receivables from contracts with customers
Notes and accounts receivable—trade
Contract assets
Contract liabilities

Note: Of the revenue recognized in the prior fiscal year, the amount included in the contract liabilities balance at the beginning of the period is ¥8,135 million.

1. Outline of reporting segments
The Group’s reporting segments are organizational units for which separate financial information is available. On this basis, the Board of Directors
makes decisions on allocating management resources and examines financial performance on a regular basis.
Planning of business development and strategies as well as execution of business activities in respect of each product and service is carriedout by each Group company that provides such product and service.
As such, the Group is comprised of segments classified by product and service provided through the businesses run by each Group company,in which Entertainment Contents Business, Pachislot and Pachinko Machines Business, and Resort Business are the reporting segments.
The lines of business for each reporting segment are as follows:(2) Transaction price allocated to remaining performance obligations

Segment

Main product and business

The total transaction price allocated to the remaining performance obligations and the time frame in which the Company expects to recognize theamount as revenue are as follows:Entertainment Contents Business

Development and sales of consumer game software including Full Game, F2P, etc., andamusement machines, planning, production and sales of animated films, development,
manufacture and sales of toys

Pachislot and Pachinko Machine Business

Development, manufacture and sales of pachislot and pachinko machines

Resort Business

Integrated resorts business and development and operation of hotels and golf courses, etc.,
in other facilities businesses

Millions of yen

Within one year

¥ 8,877

Over 1 year but within 2 years

915

Over 2 years

465

Total

10,257

Integrated Report 2023

SEGA SAMMY HOLDINGS

23 Segment Information
Millions of yen

2. Method for calculating net sales, income or loss, assets and other items by each reporting segment
The accounting methods applied to reporting segments are generally the same as those described in “Significant matters forming the basis for
preparing consolidated financial statements.”

Current fiscal year (from April 1, 2022 to March 31, 2023)(1) Receivables from contracts with customers; the balances of contract assets and contract liabilities
The breakdown of receivables from contracts with customers, contract assets, and contract liabilities is as follows:
Millions of yen
Beginning balance forthe current year

Ending balance forthe current year

¥34,958¥52,673

Receivables from contracts with customers
Notes and accounts receivable—trade

140

Contract assets

3,993

696

Contract liabilities

10,25725,852141

Notes to Consolidated Financial Statements

3. Information on the amounts of net sales, income (loss), assets and other items by each reporting segment

Current fiscal year (From April 1, 2022 to March 31, 2023)

Prior fiscal year (From April 1, 2021 to March 31, 2022)

Millions of yen
Reporting segment

Millions of yen
Reporting segment
Entertainment
Contents

Pachislot
Pachinko
Machines

Resort¥235,937¥75,868¥ 8,663

Subtotal

Adjustment(Note)

Amount inConsolidated
financialstatements¥320,469¥    480¥320,949

Net sales:
Net sales to external customers

Entertainment
Contents

Pachislot
Pachinko
Machines

ResortSubtotal¥282,881¥94,253¥11,540¥388,675

311

575

79

965

Adjustment(Note)

Amount inConsolidated
financialstatements¥

Net sales:
Net sales to external customers
Inter-segment sales and transfers

960¥389,635(965)—
389,635

349

143

1,046

(1,046)—

Total

283,192

94,828

11,619389,640(5)

236,491

76,218

8,806

321,515(565)

320,949

Segment income (loss)

41,181

20,713(3,217)58,676(9,202)49,473

Segment income (loss)

36,861

10,282(6,738)40,405(7,061)33,344

Segment assets

221,633

73,372

31,474326,479

175,086

501,566

Segment assets

191,320

56,73831,701

279,760

155,732

435,492

Other items:
Depreciation

5,766

3,227

628

9,622

1,047

10,669Depreciation

6,247

3,566

683

10,497908

11,406

Interest income

224

257

0

483

(49)

433

Interest income

34

239

0

274

(162)

112

Interest expenses

105

90

29

225

96

321

Interest expenses

83

77

30

191

109

301

Equity in earnings (losses) of affiliates

1,069

303

(1,893)

(520)

—

(520)

Equity in earnings (losses) of affiliates

1,028

291

(4,116)(2,795)17(2,778)Investments in affiliates accounted
for by the equity method

Investments in affiliates accounted
for by the equity method

39

668

17,867

18,575—

18,57530

659

18,542

19,232813

20,046

Increases in property, plant and equipment
and intangible assets

5,986

4,266

1,258

11,511384

11,896

Inter-segment sales and transfers

Other items:

SEGA SAMMY HOLDINGS

Increases in property, plant and equipment
and intangible assets

7,365

4,114

434

11,9141,130

13,045

Notes: 1. Adjustment to segment income (loss) of ¥(7,061) million includes elimination of inter-segment transactions of ¥83 million and general corporate expenses of ¥(7,145)
million which are not allocated to each reporting segment. General corporate expenses consist mainly of Group management expenses incurred by the Company.
2. Adjustment to segment assets of ¥155,732 million includes the elimination of inter-segment transactions of ¥(19,256) million and general corporate assets of ¥174,988
million that are not allocated to each reporting segment. General corporate assets are mainly assets of the Company that are not allocated to each segment.
3. Adjustments to depreciation consist mainly of depreciation associated with the Company.
4. Adjustment to interest income of ¥(162) million includes the elimination of inter-segment transactions of ¥(327) million and interest income of the Company of ¥164 million.
5. Adjustment to interest expenses of ¥109 million includes the elimination of inter-segment transactions of ¥(327) million and interest expenses of the Company of ¥436 million.
6. Adjustments to equity in earnings (losses) of affiliates represent equity in earnings or losses of affiliates not belonging to any reporting segment.
7. Adjustments to investments in affiliates accounted for by the equity method represent investments in affiliates accounted for by the equity method that do not belong to
any reporting segment.
8. Adjustments to increases in property, plant, and equipment and intangible assets consist mainly of the purchase amount of noncurrent assets related to the Company.
9. Adjustments have been made to segment income (loss) and ordinary income in the consolidated statements of income and comprehensive income.

Notes: 1. The adjustment to net sales to external customers of ¥960 million corresponds to net sales of businesses not belonging to reporting segments.
2. The adjustment to segment income (loss) of ¥(9,202) million includes losses of ¥(497) million on businesses not belonging to reporting segments, elimination ofinter-segment transactions of ¥198 million, and general corporate expenses of ¥(8,904) million not allocated to reporting segments. General corporate expenses
consist mainly of Group management expenses incurred by the Company.
3. Adjustment to segment assets of ¥175,086 million includes the elimination of inter-segment transactions of ¥(17,551) million and general corporate assets of ¥192,637
million not allocated to each reporting segment. General corporate assets are mainly assets of the Company that are not allocated to each segment.
4. Adjustments to depreciation consist mainly of depreciation associated with the Company.
5. Adjustment to interest income of ¥(49) million includes the elimination of inter-segment transactions of ¥(483) million and interest income of the Company of ¥433 million.
6. Adjustment to interest expenses of ¥96 million includes the elimination of inter-segment transactions of ¥(483) million and interest expenses of the Company of ¥579 million.
7. Adjustments to increases in property, plant, and equipment and intangible assets consist mainly of the purchase amount of noncurrent assets related to the Company.
8. Adjustments have been made to segment income (loss) and ordinary income in the consolidated statements of income and comprehensive income.

Integrated Report 2023

553

Total

[Related information]
Prior fiscal year (From April 1, 2021 to March 31, 2022)

1. Information by product and service
This information has been omitted as the same information is disclosed in Segment information.

2. Information by geographical area
(1) Net sales
Millions of yen
Japan

US

Europe

Other

Total

¥215,236¥75,285¥15,343¥15,084¥320,949

Note: Net sales are classified by country or region based on the customer’s location.

(2) Property, plant and equipment
Millions of yen

142

Japan

North America

UK

Other

Total

¥50,376¥1,635¥6,929¥1,416¥60,358

143

Notes to Consolidated Financial Statements

3. Information by each major customer
No description is provided here since no external customer exists to whom sales are 10% or more of the net sales recorded in the consolidated
statements of income or comprehensive income.

[Information on amortization and unamortized balance of goodwill by reporting segment]
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Reporting segment

Current fiscal year (From April 1, 2022 to March 31, 2023)
Entertainment
Contents
Business

Pachislot andPachinko
Machines
Business

ResortBusiness

Subtotal

Adjustment

Amount inconsolidated
financialstatements

Amortization during current period¥2,311¥—¥—¥2,311¥—¥2,311

Balance as of March 31, 2022

3,460

—

—

3,460

—

3,460

1. Information by product and service
This information has been omitted as the same information is disclosed in Segment information.

2. Information by geographical area
(1) Net sales
Millions of yen
Japan

US

Europe

Other

Total

¥255,935¥96,256¥18,565¥18,878¥389,635

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Reporting segment
Entertainment
Contents
Business

Pachislot andPachinko
Machines
Business

ResortBusiness

Subtotal

Adjustment

Amount inconsolidated
financialstatements

Amortization during current period¥2,142¥ 36¥—¥2,178¥—¥2,178

Balance as of March 31, 2023

2,072

519

—

2,592

—

2,592

Note: Net sales are classified by country or region based on the customer’s location.

(2) Property, plant and equipment
Millions of yen
North America

UK

Other

Total

¥49,264¥2,822¥6,685¥1,711¥60,482

3. Information by each major customer
No description is provided here since no external customer exists to whom sales are 10% or more of the net sales recorded in the consolidated
statements of income or comprehensive income.
[Information on impairment loss on noncurrent assets by each reporting segment]
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen
Reporting segment

Impairment loss

Entertainment
Contents

Pachislot
Pachinko
Machines

Resort

¥232

¥197

¥—

Subtotal

Adjustment(Note)

Amount inconsolidated
financialstatements

¥430

¥—

¥430

Integrated Report 2023

SEGA SAMMY HOLDINGSJapan[Information on gain on negative goodwill by each reporting segment]
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable
Current fiscal year (From April 1, 2022 to March 31, 2023)
Not applicable

24 Related-Party Transactions
1. Transactions with related parties(1) Transactions between the Company and related parties
1) Non-consolidated subsidiaries and affiliated companies of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Millions of yen

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Reporting segment

Impairment loss

Entertainment
Contents

Pachislot
Pachinko
Machines

ResortSubtotal

Adjustment

Amount inconsolidated
financialstatements

¥142

¥304

¥—

¥446

¥—

¥446

Transaction
amountEnd of period
accountbalance

Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

PARADISESEGASAMMY
Co., Ltd.

Resort business

Subscription to additional
capital shares (Note1)¥4,315——

Provision of collateral (Note2)

18,542——

Accounts

Notes: 1. This is a subscription to additional capital shares allotted to shareholders.
2. For a portion of the loans from financial institutions to PARADISE SEGASAMMY Co., Ltd., the shares of the company are pledged as collateral

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

Transaction
amountPARADISESEGASAMMY
Co., Ltd.

Resort business

Provision of collateral (Note)¥17,867

End of period
accountbalance

Accounts——

Note: For a portion of the loans from financial institutions to PARADISE SEGASAMMY Co., Ltd., the shares of the company are pledged as collateral.

144

145

Notes to Consolidated Financial Statements

2) Directors and major shareholders (limited to individuals) of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen
Millions of yen

Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

Haruki Satomi

Chairman of
SEGA SAMMYARTS FOUNDATION

Payment of donation (Note 1)

Non-life insurance agent

Payment of insurance premium (Note 2)

FSC Co., Ltd. (Note 3)

Transaction
amountEnd of period
accountbalance

Accounts¥107—

Position andprincipal business

Description of
the Company’s transactions

Transaction
amountAccounts

ZEEG Co., Ltd.

Pachislot and Pachinko
Machines Business

Purchase of pachislot andpachinko machine parts (Note 1)¥12,270

Accounts payable–trade¥  4391,500

Short-term loans receivable

2,500

2,155

Long-term loans receivable

2,497

—

Loan of funds
11

Prepaid expenses¥10Long-term prepaid
expenses

0

Notes: 1. The amount donated to the Foundation is determined with the approval of the Board of Directors.
2. Transaction prices are determined in the same way as for general transactions, referring to market prices.
3. Hajime Satomi, Chairman, Representative Director, and Haruki Satomi, President and Group CEO, Representative Director, directly hold a majority of the shares of
FSC Co., Ltd.
4. Transaction amounts exclude consumption tax.

End of period
accountbalance

Name of related
individual or company(Note 2)

Collection of loans (Note 2)
Interest income(Note 2)

79

Notes: 1. Transaction prices are determined in the same way as general transactions, referring to market prices.
2. The interest rate on loans is determined by taking market interest rates into consideration. The repayment terms are one to five years with the principal to be repaid ina lump sum on the due date and interest to be repaid in annual installments. No collateral is accepted.

2) Directors and major shareholders (limited to individuals) of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)
Not applicable

Current fiscal year (From April 1, 2022 to March 31, 2023)

Current fiscal year (From April 1, 2022 to March 31, 2023)
Millions of yen

Position andprincipal business

Description of
the Company’s transactions

Transaction
amount

FSC Co., Ltd. (Note 2)

Non-life insurance agent

Payment of insurance premium (Note 1)

Accounts¥6

Prepaid expenses¥1Long-term prepaid
expenses2

Notes: 1. Transaction prices are determined in the same way as general transactions, referring to market prices.
2. Hajime Satomi, Chairman, Representative Director, and Haruki Satomi, President and Group CEO, Representative Director, directly holds a majority of the shares of
FSC Co., Ltd.
3. Transaction amounts exclude consumption tax.

(2) Transactions between consolidated subsidiaries of the Company and related parties
1) Non-consolidated subsidiaries and affiliates of the Company
Prior fiscal year (From April 1, 2021 to March 31, 2022)

Name of related
individual or company

Position andprincipal business

Description of
the Company’s transactions

ZEEG Co., Ltd.

Pachislot and Pachinko
Machines Business

Purchase of pachislot andpachinko machine parts (Note 1)
Loan of funds (Note 2)
Collection of loans(Note 2)

(Note 2)

Transaction
amount¥6,039500
2,355

Accounts

End of period
accountbalance

Accounts payable–trade¥  480

Short-term loans receivable

3,069

Long-term loans receivable

Position andprincipal business

Description of
the Company’s transactions

Haruki Satomi

Chairman of
SEGA SAMMY ARTSFOUNDATION

Payment of donation (Note 1)

FSC Co., Ltd. (Note 3)

Non-life insurance agent

Payment of insurance premium (Note 2)

Transaction
amount¥91

8

End of period
accountbalance

Accounts——¥5

Prepaid expenses

Notes: 1. The amount donated to the Foundation is determined with the approval of the Board of Directors.
2. Transaction prices are determined in the same way as general transactions, referring to market prices.
3 Hajime Satomi, Chairman, Representative Director, and Haruki Satomi, President and Group CEO, Representative Director, directly holds a majority of the shares of
FSC Co., Ltd.
4. Transaction amounts exclude consumption tax.

(1) Information on the parent company
Not applicable(2) Summarized financial information of significant affiliates
PARADISE SEGASAMMY Co., Ltd. is a significant affiliate in the current fiscal year and its summarized financial statements are as follows.
Millions of yen

Prior year

Current year

Total current assets¥  4,808¥ 20,558

Total noncurrent assets

127,675

126,893

Total current liabilities

17,46482,798

Total noncurrent liabilities

83,40324,949Total net assets

31,61639,704

Net sales

15,50527,410

Income (loss) before income taxes(9,147)(4,208)Net Income (loss)(9,147)(4,208)2,582

66

Notes: 1. Transaction prices are determined in the same way as general transactions, referring to market prices.
2. The interest rate on loans is determined by taking market interest rates into consideration. The repayment terms are one to five years, with the principal to be repaid inlump sum on the due date and interest to be repaid in annual installments. No collateral is accepted.

146

Name of related
individual or company

2. Notes on the parent company or significant affiliates
Millions of yen

Interest income

Millions of yen

Integrated Report 2023

SEGA SAMMY HOLDINGS

Name of related
individual or company

End of period
accountbalance

147

Notes to Consolidated Financial Statements(i)

25 Per Share Information
Yen

Item

Prior year

Current year

(from April 1, 2021 toMarch 31, 2022)(from April 1, 2022 toMarch 31, 2023)¥1,311.72¥1,498.75

Profit per share

158.85208.07

Profit per share (diluted)

158.24207.13

Net assets per share

1. The calculation basis for net assets per share is as follows.
Items

Prior year

Current year

(as of March 31, 2022)(as of March 31, 2023)¥292,637¥331,347

Amounts deducted from net assets in the consolidated balance sheets (Millions of yen)

225

492

(Subscription rights to shares) (Millions of yen)

176

468

Total of net assets in the consolidated balance sheets (Millions of yen)

49

24

Net assets pertaining to common stock (Millions of yen)

292,411

330,854

Number of common shares used to calculate net assets per share (Thousands of shares)

222,921220,753(Non-controlling interests) (Millions of yen)

Item

Prior year

Current year

(from April 1, 2021 toMarch 31, 2022

(from April 1, 2022 toMarch 31, 2023)

Net income (loss) per share:¥ 37,027¥ 45,938——

Profit attributable to owners of parent pertaining to common stock (Millions of yen)

37,02745,938Average number of common shares during the period (Thousands of shares)

233,091

220,790——

Increase in common stock (Thousands of shares)

909

999

(Subscription rights to shares) (Thousands of shares)

909

999

—

—

Profit attributable to owners of parent (Millions of yen)Amount not attributable to ordinary shareholders (Millions of yen)

Profit per share (diluted):
Adjustment to profit attributable to owners of parent (Millions of yen)

Overview of dilutive shares not included in calculation of profit per share (diluted)
because of no dilutive effect

26 Significant Subsequent Events
1. Acquisition of Rovio Entertainment Corporation
At the Board of Directors meeting held on April 17, 2023, the Company and SEGA CORPORATION (“SEGA”), a subsidiary of the Company,
resolved to implement a tender offer (tender offer under the Finnish L aw, the “Tender Offer”) to acquire Rovio Entertainment Corporation(“Rovio”), a mobile game company headquartered in Finland, through SEGA’s wholly owned UK subsidiary SEGA Europe Limited. The Tender
Offer period expired on August 7, 2023, at 4:00 p.m. (EET). Regarding the result of the Tender Offer, the Company’s group company SEGA Europe
Limited acquired approximately 96.3% of the issued and outstanding shares of Rovio, making it the Company’s group company on August 17, 2023.
Furthermore, SEGA Europe Limited commenced a subsequent offer (the “Subsequent Offer”) in accordance with the terms and conditions of
the Tender Offer on August 11, 2023, at 9:30 a.m. (EET), which was completed on August 25, 2023 at 4:00 p.m. (EET). Based on the final result of
the Subsequent Offer, 1,030,171 shares were tendered during the Subsequent Offer period, representing approximately 1.4 percent of all issued
and outstanding shares of Rovio. Together with the shares validly tendered during the Tender Offer period, the shares validly tendered during theSubsequent Offer period represented approximately 97.7% of the issued and outstanding shares and voting rights in Rovio.

148(1) Ownership of shares before the acquisition

0 shares (Number of voting rights: 0)(Ratio of voting rights: 0%)(2) Number of shares acquired

74,427,345 shares, 742,300 options(Number of voting rights: 74,427,345)(3) Acquisition price

Shares of Rovio: approximately EUR 689 million (¥ 107,146 million)(4) Ownership of shares after the acquisition

74,427,345 shares, 742,300 options(Number of voting rights: 74,427,345)(Ratio of voting rights: 97.7%)

Integrated Report 2023

SEGA SAMMY HOLDINGS

2. The calculation basis for profit per share and profit per share (diluted) are as follows.

Purpose of the acquisition(a) Positioning of the consumer business for the Company
	The Company positions the consumer area of its Entertainment Contents Business as a growth area under its medium-term plan (fromFY2022 to FY2024), and has accelerated its efforts to strengthen the business through initiatives such as converting existing IPs into global
brands as well as strengthening user engagement through multi-platform support and enhanced media mix, etc.
	  As a part of its growth strategy to invest up to ¥250 billion during the five-year period ending FY2026, the Company has been exploring
investment opportunities in the consumer area to strengthen its development capabilities as well as to create new ecosystems.
(b) Background of the acquisition
	The size of the global gaming market is projected to reach US$263.3 billion by 2026, registering a CAGR of 3.5% from 2022 to 2026. The
mobile gaming market, in particular, is set to expand at a CAGR of 5.0% to represent 56% of the global gaming market overall, an increase
from 53% in 2022. (Source: IDG Report (dated October 2022))
	  The Company firmly believes that it is imperative to continue investing in its game development and operating capabilities, in order to further
strengthen its position in this fast-growing mobile and global gaming market, which therefore led to the decision to acquire Rovio.
	  Through the Acquisition, the Company aims to take in Rovio’s live-operated mobile game development capabilities and expertise in mobile
game operation, to accelerate the development of mobile-compatible and multi-platform-supported version of SEGA’s existing game IPs,
thereby strengthening SEGA’s game portfolio and further accelerating global expansion of its business.
(c) Purpose of the acquisition
	Rovio is a global mobile-first, game company that creates, develops, and publishes mobile games, which have been downloaded over 5 billion
times. Rovio is best known for the global Angry Birds brand, which started as a popular mobile game in 2009, and has since evolved fromgames to various entertainment, anime, and consumer products through brand licensing.
	  SEGA aims to accelerate its growth in the global gaming market and increase its corporate value by generating synergies between SEGA’s
existing businesses and Rovio’s strengths, including its global IPs and live-operated mobile game development capabilities.
(ii) Number of shares acquired, acquisition price, and ownership of shares before and after the acquisition (Note)

Note: Acquisition price represents the amount of payment for purchasing shares and stock options.
The Company successfully acquired more than 90% of all shares and voting rights in Rovio. It further intends to implement a squeeze-out procedure set forth in
the Finnish Companies Act to acquire the remaining untendered shares in order to make Rovio its wholly owned subsidiary.

2. Acquisition of treasury stock
At the Board of Directors meetings held on April 28, 2023 and August 31, 2023, the Company resolved the matter related to the acquisition oftreasury stock, pursuant to the provisions of Article 156 of the Companies Act of Japan as applied by replacing the provisions stipulated in Article
165 Paragraph 3 of the same law.
(i) Reasons for the acquisition of treasury stock	The Company aims to maximize corporate value by focusing on capital efficiency in its medium-term financial strategy until the fiscal year
ending March 31, 2026. While promoting aggressive investment for growth, the Company will also provide appropriate shareholder returns.
As a result of considering shareholder returns including acquisition of treasury stock based on the return policy of adopting higher of DOE 3%
or more, or total return ratio of 50% or more, the Company decided to acquire treasury stock.
(ii) Details of the acquisition of treasury stock(a) Type of shares to be acquired
		 Common stock(b) Total number of shares to be acquired
		 8,000,000 shares (upper limit)
		 Ratio of total number of shares outstanding (excluding treasury stock): 3.62%(c) Total cost of acquisition
		 10.0 billion yen (upper limit)(d) Acquisition period
		 From May 1, 2023 to March 29, 2024(e) Acquisition method
		 Market purchase on the Tokyo Stock Exchange

149

Notes to Consolidated Financial Statements

4. Implementation of Structural Reforms in the consumer area (Entertainment Contents Business)
At the Board of Directors meeting held on September 28, 2023, the Company resolved to implement structural reforms in the consumer area,
mainly at its European bases. In accordance with this decision, the Company expects to record a loss for the fiscal year ending March 31, 2024.
(i) Background of implementation of structural reforms
	The Company has set the consumer area as one of its growth areas and has achieved rapid earnings growth in recent years by promoting the
global branding of its existing IPs and other measures. On the other hand, the business environment surrounding the consumer area has been
rapidly changing, including reactionary decline from the stay-at-home demand in COVID-19 and the economic downturn due to inflation in theEuropean region, and profitability has been lowered mainly in European bases.
	  To promptly adapt to these changes in the environment and improve profitability, the Company decided to implement structural reforms
aimed at increasing efficiency, mainly at the Company’s European bases by reviewing their title portfolio. As a result, the Company has madethe difficult decision to cancel some titles under the development as well as to reduce the fixed expenses.
(ii) Details of implementation
	The Company will implement the following measures regarding structural reform in the Company’s European bases which are determined at
this time.
(a) Cancelation of titles under development
	In response to the lower profitability of the European region, the Company has reviewed the title portfolio of each development base inEurope and the resulting action will be to cancel “HYENAS” and some unannounced titles under development. Accordingly, the Company will
implement a write-down of work-in-progress for titles under development.
(b) Reduction of fixed expenses
	The Company will reduce various fixed expenses at several group companies in the region, mainly for The Creative Assembly Ltd. One-time
expenses related to the reduction of fixed expenses are expected to be incurred. The Company will continue to consider measures toimprove profitability in European bases apart from the above.
(iii) Future outlook
	As a result of implementation of the structural reform described above in the consumer area, the Company expects to record losses ofapproximately 14.3 billion yen for the fiscal year ending March 31, 2024.

27 Supplemental Information[Annexed consolidated detailed schedule of bonds]

Company nameSecurity titles

Issuance date

The Company

5th Series of Unsecured
Straight Bonds(Publicly offered bonds)

October 10, 2019

Balances asof April 1,
2022

Balances asof March 31,2023(Millions of yen)

(Millions of yen)Interest rate(%)

¥10,000¥10,000

0.38

10,00010,000
(—)

Total

Type

Date of maturity

Unsecured

October 10, 2029

Notes: 1. Figure in parentheses under “Balance as of March 31, 2023” is the current portion of the amount of redemption.
2. The scheduled amount of redemption after the consolidated closing date is as follows:
Millions of yen
Within one year

One to two years

Two to three years

Three to four years

Four to five years

Over five years

¥—

¥—

¥—

¥—

¥—

¥10,000[Annexed consolidated detailed schedule of borrowings]
Balances as ofApril 1, 2022
(Millions of yen)

Balances as ofMarch 31, 2023
(Millions of yen)

Short-term borrowings¥¥

Current portion of long-term l borrowings

10,000Category—

Average interest rate(%)

Repayment period

—

—

—

17,0000.4—

Current portion of lease obligations

1,123

1,377

2.0

—

Long-term borrowings (Excluding current portion)

32,00025,0000.5

From 2025 to 2027

Lease obligations (Excluding current portion)

4,013

5,352

2.0

From 2024 to 2031

30

29

1.3

—

116

119

1.5

From 2024 to 2030

47,284

48,879——Integrated Report 2023

SEGA SAMMY HOLDINGS

150

3. Commitment-type term loan
SEGA’s wholly owned UK subsidiary SEGA Europe Limited has implemented the Tender Offer to acquire Rovio. At the Board of Directors
meeting held on August 9, 2023, the Company resolved to borrow funds required for the Tender Offer from a capital policy perspective as below.
The Company signed a commitment-type term loan agreement with financial institutions on August 10, 2023.
(i) Form of borrowing:	Commitment-type term loan(ii) Lender(a) Arranger and agent:		 Sumitomo Mitsui Banking Corporation(b) Joint arranger:
		 MUFG Bank, Ltd., Mizuho Bank, Ltd.
(c) Participating financial institutions:		 Aozora Bank, Ltd., SBI Shinsei Bank, Limited(iii) Total commitment amount:
105.0 billion yen(iv) Borrowing amount:
100.4 billion yen(v) Contract day:August 10, 2023(vi) Commitment period:	From August 15, 2023 to the earlier of August 15, 2024 or a corresponding day of one month after the date on which the squeeze-out is completed(vii) Borrowing period:
1 year(viii) Borrowing rate:
Base rate and spread(ix) Collateral:
None

Other interest-bearing debts:
Accounts payable—facilities
Accounts payable—facilities(Excluding current portion)
Total

Notes: 1. “Average interest rate” represents the weighted average rate applicable to the balance of borrowings at end of period.
2. Some lease obligations stated in the consolidated balance sheets represent the amounts with interest equivalents not deducted from the total lease payments.
Accordingly, said lease obligations are not included when calculating the “Average interest rate.”
3. The scheduled amounts of long-term borrowings, lease obligations, and other interest-bearing debts (excluding current portion) to be repaid after the consolidated
closing date are as follows:
Millions of yen

Long-term borrowings
Lease obligations

One to two years

Two to three years

Three to four years

Four to five years¥15,000¥ —¥ —¥10,000

Over five years

1,184

993

861

795

1,518

22

20

20

20

34

¥

—

Other interest-bearing debt:
Accounts payable—facilities

Schedule of asset retirement obligations
No description is provided here, since the amount of asset retirement obligations as of the beginning and end of the current fiscal year were lessthan 1/100 of the total amount of liabilities and net assets, respectively, as of the beginning and end of the current fiscal year.

151Independent Auditor’s Report

Notes to Consolidated Financial Statements

To the Board of Directors of SEGA SAMMY HOLDINGS INC.:

28 OtherQuarterly information for the current fiscal year
(Cumulative period)

Net sales (Millions of yen)
Income before income taxes (Millions of yen)

OpinionFirst three months

First six months

First nine months

Current fiscal year

¥66,118¥150,095¥271,979¥389,635

4,106

12,01939,79647,069Profit attributable to owners of parent (Millions of yen)

3,158

9,619

32,84645,938

Profit per share (Yen)

14.29

43.56

148.76208.07First quarter

Second quarter

Third quarter

Fourth quarter¥14.29¥29.28¥105.22¥59.31(Accounting period)

Profit per share (Yen)

Independent auditor’s report

We have audited the accompanying consolidated financial statements of SEGA SAMMY HOLDINGS
INC. (“the Company”) and its consolidated subsidiaries (collectively referred to as “the Group”),
which comprise the consolidated balance sheets as at March 31, 2023 and 2022, the consolidated
statements of income and comprehensive income, changes in net assets and cash flows for the years
then ended , and notes, comprising a summary of significant accounting policies and other explanatory
information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2023 and 2022, and its
consolidated financial performance and its consolidated cash flows for the years then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion

Emphasis of Matter

Integrated Report 2023

SEGA SAMMY HOLDINGS

We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Groupin accordance with the ethical requirements that are relevant to our audit of the consolidated financial
statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our opinion.

We draw attention to Note 26 “Significant Subsequent Events” to the consolidated financial statements.
At the Board of Directors meeting held on April 17, 2023, the Company and SEGA CORPORATION,
a subsidiary of the Company, resolved to implement a tender offer (the “Tender Offer”) to acquire
Rovio Entertainment Corporation (“Rovio”), a mobile game company headquartered in Finland,through SEGA’s wholly owned UK subsidiary SEGA Europe Limited. Regarding the result of theTender Offer, SEGA Europe Limited acquired approximately 96.3% of the issued and outstanding
shares of Rovio, making it the Company's group company on August 17, 2023.
Furthermore, SEGA Europe Limited commenced a subsequent offer (the “Subsequent Offer”) on
August 11, 2023 (EET), which was completed on August 25, 2023 (EET). Together with the shares
validly tendered during the Tender Offer period, the shares validly tendered during the Subsequent
Offer period represented approximately 97.7% of the issued and outstanding shares and voting rights in
Rovio.
Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our

152

153

Independent Auditor’s Report

audit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Appropriateness of management’s judgment as to whether an impairment loss should berecognized on non-financial assets including goodwill at the equity-method affiliate.
How the matter was addressed in our audit

As described in Note 3, “Significant Accounting
Estimates” (3), to the consolidated financial
statements, SEGA SAMMY HOLDINGS INC.
(hereinafter, referred to as the “Company”) and its
consolidated subsidiaries reported investment
securities of 39,538 million yen in the consolidatedbalance sheet as of March 31, 2023, which
included an investment in PARADISESEGASAMMY Co., Ltd. (hereinafter “PSS”), an
equity-method affiliate in the Resort Businesssegment, of 17,867 million yen, representing
approximately 4% of total assets in the
consolidated financial statements. PSS recognized
non-financial assets of 125,811 million yen in its
financial statements, of which 7,771 million yen
was related to goodwill.

In order to assess the appropriateness ofmanagement’s judgment with respect to whether an
impairment loss should be recognized on nonfinancial assets including goodwill held by PSS, werequested the component auditors of PSS, an equitymethod affiliate, to perform specified audit procedures
including the involvement of valuation specialists
within the network firms of the component auditors.

PSS prepares its financial statements in accordancewith International Financial Reporting Standards
and performs an impairment test on a cashgenerating unit (CGU) whenever there is an
impairment indicator, or at least annually on a
CGU to which goodwill has been allocated. In the
impairment testing, when the recoverable amountof a CGU is less than the carrying amount, PSS
reduces the carrying amount to the recoverable
amount and recognizes the resulting decrease in the
carrying amount as an impairment loss, which
affects the amount of investment securities
recorded in the Company’s consolidated financial
statements through the equity method of
accounting.
In the current fiscal year, PSS performed
impairment tests on the CGU to which goodwill
had been allocated as well as on other CGU for
which there was an impairment indicator, using thevalue in use or the fair value less cost of disposal
as the recoverable amount. The future cash flows
used to measure the value in use were estimatedbased on the business plan of PSS approved bymanagement. For periods beyond the period
covered by the business plan, the future cash flows

154

We then evaluated the report of the component
auditors to conclude on whether sufficient andappropriate audit evidence was obtained from thefollowing procedures among others:(1) Internal control testing
We tested the design and operating effectiveness ofcertain of the Company’s internal controls relevant toevaluating the appropriateness of PSS’s financial
statements including the assessment on its CGUs.
(2) Assessment of the reasonableness of theestimated recoverable amount
Evaluating the appropriateness of the rationale
supporting key assumptions adopted by managementin preparing the business plan that formed the basis
for estimating future cash flows used to calculate thevalue in use, by performing the procedures set forth
below, as well as evaluating the competence,capabilities and objectivity of the external valuation
expert engaged by management.
⚫

Inspected the materials supporting the number ofcasino visitors and amounts of Drop embedded in
the business plan, and compared them with pastactual results; and⚫

Compared the growth rate with external data inorder to ensure that it was within the long-term
average growth rate of relevant markets.

In addition, we involved valuation specialists within
our network firms who assisted our assessment of theappropriateness of the selection of input data for
estimating the discount rate used to calculate thevalue in use, and the selection of appropriate
valuation techniques and key assumptions formeasuring the fair value less cost of disposal.

In addition, selecting the input data for estimating
the discount rate used to calculate the value in use
and selecting the appropriate valuation techniques
and key assumptions for measuring the fair valueless cost of disposal, using mainly the depreciatedreplacement cost approach, required a high degreeof expertise in valuation.
We, therefore, determined that our assessment of
the appropriateness of management’s judgment as
to whether an impairment loss should berecognized on non-financial assets including
goodwill held by PSS was of most significance in
our audit of the consolidated financial statements
for the current fiscal year, and accordingly, a key
audit matter.

Integrated Report 2023

SEGA SAMMY HOLDINGSThe key audit matter

were estimated based on the forecasts using a
projected growth rate within the long-term average
growth rate of relevant markets. Key assumptions
used to project future cash inflows and outflows
included in the business plan, such as the numberof casino visitors, amounts of Drop (chips
purchased at a table) and projected market growthrate, involved a high degree of estimation
uncertainty. Accordingly, management’s judgment
thereon had a significant effect on the estimatedfuture cash flows.

Other Information
The other information comprises the information included in the INTEGRATED Report, but does notinclude the consolidated financial statements, the financial statements, and our auditor’s reports
thereon. Management is responsible for the preparation and presentation of the other information. The
audit and supervisory committee are responsible for overseeing the directors’ performance of theirduties with regard to the design, implementation and maintenance of the reporting process for the otherinformation.
Our opinion on the consolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of thisother information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and the Audit and Supervisory Committee for the Consolidated
Financial Statements
155

Independent Auditor’s ReportManagement is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern inaccordance with accounting principles generally accepted in Japan and using the going concern basis ofaccounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
The audit and supervisory committee are responsible for overseeing the directors’ performance of theirduties with regard to the design, implementation and maintenance of the Group’s financial reporting
process.

We communicate with the audit and supervisory committee regarding, among other matters, theplanned scope and timing of the audit, significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the audit and supervisory committee with a statement that we have complied with
relevant ethical requirements regarding independence, and 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 audit and supervisory committee, we determine those mattersthat were of most significance in the audit of the consolidated financial statements of the current period
and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, while the objective of the audit is not to express an
opinion on the effectiveness of the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting
and based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Group tocease to continue as a going concern.





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Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

Evaluate whether the presentation and disclosures in the consolidated financial statements are inaccordance with accounting standards generally accepted in Japan, the overall presentation,
structure and content of the consolidated financial statements, including the disclosures, andwhether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

We 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.

Hidetoshi Fukuda
Designated Engagement Partner
Certified Public Accountant

Integrated Report 2023

SEGA SAMMY HOLDINGSOur objectives are to obtain reasonable assurance about whether the consolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’sreport that includes our opinion. Reasonable assurance is a high level of assurance, but is not aguarantee that an audit conducted in accordance with auditing standards generally accepted in Japan
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the economic decisions of users taken on the basis of these consolidated financial statements.

Interest required to be disclosed by the Certified Public Accountants Act of Japan

Danya Sekiguchi
Designated Engagement Partner
Certified Public Accountant

Yoichi Ueno
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, JapanOct 27, 2023
Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by theCompany and KPMG AZSA LLC.

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