A Creator of Unique Value
KURITA WATER INDUSTRIES LTD.
Integrated Report 2021
Financial Section
For the year ended March 31, 2021

Contents
Management's Discussion and Analysis 

1Business Risks 

9
13
15

Consolidated Statement of Comprehensive Income 

16Consolidated Statement of Changes in Equity 

17Consolidated Statement of Cash Flows 

21

Notes to Consolidated Financial Statements 

22

Independent Auditor's Report 

88

Financial Information/Corporate Information

Consolidated Statement of Financial Position 
Consolidated Statement of Profit or Loss Management’s Discussion and Analysis
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Business Results
During the fiscal year ended March 31, 2021, economic activity worldwide was sluggish in the face of
lockdowns and mobility restrictions, among other measures, in response to COVID-19. The second half ofthe fiscal year, however, brought signs of a recovery as economic activity gradually resumed.
Looking at the market environment surrounding the Kurita Group, in Japan, production in the
manufacturing sector slumped temporarily, owing to a falloff in demand in Japan and overseas, but there
were subsequent signs of a recovery, including a pickup in exports. In terms of capital expenditure, anincreasing number of companies delayed investment plans as corporate earnings declined and theeconomic outlook became increasingly uncertain. Overseas, in China, economic activity normalized, andthe economy recovered steadily. Although the economies of Europe, the United States and Asia except
China still faced harsh conditions, there were signs of a gradual recovery.
In this environment, the Group used the fiscal year under review, which is the third year of the mediumterm management plan Maximize Value Proposition 2022 (MVP-22), to strengthen a structure where
marketing, sales, technologies, and development functions cooperate with each other for each customer
market. The Group also set profitability improvement indicators based on securing new orders in theCreating Shared Value (CSV) business, total solutions, etc., and accelerated development. In addition,
the Group continued to focus on creating solution models encompassing the products, technologies,
services, and contractual methods that enable horizontal expansion. Through these efforts, we completed
six models, such as an RO Operation Optimization Service, which contributes to saving water at plants. In
order to move away from existing business processes and business models and create new value forcustomers, the Company established the Digital Strategy Division, strengthened cross-organizational
functions aimed at promoting digital transformation (DX) throughout the Group, and promoted theutilization of AI and IoT. As part of these measures, the Company also collaborated with subsidiary
Fracta, an AI startup based in the United States, to promote the Meta-Aqua Project, and thereby drive thedevelopment of AI and IoT products in water treatment. As a result, the Company succeeded indeveloping solutions to realize AI-optimized operation that uses AI to reduce the amount of electric power
consumed and reduce operating management costs, completed testing and verification in a plant
environment setup in the field, and filed an application for a patent. Furthermore, in Japan, the Company
conducted an absorption-type merger with subsidiary Kurita Engineering Co., Ltd., effective April 1, 2021,
which operates a business centered on engineering cleaning for large plants in Japan. By harnessing
Kurita Engineering’s strong technological base and customer base and flexibly using the Company’s
management resources, including financial capital and human capital, the Company aims to accurately
capture the needs of the social and industrial infrastructure market and offer optimal solutions. Overseas,
the Company acquired additional shares in Pentagon Technologies Group, Inc., which operates a toolcleaning business, primarily in the United States, making it a subsidiary. Additionally, in order toaccelerate business growth in the Middle East, the Company entered into a share transfer agreement with
AquaChemie DMCC, a water treatment chemicals company in the United Arab Emirates (UAE).
As a result, total consolidated orders for the Group in the fiscal year ended March 31, 2021 amounted to¥262,341 million (up 1.1% year on year), and net sales amounted to ¥267,749 million (up 1.1% year onyear). Business profit was ¥29,470 million (up 10.6% year on year), operating profit was ¥31,529 million(up 14.7% year on year), profit before tax was ¥29,150 million (up 9.2% year on year) and profit
attributable to owners of parent was ¥19,088 million (up 4.4% year on year). Furthermore, the operating
results of Pentagon Technologies Group, Inc. in the United States, which had been an equity-method
affiliate, were consolidated from the fiscal year under review after it became a consolidated subsidiary.
OrdersNet Sales

Business Profit(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

300,000

300,000

30,000200,000

200,000

20,000100,000

100,000

10,000

0

0
2020

2021

0
2020

2021

- 1 -

2020

2021

Profit Attributable to Owners of
ParentOperating Profit(Millions of Yen)

Return on Equity(%)(Millions of Yen)

40,0009.0
20,00030,0006.0

15,00020,00010,00010,000

3.0

5,000

0

0.0

0
2020

2021

2020

2020

2021

2021

2. Business Segment Information(1) Water Treatment Chemicals
The MVP-22 plan for the Water Treatment Chemicals business is to transform the business model andstrengthen the business foundations overseas in order to enhance profitability.
In Japan, we focused on developing total solutions to help customers realize productivity improvements
and reduce environmental impact. Overseas, we worked to withdraw from and downsize products andtransactions with low profitability in each region and switch to highly profitable products and transactions.
In addition, we also strengthened coordination between Group companies in each region and worked toenhance profitability by optimizing each function.
As for products and services, we completed our global lineup of RO membrane treatment chemicals bypromoting products and technologies related to the Group’s RO membrane treatment chemicals and otherprojects operating horizontally across the Group, and began rolling out these products globally. In
addition, we also focused on expanding our service contract-type business, which offers customers value
in ways such as utilizing coagulation sensors to stabilize wastewater treatment, and eliminating waste andsaving power through waste gas and fly ash treatment.
With respect to orders and sales in Japan, both orders and sales declined due to a fall in capacity
utilization at the plants of customers, except for some customers such as the electronics industry, as aresult of stagnation in economic activity caused by the spread of COVID-19. Overseas, both orders andsales decreased, partly due to the effect of a reduction in sales at overseas subsidiaries because of astronger yen against certain foreign currencies, in addition to the impact of the spread of COVID-19.
Despite the impact of the decline in sales, business profit and operating profit both increased as a result of
initiatives aimed at improving the cost of sales ratio and reducing expenses.
As a result, total Group orders for the Water Treatment Chemicals business amounted to ¥103,579 million(down 9.0% year on year), while sales amounted to ¥103,231 million (down 9.2% year on year). Businessprofit amounted to ¥12,287 million (up 5.3% year on year) and operating profit amounted to ¥11,816
million (up 16.7% year on year).
Net Sales

Orders(Millions of Yen)

(Millions of Yen)
150,000

150,000

100,000

100,000

50,00050,000

0

0
2020

2020

2021

- 2 -

2021

Business Profit

Operating Profit(Millions of Yen)

(Millions of Yen)

15,00015,00010,00010,000

5,000

5,000

0

0
2020

2021

2020

2021

Water Treatment Facilities
The MVP-22 plan for the Water Treatment Facilities business is to apply knowledge and technology
cultivated in the ultrapure water supply business to propose comprehensive contracts for maintenanceand operational management starting from large-scale Engineering, Procurement and Construction (EPC)
projects in order to increase profitability.
In Japan, we utilized different systems for each market sector, each integrated with water treatment
chemicals, to deploy total solutions to help customers realize productivity improvements and reduce
environmental impact, while also utilizing AI and IoT to optimize the operation of water treatment facilities.
Overseas, we made US company Pentagon Technologies Group, Inc. a consolidated subsidiary andstrengthened collaboration in sales and marketing, as well as technology, with Kuritec Service Co., Ltd., asubsidiary operating a tool cleaning business in Japan, as a means of strengthening the competitivenessof the tool cleaning business. Also, on the production side, we promoted broad partnerships with external
parties as part of measures to improve productivity, and promoted DX across the engineering chain andthe supply chain. At the same time, we focused on automating water treatment facility design, successfully
automating cost estimations and equipment list creation for equipment to be purchased from the initialstages of the design process at certain facilities.
As for products and services, we installed wastewater reclamation equipment, which are assets owned by
the Company, in customers’ plants, and expanded our service contract-type business, including reclaimed
water supply services, which utilize remote monitoring for everything from operation and management tomaintenance, and our pure water supply service, KWSS® (Kurita Water Supply Service). At the same, on
the production side, we also took steps to improve operational processes and improve the accuracy of
cost estimation for facility manufacturing.
With respect to orders and sales in Japan, while orders for water treatment facilities for the electronics
industry increased, sales declined due to the completion of large projects. Orders for maintenanceservices for the industry remained flat, reflecting a recovery in demand in the latter half of the fiscal year.
Sales increased due to progress in construction projects for which orders were posted in the previous
fiscal year and a recovery in demand in the latter half of the fiscal year. For water treatment facilities forgeneral industries, both orders and sales increased due to the posting of orders for and sales from large
projects.
Both orders for and sales from maintenance services for general industries fell, reflecting moves bycustomers to postpone the implementation of maintenance of their facilities due to the spread of COVID19. For water treatment facilities for the electric power industry, although orders declined in reaction to theposting of orders for large projects in the previous fiscal year, sales increased. Orders and sales of soil
remediation decreased as orders for and sales from large projects had run their course and theimplementation of remediation plans was postponed. Overseas, both orders and sales increased due tothe new consolidation of operating results of Pentagon Technologies Group, Inc. Except for the effect of
the new consolidation, both orders and sales fell, although sales from the electronics industry in East Asia
rose due to progress in the construction of large projects in South Korea and Taiwan. Total sales in theultrapure water supply business in Japan and overseas increased due to a contract that began in theprevious fiscal year.
As a result, total Group orders for the Water Treatment Facilities business amounted to ¥158,762 million(up 8.9% year on year), while sales amounted to ¥164,518 million (up 8.8% year on year). Business profit
amounted to ¥17,129 million (up 13.7% year on year) and operating profit amounted to ¥19,634 million(up 12.9% year on year), as a result of the new consolidation of Pentagon Technologies Group, Inc. andinitiatives aimed at reducing expenses.

- 3 -Orders

Net Sales(Millions of Yen)

(Millions of Yen)

200,000

200,000

150,000

150,000

100,000

100,000

50,00050,000

0

0
2020

2021

2020

2021

Business Profit

Operating Profit(Millions of Yen)

(Millions of Yen)

20,00020,00015,00015,00010,00010,000

5,000

5,000

0

0
2020

2021

2020

2021

3. Regional Segment Information
Although overseas sales in the Water Treatment Chemicals segment decreased, growth in the Water
Treatment Facilities segment due to the consolidation of Pentagon Technologies Group, Inc. drove a 3.2%
year-on-year increase in sales to ¥106,376 million. The ratio ofOverseas Sales by Region
overseas sales to total consolidated net sales was also up, from 38.9%(Millions of Yen)in the previous fiscal year to 39.7%.
150,000

By region, in North America, sales increased 28.3% to ¥36,994 million,
reflecting the consolidation of Pentagon Technologies Group, Inc. In
Asia, sales declined 7.6% to ¥48,535 million, mainly due to weakersales in the Water Treatment Chemicals business, which was impacted
by COVID-19. Sales also contracted in the EMEA region, declining
2.4% to ¥18,681 million on weaker sales at Kurita Europe GmbH. In the
Others region, sales fell 17.9% to ¥2,166 million.

100,000
50,0000
2020
Asia

North America

2021
EMEA

Others

4. Financial Position(1) Assets
Current assets were ¥176,482 million, an increase of ¥13,635 million from the end of the previous
consolidated fiscal year. This mainly reflected a ¥12,013 million increase in cash and cash equivalents.
Non-current assets were ¥248,445 million at the end of the consolidated fiscal year, a year-on-yearincrease of ¥23,543 million. Property, plant and equipment increased ¥11,245 million chiefly due toprogress in the construction of a new research and development base in Akishima-shi, Tokyo, which theCompany plans to open in April 2022. Goodwill increased ¥8,563 million while investments accounted forusing equity method decreased ¥5,891 million due to the conversion of Pentagon Technologies Group,
Inc. (Water Treatment Facilities business) from an equity-method affiliate to a consolidated subsidiary in
the first quarter of this fiscal year. Other financial assets rose ¥5,098 million while deferred tax assets
decreased ¥1,096 million owing to an increase in unrealized gains, mainly due to a rise in the market
value of shares held.
As a result, total assets were ¥424,928 million, an increase of ¥37,179 million from the end of the previous
consolidated fiscal year.

- 4 -Current Assets

Non-current Assets(Millions of Yen)

(Millions of Yen)
300,000

200,000
150,000

200,000

100,000
100,000

50,00002021

500,000

10.0

400,000

8.0

300,000

6.0

200,000

4.0

100,000

2.0

0

0
2020

Total Assets and Return on
Assets

2020

0.0
2020

2021

2021

Total Assets (Millions of Yen)
Return on Assets (%)(2) Liabilities
Current liabilities were ¥74,952 million, a decrease of ¥19,456 million from the end of the previous
consolidated fiscal year. This was mainly due to a decrease in borrowings of ¥34,926 million resulting
from the repayment of commitment line contracts, outweighing an increase in trade and other payables of¥10,826 million and an increase in income taxes payable of ¥6,137 million.
Non-current liabilities were ¥92,137 million, an increase of ¥42,905 million from the end of the previous
consolidated fiscal year. Bonds and borrowings increased ¥29,902 million, chiefly due to the issuance of
unsecured bonds (¥30,000 million) in the third quarter. Other financial liabilities increased ¥11,141 million,
mainly reflecting the initial recognition of the present value of the expected value of shares to betransferred in the future based on the forward contract concluded between Kurita America Holdings Inc., awholly owned subsidiary of the Company and non-controlling shareholders of Pentagon Technologies
Group, Inc. (Water Treatment Facilities business).
As a result, total liabilities were ¥167,090 million, an increase of ¥23,450 million from the end of theprevious consolidated fiscal year.
(3) Shareholders’ Equity
Total equity stood at ¥257,837 million, an increase of ¥13,729 million
from the end of the previous fiscal year. This principally reflected a riseof ¥12,682 million in retained earnings, mainly due to profit for theperiod and an increase of ¥8,284 million in other components of equity
in association with a rise in the market value of shares held, while thecapital surplus decreased ¥10,424 million, mainly as a result of initialrecognition related to the aforementioned forward contract for shares inPentagon Technologies Group, Inc.

Equity Attributable to Ownersof Parent and Equity Ratio
300,000

90.0

200,000

60.0

100,000

30.0

0

0.0
2020

2021

Equity Attributable to Owners of Parent(Millions of Yen)
Equity Ratio (%)

5. Cash Flows
Cash and cash equivalents at the end of the fiscal year totaled ¥62,228 million, an increase of ¥12,013
million from the end of the previous fiscal year.
(1) Cash Flows from Operating Activities
Net cash provided by operating activities was ¥40,002 million, a year-on-year increase of ¥2,626 million.
This was mainly due to cash provided from profit before tax (¥29,150 million) and depreciation andamortization (¥20,739 million), outweighing cash used for income taxes paid (¥4,541 million), among otherfactors.
(2) Cash Flows from Investing Activities
Net cash used in investing activities was ¥10,771 million, a year-on-year decrease of ¥32,912 million. This
mainly reflected cash used for acquisition of subsidiaries of ¥4,599 million (after deducting cash and cash

- 5 -equivalents included in acquired assets) and purchases of property, plant and equipment of ¥14,055
million, outweighing cash provided by proceeds from sales of property, plant and equipment of ¥8,401
million.
(3) Cash Flows from Financing Activities
Net cash used in financing activities was ¥18,852 million, a decrease of ¥40,833 million from the previous
fiscal year. This mainly reflected a net decrease of ¥35,001 million in short-term borrowings, dividends
paid of ¥8,083 million and repayments of lease liabilities of ¥5,033 million, outweighing proceeds fromissuance of bonds of ¥29,882 million.

6. Commitment LineThe Group’s basic policy is to secure the liquidity needed for business operations and maintain a stablefinancing structure. The Group basically uses its own funds to meet short-term working capital needs, andalso basically uses its own funds for capital investments and other investments in growth fields, while
anticipating procurement through bond markets or bank loans as required. At the end of the fiscal year
under review, the Group had concluded a commitment line agreement with one financial institution, withno executed borrowings and an unused available balance of ¥20,000 million.

7. Research and Development

R&D Expenses(Millions of Yen)

The Group is prioritizing the development of new products andtechnologies to support the provision of innovative solutions that
increase the corporate value and competitiveness of customers andthat help to address issues faced by society. The Group is also
focusing on developing sensing technology, data analysis technology,
and optimization & control technology needed for business model DX,
while also conducting research into understanding water treatment
process mechanisms and limitations to support product development
and the development of mathematical models for water treatment
technology to underpin DX.

6,000

4,000

2,000

0
2020

2021

Water Treatment Facilities
Water Treatment Chemicals

Going forward, Kurita will continue to refine the water-related technology it has cultivated over many
years, aiming to realize the corporate vision of being “A Creator of unique value to the solution of waterand environment,” contributing to the realization of a sustainable society. The Group’s development
centers mainly in Japan, Germany, Singapore, and North America are working together to proactively
develop products and technologies that meet the wide-ranging needs of industry and society.
R&D activities are performed mainly by the Research and Development Division of Kurita Water Industries
Ltd. There are approximately 180 R&D staff across the Group, representing 2.5% of all employees. Total
R&D expenses in the fiscal year under review were ¥5,317 million, equivalent to 2.0% of net sales.
(1) Water Treatment Chemicals
Kurita is pushing ahead with the development of water treatment chemicals that help customers savewater and energy, reduce waste, improve productivity and mitigate environmental impact. The Group isalso developing technology to analyze the effectiveness of water treatment chemicals and automaticallycontrol optimal dosing using sensors. Total R&D expenses related to this segment were ¥1,722 million for
the fiscal year under review.
<Major Accomplishments for the Fiscal Year>・ To achieve stable and energy-efficient operation of water treatment systems using membranes andfilters in water treatment facilities and wastewater reclamation facilities, the business reinforced
technology to prevent fouling by organic material. Specifically, Kurita developed water treatment
agents that are better at controlling fouling by microorganisms, as well as high-performance cleaning
agents that can remove organic material that was difficult to clean with existing agents.
・ New high-performance chemicals and related additive control technology were developed to reduceenergy and raw material costs in steel- and paper-making processes. In steel plants, the newchemicals and technology limit stoppages on raw material conveying lines and higher fuel usage due- 6 -to increased water content in raw materials caused by rainfall during storage. In paper plants, thechemicals limit the need for increased use of steam to dry low-quality recycled paper.
・ To reduce the environmental impact of cooling water chemicals, which are in growing demand
worldwide for factory and air-conditioning applications, Kurita has developed environmentally soundcooling water treatment technology that does not use phosphorous, a cause of eutrophication. The
new technology can be used in the facility start-up phase and during normal operation.
・ Kurita has developed a diagnosis and control system incorporating proprietary sensing technology to
optimize the operation of sludge dehydration systems in wastewater treatment processes.
(2) Water Treatment Facilities
Kurita is working on technologies that meet the needs of recycling-oriented societies, such as for
wastewater reclamation and reuse, waste reduction, and creating renewable energy sources throughrecycling. The Group is also working to improve the energy efficiency of wastewater treatment systems
and ultrapure water production systems to support productivity improvements in the manufacture ofsemiconductors and other products in the electronics industry. It is also developing soil remediation
technology that preempts future environmental regulations. Total R&D expenses for the segment for the
fiscal year under review were ¥3,594 million.
<Major Accomplishments for the Fiscal Year>・ To improve the operational stability and profitability of power generation facilities that use biogas
recovered through methane fermentation of residue food and other waste, Kurita developed preprocessing technology that increases the generation of methane from waste that is harder todecompose and that enables more types of raw material to be used in the system. Kurita also
developed a navigation system that supports the optimal input of raw materials.
・ To reduce ultrapure water production system power costs and contribute to lower energy usage andexpenses, Kurita developed water flow control technology that can be adjusted in real time to match
water volume usage in customer manufacturing processes.
・ To support stable operations and save labor in monitoring of water supply facilities and wastewater
treatment facilities, Kurita developed an automated detection system incorporating an AI-powered
diagnostic imaging system to rapidly identify any issues in water tanks.

8. Capital Expenditures
The Group is committed to making the investments needed to pursue technological innovation, expand
production capacity, and contend with intensifying competition. In the fiscal year under review, capital
expenditures totaled ¥32,647 million. This is an increase of ¥917 million compared with the previous fiscal
year, and includes the right-of-use assets recorded for the fiscal year under review.
The Water Treatment Chemicals segment carried out capital expenditures totaling ¥8,113 million, mainly
to expand and upgrade existing facilities, representing a ¥1,690 million increase compared with theprevious fiscal year. In addition, the Water Treatment Facilities segment undertook capital expenditures
totaling ¥24,533 million, a year-on-year decrease of ¥772 million. This mainly reflected installation andexpansion of facilities for the ultrapure water supply and tool cleaning businesses. The amount of capital
expenditure includes expenses related to the construction of a new global technology center, which theCompany built in Akishima-shi, Tokyo.
In the one-year period following the fiscal year under review, the Group plans to undertake a total of ¥63.4
billion in capital expenditures for new construction, expansion, and renovation. In terms of equipment for
the ultrapure water supply business in particular, in light of significant fluctuations in the economy and incustomer capital investment trends, the Group had not formulated specific capital expenditure plans forindividual projects as of the end of the fiscal year under review.

- 7 -Capital Expenditures

Depreciation and Amortization(Millions of Yen)

(Millions of Yen)
25,00040,00020,00030,00015,00020,00010,00010,000

5,000
0

0
2020

2020

2021

2021

Water Treatment Facilities
Water Treatment Chemicals

Water Treatment Facilities
Water Treatment Chemicals

9. Dividend Policy
The Group’s basic policy is to continue to pay stable dividends to shareholders.
Specifically, Kurita has set a consolidated dividend payout ratio target of 30%-50%. The Group will work tocontinue dividend increases, making decisions based on payout ratios for the most recent five years to
respond flexibly to yearly fluctuations in business performance.
The Group’s basic policy is to pay dividends from surplus twice a year, an interim and a year-end
dividend.
The decision-making body for paying dividends from surplus is the General Meeting of Shareholders for
year-end dividends and the Board of Directors for interim dividends.
Regarding dividends paid from surplus for the fiscal year under review, in consideration of future businessgrowth and with shareholder support, it was decided to pay a total dividend of ¥66 per share, including aninterim dividend of ¥32 per share. As a result, the dividend payout ratio was 68.8% (38.8% on aconsolidated basis) for the fiscal year.
Regarding retained earnings, Kurita will prioritize the use of retained earnings for businesses withprospects for growth while maintaining rigorous investment discipline. If the Group determines that surplus
has accumulated, it will consider the repurchase of shares, taking the share price level into account, as
well as seek to improve capital efficiency and increase returns to shareholders.
Basic Earnings per ShareDividends per Share andDividend Payout Ratio(Yen)
180.00150.00

80.0

80.0

60.0

60.0

40.0

40.0

20.0

20.0

120.00
90.00
60.00
30.00
0.0

0.00
2020

0.0
2020

2021

2021

Dividends per Share (Yen)Dividend Payout Ratio (%)- 8 -Business Risks
Kurita Water Industries Ltd. and Consolidated Subsidiaries

The Executive General Manager of the Corporate Planning and Control Division is designated as theofficer in charge of monitoring risks facing the Kurita Group and promoting risk management. The officer
seeks to regularly analyze and assess risks facing Kurita Water Industries and Kurita Group companies,
and to continue monitoring risks to prevent problems from materializing.
The following are summaries of major foreseeable risks present in the business environments in which the
Kurita Group operates. Forward-looking statements herein are based on judgments made bymanagement as of March 31, 2021.

1. Impact of the COVID-19 Pandemic
With the global COVID-19 pandemic showing no signs of subsiding, countries and regions worldwide are
implementing various measures to prevent the spread of infection and the collapse of healthcare systems,
including calls to stay at home and requests for businesses to close temporarily or reduce operating
hours, mainly in the food service sector. These measures are being implemented intermittently, and thissituation is likely to continue until vaccination uptake becomes widespread. Due to uncertainties regarding
the duration of the pandemic and the outlook for the global economy, lower capacity utilization atcustomer plants, decisions by customers to postpone capital expenditure plans and delays to the Group’sbusiness activities could impact the Group’s financial results. Instead of requiring employees to physicallyattend business offices, customers’ plants or other worksites, the Group is using digital technologies to
add remote capabilities to business-critical processes and constructing backup systems at manufacturing
sites to support business continuity. The Group has also formulated COVID-19 response guidelines andimplemented measures to prevent the spread of infection, contributing to the continued operation ofcustomer businesses and the maintenance of social and industrial infrastructure.

2. Large-Scale Natural Disasters
A large-scale natural disaster or other similar event that directly or indirectly disrupts the Group’s businessexecution could affect the Group’s business activities, financial results and financial condition. The Grouphas established the Kurita Group Business Continuity Management (BCM) Policy to prepare forearthquakes, typhoons, severe rainstorms or other large-scale natural disasters. In line with the policy, theGroup develops business continuity plans, conducts water damage risk assessments of Group facilities,
offices and officer and employee residences and implements response measures, establishes safety
verification systems, reinforces buildings against earthquakes, builds stockpiles of disaster prevention
supplies and conducts disaster response drills for officers and employees.

3. Overseas Business Development
The Group is working to expand its business outside Japan. In contrast to the Japanese market,
conducting business in overseas markets involves a number of inherent risks, including the risk of
unexpected changes to local laws and regulations, the risk of political and economic instability, and therisk of conflict or terrorist incidents. If such risks materialized, the Group’s financial results could be
affected. In regions where the Group operates, the Group obtains information about the local security
situation and other conditions from the Ministry of Foreign Affairs or consultants and uses local legal
counsel, accountants and other experts to verify the legal and regulatory framework in local markets. In
addition, the Group uses a guidebook for overseas deployments to provide safety training and advice toemployees being sent overseas, provides medical and emergency support services to employees based
overseas and publishes safety information as part of efforts to ensure the safety of all officers andemployees.

- 9 -4. Development of New Technologies, Products and Services and Transformationof Business Processes
The Group develops new technologies, products and services to improve and expand its range of totalsolutions, which leverage chemicals, facilities and maintenance technologies, products and services. In
addition, the recently established Digital Strategy Division is actively driving the Group’s digitaltransformation (DX) by introducing IoT and AI into new products and services and by digitizing businessprocesses. However, the success of new technology and product development efforts and business
transformation cannot be guaranteed. The Group may not be able to offer new technologies or superior
products, services, or solution models that meet the needs of its customers in a timely fashion. The Group
may also fail to keep pace with rapid technological innovation, changing customer needs and advances indigital technologies. Failure to develop superior new products, services or solution models, or delays to
DX initiatives could limit future growth and profitability or otherwise affect the Group’s financial results.

5. Economic and Market Conditions
The Group’s businesses are affected by economic conditions in Japan and in other countries and regions
where it operates. Demand in the Water Treatment Chemicals business fluctuates in response to factory
capacity utilization rates in industries such as steel, petroleum refining and petrochemicals, and pulp andpaper – the main areas of demand for the business. Such demand fluctuations may affect the Group’s
financial results. Demand in the Water Treatment Facilities business fluctuates in response to trends incapital expenditure in the electronics and general industrial sectors – the main areas of demand for thebusiness – and also due to changes in business conditions at customers with which the Group has longterm ultrapure water supply contracts. Such fluctuations in demand could affect the Group’s financial
results. Furthermore, rising US-China trade friction may lead to punitive customs tariffs or stricter
restrictions on the activities of overseas companies in domestic markets, which could impact the business
operations of the Group’s customers, leading to an indirect impact on the Group’s financial results. The
Group provides solutions for issues related to water and the environment, so its customers are spread
across a wide range of industries. In addition, the Group is working to generate stable earnings bydeveloping business models such as the ultrapure water supply business, which minimize the earnings
impact of fluctuations in investment activity at customers. The Group also manages the operations ofaffiliated companies. Specifically, the Group verifies earnings and progress with the implementation ofstrategies and measures at affiliated companies on a monthly and quarterly basis, monitors internal
audits, financial reporting and other matters related to internal controls, and makes decisions on importantmatters at affiliated companies, in line with the Group’s Internal Decision Approval and Review Rules. In
addition, increasing competition with rivals in the Group’s business domains could lead to declines in theprice of products and services, which could lower the Group’s profitability. However, as described in 4.
above, the Group is working to secure competitive advantages.

6. Exchange Rate Fluctuations
The ratio of overseas sales to total consolidated sales in the Kurita Group is 39.7%, reflecting overseas
acquisitions and other factors. The local currency-denominated financial statements of each overseas
subsidiary are reflected in the consolidated financial statements after conversion to Japanese yen.
Therefore, exchange rate fluctuations may affect the Group’s business results and financial condition. To
hedge against exchange rate risk, the Group uses forward exchange contracts, currency swap contracts
and other types of derivatives.

7. Impairment Loss on Fixed Assets(1) Impairment Loss on Goodwill and Intangible Assets
The Kurita Group has acquired companies to obtain a foundation for overseas business and to gain
access to competitive technologies and business models. As a result, the current balance of goodwill is¥55,596 million (13.1% of consolidated total assets). Goodwill is not amortized, and is tested for
impairment annually, or whenever there are signs of possible impairment. If, because of changes in thebusiness environment, an acquisition does not yield expected benefits, or if there is a difference between
the estimated future cash flows obtained by the impairment test and actual cash flows, impairment losses
on goodwill or other impairment losses may occur. Impairment tests estimate recoverable amounts based- 10 -

on value in use, and value in use is calculated using a discount rate for future cash flow referencing theweighted average cost of capital (WACC) for each cash-generating unit. Future cash flow forecasts havea five-year horizon and are formulated based on historical trends and external data. The forecasts form
the basis of business plans approved by management. Forecasts for periods longer than five years arecalculated based on average long-term growth rates, taking into account conditions in markets for eachcash-generating unit. Five-year cash flow estimates, longer-term growth rates and discount rates are usedby the Group as key assumptions, and any change in these assumptions could have an impact on theGroup’s financial results and financial condition. The Company has established an Investment Committee
to strengthen the Group’s investment and lending screening functions. The committee is chaired by the
Executive General Manager of the Corporate Planning and Control Division. The committee conducts prescreening of investment and lending projects to be discussed by the Board of Directors or the Executive
Committee, focusing on business plans, investment amounts, adequacy of risk assessments, profitability,competitive advantages, legality and other criteria. The results of the screening and key points fordiscussion are presented to the Board of Directors and the Executive Committee, ensuring corporate
acquisitions are only conducted after careful consideration and discussion by the Company. In addition, allacquired companies are subject to business management procedures for affiliated companies explainedin 5. above.
(2) Impairment Loss on Property, Plant and Equipment
The Group’s ultrapure water supply business and other businesses install equipment at customer plants.
In cases where a customer withdraws from a business or suspends operations at a plant, impairment
losses on fixed assets may occur, which may affect the Group’s financial results and financial condition.
When making investment decisions on installing equipment at customer plants, the Group carefully
considers factors such as the customer’s business conditions, customer contract terms and return on
investment.

8. Risk of Unprofitable Projects
The installation of water treatment facilities may lead to additional costs if the Group fails to meet
contractual obligations to customers for raw water and other criteria, or due to defects with products orservices arising from faults with design or engineering work, or as a result of accidents. The Group may
also face requests for compensation for damages incurred by customers as a result of these issues. The
Group rigorously carries out design and engineering work in accordance with design and engineering
procedures, and prior to the issue of project budget documents, establishes an engineering review
meeting to verify various aspects of project design, including quality, cost, delivery, safety andenvironmental criteria. In addition, the Group holds monthly business process review meetings from when
the order is received until the project is delivered to confirm engineering progress and manage theprofitability of each project component, allowing total project costs to be estimated using the latest
information. Overseas Group companies follow similar procedures, and the Company also provides themwith design and engineering management support for large projects. In this way, the Group aims toprevent any problems before they occur by sharing information about project issues and other areas.

9. Laws and ComplianceIn the event that the Group’s officers or employees fail to comply with laws or regulations or are
responsible for conduct that contravenes social ethics, the Group may face restrictions on its businessactivities, fines, damage to public trust or other issues, which could affect the Group’s financial results andfinancial condition. The Group has established an Environmental & Social (E&S) Committee, chaired by adirector, and a Group E&S Committee, made up of representatives from Group companies. These
committees are tasked with rigorously ensuring all the Group’s activities are underpinned by sociallyethical behavior, rather than conducting compliance activities simply to meet legal requirements.

- 11 -

10. Product and Service Quality and Water Treatment Facility Operational Errors
The supply or discharge of water that falls short of required standards due to human error or otheroperational issues at customer or Group water treatment facilities may lead to requests for damage
compensation or a loss of public trust. The Group’s financial results may be affected if its obligations
exceed the scope of liability insurance coverage, or if there is a loss of public trust. As explained in 8.
above, the Group has created a quality management system and continuously implements improvements
to increase customer satisfaction.

11. Intellectual Property
Given the wide scope of the Group’s business, there is potential for the Group’s intellectual property rights
to be infringed and potential for the Group to infringe rights held by third parties. While such actions could
affect the Group’s financial results, the Group recognizes the importance of intellectual property andcontinually seeks to register its own intellectual property while avoiding infringements of rights held by
third parties, both in Japan and overseas.

12. Materials and Parts Procurement
The Group procures raw materials and parts from outside the Group for the manufacture of products andthe construction of facilities. The Group also procures external business services to support various
business processes. These procurement activities are conducted with respect for human rights, inaccordance with the Kurita Group Code of Conduct, and also comply with laws and regulations and take
into account economic, social and environmental factors, as set out in the Kurita Group Procurement
Policy. The prices of raw materials, parts and business services fluctuate based on changes in market
conditions, and this may affect the Group’s financial results.

13. Information System Security
The Group’s use of information systems is increasing, as is the importance of information systems to theGroup’s business. If a computer virus or other factor were to obstruct the functions of the Group’s
information systems, the Group’s business activities, financial results and financial condition could be
negatively affected. In accordance with the Kurita Group Information System Management Policy, theGroup is strengthening measures against computer viruses by installing antivirus software and providing
information security education and awareness training to officers and employees, including training about
targeted email attacks.

- 12 -

Consolidated Statement of Financial Position
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Notes
AssetsCurrent assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets
Investments accounted for using equity method
Other financial assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets- 13 -

Millions of yen
2020
2021

Thousands of
U.S. dollars
2021

89, 25, 34
10, 34
11¥50,215
96,974
2,562
9,247
3,847
162,847¥62,228
97,745
2,817
9,911
3,780
176,482$560,612
880,585
25,37889,28834,054
1,589,927

12
20
13
13
15
10, 34
16

106,358
17,78447,033
13,381
7,469
28,465
4,295
113
224,902

117,603
19,40555,596
17,3201,578
33,563
3,199
177
248,445

1,059,486
174,819
500,864
156,036
14,216302,369
28,8191,594
2,238,243

6¥387,749¥424,928$3,828,180

NotesLiabilities and equity
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Other financial liabilities
Income taxes payable
Provisions
Other current liabilities
Total current liabilities

17, 3418, 3420, 3419, 34EquityShare capital
Capital surplus
Treasury shares
Other components of equity
Retained earnings
Equity attributable to owners of parent
Non-controlling interests
Total equity
Total liabilities and equity- 14 -

Thousands of
U.S. dollars
2021¥35,680
35,371
4,234
219
1,998
1,557
15,345
94,408¥46,506
445
4,373
—
8,135
1,847
13,64474,952$418,972
4,009
39,396—73,288
16,639122,918
675,243

18, 3420, 3419, 34
21
22
16

1,305
13,701
2,562
16,913499
1,346
12,90349,232
143,640

31,207
15,327
13,70318,027
1,160
2,368
10,343
92,137167,090

281,144
138,081
123,450
162,405
10,45021,333
93,180830,063
1,505,315

23
23
23
23
23

13,4508,212(10,893)216
231,456
242,442
1,666
244,108

13,450(2,212)(10,787)
8,500
244,138
253,089
4,748
257,837

121,171(19,927)(97,180)
76,576
2,199,441
2,280,081
42,7742,322,855¥387,749¥424,928$3,828,180

22

Non-current liabilities
Bonds and borrowings
Lease liabilities
Other financial liabilities
Retirement benefit liability
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities

Millions of yen
2020
2021

Consolidated Statement of Profit or Loss
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Notes
6, 25

Net sales
Cost of sales
Gross profit

Millions of yen
2020
2021
¥264,807¥267,749(172,092)(173,073)
92,715
94,676

Thousands of
U.S. dollars
2021$2,412,153(1,559,216)
852,936

Selling, general and administrative expenses
Other income
Other expenses
Operating profit

26
27
28
6

(66,060)
5,832(5,006)27,479(65,206)
5,929(3,870)31,529(587,441)
53,414(34,864)
284,045

Finance income
Finance costs
Share of profit (loss) of investments accounted forusing equity method
Profit before tax

29
29

569
(1,417)545(1,923)

4,909(17,324)

15

60

(999)

(9,000)26,691

29,150262,612

Income tax expense
Profit16(8,378)18,312(9,326)
19,824(84,018)
178,594

18,28725¥18,31219,088735¥19,824

171,963
6,621$178,594

Profit attributable to
Owners of parent
Non-controlling interests
ProfitYen
Notes
Earnings per share
Basic earnings per share
Diluted earnings per share31- 15 -

2020

2021¥162.86—¥169.94—

U.S. dollars
2021
$1.53
—

Consolidated Statement of Comprehensive Income
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Notes
ProfitOther comprehensive income
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets measured
at fair value through other comprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Cash flow hedges
Share of other comprehensive income of investments
accounted for using equity method
Total of items that may be reclassified to profit or loss
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests
Comprehensive income- 16 -

Millions of yen
2020
2021
¥18,312¥19,824

Thousands of
U.S. dollars
2021$178,594

30

(462)

5,202

46,864

30
30

62
(400)

(234)
4,968

(2,108)44,75630
30
30(4,316)
192

4,851
(594)

43,702(5,351)

30

(94)

24

216

30
30

(4,219)(4,619)¥13,693

4,280
9,249
¥29,073

38,55883,324$261,918¥13,717(24)¥13,693¥28,0211,052¥29,073$252,441
9,477$261,918

Consolidated Statement of Changes in Equity
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Millions of yen
Equity attributable to owners of parent
Other components of equity
Financial assets

Notes

Balance as of April 1, 2019
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2020
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2021

Sharecapital¥13,450

Capitalsurplus¥10,265

Treasuryshares¥(10,932)

—

—

—
(3)

103

42

23
24
33

(1,385)

Exchangemeasured at
differences onfair valuetranslation ofthrough otherCash flow comprehensive
foreignhedgesoperations
income¥(4,671)¥310¥9,199(4,362)(4,362)

192
192

(462)
(462)

0
10

—
¥13,450(771)(2,053)¥8,212

—

—

—
(4)

9

111

23
24
33

38
¥(10,893)(991)

0¥(9,033)

—
¥503

10
¥8,747

4,560
4,560

(594)
(594)

5,202
5,202

4

7
7

(10,578)(888)—¥13,450

1,135(10,424)¥(2,212)- 17 -

106¥(10,787)

4¥(4,469)

—
¥(91)

(888)
¥13,060

Millions of yen
Equity attributable to owners of parent
Other components of equity

Remeasurementsof defined
benefit plans

¥—
63
63

(63)
(63)
¥—
(235)
(235)

Total
¥4,838—(4,569)(4,569)——Retainedearnings¥219,660
18,28718,287(6,521)

Total¥237,282
18,287(4,569)13,717(3)(6,521)

Noncontrollinginterests¥1,902
25
(49)
(24)
(24)

Total
¥239,184
18,312(4,619)13,693(3)(6,546)

—

145

8

154

0

(1,385)(196)(1,581)

(52)

52

—

—

—
(52)
¥216
—
8,932
8,932
—
—

(21)
(6,490)¥231,456
19,088(792)(8,557)¥242,442
19,088
8,932
28,021(4)(7,076)(1,013)(792)(8,769)¥244,108
19,824
9,249
29,073(4)(8,090)19,088(7,076)(211)¥1,666
735
316
1,052

—

120

(9)

111

4

(986)

(208)

(1,194)

—

—

3,260

3,260

—

(10,578)(10,578)
—

235

(653)

653

—

235
¥—

—
(648)
¥8,50016(6,406)¥244,138

1,152(17,373)¥253,089

2,029¥4,748- 18 -

1,152(15,344)¥257,837

Notes

Balance as of April 1, 2019
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2020

23
24
33

ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2021

23
24
33

7
7

Thousands of U.S. dollars
Equity attributable to owners of parent
Other components of equity
Financial assets

Notes

Balance as of March 31, 2020
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2021

Sharecapital$121,171

Capitalsurplus$73,981

Treasuryshares$(98,135)

—

—

—
(36)

81

1,000

23
24
33

(8,927)

Exchangemeasured at
differences onfair valuetranslation ofthrough otherCash flow comprehensive
foreignhedgesoperations
income$(81,378)$4,531$78,801

41,081
41,081(5,351)(5,351)

46,864
46,86436

7
7(95,297)(8,000)—$121,171

10,225(93,909)$(19,927)- 19 -

954$(97,180)

36$(40,261)—$(819)(8,000)$117,657

Thousands of U.S. dollars
Equity attributable to owners of parent
Other components of equity

Remeasurementsof defined
benefit plans$—(2,117)(2,117)

2,117
2,117
$—

Total
$1,945—80,46880,468——Retainedearnings$2,085,189
171,963

Total$2,184,162
171,963
80,468
171,963
252,441(36)(63,747)(63,747)

Noncontrollinginterests$15,009
6,621
2,846
9,477

Total
$2,199,171
178,594
83,324
261,918(36)(9,126)(72,882)

—

1,081

(81)

1,000

36

(8,882)(1,873)(10,756)——

29,36929,369—(95,297)(95,297)——(5,882)

5,882

—
144
10,378(5,837)(57,711)(156,513)$76,576 $2,199,441 $2,280,081

18,279$42,774- 20 -

10,378(138,234)$2,322,855

Notes

Balance as of March 31, 2020
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2021

23
24
33

7
7

Consolidated Statement of Cash Flows
Kurita Water Industries Ltd. and Consolidated Subsidiaries

Note
Cash flows from operating activities
Profit before tax
Depreciation and amortization
Share of loss (profit) of investments accounted for using
equity method
Loss (gain) on sale of fixed assets
Decrease (increase) in inventories
Decrease (increase) in trade and other receivables
Increase (decrease) in trade and other payables
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Proceeds from sale of investment securities
Payments for acquisition of subsidiaries (after deduction of
cash and cash equivalents included in acquired assets)
Purchase of investments in associates
Other
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from issuance of bonds
Repayments of long-term borrowings
Repayments of lease liabilities
Dividends paid
Purchase of investments in subsidiaries not resulting inchange in scope of consolidation
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period- 21 -

27

7, 32

18

24

8
8

Thousands of
U.S. dollars
2021

Millions of yen
2020
2021
¥26,691
18,700¥29,150
20,739$262,612
186,837

(60)

999

9,000

(2,471)(169)
4,527(1,893)
2,652
47,977
141
410
(305)
(10,847)
37,376(1,333)254
746(2,904)(3,410)44,242
153
360
(213)
(4,541)40,002(12,009)
2,288
6,720
(26,162)(30,720)
398,576
1,378
3,243(1,918)(40,909)360,378(1,951)
1,545(31,168)
5,942(1,534)41(1,856)
1,588(14,055)
8,401(1,909)2,533(16,720)
14,306(126,621)
75,684(17,198)
22,819(8,501)(4,599)(41,432)(5,915)(2,140)(43,683)—(874)(10,771)—(7,873)(97,036)

35,001—(384)(4,514)(6,539)(35,001)
29,882(645)(5,033)(8,083)(315,324)
269,207(5,810)(45,342)(72,819)(1,588)——

7
21,981

29(18,852)

261(169,837)(1,006)
14,66735,547¥50,215

1,634
12,01350,215¥62,228

14,720108,225
452,387$560,612

Notes to Consolidated Financial Statements
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Reporting entity
Kurita Water Industries Ltd. (the “Company”) is a stock company located in Japan, which lists its shareson the Tokyo Stock Exchange. The registered addresses of its head office and major offices are disclosed
on its official website (https://www.kurita.co.jp/english/).
The Company’s consolidated financial statements consist of the Company and its consolidated
subsidiaries (together, the “Group”).
The major businesses of the Group are the water treatment chemicals business and the water treatment
facilities business. Details regarding these businesses are provided in Note 6. “Segment information.”

2. Basis of preparation(1) Compliance with IFRSThe consolidated financial statements of the Group are prepared in compliance with International
Financial Reporting Standards (IFRS), pursuant to the provisions of Article 93 of the Regulation on
Terminology, Forms, and Preparation Method of Consolidated Financial Statements (Ministry of Finance
Order No. 28 of 1976), as the Group meets the requirements for a “specified company complying withdesignated international accounting standards” set forth in Article 1-2 of the said regulation.
The consolidated financial statements of the Group were approved by Michiya Kadota, President andRepresentative Director, on June 29, 2021.
(2) Basis for measurement
As stated in Note 3. “Significant accounting policies,” the consolidated financial statements of the Group
have been prepared based on acquisition cost, with the exception of specified financial instruments, etc.,
measured at fair value.
(3) Functional currency and presentation currency
The consolidated financial statements of the Group are presented in Japanese yen, which is the functional
currency of the Company. Amounts are presented in millions of yen, with fractional amounts less than one
million yen rounded down to the nearest million yen.
The translation of yen amounts as of or for the year ended March 31, 2021 into U.S. dollars is included
solely for the convenience of readers and has been made, as a matter of arithmetical computation only, atthe rate of ¥111 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2021.
The translation should not be construed as a representation that yen amounts have been, could havebeen or could in the future be converted into U.S. dollars at the above or any other rate.

- 22 -

3. Significant accounting policies
The consolidated financial statements of the Group are prepared based on the financial statements of theCompany, its consolidated subsidiaries and its associates using unified accounting policies.
(1) Basis for consolidation
1) Subsidiaries
A subsidiary is a company that is controlled by the Group. When the Group is exposed, or has rights, tovariable returns from its involvement with the company and has the current ability to affect those returns
through its power over the company, the Group considers that it controls the company.
The financial statements of a subsidiary are included in the consolidated financial statements from thedate the Group gains control until the date when it ceases to control the subsidiary.
If accounting policies adopted by a subsidiary differ from that adopted by the Group, appropriate
adjustments are made to the financial statements of the subsidiary, as necessary.
Intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between
entities of the Group and profits or losses resulting from intragroup transactions that are recognized in
assets, are eliminated in full in preparing the consolidated financial statements.
The comprehensive income of subsidiaries is attributed to owners of parent and non-controlling interests,
even if the balance of non-controlling interests is negative.
When the Group has disposed of part of the ownership interests in the subsidiary; and it still continues tocontrol a subsidiary, such transaction is accounted for as an equity transaction.
Differences between the adjustment of non-controlling interests and the fair value of the consideration arerecognized directly in equity as equity attributable to owners of parent.
If the Group loses control of a subsidiary, the gain or loss associated with the loss of control is recognizedin profit or loss.
When the end of the reporting period of a subsidiary is different from that of the Company, the subsidiary’s
additional financial information as of the same date of that of the Company, which is prepared forconsolidation purposes, is used for the consolidation.
2) Associates
An associate is a company over which the Group has significant influence. When the Group has thepower to participate in the financial and operating policy decisions of an investee but it is not control orjoint control of those policies, the Group considers that it has a significant influence over the company.
Investment in an associate is accounted for using the equity method from the date the Group comes tohave significant influence until the date when it loses significant influence.
When applying the equity method, if an associate uses accounting policies other than those adopted in
the consolidated financial statements, appropriate adjustments are made to the associate’s financial
statements in preparing the consolidated financial statements to ensure conformity with the accounting
policies of the Group.
The consolidated financial statements include investments in associates whose end of the reporting
period is different from that of the Company since it is impracticable to unify their reporting periods withthat of the Company due to reasons such as their relationships with other shareholders. Adjustments are
made for the effects of significant transactions or events that occur during the period resulting from thedifference in the reporting period. The date of the end of the reporting period of these associates
accounted for using the equity method is December 31.
Profits resulting from transactions with an associate accounted for using the equity method that arerecognized in assets, are deducted from investment in associates to the extent of the Group's ownershipinterests in the associate. Losses resulting from transactions with an associate that are recognized in
assets are deducted from investment in associates in the same manner unless the losses indicate an
impairment that requires recognition in the consolidated financial statements.

- 23 -

(2) Business combinations
The Group accounts for each business combination by applying the acquisition method.
The consideration transferred in a business combination is measured at fair value, which is calculated as
the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities assumed
and the equity instruments issued by the Group in exchange for control of the acquiree. If theconsideration transferred exceeds the net of the amounts of the identifiable assets acquired and theliabilities assumed measured at their acquisition-date fair values, the Group recognizes the excess as
goodwill in the consolidated statement of financial position. Conversely, if the consideration is less than
the net of the fair values, the difference is immediately recognized as income in the consolidated
statement of profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period inwhich the business combination occurs, provisional amounts are used for the accounting, and theprovisional amounts recognized are adjusted during a measurement period of within one year from theacquisition date.
Acquisition-related costs incurred are recognized as expenses.
The additional acquisition of non-controlling interests after control of an acquiree is obtained is accounted
for as an equity transaction and no goodwill is recognized from such transaction.
(3) Foreign currency translation
The consolidated financial statements of the Group are presented in Japanese yen, which is the functional
currency of the Company. Each company in the Group determines its own functional currency, and thetransactions of each company are measured in its functional currency.
Foreign currency transactions are translated into the functional currency at the average exchange rateduring the period unless the exchange rate fluctuates significantly during such period. Foreign currency
monetary assets and liabilities are translated using the closing rate as of each reporting period. Exchange
differences arising from such translations and settlements are recognized in profit or loss. However,exchange differences arising from financial assets measured at fair value through other comprehensive
income and cash flow hedges are recognized in other comprehensive income.
For foreign operations, assets and liabilities are translated into Japanese yen at the closing rate at the endof each reporting period, and income and expenses are translated into Japanese yen at the averageexchange rate during the period unless the exchange rate fluctuates significantly during such period. All
resulting exchange differences are recognized in other comprehensive income. On the disposal of aforeign operation, the cumulative amount of the exchange differences related to such foreign operation
are reclassified from equity to profit or loss in the period of the disposal.
(4) Financial instruments
1) Financial assets(i) Initial recognition and measurement
The Group classifies financial assets as fair value through profit or loss, fair value through othercomprehensive income, or measured at amortized cost. This classification is determined at initialrecognition of the assets. The Group recognizes a financial asset at the date when the Group becomesparty to the contract of the financial instruments.
A financial asset is classified as financial assets measured at amortized cost if both of the following
conditions are met; otherwise, it is classified as financial assets measured at fair value:・ The financial asset is held within a business model whose objective is to hold financial assets in order
to collect contractual cash flows.
・ The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

- 24 -

With regard to financial assets measured at fair value, with the exception of equity instruments held for
trading which must be measured at fair value through profit or loss, each equity instrument is designatedto be measured at fair value through profit or loss, or to be measured at fair value through othercomprehensive income, and such designation is applied on a continuous basis.
All financial assets, unless classified as measured at fair value through profit or loss, are measured attheir fair value plus transaction costs that are directly attributable to the financial assets.
(ii) Classification and subsequent measurement
After initial recognition, financial assets are measured based on their classification as follows:(a) Financial assets measured at amortized cost
Financial assets measured at amortized cost are measured at amortized cost using the effective
interest method.
(b) Other financial assets
Financial assets other than those measured at amortized cost are measured at fair value.
Subsequent changes in the fair value of financial assets measured at fair value are recognized as
profit or loss.
However, for investments in equity instruments that are designated to be measured at fair value throughother comprehensive income, subsequent changes in their fair value are recognized in othercomprehensive income, and if they are derecognized or their fair value has declined significantly, theamount previously recognized in other comprehensive income is reclassified to retained earnings.
Dividends from that investment are recognized in profit or loss.
(iii) Derecognition
A financial asset is derecognized when the rights to receive benefits from the financial asset expire or thefinancial asset is transferred or substantially all of the risks and rewards of ownership of the financial asset
are transferred.
2) Impairment of financial assets
Under IFRS 9 “Financial Instruments” (hereinafter “IFRS 9”), the Group estimates expected credit losses
for financial assets that are subject to the impairment requirements of IFRS 9 at each reporting date andrecognizes an allowance for doubtful accounts for such expected credit losses.
After initial recognition, expected credit losses are measured at the reporting date for each category offinancial assets as follows:Stage 1 Financial assets for which credit risk has not increased significantly since initial recognition:
12-month expected credit losses
Stage 2 Financial assets for which credit risk has increased significantly since initial recognition but
no credit impairment has been identified:
Lifetime expected credit losses
Stage 3 Credit-impaired financial assets:
Lifetime expected credit losses
The Group directly reduces the carrying amount of a financial asset when its future recovery cannot berealistically expected and all collateral on the financial asset is enforced or transferred to the Group.

- 25 -

The Group determines that the credit risk on a financial asset has increased significantly since initialrecognition if contractual payments are more than 60 days past due, that a financial instrument is indefault if payments are more than one year past due, and that a financial asset is credit-impaired if at
least one of the following events occurs:・ Significant financial difficulty for the issuer or obligor;
・ A breach of contract, such as a default or delinquency in interest or principal payment;
・ The creditor, for economic or legal reasons relating to the debtor’s financial difficulty, granting to thedebtor a concession that the creditor would not otherwise consider;・ It has become probable that the debtor will enter bankruptcy or other financial reorganization;
・ The disappearance of an active market for that financial asset because of financial difficulties; or・ Substantial discounts on a purchased or originated financial asset that reflects the incurred credit
losses.
The Group evaluates stage 1 financial instruments on a collective basis and stage 2 and 3 financial
instruments on an individual basis.
12-month and lifetime expected credit losses are measured using reasonable and supportable information
about past events, current conditions and forecasts of future economic conditions that is available without
undue cost or effort at the end of the reporting period.
When an event that has an adverse impact on the estimated future cash flows of credit-impaired financial
assets that were purchased or originated has occurred, that is, there is evidence that their credit is
impaired, at initial recognition, for such purchased or originated credit-impaired financial assets, thecumulative changes in expected credit losses over their remaining life subsequent to initial recognition arerecognized as an allowance for doubtful accounts at the reporting date.
3) Financial liabilities(i) Initial recognition and measurement
The Group classifies financial liabilities as fair value through profit or loss or measured at amortized cost.
This classification is determined at initial recognition of the financial liabilities.
All financial liabilities are initially measured at fair value, while financial liabilities measured at amortizedcost are measured at their fair vale minus transaction costs that are directly attributable to the financial
liabilities.
(ii) Classification and subsequent measurement
After initial recognition, financial liabilities are measured based on their classification as follows:(a) Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at fair value through profit or loss are subsequently measured at fairvalue after initial recognition, and any gain or loss arising from remeasurements is recognized as
profit or loss.
(b) Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost are measured at amortized cost using the effective
interest method after initial recognition. Amortization using the effective interest method and any
gain or loss on derecognition are recognized as profit or loss in the consolidated statement of profit
or loss.
(iii) Derecognition
A financial liability is derecognized when the obligation is discharged or cancelled or expires.
4) Offsetting financial instruments
A financial asset and a financial liability are offset and the net amounts are presented in the consolidated
statement of financial position only when the Group currently has a legally enforceable right to set off therecognized amounts and intends either to settle on a net basis, or to realize the asset and settle theliability simultaneously.

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5) Derivatives and hedge accounting
The Group uses derivatives, such as foreign exchange contracts and currency swap contracts, to hedge
currency risks and interest rate risks. Derivatives are classified into financial assets measured at fair value
through profit or loss and financial liabilities measured at fair value through profit or loss. Derivatives thatmeet the requirements for hedge accounting are designated as hedging instruments and hedge
accounting is applied.
For the adoption of hedge accounting, the Group formally designates and documents the hedging
relationship and the risk management objectives and strategies at the inception of the hedge. The
documentation includes the details of the hedging instruments, the hedged items, the nature of the risks
being hedged and the method of assessing hedge effectiveness. The Group assesses the hedging
relationship on an ongoing basis with respect to whether the hedging relationship will be effective in the
future.
The Group applies cash flow hedges to interest rate-related derivative transactions that meet therequirements for hedge accounting.
The portion of the changes in fair value of hedging instruments of cash flow hedges that is determined to
be an effective hedge is recognized in other comprehensive income, and is accumulated as othercomponents of equity until the hedged transaction is executed and recognized in profit or loss. The
ineffective portion is recognized as profit or loss.
The amount that has been accumulated in other components of equity related to hedging instruments is
reclassified to profit or loss when a hedged transaction affects profit or loss.
If a hedged transaction results in the recognition of non-financial assets or liabilities, the amounts thathave been accumulated in other components of equity are accounted for as an adjustment to the initialcost of the non-financial assets or liabilities.
When forecast transactions are no longer expected to occur, hedge accounting is discontinued, and any
cumulative gains and losses that have been accumulated in other components of equity are reclassified to
profit or loss. Even if hedge accounting is discontinued, when hedged future cash flows are expected tooccur, the amount that has been accumulated as other components of equity by the time of
discontinuation of hedge accounting continues to be recognized in other components of equity until such
future cash flows occur.
The Group does not apply fair value hedges or hedges of net investments in foreign operations.
6) Fair value of financial instruments
For fair value of financial instruments that are traded in active markets as of each fiscal year-end, quoted
market prices or dealer prices are referred to.
Fair value of financial instruments for which there is no active market is calculated using appropriate
valuation techniques.
(5) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits withdrawable at any time and short-term,
highly liquid investments with a maturity of three months or less from the acquisition date that are readily
convertible to cash and which are subject to an insignificant risk of change in value.
(6) Inventories
The cost of inventories includes all costs of purchase, costs of conversion and all other costs incurred inbringing the inventories to their present location and condition.
Inventories are measured at the lower of cost and net realizable value. The cost is principally assigned byusing the moving average method. Net realizable value is the estimated selling price in the ordinary
course of business less the estimated costs of completion and estimated costs necessary to sell.

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(7) Property, plant and equipment
The cost model is applied to property, plant and equipment and they are measured at cost lessaccumulated depreciation and accumulated impairment losses.
The cost includes any costs directly attributable to the acquisition of the asset, as well as costs of
dismantling, removal, and restoration.
Except for assets that are not subject to depreciation, such as land, each asset is depreciated over its
estimated useful life using the straight-line method (however, some assets, such as equipment for
research and development, are depreciated using the diminishing balance method).
The estimated useful lives of major asset items are as follows:・ Buildings and structures: 2 – 65 years;
・ Machinery, equipment and vehicles: 4 – 10 years
Estimated useful lives and depreciation methods, etc., are reviewed at each fiscal year-end, and if any
changes occur, they are amended prospectively as changes in accounting estimates.
(8) Goodwill and intangible assets
1) Goodwill
The Group measures goodwill as the amount of the consideration transferred that is measured at theacquisition-date fair value, including the recognized amount of non-controlling interests in an acquiree,less the net of the acquisition-date amounts (usually fair value) of identifiable assets acquired andliabilities assumed.
Goodwill is not amortized. Goodwill is allocated to cash-generating units identified based on the region inwhich the business is conducted and the type of business and is tested for impairment annually or
whenever there is any indication of impairment.
Impairment losses on goodwill are recognized in the consolidated statement of profit or loss, and they are
not reversed in a subsequent period.
Goodwill is presented at the amount of acquisition cost less accumulated impairment losses.
2) Intangible assets
The cost model is applied to intangible assets, and such assets are measured at cost less accumulated
amortization and accumulated impairment losses.
A separately acquired intangible asset is measured initially at cost. The cost of an intangible asset
acquired in a business combination is measured at fair value at the acquisition date.
Expenditure on internally generated intangible assets, with the exception of an intangible asset arisingfrom development that meets the recognition criteria, is recognized as expense when it is incurred.
An intangible asset with finite useful life is amortized over its estimated useful life using the straight-line
method.
Estimated useful lives and amortization methods for intangible assets with finite useful lives are reviewed
at each fiscal year-end, and if any changes occur, they are amended prospectively as changes inaccounting estimates.
The estimated useful lives of major intangible assets with finite useful lives are as follows:
・ Software: 5 years;
・ Customer-related assets: 8 – 21 years
An intangible asset with indefinite useful life and an intangible asset not yet available for use are notamortized and are instead tested for impairment annually or whenever there is any indication of
impairment for each individual asset or each cash-generating unit.

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(9) Leases
For lease transactions as a lessee, at the commencement date of the lease, the Group measures a rightof-use asset at cost and a lease liability at the present value of the lease payments that are not paid atthat date.
A right-of-use asset is depreciated over the shorter of its useful life or its lease term using the straight-line
method.
The Group determines the lease term as the non-cancellable period of the lease, together with periods
covered by an extension option that is reasonably certain to be exercised or a cancellation option that isreasonably certain not to be exercised.
Lease payments are apportioned to finance costs and repayments of lease liabilities using the effective
interest method, and finance costs are recognized in the consolidated statement of profit or loss.
However, for short-term leases with a lease term of 12 months or less and leases for which the underlying
assets are of low value, right-of-use assets and lease liabilities are not recognized, and the total lease
payments are recognized as an expense on either a straight-line basis over the lease term or anothersystematic basis.
(10) Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is any indication of impairment foreach asset. If there is any indication that an asset may be impaired or if the asset is required to test for
impairment at least annually, the Group estimates the recoverable amount of the asset. If it is not possible
to estimate the recoverable amount of the individual asset, the Group estimates the recoverable amountof the cash-generating unit to which the asset belongs.
The recoverable amount of an asset or cash-generating unit is measured at the higher of its fair value lesscosts of disposal or its value in use. When the carrying amount of the asset or cash-generating unit
exceeds its recoverable amount, impairment losses for the asset are recognized and the carrying amountis reduced to its recoverable amount.
Value in use is determined as estimated future cash flows that are discounted to the present value, using
a pre-tax discount rate that reflects the current market assessments of the time value of money, the risks
specific to the asset and other factors. In calculating fair value less costs of disposal, an appropriate
valuation model is used, supported by available indicators of fair value.
For an asset other than goodwill, the Group assesses whether there is any indication that an impairment
loss recognized in the prior periods for the asset may no longer exist or may have decreased, such as any
changes in the assumptions used to calculate the recoverable amount of the asset. If any such indication
exists, the Group estimates the recoverable amount of the asset or cash-generating unit. When therecoverable amount exceeds the carrying amount of the asset or cash-generating unit, impairment losses
are reversed up to the lower of the calculated recoverable amount and the carrying amount lessdepreciation and amortization, in the case where no impairment losses have been recognized in the priorperiods.
(11) Employee benefits
1) Post-employment benefits
The Group implements defined benefit plans and defined contribution plans as its employees’ postemployment benefit program.
The Group determines the present value of its defined benefit obligations and the related current service
cost and prior service cost using the projected unit credit method.
The discount rate is determined by reference to market yields at the end of the reporting period on highquality corporate bonds corresponding to the discount period, which is determined based on the period up
to the expected benefit payment date in each future reporting period.

- 29 -

Remeasurements of defined benefit liability (asset) are recognized collectively as other comprehensive
income in the period of their occurrence, and are immediately reclassified from other components ofequity to retained earnings.
Prior service cost is amortized over the average period until benefits are vested using the straight-line
method, while if the benefit has already been vested immediately after the introduction or change of thedefined benefit plan, the prior service cost is recognized as profit or loss in the period in which it wasincurred.
Contributions for retirement benefits under defined contribution plans are recognized as expenses at thetime of contribution.
2) Short-term employee benefits
The Group recognizes the undiscounted amount of short-term employee benefits as an expense when an
employee has rendered related service.
For bonus plans and paid absences, the Group recognizes the amount estimated to be paid under theapplicable plan as liabilities when the Group has legal or constructive obligations to make such payments
and reliable estimates of the obligations can be made.
(12) Share-based payment
The Group has introduced a performance-linked stock compensation program and a performance andshare price-linked monetary compensation program.
The consideration for services received under the performance-linked stock compensation program ismeasured by reference to the fair value of the Company's shares on the grant date or is measured at thefair value of the incurred liabilities, and is recognized as an expense over the corresponding period, while
the same amount is recognized as an increase in capital surplus or liabilities.
The consideration for services received under the performance and share price-linked monetarycompensation program is measured by reference to the fair value of the Company's shares at the end of
the reporting period, and is recognized as an expense over the corresponding period, while the sameamount is recognized as an increase in liabilities. Fair value of the relevant liabilities is remeasured at theend of the reporting period and the settlement date, and any changes in fair value are recognized as profit
or loss.
The details of the programs are provided in (Overview of performance-linked stock compensation programand performance and share price-linked monetary compensation program) in Note 33. “Share-based
payments.”(13) Provisions
The Group recognizes a provision when the Group has a present obligation (legal or constructive) as aresult of a past event, it is highly probable that the Group will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Where the effect of the time value of money is material, the provision is measured at the present value ofthe expenditures expected to be required to settle the obligation. For calculation of the present value, apre-tax discount rate that reflects the current market assessment of the time value of money and risks
specific to the liability is used.
(14) Revenue
1) Revenue from contracts with customers
For revenue from contracts with customers, the Group identifies the contract with a customer, identifies
the performance obligations in the contract at contract inception, determines the transaction price,
allocates the transaction price to the performance obligations in the contract, and recognizes the revenue
when the Group satisfies a performance obligation.
A performance obligation is satisfied when control of the goods or services associated with an identified
performance obligation is transferred to the customer.

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Revenue from contracts with customers is classified into the following:・ Revenue from sales of products and construction contracting
For product sales contracts with customers, revenue is recognized when the product is delivered tothe customer.
The consideration under the product sales contract is collected within a reasonable period after thetime of delivery of the product to the customer and includes no significant financial component.
For construction contracts, control of assets is transferred to the customer over a certain period of timesince the Company's performance does not create an asset with an alternative use and the Company
has an enforceable right to payment for performance completed to date. Therefore, sales arerecognized over the period of the construction contract, based on the degree of progress towardsatisfaction of performance obligations as measured at the end of each reporting date. To measureprogress, the input method is applied, using the ratio of the incurred cost against the estimated total
cost for each contract.
Consumption taxes, value-added taxes, etc., are deducted from the transaction price when the Groupis found to act as an agent of the taxation authority in the transaction, taking into comprehensive
consideration the laws and regulations as well as the actual situation regarding transactions in eachcountry. An amount substantially equivalent to the discount from the sales price under the contract witha customer is deducted from transaction price. For transactions that have variable consideration, sales
are recognized to the extent that there will be no significant reversals in the future, and the most likely
amount method or the expected value method is used.
The Group has no significant obligations to return goods or to refund.
・ Technology revenue
Technology revenue is recognized on an accrual basis in accordance with the substance of therelevant contractual arrangements. The Group earns revenue under the contracts that allow third
parties to manufacture and sell its products and use its technologies.
2) Interest revenue
Interest revenue is calculated by using the effective interest method.
For the financial assets described in (4) Financial instruments 2) Impairment of financial assets, interest
revenue is recognized by using the effective interest method as follows, for each category of financial
assets:Stage 1 and stage 2 financial assets:
Carrying amount before deducting allowance for doubtful accounts × effective interest rate
Stage 3 financial assets:
Carrying amount after deducting allowance for doubtful accounts × effective interest rate
Purchased or originated credit-impaired financial assets:
Carrying amount after deducting allowance for doubtful accounts × credit-adjusted effective interest rate3) Dividends
Dividends are recognized when the shareholders' rights to receive payment are established.

- 31 -

(15) Government grants
Government grants are recognized at fair value when there is reasonable assurance that the Group willcomply with the conditions attaching to them and that the grants will be received.
Government grants are recognized in profit or loss on a systematic basis over the periods in which theGroup recognizes as expense the related costs for which the grants are intended to compensate.
Government grants related to assets are deducted from the carrying value of the assets.
(16) Income taxes
Income tax expense in the consolidated statement of profit or loss is presented as the aggregate amountof current tax and deferred tax.
Income taxes are recognized as profit or loss, except for the tax arising from items that are recognized inother comprehensive income or directly in equity, and the tax arising from business combinations.
Current taxes are measured at the amount expected to be paid to or recovered from the taxation
authorities.
The amount of these taxes is calculated using the tax rates and tax laws that have been enacted or
substantively enacted by the end of the reporting period.
Deferred taxes are recognized related to the temporary differences between the carrying amount of anasset and a liability at the end of the period for accounting purposes and its tax base.
A deferred tax asset is recognized for deductible temporary differences, unused tax credits and unused
tax losses to the extent that it is probable that taxable profits will be available against which they can beutilized. A deferred tax liability is recognized, in principle, for all taxable temporary differences.
However, deferred tax assets or liabilities are not recognized for the following temporary differences
deferred taxes arises from:・ The initial recognition of goodwill;
・ The initial recognition of an asset or a liability in a transaction which is not a business combination
and affects neither accounting profit nor taxable profit (tax loss) at the time of the transaction;
・ For deductible temporary differences arising from investments in subsidiaries and associates andinterests in joint arrangements when it is probable that the temporary differences will not reverse in
the foreseeable future or it is not probable that taxable profits will be available against which thetemporary differences can be utilized; or・ For taxable temporary differences associated with investments in subsidiaries and associates andinterests in joint arrangements when the timing of the reversal of temporary differences can becontrolled and it is probable that the temporary differences will not reverse in the foreseeable future.
At the end of each reporting period, the Group reassesses unrecognized deferred tax assets andrecognizes a previously unrecognized deferred tax asset to the extent that it has become probable that
future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled, based on tax rates that have been enacted or
substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to set off
current tax assets against current tax liabilities and related income taxes are levied by the same taxation
authority on the same taxable entity.
The income tax expense for each quarter is calculated based on an estimated yearly effective tax rate.

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(17) Equity
1) Ordinary shares
For ordinary shares issued by the Company, the total issue price of the shares is recorded in share capitaland capital surplus, and transaction costs, net of related tax effects, are deducted from capital surplus.
2) Treasury shares
Treasury shares are measured at cost and deducted from equity. No gain or loss is recognized in profit orloss on the purchase, sale or cancellation of treasury shares. The difference between the carrying amountand the consideration received from the sale is recognized in equity.
(18) Earnings per share
Basic earnings per share are calculated by dividing profit or loss attributable to common shareholders of
the parent by the weighted average number of common shares outstanding, after adjusting for treasury
shares, during the period.
(19) Liabilities pertaining to forward contracts concluded with non-controlling shareholders
For forward contracts for shares in subsidiaries which the Group has concluded with non-controllingshareholders, the present value of the expected transfer price is initially recognized as other financial
liabilities, and the same amount is deducted from capital surplus. After initial recognition, the present value
is measured at amortized cost using the effective interest method, in principle, and the amount ofsubsequent changes is recognized in profit or loss.

4. Significant accounting estimates and judgments
In preparing the consolidated financial statements of the Group, management is required to makejudgments, estimates and assumptions that affect the application of accounting policies and the disclosureof reported amounts of income, expenses, assets and liabilities. However, actual results may differ fromthese estimates.
The estimates and their underlying assumptions are reviewed on a continuous basis. The impact of thesereviews on estimates and assumptions are recognized in the period in which the estimates orassumptions are reviewed, the reporting period, and subsequent reporting periods.
In the application of the accounting policies, estimates and judgments that may have a particularly
significant effect on the amounts recognized in the consolidated financial statements of the Group are as
follows:
・ Valuation of goodwill（Note 3. “Significant accounting policies (8) Goodwill and intangible assets”）
Careful judgments are made with external experts for estimates of future cash flows based on thebusiness plan*, growth rates and discount rates to be used in the impairment test for goodwill.
However, these judgments are subject to future uncertainties.
In addition, although the impact of COVID-19 on the future business performance has, to a certain
extent, been factored into the business plan of each company, the timing of convergence is still
uncertain, and that uncertainty may increase in the future.
In the event of an increase in the discount rate or a decrease in the growth rate, an impairment loss
may be incurred.
*This refers to MVP-22, which is the medium-term management plan approved by management forthe period up to fiscal 2022. Future plans thereafter are determined based on the growth rate in themedium-term management plan and through estimation on the basis of the long-term average growthrate, etc., of the market in which the cash-generating unit is operating.

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・ Estimates of fair value of intangible assets acquired in a business combination（Note 3. “Significant accounting policies (2) Business combinations”）
The Group uses external experts to evaluate the estimates of fair value of intangible assets acquired
in a business combination at the acquisition date. These estimates are subject to future uncertainties.
Specifically, for the measurement of customer-related assets, the Group uses future sales plans andattrition rates of existing customers and discount rates, and for the measurement of technologyrelated assets, the Group uses future sales plans, obsolescence rates of technology assets anddiscount rates.
・ Estimates of the total cost of transactions that recognize revenue over a certain period of time
（Note 3. “Significant accounting policies (14) Revenue”）
The Group uses estimated total costs to measure the degree of the construction’s progress, which isused for recognizing revenues over a certain period of time. However, these estimates are subject tofuture uncertainties due to technical or physical factors and changes in the environment surrounding
the contracts.
In addition, other estimates and judgments that are considered important are as follows:・ Impairment of non-financial assets（Note 3. “Significant accounting policies (10) Impairment of non-financial assets”）
・ Useful lives of intangible assets（Note 3. “Significant accounting policies (8) Goodwill and intangible assets”）
・ Recoverability of deferred tax assets（Note 3. “Significant accounting policies (16) Income taxes”）
・ Estimates of the extension option and cancellation option in lease agreements（Note 3. “Significant accounting policies (9) Leases”）
・ Provisions（Note 3. “Significant accounting policies (13) Provisions”）
・ Measurement of defined benefit obligations（Note 3. “Significant accounting policies (11) Employee benefits”）
・ Fair value of financial instruments（Note 3. “Significant accounting policies (4) Financial instruments”）(Additional information)
During the fiscal year ended March 31, 2021, economic activities worldwide were sluggish in the face of
lockdowns and movement restrictions, among other measures, in response to the COVID-19 pandemic.
The second half of the fiscal year, however, brought signs of a recovery as economic activities gradually
resumed. The Group is suffering from impacts of declines in orders and net sales due to a fall in capacity
utilization at plants of customers, except for some customers such as the electronics industry.
It is difficult to reasonably predict the future spread of the disease, or when the spread would converge.
However, the Group has made accounting estimates, including impairment tests for goodwill andintangible assets, based on the assumption that, according to information, etc., from external sources,
economic activities will gradually normalize in the second half of the fiscal year ending March 31, 2022. If
a revision should become necessary, it may have a significant impact on the amounts to be recognizedin the consolidated financial statements from the fiscal year ending March 31, 2022 onward.

5. New standards not yet appliedWith respect to the standards or interpretations newly issued or amended by the date of the approval of
the consolidated financial statements, the Group has not applied them early as of March 31, 2021.
The impact of the application is not stated herein, due to its immateriality.

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6. Segment information(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial
information is available. These segments are subject to periodic review to enable the Company’s Board of
Directors to decide how to allocate resources and assess performance.
The Group plans comprehensive strategies for the products and services that it handles in Japan andoverseas and conducts business accordingly. The Group’s operations are therefore classified into tworeportable segments, the Water Treatment Chemicals business and the Water Treatment Facilities
business.
The Water Treatment Chemicals business manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities business manufacturesand sells water treatment equipment and facilities, provides ultrapure water, chemical cleaning, toolcleaning, soil and groundwater remediation services, and provides maintenance services that encompass
operation, maintenance, and management of water treatment facilities.
(2) Information on reportable segments
The accounting policies for reportable segments are the same as the accounting policies for the Group,
which are provided in Note 3. “Significant accounting policies.” Intersegment sales are based on prevailingmarket prices.
Fiscal year ended March 31, 2020
Millions of yen

2020
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method

Reportable segments
Water
Water
treatment
treatmentchemicals
facilities¥113,632
681
114,313
10,127¥151,174
1,777
152,952
17,390Total¥264,807
2,458
267,265
27,518Adjustments(Notes)¥—(2,458)(2,458)(38)¥264,807—
264,80727,479569(1,417)
60

Profit before tax
Segment assets

Consolidated¥26,691¥119,960¥209,015¥328,975¥58,774¥387,749

Other items
Depreciation and amortization¥5,496¥13,204¥18,700¥—¥18,700
Impairment losses
—
29
29
—
29
Investments accounted for using equity
2,489
4,960
7,449
20
7,469
methodCapital expenditures
6,853
26,42833,281—33,281
Notes 1. Adjustments to segment profit include the elimination of inter-segment transactions, etc.
2. Segment profit presents the amount of operating profit.
3. Adjustments to segment assets include the elimination of inter-segment transactions, etc., and consist mainlyof corporate assets unallocated to reportable segments.
4. Capital expenditures include an increase in right-of-use assets.
5. Capital expenditures do not include assets acquired through business acquisitions.

- 35 -

Fiscal year ended March 31, 2021
Millions of yen

2021
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method

Reportable segments
Water
Water
treatment
treatmentchemicals
facilities¥103,231
453
103,684
11,816¥164,518
2,306
166,825
19,634

Total¥267,749
2,760
270,50931,451

Adjustments(Notes)¥—(2,760)(2,760)78

Other items
Depreciation and amortization
Impairment losses
Investments accounted for using equity
methodCapital expenditures

2021
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method¥29,150¥123,476¥233,530¥357,006¥67,921¥424,928¥4,986—¥15,752
1,419¥20,739
1,419

¥—
—

¥20,739
1,419

1,448

110

1,558

19

1,578

8,719

25,84834,568—34,568

Thousands of U.S. dollars
Reportable segments
Water
Water
treatment
treatment
Adjustments
chemicals
facilities
Total(Notes)Consolidated$930,009
4,081
934,090
106,450$1,482,144
20,774
1,502,927
176,882$2,412,153
24,8642,437,018
283,342$—(24,864)(24,864)702$2,412,153—
2,412,153
284,045
4,909(17,324)(9,000)

Profit before tax
Segment assets¥267,749—
267,749
31,529545(1,923)(999)

Profit before tax
Segment assets

Consolidated$262,612$1,112,396$2,103,873$3,216,270$611,900$3,828,180

Other items
Depreciation and amortization$44,918$141,909$186,837$—$186,837
Impairment losses—
12,783
12,783—
12,783
Investments accounted for using equity
13,045990
14,036
171
14,216
methodCapital expenditures
78,549232,864
311,423—
311,423
Notes 1. Adjustments to segment profit include the elimination of inter-segment transactions, etc.
2. Segment profit presents the amount of operating profit.
3. Adjustments to segment assets include the elimination of inter-segment transactions, etc., and consist mainlyof corporate assets unallocated to reportable segments.
4. Capital expenditures include an increase in right-of-use assets.
5. Capital expenditures do not include assets acquired through business acquisitions.
6. Impairment losses consist mainly of impairment losses on goodwill of ¥1,304 million ($11,747 thousand).

- 36 -

(3) Information about products and services
This information is omitted since the classification of products and services herein follows the sameclassification as used for reportable segments.
(4) Information about geographical areas
Non-current assets and net sales to external customers by geographical areas are as follows:
1) Non-current assets
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Japan
¥110,963¥119,495$1,076,531
Asia
17,446
17,939161,612
North America
40,161
55,323
498,405
EMEA
15,695
16,975
152,927
Other
405
370
3,333
Total
¥184,671¥210,104$1,892,828
Note Non-current assets are allocated based on the location of assets, and financial instruments or deferred tax assets are notincluded. EMEA refers to the European, Middle Eastern and African regions.

2) Net sales
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Japan
¥161,699¥161,371$1,453,792
Asia
52,50948,535437,252
North America
28,82636,994333,279
EMEA
19,132
18,681
168,297
Other
2,639
2,166
19,513
Total¥264,807¥267,749$2,412,153
Note Net sales are allocated to a country or areas based on the locations of customers. EMEA refers to the European, Middle
Eastern and African regions.

(5) Information about major customers
This information is omitted since there is no single external customer that accounts for 10% or more of the net sales
in the consolidated statement of profit or loss.

- 37 -

7. Business combinations and Acquisition of non-controlling interests
Fiscal year ended March 31, 2020
(Acquisition of Avista Technologies, Inc., Avista Technologies (UK) Ltd. (currently Kurita UK Ltd.;
hereinafter the same shall apply) and Avista Singapore Pte Ltd.)The Group acquired all shares outstanding of Avista Technologies, Inc., a manufacturing and sales
company of water treatment chemicals in the United States, through Kurita America Holdings Inc., awholly owned subsidiary of the Company, on May 15, 2019. Through the investment in Avista
Technologies, Inc., the Group also acquired Avista Singapore Pte Ltd., a wholly owned subsidiary of
Avista Technologies, Inc. On the same date, the Group acquired all shares outstanding of Avista
Technologies (UK) Ltd., a manufacturing and sales company of water treatment chemicals in the United
Kingdom, through Kurita Europe GmbH, a wholly owned subsidiary of the Company.
Avista Technologies specializes in reverse osmosis (RO) chemicals that are applied to RO membranes,
one of the components of water treatment facilities, among water treatment chemicals. It manufacturesand sells a wide variety of RO chemicals. Avista Technologies also develops services including RO
membrane cleaning and has many customers in a broad range of industrial fields including mining,chemical, oil, marine oilfields, food, beverages and local governments, mainly in the United States. Avista
Technologies (UK) develops similar businesses in EMEA (Europe, the Middle East and Africa) throughlicensing from Avista Technologies. The Group will bolster the product lineup of RO chemicals by
combining RO chemicals of Avista Technologies and distinctive RO chemicals of the Company and willseek to expand sales of RO chemicals by proposing a wider range of products to all customers. The
Group will also strengthen its RO membrane-related services by sharing the technologies and know-how
of the both companies.
(1) Assets acquired and liabilities assumed
The fair value of identifiable assets acquired and liabilities assumed of Avista Technologies, Inc. andAvista Singapore Pte Ltd. as of the acquisition date are as follows:
2020
Fair value of consideration (cash)
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents
Trade receivables
Other current assets
Non-current assets
Trade and other payables
Non-current liabilities
Fair value of assets acquired and liabilities assumed (net)
Goodwill

Millions of yen¥7,615
248
341
142
3,244
(666)
(50)
3,259
¥4,355In the fourth quarter of the fiscal year ended March 31, 2020, the amount of goodwill as of the acquisition
date decreased by ¥2,858 million, due to finalization of the provisional accounting process. This was
mainly attributable to an increase of ¥1,764 million in intangible assets.
The amount of goodwill that occurred was ¥4,355 million, which reflects expected excess earning power.
The Group expects that some amount of the recognized goodwill can be deductible for tax purposes.

- 38 -

The fair value of identifiable assets acquired and liabilities assumed of Avista Technologies (UK) Ltd. as of
the acquisition date are as follows:
2020
Fair value of consideration (cash)
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents
Other current assets
Non-current assets
Other current liabilities
Non-current liabilities
Fair value of assets acquired and liabilities assumed (net)
Goodwill

Millions of yen¥1,889
957
223
723
(256)
(141)
1,505
¥383

In the fourth quarter of the fiscal year ended March 31, 2020, the amount of goodwill as of the acquisition
date decreased by ¥578 million, due to finalization of the provisional accounting process. This was mainly
attributable to an increase of ¥702 million in intangible assets.
The amount of goodwill that occurred was ¥383 million, which reflects expected excess earning power.
For goodwill, the Group does not expect any amounts that can be deductible for tax purposes.
Net sales and profit of Avista Technologies, Inc., Avista Technologies (UK) Ltd., and Avista Singapore PteLtd., which are included in the consolidated statement of profit or loss for the fiscal year ended March 31,
2020, are immaterial.
Pro forma information, under the assumption that the business combination was conducted at the
beginning of the fiscal year ended March 31, 2020, is not stated here, as its effect on the consolidated
statement of profit or loss for the fiscal year ended March 31, 2020 is immaterial.
(2) Transactions that are accounted for separately from business combination
Acquisition-related costs were ¥325 million. The amount is recorded in other expenses in the consolidated
statement of profit or loss.

- 39 -

Business combinations of entities or businesses under common control(1) Outline of the transaction
1) Company names and businesses at the time of business combination(i) Surviving company
Name:
U.S. Water Services, Inc.
Business: Manufacture, sale, and export and import of water treatment chemicals, manufacture, sale,design, building, and maintenance of water treatment equipment, and operation andmaintenance of water treatment facilities(ii) Merged companies
Name:
Kurita America, Inc.
Business: Manufacture and sale of water treatment chemicals, manufacture and sale of water
treatment equipment, and operation and maintenance of water treatment facilities
Name:
Business:

Fremont Industries, LLC
Manufacture and sale of water treatment chemicals

Name:
Business:

Global Water Services Holding Company, Inc.
Holding company of U.S. Water Services, Inc.

2) Date of business combination
March 31, 2020
3) Legal form of business combination
An absorption-type merger. The surviving company is U.S. Water Services, Inc. (a consolidated
subsidiary of Kurita America Holdings Inc., a wholly owned subsidiary of the Company). The merged
companies are Kurita America, Inc., Fremont Industries, LLC, and Global Water Services Holding
Company, Inc. (all of them are consolidated subsidiaries of Kurita America Holdings Inc., a wholly owned
subsidiary of the Company). The Company contributed shares in Kurita America, Inc. to Kurita America
Holdings Inc., a wholly owned subsidiary of the Company, in kind.
4) Name of the company after business combination
The company name after the business combination became Kurita America Inc. on April 1, 2020.
5) Main reason of integration
To integrate sales and production systems, business models, products, technologies, and management
systems, improve efficiency in business operation, and provide total solutions to customers.
(2) Outline of accounting
The business combination under common control is a business combination in which all companies orbusinesses involved are ultimately controlled by the same company before and after the businesscombination. The control is not temporary. The Group continues to perform accounting treatment basedon carrying the amount for all business combination transactions under common control.

- 40 -

Fiscal year ended March 31, 2021
(Acquisition of Pentagon Technologies Group, Inc.)On April 1, 2020, Kurita America Holdings Inc., a wholly owned subsidiary of the Company, purchased an
additional 26% of shares of Pentagon Technologies Group, Inc. (hereinafter “Pentagon Technologies”),
which is a U.S. tool cleaning company. Kurita America Holdings Inc. already held 25% of shares ofPentagon Technologies as of March 31, 2020. As a result, Kurita America Holdings Inc. owns 51% ofshares of Pentagon Technologies, which became a consolidated subsidiary of the Company.
The Company made Pentagon Technologies its subsidiary to have a base for overseas service in theelectronics industry, which the Company positions as a key business field, and to further increase its
competitiveness in the market. The Company will also accelerate its business growth and offer new valueby acquiring the cutting-edge tool cleaning technologies and expertise of Pentagon Technologies andcreating synergies with the tool cleaning business that the Group has been developing in Japan.
(1) Acquisition cost and breakdown
Consideration for acquisition
2021
Acquisition-date fair value of the shares of the acquiree held by
the acquirer immediately before the acquisition date
Fair value of the shares of the acquiree additionally acquired on
the acquisition date
Total

Millions ofyen

Thousands of
U.S. dollars¥5,379$48,4595,594

50,396¥10,974$98,864(2) Gain on remeasurement relating to business combinations
As a result of the remeasurement of the equity interest in the acquiree held immediately before theacquisition date at acquisition-date fair value, gain on remeasurement relating to business combinationsof ¥463 million ($4,171 thousand) was recognized due to the relevant business combination. This gain isrecorded in other income in the consolidated statement of profit or loss.
(3) Assets acquired and liabilities assumed
The fair value of identifiable assets acquired and liabilities assumed of Pentagon Technologies as of theacquisition date is as follows:
2021
Fair value of consideration for acquisition
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents
Trade receivables
Other current assets
Technology-related assets
Customer-related assets
Other non-current assets
Trade and other payables
Non-current liabilities
Fair value of assets acquired and liabilities assumed (net)Non-controlling interests
Goodwill- 41 -

Millions ofyen¥10,974

Thousands of
U.S. dollars$98,864

995
1,636
554
2,334
1,732
3,169
(1,520)(2,407)
6,494
3,260¥7,7398,963
14,7384,990
21,027
15,60328,549(13,693)(21,684)
58,50429,369$69,720

In the fourth quarter of the fiscal year ended March 31, 2021, the provisional accounting process was
finalized, and the amount of goodwill as of the acquisition date decreased by ¥1,881 million ($16,945
thousand). This was mainly attributable to increases of ¥1,234 million ($11,117 thousand) in non-current
liabilities and ¥1,808 million ($16,288 thousand) in non-controlling interests, despite increases of ¥2,334
million ($21,027 thousand) in technology-related assets and ¥1,732 million ($15,603 thousand) incustomer-related assets. The amount of goodwill that occurred was ¥7,739 million ($69,720 thousand),
which reflects expected excess earning power. The Group does not expect any amount related torecognized goodwill to be deductible for tax purposes.
Net sales and profit of Pentagon Technologies, which are included in the consolidated statement of profit
or loss for the fiscal year ended March 31, 2021, are ¥11,350 million ($102,252 thousand) and ¥814
million ($7,333 thousand), respectively.
Non-controlling interests are measured at their ownership interests of the fair value of the identifiable net
assets of the acquiree.
(4) Transactions that are accounted for separately from business combination
Acquisition-related costs were ¥171 million ($1,540 thousand). The amount is recorded in other expenses
in the consolidated statement of profit or loss.
(5) Forward contract concluded with non-controlling shareholders
With regard to the remaining 49% shares of Pentagon Technologies, a forward contract has beenconcluded between Kurita America Holdings, Inc. and non-controlling shareholders of Pentagon
Technologies, under which it has been agreed that Pentagon Technologies will become a wholly owned
subsidiary of Kurita America Holdings, Inc. with June 30, 2022 as the target date.
The present value of the expected transfer price based on the forward contract, which is ¥10,578 million($95,297 thousand), is initially recognized as other financial liabilities, and the same amount is deductedfrom capital surplus. After initial recognition, the present value is measured at amortized cost using theeffective interest method, in principle, and the amount of subsequent changes is recognized in profit orloss.

8. Cash and cash equivalents
The breakdown of cash and cash equivalents is as follows:
Millions of yen
2020
2021
¥49,140¥61,0391,074
1,189¥50,215¥62,228

Cash and deposits
Short-term investments
Total

Thousands of
U.S. dollars
2021$549,900
10,711$560,612

The balance of cash and cash equivalents in the consolidated statement of financial position matches thatin the consolidated statement of cash flows.

- 42 -

9. Trade and other receivables
The breakdown of trade and other receivables is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Notes and accounts receivable - trade¥69,338¥64,031$576,855
Accounts receivable - other
2,839
717
6,459
Contract asset
24,21832,347
291,414
Lease receivables
1,067
1,041
9,378
Allowance for doubtful accounts
(489)
(393)
(3,540)Total¥96,974¥97,745$880,585
Notes 1. In the consolidated statement of financial position, trade and other receivables are presented in the amountafter deduction of allowance for doubtful accounts.
2. With the exception of lease receivables, trade and other receivables are classified as financial assets
measured at amortized cost.

10. Other financial assets(1) Breakdown of other financial assets
The breakdown of other financial assets is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Shares¥21,002¥25,705$231,576
Insurance funds
3,463
4,228
38,090
Leasehold deposits
1,708
1,735
15,630Time deposits
2,062
2,454
22,108
Other
2,791
2,256
20,324
Total¥31,027¥36,380$327,747
Current assets¥2,562¥2,817$25,378
Non-current assets
28,46533,563
302,369
Notes 1. In the consolidated statement of financial position, other financial assets are presented in the amount after
deduction of allowance for doubtful accounts.
2. Insurance funds, shares, and time deposits and leasehold deposits are classified as financial assets measured
at fair value through profit or loss, financial assets measured at fair value through other comprehensive income
and financial assets measured at amortized cost, respectively. Other consists primarily of financial assets
measured at amortized cost.

- 43 -

(2) Financial assets measured at fair value through other comprehensive income
Major equity instruments and their fair values, of financial assets measured at fair value through othercomprehensive income, are as follows:
Thousands ofMillions of yen
U.S. dollars
Name of shares
2020
2021
2021
Daikin Industries, Ltd.
¥6,524¥11,057$99,612
ONO PHARMACEUTICAL CO., LTD.
5,141
5,976
53,837Shin-Etsu Chemical Co., Ltd.
1,918
3,327
29,972NIPPON SHOKUBAI CO.,LTD.
923
1,183
10,657
Otsuka Holdings Co., Ltd.
846
937
8,441
Note Shares are held primarily for business relationship purposes, and are therefore designated as financial assets measured
at fair value through other comprehensive income.

The Group sells (derecognizes) financial assets measured at fair value through other comprehensive
income in order to ensure the efficient and effective use of the assets it holds.
Fair values at the time of sales and cumulative gain or loss on disposal recognized as othercomprehensive income in equity are as follows:
Millions of yen
2020
2021
¥41
¥2,536

Thousands of
U.S. dollars
2021$22,846

Millions of yen
2020
2021
¥5,038¥5,248
1,291
948
2,917
3,714
¥9,247¥9,911Thousands of
U.S. dollars
2021$47,279
8,540
33,459$89,288

Fair value
Cumulative gain or loss on disposal recognized as other comprehensive
28
1,290
11,621income in equity
Note Cumulative gain or loss on disposal recognized as other comprehensive income in equity are reclassified to retained
earnings when the assets are sold or when their fair value declines significantly.

11. Inventories
The breakdown of inventories is as follows:

Finished goods
Work in process
Raw materials and supplies
Total- 44 -

12. Property, plant and equipment
Changes in carrying amount, acquisition cost, accumulated depreciation and impairment losses ofproperty, plant and equipment are as follows:
1) Carrying amountMillions of yen

Balance as of April 1, 2019
Individual acquisition
Acquisition through businesscombination
Depreciation (Note)
Impairment loss
Sale or disposal
Reclassification to other accountExchange differences ontranslation of foreign
operations
Other
Balance as of March 31, 2020
Individual acquisition
Acquisition through businesscombination
Depreciation (Note)
Impairment loss
Sale or disposal
Reclassification to other accountExchange differences ontranslation of foreign
operations
Other
Balance as of March 31, 2021

Buildings
andstructures¥14,319
321

Machineryandvehicles¥42,608891

Land¥14,527
—

84

28

—

(1,713)(29)(1,698)
8,832(9,094)—(163)
28,712(313)
44¥19,847
104

Constructionin progress¥28,088
18,158Other¥3,822715

Total¥103,366
20,085

—

7

119

—
—
(1,725)————(38,840)(1,399)
—
(23)
1,244

(12,207)(29)(3,610)
(50)

(737)

(176)

(29)

(78)

(1,333)(14)¥62,231707—¥12,624——¥7,37625,885(11)¥4,277816

19¥106,358
27,513

556

1,591

—

—

69

2,216

(1,874)
(15)
(423)
699

(10,349)—(3,643)
9,612

—
(99)
(1,138)————(11,699)(1,543)
—
(108)
961

(13,766)(115)(5,312)
(425)

144

636

150

103

127

1,162

(0)
¥19,03918¥60,805

0¥11,537

0¥21,666(45)¥4,554(26)¥117,603

Buildings
andstructures$178,801
936

Machineryandvehicles$560,639
6,369

Other
Balance as of March 31, 2020
$38,531
Individual acquisition
7,351
Acquisition through business
5,009
14,333——621
combination
Depreciation (Note)(16,882)(93,234)——(13,900)
Impairment loss
(135)
—
(891)
—
—
Sale or disposal(3,810)(32,819)(10,252)—(972)
Reclassification to other account
6,297
86,594—(105,396)
8,657
Exchange differences ontranslation of foreign
1,297
5,729
1,351
927
1,144
operations
Other
(0)
162
0
0
(405)
Balance as of March 31, 2021
$171,522$547,792$103,936$195,189$41,027
Note Depreciation of property, plant and equipment is included in cost of sales and selling, general andadministrative expenses in the consolidated statement of profit or loss.

Total$958,180
247,864

Thousands of U.S. dollars- 45 -

Land$113,729—

Constructionin progress$66,450
233,198

19,963(124,018)(1,036)(47,855)(3,828)
10,468(234)$1,059,486

2) Acquisition cost
Millions of yen

Balance as of April 1, 2019
Balance as of March 31, 2020
Balance as of March 31, 2021

Buildings
andstructures¥66,091¥48,956¥49,605

Machineryandvehicles¥144,892¥171,861¥177,839

Balance as of March 31, 2021

Buildings
andstructures$446,891

Machineryandvehicles$1,602,153

Land¥15,018¥13,122¥12,036

Constructionin progress¥28,088¥7,376¥21,666

Other¥16,608¥17,509¥18,440

Total¥270,698¥258,826¥279,588

Other$166,126

Total$2,518,810

Other¥12,786¥13,232¥13,885

Total¥167,332¥152,468¥161,984

Other$125,090

Total$1,459,315

Thousands of U.S. dollars
Land$108,432

Constructionin progress$195,189

3) Accumulated depreciation and impairment losses
Millions of yen

Balance as of April 1, 2019
Balance as of March 31, 2020
Balance as of March 31, 2021

Buildings
andstructures¥51,771¥29,109¥30,565

Machineryandvehicles¥102,284¥109,630¥117,034

Balance as of March 31, 2021

Buildings
andstructures$275,360

Machineryandvehicles$1,054,360

Land
¥490
¥497
¥498

Constructionin progress
¥—
¥—
¥—

Thousands of U.S. dollars- 46 -

Land$4,486

Constructionin progress$—

13. Goodwill and intangible assets(1) Table of changes
Changes in carrying amount, acquisition cost, accumulated amortization and impairment losses of
goodwill and intangible fixed assets are as follows:
1) Carrying amount

Balance as of April 1, 2019
Individual acquisition
Acquisition through business combination
Amortization (Note)
Exchange differences on translation offoreign operations
Other changes
Balance as of March 31, 2020
Individual acquisition
Acquisition through business combination
Amortization (Note)
Impairment loss
Sale or disposal
Exchange differences on translation offoreign operations
Other changes
Balance as of March 31, 2021

Goodwill¥43,758—
4,739—

Millions of yen
Customerrelated
Softwareassets¥2,582¥6,591
1,515
—
—
2,167
(886)
(940)

Other
¥3,18118363(1,055)

Total¥56,1131,534
7,269(2,882)(1,464)

0

(228)

(20)

(1,712)—¥47,033—
7,739—(1,304)—96¥3,307
1,908—(1,122)—(33)

65¥7,655
—
1,732
(881)
—
—

(69)
¥2,418
1
2,371
(819)
—
—

92
¥60,415
1,909
11,843(2,823)(1,304)
(33)

2,136

27

209

42

2,416

(8)
¥55,596455¥4,542(0)¥8,71647¥4,061

494¥72,916

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$29,792$68,963$21,783
17,189—9—15,60321,360(10,108)(7,936)(7,378)
—
—
—
(297)
—
—

Goodwill
Total
Balance as of March 31, 2020
$423,720$544,279
Individual acquisition—
17,198Acquisition through business combination
69,720106,693
Amortization (Note)—(25,432)
Impairment loss
(11,747)(11,747)
Sale or disposal—(297)
Exchange differences on translation of
19,243
243
1,882
378
21,765
foreign operations
Other changes
(72)
4,099
(0)
423
4,450
Balance as of March 31, 2021
$500,864$40,918$78,522$36,585$656,900
Note Amortization of intangible assets is included in cost of sales and selling, general and administrative expenses
in the consolidated statement of profit or loss.

- 47 -

2) Acquisition cost

Balance as of April 1, 2019
Balance as of March 31, 2020
Balance as of March 31, 2021

Balance as of March 31, 2021

Millions of yen
Customerrelated
assets¥8,425¥10,308¥12,472

Goodwill¥44,929¥48,204¥58,071

Software¥12,337¥13,694¥15,384

Other¥5,236¥4,686¥6,896

Total¥70,929¥76,894¥92,825

Goodwill$523,162

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$138,594$112,360$62,126

Total$836,261

Millions of yen
Customerrelated
assets¥1,834¥2,652¥3,7563) Accumulated amortization and impairment losses

Balance as of April 1, 2019
Balance as of March 31, 2020
Balance as of March 31, 2021

Balance as of March 31, 2021

Goodwill¥1,171¥1,171¥2,475

Software¥9,755¥10,387¥10,841

Other¥2,054¥2,268¥2,835

Total¥14,815¥16,479¥19,908

Goodwill$22,297

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$97,666$33,837$25,540

Total$179,351(2) Impairment tests for goodwill
The carrying amount of the goodwill allocated to each cash-generating unit is as follows:
Millions of yen
2020
2021
¥38,823¥40,584
10,405
11,710
4,322
4,739
4,324
4,390
19,40919,744361—¥8,210¥15,011
5,144
5,232
3,066
1,814
—
7,964
¥47,033¥55,596

Reportable segments
Water Treatment Chemicals
Kurita Europe GmbHHansu Co., Ltd.
Avista Technologies, Inc.
Kurita America, Inc.
OthersWater Treatment Facilities
Kurita America, Inc.
Kurita Fracta Holdings, Inc.
Pentagon Technologies Group, Inc.
Total

- 48 -

Thousands of
U.S. dollars
2021$365,621
105,495
42,69339,549177,873—$135,234
47,135
16,342
71,747$500,864

Impairment tests for major goodwill are performed as follows:
1) Kurita Europe GmbH (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 6.3%, and the discount rate used is determined with reference to the weighted average costof capital for the cash-generating unit. The forecast period of future cash flows is five years, based on abusiness plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 1.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2021.
For the fiscal year ended March 31, 2020, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 6.9% and 1.0%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
2) Hansu Co., Ltd. (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 11.2%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 0.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2021.
For the fiscal year ended March 31, 2020, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 10.6% and 0.0%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
3) Avista Technologies, Inc. (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 9.3%, and the discount rate used is determined with reference to the weighted average costof capital for the cash-generating unit.
The forecast period of future cash flows is five years, based on a business plan that was created reflecting
past experience and external information and approved by management. For periods after five years, agrowth rate of 2.2% is used, which was determined by taking into account the conditions of the market inwhich the cash-generating unit is operating. Accordingly, the recoverable amount exceeds the carrying
amount, and therefore, no impairment loss was recognized for the fiscal year ended March 31, 2021.
For the fiscal year ended March 31, 2020, the forecast period of future cash flows was three years, andthe discount rate and the growth rate used were 9.8% and 2.3%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.

- 49 -

4) Kurita America, Inc. (Water Treatment Chemicals business and Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 8.9%, and the discount rate used is determined with reference to the weighted average costof capital for the cash-generating unit.
In the fiscal year ended March 31, 2020, Kurita America, Inc. completed an absorption-type merger withthree consolidated subsidiaries based in the U.S. In estimating future cash flows after the businesscombination, the Group expects synergies such as the integration of sales and production systems,
business models, products, technologies, and management systems, as well as the improvement ofefficiency in business operation. The forecast period of future cash flows is five years, based on abusiness plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 1.7% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amounts exceed each of their carrying amounts, and therefore, no impairment loss wasrecognized for the fiscal year ended March 31, 2021.
For the fiscal year ended March 31, 2020, the forecast period of future cash flows was three years, andthe discount rate and the growth rate used were 9.7% and 2.3%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
5) Kurita Fracta Holdings, Inc. (Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 18.0%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 2.5% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount was less than the carrying amount, and therefore, an impairment loss of ¥1,304
million ($11,747 thousand) was recognized for the fiscal year ended March 31, 2021.
For the fiscal year ended March 31, 2020, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 17.2% and 2.5%, respectively.
6) Pentagon Technologies Group, Inc. (Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 10.6%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 1.7% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2021.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.

- 50 -

14. Impairment losses for non-financial assets
Business assets are grouped mainly by segment and idle assets are grouped by individual property.
Fiscal year ended March 31, 2020
This information is omitted due to the absence of material matters.
Fiscal year ended March 31, 2021
For the fiscal year ended March 31, 2021, impairment losses of ¥1,304 million ($11,747 thousand) wererecognized mainly on goodwill.
Details are provided in Note 13. “Goodwill and intangible assets.”

15. Investments accounted for using equity method(1) Material associates
Not applicable.
(2) Individually immaterial associates(i) The carrying amount of investments in individually immaterial associates is as follows:
Millions of yen
2020
2021
¥7,469¥1,578

Total carrying amountThousands of
U.S. dollars
2021$14,216(ii) The aggregate amount of the Group’s share of profit and comprehensive income of individually
immaterial associates is as follows:
Millions of yen
2020
2021
Share of:
ProfitOther comprehensive income
Comprehensive income

¥60
(94)
¥(34)

- 51 -¥(999)
24¥(975)

Thousands of
U.S. dollars
2021$(9,000)
216$(8,783)16. Income taxes(1) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities, classified by primary cause, are as follows:
Fiscal year ended March 31, 2020
Millions of yen

2020

Deferred tax assets
Depreciation
Net defined benefit liability
Accrued bonuses to employees
Accrued paid absences
The carryforward of unused tax losses
Unrealized gain on the sale of fixed assets
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Tax effects related to retained earnings offoreign subsidiaries
Other
Total deferred tax liabilities
Net

Recognized inothercomprehensive
incomeApril 1, 2019

Recognizedthrough
profit or loss

¥6,359
4,754
722
609
540
491
1,341
14,818¥(3,784)
51
21
46
221
(11)
290
(3,164)

¥—
(53)
—
—
—
—
(14)
(68)

¥—
—
—
—
—
—
1,091
1,091

¥2,575
4,751
743
655
762
479
2,707
12,677

3,941

—

42

—

3,984

1,591

89

—

—

1,680

3,627
9,160
¥5,658343
432¥(3,597)

(24)
18
¥(86)

116
116
¥974

4,062
9,728
¥2,949March 31,
2020

Other

Fiscal year ended March 31, 2021
Millions of yen

2021

Deferred tax assets
Depreciation
Net defined benefit liability
Accrued bonuses to employees
Accrued paid absences
The carryforward of unused tax losses
Unrealized gain on the sale of fixed assets
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Tax effects related to retained earnings offoreign subsidiaries
Other
Total deferred tax liabilities
Net

Recognized inothercomprehensive
incomeApril 1, 2020

Recognizedthrough
profit or loss

¥2,575
4,751
743
655
762
479
2,707
12,677

¥49
142
88
17
383
(168)
835
1,347

¥—
97
—
—
—
—
40
137

¥—
—
—
—
—
—
—
—

¥2,624
4,991
832
672
1,145
311
3,583
14,161

3,984

—

1,821

—

5,805

1,680

485

—

—

2,166

4,062
9,728
¥2,949

161
647
¥700

(221)
1,599
¥(1,462)

1,355
1,355
¥(1,355)

5,358
13,330¥831- 52 -March 31,
2021

Other

Thousands of U.S. dollars

2021

Deferred tax assets
Depreciation
Net defined benefit liability
Accrued bonuses to employees
Accrued paid absences
The carryforward of unused tax losses
Unrealized gain on the sale of fixed assets
Other
Total deferred tax assets
Deferred tax liabilities
Financial assets measured at fair value
through other comprehensive income
Tax effects related to retained earnings offoreign subsidiaries
Other
Total deferred tax liabilities
Net

Recognized inothercomprehensive
incomeApril 1, 2020

Recognizedthrough
profit or loss

$23,198
42,801
6,693
5,900
6,864
4,315
24,387
114,207

$441
1,279
792
153
3,450
(1,513)
7,522
12,135

$—
873
—
—
—
—
360
1,234

$—
—
—
—
—
—
—
—

$23,639
44,963
7,495
6,054
10,3152,801
32,279127,576

35,891—

16,405—52,297

15,135

4,369

—

—

19,51336,594
87,639$26,567

1,450
5,828
$6,306(1,990)14,405$(13,171)12,207
12,207$(12,207)

48,270120,090$7,486

March 31,
2021

Other

(2) Unrecognized deferred tax assets
The following are deductible temporary differences, the carryforward of unused tax losses (breakdown by
expiration) and unused tax credits (breakdown by expiration) for which no deferred tax assets arerecognized in the consolidated statement of financial position. Amounts hereunder are presented on a tax
amount basis.
Millions of yen
2020
2021
¥5,466¥5,437

Deductible temporary differences
The carryforward of unused tax losses
Less than 1 year
1 year or more and less than 5 years
5 years or more
Total
The carryforward of unused tax credits
Less than 1 year
1 year or more and less than 5 years
5 years or more
Total

Thousands of
U.S. dollars
2021$48,981¥3
3
2,028¥2,034¥—18
2,206¥2,225$—
162
19,873$20,045

¥—
—
—
¥—

¥—
—
—
¥—

$—
—
—
$—

(3) Unrecognized deferred tax liabilities
The total amount of temporary differences related to investments in subsidiaries, etc., that are notrecognized as deferred tax liabilities as of March 31, 2020 and 2021 are ¥26,003 million and ¥30,095
million ($271,126 thousand), respectively. When the Group is capable of controlling the timing of thereversal of temporary differences and the temporary differences will not reverse within the foreseeable
future, no deferred tax liability related to such temporary differences is recognized.

- 53 -

(4) Income taxes recognized through profit or loss
The breakdown of income taxes recognized through profit or loss is as follows:
Millions of yen
2020
2021
¥4,724¥10,026

Current tax expense
Deferred tax expense
Origination and reversal of temporary differences
Changes in unrecognized deferred tax assets
Other
Total deferred tax expense
Total

3,661
(7)
—
3,654
¥8,378

(207)
(422)
(69)
(700)
¥9,326

Thousands of
U.S. dollars
2021$90,324(1,864)(3,801)(621)(6,306)$84,018(5) Reconciliation of the effective tax rate
Below is a breakdown of the principal items that caused a difference between the statutory effective tax
rate and the average effective tax rate. The Company is primarily subject to corporate tax, inhabitants’ tax
and enterprise tax. The statutory effective tax rate calculated based on these taxes is 30.6%. Foreignsubsidiaries are subject to income taxes, etc., in their respective countries of domicile.
Domestic statutory effective tax rate
Items permanently not tax deductible, such as entertainment expenses
Items permanently not taxable, such as dividend income
Increase (decrease) in unrecognized deferred tax assets
Tax credits
Difference in tax rates applied to foreign subsidiaries
Impairment of goodwill
Other
Average effective tax rate

2020
30.6%
0.9%
(0.1%)(0.9%)(0.6%)(1.5%)
—%
3.0%
31.4%

2021
30.6%
0.4%
(0.0%)(0.8%)(0.9%)(1.7%)
1.4%
3.0%
32.0%

17. Trade and other payables
The breakdown of trade and other payables is as follows:
Millions of yen
2020
2021
Notes and accounts payable - trade¥24,016¥22,907
Accounts payable - other
5,752
18,712Contract liabilities
5,912
4,886
Total
¥35,680¥46,506
Note Trade and other payables are classified as financial liabilities measured at amortized cost.

- 54 -

Thousands of
U.S. dollars
2021$206,369
168,576
44,018$418,972

18. Bonds and borrowings
The breakdown of bonds and borrowings is as follows:
Thousands ofMillions of yen
U.S. dollars
Average
2020
2021
2021
Due dateinterest rate
Short-term borrowings¥35,001¥—$—
Current portion of long-term borrowings
370
445
4,009
2.58%
1,305
1,317
11,864
3.16% 2022-2027
Long-term borrowings
Bonds—
29,889269,270
0.15% 2025
Total
¥36,677¥31,652$285,153
Current liabilities¥35,371¥445$4,009Non-current liabilities
1,305
31,207281,144
Total¥36,677¥31,652$285,153
Notes 1. The average interest rate is calculated using interest rates and balances as of March 31, 2021.
2. Bonds and borrowings are classified as financial liabilities measured at amortized cost.
3. The borrowings have no financial covenants that have a significant effect on the financial activities of theGroup.

The terms and conditions of the issuance of bonds are summarized as follows:

Name
The Company

Issue
First series of
unsecured bonds

Issue date
December
10, 2020

Millions of yen
2020
2021
¥—

¥30,000

Thousands of
U.S. dollars Interest
Redemption
2021
Collateral
rate
periodDecember$270,2700.150%
None
10, 2025

19. Other financial liabilities
The breakdown of other financial liabilities is as follows:
Millions of yen
2020
2021
¥1,164¥1,182
1,397
193

Thousands of
U.S. dollars
2021$10,648
1,738

Long-term guarantee deposits
Put options granted to non-controlling shareholders
Liabilities pertaining to forward contracts concluded—
12,326
111,045
with non-controlling shareholders
Other
219
—
—
Total
¥2,781¥13,703$123,450
Current liabilities¥219——
Non-current liabilities
2,562
13,703
123,450
Total¥2,781¥13,703$123,450
Notes 1. Long-term guarantee deposits and liabilities pertaining to forward contracts concluded with non-controllingshareholders are classified as financial liabilities measured at amortized cost.
2. Put options granted to non-controlling shareholders are classified as financial liabilities measured at fair value
through profit or loss.

- 55 -

20. Leases
Lease as lessee
The Group mainly leases buildings and structures, machinery, equipment and vehicles and land. Leaseterms mainly range from one year to 30 years, while the average interest rate that is applied to leaseliabilities is 1.4%. There are no significant purchase options, escalation clauses, or restrictions imposed
under lease agreements (including restrictions on dividends, additional borrowings and additional leases).
In domestic businesses in particular, lease agreements for buildings mostly allow the lessee to repeatedly
exercise an extension option and also include an early cancellation option only if cancellation is noticed inwriting to the counterparty no later than six months in advance. Only those lease payments corresponding
to the period during which the exercise of such options was reasonably expected with certainty areincluded in the measurement of lease liabilities.
1) Right-of-use assets
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Buildings and structures¥6,175¥8,452$76,144
Machinery and vehicles
1,584
1,610
14,504
Land
9,324
8,751
78,837
Other
699
591
5,324
Total
¥17,784¥19,405$174,819
Note The increases in right-of-use assets for the fiscal years ended March 31, 2020 and 2021 were ¥11,660 million and¥5,145 million ($46,351 thousand), respectively.

2) Expenses from lease
Millions of yen
2020
2021
Depreciation of right-of-use assets
Buildings and structures
Machinery and vehicles
Land
Other
Total depreciation of right-of-use assets
Interest expenses on lease liabilities
Short-term lease expense
Lease expense of low-value assets
Total expenses¥2,287
644
379
299
3,609
154
1,117
44
¥4,926¥2,778
684
420
256
4,139
225
1,020
136
¥5,522Thousands of
U.S. dollars
2021$25,027
6,162
3,783
2,306
37,288
2,027
9,189
1,225
$49,7473) Maturity analysis of lease liabilities
The maturity analysis of lease liabilities is described in Note 34. “Financial instruments (3) Liquidity risk.”
4) Total cash outflow for leases
The total amount of lease-related cash outflows for the fiscal years ended March 31, 2020 and 2021 was¥4,900 million and ¥5,449 million ($49,090 thousand), respectively.

- 56 -

21. Employee benefits(1) Overview of the retirement benefit plan adopted by the GroupThe Company and certain consolidated subsidiaries adopt funded and unfunded defined benefit plans anddefined contribution plans in order to provide retirement benefits to employees. Nearly all employees arecovered by these plans.
While these retirement benefit plans are exposed to risks, including general investment risks, interest raterisks and inflation risks, none are considered to be material.
The funded defined benefit plan is operated by pension funds that are legally separate from the Group.
The board of directors of the pension funds and the organization entrusted with management of thepension funds are required by law to act in the best interests of the plan members, while bearing the
responsibility for managing plan assets in accordance with given policies.
(2) Defined benefit plan
1) Reconciliation of defined benefit obligations and plan assets
The relationship between defined benefit obligations and plan assets and net defined benefit liability(asset) presented in the consolidated statement of financial position is as follows:

Present value of funded defined benefit obligations
Fair value of plan assets
Sub-total
Present value of unfunded defined benefit obligations
Net defined benefit liability (asset)

Millions of yen
2020
2021
¥563
¥671
(508)
(566)
54
105
16,85917,921¥16,913¥18,027

Amount presented in the consolidated statement of financial position
Retirement benefit liabilities
Net defined benefit liability (asset)¥16,913¥16,913- 57 -¥18,027¥18,027

Thousands of
U.S. dollars
2021$6,045(5,099)945
161,450$162,405$162,405$162,405

2) Reconciliation of the present value of defined benefit obligations
Changes in present value of defined benefit obligations are as follows:

Balance as of April 1, 2019
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2020
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Prior service cost and gains and losses on settlement
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2021

Balance as of March 31, 2020
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Prior service cost and gains and losses on settlement
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2021

In Japan¥14,625
957
38
(552)

Millions of yen
Outside Japan¥2,463
222
55
(202)

Total
¥17,089
1,180
94
(754)

29

11

40

(172)

43

(128)

—
(81)
¥14,846
972
65
(596)

(49)
31
¥2,575
206
58
(256)

(49)
(49)
¥17,421
1,179
123
(853)

142

(16)

125

198

8

206

—
—
151
¥15,779

(39)
227
49
¥2,814

(39)
227
201
¥18,593

Thousands of U.S. dollars
In Japan
Outside Japan
Total$133,747$23,198$156,945
8,756
1,855
10,621
585
522
1,108
(5,369)(2,306)(7,684)
1,279

(144)

1,126

1,783

72

1,855

—
—
1,360
$142,153

(351)
2,045
441
$25,351

(351)
2,045
1,810
$167,504

The weighted average duration of defined benefit obligations of the Company and principal consolidated
subsidiaries was 12 years in Japan and 23 years overseas in the fiscal year ended March 31, 2020, and12 years in Japan and 24 years overseas in the fiscal year ended March 31, 2021.

- 58 -

3) Reconciliation of the fair value of plan assets
Changes in fair value of plan assets are as follows:

Balance as of April 1, 2019
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2020
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2021

Balance as of March 31, 2020
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2021

Millions of yen
Outside Japan
¥508
10
(16)
61
3
(61)
1
¥508
10
(258)
258
0
48
(1)
¥566
Thousands of
U.S. dollars
Outside Japan
$4,57690(2,324)
2,324
0
432
(9)
$5,099

Information of changes in plan assets in Japan is omitted, as there is nothing applicable.
For the defined contribution plans, in the fiscal year ending March 31, 2022, the Group is scheduled tocontribute ¥65 million ($585 thousand).
4) Fair values of plan assets by asset category
Fair values of plan assets by principal asset category are as follows:
Millions of yen
2020
2021
¥508
¥566
¥508
¥566

Cash and cash equivalents
Total- 59 -

Thousands of
U.S. dollars
2021$5,099$5,099

5) Actuarial assumptions
The significant actuarial assumptions used to calculate the present value of defined benefit obligations of
the Company and its main domestic consolidated subsidiaries are as follows:
2020
0.50%

Discount rate

2021
0.40%

A sensitivity analysis (effects on defined benefit obligations) of significant actuarial assumptions of theCompany and its main domestic consolidated subsidiaries is as follows:
Millions of yen
2020
2021
Discount rate
0.5% increase
0.5% decrease¥(725)
790

Thousands of
U.S. dollars
2021¥(781)
852$(7,036)7,675(3) Employee benefits expense
The employee benefits expense included in cost of sales and selling, general and administrative
expenses in the consolidated statement of profit or loss is as follows:
Millions of yen
2020
2021
¥46,469¥49,845
2,760
3,089
8,820
8,342
¥58,050¥61,277

Wages, salaries, bonuses, etc.
Retirement benefit expenses
Other employee benefits expenses
Total

Thousands of
U.S. dollars
2021$449,054
27,82875,153$552,045

The amounts recognized as expense for the defined contribution plan were ¥1,250 million and ¥1,169
million ($10,531 thousand) in the fiscal years ended March 31, 2020 and 2021, respectively.

22. Provisions
An explanation for each provision is as follows:
1) Provision for loss on construction contracts
The Group recognizes a provision for losses that are expected to occur in or after the following fiscal year,with respect to contracted constructions for which a loss is expected to occur and the amount of such loss
can be reasonably estimated. Related expenses are expected to be incurred prior to completion of theconstruction, and additional expenses may arise in the case of an increase in estimated costs.
2) Provision for product warranties
To provide for warranty expenses that are expected to occur during the Company’s warranty period forsome delivered products or services, the Group recognizes a provision based on the actual amount of
warranty expenses paid in past fiscal years, taking into account the prospect of future warranty expenses.

- 60 -

3) Asset retirement obligations
To provide for the Group’s obligation to restore rental offices, buildings, etc., held by the Group, the Group
recognizes asset retirement obligations. Related expenses are expected to be paid after the usage period
has elapsed, and will be affected by future business plans, etc.
4) Provision for business restructuring
The Group recognizes a provision for losses that are expected to occur in the future, due to partial
closures and relocations, etc., of the Group’s overseas bases. While these expenses are expected to be
paid in the fiscal year ending March 31, 2022, additional expenses may be incurred if there is an increasein the estimated cost.
The breakdown of and changes in the provisions are as follows:
Fiscal year ended March 31, 2021
Millions of yen

Balance as of April 1, 2020
Increase during the period
Decrease during the period(due to intended use)(reversal)
Other
Balance as of March 31, 2021
Current liabilities
Non-current liabilities

Provision
for loss on
construction
contracts¥179
121

Provisionfor productwarranties
¥932
934

Asset
retirement
obligations
¥499
666

Provision forbusiness
restructuring
¥—
611

(178)
(0)
(0)
¥121
¥121
—

(874)
(7)
13
¥999
¥996
2

—
—
0
¥1,166
¥8
1,157

—
—
30
¥641
¥641
—

Other
¥445
—

Total
¥2,055
2,334

—
(368)
0
¥77
¥77
—

(1,052)(375)
44¥3,007¥1,847
1,160

Thousands of U.S. dollars

Balance as of April 1, 2020
Increase during the period
Decrease during the period(due to intended use)(reversal)
Other
Balance as of March 31, 2021
Current liabilities
Non-current liabilities

Provision
for loss on
construction
contracts$1,612
1,090

Provisionfor productwarranties$8,396
8,414

Asset
retirement
obligations$4,495
6,000

Provision forbusiness
restructuring
$—
5,504

Other
$4,009—Total$18,513
21,027(1,603)(0)(0)$1,090$1,090—(7,873)(63)
117$9,000$8,97218——
0$10,504$72
10,423——
270$5,774$5,774——(3,315)
0
$693
$693
—

(9,477)(3,378)396$27,090$16,639
10,450- 61 -

23. Share capital and other equity items(1) Share capital and capital surplus
The Japanese Companies Act (hereinafter the “Companies Act”) provides that 50% or more of the amount
paid or granted for share issue can be incorporated into share capital, while the remaining amount can beincorporated into capital reserves, which is included in capital surplus. The Companies Act also provides
that capital reserves can be incorporated into share capital by a resolution of a general meeting ofshareholders.
1) Number of authorized shares
The total number of authorized shares as of March 31, 2020 and 2021 remained at 531,000 thousand
shares of common stock.
2) Number of shares outstanding
ThousandsharesNumber ofcommonsharesApril 1, 2019116,200
Increase (decrease)—
March 31, 2020
116,200
Increase (decrease)—
March 31, 2021
116,200
Note All of the shares issued by the Company are no-par common stock without any limitation on the rights of theshares, and the outstanding shares have been paid in full.

(2) Retained earnings
The Companies Act provides that 10% of the amount to be paid as dividends from surplus shall be
accumulated as capital reserves or retained earnings reserves until the total amount of capital reserves
and retained earnings reserves reaches 25% of capital stock. The accumulated retained earnings
reserves can be used to eliminate losses carried forward. In addition, the retained earnings reserves canbe reversed by a resolution of a general meeting of shareholders.
(3) Treasury shares
ThousandsharesNumber ofsharesoutstanding
3,921
(16)
3,904
(45)
3,859

April 1, 2019
Increase (decrease)
March 31, 2020
Increase (decrease)
March 31, 2021

Millions of yen

Thousands of
U.S. dollars

Amount¥10,932(38)¥10,893$98,135(106)(954)¥10,787$97,180(4) Liabilities pertaining to forward contracts concluded with non-controlling shareholders
For forward contracts for shares in subsidiaries that have been concluded with non-controllingshareholders of Pentagon Technologies Group, Inc., a consolidated subsidiary, the Company deducted
the liabilities pursuant to the relevant contract from capital surplus.
The amount deducted from capital surplus in the fiscal year ended March 31, 2021 was ¥10,578 million($95,297 thousand).
For further details regarding the liabilities pertaining to forward contracts concluded with non-controllingshareholders, please refer to Note 3. “Significant accounting policies (19) Liabilities pertaining to forward
contracts concluded with non-controlling shareholders.”- 62 -

24. Dividends(1) Amount of dividends paid
Fiscal year ended March 31, 2020
Millions of yen
Yen
Type of
Total amount
Dividend
Resolution
sharesof dividend
per share
Record date
Effective dateJune 27, 2019
CommonOrdinary General Meeting of Shareholders
share¥3,040¥27
March 31, 2019 June 28, 2019
November 11, 2019
CommonSeptember 30,
November 29,
Board of Directors’ meetingshare¥3,490
¥31
2019
2019
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 27, 2019 includes dividends of ¥8 million paid for 327 thousand shares of the Company(entrusted for performance-linked stock compensation for Directors) held by the trust account of Custody Bankof Japan, Ltd.
The total amount of dividends determined by a resolution of the Board of Directors meeting held on November
11, 2019 includes dividends of ¥9 million paid for 312 thousand shares of the Company (entrusted for
performance-linked stock compensation for Directors) held by the trust account of Custody Bank of Japan, Ltd.

Fiscal year ended March 31, 2021
Resolution
June 29, 2020
Ordinary General Meeting of Shareholders
November 5, 2020
Board of Directors’ meeting

Type ofsharesCommonshare
Commonshare

Millions of yen
Total amountof dividend

Yen
Dividend
per share¥3,490¥31¥3,603¥32

Thousands of
U.S. dollars
Total amountof dividendRecord date

Effective date

March 31, 2020
September 30,
2020

June 30, 2020
November 27,
2020

U.S. dollar
Type of
Dividend
Resolution
sharesper share
Record date
Effective dateJune 29, 2020
CommonOrdinary General Meeting of Shareholders
share$31,441$0.28 March 31, 2020 June 30, 2020
November 5, 2020
CommonSeptember 30,
November 27,
Board of Directors’ meetingshare$32,459$0.29 2020
2020
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2020 includes dividends of ¥9 million ($81 thousand) paid for 312 thousand shares of theCompany (entrusted for performance-linked stock compensation for Directors) held by the trust account of
Custody Bank of Japan, Ltd.
The total amount of dividends determined by a resolution of the Board of Directors meeting held on November
5, 2020 includes dividends of ¥8 million ($72 thousand) paid for 274 thousand shares of the Company(entrusted for performance-linked stock compensation for Directors) held by the trust account of Custody Bankof Japan, Ltd.

- 63 -

(2) Dividends whose effective date falls in the fiscal year ending March 31, 2022

Resolution
June 29, 2021
Ordinary General Meeting of Shareholders

Type ofsharesCommonshare

Millions of yen
Total amountof dividend

Yen
Dividend
per share

Record date

Effective date

¥34

March 31, 2021

June 30, 2021

¥3,828
Thousands of
U.S. dollars
Total amountof dividend

U.S. dollar
Type of
Dividend
Resolution
sharesper share
Record date
Effective dateJune 29, 2021
CommonOrdinary General Meeting of Shareholders
share$34,486$0.31 March 31, 2021 June 30, 2021
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2021 includes dividends of ¥9 million ($81 thousand) paid for 274 thousand shares of theCompany (entrusted for performance-linked stock compensation for Directors) held by the trust account of
Custody Bank of Japan, Ltd.

25. Net sales(1) Breakdown of net sales recognized from contracts with customers
Fiscal year ended March 31, 2020
Millions of yen
Reportable segments
Water
Water
treatment
treatment
2020
chemicals
facilities
Consolidated
Japan¥46,024¥115,675¥161,699
Asia
26,351
26,15852,509North America
19,492
9,334
28,826
EMEA
19,125
6
19,132
Other
2,639
—
2,639
Total
¥113,632¥151,174¥264,807
Notes 1. The above amounts are presented after deduction of inter-segment transactions.
2. Net sales are broken down into countries or regions based on customer location. EMEA refers to theEuropean, Middle Eastern and African regions.

Fiscal year ended March 31, 2021
Millions of yen
Reportable segments
Water
Water
treatment
treatmentchemicals
facilities
Consolidated¥42,240¥119,131¥161,371
22,457
26,07748,535
17,684
19,30936,994
18,681—
18,681
2,166
—
2,166
¥103,231¥164,518¥267,749

2021
Japan
Asia
North America
EMEA
Other
Total

- 64 -

Thousands of U.S. dollars
Reportable segments
Water
Water
treatment
treatment
2021
chemicals
facilities
Consolidated
Japan$380,540$1,073,252$1,453,792
Asia
202,315
234,927
437,252
North America
159,315
173,954333,279
EMEA
168,297—
168,297
Other
19,513—
19,513
Total$930,009$1,482,144$2,412,153
Notes 1. The above amounts are presented after deduction of inter-segment transactions.
2. Net sales are broken down into countries or regions based on customer location. EMEA refers to theEuropean, Middle Eastern and African regions.

For transactions with variable consideration, the most likely amount method or the expected value method
is used to recognize net sales to the extent that no significant reversal occurs in the future.
Although ultrapure water supply contracts have cancellation clauses, penalties for cancellation are notreflected into the transaction price since it is difficult to predict cancellation of existing conditions.
(2) Contract balances
The balance of receivables from contracts with customers, contract assets and contract liabilities is asfollows:
Fiscal year ended March 31, 2020
Millions of yen
2019
2020
¥69,117¥69,338
30,15324,218
4,586
5,912

2020
Receivables from contracts with customers
Contract assets
Contract liabilities

Fiscal year ended March 31, 2021
Millions of yen
2020
2021
¥69,338¥64,031
24,21832,347
5,912
4,886

2021
Receivables from contracts with customers
Contract assets
Contract liabilities

Thousands of
U.S. dollars
2021$576,855
291,41444,018In the consolidated statement of financial position, receivables from contracts with customers and contract
assets are included in trade and other receivables, while contract liabilities are included in other current
liabilities.
Revenues that were included in the balance of contract liabilities at the beginning of the fiscal years ended
March 31, 2020 and 2021 were ¥4,586 million and ¥5,912 million ($53,261 thousand), respectively.
Among the revenue for the fiscal years ended March 31, 2020 and 2021, the amount of revenue fromperformance obligations satisfied in past fiscal years is immaterial.
Significant changes in the balances of contract assets and contract liabilities are as follows:
Millions of yen

Increase due to recognition of net sales
Decrease due to transfer to receivables
Increase due to receipt of cash
Decrease due to recognition of net sales

2020
Contract
Contract
assetsliabilities¥92,292¥—(107,003)
—
—
7,117
—
(8,016)- 65 -

2021
Contract
Contract
assetsliabilities¥72,526¥—(65,707)
—
—
9,175
—
(10,333)

Thousands of
U.S. dollars
2021
Contract
Contract
assetsliabilities$653,387$—(591,954)——
82,657—(93,090)

(3) Performance obligations
For sales of products, when products have been delivered, the Company determines that performanceobligations have been satisfied and recognizes their sales.
For construction contracting, sales are recognized over the period of the construction contract, as
performance obligations are satisfied according to the construction’s progress. To measure progress, theinput method is applied, using the ratio of the incurred cost against the estimated total cost for eachcontract.
Considerations are received within a reasonable period from the time of satisfaction of performanceobligations. For these contracts, the expedient provided for in IFRS 15 “Revenue from Contracts with
Customers” is applied, and no adjustments related to financing components are performed.
Sales are measured at the consideration promised in the contract.
There are no significant contracts with customers regarding a return of products.
Furthermore, in connection with construction contracts, etc., the Company provides product warranty,
such as the free repair of defects identified within a certain period of time. Such warranty intends toprovide customers with a warranty to ensure that the products, etc., of the Company function as intended,in accordance with the specifications agreed upon with the customers. Future expenditures are estimatedby taking into account actual product warranty expenses in the past, and are recognized as a provision for
product warranties.
Scheduled period for satisfying remaining performance obligations
Millions of yen
2020
2021
¥41,171¥36,219
25,991
25,535¥67,162¥61,754

Up to 1 year
Over 1 year
Balance at end of period

Thousands of
U.S. dollars
2021$326,297
230,045$556,342

26. Selling, general and administrative expenses
The breakdown of selling, general and administrative expenses is as follows:
Millions of yen
2020
2021
¥5,693¥5,31734,78735,962
5,826
7,257
19,752
16,668¥66,060¥65,206

Research and development expenses
Employee benefits expense
Depreciation and amortization
Other
Total

Thousands of
U.S. dollars
2021$47,900
323,981
65,378150,162$587,441

27. Other income
The breakdown of the items and amounts included in other income is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Gain on sale of fixed assets¥4,777¥1,342$12,090
Gain on settlement of contracts—
2,066
18,612
Other
1,055
2,521
22,711
Total¥5,832¥5,929$53,414
Notes 1. ¥4,752 million of Gain on sale of fixed assets for the fiscal year ended March 31, 2020 is due to the sale of acertain facility in the ultrapure water supply business.
2. Gain on settlement of contracts for the fiscal year ended March 31, 2021 was generated as a result of thetermination of a contract with a certain customer in the ultrapure water supply business.

- 66 -

28. Other expenses
The breakdown of the items and amounts included in other expenses is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Loss on sales and retirement of property, plant and equipment¥2,413¥156$1,405
Impairment losses
29
1,419
12,783
Other
2,563
2,294
20,666
Total¥5,006¥3,870$34,864
Note Among the impairment losses for the fiscal year ended March 31, 2021, ¥1,304 million ($11,747 thousand) isfrom an impairment of goodwill related to Kurita Fracta Holdings, Inc. Details are provided in Note 13. “Goodwill
and intangible assets.”

29. Finance income and Finance costs(1) Finance income
The breakdown of finance income is as follows:
Millions of yen
2020
2021

Thousands of
U.S. dollars
2021

Dividend income
Dividend income from financial assets held at end of period
¥409
¥320
$2,882
Dividend income from financial assets derecognized during the period
040360Interest income
156
132
1,189
Foreign exchange gains
—
22
198
Other
2
28
252
Total
¥569
¥545
$4,909Notes 1. Dividend income relates to financial assets measured at fair value through other comprehensive income.
2. Interest income relates to financial assets measured at amortized cost.

(2) Finance costs
The breakdown of finance costs is as follows:
Millions of yen
2020
2021
Interest expense
¥296
¥249
Loss on valuation and realization of fair value
884
1,400
Foreign exchange loss
20
—
Other
217
274
Total
¥1,417¥1,923Note Interest expense mainly relates to financial liabilities measured at amortized cost.

- 67 -

Thousands of
U.S. dollars
2021$2,243
12,612—
2,468$17,324

30. Other comprehensive income
The amount arising during the period, reclassification adjustments to profit or loss and the impact of tax
effects for each item of other comprehensive income are as follows:
Fiscal year ended March 31, 2020
Millions of yen

2020
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects¥(673)¥—¥(673)¥210¥(462)

91

—

91

(28)

62

(581)

—

(581)

181

(400)

(4,316)—(4,316)—(4,316)

95

181

277

(84)

192

(94)

—

(94)

—

(94)

(4,315)

181(4,134)(84)(4,219)¥(4,897)¥181¥(4,715)¥96¥(4,619)

Fiscal year ended March 31, 2021
Millions of yen

2021
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects¥7,124¥—¥7,124¥(1,921)¥5,202

(331)

—

(331)

97

(234)

6,792

—

6,792

(1,824)

4,968

4,851

—

4,851

—

4,851

(851)

(4)

(856)

262

(594)

24

—

24

—

24

4,023

(4)

4,018

262

4,280

¥10,816¥(4)¥10,811¥(1,562)¥9,249- 68 -

Thousands of U.S. dollars

2021
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects$64,180$—$64,180$(17,306)$46,864(2,981)—(2,981)873(2,108)61,189—61,189(16,432)

44,75643,702—

43,702—

43,702(7,666)(36)(7,711)

2,360(5,351)

216

—

216

—

216

36,243(36)

36,1982,360

38,558$97,441$(36)$97,396$(14,072)$83,324

Millions of yen
2020
2021
¥18,287¥19,088——¥18,287
19,088

Thousands of
U.S. dollars
2021$171,963—
171,963

31. Earnings per share
The calculation bases for basic earnings per share are as follows:

Profit attributable to owners of parent
Profit not attributable to ordinary shareholders of parent
Profit used for calculation of basic earnings per share

Average number of common shares during the period (shares)
112,291,114
112,327,368
112,327,368
Notes 1. Diluted earnings per share are not stated because there are no dilutive shares.
2. The Company’s own shares posted as treasury shares remaining in trust are included in the treasury sharesthat are deducted in the calculation of the average number of shares outstanding for calculation for basic net
income per share. The numbers of average shares of the treasury shares that are deducted for the fiscal years
ended March 31, 2020 and 2021 are 317 thousand shares and 286 thousand shares, respectively.

- 69 -

32. Cash flow information(1) Changes in liabilities arising from financing activities
The changes in liabilities arising from financing activities are as follows:
Millions of yen

Balance as of April 1, 2019
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2020
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2021

Bonds andlong-term
borrowings¥2,103(384)

Short-termborrowings¥—
35,001Lease
liabilities¥13,446(4,514)

Total¥15,550
30,1028—(51)—¥1,67629,236————¥35,001(35,001)

77
11,99432(3,099)¥17,936(5,033)86
11,994(18)(3,099)¥54,614(10,798)

699
—
40
—
¥31,652

—
—
—
—
¥—

921
4,294
166
1,415
¥19,701

1,620
4,294
206
1,415
¥51,353

Thousands of U.S. dollars

Balance as of March 31, 2020
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2021

Bonds andlong-term
borrowings$15,099
263,387

Short-termborrowings$315,324(315,324)

Leaseliabilities$161,585(45,342)

Total$492,018(97,279)

6,297
—
360
—
$285,153

—
—
—
—
$—

8,297
38,684
1,495
12,747$177,486

14,59438,684
1,855
12,747$462,639(2) Payments for acquisition of businesses
The relationship between the consideration paid for the acquisition of businesses and the income andexpenditure for it is as follows:

Consideration paid in cash
Cash and cash equivalents included in the assets of the acquireeat the time of acquiring control
Payments for acquisition of businesses- 70 -

Millions of yen
2020
2021
¥9,706¥5,594

Thousands of
U.S. dollars
2021$50,396(1,204)(995)(8,963)¥8,501¥4,599$41,43233. Share-based payments(Overview of performance-linked stock compensation program and performance and share price-linked
monetary compensation program)
The Company has introduced a performance-linked stock compensation program that covers Directors(excluding External Directors; hereinafter the same shall apply) and Executive Officers as well as full-time
directors of certain domestic subsidiaries and associates, and a performance and share price-linked
monetary compensation program that covers certain officers of overseas subsidiaries and associates.
1. Performance-linked stock compensation program for Directors and for Executive Officers and certain
full-time directors of domestic subsidiaries and associates(1) Overview of the program
1) For Directors
Under the performance-linked stock compensation program for Directors, points are granted to eligible
individuals based on their position and performance, and upon their retirement from the post of Director,
the Company’s shares are delivered at a number equivalent to their accumulated points granted, andmoney is delivered at an amount equivalent to the conversion amount of the Company's shares into cash.
For the introduction of the program, a stock delivery trust (hereinafter the “Trust”) system for officers has
been applied, which is established through the monetary contributions of the Company. The program wasresolved with a trust period of five years at the 80th Ordinary General Meeting of Shareholders held on
June 29, 2016 and was introduced accordingly. As the term of the Trust is expiring, at a meeting of theBoard of Directors held on May 28, 2021, the Company decided to extend the term for three years.
2) For Executive Officers and full-time directors of certain domestic subsidiaries and associates
Under the performance-linked stock compensation program for Executive Officers and full-time directorsof certain domestic subsidiaries and associates, points are granted to eligible individuals based on theirposition and performance, and upon their retirement, the Company’s shares are delivered at a number
equivalent to their accumulated points granted, and money is delivered at an amount equivalent to theconversion amount of the Company's shares into cash, to the Executive Officers and full-time directors ofcertain domestic subsidiaries and associates who will retire (hereinafter collectively the “Retirees”). The
program employs a system in which the Retirees pay to the Company monetary compensation
receivables (contributed properties in kind related to the payment for the Company’s common shares)
granted by the company from which they retire and the Company delivers the Company’s shares to the
Retirees through a disposal of treasury shares or issuance of new shares. The program for Executive
Officers was resolved at the Board of Directors meeting held on February 27, 2018, and the program forfull-time directors of certain domestic subsidiaries and associates was resolved at the Ordinary General
Meeting of Shareholders of each company held in and after 2018, both of which were introduced
accordingly.
(2) Upper limits of the total number of shares scheduled to be acquired by Directors and the number ofshares scheduled to be acquired by Executive Officers and full-time directors of certain domestic
subsidiaries and associates.
1) For Directors: 339,800 shares
2) For Executive Officers and full-time directors of certain domestic subsidiaries and associates
In principle, points up to the equivalent of 2,215 shares annually are granted to each person.
(3) Scope of persons entitled to acquire beneficiary and other rights under the program
Directors as well as Executive Officers and full-time directors of certain domestic subsidiaries andassociates- 71 -

2. Performance and share price-linked monetary compensation program for certain officers of overseas
subsidiaries and associates(1) Overview of the program
Under the performance and share price-linked monetary compensation program for officers of certain
overseas subsidiaries and associates, points are granted to eligible individuals based on theirperformance, and three years after the end of the period subject to performance evaluation, money isdelivered at an amount equivalent to the conversion amount of the number of the Company's sharesequivalent to the number of points granted into cash.
(2) Scope of persons entitled to acquire beneficiary and other rights under the program
Certain officers of overseas subsidiaries and associates(Total amount of expenses under the performance-linked stock compensation program and theperformance and share price-linked monetary compensation program)
The part involving delivery of shares is accounted for as an equity-settled share-based paymenttransaction, while the part involving payment of cash is accounted for as a cash-settled share-based
payment transaction.
For the fiscal years ended March 31, 2020 and 2021, the expenses recorded in connection with thisprogram were ¥212 million and ¥250 million ($2,252 thousand), respectively.
(Liabilities arising from the performance-linked stock compensation program and the performance andshare price-linked monetary compensation program)
Liabilities arising from the part associated with the cash-settled share-based payment transaction arerecognized as liabilities arising from stock compensation, under other non-current liabilities.
The carrying amount of the liabilities arising from the program was ¥302 million and ¥414 million ($3,729
thousand) as of March 31, 2020 and 2021, respectively.
(Fair value of the points granted and the method for estimating such fair value)
As the fair value as of the grant date is deemed to approximate the price of the Company’s shares, it ismeasured mainly using the price of the Company’s shares as of the grant date. No adjustments are madein consideration of prospective dividends.
The number of points granted and their weighted average fair value in the fiscal years ended March 31,
2020 and 2021 are as follows:Yen
2020
78,711¥2,624

Number of points granted
Weighted average fair value as of the grant dates- 72 -

2021
71,119¥2,949U.S. dollars
2021
71,119$26,56734. Financial instruments(1) Capital management
The Group’s basic policy is to constantly secure liquidity necessary for business operations and resourceof funds.
Short-term working capital is basically supplied by the Group’s own funds. Capital investment and otherinvestments in growth fields depend chiefly on the Group’s own funds, but the Group anticipates
procurement in the bond market and through bank loans as required.
Temporary surplus funds are invested in highly safe financial assets, while derivatives are used only to
avoid the risks described below. In addition, it is our policy not to engage in speculative transactions.
2020
62.5%

Ratio of equity attributable to owners of parent

2021
59.6%

(2) Credit risk management
1) Content and management of risk
Notes and accounts receivable-trade, which are trade receivables of the Group, are exposed tocustomer’s credit risk.
Regarding such risk, in accordance with internal regulations, the Group conducts credit investigations of
its principal business partners, and manages the due dates and outstanding balances of each business
partner. In addition, efforts are made to quickly identify and mitigate any concerns regarding collection thatare mainly due to worsening financial positions.
Furthermore, regarding the use of derivatives, the Group deals with only financial institutions with highcredit standing, in order to reduce credit risk.
The carrying amount of financial assets presented in the consolidated statement of financial position is the
maximum exposure to credit risk of the Group’s financial assets.
For trade and other receivables, the Group always measures the allowance for doubtful accounts at thesame amount as the lifetime expected credit losses (simplified approach).
For financial assets measured at amortized cost other than the above, in order to recognize and measure
the allowance for doubtful accounts, financial assets are categorized into the following stages based on
the existence of a significant increase in credit risk and the existence of a credit impairment (generalapproach).
Stage 1: Financial assets for which credit risk has not increased significantly since initial recognition
Stage 2: Financial assets for which credit risk has increased significantly since initial recognition but
no credit impairment has been identified
Stage 3: Credit-impaired financial assets- 73 -

2) Quantitative and qualitative information on allowance for doubtful accounts and financial assets
coveredChanges in the total carrying amount of held financial assets are as follows:

Balance as of March 31, 2020
Balance as of March 31, 2021

Balance as of March 31, 2021

Financialassets undera simplified
approach¥97,464¥98,138

Millions of yen
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets¥5,701¥423¥89¥5,207
¥510
¥96

Total
¥103,678¥103,953

Financialassets undera simplified
approach$884,126

Thousands of U.S. dollars
Financial assets under a general approach
Stage 1
Stage 2
Stage 3Financial
Financialassetsrecognizedassets witha significant
at the sameamount asincrease in
Creditthe 12-monthcredit risk
impairedsince initialfinancialexpected
credit losses
recognition
assets$46,909$4,594$864

Total$936,513- 74 -

Changes in the allowance for doubtful accounts are as follows:

Balance as of April 1, 2019
Increase during the period
Decrease during the period
Balance as of March 31, 2020
Increase during the period
Decrease during the period
Balance as of March 31, 2021

Balance as of March 31, 2020
Increase during the period
Decrease during the period
Balance as of March 31, 2021

Financialassets undera simplified
approach
¥534
378
(388)
¥524
231
(362)
¥393

Millions of yen
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets
¥—
¥101
¥82
—
286
—
—
(10)
(1)
¥—
¥377
¥80
—
202
6
—
(81)
—
—
¥498
¥87

Total
¥718
665
(400)
¥982
440
(443)
¥979

Financialassets undera simplified
approach$4,7202,081(3,261)$3,540Thousands of U.S. dollars
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets witha significant
at the sameamount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets$—$3,396
$720
—
1,819
54
—
(729)
—
$—
$4,486$783

Total$8,846
3,963(3,990)$8,819- 75 -

Aging analyses for the financial assets as of fiscal years ended March 31, 2020 and 2021 are as follows:
The amounts expected to be recovered by insurance coverage and collateral obtained are included.
Fiscal year ended March 31, 2020

2020
Trade and other receivables
Other financial assets

Total¥97,464
6,214

Millions of yen
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
¥91,635¥4,207¥1,622
5,619
56
538

Total
¥98,138
5,814

Millions of yen
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
¥92,149¥3,562¥2,426
5,147
36
631

Total
$884,126
52,378

Thousands of U.S. dollars
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
$830,171$32,090$21,855
46,369324
5,684

Fiscal year ended March 31, 2021

2021
Trade and other receivables
Other financial assets

2021
Trade and other receivables
Other financial assets(3) Liquidity risk
The Group procures necessary funds mainly in the bond market and through bank loans. Financial
liabilities, such as bonds and borrowing, are exposed to liquidity risk. Such liquidity risk is primarily
managed by having the Finance Division formulate and update a cash flow management plan in a timely
manner, based on reports from each department, maintaining liquidity on hand above a certain level ofconsolidated net sales and taking other measures.

- 76 -

The balance of financial liabilities by due date is as follows:
Fiscal year ended March 31, 2020

2020
Non-derivative financial
liabilities
Trade and otherpayablesShort-termborrowings
Long-term
borrowings
Lease liabilities
Total

2020
Derivative liabilities
Put options onshares in foreignsubsidiaries
Total

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year¥35,680¥35,680¥35,680

¥—

¥—

¥—

¥—

¥—

35,00135,00135,001

—

—

—

—

—

1,676

1,676

370

217

217

217

217

435

17,936¥90,294

18,607¥90,966

4,328¥75,3812,500¥2,717

1,431¥1,6481,077¥1,295841¥1,0598,428¥8,864

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year¥1,397¥1,845¥608¥1,236

¥—

¥—

¥—

¥—

¥1,397¥1,845¥608¥1,236

¥—

¥—

¥—

¥—

- 77 -

Fiscal year ended March 31, 2021

Contractual
Book
2021
balance cash flows
Non-derivative financial
liabilities
Trade and other¥46,506¥46,506
payablesBonds
29,88930,227Long-term
1,763
1,914
borrowings
Lease liabilities
19,701
21,472
Liabilities pertaining toforward contracts
concluded with non12,326
13,384
controllingshareholders¥110,187 ¥113,505
Total

2021
Derivative liabilities
Put options onshares in foreignsubsidiaries
Total

2021
Non-derivative
financial liabilities
Trade and otherpayablesBonds
Long-term
borrowings
Lease liabilities
Liabilities pertaining
to forward
contracts
concluded with
non-controllingshareholders
Total

2021
Derivative liabilities
Put options onshares in foreignsubsidiaries
Total

Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 years

Up to
1 yearOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years¥46,506

¥—

¥—

¥—

¥—

¥—

45

45

45

45

30,045

—

491

471

249

241

234

226

4,561

3,409

1,823

1,141

983

9,553

—

13,384————¥51,605¥17,310¥2,118¥1,428¥31,262¥9,779Millions of yen
Over
Over
1 year
2 years
and up to and up to
2 years
3 yearsOver
3 years
and up to
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year

¥193

¥227

¥—

¥227

¥—

¥—

¥—

¥—

¥193

¥227

¥—

¥227

¥—

¥—

¥—

¥—

Thousands of U.S. dollars
Over
Over
Over
1 year
2 years
3 years
Up toand up to and up to and up to
1 year
2 years
3 years
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows$418,972$418,972$418,972

$—

$—

$—

$—

$—

269,270

272,315

405

405

405

405

270,675—

15,882

17,243

4,423

4,243

2,243

2,171

2,108

2,036

177,486

193,441

41,09030,711

16,423

10,2798,855

86,063111,045

120,576—

120,576

—

—

—

—

$992,675$1,022,567$464,909$155,945$19,081$12,864$281,639$88,099

Thousands of U.S. dollars
Over
Over
Over
1 year
2 years
3 years
and up to and up to and up to
2 years
3 years
4 yearsOver
4 years
and up to
5 years

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year$1,738$2,045$—$2,045

$—

$—

$—

$—

$1,738$2,045$—$2,045

$—

$—

$—

$—

The cash flows included in this maturity analysis are not expected to be generated significantly earlier orat significantly different amounts.

- 78 -

The total amount of overdraft and commitment line and the balance of executed loans are as follows:
Millions of yen
2020
2021
¥78,406¥30,005
35,000—¥43,406¥30,005

Total amount of overdraft and commitment line
Balance of executed loans
Balance of unexecuted loans

Thousands of
U.S. dollars
2021$270,315—$270,315(4) Market risk
1) Foreign exchange risk
Since the Group operates its business globally, its transactions denominated in currencies other than thefunctional currency are exposed to foreign exchange risks. In principle, the Group uses forward foreignexchange contracts to hedge exchange rate fluctuation risks, which are identified by currency and month.
Sensitivity analysis of exchange rate fluctuation risks
With regard to the financial instruments held by the Group at the end of the fiscal year, the effect of the
U.S. dollar and the renminbi becoming stronger against the yen by 1 yen, on profit before tax in the
consolidated statement of profit or loss is as follows. This analysis assumes that all other variables remain
constant.
Millions of yen
2020
2021
¥(49)
¥(39)
(63)
(47)

U.S. dollar
Renminbi

Thousands of
U.S. dollars
2021$(351)(423)

2) Market price risk
The Group holds equity instruments with quoted market prices for policy investment aims, such as thesmooth implementation of business alliances. With regard to equity instruments with quoted market
prices, since their market prices are determined based on market principles, the value of such financial
instruments may decline depending on trends in the market economy. For such equity instruments withquoted market prices, their quoted market prices, the financial conditions of the issuers (business partnercompanies) and other relevant factors are regularly monitored, and the holding status of those
instruments is also continuously reviewed, taking into account relationships with business partnercompanies.
Sensitivity analysis of quoted market prices
With regard to the equity instruments with quoted market prices held by the Group at the end of the fiscal
year, the effect of a 1% decline in the quoted market prices at the end of the fiscal year on othercomprehensive income (before tax effects) in the consolidated statement of comprehensive income is asfollows. In this analysis, the amount of the effect is calculated by multiplying the values of the equity
instruments at the end of the fiscal year by 1%.
Millions of yen
2020
2021
¥(202)¥(250)

Other comprehensive income (before tax effects)- 79 -

Thousands of
U.S. dollars
2021$(2,252)

(5) Fair value
1) Fair value of financial instruments
The fair values of financial liabilities measured at amortized cost and their carrying amounts in the
consolidated statement of financial position are as follows:
Financial instruments whose carrying amounts are reasonable approximations of fair values andimmaterial financial instruments are not included in the table below.
Millions of yen
2020
Carrying
Fair
amountvalue
Financial liabilities
Borrowings
Bonds¥1,676—¥1,664—2021
Carrying
Fair
amountvalue¥1,32829,889¥1,31729,859Thousands of
U.S. dollars
2021
Carrying
Fair
amountvalue$11,963
269,270$11,864
269,000

2) Fair value measurement method
The fair values of financial assets and financial liabilities are calculated as follows:(Derivatives)
Derivatives include foreign exchange contracts, currency swaps and put options on shares in foreignsubsidiaries.
Foreign exchange contracts and currency swaps, whose fair values are calculated based on forward
exchange rate or quoted prices obtained from financial institutions and other available information, arecategorized within Level 2.
Put options on shares in foreign subsidiaries, whose fair values are evaluated based on the present valueof the amount that may be required to be paid to counterparties, are categorized within Level 3. Thisvaluation model uses unobservable inputs, such as discount rates. The fair values are assumed tofluctuate, depending on the business plan, interest rates, etc., at each point in time.
(Shares, etc.)
Shares, etc., include shares for which an active market exists, investment trusts and unlisted shares.
Shares with active markets are evaluated by prices quoted at the stock exchange, and are categorized
within Level 1. Investment trusts are evaluated by prices quoted at the stock exchange or prices provided
by correspondent financial institutions, etc., and are categorized within Level 1. Unlisted shares, whose
fair values are calculated by valuation techniques, such as the comparable peer company multiples
method, using unobservable inputs, such as valuation multiples, are categorized within Level 3.
(Borrowings)
Since short-term borrowings are settled in a short period of time, their fair values approximate theircarrying amounts.
Long-term borrowings, whose fair values are calculated by discounting the sum of the principal andinterest using the interest rate that would be applied if new borrowings were made with similar terms, arecategorized within Level 2.
However, since floating rate long-term borrowings reflect market interest rates in a short period of timeand credit standings after execution do not vary significantly, their fair values approximate their carrying
amounts.
(Bonds)Bonds, whose fair values are calculated by discounting the sum of the principal and interest using theinterest rate that takes into account the remaining period and credit risk of the relevant bonds, arecategorized within Level 2.

- 80 -

(Liabilities pertaining to forward contracts concluded with non-controlling shareholders)
For forward contracts for shares in subsidiaries which the Group has concluded with non-controllingshareholders, the present value of the expected transfer price is initially recognized as other financial
liabilities, and after initial recognition, the present value is measured at amortized cost using the effective
interest method in principle. Fair values of liabilities pertaining to forward contracts concluded with noncontrolling shareholders are calculated by discounting future cash flows, and their fair values approximate
their carrying amounts.
(Financial instruments other than the above mentioned)
Since financial instruments other than the above mentioned are mainly settled in a short period of time,
their fair values approximate their carrying amounts.
3) Fair value hierarchy
The following is an analysis of financial instruments recorded at fair value by valuation methods. Based on
the inputs used to measure fair values, the fair value levels are classified as follows:
Level 1: Fair value measured using (unadjusted) quoted market prices in active markets for identicalassets or liabilities.
Level 2: Fair value measured using directly or indirectly observable inputs other than Level 1 inputs.
Level 3: Fair value measured using significant unobservable inputs.
Transfers between levels of the fair value hierarchy are recognized on the date of occurrence of the eventor change in circumstances that causes the transfer. No transfer was made between levels for the fiscal
years ended March 31, 2020 and 2021.
Financial instruments measured at fair value
Fiscal year ended March 31, 2020
2020
Derivative assets
Financial assets measured at fair value throughother comprehensive income:
Shares, etc.
Derivative liabilities

Level 1¥—

20,263—

Millions of yen
Level 2
Level 3
¥812
¥—

—
—

4,745
1,397

Total
¥812

25,009
1,397

Fiscal year ended March 31, 2021
2021
Derivative assets
Financial assets measured at fair value throughother comprehensive income:
Shares, etc.
Derivative liabilities

Level 1¥—2021
Derivative assets
Financial assets measured at fair value throughother comprehensive income:
Shares, etc.
Derivative liabilities

Level 1$—

25,007—225,288—

Millions of yen
Level 2
Level 3
¥4
¥—

—
—

Total
¥4

5,765
193

30,772
193

Thousands of U.S. dollars
Level 2
Level 3
$36
$—

Total
$36

—
—

51,936
1,738

277,225
1,738

For financial instruments categorized within Level 3, external evaluation specialists or appropriate persons
in charge of evaluation conduct an evaluation and analysis of the results in accordance with theevaluation policy and procedures approved by the Manager of the Corporate Planning and Control
Division. The evaluation results have been reviewed and approved by the Manager of the Corporate
Planning and Control Division.

- 81 -

Among derivative liabilities categorized within Level 3, for put options on shares in foreign subsidiaries,
the significant unobservable input for the measurement of their fair value is the discount rate. As discountrates decline (rise), fair values increase (decrease).
Fair values of unlisted shares categorized within Level 3 are measured by the comparable peer company
multiples method and net asset-based valuation model, etc. Since this valuation model employs
unobservable inputs, such as the price book-value ratio, unlisted shares are categorized within Level 3.
Reconciliation from the beginning balance to the ending balance of financial instruments categorized
within Level 3
Millions of yen
2020
Beginning balance
Total gains and losses
Profit or loss
Other comprehensive income
Purchase
Issuance
Sale
Other
Ending balance
Changes in unrealized gains andlosses for the period recognizedin profit or loss for assets andliabilities held at the end of thereporting period

2021

Financialassets¥4,317(1,320)(1,151)
(169)
756
1,122
(50)
(79)
¥4,745

Financialliabilities
¥626
—
—
—
—
—
—
771
¥1,397

Financialassets¥4,745
230
(15)
246
803
—
(17)
4
¥5,765

Financialliabilities¥1,397——————(1,203)
¥193

¥(23)

¥—

¥(15)

¥—

Thousands of U.S. dollars
2021
Financial
Financialassetsliabilities$42,747$12,585
2,072
—
(135)
—
2,216
—
7,234
—
—
—
(153)
—
36
(10,837)$51,936$1,738$(135)The gains and losses included in profit or loss are for financial assets and financial liabilities measured atfair value through profit or loss as of the fiscal year-end. Such profit or loss is included in finance income
and finance costs in the consolidated statement of profit or loss.
The gains and losses included in other comprehensive income are for financial assets measured at fairvalue through other comprehensive income as of the fiscal year-end. Such gains and losses are included
in net change in the fair value of financial assets measured at fair value through other comprehensive
income in the consolidated statement of comprehensive income.
(6) Derivatives and hedging activities
Derivative transactions consist of forward foreign exchange contracts for the purpose of hedging
exchange rate fluctuation risks related to foreign currency-denominated trade receivables and payables
and currency swap transactions for the purpose of hedging exchange rate fluctuation risks related toforeign currency-denominated loans.
In applying hedge accounting, in order to ensure that there is an economic relationship in which changes
in fair value or cash flows of the hedged item caused by the risk being hedged are offset by changes infair value or cash flows of the hedging instrument, the existence of such economic relationship between
the hedged item and hedging instrument is confirmed. This confirmation is achieved through a qualitative
assessment of whether the significant terms and conditions of the hedged item match or closely conformto those of the hedging instrument and through a quantitative assessment of whether changes in thevalues of the hedged item and hedging instrument offset each other due to the same risk. In addition, an
appropriate hedge ratio has been set in light of the economic relationship between the hedged item andhedging instrument and the risk management strategy.
Any hedge ineffectiveness is recognized in profit or loss. The amount recognized in profit or loss for thehedge ineffectiveness and the portion excluded from the assessment of hedge effectiveness in theprevious fiscal year and this fiscal year is immaterial. The amount reclassified from other components ofequity in the consolidated statement of financial position to profit or loss in the previous and this fiscal year
because forecasted transactions are no longer expected to occur is also immaterial.

- 82 -$—

The notional principal and average price of main hedging instruments are as follows:
Fiscal year ended March 31, 2020
2020
Cash flow hedges
Currency swaps(Receive yen, Pay Euros)
Currency swaps(Receive yen, Pay Korean won)
Forward exchange contract(Buying: Euros)
Total

Up to 1 year

Millions of yen
Over 1 year

Notional principal
Forward rate (Yen)¥1,376¥134.29¥5,505¥134.29¥6,882—

Notional principal
Forward rate (Yen)833
0.096974
0.0935908—

Notional principal
Forward rate (Yen)1
121.98¥2,211——¥5,5801—¥7,792Up to 1 year

Millions of yen
Over 1 year

Notional principal
Forward rate (Yen)¥1,376134.29¥6,026131.72¥7,402—

Notional principal
Forward rate (Yen)74
0.0935¥1,451——¥6,02674—¥7,477

Notional principal andaverage price

Total

Fiscal year ended March 31, 2021
2021
Cash flow hedges
Currency swaps(Receive yen, Pay Euros)
Currency swaps(Receive yen, Pay Korean won)
Total

2021
Cash flow hedges
Currency swaps(Receive yen, Pay Euros)
Currency swaps(Receive yen, Pay Korean won)
Total

Notional principal andaverage priceNotional principal andaverage price

Total

Thousands of U.S. dollars
Up to 1 year
Over 1 year
Total

Notional principal
Forward rate (U.S. dollars)$12,396$1.21$54,288$1.19$66,684—

Notional principal
Forward rate (U.S. dollars)

666
0.0008$13,072——$54,288666—$67,360- 83 -

The carrying amounts of hedging instruments to which hedge accounting is applied by type of hedge areas follows:
Thousands of
U.S. dollars
2021

Millions of yen
2020
AssetsLiabilities

2021
AssetsLiabilities

AssetsLiabilities

Account in consolidated
statement of financial position
and in consolidated statement of
profit or loss of transfer
adjustments

Cash flow hedges
Foreign exchange risk

¥725
¥—
¥—
¥0
$—
$0
Note
Note Other financial assets in current and non-current assets, other financial liabilities in current and non-current
liabilities, finance income and finance costs.

The balance of cash flow hedge reserve related to cash flow hedges is as follows:
Millions of yen
2020
2021
Cash flow hedges
Foreign exchange risk

¥503

Thousands of
U.S. dollars
2021

¥(91)

$(819)

The contract amount and the carrying amount of derivatives to which hedge accounting is not applied are
as follows:
Fiscal year ended March 31, 2020
Millions of yen
2020
Currency swaps(to receive yen and pay South Korean won)Contract
amount, etc.

Over 1 year

¥632

¥138

AssetsLiabilities

¥86

¥—

Account inconsolidated
statement offinancial position

Note

Fiscal year ended March 31, 2021
Millions of yen
2021
Currency swaps(to receive yen and pay South Korean won)Contract
amount, etc.

Over 1 year

¥138

¥68

AssetsLiabilities¥4

Thousands of U.S. dollars
Contract
amount, etc.

¥—

Account inconsolidated
statement offinancial position

Note
Account inconsolidated
statement offinancial position

2021
Over 1 year
AssetsLiabilities
Currency swaps$1,243
$612
$36
$—
Note
(to receive yen and pay South Korean won)Note Other financial assets in current and non-current assets and other financial liabilities in current and non-current
liabilities.

- 84 -

35. Subsidiaries and associates
The Group’s consolidated subsidiaries as of March 31, 2021 are as follows:
Company name

Ownership
ratio ofvoting rights

Location

Main Business

Kurita Europe GmbH

Mannheim, Germany

Water treatment chemicals

100.0%

Kurita Water Industries (Suzhou) Ltd.

Jiangsu, China

Water treatment facilities

100.0%

Kurita Water Industries (Jiangyin) Co., Ltd. Jiangsu, China

Water treatment chemicals

100.0%

Hansu Technical Service Ltd.

Gyeonggi-do, Korea

Water treatment facilities

100.0%

Hansu Co., Ltd.

Seoul, Korea

Water treatment chemicals

100.0%

Pentagon Technologies Group, Inc.

California, U.S.A.

Water treatment facilities

51.0%

Kurita America, Inc.

Minnesota, U.S.A.

Water treatment chemicals andWater treatment facilities

100.0%

Kuritaz Co., Ltd.

Toshima-ku, Tokyo

Water treatment facilities

100.0%

Kurita Engineering Co., Ltd.

Chuo-ku, Osaka

Water treatment facilities

100.0%

Kuritec Service Co., Ltd.

Chuo-ku, Osaka

Water treatment facilities

100.0%

Kurita Chemical Manufacturing Ltd.

Gokamachi,
Sashima-gun, Ibaraki

Water treatment chemicals

100.0%

56 other companies

The Group’s associates accounted for using the equity method as of March 31, 2021 are as follows:
Company name
Angang Kurita (Anshan) Water Treatment
Co., Ltd.

Location
Liaoning, China

Main Business
Water treatment chemicals

Ownership
ratio ofvoting rights
50.0%

Another company

36. Related parties(1) Transactions with related parties
For the fiscal years ended March 31, 2020 and 2021, information on transactions with related parties has
been omitted due to the absence of significant transactions.
(2) Compensation for key management personnel
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Short-term employee benefits
¥403
¥442
$3,981
Share-based payment
131
119
1,072
Note Compensation for key management personnel is compensation for Directors (including External Directors) and
Audit & Supervisory Board Members (including external members of the Audit & Supervisory Board) of theCompany.

- 85 -

37. Commitments
The total contract amount regarding commitments for asset purchases, etc., is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2021
2021
Acquisition of property, plant and equipment¥21,792¥27,793$250,387
Note Commitments as of March 31, 2021 consist primarily of those associated with the establishment of the new
global technology center and the construction of a certain facility in the ultrapure water supply business.

38. Subsequent events(Business combinations of entities or businesses under common control)(1) Outline of the transaction
1) Company names and businesses at the time of business combination(i) Surviving company
Name:
Kurita Water Industries Ltd.
Business: Manufacture and sale of water treatment chemicals and water treatment facilities,
maintenance of water treatment facilities, ultrapure water supply, and soil and groundwater
remediation(ii) Merged companies
Name:
Kurita Engineering Co., Ltd. (hereinafter “Kurita Engineering”)
Business: Plant cleaning and maintenance, manufacture and sale of cleaning and wastewater
treatment chemicals, facilities and equipment, and rental of temporary machinery
2) Date of business combination
April 1, 2021
3) Legal form of business combination
Kurita Engineering has been dissolved through an absorption-type merger in which the Company is thesurviving company.
4) Name of the company after business combination
Kurita Water Industries Ltd.
5) Main reason of integration
Kurita Engineering was established in 1959 when the chemical cleaning division was separated from theCompany, and has been developing its business focusing on chemical cleaning for large plants in Japanas a leading company in plant facilities cleaning services. In the social and industrial infrastructure
markets such as electric power, iron and steel, petroleum refining, and petrochemicals, which are themain markets for Kurita Engineering and the Company, there are growing needs to reduce environmental
impact and improve productivity, including decarbonization measures against global climate change.
This merger will enable the Company to flexibly invest its management resources, such as financial andhuman resources, into Kurita Engineering's solid technological and customer base so that the Company
can accurately identify these needs and provide optimal solutions. We will aim to expand the scope of ourplant facilities cleaning business and achieve sustainable growth by establishing a system to respondpromptly to social demands and customer needs in the future social and industrial infrastructure markets.

- 86 -

(2) Outline of accounting
The business combination under common control is a business combination in which all companies orbusinesses involved are ultimately controlled by the same company before and after the businesscombination. The control is not temporary. The Group continues to perform accounting treatment basedon carrying the amount for all business combination transactions under common control.
********************************************************************************************************************- 87 -

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Valu�- Description ofKeyAuditMatter
The Group recorded goodwill. of¥55.596 billion (13.1% oftofal assets) inthe consolidated statement of financial
position for the current fiscal year.
Goodwill is required to be tested for
impairment each year and theassumptions used in the im[airment
test are disclosed in Note 13.(2) to theconsolidated financial statements.
When performing the impairment
test,
the Group calculates therecoverable amount of the cash­
generating units, including goodwill,based on its value in use. If therecoverable amount is less than the
carrying amount as a result of theimpairment test, the Group recognizes
an impairment loss and writes down the
carrying amount to the recoverable
amount.
The value in use is calculated as thepresent value of the future cash flows
expected to be generated by the cash­
generating units, including goodwill.
Future cash flows are calculated basedon the estimated amounts on thebusiness plans for each cash-generating
unit included in MVP-22 plan, aplan
medium-term
management
approved by management.
MVP-22 plan is a medium-term
management plan up to fiscal 2022, andfuture plans thereafter are estimatedand determined based on the growthrate in the mid-term management plan,and the long-term average growth rateof the markets to which the cash­
generating unit belongs and otherfactors.
Significant assumptions in estimating
the value in use ofeach cash-generating
unit are business plan-based estimatesof future cash flows, growth rates anddiscount rates for subsequent periods.
Future plans are primarily affected bymarket growth rates and other factors,
and in particular, estimates for thecurrent fiscal year may be affected by
the timing of convergence of COVID-19
and the recovery of the global economy.
In addition to this, Kurita America, Inc.,
which has a large goodwill balance ofAuditor'sResponse
We· evaluated the design andoperation of the Group's internal
controls over the development of future�lans_
underlying . the..
g�odwi�
impa江ment test, the calculation ofvalue in use and the measurement of
impairment losses, as well as performed
the followi11:g P!�?cedures I?ri�arily "'.ith
respect to significant goodwill to review
theadequacyof thegoodwill
impairment test.
With respect to the impairment tests
for the significant goodwill recorded at
the foreign subsidiaries, we also
directed the auditors of the subsidiaryin question to perform the sameprocedures, received reports on the
results of the implementation of theaudit procedures,and evaluatedwhether sufficient and appropriate
audit evidence was obtained.
• Valuation experts were engaged asnecessary to verify valuation methods
in the calculation of value in use.
• We evaluated the accuracy of
estimates of the future plans bycomparing budgets in the medium­
term management plan and previous
years with the actual results.
•Regarding market growth rates, etc.,whi�h. are . imI?orta�t assump!ionsnused in estimating the futureplans,
we conducted a discussion withmanagement and business managers.
In addition, we made an analysis on
trends in actual results for each cash­
generating unit and comparison withexternal data, such as available
similarorforecasts
markettheassesstoenterprises
reasonableness of market growth
rates, etc.
• We conducted a discussion withmanagement about the impact of
COVID-19 on the market to which the
cash-generating unit belongs, andexamined whether it was properlyreflected in the estimates ofthe futureplans.
•Regarding synergies included in the
future plans of Kurita America, Inc.,
we conducted a discussion with- 89 -

¥24.977 billion, absorbed and merged
three consolidated subsidiaries with
offices in the U.S. in the previous fiscal
year. In estimating future cash flows
after the merger, Kurita America, Inc.
expects synergies such as integrating its
sales and production systems, businessmodels, products and technologies, andits business management system, andimproving the operational efficiency ofits businesses.
Given the complexity of the goodwill
impairment test and the uncertainty
associatedwithchangesintheoperatingenvironment
regardingestimates of future cash flows, market
growth rates, discount rates and therealization of the synergies of Kurita
America, Inc. and the requirement ofmanagement's
we
judgment,
determined that the adequacy of the
goodwill impairment test as a key audit
matter.

management and business managers
about the status of integration of sales
and production systems, businessmodels, products and technologies,an� busin��s m.anagement �ystems,
and consideration was given towhether information of the current
status of the business integration wasproperly reflected in the estimates ofthe future plans.
• Regarding future cash flows, weverified the consistency between the
future plans underlying such plans
and the medium-term management
plan approved by management andthe budget for the fiscal year ending
March 31, 2022.
• For the discount rate, which is a key
assumption, we compared it to theestimated results using external data
available from the valuation expert.
We also assessed the impact ofchanges in the discount rate onchanges in value in use.
• With regard to the amount of
impairment loss recorded, we verified
accuracy of the calculation andappropriateness of the disclosure on
the related notes.

- 90 -

�f intangible assets acquired in a business combination as of
the acquisition date
Auditor'sResponse
Description ofKeyAuditMatterIn reviewing the adequacy offair value
As disclosed in Note 7 to theestimates of intangible assets acquiredconsolidated financial statements, onin the business combination as of theApril 1, 2020, Kurita America Holdings,
acquisition date, we performed theInc., a wholly owned subsidiary of thefollowing audit procedures:Company, acquired an additional 26%• We evaluated the status of design andshares of Pentagon Technologies Group,
operation of internal controls relatedInc.,making it a consolidated
tothe allocation of assets andsubsidiary.
determinedliabilities
theinConsideration for the acquisition of
consideration of the acquisition.
the shares totaled ¥10.974 billion,• We assessed the suitability, ability,
consisting of ¥5.379 billion for theand objectivity of the evaluation
shares of Pentagon Technologies Group,
experts engaged by the Group.
Inc. held prior to the acquisition date
• In order to understand the outline andand ¥5.594 billion for the additional
purpose of the acquisition transaction
acquisition.
of the shares of Pentagon Technologies
The Group used external valuation
Group, Inc., we held discussions withexperts to recognize and measure themanagement and business managers,
identifiable assets acquired and theand inspected the contract documents
liabilities assumed. As a result, therelated to the acquisition of the sharesGroup
recordedcustomer-related
and the materials for reporting to theassets, technology-related assets andGroup's Board of Directors, etc.
g,odwill as intangible assets of¥1.732• We instructed our network firm that isbillion, ¥2.334 billion and ¥7.739
the auditor of Kurita America
billion, respectively.
Holdings, Inc. to perform the following
Significant assumptions in estimating
audit procedures and were informed of
the fair value of intangible assets
the results ofthe audit procedures andacquired in business combinations areevaluated whether sufficient andfuture sales plans, attrition rates ofappropriate audit evidence wasexisting customers and discount rates
obtained.
for the measurement of customer­· We engaged network firm valuation
related assets, and future sales plans,
experts to assess the reasonablenessobsolescence rates for technology assetsof the valuation methodologies usedand discount rates for the measurement
to measure the customer-related andof technology-related assets.
technology-related assets and to
Due to the complexity of estimating
consider whether there are otherthe acquisition date fair value of
intangible assets to be identified orintangible assets acquired in businessliabilities assumed.
uncertainty
thecombinations,· We conducted a discussion withassociated with future sales plans,management of Kurita America
attrition rates of existing customers,
Holdings, Inc. regarding the content
obsolescence rates for technology assetsof the future sales plans related toand discount rates, and the need forthe customer-related assets andmanagement judgment, we determined
technology-related assets, as well asthat the adequacy of estimated fairassessed the reasonableness of thevalue of intangible assets acquired inplan by comparing the growth rate,
the business combination as of thewhich is a precondition for the plan,acquisition date as a key audit matter.
with historical results and available
external data.
· We engaged network firm valuation
experts to assess the reasonableness- 91 -

of existing customer attrition rates
and obsolescence rates related to thetechnology-related assets comparing
to the estimated results using
available external data.
· We engaged network firm valuation
specialists to assess the validity of the
discount rates for the customer­
related assets and technology-related
assets by comparing with theestimated results using external data
available to, etc., as well as byanalyzing indicators, such as WAR�(weighted-average return on a�sets)
and IRR (internal rate of return).

- 92 -

Estimate of the total cost of transactions that recognize revenue over a certain periodof time
Auditor's Response
Description ofKeyAudit Matte( ) and 3
In reviewing the adequacy of our
As disclosed in Notes 25.(2)( ) toestimate of the total C?S! in _rec_ognizing
the consolidated financial statements,
revenue over a period of time, wethe. Gro�p recognizes re�enue fo�
following
audit
performed
theconstruction contracts over the term ofprocedures:the contract as performance obligations• We conducted discussions withare satisfied as construction progresses
management on the method forand applies the input method, using themanagin� sal�s/exi;>en�tures �ndratio of the incurred cost against the
progress for each unit of construction
estimated total cost for each contract toand measures to enhance the accuracy
measure progress.
of estimates of total costs, as well as
A significant assumption 1s anassessed the design and operation of
estimate of the total cost in the caseinternal controls related to estimatesrecognizing revenue over a period.
of total costs, including timely
Estimates of the total cost may berevisions of estimates.
affected by changes in the content of• In order to understand the contents ofcontracts that occur due to changes in
the construction and the obligation to
the environment surrounding contracts
perform included in the contracts with
with customers.
the customers, we inspected the
The Group implements income andforconstruction
contracts
theexpenditure management and progress
extracted
accordingtocertainmanagement, etc. for each construction
standards. In addition, we inspected
unit. In order to properly estimate thethe schedule, conducted on-site
total cost, the Group has establishedinspections as necessary, and inquired
and operates internal controls for theof the appropriate person in charge ofallocation of the initial budget and theconstruction.
re_v�sion of the total cost. Inr,_ _ �a�ticul�
• Regarding the estimate of the total
with respect to work involving thecost of construction extracted by aCompany's design department, thecertain standard, we inspected theGroup performs a business process
documents of the initial budget grant,
review on a monthly basis to review theand, as necessary, we inquired of theexecution of the initial budget andperson in charge to examine whether
revises its estimates of total costs as
the initial cost estimate was made innecessary.
accordance with the procedures
Due to the uncertainty associated withstipulated by the Group.
technological or physical factors and• Regarding the revision of the estimate
theinenvironmentchangesof total costs, in order to confirm
thesurrounding
thecontract,
whether the revisions of the estimate
�ig�ficant �otential imp�c! and.
of the total cost were properly carried
involvement of management judgment,out, we reviewed the construction
we determined that the adequacy of theledgers and the business processestimate ofthe total cost for recognizingtheinspected
andreviews,
revenue over a period as a key audit
constructions extracted by certain
matter.
criteria through inquiries to thepersons in charge of managing thesales/expenditures of the construction,etc., and reviewing the process chart,etc.
• We examined the estimates ofthe total
cost at the end of the current fiscal
year in comparison with the estimatesい- 93 -

at the end of the previous fiscal year
and the reasons for the change, as well
as evaluated the accuracy of theestimates of the total cost incomparative review of the estimateswith the actual results.
Responsibilities of Management and th� Audit_ & �up�rviso� Boa_r!!
Members and the Audit & Supervisory Board for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of th_econsolidated financial statements in accordance with IFRSs, and for suchinternal control as management determines is necessary to enable thepreparation 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,_
including whether the use of the disclosing, as applicable, matters related togoing concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Group or to cease operations, or
has no realistic alternative but to do so.
The Audit & Supervisory Board Members and the Audit & Supervisory Boar_ d
are responsible for over��eing the Dir�c�ors' exec�tion of �uti�s rel�ti�g to t畑
design -and operating effectiveness of the controls over the Group's financial
reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guara11tee that a� audit_ conduct�i in_ accord�nce with auditi!l�standards generally accepted in Japan will always detect_ a materia�
misstatement when it exists. Misstatements can arise from fraud or error andare con?�de_red mater�al if, _individ�ally or i� t?e. a_ggreg�te, they. could
reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements.
ASpart of an audit in accordance with auditing standards generally acceptedin �apan, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the consolid�ted
financfal statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence t_hat
is sufficient and appropriate to provide a basis for our opinion. The risk of
1_1ot detecting _ a mat�rial misstatem�nt r�sultin� fro� fra�� is_high�r thanfor one re_sulting. from e!ror, as frau� may in:7olve col��sion,_, _forger)';intentional omissions, misrepresentations, or the override of internal
control.

- 94 -

•
•
•

•

•

Obtain, an understanding of internal control relevant to the audit in orderto design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Q-ro1_:1p's int�rnal contro�.
Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made bymanagement.
Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained,
may cast_ �ignifica�t do1:1bt on the Gr?up's abi�ity to _continue as a g<?in�_ that a material uncertainty exists, we are required
concern. If we conclude
to draw attention in our auditor's report to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor's report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
Evaluate whether the presentation and disclosures of the consolidated
financial statements are in accordance with IFRSs, the overall
presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
Obtain sufficient appropriate aud.it evidence regarding the financial
information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.

We communicate with the Audit & Supervisory Board Members and the Audit& Supervisory Board regarding, among other matters, the planned scope andtiming of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide the Audit & Supervisory Board Members and the Audit &Supervisory Board with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them
all relatio:nships and other matters that may reasonably be thought to bearon our independence, and where applicable, related safeguards.
From the matters communicated with the Audit & Supervisory Board
Members and the Audit & Supervisory Board, 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 regulationprecludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated inour report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.

- 95 -

Interest Required to Be Disclosed by the Certified Public Accountants Act ofJapan
Our firm and its designated engagement partners do not have any interestin the Group which is required to be disclosed pursuant to the provisions of
the Certified Public Accountants Act of Japan.

:／

区

0

匁¼/

Tetsuo Shibaya
Designated Engagement Partner
Certified Public Accountant

危Makio Wada
Designated Engagement Partner
Certified Public Accountant

えKenta Nishimura
Designated Engagement Partner
Certified Public Accountant
Grant Thornton Taiyo LLC
Tokyo,Japan24, September, 2021

- 96 -