This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between
this translated document and the Japanese original, the original shall prevail.
SEPTENI HOLDINGS CO., LTD. (“the Company”) assumes no responsibility for this translation or for direct, indirect or any otherforms of damages arising from the translation.

Annual Securities Report(Excerpt)(Report pursuant to Article 24, Paragraph 1 of the Financial Instruments and Exchange Act)
Fiscal year From: October 1, 2022
(The 33rd term) To: December 31, 2023

SEPTENI HOLDINGS CO., LTD.

(E05206)

Contents
I Business Operations .................................................................................................................. 1
1. Management Policies, Management Environment, and Issues to be Addressed, etc. ............... 1
2. Sustainability Approach and Initiatives ...................................................................................... 2
3. Business Risks............................................................................................................................. 5
4. Management’s Discussion and Analysis of Financial Condition, Results of Operations andCash Flows ................................................................................................................................ 10

II Financial Information .............................................................................................................. 15
1. Consolidated Financial Statements, etc..................................................................................... 16

[Cover page][Document title]

Annual Securities Report[Clause of stipulation]

Article 24, Paragraph 1 of the Financial Instruments andExchange Act of Japan[Place of filing]

Director-General, Kanto Local Finance Bureau[Filing date]

March 28, 2024

[Fiscal year]

The 33rd term (from October 1, 2022 to December 31,
2023)[Company name]

Kabushiki Kaisha SEPTENI HOLDINGS[Company name in English]

SEPTENI HOLDINGS CO., LTD.

[Title and name of representative]

Yuichi Kouno, Representative Director[Address of registered headquarter]

17-1 Nishishinjuku 8-chome, Shinjuku-ku, Tokyo, Japan[Telephone number]+81-3-6863-5623 (main)[Name of contact person]

Kei Hatano, Group Senior Executive Officer[Nearest place of contact]

17-1 Nishishinjuku 8-chome, Shinjuku-ku, Tokyo, Japan[Telephone number]+81-3-6863-5623 (main)[Name of contact person]

Kei Hatano, Group Senior Executive Officer[Place for public inspection]

Tokyo Stock Exchange, Inc.
(2-1 Nihombashi Kabutocho, Chuo-ku, Tokyo, Japan)

I

Business Operations
1. Management Policies, Management Environment, and Issues to be Addressed, etc.
The Group’s management policies, management environment, and issues to be addressed, etc. are as follows.
Any description regarding the future below is based on the available information and certain conditions which the Group
believes to be reasonable at the end of the fiscal year ended December 31, 2023.
On the business and financial issues of the Group to be addressed
Under the new management structure, the Group’s medium-term theme for the fiscal year ending December 31, 2024 andbeyond is “Focus & Synergies.” Based on the human capital management that has been built up to date, the Group will createsynergies among its business segments and within its business areas while evolving its strengths to become a group withmultiple strong businesses, aiming to achieve sustainable growth and increase corporate value over the medium to long term.
In the Digital Marketing Business, by dividing the business into three areas: “Marketing Communications Area,” “Direct
Business Area,” and “Data & Solutions Area,” the Group will develop area management while reorganizing andstrengthening the business. In addition, the Group will work to create group synergies by leveraging the assets of the DigitalMarketing Business and aim to create new businesses from within each area.
Furthermore, as growth investments, the Group will consider investments for organic growth and new business creation,
as well as M&A for growth in each area of the Digital Marketing Business.
In addition, the Company discovered inappropriate use of expenses (totaling approximately 22 million yen) by the former
Representative Director of the Company during the current fiscal year. Based on the results of the investigation by the boardof company auditors, the following measures to prevent recurrence have been formulated and implemented after analyzing thecauses of the inappropriate use by the former Representative Director of the Company. The former Company’s Representative
Director has reimbursed the Company for all expenses incurred for such inappropriate use.
‒

Implementation of re-education for officers with the aim of ensuring thorough compliance.

‒

Improving and strengthening the system for checking the appropriateness of expenses claimed by officers.

‒

Stricter regulations and approval process for expense processing regarding the use of travel and transportation expenses
by officers.

‒

Formulating new regulations for use of hired cars by officers.

‒

Adding check items regarding expenses in internal audits, and continuing auditing of the appropriateness and operating
effectiveness of the regulations regarding expenses used by officers.

The Company will continue to regularly review and strengthen its management systems, including its internal control
system, to prevent the recurrence of inappropriate use of expenses.

-1-2. Sustainability Approach and Initiatives
The Group's approach and initiatives on sustainability are as follows.
Any description regarding the future in the text is based on the available information and certain conditions which theGroup believes to be reasonable at the end of the fiscal year under review.

(1) Sustainability
The Group believes that contributing to the resolution of social issues through its corporate activities is what is requiredby its stakeholders to realize the Group's mission of “To inspire the world with entrepreneurship” and its vision, and thus, it ispromoting sustainability activities.
In its sustainability activities, the Group has set out its mission and vision as a basic policy, and it is actively promoting
activities with the aim of achieving sustainable growth of the Group, improving corporate value, and realizing a sustainable
society.
(i)

Governance
The Group reorganized the CSR Committee in January 2022 and launched the Sustainability Committee as anadvisory body to the Board of Directors. Chaired by the Group President and Chief Executive Officer, this committee iscomprised of future generation employees aged 30 and below, female managers, ESG leaders in each reportable segment,
and external advisors. The Sustainability Committee examines policies, themes, and measures related to sustainability andreports the status of activities to the Board of Directors on a regular basis. In addition, particularly important mattersrelated to sustainability are resolved at meetings of the Board of Directors.

(ii) Strategy
The Group has set forth the following four materialities as key issues for realizing the sustainable growth of the Groupand the enhancement of corporate value.
I. Response to Climate Change
II. Enhancement of Corporate Value by Empowering People Who Create a New Era
III. Realization of a “Nameraka*” Society Through Creativity and Technology
IV. Building an Advanced Governance System to Support Discontinuous Growth
By addressing the aforementioned materialities, the Group aims to achieve its vision and realize its mission of "To
inspire the world with entrepreneurship."*“nameraka”: the Company defines “nameraka” as a harmonious state without friction and barriers.
(iii) Risk management
In order to recognize significant events that may affect the Group’s business management, to identify, analyze andassess risks that may harm the growth and development of the business and to make responses to the risks such as
aversion, mitigation, transfer, etc., the Group has established the “Group Risk Management Regulations.” In addition, it
set up the Group Risk Management Committee as a body to oversee and manage such risks in an integrated and effective
manner under the common policy as the Group. It constructs the PDCA cycle of risk management operations andpromotes risk management in the Group as a whole to achieve sustainable development. The Group Risk Management
Committee and the Sustainability Committee also work together to promote risk management with regard tosustainability-related risks.
(iv) Indicators and targets
The Group has set KPIs and targets linked to subcategories for the four materialities.
The Sustainability Committee monitors the performance and progress of each indicator, and promotes efforts toachieve the targets, mainly by the person in charge of each materiality.
Please refer to the Group’s website below for details of initiatives.
https://www.septeni-holdings.co.jp/en/csr/policy.html-2-(2) Climate change
Given that a sustainable and sound global environment are prerequisites for business operations, the Group recognizes thehigh importance of addressing climate change and promotes activities with this in place as the materiality of sustainability
activities.
In light of this, the Group endorsed the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD) in October 2023 and has implemented information disclosure based on the TCFD framework.
(i)

Governance
The Sustainability Committee, an advisory body to the Board of Directors and chaired by the Group President andChief Executive Officer, discusses and examines sustainability activities and climate-related issues. The status ofactivities related to climate issues is reported regularly to the Board of Directors.

(ii) Strategy
The Group conducted scenario analysis on the risks, measures and opportunities brought about by climate change.
Please refer to the Group’s website below for details of scenario analysis.
https://www.septeni-holdings.co.jp/en/csr/activity/environment.html(iii) Risk management
The Group identifies climate change risks as one of the themes related to sustainability. The Sustainability Promotion
Department evaluates the importance of risks and opportunities related to climate change based on their impact on theGroup businesses, and the Sustainability Committee makes decisions. In the evaluation, the Group conducts hearings withrelated group companies and departments as necessary.
The Group Risk Management Committee and the Sustainability Committee work together to promote risk
management in order to comprehensively manage risks related to the identified climate change with other risks of theGroup.
(iv) Indicators and targets
The Group has set targets related to GHG emissions.
Please refer to the Group’s website below for details of GHG emissions results and reduction targets.
https://www.septeni-holdings.co.jp/en/csr/activity/environment.html(3) Human capital
As stated in the first clause of the Group’s vision, “To be a place where people are empowered to create a new era,” theSepteni Group regards people as the most valuable asset and focuses on their development.
Since starting the Digital Marketing Business in 2000, the Group has continued to expand business along with thedevelopment of the market. However, in growth industries like the Group’s business sector, the competition for acquiring
skilled talent has been extremely fierce. In such a business environment, the Group believes that how it recruits, develops, andretains high-potential human resources is a critical factor that significantly influences corporate competitiveness.
For this reason, the Group has focused on achieving “individual optimization and reproducibility in human resource
development” and “creation of an environment in which individual employees can demonstrate their abilities.” Through these
initiatives, the Group aims to sustainably increase the value of its human capital.
(i)

Strategya. Human resource development policy
The Group defines the concept of human resources development not as a matter of “being developed” but rather as
one of “developing through the accumulation of positive experiences in the workplace.” The idea is that mutualinteraction between the individual personality (P) people are born with and the environments (E) surrounding theminfluences their growth (G). The Group expresses this in the form of its HR Development Equation (G=P×E).
The Group has been working on achieving individual optimization and reproducibility in talent development by
combining a talent database accumulated over more than 20 years and technology for analysis, with the “development
equation” as the foundation of human resource development ((Notes) 1).
In addition, the Company established the Human Capital Lab in one of the Group’s organizations in 2016 with theaim of further developing its human resource development. The Group is working to improve quality by building asystem of close collaboration with experts and researchers both inside and outside the company.

-3-

Please refer to the Group’s website below for the various initiatives and research results related to human resource
development.
https://www.septeni-holdings.co.jp/en/csr/activity/new-era/hr.html
b. Internal environment improvement policy
The Group has been continuously investing in human capital with the aim of “creating an environment in which
individual abilities can be easily demonstrated.” For example, based on the concept of “creating a state where everyone
is working autonomously and actively in valuable jobs regardless of time and place,” the Group has developed a systemthat allows employees to choose their own work styles, such as a flextime system, a telecommuting system, and a side
job system.
The Group also has been working on creating a conducive environment for women, including implementing
women's skills development programs, supporting work-life balance, and providing assistance to employees returningfrom childcare leave. In addition to these efforts, the Group has been committed to achieving equity and inclusion acrossother attributes such as gender, age, nationality, and race.
In addition to initiatives to support the diverse work styles of employees, the Group has raised salary levels twice inthe past and raised the rate of incentive subsidy for the Employee Stock Ownership Plan with the aim of enhancing
competitiveness in the human resources market and fostering employee ownership. The Group will continue to invest in
human capital to build a system that can improve employee job satisfaction and maximize performance, with the aim ofsustainably increasing corporate value.
(Notes) With regard to employee data, the Group has established and implemented HR Guidelines, a basic policy for theutilization of human resource data. Based on the philosophy that “the improvement of corporate value isachieved through the growth of individuals,” the Group has established an appropriate management andoperation system.
(ii) Indicators and targets
The Group has set the ratio of female employees in managerial positions at the Company and domestic consolidated
subsidiaries as a KPI for measuring the active participation of diverse human resources, aiming to achieve a target of 30%
by FY2030 (FY2023 results: 25.8%).

-4-

3. Business Risks
The main matters that may constitute risk factors among the information related to the Group’s business conditions arepresented hereunder. Information that is not necessarily considered a business risk by the Group but constitutes important
information necessary for making investment decisions or for understanding the Group’s business activities is also actively
presented from the standpoint of information disclosure for investors. The Group’s policy is to recognize the potential for risks
to materialize and then work to mitigate that potential and appropriately address any risk that does materialize.
Unless otherwise described, forward-looking statements in the following risks are based on the Group’s judgement madeon the filing date of Annual Securities Report and may therefore differ from actual results due to potential uncertain factors.
In order to recognize significant events that may affect the Group’s business management, to identify, analyze and assess
risks that may harm the growth and development of the business and to make responses to the risks such as aversion,
mitigation, transfer and others, the Group has established the “Group Risk Management Regulations.” In addition, it set up the“Group Risk Management Committee” as a body to oversee and manage such risks in an integrated and effective manner under
the common policy as the Group. It constructs the PDCA cycle of risk management operations and promotes risk managementin the Group as a whole to achieve sustainable development. Risk management policies of the entire Group as well as
assessment of and responses to the risks related to strategic decision-making such as management strategy and merger andacquisition shall be treated as the exclusive prerogatives of the Group’s board of directors. In making these management
decisions, the Group assesses the risks appropriately.
(i)Trends in Internet advertising market and competitive environment
The Internet advertising industry, which is the main area of business developed by the Group, has rapidly expanded inrecent years, for dozen years or so. However, the advertising business, and not just Internet advertising, tends to be highly
susceptible to prevailing business conditions. If business conditions deteriorate going forward and the market size does
not expand as much as expected due to the reduction of advertising expenses by advertisers, among other factors, theGroup’s business activities, financial position and operating results may be significantly affected.
In addition, the competitive environment remains intense, so the Group is taking a variety of measures to establish acompetitive advantage and bolster its overall competitiveness. However, these measures may not bear fruit and may notnecessarily lead to the establishment of a competitive advantage, and if this is the case, the Group’s business activities,
financial position and operating results could be impacted considerably.

(ii) Securing and development of human resources
The Group considers human resources to be the greatest asset that underpins its growth. It also recognizes that therecruitment and development of outstanding individuals and continuous efforts to secure human resources in line with its
business expansions and global development are key challenges for the Company. With this in mind, the Group places its
maximum effort into the securing and development of competent human resources by preparing a better environment towork, constructing a satisfying support system and promoting work style reforms. That said, failure to secure or develop
the necessary human resources due to intensifying competition for human resources, a supply-demand balance in thestaffing market or other factors may have a material impact on the business activities, financial position, operating results
and growth of the Group.
(iii) New Businesses
Going forward, the Group will continue to create and develop new businesses proactively to achieve sustainablegrowth and diversify revenue sources. However, the launch of new businesses may lead to the inclusion of risk factorsthat are uniquely associated with such businesses, while at the same time numerous unpredictable risks including suddenchanges in the business environment may arise in the course of the execution of new businesses. As a result, if the goalsof the initial business plan cannot be achieved, there is the potential for the Group’s business activities, financial positionand operating results to be substantially impacted.

-5-

(iv) Business expansion through mergers and acquisitions (M&As)
The Group’s policy is to use M&As effectively as a measure to accelerate business expansion. It makes decisions on
M&As after conducting a preliminary survey of target companies in conjunction with a range of subjects, including
financial details and contract related matters, and examining risks exhaustively. Nevertheless, the Group may experience a
problem that it does not understand during preliminary surveys, such as contingent liabilities or unrecognized liabilities
that occur or are identified after the completion of relevant M&As, or need to post impairment losses on goodwill if it
does not make expected progress in business development. In such cases, there is potential for the Group’s businessactivities, financial position and operating results to be substantially impacted. In addition, if any new business that theGroup has not traditionally engaged in is included as the result of the acquisition of a company, there will be an additionalrisk factor related to such business.
(v) Overseas business
The Group has been developing businesses aggressively in numerous countries and regions overseas, including theUnited States and Asia. Consequently, the presence of its overseas business is increasing steadily. However, overseas
business involves risks, including changes in global economic trends, fluctuations in foreign currency exchange rates,
laws and regulations governing investment and competition, differences in business practices, industrial relations, andinternational politics, and the Group makes its maximum efforts to implement some measures. If these risks materialize,
the Group’s business activities, financial position and operating results may be impacted considerably.
(vi) Personal information management
A number of the Group companies handle personal information in the ordinary course of business. These companies
have been improving their management system based on their personal information protection policy established chiefly
pursuant to the Act on the Protection of Personal Information, while also proactively working to acquire certificates on
information security, such as the Privacy Mark and ISMS. By doing so, they have been exercising the utmost care to
manage personal information properly and prevent any leak. In addition, they are in the process of examining andadopting a framework for personal information protection in various countries, including the General Data Protection
Regulation and the California Consumer Privacy Act, from a range of perspectives. Even so, there is no denying thepossibility of the leak of personal information attributable to any system failures, intentional or unintentional errors
committed by internal or outside concerned parties, and/or criminal acts, among other factors. If this is the case, theGroup may face claims for damages and losses, lose its credibility, and its business activities, financial position andoperating results may be significantly affected.
(vii) System risk
A majority of the Media Platform Business and a part of the Digital Marketing Business provide services to clientsfrom server-based computer systems via the Internet. We are constantly taking measures to ensure stable operation ofthese systems, including system augmentation and reinforcement of backup systems. However, if computer systems orcommunication networks are shut down by device failure, natural disaster, dramatic and unanticipated increases in access,computer viruses, or other circumstances, it could force services to be suspended, and this could diminish the trust placedin us by clients. Such a turn of events has the potential to seriously impact the Group’s business activities, financial
position and operating results.
(viii) Media Platform Business
The Group develops business in the media platform market, and this market is characterized by dramatic changes inuser needs as well as large numbers of competitors. The Group is striving to increase revenue by working to provide
media, products, etc. with high user satisfaction levels, but if we are unable to appropriately respond to changes in userneeds and intensifying competition and therefore unable to provide appealing media, products, etc., there is the potential
for the Group’s business activities, financial position and operating results to be substantially impacted; for example, by adecrease in fee revenues. In addition, the Media Platform Business provides content to users through platform providers
such as social networking services and app markets. For this reason, if these companies change their business policies,
etc. and transaction terms are revised or it becomes no longer possible to provide content, it could seriously impact theGroup’s business activities, financial position and operating results.

-6-

(ix) Intellectual property rights
The Group recognizes the importance of protecting and controlling intellectual property rights and operating eachbusiness with the utmost care to avoid infringement of any third party’s intellectual property rights. However, in the casethat we infringe on a third party’s intellectual property rights, due to procedural flaws or errors caused by officers andemployees, there is a possibility that we will be requested to pay compensation for damages or stop using such rights, andthis has the potential to seriously impact the Group’s business activities, financial position and operating results.
On the other hand, the Group is taking proper measures to protect its intellectual property rights, pertaining to services
and content owned by the Group, from infringement by third parties. However, if, for some reason, the Group’s
intellectual rights are infringed, there is the possibility that the Group’s business activities, financial position andoperating results will be materially affected, due to such effects as a decline in competitive advantage.
(x) Internal control systems
Positioning the enhancement of corporate governance as a key management challenge, the Group is implementing
diverse measures to maximize its corporate value. In addition, to secure the proper implementation of operations and thereliability of financial reports, it is working to establish, improve and operate a system that makes the relevant internal
control systems function effectively. However, if sufficient internal control systems are not established in a timely fashion
due to a rapid expansion of business or other factors, the Company may have difficulties operating businesses
appropriately, which may have a significant impact on the Group’s business activities, financial position and operating
results.
(xi) Dependence on a specific client
In the Digital Marketing Business, transactions with a specific client may expand sharply against the backdrop of anincrease in the advertising budget and an improvement in the cost-effectiveness of Internet advertising, among otherfactors, thereby leading to an increased presence in the sales breakdown. In this case, if transactions with the relevantclient decline significantly due to a change in its business policy or other reasons such as operating results trends, theGroup’s business activities, financial position and operating results may be significantly affected.
(xii) Laws and regulations
The Group’s main business domain is not subject to any legal restriction that significantly limits the development ofbusinesses at this point. That said, given the diverse use of the Internet, it is possible that relevant laws and regulations
will be newly established in the future, existing laws and regulations will be revised or interpreted differently, and/or
voluntary industrial restrictions will be established as rules equivalent to laws and regulations, coupled with a request forcompliance therewith. If this is the case, the Group’s business activities, financial position and operating results may besubstantially impacted, depending on the details of the requirements.
(xiii) Operational risks
When executing operations, the Group takes a variety of measures, such as double checking through third parties
excluding those in charge of relevant operations and the use of a range of information systems to improve accuracy,efficiency and a security level in operations. However, with some operations carried out by people, there may be errors in
paperwork due to misrecognition on the part of officers and employees or malfunctions, among other factors. Dependingon the type of operation, errors in paperwork may result in a hindrance to stable services, the occurrence of economic
losses and/or the leak of personal information, among other issues, which may seriously impact the Group’s businessactivities, financial position and operating results.
The Group has been working on the standardization and documentation of internal regulations and paperwork
processes. Nevertheless, knowledge necessary for the execution of operations may not be fully shared or possessed due toorganizational restructuring and an increase in the number of employees resulting from the expansion of the Group’sbusinesses. An increase in paperwork errors and decline in productivity that may occur as a result could seriously impact
the Group’s business activities, financial position and operating results.

-7-

(xiv) Corporate social responsibility
The Group understands that corporate social responsibility, such as the implementation of environmentally friendly
initiatives, the improvement of working conditions and respect for human rights, constitutes important management issues
for the sustainable development of society. With this in mind, the Group has been acting to create such a society in all
business activities in which it engages, including those related to supply chains. However, despite the Group’s efforts, if it
has any issues related to environmental contamination, industrial safety and health such as the occurrence of industrial
accidents, and/or any issues related to human rights such as discrimination of foreign workers, the Group’s social
credibility will be downgraded, which could cause clients to terminate transactions or the Group to withdraw from somebusinesses. If this is the case, the Group’s business activities, financial position and operating results may be affectedsignificantly.
(xv) Severe fluctuations in asset prices of securities holdings
The Group may hold marketable securities whose prices have the potential for substantial fluctuations (declines) due
to the performance of individual companies and trends in financial markets, including shares in business partners andinvestment targets, etc. and various financial instruments for effectively utilizing surplus funds. If these asset values
substantially decline due to drastic changes in the economic environment, etc., it could exert a major impact on theGroup’s business activities, financial position and operating results; for example, profits may decline as a result of being
forced to recognize valuation losses or sales losses.
(xix)Impacts of disasters
Natural disasters, fires, abnormal weather conditions attributable to climate change (torrential rainfall, floods andwater shortages), the global spread (pandemic) of severe infections with high fatality rates, wars, and/or terrorist attacks,
among other matters, may seriously affect the Group’s business activities, financial position and operating results if theytake place in countries or regions in which the Group conducts its businesses.
In addition, the Group, along with the implementation of preliminary disaster reduction programs, has been taking
proactive measures through the placement of a system for confirming the safety of employees and providing training andeducational programs according to its business continuity plan (BCP), in which procedures for recovery and action
guidelines are described in the event of an emergency. Even so, if additional expenses need to be allocated forcountermeasures due to the occurrence of large-scale disasters, there is the potential for the Group’s business activities,
financial position and operating results to be substantially impacted.
The Company will also continue to closely monitor and respond appropriately to geopolitical risks associated with thesituation in Ukraine, Israel and Palestine, etc., as well as the impact of these risks on the economy. The Group does nothave a base in Ukraine, Russia, Israel, and Palestine, and recognizes that there is little direct impact. However, if themilitary conflict between the two countries intensifies or prolongs, indirect risks such as persistently high raw material
and fuel prices and the acceleration of global inflation may emerge and increase uncertainty, which could have a material
impact on its business activities, financial condition and results of operations.
Furthermore, with the penetration of ESG, there is a possibility that there will be a rise in environmental awareness,such as climate change measures, a rapid change in social awareness, and the strengthening of environmental regulations
worldwide and changes in various governmental policies, such as disaster countermeasures, associated with them. While
the Group will endeavor to respond promptly while constantly monitoring trends and changes in the external
environment, its business activities, financial condition and results of operations may be seriously affected if the Groupneeds to review its business strategies and systems.
(xvii) Reputational risks
Information about the Group’s businesses, officers and employees may be disseminated through various media suchas social media. The dissemination of such information may contain information that is not based on accurate informationand that is based on speculation. Regardless of the accuracy of the content or whether it is applicable to the Group, theperception or behavior of clients, users, investors, etc. may be affected. The Company will disclose appropriate
information in the capital markets to enable investors to value the Company’s shares in accordance with the correct
information, including immediate disclosure of the Group’s views on this unclear information in the event of unclear
information that could have a material impact on the stock price. At the same time, the Company endeavors to provide
appropriate information through the Group’s corporate website. However, the dissemination of such information could
result in damage to the social credibility of the Group and cause the departure of its clients and users, which could
seriously harm its business activities, financial condition and results of operations.

-8-

(xviii)Capital and business alliance with Dentsu Group Inc.
The Company concluded a capital and business alliance agreement with Dentsu Inc. (current trade name: Dentsu
Group Inc.) on October 30, 2018 and concluded a new capital and business alliance agreement with Dentsu Group Inc. on
October 28, 2021. Currently, the Company is working on a range of measures to maximize business synergies through theestablishment of a close collaborative business relationship with Dentsu Group Inc. pursuant to the agreement, while
maintaining our independence and autonomy as a listed company. That being said, initially expected results may notoccur due to unexpected incidents following the conclusion of the agreement or changes in the business environment,
among other factors. Besides, the capital and business alliance may be terminated in the future for certain reasons. Taking
these factors into consideration, the capital and business alliance with Dentsu Group Inc. may have a significant impact on
the Group’s business activities, financial position and operating results.

-9-4. Management’s Discussion and Analysis of Financial Condition, Results of Operations and Cash Flows(1) Analysis of operating results
Due to a change in the fiscal year-end, the fiscal year under review is the 15-month period from October 1, 2022 to
December 31, 2023, and the rate of year-over-year change in consolidated results on a financial reporting basis is not stated.
In addition, because the results of COMICSMART INC. and its subsidiaries, etc. have been reclassified as discontinued
operations, revenue, operating profit, Non-GAAP operating profit and profit before tax represent the amount of continuing
operations, excluding discontinued operations.
As a reference, the results of profit and loss and the rate of year-over-year change from the previous fiscal year arepresented, assuming that both the previous year and the current fiscal year are the 12-month period from January to
December.
(Earnings for the fiscal year under review)
In 2022, the rate of individuals owning smartphones in Japan increased to 77.3% and exceeded 90% among people in their
20s to 50s, showing the quantitative expansion is ongoing. At the same time, the purpose of using smartphones has diversified
with the increase in the rate of social media use, and there have been remarkable qualitative changes (Source: Ministry ofInternal Affairs and Communications, “Results of FY2022 Communication Usage Trend Survey”). With smartphones
becoming the main Internet devices, in the services and applications markets, the expansion of content business such as video,
music, and e-books is accelerating. In addition, the use of social media is expanding beyond communication to include areas
such as payments and purchasing, further strengthening its influence. As a result, demand for marketing support using therespective media features, data, and AI is growing further. Moreover, in the Japanese advertising market in 2022, Internet
advertising expenditures reached ¥3.0912 trillion (114.3% compared to the previous year), surpassing four Traditional Media
advertising expenditures (¥2.3985 trillion, or 97.7% compared to the previous year) (Source: Dentsu Inc., “2022 Advertising
Expenditures in Japan”). In this way, the COVID-19 crisis has triggered a major wave of digital transformation (DX) in allindustries, further increasing demand for digital marketing in the advertising industry.
Under these circumstances, in the main Digital Marketing Business, despite the economic impact, it acquired new clients,
expanded existing businesses, and promoted collaboration with the Dentsu Group. It also made up-front investments centeredon strengthening investment in human capital.
As a result, revenue was ¥34,267 million, operating profit was ¥4,949 million, Non-GAAP operating profit was ¥5,091
million, profit before tax was ¥6,652 million, profit was ¥4,267 million and profit attributable to owners of parent was ¥4,319
million.
The Group discloses consolidated operating results in terms of both its internal measures which management relies uponin making decisions (the “Non-GAAP financial measures”) and those under IFRS. Non-GAAP operating profit is a profit
indicator of constant business performance determined by excluding gain and loss related to acquisition actions andtemporary factors from the IFRS-based operating profit. Management believes that the disclosure of Non-GAAP financial
measures facilitates comparison between the Group and industry peers and year-on-year comparison by stakeholders and canprovide useful information in understanding the underlying operating results and outlook of the Group. Gain and loss related
to acquisition actions refer to amortization of acquisition-related intangible assets, M&A expenses, etc., and unusual items
refer to one-off items, such as share-based payment expenses, impairment losses, and gain and loss on sales of fixed assets,
which the Group believes shall be excluded for the purposes of preparing an outlook based on certain rules.

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Adjustments from operating profit to Non-GAAP operating profit are as follows. Due to a change in the fiscal year-end,
the fiscal year under review is the 15-month period from October 1, 2022 to December 31, 2023, and the rate of year-overyear change in consolidated results on a financial reporting basis is not stated:(Million yen)
FY2022

FY2023(Fiscal year ended September
30, 2022)(Fiscal year ended December
31, 2023)

6,166

4,949

–

31

51

–

129

39

–

Adjustment (Others)

240

52

–

Non-GAAP operating profit

6,565

5,091

–

Operating profit
Adjustment (Amortization of
acquisition-related intangible

Change ofRate ofamountchange–assets)Adjustment (Share-based
payment expenses)–

Operating results by reportable segments are as follows. Revenue and Non-GAAP operating loss for the Media Platform
Business represent the amount before the results of COMICSMART INC. and its subsidiaries, etc. have been reclassified as
discontinued operations.
(i)

Digital Marketing Business
The Digital Marketing Business consists of business segments that provide comprehensive DX support, centered on
digital marketing.
In the fiscal year under review, despite the economic impact, it acquired new clients, expanded existing businesses,
and promoted collaboration with the Dentsu Group. It also made up-front investments centered on strengthening
investment in human capital.
As a result, revenue was ¥32,112 million, and Non-GAAP operating profit was ¥8,527 million.

(ii) Media Platform Business
The Media Platform Business consists of IP Platform Business “GANMA!,” Employment Platform Business“ViViViT,” Platform Business of Social Contribution “gooddo,” Childcare Platform Business “Babyful” etc.
In the fiscal year under review, the segment grew mainly in the IP Platform Business, and the loss narrowed. However,other businesses underperformed under the post-COVID environment.
As a result, revenue was ¥5,839 million, and Non-GAAP operating loss was ¥656 million.
(Reference)
The following figures show the status of profit and loss and the rate of year-over-year change on a calendar year basis,
assuming that the accounting period of the Group was the 12-month period from January to December for both theprevious fiscal year and the current fiscal year.
As the results of COMICSMART INC. and its subsidiaries, etc. have been reclassified as discontinued operations,revenue, operating profit, Non-GAAP operating profit and profit before tax represent the amount of continuing operations,excluding discontinued operations.
Revenue was ¥27,674 million (down 0.6% year on year), operating profit was ¥3,922 million (down 22.3% year onyear), Non-GAAP operating profit was ¥4,016 million (down 25.9% year on year), profit before tax was ¥5,660 million(down 27.2% year on year), profit was ¥3,699 million (down 26.7% year on year), and profit attributable to owners ofparent was ¥3,736 million (down 25.9% year on year).

- 11 -

(2) Overview of financial positions
Total assets increased by ¥4,875 million compared to the previous fiscal year and reached ¥93,606 million. This is mainly
due to an increase of ¥1,546 million in trade receivables, ¥907 million in investment accounted for using equity method, and¥809 million in right-of-use assets.
Total liabilities increased by ¥1,924 million compared to the previous fiscal year and reached ¥27,901 million. This ismainly due to trade payables increased by ¥2,140 million.
Total equity increased by ¥2,951 million compared to the previous fiscal year and reached ¥65,705 million. This is mainly
due to a record of profit of ¥4,267 million and an increase of ¥658 million from changes without loss of control ofsubsidiaries, while a decrease of ¥1,278 million from purchase of treasury shares and dividends paid of ¥963 million.
(3) Overview of cash flows“Cash and cash equivalents” decreased by ¥467 million and totaled ¥20,873 million. The following are the details andfactors of each cash flows in the fiscal year under review.
(i)Cash flows from operating activities
As a result of operating activities in the fiscal year under review, cash inflows totaled ¥3,785 million (cash inflows of¥3,650 million in the previous fiscal year). This was mainly due to a record of ¥6,652 million in profit before tax fromcontinuing operations, ¥1,856 million in dividends received and ¥2,271 million in increase in trade payables, while arecord of ¥1,851 million in equity in earnings of affiliates, ¥1,909 million in increase in trade receivables and ¥3,740
million in income taxes paid.

(ii) Cash flows from investing activities
As a result of investing activities in the fiscal year under review, cash outflows totaled ¥2,020 million (cash outflowsof ¥30,553 million in the previous fiscal year). This was mainly due to a record of ¥1,109 million in purchase of
securities, ¥933 million in purchase of investments accounted for using the equity method, and ¥828 million in paymentsof contingent consideration.
(iii) Cash flows from financing activities
As a result of financing activities in the fiscal year under review, cash outflows totaled ¥1,835 million (cash inflows of¥31,229 million in the previous fiscal year). This was mainly due to repayments of long-term loans payable of ¥2,000
million, purchase of treasury shares of ¥1,278 million, dividends paid of ¥963 million, and repayments of lease liabilitiesof ¥752 million, while there was a net increase in short-term borrowings of ¥3,000 million.

- 12 -

(4) Actual purchases and sales(i) Actual purchases
The information is omitted as purchasing is generally in line with sales.
(ii) Actual sales
The actual sales (net sales) of the segments in the fiscal year ended December 31, 2023 are as follows:
Segment nameAmount (Million yen)

Digital Marketing Business

168,076

Media Platform Business

5,839

Adjustments-4,196

Total

169,719(Notes) 1. Inter-segment transactions have been eliminated.
2. Net sales represent the sum of the amount billed to clients and the amount billable to clients by the Group(excluding discounts), and are not disclosures in accordance with IFRS.
3. Due to a change in the fiscal year-end, the fiscal year under review is the 15-month period from October 1,
2022 to December 31, 2023, and the rate of year-over-year change is not stated.
4. Adjustments include revenue related to the operation of the holding company and the elimination of profit andloss transactions between reportable segments. It also includes the amount of ¥-3,014 million for thereclassification to discontinued operations of the performance of COMICSMART INC. and its subsidiaries,
etc., which are included in the Media Platform Business.
5. The actual sales to each major transaction counterparty and its ratio to the total actual sales in the past two
fiscal years are as follows. Due to a change in the fiscal year-end, the fiscal year under review is the 15-month
period from October 1, 2022 to December 31, 2023.

Major transaction counterparty

FY2022(Fiscal year ended September 30, 2022)
Amount (Million yen)

Dentsu Inc.

19,142

Ratio (%)

FY2023(Fiscal year ended December 31, 2023)
Amount (Million yen)

14.7

22,753

Ratio (%)
13.4

(5) Factors with a significant impact on operating results
Details that correspond to the factors with a significant impact on operating results are described in “3. Business Risks.”(6) Management’s awareness of issues and policies for the future
Details regarding management’s awareness of issues and policies for the future are described in “1. Management Policies,
Management Environment, and Issues to be Addressed, etc.”(7) Fund sources and fund liquidity
The Group is determined to work to develop new services and businesses, with a view toward achieving sustainablegrowth by maintaining and enhancing our business competitiveness, while expanding the scale of its business operations anddiversifying our sources of revenue. These demands for funds shall basically be financed by cash on hand, while raising funds
as appropriate.
Liquidity risk and its management method are described in “29. Financial instruments” in “Notes to the Consolidated
Financial Statements” in “1. Consolidated Financial Statements, etc.” of “V. Financial Information.”- 13 -

(8) Significant accounting estimates and assumptions used for the estimates
The Group’s consolidated financial statements are prepared in accordance with IFRS, pursuant to the provisions of Article
93 of the “Regulation on Terminology, Forms and Preparation Methods of Consolidated Financial Statements.” Estimates thatare deemed necessary for preparing these consolidated financial statements are carried out in accordance with reasonable
standards.
Significant accounting policies, accounting estimates, and assumptions used for such estimates, as adopted in the Group’s
consolidated financial statements, are described in “2. Basis of preparation” and “3. Significant accounting policies” in “Notes
to the Consolidated Financial Statements” in “1. Consolidated Financial Statements, etc.” of “V. Financial Information.”- 14 -

II Financial Information
1. Method of preparation of consolidated financial statements and non-consolidated financial statements,
etc.
(1)

The Group’s consolidated financial statements are prepared based on International Financial Reporting Standards(“IFRS”), pursuant to the provisions of Article 93 of the “Regulation on Terminology, Forms and Preparation Methods ofConsolidated Financial Statements” (Ministry of Finance Order No. 28 of 1976; the “Regulation on Consolidated Financial
Statements”).

(2)

The Company’s non-consolidated financial statements are prepared pursuant to the “Regulation on Terminology, Forms,
and Preparation Methods of Financial Statements” (Ministry of Finance Order No. 59 of 1963; the “Regulation on Financial
Statements”).
The Company is qualified as a company allowed to file specified financial statements, and thus prepares its nonconsolidated financial statements pursuant to the provisions of Article 127 of the Regulation on Financial Statements.

2. Audit certificate
Pursuant to the provisions of Article 193-2, paragraph (1) of the Financial Instruments and Exchange Act, the consolidated
financial statements for the fiscal year ended December 31, 2023 (from October 1, 2022 to December 31, 2023) and the nonconsolidated financial statements for the fiscal year ended December 31, 2023 (from October 1, 2022 to December 31, 2023)
were audited by KPMG AZSA LLC.

3. Change in fiscal year-end
Due to a partial amendment of the Articles of Incorporation at the 32nd Ordinary General Meeting of Shareholders held on
December 21, 2022, the Company changed its fiscal year-end from September 30 to December 31.
Accordingly, the fiscal year under review and the business year under review are for the 15-month period from October 1,
2022 to December 31, 2023.

4. Specific measures to ensure the appropriateness of the consolidated financial statements, etc.
The Company adopts specific measures to ensure the appropriateness of its consolidated financial statements, etc. In
particular, the Company has become a member of the Financial Accounting Standards Foundation, and has participated intraining on newly established or revised accounting standards, etc., in order to obtain an adequate understanding of the detailsof accounting standards, etc. and to make appropriate disclosures.

5. Development of a framework for appropriately preparing consolidated financial statements, etc. inaccordance with IFRSThe Company has developed a framework for appropriately preparing consolidated financial statements, etc. in accordancewith IFRS. The details of the framework are as follows.
For application of IFRS, the Company obtains as appropriate, press releases and statements of accounting standards issued
by the International Accounting Standards Board, in order to understand the latest standards. Furthermore, for the purpose of
preparing appropriate consolidated financial statements, etc. pursuant to IFRS, the Company formulates Group accounting
policies and guidelines in accordance with IFRS, and carries out accounting based thereon.

- 15 -

1. Consolidated Financial Statements, etc.
(1) Consolidated Financial Statements(i)Consolidated Statement of Financial Position(Thousand yen)
Notes

FY2022(As of September 30, 2022)

FY2023(As of December 31, 2023)

AssetsCurrent assets
Cash and cash equivalents
Trade receivables
Inventories
Other financial assets
Other current assets

29

21,340,076

20,873,416

8, 21, 29

18,285,273
103,154

19,830,799
72,8499, 29
1098,953757,815

6

40,585,272－

101,550
1,997,253
42,875,867

Subtotal
Assets held for sale
Total current assets

807,491

40,585,272

43,683,358

Non-current assets
Property, plant, and equipment

11

235,022

257,486

Right-of-use assets

13

1,090,965

1,899,500

Goodwill
Intangible assets

7, 12
7, 12

4,693,055
525,138

4,693,055
432,366

Investments accounted for using equity method
Other financial assets

31
9, 29

33,342,226
6,904,527

34,249,351
7,106,364

24,244

13,260

Other non-current assets
Deferred tax assets

16

Total non-current assets
Total assets- 16 -

1,330,663

1,271,250

48,145,841

49,922,632

88,731,112

93,605,990

Notes

FY2022(As of September 30, 2022)(Thousand yen)
FY2023(As of December 31, 2023)

Trade payables

14, 2916,891,357

19,031,397

Other financial liabilities

15, 294,910,042

4,414,965

18, 21

557,879
2,847,110
25,206,388

421,9292,227,759
26,096,050－

236,525

25,206,388

26,332,575

15, 29531,226

1,369,940

Provisions

17

159,063

152,549

Deferred tax liabilities

16

80,366

46,137

Liabilities and Equity
Liabilities
Current liabilities

Income taxes payable
Other current liabilities
Subtotal
Liabilities directly associated with assets
held for sale

6

Total current liabilities
Non-current liabilities
Other financial liabilities

Total non-current liabilities

770,655

1,568,627

25,977,043

27,901,201

19

18,428,004

18,428,004

Capital surplus
Treasury shares

19
19

25,309,728-575,707

25,426,993-1,396,624

Retained earnings
Other components of equity

19

19,671,818-128,588

23,185,222-49,731

Total equity attributable to owners of parent
Non-controlling interests

62,705,254
48,81565,593,864
110,925

Total equity

62,754,069

65,704,788

88,731,112

93,605,990

Total liabilities
EquityEquity attributable to owners of parent
Share capital

Total liabilities and equity- 17 -

(ii) Consolidated Statement of Profit or Loss
FY2022(From October 1, 2021 toSeptember 30, 2022)

Notes(Thousand yen)
FY2023(From October 1, 2022 to
December 31, 2023)

Continuing operations
Revenue4, 21Cost of sales

22

27,589,386

Gross profit
Selling, general and administrative expenses

22, 28Other income
Other expenses

34,266,611

5,023,904

6,799,214

22,565,482

27,467,397

16,176,779

22,499,702

23,314

66,173

23

246,238

84,734

Operating profit
Finance income

24

6,165,779
2,068,952

4,949,134
5,760

Finance costs

24

334,594

153,485

Share of profit of investments accounted for using
equity method

31

1,066,228

1,850,739

8,966,365

6,652,148

2,659,861

1,727,766

6,306,504

4,924,381-555,831-657,107

Profit5,750,673

4,267,275

Profit (loss) attributable to:
Owners of parent

5,733,564

4,318,831

Non-controlling interests

17,109-51,556

5,750,673

4,267,275

33.50

23.56

Profit before tax
Income tax expenses

16

Profit from continuing operations
Discontinued operations
Loss from discontinued operations

5

Total
Earnings per share

27

Basic earnings (loss) per share (Yen)Continuing operations

-2.96

-2.82

Total

Discontinued operations

30.54

20.74

Diluted earnings (loss) per share (Yen)Continuing operations

33.40

23.50

-2.95

-2.81

30.45

20.68

Discontinued operations
Total- 18 -

(iii) Consolidated Statement of Comprehensive Income(Thousand yen)
FY2023(From October 1, 2022 to
December 31, 2023)

FY2022
Notes(From October 1, 2021 toSeptember 30, 2022)

Profit5,750,673

4,267,275

19, 2525,055

201,646

19, 25

114,591

28,09719, 25, 29

8,356

2,990

19, 25－

3,664

148,001

236,397

Total comprehensive income

5,898,674

4,503,672

Comprehensive income attributable to:
Owners of parent

Other comprehensive income
Items that will not be reclassified to profit or loss
Net changes in financial assets measured at fairvalue through other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestment accounted for using equity method
Total other comprehensive income, net of tax

5,881,565

4,555,228

Non-controlling interests

17,109-51,556

Comprehensive income

5,898,674

4,503,672- 19 -

(iv) Consolidated Statement of Changes in Equity(Thousand yen)

Equity attributable to owners of parent
Notes Share capital
Balance at October 1, 2021

CapitalsurplusTreasurysharesRetainedearnings

Other
componentsof equity

Total

Noncontrollinginterests

Total equity

2,125,384

3,901,272-1,691,842

14,322,283

18,86918,445,288

－

－

－

5,733,564-230,678－

18,426,419

Profit

5,733,564

17,1095,750,673

Other comprehensive income

－

－

－

－

148,001

148,001－

148,001

Total comprehensive income
Issuance of new shares
Dividends of surplus
Purchase of treasury shares
Obtaining of control ofsubsidiaries
Other

－

－

－

5,733,564

148,001

5,881,565

17,1095,898,674

19
20
19

16,302,620－－

16,161,638
－
－

－
－

－

-26

-429,940－－－－

32,464,257-429,940
-26

－
－
－

32,464,257-429,940
-26

7, 19

－

5,102,147

1,116,161－－

6,218,308

14,9026,233,210

Total transactions with owners
Balance at September 30, 2022－

144,671－

45,911-45,911

144,671-2,064

142,606

16,302,620

21,408,456

1,116,135-384,029-45,911

38,397,270

12,83838,410,107

18,428,004

25,309,728-575,707

19,671,818-128,588

62,705,254

48,81562,754,069(Thousand yen)

Equity attributable to owners of parent
CapitalsurplusTreasurysharesRetainedearnings

18,428,004

25,309,728-575,707

19,671,818

－

－

－

4,318,831

Notes Share capital
Balance at October 1, 2022
Profit (loss)

Other
componentsof equity-128,588－

Noncontrollinginterests

Total equity

62,705,254

48,81562,754,069

4,318,831-51,556

4,267,275
236,397

Total

Other comprehensive income

－

－

－

－

236,397

236,397－

Total comprehensive income
Dividends of surplus
Purchase of treasury shares
Disposal of treasury shares
Changes without loss of controlof subsidiaries
Other

－

－

－

4,318,831

236,397

4,555,228-51,556

4,503,672

20
19
19

－
－
－

－

－

-2,506-455,025-1,275,942
455,025-962,966
－
－

－
－
－

-962,966-1,278,448
－

－
－
－

-962,966-1,278,448
－

30

－

542,167－－－

542,167

115,350

657,516

Total transactions with owners
Balance at December 31, 2023－

32,629－157,539-157,539

32,629-1,68430,945－

117,265-820,917-805,426-157,539-1,666,618

113,665-1,552,953

18,428,004

25,426,993-1,396,624

23,185,222-49,73165,593,864

110,925

65,704,788- 20 -

(v) Consolidated Cash Flow Statement
FY2022(From October 1, 2021 toSeptember 30, 2022)

Notes(Thousand yen)
FY2023(From October 1, 2022 to
December 31, 2023)

Cash flows from operating activities
8,966,365

6,652,148-725,652-666,259

Depreciation and amortization

767,297

967,653

Interest and dividend income-2,446-4,562

24,92026,229

-1,066,228-1,850,739-2,032,753
183,323

42,70070,391

1,242,834
16,657-19,550-1,234,828
6,119,938
2,255
34,227-25,202－-2,481,389-1,908,593
27,526
2,271,407-1,431
5,626,471
4,462
1,855,868-28,144
66,438-3,739,690

3,649,828

3,785,405

99,998-1,311,447-37,769-72,805

311,068-1,109,047-168,007-12,573－

43,065

162,427－－-828,080

31-31,312,999-932,830

26-609,149
2,165,465
363,304－－
676,358-30,552,974-2,020,045

Profit before tax from continuing operations
Loss before tax from discontinued operations
Adjustments:

Interest expenses
Share of loss (profit) of investments accounted
for using equity method
Loss (profit) on valuation of securities
Other
Changes in working capital
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes refund
Income taxes paid
Cash flows provided by (used in) operating
activities
Cash flows from investing activities
Proceeds from sale of securities
Purchase of securities
Purchase of property, plant, and equipment
Purchase of intangible assets
Proceeds from sale of shares of subsidiaries
resulting in change in scope of consolidation
Proceeds from purchase of shares of subsidiaries
resulting in change in scope of consolidation
Payments of contingent considerations
Purchases of investments accounted for using
equity method
Payments for loans receivableCollection of loans receivable
Other
Cash flows provided by (used in) investing
activities

5

26

26

7

- 21 -

(Thousand yen)
FY2023(From October 1, 2022 to
December 31, 2023)

FY2022(From October 1, 2021 toSeptember 30, 2022)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Repayments of lease liabilities
Dividends paid
Proceeds from issuance of shares
Proceeds from sale of treasury shares
Purchase of treasury shares
Other
Cash flows 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
Net increase (decrease) in cash and cash equivalentsfrom transfer to assets held for sale
Cash and cash equivalents at end of period

26
26
26
20
19
19
19
26

6

- 22 -－-851,551-605,802-429,940
32,402,037－-26
713,9243,000,000-2,000,350-751,749-962,966－
221,993-1,278,448-63,181

31,228,641-1,834,702

114,591

29,1184,440,086
16,899,990-40,223
21,340,076－-426,437

21,340,076

20,873,416

Notes to the Consolidated Financial Statements
1. Reporting entity
SEPTENI HOLDINGS CO., LTD. (the “Company”) is a company established and incorporated in Japan. The addresses of
its registered headquarters and main offices are disclosed on its website (https://www.septeni-holdings.co.jp/en/). The
Company’s consolidated financial statements were prepared with December 31, 2023 as the year-end date, and comprise theCompany and its subsidiaries (the “Group”), as well as equity in its affiliates. The parent company of the Company is Dentsu
Group Inc.
The Group’s main businesses are described in “(1) Overview of reportable segments” in “Note 4. Information on Reportable
Segments.”
2.

Basis of preparation(1) Compliance with IFRS
Pursuant to the provision of Article 93 of the Regulation on Consolidated Financial Statements, the consolidated financial
statements of the Group have been prepared in compliance with IFRS since the Company qualifies as a “specified company
complying with designated international accounting standards” prescribed in Article 1-2 of the said Regulation.
(2) Basis of measurement
The Group’s consolidated financial statements are prepared on a historical cost basis, with the exception of certain
financial instruments that are measured at fair value.
(3) Functional currency and presentation currency
The Group’s consolidated financial statements are presented in Japanese yen, which is the Company’s functional currency,
and figures are rounded to the nearest thousand yen.
(4) Significant accounting judgments, estimates, and assumptions
In preparing the consolidated financial statements, management is required to make judgments, estimates, andassumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, revenue, andexpenses. Actual results may differ from these estimates.
Such estimates and underlying assumptions are reviewed on an ongoing basis. The effects of the review of the accounting
estimates are recognized in the accounting period in which the review was conducted and in future accounting periods.
Information regarding the judgments made in applying accounting policies that have a significant impact on the amounts
recognized on the consolidated financial statements is included in the following notes:
 Note 3. (1) Basis of consolidation
 Note 3. (6) Financial instruments
 Note 3. (16) Revenue
Estimates involving significant risks that may lead to significant adjustments to the carrying amount of assets andliabilities in the next fiscal year, and assumptions that serve as the basis of such estimates are as follows:・ Fair value of assets acquired and liabilities assumed through business combinations
Note 3. (2) Business combinations
Note 7. Business combinations
Note 29. (4) Liquidity risk management
Note 29. (9) Fair value of financial instruments
・ Fair value of financial instruments
・ Impairment of financial assets
・ Impairment of non-financial assets

Note 3. (6) Financial instruments
Note 3. (6) Financial instruments
Note 3. (10) Impairment of assets
Note 12. (4) Impairment test of goodwill

・ Provisions
・ Share-based remuneration
・ Recoverability of deferred tax assets

Note 3. (12) Provisions
Note 3. (15) Share-based payment
Note 3. (17) Income taxes- 23 -

(5) Adoption of new statements of accounting standards and interpretations(Amendments to IAS 12 “income taxes”)
Effective from the fiscal year under review, the Group adopted the “International Tax Reform — Pillar Two Model Rules(Amendments to IAS 12).” The amendments clarify that IAS 12 applies to income taxes resulting from tax laws enacted or
substantially enacted to introduce the Pillar Two GloBE Rules (global minimum tax) of the OECD's BEPS initiative.
However, it provides for temporary exceptions to the requirements to recognize and disclose information about deferred tax
assets and liabilities for income taxes arising from global minimum tax rules. The Group applies the exceptional measures set
forth in IAS 12 and does not recognize or disclose information about deferred tax assets and liabilities for income taxes
arising from global minimum tax rules.
(6) Statements of accounting standards and interpretations not yet applied
None of the announced statements of accounting standards and interpretations that have been newly established oramended by the approval date of the consolidated financial statements have a significant impact.
(7) Change in fiscal year-end
The Company and its subsidiaries whose fiscal year-end are not December 31 changed fiscal year-end to December 31.
As a result of this change, the previous fiscal year was from October 1, 2021 to September 30, 2022, and the current fiscal
year was from October 1, 2022 to December 31, 2023, which is not completely comparable to the previous fiscal year.
3.

Significant accounting policies(1) Basis of consolidation(i) Subsidiaries
Subsidiaries are investee entities (including structured entities) that are controlled by the Group. If the Group owns amajority of the voting rights of an investee entity, it is deemed to be under the Group’s control in principle, and is included
as a subsidiary. If the Group does not own a majority of the voting rights, but has exposure or rights to variable return
arising from its involvement in the investee entity, while retaining the capability to influence such return by exercising its
power over the investee entity, it is deemed to be under the Group’s control, and is included as a subsidiary.
The financial statements of subsidiaries are included in the consolidated financial statements from the date when theGroup obtains control until the date when it loses control.
Changes in the equity in subsidiaries is accounted for as capital transactions if the control continues, and the difference
between the adjusted amount of non-controlling interests and the fair value of considerations is recognized directly inequity attributable to owners of the Company. If the Group loses control over a subsidiary, gains or losses derived fromsuch loss are recognized in profit or loss.
(ii) Investments in affiliates
Affiliates are investee entities (including structured entities) over which the Group has significant influence on
financial and management policies, but which the Group does not control or jointly control.
Investments in affiliates are recognized at cost at the time of acquisition, and are subsequently accounted for using theequity method. Their carrying amount includes goodwill recognized at the time of acquisition. Goodwill included in the
carrying amount is calculated as the difference between the company’s equity in the net fair value of identifiable assets(including customer-related assets) and the liabilities of the affiliates and the investment cost.
The consolidated financial statements include the Group’s equity in the affiliates’ profit or loss, as well as othercomprehensive income.
In addition, whether there is objective evidence of impairment of investment in an affiliate is determined by the
management, based on information regarding significant changes in the value of the investment with an adverse impact
indicating the potential irrecoverability of the investment cost arising from the market or economic environment, as
supported by observable data related to loss events.
(iii) Reporting date
The end of the reporting period for all subsidiaries is consistent with the Company.
If the last day of the reporting period differs between the Company and its affiliates, the financial statements of thesubsidiaries and affiliates are used based on provisional settlement as of the consolidated closing date.

- 24 -

(iv) Transactions eliminated in the consolidated financial statements
The amounts of receivables, payables, transactions, and unrealized gains and losses arising from inter-Grouptransactions are eliminated when preparing the consolidated financial statements.
(2) Business combinations
Business combinations are accounted for using the acquisition method. Consideration for acquisition is measured as thesum of the fair values at the acquisition date (the date of obtaining control) of the assets transferred in exchange for control
over an acquiree, the liabilities assumed, and the equity instruments issued by the Company. Acquisition-related cost isrecognized in profit or loss when incurred.
In the case where initial accounting for a business combination is not complete by the end of the fiscal year, during whichsuch business combination occurs, provisional amounts are reported on the items for which the accounting treatment isincomplete. If such incomplete state was anticipated beforehand, provisional amounts are adjusted during the measurement
period (not to exceed one year), or additional assets acquired or liabilities assumed are recognized, in order to reflect new
information obtained regarding facts or circumstances on the acquisition date, which are considered would have affected theamounts recognized on the acquisition date had they been brought to light.
In a business combination, following the identification of the acquirer, identifiable assets acquired and liabilities assumedof the acquired subsidiary are measured at fair value on the acquisition date, except for the following:・ Deferred tax assets or deferred tax liabilities measured in accordance with IAS 12 “Income Taxes”
・ Assets or liabilities related to the employee benefits contracts, as measured in accordance with IAS 19 “Employee
Benefits”
・ Liabilities related to the share-based remuneration contract of the acquiree, as measured in accordance with IFRS 2“Share-based Payment”
・ Non-current assets or disposal groups classified and measured in accordance with IFRS 5 Non-current Assets Held for Saleand Discontinued Operations
If the sum of the consideration for the business combination transferred, the amount of non-controlling interests in theacquiree, and the fair value on the acquisition date of the equity in the acquiree held previously by the Company exceeds thenet fair value of the identifiable assets acquired and liabilities assumed, such excess is recorded as goodwill in the
consolidated statement of financial position. Conversely, if the above-mentioned sum falls short of such net fair value, such
shortfall is recognized directly in profit or loss in the consolidated statement of profit or loss. The Group chooses whether tomeasure non-controlling interests at fair value or based on the proportion of non-controlling interests relative to therecognized identifiable net assets, for each business combination transaction.
The additional acquisition of non-controlling interests following the obtaining control are accounted for as a capitaltransaction. The difference between the adjusted amount of non-controlling interests and the fair value of the consideration
paid or received is recognized directly in capital surplus, and no goodwill is recognized from such transaction.
(3) Foreign currency translation(i)

Foreign currency denominated transactions
Foreign currency denominated transactions are translated into the functional currency of each Group company at theexchange rate on the transaction date. Foreign currency denominated monetary assets and liabilities remeasured at the
year-end date are retranslated into the functional currency at the exchange rate on the year-end date. Foreign currency
denominated non-monetary assets and liabilities measured at fair value are retranslated into the functional currency at theexchange rate on the fair value measurement date.
Foreign currency differences arising from the settlement of these transactions, as well as those arising from thetranslation of foreign currency denominated monetary assets and liabilities at the exchange rate on the year-end date arerecognized in profit or loss. However, if profit or loss from non-monetary items is recorded in other comprehensive
income, foreign currency differences therefrom are also recorded in other comprehensive income.

(ii) Foreign operations
Assets and liabilities of foreign operations (including goodwill arising from acquisitions and adjustments of fair value)
are translated into Japanese yen at the exchange rate on the year-end date, while revenue and expenses are translated into
Japanese yen at the average exchange rate during the corresponding fiscal year. However, in cases where the exchange rate
fluctuates significantly, such translation is based on the exchange rate on the transaction date.

- 25 -

Foreign currency translation differences arising from the translation of financial statements of foreign operations arerecognized in other comprehensive income. With regard to full disposal of equity in a foreign operation or partial disposal
thereof involving the loss of control or significant influence, such translation differences are reclassified to profit or loss,
as part of profit or loss on disposal.
(4) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits convertible into cash as needed, and short-term investmentswith original maturities of three months or less that are readily convertible to known amounts of cash and are so near tomaturity that they present an insignificant risk of changes in value.
(5) Inventories
Inventories consist of merchandise and work in process, and are measured at the lower of cost or net realizable value.
Costs are calculated primarily by using the weighted average method, while inventories with no substitutability are calculated
by using the specific identification method.
(6) Financial instruments(i)

Non-derivative financial assets
The Group initially recognizes trade and other receivables on the date such receivables arise. All other financial assets
are initially recognized on the contract date when the Group becomes a party to the contract of the financial instruments.
The Group derecognizes financial assets when the contractual rights to cash flows from the financial assets expire, orthe contractual rights to receive cash flows from the financial assets are transferred in a transaction that substantiallytransfers to another party all of the risks and economic benefits associated with ownership of the financial assets. Equity inthe transferred financial assets held in an ongoing manner by the Group is recognized as separate assets and liabilities.
An outline of the classification of non-derivative financial assets and the method for measurement thereof is asfollows:a.

Financial assets measured at amortized cost
Investments in debt instruments with contractual cash flows that comprise principal and interest on the principal
amount paid on certain dates, and are held by the Group based on a business model designed to collect contractual cash
flows are measured at amortized cost. Transaction costs that are directly attributable to the acquisition of financial
assets measured at amortized cost are added to its fair value.
Following initial recognition, amortized cost is measured by using the effective interest method, involving anappropriate deduction of impairment loss. Interest income, foreign exchange gain and loss, and impairment loss related
to financial assets measured at amortized cost are recognized in profit or loss.

b.

Financial assets measured at fair value through other comprehensive income (“financial assets measured at FVTOCI”)
Investments in debt instruments with contractual cash flows that comprise principal and interest on the principal
amount paid on certain dates, and are held by the Group based on a business model designed to collect contractual cash
flows and sell such financial assets are measured at fair value. In this case, interest income, foreign exchange gain andloss, and impairment loss are recognized in profit or loss by using the effective interest method, while changes in fairvalue other than the foregoing are recognized in other comprehensive income (with possible reclassification to profit orloss).
The Group may (irrevocably) opt to measure investments in equity instruments not held for trading at fair value atinitial recognition, and recognize changes therein in other comprehensive income. In this case, changes in fair value arerecognized in other comprehensive income (with no reclassification to profit or loss). In the case of derecognition,
cumulative changes in fair value that are recognized in other comprehensive income are directly transferred to retained
earnings. Dividends are recognized in profit or loss unless they apparently represent a partial collection of investment
cost.
Transaction costs that are directly attributable to the acquisition of a financial asset measured at FVTOCI are added
to its fair value.

- 26 -

c.

Financial assets measured at fair value through profit or loss (“financial assets measured at FVTPL”)
Financial assets other than those described above are measured at fair value, while changes therein are recognizedin profit or loss. Transaction costs that are directly attributable to the acquisition of financial assets measured at FVTPL
are recognized in profit or loss when incurred.
The Group does not designate any debt instruments as those to be measured at fair value through profit or loss forthe purpose of eliminating or significantly reducing an accounting mismatch.

(ii) Impairment of financial assets
In recognizing amortized cost or impairment of debt instruments measured at fair value through other comprehensive
income, the Group assesses at each year-end date whether the credit risk associated with a concerned financial asset orgroup of financial assets increased significantly after initial recognition. Specifically, if credit risk has not increased
significantly after initial recognition, the 12-month expected credit losses are recognized as loss allowance. On the other
hand, if credit risk has increased significantly after initial recognition, the expected credit loss during the remaining period
is recognized as loss allowance. Whether or not credit risk has increased significantly is determined based on the change indefault risk.
For trade receivables arising from normal transactions by the Group, a loss allowance is recognized, based simply on
historical credit loss due to a short collection period, at an amount equivalent to the expected credit losses during theremaining period after initial recognition.
Expected credit losses are measured based on the difference between the contractual cash flows payable to a businessaccording to a contract and the cash flows a business expects to receive as present value.
If the Group has no reasonable expectation to collect a financial asset in whole or in part, a reduction is made directly
to the carrying amount of the whole financial asset.
(iii) Non-derivative financial liabilities
The Group recognizes a financial liability on the transaction date when it becomes a party to the contract for thefinancial instruments. The Group derecognizes the financial liabilities only when they are extinguished, that is, when the
obligations in the contract are discharged, cancelled, or expired.
The Group has borrowings, trade and other payables as non-derivative financial liabilities, and transaction costs thatare subject to initial recognition at fair value and are directly attributable to the acquisition of financial liabilities measured
at amortized cost are deducted from such fair value.
Following initial recognition, the aforementioned liabilities are measured at amortized cost by using the effective
interest method.
Contingent considerations are recognized at fair value at the time of acquisition. If it falls into measurement during themeasurement period, changes in fair value after the acquisition involve adjustments to the acquisition cost; otherwise, suchchanges are recognized in profit or loss as changes in fair value.
(iv) Derivatives and hedge accounting
The Group owns various derivative financial instruments as a means to hedge foreign exchange and other risks.
The Group recognizes changes in the fair value of derivatives as profit or loss. However, the effective portions of cash
flow hedges are recognized as other comprehensive income.
At the inception of hedging, the Group formally designates and documents the hedging relationship to which hedge
accounting is to be applied, as well as the objectives and strategies of risk management for undertaking the hedge. This
documentation includes specific hedging instruments, hedged items, nature of the risk to be hedged, and the assessment
methods of the effectiveness of the hedging relationship. These hedges are expected to meet the prerequisites: (i) economic
relationships exist between the hedged items and hedging instruments; (ii) the impact of the credit risk does not
significantly exceed the changes in value arising from the economic relationship; and (iii) the hedging ratio of the hedging
relationship is identical to the ratio based on the actual quantities of the hedged items and hedging instruments. These
prerequisites are verified continuously, to determine whether the hedging relationship will remain effective in the future.
The Group adopts cash flow hedges by designating as hedging instruments derivative financial instruments that meetthe criteria for hedge accounting. Cash flow hedges are hedges against exposure to the variability of cash flows that arises
from specific risks associated with recognized assets or liabilities, or from forecast transactions that are highly likely to be
made, which have an impact on profit or loss.
Portions of gains or losses on hedging instruments that are determined to be effective hedges are recognized as othercomprehensive income. The amount recognized as other comprehensive income is transferred from other comprehensive- 27 -

income to profit or loss in the same fiscal year as that in which the hedged cash flows have an impact on profit or loss. In
cases where hedged items result in the recognition of a non-financial asset or non-financial liability, the amount recognizedin other comprehensive income is accounted for as an adjustment to the initial carrying amount of such non-financial asset
or non-financial liability. Any ineffective portions of qualified hedges are recognized as profit or loss.
(v) Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and presented on a net basis in the consolidated statement offinancial position only when the Group has a legally enforceable right to offset the balances of such assets and liabilities,
and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
(7) Property, plant and equipment
Property, plant and equipment are measured under the cost model and carried at their cost, less any accumulated
depreciation and impairment. The cost of property, plant and equipment includes expenses that are directly incidental to theacquisition of such assets, and the initial estimated costs of dismantling and removing the assets as well as restoring thepremises to the original condition.
Regarding depreciation expense, the depreciable amount is calculated primarily by the straight-line method over therespective estimated useful life of each component. The depreciable amount is calculated by subtracting residual value fromthe cost of the asset.
The estimated useful lives of major property, plant and equipment are as follows:
3 to 15 years
 Buildings and accompanying facilities:
3 to 20 years
 Tools, furniture and fixtures:
The depreciation method, estimated useful life, and residual value are reviewed at each year-end date and revised as
appropriate.
(8) Goodwill and intangible assets(i) Goodwill
The measurement of goodwill at initial recognition is described in “(2) Business combinations.” Goodwill is notamortized. If amortization is found to be necessary as a result of impairment test, an impairment loss is recorded. Goodwill
is measured at cost less the accumulated impairment loss.
(ii)

Other intangible assets
Separately acquired intangible assets are measured at cost at initial recognition. Intangible assets acquired as a result ofa business combination are recognized separately from goodwill at initial recognition, and measured at fair value on theacquisition date.
Measurement after initial recognition is carried out under the cost model. Intangible assets with definite useful lives aremeasured at cost less accumulated amortization and impairment, while those with indefinite useful lives are measured atcost less accumulated impairment losses.
Research and development expenses incurred within the Group are recognized as expenses when incurred, except for
expenditures for development activities that meet capitalization requirements (internally generated intangible assets).
Internally generated intangible assets are measured at initial recognition, at the sum of the expenditures that incurred in the
period from the date when all the capitalization requirements are met until the development is completed.
Intangible assets with definite useful lives are amortized over their estimated useful lives, under the straight-line
method. Intangible assets with indefinite useful lives are not amortized, and impairment tests are carried out at each yearend date until their useful life becomes apparent.
The estimated useful lives of major intangible assets are as follows:
3 to 5 years
 Software:
11 years
 Customer relationships:
The amortization method, estimated useful life, and residual value are reviewed at each year-end date and revised as
appropriate.

- 28 -

(9) Leases
The Group determines whether a contract is or contains a lease, at the time of its inception. The Group chooses to treat
consideration in a contract containing a lease at its inception date or reevaluation date by deeming each lease component andrelated non-lease component as a single lease component, without distinguishing it from non-lease components at eachunderlying asset class, as a practical expedient measure as allowed under IFRS 16. In addition, the lease term consists of the
non-cancellable term plus a period covered by the extension option that is likely to be exercised with reasonable certainty, as
well as a period covered by a cancellation option that is unlikely to be exercised with reasonable certainty.
(Lessee)(i) Right-of-use assets
Right-of-use assets are recognized on the inception date of lease. Right-of-use assets are measured at acquisition coston the inception date of lease, where the acquisition cost consists of the total of the initially measured lease liabilities, lease
payments paid prior to the inception date of the lease less the lease incentive received, initial direct costs incurred, andestimated cost to be incurred by the lessee in restoring the underlying asset to its original condition, as required under theterms of the lease.
After the inception date of lease, right-of-use assets are measured under the cost model, at acquisition cost lessaccumulated depreciation and impairment. Right-of-use assets are depreciated from the inception date until the end of theuseful lives of the right-of-use assets or the end of the lease term, whichever is earlier, unless the Group is reasonably
certain to acquire the ownership of the right-of-use assets at the end of the lease term. The useful lives of the right-of-use
assets are determined in the same manner as used for property, plant and equipment.
(ii) Lease liabilities
Lease liabilities are recognized on the inception date of lease. Lease liabilities are measured at the present value of thelease payments that are yet to be paid, as of the inception date of lease. If the interest rate implicit in the lease is readily
determinable, such lease payments are discounted by using such interest rate, or otherwise discounted by using the lessee’s
incremental borrowing rate. The lease payments included in the measurement of lease liabilities consist primarily of fixedlease payments, lease payments for the extension period if such extension option is likely to be exercised with reasonablecertainty, and payments of a penalty for cancellation of the lease unless it is reasonably certain that the contract will not beprematurely canceled.
After the inception date of lease, the carrying amount of the lease liabilities is adjusted to reflect the interest rate on thelease liabilities and the lease payments paid. In case of a review of the lease liabilities or a lease modification, the leaseliabilities are remeasured to adjust the right-of-use asset.
(10) Impairment of assets(i)Financial assets
Impairment of financial assets is described in “(ii) Impairment of financial assets” in “(6) Financial instruments.”- 29 -

(ii) Non-financial assets
The Group assesses at each year-end date whether there is any indication that the carrying amount of its non-financial
assets, excluding inventories and deferred tax assets, etc., may be impaired. If such an indication is found, the recoverable
amounts of such assets are estimated.
Goodwill and intangible assets with indefinite useful lives or those not yet available for use are tested for impairment
to estimate recoverable amount whenever there is an indication, or at least annually regardless of whether there is such
indication.
The recoverable amount of an asset or a cash-generating unit is calculated at the higher of its value in use or its fairvalue less the cost of disposal. The value in use is calculated by discounting the estimated future cash flows to the present
value, using a pre-tax discount rate that reflects the time value of money, the risks specific to the asset, etc. A cashgenerating unit is the smallest group of assets that generates cash inflows that are largely independent of the cash inflows
from other assets or groups of assets through its continued use.
The allocation of goodwill to cash-generating units is determined based on the unit for managing goodwill for the
purpose of internal control, which is within the scope of a business segment.
Since corporate assets do not generate independent cash inflows, if there is an indication of impairment of corporate
assets, this is assessed by calculating the recoverable amount of the cash-generating unit to which the corporate assets
belong.
If the recoverable amount of an asset or a cash-generating unit is less than its carrying amount, such asset is devalued
to its recoverable amount and an impairment loss is recognized. An impairment loss recognized in association with cashgenerating units is first allocated so as to reduce the carrying amount of goodwill allocated to the unit, with the remaining
amount allocated so as to reduce other assets, according to the proportion of the carrying amount of other assets in the unit.
For an impairment loss that is recognized in the prior periods of assets other than goodwill, the Group assesses whether
there is any indication of a decrease or disappearance of the loss at each year-end date. If there is any indication of areversal of the impairment loss and the estimated amount used to determine the recoverable amount changes, theimpairment loss is reversed. The impairment loss is reversed up to the carrying amount less any necessary depreciation oramortization expenses that would have been determined had no impairment loss been recognized.
However, the goodwill-related impairment loss is not reversed.
Since the goodwill that forms part of the carrying amount of investment in entities accounted for using equity method
is not separately recognized, it is not tested for impairment separately. If there is an indication of impairment supported by
objective evidence in the investment in entities accounted for using the equity method, the carrying amount of the entire
investment amount is tested for impairment as a single asset. There is no indication of impairment in the investment in
Dentsu Digital Inc., as there is no objective evidence to support such impairment.
(11) Employee benefits
Short-term employee benefits are not discounted, but are recorded as expenses upon provision of the related services.
Regarding bonuses, the Group is legally or constructively obligated to pay bonuses, and when reliable estimates are available,
an estimated amount to be paid under the relevant system is recognized as a liability.
(12) Provisions
Provisions are recognized when there are present legal or constructive obligations as a result of past events, it is probablethat outflows of resources embodying economic benefits will be required to settle the obligations, and reliable estimates
regarding the amount of the obligations are available.
If the time value of money has a significant effect, provisions are calculated by discounting the estimated future cash
flows to the present value, by using the pre-tax discount rate reflecting the time value of money and the risks specific to theliability. An increase in provisions due to the passage of time is recognized as finance costs.
(13) Non-current assets held for sale and discontinued operations(i) Non-current assets held for saleNon-current assets or disposal groups that are expected to be recovered in carrying amounts not by continuous use but
by sale are classified as non-current assets and disposal groups held for sale, when they are highly likely to be sold within
one year, they are available for immediate sale in their present condition, and management of the Group is committed tosuch sale. In such case, the non-current assets are neither depreciated nor amortized, and are measured at the carrying
amount or fair value less the cost of sales, whichever is lower.

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(ii) Discontinued operations
A discontinued operation is a corporate component that has already been disposed or classified as held for sale, andrepresents a major independent business domain or an operational area of the Group, or represents a part of the unified
plan for disposing a major independent business domain or operational area. Such a component is presented or disclosed asa discontinued operation, separate from continuing operations.
(14) Equity(i) Common shares
Common shares issued by the Company are accounted for by recognizing the issue price in share capital and capitalsurplus, while the direct issue cost (after tax effect) is deducted from capital surplus.
(ii) Treasury shares
When purchasing treasury shares, consideration paid including direct transaction costs after tax effect are recognized inequity, as a deduction item. In the case of the sale of treasury shares, the difference between its carrying amount and theconsideration received at sale is recognized in capital surplus.
(15) Share-based payment(i) Share option plan
The Group has introduced a share option plan for providing equity-settled share-based payment. The fair value ofshare-based remuneration at the grant date is recognized as expenses over the vesting period from the grant date, while
recognizing the corresponding amounts as increases in other components of equity. The fair value of the granted shareoptions is calculated by using the Black Scholes model, etc., in consideration of the various conditions of the options.
(ii) Share-based remuneration plan
The Group has introduced a performance-linked share-based remuneration plan for providing equity-settled sharebased payment.
The fair value of the equity-settled share-based remuneration on the grant date is recognized as expenses over thevesting period from the grant date, while recognizing the corresponding amounts as increases in equity.
(16) Revenue
Revenue is recognized based on the following five-step approach:
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Group provides services to customers through the Digital Marketing Business and the Media Platform Business.
(i)

Digital Marketing Business
The Digital Marketing Business provides services including the distribution and placement of advertising, as well as
creative/marketing support services on digital media, etc. provided by media companies.
Performance obligations are satisfied regarding the distribution and placement of advertising on the digital media, etc.
provided by media companies, primarily when advertising is actually distributed and/or placed on the digital media, andfor creative/marketing support services, etc., primarily when products are delivered or services are provided. Revenue istherefore recognized upon the respective point of time of satisfaction of such performance obligations.
For transactions in the Digital Marketing Business, the Group records the revenue primarily at the consideration
received from clients as remuneration for the services provided by the Group less the relevant cost, or at a certain
remuneration paid in the form of a commission. However, for some transactions for which the Group determines that it
acts justifiably as a principal, consideration received from clients and costs are recorded on a gross basis. Consideration fortransactions is primarily received within one year after the satisfaction of performance obligations, and does not contain asignificant financing component.

- 31 -

(ii) Media Platform Business
The Media Platform Business provides services including the distribution and placement of advertising on the digital
media provided by the Group, as well as the provision of e-books, etc.
Performance obligations are satisfied regarding the distribution and placement of advertising on the digital media
provided by the Group, primarily when advertising is actually distributed and/or placed on the digital media, and for theprovision of e-books, etc., primarily when products are delivered. Revenue is therefore recognized upon the respective
point of time of satisfaction of such performance obligations.
For transactions in the Media Platform Business, revenue and costs are recorded on a gross basis, because the Group
determines that it acts justifiably as a principal. Consideration for transactions is primarily received within one year after
the satisfaction of performance obligations, and does not contain a significant financing component.
(17) Income taxes
Income tax expense comprises current income taxes and deferred income taxes, and is recognized in profit or loss, except
for taxes arising from business combinations, and from other comprehensive income or the items recognized directly inequity.
Current income taxes are measured at an amount that is expected to be paid to or refunded from the tax authority. The tax
rate and tax law that are applied for calculating the tax amount are in force or effectively in force by the year-end date in acountry where the Group conducts its business activities, and generates profit or loss that is subject to taxation.
For deferred tax assets, deductible temporary differences, unused tax losses, and unused tax credits are recognized within
the range that is highly likely to be usable for future taxable profit. Deferred tax assets are under a recoverability review at
each year-end date. Deferred tax liabilities are recognized regarding taxable temporary differences, in principle.
However, deferred tax assets or deferred tax liabilities are not recognized regarding the following temporary differences:・Temporary differences arising from the initial recognition of assets or liabilities in transactions other than businesscombinations that affect neither accounting profit nor taxable profit
・Temporary differences arising from the initial recognition of goodwill
・In cases where deductible temporary differences associated with investments in subsidiaries and affiliates are unlikely tobe reversed in the foreseeable future, or taxable profit against which such deductible temporary differences could be
utilized is unlikely to be available
・In cases where the timing of reversal of taxable temporary differences associated with investments in subsidiaries andaffiliates can be controlled, and such temporary differences are unlikely to be reversed in the foreseeable future
Deferred tax assets and deferred tax liabilities are measured by using the tax rate that is expected to be applied at the timeof reversal of the temporary differences, based on the law in force or effectively in force at the year-end date.
Deferred tax assets and deferred tax liabilities are offset if the Group has a legally enforceable right to offset current tax
assets and current tax liabilities, and they are related to income taxes imposed on the same taxable entity, or they are related toincome taxes imposed by the same tax authority on different taxable entities, with the intent to make settlement on a net basis.
The Company and its domestic wholly-owned subsidiaries apply the Japanese group relief, in which they file an income
tax return and pay taxes as one consolidated tax-filing group.
(18) Earnings per share
Basic earnings (loss) per share are calculated by dividing profit (loss) attributable to owners of parent by the weighted
average number of common shares outstanding less the number of treasury shares during the period. Diluted earnings (loss)
per share are calculated, with reference to the impact of all potential common shares with dilutive effects, by adjusting profit(loss) attributable to owners of parent and the weighted average number of shares outstanding less the number of treasury
shares.

- 32 -

4.

Information on Reportable Segments(1) Overview of reportable segments
The Group has a holding company structure where the Company is a holding company, and its subsidiaries (or theirgroups) are business units. Activities directly related to revenue generation are conducted solely by the business units.
The Group’s reportable segments are based on business segments for which separate financial information is available andthat the highest decision-maker examines on a regular basis to determine the distribution of management resources andevaluate the results. In consideration of similarities among the economic characteristics of each business segment and theirquantitative importance and for the purpose of enabling the users of the financial statements to appropriately evaluate theGroup’s businesses and the economic circumstances, and their effects on the businesses, the Group discloses information on
two reportable segments: the Digital Marketing Business and the Media Platform Business.
(i)

Digital Marketing Business
The Digital Marketing Business consists of businesses that provide comprehensive DX support, mainly in themarketing domain, such as marketing support through online-offline integration centered on the sales and operation ofdigital advertising, and the development and provision of solutions utilizing data and AI.

(ii) Media Platform Business
The Media Platform Business consists of IP Platform Business (the name changed from the Manga Content
Business from the current fiscal year) “GANMA!,” Employment Platform Business “ViViViT,” Platform Business ofSocial Contribution “gooddo,” Childcare Platform Business “Babyful” etc. This segment includes business units that havecommenced operation in recent years and have not made a profit due to prior investment for revenue generation. The
highest decision-maker makes decisions on the distribution of management resources to those business units and evaluates
their results, assuming risks and economic values that allow the Group to recover the investment costs through future
revenue generation.
(2) Measurement of reportable segments’ profit and loss
Segment profit uses Non-GAAP operating profit based on IFRS adjusted for gain and loss related to acquisition actions
such as amortization of acquisition-related intangible assets and M&A expenses and temporary factors such as share-based
payment expenses, impairment losses, and gain and loss on sales of fixed assets. Non-GAAP operating profit is a profit
indicator of constant business performance determined by excluding gain and loss related to acquisition actions andtemporary factors from the IFRS-based operating profit. Management believes that disclosing Non-GAAP measuresfacilitates comparison between the Group and industry peers and year-on-year comparison by stakeholders and can provide
useful information in understanding the underlying operating results and outlook of the Group. Gain and losses related toacquisition actions refer to amortization of acquisition-related intangible assets and M&A expenses, and unusual items refer toone-off items, such as share-based payment expenses, impairment losses, and gain and loss on sales of fixed assets, which theGroup believes shall be excluded for the purposes of preparing an outlook based on certain rules.
The prices of inter-segment transactions are determined based on the prices of transactions with external clients.

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(3) Information on reportable segments’ profit and loss
Previous consolidated fiscal year (from October 1, 2021 to September 30, 2022)(Thousand yen)
DigitalMarketing *2

Media Platform *3

Total

Adjustments *4

Consolidated

Segment revenue

25,861,984

3,296,727

29,158,711-1,569,324

27,589,386

Segment profit (loss) *1

9,211,291-844,464

8,366,827-1,801,650

6,565,177(Notes) 1. The segment profit is Non-GAAP operating profit.
2. The segment revenue and segment profit in the Digital Marketing Business include segment revenue and segment loss
related to JNJ INTERACTIVE INC., which was transferred on November 30, 2023.
3. The segment revenue and segment loss in the Media Platform Business show the amount before reclassification of theresults of COMICSMART INC. and its subsidiaries, etc.
4. The breakdown of adjustments is as follows. Expenses related to the operation of the holding company consist of
personnel expenses, etc. The results of COMICSMART INC. and its subsidiaries, etc. are reclassified to “transfer todiscontinued operations.”(Thousand yen)
Revenue and expenses related to the operation ofTransfer tothe holding company and elimination of profit anddiscontinued
Adjustments
loss transaction between reportable segments
operations
Segment revenue
Segment profit (loss)-339,787-1,229,537-1,569,324-2,511,599

709,949-1,801,650

Current consolidated fiscal year (from October 1, 2022 to December 31, 2023)(Thousand yen)
Digital Marketing
Media Platform *3
*2

Total

Adjustments *4

Consolidated

Segment revenue

32,111,575

5,838,993

37,950,568-3,683,957

34,266,611

Segment profit (loss) *1

8,526,919-655,910

7,871,009-2,779,703

5,091,306(Notes) 1. The segment profit is Non-GAAP operating profit.
2. The segment revenue and segment profit in the Digital Marketing Business include segment revenue and segment loss
related to JNJ INTERACTIVE INC., which was transferred on November 30, 2023.
3. The segment revenue and segment loss in the Media Platform Business show the amount before reclassification of theresults of COMICSMART INC. and its subsidiaries, etc.
4. The breakdown of adjustments is as follows. Expenses related to the operation of the holding company consist of
personnel expenses, etc. The results of COMICSMART INC. and its subsidiaries, etc. are reclassified to “transfer todiscontinued operations.”(Thousand yen)
Revenue and expenses related to the operation ofTransfer tothe holding company and elimination of profit anddiscontinued
Adjustments
loss transaction between reportable segments
operations
Segment revenue
Segment profit (loss)- 34 --669,472-3,014,485-3,683,957-3,444,787

665,084-2,779,703

Adjustments of segment profit (loss) to profit before tax(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Segment profit (non-GAAP operating profit)
Selling, general and administrative expenses

FY2023(From October 1, 2022 to
December 31, 2023)

6,565,177

5,091,306-30,614-128,729-51,023-38,877

Other profit (loss) (net)
Financial profit (loss) (net)-240,056
1,734,358-52,273-147,725

Share of profit of investments accounted for using equity
method

1,066,228

1,850,739

Profit before tax

8,966,365

6,652,148

Amortization of acquisition-related intangible assets
Share-based payment expenses(4) Information regarding products and services
This is omitted, as identical information is disclosed in “(3) Information on reportable segments’ profit and loss.”(5) Information by region
A breakdown of revenue by region is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Japan

26,181,376

Other

1,408,010

1,198,844

27,589,386

34,266,611

Total

33,067,767(Note) The information is based on the location of the clients, in principle.
A breakdown of non-current assets (excluding investments, financial instruments, and deferred tax assets that are
accounted for using the equity method) by region is as follows:(Thousand yen)
FY2021(Ended September 30, 2021)
Japan
Other
Total

FY2022(Ended September 30, 2022)

6,493,483
74,9417,226,327
69,3396,568,424

7,295,667(6) Information on major clients
Among revenue from external clients, the Digital Marketing Business is the primary segment having a client that solely
represents 10% or more of the revenue on the consolidated statement of profit or loss. The total revenue from theaforementioned clients for the fiscal year ended September 30, 2022 and the fiscal year ended December 31,2023 was¥4,082,406 thousand and ¥4,731,075 thousand, respectively.

- 35 -

5.

Discontinued operations
The Company resolved at the Board of Directors meeting held on December 19, 2023 to sell 74,000 of the 116,400 shares of
COMICSMART INC. held by the Company (the transfer date is scheduled to be March 29, 2024). As of the date of the transfer,
the Company's ownership of the voting rights in COMICSMART INC. and its subsidiaries, etc. decrease from 89.42% to32.57%. The Company will lose control of COMICSMART INC. and COMICSMART INC. will become its equity-method
affiliate.
As a result, the profit and loss of COMICSMART INC. and its subsidiaries, etc. from October 1, 2022 to the expected dateof loss of control have been separated from continuing operations and presented as discontinued operations.
(1) Performance of discontinued operations(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Revenue
Expenses

1,229,794
1,955,446

3,014,566
3,680,825

Loss before tax from discontinued operations
Income tax expense-725,652-169,821-669,259-9,152

Loss from discontinued operations-555,831-657,107(Notes) Revenue includes other income and finance income.
(2) Cash flows of discontinued operations(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Cash flows from operating activities
Cash flows from investing activities-480,638-19,814

Cash flows from financing activities

1,265,988－

Net cash flow

765,536-689,926

6.

-645,144-44,782

Disposal group held for sale
As a result of the decision to sell COMICSMART INC. shares, all assets and liabilities held by COMICSMART INC. and its
subsidiaries, etc. are presented as a disposal group held for sale. The disposal group's fair value less costs to sell (the expectedsale price) exceeds its carrying amount, and therefore, such assets and liabilities are measured at their carrying amounts.
(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Assets held for sale
Cash and cash equivalents
Trade receivables－－

426,437
332,498

Others－48,556－807,491－－

106,773
129,752－

236,525

Total
Liabilities directly associated with assets held for sale
Trade receivables
OthersTotal- 36 -

7.

Business combinations
FY2022 (From October 1, 2021 to September 30, 2022)
The Company and Dentsu Group Inc. concluded, on October 28, 2021 a capital and business alliance agreement (the“Capital and Business Alliance Agreement”), with the intention of becoming the nation’s largest digital marketing partners thatlead the development of the industry, by providing the most excellent solutions to its clients, based on an organizational
environment in which personnel with a wide variety of talents gather to work with full job satisfaction, through the businesscollaboration between the Company and Dentsu Group Inc. Pursuant to the Capital and Business Alliance Agreement, theCompany carried out a share exchange on January 4, 2022 (the “Share Exchange”) with Dentsu Direct Inc., a wholly-owned
subsidiary of Dentsu Group Inc., through which the Company became the wholly-owning parent company in the Share
Exchange and Dentsu Direct Inc. became the wholly-owned subsidiary in the Share Exchange.
Matters regarding the Share Exchange
The Company carried out the Share Exchange with Dentsu Direct Inc. on January 4, 2022, and Dentsu Group Inc. carriedout the Share Exchange through Dentsu Direct Inc.
・Method and the effective date of the Share Exchange
The Share Exchange is a share exchange in which the Company is a wholly-owning parent company and Dentsu Direct Inc.
is a wholly-owned subsidiary. The Share Exchange was approved by the resolutions of the general meetings of shareholders ofboth the Company and Dentsu Direct Inc. The effective date of the Share Exchange was January 4, 2022.
・Details of allotment in the Share Exchange
Company name

The Company(Wholly-owning parent company in theshare exchange)

Dentsu Direct Inc.
(Wholly-owned subsidiary in the shareexchange)

Share exchange ratio

1

3,274

Number of shares to be delivered upon the
Share Exchange

The Company’s common shares: 12,768,600 shares(Notes) 1. Allotment ratio of shares for the Share Exchange (share exchange ratio)
3,274 common shares of the Company were allotted and delivered per share of Dentsu Direct Inc.
2. Number of new shares of the Company issued as a result of the Share Exchange
The Company allotted and delivered 12,768,600 common shares of the Company through the Share Exchange. Of theshares delivered, 10,724,240 shares were allotted from the Company’s treasury shares and 2,044,360 common shareswere newly issued.
・Overview of the accounting treatment
The Share Exchange was accounted for using the acquisition method under IFRS 3 “Business Combinations.” The following
table presents a breakdown of the fair value of the assets acquired and liabilities assumed of Dentsu Direct Inc. and thesubsidiary as of the acquisition date, as well as the consideration for the acquisition.
(Thousand yen)
Cash and cash equivalents

162,427

Trade receivables

3,442,657

Other current assets and non-current assets

2,100,529

Trade payables-2,867,292

Other current liabilities and non-current liabilities-1,298,166

Non-controlling interests (Note) 2-14,902

Goodwill (Note) 3

4,693,055
Total

6,218,308

Common shares of the Company delivered on the acquisition date (Note) 4

6,218,308

Total consideration for the acquisition

6,218,308- 37 -

(Notes)

1. The fair value of the assets acquired and liabilities assumed is calculated by comprehensively taking into accountfinancial and asset conditions scrutinized through due diligence by external specialist agencies and corporate value
assessments by external specialist agencies.
2. Non-controlling interests are measured by multiplying the fair value of the identifiable net assets of the acquiree on thedate of obtaining control less the portion attributable separately to non-controlling shareholders, by the shareholding
ratio after the business combination.
3. Goodwill primarily represents the future excess earning power that is expected to be derived from businessdevelopment, going forward. The goodwill recognized is not expected to be deductible for tax purposes.
4. The common shares of the Company delivered for the Share Exchange included 10,724,240 treasury shares held by theCompany that were allotted for the Share Exchange. Common shares delivered on the acquisition date were measured at
an amount based on the closing price of the day immediately preceding the acquisition.
5. Acquisition-related costs associated with the business combination of ¥63,000 thousand are recorded in “otherexpenses.”
6. The contingent considerations included in other current liabilities and non-current liabilities are calculated according to
the performance of the subsidiary of the acquiree. The maximum amount may be ¥828,080 thousand.

・The amount allocated to intangible assets other than goodwill and its breakdown and amortization period
The fair value of the intangible assets identified in the business combination is measured by using the excess earnings
method, based on the business plan including assumptions such as a client declining rate and discount rate.
(Thousand yen)Type

AmountCustomer relationships

Amortization period (years)
449,000

11 years

・Profit or loss information after the date of obtaining control in the business combination
Revenue and profit after the date of obtaining control at Dentsu Direct Inc. and the subsidiary, as included in the
consolidated statement of profit or loss for the fiscal year ended September 30, 2022, are ¥4,141,388 thousand and ¥258,095
thousand, respectively.
・Pro forma information
Assuming that the business combination was taken place at the beginning of the fiscal year, revenue and profit for the fiscal
year ended September 30, 2022 would be ¥30,243,203 thousand and ¥5,850,122 thousand, respectively.
The pro forma information has not been audited. This information does not necessarily indicate events that may occur in the
future. Furthermore, it does not indicate the operating results of the Group, in the case of investments actually made at the
beginning of the fiscal year.
FY2023 (From October 1, 2022 to December 31, 2023)
Not applicable.

- 38 -

8.

Trade receivables
A breakdown of trade receivables is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

Notes receivable and trade receivables
Loss allowance
Total(Notes) 1.
2.
9.

FY2023(Ended December 31, 2023)

18,315,215

19,864,034-29,942-33,234

18,285,273

19,830,799

Trade receivables are presented at an amount after deduction of loss allowance in the consolidated statement offinancial position.
Changes in loss allowance are as stated in “Note 29. Financial instruments.”

Other financial assets
A breakdown of other financial assets is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

Financial assets measured at amortized cost
Leasehold and guarantee deposits

FY2023(Ended December 31, 2023)

773,874

699,097

113,900－

138,916-18,020965,076

1,695,276

OtherFinancial assets measured at FVTPL

1,000,000

1,000,000

Investments in limited partnership
Other

4,121,535
29,095

3,692,644

7,003,480

7,207,914

98,953
6,904,527

101,550
7,106,364

7,003,480

7,207,914

Other
Loss allowance
Financial assets measured at FVTOCI
Shares

Total
Current assets
Non-current assets
Total(Note)－

The fair value, etc. of financial instruments is as stated in “Note 29. Financial instruments.”

10. Other current assets
A breakdown of other current assets is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

Income taxes refund receivable
Consumption taxes refund receivable

55,069384,869

1,518,274
39,521

Other

317,877

439,457

757,815

1,997,253

Total- 39 -

11. Property, plant and equipment(1) Acquisition cost, accumulated depreciation and impairment, and carrying amount of property, plant and equipment(Thousand yen)
Buildings andaccompanying
facilities

Furniture andfixtures

Other

Total

Beginning of FY2022 (October 1, 2021)
Acquisition cost
Accumulated depreciation and impairment

660,721555,651569,220367,262

3,256–

1,233,196
922,913

Carrying amount

105,070

201,958

3,256

310,284

Acquisition cost
Accumulated depreciation and impairment

618,807545,139

605,671444,316

10,066
10,066

1,234,543
999,521

Carrying amount

73,667

161,3550235,022

Acquisition cost
Accumulated depreciation and impairment

637,620544,683

666,545
501,995

10,066
10,066

1,314,230
1,056,744

Carrying amount

92,936

164,5500257,486

FY2022 (Ended September 30, 2022)

FY2023 (Ended December 31, 2023)(2) Reconciliation of the carrying amount of property, plant and equipment
FY2022 (From October 1, 2021 to September 30, 2022)(Thousand yen)

Balance at beginning of period
Purchase
Business combinations
Sell or disposal
Depreciation (Note) 1
Impairment losses (Note) 2
Other
Balance at end of period

Buildings andaccompanying
facilities
105,070
7,470

Furniture andfixtures

Other

Total

201,958
22,901

3,256–

310,284
30,372

1,859
-863

5,473
-3,6860-0

7,332-4,549-41,035-2,522-69,405-4,321––-110,440-6,844

3,688

8,435

-3,256

8,867

73,667

161,3550235,022

FY2023 (From October 1, 2022 to December 31, 2023)(Thousand yen)

Balance at beginning of period
Purchase

Buildings andaccompanying
facilities
73,667
82,380Furniture andfixtures

Other

Total

161,355
109,5310–

235,022
191,911

Loss of control of subsidiaries
Sell or disposal

-230
-0

-301
-1,954––-531-1,954

Depreciation (Note) 1
Impairment losses (Note) 2-47,156-719-79,626-14,741––-126,782-15,460

Transfer to assets held for sale
Other

-8,466-6,540-9,130-584––-17,596-7,12592,936

164,5500257,486

Balance at end of period(Notes) 1.

Depreciation is included in “cost of sales,” “selling, general and administrative expenses” and “loss from discontinued

operations” on the consolidated statement of profit or loss.
2. Impairment losses are recognized as certain businesses in the Digital Marketing Business and the Media Platform
Business were no longer expected to generate revenue as initially anticipated. Impairment losses are included in “otherexpenses” and “loss from discontinued operations” on the consolidated statement of profit or loss. The recoverable
amount is calculated based on value in use, which is considered as nil herein.

- 40 -

12. Goodwill and intangible assets(1) Acquisition cost, accumulated amortization and impairment, and carrying amount of goodwill and intangible assets(Thousand yen)
Goodwill
Beginning of FY2022 (October 1, 2021)
Acquisition cost

SoftwareIntangible assets
Customer
Other
relationships

Total

–

301,628–

1,257

302,885

Accumulated depreciation and impairment–

234,338–

1,257

235,595

Carrying amount–

67,290––67,2904,693,055

408,356

449,000

22,852880,208–

317,066

30,614

7,391

355,071

4,693,055

91,290418,386

15,461

525,138

4,693,055

421,259

449,000

2,518

872,777–

356,330

81,6362,444

440,411

4,693,055

64,928367,36474

432,366

FY2022 (Ended September 30, 2022)
Acquisition cost
Accumulated depreciation and impairment
Carrying amountFY2023 (Ended December 31, 2023)
Acquisition cost
Accumulated depreciation and impairment
Carrying amount(2) Reconciliation of the carrying amount of goodwill and intangible assets
FY2022 (From October 1, 2021 to September 30, 2022)(Thousand yen)
Goodwill
Balance at beginning of period
Purchase
Business combinations
Sell or disposal

Total

–
–

67,29052,046

4,693,055–

10,579-2,381

449,000–

214–

459,793-2,381––-36,220–-30,614–-5,053-85-71,887-85

Amortization (Note) 1
Impairment losses (Note) 2
Other
Balance at end of period

SoftwareIntangible assets
Customer
Other
relationships–––
20,34467,29072,389

–

-23

–

41

18

4,693,055

91,290418,386

15,461

525,138

FY2023 (From October 1, 2022 to December 31, 2023)(Thousand yen)
Goodwill
Balance at beginning of period

SoftwareIntangible assets
Customer
Other
relationships
418,386
15,461

Total

4,693,055

91,290Purchase
Amortization (Note) 1

–
–

9,636
-40,455–-51,023

9,255-15,000

18,891-106,478

Impairment losses (Note) 2
Transfer to assets held for sale–

-1,335-3,664––

5–-1,330-3,664

Other
Balance at end of period

525,138

–

9,455

–

-9,647-191

4,693,055

64,928367,36474

432,366(Notes) 1.

Amortization is included in “cost of sales,” “selling, general and administrative expenses” and “loss from discontinued
operations” on the consolidated statement of profit or loss.
2. Impairment losses are recognized as certain businesses in the Digital Marketing Business and the Media Platform
Business were no longer expected to generate revenue as initially anticipated. Impairment losses are included in “otherexpenses” and “loss from discontinued operations” on the consolidated statement of profit or loss. The recoverable
amount is calculated based on value in use, which is considered as nil herein.

- 41 -

(3) Significant goodwill and intangible assets
FY2022 (Ended September 30, 2022)
Significant goodwill and intangible assets in the fiscal year ended September 30, 2022 are ¥4,693,055 thousand of
goodwill and ¥418,386 thousand of customer relationships associated with the obtaining control over Dentsu Direct Inc.,
which is part of the Digital Marketing Business. The remaining amortization period of customer relationships as of the end of
the fiscal year ended September 30, 2022 is 10 years.
FY2023 (Ended December 31, 2023)
Significant goodwill and intangible assets in the fiscal year ended December 31, 2023 are ¥4,693,055 thousand of
goodwill and ¥367,364 thousand of customer relationships associated with the obtaining control over Dentsu Direct Inc.,
which is part of the Digital Marketing Business. The remaining amortization period of customer relationships as of the end of
the fiscal year ended December 31, 2023 is 9 years.
(4) Impairment test of goodwill
FY2022 (From October 1, 2021 to September 30, 2022)
In conducting the impairment test of goodwill, the Group’s goodwill has been allocated to Dentsu Direct Inc., which ispart of the Digital Marketing Business. The recoverable amount of Dentsu Direct Inc., as a cash-generating unit, is calculated
based on its value in use. The value in use is calculated based on the business plan for the three fiscal years following the next
fiscal year, as approved by the management, which anticipates increases in future sales revenue and business growth beyond
the plan period. Cash flows beyond the three-year period are calculated by discounting the estimated future cash flows to thepresent value using a perpetual growth rate. The discount rate is calculated based on the pre-tax weighted average cost ofcapital at 12.9%, reflecting the current market assessments of the time value of money and inherent risks. The perpetual
growth rate is determined at 0.9% in consideration of the situation of countries and industries to which the cash-generating
unit belongs. This perpetual growth rate is not exceeding the long-term average growth rate of the industries in which the
cash-generating unit operates.
Furthermore, the management assumes that, even if the discount rate and the perpetual growth rate used in the
aforementioned impairment test change within reasonably predictable range, it is not likely for such change to causesignificant impairment to the cash-generating unit.
FY2023 (From October 1, 2022 to December 31, 2023)
In conducting the impairment test of goodwill, the Group’s goodwill has been allocated to Dentsu Direct Inc., which ispart of the Digital Marketing Business. The recoverable amount of Dentsu Direct Inc., as a cash-generating unit, is calculated
based on its value in use. The value in use is calculated based on the business plan for the three fiscal years following the next
fiscal year, as approved by the management, which anticipates increases in future sales revenue and business growth beyond
the plan period. Cash flows beyond the three-year period are calculated by discounting the estimated future cash flows to thepresent value using a perpetual growth rate. The discount rate is determined based on the pre-tax weighted average cost ofcapital at 12.2%, reflecting the current market assessments of the time value of money and inherent risks. The perpetual
growth rate is determined at 0.7% in consideration of the situation of countries and industries to which the cash-generating
unit belongs. This perpetual growth rate is not exceeding the long-term average growth rate of the industries in which the
cash-generating unit operates.
Furthermore, the management assumes that, even if the discount rate and the perpetual growth rate used in the
aforementioned impairment test change within reasonably predictable range, it is not likely for such change to causesignificant impairment to the cash-generating unit.

- 42 -

13. Lease transactions
The Group has entered into lease agreements for its offices. The lease term for major offices is three years without a renewal
clause. The Group is under no restrictions associated with the lease agreement such as a purchase option and an escalation
clause.
A breakdown of profit or loss on leases is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Depreciation of right-of-use assets
Buildings and accompanying facilities
Other
Total

580,070
4,899

728,974
5,418

584,969

734,393

25,671

10,52025,671

10,5205,431
312,874

7,167
411,983

Impairment losses of right-of-use assets
Buildings and accompanying facilities
Total
Interest expense on lease liabilities
Lease of low-value assets and short-term leases
A breakdown of the carrying amount of right-of-use assets is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

Right-of-use assets
Buildings and accompanying facilities
Other
Total

1,082,772
8,193

1,896,725
2,775

1,090,965

1,899,500

Increases in right-of-use assets for the fiscal year ended September 30, 2022 and the fiscal year ended December 31, 2023
are ¥47,845 thousand and ¥1,553,447 thousand, respectively.
The total cash outflows related to leases for the fiscal year ended September 30, 2022 and the fiscal year ended December
31, 2023 amounted to ¥611,233 thousand and ¥759,170 thousand, respectively.
For maturity analysis of lease liabilities, please refer to “Note 29. Financial instruments (4) Liquidity risk management.”
Lease liabilities are included in “Other financial liabilities (current)” and “Other financial liabilities (non-current).”
Leases with a remaining term of 12 months or less are applicable to exemption from the recognition of right-of-use assets
and lease liabilities.

- 43 -

14. Trade payables
A breakdown of trade payables is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)
Trade payables
Total

FY2023(Ended December 31, 2023)

16,891,357

19,031,397

16,891,357

19,031,397

15. Other financial liabilities
A breakdown of other financial liabilities is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)
Financial liabilities measured at amortized cost
Other payables
Short-term borrowings
Long-term borrowings
Other
Financial liabilities measured at FVTPL
Derivatives
Lease liabilities
Contingent considerations
Total
Current liabilities
Non-current liabilities
Total

FY2023(Ended December 31, 2023)

1,011,768

817,223–2,000,350

3,000,000–

510,91179,794

3,969
1,086,190–
1,887,887

828,080–

5,441,268

5,784,905

4,910,042

4,414,965

531,226

1,369,940

5,441,268

5,784,905(Note) The fair value of financial instruments is as stated in “Note 29. Financial instruments.”
The Group’s borrowings are under no financial covenants.
The average interest rate on short-term borrowings is 0.400%. An average interest rate represents the weighted averageinterest rate applicable to the balance as of the end of the fiscal year ended December 31, 2023.

- 44 -

16. Deferred tax assets, deferred tax liabilities, and income tax expense(1) Deferred tax assets and deferred tax liabilities
Breakdowns of deferred tax assets and deferred tax liabilities by major cause of occurrence are as follow:(Thousand yen)
FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

Deferred tax assets
Intangible assets
Other855,936
704,130

829,175
698,485

Total

1,560,066

1,527,659

Deferred tax liabilities
Retained earnings at affiliates

153,722

156,513

128,11027,937

112,487
33,547

Customer relationships
Other
Total
Net amount

309,769

302,546

1,250,297

1,225,113

Changes in deferred tax assets and deferred tax liabilities on a net basis are as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Balance at beginning of period
Deferred tax assets recognized in profit or loss
Deferred tax assets recognized in other comprehensive
incomeEffects of business combinations
Balance at end of period

FY2023(From October 1, 2022 to
December 31, 2023)

1,569,185

1,250,297-264,483-35,451

321

10,268-54,726–

1,250,297

1,225,113

Deductible temporary differences and tax loss carried forward (as of the expiry date) for which deferred tax assets were
not recognized in the consolidated statement of financial position are as follows:(Thousand yen)
FY2022(Ended September 30, 2022)
Deductible temporary differences

1,009,115

FY2023(Ended December 31, 2023)
561,268

Tax loss carried forward
Year 1

92,798

9,692

Year 2 through Year 4
Year 5 onward

163,035
485,093

20,646250,676

740,926

281,014

Total

There are no taxable temporary differences regarding investments in subsidiaries for which deferred tax liabilities were
not recognized in the fiscal year ended September 30, 2022 and the fiscal year ended December 31, 2023.

- 45 -

(2) Income tax expense
A breakdown of income tax expense is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Current tax expense:
Current tax expense
Subtotal

2,414,123

1,692,315

2,414,123

1,692,315

245,738

35,451

Deferred tax expense
Origination and reversal of temporary differences
Subtotal

245,738

35,451

Total

2,659,861

1,727,766

Statutory effective tax rate applicable for the fiscal year ended December 31, 2023 is calculated based on the corporate
income tax, inhabitant tax, and enterprise tax in Japan at 30.6% (30.6% for the fiscal year ended September 30, 2022).
Reconciliation between the statutory effective tax rate and the actual tax rate in income tax expense is as follows:(%)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Statutory effective tax rate
Non-deductible expenses such as entertainment expenses

30.6
0.3

30.6
0.8

Share-based payment expenses
Share of profit (loss) of investments accounted for by

0.2

0.1

-1.9

-4.3

using equity method
Increase or decrease in unrecognized deferred tax assets
Gain on sale of shares of subsidiaries
Other
Actual tax rate in income tax expense- 46 -

1.7

1.0

–
-1.2

-1.2
-1.0

29.7

26.0

17. Provisions
The details and changes of provisions are as follows:
FY2022 (From October 1, 2021 to September 30, 2022)(Thousand yen)
Asset retirement obligations
Balance at beginning of period
Increase during the period
Decrease during the period (intended
use)
Other
Balance at end of period

Other

Total

131,444

23,646

155,090

10,081–

10,081-10,081–-10,081

–

3,973

3,973

131,444

27,619159,063

FY2023 (From October 1, 2022 to December 31, 2023)(Thousand yen)
Asset retirement obligations
Balance at beginning of period
Increase during the period
Decrease during the period (intended
use)
Other
Balance at end of period

Other

Total

131,444

27,619159,063

16,219–16,219-22,400–-22,400

–

-333

-333

125,263

27,287

152,549

In order to be prepared to fulfill obligation to restore site to original condition at future relocation from leased officepursuant to office lease agreement, asset retirement obligations are estimated, recognized and measured in consideration of thesituation of each specific premises based on the expected period of use determined in reference to the past record of restoration
as well as service life of interior fixtures at offices.
These expenses are expected to be paid largely after no less than one year, which, however, is subject to factors including thefuture business plan.
18. Other current liabilities
A breakdown of other liabilities is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

Other current liabilities
Accrued consumption taxes

374,468

574,171

Accrued bonuses
Accrued vacation pay

732,012373,885

573,068
432,673

1,366,745

647,847

2,847,110

2,227,759

Other
Total

- 47 -

19. Equity and other equity items(1) Total number of shares authorized, total number of shares issued, and number of treasury shares(Shares)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Total number of shares authorized
Balance at beginning of period

370,080,000

370,080,000

Balance at end of period

370,080,000

370,080,000

138,916,500

211,079,654

2,044,360
70,118,794––

211,079,654

211,079,654

12,463,440-10,724,240

1,739,243–

Acquisition based on request for purchase of sharesless than one unit

43–

Granted to beneficiary of the directors’ remuneration
board incentive plan (BIP) trust–-1,374,698

Acquisition based on the resolution at the Board of
Directors (Note) 4–

2,200,000

Acquisition by the directors’ remuneration board
incentive plan (BIP) trust (Note) 5–

1,400,000

1,739,243

3,964,545

Total number of shares issued
Balance at beginning of period
Share exchange (Note) 2
Third-party allotment (Note) 3
Balance at end of period
Number of treasury shares
Balance at beginning of period
Share exchange (Note) 2

Balance at end of period(Notes) 1.

Shares issued by the Company are no par value common shares without any restrictions on rights, and all issued sharesare fully paid up.
2. Total number of shares issued increased by 2,044,360 shares due to the share exchange carried out with the effective
date of January 4, 2022, in the fiscal year ended September 30, 2022. In addition, 10,724,240 treasury shares (including
40 shares less than one unit) were allotted. The details are stated in “Note 7. Business combinations.”
3. Total number of shares issued increased by 70,118,794 shares due to the third-party allotment, which was paid in on
January 4, 2022, in the fiscal year ended September 30, 2022.
4. The Company acquired its own shares as below based on the resolution on February 9, 2023, in the fiscal year ended
December 31, 2023.
- Class of shares acquired: Common shares- Total number of shares acquired: 2,200,000 shares- Total amount of share acquisition costs: ¥744,512 thousand- Acquisition period: From February 17, 2023 to March 17, 2023
- Method of Acquisition: Market purchase on the Tokyo Stock Exchange
5. The Company acquired 1,400,000 shares of the common shares of the Company (total amount of share acquisition
costs: ¥531, 430 thousand) though the BIP trust. The Company’s shares held by the BIP trust are recognized as treasury
shares.

- 48 -

(2) Share capital and capital surplus
FY2022 (From October 1, 2021 to September 30, 2022)
The Company allocated its shares to Dentsu Group Inc. through a third-party allotment of shares under the following
conditions after necessary procedures based on laws and regulations, etc., and Dentsu Group Inc. underwrote them.
Common shares: 70,118,794 shares (issuance of 70,118,794 new shares)
・ Number of shares for subscription:¥465 per common share
・ Issue price:・ Amount to be incorporated into share capital: ¥232.5 per common share¥32,605,239,210
・ Amount of fund raising:・ Payment date:・ Use of the funds:

January 4, 2022
The funds are mainly used as part of the fund for acquiring shares(consideration for acquisition at ¥31,312,999 thousand) of Dentsu Digital Inc.,
which were owned by Dentsu Group Inc.

Under certain provisions of the Companies Act of Japan, 50% or more of the payment or delivery for accepting the issued
shares may be incorporated into share capital, while the remainder may be incorporated into legal capital surplus.
FY2023 (From October 1, 2022 to December 31, 2023)
The decrease in capital surplus due to the disposal of treasury shares was due to granting to the beneficiary of thedirectors’ remuneration BIP trust. The details of the share-based remuneration plan are stated in “Note 28. Share-based
payment.”
The effect of changes without loss of control of subsidiaries on capital surplus is omitted because the same information isdisclosed in “Note 30. Subsidiaries.”(3) Retained earnings
Under certain provisions of the Companies Act of Japan, 10% of the amount paid as dividend of surplus shall be set aside
as legal capital surplus or as legal retained earnings until the sum of these two reserves reaches 25% of share capital.
(4) Changes in other components of equity
A breakdown of other components of equity and the details of their increase or decrease are as follows:
FY2022 (From October 1, 2021 to September 30, 2022)(Thousand yen)

Balance at beginning of period
Amount arising during the year
Amount transferred to retained earnings
Balance at end of period

Changes in fairvalue of financial
assets measured at
FVTOCI-284,901

Exchangedifferences ontranslation offoreign operations
65,56825,055

114,591

Cash flow hedges

Total-11,346-230,678

8,356

148,001-45,911––-45,911-305,758

180,159-2,990-128,588

FY2023 (From October 1, 2022 to December 31, 2023)(Thousand yen)
Changes in fairvalue of financial
assets measured at
FVTOCI-305,758

Exchangedifferences ontranslation offoreign operations
180,159

Amount arising during the year

201,646

31,761

2,990

236,397

Amount transferred to retained earnings-157,539––-157,539-261,651

211,921–-49,731

Balance at beginning of period

Balance at end of period- 49 -Cash flow hedges-2,990Total-128,588

20. Dividends
The Company pays the year-end dividend only. The Articles of Incorporation of the Company stipulate that the Company
may determine dividends of surplus, etc. by a resolution of the board of directors pursuant to the provisions of Article 459,
paragraph (1) of the Companies Act. However, since the fiscal year under review is a 15-month period due to a change in the
Company’s fiscal year-end, the year-end dividends for the fiscal year under review is determined by the general meeting ofshareholders.
(1) Total amount of dividend
FY2022 (From October 1, 2021 to September 30, 2022)
Total amount ofDate of resolution
Class of shares
dividends(Thousand yen)
November 25,
Common shares
435,8542021(Note)

Dividend per share
(Yen)
3.40

Record date
September 30,
2021

Effective date
December 3, 2021

The above total amount of dividend includes ¥5,913 thousand of dividend paid to the Company’s shares held by the
directors’ remuneration BIP trust.

FY2023 (From October 1, 2022 to December 31, 2023)
Total amount ofDate of resolution
Class of shares
dividends(Thousand yen)
November 22,
Common shares
970,966
2022(Note)

Dividend per share
(Yen)
4.60

Record date
September 30,
2022

Effective date
December 2, 2022

The above total amount of dividend includes ¥8,000 thousand of dividend paid to the Company’s shares held by the
directors’ remuneration BIP trust.

(2) Dividend with its record date falling within the fiscal year, while its effective date falling in the next fiscal year
FY2022 (From October 1, 2021 to September 30, 2022)
Date of resolution

Class of shares

November 22,
2022

Common shares(Note)

Total amount ofdividends(Thousand yen)

Dividend per share(Yen)

Record date

Effective date

4.60

September 30,
2022

December 2, 2022

970,966

The above total amount of dividend includes ¥8,000 thousand of dividend paid to the Company’s shares held by the
directors’ remuneration BIP trust.

FY2023 (From October 1, 2022 to December 31, 2023)
Total amount ofDate of resolution
Class of shares
dividends(Thousand yen)March 27, 2024
CommonOrdinary General Meeting
1,086,174
sharesof Shareholders(Note)

Dividend per share
(Yen)
5.20

Record date
December 31,
2023

Effective date

March 28, 2024

The above total amount of dividend includes ¥9,175 thousand of dividend paid to the Company’s shares held by the
directors’ remuneration BIP trust.

- 50 -

21. Revenue(1) Disaggregation of revenue
Disaggregation of revenue recognized in contracts with customers is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Digital Marketing Business (Japan)
Digital Marketing Business (overseas)

24,458,161
1,403,823

30,921,890
1,189,686

Media Platform Business
Adjustments

3,296,727-1,569,324

5,838,993-3,683,957

27,589,386

34,266,611

Total(Note)

Adjustments include revenue related to the operation of the holding company and the elimination of profit and losstransactions between reportable segments. It also includes the amount of ¥-3,014,485 thousand (¥-1,229,537 thousand forthe fiscal year ended September 30, 2022) for the reclassification to discontinued operations of the performance of
COMICSMART INC. and its subsidiaries, etc., which are included in the Media Platform Business.

(2) Contract balance
Balances of receivables and contract liabilities from contracts with customers are as follows:
FY2022 (From October 1, 2021 to September 30, 2022)(Thousand yen)
Beginning of FY2022(October 1, 2021)
Receivables from contracts with customers
Notes receivable and trade receivables
Contract liabilities

FY2022(Ended September 30, 2022)

16,085,450

18,285,273

420,948

429,552

FY2023 (From October 1, 2022 to December 31, 2023)(Thousand yen)
Beginning of FY2023(October 1, 2022)
Receivables from contracts with customers
Notes receivable and trade receivables
Contract liabilities

FY2023(Ended December 31, 2023)

18,285,273

19,830,799

429,552

239,426

In the consolidated financial statements, receivables from contracts with customers, including notes receivable and tradereceivables, are included in trade receivables, while contract liabilities are included in other current liabilities.
Of the revenue recognized in the fiscal year ended September 30, 2022 and the fiscal year ended December 31, 2023, theamount included in contract liabilities as of the beginning of the fiscal years were ¥420,948 thousand and ¥429,552 thousand,respectively. In the fiscal year ended September 30, 2022 and the fiscal year ended December 31, 2023, the amount ofrevenue recognized in performance obligations fulfilled (either wholly or partially) in previous periods was not material. In
addition, there were no significant changes in the balances of contract liabilities in the fiscal year ended September 30, 2022
and the fiscal year ended December 31, 2023.

- 51 -

22. Cost of sales and selling, general and administrative expenses
A breakdown of cost of sales and selling, general and administrative expenses is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Cost of goods sold4,892,953

3,895,947

Officers’ remunerations (Note)
Share-based payment expenses (Note)

1,197,603
128,729

1,796,732
38,877

Employee benefit expenses
Sales promotion and advertising expenses

8,438,131
655,566

14,062,018
441,324

Depreciation and amortization
Other

748,180
5,139,521

945,345
8,118,673

Total

21,200,683

29,298,916(Note)

Officers’ remunerations and share-based payment expenses represent remunerations for directors (including outside
directors) of the Company, Group Executive Officers, and officers of subsidiaries.

23. Other expenses
A breakdown of other expenses is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Impairment losses
Loss on retirement of fixed assets

32,600
6,882

20,971
1,954

Advisory expenses
Other

147,730
59,026

42,61019,199246,238

84,734Total- 52 -

24. Finance income and finance costs
A breakdown of finance income is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Interest income
Financial assets measured at amortized cost
Dividend income

2,241

4,453

Financial assets measured at FVTOCI
Gain on investments in securities

200

100

Financial assets measured at FVTPL
Other2,032,753
33,757–1,207

2,068,952

5,760

Total
The breakdown of finance costs is as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Interest expenses
Financial liabilities measured at amortized cost
Loss on investments in securities

24,92026,229Financial liabilities measured at FVTPL
Changes in fair value of contingent considerations–
293,640

42,700–Other

16,03384,556

334,594

153,485

Total- 53 -

25. Other comprehensive income
Amount arising during the year, reclassification adjustments to profit or loss, and tax effect accounting of each component ofother comprehensive income are as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Net change in fair value of financial assets measured
through other comprehensive income
Amount arising during the year
Reclassification adjustments

21,999–190,400–

21,9993,056

190,400
11,24625,055

201,646

114,591–

28,097–

114,591–

28,097–

114,591

28,097-7,907
18,997-2,899
6,867

11,091-2,735

3,969
-979

8,356

2,990

accounted for using equity method
Amount arising during the year

–

3,664

Reclassification adjustments
Before tax effects

–
–

–
3,664

Tax effects––

After tax effects

–

3,664

Before tax effects
Tax effects
After tax effects
Exchange differences on translation of foreign operations
Amount arising during the year
Reclassification adjustments
Before tax effects
Tax effects
After tax effects
Cash flow hedges
Amount arising during the year
Reclassification adjustments
Before tax effects
Tax effects
After tax effects
Share of other comprehensive income of investments- 54 -

26. Information on cash flows(1) Breakdowns of other under cash flows from operating activities, cash flows from investing activities, and cash flows fromfinancing activities are as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Cash flows from operating activities
Adjustments
Impairment losses
Other

32,600150,723

27,31043,081

183,323

70,391

Increase (decrease) in accrued consumption taxes
Increase (decrease) in accrued bonuses-812,372-189,856

548,549-140,536

Changes in contingent considerations
Other

293,640-526,241–-409,444-1,234,828-1,431

Proceeds from distributions from investment
partnerships

77,304710,918

Proceeds from refund of leasehold and guarantee
deposits

290,141

7,302

Total
Changes in working capital

Total
Cash flows from investing activities

Other
Total
Cash flows from financing activities
Other (Note)
Total(Note)-4,141-41,861

363,304

676,358

713,924-63,181

713,924-63,181

For the fiscal year ended September 30, 2022, it refers to income related to transactions with the effective date of October 1,
2022.

(2) Reconciliation of liabilities from financing activities
FY2022 (From October 1, 2021 to September 30, 2022)(Thousand yen)
Long-term borrowings
Balance at beginning of period
Changes from financial cash flows
Increase (decrease) in long-term borrowings
Increase (decrease) in lease liabilities
New leases
Increase through business combinations
Balance at end of period- 55 -

Lease liabilities

2,849,976

1,643,866-851,551––-605,802–
1,925

44,3383,788

2,000,350

1,086,190

FY2023 (From October 1, 2022 to December 31, 2023)(Thousand yen)
Short-term borrowings
Balance at beginning of period

Long-term borrowings

Lease liabilities–

2,000,350

1,086,190

3,000,000–––-2,000,350

–

–

–

-751,749––

1,553,447–––

3,000,000–

1,887,887

Changes from financial cash flows
Increase (decrease) in short-termborrowings
Increase (decrease) in long-termborrowings
Increase (decrease) in leaseliabilities
New leases
Increase through businesscombinations
Balance at end of period(3) Non-cash transactions
Significant non-cash transactions are as follows:(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Right-of-use assets acquired through leases
44,3381,553,447(Note) In the fiscal year ended September 30, 2022, share exchange was carried out with the effective date of January 4, 2022. The
details are stated in “Note 7. Business combinations.”- 56 -

27. Information on earnings per share
The basis of the calculation of earnings per share is as below.
FY2022(From October 1, 2021 toSeptember 30, 2022)
Profit (loss) attributable to owners of parent (thousand yen)
Continuing operations

6,289,395

Discontinued operations
Total
Average number of common shares outstanding during the
fiscal year (thousand shares)
Number of potential shares with dilutive effects
Number of share acquisition rights (thousand shares)
Average number of shares outstanding in consideration of
the number of potential shares with dilutive effects

FY2023(From October 1, 2022 to
December 31, 2023)

4,906,493-555,831-587,663

5,733,564

4,318,831

187,767

208,285513

511

188,280

208,796

33.50

23.56

(thousand shares)
Basic earnings (loss) per share (yen)Continuing operations
Discontinued operations
Total

-2.96

-2.82

30.54

20.74

33.40
-2.95

23.50
-2.81

30.45

20.68

Diluted earnings per share (yen)Continuing operations
Discontinued operations
Total- 57 -

28. Share-based payment(1) Share option plan
The Company introduced a share option plan as share-based payment for a period up to the fiscal year ended September
30, 2016. Share options are granted to officers of the Company and its subsidiaries, based on the details approved by theOrdinary General Meeting of Shareholders and the Board of Directors of the Company.
(i)

Details of the share option plan
Overall terms of contract are as follows:
Share options based on Article 280-20 and Article 280-21 of the former Commercial Code revised in 2001
Number of shares

1st series share options in share-based
payment arrangement
2nd series share options in share-based
payment arrangement
3rd series share options in share-based
payment arrangement(Notes) 1.

granted (shares)(Note) 1

Grant date

1,980,000

June 28, 2004

600,000

March 15, 2005

490,000

January 31, 2006

Exercise period of share

Vesting

options

conditions

From June 29, 2004
to December 18, 2033

(Note) 2

From March 16, 2005

(Note) 2

to December 16, 2034
From February 1, 2006
to December 20, 2035

(Note) 2

For the 1st series share options in share-based payment arrangement and the 2nd series share options in share-based
payment arrangement, the number of shares is stated on the post-share split basis, reflecting the share split conducted on
May 20, 2005 (two for one) and the share split conducted on October 1, 2013 (200 for one). For the 3rd series shareoptions in share-based payment arrangement, the number of shares is stated on the post-share split basis, reflecting theshare split conducted on October 1, 2013 (200 for one). For all share options, the numbers of shares are stated on the

post-share split basis, reflecting the share split conducted on October 1, 2016 (five for one).
2. The conditions for exercise (loss of office as a director or a company auditor of the Company) shall be satisfied after the
grant date.
(ii) Number of share options and weighted average exercise price
Share options based on Article 280-20 and Article 280-21 of the former Commercial Code revised in 2001

Share options unexercised at the
beginning of the fiscal year
GrantedExercised
LapsedExpired at maturity

FY2022(From October 1, 2021 to September 30,
2022)

FY2023(From October 1, 2022 to December 31,
2023)

Number of shares(shares)Number of shares(shares)

Weighted average
exercise price (yen)Weighted average
exercise price (yen)520,000

7

520,000

7

–

–

–

–

–
–

–
–

–
–

–
–

–

–

–

–

Share options unexercised at the endof the fiscal year

520,000

7

520,000

7

Share options exercisable at the end of

210,000

7

210,000

7

the fiscal year
Range of exercise prices
Weighted average remaining years
under contract
Weighted average share price as of theexercise date¥7¥7

11.8 years

10.6 years––- 58 -

(2) Share-based remuneration plan(i) Details of the share-based remuneration plan
The Company introduced the share-based remuneration plan as a form of share-based payment in the fiscal year ended
September 30, 2017. The share-based remuneration plan grants (and provides) shares to directors of the Company(excluding outside directors and those who are non-residents of Japan) and Executive Officers of the Group (excluding
those who are non-residents of Japan; hereinafter directors and Executive Officers collectively referred to as “Directors,etc.”), based on the details as approved at the 26th Ordinary General Meeting of Shareholders held on December 20, 2016
(renewal of the plan was resolved at the Board of Directors meeting held on November 26, 2019 and renewal and partial
amendment of the plan was resolved at the 32nd Ordinary General Meeting of Shareholders held on December 21, 2022).
This plan adopts the framework of a Board Incentive Plan trust (the “BIP trust”). The BIP trust works as an incentive
plan for officers based on the performance-linked share-based remuneration plans and restricted share-based remunerationplans in the United States, providing a performance-linked share-based remuneration plan in which shares of the Company
acquired by the BIP trust (and the cash equivalent to the cash-converted value of the Company’s shares) are granted (andprovided) to the eligible Directors, etc., according to their roles and the degree of achievement, etc. of performance goals.
(ii) Fair value of the points granted
Fair value of the Company’s shares, etc. delivered commensurate with the number of points granted is measured basedon the observable market price reflecting the expected dividend.
Weighted average fair value of the Company’s shares granted during the period is ¥301 for the fiscal year ended
December 31, 2023 (¥301 for the fiscal year ended September 30, 2022.)(iii) Increase or decrease of the number of points during the year
(Points)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Balance at beginning of period
Issuance

FY2023(From October 1, 2022 to
December 31, 2023)–
405,486

405,486
969,212Granted and provision–-1,374,698

Balance at end of period

405,486–(iv) Expenses recorded under the share-based remuneration plan(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Share-based payment expenses

144,671

32,629

Total

144,671

32,629

Share-based payment expenses are recorded under selling, general and administrative expenses in continuing
operations on the consolidated statement of profit or loss, which amounted ¥128,729 thousand in the fiscal year ended
September 30, 2022 and ¥38,877 thousand in the fiscal year ended December 31, 2023, and under loss from discontinued
operations of discontinued operations, which amounted ¥15,942 thousand in the fiscal year ended September 30, 2022 and¥-6,247 thousand in the fiscal year ended December 31, 2023.

- 59 -

29. Financial instruments(1) Capital management
The Group’s basic policy of capital management is building and maintaining a sound financial structure to continue
sustainable growth and maximize corporate value.
It should be noted that there are no significant capital regulations applicable to the Group.
(2) Financial risk management
In the course of conducting business activities, the Group is exposed to various risks, including credit risk, liquidity risk,
market risk (currency risk, interest rate risk, and market price risk). The Group is carrying out risk management based on
certain policies for the prevention and mitigation of these risks.
Meanwhile, the Group’s policy dictates that derivative transactions are conducted only within the scope of actual
requirements to hedge against exchange rate fluctuations and other risks, avoiding any speculative trading.
(3) Credit risk management
The Group holds receivables from many business partners. In connection with these receivables, the Group is exposed tocredit risk, which is the risk of financial loss if a business partner fails to fulfill its contractual obligations.
The Group manages this type of risk by placing credit limits for each business partner based on the credit management
regulations. Regular monitoring of business partners’ situations allows us to manage due dates and balances, as well as toearly detect and mitigate the risk of non-recovery due to financial deterioration. The Group recognizes and measures expectedcredit loss, taking into account the transactional, financial and economic status of our business partners, which are obtained
through our credit management practice.
The Group does not have an excessively concentrated credit risk with any single business partner or group, and believes
the overall exposure to credit risk is not significant; therefore, has not disclosed an expected credit loss matrix.
The impaired carrying amount of financial assets presented in the consolidated statement of financial position reflects theGroup’s maximum exposure to credit risk of financial assets without considering any collateral or other credit enhancements.
The Group calculates loss allowance by categorizing receivables into trade receivables and non-trade receivables.
If any part of a financial asset is deemed unrecoverable or very difficult to collect, it is considered a default and treated asa credit-impaired financial asset.

- 60 -

Changes in loss allowance are as follows:(Thousand yen)
Financial assets
recorded at an
amountequivalent to
the 12-month
expected credit
lossesBalance as of October 1, 2021–
Transfer to lifetime expected credit losses–

Financial assets recorded at an amount equivalent
to the lifetime expected credit losses
Financial assets
not classified as Credit-impaired
credit-impaired financial assets
financial assets

Total

Trade
receivables

–
–

3,346
–

18,970–22,316
–

–

–

3,134

–

3,134

–

–

–

–

–

Financial assets derecognized during the
fiscal year

–

–

-495

–

-495

Direct write-off
Other

–
–

–
–

–
987

–
4,000

–
4,987

Balance as of September 30, 2022
Transfer to lifetime expected credit losses

–
–

–
–

6,972
–

22,970–29,942–

Transfer to credit-impaired financial assets
Transfer to 12-month expected credit––

18,068–18,068

–

–

–

–

–

–

–

-3,261–-3,261

Transfer to credit-impaired financial assets
Transfer to 12-month expected credit
losseslossesFinancial assets derecognized during the
fiscal year
Direct write-off
Other
Balance as of December 31, 2023

–

–

-245

–

-245

802

–

948

5,000

6,751

802

–

22,482

27,97051,255In the fiscal year ended September 30, 2022 and the fiscal year ended December 31, 2023, there were no significant
changes in the carrying amounts of financial instruments that had material impact on loss allowance.
Furthermore, there were no outstanding contractual receivables of financial assets for which collection efforts continue
after the direct write-off.
A portion of trade receivables is secured through guarantee contracts with credit guarantee companies. These credit
guarantee contracts stipulate that, in the event of a business partner default, a predetermined amount of insurance money ispaid to the Group by the credit guarantee company, thereby mitigating the credit risk exposure associated with tradereceivables.
(4) Liquidity risk management
The Group uses borrowings from financial institutions as a source of funds to support business activities. Together withtrade payables, the Group is exposed to liquidity risk, where there is a risk of not being able to meet obligations to repay
financial liabilities as they come due.
The Group is engaged in risk management through maintaining sufficient cash and deposits balances, setting up cash
flows from operating activities, arranging credit lines that are available on demand with financial institutions, andcontinuously monitoring cash flow plans against actual results.

- 61 -

Outstanding financial liabilities (including derivative financial instruments) by maturity are as follows:
FY2022 (Ended September 30, 2022)(Thousand yen)
Carrying
amountOutstanding
amount undercontract

Within 1 year

Trade payables

16,891,357

16,891,357

16,891,357

Lease liabilities

1,086,190

1,090,320

593,978

1,011,768

1,011,768

1,011,768

828,080828,080

2,000,350

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years

Over 5 years

–

–

–

–

–

492,594

3,748

–

–

–

–

–

–

–

–

828,080

–

–

–

–

–

2,003,267

2,003,267

–

–

–

–

–

510,911510,911475,061

–

–

–

–

35,850

3,969

3,969

3,969

–

–

–

–

–

22,332,624

22,339,672

21,807,479

492,594

3,748

–

–

35,850Non- derivatives
Financial liabilities

Accounts payable otherContingent
considerations
Long-term
borrowings
Other
Derivatives
Financial liabilities
Interest rate
derivatives
Total(Note)The net receivables and payables arising from derivative transactions are presented on a net basis.
FY2023 (Ended December 31, 2023)(Thousand yen)
Carrying
amountOutstanding
amount undercontract

Within 1 year

Over 1 year
within 2 years

Over 2 years
within 3 years

Over 3 years
within 4 years

Over 4 years
within 5 years

Over 5 years

19,031,397

19,031,397

19,031,397

–

–

–

–

–

3,000,000

3,000,000

3,000,000

–

–

–

–

–

1,887,887

1,901,637

559,312523,678

491,838

326,810––817,223

817,223

817,223

–

–

–

–

–

79,794

79,79444,944–10,000––24,85024,816,302

24,830,052

23,452,877

523,678

501,838

326,810–24,850Non- derivatives
Financial liabilities
Trade payables
Short-termborrowings
Lease liabilities
Accounts payable other
Other
Total

- 62 -

(5) Market risk management(i) Currency risk
Given its international business operations, the Group conducts transactions in various currencies, and therefore
exposed to foreign currency fluctuation risks related to foreign currency-dominated business activities.
The Group manages this type of risk by using derivatives such as forward foreign exchange contracts to hedge a
portion of it.
a. Foreign exchange sensitivity analysis
For the fiscal year ended September 30, 2022 and the fiscal year ended December 31, 2023, if the Japanese yen,which is the functional currency, appreciated by 1% against the US dollar, the impact on the profit before tax in the
consolidated statement of profit or loss would be as follows.
However, this is based on the assumption that currencies other than those used in the calculation do not fluctuate
and all other variables remain constant.
(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Profit before tax

FY2023(From October 1, 2022 to
December 31, 2023)-6,332-4,499b. Derivatives and hedge accounting
Not applicable.
(ii) Interest rate risk
Through its borrowings from financial institutions with interest amounts subject to fluctuations in market interest rates,
the Group is exposed to interest rate risk that fluctuates future cash flows of interest.
The Group manages this type of risk by using interest rate swaps to fix cash flows. As this arrangement reduces theGroup’s exposure to interest rate risk to a limited level, reducing the impact of the interest rate fluctuations to a minor
level, disclosure of the interest rate sensitivity analysis is omitted.
a. Derivatives and hedge accounting
The Group has entered into interest rate swap contracts that fix interest payments to hedge against interest rate risk
associated with a portion of its variable-rate borrowings. The impact of these transactions are as follows:i.

Impact of hedging on the consolidated statement of financial position
The details of hedging instruments designated as cash flows hedge are as follows:(Thousand yen)Contract amountApplicable interest rate

AssetsLiabilities

FY2022 (Ended September 30, 2022)
Floating rate receivable: JapaneseInterest rate risk

Current

Non-current
FY2023 (Ended December 31, 2023)

2,000,000 yen TIBOR for one month
Fixed payment: 0.83%
–

–

–

3,969

–

–

Not applicable.
Financial assets and financial liabilities arising from derivative contracts are recorded under “other financial
assets” and “other financial liabilities” on the consolidated statement of financial position.
The fluctuations in fair value of hedging instruments used as a basis to calculate ineffective portion of hedges
closely match the fluctuations in value of hedged items, making the ineffective portion of the hedges insignificance.
There are no derivative transactions that are not subject to hedge accounting other than those described above.

- 63 -

The amounts recognized in other components of equity related to cash flow hedges are as follows:(Thousand yen)Amounts recognized in othercomponents of equity related toongoing hedge relationships

Amounts recognized in othercomponents of equity related to
discontinued hedge
relationships

FY2022 (Ended September 30, 2022)
Interest rate risk

-2,990–

FY2023 (Ended December 31, 2023)
Interest rate risk––

ii. The impact of hedging on the consolidated statement of profit and loss and other comprehensive income:(Thousand yen)
FY2022(From October 1, 2021 to September 30, 2022)
Amounts reclassified
from other componentsof equity to theconsolidated statementof profit or loss
11,091
18,997

Amounts recognized inother comprehensive
incomeInterest rate risk

FY2023(From October 1, 2022 to December 31, 2023)
Amounts recognized inother comprehensive
income3,969

Amounts reclassified
from other componentsof equity to theconsolidated statementof profit or loss
6,867(iii) Market price risk
The Group is primarily exposed to market price fluctuation risks arising from equity instruments (shares).The Groupmanages this type of risk by regularly reviewing financial conditions of issuers and fair values, and periodicallyreassessing its holdings.
a. Market price sensitivity analysis
For the fiscal years ended September 30, 2022 and the fiscal year ended December 31, 2023, a hypothetical 10%
decline in market prices of equity instruments held would have affected other comprehensive income (before tax effect)on the consolidated statement of comprehensive income and profit before tax on the consolidated statement of profit orloss as follows.
However, this subject to the assumption that all other variables remain constant.
(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Other comprehensive income (before tax effects)-196,508-269,528

Profit before tax-412,154-369,264- 64 -

(6) Classification of financial instruments
The carrying amounts of the Group’s financial assets and financial liabilities, categorized by classification, are as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

Financial assets
Financial assets measured at amortized cost
Cash and cash equivalents
Trade receivables
Other financial assets (current)
Other financial assets (non-current)
Total
Financial assets measured at FVTOCIOther financial assets (non-current)
Total

21,340,076

20,873,416

18,285,273
98,953

19,830,799
101,550

788,820

718,443

40,513,123

41,524,208

1,965,076

2,695,276

1,965,076

2,695,276

4,150,630

3,692,644

4,150,630

3,692,644

16,891,357
3,487,179

19,031,397
3,862,168

Financial assets measured at FVTPL
Other financial assets (non-current)
Total
Financial liabilities
Financial liabilities measured at amortized cost
Trade payables
Other financial liabilities (current)
Other financial liabilities (non-current)
Total
Financial liabilities measured at FVTPL
Other financial liabilities (current)
Total

35,85034,85020,414,386

22,928,415

3,969

–

3,969

–

(7) Financial assets measured at FVTOCIFor financial assets designated as financial assets measured at FVTOCI, the principal issuers and their fair values aredetailed below:(Thousand yen)
Issuer

FY2022(Ended September 30, 2022)

Kamiyama Marugoto Scholarship FundFY2023(Ended December 31, 2023)

1,000,000

1,000,000

Nyle Inc.
HOMMA Group Inc.

39,438376,104

219,409
184,182

jig.jp co., ltd.
Gunosy Inc.

–
30,64093,81830,880- 65 -

(8) Derecognition of financial assets measured at FVTOCI
Following regular portfolio reviews, the Group sold financial assets measured at FVTOCI and subsequently derecognized
them. The fair values at the time of derecognition, the cumulative gains or losses (pre-tax) from disposal, and dividend
income are outlined below:(Thousand yen)
FY2022(From October 1, 2021 to September 30, 2022)
Fair value

Cumulative gains orlossesDividend income

66,174–

99,998(Note)FY2023(From October 1, 2022 to December 31, 2023)
Fair value
311,068

Cumulative gains orlossesDividend income

227,067–

Cumulative gains or losses (net of tax) in other comprehensive income transferred to retained earnings were ¥45,911
thousand for the fiscal year ended September 30, 2022, while ¥157,539 thousand for the fiscal year ended December 31,
2023.

(9) Fair value of financial instruments(i)

Fair value hierarchy
For financial instruments measured at fair value, the fair value measurement amount is classified into three levels, fromLevel 1 through Level 3, depending on the observability and materiality of the inputs used for measurement.
Level 1: Fair value measured at (unadjusted) market price in the active market for identical assets and liabilities
Level 2: Fair value measured by using directly or indirectly observable inputs other than those used for Level 1
Level 3: Fair value measured by using unobservable inputs
Reclassifications between fair value hierarchy levels are recognized as if they occurred at the beginning of eachreporting period.
There are no financial assets and financial liabilities measured at fair value on a non-recurring basis.
FY2022 (Ended September 30, 2022)(Thousand yen)
Level 1

Level 2

Level 3

Total

Financial assets
SharesInvestments in limited partnership

30,640–––934,436
4,121,535

965,076
4,121,535

Other
Total

–

–

1,000,000

1,000,000

30,640–6,055,972

6,086,612

–

3,969

–

3,969

–

–

828,080828,080–3,969

828,080

832,049

Financial liabilities
Derivatives
Contingent considerations
Total
FY2023 (Ended December 31, 2023)(Thousand yen)
Level 1
Financial assets
SharesInvestments in limited partnership
Other
Total

Level 2

Level 3

Total

344,107–

1,351,169

1,695,276

–
–

–
–

3,692,644
1,000,000

3,692,644
1,000,000

344,107–

6,043,814

6,387,921(ii) Valuation process
For financial instruments classified as Level 3, the responsible department determines the valuation technique based on
the policies and procedures of fair value measurement and assesses their fair value accordingly. The results of the fairvalue measurement are approved by an appropriately authorized individual in charge.

- 66 -

In Level 3 fair value measurements, if one or more of the unobservable inputs are changed to reasonably possible
alternative assumptions, the increase or decrease in fair value is not significant.
(iii) Reconciliation of financial instruments classified as Level 3, from the balance at beginning of period to the balance at endof perioda. Financial assets(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Balance at beginning of period
Profit or loss (Note) 1
Other comprehensive income (Note) 2
Purchase or acquisition

2,814,705
2,032,753

6,055,972-42,700

74,071
1,311,447-226,207
1,009,053-99,998–-1,948-39,438

Sale
Transfer from Level 3 to Level 1
Other (Note) 3
Balance at end of period

FY2023(From October 1, 2022 to
December 31, 2023)-77,006-710,918

6,055,972

6,043,814

b. Financial liabilities(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Balance at beginning of period
Profit or loss (Note) 1
Increase due to business combinations
Settlement
Balance at end of period(Notes) 1.

FY2023(From October 1, 2022 to
December 31, 2023)–
293,640

828,080–

534,440––-828,080

828,080–

It is related to financial assets and financial liabilities measured at FVTPL and included in “finance income” and“finance costs” on the consolidated statement of profit or loss.
2. It is related to financial assets measured at FVTOCI and included in “net changes in financial assets measured at fairvalue through other comprehensive income” on the consolidated statement of comprehensive income.
3. “Others” mainly consist of distributions from limited partnerships for investment.
(iv) Financial instruments measured at amortized cost
Since the carrying amount of financial instruments measured at amortized cost is identical or approximate to fair value,
disclosure of the fair value is omitted. The fair value of borrowings is classified into Level 2.
(v) Method for calculating fair value
Method for calculating fair value of financial instruments is as follows:a. Cash and cash equivalents, trade receivables, and trade payables
As fair value is approximate to the carrying amount due to short-term settlement, the carrying amount is treated asfair value.
b. Other financial assets and other financial liabilities
The fair value of listed shares is calculated based on the market price at the fiscal year end. The fair value of
unlisted shares is measured by using a valuation technique based on the market price of similar shares in view oftransaction trends on a case-by-case basis. The fair value of investments in limited partnership is measured by using avaluation technique based on net asset value. Derivatives, which are financial assets or financial liabilities measured atfair value, are calculated based on, among other factors, the prices provided by partner financial institutions.
For borrowings with variable interest rates, the fair value is nearly equivalent to the carrying amount, as market
interest rates are reflected in a short period. Therefore, the carry amount is treated as the fair value.
The fair value of contingent considerations is measured using an amount calculated by the discounted cash flow
method, which incorporates unobservable inputs. Significant unobservable inputs primarily include future profit levels- 67 -

and discount rates. The fair value will increase (decrease) with an improvement (deterioration) in profit levels, anddecrease (increase) with a rise (fall) in discount rates.
For other financial assets and financial liabilities not mentioned above, which are typically settled in a short period,
the fair value approximates the carrying amount. Thus, the carrying amount is considered as the fair value.
30. Subsidiaries(1) Major subsidiaries
Voting rights holding or held (%)
Name

Address

Reportable segment

FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

100.0

100.0

100.0

100.0

Shinjukuku, Tokyo

Digital Marketing
Business

Shinjuku-

Digital Marketing

ku, Tokyo

Business

Dentsu Direct Inc.

Minatoku, Tokyo

Digital Marketing
Business

100.0

100.0

COMICSMART INC.

Shinjukuku, TokyoMedia Platform Business

100.0

89.4%

SEPTENI CO., LTD.
Septeni Data Solutions, Inc.

(2) Impact on capital surplus due to changes in ownership interests in consolidated subsidiaries that do not result in a loss ofcontrolThis was mainly due to the receipt of ¥715,988 thousand from 3 parties other than the Group through a third-party
allocation by COMICSMART INC., a subsidiary of the Company. with October 1, 2022 as the payment date. As a result,capital surplus increased ¥568,303 thousand and non-controlling interests increased ¥118,173 thousand.

- 68 -

31. Investments accounted for by using the equity method(1) Investments in affiliates (including the goodwill that forms part of the carrying amount of investment in entities accounted for(i)using equity method)
Condensed consolidated financial information of significant affiliates
Dentsu Digital Inc.
a. General information
Dentsu Digital Inc. (located in Minato-ku, Tokyo) provides consulting, development, implementation, operation,and execution in all domains of digital marketing.
b. Condensed consolidated financial information
The condensed consolidated financial information of Dentsu Digital Inc., which has been accounted for by using theequity method since January 4, 2022, is as follows:(Thousand yen)
FY2022(Ended September 30, 2022)

FY2023(Ended December 31, 2023)

Current assets

33,641,476

43,271,362

Non-current assets

6,296,492

6,005,849

Current liabilities

27,013,834

37,445,272

Non-current liabilities

1,022,354

369,134

Equity11,901,779

11,462,805

25.0%

25.0%

The Group’s interest in equity

2,975,445

2,865,701

Goodwill and consolidation adjustment

29,281,049

29,287,400

Carrying amount of investment

32,256,494

32,153,102

Equity interest ownership ratio (%)(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)

FY2023(From October 1, 2022 to
December 31, 2023)

Sales revenue

28,934,668

52,428,314

Profit

3,774,227

6,941,074–

14,657

Comprehensive income

3,774,227

6,955,730

Profit attributable to owners of parent

3,773,980

6,939,341–

14,657

3,773,980

6,953,998

Other comprehensive income

Other comprehensive income attributable to owners of parent
Comprehensive income attributable to owners of parent(Note)In the fiscal year ended December 31, 2023, the amount of dividend the Company received from Dentsu Digital Inc. was¥1,817,552 thousand. In the fiscal year ended September 30, 2022, no dividend was received from Dentsu Digital Inc.

- 69 -

(Thousand yen)
FY2022(From October 1, 2021 toSeptember 30, 2022)
Share of profit
Share of other comprehensive income
Share of comprehensive income

FY2023(From October 1, 2022 to
December 31, 2023)

943,495

1,734,835

–

3,664

943,495

1,738,499

On October 28, 2021, the Company and Dentsu Group Inc. concluded a capital and business alliance agreement (the“Capital and Business Alliance Agreement”). Pursuant to the Capital and Business Alliance Agreement, on January 4,2022, the Company acquired a part of common shares (25.00%) of Dentsu Digital Inc. from Dentsu Group Inc. (the “Share
Transfer”), resulting in Dentsu Digital Inc. becoming an affiliate accounted for by using the equity method.
Matters pertaining to the Share Transfer
On January 4, 2022, Dentsu Group Inc. transferred 3,675 common shares of Dentsu Digital Inc. to the Company, whichwere duly acquired by the Company.
・ Number of shares and ownership percentage of voting rights held by the Company before and after the transfer
Number of shares held

Ownership percentage of voting rights

Before the transfer- shares–

After the transfer

3,675 shares

25.00%(ii) Investments in non-significant affiliates
The financial information regarding investments in individually non-significant affiliates, which are accounted for byusing the equity method, is as follows: Note that these amounts are after considering the Company’s shareholding ratio.
(Thousand yen)
FY2022

FY2023(Ended September 30, 2022)(Ended December 31, 2023)

Total carrying amount of investments

1,085,733

2,096,249(Thousand yen)

FY2022

FY2023(From October 1, 2021 to September
30, 2022)(From October 1, 2022 to December
31, 2023)

122,733

115,903––

122,733

115,903

Share of profit
Share of other comprehensive income
Share of comprehensive income(iii) and factory,inc.

On October 25, 2022, the Company and and factory,inc. (“and factory”) concluded a capital and business allianceagreement (the “Capital and Business Alliance Agreement”), based on the agreement on the direction that realizing
business collaboration as a medium- to long-term partner will contribute to the enhancement of the corporate value of bothcompanies. Pursuant to the Capital and Business Alliance Agreement, effective November 10, 2022, the Company
underwrote new shares to be issued by and factory through a third-party allotment (the “Third-Party Allotment”), andacquired the shares of and factory held by Mr. Takamasa Ohara, the Chairman of the Board of Directors of and factory (the“Acquisition of Shares”) in order to make the company an equity method affiliate of the Company.

- 70 -

(1) Matters related to the Third-Party Allotment
The outline of the Third-Party Allotment is as follows:(1) Number of shares underwritten

1,408,450 shares(2) Paid-in amount¥500,000 thousand in total(2) Matters related to the Acquisition of Shares
Outline of the Acquisition of Shares is as follows:(1) Number of shares acquired

988,898 shares(2) Acquisition amount¥351,059 thousand in total(3) Matters related to acquisition-related expenses
Acquisition-related expenses related to the Third-Party Allotment of new shares and the Acquisition of Shares were¥81,771 thousand.
(4) Number of shares and ownership percentage of voting rights held by the Company before and after the transfer
Number of shares held

Ownership percentage of voting rights

Before the transfer- shares–

After the transfer

2,397,348 shares

21.29%- 71 -

32. Related parties(1) Transactions with related parties
Transactions between the Group and its affiliates and balances of receivables and payables are as follows:(Thousand yen)

Category

Name

Subsidiary of
the parent
company

Transaction
content

FY2023(From October 1, 2022 to
December 31, 2023)

Transaction

Unsettled

Transaction

Unsettledamountbalanceamountbalance

19,141,813

2,536,653

22,752,610

2,129,395

1,045,853–––

1,218,798–––

Receivinginterest (Note) 3

188

–

–

–

Share exchange(Note) 4

6,218,308–––

31,249,999

–

–

–

32,605,239

–

–

–

–

–

22,715–––80,00080,000

Sales of
Dentsu Inc.

advertisement(Note) 1
Loaning offunds (Note) 3
Collection offunds (Note) 3

Parent company

FY2022(From October 1, 2021 toSeptember 30, 2022)

Dentsu Group Inc.

Share transfer(Note) 5
Issuance ofshares throughthird-party
allotment(Note) 6
Settlement of
Officer
A company inwhich amajority of thevoting rights areheld by its
officers andtheir relatives on
its own accountKoki Satoadvances(Note) 7

Animal Spirits
No. 1 Investment

Investment ininvestment

Business Limited
Partnershipbusiness limited
partnership(Note) 8(Note) 9(Notes) 1. The transaction amount represents “net sales” and “cost of sales,” which are presented in gross amounts.
2. The transactions with the parent company and subsidiary of the parent company above are determined after negotiations
while considering market prices and business content.
3. Some of the Company’s consolidated subsidiaries participated in CMS (cash management system) introduced by Dentsu
Group Inc. However, CMS contracts between these consolidated subsidiaries and Dentsu Group Inc. have beencancelled. The interest rate on loans is reasonably determined by considering market interest rates. The transaction
amounts are stated as the average of the increases and decreases throughout the fiscal year.
4. The share exchange aimed to make Dentsu Direct Inc. a wholly-owned subsidiary of the Company, and the shareexchange ratio was reasonably determined through negotiations based on the calculation by an independent third-party
institution. Furthermore, the transaction price was reasonably determined through negotiations based on the calculation
by an independent third-party institution.
5. The transfer of shares aimed to convert Dentsu Digital Inc. into an equity method affiliate of the Company, and thetransaction price was reasonably determined through negotiations based on the price calculated by an independent thirdparty institution.
6. The transaction price for the issuance of shares through third-party allotment was reasonably determined throughnegotiations based on the price calculated by an independent third-party institution.

- 72 -

7. Settlement of advances is the amount of voluntary refunds related to the improper use of expenses by the Company’s
Representative Director.
8. It is operated by Animal Spirits No. 1 Limited Liability Partnership, of which Animal Spirits Ltd. is a partner, as anunlimited liability partner, and the Company’s director, Yusuke Asakura, effectively holds the authority to decidebusiness execution.
9. Investments in an investment business limited partnership are made pursuant to the limited partnership agreement.
(2) Remuneration for key executive management
The information is omitted as the same information is disclosed in “Note 22. Cost of sales and selling, general andadministrative expenses.”
33. Subsequent events
At the meeting of the Board of Directors held on December 19, 2023, the Company resolved to sell (with a planned transfer
date of March 29, 2024) 74,000 shares of the 116,400 shares of COMICSMART INC. it holds in order to help COMICSMART
INC. achieve sustainable growth and maximization of its corporate value. On the date on which the aforementioned shares willbe transferred, the Company’s ratio of voting rights held in COMICSMART INC. and its subsidiaries, etc. will fall from 89.42%
to 32.57%, and it will lose control of the aforementioned company. As a result, the Company plans to make the aforementioned
company an affiliate accounted for using the equity method and record of a profit of approximately ¥2.23 billion related to thesale of shares of COMICSMART INC.
34. Approval of the consolidated financial statements
The consolidated financial statements were approved by Koki Sato, Representative Director, Group President and Chief
Executive Officer on March 27, 2024.
(2) Other Information
Quarterly financial information in the fiscal year ended December 31, 2023
(Cumulative period)
Revenue (thousand yen)Three months

Six months

Nine months

Twelve months

Full year

6,592,461

13,661,261

20,164,781

26,926,947

34,266,611

Profit before tax (thousand yen)

992,542

3,385,899

3,574,882

4,737,788

6,652,148

Profit attributable to owners ofparent (thousand yen)

582,626

2,155,643

2,031,026

2,768,957

4,318,831

Basic earnings per share (yen)

2.78

10.28

9.71

13.28

20.74

Second quarter

Third quarter

Fourth quarter

7.49

-0.60

3.56

(Accounting period)
Basic earnings (loss) per share (yen)(Note)First quarter
2.78

Fifth quarter
7.48

Revenue and profit before tax are the amount of continuing operations, excluding discontinued operations. For the details of
discontinued operations, please refer to “Note 5. Discontinued Operations.”- 73 -