KURITA WATER INDUSTRIES LTD.
MD&A and Consolidated Financial Statements
For the year ended March 31, 2022

Contents
Management's Discussion and Analysis 

1Business Risks 

9Consolidated Statement of Financial Position 

13Consolidated Statement of Profit or Loss 

15

Consolidated Statement of Comprehensive Income 

16Consolidated Statement of Changes in Equity 

17Consolidated Statement of Cash Flows 

21

Notes to Consolidated Financial Statements 

22

Independent Auditor's Report 87

Management’s Discussion and Analysis
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Business Results
During the fiscal year ended March 31, 2022, economies worldwide showed signs of recovery as
economic activity began to normalize, backed by stimulus measures and wider uptake of vaccinations.
However, the recovery lost momentum at times due to mobility restrictions and supply-chain disruption
caused by COVID-19 variants.
Looking at the market environment surrounding the Kurita Group, in Japan, production slowed in someparts of the manufacturing sector owing to supply constraints for materials, including shortages ofsemiconductors. However, the recovery trend continued and capital investment also picked up. Overseas,in Europe, the U.S., and China, economies continued to recover at a moderate pace, but a resurgence in
COVID-19 infections weighed on economic recovery in certain Asian countries.
In this environment, the Kurita Group used the fiscal year under review, which is the fourth year of themedium-term management plan Maximize Value Proposition 2022 (MVP-22), to become an indispensable
long-term partner for customers. Specifically, the Group worked to expand its range of total solutions andCreating Shared Value (CSV) business, which help to solve customer problems based on in-depth
understanding of society and challenges faced by customers, such as minimizing water consumption, CO2
emissions, waste, and other environmental loads, as well as the need to improve productivity. Also,targeting improved profitability, the Group made tangible progress in the high-margin ultrapure watersupply business and tool cleaning business by responding to increased production capacity at customers
and deploying new projects. In the design and construction process for water treatment facilities, theGroup minimized cost overruns by utilizing a model to prevent the recurrence of non-compliance issues.
Overseas, the Group overhauled its business portfolio and production and sales structures in each region,
leading to growth in high-margin businesses. The Group also built a business structure that is highly
resilient to changes in the operating environment. Furthermore, the operating results of Kurita
AquaChemie Limited in the Middle East and its two subsidiaries, as well as Keytech Water Management,a Canadian company, have been included in the scope of consolidation from the fiscal year under review
after they became consolidated subsidiaries.
As a result, total consolidated orders for the Kurita Group in the fiscal year ended March 31, 2022
amounted to ¥315,240 million (up 20.2% year on year), and net sales totaled ¥288,207 million (up 7.6%
year on year). Business profit was ¥32,944 million (up 11.8% year on year), operating profit was ¥35,734
million (up 13.3% year on year), and profit before tax was ¥30,079 million (up 3.2% year on year). Profit
attributable to owners of parent was ¥18,471 million (down 3.2% year on year), reflecting the booking offinancial costs of ¥5,496 million due to the subsequent measurement of financial liabilities related toforward acquisition contracts concluded with non-controlling shareholders of Pentagon Technologies
Group, Inc. in the U.S. Kurita also booked other income of ¥6,119 million and other expenses of ¥3,329
million. Other income includes gain on sale of fixed assets of ¥4,079 million, mainly from the sale of realestate related to the former Head Office (Shinjuku) and the Osaka Office. Other expenses included
impairment loss on fixed assets of ¥1,028 million, which mainly reflected the closure of the Yamaguchi
Plant as part of a reorganization of manufacturing bases in the domestic Water Treatment Facilities
business, and the decision to suspend operations at a plant owned by Kurita Water Industries (Jiangyin)
Co. (Water Treatment Chemicals business) after a review of the production framework for water treatment
chemicals in China.

OrdersNet Sales(Millions of Yen)

(Millions of Yen)

Business Profit(Millions of Yen)

400,000

400,000

40,000300,000

300,000

30,000200,000

200,000

20,000100,000

100,000

10,000

0

0
2021

2022

0
2021

2022

- 1 -

2021

2022

Return on Equity

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

(Millions of Yen)
9.0

40,00020,00030,0006.0

15,00020,00010,0003.0

10,000

5,000

0

0
2021

0.0
2021

2022

2022

2021

2022

2. Business Segment Information(1) Water Treatment Chemicals
With respect to orders and sales in Japan, capacity utilization at customers’ plants increased as
production activity in the manufacturing sector began to recover. Overseas, both orders and sales
increased on the back of a rebound in demand from the previous fiscal year, when the COVID-19
pandemic led to a slump in economic activity. Overseas sales and orders were also boosted by earnings
from newly consolidated subsidiaries in the Middle East and Canada acquired in the first quarter of the
fiscal year, and by an increase in foreign exchange differences on translation of overseas earnings due tothe yen's depreciation.
As a result, total Group orders for the Water Treatment Chemicals business amounted to ¥118,401 million(up 14.3% year on year) and sales totaled ¥117,672 million (up 14.0% year on year). Business profit was¥13,589 million (up 10.6% year on year), supported by an increase in sales, which outweighed higher
expenses resulting from an ongoing normalization in sales activities and the impact of soaring raw
material prices. Operating profit totaled ¥14,560 million (up 23.2% year on year) partly due to foreignexchange gains at overseas subsidiaries.

OrdersNet Sales(Millions of Yen)

(Millions of Yen)

150,000

150,000

100,000

100,000

50,00050,000

0

0
2021

2022

2021

Business Profit

Operating Profit(Millions of Yen)

(Millions of Yen)

15,00015,00010,00010,000

5,000

5,000

0

2022

0
2021

2022

2021

- 2 -

2022

(2) Water Treatment Facilities
In Japan, orders for water treatment facilities from the electronics industry increased sharply on the backof orders for large projects, while sales also increased due to progress with the construction of large
projects. Orders and sales for maintenance services from the electronics industry increased due toupgrade projects such as the installation of additional equipment and the replacement of consumables,
supported by a steady rise in capacity utilization at customers’ plants. Orders for water treatment facilities
from general industry decreased significantly due to the cancellation of large projects, with sales also
contracting as sales booked from large projects ran their course. Orders for maintenance services fromthe general industry declined due to a focus on profitability in sales activities, but sales increased as
demand grew on the back of a recovery in capacity utilization at customers’ plants. Orders and sales forwater treatment facilities from the electric power industry decreased, with orders for large projects
declining and sales from the backlog of orders dropped off. Orders for soil remediation rose, but sales
declined as orders and sales from large projects ran their course. Overseas, both orders and sales
increased due to the booking of orders and sales from large projects for water treatment equipment for theelectronics industry in East Asia, as well as increased demand in the tool cleaning business. Total sales in
the ultrapure water supply business in Japan and overseas increased, reflecting a contract that began in
the previous fiscal year and a contribution from projects recently put into operation.
As a result, total Group orders in the Water Treatment Facilities business amounted to ¥196,839 million(up 24.0% year on year), while sales totaled ¥170,534 million (up 3.7% year on year). Business profit was¥19,391 million (up 13.2% year on year), mainly reflecting cost reduction and other efforts to improve
profitability. Operating profit was ¥21,169 million (up 7.8% year on year), despite the absence of aliquidation gain of ¥2,066 million from the termination of contracts with certain customers in the ultrapure
water supply business booked in other income in the previous fiscal year.

OrdersNet Sales(Millions of Yen)

(Millions of Yen)

200,000

200,000

150,000

150,000

100,000

100,000

50,00050,000
0

0
2021

2021

2022

Business Profit

Operating Profit(Millions of Yen)

(Millions of Yen)

20,0002022

25,00020,00015,00015,00010,00010,000
5,000

5,000

0

0
2021

2022

2021

- 3 -

2022

3. Regional Segment Information

Overseas Sales by Region(Millions of Yen)In the fiscal year under review, overseas sales increased 21.1% year
on year to ¥128,840 million, supported by growth in both the Water
Treatment Chemicals business and the Water Treatment Facilities
business. Overseas sales accounted for 44.7% of consolidated net
sales, up from 39.7% in the previous fiscal year.

150,000
100,000
50,0000

By region, sales increased 18.3% to ¥46,351 million in the Americas,
19.5% to ¥58,032 million in Asia, and 30.9% to ¥24,457 million in
EMEA.

2021
Asia

2022

North America

EMEA

4. Financial Position(1) Assets
Current assets were ¥178,396 million, an increase of ¥1,914 million from the end of the previous fiscal
year. This mainly reflected an increase of ¥11,147 million for trade and other receivables due to a rise in
net sales, as well as increases of ¥3,784 million and ¥3,221 million for other current assets andinventories, respectively, outweighing a decline of ¥16,498 million for cash and cash equivalents, whichmainly reflected the purchase of property, plant and equipment and income taxes paid.
Non-current assets as of March 31, 2022 were ¥291,585 million, an increase of ¥43,140 million from theend of the previous fiscal year. Property, plant and equipment increased ¥43,431 million, largely due tothe opening of Kurita Innovation Hub, a new research and development base in Akishima-shi, Tokyo, in
April 2022, and the purchase of new facilities for the ultrapure water supply business (Water Treatment
Facilities business). Goodwill increased ¥7,396 million, reflecting a rise in the amount of goodwill recorded
at overseas subsidiaries on a yen basis as a result of the weaker yen, the acquisition of a 51% stake in
Kurita AquaChemie Ltd. in the Middle East (Water Treatment Chemicals business) in the first quarter ofthe fiscal year, resulting in the consolidation of the company and its two wholly owned subsidiaries, andthe acquisition of Canada-based Keytech Water Management (Water Treatment Chemicals business),which also became a consolidated subsidiary. Other financial assets declined ¥10,552 million anddeferred tax assets increased ¥2,872 million, mainly due to the partial sale of holdings of shares in othercompanies.
As a result, total assets were ¥469,981 million, an increase of ¥45,053 million from the end of the previous
fiscal year.

Current Assets

Non-current Assets(Millions of Yen)

(Millions of Yen)
300,000

200,000
150,000

Total Assets and Return on
Assets500,000

10.0

400,000

8.0

300,000

6.0

200,000

4.0

100,000

2.0

200,000

100,000
100,000

50,000
0

0

0
2021

2022

2021

2022

0.0
2021

2022

Total Assets (Millions of Yen)
Return on Assets (%)(2) Liabilities
Current liabilities were ¥113,927 million, an increase of ¥38,975 million from the end of the previous fiscal
year. This was mainly due to increases of ¥19,613 million, ¥11,461 million, and ¥7,735 million for otherfinancial liabilities, trade and other payables, and bonds and borrowings, respectively. The increase forother financial liabilities reflected the subsequent measurement of financial liabilities related to forward- 4 -acquisition contracts concluded with non-controlling shareholders of Pentagon Technologies Group, Inc. in
the U.S. (Water Treatment Facilities business), and the reclassification of the financial liabilities from noncurrent liabilities.
Non-current liabilities were ¥78,191 million, a decrease of ¥13,946 million from the end of the previous
fiscal year. This chiefly reflected a decline of ¥11,946 million in other financial liabilities due to the above
reclassification of financial liabilities related to forward contracts from non-current to current liabilities.
As a result, total liabilities were ¥192,119 million, an increase of ¥25,029 million from the end of theprevious fiscal year.
(3) Shareholders’ Equity
Total equity stood at ¥277,862 million, an increase of ¥20,025 million
from the end of the previous fiscal year.
The main factors were an increase in retained earnings of ¥15,935
million, largely due to the booking of equity attributable to owners ofparent, and an increase in other components of equity of ¥3,661
million, reflecting exchange differences on translation of foreign
operations resulting from the yen's depreciation against overseas
currencies.

Equity Attributable to Ownersof Parent and Equity Ratio
300,000

90.0

200,000

60.0

100,000

30.0

0

0.0
2021

2022

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

5. Cash Flows
Cash and cash equivalents at the end of the fiscal year totaled ¥45,730 million, a decrease of ¥16,497
million from the end of the previous fiscal year.
(1) Cash Flows from Operating Activities
Net cash provided by operating activities was ¥28,737 million, a decrease of ¥11,265 million year on year,
mainly reflecting cash provided from profit before tax of ¥30,079 million and depreciation and amortizationof ¥23,412 million, outweighing cash used for income tax paid of ¥13,308 million and increase in tradeand other receivables of ¥6,713 million.
(2) Cash Flows from Investing Activities
Net cash used in investing activities was ¥39,929 million, an increase of ¥29,158 million year on year. This
mainly reflected cash used for the purchase of property, plant and equipment of ¥55,096 million,
outweighing proceeds from sale of investment securities of ¥9,197 million and proceeds from sale ofproperty, plant and equipment of ¥8,743 million.
(3) Cash Flows from Financing Activities
Net cash used in financing activities was ¥7,927 million, a decrease of ¥10,925 million year on year. This
was largely due to dividends paid of ¥8,797 million and repayments of lease liabilities of ¥5,005 million,
outweighing proceeds from a net increase in short-term borrowings and commercial papers of ¥7,577
million.

6. Commitment LineThe Group’s basic policy is to secure the liquidity needed for business operations and maintain a stablefinancing structure. In general, the Group uses its own funds to meet short-term working capital needs
and for capital investments and other investments in growth fields, while also procuring funds throughbond markets or bank loans as required. At the end of the fiscal year, the Group had concluded acommitment line agreement with one financial institution, with no executed borrowings and an unused
available balance of ¥20,000 million.

- 5 -7. Research and Development

R&D Expenses(Millions of Yen)

The Group is prioritizing the development of new products andtechnologies to support the provision of innovative solutions that help
resolve issues faced by society and increase the corporate value andcompetitiveness of customers. The Group is also focusing on
developing sensing technology, data analytics technology, andoptimization & control technology needed for business model digitaltransformation (DX), while also conducting research into understanding
water treatment process mechanisms and limitations to support productdevelopment and the development of mathematical modeling for water
treatment technology to underpin DX.

6,000

4,000

2,000

0
2021

2022

Water Treatment Facilities
Water Treatment Chemicals

The Group will continue to refine the water-related technology it has developed over many years, aiming
to realize its corporate vision of being “A Creator of unique value to the solution of water andenvironment,” contributing to the realization of a sustainable society. The Group’s main development
centers in Japan, Germany, Singapore, and North America are working together to proactively develop
products and technologies that meet the wide-ranging needs of society and industry.
R&D activities are performed mainly by the Research and Development Division of Kurita Water Industries
Ltd. There are approximately 170 R&D staff across the Group, representing 2.2% of all employees. Total
R&D expenses in the fiscal year under review were ¥5,386 million, equivalent to 1.9% of net sales.
(1) Water Treatment Chemicals
The Group is pushing ahead with the development of water treatment chemicals that help customers savewater, reduce CO2 emissions, cut waste, improve productivity and mitigate environmental impact. The
Group is also developing technology to analyze the effectiveness of water treatment chemicals andautomatically control optimal dosing with sensing technology. Total R&D expenses related to this segment
were ¥1,531 million in the fiscal year under review.
<Major Accomplishments for the Fiscal Year>・ To achieve stable and energy-efficient operation of membrane-based water treatment systems inwater treatment facilities and wastewater reclamation facilities, the Group expanded its lineup of
high-performance cleaning agents that can treat various types of membrane fouling without the needfor phosphorous-based additives, which can cause eutrophication. The business also developed amultifunctional water treatment agent that is effective against mixed fouling caused by inorganic andmicroorganism-derived organic matter.
・ The Group developed a steel raw material yard monitoring system for steel plants to limit stoppages
on raw material conveying lines and to prevent higher fuel usage due to increased moisture in raw
materials caused by rainfall during storage. The system consists of moisture content detection
technology for raw material stockpiles, an algorithm to predict moisture fluctuations in raw materials,
and a highly impermeable dust suppressant that prevents moisture from increasing due to rainfall.
・ The Group improved its proprietary sensing technology for optimizing the automated operation ofsludge dewatering systems in wastewater treatment processes and developed a new dewatering
treatment support system compatible with various sludge characteristics and dewatering equipment.
(2) Water Treatment Facilities
The Group is developing technologies that meet the needs of recycling-oriented societies, such astechnology for wastewater reclamation and reuse, waste reduction, and generating renewable energy
through recycling. The Group is also working to improve the energy efficiency of wastewater treatment
systems and ultrapure water production systems to increase productivity in the manufacture ofsemiconductors and other products in the electronics industry. It is also developing soil remediation
technology that anticipates future environmental regulations. Key outcomes in the fiscal year under review
are described below. Total R&D expenses for the segment in the fiscal year under review were ¥3,855
million.
<Major Accomplishments for the Fiscal Year>・ The Group has developed a high-density wastewater concentration system that accumulates tin andnickel from metal plating wastewater discharged from metallic processing, electronic component
manufacturing and other processes. The system helps to reduce industrial waste disposal costs andrecover valuable resources, as metal plating wastewater has typically been treated as industrial waste.

- 6 -・ Adult disposable diapers are being used in greater numbers as populations age. To establish
recycling technology for used diapers, the Group has developed processing equipment that iscompatible with various types of recycling methods. The equipment breaks down, crushes andsterilizes collected used diapers, and dehydrates and separates the resulting material into waste
plastic, pulp and superabsorbent polymers.
・ To reduce waste from semiconductor facilities, the Group has developed technology to precisely
separate and recycle high-performance ion-exchange resin used to produce ultrapure water for
wafer cleaning in customers’ manufacturing processes. The Group also created technology toevaluate the performance of the recycled resins. The aim is to develop the technology into abusiness that recycles and reuses resin.

8. Capital Expenditures
The Group is committed to making the necessary investments to pursue technological innovation, expand
production capacity, and address intensifying competition. In the fiscal year under review, capital
expenditures totaled ¥66,394 million, an increase of ¥33,747 million year on year, including the amountrecorded for right-of-use assets.
The Water Treatment Chemicals business carried out capital expenditures totaling ¥10,843 million, up¥2,729 million year on year, mainly reflecting the construction of a new plant in China and the expansion
and upgrade of existing facilities.
The Water Treatment Facilities business undertook capital expenditures totaling ¥55,551 million, up¥31,018 million year on year, primarily for the installation and expansion of facilities in the ultrapure watersupply business and for the establishment of new resin and membrane processing facilities as part of areorganization of domestic manufacturing bases.
Capital expenditure includes expenses related to the construction of the Group’s research anddevelopment facility, Kurita Innovation Hub, which opened on April 1, 2022.
In the one-year period following the fiscal year under review, the Group plans to undertake a total of ¥53.7
billion in capital expenditures for new construction, expansion, and renovation. Significant fluctuations in
the economy and in customers’ capital investment trends tend to have an especially large impact on thepurchase of equipment for the ultrapure water supply business. As such, the Group may adjust its capital
expenditure plan if conditions deviate from current assumptions.

Capital Expenditures

Depreciation and Amortization(Millions of Yen)

(Millions of Yen)
25,00080,00020,00060,00015,00040,00010,00020,000

5,000
0

0
2021

2021

2022

2022

Water Treatment Facilities
Water Treatment Chemicals

Water Treatment Facilities
Water Treatment Chemicals- 7 -9. Dividend Policy
Kurita’s basic policy is to continue paying stable dividends to shareholders.
Specifically, Kurita has set a consolidated dividend payout ratio target of 30%-50%. Kurita will work tocontinue raising the dividend, making decisions based on payout ratios for the most recent five years to
respond flexibly to yearly fluctuations in business performance.
Kurita’s basic policy is to pay dividends from surplus twice a year, an interim and a year-end dividend.
The decision-making body for paying dividends from surplus is the General Meeting of Shareholders for
year-end dividends and the Board of Directors for interim dividends.
Regarding dividends paid from surplus for the fiscal year under review, in consideration of future businessgrowth and with shareholder support, it was decided to pay a total dividend of ¥72 per share, including aninterim dividend of ¥36 per share. As a result, the dividend payout ratio was 33.3% (43.8% on aconsolidated basis) for the fiscal year.
Regarding retained earnings, Kurita will prioritize the use of retained earnings for businesses withprospects for growth while maintaining rigorous investment discipline. If Kurita determines that a surplus
has accumulated, it will consider the repurchase of shares, taking the share price level into account, as
well as seek to improve capital efficiency and increase returns to shareholders.

Basic Earnings per ShareDividends per Share andDividend Payout Ratio(Yen)
180.00

80.0

80.0

60.0

60.0

40.0

40.0

20.0

20.0

150.00120.00
90.00
60.00
30.00
0.0

0.00
2021

0.0
2021

2022

2022

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

The Executive General Manager of the Corporate Planning and Management Office is designated as theofficer in charge of monitoring risks and promoting risk management for the Kurita Group (the Group). The
officer seeks to regularly analyze and assess risks facing Kurita Water Industries and Kurita Group
companies, and to continue monitoring risks to prevent problems from materializing. The officer is also
responsible for comprehensively managing risks related to climate change.
The following are summaries of major foreseeable risks present in the business environments in which theGroup operates.
Forward-looking statements herein are based on judgments made by management as of March 31, 2022.

1. Impact of the COVID-19 Pandemic
Countries worldwide continue to roll out vaccination programs, but the global COVID-19 pandemic has
shown no signs of subsiding, with the number of new infections continuing to fluctuate as new COVID-19
variants emerge. Against this backdrop, countries and regions worldwide are likely to periodically
implement various measures to prevent the spread of infection and the collapse of healthcare systems,
including calls to stay at home and requests for businesses to close temporarily or reduce operating
hours, mainly in the food service sector. Due to uncertainties regarding the duration of the pandemic andthe outlook for the global economy, lower capacity utilization at customer plants, decisions by customers
to postpone capital expenditure plans and delays to the Group’s business activities could impact theGroup’s financial results. Instead of requiring employees to physically attend business offices, customers’
plants or other worksites, the Group is using digital technologies to add remote capabilities to businesscritical processes and constructing backup systems at manufacturing sites to support business continuity.
The Group has also formulated COVID-19 response guidelines and implemented measures to prevent the
spread of infection, contributing to the continued operation of customer businesses and the maintenanceof social and industrial infrastructure.

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

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

- 9 -4. Economic and Market Conditions
The Group’s businesses are affected by economic conditions in Japan and in other countries and regions
where it operates. Demand in the Water Treatment Chemicals business fluctuates in response to factory
capacity utilization rates in industries such as steel, petroleum refining and petrochemicals, and pulp andpaper – the main areas of demand for the business. Such demand fluctuations may affect the Group’s
financial results. Demand in the Water Treatment Facilities business fluctuates in response to trends incapital expenditure in the manufacturing sector – the main area of demand for the business – and also
due to changes in business conditions at customers with which the Group has long-term ultrapure watersupply contracts. Such fluctuations in demand could affect the Group’s financial results. Furthermore,rising US-China trade friction may lead to stricter customs tariffs or restrictions on the activities ofoverseas companies in domestic markets, which could impact the business operations of the Group’s
customers, leading to an indirect impact on the Group’s financial results. The Group’s financial results
may also be affected by the response to climate change, including moves by customers to shrink or exitfrom fossil fuel-related businesses, a shift to alternative fuels and water resources, and the introduction ofor an increase in carbon taxes on CO2 emissions generated by the Group’s facilities or products. The
Group provides solutions for issues related to water and the environment, so its customers are spread
across a wide range of industries. In addition, the Group is working to generate stable earnings bydeveloping business models such as the ultrapure water supply business, which minimize the earnings
impact of fluctuations in investment activity at customers. The Group also manages the operations ofaffiliated companies. Specifically, the Group verifies earnings and progress with the implementation ofstrategies and measures at affiliated companies on a monthly and quarterly basis, monitors internal
audits, financial reporting and other matters related to internal controls, and makes decisions on importantmatters at affiliated companies, in line with the Group’s Internal Decision Approval and Review Rules. In
addition, increasing competition with rivals in the Group’s business domains could lead to declines in theprice of products and services, which could lower the Group’s profitability. However, as noted in 7., theGroup is working to secure competitive advantages.

5. Exchange Rate Fluctuations
The ratio of overseas sales to total consolidated sales in the Group is 44.7%, reflecting overseas
acquisitions and other factors. The local currency-denominated financial statements of each overseas
subsidiary are reflected in the consolidated financial statements after conversion to Japanese yen.
Therefore, exchange rate fluctuations may affect the Group’s business results and financial condition. To
hedge against exchange rate risk, the Group may use forward exchange contracts, currency swap
contracts and other types of derivatives.

6. Impact on Materials and Parts Procurement from Soaring Prices for Raw
Materials, Parts and Materials and Energy, and Supply Chain Disruption
The Group procures raw materials and parts from outside the Group for the manufacture of products andthe construction of facilities. The Group also procures external services to support various businessprocesses. The Group conducts these procurement activities with respect for human rights, in accordancewith the Kurita Group Code of Conduct, and also complies with laws and regulations and takes into
account economic, social and environmental factors, as set out in the Kurita Group Procurement Policy.
The prices of raw materials, parts and services fluctuate based on changes in market conditions, and thismay affect the Group’s financial results. Meanwhile, the COVID-19 pandemic and Russia’s invasion of
Ukraine have led to soaring prices for raw materials for water treatment chemicals and for parts andmaterials used in water treatment facilities, as well as higher logistics costs amid surging energy prices
and supply chain disruption. In response, the Group is raising prices to pass on higher costs and working
to secure inventories.

- 10 -

7. Development of New Technologies, Products and Services and Transformationof Business Processes
The Group operates CSV businesses that help to significantly cut CO2 emissions, save water and reduce
industrial waste compared with previous approaches and also develops new technologies, products andservices to improve and expand its range of total solutions, which leverage chemicals, facilities andmaintenance technologies, products and services. In addition, the Group has established a Digital
Strategy Division to actively drive the Group’s digital transformation (DX) by introducing IoT and AI into
new products and services and by digitizing business processes. However, the success of newtechnology and product development efforts and business transformation cannot be guaranteed. The
Group may not be able to offer new technologies or superior products, services, or solution models thatmeet the needs of its customers in a timely fashion. The Group may also fail to keep pace with rapid
technological innovation, changing customer needs and advances in digital technologies. Failure todevelop superior new products, services or solution models, delays to DX initiatives, or slow progress withmeasures to reduce greenhouse gas emissions from customers’ operations could limit future growth andprofitability or otherwise affect the Group’s financial results.

8. Impairment Loss on Fixed Assets(1) Impairment Loss on Goodwill and Intangible Assets
The Group has acquired companies to obtain a foundation for overseas business and to gain access tocompetitive technologies and business models. As a result, the current balance of goodwill is ¥62,992
million (13.4% of consolidated total assets). Goodwill is not amortized, and is tested for impairment
annually, or whenever there are signs of possible impairment. If, because of changes in the businessenvironment, an acquisition does not yield expected benefits, or if there is a difference between theestimated future cash flows obtained by the impairment test and actual cash flows, impairment losses on
goodwill or other impairment losses may occur. Impairment tests estimate recoverable amounts based onvalue in use, and value in use is calculated using a discount rate for future cash flow referencing theweighted average cost of capital (WACC) for each cash-generating unit. Future cash flow forecasts havea five-year horizon and are formulated based on historical trends and external data. The forecasts form
the basis of business plans approved by management. Forecasts for periods longer than five years arecalculated based on average long-term growth rates, taking into account conditions in markets for eachcash-generating unit. Five-year cash flow estimates, longer-term growth rates and discount rates are usedby the Group as key assumptions, and any change in these assumptions could have an impact on theGroup’s financial results and financial condition. The Company has established an Investment Committee
to strengthen the Group’s investment and lending screening functions. The committee is chaired by the
Deputy Executive General Manager of the Corporate Control and Administration Division. The committee
conducts pre-screening of investment and lending projects to be discussed by the Board of Directors or
the Executive Committee, focusing on business plans, investment amounts, adequacy of risk
assessments, profitability, competitive advantages, legality and other criteria. The results of the screening
and key points for discussion are presented to the Board of Directors and the Executive Committee,
ensuring corporate acquisitions are only conducted after careful consideration and discussion by theCompany. In addition, all acquired companies are subject to business management procedures foraffiliated companies explained in 4. above.
(2) Impairment Loss on Property, Plant and Equipment
The Group’s ultrapure water supply business and other businesses install equipment at customer plants.
In cases where a customer withdraws from a business or suspends operations at a plant, impairment
losses on fixed assets may occur, which may affect the Group’s financial results and financial condition.
When making investment decisions on installing equipment at customer plants, the Group carefully
considers factors such as the customer’s business conditions, customer contract terms and return on
investment.

- 11 -

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

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

11. Product and Service Quality and Water Treatment Facility Operational Errors
The supply or discharge of water that falls short of required standards due to human error or otheroperational issues at customer or Group water treatment facilities may lead to claims for damage
compensation or a loss of public trust. The Group’s financial results may be affected if its obligations
exceed the scope of liability insurance coverage, or if there is a loss of public trust. As explained in 9.
above, the Group has created a quality management system and continuously implements improvements
to increase customer satisfaction.

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

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

- 12 -

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

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

Millions of yen
2021
2022

Thousands of
U.S. dollars
2022

89, 25, 34
10, 34
11¥62,228
97,745
2,817
9,911
3,780
176,482¥45,730
108,892
3,075
13,132
7,564
178,396$374,836
892,557
25,204
107,63962,0001,462,262

12
20
13
13
15
10, 34
16

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

161,034
19,042
62,992
18,092
1,191
23,0116,071
150
291,585

1,319,950
156,081516,327
148,295
9,762
188,61449,762
1,229
2,390,040

6¥424,928¥469,981$3,852,303

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

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

Thousands of
U.S. dollars
2022¥46,506
445
4,373
—
8,135
1,847
13,64474,952¥57,967
8,180
4,683
19,613
8,663
1,529
13,289113,927$475,139
67,04938,385
160,762
71,00812,532
108,926
933,827

18, 3420, 3419, 3421
22
16

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

30,953
14,862
1,757
18,144
2,335
2,646
7,491
78,191
192,119

253,713
121,819
14,401
148,721
19,13921,68861,401
640,909
1,574,745

23
23
23
23
23

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

13,450(3,076)(10,694)
12,161
260,073
271,914
5,948
277,862

110,245(25,213)(87,655)
99,6802,131,745
2,228,803
48,754
2,277,557¥424,928¥469,981$3,852,303

22

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

Millions of yen
2021
2022

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

Notes
6, 25

Net sales
Cost of sales
Gross profit

Millions of yen
2021
2022
¥267,749¥288,207(173,073)(183,928)
94,676104,278

Thousands of
U.S. dollars
2022$2,362,352(1,507,606)
854,737

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

26
27
28
6

(65,206)
5,929(3,870)31,529(71,334)
6,119(3,329)35,734(584,704)
50,155(27,286)
292,901

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

29
29

545
(1,923)601(6,176)

4,926(50,622)

15

(999)

(80)

(655)

29,15030,079246,549

Income tax expense
Profit16(9,326)
19,824(10,454)
19,624(85,688)
160,852

19,088735¥19,824

18,471
1,153¥19,624

151,401
9,450$160,852

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

2021

2022¥169.94—¥164.38—

U.S. dollars
2022
$1.35
—

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

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

Millions of yen
2021
2022
¥19,824¥19,624

Thousands of
U.S. dollars
2022$160,852

30

5,202

520

4,262

30
30

(234)
4,968

417
938

3,418
7,688

30
30
30

4,851
(594)

8,692
131

71,245
1,073

30

24

121

991

30
30

4,280
9,249
¥29,073

8,944
9,883
¥29,50773,31181,008$241,860¥28,0211,052¥29,073¥27,501
2,005¥29,507$225,418
16,434$241,860

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

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

Notes

Balance as of April 1, 2020
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Liabilities pertaining to forward
contracts concluded with noncontrolling shareholders
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2021
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2022

Sharecapital¥13,450

Capitalsurplus¥8,212

Treasuryshares¥(10,893)

—

—

—
(4)

9

111

23
24
33

(991)

Exchangemeasured at
differences onfair valuetranslation ofthrough otherCash flow comprehensive
foreignhedgesoperations
income¥(9,033)¥503¥8,747

4,560
4,560

(594)
(594)

5,202
5,202

4

7
7

(10,578)(888)—¥13,450

1,135(10,424)¥(2,212)

—

—

—
(5)

57

98

23
24
33

106
¥(10,787)

4¥(4,469)

—
¥(91)

(888)
¥13,060

7,962
7,962

131
131

520
520

(1,115)
7(4,954)—¥13,450193(864)¥(3,076)- 17 -

93¥(10,694)—¥3,493—¥40(4,954)¥8,627

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

Remeasurementsof defined
benefit plans

¥—
(235)
(235)

235
235
¥—
415
415

Total
¥216
—
8,932
8,932
—
—

Retainedearnings¥231,456
19,08819,088(7,076)

Total¥242,442
19,088
8,932
28,021(4)(7,076)

Noncontrollinginterests¥1,666
735
316
1,052
(1,013)

Total¥244,108
19,824
9,249
29,073(4)(8,090)

—

120

(9)

111

4

(986)

(208)

(1,194)

—

—

3,260

3,260

—

(10,578)(10,578)

(653)

653

—

—

—
(648)
¥8,500
—
9,030
9,030
—
—

16
(6,406)¥244,138
18,471

1,152(17,373)¥253,089
18,471
9,030
27,501(5)(7,865)

(943)

1,152
(15,344)¥257,837
19,624
9,883
29,507(5)(8,809)18,471(7,865)

2,029¥4,748
1,153
852
2,005

—

155

23

179

—

(1,115)(268)(1,384)

—

—

357

357

(415)

(5,369)

5,369

—

(415)
¥—

—
(5,369)¥12,161(41)(2,536)¥260,073

152(8,677)¥271,914

—
26
(805)
¥5,948- 18 -

179(9,483)¥277,862

Notes

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

23
24
33

7
7

ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2022

23
24
33

7

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

Notes

Balance as of March 31, 2021
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2022

Sharecapital$110,245

Capitalsurplus$(18,131)

Treasuryshares$(88,418)

—

—

—
(40)

467

803

23
24
33

Exchangemeasured at
differences onfair valuetranslation ofthrough otherCash flow comprehensive
foreignhedgesoperations
income$(36,631)$(745)$107,049

65,262
65,262

1,073
1,073

4,262
4,262

(9,139)7(40,606)—$110,245

1,581(7,081)$(25,213)- 19 -

762$(87,655)—$28,631—$327(40,606)$70,713

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

Remeasurementsof defined
benefit plans

$—
3,401
3,401

Total
$69,672—
74,01674,016——

Retainedearnings$2,001,131
151,401

Total$2,074,500
151,401
74,016
151,401
225,418(40)(64,467)(64,467)

Noncontrollinginterests$38,918
9,450
6,983
16,434(7,729)Total$2,113,418
160,852
81,008
241,860(40)(72,204)

—

1,270

188

1,467

—

(9,139)(2,196)(11,344)

—

—

2,926

2,926

(3,401)(44,008)

44,008——(3,401)
$—

—
(336)
1,245
(44,008)(20,786)(71,122)$99,680 $2,131,745 $2,228,803

213
1,467
(6,598)(77,729)$48,754 $2,277,557- 20 -

Notes

Balance as of March 31, 2021
ProfitOther comprehensive income
Comprehensive income
Purchase of treasury shares
Dividends
Share-based remunerationtransactions
Changes in ownership interestin subsidiaries
Increase (decrease) bybusiness combination
Transfer from other componentsof equity to retained earnings
Other
Total transactions with owners
Balance as of March 31, 2022

23
24
33

7

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

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

27

7, 32

18

24

8
8

Thousands of
U.S. dollars
2022

Millions of yen
2021
2022
¥29,150
20,739¥30,079
23,412$246,549
191,901

999

80

655

(1,333)254
746(2,904)(3,410)44,242
153
360
(213)
(4,541)40,002(4,073)(1,918)(6,713)
1,459(828)
41,497
177
601
(232)
(13,308)
28,737(33,385)(15,721)(55,024)
11,959(6,786)340,139
1,450
4,926(1,901)(109,081)
235,549(1,856)
1,588(14,055)
8,401(1,909)2,533(2,348)2,175(55,096)
8,743(2,038)
9,197(19,245)
17,827(451,606)
71,663(16,704)
75,385(4,599)(2,401)(19,680)(874)(10,771)

1,839(39,929)

15,073(327,286)(35,001)

7,577

62,10629,882(645)(5,033)(8,083)—(485)(5,005)(8,797)—(3,975)(41,024)(72,106)—(1,440)(11,803)29(18,852)

224(7,927)

1,836(64,975)

1,634
12,01350,215¥62,228

2,622(16,497)
62,228¥45,730

21,491(135,221)
510,065$374,836

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

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

2. Basis of preparation(1) Compliance with IFRSThe consolidated financial statements of the Group are prepared in compliance with International
Financial Reporting Standards (IFRS), pursuant to the provisions of Article 93 of the Regulation on
Terminology, Forms, and Preparation Method of Consolidated Financial Statements (Ministry of Finance
Order No. 28 of 1976), as the Group meets the requirements for a “specified company complying withdesignated international accounting standards” set forth in Article 1-2 of the said regulation.
The consolidated financial statements of the Group were approved by Michiya Kadota, President andRepresentative Director, on June 29, 2022.
(2) Basis for measurement
As stated in Note 3. “Significant accounting policies,” the consolidated financial statements of the Group
have been prepared based on acquisition cost, with the exception of specified financial instruments, etc.,
measured at fair value.
(3) Functional currency and presentation currency
The consolidated financial statements of the Group are presented in Japanese yen, which is the functional
currency of the Company. Amounts are presented in millions of yen, with fractional amounts less than one
million yen rounded down to the nearest million yen.
The translation of yen amounts as of or for the year ended March 31, 2022 into U.S. dollars is included
solely for the convenience of readers and has been made, as a matter of arithmetical computation only, atthe rate of ¥122 to US$1, the prevailing rate on the Tokyo Foreign Exchange Market on March 31, 2022.
The translation should not be construed as a representation that yen amounts have been, could havebeen or could in the future be converted into U.S. dollars at the above or any other rate.

- 22 -

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

- 23 -

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

- 24 -

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

- 25 -

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

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

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(7) Property, plant and equipment
The cost model is applied to property, plant and equipment and they are measured at cost lessaccumulated depreciation and accumulated impairment losses.
The cost includes any costs directly attributable to the acquisition of the asset, as well as costs of
dismantling, removal, and restoration.
Except for assets that are not subject to depreciation, such as land, each asset is depreciated over its
estimated useful life using the straight-line method (however, some assets, such as equipment for
research and development, are depreciated using the diminishing balance method).
The estimated useful lives of major asset items are as follows:・ Buildings and structures: 2 – 60 years;
・ Machinery, equipment and vehicles: 4 – 10 years
Estimated useful lives and depreciation methods, etc., are reviewed at each fiscal year-end, and if any
changes occur, they are amended prospectively as changes in accounting estimates.
(8) Goodwill and intangible assets
1) Goodwill
The Group measures goodwill as the amount of the consideration transferred that is measured at theacquisition-date fair value, including the recognized amount of non-controlling interests in an acquiree,less the net of the acquisition-date amounts (usually fair value) of identifiable assets acquired andliabilities assumed.
Goodwill is not amortized. Goodwill is allocated to cash-generating units identified based on the region inwhich the business is conducted and the type of business and is tested for impairment annually or
whenever there is any indication of impairment.
Impairment losses on goodwill are recognized in the consolidated statement of profit or loss, and they are
not reversed in subsequent periods.
Goodwill is presented at the amount of acquisition cost less accumulated impairment losses.
2) Intangible assets
The cost model is applied to intangible assets, and such assets are measured at cost less accumulated
amortization and accumulated impairment losses.
A separately acquired intangible asset is measured initially at cost. The cost of an intangible asset
acquired in a business combination is measured at fair value at the acquisition date.
Expenditure on internally generated intangible assets, with the exception of an intangible asset arisingfrom development that meets the recognition criteria, is recognized as expense when it is incurred.
An intangible asset with finite useful life is amortized over its estimated useful life using the straight-line
method.
Estimated useful lives and amortization methods for intangible assets with finite useful lives are reviewed
at each fiscal year-end, and if any changes occur, they are amended prospectively as changes inaccounting estimates.
The estimated useful lives of major intangible assets with finite useful lives are as follows:
・ Software: 5 years;
・ Customer-related assets: 5 – 21 years
An intangible asset with indefinite useful life and an intangible asset not yet available for use are notamortized and are instead tested for impairment annually or whenever there is any indication of
impairment for each individual asset or each cash-generating unit.

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

- 29 -

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

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

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

- 32 -

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

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

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・ Estimates of the total cost of transactions that recognize revenue over a certain period of time
（Note 3. “Significant accounting policies (14) Revenue”）
The Group uses estimated total costs to measure the degree of the construction’s progress, which isused for recognizing revenues over a certain period of time. However, these estimates are subject tofuture uncertainties due to technical or physical factors and changes in the environment surrounding
the contracts.
In addition, other estimates and judgments that are considered important are as follows:・ Estimates of fair value of intangible assets acquired in a business combination（Note 3. “Significant accounting policies (2) Business combinations”）
・ Impairment of non-financial assets（Note 3. “Significant accounting policies (10) Impairment of non-financial assets”）
・ Useful lives of intangible assets（Note 3. “Significant accounting policies (8) Goodwill and intangible assets”）
・ Recoverability of deferred tax assets（Note 3. “Significant accounting policies (16) Income taxes”）
・ Estimates of the extension option and cancellation option in lease agreements（Note 3. “Significant accounting policies (9) Leases”）
・ Provisions（Note 3. “Significant accounting policies (13) Provisions”）
・ Measurement of defined benefit obligations（Note 3. “Significant accounting policies (11) Employee benefits”）
・ Fair value of financial instruments（Note 3. “Significant accounting policies (4) Financial instruments”）(Additional information)
During the fiscal year ended March 31, 2022, economic activities worldwide showed signs of a recovery
as economic activities began to return to normal backed by national economic stimulus measures andwidespread vaccinations, although the momentum of recovery was weakened occasionally by movement
restrictions and logistical disruptions due to the outbreak of COVID-19 variants. Both orders and sales for
the Group increased mainly due to the rebound from the decrease in demand triggered by the stagnationin economic activities in the previous year caused by the spread of COVID-19.
It is difficult to reasonably predict the future spread of the disease, or when the spread would converge.
However, the Group has made accounting estimates, including impairment tests for goodwill andintangible assets, based on the assumption that, according to information, etc., from external sources,
economic activities will normalize due to the worldwide progress of vaccination and economic stimulus
measures, allowing the economy to gradually recover. If a revision should become necessary, it may havea significant impact on the amounts to be recognized in the consolidated financial statements from thefiscal year ending March 31, 2023 onward.

5. New standards not yet appliedWith respect to the standards or interpretations newly issued or amended by the date of the approval of
the consolidated financial statements, the Group has not applied them early as of March 31, 2022.
The impact of the application is not stated herein, due to its immateriality.

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6. Segment information(1) Overview of reportable segments
The Company’s reportable segments are components of the Group about which separate financial
information is available. These segments are subject to periodic review to enable the Company’s Board of
Directors to decide how to allocate resources and assess performance.
The Group plans comprehensive strategies for the products and services that it handles in Japan andoverseas and conducts business accordingly. The Group’s operations are therefore classified into tworeportable segments, the Water Treatment Chemicals business and the Water Treatment Facilities
business.
The Water Treatment Chemicals business manufactures and sells water treatment chemicals andequipment and provides maintenance services. The Water Treatment Facilities business manufacturesand sells water treatment equipment and facilities, provides ultrapure water, chemical cleaning, toolcleaning, soil and groundwater remediation services, and provides maintenance services that encompass
operation, maintenance, and management of water treatment facilities.
(2) Information on reportable segments
The accounting policies for reportable segments are the same as the accounting policies for the Group,
which are provided in Note 3. “Significant accounting policies.” Intersegment sales are based on prevailingmarket prices.
Fiscal year ended March 31, 2021
Millions of yen

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

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

Total¥267,749
2,760
270,50931,451

Adjustments(Notes)¥—(2,760)(2,760)78¥267,749—
267,749
31,529545(1,923)(999)

Profit before tax
Segment assets

Consolidated¥29,150¥123,476¥233,530¥357,006¥67,921¥424,928

Other items
Depreciation and amortization¥4,986¥15,752¥20,739¥—¥20,739
Impairment losses
—
1,419
1,419
—
1,419
Investments accounted for using equity
1,448
110
1,558
19
1,578
methodCapital expenditures
8,719
25,84834,568—34,568Notes 1. Adjustments to segment profit include the elimination of inter-segment transactions, etc.
2. Segment profit presents the amount of operating profit.
3. Adjustments to segment assets include the elimination of inter-segment transactions, etc., and consist mainlyof corporate assets unallocated to reportable segments.
4. Capital expenditures include an increase in right-of-use assets.
5. Capital expenditures do not include assets acquired through business acquisitions.
6. Impairment losses consist mainly of impairment losses on goodwill of ¥1,304 million.

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Fiscal year ended March 31, 2022
Millions of yen

2022
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method

Reportable segments
Water
Water
treatment
treatmentchemicals
facilities¥117,672
518
118,191
14,560¥170,534
561
171,095
21,169

Total¥288,207
1,080
289,287
35,729Adjustments(Notes)¥—(1,080)(1,080)4

Other items
Depreciation and amortization
Impairment losses
Investments accounted for using equity
methodCapital expenditures2022
Net sales
Sales to external customers
Intersegment sales
Total
Segment profit
Finance income
Finance costs
Share of profit (loss) of investments
accounted for using equity method¥30,079¥148,267¥274,119¥422,386¥47,595¥469,981¥5,935
380¥17,477
647¥23,412
1,028

¥—
—

¥23,412
1,028

988

163

1,152

39

1,191

11,45457,016

68,471—

68,471Thousands of U.S. dollars
Reportable segments
Water
Water
treatment
treatment
Adjustments
chemicals
facilities
Total(Notes)Consolidated$964,524
4,245
968,778
119,344$1,397,819
4,598
1,402,418
173,516$2,362,352
8,852
2,371,204
292,860$—(8,852)(8,852)32$2,362,352—
2,362,352
292,901
4,926(50,622)(655)

Profit before tax
Segment assets¥288,207—
288,20735,734601(6,176)(80)

Profit before tax
Segment assets

Consolidated$246,549$1,215,303$2,246,877$3,462,180$390,122$3,852,303

Other items
Depreciation and amortization$48,647$143,254$191,901$—$191,901
Impairment losses
3,114
5,303
8,426
—
8,426
Investments accounted for using equity
8,098
1,336
9,442
319
9,762
methodCapital expenditures
93,885467,344561,237—
561,237
Notes 1. Adjustments to segment profit include the elimination of inter-segment transactions, etc.
2. Segment profit presents the amount of operating profit.
3. Adjustments to segment assets include the elimination of inter-segment transactions, etc., and consist mainlyof corporate assets unallocated to reportable segments.
4. Capital expenditures include an increase in right-of-use assets.
5. Capital expenditures do not include assets acquired through business acquisitions.
6. The amount of revenue recorded for transactions in which revenue is recognized over a certain period of timeby the Company is ¥51,440 million ($421,639 thousand).

- 36 -

(3) Information about products and services
This information is omitted since the classification of products and services herein follows the sameclassification as used for reportable segments.
(4) Information about geographical areas
Non-current assets and net sales to external customers by geographical areas are as follows:
1) Non-current assets
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Japan
¥119,495¥159,264$1,305,442
Asia
17,93919,450159,426
Americas55,69361,740506,065
EMEA
16,97520,855
170,942
Total¥210,104¥261,311$2,141,893
Note Non-current assets are allocated based on the location of assets, and financial instruments or deferred tax assets are notincluded. EMEA refers to the European, Middle Eastern and African regions. Meanwhile, the geographical classification forthe purpose of disclosure was changed to integrate “Other” and “North America” into “Americas.” Accordingly, figures forthe previous fiscal year have been reclassified based on this new classification.

2) Net sales
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Japan
¥161,371¥159,365$1,306,270
Asia
48,53558,032475,672
Americas39,16046,351
379,926
EMEA
18,681
24,457200,467
Total¥267,749¥288,207$2,362,352
Note Net sales are allocated to a country or areas based on the locations of customers. EMEA refers to the European, Middle
Eastern and African regions. Meanwhile, the geographical classification for the purpose of disclosure was changed tointegrate “Other” and “North America” into “Americas.” Accordingly, figures for the previous fiscal year have been
reclassified based on this new classification.

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

- 37 -

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

Millions of yen¥5,3795,594¥10,974(2) Gain on remeasurement relating to business combinations
As a result of the remeasurement of the equity interest in the acquiree held immediately before theacquisition date at acquisition-date fair value, gain on remeasurement relating to business combinationsof ¥463 million was recognized due to the relevant business combination. This gain is recorded in otherincome in the consolidated statement of profit or loss.
(3) Assets acquired and liabilities assumed
The fair value of identifiable assets acquired and liabilities assumed of Pentagon Technologies as of theacquisition date is as follows:
2021
Fair value of consideration for acquisition
Fair value of assets acquired and liabilities assumed
Cash and cash equivalents
Trade receivables
Other current assets
Technology-related assets
Customer-related assets
Other non-current assets
Trade and other payables
Non-current liabilities
Fair value of assets acquired and liabilities assumed (net)Non-controlling interests
Goodwill- 38 -

Millions of yen¥10,974
995
1,636
554
2,334
1,732
3,169
(1,520)(2,407)
6,494
3,260¥7,739In the fourth quarter of the fiscal year ended March 31, 2021, the provisional accounting process was
finalized, and the amount of goodwill as of the acquisition date decreased by ¥1,881 million. This was
mainly attributable to increases of ¥1,234 million in non-current liabilities and ¥1,808 million in noncontrolling interests, despite increases of ¥2,334 million in technology-related assets and ¥1,732 million incustomer-related assets. The amount of goodwill that occurred was ¥7,739 million, which reflects
expected excess earning power. The Group does not expect any amount related to recognized goodwill tobe deductible for tax purposes.
Net sales and profit of Pentagon Technologies, which are included in the consolidated statement of profit
or loss for the fiscal year ended March 31, 2021, are ¥11,350 million and ¥814 million, respectively.
Non-controlling interests are measured at their ownership interests of the fair value of the identifiable net
assets of the acquiree.
(4) Transactions that are accounted for separately from business combination
Acquisition-related costs were ¥171 million. The amount is recorded in other expenses in the consolidated
statement of profit or loss.
(5) Forward contract concluded with non-controlling shareholders
With regard to the remaining 49% shares of Pentagon Technologies, a forward contract has beenconcluded between Kurita America Holdings, Inc. and non-controlling shareholders of Pentagon
Technologies, under which it has been agreed that Pentagon Technologies will become a wholly owned
subsidiary of Kurita America Holdings, Inc. with June 30, 2022 as the target date.
The present value of the expected transfer price based on the forward contract, which is ¥10,578 million,
is initially recognized as other financial liabilities, and the same amount is deducted from capital surplus.
After initial recognition, the present value is measured at amortized cost using the effective interest
method, in principle, and the amount of subsequent changes is recognized in profit or loss.

- 39 -

Fiscal year ended March 31, 2022
(Business combinations of entities or businesses under common control)(1) Outline of the transaction
1) Company names and businesses at the time of business combination(i) Surviving company
Name:
Kurita Water Industries Ltd.
Business: Manufacture and sale of water treatment chemicals and water treatment facilities,
maintenance of water treatment facilities, ultrapure water supply, and soil and groundwater
remediation(ii) Merged company
Name:
Kurita Engineering Co., Ltd. (hereinafter “Kurita Engineering”)
Business: Plant cleaning and maintenance, manufacture and sale of cleaning and wastewater
treatment chemicals, facilities and equipment, and rental of temporary machinery
2) Date of business combination
April 1, 2021
3) Legal form of business combination
Kurita Engineering has been dissolved through an absorption-type merger in which the Company is thesurviving company.
4) Name of the company after business combination
Kurita Water Industries Ltd.
5) Main reason of integration
Kurita Engineering was established in 1959 when the chemical cleaning division was separated from theCompany, and has been developing its business focusing on chemical cleaning for large plants in Japanas a leading company in plant facilities cleaning services. In the social and industrial infrastructure
markets such as electric power, iron and steel, petroleum refining, and petrochemicals, which are themain markets for Kurita Engineering and the Company, there are growing needs to reduce environmental
impact and improve productivity, including decarbonization measures against global climate change.
This merger will enable the Company to flexibly invest its management resources, such as financial andhuman resources, into Kurita Engineering's solid technological and customer base so that the Company
can accurately identify these needs and provide optimal solutions. We will aim to expand the scope of ourplant facilities cleaning business and achieve sustainable growth by establishing a system to respondpromptly to social demands and customer needs in the future social and industrial infrastructure markets.
(2) Outline of accounting
The business combination under common control is a business combination in which all companies orbusinesses involved are ultimately controlled by the same company before and after the businesscombination. The control is not temporary. The Group continues to perform accounting treatment basedon carrying the amount for all business combination transactions under common control.

- 40 -

8. Cash and cash equivalents
The breakdown of cash and cash equivalents is as follows:
Millions of yen
2021
2022
¥61,039¥43,974
1,189
1,756¥62,228¥45,730

Cash and deposits
Short-term investments
Total

Thousands of
U.S. dollars
2022$360,442
14,393$374,836

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

9. Trade and other receivables
The breakdown of trade and other receivables is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Notes and accounts receivable - trade¥64,031¥75,290$617,131
Accounts receivable - other
717
778
6,377
Contract asset
32,34731,900261,475
Lease receivables
1,041
1,260
10,327
Allowance for doubtful accounts
(393)
(338)
(2,770)
Total¥97,745¥108,892$892,557
Notes 1. In the consolidated statement of financial position, trade and other receivables are presented in the amountafter deduction of allowance for doubtful accounts.
2. With the exception of lease receivables, trade and other receivables are classified as financial assets
measured at amortized cost.

10. Other financial assets(1) Breakdown of other financial assets
The breakdown of other financial assets is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Shares¥25,705¥17,078$139,983
Insurance funds
4,228
2,410
19,754
Leasehold deposits
1,735
1,897
15,549Time deposits
2,454
2,757
22,598
Other
2,256
1,943
15,926
Total¥36,380¥26,086$213,819
Current assets¥2,817¥3,075$25,204
Non-current assets
33,56323,011
188,614
Notes 1. In the consolidated statement of financial position, other financial assets are presented in the amount after
deduction of allowance for doubtful accounts.
2. Insurance funds, shares, and time deposits and leasehold deposits are classified as financial assets measured
at fair value through profit or loss, financial assets measured at fair value through other comprehensive income
and financial assets measured at amortized cost, respectively. Other consists primarily of financial assets
measured at amortized cost.

- 41 -

(2) Financial assets measured at fair value through other comprehensive income
Major equity instruments and their fair values, of financial assets measured at fair value through othercomprehensive income, are as follows:
Thousands ofMillions of yen
U.S. dollars
Name of shares
2021
2022
2022
Daikin Industries, Ltd.
¥11,057¥5,550$45,491
ONO PHARMACEUTICAL CO., LTD.
5,976
4,227
34,647Shin-Etsu Chemical Co., Ltd.
3,327
3,359
27,532NIPPON SHOKUBAI CO.,LTD.
1,183
994
8,147
Otsuka Holdings Co., Ltd.
937
846
6,934
Note Shares are held primarily for business relationship purposes, and are therefore designated as financial assets measured
at fair value through other comprehensive income.

The Group sells (derecognizes) financial assets measured at fair value through other comprehensive
income in order to ensure the efficient and effective use of the assets it holds.
Fair values at the time of sales and cumulative gain or loss on disposal recognized as othercomprehensive income in equity are as follows:
Millions of yen
2021
2022
¥2,536¥9,212Thousands of
U.S. dollars
2022$75,508

Millions of yen
2021
2022
¥5,248¥6,640
948
1,029
3,714
5,462
¥9,911¥13,132

Thousands of
U.S. dollars
2022$54,426
8,434
44,770$107,639

Fair value
Cumulative gain or loss on disposal recognized as other comprehensive
1,290
7,259
59,500income in equity
Note Cumulative gain or loss on disposal recognized as other comprehensive income in equity are reclassified to retained
earnings when the assets are sold or when their fair value declines significantly.

11. Inventories
The breakdown of inventories is as follows:

Finished goods
Work in process
Raw materials and supplies
Total- 42 -

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

Balance as of April 1, 2020
Individual acquisition
Acquisition through businesscombination
Depreciation (Note)
Impairment loss
Sale or disposal
Reclassification to other accountExchange differences ontranslation of foreign
operations
Other
Balance as of March 31, 2021
Individual acquisition
Acquisition through businesscombination
Depreciation (Note)
Impairment loss
Sale or disposal
Reclassification to other accountExchange differences ontranslation of foreign
operations
Other
Balance as of March 31, 2022

Buildings
andstructures¥19,847
104

Machineryandvehicles¥62,231707

Land¥12,624
—

556

1,591

—

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

(10,349)—(3,643)
9,612

144
(0)
¥19,039
276

Constructionin progress¥7,37625,885

Other¥4,277816

Total¥106,358
27,513

—

69

2,216

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

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

636

150

103

127

1,162

18
¥60,8051,260

0¥11,537—

0¥21,666
61,006(45)¥4,554515(26)¥117,603
63,058

559

129

—

—

26

715

(2,041)(476)(248)
25,806(12,265)
(131)
(177)
19,603—(400)(4,301)————(48,346)(1,631)
(19)
(49)
2,568

(15,939)(1,027)(4,777)
(368)

365

571

13

255

156

1,364

16
¥43,298

21¥69,817—¥6,849(0)¥34,581366¥6,488404¥161,034

Buildings
andstructures$156,057
2,262

Machineryandvehicles$498,401
10,327

Other
Balance as of March 31, 2021
$37,327
Individual acquisition
4,221
Acquisition through business
4,581
1,057
—
—
213
combination
Depreciation (Note)(16,729)(100,532)——(13,368)
Impairment loss
(3,901)(1,073)(3,278)—(155)
Sale or disposal(2,032)(1,450)(35,254)—(401)
Reclassification to other account211,524
160,680—(396,278)
21,049Exchange differences ontranslation of foreign
2,991
4,680
106
2,090
1,278
operations
Other
131
172
—
(0)
3,000
Balance as of March 31, 2022
$354,901$572,270$56,139$283,450$53,180
Note Depreciation of property, plant and equipment is included in cost of sales and selling, general andadministrative expenses in the consolidated statement of profit or loss.

Total$963,959
516,868

Thousands of U.S. dollars- 43 -

Land$94,565—

Constructionin progress$177,590
500,049

5,860(130,647)(8,418)(39,155)(3,016)
11,1803,311$1,319,950

2) Acquisition cost
Millions of yen

Balance as of April 1, 2020
Balance as of March 31, 2021
Balance as of March 31, 2022

Buildings
andstructures¥48,956¥49,605¥74,439

Machineryandvehicles¥171,861¥177,839¥198,432

Balance as of March 31, 2022

Buildings
andstructures$610,155

Machineryandvehicles$1,626,491

Land¥13,122¥12,036¥7,678Constructionin progress¥7,376¥21,666¥34,581

Other¥17,509¥18,440¥21,089

Total¥258,826¥279,588¥336,221

Other$172,860

Total$2,755,909

Other¥13,232¥13,885¥14,601

Total¥152,468¥161,984¥175,187

Other$119,680

Total$1,435,959

Thousands of U.S. dollars

Land$62,934

Constructionin progress$283,4503) Accumulated depreciation and impairment losses
Millions of yen

Balance as of April 1, 2020
Balance as of March 31, 2021
Balance as of March 31, 2022

Buildings
andstructures¥29,109¥30,565¥31,141

Machineryandvehicles¥109,630¥117,034¥128,615

Balance as of March 31, 2022

Buildings
andstructures$255,254

Machineryandvehicles$1,054,221

Land
¥497
¥498
¥829

Constructionin progress
¥—
¥—
¥—

Thousands of U.S. dollars- 44 -

Land$6,795Constructionin progress$—

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

Balance as of April 1, 2020
Individual acquisition
Acquisition through business combination
Amortization (Note)
Impairment loss
Sale or disposal
Exchange differences on translation offoreign operations
Other changes
Balance as of March 31, 2021
Individual acquisition
Acquisition through business combination
Amortization (Note)
Impairment loss
Sale or disposal
Exchange differences on translation offoreign operations
Other changes
Balance as of March 31, 2022

Goodwill¥47,033—
7,739—(1,304)—

Millions of yen
Customerrelated
Softwareassets¥3,307¥7,655
1,908
—
—
1,732
(1,122)
(881)
—
—
(33)
—

Other
¥2,418
1
2,371
(819)
—
—

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

2,136

27

209

42

2,416

(8)
¥55,596
—
2,320
—
—
—

455
¥4,5422,005
0(1,444)
(1)
(2)

(0)
¥8,71616661(1,048)——47¥4,061
15
0
(828)
—
(0)

494
¥72,916
2,037
2,982(3,321)
(1)
(2)

5,075

23

729

209

6,037

—
¥62,992331¥5,45466¥9,14237¥3,494435¥81,084

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$37,229$71,442$33,286
16,434
131
122
0
5,418
0
(11,836)(8,590)(6,786)
(8)
—
—
(16)
—
(0)

Goodwill
Total
Balance as of March 31, 2021
$455,704$597,672
Individual acquisition—
16,696
Acquisition through business combination
19,01624,442
Amortization (Note)—(27,221)
Impairment loss—
(8)
Sale or disposal—(16)
Exchange differences on translation of
41,598
188
5,975
1,713
49,483
foreign operations
Other changes
—
2,713
540
303
3,565
Balance as of March 31, 2022
$516,327$44,704$74,934$28,639$664,622
Note Amortization of intangible assets is included in cost of sales and selling, general and administrative expenses
in the consolidated statement of profit or loss.

- 45 -

2) Acquisition cost

Balance as of April 1, 2020
Balance as of March 31, 2021
Balance as of March 31, 2022

Balance as of March 31, 2022

Millions of yen
Customerrelated
assets¥10,308¥12,472¥14,272

Goodwill¥48,204¥58,071¥65,467

Software¥13,694¥15,384¥17,741

Other¥4,686¥6,896¥7,263

Total¥76,894¥92,825¥104,744

Goodwill$536,614

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$145,418$116,983$59,532

Total$858,557

Millions of yen
Customerrelated
assets¥2,652¥3,756¥5,1293) Accumulated amortization and impairment losses

Balance as of April 1, 2020
Balance as of March 31, 2021
Balance as of March 31, 2022

Balance as of March 31, 2022

Goodwill¥1,171¥2,475¥2,475

Software¥10,387¥10,841¥12,286

Other¥2,268¥2,835¥3,768

Total¥16,479¥19,908¥23,660

Goodwill$20,286

Thousands of U.S. dollars
Customerrelated
SoftwareassetsOther$100,704$42,040$30,885

Total$193,934(2) Impairment tests for goodwill
The carrying amount of the goodwill allocated to each cash-generating unit is as follows:
Millions of yen
2021
2022
¥40,584¥46,396
11,71014,309
4,739
4,908
4,390
4,853
19,744
22,325¥15,011¥16,595
5,232
5,784
1,814
2,006
7,964
8,804
¥55,596¥62,992

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

- 46 -

Thousands of
U.S. dollars
2022$380,295
117,286
40,22939,778
182,991$136,024
47,40916,442
72,163$516,327

Impairment tests for major goodwill are performed as follows:
1) Kurita Europe GmbH (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 6.8%, and the discount rate used is determined with reference to the weighted average costof capital for the cash-generating unit. The forecast period of future cash flows is five years, based on abusiness plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 1.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2021, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 6.3% and 1.0%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
2) Hansu Co., Ltd. (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 11.4%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 0.0% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2021, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 11.2% and 0.0%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
3) Avista Technologies, Inc. (Water Treatment Chemicals business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 9.5%, and the discount rate used is determined with reference to the weighted average costof capital for the cash-generating unit.
The forecast period of future cash flows is five years, based on a business plan that was created reflecting
past experience and external information and approved by management. For periods after five years, agrowth rate of 2.2% is used, which was determined by taking into account the conditions of the market inwhich the cash-generating unit is operating. Accordingly, the recoverable amount exceeds the carrying
amount, and therefore, no impairment loss was recognized for the fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2021, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 9.3% and 2.2%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.

- 47 -

4) Kurita America, Inc. (Water Treatment Chemicals business and Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 9.5%, and the discount rate used is determined with reference to the weighted average costof capital for the cash-generating unit.
Despite the serious impact of the developments in the first half of the fiscal year ended March 31, 2022,
including the decline in private demand associated with the closure of commercial facilities due to the
spread of COVID-19 and other factors, delay in shipment of products due to logistic disruption and soaring
costs of materials and distribution triggered by inflation, we expect to see an improvement in businessperformance due to positive prospects, such as normalization of product shipment and the progress in thenegotiation with customers for price increase, as well as the strengthening of sales structure suitable forthe focused markets in the course of the latter half of the fiscal year.
The forecast period of future cash flows is five years, based on a business plan that was created reflecting
past experience and external information and approved by management. For periods after five years, agrowth rate of 2.2% is used, which was determined by taking into account the conditions of the market inwhich the cash-generating unit is operating. Accordingly, the recoverable amounts exceed each of theircarrying amounts, and therefore, no impairment loss was recognized for the fiscal year ended March 31,2022.
For the fiscal year ended March 31, 2021, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 8.9% and 1.7%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
5) Kurita Fracta Holdings, Inc. (Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 17.9%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 2.5% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amounts exceed each of their carrying amounts, and therefore, no impairment loss wasrecognized for the fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2021, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 18.0% and 2.5%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.
6) Pentagon Technologies Group, Inc. (Water Treatment Facilities business)
The recoverable amount is measured at value in use. The value in use is calculated by discounting future
cash flows at 10.7%, and the discount rate used is determined with reference to the weighted average
cost of capital for the cash-generating unit. The forecast period of future cash flows is five years, based ona business plan that was created reflecting past experience and external information and approved bymanagement. For periods after five years, a growth rate of 2.2% is used, which was determined by taking
into account the conditions of the market in which the cash-generating unit is operating. Accordingly, therecoverable amount exceeds the carrying amount, and therefore, no impairment loss was recognized forthe fiscal year ended March 31, 2022.
For the fiscal year ended March 31, 2021, the forecast period of future cash flows was five years, and thediscount rate and the growth rate used were 10.6% and 1.7%, respectively.
The Group considers that, even if key assumptions used in the impairment test change within areasonably foreseeable range, a significant impairment is unlikely to occur in the cash-generating unit.

- 48 -

14. Impairment losses for non-financial assets
Business assets are grouped mainly by segment and idle assets are grouped by individual property.
Fiscal year ended March 31, 2021
For the fiscal year ended March 31, 2021, impairment losses of ¥1,304 million were recognized mainly on
goodwill.
Fiscal year ended March 31, 2022
For the fiscal year ended March 31, 2022, impairment losses of ¥1,028 million ($8,426 thousand) [¥1,027
million ($8,418 thousand) for property, plant and equipment, ¥1 million ($8 thousand) for intangible assets]
were recorded in “Other expenses,” as a result of the closure of the Yamaguchi Plant accompanying thereorganization of manufacturing bases in the domestic Water Treatment Facilities business and thedecision to suspend the operation of the plant of Kurita Water Industries (Jiangyin) Co. (Water Treatment
Chemicals business) due to a review of the production structures for water treatment chemicals in China.
The breakdown of impairment losses by segment is provided in Note 6. “Segment Information.”

15. Investments accounted for using equity method(1) Material associates
Not applicable.
(2) Individually immaterial associates(i) The carrying amount of investments in individually immaterial associates is as follows:
Millions of yen
2021
2022
¥1,578¥1,191

Total carrying amountThousands of
U.S. dollars
2022$9,762(ii) The aggregate amount of the Group’s share of profit and comprehensive income of individually
immaterial associates is as follows:
Millions of yen
2021
2022
Share of:
ProfitOther comprehensive income
Comprehensive income¥(999)
24¥(975)- 49 -

¥(80)
121
¥41

Thousands of
U.S. dollars
2022$(655)
991$336

16. Income taxes(1) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities, classified by primary cause, are as follows:
Fiscal year ended March 31, 2021
Millions of yen

2021

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

Recognized inothercomprehensive
incomeApril 1, 2020

Recognizedthrough
profit or loss

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

¥49
142
88
17
383
(168)
835
1,347

¥—
97
—
—
—
—
40
137

¥—
—
—
—
—
—
—
—

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

3,984

—

1,821

—

5,805

1,680

485

—

—

2,166

4,062
9,728
¥2,949

161
647
¥700

(221)
1,599
¥(1,462)

1,355
1,355
¥(1,355)

5,358
13,330¥831

Other

March 31,2022

March 31,
2021

Other

Fiscal year ended March 31, 2022
Millions of yen

2022

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

Recognized inothercomprehensive
incomeApril 1, 2021

Recognizedthrough
profit or loss

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

¥347
311
41
68
(109)
(8)
182
834

¥—
(105)
—
—
—
—
(57)
(163)

¥—
—
—
—
—
—
—
—

¥2,972
5,196
873
740
1,036
302
3,708
14,831

5,805—(1,983)

—

3,822

2,166

535

—

—

2,701

5,358
13,330
¥831

(782)
(246)
¥1,080—(1,983)¥1,819306
306¥(306)

4,883
11,406¥3,425- 50 -

Thousands of U.S. dollars

2022

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

Recognized inothercomprehensive
incomeApril 1, 2021

Recognizedthrough
profit or loss

$21,508
40,909
6,819
5,508
9,385
2,549
29,368116,073$2,844
2,549
336
557
(893)
(65)
1,491
6,836

$—
(860)
—
—
—
—
(467)
(1,336)

$—
—
—
—
—
—
—
—

$24,360
42,590
7,155
6,065
8,491
2,475
30,393
121,565

47,581—(16,254)—

31,327

17,754

4,385

—

—

22,13943,918109,262$6,811(6,409)(2,016)$8,852—(16,254)$14,909

2,508
2,508
$(2,508)

40,02493,491$28,073

March 31,
2022

Other

(2) Unrecognized deferred tax assets
The following are deductible temporary differences, the carryforward of unused tax losses (breakdown by
expiration) and unused tax credits (breakdown by expiration) for which no deferred tax assets arerecognized in the consolidated statement of financial position. Amounts hereunder are presented on a tax
amount basis.
Millions of yen
2021
2022
¥5,437¥8,185

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

Thousands of
U.S. dollars
2022$67,090

¥—
18
2,206
¥2,225¥—36
2,956¥2,992$—295
24,229$24,524

¥—
—
—
¥—

¥—
—
—
¥—

$—
—
—
$—

(3) Unrecognized deferred tax liabilities
The total amount of temporary differences related to investments in subsidiaries, etc., that are notrecognized as deferred tax liabilities as of March 31, 2021 and 2022 are ¥30,095 million and ¥35,265
million ($289,057 thousand), respectively. When the Group is capable of controlling the timing of thereversal of temporary differences and the temporary differences will not reverse within the foreseeable
future, no deferred tax liability related to such temporary differences is recognized.

- 51 -

(4) Income taxes recognized through profit or loss
The breakdown of income taxes recognized through profit or loss is as follows:
Millions of yen
2021
2022
¥10,026¥11,535

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

(207)
(422)
(69)
(700)
¥9,326(1,080)—0(1,080)¥10,454

Thousands of
U.S. dollars
2022$94,549(8,852)—0(8,852)$85,688(5) Reconciliation of the effective tax rate
Below is a breakdown of the principal items that caused a difference between the statutory effective tax
rate and the average effective tax rate. The Company is primarily subject to corporate tax, inhabitants’ tax
and enterprise tax. The statutory effective tax rate calculated based on these taxes is 30.6%. Foreignsubsidiaries are subject to income taxes, etc., in their respective countries of domicile.

Domestic statutory effective tax rate
Items permanently not tax deductible, such as entertainment expenses
Items permanently not taxable, such as dividend income
Increase (decrease) in unrecognized deferred tax assets
Tax credits
Difference in tax rates applied to foreign subsidiaries
Impairment of goodwill
Other
Average effective tax rate

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

2022
30.6%
0.7%
(0.0%)
4.4%(2.5%)(1.4%)
—%
3.0%
34.8%

17. Trade and other payables
The breakdown of trade and other payables is as follows:
Millions of yen
2021
2022
Notes and accounts payable - trade¥22,907¥25,288
Accounts payable - other
18,712
26,357
Contract liabilities
4,886
6,320
Total
¥46,506¥57,967
Note Trade and other payables are classified as financial liabilities measured at amortized cost.

- 52 -

Thousands of
U.S. dollars
2022$207,278
216,040
51,803$475,139

18. Bonds and borrowings
The breakdown of bonds and borrowings is as follows:
Thousands ofMillions of yen
U.S. dollars
Average
2021
2022
2022
Due dateinterest rate
Short-term borrowings¥—¥2,739$22,450
1.15%
Current portion of long-term borrowings
445
440
3,606
2.64%
Commercial papers—
5,000
40,983
0.02%
Long-term borrowings
1,317
1,040
8,524
3.42% 2023-2027
Bonds
29,88929,913245,188
0.15% 2025
Total
¥31,652¥39,133$320,762
Current liabilities¥445¥8,180$67,049
Non-current liabilities
31,20730,953
253,713
Total¥31,652¥39,133$320,762
Notes 1. The average interest rate is calculated using interest rates and balances as of March 31, 2022.
2. Bonds and borrowings are classified as financial liabilities measured at amortized cost.
3. The borrowings have no financial covenants that have a significant effect on the financial activities of theGroup.

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

Name
The Company

Issue
First series of
unsecured bonds

Issue date
December
10, 2020

Millions of yen
2021
2022
¥30,000¥30,000

Thousands of
U.S. dollars Interest
Redemption
2022
Collateral
rate
periodDecember$245,9010.15%
None10, 2025

19. Other financial liabilities
The breakdown of other financial liabilities is as follows:
Millions of yen
2021
2022
¥1,182¥797
193—

Thousands of
U.S. dollars
2022$6,532—Long-term guarantee deposits
Put options granted to non-controlling shareholders
Liabilities pertaining to forward contracts concluded
12,326
19,613
160,762
with non-controlling shareholders
Contingent consideration
—
781
6,401
Other
—
177
1,450
Total
¥13,703¥21,371$175,172
Current liabilities¥—¥19,613$160,762
Non-current liabilities
13,703
1,757
14,401
Total¥13,703¥21,371$175,172
Notes 1. Long-term guarantee deposits and liabilities pertaining to forward contracts concluded with non-controllingshareholders are classified as financial liabilities measured at amortized cost.
2. Put options granted to non-controlling shareholders and contingent consideration are classified as financial
liabilities measured at fair value through profit or loss.

- 53 -

20. Leases
Lease as lessee
The Group mainly leases buildings and structures, machinery, equipment and vehicles and land. Leaseterms mainly range from one year to 30 years, while the average interest rate that is applied to leaseliabilities is 1.4%. There are no significant purchase options, escalation clauses, or restrictions imposed
under lease agreements (including restrictions on dividends, additional borrowings and additional leases).
In domestic businesses in particular, lease agreements for buildings mostly allow the lessee to repeatedly
exercise an extension option and also include an early cancellation option only if cancellation is noticed inwriting to the counterparty no later than six months in advance. Only those lease payments corresponding
to the period during which the exercise of such options was reasonably expected with certainty areincluded in the measurement of lease liabilities.
1) Right-of-use assets
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Buildings and structures¥8,452¥8,339$68,352
Machinery and vehicles
1,610
1,506
12,344
Land
8,751
8,508
69,737
Other
591
687
5,631
Total
¥19,405¥19,042$156,081
Note The increases in right-of-use assets for the fiscal years ended March 31, 2021 and 2022 were ¥5,145 million and ¥3,375
million ($27,663 thousand), respectively.

2) Expenses from lease
Millions of yen
2021
2022
Depreciation of right-of-use assets
Buildings and structures
Machinery and vehicles
Land
Other
Total depreciation of right-of-use assets
Interest expenses on lease liabilities
Short-term lease expense
Lease expense of low-value assets
Total expenses¥2,778
684
420
256
4,139
225
1,020
136
¥5,522¥2,804
697
413
236
4,151
300
975
173
¥5,600Thousands of
U.S. dollars
2022$22,983
5,713
3,385
1,934
34,024
2,459
7,991
1,418
$45,901

3) Maturity analysis of lease liabilities
The maturity analysis of lease liabilities is described in Note 34. “Financial instruments (3) Liquidity risk.”
4) Total cash outflow for leases
The total amount of lease-related cash outflows for the fiscal years ended March 31, 2021 and 2022 was¥5,449 million and ¥5,453 million ($44,696 thousand), respectively.

- 54 -

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

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

Millions of yen
2021
2022
¥671
¥681
(566)
(646)
105
35
17,921
18,108¥18,027¥18,144

Amount presented in the consolidated statement of financial position
Retirement benefit liabilities
Net defined benefit liability (asset)¥18,027¥18,027- 55 -¥18,144¥18,144

Thousands of
U.S. dollars
2022$5,581(5,295)286
148,426$148,721$148,721$148,721

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

Balance as of April 1, 2020
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Prior service cost and gains and losses on settlement
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2021
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2022

Balance as of March 31, 2021
Current service cost
Interest expense
Benefits paid
Remeasurements
Actuarial gains and losses arising from changes indemographic assumptions
Actuarial gains and losses arising from changes infinancial assumptions
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2022

In Japan¥14,846
972
65
(596)

Millions of yen
Outside Japan¥2,575
206
58
(256)

Total
¥17,421
1,179
123
(853)

142

(16)

125

198

8

206

—
—
151
¥15,779
1,001
56
(717)

(39)
227
49
¥2,814
209
55
(144)

(39)
227
201
¥18,593
1,210
112
(861)

(174)

(26)

(201)

(84)

(291)

(376)

—
12
¥15,873

159
141¥2,917

159
153¥18,790

Thousands of U.S. dollars
In Japan
Outside Japan
Total$129,336$23,065$152,401
8,204
1,713
9,918
459
450
918
(5,877)(1,180)(7,057)(1,426)(213)(1,647)(688)(2,385)(3,081)—
98$130,106

1,303
1,155
$23,909

1,303
1,254
$154,016

The weighted average duration of defined benefit obligations of the Company and principal consolidated
subsidiaries was 12 years in Japan and 24 years overseas in the fiscal year ended March 31, 2021, and12 years in Japan and 22 years overseas in the fiscal year ended March 31, 2022.

- 56 -

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

Balance as of April 1, 2020
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2021
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2022

Balance as of March 31, 2021
Interest income
Benefits paid
Contributions to the plan by the employer
Remeasurements
Return on plan assets
Exchange differences on translation of foreign operations
Other changes
Balance as of March 31, 2022

Millions of yen
Outside Japan
¥508
10
(258)
258
0
48
(1)
¥566
13
(40)
85
6
15
(1)
¥646
Thousands of
U.S. dollars
Outside Japan
$4,639
106
(327)
696
49
122
(8)
$5,295

Information of changes in plan assets in Japan is omitted, as there is nothing applicable.
For the defined contribution plans, in the fiscal year ending March 31, 2023, the Group is scheduled tocontribute ¥70 million ($573 thousand).
4) Fair values of plan assets by asset category
Fair values of plan assets by principal asset category are as follows:
Market price in an active market
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
¥566
¥646
$5,295¥566¥646$5,295

Cash and cash equivalents
Total- 57 -

5) Actuarial assumptions
The significant actuarial assumptions used to calculate the present value of defined benefit obligations of
the Company and its main domestic consolidated subsidiaries are as follows:
2021
0.40%

Discount rate

2022
0.50%

A sensitivity analysis (effects on defined benefit obligations) of significant actuarial assumptions of theCompany and its main domestic consolidated subsidiaries is as follows:
Millions of yen
2021
2022
Discount rate
0.5% increase
0.5% decrease¥(781)
852

Thousands of
U.S. dollars
2022¥(771)
841$(6,319)6,893(3) Employee benefits expense
The employee benefits expense included in cost of sales and selling, general and administrative
expenses in the consolidated statement of profit or loss is as follows:
Millions of yen
2021
2022
¥49,845¥55,227
3,089
2,751
8,342
9,226
¥61,277¥67,205

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

Thousands of
U.S. dollars
2022$452,680
22,54975,622$550,860

The amounts recognized as expense for the defined contribution plan were ¥1,169 million and ¥1,317
million ($10,795 thousand) in the fiscal years ended March 31, 2021 and 2022, respectively.

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

- 58 -

3) Asset retirement obligations
To provide for the Group’s obligation to restore rental offices, buildings, etc., held by the Group, the Group
recognizes asset retirement obligations. Related expenses are expected to be paid after the usage period
has elapsed, and will be affected by future business plans, etc.
4) Provision for business restructuring
The Group recognizes a provision for losses that are expected to occur in the future, due to partial
closures and relocations, etc., of the Group’s overseas bases. While these expenses are expected to be
paid in the fiscal year ending March 31, 2023, additional expenses may be incurred if there is an increasein the estimated cost.
The breakdown of and changes in the provisions are as follows:
Fiscal year ended March 31, 2022
Millions of yen

Balance as of April 1, 2021
Increase during the period
Decrease during the period(due to intended use)(reversal)
Other
Balance as of March 31, 2022
Current liabilities
Non-current liabilities

Provision
for loss on
construction
contracts¥121
7

Provisionfor productwarranties
¥999
1,026

Asset
retirement
obligations¥1,166
1,173

Provision forbusiness
restructuring
¥641
—

(121)
—
—
¥7
¥7
—

(882)
(8)
23
¥1,157¥1,1552——
1¥2,341
¥9
2,332

(244)
(59)
19
¥357
¥357
—

Other
¥77
—

Total
¥3,007
2,207

(77)
—
—
¥—
¥—
—

(1,327)(67)
45¥3,864¥1,529
2,335

Other
$631
—

Total
$24,647
18,090

(631)
—
—
$—
$—
—

(10,877)(549)
368$31,672$12,532
19,139Thousands of U.S. dollars

Balance as of April 1, 2021
Increase during the period
Decrease during the period(due to intended use)(reversal)
Other
Balance as of March 31, 2022
Current liabilities
Non-current liabilities

Provision
for loss on
construction
contracts$991
57

Provisionfor productwarranties$8,1888,409

Assetretirement
obligations$9,557
9,614

Provision forbusiness
restructuring$5,254
—

(991)
—
—
$57
$57
—

(7,229)(65)
188$9,483$9,46716——
8$19,188$73
19,114(2,000)(483)
155$2,926$2,926—- 59 -

23. Share capital and other equity items(1) Share capital and capital surplus
The Japanese Companies Act (hereinafter the “Companies Act”) provides that 50% or more of the amount
paid or granted for share issue can be incorporated into share capital, while the remaining amount can beincorporated into capital reserves, which is included in capital surplus. The Companies Act also provides
that capital reserves can be incorporated into share capital by a resolution of a general meeting ofshareholders.
1) Number of authorized shares
The total number of authorized shares as of March 31, 2021 and 2022 remained at 531,000 thousand
shares of common stock.
2) Number of shares outstanding
ThousandsharesNumber ofcommonsharesApril 1, 2020
116,200
Increase (decrease)—
March 31, 2021
116,200
Increase (decrease)—
March 31, 2022
116,200
Note All of the shares issued by the Company are no-par common stock without any limitation on the rights of theshares, and the outstanding shares have been paid in full.

(2) Retained earnings
The Companies Act provides that 10% of the amount to be paid as dividends from surplus shall be
accumulated as capital reserves or retained earnings reserves until the total amount of capital reserves
and retained earnings reserves reaches 25% of capital stock. The accumulated retained earnings
reserves can be used to eliminate losses carried forward. In addition, the retained earnings reserves canbe reversed by a resolution of a general meeting of shareholders.
(3) Treasury shares
ThousandsharesNumber ofsharesoutstanding
3,904
(45)
3,859
(39)
3,819

April 1, 2020
Increase (decrease)
March 31, 2021
Increase (decrease)
March 31, 2022

Millions of yen

Thousands of
U.S. dollars

Amount¥10,893(106)¥10,787$88,418(93)(762)¥10,694$87,655(4) Liabilities pertaining to forward contracts concluded with non-controlling shareholders
For forward contracts for shares in subsidiaries that have been concluded with non-controllingshareholders of Pentagon Technologies Group, Inc., a consolidated subsidiary, the Company deducted
the liabilities pursuant to the relevant contract from capital surplus.
The amount deducted from capital surplus in the fiscal year ended March 31, 2021 was ¥10,578 million.
For further details regarding the liabilities pertaining to forward contracts concluded with non-controllingshareholders, please refer to Note 3. “Significant accounting policies (19) Liabilities pertaining to forward
contracts concluded with non-controlling shareholders.”- 60 -

24. Dividends(1) Amount of dividends paid
Fiscal year ended March 31, 2021
Millions of yen
Yen
Type of
Total amount
Dividend
Resolution
sharesof dividend
per share
Record date
Effective dateJune 29, 2020
CommonOrdinary General Meeting of Shareholders
share¥3,490¥31
March 31, 2020 June 30, 2020
November 5, 2020
CommonSeptember 30,
November 27,
Board of Directors’ meetingshare¥3,603
¥32
2020
2020
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2020 includes dividends of ¥9 million paid for 312 thousand shares of the Company(entrusted for performance-linked stock compensation for Directors) held by the trust account of Custody Bankof Japan, Ltd.
The total amount of dividends determined by a resolution of the Board of Directors meeting held on November
5, 2020 includes dividends of ¥8 million paid for 274 thousand shares of the Company (entrusted for
performance-linked stock compensation for Directors) held by the trust account of Custody Bank of Japan, Ltd.

Fiscal year ended March 31, 2022
Resolution
June 29, 2021
Ordinary General Meeting of Shareholders
October 29, 2021
Board of Directors’ meeting

Type ofsharesCommonshare
Commonshare

Millions of yen
Total amountof dividend

Yen
Dividend
per share¥3,828¥34¥4,054¥36

Thousands of
U.S. dollars
Total amountof dividendRecord date

Effective date

March 31, 2021
September 30,
2021

June 30, 2021
November 29,
2021

U.S. dollar
Type of
Dividend
Resolution
sharesper share
Record date
Effective dateJune 29, 2021
CommonOrdinary General Meeting of Shareholders
share$31,377$0.28 March 31, 2021 June 30, 2021
October 29, 2021
CommonSeptember 30,
November 29,
Board of Directors’ meetingshare$33,229$0.30 2021
2021
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2021 includes dividends of ¥9 million ($73 thousand) paid for 274 thousand shares of theCompany (entrusted for performance-linked stock compensation for Directors) held by the trust account of
Custody Bank of Japan, Ltd.
The total amount of dividends determined by a resolution of the Board of Directors meeting held on October 29,
2021 includes dividends of ¥8 million ($65 thousand) paid for 244 thousand shares of the Company (entrusted
for performance-linked stock compensation for Directors) held by the trust account of Custody Bank of Japan,Ltd.

- 61 -

(2) Dividends whose effective date falls in the fiscal year ending March 31, 2023

Resolution
June 29, 2022
Ordinary General Meeting of Shareholders

Type ofsharesCommonshare

Millions of yen
Total amountof dividend

Yen
Dividend
per share

Record date

Effective date¥36

March 31, 2022

June 30, 2022

¥4,054
Thousands of
U.S. dollars
Total amountof dividend

U.S. dollar
Type of
Dividend
Resolution
sharesper share
Record date
Effective dateJune 29, 2022
CommonOrdinary General Meeting of Shareholders
share$33,229$0.30 March 31, 2022 June 30, 2022
Note The total amount of dividends determined by a resolution of the Ordinary General Meeting of Shareholders
held on June 29, 2022 includes dividends of ¥8 million ($65 thousand) paid for 244 thousand shares of theCompany (entrusted for performance-linked stock compensation for Directors) held by the trust account of
Custody Bank of Japan, Ltd.

25. Net sales(1) Breakdown of net sales recognized from contracts with customers
Fiscal year ended March 31, 2021

2021
Japan
Asia
Americas
EMEA
Total
Notes 1.
2.
3.

Millions of yen
Reportable segments
Water
Water
treatment
treatmentchemicals
facilities
Consolidated¥42,240¥119,131¥161,371
22,457
26,07748,53519,85019,30939,16018,681—
18,681¥103,231¥164,518¥267,749
The above amounts are presented after deduction of inter-segment transactions.
Net sales are broken down into countries or regions based on customer location. EMEA refers to theEuropean, Middle Eastern and African regions.
From the fiscal year ended March 31, 2022, the geographical classification for the purpose of disclosure waschanged to integrate “Other” and “North America” into “Americas.” Accordingly, figures for the fiscal year ended
March 31, 2021 have been reclassified based on this new classification.

Fiscal year ended March 31, 2022
Millions of yen
Reportable segments
Water
Water
treatment
treatmentchemicals
facilities
Consolidated¥42,826¥116,538¥159,365
26,78331,24958,032
23,60522,74546,351
24,457—24,457¥117,672¥170,534¥288,207

2022
Japan
Asia
Americas
EMEA
Total

- 62 -

2022
Japan
Asia
Americas
EMEA
Total
Notes 1.
2.
3.

Thousands of U.S. dollars
Reportable segments
Water
Water
treatment
treatmentchemicals
facilities
Consolidated$351,032$955,229$1,306,270
219,532
256,139475,672
193,483
186,434
379,926
200,467—
200,467$964,524$1,397,819$2,362,352
The above amounts are presented after deduction of inter-segment transactions.
Net sales are broken down into countries or regions based on customer location. EMEA refers to theEuropean, Middle Eastern and African regions.
From the fiscal year ended March 31, 2022, the geographical classification for the purpose of disclosure waschanged to integrate “Other” and “North America” into “Americas.”(2) Contract balances
The balance of receivables from contracts with customers, contract assets and contract liabilities is asfollows:
Fiscal year ended March 31, 2021
Millions of yen
2020
2021
¥69,338¥64,031
24,21832,347
5,912
4,886

2021
Receivables from contracts with customers
Contract assets
Contract liabilities

Fiscal year ended March 31, 2022
Millions of yen
2021
2022
¥64,031¥75,290
32,34731,900
4,886
6,320

2022
Receivables from contracts with customers
Contract assets
Contract liabilities

Thousands of
U.S. dollars
2022$617,131
261,475
51,803In the consolidated statement of financial position, receivables from contracts with customers and contract
assets are included in trade and other receivables, while contract liabilities are included in other current
liabilities.
Revenues that were included in the balance of contract liabilities at the beginning of the fiscal years ended
March 31, 2021 and 2022 were ¥5,912 million and ¥4,886 million ($40,049 thousand), respectively.
Among the revenue for the fiscal years ended March 31, 2021 and 2022, the amount of revenue fromperformance obligations satisfied in past fiscal years is immaterial.
Significant changes in the balances of contract assets and contract liabilities are as follows:
Millions of yen

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

2021
Contract
Contract
assetsliabilities¥72,526¥—(65,707)
—
—
9,175
—
(10,333)- 63 -

2022
Contract
Contract
assetsliabilities¥79,662¥—(80,201)——
12,689—(11,549)

Thousands of
U.S. dollars
2022
Contract
Contract
assetsliabilities$652,967$—(657,385)——
104,008—(94,663)(3) Performance obligations
For sales of products, when products have been delivered, the Company determines that performanceobligations have been satisfied and recognizes their sales.
For construction contracting, sales are recognized over the period of the construction contract, as
performance obligations are satisfied according to the construction’s progress. To measure progress, theinput method is applied, using the ratio of the incurred cost against the estimated total cost for eachcontract.
Considerations are received within a reasonable period from the time of satisfaction of performanceobligations. For these contracts, the expedient provided for in IFRS 15 “Revenue from Contracts with
Customers” is applied, and no adjustments related to financing components are performed.
Sales are measured at the consideration promised in the contract.
There are no significant contracts with customers regarding a return of products.
Furthermore, in connection with construction contracts, etc., the Company provides product warranty,
such as the free repair of defects identified within a certain period of time. Such warranty intends toprovide customers with a warranty to ensure that the products, etc., of the Company function as intended,in accordance with the specifications agreed upon with the customers. Future expenditures are estimatedby taking into account actual product warranty expenses in the past, and are recognized as a provision for
product warranties.
The total amount of transaction price allocated to remaining performance obligations was ¥61,754 million
at March 31, 2021, while the total amount of transaction price allocated to remaining performanceobligations at March 31, 2022 was ¥89,001 million ($729,516 thousand). For these transactions, revenue
will be recognized on a step-by-step basis within approximately three years to come, commensurate withthe progress in the contract performance.

26. Selling, general and administrative expenses
The breakdown of selling, general and administrative expenses is as follows:
Millions of yen
2021
2022
¥5,317¥5,38635,96238,365
7,257
8,064
16,66819,516¥65,206¥71,334

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

Thousands of
U.S. dollars
2022$44,147
314,467
66,098
159,967$584,704

27. Other income
The breakdown of the items and amounts included in other income is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Gain on sale of fixed assets¥1,342¥4,079$33,434
Gain on settlement of contracts
2,066
—
—
Other
2,521
2,040
16,721
Total¥5,929¥6,119$50,155
Notes 1. Gain on settlement of contracts for the fiscal year ended March 31, 2021 was generated as a result of thetermination of a contract with a certain customer in the ultrapure water supply business.
2. Among gain on sale of fixed assets for the fiscal year ended March 31, 2022, ¥2,894 million ($23,721
thousand) is due to the sale of the land of former Head Office (in Shinjuku) and ¥1,079 million ($8,844
thousand) is due to the sale of the land and building of Osaka Office.

- 64 -

28. Other expenses
The breakdown of the items and amounts included in other expenses is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Loss on sales and retirement of property, plant and equipment
¥156
¥93
$762
Impairment losses
1,419
1,028
8,426
Other
2,294
2,207
18,090Total¥3,870¥3,329$27,286
Notes 1. Among the impairment losses for the fiscal year ended March 31, 2021, ¥1,304 million is from an impairment of
goodwill related to Kurita Fracta Holdings, Inc. Details are provided in Note 13. “Goodwill and intangible
assets.”2. Impairment losses for the fiscal year ended March 31, 2022 were mainly incurred due to the closure of the
Yamaguchi Plant accompanying the reorganization of manufacturing bases in the domestic Water Treatment
Facilities business and the decision to suspend the operation of the plant of Kurita Water Industries (Jiangyin)
Co. (Water Treatment Chemicals business) due to a review of the production structures for water treatment
chemicals in China.

29. Finance income and Finance costs(1) Finance income
The breakdown of finance income is as follows:
Millions of yen
2021
2022

Thousands of
U.S. dollars
2022

Dividend income
Dividend income from financial assets held at end of period
¥320
¥272
$2,229Dividend income from financial assets derecognized during the period
40
120
983
Interest income
132
190
1,557
Foreign exchange gains
22
—
—
Other
28
18
147
Total
¥545
¥601
$4,926
Notes 1. Dividend income relates to financial assets measured at fair value through other comprehensive income.
2. Interest income relates to financial assets measured at amortized cost.

(2) Finance costs
The breakdown of finance costs is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Interest expense
¥249
¥209
$1,713
Loss on valuation and realization of fair value
19
30
245
Foreign exchange loss
—
22
180
Other
1,655
5,913
48,467
Total¥1,923¥6,176$50,622
Notes 1. Interest expense mainly relates to financial liabilities measured at amortized cost.
2. Other consists mainly of costs related to the subsequent measurement of the fair value of liabilities pertaining
to forward contracts concluded with non-controlling shareholders of Pentagon Technologies Group, Inc.
(United States), which amounted to ¥1,381 million and ¥5,496 million ($45,049 thousand) for the fiscal year
ended March 31, 2021 and 2022, respectively.

- 65 -

30. Other comprehensive income
The amount arising during the period, reclassification adjustments to profit or loss and the impact of tax
effects for each item of other comprehensive income are as follows:
Fiscal year ended March 31, 2021
Millions of yen

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

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

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

(331)

—

(331)

97

(234)

6,792

—

6,792

(1,824)

4,968

4,851

—

4,851

—

4,851

(851)

(4)

(856)

262

(594)

24

—

24

—

24

4,023

(4)

4,018

262

4,280

¥10,816¥(4)¥10,811¥(1,562)¥9,249Fiscal year ended March 31, 2022
Millions of yen

2022
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects¥(1,462)¥—¥(1,462)¥1,983

¥520

523

—

523

(105)

417

(939)

—

(939)

1,877

938

8,692

—

8,692

—

8,692

(223)

412

189

(57)

131

94

26

121

—

121

8,563

439

9,002

(57)

8,944

¥7,624¥439¥8,063¥1,819¥9,883- 66 -

Thousands of U.S. dollars

2022
Items that will not be reclassified to profit or loss
Net change in fair value of financial assets
measured at fair value through othercomprehensive income
Remeasurements of defined benefit plans
Total of items that will not be reclassified to
profit or loss
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign
operations
Cash flow hedges
Share of other comprehensive income ofinvestments accounted for using equity
methodTotal of items that may be reclassified to profit
or loss
Total

Amountarisingduring theperiodReclassification
adjustments

Before tax
effects

Tax effects

Net of tax
effects$(11,983)$—$(11,983)$16,254$4,262

4,286

—

4,286

(860)

3,418

(7,696)—(7,696)

15,385

7,688

71,245—71,245—71,245(1,827)

3,377

1,549

(467)

1,073

770

213

991

—

991

70,1883,598

73,786(467)

73,311$62,491$3,598$66,090$14,909$81,008

Millions of yen
2021
2022
¥19,088¥18,471——
19,08818,471Thousands of
U.S. dollars
2022$151,401—
151,401

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

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

Average number of common shares during the period (shares)
112,327,368
112,368,155
112,368,155
Notes 1. Diluted earnings per share are not stated because there are no dilutive shares.
2. The Company’s own shares posted as treasury shares remaining in trust are included in the treasury sharesthat are deducted in the calculation of the average number of shares outstanding for calculation for basic net
income per share. The numbers of average shares of the treasury shares that are deducted for the fiscal years
ended March 31, 2021 and 2022 are 286 thousand shares and 253 thousand shares, respectively.

- 67 -

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

Bonds andlong-term
borrowings¥1,67629,236

Balance as of April 1, 2020
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2021
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2022

Total
¥54,614(10,798)

699
—
40
—
¥31,652
(427)

—
—
—
—
¥—
7,577

921
4,294
166
1,415
¥19,701(5,005)

1,620
4,294
206
1,415
¥51,353
2,144

—
—
145
23
¥31,394——
161—¥7,739

31
4,410
456
(47)
¥19,546

31
4,410
763
(23)
¥58,680

Thousands of U.S. dollars
Short-termborrowings
andcommercial
Lease
papersliabilities$—$161,483
62,106(41,024)

Total$420,926
17,573

Bonds andlong-term
borrowings$259,442(3,500)

Balance as of March 31, 2021
Changes arising from cash flows
Non-cash changes
Obtaining or losing control of subsidiaries
New lease agreements
Exchange differences
Other
Balance as of March 31, 2022

Millions of yen
Short-termborrowings
andcommercial
Lease
papersliabilities¥35,001¥17,936(35,001)(5,033)

—
—
1,188
188
$257,327

—
—
1,319
—
$63,434

254
36,1473,737(385)$160,213

254
36,1476,254(188)$480,983(2) Payments for acquisition of businesses
The relationship between the consideration paid for the acquisition of businesses and the income andexpenditure for it is as follows:

Consideration paid in cash
Cash and cash equivalents included in the assets of the acquireeat the time of acquiring control
Payments for acquisition of businesses- 68 -

Millions of yen
2021
2022
¥5,594¥2,666

Thousands of
U.S. dollars
2022$21,852

(995)

(264)

(2,163)¥4,599¥2,401$19,680

33. Share-based payments(Overview of performance-linked stock compensation program and performance and share price-linked
monetary compensation program)
The Company has introduced a performance-linked stock compensation program that covers Directors(excluding External Directors; hereinafter the same shall apply) and Executive Officers as well as full-time
directors of certain domestic subsidiaries and associates, and a performance and share price-linked
monetary compensation program that covers certain officers of overseas subsidiaries and associates.
1. Performance-linked stock compensation program for Directors and for Executive Officers and certain
full-time directors of domestic subsidiaries and associates(1) Overview of the program
1) For Directors
Under the performance-linked stock compensation program for Directors, points are granted to eligible
individuals based on their position and performance, and upon their retirement from the post of Director,
the Company’s shares are delivered at a number equivalent to their accumulated points granted, andmoney is delivered at an amount equivalent to the conversion amount of the Company's shares into cash.
For the introduction of the program, a stock delivery trust (hereinafter the “Trust”) system for officers has
been applied, which is established through the monetary contributions of the Company. The program wasresolved with a trust period of five years at the 80th Ordinary General Meeting of Shareholders held on
June 29, 2016 and was introduced accordingly. As the term of the Trust is expiring, at a meeting of theBoard of Directors held on May 28, 2021, the Company decided to extend the term for three years.
2) For Executive Officers and full-time directors of certain domestic subsidiaries and associates
Under the performance-linked stock compensation program for Executive Officers and full-time directorsof certain domestic subsidiaries and associates, points are granted to eligible individuals based on theirposition and performance, and upon their retirement, the Company’s shares are delivered at a number
equivalent to their accumulated points granted, and money is delivered at an amount equivalent to theconversion amount of the Company's shares into cash, to the Executive Officers and full-time directors ofcertain domestic subsidiaries and associates who will retire (hereinafter collectively the “Retirees”). The
program employs a system in which the Retirees pay to the Company monetary compensation
receivables (contributed properties in kind related to the payment for the Company’s common shares)
granted by the company from which they retire and the Company delivers the Company’s shares to the
Retirees through a disposal of treasury shares or issuance of new shares. The program for Executive
Officers was resolved at the Board of Directors meeting held on February 27, 2018, and the program forfull-time directors of certain domestic subsidiaries and associates was resolved at the Ordinary General
Meeting of Shareholders of each company held in and after 2018, both of which were introduced
accordingly.
(2) Upper limits of the total number of shares scheduled to be acquired by Directors and the number ofshares scheduled to be acquired by Executive Officers and full-time directors of certain domestic
subsidiaries and associates.
1) For Directors: 339,800 shares
2) For Executive Officers and full-time directors of certain domestic subsidiaries and associates
In principle, points up to the equivalent of 2,215 shares annually are granted to each person.
(3) Scope of persons entitled to acquire beneficiary and other rights under the program
Directors as well as Executive Officers and full-time directors of certain domestic subsidiaries andassociates- 69 -

2. Performance and share price-linked monetary compensation program for certain officers of overseas
subsidiaries and associates(1) Overview of the program
Under the performance and share price-linked monetary compensation program for officers of certain
overseas subsidiaries and associates, points are granted to eligible individuals based on theirperformance, and three years after the end of the period subject to performance evaluation, money isdelivered at an amount equivalent to the conversion amount of the number of the Company's sharesequivalent to the number of points granted into cash.
(2) Scope of persons entitled to acquire beneficiary and other rights under the program
Certain officers of overseas subsidiaries and associates(Total amount of expenses under the performance-linked stock compensation program and theperformance and share price-linked monetary compensation program)
The part involving delivery of shares is accounted for as an equity-settled share-based paymenttransaction, while the part involving payment of cash is accounted for as a cash-settled share-based
payment transaction.
For the fiscal years ended March 31, 2021 and 2022, the expenses recorded in connection with thisprogram were ¥250 million and ¥280 million ($2,295 thousand), respectively.
(Liabilities arising from the performance-linked stock compensation program and the performance andshare price-linked monetary compensation program)
Liabilities arising from the part associated with the cash-settled share-based payment transaction arerecognized as liabilities arising from stock compensation, under other non-current liabilities.
The carrying amount of the liabilities arising from the program was ¥414 million and ¥473 million ($3,877
thousand) as of March 31, 2021 and 2022, respectively.
(Changes in number of points and their weighted average fair value)
Changes in the number of points and their weighted average fair value for the fiscal years ended March
31, 2021 and 2022 are as follows:
As the fair value as of the grant date of points is deemed to approximate the price of the Company’s
shares, it is measured mainly using the price of the Company’s shares as of the grant date. No
adjustments are made in consideration of prospective dividends.

Beginning balance of unexercised points
Increase due to grant of points
Decrease due to exercise of points
Ending balance of unexercised points
Ending balance of exercisable points

Yen
2021
132,021 point
71,119 point(51,398) point
151,742 point
151,742 point

2022
151,742 point
58,513 point(48,197) point
162,058 point
162,058 point

U.S. dollars
2022
151,742 point
58,513 point(48,197) point
162,058 point
162,058 point

Weighted average fair value as of the grant dates¥2,949¥5,120$41,967- 70 -

34. Financial instruments(1) Capital management
The Group’s basic policy is to secure the liquidity needed for business operations and maintain a stablefinancing structure.
Short-term working capital is basically supplied by the Group’s own funds. Capital investment and otherinvestments in growth fields depend chiefly on the Group’s own funds, but the Group anticipates
procurement in the bond market and through bank loans as required.
Temporary surplus funds are invested in highly safe financial assets, while derivatives are used only to
avoid the risks described below. In addition, it is our policy not to engage in speculative transactions.
2021
59.6%

Ratio of equity attributable to owners of parent

2022
57.9%

(2) Credit risk management
1) Content and management of risk
Notes and accounts receivable-trade, which are trade receivables of the Group, are exposed tocustomer’s credit risk.
Regarding such risk, in accordance with internal regulations, the Group conducts credit investigations of
its principal business partners, and manages the due dates and outstanding balances of each business
partner. In addition, efforts are made to quickly identify and mitigate any concerns regarding collection thatare mainly due to worsening financial positions.
Furthermore, regarding the use of derivatives, the Group deals with only financial institutions with highcredit standing, in order to reduce credit risk.
The carrying amount of financial assets presented in the consolidated statement of financial position is the
maximum exposure to credit risk of the Group’s financial assets.
For trade and other receivables, the Group always measures the allowance for doubtful accounts at thesame amount as the lifetime expected credit losses (simplified approach).
For financial assets measured at amortized cost other than the above, in order to recognize and measure
the allowance for doubtful accounts, financial assets are categorized into the following stages based on
the existence of a significant increase in credit risk and the existence of a credit impairment (generalapproach).
Stage 1: Financial assets for which credit risk has not increased significantly since initial recognition
Stage 2: Financial assets for which credit risk has increased significantly since initial recognition but
no credit impairment has been identified
Stage 3: Credit-impaired financial assets- 71 -

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

Balance as of March 31, 2021
Balance as of March 31, 2022

Balance as of March 31, 2022

Financialassets undera simplified
approach¥98,138¥109,230

Millions of yen
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets¥5,207¥510¥96¥5,595
¥401
¥111

Total
¥103,953¥115,339

Financialassets undera simplified
approach$895,327

Thousands of U.S. dollars
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets$45,860$3,286$909

Total$945,401- 72 -

Changes in the allowance for doubtful accounts are as follows:

Balance as of April 1, 2020
Increase during the period
Decrease during the period
Balance as of March 31, 2021
Increase during the period
Decrease during the period
Balance as of March 31, 2022

Balance as of March 31, 2021
Increase during the period
Decrease during the period
Balance as of March 31, 2022

Financialassets undera simplified
approach
¥524
231
(362)
¥393
46
(101)
¥338

Millions of yen
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets
¥—
¥377
¥80
—
202
6
—
(81)
—
¥—
¥498
¥87
—
155
20
—
(268)
—
¥—
¥386
¥107

Total
¥982
440
(443)
¥979
222
(369)
¥832

Financialassets undera simplified
approach$3,221377(827)$2,770Thousands of U.S. dollars
Financial assets under a general approach
Stage 1
Stage 2
Stage 3FinancialassetsFinancialrecognizedassets withat the samea significant
amount asincrease in
Creditthe 12-monthcredit risk
impaired
expectedsince initialfinancialcredit losses
recognition
assets$—$4,081
$713
—
1,270
163
—
(2,196)—$—$3,163$877

Total$8,024
1,819(3,024)$6,819- 73 -

Aging analyses for the financial assets as of fiscal years ended March 31, 2021 and 2022 are as follows:
The amounts expected to be recovered by insurance coverage and collateral obtained are included.
Fiscal year ended March 31, 2021

2021
Trade and other receivables
Other financial assets

Total¥98,138
5,814

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

Total
¥109,230
6,108

Millions of yen
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
¥103,634¥2,937¥2,659
5,427
39
642

Total
$895,327
50,065

Thousands of U.S. dollars
Past due amount
Up to
Over
2 months
2 months(including
and up to
not past due)
1 yearOver 1 year
$849,459$24,073$21,795
44,483319
5,262

Fiscal year ended March 31, 2022

2022
Trade and other receivables
Other financial assets

2022
Trade and other receivables
Other financial assets(3) Liquidity risk
The Group procures necessary funds mainly in the bond market and through bank loans. Financial
liabilities, such as bonds and borrowing, are exposed to liquidity risk. Such liquidity risk is primarily
managed by having the Finance Division formulate and update a cash flow management plan in a timely
manner, based on reports from each department, maintaining liquidity on hand above a certain level ofconsolidated net sales and taking other measures.

- 74 -

The balance of financial liabilities by due date is as follows:
Fiscal year ended March 31, 2021

Book
Contractual2021balance cash flows
Non-derivative financial
liabilities
Trade and other¥46,506¥46,506
payablesBonds
29,88930,227Long-term
1,763
1,914
borrowings
Lease liabilities
19,701
21,472
Liabilities pertaining toforward contracts
concluded with non12,326
13,384
controllingshareholders¥110,187 ¥113,505
Total

2021
Derivative liabilities
Put options onshares in foreignsubsidiaries
Total

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

Over 5years¥46,506

¥—

¥—

¥—

¥—

¥—

45

45

45

45

30,045

—

491

471

249

241

234

226

4,561

3,409

1,823

1,141

983

9,553

—

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

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year

¥193

¥227

¥—

¥227

¥—

¥—

¥—

¥—

¥193

¥227

¥—

¥227

¥—

¥—

¥—

¥—

- 75 -

Fiscal year ended March 31, 2022

2022
Non-derivative financial
liabilities
Trade and otherpayablesCommercial papers
Bonds
Short-termborrowings
Long-term
borrowings
Lease liabilities
Liabilities pertaining toforward contracts
concluded with noncontrollingshareholders
Liabilities undercontingent
considerationagreements
Total

2022
Derivative liabilities
Currency swaps
Total

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

Over 5years

Bookbalance

Contractual
cash flows

Up to
1 year¥57,967¥57,967¥57,967

¥—

¥—

¥—

¥—

¥—

5,000
29,9135,000
30,182

5,000
45

—
45

—
45

—
30,045

—
—

—
—

2,739

2,763

2,763

—

—

—

—

—

1,481

1,597

482

338

267

258

250

—

19,546

21,595

4,920

3,041

1,946

1,281

1,128

9,277

19,613

19,746

19,746

—

—

—

—

—

781

956

—

410

273

273

—

—

¥137,043¥139,809¥90,925¥3,836¥2,532¥31,859¥1,378¥9,277

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

Over 5
years

¥0
¥0

¥75
¥75

¥—
¥—

Book
balance

Contractual
cash flows

Up to
1 year

¥171
¥171

¥171
¥171

¥31
¥31

- 76 -

¥31
¥31

¥31
¥31

Contractual
Up to
Book
1 year2022
balance cash flows
Non-derivative financial
liabilities
Trade and other$475,139 $475,139 $475,139
payablesCommercial papers
40,98340,98340,983245,188
247,393
368
Bonds
Short-term
22,45022,64722,647borrowings
Long-term
12,13913,0903,950
borrowings
Lease liabilities
160,213
177,008
40,327
Liabilities pertaining toforward contracts
concluded with non160,762
161,852 161,852
controllingshareholders
Liabilities undercontingent
6,401
7,836
—
considerationagreements
Total$1,123,303 $1,145,975 $745,286

2022
Derivative liabilities
Currency swaps
Total

Book
balance$1,401$1,401

Contractual
cash flows$1,401$1,401Up to
1 yearThousands of U.S. dollars
Over
Over
Over
1 year
2 years
3 years
and up to and up to and up to
2 years
3 years
4 yearsOver
4 years
and up to
5 years

Over 5
years

$—

$—

$—

$—

$—

—
368

—
368

—
246,270

—
—

—
—

—

—

—

—

—

2,770

2,188

2,114

2,049

—

24,926

15,95010,5009,245

76,040

—

—

—

—

—

3,360

2,237

2,237

—

—

$31,442$20,754$261,139$11,295$76,040

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

Over 5
years

$614
$614

$—
$—

$254
$254

$254
$254

$254
$254

$0
$0

The cash flows included in this maturity analysis are not expected to be generated significantly earlier orat significantly different amounts.
The total amount of overdraft and commitment line and the balance of executed loans are as follows:
Millions of yen
2021
2022
¥61,615¥66,673—
1,199¥61,615¥65,473

Total amount of overdraft and commitment line
Balance of executed loans
Balance of unexecuted loans- 77 -

Thousands of
U.S. dollars
2022$546,500
9,827$536,663

(4) Market risk
1) Foreign exchange risk
Since the Group operates its business globally, its transactions denominated in currencies other than thefunctional currency are exposed to foreign exchange risks. In principle, the Group uses forward foreignexchange contracts to hedge exchange rate fluctuation risks, which are identified by currency and month.
Sensitivity analysis of exchange rate fluctuation risks
With regard to the financial instruments held by the Group at the end of the fiscal year, the effect of the
U.S. dollar and the renminbi becoming stronger against the yen by 1 yen, on profit before tax in the
consolidated statement of profit or loss is as follows. This analysis assumes that all other variables remain
constant.
Millions of yen
2021
2022
¥(39)
¥(21)
(47)
(37)

U.S. dollar
Renminbi

Thousands of
U.S. dollars
2022$(172)(303)

2) Market price risk
The Group holds equity instruments with quoted market prices for policy investment aims, such as thesmooth implementation of business alliances. With regard to equity instruments with quoted market
prices, since their market prices are determined based on market principles, the value of such financial
instruments may decline depending on trends in the market economy. For such equity instruments withquoted market prices, their quoted market prices, the financial conditions of the issuers (business partnercompanies) and other relevant factors are regularly monitored, and the holding status of those
instruments is also continuously reviewed, taking into account relationships with business partnercompanies.
Sensitivity analysis of quoted market prices
With regard to the equity instruments with quoted market prices held by the Group at the end of the fiscal
year, the effect of a 1% decline in the quoted market prices at the end of the fiscal year on othercomprehensive income (before tax effects) in the consolidated statement of comprehensive income is asfollows. In this analysis, the amount of the effect is calculated by multiplying the values of the equity
instruments at the end of the fiscal year by 1%.
Millions of yen
2021
2022
¥(250)¥(164)

Other comprehensive income (before tax effects)- 78 -

Thousands of
U.S. dollars
2022$(1,344)(5) Fair value
1) Fair value of financial instruments
The fair values of financial liabilities measured at amortized cost and their carrying amounts in the
consolidated statement of financial position are as follows:
Financial instruments whose carrying amounts are reasonable approximations of fair values andimmaterial financial instruments are not included in the table below.
Millions of yen
2021
Carrying
Fair
amountvalue
Financial liabilities
Borrowings
Bonds¥1,32829,889¥1,31729,8592022
Carrying
Fair
amountvalue¥1,28529,913¥1,29029,814

Thousands of
U.S. dollars
2022
Carrying
Fair
amountvalue$10,532
245,188$10,573244,3772) Fair value measurement method
The fair values of financial assets and financial liabilities are calculated as follows:(Derivatives)
Derivatives include foreign exchange contracts, currency swaps and put options on shares in foreignsubsidiaries.
Foreign exchange contracts and currency swaps, whose fair values are calculated based on forward
exchange rate or quoted prices obtained from financial institutions and other available information, arecategorized within Level 2.
Put options on shares in foreign subsidiaries, whose fair values are evaluated based on the present valueof the amount that may be required to be paid to counterparties, are categorized within Level 3. Thisvaluation model uses unobservable inputs, such as discount rates. The fair values are assumed tofluctuate, depending on the business plan, interest rates, etc., at each point in time.
(Shares, etc.)
Shares, etc., include shares for which an active market exists, investment trusts and unlisted shares.
Shares with active markets are evaluated by prices quoted at the stock exchange, and are categorized
within Level 1. Investment trusts are evaluated by prices quoted at the stock exchange or prices provided
by correspondent financial institutions, etc., and are categorized within Level 1. Unlisted shares, whose
fair values are calculated by valuation techniques, such as the comparable peer company multiples
method, using unobservable inputs, such as valuation multiples, are categorized within Level 3.
(Borrowings)
Since short-term borrowings are settled in a short period of time, their fair values approximate theircarrying amounts.
Long-term borrowings, whose fair values are calculated by discounting the sum of the principal andinterest using the interest rate that would be applied if new borrowings were made with similar terms, arecategorized within Level 2.
However, since floating rate long-term borrowings reflect market interest rates in a short period of timeand credit standings after execution do not vary significantly, their fair values approximate their carrying
amounts.
(Bonds)Bonds, whose fair values are calculated by discounting the sum of the principal and interest using theinterest rate that takes into account the remaining period and credit risk of the relevant bonds, arecategorized within Level 2.

- 79 -

(Liabilities pertaining to forward contracts concluded with non-controlling shareholders)
For forward contracts for shares in subsidiaries which the Group has concluded with non-controllingshareholders, the present value of the expected transfer price is initially recognized as other financial
liabilities, and after initial recognition, in principle, the present value is measured at amortized cost using
the effective interest method and the amount of subsequent changes is recognized in profit or loss. Fairvalues of liabilities pertaining to forward contracts concluded with non-controlling shareholders arecalculated by discounting future cash flows, and their fair values approximate their carrying amounts.
In the fiscal year ended March 31, 2022, as a result of subsequent measurement of the liabilities, financecosts of ¥5,496 million ($45,049 thousand) were recorded. Primarily due to this, the balance of theseliabilities pertaining to forward contracts was ¥19,613 million ($160,762 thousand), an increase of ¥7,286
million ($59,721 thousand) from the end of the previous consolidated fiscal year.
(Other (financial liabilities))
Fair values of other (financial liabilities) are evaluated at the amount calculated by the discounted cash
flow method using unobservable inputs, and are therefore categorized within Level 3.
(Financial instruments other than the above mentioned)
Since financial instruments other than the above mentioned are mainly settled in a short period of time,
their fair values approximate their carrying amounts.
3) Fair value hierarchy
The following is an analysis of financial instruments recorded at fair value by valuation methods. Based on
the inputs used to measure fair values, the fair value levels are classified as follows:
Level 1: Fair value measured using (unadjusted) quoted market prices in active markets for identicalassets or liabilities.
Level 2: Fair value measured using directly or indirectly observable inputs other than Level 1 inputs.
Level 3: Fair value measured using significant unobservable inputs.
Transfers between levels of the fair value hierarchy are recognized on the date of occurrence of the eventor change in circumstances that causes the transfer. No transfer was made between levels for the fiscal
years ended March 31, 2021 and 2022.

- 80 -

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

Level 1¥—

25,007—

Millions of yen
Level 2
Level 3
¥4
¥—

—
—

5,765
193

Total
¥4

30,772
193

Fiscal year ended March 31, 2022
2022
Derivative assets
Financial assets measured at fair value
through other comprehensive income:
Shares, etc.
Derivative liabilities
Other (financial liabilities)

Level 1¥—

2022
Derivative assets
Financial assets measured at fair value
through other comprehensive income:
Shares, etc.
Derivative liabilities
Other (financial liabilities)

Level 1$—

16,433——

134,696——

Millions of yen
Level 2
Level 3
¥2
¥—

—
171
—

Total
¥2

4,059
—
781

20,492
171
781

Thousands of U.S. dollars
Level 2
Level 3
$16
$—

Total
$16

—
1,401
—

33,270—6,401

167,967
1,401
6,401

For financial instruments categorized within Level 3, external evaluation specialists or appropriate persons
in charge of evaluation conduct an evaluation and analysis of the results in accordance with theevaluation policy and procedures approved by the Manager of the Corporate Planning and Control
Division. The evaluation results have been reviewed and approved by the Manager of the Corporate
Planning and Control Division.
Among derivative liabilities categorized within Level 3, for put options on shares in foreign subsidiaries,
the significant unobservable input for the measurement of their fair value is the discount rate. As discountrates decline (rise), fair values increase (decrease).
Fair values of unlisted shares categorized within Level 3 are measured by the comparable peer company
multiples method and net asset-based valuation model, etc. Since this valuation model employs
unobservable inputs, such as the price book-value ratio, unlisted shares are categorized within Level 3.

- 81 -

Reconciliation from the beginning balance to the ending balance of financial instruments categorized
within Level 3
Millions of yen
2021

Beginning balance
Total gains and losses
Profit or loss
Other comprehensive income
Purchase
Issuance
Sale
Other
Ending balance
Changes in unrealized gains andlosses for the period recognizedin profit or loss for assets andliabilities held at the end of thereporting period

2022

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

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

Financialassets¥5,765
105
(24)
129
890
—
(2,698)(3)¥4,059Financialliabilities
¥193
—
—
—
—
781
—
(193)
¥781

¥(15)

¥—

¥76

¥—

Thousands of U.S. dollars
2022
Financial
Financialassetsliabilities$47,254$1,581
860
—
(196)
—
1,057
—
7,295
—
—
6,401
(22,114)—(24)(1,581)$33,270$6,401$622

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

- 82 -$—

The notional principal and average price of main hedging instruments are as follows:
Fiscal year ended March 31, 2021
2021
Cash flow hedges
Currency swaps(Receive Yen, Pay Euros)
Currency swaps(Receive Yen, Pay South Korean won)Total

Up to 1 year

Millions of yen
Over 1 year

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

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

Millions of yen
Over 1 year

¥1,376134.29¥1,376¥4,649130.98¥4,649

Notional principal andaverage price

Total

Fiscal year ended March 31, 2022
2022
Cash flow hedges
Currency swaps(Receive Yen, Pay Euros)
Total

2022
Cash flow hedges
Currency swaps(Receive Yen, Pay Euros)
Total

Notional principal andaverage priceNotional principal
Forward rate (Yen)

Notional principal andaverage priceNotional principal
Forward rate (U.S. dollars)- 83 -

Total¥6,026—¥6,026

Thousands of U.S. dollars
Up to 1 year
Over 1 year
Total
$11,278
1.10$11,278$38,106
1.07$38,106$49,393—$49,393

The carrying amounts of hedging instruments to which hedge accounting is applied by type of hedge areas follows:
Thousands of
U.S. dollars
2022

Millions of yen
2021
AssetsLiabilities

2022
AssetsLiabilities

AssetsLiabilities

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

Cash flow hedges
Foreign exchange risk

¥—
¥0
¥—
¥ 172
$ — $ 1,409
Note
Note Other financial assets in current and non-current assets, other financial liabilities in current and non-current
liabilities, finance income and finance costs.

The balance of cash flow hedge reserve related to cash flow hedges is as follows:
Millions of yen
2021
2022
Cash flow hedges
Foreign exchange risk¥(91)

Thousands of
U.S. dollars
2022

¥40

$327

The contract amount and the carrying amount of derivatives to which hedge accounting is not applied are
as follows:
Fiscal year ended March 31, 2021
Account inconsolidated
statement offinancial position

Millions of yen
Contract
amount, etc.

2021
Over 1 year
AssetsLiabilities
Currency swaps
¥138
¥68
¥4
¥—
Note
(Receive Yen, Pay South Korean won)Note Other financial assets in current and non-current assets and other financial liabilities in current and non-current
liabilities.

Fiscal year ended March 31, 2022
Millions of yen
2022
Currency swaps(Receive Yen, Pay South Korean won)Contract
amount, etc.

Over 1 year

¥68

¥68

AssetsLiabilities¥0

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

¥—

Account inconsolidated
statement offinancial position

Note
Account inconsolidated
statement offinancial position

2022
Over 1 year
AssetsLiabilities
Currency swaps
$557
$557
$0
$—
Note
(Receive Yen, Pay South Korean won)Note Other financial assets in current and non-current assets and other financial liabilities in current and non-current
liabilities.

- 84 -

35. Subsidiaries and associates
The Group’s consolidated subsidiaries as of March 31, 2022 are as follows:
Company name

Ownership
ratio ofvoting rights

Location

Main business

Kurita Europe GmbH

Mannheim, Germany

Water treatment chemicals

100.0%

Kurita Water Industries (Dalian) Co., Ltd.

Liaoning, China

Water treatment chemicals

90.1%

Kurita Water Industries (Suzhou) Ltd.

Jiangsu, China

Water treatment facilities

100.0%

Hansu Technical Service Ltd.

Gyeonggi-do, Korea

Water treatment facilities

100.0%

Hansu Co., Ltd.

Seoul, Korea

Water treatment chemicals

100.0%

Kurita Water (Malaysia) Sdn.Bhd.

Selangor, Malaysia

Water treatment chemicals andWater treatment facilities

100.0%

Pentagon Technologies Group, Inc.

California, U.S.A.

Water treatment facilities

51.0%

Kurita America, Inc.

Minnesota, U.S.A.

Water treatment chemicals andWater treatment facilities

100.0%

Kuritaz Co., Ltd.

Toshima-ku, Tokyo

Water treatment facilities

100.0%

Kuritec Service Co., Ltd.

Chuo-ku, Osaka

Water treatment facilities

100.0%

Kurita Chemical Manufacturing Ltd.

Gokamachi,
Sashima-gun, Ibaraki

Water treatment chemicals

100.0%

59 other companies

The Group’s associates accounted for using the equity method as of March 31, 2022 are as follows:
Company name
Angang Kurita (Anshan) Water Treatment
Co., Ltd.

Location
Liaoning, China

Main business
Water treatment chemicals

Ownership
ratio ofvoting rights
40.0%

Another company
Notes 1.
2.

The main business column refers to segment names.
Kurita Europe GmbH, Hansu Technical Service Ltd. and Kurita Chemical Manufacturing Ltd. are thespecified subsidiary companies.

36. Related parties(1) Transactions with related parties
For the fiscal years ended March 31, 2021 and 2022, information on transactions with related parties has
been omitted due to the absence of significant transactions.
(2) Compensation for key management personnel
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Short-term employee benefits
¥442
¥428
$3,508
Share-based payment
119
83
680
Note Compensation for key management personnel is compensation for Directors (including External Directors) and
Audit & Supervisory Board Members (including external members of the Audit & Supervisory Board) of theCompany.

- 85 -

37. Commitments
The total contract amount regarding commitments for asset purchases, etc., is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2022
2022
Acquisition of property, plant and equipment¥27,793¥19,606$160,704
Note Commitments as of March 31, 2022 consist primarily of those associated with the acquisition of a certain facility
in the ultrapure water supply business.

38. Subsequent events(Issuance of bonds)
In accordance with a resolution of the Board of Directors’ meeting held on November 30, 2021, theCompany decided on May 20, 2022 (conditional resolution date) to issue second series of unsecured
bonds on May 26, 2022. Payments have been completed on May 26, 2022. The summary of the issuanceis as follows:(1)

Name of bonds

(2)
(3)
(4)
(5)
(6)
(7)
(8)

Total issue amountInterest rate
Pay-in amount
Redemption amountPay-in date
Redemption date
Rating received(9)

Underwriting company(10)

Fiscal agent(11)

Content of collaterals(12)

Use of funds

Kurita Water Industries Ltd. Second Series of Unsecured Bonds(five-year bonds)¥10 billion ($81,967 thousand)0.290%¥100 for ¥100 of the amount of each bond¥100 for ¥100 of the amount of each bondMay 26, 2022
May 26, 2027
A+ (Rating and Investment Information, Inc.)
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.,
Nomura Securities Co., Ltd. and Daiwa Securities Co. Ltd.
Resona Bank, Limited.
No collateral or guarantee is provided, and no assets are reserved
specifically for the bonds.
Funds are planned to be used as funding for investment and lending.

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